<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 1999
REGISTRATION NO. 333-77499
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2 TO
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
------------------------
CHARTER COMMUNICATIONS HOLDINGS, LLC
AND
CHARTER COMMUNICATIONS HOLDINGS
CAPITAL CORPORATION
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
<TABLE>
<S> <C> <C>
DELAWARE 4841 43-1843179
DELAWARE 4841 43-1843177
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (FEDERAL EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
12444 POWERSCOURT DRIVE
ST. LOUIS, MISSOURI 63131
(314) 965-0555
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF REGISTRANTS'
PRINCIPAL EXECUTIVE OFFICES)
CURTIS S. SHAW, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
12444 POWERSCOURT DRIVE
ST. LOUIS, MISSOURI 63131
(314) 965-0555
(NAME, ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING
AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
DANIEL G. BERGSTEIN, ESQ. ALVIN G. SEGEL, ESQ.
PAUL, HASTINGS, JANOFSKY & WALKER LLP IRELL & MANELLA LLP
399 PARK AVENUE 1800 AVENUE OF THE STARS, SUITE 900
NEW YORK, NEW YORK 10022 LOS ANGELES, CALIFORNIA 90067-4276
(212) 318-6000 (310) 277-1010
</TABLE>
-------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFER TO THE PUBLIC EXCHANGE
OFFER: As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
-------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SUBJECT TO COMPLETION, DATED JUNE 21, 1999
$3,575,000,000
OFFER TO EXCHANGE
8.250% SENIOR NOTES DUE 2007,
8.625% SENIOR NOTES DUE 2009 AND 9.920% SENIOR DISCOUNT NOTES DUE 2011
FOR ANY AND ALL OUTSTANDING
8.250% SENIOR NOTES DUE 2007,
8.625% SENIOR NOTES DUE 2009 AND 9.920% SENIOR DISCOUNT NOTES DUE 2011,
RESPECTIVELY, OF
CHARTER COMMUNICATIONS HOLDINGS, LLC
and
CHARTER COMMUNICATIONS HOLDINGS
CAPITAL CORPORATION
-------------------------
The notes being offered by this prospectus are being issued in exchange for
notes sold by us in a private placement in March 1999. The new notes will be
governed by the same indentures governing the original notes. The new notes will
be substantially identical to the original notes except that you will not have
any exchange or registration rights in connection with the new notes.
- The exchange offer expires at 5:00 p.m., New York City time, on
, 1999, unless extended.
- No public market exists for the original notes or the new notes. We do
not intend to list the new notes on any securities exchange or to seek
approval for quotation through any automated quotation system.
-------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 18 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR ORIGINAL NOTES IN THE
EXCHANGE OFFER AND BY PURCHASERS OF THE NOTES FROM PERSONS ELIGIBLE TO USE THIS
PROSPECTUS FOR RESALES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state in which the offer or sale would be unlawful.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-b OF THE NEW HAMPSHIRE UNIFORM
SECURITIES ACT WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS
EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE
CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER
RSA 421-b IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE
FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION
MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR
QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR
TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE
PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE
PROVISIONS OF THIS PARAGRAPH.
The date of this prospectus is , 1999.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.......................................... 1
Risk Factors................................................ 18
Forward-Looking Statements.................................. 29
Use of Proceeds............................................. 30
Capitalization.............................................. 31
Unaudited Pro Forma Financial Statements.................... 32
Unaudited Selected Historical Combined Financial and
Operating Data............................................ 47
Selected Historical Financial Data.......................... 49
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 50
The Exchange Offer.......................................... 69
Business.................................................... 79
Regulation and Legislation.................................. 107
Management.................................................. 115
Principal Equity Holders.................................... 121
Certain Relationships and Related Transactions.............. 122
Description of the Credit Facilities........................ 127
Description of Notes........................................ 129
Certain Federal Tax Considerations.......................... 174
Plan of Distribution........................................ 181
Legal Matters............................................... 181
Index to Financial Statements............................... F-1
</TABLE>
i
<PAGE> 4
SUMMARY
The following summary contains a general discussion of our business, the
exchange offer and summary financial information. It likely does not contain all
the information that is important to you in making a decision to tender original
notes in exchange for new notes. For a more complete understanding of the
exchange offer, we encourage you to read this entire prospectus and other
documents to which we refer.
THE COMPANY
We offer a full range of cable television services. Our service offerings
include the following programming packages:
- basic programming, which generally includes a variety of entertainment
programming, locally originated programming and the retransmission of
local broadcast stations;
- expanded basic programming, known in the cable industry as cable
programming service tier, or CPST, which offers more services than basic
programming;
- premium channels, which provide unedited, commercial-free movies, sports
and other special event entertainment programming; and
- pay-per-view television programming, where customers are charged a fee
for individual programs.
We have begun to offer digital cable television services to customers in
some of our systems, and are also expanding into other entertainment,
educational and communications services, including high-speed Internet access.
In addition, we are currently upgrading our cable systems to offer services
which will allow our customers to interact with the programming we provide. Such
services are referred to as interactive services. As of March 31, 1999, we
served approximately 2.4 million cable television service customers in 22
states. We have entered into agreements to acquire additional cable systems that
would have increased the number of our customers to 3.7 million as of that date.
For the three months ended March 31, 1999, pro forma for the acquisitions
we completed during 1999, our revenues were approximately $311 million and our
EBITDA was approximately $143 million. For the year ended December 31, 1998, pro
forma for the acquisitions and a merger we completed during 1999, our revenues
were approximately $1.2 billion and our earnings before interest, taxes,
depreciation and amortization, or EBITDA, was approximately $532 million.
We have pursued and executed a strategy of operating, developing, acquiring
and consolidating cable systems with the primary goals of increasing our
customer base and operating cash flow by consistently emphasizing superior
customer service. Without giving effect to the cable systems we acquired in
1998, we increased our customer base by 4.8%, revenues by 9.5% and EBITDA by 11%
during that year. This customer growth was more than twice the national average
of 1.7% for 1998. In 1997, our customer growth was 3.5%, significantly higher
than the national average of 2.0% for 1997.
In addition to growing our customer base internally, we have grown
significantly through acquisitions. Over the past five years, our management
team has successfully completed 22 acquisitions, including two acquisitions in
1999. We have also entered into six agreements to acquire additional cable
systems. These recent and pending acquisitions serve a total of approximately
1.3 million customers.
1
<PAGE> 5
Our principal executive offices are located at 12444 Powerscourt Drive, St.
Louis, Missouri 63131. Our telephone number is (314)965-0555 and our e-mail
address is www.chartercom.com.
BUSINESS STRATEGY
Our business strategy is to grow our customer base and increase our
operating cash flow by:
- maximizing customer satisfaction;
- implementing decentralized operations with centralized financial
controls;
- pursuing strategic acquisitions;
- upgrading our systems;
- emphasizing innovative marketing; and
- offering new products and services.
RECENT EVENTS
RECENT ACQUISITIONS
In the second quarter of 1999, we completed two transactions in which we
acquired cable systems serving a total of approximately 200,000 customers in
four states. The total purchase price for these acquisitions was approximately
$699 million. For the three months ended March 31, 1999, these systems had
revenues of approximately $24.4 million and EBITDA of approximately $12.6
million. For the year ended December 31, 1998, these systems had revenues of
approximately $57.2 million and EBITDA of approximately $28.4 million.
PENDING ACQUISITIONS
In addition to the recent acquisitions described above, since the beginning
of 1999, we have entered into six agreements to acquire additional cable
systems. The total purchase price for these acquisitions will be approximately
$3.9 billion. This includes the exchange with another cable service provider of
certain of our cable television systems with a fair market value of $0.4 billion
for cable systems that we can operate more efficiently because of their
geographic proximity to our other systems. As of March 31, 1999, the systems to
be acquired by us served, in the aggregate, approximately 1.1 million customers
in 18 states. For the three months ended March 31, 1999, these systems had
revenues of approximately $144.2 million, and EBITDA of approximately $59.0
million. For the year ended December 31, 1998, such systems had revenues of
approximately $464.0 million and EBITDA of approximately $271.6 million. We
expect to finance these pending acquisitions with additional borrowings under
our credit facilities and with additional equity.
2
<PAGE> 6
ORGANIZATION
The chart below sets forth our corporate structure.
[CHARTER COMMUNICATIONS ORGANIZATION CHART]
EXPLANATORY NOTE: Prior to our acquisition by Paul G. Allen, Charter
Communications, Inc. managed three groups of systems. Since Charter
Communications, Inc. held only a minority interest in two of these groups, their
financial statements were not consolidated with those of Charter Communications,
Inc. or with each other. In connection with our acquisition by Mr. Allen on
December 23, 1998:
- Charter Communications, Inc. became the owner of all of the interests in
all three groups;
- we changed our corporate structure by converting certain corporations and
partnerships into limited liability companies; and
- we merged certain subsidiaries.
3
<PAGE> 7
In February 1999, Charter Communications Holdings, LLC, or Charter
Holdings, was formed as a wholly owned subsidiary of Charter Communications,
Inc. and Charter Communications Operating LLC, or Charter Operating, was formed
as a wholly owned subsidiary of Charter Holdings. All of Charter Communications,
Inc.'s equity interests in all of its subsidiaries were transferred to Charter
Operating. In May 1999, Charter Communications Holding Company, LLC was formed
as a wholly owned subsidiary of Charter Communications, Inc. All of Charter
Communications, Inc.'s equity interests in Charter Holdings were transferred to
Charter Communications Holding Company.
The following is a breakdown of the three groups of systems and where they
are today:
(1) Charter Communications Properties Holdings LLC, which is now Charter
Communications Properties, LLC.
(2) The CCA Group, which consisted of three sister companies,
(a) CCT Holdings, LLC,
(b) CCA Holdings, LLC, and
(c) Charter Communications Long Beach, LLC.
These three companies were merged out of existence and their operating
companies renamed.
(3) CharterComm Holdings, LLC, which is now Charter Communications, LLC.
Mr. Allen acquired Marcus Cable Company, L.L.C., or Marcus Cable, and all
of its operating subsidiaries. In February 1999, Marcus Holdings Company, LLC or
Marcus Holdings was formed and all of Mr. Allen's interests in Marcus Cable
Company, L.L.C. or Marcus Cable were transferred to Marcus Holdings. In April
1999, Marcus Holdings was merged into Charter Holdings. The operating
subsidiaries of Marcus Holdings became subsidiaries of Charter Holdings.
All of the recent and pending acquisitions described in this prospectus
were or will be acquired by Charter Holdings or one or more of its subsidiaries.
4
<PAGE> 8
THE EXCHANGE OFFER
Resales Without Further
Registration.................... We believe that the new notes issued
pursuant to the exchange offer in exchange
for original notes may be offered for
resale, resold and otherwise transferred by
you without compliance with the registration
and prospectus delivery provisions of the
Securities Act of 1933, provided that:
- you are acquiring the new notes issued in
the exchange offer in the ordinary course
of your business;
- you have not engaged in, do not intend to
engage in, and have no arrangement or
understanding with any person to
participate in the distribution of the
new notes issued to you in the exchange
offer; and
- you are not our "affiliate," as defined
under Rule 405 of the Securities Act.
Each of the participating broker-dealers
that receives new notes for its own account
in exchange for original notes that were
acquired by such broker or dealer as a
result of market-making or other activities
must acknowledge that it will deliver a
prospectus in connection with the resale of
the new notes.
Expiration Date................. 5:00 p.m., New York City time, on
, 1999, unless we extend the
exchange offer.
Exchange and Registration Rights
Agreements.................... You have the right to exchange the original
notes that you hold for new notes with
substantially identical terms. This exchange
offer is intended to satisfy these rights.
Once the exchange offer is complete, you
will no longer be entitled to any exchange
or registration rights with respect to your
notes.
Accrued Interest on the New
Notes and Original Notes........ The new notes will bear interest from March
17, 1999. Holders of original notes which
are accepted for exchange will be deemed to
have waived the right to receive any payment
in respect of interest on such original
notes accrued to the date of issuance of the
new notes.
Conditions to the Exchange
Offer........................... The exchange offer is conditioned upon
certain customary conditions which we may
waive and upon compliance with securities
laws.
5
<PAGE> 9
Procedures for Tendering
Original Notes.................. Each holder of original notes wishing to
accept the exchange offer must:
- complete, sign and date the letter of
transmittal, or a facsimile of the letter
of transmittal; or
- arrange for the Depository Trust Company
to transmit certain required information
to the exchange agent in connection with a
book-entry transfer.
You must mail or otherwise deliver such
documentation together with the original
notes to the exchange agent.
Special Procedures for
Beneficial Holders.............. If you beneficially own original notes
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee and you wish to tender your original
notes in the exchange offer, you should
contact such registered holder promptly and
instruct them to tender on your behalf. If
you wish to tender on your own behalf, you
must, before completing and executing the
letter of transmittal for the exchange offer
and delivering your original notes, either
arrange to have your original notes
registered in your name or obtain a properly
completed bond power from the registered
holder. The transfer of registered ownership
may take considerable time.
Guaranteed Delivery
Procedures...................... You must comply with the applicable
procedures for tendering if you wish to
tender your original notes and:
- time will not permit your required
documents to reach the exchange agent by
the expiration date of the exchange offer;
or
- you cannot complete the procedure for
book-entry transfer on time; or
- your original notes are not immediately
available.
Withdrawal Rights............... You may withdraw your tender of original
notes at any time prior to 5:00 p.m., New
York City time, on the date the exchange
offer expires.
Failure to Exchange Will Affect
You Adversely................... If you are eligible to participate in the
exchange offer and you do not tender your
original notes, you
6
<PAGE> 10
will not have further exchange or
registration rights and your original notes
will continue to be subject to some
restrictions on transfer. Accordingly, the
liquidity of the original notes will be
adversely affected.
Certain Federal Tax
Considerations................ We believe that the exchange of original
notes for new notes pursuant to the exchange
offer will not be a taxable event for United
States federal income tax purposes. A
holder's holding period for new notes will
include the holding period for original
notes. See "Certain Federal Tax
Considerations."
Exchange Agent.................. Harris Trust Company of New York is serving
as exchange agent.
Use of Proceeds................. We will not receive any proceeds from the
exchange offer.
7
<PAGE> 11
SUMMARY TERMS OF NEW NOTES
Issuers......................... Charter Communications Holdings, LLC and
Charter Communications Holdings Capital
Corporation.
Notes Offered................... $600 million in principal amount of 8.250%
Senior Notes due 2007.
$1.5 billion in principal amount of 8.625%
Senior Notes due 2009.
$1.475 billion in principal amount at
maturity of 9.920% Senior Discount Notes due
2011.
The form and terms of the new notes will be
the same as the form and terms of the
outstanding notes except that:
- the new notes will bear a different CUSIP
number from the original notes;
- the new notes will have been registered
under the Securities Act of 1933 and,
therefore, will not bear legends
restricting their transfer; and
- you will not be entitled to any exchange
or registration rights with respect to the
new notes.
The new notes will evidence the same debt as
the original notes. They will be entitled to
the benefits of the indentures governing the
original notes and will be treated under the
indentures as a single class with the
original notes.
8
<PAGE> 12
<TABLE>
<CAPTION>
MATURITY
DATE ISSUE PRICE INTEREST
------------- --------------------- ---------------------
<S> <C> <C> <C>
8.250% notes......... April 1, 2007 99.233% plus accrued 8.250% per annum,
interest, if any, payable every six
from March 17, 1999 months on April 1 and
October 1, beginning
October 1, 1999
8.625% notes......... April 1, 2009 99.695%, plus accrued 8.625% per annum,
interest, if any, payable every six
from March 17, 1999 months on April 1,
and October 1,
beginning October 1,
1999
9.920% notes......... April 1, 2011 61.394% Interest to accrete
at a rate of 9.920%
per annum through
April 1, 2004; cash
interest every six
months on April 1 and
October 1 at the rate
of 9.920% per annum,
beginning October 1,
2004
</TABLE>
Ranking......................... The new notes are senior debts. They rank
equally with the current and future
unsecured and unsubordinated debt, including
trade payables, of Charter Holdings, which
is a holding company and conducts all of its
operations through its subsidiaries. If it
defaults, your right to payment under the
new notes will rank below all existing and
future liabilities, including trade
payables, of its subsidiaries. As of March
31, 1999, all of our outstanding
indebtedness, other than the notes but
including our credit facilities, was
incurred by our subsidiaries. As of that
date, our subsidiaries' liabilities, on a
pro forma basis giving effect for our recent
and pending acquisitions, totaled $4
billion. All such liabilities would have
ranked senior to the new notes.
Optional Redemption............. We will not have the right to redeem the
8.250% notes prior to their maturity date on
April 1, 2007.
Before April 1, 2002, we may redeem up to
35% of the 8.625% notes and the 9.920% notes
with the proceeds of certain offerings of
equity securities. On or after April 1,
2004, we may redeem some or all of the
8.625% notes and the 9.920% notes at any
time.
9
<PAGE> 13
Mandatory Offer to Repurchase... If we experience certain changes of control,
we must offer to repurchase any then-issued
notes at 101% of their principal amount or
accreted value, as applicable in each class
of notes, plus accrued and unpaid interest.
Basic Covenants of Indentures... The indentures governing the notes, among
other things, restrict our ability and the
ability of certain of our subsidiaries to:
- borrow money;
- create certain liens;
- pay dividends on stock or repurchase
stock;
- make investments;
- sell all or substantially all of our
assets or merge with or into other
companies;
- sell assets;
- in the case of our restricted
subsidiaries, create or permit to
exist dividend or payment
restrictions with respect to us; and
- engage in certain transactions with
affiliates.
These covenants are subject to important
exceptions.
RISK FACTORS
You should carefully consider all of the information in this prospectus. In
particular, you should evaluate the specific risk factors under "Risk Factors"
for a discussion of certain risks involved with an investment in the new notes.
10
<PAGE> 14
UNAUDITED SUMMARY PRO FORMA FINANCIAL STATEMENTS
The following Unaudited Summary Pro Forma Financial Statements are based on
the financial statements of Charter Holdings, CCA Group, and CharterComm
Holdings, LLC, as adjusted to illustrate the estimated effects of our recent
acquisitions and pending acquisitions, as if such acquisitions, had occurred on
March 31, 1999 for the Balance Sheet Data and Operating Data and for the
estimated effects of the following transactions, as if such transactions had
occurred on January 1, 1998 for the Statements of Operations and Other Financial
Data:
(1) the acquisition of us on December 23, 1998 by Paul G. Allen;
(2) the acquisition of Sonic Communications, Inc. on May 20, 1998 by
us;
(3) the acquisition of Marcus Cable on April 23, 1998 by Mr. Allen;
(4) the acquisitions and dispositions during 1998 by Marcus Cable;
(5) our merger with Marcus Holdings;
(6) our recent acquisitions and pending acquisitions; and
(7) the refinancing of all our debt through the issuance of the
original notes and funding under our current credit facilities.
The Unaudited Summary Pro Forma Financial Statements reflect the
application of the principles of purchase accounting to the transactions listed
in items (1) through (4) and (6) of the preceding sentence. In purchase
accounting, all separately identifiable assets and liabilities are recorded at
fair value with the excess purchase price recorded as franchises. The allocation
of the purchase price is based, in part, on preliminary information, which is
subject to adjustment upon obtaining complete valuation information of
intangible assets. The valuation information is expected to be finalized in the
third quarter of 1999. However, no significant adjustments are anticipated.
11
<PAGE> 15
The Unaudited Summary Pro Forma Financial Statements do not purport to be
indicative of what our financial position or results of operations would
actually have been had the transactions described above been completed on the
dates indicated or to project our results of operations for any future date. See
"Unaudited Pro Forma Financial Statements."
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
---------------------------------------------------------------------------------
CHARTER RECENT PENDING REFINANCING
HOLDINGS ACQUISITIONS SUBTOTAL ACQUISITIONS ADJUSTMENTS TOTAL
---------- ------------ ---------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT CUSTOMER DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues.................... $ 286,135 $ 24,483 $ 310,618 $ 134,653 $ -- $ 445,271
---------- ---------- ---------- ---------- -------- -----------
Operating expenses:
Operating, general and
administrative.......... 152,075 10,881 162,956 73,342 -- 236,298
Corporate expense
charges(a).............. 5,323 724 6,047 1,033 -- 7,080
Depreciation and
amortization............ 153,747 26,098 179,845 79,856 -- 259,701
Management fees........... -- 275 275 2,507 -- 2,782
---------- ---------- ---------- ---------- -------- -----------
Total operating
expenses.............. 311,145 37,978 349,123 156,738 -- 505,861
---------- ---------- ---------- ---------- -------- -----------
Loss from operations........ (25,010) (13,495) (38,505) (22,085) -- (60,590)
Interest expense............ (71,591) (14,586) (86,177) (38,514) (13,550) (138,241)
Interest income............. 1,733 108 1,841 151 -- 1,992
Other income (expense)...... 15 -- 15 (137) -- (122)
---------- ---------- ---------- ---------- -------- -----------
Net loss.................... $ (94,853) $ (27,973) $ (122,826) $ (60,585) $(13,550) $ (196,961)
========== ========== ========== ========== ======== ===========
OTHER FINANCIAL DATA:
EBITDA(b)................... $ 130,485 $ 12,711 $ 143,196 $ 57,785 $ 200,981
EBITDA margin(c)............ 45.6% 51.9% 46.1% 42.9% 45.1%
Adjusted EBITDA(d).......... 134,060 13,602 147,662 61,311 208,973
Cash flows from operating
activities................ 45,824 5,390 51,214 31,790 83,004
Cash interest expense....... 109,186
Capital expenditures........ $ 109,629 $ 3,653 $ 113,282 $ 39,815 $ 153,097
Total debt to annualized
EBITDA.................... 8.2x
Total debt to annualized
Adjusted EBITDA........... 7.9
EBITDA to cash interest
expense................... 1.8
EBITDA to interest
expense................... 1.5
Deficiency of earnings to
cover fixed charges(e).... $ 196,961
BALANCE SHEET DATA (AT END
OF PERIOD):
Total assets................ $8,357,282 $ 12,027 $8,369,309 $3,271,029 $ -- $11,640,338
Total debt.................. 4,754,018 -- 4,754,018 1,869,158 -- 6,623,176
Members' equity............. 3,326,142 -- 3,326,142 1,325,000 -- 4,651,142
</TABLE>
12
<PAGE> 16
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
---------------------------------------------------------------------------------
CHARTER RECENT PENDING REFINANCING
HOLDINGS ACQUISITIONS SUBTOTAL ACQUISITIONS ADJUSTMENTS TOTAL
---------- ------------ ---------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT CUSTOMER DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA (AT END OF
PERIOD, EXCEPT FOR
AVERAGES):
Homes passed................ 4,161,000 293,000 4,454,000 1,622,000 6,076,000
Basic customers............. 2,364,000 200,000 2,564,000 1,111,000 3,675,000
Basic penetration(f)........ 56.8% 68.3% 57.6% 68.5% 60.5%
Premium units............... 1,347,000 83,000 1,430,000 671,000 2,101,000
Premium penetration(g)...... 57.0% 41.5% 55.8% 60.4% 57.2%
Average monthly revenue per
basic customer(h)......... $ 40.35 $ 40.81 $ 40.38 $ 40.40 $ 40.39
</TABLE>
13
<PAGE> 17
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
----------------------------------------------------------------------------------------------
CHARTER RECENT PENDING REFINANCING
HOLDINGS MARCUS ACQUISITIONS SUBTOTAL ACQUISITIONS ADJUSTMENTS TOTAL
---------- ---------- ------------ ---------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT CUSTOMER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.............. $ 611,690 $ 448,192 $ 93,316 $1,153,198 $ 504,125 $ -- $ 1,657,323
---------- ---------- ---------- ---------- ---------- -------- -----------
Operating expenses:
Operating, general
and
administrative.... 310,100 231,050 43,357 584,507 262,852 -- 847,359
Corporate expenses
charges(a)........ 16,493 17,042 2,786 36,321 3,973 -- 40,294
Depreciation and
amortization...... 375,899 252,855 53,004 681,758 274,727 -- 956,485
Management fees..... -- -- 1,077 1,077 13,595 -- 14,672
---------- ---------- ---------- ---------- ---------- -------- -----------
Total operating
expenses........ 702,492 500,947 100,224 1,303,663 555,147 -- 1,858,810
---------- ---------- ---------- ---------- ---------- -------- -----------
Loss from
operations.......... (90,802) (52,755) (6,908) (150,465) (51,022) -- (201,487)
Interest expense...... (207,468) (137,953) (61,757) (407,178) (150,243) 4,400 (553,021)
Other income
(expense)........... 518 -- 437 955 (6,299) -- (5,344)
---------- ---------- ---------- ---------- ---------- -------- -----------
Net loss.............. $(297,752) $(190,708) $ (68,228) $ (556,688) $ (207,564) $ 4,400 $ (759,852)
========== ========== ========== ========== ========== ======== ===========
OTHER FINANCIAL DATA:
EBITDA(b)............. $ 285,615 $ 200,100 $ 46,533 $ 532,248 $ 217,406 $ 749,654
EBITDA margin(c)...... 46.7% 44.6% 49.9% 46.2% 43.1% 45.2%
Adjusted EBITDA(d).... 301,590 217,142 49,959 568,691 241,273 809,964
Cash flows from
operating
activities.......... 137,160 139,908 12,399 289,467 61,995 351,462
Cash interest
expense............. 436,432
Capital
expenditures........ $ 213,353 $ 224,723 $ 5,001 $ 443,077 $ 86,106 $ 529,183
Total debt to
EBITDA.............. 8.8x
Total debt to Adjusted
EBITDA.............. 8.1
EBITDA to cash
interest expense.... 1.7
EBITDA to interest
expense............. 1.4
Deficiency of earnings
to cover fixed
charges(e).......... $ 759,852
BALANCE SHEET DATA (AT
END OF PERIOD):
Total assets.......... $7,235,656 $ -- $ 716,060 $7,951,716 $3,634,684 $125,000 $11,711,400
Total debt............ 3,523,201 -- 703,000 4,226,201 2,204,821 128,602 6,559,624
Members' equity....... 3,429,291 -- -- 3,429,291 1,325,000 (3,602) 4,750,689
</TABLE>
14
<PAGE> 18
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
----------------------------------------------------------------------------------------------
CHARTER RECENT PENDING REFINANCING
HOLDINGS MARCUS ACQUISITIONS SUBTOTAL ACQUISITIONS ADJUSTMENTS TOTAL
---------- ---------- ------------ ---------- ------------ ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT CUSTOMER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA (AT END OF
PERIOD, EXCEPT FOR
AVERAGES):
Homes passed................ 2,149,000 1,743,000 289,000 4,181,000 1,506,000 5,687,000
Basic customers............. 1,255,000 1,062,000 195,000 2,512,000 1,105,000 3,617,000
Basic penetration(f)........ 58.4% 60.9% 67.5% 60.1% 73.4% 63.6%
Premium units............... 845,000 411,000 87,000 1,343,000 724,000 2,067,000
Premium penetration(g)...... 67.3% 38.7% 44.6% 53.5% 65.5% 57.1%
Average monthly revenue per
basic customer(h)......... NM NM $ 39.88 $ 32.26 $ 38.02 $ 38.18
</TABLE>
- -------------------------
(a) Charter Communications, Inc. provided corporate management and consulting
services to Charter Holdings during 1998 and 1999, and to Marcus Holdings
beginning in October 1998. See "Certain Relationships and Related
Transactions."
(b) EBITDA represents earnings (loss) before interest expense, income taxes,
depreciation and amortization. EBITDA is presented because it is a widely
accepted financial indicator of a cable television company's ability to
service indebtedness. However, EBITDA should not be considered as an
alternative to income from operations or to cash flows from operating,
investing or financing activities, as determined in accordance with
generally accepted accounting principles. EBITDA should also not be
construed as an indication of a company's operating performance or as a
measure of liquidity. Management's discretionary use of funds depicted by
EBITDA may be limited by working capital, debt service and capital
expenditure requirements and by restrictions related to legal requirements,
commitments and uncertainties.
(c) EBITDA margin represents EBITDA as a percentage of revenues.
(d) Adjusted EBITDA means EBITDA before corporate expenses, management fees and
other income (expense) in accordance with the term "Consolidated EBITDA"
used in the indentures governing the notes. See "Description of Notes" for a
complete presentation of the methodology employed in calculating Adjusted
EBITDA. Adjusted EBITDA is presented because it is a widely accepted
financial indicator of a cable company's ability to meet its debt payments
and because it is used in the indentures to determine compliance with
certain covenants. However, Adjusted EBITDA should not be considered as an
alternative to income from operations or to cash flows from operating,
investing or financing activities, as determined in accordance with
generally accepted accounting principles. Adjusted EBITDA should also not be
construed as an indication of a company's operating performance or as a
measure of liquidity. In addition, because Adjusted EBITDA is not calculated
identically by all companies, the presentation here may not be comparable to
other similarly titled measures of other companies. Management's
discretionary use of funds depicted by Adjusted EBITDA may be limited by
working capital, debt service and capital expenditure requirements and by
restrictions related to legal requirements, commitments and uncertainties.
(e) Earnings include net income (loss) plus fixed charges. Fixed charges consist
of interest expense and an estimated interest component of rent expense.
(f) Basic penetration represents basic customers as a percentage of homes
passed. Homes passed are the number of single residence homes, apartments
and condominium units passed by the cable distribution network in a given
cable system service area.
(g) Premium penetration represents premium units as a percentage of basic
customers.
(h) Average monthly revenue per basic customer represents revenues divided by
the number of months in the period divided by the number of basic customers
at period end.
See "Notes to the Unaudited Pro Forma Financial Statements."
15
<PAGE> 19
UNAUDITED SUMMARY HISTORICAL COMBINED FINANCIAL AND OPERATING DATA
The Unaudited Summary Historical Combined Financial and Operating Data for
the years ended December 31, 1996, 1997 and 1998 have been derived from the
separate financial statements of Charter Holdings, CCA Group, and CharterComm
Holdings, which have been audited by Arthur Andersen LLP, independent public
accountants, and are included elsewhere in this prospectus. The combined
financial and operating data represent the sum of the results of each of our
operating subsidiaries. Each of the companies was managed by Charter
Communications, Inc. under the terms of its respective management agreement with
such company during the presented periods. Since our operating subsidiaries were
under common management, we believe presenting combined financial information of
these companies is informative.
As a result of the acquisition of us by Paul G. Allen, we have applied
purchase accounting, whereby all separately identifiable assets and liabilities
are recorded at fair value with the excess purchase price recorded as
franchises, which had the effect of increasing total assets, total debt and
members' equity as of December 23, 1998. In addition, we have retroactively
restated our financial statements to include the results of operations of Marcus
Cable for the period from December 24, 1998 through December 31, 1998, and the
balance sheet of Marcus Cable as of December 31, 1998. As a result of our
acquisition by Mr. Allen and our merger with Marcus Holdings, we believe that
the periods on or prior to December 23, 1998 are not comparable to the periods
after December 23, 1998.
16
<PAGE> 20
<TABLE>
<CAPTION>
CHARTER HOLDINGS, CCA GROUP,
AND CHARTERCOMM HOLDINGS
-----------------------------------------------
YEAR ENDED DECEMBER 31, 1/1/98 12/24/98
----------------------- THROUGH THROUGH
1996 1997 12/23/98 12/31/98
---------- ---------- -------- ----------
(DOLLARS IN THOUSANDS,
EXCEPT CUSTOMER DATA)
<S> <C> <C> <C> <C>
COMBINED STATEMENT OF OPERATIONS:
Revenues.................................. $ 368,553 $ 484,155 $570,964 $ 23,450
---------- ---------- -------- ----------
Operating expenses:
Operating, general and administrative... 190,084 249,419 288,428 12,679
Depreciation and amortization........... 154,273 198,718 240,294 13,811
Management fees/corporate expense
charges(a)........................... 15,094 20,759 38,348 766
---------- ---------- -------- ----------
Total operating expenses............. 359,451 468,896 567,070 27,256
---------- ---------- -------- ----------
Income (loss) from operations............. $ 9,102 $ 15,259 $ 3,894 $ (3,806)
========== ========== ======== ==========
CAPITAL EXPENDITURES...................... $ 110,291 $ 162,607 $195,468 $ 13,672
BALANCE SHEET DATA (AT END OF PERIOD):
Total assets.............................. $1,660,242 $2,002,181 $7,235,656
Total debt................................ 1,195,899 1,846,159 3,523,201
Members' equity........................... 26,099 (80,505) 3,429,291
OPERATING DATA (AT END OF PERIOD, EXCEPT
FOR AVERAGES):
Homes passed.............................. 1,546,000 1,915,000 3,892,000
Basic customers........................... 902,000 1,086,000 2,317,000
Basic penetration(b)...................... 58.3% 56.7% 59.5%
Premium units............................. 517,000 629,000 1,256,000
Premium penetration(c).................... 57.3% 57.9% 54.2%
</TABLE>
- -------------------------
(a) Charter Communications, Inc. provided corporate management and consulting
services to us. CCA Group, and CharterComm Holdings paid fees to Charter
Communications, Inc. as compensation for such services and recorded such
fees as expense. See "Certain Relationships and Related Transactions."
Charter Holdings recorded charges for actual corporate expenses incurred by
Charter Communications, Inc. on behalf of Charter Holdings. Management
fees/corporate expense charges for the year ended December 31, 1998 include
$14.4 million of change of control payments under the terms of then-existing
equity appreciation rights plans. Such payments were triggered by the
acquisition of us by Paul G. Allen. Such payments were made by Charter
Communications, Inc. and were not subject to reimbursement by us but were
allocated to us for financial reporting purposes. The equity appreciation
rights plans were terminated in connection with our acquisition by Mr.
Allen, and these costs will not recur.
(b) Basic penetration represents basic customers as a percentage of homes
passed.
(c) Premium penetration represents premium units as a percentage of basic
customers.
17
<PAGE> 21
RISK FACTORS
The new notes, like the old notes, entail the following risks. You should
carefully consider these risk factors, as well as the other information in this
prospectus, before tendering original notes in exchange for new notes.
WE HAVE SUBSTANTIAL EXISTING DEBT AND WILL INCUR SUBSTANTIAL ADDITIONAL DEBT
WHICH COULD ADVERSELY AFFECT OUR FINANCIAL HEALTH AND PREVENT US FROM FULFILLING
OUR OBLIGATIONS UNDER THE NOTES.
We have a significant amount of debt. As of March 31, 1999, pro forma for
our recent and pending acquisitions, our total indebtedness would have been
approximately $6.6 billion, our total members' equity would have been
approximately $4.7 billion, and the deficiency of our earnings available to
cover fixed charges would have been approximately $197 million. Our substantial
debt could have important consequences to you. For example, it could:
- make it more difficult for us to satisfy our obligations to you with
respect to the notes and to satisfy our obligations under our credit
facilities;
- increase our vulnerability to general adverse economic and cable industry
conditions, including interest rate fluctuations;
- require us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, which will reduce our funds
available for working capital, capital expenditures, acquisitions of
additional systems and other general corporate requirements;
- limit our flexibility in planning for, or reacting to, changes in our
business and the cable industry generally;
- place us at a competitive disadvantage compared to our competitors that
have proportionately less debt;
- limit our ability to borrow additional funds, if we need them, due to
applicable financial and restrictive covenants in such indebtedness; and
- increase our interest expenses above current levels due to increases in
interest rates, since much of our borrowings are and will continue to be
at variable rates of interest.
We anticipate incurring substantial additional debt in the future to
finance additional acquisitions and to fund the expansion, maintenance and the
upgrade of our systems. If new debt is added to our current debt levels, the
related risks that we and you now face could intensify.
OUR ABILITY TO GENERATE THE SIGNIFICANT AMOUNT OF CASH NEEDED TO SERVICE OUR
DEBT AND GROW OUR BUSINESS DEPENDS ON MANY FACTORS BEYOND OUR CONTROL.
Our ability to make payments on our debt, including the notes, and to fund
our planned capital expenditures for upgrading our cable systems and for other
purposes will depend on our ability to generate cash and secure financing in the
future. This, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory and other factors that are beyond our
control. If our business does not generate sufficient cash flow from operations,
and sufficient future borrowings are not available to us under our
18
<PAGE> 22
credit facilities or from other sources of financing, we may not be able to
repay our indebtedness, including the notes, to grow our business or to fund our
other liquidity needs.
THE AGREEMENTS AND INSTRUMENTS GOVERNING OUR DEBT CONTAIN RESTRICTIONS AND
LIMITATIONS WHICH COULD SIGNIFICANTLY IMPACT OUR ABILITY TO OPERATE OUR BUSINESS
AND REPAY THE NOTES.
Our credit facilities and the indentures governing the notes contain a
number of significant covenants that, among other things, restrict the ability
of our subsidiaries to:
- pay dividends;
- pledge assets;
- dispose of assets or merge;
- incur additional indebtedness;
- issue equity;
- repurchase or redeem equity interests and indebtedness;
- create liens; and
- make certain investments or acquisitions.
In addition, our credit facilities contain, among other covenants:
- covenants, such as financial maintenance ratios, which may restrict the
ability of our subsidiaries to distribute funds to service principal and
interest payments on the notes; and
- requirements that Charter Operating, the borrower on a consolidated basis
with our other subsidiaries, maintain specified financial ratios.
The ability to comply with these provisions may be affected by events
beyond our control. The breach of any of these covenants will result in a
default under the applicable debt agreement or instrument. In the event of a
default under our credit facilities, lenders could elect to declare all amounts
borrowed, together with accrued and unpaid interest and other fees, to be due
and payable and in any event when a default exists under our credit facilities,
funds may not be distributed by Charter Operating to Charter Holdings to pay
interest or principal on the notes. Additionally, if the amounts outstanding
under our credit facilities are accelerated, thereby causing an acceleration of
amounts outstanding under the notes, we may not be able to repay such amounts or
the notes. If the 8.250% notes are not refinanced at least six months prior to
the date of their maturity, the entire amount due under our credit facilities
will become due and payable and we may not have the ability to make such
payment.
WE HAVE GROWN RAPIDLY AND HAVE A LIMITED HISTORY OF OPERATING OUR CURRENT
SYSTEMS. THIS MAKES IT DIFFICULT FOR YOU TO COMPLETELY EVALUATE OUR PERFORMANCE.
We commenced active operations in 1995 and have grown rapidly since then
through acquisitions of cable systems. Our merger with Marcus Holdings on April
7, 1999 nearly doubled the number of customers we serve. Additionally, our
recent and pending acquisitions will increase the number of customers served by
our systems by approximately 55%. As a result, historical financial information
about us may not be indicative of the future or of results that can be achieved
by us with the cable systems which will be under our control. Although we have
experienced internal customer growth, recent growth in
19
<PAGE> 23
revenue, and growth in EBITDA, there can be no assurance that growth or positive
cash flow will continue to be achieved within the combined systems or other
systems we may acquire in the future.
WE HAVE A HISTORY OF NET LOSSES AND EXPECT TO CONTINUE TO EXPERIENCE NET LOSSES.
CONSEQUENTLY, WE MAY NOT HAVE THE ABILITY TO FINANCE OUR FUTURE OPERATIONS.
We have had a history of net losses and expect to continue to report net
losses for the foreseeable future. We reported net losses from continuing
operations, before extraordinary items, of $157 million for 1997 and $200
million for 1998. The companies we acquired through our merger with Marcus
Holdings reported net losses from continuing operations, before extraordinary
items, of $109 million for 1997 and $248 million for 1998. We cannot predict
what impact, if any, continued losses will have on our ability to finance our
operations in the future.
IF OUR CAPITAL INVESTMENT PROGRAM DOES NOT RESULT IN SUFFICIENTLY INCREASED
REVENUES, WE MAY NOT BE ABLE TO OBTAIN ADDITIONAL CAPITAL TO FUND OUR PLANNED
UPGRADES AND OTHER CAPITAL EXPENDITURES. THIS COULD ADVERSELY AFFECT OUR ABILITY
TO OFFER NEW SERVICES, WHICH COULD ADVERSELY AFFECT OUR GROWTH, OUR FINANCIAL
CONDITION AND OUR RESULTS OF OPERATIONS.
We intend to upgrade a significant portion of our cable systems over the
coming years and make other capital investments. Over the next three years, we
plan to spend approximately $900 million, or $1.2 billion pro forma including
our recent and pending acquisitions, to upgrade our existing systems. We also
plan to spend an additional $900 million, or $1.3 billion pro forma for our
recent and pending acquisitions, to maintain and expand our existing systems. As
we make additional acquisitions, we expect that our need to make additional
capital expenditures will increase. If we cannot obtain the funds we need, we
may not be able to fund these planned upgrades and other capital expenditures.
Consequently, our growth, our financial condition and the results of our
operations could suffer materially.
IF WE ARE UNSUCCESSFUL IN IMPLEMENTING OUR GROWTH STRATEGY, WE MAY BE UNABLE TO
FULFILL OUR OBLIGATIONS UNDER THE NOTES.
We expect that a substantial portion of our future growth will be achieved
through revenues from new and enhanced services and the acquisition of
additional cable systems. We cannot assure you that we will be able to offer new
services successfully to our customers or that those new services will generate
revenues. In addition, we cannot predict the success of our acquisition
strategy. Recently, the cable television industry has undergone significant
consolidation which has reduced the number of future acquisition prospects for
us. Additionally, those acquisitions we do complete are not likely to have a
positive net impact on our operating results in the near future. If we are
unable to grow our cash flow sufficiently, we may be unable to fulfill our
obligations to you under the notes or obtain alternative financing.
WE MAY NOT HAVE THE ABILITY TO INTEGRATE THE NEW SYSTEMS THAT WE ACQUIRE AND THE
CUSTOMERS THEY SERVE WITH OUR EXISTING SYSTEMS. THIS COULD ADVERSELY AFFECT OUR
OPERATING RESULTS AS WELL AS OUR GROWTH STRATEGY.
Upon the completion of our recent and pending acquisitions, we will own and
operate cable systems serving approximately 3.7 million customers, as compared
to the cable
20
<PAGE> 24
systems we currently own which serve approximately 2.4 million customers as of
March 31, 1999. In addition, we expect to acquire more cable systems in the
future. This strategy poses the following risks:
- The integration of these new systems and customers will place significant
demands on our management and our operational, financial and marketing
resources. Our current operating and financial systems and controls may
not be adequate, and any steps taken to improve these systems and
controls may not be sufficient.
- Acquired businesses sometimes result in unexpected liabilities and
contingencies which could be expensive and might hinder our growth.
- Our continued growth will also increase our need for qualified personnel.
We may not be able to hire such additional qualified personnel.
Potentially successful acquisitions initially may be a material drain on
our cash and other resources while we integrate them with our other systems. We
cannot assure you that we will successfully integrate any acquired systems into
our operations. The fact that we are aggressively seeking and attempting to
complete acquisitions enhances these risks.
THE FAILURE TO OBTAIN NECESSARY REGULATORY APPROVALS, OR TO SATISFY OTHER
CLOSING CONDITIONS, COULD IMPEDE THE CONSUMMATION OF A PENDING ACQUISITION,
THEREBY PREVENTING OR DELAYING OUR STRATEGY TO EXPAND OUR BUSINESS AND INCREASE
REVENUES.
Our pending acquisitions are subject to regulatory approvals, including the
approval of the relevant public utilities commission in the state of the cable
systems to be acquired where relevant. No assurance can be given that the
necessary approvals will be received. These pending acquisitions are also
subject to certain other closing conditions. There can be no assurance as to
when, or if, each such acquisition will be consummated. Any delay, prohibition
or modification could adversely affect the terms of a pending acquisition or
could require us to abandon an otherwise attractive opportunity and possible
forfeit earnest money.
THE NOTES ARE THE OBLIGATIONS OF A HOLDING COMPANY WHICH HAS NO OPERATIONS AND
DEPENDS ON ITS OPERATING SUBSIDIARIES FOR CASH. OUR SUBSIDIARIES MAY BE LIMITED
IN THEIR ABILITY TO MAKE FUNDS AVAILABLE FOR THE PAYMENT OF AMOUNTS DUE UNDER
THE NOTES.
As a holding company, Charter Holdings does not hold substantial assets
other than its direct or indirect investments in and advances to our operating
subsidiaries. Consequently, our subsidiaries conduct all of our operations and
own substantially all of our assets. As a result, our cash flow and our ability
to meet our debt payment obligations on the notes will depend upon the cash flow
of our subsidiaries and the payment of funds by our subsidiaries to us in the
form of loans, equity distributions or otherwise. Our subsidiaries are not
obligated to make funds available to us for payment on the notes. In addition,
our subsidiaries' ability to make any such loans, equity distributions or other
payments to us will depend on their earnings, the terms of their indebtedness,
business and tax considerations and legal restrictions.
Because of our holding company structure, the notes will be subordinate to
all liabilities of our subsidiaries. Under our credit facilities Charter
Operating is the borrower, and our other subsidiaries are guarantors. The
lenders under our credit facilities will have the right to be paid before you
from any of our subsidiaries' assets. In the event of
21
<PAGE> 25
bankruptcy, liquidation or dissolution of a subsidiary, following payment by
such subsidiary of its liabilities, such subsidiary may not have sufficient
assets remaining to make payments to us as a shareholder or otherwise.
OUR PROGRAMMING COSTS ARE INCREASING. WE MAY NOT HAVE THE ABILITY TO PASS THESE
INCREASES ON TO OUR CUSTOMERS, WHICH WOULD ADVERSELY AFFECT OUR PROFITABILITY
AND CASH FLOW.
Programming has been and is expected to continue to be our largest single
expense item. The combined programming costs of Charter Holdings, CCA Group, and
CharterComm Holdings were equal to approximately 21% of revenues in 1998. In
recent years the cable industry has experienced a rapid escalation in the cost
of programming, in particular, sports programming. Our programming costs for the
services carried on our basic and expanded basic levels of service increased by
approximately 12%, on a per customer basis, from 1997 to 1998. This escalation
may continue and we may not be able to pass programming cost increases on to our
customers. In addition, as we upgrade the channel capacity of our systems and
add programming to our basic and expanded basic tiers, and reposition premium
services to the basic tier, we may face additional market constraints on our
ability to pass programming costs on to our customers. The inability to pass
these increases on to our customers will affect our profitability and cash flow.
OUR PRINCIPAL EQUITY HOLDER MAY HAVE INTERESTS ADVERSE TO YOUR INTERESTS.
Paul G. Allen beneficially owns approximately 96% of our outstanding equity
interests on a fully diluted basis. Accordingly, Mr. Allen has the ability to
control fundamental corporate transactions requiring equity holder approval,
including without limitation, election of directors, approval of merger
transactions involving us and sales of all or substantially all of our assets.
Mr. Allen may make decisions which are adverse to your interests. There can be
no assurance that the interests of either Mr. Allen or his affiliates will not
conflict with the interests of the holders of the notes.
OUR MANAGEMENT WILL BE RESPONSIBLE FOR MANAGING OTHER CABLE OPERATIONS AND WILL
NOT DEVOTE THEIR FULL TIME TO OUR OPERATIONS. THIS COULD IMPAIR OUR OPERATING
RESULTS AND GIVE RISE TO CONFLICTS OF INTEREST.
Mr. Allen has agreed to acquire and may, from time to time in the future,
acquire cable systems in addition to those owned or acquired by us. To date,
affiliates of Mr. Allen have signed agreements to purchase cable systems with a
total of approximately 1.8 million customers. Charter Communications, Inc., of
which Mr. Allen is the majority owner, as well as some of the officers of
Charter Communications, Inc. who currently manage our cable systems, will have a
substantial role in managing these outside systems. Charter Communications, Inc.
and its officers and employees now devote substantially all of their time to
managing our systems. However, when such persons begin to manage outside cable
systems as well, the time they devote to managing our systems will be
correspondingly reduced. This could impair our results of operations. Moreover,
allocating managers' time and other resources of Charter Communications, Inc.
between our systems and outside systems held by Mr. Allen could give rise to
conflicts of interest. Charter Communications, Inc. does not have or plan to
create formal procedures for determining whether and to what extent outside
cable television systems described above will receive priority with respect to
personnel requirements.
22
<PAGE> 26
THE LOSS OF CERTAIN KEY EXECUTIVES COULD ADVERSELY AFFECT OUR ABILITY TO MANAGE
OUR BUSINESS.
Our operations are managed by Charter Communications, Inc. which, in turn,
is managed by a small number of key executive officers, including Jerald L.
Kent. The loss of the services of these individuals, and, in particular, of Mr.
Kent, could adversely affect our ability to manage our business which, in turn,
could adversely affect our financial condition and results of operations.
THERE IS NO PUBLIC MARKET FOR THE NOTES. AN ACTIVE MARKET MAY NOT DEVELOP
CAUSING DIFFICULTIES FOR YOU IF YOU TRY TO RESELL THE NOTES.
The new notes will be new securities for which there is currently no public
market. We do not intend to list the new notes on any national securities
exchange or quotation system. There can be no assurance as to the development of
any market or liquidity of any market that may develop for the new notes. If a
trading market does not develop or is not maintained, you may experience
difficulty in reselling new notes, or you may be unable to sell them at all.
IF YOU FAIL TO EXCHANGE YOUR ORIGINAL NOTES FOR NEW NOTES, SUCH ORIGINAL NOTES
WILL REMAIN SUBJECT TO RESTRICTIONS ON TRANSFER. ACCORDINGLY, THE LIQUIDITY OF
THE MARKET FOR THE ORIGINAL NOTES COULD BE ADVERSELY AFFECTED.
Holders of original notes who do not exchange their original notes for new
notes pursuant to the exchange offer will continue to be subject to the
restrictions on transfer of the original notes set forth in the legend on the
original notes. This is a consequence of the issuance of the original notes
pursuant to an exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act. In general, original notes may
not be offered or sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. If we complete the exchange
offer, we will not be required to register the original notes, and we do not
anticipate that we will register the original notes, under the Securities Act.
Additionally, to the extent that original notes are tendered and accepted in the
exchange offer, the aggregate principal amount of original notes outstanding
will decrease, with a resulting decrease in the liquidity of the market for the
original notes.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FULFILL OUR
OBLIGATIONS UNDER THE NOTES FOLLOWING A CHANGE OF CONTROL OFFER. THIS WOULD
PLACE US IN DEFAULT UNDER THE INDENTURES GOVERNING THE NOTES.
Under the indentures governing the notes, upon the occurrence of specified
change of control events, we will be required to offer to repurchase all
outstanding notes. However, we may not have sufficient funds at the time of the
change of control event to make the required repurchase of the notes. In
addition, a change of control would require the repayment of borrowings under
our credit facilities. Because the credit facilities are obligations of our
subsidiaries, the credit facilities would have to be repaid by our subsidiaries
before their assets could be used to repurchase the notes. Our failure to make
or complete an offer to repurchase the notes would place us in default under the
indentures.
23
<PAGE> 27
THE 9.920% NOTES WILL BE ISSUED WITH ORIGINAL ISSUE DISCOUNT. CONSEQUENTLY,
HOLDERS OF 9.920% NOTES WILL GENERALLY BE REQUIRED TO INCLUDE AMOUNTS IN GROSS
INCOME FOR FEDERAL INCOME TAX PURPOSES IN ADVANCE OF RECEIVING CASH.
The 9.920% notes will be issued at a substantial discount from their stated
principal amount. As a result, purchasers of such notes generally will be
required to include the accrued portion of such discount in gross income, as
interest, for federal tax purposes in advance of the receipt of cash payments of
such interest.
IF A BANKRUPTCY PETITION WERE FILED BY OR AGAINST US, YOU MAY RECEIVE A LESSER
AMOUNT FOR YOUR CLAIM THAN YOU WOULD BE ENTITLED TO RECEIVE UNDER THE INDENTURE
GOVERNING THE 9.920% NOTES, AND YOU MAY REALIZE TAXABLE GAIN OR LOSS UPON
PAYMENT OF YOUR CLAIM.
If a bankruptcy petition were filed by or against us under the U.S.
Bankruptcy Code after the issuance of the 9.920% notes, the claim by a holder of
such notes for the principal amount of such notes may be limited to an amount
equal to the sum of:
(1) the initial offering price for such notes; and
(2) that portion of the original issue discount that does not constitute
"unmatured interest" for purposes of the U.S. Bankruptcy Code.
Any original issue discount that was not amortized as of the date of the
bankruptcy filing would constitute unmatured interest. Accordingly, holders of
9.920% notes under these circumstances may receive a lesser amount than they
would be entitled to receive under the terms of the indenture governing the
9.920% notes, even if sufficient funds are available. In addition, to the extent
that the U.S. Bankruptcy Code differs from the Internal Revenue Code in
determining the method of amortization of original issue discount, a holder of
9.920% notes may realize taxable gain or loss upon payment of that holder's
claim in bankruptcy.
IF WE DO NOT FULFILL OUR OBLIGATIONS TO YOU UNDER THE NOTES, YOU WILL NOT HAVE
ANY RECOURSE AGAINST OUR EQUITY HOLDERS OR THEIR AFFILIATES.
The notes will be issued solely by Charter Holdings and Charter Capital.
None of our equity holders, directors, officers, employees or affiliates,
including Paul G. Allen, will be an obligor or guarantor under the notes.
Furthermore, the indentures governing the notes expressly provide that these
parties will not have any liability for our obligations under the notes or the
indentures. By accepting the notes, you waive and release all such liability as
consideration for issuance of the notes. Consequently, if we do not fulfill our
obligations to you under the notes, you will have no recourse against any of
these parties.
Additionally, our equity holders, including Mr. Allen, will be free to
manage other entities, including other cable companies. If we do not fulfill our
obligations to you under the notes, you will have no recourse against those
other entities or their assets. There should be no expectation that Mr. Allen or
our other equity holders will fund our operations or obligations in the future.
WE OPERATE IN A VERY COMPETITIVE BUSINESS ENVIRONMENT WHICH CAN AFFECT OUR
BUSINESS AND OPERATIONS.
The industry in which we operate is highly competitive. In many instances
we compete against companies with fewer regulatory burdens, easier access to
financing, greater personnel resources, greater brand name recognition and
long-standing relationships
24
<PAGE> 28
with regulatory authorities. Mergers, joint ventures and alliances among cable
television operators, regional telephone companies, long distance telephone
service providers, competitive local exchange carriers, providers of cellular
and other wireless communications services and others may result in providers
capable of offering cable television and other telecommunications services in
direct competition with us. Additionally, the Federal Communications Commission
and the U.S. Congress are considering proposals to enhance the ability of direct
broadcast satellite providers to gain access to additional programming, and to
authorize them to transmit local broadcast signals to local markets on a broader
basis than permitted under current law. If they gain permission and are able to
deliver local or regional broadcast signals more broadly, cable system operators
will lose a competitive advantage over direct broadcast satellite providers.
We also face competition within the subscription television industry from
non-cable technologies for distributing television broadcast signals. Current
and potential competitors include:
- direct broadcast satellite providers, which transmit signals via
satellite;
- multichannel multipoint distribution systems, or wireless cable, which
distributes cable television signals through microwave signals; and
- operators of satellite master antenna television systems, a distribution
system that feeds satellite signals, usually to multiple dwelling units
such as hotels and apartments.
Electric utilities also have the potential to become significant
competitors in the video marketplace, as many of them already possess fiber
optic transmission lines, which are capable of transmitting signals over long
distances with minimum signal loss or distortion, in certain of the areas they
serve. We also face competition from other communications and entertainment
media, including conventional off-air television and radio broadcasting
services, newspapers, movie theaters, the Internet, live sports events and home
video products.
We hope that upgrading our cable systems will give us an advantage over our
competitors, although we cannot assure you that such upgrades will allow us to
compete effectively. Additionally, as we expand and introduce new and enhanced
services, including additional telecommunications services, we will be subject
to competition from other telecommunications providers. Advances in
communications technology and changes in the marketplace and the regulatory and
legislative environment are constantly occurring. We cannot predict the specific
effect ongoing or future developments might have on us or the general effect
these developments might have on the cable television industry. We also cannot
predict the extent to which this competition may affect our business and
operations in the future.
WE OPERATE OUR CABLE SYSTEMS UNDER FRANCHISES WHICH ARE NON-EXCLUSIVE. LOCAL
FRANCHISING AUTHORITIES CAN GRANT ADDITIONAL FRANCHISES AND CREATE COMPETITION
IN MARKET AREAS WHERE NONE EXISTED PREVIOUSLY.
Our cable systems are operated under franchises granted by local
franchising authorities. These franchises are non-exclusive. Consequently, such
local franchising authorities can grant additional franchises to competitors in
the same geographic area. As a result, competing operators may build systems in
areas in which we hold franchises. The existence of more than one cable system
operating in the same territory is referred to as an overbuild. Overbuilds can
affect our ability to compete. We are currently aware of
25
<PAGE> 29
overbuild situations in six of our systems and potential overbuild situations in
another four of our systems, together representing a total of approximately
89,000 customers. Although these overbuild situations are relatively uncommon,
they may occur in additional systems.
WE MAY NOT BE ABLE TO FUND THE CAPITAL EXPENDITURES NECESSARY TO KEEP PACE WITH
TECHNOLOGICAL DEVELOPMENTS OR OUR CUSTOMERS' DEMAND FOR NEW PRODUCTS OR
SERVICES. THIS COULD LIMIT OUR ABILITY TO COMPETE EFFECTIVELY.
The cable business is characterized by rapid technological change and the
introduction of new products and services. There can be no assurance that we
will be able to fund the capital expenditures necessary to keep pace with
technological developments or that we will successfully anticipate the demand of
our customers for products or services requiring new technology. Our inability
to provide enhanced services in a timely manner or to anticipate the demands of
the market place could have a material adverse effect on our ability to compete
and, consequently, on our business, results of operations and financial
condition.
OUR BUSINESS IS SUBJECT TO EXTENSIVE GOVERNMENTAL LEGISLATION AND REGULATION.
THE APPLICABLE LEGISLATION AND REGULATIONS, AND CHANGES TO THEM, COULD ADVERSELY
AFFECT OUR BUSINESS BY INCREASING OUR EXPENSES.
Regulation of the cable industry has increased the administrative and
operational expenses of cable systems and has resulted in additional oversight
by the Federal Communications Commission and state local franchising
authorities. Cable operators are subject to, among other things:
- rate regulations;
- requirements that, under certain circumstances, a cable system carry a
local broadcast station or obtain consent to carry a local or distant
broadcast station;
- rules for franchise renewals and transfers; and
- other requirements covering a variety of operational areas such as equal
employment opportunity, technical standards and customer service
requirements.
Additionally, many aspects of such regulation are currently the subject of
judicial proceedings and administrative or legislative proposals. Among these is
a proposal which would require cable operators to provide access to their cable
networks to other Internet service providers such as telephone companies. There
are also ongoing efforts to amend or expand the state and local regulation of
some of our cable systems, which may compound the regulatory risks we already
face. We expect further such efforts, but cannot predict whether any of the
states or localities in which we now operate will expand regulation of our cable
systems in the future or how they will do so. Legislation and regulations
change, and we cannot predict the impact of future developments on the cable
television industry in general or on us, in particular.
OUR CABLE SYSTEMS ARE OPERATED UNDER FRANCHISES WHICH SUBJECTS US TO REGULATION
BY LOCAL FRANCHISING AUTHORITIES. THIS FURTHER INCREASES OUR EXPENSES.
Our cable systems generally operate pursuant to non-exclusive franchises,
permits or licenses typically granted by a municipality or other state or local
government controlling the public rights-of-way. Franchises are generally
granted for fixed terms and must be periodically renewed. Local franchising
authorities may resist granting a renewal if either past performance or the
prospective operating proposal is considered inadequate. In many cases,
franchises are terminable if the franchisee fails to comply with material
provisions
26
<PAGE> 30
set forth in the franchise agreement governing system operations. Many
franchises establish specific customer service standards and establish monetary
penalties for non-compliance. In addition to the franchise document, cable
authorities have also adopted in some jurisdictions cable regulatory ordinances
that further regulate the operation of cable systems. This additional regulation
increases our expenses in operating our business. We cannot assure you that the
local franchising authorities will not impose new and more restrictive
requirements.
Local franchising authorities also have the power to order refunds of basic
service tier rates paid in the previous twelve-month period determined to be in
excess of the maximum permitted rates. As of March 31, 1999, we have refunded an
aggregate amount of approximately $453,000 since our inception. We may be
required to refund additional amounts in the future.
DESPITE THE CURRENT DEREGULATION OF PRICING GUIDELINES, CONCERNS OVER CABLE RATE
INCREASES COULD GIVE RISE TO FURTHER REGULATION. THIS COULD IMPAIR OUR ABILITY
TO RAISE RATES TO COVER OUR INCREASING COSTS.
As of March 31, 1999, the pricing guidelines of cable programming packages
for all cable operators was deregulated. This affords cable operators
substantially more flexibility in implementing rate changes. However, the
Federal Communications Commission and the U.S. Congress continue to be concerned
that rates for cable services are rising at a rate exceeding inflation. It is
therefore possible that either the U.S. Congress or the Federal Communications
Commission will further restrict the ability of cable television operators to
implement desired rate increases. Should this occur, it could impede our ability
to raise rates to cover increased costs.
IF WE OFFER TELECOMMUNICATIONS SERVICES, WE MAY BE SUBJECT TO ADDITIONAL
REGULATORY BURDENS CAUSING US TO INCUR ADDITIONAL COSTS.
If we enter the business of offering telecommunications services, we may be
required to obtain federal, state and local licenses or other authorizations to
offer such services. We may not be able to obtain such authorizations in a
timely manner, if at all, and conditions could be imposed upon such licenses or
authorizations that may not be favorable to us. Furthermore, telecommunications
companies generally are subject to significant regulation as well as higher fees
for attaching cable wires to poles, known in the cable industry as pole
attachments. In particular, cable operators who provide telecommunications
services and cannot reach agreement with local utilities over pole attachment
rates in states that do not regulate pole attachment rates will be subject to a
methodology prescribed by the Federal Communications Commission for determining
the rates. Such rates may be higher than those paid by cable operators who do
not provide telecommunications services. The rate increases are to be phased in
over a five-year period beginning on February 8, 2001. If we become subject to
telecommunications regulation or higher pole attachment rates, we may incur
additional costs which may be material to our business.
OUR FRANCHISES ARE SUBJECT TO NON-RENEWAL OR TERMINATION. AUTHORITIES MAY
REQUIRE COSTLY CONCESSIONS AS A CONDITION TO RENEWING A FRANCHISE. THE FAILURE
TO RENEW A FRANCHISE COULD ADVERSELY AFFECT OUR BUSINESS IN A KEY MARKET.
Our business is dependent on our ability to obtain and renew our
franchises. Our franchises are subject to non-renewal or termination. In
addition, the franchise authorities often demand concessions or other
commitments as a condition to renewal, which have been and may continue to be
costly to us. In certain cases, franchises have not been
27
<PAGE> 31
renewed at expiration, and we have operated under either temporary operating
agreements or without a license while negotiating renewal terms with the local
franchising authorities. You should be aware that the process of renewing these
franchises increases our cost of doing business. We cannot assure you that we
will be able to renew these franchises. A sustained and material failure to
renew a franchise could adversely affect our business in the affected
metropolitan area.
DATA PROCESSING FAILURES AFTER DECEMBER 31, 1999 COULD SIGNIFICANTLY DISRUPT OUR
OPERATIONS, CAUSING A DECLINE IN CASH FLOW AND REVENUES AND OTHER DIFFICULTIES.
Many existing computer systems and applications, and other control devices
and embedded computer chips use only two chips rather than four to identify a
year, without considering the impact of the upcoming change in the century. As a
result, such systems, applications, devices and chips could create erroneous
results, or might fail altogether, unless corrected to properly interpret data
related to the year 2000 and beyond. In addition, two interacting systems,
applications, devices or chips, each of which has been individually fixed so
that it will properly handle this year 2000 problem, could nonetheless suffer a
failure to integrate because their method of dealing with the problem is not
compatible.
This year 2000 problem impacts our owned or licensed computer systems and
equipment used in connection with internal operations. It also impacts our
non-information technology systems, including embedded systems in our buildings
and other infrastructure. Additionally, since we rely directly and indirectly,
in the regular course of business, on the proper operation and compatibility of
third party systems, the year 2000 problem could cause these systems to fail,
err, or become incompatible with our systems.
We are addressing the year 2000 problem with respect to our internal
operations. Much of our assessment efforts has involved, and depends on,
inquiries to third party service providers. Certain of these third parties that
have certified the readiness of their products will not certify that such
products have operating compatibility within our systems. If we, or a
significant third party with whom we interact with by computers, fails to become
year 2000 ready, or if the year 2000 problem causes our systems to become
internally incompatible or incompatible with key third party systems, our
business could suffer material disruptions, including inability to process
transactions, send invoices, accept customer orders or provide customers with
products and services. We could also face similar disruptions if the year 2000
problem causes general widespread problems or an economic crisis. We cannot now
estimate the extent of these potential disruptions. We cannot assure you that
our efforts to date and our ongoing efforts to prepare for the year 2000 problem
will be sufficient to prevent a material disruption of our operations,
particularly with respect to systems we may acquire prior to December 31, 1999.
Any such disruption could have a material adverse effect on our operations
causing a decline in cash flow and revenues.
28
<PAGE> 32
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements regarding, among other
things, our plans, strategies and prospects, both business and financial.
Although we believe that our plans, intentions and expectations reflected in or
suggested by these forward-looking statements are reasonable, we cannot assure
you that we will achieve or realize these plans, intentions or expectations.
Forward-looking statements are inherently subject to risks, uncertainties and
assumptions. Important factors that could cause actual results to differ
materially from the forward-looking statements we make in this prospectus are
set forth under the caption "Risk Factors" and elsewhere in this prospectus, and
include, but are not limited to:
- our plans to achieve growth by offering new and enhanced services and
through acquisitions;
- our anticipated capital expenditures for our planned upgrades, and the
ability to fund such upgrades;
- our beliefs regarding the affects of governmental regulation on our
business;
- our ability to effectively compete in a highly competitive environment;
and
- our expectations to be ready for any year 2000 problem.
All forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by those cautionary statements.
29
<PAGE> 33
USE OF PROCEEDS
This exchange offer is intended to satisfy certain of our obligations under
the exchange and registration rights agreements entered into in connection with
the offering of the original notes. We will not receive any proceeds from the
exchange offer. In consideration for issuing the new notes, we will receive
original notes with like original principal amount at maturity. The form and
terms of the original notes are the same as the form and terms of the new notes,
except as otherwise described in this prospectus. The original notes surrendered
in exchange for new notes will be retired and canceled and cannot be reissued.
Accordingly, the issuance of the new notes will not result in any increase in
our outstanding debt.
We received net proceeds totaling approximately $2.92 billion from the
private placement of the original notes. Discounts and commissions and other
expenses payable by us totaled approximately $125 million. Some of the net
proceeds were used to complete the cash tender offers in an amount of
approximately $1.0 billion for certain then-outstanding notes of our
subsidiaries. Some of the net proceeds totalling approximately $1.3 billion were
also used to pay-off a portion of our previous credit facilities, including
accrued interest.
30
<PAGE> 34
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 1999 as
adjusted to give effect to additional borrowings under our credit facilities and
an additional equity contribution in connection with our recent acquisitions and
pending acquisitions, as if such transactions had occurred on March 31, 1999.
This table should be read in conjunction with the Unaudited Pro Forma
Financial Statements and the accompanying notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-------------------------
AS
HISTORICAL ADJUSTED
---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CHARTER HOLDINGS:
Cash and cash equivalents(a).............................. $1,038,360 $ 30,464
========== ===========
Long-term debt:
Credit facilities......................................... $1,750,000 $ 3,507,789
8.250% senior notes....................................... 598,398 598,398
8.625% senior notes....................................... 1,495,480 1,495,480
9.920% senior discount notes.............................. 909,055 909,055
Other(b).................................................. 1,085 1,085
10% senior discount notes -- Renaissance(c)............... -- 111,369
---------- -----------
Total long-term debt................................... 4,754,018 6,623,176
Members' equity(d)........................................ 3,326,142 4,651,142
---------- -----------
Total capitalization................................... $8,080,160 $11,274,318
========== ===========
</TABLE>
- -------------------------
(a) We presented cash and cash equivalents historical of $1 billion since we
were required to draw the full amount of the Tranche B term loan under our
credit facilities pursuant to the terms of the credit facilities. Therefore,
Charter Holdings will have cash available pending application of such
amounts to future acquisitions, capital expenditures and other working
capital purposes.
(b) Represents the notes of certain subsidiaries not tendered in connection with
the tender offers.
(c) Represents debt of Renaissance Media Group LLC.
(d) Members' equity, as adjusted, is increased by $1.325 billion, the additional
equity that is expected in connection with our recent and pending
acquisitions.
31
<PAGE> 35
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following Unaudited Pro Forma Financial Statements are based on the
financial statements of Charter Holdings, CCA Group, and CharterComm Holdings,
LLC. They are adjusted to illustrate the estimated effects of our recent
acquisitions and pending acquisitions, as if such acquisitions had occurred on
March 31, 1999 for the Balance Sheet Data and Operating Data and for the
estimated effects of the following transactions as if they had occurred on
January 1, 1998 for the Statement of Operations and Other Financial Data:
(1) the acquisition of us on December 23, 1998 by Paul G. Allen;
(2) the acquisition of Sonic on May 20, 1998 by us;
(3) the acquisition of Marcus Cable on April 23, 1998 by Paul G. Allen;
(4) the acquisitions and dispositions during 1998 by Marcus Cable;
(5) our merger with Marcus Holdings;
(6) our recent acquisitions and pending acquisitions; and
(7) the refinancing of all the debt of our subsidiaries through the
issuance of the original notes and funding under our credit facilities.
The Unaudited Pro Forma Financial Statements reflect the application of the
principles of purchase accounting to the transactions listed in items (1)
through (4) and (6). The allocation of purchase price is based, in part, on
preliminary information which is subject to adjustment upon obtaining complete
valuation information of intangible assets. The valuation information is
expected to be finalized in the third quarter of 1999. However, no significant
adjustments are anticipated.
The unaudited pro forma adjustments are based upon available information
and certain assumptions that we believe are reasonable. The Unaudited Pro Forma
Financial Statements and accompanying notes should be read in conjunction with
the historical financial statements and other financial information appearing
elsewhere in this prospectus, including "Capitalization" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
32
<PAGE> 36
The Unaudited Pro Forma Financial Statements do not purport to be
indicative of what our financial position or results of operations would
actually have been had the transactions above been completed on the dates
indicated or to project our results of operations for any future date.
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
------------------------------------------------------------------------------------
RECENT PENDING REFINANCING
CHARTER ACQUISITIONS ACQUISITIONS ADJUSTMENTS
HOLDINGS (NOTE A) SUBTOTAL (NOTE A) (NOTE B) TOTAL
---------- ------------ ---------- ---------------- ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT CUSTOMER DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues........................ $ 286,135 $ 24,483 $ 310,618 $ 134,653 $ -- $ 445,271
---------- -------- ---------- ---------- ---------- ----------
Operating expenses:
Operating, general and
administrative.............. 152,075 10,881 162,956 73,342 -- 236,298
Corporate expense charges
(Note C).................... 5,323 724 6,047 1,033 -- 7,080
Depreciation and
amortization................ 153,747 26,098 179,845 79,856 -- 259,701
Management fees............... -- 275 275 2,507 -- 2,782
---------- -------- ---------- ---------- ---------- ----------
Total operating expenses.... 311,145 37,978 349,123 156,738 -- 505,861
---------- -------- ---------- ---------- ---------- ----------
Loss from operations............ (25,010) (13,495) (38,505) (22,085) -- (60,590)
Interest expense................ (71,591) (14,586) (86,177) (38,514) (13,550) (138,241)
Interest income................. 1,733 108 1,841 151 -- 1,992
Other income (expense).......... 15 -- 15 (137) -- (122)
---------- -------- ---------- ---------- ---------- ----------
Net income (loss)............... $ (94,853) $(27,973) $ (122,826) $ (60,585) $ (13,550) $ (196,961)
========== ======== ========== ========== ========== ==========
OTHER FINANCIAL DATA:
EBITDA (Note D)................. $ 130,485 $ 12,711 $ 143,196 $ 57,785 $ 200,981
EBITDA margin (Note E).......... 45.6% 51.9% 46.1% 42.9% 45.1%
Adjusted EBITDA (Note F)........ 134,060 13,602 147,662 61,311 208,973
Cash flows from operating
activities.................... 45,824 5,390 51,214 31,790 83,004
Cash interest expense........... 109,186
Capital expenditures............ $ 109,629 $ 3,653 $ 113,282 $ 39,815 $ 153,097
Total debt to annualized
EBITDA........................ 8.2x
Total debt to annualized
Adjusted EBITDA............... 7.9
EBITDA to cash interest
expense....................... 1.8
EBITDA to interest expense...... 1.5
Deficiency of earnings to cover
fixed charges (Note G)........ $ 196,961
OPERATING DATA (AT END OF
PERIOD, EXCEPT FOR AVERAGES):
Homes passed.................... 4,161,000 293,000 4,454,000 1,622,000 6,076,000
Basic customers................. 2,364,000 200,000 2,564,000 1,111,000 3,675,000
Basic penetration (Note H)...... 56.8% 68.3% 57.6% 68.5% 60.5%
Premium units................... 1,347,000 83,000 1,430,000 671,000 2,101,000
Premium penetration (Note I).... 57.0% 41.5% 55.8% 60.4% 57.2%
Average monthly revenue per
basic customer (Note J)....... $ 40.35 $ 40.81 $ 40.38 $ 40.40 $ 40.39
</TABLE>
33
<PAGE> 37
NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
NOTE A: Pro forma operating results for our recent acquisitions and
pending acquisitions consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
----------------------------------------------------------------------------------------------------
PENDING ACQUISITIONS -- HISTORICAL
RECENT ACQUISITIONS -- HISTORICAL --------------------------------------------------------------
----------------------------------- GREATER
AMERICAN TOTAL MEDIA INTERMEDIA TOTAL
RENAISSANCE CABLE RECENT SYSTEMS SYSTEMS HELICON RIFKIN(a) OTHER PENDING
------------ --------- -------- ------- ---------- ------- --------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues................... $15,254 $ 9,151 $24,405 $20,394 $ 48,288 $21,252 $ 50,914 $3,354 $144,202
Operating expenses:
Operating, general and
administrative......... 6,889 4,681 11,570 12,757 26,080 11,277 27,028 1,594 78,736
Depreciation and
amortization........... 6,655 5,536 12,191 2,425 26,100 6,828 26,187 938 62,478
Management fees.......... -- 275 275 -- 781 1,063 841 -- 2,685
------- ------- ------- ------- -------- ------- -------- ------ --------
Total operating
expenses............. 13,544 10,492 24,036 15,182 52,961 19,168 54,056 2,532 143,899
Income (loss) from
operations............... 1,710 (1,341) 369 5,212 (4,673) 2,084 (3,142) 822 303
Interest expense........... (4,797) (2,450) (7,247) (157) (5,778) (7,821) (11,414) (758) (25,928)
Interest income............ 90 18 108 -- 77 51 -- -- 128
Other income (expense)..... -- -- -- (16) -- -- (3,851) -- (3,867)
------- ------- ------- ------- -------- ------- -------- ------ --------
Income (loss) before income
tax expense (benefit).... (2,997) (3,773) (6,770) 5,039 (10,374) (5,686) (18,407) 64 (29,364)
Income tax (benefit)
expense.................. 58 -- 58 2,088 (1,396) -- (537) -- 155
------- ------- ------- ------- -------- ------- -------- ------ --------
Income (loss) before
extraordinary item....... $(3,055) $(3,773) $(6,828) $ 2,951 $ (8,978) $(5,686) $(17,870) $ 64 $(29,519)
======= ======= ======= ======= ======== ======= ======== ====== ========
</TABLE>
34
<PAGE> 38
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
--------------------------------------------------------------------------------------
RECENT ACQUISITIONS PENDING ACQUISITIONS
------------------------------------------------------ ----------------------------
PRO FORMA PRO FORMA
----------------------------------------- ---------------
HISTORICAL ACQUISITIONS(b) ADJUSTMENTS TOTAL HISTORICAL ACQUISITIONS(b)
---------- --------------- ----------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues.............. $24,405 $ 78 $ -- $ 24,483 $144,202 $ 6,400
Operating expenses:
Operating, general
and
administrative.... 11,570 35 (724)(d) 10,881 78,736 3,541
Corporate expense
charges........... -- -- 724(d) 724 -- --
Depreciation and
amortization...... 12,191 34 13,873(e) 26,098 62,478 1,376
Management fees..... 275 -- -- 275 2,685 280
------- ---- -------- -------- -------- -------
Total operating
expenses.......... 24,036 69 13,873 37,978 143,899 5,197
Income (loss) from
operations.......... 369 9 (13,873) (13,495) 303 1,203
Interest expense...... (7,247) (25) (7,314)(f) (14,586) (25,928) (1,309)
Interest income....... 108 -- -- 108 128 23
Other income
(expense)........... -- -- -- -- (3,867) (44)
------- ---- -------- -------- -------- -------
Income (loss) before
income tax expense
(benefit)........... (6,770) (16) (21,187) (27,973) (29,364) (127)
Income tax (benefit)
expense............. 58 -- (58)(h) -- 155 (114)
------- ---- -------- -------- -------- -------
Income (loss) before
extraordinary
item................ $(6,828) $(16) $(21,129) $(27,973) $(29,519) $ (13)
======= ==== ======== ======== ======== =======
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999
------------------------------------------
PENDING ACQUISITIONS
------------------------------------------
PRO FORMA
------------------------------------------
DISPOSITIONS(c) ADJUSTMENTS TOTAL
--------------- ----------- ---------
<S> <C> <C> <C>
Revenues.............. $(15,949) $ -- $ 134,653
Operating expenses:
Operating, general
and
administrative.... (7,902) (1,033)(d) 73,342
Corporate expense
charges........... -- 1,033(d) 1,033
Depreciation and
amortization...... (6,883) 22,885(e) 79,856
Management fees..... (458) -- 2,507
-------- --------- ---------
Total operating
expenses.......... (15,243) 22,885 156,738
Income (loss) from
operations.......... (706) (22,885) (22,085)
Interest expense...... (4) (11,273)(f) (38,514)
Interest income....... -- -- 151
Other income
(expense)........... -- 3,774(g) (137)
-------- --------- ---------
Income (loss) before
income tax expense
(benefit)........... (710) (30,384) (60,585)
Income tax (benefit)
expense............. -- (41)(h) --
-------- --------- ---------
Income (loss) before
extraordinary
item................ $ (710) $ (30,343) $ (60,585)
======== ========= =========
</TABLE>
(a) Includes the results of operations of Rifkin Acquisition Partners, L.L.L.P.,
Rifkin Cable Income Partners, L.P., Indiana Cable Associates, Ltd. and R/N
South Florida Cable Management Limited Partnership.
(b) Represents the historical results of operations for the period from January
1, 1999 through the date of acquisition for acquisitions completed by
Renaissance, the InterMedia systems, Helicon and Rifkin, and for the period
from January 1, 1999 through March 31, 1999 for acquisitions to be completed
subsequent to March 31, 1999.
(c) Represents the elimination of the operating results primarily related to the
cable systems to be transferred to the InterMedia systems.
(d) Reflects a reclassification of expenses representing corporate expenses that
would have occurred at Charter Communications, Inc.
(e) Represents additional amortization of franchises as a result of our recent
and pending acquisitions. The excess of purchase price over the net tangible
assets acquired, $3.6 billion, is expected to be recorded in franchises and
amortized over 15 years.
(f) Reflects additional interest expense on borrowings which will be used to
finance the acquisitions using a 7.4% interest rate.
(g) Represents the elimination of gain (loss) on sale of assets.
(h) Reflects the elimination of income tax expense as a result of being acquired
by a limited liability company.
35
<PAGE> 39
NOTE B: We have extinguished substantially all of our long-term debt, excluding
borrowings of our previous credit facilities, and refinanced all previous credit
facilities, and have incurred and plan to incur additional debt in connection
with our recent acquisitions and pending acquisitions. See "Capitalization." The
refinancing adjustment of lower interest expense consists of the following
(dollars in thousands):
<TABLE>
<CAPTION>
INTEREST
DESCRIPTION EXPENSE
----------- --------
<S> <C>
Notes (at blended rate of 9.0%)............................. $67,250
Credit facilities (at blended rate of 7.4%)................. 63,750
Amortization of debt issuance costs......................... 3,900
Commitment fee on unused portion of our credit facilities
($652,000 at 0.375%)...................................... 600
10% senior discount notes -- Renaissance.................... 2,750
-------
Total pro forma interest expense.......................... 138,250
Less -- interest expense (including our recent and pending
acquisitions).......................................... 124,700
-------
Adjustment............................................. $13,550
=======
</TABLE>
NOTE C: Charter Communications, Inc. provides corporate management and
consulting services to us. See "Certain Relationships and Related Transactions."
NOTE D: EBITDA represents earnings (loss) before interest expense, income
taxes, depreciation and amortization. EBITDA is presented because it is a widely
accepted financial indicator of a cable television company's ability to service
indebtedness. However, EBITDA should not be considered as an alternative to
income from operations or to cash flows from operating, investing or financing
activities, as determined in accordance with generally accepted accounting
principles. EBITDA should also not be construed as an indication of a company's
operating performance or as a measure of liquidity. Management's discretionary
use of funds depicted by EBITDA may be limited by working capital, debt service
and capital expenditure requirements and by restrictions related to legal
requirements, commitments and uncertainties.
NOTE E: EBITDA margin represents EBITDA as a percentage of revenues.
NOTE F: Adjusted EBITDA means EBITDA before corporate expenses, management fees
and other income (expense) in accordance with the term "Consolidated EBITDA"
used in the indentures governing the notes. See "Description of Notes" for a
complete presentation of the methodology employed in calculating Adjusted
EBITDA. Adjusted EBITDA is presented because it is a widely accepted financial
indicator of a cable company's ability to service indebtedness and because it is
used in the indentures to determine compliance with certain covenants. However,
Adjusted EBITDA should not be considered as an alternative to income from
operations or to cash flows from operating, investing or financing activities,
as determined in accordance with generally accepted accounting principles.
Adjusted EBITDA should also not be construed as an indication of a company's
operating performance or as a measure of liquidity. In addition, because
Adjusted EBITDA is not calculated identically by all companies, the presentation
here may not be comparable to other similarly titled measures of other
companies. Management's discretionary use of funds depicted by Adjusted EBITDA
may be limited by working capital, debt service and capital expenditure
requirements and by restrictions related to legal requirements, commitments and
uncertainties.
NOTE G: Earnings include net income (loss) plus fixed charges. Fixed charges
consist of interest expense and an estimated interest component of rent expense.
NOTE H: Basic penetration represents basic customers as a percentage of homes
passed. Homes passed are the number of single residence homes, apartments and
condominium units passed by the cable distribution network in a given cable
system service area.
NOTE I: Premium penetration represents premium units as a percentage of basic
customers.
NOTE J: Average monthly revenue per basic customer represents revenues divided
by the number of months in the period divided by the number of basic customers
at March 31, 1999.
36
<PAGE> 40
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
-------------------------------------------------------------------------------------------
CHARTER RECENT PENDING REFINANCING
HOLDINGS MARCUS ACQUISITIONS ACQUISITIONS ADJUSTMENTS
(NOTE A) (NOTE B) (NOTE C) SUBTOTAL (NOTE C) (NOTE D) TOTAL
--------- --------- ------------ ---------- ------------ ----------- ----------
(DOLLARS IN THOUSANDS, EXCEPT CUSTOMER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues........................ $ 611,690 $ 448,192 $ 93,316 $1,153,198 $ 504,125 $ -- $1,657,323
--------- --------- -------- ---------- --------- ------ ----------
Operating expenses:
Operating, general and
administrative.............. 310,100 231,050 43,357 584,507 262,852 -- 847,359
Corporate expense charges
(Note E).................... 16,493 17,042 2,786 36,321 3,973 -- 40,294
Depreciation and
amortization................ 375,899 252,855 53,004 681,758 274,727 -- 956,485
Management fees............... -- -- 1,077 1,077 13,595 -- 14,672
--------- --------- -------- ---------- --------- ------ ----------
Total operating expenses.... 702,492 500,947 100,224 1,303,663 555,147 -- 1,858,810
--------- --------- -------- ---------- --------- ------ ----------
Loss from operations............ (90,802) (52,755) (6,908) (150,465) (51,022) -- (201,487)
Interest (expense) benefit...... (207,468) (137,953) (61,757) (407,178) (150,243) 4,400 (553,021)
Other income (expense).......... 518 -- 437 955 (6,299) -- (5,344)
--------- --------- -------- ---------- --------- ------ ----------
Net income (loss)............... $(297,752) $(190,708) $(68,228) $ (556,688) $(207,564) $4,400 $ (759,852)
========= ========= ======== ========== ========= ====== ==========
OTHER FINANCIAL DATA:
EBITDA (Note F)................. $ 285,615 $ 200,100 $ 46,533 $ 532,248 $ 217,406 $ 749,654
EBITDA margin (Note G).......... 46.7% 44.6% 49.9% 46.2% 43.1% 45.2%
Adjusted EBITDA (Note H)........ 301,590 217,142 49,959 568,691 241,273 809,964
Cash flows from operating
activities.................... 137,160 139,908 12,399 289,467 61,995 351,462
Cash interest expense........... 436,432
Capital expenditures............ $ 213,353 $ 224,723 $ 5,001 $ 443,077 $ 86,106 $ 529,183
Total debt to EBITDA............ 8.8x
Total debt to Adjusted EBITDA... 8.1
EBITDA to cash interest
expense....................... 1.7
EBITDA to interest expense...... 1.4
Deficiency of earnings to cover
fixed charges (Note I)........ $ 759,852
OPERATING DATA (AT END OF
PERIOD, EXCEPT FOR AVERAGES):
Homes passed.................... 2,149,000 1,743,000 289,000 4,181,000 1,506,000 5,687,000
Basic customers................. 1,255,000 1,062,000 195,000 2,512,000 1,105,000 3,617,000
Basic penetration (Note J)...... 58.4% 60.9% 67.5% 60.1% 73.4% 63.6%
Premium units................... 845,000 411,000 87,000 1,343,000 724,000 2,067,000
Premium penetration (Note K).... 67.3% 38.7% 44.6% 53.5% 65.5% 57.1%
Average monthly revenue per
basic customer (Note L)....... NM NM $ 39.88 $ 38.26 $ 38.02 $ 38.18
</TABLE>
See "Notes to the Unaudited Pro Forma Financial Statements."
37
<PAGE> 41
NOTES TO THE UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
NOTE A: Pro forma operating results for Charter Holdings, including the
acquisition of us on December 23, 1998 by Paul G. Allen and the acquisition of
Sonic, consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
12/24/98 1/1/98
THROUGH THROUGH
1/1/98 THROUGH 12/23/98 12/31/98 5/20/98
----------------------------------- -------- -------
CCA CHARTERCOMM
GROUP HOLDINGS CHARTER HOLDINGS SONIC ELIMINATIONS SUBTOTAL
--------- ----------- ------------------- ------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... $ 324,432 $196,801 $ 49,731 $23,450 $17,276 $ -- $ 611,690
--------- -------- -------- ------- ------- --------- ---------
Operating expenses:
Operating, general and
administrative............ 164,145 98,331 25,952 12,679 8,993 -- 310,100
Depreciation and
amortization.............. 136,689 86,741 16,864 13,811 2,279 -- 256,384
Management fees/corporate
expense charges........... 17,392 14,780 6,176 766 -- -- 39,114
--------- -------- -------- ------- ------- --------- ---------
Total operating
expenses................ 318,226 199,852 48,992 27,256 11,272 -- 605,598
--------- -------- -------- ------- ------- --------- ---------
Income (loss) from
operations.................. 6,206 (3,051) 739 (3,806) 6,004 -- 6,092
Interest expense.............. (113,824) (66,121) (17,277) (5,051) (2,624) 1,900 (202,997)(c)
Other income (expense)........ 4,668 (1,684) (684) 133 (15) (1,900) 518(c)
--------- -------- -------- ------- ------- --------- ---------
Income (loss) before income
taxes....................... (102,950) (70,856) (17,222) (8,724) 3,365 -- (196,387)
Provision for income taxes.... -- -- -- -- 1,346 -- 1,346
--------- -------- -------- ------- ------- --------- ---------
Income (loss) before
extraordinary item.......... $(102,950) $(70,856) $(17,222) $(8,724) $ 2,019 $ -- $(197,733)
========= ======== ======== ======= ======= ========= =========
<CAPTION>
PRO FORMA
------------------------
ADJUSTMENTS TOTAL
----------- ---------
<S> <C> <C>
Revenues...................... $ -- $ 611,690
--------- ---------
Operating expenses:
Operating, general and
administrative............ 310,100
Depreciation and
amortization.............. 119,515(a) 375,899
Management fees/corporate
expense charges........... (22,621)(b) 16,493
--------- ---------
Total operating
expenses................ 96,894 702,492
--------- ---------
Income (loss) from
operations.................. (96,894) (90,802)
Interest expense.............. (4,471)(d) (207,468)
Other income (expense)........ -- 518
--------- ---------
Income (loss) before income
taxes....................... (101,365) (297,752)
Provision for income taxes.... (1,346)(e) --
--------- ---------
Income (loss) before
extraordinary item.......... $(100,019) $(297,752)
========= =========
</TABLE>
- -------------------------
(a) Represents additional amortization of franchises as a result of the
acquisition of us by Mr. Allen. The excess of purchase price over the net
tangible assets acquired, $3.6 billion, was recorded in franchises,
amortized over 15 years.
(b) Reflects the reduction in corporate expense charges of approximately $8.2
million to reflect the actual costs incurred. Management fees charged to CCA
Group and CharterComm Holdings, companies not controlled by Charter
Communications, Inc. at that time exceeded the allocated costs incurred by
Charter Communications, Inc. on behalf of those companies by $8.2 million.
Also reflects the elimination of approximately $14.4 million of change of
control payments under the terms of then-existing equity appreciation rights
plans. Such payments were triggered by the acquisition of us by Mr. Allen.
Such payments were made by Charter Communications, Inc. and were not subject
to reimbursement by us, but were allocated to us for financial reporting
purposes. The equity appreciation rights plans were terminated in connection
with the acquisition of us by Mr. Allen, and these costs will not recur.
(c) Represents the elimination of intercompany interest on a note payable from
Charter Holdings to CCA Group.
(d) Reflects additional interest expense on borrowings used to finance the
acquisition by us of Sonic, using a 7.4% interest rate.
(e) Reflects the elimination of provision for income taxes, as Charter Holdings
will operate as a limited liability company and all income taxes will flow
through to the members.
38
<PAGE> 42
NOTE B: Pro forma operating results for Marcus Cable consist of the
following (dollars in thousands):
<TABLE>
<CAPTION>
JANUARY 1, APRIL 23,
1998 1998
THROUGH THROUGH PRO FORMA
APRIL 22, DECEMBER 23, ------------------------------------------------------------
1998 1998 ACQUISITIONS(a) DISPOSITIONS(b) ADJUSTMENTS TOTAL
---------- ------------ --------------- --------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues........................... $ 157,763 $ 332,320 $2,620 $(44,511) $ -- $ 448,192
--------- --------- ------ -------- --------- ---------
Operating expenses:
Operating, general and
administrative................ 84,746 181,347 1,225 (20,971) (15,297)(c) 231,050
Corporate expenses............... -- 17,042(c) 17,042
Depreciation and
amortization.................. 64,669 174,968 -- -- 13,218(d) 252,855
Management fees.................. -- 3,048 -- -- (3,048)(c) --
Transaction and severance
costs......................... 114,167 16,034 -- -- (130,201)(e) --
--------- --------- ------ -------- --------- ---------
Total operating expenses...... 263,582 375,397 1,225 (20,971) (118,286) 500,947
--------- --------- ------ -------- --------- ---------
Income (loss) from
operations....................... (105,819) (43,077) 1,395 (23,540) 118,286 (52,755)
Interest (expense) benefit......... (49,905) (93,103) -- -- 5,055(d) (137,953)
Other income (expense)............. 43,662 -- -- (43,662) -- --
--------- --------- ------ -------- --------- ---------
Income (loss) before extraordinary
item............................. $(112,062) $(136,180) $1,395 $(67,202) $ 123,341 $(190,708)
========= ========= ====== ======== ========= =========
</TABLE>
- -------------------------
(a) Represents the results of operations of acquired cable systems prior to
their acquisition in 1998 by Marcus Cable.
(b) Represents the elimination of the operating results and corresponding gain
on sale of cable systems sold by Marcus Cable during 1998.
(c) Represents a reclassification to reflect the expenses totaling $15.3 million
from operating, general and administrative to corporate expenses. Also
reflects the elimination of management fees and the addition of corporate
expense charges of $1.7 million for actual costs incurred by Charter
Communications, Inc. on behalf of Marcus Cable. Management fees charged to
Marcus Cable exceeded the costs incurred by Charter Communications, Inc. by
$1.3 million.
(d) As a result of the acquisition of Marcus Cable by Paul G. Allen, the excess
of purchase price over the net tangible and identifiable intangible assets,
$2.5 billion, was recorded as franchises, amortized over 15 years. This
resulted in additional amortization for the period from January 1, 1998
through April 23, 1998. Additionally, the carrying value of outstanding debt
was recorded at estimated fair value, resulting in a debt premium that is to
be amortized as an offset to interest expense over the term of the debt.
This resulted in a reduction in interest expense for the period from January
1, 1998 through April 23, 1998.
(e) As a result of the acquisition of Marcus Cable by Mr. Allen, Marcus Cable
recorded transaction costs of approximately $114.2 million. These costs
comprised of approximately $90.2 million paid to employees of Marcus Cable
in settlement of specially designated Class B units and approximately $24.0
million of transaction fees paid to certain equity partners for investment
banking services. In addition, Marcus Cable recorded costs related to
employee and officer stay-bonus and severance arrangements of approximately
$16 million.
39
<PAGE> 43
NOTE C: Pro forma operating results for our recent and pending
acquisitions consist of the following (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
---------------------------------------------------------------------------------
RECENT ACQUISITIONS -- HISTORICAL PENDING ACQUISITIONS -- HISTORICAL
----------------------------------- -------------------------------------------
TOTAL GMI INTERMEDIA
RENAISSANCE ACE RECENT SYSTEMS SYSTEMS HELICON RIFKIN(a)
------------ -------- --------- ------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues................ $ 41,524 $15,685 $ 57,209 $78,635 $176,062 $ 75,577 $124,382
-------- ------- -------- ------- -------- -------- --------
Operating expenses:
Operating, general and
administrative...... 21,037 7,441 28,478 48,852 86,753 40,179 63,815
Corporate expense
charges............. -- -- -- -- -- -- --
Depreciation and
amortization........ 19,107 6,784 25,891 8,612 85,982 24,290 47,657
Management fees....... -- 471 471 -- 3,147 3,496 4,106
-------- ------- -------- ------- -------- -------- --------
Total operating
expenses.......... 40,144 14,696 54,840 57,464 175,882 67,965 115,578
-------- ------- -------- ------- -------- -------- --------
Income from
operations............ 1,380 989 2,369 21,171 180 7,612 8,804
Interest expense........ (14,358) (4,501) (18,859) (535) (25,449) (27,634) (30,482)
Interest income......... 158 122 280 -- 341 93 --
Other income
(expense)............. -- -- -- (493) 23,030 -- 44,959
-------- ------- -------- ------- -------- -------- --------
Income (loss) before
income tax expense
(benefit)............. (12,820) (3,390) (16,210) 20,143 (1,898) (19,929) 23,281
Income tax (benefit)
expense............... 135 -- 135 7,956 1,623 -- (4,178)
-------- ------- -------- ------- -------- -------- --------
Income (loss) before
extraordinary item.... $(12,955) $(3,390) $(16,345) $12,187 $ (3,521) $(19,929) $ 27,459
======== ======= ======== ======= ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-----------------------
PENDING ACQUISITIONS -- HISTORICAL
-----------------------
OTHER TOTAL
ACQUISITIONS PENDING
------------ --------
<S> <C> <C>
Revenues................ $ 9,336 $463,992
------- --------
Operating expenses:
Operating, general and
administrative...... 4,618 244,217
Corporate expense
charges............. -- --
Depreciation and
amortization........ 2,794 169,335
Management fees....... -- 10,749
------- --------
Total operating
expenses.......... 7,412 424,301
------- --------
Income from
operations............ 1,924 39,691
Interest expense........ (2,375) (86,475)
Interest income......... -- 434
Other income
(expense)............. 3 67,499
------- --------
Income (loss) before
income tax expense
(benefit)............. (448) 21,149
Income tax (benefit)
expense............... -- 5,401
------- --------
Income (loss) before
extraordinary item.... $ (448) $ 15,748
======= ========
</TABLE>
40
<PAGE> 44
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
-------------------------------------------------------------------------------------
RECENT ACQUISITIONS PENDING ACQUISITIONS
------------------------------------------------------ ----------------------------
PRO FORMA PRO FORMA
----------------------------------------- ---------------
TOTAL
HISTORICAL ACQUISITIONS(b) ADJUSTMENTS RECENT HISTORICAL ACQUISITIONS(b)
---------- --------------- ----------- -------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues............... $ 57,209 $36,107 $ -- $ 93,316 $463,992 $109,841
Operating expenses:
Operating, general
and
administrative..... 28,478 17,665 (2,786)(d) 43,357 244,217 58,180
Corporate expense
charges............ -- -- 2,786(d) 2,786 -- --
Depreciation and
amortization....... 25,891 13,987 13,126(e) 53,004 169,335 24,526
Management fees...... 471 606 -- 1,077 10,749 3,783
-------- ------- -------- -------- -------- --------
Total operating
expenses......... 54,840 32,258 13,126 100,224 424,301 86,489
Income (loss) from
operations........... 2,369 3,849 (!3,126) (6,908) 39,691 23,352
Interest expense....... (18,859) (5,787) (37,111)(f) (61,757) (86,475) (28,859)
Interest income........ 280 157 -- 437 434 175
Other income
(expense)............ -- 96 (96)(g) -- 67,499 307
-------- ------- -------- -------- -------- --------
Income (loss) before
income tax expense
(benefit)............ (16,210) (1,685) (50,333) (68,228) 21,149 (5,025)
Income tax expense
(benefit)............ 135 1,191 (1,326)(h) -- 5,401 927
-------- ------- -------- -------- -------- --------
Income (loss) before
extraordinary item... $(16,345) $(2,876) $(49,007) $(68,228) $ 15,748 $ (5,952)
======== ======= ======== ======== ======== ========
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
------------------------------------------
PENDING ACQUISITIONS
------------------------------------------
PRO FORMA
------------------------------------------
TOTAL
DISPOSITIONS(c) ADJUSTMENTS PENDING
--------------- ----------- ---------
<S> <C> <C> <C>
Revenues............... $(69,708) $ -- $ 504,125
Operating expenses:
Operating, general
and
administrative..... (35,572) (3,973)(d) 262,852
Corporate expense
charges............ -- 3,973(d) 3,973
Depreciation and
amortization....... (40,811) 121,677(e) 274,727
Management fees...... (937) -- 13,595
-------- --------- ---------
Total operating
expenses......... (77,320) 121,677 555,147
Income (loss) from
operations........... 7,612 (121,677) (51,022)
Interest expense....... 19,543 (54,452)(f) (150,243)
Interest income........ (10) -- 599
Other income
(expense)............ (380) (74,324)(g) (6,898)
-------- --------- ---------
Income (loss) before
income tax expense
(benefit)............ 26,765 (250,453) (207,564)
Income tax expense
(benefit)............ 310 (6,638)(h) --
-------- --------- ---------
Income (loss) before
extraordinary item... $ 26,455 $(243,815) $(207,564)
======== ========= =========
</TABLE>
- -------------------------
(a) Includes the results of operations of Rifkin Acquisition Partners, L.L.L.P.,
Rifkin Cable Income Partners, L.P., Indiana Cable Associates, Ltd and R/N
South Florida Cable Management Limited Partnership.
(b) Represents the historical results of operations for the period from January
1, 1998 through the date of acquisition for acquisitions completed by
Renaissance, the InterMedia systems, Helicon and Rifkin, and for the period
from January 1, 1998 through December 31, 1998 for acquisitions to be
completed in 1999.
(c) Represents the elimination of the operating results primarily related to the
cable systems to be transferred to the InterMedia systems as part of a swap
of cable systems and to the sale of several smaller cable systems.
(d) Reflects a reclassification of expenses representing corporate expenses that
would have occurred at Charter Communications, Inc.
(e) Represents additional amortization of franchises as a result of our recent
and pending acquisitions. The excess of purchase price over the net tangible
assets acquired, $3.6 billion, is expected to be recorded in franchises,
amortized over 15 years.
(f) Reflects additional interest expense on borrowings which will be used to
finance the acquisitions using a 7.4% interest rate.
(g) Represents the elimination of gain (loss) on the sale of assets.
(h) Reflects the elimination of income tax expense as a result of being acquired
by a limited liability company.
41
<PAGE> 45
NOTE D: We have extinguished substantially all of our long-term debt,
excluding borrowings of our previous credit facilities, and refinanced all
previous credit facilities, and have incurred and plan to incur additional debt
in connection with our recent acquisitions and pending acquisitions. See
"Capitalization." The refinancing adjustment of lower interest expense consists
of the following (dollars in thousands):
<TABLE>
<CAPTION>
INTEREST
DESCRIPTION EXPENSE
- ----------- ---------
<S> <C>
Notes (at blended rate of 9.0%)............................. $ 269,000
Credit facilities (at blended rate of 7.4%)................. 255,000
Amortization of debt issuance costs......................... 15,600
Commitment fee on unused portion of credit facilities
($652,000 at 0.375%)...................................... 2,400
10% senior discount notes -- Renaissance.................... 11,000
---------
Total pro forma interest expense.......................... 553,000
Less -- interest expense (including Marcus Cable and
recent acquisitions and pending acquisitions).......... (557,400)
---------
Adjustment............................................. $ (4,400)
=========
</TABLE>
NOTE E: Charter Communications, Inc. provided corporate management and
consulting services to Charter Holdings in 1998 and to Marcus Cable beginning in
October 1998. See "Certain Relationships and Related Transactions."
NOTE F: EBITDA represents earnings (loss) before interest expense, income
taxes, depreciation and amortization. EBITDA is presented because it is a widely
accepted financial indicator of a cable television company's ability to service
indebtedness. However, EBITDA should not be considered as an alternative to
income from operations or to cash flows from operating, investing or financing
activities, as determined in accordance with generally accepted accounting
principles. EBITDA should also not be construed as an indication of a company's
operating performance or as a measure of liquidity. Management's discretionary
use of funds depicted by EBITDA may be limited by working capital, debt service
and capital expenditure requirements and by restrictions related to legal
requirements, commitments and uncertainties.
NOTE G: EBITDA margin represents EBITDA as a percentage of revenues.
NOTE H: Adjusted EBITDA means EBITDA before corporate expenses, management
fees and other income (expense) in accordance with the term "Consolidated
EBITDA" used in the indentures governing the notes. See "Description of Notes"
for a complete presentation of the methodology employed in calculating Adjusted
EBITDA. Adjusted EBITDA is presented because it is a widely accepted financial
indicator of a cable company's ability to service indebtedness and because it is
used in the indentures to determine compliance with certain covenants. However,
Adjusted EBITDA should not be considered as an alternative to income from
operations or to cash flows from operating, investing or financing activities,
as determined in accordance with generally accepted accounting principles.
Adjusted EBITDA should also not be construed as an indication of a company's
operating performance or as a measure of liquidity. In addition, because
Adjusted EBITDA is not calculated identically by all companies, the presentation
here may not be comparable to other similarly titled measures of other
companies. Management's discretionary use of funds depicted by Adjusted EBITDA
may be limited by working capital, debt service and capital expenditure
requirements and by restrictions related to legal requirements, commitments and
uncertainties.
NOTE I: Earnings include net income (loss) plus fixed charges. Fixed
charges consist of interest expense and an estimated interest component of rent
expense.
NOTE J: Basic penetration represents basic customers as a percentage of
homes passed. Homes passed are the number of single residence homes, apartments
and condominium units passed by the cable distribution network in a given cable
system service area.
NOTE K: Premium penetration represents premium units as a percentage of
basic customers.
NOTE L: Average monthly revenue per basic customer represents revenues
divided by the number of months in the period divided by the number of basic
customers at December 31, 1998.
42
<PAGE> 46
<TABLE>
<CAPTION>
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1999
-------------------------------------------------------------------
RECENT PENDING
CHARTER ACQUISITIONS ACQUISITIONS PRO FORMA
HOLDINGS (NOTE A) SUBTOTAL (NOTE A) TOTAL
---------- ------------ ---------- ------------ -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
Cash and cash equivalents................ $1,038,360 $(692,594) $ 345,766 $ (315,302) $ 30,464
Accounts receivable, net................. 30,314 1,903 32,217 21,942 54,159
Prepaid expenses and other............... 15,882 1,817 17,699 10,297 27,996
---------- --------- ---------- ---------- -----------
Total current assets................ 1,084,556 (688,874) 395,682 (283,063) 112,619
Property, plant and equipment............ 1,533,197 79,921 1,613,118 600,691 2,213,809
Franchises............................... 5,607,539 620,980 6,228,519 2,866,476 9,094,995
Other assets............................. 131,990 -- 131,990 86,925 218,915
---------- --------- ---------- ---------- -----------
Total assets........................ $8,357,282 $ 12,027 $8,369,309 $3,271,029 $11,640,338
========== ========= ========== ========== ===========
Accounts payable and accrued expenses.... 216,397 11,272 227,669 73,594 301,263
Payables to manager of cable television
systems................................ 12,554 -- 12,554 -- 12,554
Other current liabilities................ -- 755 755 -- 755
---------- --------- ---------- ---------- -----------
Total current liabilities........... 228,951 12,027 240,978 73,594 314,572
Long-term debt........................... 4,754,018 -- 4,754,018 1,869,158 6,623,176
Other long-term liabilities.............. 48,171 -- 48,171 3,277 51,448
Members' equity.......................... 3,326,142 -- 3,326,142 1,325,000 4,651,142
---------- --------- ---------- ---------- -----------
Total liabilities and equity........ $8,357,282 $ 12,027 $8,369,309 $3,271,029 $11,640,338
========== ========= ========== ========== ===========
</TABLE>
43
<PAGE> 47
NOTE A: Pro forma balance sheet for our recent acquisitions and pending
acquisitions consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
------------------------------------------------------------------------------------------------------
RECENT ACQUISITIONS -- HISTORICAL PENDING ACQUISITIONS -- HISTORICAL
--------------------------------- ------------------------------------------------------------------
GREATER
AMERICAN TOTAL MEDIA INTERMEDIA TOTAL
RENAISSANCE CABLE RECENT SYSTEMS SYSTEMS HELICON RIFKIN OTHER PENDING
----------- -------- -------- ------- ---------- --------- -------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Cash and cash
equivalents.............. $ 8,901 $ 1,201 $ 10,102 $ 2,440 $ -- $ 11,464 $ 7,580 $ 585 $ 22,069
Accounts receivable, net... 1,283 620 1,903 2,577 13,949 1,619 12,009 1,450 31,604
Receivable from related
party.................... -- -- -- -- 5,038 -- -- -- 5,038
Prepaid expenses and
other.................... 381 1,436 1,817 3,052 1,053 2,867 2,789 110 9,871
Deferred income tax
asset.................... -- -- -- -- -- -- -- -- --
-------- -------- -------- ------- -------- --------- -------- ------- ----------
Total current assets..... 10,565 3,257 13,822 8,069 20,040 15,950 22,378 2,145 68,582
Receivable from related
party.................... -- -- -- -- -- -- -- -- --
Property, plant and
equipment................ 64,594 15,327 79,921 58,196 225,682 88,723 283,208 9,934 665,743
Franchises................. 222,971 143,546 366,517 2,653 240,567 12,096 456,523 55,452 767,291
Deferred income tax
assets................... -- -- -- -- 13,994 -- -- -- 13,994
Other assets............... 16,129 2,334 18,463 80 3,697 83,546 72,148 205 159,676
-------- -------- -------- ------- -------- --------- -------- ------- ----------
Total assets............. $314,259 $164,464 $478,723 $68,998 $503,980 $ 200,315 $834,257 $67,736 $1,675,286
======== ======== ======== ======= ======== ========= ======== ======= ==========
Accounts payable and
accrued expenses......... $ 7,649 $ 3,623 $ 11,272 $ 6,022 $ 19,030 $ 16,496 $ 34,486 $ 1,899 $ 77,933
Current deferred revenue... -- -- -- 1,904 11,944 -- 2,092 1,207 17,147
Note payable to related
party.................... 135 -- 135 -- 3,057 -- -- -- 3,057
Other current
liabilities.............. 1,406 -- 1,406 -- -- -- -- -- --
-------- -------- -------- ------- -------- --------- -------- ------- ----------
Total current
liabilities............ 9,190 3,623 12,813 7,926 34,031 16,496 36,578 3,106 98,137
Deferred revenue........... -- -- -- -- 3,900 -- -- -- 3,900
Deferred income taxes...... -- -- -- -- -- -- 7,405 -- 7,405
Long-term debt............. 212,503 118,000 330,503 -- -- 295,345 541,575 38,914 875,834
Note payable to related
party, including accrued
interest................. -- -- -- -- 412,436 5,137 -- -- 417,573
Other long-term
liabilities, including
redeemable preferred
shares................... -- -- -- 3,618 14,430 18,708 -- -- 36,756
Equity..................... 92,566 42,841 135,407 57,454 39,183 (135,371) 248,699 25,716 235,681
-------- -------- -------- ------- -------- --------- -------- ------- ----------
Total liabilities and
equity................. $314,259 $164,464 $478,723 $68,998 $503,980 $ 200,315 $834,257 $67,736 $1,675,286
======== ======== ======== ======= ======== ========= ======== ======= ==========
</TABLE>
44
<PAGE> 48
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
-----------------------------------------------------------------------------------------
RECENT ACQUISITIONS PENDING ACQUISITIONS
---------------------------------------- ----------------------------------------------
PRO FORMA PRO FORMA
---------------------------------------- ----------------------------------------------
HISTORICAL ADJUSTMENTS TOTAL HISTORICAL ACQUISITIONS(A) DISPOSITIONS(B)
---------- -------------- --------- ---------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents... $ 10,102 $(702,696)(c) $(692,594) $ 22,069 $ 90 $ (1,797)
Accounts receivable, net.... 1,903 -- 1,903 31,604 54 (1,671)
Receivable from related
party..................... -- -- -- 5,038 -- --
Prepaid expenses and
other..................... 1,817 -- 1,817 9,871 713 (287)
-------- --------- --------- ---------- ------- ---------
Total current assets...... 13,822 (702,696) (688,874) 68,582 857 (3,755)
Property, plant and
equipment................. 79,921 -- 79,921 665,743 12,975 (78,027)
Franchises.................. 366,517 254,463(f) 620,980 767,291 98 (342,844)
Deferred income tax
assets.................... -- -- -- 13,994 -- --
Other assets................ 18,463 (18,463)(h) -- 159,676 -- (523)
-------- --------- --------- ---------- ------- ---------
Total assets.............. $478,723 $(466,696) $ 12,027 $1,675,286 $13,930 $(425,149)
======== ========= ========= ========== ======= =========
Accounts payable and accrued
expenses.................. $ 11,272 $ -- $ 11,272 $ 77,933 $ 896 $ (4,280)
Current deferred revenue.... -- -- -- 17,147 -- --
Note payable to related
party..................... 135 (135)(i) -- 3,057 -- --
Other current liabilities... 1,406 (651)(d) 755 -- -- --
-------- --------- --------- ---------- ------- ---------
Total current
liabilities............. 12,813 (786) 12,027 98,137 896 (4,280)
Deferred revenue............ -- -- -- 3,900 173 --
Deferred income taxes....... -- -- -- 7,405 -- --
Long-term debt.............. 330,503 (330,503) (j) -- 875,834 1,260 (420,528)
Note payable to related
party, including accrued
interest.................. -- -- 417,573 -- --
Other long-term
liabilities............... -- -- -- 36,756 -- (341)
Equity...................... 135,407 (135,407)(k) -- 235,681 11,601 --
-------- --------- --------- ---------- ------- ---------
Total liabilities and
equity.................. $478,723 $(466,696) $ 12,027 $1,675,286 $13,930 $(425,149)
======== ========= ========= ========== ======= =========
<CAPTION>
AS OF MARCH 31, 1999
-------------------------
PENDING ACQUISITIONS
-------------------------
PRO FORMA
-------------------------
ADJUSTMENTS TOTAL
----------- ----------
<S> <C> <C>
Cash and cash equivalents... $ (335,664)(c) $ (315,302)
Accounts receivable, net.... (8,045)(d) 21,942
Receivable from related
party..................... (5,038)(e) --
Prepaid expenses and
other..................... -- 10,297
---------- ----------
Total current assets...... (348,747) (283,063)
Property, plant and
equipment................. -- 600,691
Franchises.................. 2,441,931(f) 2,866,476
Deferred income tax
assets.................... (13,994)(g) --
Other assets................ (72,228)(h) 86,925
---------- ----------
Total assets.............. $2,006,962 $3,271,029
========== ==========
Accounts payable and accrued
expenses.................. $ (955) $ 73,594
Current deferred revenue.... (17,147)(d) --
Note payable to related
party..................... (3,057)(i) --
Other current liabilities... -- --
---------- ----------
Total current
liabilities............. (21,159) 73,594
Deferred revenue............ (4,073)(d) --
Deferred income taxes....... (7,405)(g) --
Long-term debt.............. 1,412,592(j) 1,869,158
Note payable to related
party, including accrued
interest.................. (417,573)(i) --
Other long-term
liabilities............... (33,138)(j) 3,277
Equity...................... 1,077,718(k) 1,325,000
---------- ----------
Total liabilities and
equity.................. $2,006,962 $3,271,029
========== ==========
</TABLE>
- -------------------------
(a) Represents the historical balance sheets as of March 31, 1999, of our recent
and pending acquisitions.
(b) Represents the historical assets and liabilities as of March 31, 1999, of
the cable systems to be transferred to the InterMedia systems as part of a
swap of cable systems.
(c) Represents the use of Charter Holdings cash for the recent and pending
acquisitions.
(d) Represents the offset of advance billings against deferred revenue to be
consistent with Charter Holdings' accounting policy and the elimination of
deferred revenue.
(e) Reflects assets retained by the seller.
(f) Reflects the excess purchase price over the amounts assigned to net tangible
assets, amortized over 15 years.
(g) Represents the elimination of deferred income tax assets and liabilities.
(h) Represents the elimination of deferred debt issuance costs and a reduction
in carrying value of various intangible assets, including goodwill,
subscriber lists, noncompete agreements and organization costs, based on
estimated fair values.
45
<PAGE> 49
(i) Represents liabilities retained by the seller.
(j) Represents the following:
<TABLE>
<S> <C>
Long-term debt not assumed.................................. (675,700)
Additional borrowings under our credit facilities........... 1,757,789
----------
$1,082,089
==========
</TABLE>
(k) Represents the following:
<TABLE>
<S> <C>
Elimination of historical equity............................ $ (382,689)
Additional contributions.................................... 1,325,000
----------
$ 942,311
==========
</TABLE>
46
<PAGE> 50
UNAUDITED SELECTED HISTORICAL COMBINED FINANCIAL AND OPERATING DATA
The Unaudited Selected Historical Combined Financial and Operating Data for
the years ended December 31, 1996, 1997 and 1998 have been derived from the
separate financial statements of Charter Holdings, CCA Group and CharterComm
Holdings, which have been audited by Arthur Andersen, independent public
accountants, and are included elsewhere in this prospectus. The combined
financial and operating data represent the sum of the results of each of our
then-existing subsidiaries prior to our merger with Marcus Holdings and our
recent acquisitions. Each such subsidiary was managed by Charter Communications,
Inc. in accordance with its respective management agreement during the presented
periods. Since these subsidiaries were under common management, we believe
presenting combined financial information of these companies is informative.
As a result of the acquisition of us by Paul G. Allen, we have applied the
purchase accounting method which had the effect of increasing total assets,
total debt and members' equity as of December 23, 1998. In addition, we have
retroactively restated our financial statements to include the results of
operations of Marcus Cable for the period from December 24, 1998, through
December 31, 1998, and the balance sheet of Marcus Cable as of December 31,
1998. As a result of the acquisition of us by Mr. Allen and our merger with
Marcus Holdings, we believe that the periods on or prior to December 23, 1998
are not comparable to the periods after December 23, 1998.
<TABLE>
<CAPTION>
CHARTER HOLDINGS, CCA GROUP AND CHARTERCOMM
HOLDINGS
-----------------------------------------------
YEAR ENDED DECEMBER 31, 1/1/98 12/24/98
----------------------- THROUGH THROUGH
1996 1997 12/23/98 12/31/98
---------- ---------- -------- ----------
(DOLLARS IN THOUSANDS, EXCEPT CUSTOMER DATA)
<S> <C> <C> <C> <C>
COMBINED STATEMENT OF OPERATIONS:
Revenues............................ $ 368,553 $ 484,155 $570,964 $ 23,450
---------- ---------- -------- ----------
Operating expenses:
Operating, general and
administrative................. 190,084 249,419 288,428 12,679
Depreciation and amortization..... 154,273 198,718 240,294 13,811
Management fees/corporate expense
charges(a)..................... 15,094 20,759 38,348 766
---------- ---------- -------- ----------
Total operating expenses....... 359,451 468,896 567,070 27,256
---------- ---------- -------- ----------
Income (loss) from operations....... $ 9,102 $ 15,259 $ 3,894 $ (3,806)
========== ========== ======== ==========
CAPITAL EXPENDITURES................ $ 110,291 $ 162,607 $195,468 $ 13,672
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets........................ $1,660,242 $2,002,181 $7,235,656
Total debt.......................... 1,195,899 1,846,159 3,523,201
Members' equity..................... 26,099 (80,505) 3,429,291
</TABLE>
47
<PAGE> 51
<TABLE>
<CAPTION>
CHARTER HOLDINGS, CCA GROUP AND
CHARTERCOMM HOLDINGS
-----------------------------------------------
YEAR ENDED DECEMBER 31, 1/1/98 12/24/98
----------------------- THROUGH THROUGH
1996 1997 12/23/98 12/31/98
---------- ---------- -------- ----------
(DOLLARS IN THOUSANDS, EXCEPT CUSTOMER DATA)
<S> <C> <C> <C> <C>
OPERATING DATA (AT END OF PERIOD,
EXCEPT FOR AVERAGES):
Homes passed........................ 1,546,000 1,915,000 3,892,000
Basic customers..................... 902,000 1,086,000 2,317,000
Basic penetration(b)................ 58.3% 56.7% 59.5%
Premium units....................... 517,000 629,000 1,256,000
Premium penetration(c).............. 57.3% 57.9% 54.2%
</TABLE>
- -------------------------
(a) Charter Communications, Inc. provided corporate management and consulting
services to us. CCA Group and CharterComm Holdings paid fees to Charter
Communications, Inc. as compensation for such services and recorded
management fee expense. See "Certain Relationships and Related
Transactions." Charter Holdings recorded actual corporate expense charges
incurred by Charter Communications, Inc. on our subsidiaries' behalf.
Management fees and corporate expenses for the year ended December 31, 1998
include $14.4 million of change of control payments under the terms of
then-existing equity appreciation rights plans. Such payments were triggered
by the acquisition of us by Paul G. Allen. Such payments were made by
Charter Communications, Inc. and were not subject to reimbursement by us,
but were allocated to us for financial reporting purposes. The equity
appreciation rights plans were terminated in connection with the acquisition
of us Mr. Allen, and these costs will not recur.
(b) Basic penetration represents basic customers as a percentage of homes
passed.
(c) Premium penetration represents premium units as a percentage of basic
customers.
48
<PAGE> 52
SELECTED HISTORICAL FINANCIAL DATA
The selected historical financial data below for the years ended December
31, 1996 and 1997, for the periods from January 1, 1998, through December 23,
1998, and from December 24, 1998 through December 31, 1998, are derived from the
consolidated financial statements of Charter Holdings. They have been audited by
Arthur Andersen LLP, independent public accountants, and are included elsewhere
in this prospectus. The selected historical financial data for the period from
October 1, 1995 through December 31, 1995, are derived from the predecessor of
Charter Holdings' unaudited financial statements and are not included elsewhere
in this prospectus. The selected historical financial data for the year ended
December 31, 1994 and for the period from January 1, 1995 through September 30,
1995 are derived from the unaudited financial statements of Charter Holdings'
predecessor business and are not included elsewhere in this prospectus. The
information presented below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical financial statements of Charter Holdings and related notes
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PREDECESSOR OF
CHARTER HOLDINGS CHARTER HOLDINGS
---------------------- ----------------------------------------------------
YEAR ENDED
YEAR ENDED 1/1/95 10/1/95 DECEMBER 31, 1/1/98 12/24/98
DECEMBER 31, THROUGH THROUGH ----------------- THROUGH THROUGH
1994 9/30/95 12/31/95 1996 1997 12/23/98 12/31/98
------------ ------- -------- ------- ------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Revenues....................... $ 6,584 $ 5,324 $ 1,788 $14,881 $18,867 $ 49,731 $ 23,450
Operating expenses:
Operating, general and
administrative............ 3,247 2,581 931 8,123 11,767 25,952 12,679
Depreciation and
amortization.............. 2,508 2,137 648 4,593 6,103 16,864 13,811
Management fees/corporate
expense charges........... 106 224 54 446 566 6,176 766
-------- ------- ------- ------- ------- -------- ----------
Total operating
expenses................ 5,861 4,942 1,633 13,162 18,436 48,992 27,256
-------- ------- ------- ------- ------- -------- ----------
Income (loss) from
operations................... 723 382 155 1,719 431 739 (3,806)
Interest expense............... -- -- (691) (4,415) (5,120) (17,277) (5,051)
Interest income................ 26 -- 5 20 41 44 133
Other income (expense)......... -- 38 -- (47) 25 (728) --
-------- ------- ------- ------- ------- -------- ----------
Net income (loss).............. $ 749 $ 420 $ (531) $(2,723) $(4,623) $(17,222) $ (8,724)
======== ======= ======= ======= ======= ======== ==========
Ratio of Earnings to Fixed
Charges...................... 45.14 34.00 -- -- -- -- --
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets................... $ 25,511 $26,342 $31,572 $67,994 $55,811 $281,969 $7,235,656
Total debt..................... 10,194 10,480 28,847 59,222 41,500 274,698 3,523,201
Members' equity (deficit)...... 14,822 15,311 971 2,648 (1,975) (8,397) 3,429,291
</TABLE>
- -------------------------
(a) Earnings include net income (loss) plus fixed charges. Fixed charges consist
of interest expense and an estimated interest component of rent expense.
Earnings for the period from October 1, 1995 through December 31, 1995,
years ended December 31, 1996 and 1997, periods from January 1, 1998 through
December 23, 1998, and the period from December 24, 1998 through December
31, 1998 were inadequate to cover fixed charges by $531, $2,723, $4,623,
$17,222 and $8,724, respectively.
49
<PAGE> 53
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Reference is made to the "Certain Trends and Uncertainties" section below
in this Management's Discussion and Analysis for discussion of important factors
that could cause actual results to differ from expectations and non-historical
information contained herein.
INTRODUCTION
Because of recently purchased and pending significant events, including the
acquisition of us by Paul G. Allen, our merger with Marcus Holdings, recent and
pending acquisitions and the refinancing of our previous credit facilities and
the purchase of publicly held notes that had been issued by several of our
subsidiaries, we do not believe that our historical financial condition and
results of operations are accurate indicators of future results. Provided below
is a discussion of
(1) the operation and development of the Charter Companies prior to the
acquisition of us by Mr. Allen,
(2) the acquisition of us by Mr. Allen,
(3) our merger with Marcus Holdings, and
(4) our recent acquisitions and pending acquisitions.
Charter Holdings was formed in February 1999 as a wholly owned subsidiary
of Charter Communication, Inc. through its wholly owned cable television
operating subsidiary, Charter Communications Properties, LLC, or Charter
Properties, commenced operations with the acquisition of cable television
systems on September 30, 1995.
Prior to the Charter Acquisition, Charter Communication, Inc. owned a
minority interest in, and managed the CCA Group and CharterComm Holdings.
Through Charter Properties, CCI pursued and executed a strategy of operating,
developing, acquiring and consolidating cable systems, including the Sonic
acquisition for approximately $228.4 million. Because Charter Communication,
Inc. was only a minority equity holder in the CCA Group and CharterComm
Holdings, the financial statements of these entities were not consolidated with
those of Charter Communication, Inc.
Our acquisition by Paul G. Allen became effective on December 23, 1998
through a series of transactions in which Mr. Allen acquired approximately 94%
of the equity interests of Charter Communication, Inc. for an aggregate purchase
price of $2.2 billion, excluding $2.0 billion in debt we assumed. Subsequently,
Charter Properties was contributed to Charter Operating a direct wholly owned
subsidiary of Charter Holdings. The contribution was accounted for as a
reorganization under common control. Accordingly, the accompanying financial
statements for periods prior to December 24, 1998 include the accounts of
Charter Properties. In conjunction with our acquisition, Charter Communication,
Inc. acquired the controlling interests of the CCA Group and CharterComm
Holdings and in February 1999 transferred these companies to Charter Operating.
Charter Holdings accounted for the acquisitions of the CCA Group and CharterComm
Holdings in accordance with purchase accounting, and accordingly, the financial
statements for periods after December 23, 1998 include the accounts of Charter
Properties, the CCA Group and CharterComm Holdings.
In April 1998, Paul G. Allen purchased substantially all of the outstanding
equity interests in Marcus Holdings. In April, 1999, Marcus Holdings merged with
Charter
50
<PAGE> 54
Holdings, with Charter Holdings as the serving entity. Beginning in October
1998, Charter Communication, Inc. began to manage the cable operations of Marcus
Holdings. Immediately prior to the closing of our merger with Marcus Holdings,
Mr. Allen purchased the remaining minority interest in Marcus Holdings. Our
merger with Marcus Holding was accounted for as a reorganization under common
control similar to a pooling of interests because of Mr. Allen's controlling
interests in Marcus Holdings and Charter Holdings. As such, the accounts of
Charter Holdings and Marcus Holdings have been consolidated since December 23,
1998.
In the second quarter of 1999, we, acquired American Cable and Renaissance.
In addition to these acquisitions, since the beginning of 1999, we have entered
into definitive agreements to acquire the Greater Media Systems, Helicon, the
InterMedia Systems, Rifkin and certain cable assets of Cable Satellite, all as
forth on the table below.
<TABLE>
<CAPTION>
AS OF AND FOR THE THREE MONTHS ENDED
3/31/99
----------------------------------------
(DOLLARS IN THOUSANDS)
PURCHASE BASIC -------------------------
ACQUISITION DATE(A) PRICE SUBSCRIBERS REVENUE EBITDA
- ----------- ------- -------- ----------- ------- ------
<S> <C> <C> <C> <C> <C>
American Cable................. 4/99 $240 million 68,000 $ 9,151 $ 4,213
Renaissance.................... 4/99 459 million 132,000 15,254 8,455
Greater Media Systems.......... 2nd Quarter 1999 500 million 174,000 20,394 7,621
Helicon........................ 3rd Quarter 1999 550 million 171,000 21,252 8,963
InterMedia Systems............. 3rd or 4th Quarter 872.7 million -- 408,000 48,288 21,504
1999 systems' swap (142,000)
--------
266,000
Rifkin......................... 3rd or 4th Quarter 1,460 million 463,000 50,914 19,194
1999
Other.......................... 2nd Quarter 148 million 37,000 3,354 1,760
------------------ -------- -------- -------
Total....................... $4,229.7 million 1,311,000 $169,124 $75,622
================== ======== ======== =======
</TABLE>
(a) Total represents closing date for recent acquisitions and anticipated
closing date for pending acquisitions.
The systems acquired pursuant to these recent acquisitions and the pending
acquisitions serve, in the aggregate, approximately 1.3 million customers. In
addition, we are negotiating with several other potential acquisition candidates
whose systems would further complement our regional operating clusters. We
expect to finance our pending acquisitions and any other future acquisitions
with additional borrowings under our credit facilities and with additional
equity.
OVERVIEW
Our revenues are primarily attributable to monthly subscription fees
charged to customers for our basic, expanded basic and premium cable television
programming services, equipment rental and ancillary services provided by our
cable television systems. In addition, we derive other revenues from
installation and reconnection fees charged to customers to commence or reinstate
service, pay-per-view programming, advertising revenues and commissions related
to the sale of merchandise by home shopping services. We have generated
increases in revenues in each of the past three fiscal years, primarily through
internal customer growth, basic and expanded tier rate increases and
acquisitions as well as innovative marketing such as our MVP package of premium
services. This entitles customers to receive a substantial discount on bundled
premium services of HBO, Showtime, Cinemax and The Movie Channel. The MVP
package has increased premium household penetration, premium revenue and cash
flow.
51
<PAGE> 55
Our expenses primarily consist of operating costs, general and
administrative expenses, depreciation and amortization expense and management
fees/corporate expense charges. Operating costs primarily include programming
costs, cable service related expenses, marketing and advertising costs,
franchise fees and expenses related to customer billings. Programming costs
account for approximately 50 percent of our operating costs. Programming costs
have increased in recent years and are expected to continue to increase due to
additional programming being provided to customers, increased cost to produce or
purchase cable programming, inflation and other factors affecting the cable
television industry. In each year we have operated, our costs to acquire
programming have exceeded customary inflationary increases. A significant factor
with respect to increased programming costs is the rate increases and surcharges
imposed by national and regional sports networks directly tied to escalating
costs to acquire programming for professional sports packages in a competitive
market. We have benefited in the past from our membership in an industry
cooperative that provides members with volume discounts from programming
networks. We believe our membership has minimized increases to our programming
costs relative to what the increases would otherwise have been. We also believe
that we should derive additional discounts from programming networks due to our
increased size. Finally, we were able to negotiate favorable terms with premium
networks in conjunction with the premium packages, which minimized the impact on
margins and provided substantial volume incentives to grow the premium category.
Although we believe that we will be able to pass future increases in programming
costs through to customers, there can be no assurance that we will be able to do
so.
General and administrative expenses primarily include accounting and
administrative personnel and professional fees. Depreciation and amortization
expense relates to the depreciation of our tangible assets and the amortization
of our franchise costs. Management fees/corporate expense charges are fees paid
to or charges from CCI for corporate management and consulting services. Charter
Holdings records actual corporate expense charges incurred by CCI on behalf of
Charter Holdings. Prior to the Charter Acquisition, the CCA Group and
CharterComm Holdings recorded management fees payable to CCI equal to 3.0% to
5.0% of gross revenues plus certain expenses. In October 1998, CCI began
managing the cable operations of Marcus Holdings under a management fee
arrangement. The Credit Facilities limit management fees to 3.5% of gross
revenues.
We have had a history of net losses and expect to continue to report net
losses for the foreseeable future. The principal reasons for our prior and
anticipated net losses include the depreciation and amortization expenses
associated with our acquisitions, the capital expenditures related to
construction and upgrading of our systems, and interest costs on borrowed money.
We cannot predict what impact, if any, continued losses will have on our ability
to finance our operations in the future.
52
<PAGE> 56
RESULTS OF OPERATIONS
The following discussion concerns the financial condition and results of
operations for
(1) Charter Holdings (comprised of Charter Properties only) for the period
from January 1, 1998 through December 23, 1998, for the period from
January 1, 1998 through March 31, 1998 and for the years ended December
31, 1997 and 1996 and
(2) Charter Holdings (comprised of Charter Properties, CCA Group,
CharterComm Holdings and Marcus Holdings) for the period from January
1, 1999 through March 31, 1999 and for the period from December 24,
1998 through December 31, 1998.
The following table sets forth the percentages that items in the statements
of income bear to operating revenues for the indicated periods.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------------------------------------------- 1/1/98 THROUGH
1996 1997 12/23/98
----------------------------- ----------------------------- -------------------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Revenues.............. $ 14,881 100.0% $ 18,867 100.0% $ 49,731 100.0%
Operating expenses
Operating costs..... 5,888 39.6% 9,157 48.5% 18,751 37.7%
General and
administrative
costs............. 2,235 15.0% 2,610 13.8% 7,201 14.5%
Depreciation and
amortization...... 4,593 30.9% 6,103 32.3% 16,864 33.9%
Management fees/
corporate expense
charges........... 446 3.0% 566 3.0% 6,176 12.4%
------------- ------------- ------------- ------------- --------------- -------------
Total operating
expenses.......... 13,162 88.4% 18,436 97.7% 48,992 98.5%
------------- ------------- ------------- ------------- --------------- -------------
Income (loss) from
operations.......... 1,719 11.6% 431 2.3% 739 1.5%
Interest income....... 20 0.1% 41 0.2% 44 0.1%
Interest expense...... (4,415) (29.7%) (5,120) (27.1%) (17,277) (34.7%)
Other income
(expense)........... (47) (0.3%) 25 0.1% (728) (1.5%)
------------- ------------- ------------- ------------- --------------- -------------
Net loss.............. $ (2,723) (18.3%) $ (4,623) (24.5%) $ (17,222) (34.6%)
============= ============= ============= ============= =============== =============
<CAPTION>
THREE MONTHS ENDED
12/24/98 THROUGH ---------------------------------------------------------------
12/31/98 3/31/99 3/31/98
----------------------------- ------------------------------- -----------------------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATION
Revenues.............. $ 23,450 100.0% $ 286,135 100.0% $ 4,782 100.00%
Operating expenses
Operating costs..... 9,957 42.5% 86,650 30.3% 1,583 33.1%
General and
administrative
costs............. 2,722 11.6% 65,425 22.9% 1,055 22.1%
Depreciation and
amortization...... 13,811 58.9% 153,747 53.7% 1,605 33.6%
Management fees/
corporate expense
charges........... 766 3.3% 5,323 1.9% 143 3.0%
------------- ------------- --------------- ------------- ------------- -------------
Total operating
expenses.......... 27,256 116.2% 311,145 108.7% 4,386 91.7%
------------- ------------- --------------- ------------- ------------- -------------
Income (loss) from
operations.......... (3,806) (16.2%) (25,010) (8.7%) 396 8.3%
Interest income....... 133 0.6% 1,733 0.6% 8 0.2%
Interest expense...... (5,051) (21.5%) (71,591) (25.0%) (1,329) (27.8%)
Other income
(expense)........... -- -- 3,619 1.3% 2 0.0%
------------- ------------- --------------- ------------- ------------- -------------
Net loss.............. $ (8,724) (37.2%) $ (91,249) (31.9%) $ (923) (19.3%)
============= ============= =============== ============= ============= =============
</TABLE>
53
<PAGE> 57
PERIOD FROM JANUARY 1, 1999 THROUGH MARCH 31, 1999
COMPARED TO PERIOD FROM JANUARY 1, 1998 THROUGH MARCH 31, 1998
REVENUES. Revenues increased by $281.1 million, or 5,883.6%, from $4.8
million for the period from January 1, 1998 through March 31, 1998 to $286.1
million for the period from January 1, 1999 through March 31, 1999. The increase
in revenues primarily resulted from the acquisitions of the CCA Group,
CharterComm Holdings and Sonic Communication, Inc. (Sonic) and our merger with
Marcus Holdings. The revenues of these entities for the three months ended March
31, 1999 were $89.4 million, $53.4 million, $13.1 million and $125.2 million,
respectively.
OPERATING EXPENSES. Operating expenses increased by $85.1 million, or
5,373.8%, from $1.6 million for the period from January 1, 1998 through March
31, 1998 to $86.7 million for the period from January 1, 1999 through March 31,
1999. This increase was due primarily to the acquisitions of the CCA Group,
CharterComm Holdings and Sonic and our merger with Marcus Holdings whose
operating expenses were $24.6 million, $16.6 million, $3.8 million and $39.9
million for the three months ended March 31, 1999, respectively.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by $64.4 million, or 6,101.4%, from $1.1 million for the period from
January 1, 1998 through March 31, 1998 to $65.4 million for the period from
January 1, 1999 through March 31, 1999. This increase was due primarily to the
acquisitions of the CCA Group, CharterComm Holdings and Sonic and our merger
with Marcus Holdings whose incremental general and administrative expenses were
$21.9 million, $10.3 million, $3.1 million and $29.1 million, respectively.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased by $152.1 million, or 9,479.3%, from $1.6 million for the period from
January 1, 1998 through March 31, 1998 to $153.7 million for the period from
January 1, 1999 through March 31, 1999. There was a significant increase in
amortization resulting from the acquisitions of the CCA Group, CharterComm
Holdings and Sonic and our merger with Marcus Holdings whose incremental
amortization expenses for the three months ended March 31, 1999 were $49.1
million, $32.6 million, $4.3 million and $63.7 million for the three months
ended March 31, 1999, respectively.
MANAGEMENT FEES/CORPORATE EXPENSE CHARGES. Management fees/corporate
expense charges increased by $5.2 million, or 6,849.7% from $0.1 million for the
period from January 1, 1998 through March 31, 1998 to $5.3 million for the
period from January 1, 1999 through March 31, 1999. The increase from the period
from January 1, 1998 through March 31, 1998 compared to the period from January
1, 1999 through March 31, 1999 was the result of the acquisitions of the CCA
Group, CharterComm Holdings and Sonic and our merger with Marcus Holdings.
INTEREST EXPENSE. Interest expense increased by $70.2 million, or
5,286.8%, from $1.3 million for the period from January 1, 1998 through March
31, 1998 to $71.6 million for the period from January 1, 1999 through March 31,
1999. This increase resulted primarily from the financing of the acquisitions of
the CCA Group and CharterComm Holdings and our merger with Marcus Holdings. The
interest expenses resulting from each of these transactions were $14.4 million,
$12.0 million, and $26.1 million, respectively.
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<PAGE> 58
NET LOSS. Net loss increased by $97.5 million, or 10,567.1%, from $0.9
million for the period from January 1, 1998 through March 31, 1998 to $98.5
million for the period from January 1, 1999 through March 31, 1999.
The increase in revenues that resulted from the acquisitions of the CCA
Group, CharterComm Holdings and Sonic and our merger with Marcus Holdings was
not sufficient to offset the significant costs related to the acquisitions.
PERIOD FROM DECEMBER 24, 1998, THROUGH DECEMBER 31, 1998
This period is not comparable to any other period presented. The financial
statements represent eight days of operations. This period not only contains the
results of operations of Charter Properties, but also the results of operations
of those entities purchased in the acquisition of us and our merger with Marcus
Holdings. As a result, no comparison of the operating results for this eight-day
period is presented.
PERIOD FROM JANUARY 1, 1998 THROUGH DECEMBER 23, 1998 COMPARED TO 1997
REVENUES. Revenues increased by $30.8 million, or 163.6%, from $18.9
million in 1997 to $49.7 million for the period from January 1, 1998 through
December 23, 1998. The increase in revenues primarily resulted from the
acquisition of Sonic whose revenues for that period were $30.5 million.
OPERATING EXPENSES. Operating expenses increased by $9.6 million, or
104.8%, from $9.2 million in 1997 to $18.8 million for the period from January
1, 1998 through December 23, 1998. This increase was due primarily to the
acquisition of Sonic, whose operating expenses for that period were $11.5,
partially offset by the loss of $1.4 million on the sale of a cable system in
1997.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by $4.6 million, or 175.9%, from $2.6 million in 1997 to $7.2 million
for the period from January 1, 1998 through December 23, 1998. This increase was
due primarily to the acquisition of Sonic whose general and administrative
expenses for that period were $4.4 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased by $10.8 million, or 176.3%, from $6.1 million in 1997 to $16.9
million for the period from January 1, 1998 through December 23, 1998. There was
a significant increase in amortization resulting from the acquisition of Sonic.
Incremental depreciation and amortization expenses of the acquisition of Sonic
were $10.3 million.
MANAGEMENT FEES/CORPORATE EXPENSE CHARGES. Corporate expense charges
increased by $5.6 million, or 991.2% from $0.6 million in 1997 to $6.2 million
for the period from January 1, 1998 through December 23, 1998. The increase from
1997 compared to the period from January 1, 1998 through December 23, 1998 was
the result of additional Charter Communications, Inc. charges related to equity
appreciation rights plans of $3.8 million for the period from January 1, 1998
through December 23, 1998 and an increase of $1.5 million in management services
provided by Charter Communications, Inc. as a result of the acquisition of
Sonic.
INTEREST EXPENSE. Interest expense increased by $12.2 million, or 237.4%,
from $5.1 million in 1997 to $17.3 million for the period from January 1, 1998
through December 23, 1998. This increase resulted primarily from the
indebtedness of $220.6 million, including a note payable for $60.7 million,
incurred in connection with the acquisition of Sonic resulting in $12.1 million
of additional interest expense.
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<PAGE> 59
NET LOSS. Net loss increased by $12.6 million, or 272.5%, from $4.6
million in 1997 to $17.2 million for the period from January 1, 1998 through
December 23, 1998.
The increase in revenues that resulted from cable television customer
growth was not sufficient to offset the significant costs related to the
acquisition of Sonic.
1997 COMPARED TO 1996
REVENUES. Revenues increased by $4.0 million, or 26.8%, from $14.9 million
in 1996 to $18.9 million in 1997. The primary reason for this increase is due to
the acquisition of 5 cable systems in 1996 that increased customers by 58.9%.
Revenues of Charter Properties, excluding the activity of any other systems
acquired during the periods, increased by $0.7 million, or 8.9%, from $7.9
million in 1996 to $8.6 million in 1997.
OPERATING EXPENSES. Operating expenses increased by $3.3 million, or
55.5%, from $5.9 million in 1996 to $9.2 million in 1997. This increase was
primarily due to the acquisitions of the cable systems in 1996 and the loss of
$1.4 million on the sale of a cable system in 1997.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by $0.4 million, or 16.8%, from $2.2 million in 1996 to $2.6 million
in 1997. This increase was primarily due to the acquisitions of the cable
systems in 1996.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased by $1.5 million, or 32.9%, from $4.6 million in 1996 to $6.1 million
in 1997. There was a significant increase in amortization resulting from the
acquisitions of the cable systems in 1996.
MANAGEMENT FEES/CORPORATE EXPENSE CHARGES. Corporate expense charges
increased by $0.1 million, or 26.9%, from $0.4 million in 1996 to $0.6 million
in 1997. These fees were 3.0% of revenues in both 1996 and 1997.
INTEREST EXPENSE. Interest expense increased by $0.7 million, or 16.0%,
from $4.4 million in 1996 to $5.1 million in 1997. This increase resulted
primarily from the indebtedness incurred in connection with the acquisitions of
several cable systems in 1996.
NET LOSS. Net loss increased by $1.9 million, or 69.8%, from $2.7 million
in 1996 to $4.6 million in 1997. The increase in net loss is primarily related
to the $1.4 million loss on the sale of a cable system.
SUPPLEMENTAL MANAGEMENT'S DISCUSSION AND ANALYSIS
COMBINED CHARTER COMPANIES OPERATING RESULTS
The following discusses the combined revenues and expenses of Charter
Holdings, CCA Group and CharterComm Holdings, for the years ended December 31,
1996, 1997 and for the period January 1, 1998 through December 23, 1998 and for
the period December 24, 1998 through December 31, 1998. The combined revenues
and expenses represent the sum of the revenues and expenses of each of the
companies managed by Charter Communications, Inc. during all periods presented.
Since the companies in these groups were under common management, we believe
presenting combined financial information of those companies is informative.
Other expenses, including interest expense, are not presented, as such
information was not considered meaningful. The combined revenues and expenses do
not reflect any pro forma adjustments related to acquisitions
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<PAGE> 60
made by the companies in these groups or related to the acquisition of us. The
combined revenues and expenses for the period December 24, 1998 through December
31, 1998 include the revenues and expenses for Marcus Holdings.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------------------------------------- 1/1/98 THROUGH
1996 1997 12/23/98
------------------------ ------------------------ ------------------------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Revenues................................... $ 368,553 100.0% $ 484,155 100.0% $ 570,964 100.0%
--------------- ------ --------------- ------ --------------- ------
Operating expenses:
Operating costs........................... 159,835 43.4% 207,802 42.9% 238,201 41.7%
General and administrative costs.......... 30,249 8.2% 41,617 8.6% 50,227 8.8%
Depreciation and amortization............. 154,273 41.9% 198,718 41.0% 240,294 42.1%
Management fees/corporate expense
charges................................. 15,094 4.1% 20,759 4.3% 38,348 6.7%
--------------- ------ --------------- ------ --------------- ------
Total operating expenses............ 359,451 97.5% 468,896 96.8% 567,070 99.3%
--------------- ------ --------------- ------ --------------- ------
Income (loss) from operations.............. $ 9,102 2.5% $ 15,259 3.2% $ 3,894 0.7%
=============== ====== =============== ====== =============== ======
<CAPTION>
12/24/98 THROUGH
12/31/98
------------------------
<S> <C> <C>
STATEMENT OF OPERATIONS
Revenues................................... $ 23,450 100.0%
--------------- ------
Operating expenses:
Operating costs........................... 12,679 54.1%
General and administrative costs.......... -- 0.0%
Depreciation and amortization............. 13,811 58.9%
Management fees/corporate expense
charges................................. 766 3.3%
--------------- ------
Total operating expenses............ 27,256 116.2%
--------------- ------
Income (loss) from operations.............. $ (3,806) -16.2%
=============== ======
</TABLE>
PERIOD FROM DECEMBER 24, 1998, THROUGH DECEMBER 31, 1998
This period is not comparable to any other period presented. The financial
statements represent eight days of operations of the companies owned by us and
Marcus Holdings on a new basis to reflect the push-down of the purchase price in
the acquisition of us by Paul G. Allen and the inclusion of Marcus Holdings. The
period from January 1, 1998 through December 23, 1998 represents 357 days of
operations of the companies owned by us and Marcus Holdings. As a result, no
comparison of the operating results for this eight-day period is presented.
PERIOD FROM JANUARY 1, 1998 THROUGH DECEMBER 23, 1998 COMPARED TO 1997
REVENUES. Revenues increased by $86.8 million, or 17.9%, from $484.2
million in 1997 to $571.0 million for the period from January 1, 1998 through
December 23, 1998. Increase in revenues of $30.5 million and $16.8 million
resulted from the acquisitions of Sonic in 1998 and Long Beach Acquisition Corp.
in 1997, respectively. The remaining increase in revenues is primarily related
to internally generated increases in basic subscribers and increases in premium
service subscriptions.
We have grown our subscriber base internally as a result of management's
marketing efforts to add new customers, increased efforts to retain existing
customers and a limited amount of new-build construction to increase the
coverage area of our systems.
Premium subscriptions have increased as a result of the acquisition of
Sonic and our marketing efforts.
OPERATING EXPENSES. Operating expenses increased by $30.4 million, or
14.6%, from $207.8 million in 1997 to $238.2 million for the period from January
1, 1998 through December 23, 1998. Increases in operating expenses of $11.5
million and $6.0 million resulted from acquisitions of Sonic in 1998 and Long
Beach Acquisition Corp. in 1997, respectively. The remaining difference is
primarily related to increased programming cost.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by $8.6 million, or 20.7%, from $41.6 million in 1997 to $50.2 million
for the period from January 1, 1998 through December 23, 1998. Increases in
general and administrative
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<PAGE> 61
expenses of $4.4 million and $1.6 million resulted from acquisitions of Sonic in
1998 and Long Beach Acquisition Corp. in 1997, respectively.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
$41.6 million, or 20.9% from $198.7 million in 1997 to $240.3 million for the
period from January 1, 1998 through December 23, 1998. Increases in depreciation
and amortization of $10.3 million and $8.4 million resulted from acquisitions of
Sonic in 1998 and Long Beach Acquisition Corp. in 1997, respectively. The
increase is also attributed to capital expenditures of $195.5 million for the
period from January 1, 1998 through December 23, 1998 and $162.6 million during
1997.
MANAGEMENT FEES/CORPORATE EXPENSE CHARGES. Management fees/corporate
expense charges increased by $17.6 million, or 84.7% from $20.8 million in 1997
to $38.3 million for the period from January 1, 1998 through December 23, 1998.
The increase from 1997 compared to 1998 was primarily the result of additional
Charter Communications, Inc. charges related to the equity appreciation rights
plans of $14.4 million for fiscal 1998 and the additional management fees as a
result of the Sonic and Long Beach acquisitions of $1.5 million and $0.5
million, respectively.
1997 COMPARED TO 1996
REVENUES. Revenues increased by $115.6 million, or 31.4%, from $368.6
million in 1996 to $484.2 million in 1997. This increase was due to several
acquisitions of cable systems in 1996 and 1997, including the acquisition of
Long Beach Acquisition Corp. whose incremental revenues were $23.7 million, as
well as an increase in the average monthly revenue per basic customer from
$34.05 in 1996 to $37.15 in 1997.
OPERATING EXPENSES. Operating expenses increased by $48.0 million, or
30.0%, from $159.8 million in 1996 to $207.8 million in 1997. This increase was
primarily due to the acquisitions in 1996 and 1997, most significant being the
acquisition of Long Beach Acquisition Corp. whose operating expenses were $10.9
million.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased by $11.4 million, or 37.6%, from $30.2 million in 1996 to $41.6
million in 1997. This increase was primarily due to the acquisitions acquired in
1996 and 1997, most significant being the acquisition of Long Beach Acquisition
Corp. whose general and administrative expenses were $1.9 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased by
$44.4 million, or 28.8%, from $154.3 million in 1996 to $198.7 million in 1997.
There was a significant increase in amortization resulting from the acquisitions
of several cable systems in 1996 and 1997. In connection, with such
acquisitions, the acquired franchises were recorded at fair market value, which
resulted in a stepped-up basis upon acquisition. The increase is also attributed
to capital expenditures of $162.6 million in 1997 and $110.3 million in 1996.
MANAGEMENT FEES/CORPORATE EXPENSE CHARGES. Management fees/corporate
expense charges increased by $5.7 million, or 37.5%, from $15.1 million in 1996
to $20.8 million in fiscal 1997. This increase is primarily the result of an
increase in revenues from 1996 and 1997 and additional costs incurred by Charter
Communications, Inc. to provide the management services.
58
<PAGE> 62
OUTLOOK
Our business strategy emphasizes the growth of our customer base and the
increase of our operating cash flow by pursuing strategic acquisitions and
upgrading our systems to enable us to offer new products and services. We intend
to continue to pursue strategic acquisitions and believe that the current
consolidation activity in the cable industry offers substantial opportunities to
further our acquisition strategy. We believe that there are significant
advantages in increasing the size and scope of our operations, including:
- improved economies of scale in management, marketing, customer service,
billing and other administrative functions;
- reduced costs for plant and infrastructure;
- increased leverage for negotiating programming contracts; and
- increased influence on the evolution of important new technologies
affecting our business.
We seek to "cluster" cable systems in suburban and ex-urban areas
surrounding selected metropolitan markets. We believe that such "clustering"
offers significant opportunities to increase operating efficiencies and to
improve operating margins and cash flow by spreading fixed costs over an
expanding subscriber base. In addition, we believe that by concentrating
"clusters" in markets, we will be able to generate higher growth in revenues and
operating cash flow. Through strategic acquisitions and "swaps" of cable
systems, we seek to enlarge the coverage of our current areas of operations,
and, if feasible develop "clusters" in new geographic areas within existing
regions. Swapping of cable systems allows us to trade systems that do not
coincide with our operating strategy while gaining systems that meet our
objectives. In developing and enhancing cable system "clusters", our acquisition
strategy is opportunistic and depends in part upon cable systems becoming
available in the marketplace. Because many of our operating areas include other
significant cable operators with nearby systems, marketplace availability and
pricing may be heavily influenced by interest level of other potential
purchasers. The changing competitive telecommunications market also impacts this
strategy.
Among the factors we consider in acquiring a cable system are:
- proximity to our existing cable systems or the potential for developing
new clusters of systems;
- demographic profile of the market as well as the number of homes passed
and customers within the system;
- per customer revenues and operating cash flow and opportunities to
increase these amounts;
- the technological state of such system; and
- the level of competition within the local market.
The success of this strategy will be based on our ability to continue to
acquire cable systems, which meet our business strategy, obtain financing,
maintain cash flows and manage growth.
LIQUIDITY AND CAPITAL RESOURCES
The cable television business has substantial ongoing capital requirements
for the construction, expansion and maintenance of plant. Expenditures are
primarily made to
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<PAGE> 63
rebuild and upgrade our existing plants. We also spend capital on plant
extensions, new services, converters and system maintenance. Historically, we
have been able to meet our capital requirements through our cash flows from
operations, equity contributions, debt financings and available borrowings under
our credit facilities.
Upgrading our existing plants will enable us to offer new and enhanced
services, including additional channels and tiers, expanded pay-per-view
options, high-speed Internet access, wide area network and point-to-point
services and digital advertising insertion. The upgrades will facilitate our new
services in two primary ways:
- Greater bandwidth allows us to send more information through our systems.
This provides us with the "space" to provide new services in addition to
our current services. As a result, we will be able to roll out digital
cable programming in addition to existing analog channels offered to
customers who do not wish to subscribe to a package of digital services.
- Enhanced design configured for two-way communication with the customer
allows us to provide cable Internet services without telephone support
and other interactive services such as an interactive program guide,
impulse pay-per-view, video-on-demand and Wink that cannot be offered
without upgrading the bandwidth capacity of our systems.
We also believe our upgraded systems will provide enhanced picture quality
and system reliability.
Over the next three years, we plan to spend $1.8 billion for capital
expenditures, approximately $900 million of which will be used to upgrade our
systems to bandwidth capacity of 550 megahertz or greater so that we may offer
advanced service, and the remaining $900 million will be used for plant
extensions, new services, converters and system maintenance. Capital
expenditures for 1999, 2000 and 2001 are expected to be approximately $600
million, $650 million, and $550 million, respectively. If our recent pending
acquisitions are completed over the next three years, we plan to spend an
additional $700 million for capital bandwidth capacity of 550 megahertz or
greater so that we may offer advanced cable services and $400 million will be
used for plant extensions, new services, converters and system maintenance. We
expect to finance the anticipated capital expenditures with distributions
generated from operations and additional borrowings under our credit facilities.
For the three months ended March 31, 1999, Charter Holdings made capital
expenditures, excluding the acquisitions of cable television systems, of $109.6
million and $29.0 million for all of 1998.
On March 17, 1999, Charter Holdings issued $600 million in principal amount
of 8.250% notes, $1.5 billion in principal amount of 8.625% notes and $1.475
billion outstanding under 9.920% notes. The net proceeds of approximately $3.0
billion, combined with the borrowings under our credit facilities, were used to
consummate the tender offers for publicly held debt of several of our
subsidiaries, as described below, refinance borrowings under our previous credit
facilities and for working capital purposes. Semi-annual interest payments with
respect to the 8.250% and 8.625% notes will be approximately $89.4 million,
commencing on October 1, 1999. No interest on the 9.920% notes will be payable
prior to April 1, 2004. Thereafter, semiannual interest payments will be
approximately $162.6 million in the aggregate, commencing on October 1, 2004.
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<PAGE> 64
Concurrent with the issuance of the notes, Charter Holdings refinanced
substantially all existing credit facilities of its subsidiaries with new credit
facilities entered into by Charter Operating. In February and March 1999, we
commenced cash tender offers to purchase 14% senior discount notes issued by
Charter Communications Southeast Holdings, LLC, the 11.25% senior notes issued
by Charter Communications Southeast, LLC, the 13.50% senior subordinated
discount notes issued by Marcus Operating Cable Company, L.L.C., and the 14.25%
senior discount notes issued by Marcus Cable. All notes except for $1.1 million
were paid off.
The Charter Operating Credit Agreement provides for two term facilities,
one with a principal amount of $1.0 billion that matures September 2008 (Term
A), and the other with the principal amount of $1.85 billion that matures on
March 2009 (Term B). The Charter Operating Credit Agreement also provides for a
$1.25 billion revolving credit facility with a maturity date of September 2008.
After giving effect to the pending acquisitions, we have approximately $791
million of borrowing availability under our credit facilities. In addition, an
uncommitted incremental term facility of up to $500 million with terms similar
to the terms of the credit facilities is permitted under the credit facilities,
but will be conditioned on receipt of additional new commitments from existing
and new lenders. Amounts under credit facilities bear interest at the Base Rate
or the Eurodollar Rate, as defined in the credit facilities, plus a margin up to
2.75%. A quarterly commitment fee of between 0.25% and 0.375% per annum is
payable on the unborrowed balance of Term A and the revolving credit facility.
The weighted average interest rate for outstanding debt on March 31, 1999 was
7.44%.
We acquired Renaissance in April, 1999. Renaissance has outstanding
publicly held debt comprised of 10% senior discount notes due 2008 with a $163.2
million principal amount at maturity and $100.0 million accreted value. The
Renaissance notes pay no interest until April 15, 2003. From and after April 15,
2003, the Renaissance notes will bear interest, payable semi-annually in cash,
on each April 15 and October 15, commencing October 15, 2003. The Renaissance
notes are due on April 15, 2008.
CERTAIN TRENDS AND UNCERTAINTIES
SUBSTANTIAL LEVERAGE. As of March 31, 1999, pro forma for our recent
acquisitions and pending acquisitions, our total indebtedness would have been
approximately $6.6 billion, our total members' equity would have been
approximately $4.7 billion, and the deficiency of our earnings available to
cover fixed charges would have been approximately $197 million. We anticipate
incurring substantial additional debt in the future to finance additional
acquisitions and to fund the expansion, maintenance and the upgrade of our
systems. If new debt is added to our current debt levels, the related risks that
we face could intensify.
Our ability to make payments on our debt, including the notes and to fund
planned capital expenditures for upgrading our cable systems will depend on our
ability to generate cash and secure financing in the future. This, to a certain
extent, is subject to general economic, financial, competitive, legislative,
regulatory and other factors that are beyond our control. Based upon the current
levels of operations, we believe that cash flow from operations and available
cash, together with available borrowings under our credit facilities, will be
adequate to meet our liquidity and capital needs for at least the next several
years. However, there can be no assurance our business will generate sufficient
cash flow from operations, or that future borrowings will be available to us
under our credit facilities or
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<PAGE> 65
from other sources of financing in an amount sufficient to enable us to repay
our indebtedness, to grow our business or to fund our other liquidity and
capital needs.
The degree to which we are leveraged could have material consequences to us
and our business, including, but not limited to:
- making it more difficult for us to satisfy our obligations with respect
to the notes and to satisfy our obligations under our credit facilities;
- increasing our vulnerability to general adverse economic and cable
industry conditions, including interest rate fluctuations;
- requiring us to dedicate a substantial portion of our cash flow from
operations to payments on our indebtedness, which will reduce our funds
available for working capital, capital expenditures, acquisitions of
additional systems and other general corporate requirements;
- limiting our flexibility in planning for, or reacting to, changes in our
business and the cable industry;
- placing us at a competitive disadvantage compared to our competitors that
have proportionately less debt; and
- limiting our ability to borrow additional funds, due to applicable
financial and restrictive covenants in such indebtedness.
VARIABLE INTEREST RATES. A significant portion of our indebtedness bears
interest at variable rates that are linked to short-term interest rates. If
interest rates rise, our costs relative to those obligations would also rise.
RESTRICTIVE COVENANTS. Our credit facilities contain a number of
significant covenants that, among other things, restrict the ability of our
subsidiaries to:
- pay dividends;
- pledge assets;
- dispose of assets or merge;
- incur additional indebtedness;
- issue equity;
- repurchase or redeem equity interests and indebtedness;
- create liens; and
- make certain investments or acquisitions.
In addition, our credit facilities contain, among other covenants,
requirements that Charter Operating, one of our subsidiaries and the borrower on
a consolidated basis with our other subsidiaries, maintain specified financial
ratios. The ability to comply with these provisions may be affected by events
beyond our control. The breach of any of these covenants will result in default
under our credit facilities. In the event of a default under our credit
facilities, lenders could elect to declare all amounts borrowed, together with
accrued and unpaid interest and other fees, to be due and payable. Additionally,
if the amounts outstanding under our credit facilities are accelerated, it would
be an event of default under and we may not be able to repay such amounts or the
notes. If the 8.250% notes are not refinanced at least six months prior to the
date of their maturity, the entire
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amount due under our credit facilities shall become due and payable. As of March
31, 1999, we are in compliance with the covenants of our credit facilities.
IMPORTANCE OF GROWTH STRATEGY AND RELATED RISKS. We expect that a
substantial portion of any of our future growth will be achieved through
revenues from additional services and the acquisition of additional cable
systems. We cannot assure you that we will be able to offer new services
successfully to our customers or that those new services will generate revenues.
In addition, the acquisition of additional cable systems may not have a positive
net impact on our operating results. Acquisitions involve a number of special
risks, including diversion of management's attention, failure to retain key
acquired personnel, risks associated with unanticipated events or liabilities
and difficulties in assimilation of the operations of the acquired companies,
some or all of which could have a material adverse effect on our business,
results of operations and financial condition. If we are unable to grow our cash
flow sufficiently, we may be unable to fulfill our obligations or obtain
alternative financing.
MANAGEMENT OF GROWTH. As a result of the acquisition of us by Paul G.
Allen, our merger with Marcus Holdings and our recent and pending acquisitions,
we have experienced and will continue to experience rapid growth that has placed
and is expected to continue to place a significant strain on our management,
operations and other resources. Our future success will depend in part on our
ability to successfully integrate the operations acquired and to be acquired and
to attract and retain qualified personnel. The ability to retain key acquired
personnel may require additional cost for such things as severance packages or
other employee benefits. However, acquisitions historically have had minimal
employee benefit related cost and all benefit plans have been terminated with
acquired employees transferring to the Charter 401(k) Plan. The failure to
retain or obtain needed personnel or to implement management, operating or
financial systems necessary to successfully integrate acquired operations or
otherwise manage growth when and as needed could have a material adverse effect
on our business, results of operations and financial condition.
REGULATION AND LEGISLATION. Cable systems are extensively regulated at the
federal, state, and local level. Rate regulation of cable systems has been in
place since passage of the 1992 Cable Act, although the scope of this regulation
recently was sharply contracted. Since March 31, 1999, rate regulation exists
only with respect to the lowest level of basic cable service and associated
equipment. This change affords cable operators much greater pricing flexibility,
although Congress could revisit this issue if confronted with substantial rate
increases.
Cable operators also face significant regulation of their channel capacity.
They currently can be required to devote substantial capacity to the carriage of
programming that they would not carry voluntarily, including certain local
broadcast signals, local public, educational and government access users, and
unaffiliated commercial leased access programmers. This carriage burden could
increase in the future, particularly if the Federal Communications Commission
were to require cable systems to carry both the analog and digital versions of
local broadcast signals or if it were to allow unaffiliated internet service
providers seeking direct cable access to invoke commercial leased access rights
originally devised for video programmers. The Federal Communications Commission
is currently conducting proceedings in which it is considering both of these
channel usage possibilities.
The 1992 Cable Act and the Federal Communications Commission's rules
implementing that act generally have increased the administrative and
operational expenses of cable television systems and have resulted in additional
regulatory oversight by the
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Federal Communications Commission and local or state franchise authorities. The
Cable Acts and the corresponding Federal Communications Commission regulations
have established must carry/retransmission consent and rate regulations.
The 1992 Cable Act contains broadcast signal carriage requirements that,
among other things, allow local commercial television broadcast stations to
elect once every three years between requiring a cable system to carry the
station ("must carry") or negotiating for payments for granting permission to
the cable operator to carry the station ("retransmission consent"). Less popular
stations typically elect "must carry," and more popular stations, such as those
affiliated with a national network, typically elect "retransmission consent."
Must carry requests can dilute the appeal of a cable system's programming
offerings because a cable system with limited channel capacity may be required
to forego carriage of popular channels in favor of less popular broadcast
stations electing must carry. Retransmission consent demands may require
substantial payments or other concessions. Either option has a potentially
adverse effect on our business. The burden associated with "must carry" may
increase substantially if broadcasters proceed with planned conversion to
digital transmission and the Federal Communications Commission determines that
cable systems must carry all analog and digital broadcasts in their entirety. A
rulemaking is now pending at the Federal Communications Commission regarding the
imposition of dual digital and analog must carry.
The 1992 Cable Act permits certified local franchising authorities to order
refunds of basic service rates paid in the previous twelve-month period
determined to be in excess of the maximum permitted rates. As of December 31,
1998, the amount refunded by us has been insignificant. We may be required to
refund additional amounts in the future.
We believe that we have complied in all material respects with the
provisions of the 1992 Cable Act, including the rate setting provisions
promulgated by the Federal Communications Commission. However, in jurisdictions
that have chosen not to certify, refunds covering the previous twelve-month
period may be ordered upon certification if we are unable to justify its basic
rates. We are unable to estimate at this time the amount of refunds, if any,
that may be payable by us in the event certain of its rates are successfully
challenged by franchising authorities or found to be unreasonable by the Federal
Communications Commission. We do not believe that the amount of any such refunds
would have a material adverse effect on our financial position or results of
operations.
The 1996 Telecom Act, among other things, immediately deregulated the rates
for certain small cable operators and in certain limited circumstances rates on
the basic service tier, and as of March 31, 1999, deregulates rates on the cable
programming service tier. This allows us more flexibility in implementing rate
changes. The Federal Communications Commission and Congress continue to be
concerned that rates for cable programming services are rising at a rate
exceeding inflation. It is therefore possible that either Congress or the
Federal Communications Commission will further restrict the ability of cable
television operators to implement desired rate increases. Should this occur, it
could impede our ability to raise rates to cover increased costs.
INTEREST RATE RISK
The use of interest rate risk management instruments, such as interest rate
exchange agreements, interest rate cap agreements and interest rate collar
agreements, is required under the terms of our credit facilities. Our policy is
to manage interest costs using a mix of fixed and variable rate debt. Using
interest rate swap agreements, we agree to exchange, at specified intervals, the
difference between fixed and variable interest amounts calculated
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by reference to an agreed-upon notional principal amount. Interest rate cap
agreements are used to lock in a maximum interest rate should variable rates
rise, but enable us to otherwise pay lower market rates. Collars limit our
exposure to and benefits from interest rate fluctuations on variable rate debt
to within a certain range of rates.
The table set forth below summarizes the fair values and contract terms of
financial instruments subject to interest rate risk maintained by us as of
December 31, 1998 (dollars in thousands):
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE FAIR VALUE AT
---------------------------------------------------- DECEMBER 31,
1999 2000 2001 2002 2003 THEREAFTER TOTAL 1998
-------- -------- -------- -------- -------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEBT
Fixed Rate............... -- -- -- -- -- $ 984,509 $ 984,509 $ 974,327
Average Interest Rate... -- -- -- -- -- 13.5% 13.5%
Variable Rate............ $ 87,950 $110,245 $148,950 $393,838 $295,833 $1,497,738 $2,534,554 $2,534,533
Average Interest Rate... 6.0% 6.1% 6.3% 6.5% 7.2% 7.6% 7.2%
INTEREST RATE INSTRUMENTS
Variable to Fixed
Swaps................... $130,000 $255,000 $180,000 $320,000 $370,000 $ 250,000 $1,505,000 $ (28,977)
Average Pay Rate........ 4.9% 6.0% 5.8% 5.5% 5.6% 5.6% 5.6%
Average Receive Rate.... 5.0% 5.0% 5.2% 5.2% 5.4% 5.4% 5.2%
Caps..................... $ 15,000 -- -- -- -- -- $ 15,000 --
Average Cap Rate........ 8.5% -- -- -- -- -- 8.5%
Collar................... -- $195,000 $ 85,000 $ 30,000 -- -- $ 310,000 $ (4,174)
Average Cap Rate........ -- 7.0% 6.5% 6.5% -- -- 6.8%
Average Floor Rate...... -- 5.0% 5.1% 5.2% -- -- 5.0%
</TABLE>
The notional amounts of interest rate instruments, as presented in the
above table, are used to measure interest to be paid or received and do not
represent the amount of exposure to credit loss. The estimated fair value
approximates the proceeds (costs) to settle the outstanding contracts. Interest
rates on variable debt are estimated using the average implied forward LIBOR
rates for the year of maturity based on the yield curve in effect at December
31, 1998 plus the borrowing margin in effect for each credit facility at
December 31, 1998. While swaps, caps and collars represent an integral part of
our interest rate risk management program, their incremental effect on interest
expense for the years ended December 31, 1998, 1997, and 1996 was not
significant.
In March 1999, substantially all existing long-term debt, excluding
borrowings of our previous credit facilities was extinguished, and all existing
previous credit facilities were refinanced with the credit facilities. The
following table set forth the fair values and contract terms of the long-term
debt maintained by us as of March 31, 1999:
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE FAIR VALUE AT
-------------------------------------------------- MARCH 31,
1999 2000 2001 2002 2003 THEREAFTER TOTAL 1999
-------- -------- -------- ------- ------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEBT
Fixed Rate................. -- -- -- -- -- $3,575,000 $3,575,000 $3,004,023
Average Interest Rate..... -- -- -- -- -- 9.0% 9.0%
Variable Rate.............. -- -- -- $13,125 $17,500 $1,719,375 $1,750,000 $1,750,000
Average Interest Rate..... -- -- -- 5.9% 6.0% 6.4% 6.4%
</TABLE>
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Interest rates on variable debt are estimated using the average implied
forward LIBOR rates for the year of maturity based on the yield curve in effect
at March 31, 1998 plus the borrowing margin in effect for each credit facility
at March 31, 1999.
YEAR 2000 ISSUES
GENERAL. Many existing computer systems and applications, and other
control devices and embedded computer chips use only two digits, rather than
four, to identify a year in the date field, failing to consider the impact of
the upcoming change in the century. As a result, such systems, applications,
devices, and chips could create erroneous results or might fail altogether
unless corrected to properly interpret data related to the year 2000 and beyond.
These errors and failures may result, not only from a date recognition problem
in the particular part of a system failing, but may also result as systems,
applications, devices and chips receive erroneous or improper data from
third-parties suffering from the year 2000 problem. In addition, two interacting
systems, applications, devices or chips, each of which has individually been
fixed so that it will properly handle the year 2000 problem, could nonetheless
suffer "integration failure" because their method of dealing with the problem is
not compatible.
These problems are expected to increase in frequency and severity as the
year 2000 approaches. This issue impacts our owned or licensed computer systems
and equipment used in connection with internal operations, including
- information processing and financial reporting systems,
- customer billing systems,
- customer service systems,
- telecommunication transmission and reception systems, and
- facility systems.
THIRD PARTIES. We also rely directly and indirectly, in the regular course
of business, on the proper operation and compatibility of third party systems.
The year 2000 problem could cause these systems to fail, err, or become
incompatible with our systems.
If we or a significant third party on which we rely fails to become year
2000 ready, or if the year 2000 problem causes our systems to become internally
incompatible or incompatible with such third party systems, our business could
suffer from material disruptions, including the inability to process
transactions, send invoices, accept customer orders or provide customers with
our cable services. We could also face similar disruptions if the year 2000
problem causes general widespread problems or an economic crisis. We cannot now
estimate the extent of these potential disruptions.
STATE OF READINESS. We are addressing the Year 2000 problem with respect
to our internal operations in three stages:
(1) inventory and evaluation of our systems, components and other
significant infrastructure to identify those elements that reasonably
could be expected to be affected by the year 2000 problem,
(2) remediation and replacement to address problems identified in stage one
and
(3) testing of the remediation and replacement conducted in stage two. We
plan to complete all stages for our existing systems by August 1999. We
are monitoring
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the remediation process for systems we are acquiring in 1999 to ensure
completion of remediation before or as we acquire these systems.
Much of our assessment efforts in stage one have involved, and depend on,
inquiries to third party service providers, who are the suppliers and vendors of
various parts or components of our systems. Certain of these third parties that
have certified the readiness of their products will not certify their
interoperability within our fully integrated systems. We cannot assure you that
these technologies of third parties, on which we rely, will be year 2000 ready
or timely converted into year 2000 compliant systems compatible with our
systems. Moreover, because a full test of our systems, on an integrated basis,
would require a complete shut down of our operations, it is not practicable to
conduct such testing. However, we are utilizing a third party, in cooperation
with other cable operators, to test a "mock-up" of our major billing and plant
components, including pay-per-view systems, as an integrated system. We are also
evaluating the potential impact of third party failure and integration failure
on our systems.
RISKS AND REASONABLY LIKELY WORST CASE SCENARIOS. The failure to correct a
material year 2000 problem could result in system failures leading to a
disruption in, or failure of certain normal business activities or operations.
Such failures could materially and adversely affect our results of operations,
liquidity and financial condition. Due to the general uncertainty inherent in
the year 2000 problem, resulting in part from the uncertainty of the year 2000
readiness of third-party suppliers and customers, we are unable to determine at
this time whether the consequences of year 2000 failures will have a material
impact on our results of operations, liquidity or financial condition. The year
2000 taskforce is expected to significantly reduce our level of uncertainty
about the year 2000 problem and, in particular, about the year 2000 compliance
and readiness of our material vendors.
We are in the process of acquiring certain cable televisions systems, and
have negotiated certain contractual rights in the acquisition agreements
relating to the year 2000. However, we cannot determine at this time the
materiality of information technology and non-information technology issues, if
any, relating to the year 2000 problem affecting those cable television systems.
We have included the acquired cable television systems in our year 2000
taskforce's plan and we are not currently aware of any likely material system
failures relating to the year 2000 affecting the acquired systems.
CONTINGENCY AND BUSINESS CONTINUATION PLAN. The year 2000 plan calls for
suitable contingency planning for our at-risk business functions. We normally
make contingency plans in order to avoid interrupted service providing video,
voice and data products to our customers. The normal contingency planning is
being reviewed and will be revised by August 1999, where appropriate, to
specifically address year 2000 exposure with respect to service to customers.
COST. We have incurred $4.9 million in costs to date directly related to
addressing the year 2000 problem. We have redeployed internal resources and have
selectively engaged outside vendors to meet the goals of our year 2000 program.
We currently estimate the total cost of our year 2000 remediation program to be
approximately $7 million. Although we will continue to make substantial capital
expenditures in the ordinary course of meeting our telecommunications system
upgrade goals through the year 2000, we will not specifically accelerate those
expenditures to facilitate year 2000 readiness, and accordingly those
expenditures are not included in the above estimate.
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ACCOUNTING STANDARD NOT YET IMPLEMENTED:
In June 1998, the Financial Accounting Standards Board adopted SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument, including certain derivative instruments embedded in
other contracts, be recorded in the balance sheet as either an asset or
liability measured at its fair value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 2000. We have not yet
quantified the impacts of adopting SFAS No. 133 on our consolidated financial
statements nor have we determined the timing or method of our adoption of SFAS
No. 133. However, SFAS No. 133 could increase volatility in earnings (loss).
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
GENERAL
We sold the original notes on March 17, 1999 in a transaction exempt from
the registration requirements of the Securities Act of 1933. The initial
purchasers of the notes subsequently resold the original notes to qualified
institutional buyers in reliance on Rule 144A and under Regulation S under the
Securities Act of 1933.
In connection with the sale of original notes to the initial purchasers
pursuant to the Purchase Agreement, dated March 12, 1999, among us and Goldman,
Sachs & Co., Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, Bear, Stearns & Co. Inc., NationsBanc Montgomery Securities LLC,
Salomon Smith Barney Inc., Credit Lyonnais Securities (USA), Inc., First Union
Capital Markets Corp., Prudential Securities Incorporated, TD Securities (USA)
Inc., CIBC Oppenheimer Corp. and Nesbitt Burns Securities Inc., the holders of
the original notes became entitled to the benefits of the exchange and
registration rights agreements dated March 17, 1999, among us and the initial
purchasers.
Under the registration rights agreements, the issuers became obligated to
file a registration statement in connection with an exchange offer within 90
days after the issue date and cause the exchange offer registration statement to
become effective within 150 days after the issue date. The exchange offer being
made by this prospectus, if consummated within the required time periods, will
satisfy our obligations under the registration rights agreements. This
prospectus, together with the letter of transmittal, is being sent to all
beneficial holders known to the issuers.
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal, the issuers will accept all
original notes properly tendered and not withdrawn prior to the expiration date.
The issuers will issue $1,000 principal amount of new notes in exchange for each
$1,000 principal amount of outstanding original notes accepted in the exchange
offer. Holders may tender some or all of their original notes pursuant to the
exchange offer.
Based on no-action letters issued by the staff of the Securities and
Exchange Commission to third parties we believe that holders of the new notes
issued in exchange for original notes may offer for resale, resell and otherwise
transfer the new notes, other than any holder that is an affiliate of ours
within the meaning of Rule 405 under the Securities Act, without compliance with
the registration and prospectus delivery provisions of the Securities Act of
1933. This is true as long as the new notes are acquired in the ordinary course
of the holder's business, the holder has no arrangement or understanding with
any person to participate in the distribution of the new notes and neither the
holder nor any other person is engaging in or intends to engage in a
distribution of the new notes. A broker-dealer that acquired original notes
directly from the issuers cannot exchange the original notes in the exchange
offer. Any holder who tenders in the exchange offer for the purpose of
participating in a distribution of the new notes cannot rely on the no-action
letters of the staff of the Securities and Exchange Commission and must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction.
Each broker-dealer that receives new notes for its own account in exchange
for original notes, where original notes were acquired by such broker-dealer as
a result of
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market-making or other trading activities, must acknowledge that it will deliver
a prospectus in connection with any resale of such new notes. See "Plan of
Distribution" for additional information.
We shall be deemed to have accepted validly tendered original notes when,
as and if we have given oral or written notice of the acceptance of such notes
to the exchange agent. The exchange agent will act as agent for the tendering
holders of original notes for the purposes of receiving the new notes from the
issuers and delivering new notes to such holders.
If any tendered original notes are not accepted for exchange because of an
invalid tender or the occurrence of the conditions set forth under
"-- Conditions" without waiver by us, certificates for any such unaccepted
original notes will be returned, without expense, to the tendering holder of any
such original notes as promptly as practicable after the expiration date.
Holders of original notes who tender in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
original notes, pursuant to the exchange offer. We will pay all charges and
expenses, other than certain applicable taxes in connection with the exchange
offer. See "-- Fees and Expenses."
SHELF REGISTRATION STATEMENT
If applicable law or interpretations of the staff of the Securities and
Exchange Commission are changed so that the new notes received by holders who
make all of the necessary representations in the letter of transmittal are not
or would not be, upon receipt, transferrable by each such holder without
restriction under the Securities Act of 1933, we will, at our cost:
- file a shelf registration statement covering resales of the original
notes,
- use our reasonable best efforts to cause the shelf registration statement
to be declared effective under the Securities Act of 1933 at the earliest
possible time, but no later than 90 days after the time such obligation
to file arises, and
- use our reasonable best efforts to keep effective the shelf registration
statement until the earlier of two years after the date as of which the
Securities and Exchange Commission declares such shelf registration
statement effective or the shelf registration otherwise becomes
effective, or the time when all of the applicable original notes are no
longer outstanding.
We will, if and when we file the shelf registration statement, provide to
each holder of the original notes copies of the prospectus which is a part of
the shelf registration statement, notify each holder when the shelf registration
statement has become effective and take other actions as are required to permit
unrestricted resales of the original notes. A holder that sells original notes
pursuant to the shelf registration statement generally must be named as a
selling security-holder in the related prospectus and must deliver a prospectus
to purchasers, a seller will be subject to civil liability provisions under the
Securities Act in connection with these sales. A seller of the original notes
also will be bound by applicable provisions of the registration rights
agreements, including indemnification obligations. In addition, each holder of
original notes must deliver information to be used in connection with the shelf
registration statement and provide comments on the shelf registration statement
in order to have its original notes included in
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the shelf registration statement and benefit from the provisions regarding any
liquidated damages in the registration rights agreement.
INCREASE IN INTEREST RATE
If we are required to file the shelf registration statement and either
(1) the shelf registration statement has not become effective or been
declared effective on or before the 90th calendar day following the
date such obligation to file arises, or
(2) the shelf registration statement has been declared effective and such
shelf registration statement ceases to be effective, except as
specifically permitted in the registration rights agreements, without
being succeeded promptly by an additional registration statement filed
and declared effective,
the interest rate borne by the original notes will be increased by 0.25% per
annum following such default, determined daily, from the date of such default
until the date it is cured, and by an additional 0.25% per annum for each
subsequent 90-day period. However, in no event will the interest rate borne by
the original notes be increased by an aggregate of more than 1.0% per annum.
The sole remedy available to the holders of the original notes will be the
immediate increase in the interest rate on the original notes as described
above. Any amounts of additional interest due as described above will be payable
in cash on the same interest payments dates as the original notes.
EXPIRATION DATE; EXTENSIONS; AMENDMENT
We will keep the exchange offer open for not less than 30 days, or longer
if required by applicable law, after the date on which notice of the exchange
offer is mailed to the holders of the old notes. The term "expiration date"
means the expiration date set forth on the cover page of this prospectus, unless
we extend the exchange offer, in which case the term "expiration date" means the
latest date to which the exchange offer is extended.
In order to extend the expiration date, we will notify the exchange agent
of any extension by oral or written notice and will issue a public announcement
of the extension, each prior to 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
We reserve the right
(a) to delay accepting any original notes, to extend the exchange
offer or to terminate the exchange offer and not accept original notes not
previously accepted if any of the conditions set forth under
"-- Conditions" shall have occurred and shall not have been waived by us,
if permitted to be waived by us, by giving oral or written notice of such
delay, extension or termination to the exchange agent, or
(b) to amend the terms of the exchange offer in any manner deemed by
us to be advantageous to the holders of the original notes.
Any delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice. If the exchange
offer is amended in a manner determined by us to constitute a material change,
we promptly will disclose such amendment in a manner reasonably calculated to
inform the holders of the original notes of such amendment. Depending upon the
significance of the amendment, we may extend the exchange offer if it otherwise
would expire during such extension period.
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Without limiting the manner in which we may choose to make a public
announcement of any extension, amendment or termination of the exchange offer,
we will not be obligated to publish, advertise, or otherwise communicate any
such announcement, other than by making a timely release to an appropriate news
agency.
PROCEDURES FOR TENDERING
To tender in the exchange offer, a holder must complete, sign and date the
letter of transmittal, or a facsimile of the letter of transmittal, have the
signatures on the letter of transmittal guaranteed if required by instruction 2
of the letter of transmittal, and mail or otherwise deliver such letter of
transmittal or such facsimile or an agent's message in connection with a book
entry transfer, together with the original notes and any other required
documents. To be validly tendered, such documents must reach the exchange agent
before 5:00 p.m., New York City time, on the expiration date. Delivery of the
original notes may be made by book-entry transfer in accordance with the
procedures described below. Confirmation of such book-entry transfer must be
received by the exchange agent prior to the expiration date.
The term "agent's message" means a message, transmitted by a book-entry
transfer facility to, and received by, the exchange agent, forming a part of a
confirmation of a book-entry transfer, which states that such book-entry
transfer facility has received an express acknowledgment from the participant in
such book-entry transfer facility tendering the original notes that such
participant has received and agrees to be bound by the terms of the letter of
transmittal and that we may enforce such agreement against such participant.
The tender by a holder of original notes will constitute an agreement
between such holder and us in accordance with the terms and subject to the
conditions set forth in this prospectus and in the letter of transmittal.
Delivery of all documents must be made to the exchange agent at its address
set forth below. Holders may also request their respective brokers, dealers,
commercial banks, trust companies or nominees to effect such tender for such
holders.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDERS. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY TO THE EXCHANGE AGENT BEFORE 5:00 P.M. NEW
YORK CITY TIME, ON THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR ORIGINAL
NOTES SHOULD BE SENT TO US.
Only a holder of original notes may tender original notes in the exchange
offer. The term "holder" with respect to the exchange offer means any person in
whose name original notes are registered on our books or any other person who
has obtained a properly completed bond power from the registered holder.
Any beneficial holder whose original notes are registered in the name of
its broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on its behalf. If such beneficial holder wishes
to tender on its own behalf, such registered holder must, prior to completing
and executing the letter of transmittal and delivering its original notes,
either make appropriate arrangements to register ownership of the original notes
in such holder's name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take considerable time.
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Signatures on a letter of transmittal or a notice of withdrawal, must be
guaranteed by a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc. or a commercial bank or
trust company having an office or correspondent in the United States referred to
as an "eligible institution", unless the original notes are tendered
(a) by a registered holder who has not completed the box entitled "Special
Issuance Instructions" or "Special Delivery Instructions" on the letter
of transmittal or
(b) for the account of an eligible institution. In the event that
signatures on a letter of transmittal or a notice of withdrawal, are
required to be guaranteed, such guarantee must be by an eligible
institution.
If the letter of transmittal is signed by a person other than the
registered holder of any original notes listed therein, such original notes must
be endorsed or accompanied by appropriate bond powers and a proxy which
authorizes such person to tender the original notes on behalf of the registered
holder, in each case signed as the name of the registered holder or holders
appears on the original notes.
If the letter of transmittal or any original notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by us,
evidence satisfactory to us of their authority so to act must be submitted with
the letter of transmittal.
All questions as to the validity, form, eligibility, including time of
receipt, and withdrawal of the tendered original notes will be determined by us
in our sole discretion, which determination will be final and binding. We
reserve the absolute right to reject any and all original notes not properly
tendered or any original notes our acceptance of which, in the opinion of
counsel for us, would be unlawful. We also reserve the right to waive any
irregularities or conditions of tender as to particular original notes. Our
interpretation of the terms and conditions of the exchange offer, including the
instructions in the letter of transmittal, will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of original notes must be cured within such time as we shall determine. None of
us, the exchange agent or any other person shall be under any duty to give
notification of defects or irregularities with respect to tenders of original
notes, nor shall any of them incur any liability for failure to give such
notification. Tenders of original notes will not be deemed to have been made
until such irregularities have been cured or waived. Any original notes received
by the exchange agent that are not properly tendered and as to which the defects
or irregularities have not been cured or waived will be returned without cost to
such holder by the exchange agent to the tendering holders of original notes,
unless otherwise provided in the letter of transmittal, as soon as practicable
following the expiration date.
In addition, we reserve the right in our sole discretion to
(a) purchase or make offers for any original notes that remain outstanding
subsequent to the expiration date or, as set forth under
"-- Conditions," to terminate the exchange offer in accordance with the
terms of the registration rights agreements and
(b) to the extent permitted by applicable law, purchase original notes in
the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers may differ from the terms of the
exchange offer.
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By tendering, each holder will represent to us that, among other things,
(a) the new notes acquired pursuant to the exchange offer are being
obtained in the ordinary course of business of such holder or other
person,
(b) neither such holder nor such other person is engaged in or intends to
engage in a distribution of the new notes,
(c) neither such holder or other person has any arrangement or
understanding with any person to participate in the distribution of
such new notes, and
(d) such holder or other person is not our "affiliate," as defined under
Rule 405 of the Securities Act, or, if such holder or other person is
such an affiliate, will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
We understand that the exchange agent will make a request promptly after
the date of this prospectus to establish accounts with respect to the original
notes at the Depository Trust Company for the purpose of facilitating the
exchange offer, and subject to the establishment of such accounts, any financial
institution that is a participant in the Depository Trust Company's system may
make book-entry delivery of original notes by causing the Depository Trust
Company to transfer such original notes into the exchange agent's account with
respect to the original notes in accordance with the Depository Trust Company's
procedures for such transfer. Although delivery of the original notes may be
effected through book-entry transfer into the exchange agent's account at the
Depository Trust Company, an appropriate letter of transmittal properly
completed and duly executed with any required signature guarantee, or an agent's
message in lieu of the letter of transmittal, and all other required documents
must in each case be transmitted to and received or confirmed by the exchange
agent at its address set forth below on or prior to the expiration date, or, if
the guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures. Delivery of documents to Depository
Trust Company does not constitute delivery to the exchange agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their original notes and
(a) whose original notes are not immediately available or
(b) who cannot deliver their original notes, the letter of transmittal
or any other required documents to the exchange agent prior to the
expiration date, may effect a tender if:
(1) the tender is made through an eligible institution;
(2) prior to the expiration date, the exchange agent receives from
such eligible institution a properly completed and duly executed Notice
of Guaranteed Delivery, by facsimile transmission, mail or hand
delivery, setting forth the name and address of the holder of the
original notes, the certificate number or numbers of such original notes
and the principal amount of original notes tendered, stating that the
tender is being made thereby, and guaranteeing that, within three
business days after the expiration date, the letter of transmittal, or
facsimile thereof or agent's message in lieu of the letter of
transmittal, together with the certificate(s) representing the original
notes to be tendered in proper form for transfer and any other documents
required by the letter of transmittal will be deposited by the eligible
institution with the exchange agent; and
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(3) such properly completed and executed letter of transmittal (or
facsimile thereof) together with the certificate(s) representing all
tendered original notes in proper form for transfer and all other
documents required by the letter of transmittal are received by the
exchange agent within three business days after the expiration date.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this prospectus, tenders of original notes
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
expiration date, unless previously accepted for exchange.
To withdraw a tender of original notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at its address set forth in this prospectus prior to 5:00 p.m., New York
City time, on the expiration date. Any such notice of withdrawal must
(a) specify the name of the depositor, who is the person having
deposited the original notes to be withdrawn,
(b) identify the original notes to be withdrawn, including the
certificate number or numbers and principal amount of such original notes
or, in the case of original notes transferred by book-entry transfer, the
name and number of the account at Depository Trust Company to be credited,
(c) be signed by the depositor in the same manner as the original
signature on the letter of transmittal by which such original notes were
tendered, including any required signature guarantees, or be accompanied by
documents of transfer sufficient to have the trustee with respect to the
original notes register the transfer of such original notes into the name
of the depositor withdrawing the tender and
(d) specify the name in which any such original notes are to be
registered, if different from that of the depositor. All questions as to
the validity, form and eligibility, including time of receipt, of such
withdrawal notices will be determined by us, and our determination shall be
final and binding on all parties. Any original notes so withdrawn will be
deemed not to have been validly tendered for purposes of the exchange offer
and no new notes will be issued with respect to the original notes
withdrawn unless the original notes so withdrawn are validly retendered.
Any original notes which have been tendered but which are not accepted for
exchange will be returned to its holder without cost to such holder as soon
as practicable after withdrawal, rejection of tender or termination of the
exchange offer. Properly withdrawn original notes may be retendered by
following one of the procedures described above under "-- Procedures for
Tendering" at any time prior to the expiration date.
CONDITIONS
Notwithstanding any other term of the exchange offer, we will not be
required to accept for exchange, or exchange, any new notes for any original
notes, and may terminate or amend the exchange offer before the expiration date,
if the exchange offer violates any applicable law or interpretation by the staff
of the Commission.
If we determine in our reasonable discretion that the foregoing condition
exists, we may (1) refuse to accept any original notes and return all tendered
original notes to the
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tendering holders, (2) extend the exchange offer and retain all original notes
tendered prior to the expiration of the exchange offer, subject, however, to the
rights of holders who tendered such original notes to withdraw their tendered
original notes, or (3) waive such condition, if permissible, with respect to the
exchange offer and accept all properly tendered original notes which have not
been withdrawn. If such waiver constitutes a material change to the exchange
offer, we will promptly disclose such waiver by means of a prospectus supplement
that will be distributed to the holders, and we will extend the exchange offer
as required by applicable law.
Pursuant to the registration rights agreements, if the exchange offer is
not be consummated prior to the exchange offer termination date, as defined
below, we are required to cause to be filed with the Securities and Exchange
Commission a shelf registration statement with respect to the original notes as
promptly as practicable after the exchange offer termination date, and
thereafter use its best efforts to have the shelf registration statement
declared effective.
"Exchange offer termination date" means the date on which the earliest of
any of the following events occurs:
(a) applicable interpretations of the staff of the Securities and
Exchange Commission do not permit us to effect the exchange offer,
(b) any holder of notes notifies us that either
(1) such holder is not eligible to participate in the exchange
offer or
(2) such holder participates in the exchange offer and does not
receive freely transferable new notes in exchange for tendered original
notes or
(c) the exchange offer is not consummated within 180 days after the
Issue Date.
If any of the events described in the definition of "exchange offer
termination date" occurs, we will refuse to accept any original notes and will
return all tendered original notes.
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EXCHANGE AGENT
Harris Trust Company of New York has been appointed as exchange agent for
the exchange offer. Questions and requests for assistance and requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to Harris Trust Company of New York addressed as follows:
For Information by Telephone:
(212) 701-7637
By Hand or Overnight Delivery Service:
Harris Trust Company of New York
Wall Street Plaza
88 Pine Street
19th Floor
New York, New York 10005
Attention: Corporate Trust Department
By Facsimile Transmission:
(212) 701-7624
(Telephone Confirmation)
(212) 701-7637
Harris Trust Company of New York is an affiliate of the trustee under the
indentures governing the notes.
FEES AND EXPENSES
We have agreed to bear the expenses of the exchange offer pursuant to the
exchange and registration rights agreements. We have not retained any
dealer-manager in connection with the exchange offer and will not make any
payments to brokers, dealers or others soliciting acceptances of the exchange
offer. We, however, will pay the exchange agent reasonable and customary fees
for its services and will reimburse it for its reasonable out-of-pocket expenses
in connection with providing the services.
The cash expenses to be incurred in connection with the exchange offer will
be paid by us. Such expenses include fees and expenses of Harris Trust Company
of New York as exchange agent, accounting and legal fees and printing costs,
among others.
ACCOUNTING TREATMENT
The new notes will be recorded at the same carrying value as the original
notes as reflected in our accounting records on the date of exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by us.
The expenses of the exchange offer and the unamortized expenses related to the
issuance of the original notes will be amortized over the term of the notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of original notes who are eligible to participate in the exchange
offer but who do not tender their original notes will not have any further
registration rights, and their
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original notes will continue to be subject to restrictions on transfer.
Accordingly, such original notes may be resold only:
- to us, upon redemption of these notes or otherwise;
- so long as the original notes are eligible for resale pursuant to Rule
144A under the Securities Act of 1933, to a person inside the United
States whom the seller reasonably believes is a qualified institutional
buyer within the meaning of Rule 144A in a transaction meeting the
requirements of Rule 144A;
- in accordance with Rule 144 under the Securities Act, or under another
exemption from the registration requirements of the Securities Act of
1933, and based upon an opinion of counsel reasonably acceptable to us;
- outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act of 1933; or
- under an effective registration statement under the Securities Act of
1933;
in each case in accordance with any applicable securities laws of any state of
the United States.
REGULATORY APPROVALS
We do not believe that the receipt of any material federal or state
regulatory approval will be necessary in connection with the exchange offer,
other than the effectiveness of the exchange offer registration statement under
the Securities Act of 1933.
OTHER
Participation in the exchange offer is voluntary and holders of original
notes should carefully consider whether to accept the terms and condition of
this exchange offer. Holders of the original notes are urged to consult their
financial and tax advisors in making their own decisions on what action to take
with respect to the exchange offer.
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BUSINESS
GENERAL
We offer a full range of cable television services. Our service offerings
include the following programming packages:
- basic programming, which generally includes a variety of entertainment
programming, locally originated programming and the retransmission of
local broadcast stations;
- expanded basic programming, known in the cable industry as cable
programming service tier, or CPST, which offers more services than basic
programming;
- premium channels, which provide unedited, commercial-free movies, sports
and other special event entertainment programming, and
- pay-per-view television programming, where customers are charged a fee
for individual programs.
We have begun to offer digital cable television services to customers in some of
our systems, and are also expanding into other entertainment, educational and
communications services, including high-speed Internet access. These new
services will take advantage of the significant bandwidth of our cable systems.
In addition, we are currently upgrading our cable systems to offer services
which will allow our customers to interact with the programming we provide. Such
services are referred to as interactive services. As of March 31, 1999, we
served approximately 2.4 million cable television service customers in 22
states. We have entered into agreements to acquire additional cable systems that
would have increased the number of our customers to 3.7 million as of that date
For the three months ended March 31, 1999, pro forma for the acquisitions
and the merger with Marcus Holdings we completed during 1999, our revenues were
approximately $311 million and our EBITDA was approximately $143 million. For
the year ended December 31, 1998, pro forma for the acquisitions and the merger
with Marcus Holdings we completed during 1998, our revenues were approximately
$1.1 billion and our EBITDA was approximately $486 million.
Approximately 97% of our equity is beneficially owned by Paul G. Allen, the
co-founder of Microsoft Corporation. The remaining equity is owned by our
founders, Jerald L. Kent, Barry L. Babcock and Howard L. Wood. Mr. Kent is the
President and Chief Executive Officer and a director of Charter Communications,
Inc.
We have pursued and executed a strategy of operating, developing, acquiring
and consolidating cable systems with the primary goals of increasing our
customer base and operating cash flow by consistently emphasizing superior
customer service. Without giving effect to the cable systems we acquired in
1998, we increased our customer base by 4.8%, revenues by 9.5% and EBITDA by 11%
during that year. This customer growth was more than twice the national average
of 1.7% for 1998. In 1997, our customer growth was 3.5%, significantly higher
than the national average of 2.0% for 1997.
In addition to growing our customer base internally, we have grown
significantly through acquisitions. Over the past five years, our management
team has successfully completed 22 acquisitions, including two acquisitions in
1999. We also have entered into six agreements to acquire additional cable
systems. These recent acquisitions and pending acquisitions serve a total of
approximately 1.3 million customers.
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Pro forma for our recent acquisitions and pending acquisitions, our
revenues for the three months ended March 31, 1999 would have been $445 million
and our EBITDA would have been $201 million. Pro forma for the merger with
Marcus Holdings and our recent acquisitions and pending acquisitions, for the
year ended December 31, 1998 our revenues would have been approximately $1.7
billion and our EBITDA would have been $750 million. Pro forma for our recent
and pending acquisitions we serve approximately 3.7 million customers. As we
acquire and integrate these and other cable systems in the future, we believe
that the implementation of our operating philosophy will provide meaningful
opportunities to enhance the operating results of such systems.
Paul G. Allen, our principal owner and one of the computer industry's
visionaries, has long believed that the broadband capabilities of cable systems
facilitate the convergence of cable television, computers and
telecommunications. Mr. Allen believes that this convergence, which he calls the
"Wired World," will rely on the cable platform to deliver an array of new
services. These services include digital video programming, high-speed Internet
access, Internet protocol telephony, which can connect communications with
different platforms, and electronic commerce. Because of cable's ability to
provide all of these services, we believe that individuals and businesses will
view cable as an important service.
BUSINESS STRATEGY
Our business strategy is to grow our customer base and increase our
operating cash flow by:
- maximizing customer satisfaction;
- implementing decentralized operations with centralized financial
controls;
- pursuing strategic acquisitions;
- upgrading our systems;
- emphasizing innovative marketing; and
- offering new products and services.
MAXIMIZING CUSTOMER SATISFACTION. To maximize customer satisfaction, we
operate our business to provide reliable, high-quality service offerings,
superior customer service and attractive programming choices at reasonable
rates. We have implemented stringent internal customer service standards which
we believe meet or exceed those established by the National Cable Television
Association. In 1998, J.D. Power and Associates ranked us third among major
cable system operators in overall customer satisfaction. We believe that our
customer service efforts have contributed to our superior customer growth,
increased acceptance of our new and enhanced service offerings and increased the
strength of the Charter brand name.
IMPLEMENTING DECENTRALIZED OPERATIONS WITH CENTRALIZED FINANCIAL
CONTROLS. Our local cable systems are organized into seven operating regions. A
regional management team oversees local system operations in each region. We
believe that a strong management presence at the local system level:
- increases our ability to respond to customer needs and programming
preferences;
- improves our customer service;
- reduces the need for a large centralized corporate staff;
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- fosters good relations with local governmental authorities; and
- strengthens community relations.
Our regional management teams work closely with senior management in our
corporate office to develop budgets and coordinate marketing, programming,
purchasing and engineering activities. In order to attract and retain high
quality managers at the local and regional operating levels, we provide a high
degree of operational autonomy and accountability and cash and equity-based
performance compensation. We have committed to adopt a plan to distribute to
members of corporate management and to key regional and system-level management
personnel equity-based incentive compensation based on 10% of our equity value
on a fully-diluted basis.
PURSUING STRATEGIC ACQUISITIONS. We intend to continue to pursue strategic
acquisitions and believe that the current consolidation activity in the cable
industry offers substantial opportunities to further our acquisition strategy.
We believe that there are significant advantages in increasing the size and
scope of our operations, including:
- improved economies of scale in management, marketing, customer service,
billing and other administrative functions;
- reduced costs for plant and infrastructure;
- increased leverage for negotiating programming contracts; and
- increased influence on the evolution of important new technologies
affecting our business.
In addition, we recognize the benefits of "swapping" cable systems with
other cable operators to reinforce the advantages of our "clustering" strategy.
Among the factors we consider in acquiring a cable system are:
- proximity to our existing cable systems or the potential for developing
new clusters of systems;
- demographic profile of the market as well as the number of homes passed
and customers within the system;
- per customer revenues and operating cash flow and opportunities to
increase these amounts;
- the technological state of such system; and
- the level of competition within the local market.
We believe the benefits associated with "swapping" cable systems with other
cable operators helps reinforce the advantages inherent in our "clustering"
strategy. We seek to "cluster" cable systems in suburban and ex-urban areas
surrounding selected metropolitan markets. We believe that such "clustering"
offers significant opportunities to increase operating efficiencies and to
improve operating margins and cash flow by spreading fixed costs over an
expanding subscriber base. In addition, we believe that by concentrating
"clusters" in markets, we will be able to generate higher growth in revenues and
operating cash flow. Through strategic acquisitions and "swaps" of cable
systems, we seek to enlarge the coverage of our current areas of operation and,
if feasible, develop "clusters" in new geographic areas within existing regions.
In developing and enhancing cable system "clusters," our acquisition strategy is
opportunistic and depends in part upon cable systems becoming available in the
marketplace. Because many of our operating areas include other significant cable
operators with nearby systems, marketplace availability and pricing may
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be heavily influenced by interest levels of other potential purchasers. The
changing competitive telecommunications market also impacts this strategy.
UPGRADING OUR SYSTEMS. Over the next three years, we plan to spend
approximately $900 million, or $1.2 billion pro forma for our recent and pending
acquisitions, to upgrade our systems' bandwidth capacity to 550 megahertz or
greater. Upgrading to at least 550 megahertz of bandwidth capacity will allow us
to:
- offer advanced cable services, such as digital television, Internet
access and other interactive services;
- increase program offerings; and
- permit two-way communication, which will give our customers the ability
to send and receive signals over one cable system with high speed cable
access, as opposed to using a separate telephone line to send signals.
For example, having a bandwidth capacity of 550 megahertz enables us to
offer our customers up to 82 channels of analog service while also providing our
customers with advanced cable services. In addition, we intend to use some of
this bandwidth for digital service. If bandwidth is used for digital service as
opposed to analog service, customers get even more channels and advanced cable
services at competitive rates.
We believe our planned upgrade will also reduce the number of headends. A
headend is the control center of a cable television system, where incoming
signals are amplified, converted, processed and combined for transmission to
customers. Reducing the number of headends will reduce headend and maintenance
expenditures and, together with other upgrades, will provide enhanced picture
quality and system reliability. Since we expect that a portion of our future
growth will be achieved through revenues from additional and enhanced services,
our strategy to upgrade our systems becomes a vital component for us to achieve
such expectations. Additionally, by upgrading our systems, we attempt to gain an
advantage over our competitors.
Today, approximately 57% of our customers are served by cable systems with
at least 550 megahertz bandwidth capacity, and approximately 35% of our
customers have two-way communication capability. By year end 2001, we expect
that approximately 92% of our customers will be served by cable systems with at
least 550 megahertz bandwidth capacity and two-way communication capability.
EMPHASIZING INNOVATIVE MARKETING. We have developed and successfully
implemented a variety of innovative marketing techniques to attract new
customers and enhance the level of service provided to our existing customers.
Our marketing efforts focus on delivering well targeted, branded entertainment
and information services that provide value, choice, convenience and quality. We
utilize demographic "cluster codes" to address specific messages to target
audiences through direct mail and telemarketing. In addition, we promote our
services on radio, in local newspapers and by door-to-door selling. In many of
our systems, we offer discounts to customers who purchase multiple premium
services. We also have a coordinated strategy for retaining customers that
includes televised retention advertising to reinforce the link between quality
service and the Charter brand name and to encourage customers to purchase higher
service levels. Successful implementation of these marketing techniques has
resulted in internal customer growth rates in excess of the cable industry
averages in each year from 1995 through 1998 for the Charter systems. The Marcus
systems came under common management with us in
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October 1998, and we have begun to implement our marketing techniques throughout
those systems.
OFFERING NEW PRODUCTS AND SERVICES. By upgrading our systems, we will be
able to expand the array of services and advanced products we can offer to our
customers. Using digital technology, we plan to offer additional channels on our
existing service tiers, create new service tiers, introduce multiplexing of
premium services and increase the number of pay-per-view channels. We also plan
to add digital music services and interactive program guides. In addition to
these expanded cable services, we also plan to provide advanced services
including high-speed Internet access and interactive services. We have entered
into agreements with several providers of high-speed Internet and other
interactive services, including EarthLink Network, Inc., High Speed Access
Corp., WorldGate Communications, Inc., Wink Communications, Inc. and At Home
Corporation.
RECENT EVENTS
AMERICAN CABLE. In April 1999, we purchased American Cable Entertainment,
LLC. for approximately $240 million. American Cable owns cable systems located
in California serving approximately 68,000 customers and is being operated as
part of our Western Region. For the three months ended March 31, 1999, American
Cable had revenues of approximately $9.2 million and EBITDA of approximately
$4.2 million. For the year ended December 31, 1998, American Cable had revenues
of approximately $15.7 million and EBITDA of approximately $7.9 million. At year
end 1998, none of the American Cable system's customers were served by systems
with 550 megahertz bandwidth capacity or greater.
RENAISSANCE. In May 1999, we purchased Renaissance Media Group LLC for
approximately $459 million, consisting of cash of $348 million and $111 million
of debt to be assumed. Renaissance owns cable systems located in Louisiana,
Mississippi and Tennessee, has approximately 132,000 customers and is being
operated as part of our Southern Region. For the three months ended March 31,
1999, Renaissance had revenues of approximately $15.3 million and EBITDA of
approximately $8.4 million. For the year ended December 31, 1998, Renaissance
had revenues of approximately $41.5 million and EBITDA of approximately $20.6
million. At year end 1998, approximately 36% of Renaissance's customers were
served by systems with at least 550 megahertz bandwidth capacity.
GREATER MEDIA SYSTEMS. In February 1999, Charter Communications, Inc.
entered into an agreement to purchase certain cable systems of Greater Media
Cablevision Inc. for approximately $500 million. Charter Communications, Inc.
assigned its rights under this agreement to one of our subsidiaries. The Greater
Media systems are located in Massachusetts, have approximately 174,000 customers
and will be operated as part of our Northeast Region. For the three months ended
March 31, 1999, the Greater Media systems had revenues of approximately $20.4
million and EBITDA of approximately $7.6 million. For the year ended December
31, 1998, the Greater Media systems had revenues of approximately $78.6 million
and EBITDA of approximately $29.3 million. At year end 1998, approximately 75%
of the Greater Media systems customers were served by systems with at least 550
megahertz bandwidth capacity. We anticipate that this transaction will close
during the third quarter of 1999.
HELICON. In March 1999, two of our subsidiaries entered into an agreement
to acquire Helicon Partners I, L.P. for approximately $550 million, of which $25
million will be payable in the form of preferred limited liability company
interests in one of the
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subsidiaries. Helicon owns cable systems located in Alabama, Georgia, New
Hampshire, North Carolina, West Virginia, South Carolina, Tennessee,
Pennsylvania, Louisiana and Vermont, has approximately 174,000 customers and
will be operated as part of our Southeast, Southern and Northeast regions. For
the three months ended March 31, 1999, Helicon had revenues of approximately
$21.3 million and EBITDA of approximately $8.9 million. For the year ended
December 31, 1998, Helicon had revenues of approximately $75.6 million and
EBITDA of approximately $32.0 million. At year end 1998, approximately 69% of
Helicon's customers were served by systems with at least 550 megahertz bandwidth
capacity. We anticipate that this transaction will close during the third
quarter of 1999.
INTERMEDIA SYSTEMS. In April 1999, we entered into agreements to purchase
certain cable systems of InterMedia Capital Partners IV, L.P., InterMedia
Partners and their affiliates in exchange for cash and certain of our cable
systems. The InterMedia systems serve approximately 408,000 customers in North
Carolina, South Carolina, Georgia and Tennessee. As part of this transaction, we
will "swap" some of our non-strategic cable systems serving approximately
142,000 customers located in Indiana, Montana, Utah and northern Kentucky. The
purchase price of the InterMedia systems, net of the "swap," is approximately
$872.7 million. This transaction will result in a net increase of 262,000
customers concentrated in our Southeast and Southern regions. For the three
months ended March 31, 1999, the InterMedia Systems had revenues of
approximately $48.3 million and EBITDA of approximately $21.4 million. For the
year ended December 31, 1998, the InterMedia systems had revenues of
approximately $176.1 million and EBITDA of approximately $86.2 million,
respectively. At year end 1998, approximately 79% of these customers were served
by systems with at least 550 megahertz bandwidth capacity. We anticipate that
acquisition of the InterMedia Systems will close during the third or fourth
quarter of 1999.
RIFKIN. In April 1999, Charter Communications, Inc. entered into
agreements to purchase Rifkin Acquisition Partners, L.L.L.P. for a purchase
price of approximately $1.46 billion. Charter Communications, Inc. has assigned
its rights under such agreements to us. Certain sellers under the agreements
could elect to receive some or all of their pro rata portion of the purchase
price in the form of preferred or common equity of Charter Holdings or, if
mutually agreed to by the parties, of a parent of Charter Holdings. The terms of
such election are being negotiated with the sellers' representative. Depending
on the level of seller interest, this equity, if issued, would be valued between
approximately $25 million and $240 million. The cash portion of the purchase
price would be reduced accordingly. However, because such terms have not been
finalized, and seller participation has not been determined, we cannot be
certain that any such equity will be issued or that the cash portion of the
purchase price will be reduced below $1.46 billion. Rifkin owns cable systems
primarily in Florida, Georgia, Illinois, Indiana, Tennessee, Virginia and West
Virginia serving approximately 463,000 customers. These systems will primarily
be operated as part of our Central, Southern and Southeast regions. For the
three months ended March 31, 1999, Rifkin had revenues of approximately $50.9
million and EBITDA of approximately $23.0 million. For the year ended December
31, 1998, Rifkin had revenues of approximately $124.4 million and EBITDA of
approximately $101.4 million. At year end 1998, approximately 36% of Rifkin's
customers were served by systems with at least 550 megahertz bandwidth capacity.
We anticipate that this transaction will close during the third or fourth
quarter of 1999.
OTHER ACQUISITIONS. In addition to the acquisitions described above,
Charter Communications, Inc. and a subsidiary of Charter Communications, Inc.
have entered into
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definitive agreements for such subsidiary to purchase Vista Broadband
Communications, LLC and certain cable assets of Cable Satellite of South Miami,
Inc. By these other acquisitions, we plan to acquire cable systems located in
southern California, Georgia and southern Florida, have a total of approximately
37,000 customers and will be operated as part of our Southern and Southeast
regions. The total purchase price for these other acquisitions is approximately
$148 million. For the three months ended March 31, 1999, these systems to be
acquired had revenues of approximately $4.4 million and EBITDA of approximately
$2.0 million. For the year ended December 31, 1998, the cable systems to be
acquired in connection with these other acquisitions had revenues of $9.3
million and EBITDA of approximately $4.7 million.
MARCUS MERGER. On April 7, 1999, Marcus Holdings, merged with Charter
Holdings, the surviving entity and an issuer of the notes. As a result of this
merger, the subsidiaries of Marcus Holdings became our subsidiaries.
THE COMPANY'S SYSTEMS
Our systems consist of approximately 65,900 miles of coaxial and
approximately 8,500 sheath miles of fiber optic cable passing approximately 4.2
million households and serving approximately 2.4 million customers. As of March
31, 1999, approximately 60% of our customers are served by systems with at least
550 megahertz bandwidth capacity, approximately 40% have at least 750 megahertz
bandwidth capacity and approximately 35% are served by systems capable of
providing two-way interactive communication capability, such as two-way Internet
connections, Wink services and interactive program guides.
CORPORATE MANAGEMENT. We are managed from our corporate offices in Dallas,
Texas and St. Louis, Missouri. The senior management of Charter Communications,
Inc. at these offices consist of approximately 175 people led by Jerald L. Kent.
They are responsible for coordinating and overseeing our operations, including
certain critical functions such as marketing and engineering, that are conducted
by personnel at the regional and local system level. The corporate office also
performs certain financial control functions such as accounting, finance and
acquisitions, payroll and benefit administration, internal audit, purchasing and
programming contract administration on a centralized basis.
OPERATING REGIONS. To manage and operate our systems, we have established
two divisions that contain a total of seven operating regions: Western; Central;
MetroPlex (Dallas/Ft. Worth); North Central; Northeast; Southeast; and Southern.
Each region is managed by a team consisting of a Senior Vice President or a Vice
President, supported by operational, marketing and engineering personnel. The
two divisions are managed by two Senior Vice Presidents who report directly to
Mr. Kent and are responsible for overall supervision of our seven operating
regions. Within each region, certain groups of cable systems are further
organized into groups known as "clusters." We believe that much of our success
is attributable to our operating philosophy which emphasizes decentralized
management, with decisions being made as close to the customer as possible.
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The following table provides an overview of selected technical, operating
and financial data for each of our operating regions for the three months ended
March 31, 1999. Unless otherwise indicated, the following table does not reflect
the impact of our recent or pending acquisitions. Upon completion of our recent
and pending acquisitions, our systems will pass approximately 6.1 million homes
serving approximately 3.7 million customers.
SELECTED TECHNICAL, OPERATING AND FINANCIAL DATA BY OPERATING REGION
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
NORTH
WESTERN CENTRAL METROPLEX CENTRAL NORTHEAST SOUTHEAST SOUTHERN TOTAL
------- ------- --------- ------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
TECHNICAL DATA:
Miles of coaxial cable........ 7,500 8,800 5,700 10,000 4,600 16,700 12,600 65,900
Density(a).................... 131 65 77 62 31 40 38 59
Headends...................... 21 34 16 86 7 60 59 283
Planned headend
eliminations................ 3 3 1 30 0 11 8 56
Plant bandwidth(b):
450 megahertz or less......... 21.9% 53.7% 28.0% 41.9% 51.2% 37.9% 58.2% 42.7%
550 megahertz................. 8.0% 10.2% 14.4% 12.9% 33.5% 25.6% 13.8% 16.9%
750 megahertz or greater...... 70.1% 36.1% 57.6% 45.2% 15.4% 36.5% 28.0% 40.4%
Two-way capability............ 55.6% 45.5% 62.2% 56.2% 15.4% 15.5% 19.8% 35.1%
OPERATING DATA:
Homes passed.................. 997,000 595,000 486,000 603,000 160,000 748,000 572,000 4,161,000
Basic customers............... 502,000 365,000 186,000 399,000 124,000 439,000 349,000 2,364,000
Basic penetration(c).......... 50.4% 61.3% 38.3% 66.2% 77.5% 58.7% 61.0% 56.8%
Premium units................. 318,000 206,000 135,000 148,000 120,000 252,000 168,000 1,347,000
Premium penetration(d)........ 63.3% 56.4% 74.9% 37.1% 96.8% 57.4% 48.1% 57.0%
FINANCIAL DATA:
Revenues, in millions(e)...... $65.7 $45.5 $25.6 $44.6 $15.9 $49.2 $39.3 $285.8
Average monthly total revenue
per customer(f)............. $43.63 $41.55 $45.88 $37.26 $42.74 $37.36 $37.54 $40.30
</TABLE>
- -------------------------
(a) Represents homes passed divided by miles of coaxial cable.
(b) Represents percentage of basic customers within a region served by the
indicated plant bandwidth.
(c) Basic penetration represents basic customers as a percentage of homes
passed.
(d) Premium penetration represents premium units as a percentage of basic
customers.
(e) Gives effect to all acquisitions and dispositions by the Charter Companies
and the Marcus Companies as if they had occurred on January 1, 1999. See
"Unaudited Pro Forma Financial Statement and Operating Data."
(f) Represents total revenues divided by three divided by the number of
customers at period end.
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WESTERN REGION. The Western Region consists of cable systems serving
approximately 502,000 customers located entirely in the state of California,
with approximately 401,000 customers located within the Los Angeles metropolitan
area. These customers reside primarily in the communities of Pasadena, Alhambra,
Glendale, Long Beach and Riverside. We also have approximately 101,000 customers
in central California, principally located in the communities of San Luis
Obispo, West Sacramento and Turlock. The Western Region will also be responsible
for managing the approximately 68,000 customers associated with the recent
acquisition of American Cable and 4,000 customers associated with the pending
acquisition of Rifkin. According to National Decision Systems, the projected
median household growth in the counties currently served by the region's systems
is 5.2% for the period ending 2003, versus the projected U.S. median household
growth of 5.2% for the same period.
The Western Region's cable systems have been significantly upgraded with
approximately 78% of the region's customers served by cable systems with at
least 550 megahertz bandwidth capacity as of March 31, 1999. The planned upgrade
of the Western Region's cable systems will reduce the number of headends from 21
to 18 by December 31, 2001. We expect that by December 31, 2001, 99% of this
region's customers will be served by systems with at least 550 megahertz
bandwidth capacity with two-way communication capability.
CENTRAL REGION. The Central Region consists of cable systems serving
approximately 365,000 customers of which approximately 247,000 customers reside
in and around St. Louis County or in adjacent areas in Illinois, and over 94%
are served by two headends. The remaining approximately 117,000 of these
customers reside in Indiana, and these systems are primarily classic cable
systems serving small to medium-sized communities. The Indiana systems will be
"swapped" as part of the InterMedia transaction. See "-- Recent Events." The
Central Region will also be responsible for managing approximately 112,000
customers associated with the pending acquisition of Rifkin. According to
National Decision Systems, the projected median household growth in the counties
currently served by the region's systems is 4.7% for the period ending 2003,
versus the projected U.S. median household growth of 5.2% for the same period.
At March 31, 1999, approximately 46% of the Central Region's customers were
served by cable systems with at least 550 megahertz bandwidth capacity. The
majority of the cable plants in the Illinois systems have been upgraded to 750
megahertz bandwidth capacity. The planned upgrade of the Central Region's cable
systems will reduce the number of headends from 34 to 31 by December 31, 2001.
We have begun a three-year project, scheduled for completion in 2001, to upgrade
the cable plant in St. Louis County, serving approximately 175,000 customers, to
870 megahertz bandwidth capability. We expect that by December 31, 2001,
approximately 89% of this region's customers will be served by cable systems
with at least 550 megahertz bandwidth capacity with two-way communication
capability.
METROPLEX REGION. The MetroPlex Region consists of cable systems serving
approximately 186,000 customers of which approximately 129,000 are served by the
Ft. Worth system. The systems in this region serve one of the fastest growing
areas of Texas. The anticipated population growth combined with the existing low
basic penetration rate of approximately 43% offers significant potential to
increase the total number of customers and the associated revenue and cash flow
in this region. According to National Decision Systems, the projected median
household growth in the counties served by the
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region's systems is 8.4% for the period ending 2003, versus the projected U.S.
median household growth of 5.2% for the same period.
The MetroPlex Region's cable systems have been significantly upgraded with
approximately 72% of the region's customers served by cable systems with at
least 550 megahertz bandwidth capacity as of March 31, 1999. In 1997, we began
to upgrade the Ft. Worth system to 870 megahertz of bandwidth capacity. We
expect to complete this project during 1999. The planned upgrade of the
MetroPlex Region's cable systems will reduce the number of headends from 16 to
15 by December 31, 2001. We expect that by December 31, 2001, approximately 98%
of this region's customers will be served by cable systems with at least 550
megahertz bandwidth capacity with two-way communication capability.
NORTH CENTRAL REGION. The North Central Region consists of cable systems
serving approximately 399,000 customers. These customers are primarily located
throughout the state of Wisconsin, along with a small system of approximately
27,000 customers in Rosemont, Minnesota, a suburb of Minneapolis. Within the
state of Wisconsin, the four largest operating clusters are located in and
around Eau Claire, Fond du Lac, Janesville and Wausau. According to National
Decision Systems, the projected median household growth in the counties served
by the region's systems is 5.4% for the period ending 2003, versus the projected
U.S. median household growth of 5.2% for the same period.
At March 31, 1999, approximately 31.8% of the North Central Region's
customers were served by cable systems with at least 550 megahertz bandwidth
capacity. The planned upgrade of the North Central Region's cable systems will
reduce the number of headends from 86 to 56 by December 31, 2001. We plan to
rebuild much of the region's cable plant, and expect that by December 31, 2001,
approximately 93% of this region's customers will be served by cable systems
with capacity between 550 megahertz and 750 megahertz of bandwidth capacity with
two-way communication capability.
NORTHEAST REGION. The Northeast Region consists of cable systems serving
approximately 124,000 customers residing in the states of Connecticut and
Massachusetts. These systems serve the communities of Newtown and Willimantic,
Connecticut, and areas in and around Pepperell, Massachusetts, and are included
in the New York, Hartford, and Boston areas of demographic influence. The North
Central Region will be responsible for managing the approximately 170,000
customers associated with the pending acquisition of cable systems from GMI and
approximately 56,000 customers associated with the pending acquisition of
Helicon. According to National Decision Systems, the projected median household
growth in the counties currently served by the region's systems is 3.7% for the
period ending 2003, versus the projected U.S. median household growth of 5.2%
for the same period.
At March 31, 1999, approximately 49% of the Northeast Region's customers
were served by cable systems with at least 550 megahertz of bandwidth capacity.
We have begun to rebuild this region's cable plant, and expect that by December
31, 2001, all of this region's customers will be served by cable systems with at
least 750 megahertz bandwidth capacity with two-way communication capability.
SOUTHEAST REGION. The Southeast Region consists of cable systems serving
approximately 439,000 customers residing primarily in small to medium-sized
communities in North Carolina, South Carolina, Georgia and eastern Tennessee.
There are significant clusters of cable systems in and around the cities and
counties of Greenville/Spartanburg, South Carolina; Hickory and Asheville, North
Carolina; Henry County, Georgia, a suburb
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of Atlanta; and Johnson City, Tennessee. These areas have experienced rapid
population growth over the past few years, contributing to the high rate of
internal customer growth for these systems. According to National Decision
Systems, the projected median household growth in the counties served by the
region's systems is 6.9% for the period ending 2003, versus the projected U.S.
median household growth of 5.2% for the same period. In addition, the Southeast
Region will be responsible for managing an aggregate of 541,000 customers
associated with the Helicon, InterMedia, Rifkin, Vista and Cable Satellite
acquisitions.
At March 31, 1998, approximately 62% of the Southeast Region's customers
were served by cable systems with at least 550 megahertz bandwidth capacity. The
planned upgrade of the Southeast Region's cable systems will reduce the number
of headends from 60 to 49 by December 31, 2001. The rebuild program for this
region is anticipated to result in approximately 94% of this region's customer
base being served by December 31, 2001 served by cable systems with at least 550
megahertz bandwidth capacity with two-way communication capability.
SOUTHERN REGION. The Southern Region consists of cable systems serving
approximately 349,000 customers located primarily in the states of Louisiana,
Alabama, Kentucky, Mississippi and central Tennessee. In addition, the Southern
Region includes systems in Kansas, Colorado, Utah and Montana. The Southern
Region has significant clusters of cable systems in and around the cities of
Birmingham, Alabama; Nashville, Tennessee; and New Orleans, Louisiana. According
to National Decision Systems, the projected median household growth in the
counties currently served by the region's systems is 6.3% for the period ending
2003, versus the projected U.S. median household growth of 5.2% for the same
period. In addition, the Southern Region will be responsible for managing an
aggregate of 335,000 customers associated with the Helicon, InterMedia and
Rifkin acquisitions.
At March 31, 1999, approximately 42% of the Southern Region's customers
were served by cable systems with at least 550 megahertz bandwidth capacity. The
planned upgrade of the Southeast Region's cable systems will reduce the number
of headends from 59 to 51 by December 31, 2001. The rebuild program for this
region is anticipated to result in approximately 75% of this region's customer
base being served by December 31, 2001 by cable systems with at least 550
megahertz bandwidth capacity with two-way communication capability.
PLANT AND TECHNOLOGY OVERVIEW. We have engaged in an aggressive program to
upgrade our existing cable plant over the next three years. As such, we intend
to invest approximately $1.8 billion through December 31, 2001, with
approximately one-half of that amount used to rebuild and upgrade our existing
cable plant. The remaining capital will be spent on plant extensions, new
services, converters and system maintenance.
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The following table describes the current technological state of our
systems and the anticipated progress of planned upgrades through 2001, based on
the percentage of our customers who will have access to the bandwidth and other
features shown:
<TABLE>
<CAPTION>
LESS THAN 750 MEGAHERTZ TWO-WAY
550 MEGAHERTZ 550 MEGAHERTZ OR GREATER CAPABILITY
------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
March 31, 1999.............. 42.7% 16.9% 40.4% 35.1%
December 31, 1999........... 23.9% 20.1% 56.0% 65.2%
December 31, 2000........... 12.9% 22.2% 64.9% 81.4%
December 31, 2001........... 7.7% 21.5% 70.8% 91.8%
</TABLE>
We have adopted the hybrid fiber optic/coaxial architecture, referred to as
the HFC architecture, as the standard for our ongoing systems upgrades. The HFC
architecture combines the use of fiber optic cable, which can carry hundreds of
video, data and voice channels over extended distances, with coaxial cable,
which requires a more extensive signal amplification in order to obtain the
desired transmission levels for delivering channels. In most systems, we connect
fiber optic cable to individual nodes serving an average of 800 homes or
commercial buildings. A node is a single connection to a cable system's main,
high-capacity fiber optic cable that is shared by a number of customers. Coaxial
cable is then connected from each node to the individual homes or buildings. We
believe that this network design provides high capacity and superior signal
quality, and will enable us to provide the newest forms of telecommunications
services to our customers. The primary advantages of HFC architecture over
traditional coaxial cable networks include:
- increased channel capacity of cable systems;
- reduced number of amplifiers in cascade, which are needed to increase
signal capacity, from the headend to the home, resulting in improved
signal quality and reliability;
- reduced number of homes that need to be connected to an individual node,
improving the capacity of the network to provide high-speed Internet
service and reducing the number of households affected by disruptions in
the network; and
- sufficient dedicated bandwidth for two-way services, which avoids reverse
signal interference problems that can otherwise occur when you have
two-way communication capability.
The HFC architecture will enable us to offer new and enhanced services,
including additional channels and tiers, expanded pay-per-view options,
high-speed Internet access, wide area network, which permits a network of
computers to be connected together beyond an area, point-to-point data services,
which can switch data links from one point to another, and digital advertising
insertion. The upgrades will facilitate our new services in two primary ways:
- Greater bandwidth allows us to send more information through our systems.
This provides us with the "space" to provide new services in addition to
our current services. As a result, we will be able to roll out digital
cable programming in addition to existing analog channels offered to
customers who do not wish to subscribe to a package of digital services.
- Enhanced design configured for two-way communication with the customer
allows us to provide cable Internet services without telephone support
and other interactive
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services, such as an interactive program guide, impulse pay-per-view, video-on-
demand and Wink, that cannot be offered without upgrading the bandwidth capacity
of our systems.
This HFC architecture will also position us to offer cable telephony
services in the future, using either Internet protocol technology or
switch-based technology, another method of linking communications.
PRODUCTS AND SERVICES
We offer our customers a full array of traditional cable television
services and programming and have begun to offer new and advanced high bandwidth
services such as high-speed Internet access. We plan to continually enhance and
upgrade these services, including adding new programming and other
telecommunications services, and will continue to position cable television as
an essential service.
TRADITIONAL CABLE TELEVISION SERVICES. Approximately 88% of our customers
subscribe to both "basic" and "expanded basic" service and generally, receive a
line-up of between 33 to 85 channels of television programming, depending on the
bandwidth capacity of the system. Customers who pay a premium to the basic rate
are provided additional channels, either individually or in packages of several
channels, as add-ons to the basic channels. About 29% of our customers subscribe
for premium channels, with additional customers subscribing for other special
add-on packages. We tailor both our basic line-up and our additional channel
offerings to each system in response to demographics, programming preferences,
competition, price sensitivity and local regulation.
Our traditional cable television service offerings include the following:
- BASIC CABLE. All of our customers receive basic cable services, which
generally consist of local broadcast television, local community
programming, including governmental and public access, and limited
satellite programming. As of March 31, 1999, the average monthly fee was
$11.16 for basic service.
- EXPANDED BASIC CABLE. This expanded tier includes a group of
satellite-delivered or non-broadcast channels, such as Entertainment and
Sports Programming Network (ESPN), Cable News Network (CNN) and Lifetime
Television. As of March 31, 1999, the average monthly fee was $18.90 for
expanded basic service.
- PREMIUM CHANNELS. These channels provide unedited, commercial-free
movies, sports and other special event entertainment programming. Home
Box Office, Cinemax and Showtime are typical examples. We offer
subscriptions to these channels either individually or in premium channel
packages. As of March 31, 1999, the average monthly fee was $6.68 per
premium subscription.
- PAY-PER-VIEW. These channels allow customers to pay to view a single
showing of a recently released movie, a one-time special sporting event
or music concerts on an unedited, commercial-free basis. We currently
charge a fee that ranges from $3 to $9 for movies. For special events,
such as championship boxing matches, we have charged a fee of up to
$49.99.
We have employed a variety of targeted marketing techniques to attract new
customers by focusing on delivering value, choice, convenience and quality. We
employ direct mail and telemarketing utilizing demographic "cluster codes" to
target specific messages to target audiences. In many of our systems, we offer
discounts to customers who purchase premium services on a limited trial basis in
order to encourage a higher level of
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service subscription. We also have a coordinated strategy for retaining
customers that includes televised retention advertising to reinforce the
decision to subscribe and to encourage customers to purchase higher service
levels.
NEW PRODUCTS AND TECHNOLOGIES. A variety of emerging technologies and the
rapid growth of Internet usage have presented us with substantial opportunities
to provide new or expanded products and services to our customers and to expand
our sources of revenue. The desire for such new technologies and the use of the
Internet by businesses in particular have triggered a significant increase in
our commercial market penetration. As a result, we are in the process of
introducing a variety of new or expanded services beyond the traditional
offerings of analog television programming for the benefit of both our
residential and commercial customers. These new products include:
- digital television and its related enhancements,
- high-speed Internet access, through television set-top converter boxes,
cable modems installed in personal computers and traditional telephone
Internet access,
- interactive services, such as Wink, and
- Internet protocol telephony and data transmission services.
We believe that we are well positioned to compete with other providers of
these services due to the high bandwidth of cable technology and our ability to
access homes and businesses.
DIGITAL TELEVISION. As part of upgrading our systems, we are installing
headend equipment capable of delivering digitally encoded cable transmissions
with a two-way digital-capable set-top converter box in the customer's home.
This digital connection offers significant advantages. For example, we can
compress the digital signal to allow the transmission of up to twelve digital
channels in the bandwidth normally used by one analog channel. This will allow
us to increase both programming and service offerings, including near
video-on-demand for pay-per-view customers which is expected to increase the
amount of services purchased by our customers.
Digital services customers may receive a mix of additional television
programming, an electronic program guide and up to 40 channels of digital music.
The additional programming falls into four categories which are targeted towards
specific markets:
- Additional basic channels, which are marketed in systems primarily
serving rural communities;
- Additional premium channels, which are marketed in systems serving both
rural and urban communities;
- "Multiplexes" of premium channels to which a customer previously
subscribed, such as multiple channels of HBO or Showtime, which are
marketed in systems serving both rural and urban communities; and
- Additional pay-per-view programming, such as more pay-per-view options
and/or frequent showings of the most popular films to provide near
video-on-demand, which are more heavily marketed in systems primarily
serving both rural and urban communities.
As part of our current pricing strategy for digital services, we have
established a retail rate of $6.95 to $8.95 per month for the digital set-top
converter and the delivery of "multiplexes" of premium services, additional
pay-per-view channels, digital music and an
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electronic programming guide. Certain of our systems also offer additional basic
and expanded basic tiers of service. These tiers of services retail for $6.95
per month. As of March 31, 1999, we had in excess of 3,000 customers subscribing
to digital services offered by eight of our cable systems, which serve
approximately 318,000 basic cable customers. By December 31, 1999, we anticipate
that approximately 734,000 of our customers will be served by cable systems
capable of delivering digital services.
INTERNET ACCESS. We currently provide Internet access to our customers by
two principal means:
(1) through television access, using a service such as WorldGate, and
(2) through cable modems attached to personal computers, either directly or
through an outsourcing contract with an Internet service provider.
We can also provide Internet access through traditional dial-up telephone
modems, using a service provider such as High Speed Access. The principal
advantage of cable Internet connections is the high speed of data transfer over
a cable system. We currently offer these services to our residential customers
over coaxial cable at speeds that can range up to approximately 50 times the
speed of a conventional 28.8 kilobits per second telephone modem. Furthermore, a
two-way communication cable system using the HFC architecture can support the
entire connection at cable speeds without any need for a separate telephone
line. If the cable system only supports one-way signals from the headend to the
customer, the customer must use a separate telephone line to send signals to the
provider, although such customer still receives the benefit of high speed cable
access when downloading information, which is the primary reason for using cable
as an Internet connection. In addition to Internet access over our traditional
coaxial system, we also provide our commercial customers fiber optic cable
access cable at a price that we believe is generally 20% lower than the price
offered by the telephone companies.
In the past, cable Internet connections have provided customers with widely
varying access speeds because each customer accessed the Internet by sending and
receiving data through a node. Users connecting simultaneously through a single
node share the bandwidth of that node, so that a user's connection speed may
diminish as additional users connect through the same node. To induce users to
switch to our Internet services, however, we guarantee our cable modem customers
the minimum access speed selected from several speed options we offer. We also
provide higher guaranteed access speeds for customers willing to pay an
additional cost. In order to meet these guarantees, we are increasing the
bandwidth of our system and "splitting" nodes easily and cost-effectively to
reduce the number of customers per node.
We currently offer cable modem-based Internet access services in Lanett,
Alabama; Los Angeles and Riverside, California; Newtown, Connecticut; Newnan,
Georgia; St. Louis, Missouri; Fort Worth, Texas; and Eau Claire, Wisconsin. As
of March 31, 1999, we provided Internet access service to approximately 9,300
homes and 130 businesses. The following table indicates the historical and
projected availability of Internet access services to our existing customer base
as of the dates indicated. These numbers reflect the number
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of our customers who have access to these services provided through us. The
percentage of these customers who actually use these services is currently a
small percentage.
<TABLE>
<CAPTION>
BASIC CUSTOMERS WITH ADVANCED
SERVICES AVAILABLE AS OF
----------------------------------
MARCH 31, 1999 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
High-Speed Internet Access via Cable Modems:
EarthLink/Charter Pipeline..................... 413,000 740,000
High Speed Access.............................. 15,000 640,000
@Home.......................................... 131,000 154,000
--------- ---------
Total Cable Modems.......................... 559,000 1,534,000
========= =========
Internet Access via WorldGate.................... 230,000 854,000
--------- ---------
</TABLE>
- CABLE MODEM-BASED INTERNET ACCESS. A "cable modem" is a peripheral
device attached to a personal computer that allows the user to send and receive
data over a cable system. Generally, we offer Internet access through cable
modems to our customers in systems that have been upgraded to at least 550
megahertz bandwidth capacity.
We have an agreement with EarthLink, an independent Internet service
provider, to provide as a private label service Charter Pipeline(TM), which is a
cable modem-based, high-speed Internet access service we offer. We currently
charge a monthly usage fee of between $29.95 and $34.95. Our customers have the
option to lease a cable modem for $10 to $15 a month or to purchase a modem for
between $300 and $400. As of March 31, 1999, we offered EarthLink Internet
access to approximately 421,000 of our homes passed and have approximately 5,300
customers.
We have a relationship with High Speed Access to offer Internet access in
some of our smaller systems. High Speed Access also provides Internet access
services to our customers under the Charter Pipeline(TM) brand name. Although
the Internet access service is provided by High Speed Access, the Internet
"domain name" of our customer's e-mail address and web site, if any, is
"Charter.net," allowing the customer to switch or expand to our other Internet
services without a change of e-mail address. High Speed Access provides turnkey
service, bears all capital, operating and marketing costs of providing the
service, and seeks to build economies of scale in our smaller systems that we
cannot efficiently build ourselves by simultaneously contracting to provide the
same services to other small geographically contiguous systems. We receive 50%
of the monthly $39.95 service fee. As of March 31, 1999, High Speed Access
offers Internet access to approximately 225,000 of our homes passed and
approximately 3,000 customers have signed up for the service. During 1999, High
Speed Access plans to launch this service in an additional 29 systems, covering
approximately 415,000 additional homes passed. Vulcan Ventures, Inc., a company
controlled by Paul G. Allen, has an equity investment in High Speed Access. See
"Certain Relationships and Related Transactions."
We also have a revenue sharing agreement with @Home, under which @Home
currently provides Internet service to customers in our systems serving Fort
Worth, University Park and Highland Park, Texas. The @Home network provides
high-speed, cable modem-based Internet access using the cable infrastructure. As
of March 31, 1999, we offered @Home Internet service to approximately 140,000 of
our homes passed and have approximately 2,000 customers.
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As of March 31, 1999 we provided Internet access to approximately 100
commercial customers. We actively market our cable modem service to businesses
in every one of our systems where we have the capability to offer such service.
Our marketing efforts are often door-to-door, and we have established a separate
division whose function is to make businesses aware that this type of Internet
access is available through us. We also provide several virtual local area
networks, which permit networks of computers to be connected within an area,
established for municipal and educational facilities including Cal Tech, the
City of Pasadena and the City of West Covina in our Los Angeles cluster.
- TV-BASED INTERNET ACCESS THROUGH WORLDGATE. We have a non-exclusive
agreement with WorldGate to provide its TV-based e-mail and Internet access to
our cable customers. WorldGate's technology is only available to cable systems
with two-way capability. WorldGate offers easy, low-cost Internet access to
customers at connection speeds ranging up to 128 kilobits per second. For a
monthly fee, we provide our customers e-mail and Internet access without using a
PC, obtaining an additional telephone line or tying up an existing line, or
purchasing any additional equipment. Instead, the customer accesses the Internet
through the set-top box, which the customer already has on his television set,
and a wireless keyboard, that is provided with the service, which interfaces
with the box. WorldGate works on both advanced analog and digital platforms and,
therefore, can be installed utilizing the analog converters already deployed. In
contrast, other converter-based, non-PC Internet access products require a
digital platform and a digital converter prior to installation.
Subscribers who opt for television-based Internet access are generally
first-time users who prefer this more user-friendly interface. Of these users,
41% use WorldGate at least once a day, and 76% use it at least once a week.
Although the WorldGate service bears the WorldGate brand name, the Internet
"domain name" of the subscribers who use this service is "Charter.net." This
allows the customer to switch or expand to our other Internet services without a
change of e-mail address.
We first offered WorldGate to subscribers on the upgraded portion of our
systems in St. Louis in April 1998. We are also currently offering this service
in our systems in Logan, Utah, Maryville, Illinois and Newtown, Connecticut, and
plan to introduce it in eight additional systems by December 31, 1999. Charter
Communications, Inc. owns a minority interest in WorldGate. See "Certain
Relationships and Related Transactions." As of March 31, 1999, we provided
WorldGate Internet service to approximately 1,800 customers.
WINK-ENHANCED PROGRAMMING. We have formed a relationship with Wink, which
sells technology to embed interactive features, such as additional information
and statistics about a program or the option to order an advertised product,
into programming and advertisements. A customer with a Wink-enabled set-top box
and a Wink-enabled cable provider sees an icon flash on the screen when
additional Wink features are available to enhance a program or advertisement. By
pressing the select button on a standard remote control, a viewer of a
Wink-enhanced program is able to access additional information regarding such
program, including, for example, information on prior episodes or the program's
characters. A viewer watching an advertisement would be able to access
additional information regarding the advertised product and may also be able to
utilize the two-way transmission features to order a product. We have bundled
Wink service with our traditional cable services in both our advanced analog and
digital platforms. Wink services are provided free of charge. A company
controlled by Paul G. Allen has made an equity investment in Wink. See "Certain
Relationships and Related Transactions."
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Various programming networks, including CNN, NBC, ESPN, HBO, Showtime,
Lifetime, VH1, the Weather Channel, and Nickelodeon, are currently producing
over 1,000 hours of Wink-enhanced programming per week. Under certain
revenue-sharing arrangements, we will modify our headend technology to allow
Wink-enabled programming to be offered on our systems. Each time one of our
customers uses Wink to request certain additional information or order an
advertised product we receive fees from Wink.
TELEPHONE SERVICES. We expect to be able to offer cable telephony services
in the near future using our systems' direct, two-way connections to homes and
other buildings. We are exploring technologies using Internet protocol
telephony, as opposed to the traditional switching technologies that are
currently available, to transmit digital voice signals over our systems. AT&T
and other telephone companies have already begun to pursue strategic partnering
and other programs which make it attractive for us to acquire and develop this
alternative Internet protocol technology. For the last two years, we have sold
telephony services as a competitive access provider in the state of Wisconsin
through Marcus FiberLink LLC, one of our subsidiaries, and are currently looking
to expand our services as a competitive access provider into other states.
MISCELLANEOUS SERVICES. We also offer paging services to our customers in
certain markets. As of March 31, 1999, we had approximately 9,300 paging
customers. We also lease our fiber-optic cable plant and equipment to commercial
and non-commercial users of data and voice telecommunications services.
CUSTOMER SERVICE AND COMMUNITY RELATIONS
Providing a high level of service to our customers has been a central
driver of our historical success. Our emphasis on system reliability,
engineering support and superior customer satisfaction is key to our management
philosophy. In support of our commitment to customer satisfaction, we operate a
24-hour customer service hotline in most systems and offer on-time installation
and service guarantees. It is our policy that if an installer is late for a
scheduled appointment the customer receives free installation, and if a service
technician is late for a service call the customer receives a $20 credit. Our
on-time service call rate was 99.8% in 1997, and 99.7% in 1998.
We currently maintain eight call centers located in our seven regions. They
are staffed with dedicated personnel who provide service to our customers 24
hours a day, seven days a week. We believe operating regional call centers
allows us to provide "localized" service, which also reduces overhead costs and
improves customer service. We have invested significantly in both personnel and
in equipment to ensure that these call centers are professionally managed and
employ state-of-the-art technology. Where appropriate, we establish and operate
major call centers which today handle customer call volume for more than 58% of
our customers. We also maintain approximately 143 field offices, and employ
approximately 1,200 customer service representatives throughout the systems. Our
customer service representatives receive extensive training to develop customer
contact skills and product knowledge critical to successful sales and high rates
of customer retention. We have approximately 2,300 technical employees who are
encouraged to enroll in courses and attend regularly scheduled on-site seminars
conducted by equipment manufacturers to keep pace with the latest technological
developments in the cable television industry. We utilize surveys, focus groups
and other research tools as part of our efforts to determine and respond to
customer needs. We believe that all of this improves the overall quality of our
services and the reliability of our systems, resulting in fewer service calls
from customers.
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We are also committed to fostering strong community relations in the towns
and cities our systems serve. We support many local charities and community
causes in various ways, including marketing promotions to raise money and
supplies for persons in need and in-kind donations that include production
services and free air-time on major cable networks. Recent charity affiliations
include campaigns for "Toys for Tots," United Way, local theatre, children's
museums, local food banks and volunteer fire and ambulance corps. We also
participate in the "Cable in the Classroom" program, whereby cable television
companies throughout the United States provide schools with free cable
television service. In addition, we install and provide free basic cable service
to public schools, government buildings and non-profit hospitals in many of the
communities in which we operate. We also provide free cable modems and
high-speed Internet access to schools and public libraries in our franchise
areas. We place a special emphasis on education, and regularly award
scholarships to employees who intend to pursue courses of study in the
communications field.
SALES AND MARKETING
PERSONNEL RESOURCES. We have a centralized team responsible for
coordinating the marketing efforts of our individual systems. For most of our
systems with over 30,000 customers we have a dedicated marketing manager, while
smaller systems are handled regionally. We believe our success in marketing
comes from new and innovative ideas, and good interaction between our corporate
office, which handles programs and administration, and our field offices, which
implement the various programs. We are also continually monitoring the
regulatory arena, customer perception, competition, pricing and product
preferences to increase our responsiveness to our customer base. Our customer
service representatives are given the incentive to use their daily contacts with
customers as opportunities to sell our new service offerings.
TARGET MARKETING. We have an innovative marketing program. We utilize
market research on selected systems, compare the data to national research and
tailor a marketing program for each individual market. We gather detailed
customer information through our regional marketing representatives and use the
Claritas geodemographic data program and consulting services to create unique
packages of services and marketing programs. These marketing efforts and the
follow-up analysis provide consumer information down to the city block or
suburban subdivision level, which allows us to create very targeted marketing
programs. We seek to maximize our revenue per customer through the use of
"tiered" packaging strategies to market premium services and to develop and
promote niche programming services. We regularly use targeted direct mail
campaigns to sell these tiers and services to our existing customer base. We are
developing an in-depth profile database that goes beyond existing and former
customers to include all homes passed. This database information is expected to
improve our targeted direct marketing efforts, bringing us closer toward our
objective of increasing total customers as well as sales per customer for both
new and existing customers. For example, using customer profile data currently
available, we are able to identify those customers that have children under a
specified age who do not currently subscribe to The Disney Channel, which then
enables us to target our marketing efforts with respect to The Disney Channel to
specific addresses. In 1998, we were chosen by Claritas Corporation, sponsor of
a national marketing competition across all industries, as the first place
winner in their media division, which includes cable systems operations,
telecommunications and newspapers, for our national segmenting and targeted
marketing program.
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Our marketing professionals have also received numerous industry awards
within the last two years, including the Cable and Telecommunication Association
of Marketers' awards for consumer research and best advertising and marketing
programs.
In 1998, we introduced the MVP package of premium services. Customers
receive a substantial discount on bundled premium services of HBO, Showtime,
Cinemax and The Movie Channel. We were able to negotiate favorable terms with
premium networks, which allowed minimal impact on margins and provided
substantial volume incentives to grow the premium category. The MVP package has
increased premium household penetration, premium revenue and cash flow. As a
result of this package, HBO recognized us as a top performing customer. We are
currently introducing this same premium strategy in the systems we have recently
acquired.
We expect to continue to invest significant amounts of time, effort and
financial resources in the marketing and promotion of new and existing services.
To increase customer penetration and increase the level of services used by our
customers, we utilize a coordinated array of marketing techniques, including
door-to-door solicitation, telemarketing, media advertising and direct mail
solicitation. We believe we have one of the cable television industry's highest
success rates in attracting customers who have never before subscribed to cable
television. Historically, "nevers" are the most difficult customer to attract.
Furthermore, we have succeeded in retaining these "nevers."
PROGRAMMING SUPPLY
GENERAL. We believe that offering a wide variety of conveniently scheduled
programming is an important factor influencing a customer's decision to
subscribe to and retain our cable services. We devote considerable resources to
obtaining access to a wide range of programming that we believe will appeal to
both existing and potential customers of basic and premium services. We rely on
extensive market research, customer demographics and local programming
preferences to determine channel offerings in each of our markets. See "-- Sales
and Marketing."
PROGRAMMING SOURCES. We obtain basic and premium programming from a number
of suppliers, usually pursuant to a written contract. We obtain approximately
50% of our programming through contracts entered into directly with a
programming supplier. We obtain the rest of our programming through TeleSynergy,
Inc. which offers its partners contract benefits in buying programming by virtue
of volume discounts available to a larger buying base. Programming tends to be
made available to us for a flat fee per customer. However, some channels are
available without cost to us. In connection with the launch of a new channel, we
may receive a distribution fee to support the channel launch, a portion of which
is applied to marketing expenses associated with the channel launch. The amounts
we receive in distribution fees are not significant. For home shopping channels,
we may receive a percentage of the amount spent in home shopping purchases by
our customers on channels we carry. In 1998, pro forma for our merger with
Marcus Holdings such revenues totalled approximately $5 million.
Our programming contracts generally continue for a fixed period of time,
usually from three to ten years. Although longer contract terms are available,
we prefer to limit contracts to three years so that we retain flexibility to
change programming and include new channels as they become available. Some
program suppliers offer marketing support or volume discount pricing structures.
Some of our programming agreements with premium service suppliers offer cost
incentives under which premium service unit prices decline as certain premium
service growth thresholds are met.
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PROGRAMMING COSTS. Our cable programming costs have increased in recent
years and are expected to continue to increase due to factors including:
- system acquisitions,
- additional programming being provided to customers,
- increased cost to produce or purchase cable programming,
- inflationary increases, and
- other factors affecting the cable television industry generally.
The combined programming cost of Charter Holdings, CCA Group and CharterComm
Holdings were equal to approximately 21% of revenues in 1998. In every year we
have operated, our costs to acquire programming have exceeded customary
inflationary and cost-of-living type increases. Sports programming costs have
increased significantly over the past several years. In addition, contracts to
purchase sports programming sometimes contain built-in cost increases for
programming added during the term of the contract which we may or may not have
the option to add to our service offerings.
Under rate regulation of the Federal Communications Commission, cable
operators may increase their rates to customers to cover increased costs for
programming, subject to certain limitations. See "Regulation and Legislation."
We now contract through TeleSynergy for more approximately 50% of our
programming. We believe our partnership in TeleSynergy limits increases in our
programming costs relative to what the increases would otherwise be, although
given our increased size and purchasing ability following our merger with Marcus
Holdings, the effect may not be material. This is because some programming
suppliers offer advantageous pricing terms to cable operators whose number of
customers exceeds threshholds established by such programming suppliers. Our
increase in size following our merger with Marcus Holdings should provide
increased bargaining power resulting in an ability to limit increases in
programming costs. Management believes it will, as a general matter, be able to
pass increases in its programming costs through to customers, although there can
be no assurance that it will be possible.
RATES
Pursuant to the FCC's rules, we have set rates for cable-related equipment,
such as converter boxes and remote control devices, and installation services
based upon actual costs plus a 11.25% rate of return and have unbundled these
charges from the charges for the provision of cable service.
Rates charged to customers vary based on the market served and service
selected, and are typically adjusted on an annual basis. As of March 31, 1999,
the average monthly fee was $11.16 for basic service and $18.90 for expanded
basic service. Regulation of the expanded basic service was eliminated by
federal law as of March 31, 1999 and such rates are now based on market
conditions. A one-time installation fee, which may be waived in part during
certain promotional periods, is charged to new customers. We believe our rate
practices are in accordance with Federal Communications Commission Guidelines
and are consistent with those prevailing in the industry generally. See
"Regulation and Legislation."
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THEFT PROTECTION
The unauthorized tapping of cable plant and the unauthorized receipt of
programming using cable converters purchased through unauthorized sources are
problems which continue to challenge the entire cable industry. We have adopted
specific measures to combat the unauthorized use of our plant to receive
programming. For instance, in several of our regions, we have instituted a
"perpetual audit" whereby each technician is required to check at least four
other nearby residences during each service call to determine if there are any
obvious signs of piracy, namely, a drop line leading from the main cable line
into other homes. Addresses where the technician observes drop lines are then
checked against our customer billing records. If the address is not found in the
billing records, a sales representative calls on the unauthorized user to
correct the "billing discrepancy" and persuade the user to become a formal
customer. In our experience, approximately 25% of unauthorized users who are
solicited in this fashion become customers. Billing records are then closely
monitored to guard against these new customers reverting to their status as
unauthorized users. Unauthorized users who do not convert are promptly
disconnected and, in certain instances, flagrant violators are referred for
prosecution. In addition, we have prosecuted individuals who have sold cable
converters programmed to receive our signals without proper authorization.
FRANCHISES
As of March 31, 1999, our systems operated pursuant to an aggregate of
1,158 franchises, permits and similar authorizations issued by local and state
governmental authorities. Each franchise is awarded by a governmental authority
and is usually not transferable unless the granting governmental authority
consents. Most franchises are subject to termination proceedings in the event of
a material breach. In addition, most franchises require us to pay the granting
authority a franchise fee of up to 5.0% of gross revenues generated by cable
television services under the franchise (i.e., the maximum amount that may be
charged under the Communications Act).
Our franchises have terms which range from 4 to more than 32 years. Prior
to the scheduled expiration of most franchises, we initiate renewal proceedings
with the granting authorities. This process usually takes three years but can
take a longer period of time and often involves substantial expense. The
Communications Act provides for an orderly franchise renewal process in which
granting authorities may not unreasonably withhold renewals. If a renewal is
withheld and the granting authority takes over operation of the affected cable
system or awards it to another party, the granting authority must pay the
existing cable operator the "fair market value" of the system. The
Communications Act also established comprehensive renewal procedures requiring
that an incumbent franchisee's renewal application be evaluated on its own merit
and not as part of a comparative process with competing applications. In
connection with the franchise renewal process, many governmental authorities
require the cable operator make certain commitments, such as technological
upgrades to the system, which may require substantial capital expenditures.
There can be no assurance, however, that any particular franchise will be
renewed or that it can be renewed on commercially favorable terms. Our failure
to obtain renewals of the franchises, especially those in major metropolitan
areas where we have the most customers, would have a material adverse effect on
our business, results of operations and financial condition. See "Risk
Factors--Risks Associated with Regulation
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of the Cable Industry." The following table summarizes our systems' franchises
by year of expiration, and approximate number of basic customers as of March 31,
1999.
<TABLE>
<CAPTION>
PERCENTAGE PERCENTAGE
NUMBER OF OF TOTAL TOTAL BASIC OF TOTAL
YEAR OF FRANCHISE EXPIRATION FRANCHISES FRANCHISES CUSTOMERS CUSTOMERS
- ---------------------------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Prior to December 31, 1999...... 127 11% 328,000 14%
2000 to 2002.................... 214 18% 513,000 22%
2003 to 2005.................... 239 21% 456,000 19%
2006 or after................... 578 50% 1,067,000 45%
Total...................... 1,158 100% 2,364,000 100%
</TABLE>
Under the 1996 Telecom Act, cable operators are not required to obtain
franchises in order to provide telecommunications services, and granting
authorities are prohibited from limiting, restricting or conditioning the
provision of such services. In addition, granting authorities may not require a
cable operator to provide telecommunications services or facilities, other than
institutional networks, as a condition of an initial franchise grant, a
franchise renewal, or a franchise transfer. The 1996 Telecom Act also limits
franchise fees to an operator's cable-related revenues and clarifies that they
do not apply to revenues that a cable operator derives from providing new
telecommunications services.
We believe our relations with the franchising authorities under which our
systems are operated are generally good. Substantially all of the material
franchises relating to our systems eligible for renewal have been renewed or
extended at or prior to their stated expiration dates.
COMPETITION
We face competition in the areas of price, service offerings, and service
reliability. We compete with other providers of television signals and other
sources of home entertainment. In addition, as we expand into additional
services such as digital television, Internet access, interactive services and
Internet protocol telephony, we face competition from other cable systems
operators providing such services as well as from other providers of each type
of service we will provide.
To date, we believe that we have not lost a significant number of
customers, or a significant amount of revenue, to our competitors' systems.
However, competition from other providers of the technologies we expect to offer
in the future may have a negative impact on our business in the future.
Through mergers such as the recent merger of Tele-Communications, Inc. and
AT&T, customers will come to expect a variety of services from a single
provider. While the TCI/AT&T merger has no direct or immediate impact on our
business, it encourages providers of cable and telecommunications services to
expand their service offerings. It also encourages consolidation in the cable
industry as cable operators recognize the competitive benefits of a large
customer base and expanded financial resources.
Key competitors today include:
- BROADCAST TELEVISION. Cable television has long competed with broadcast
television, which consists of television signals that the viewer is able to
receive without charge using a traditional "off-air" antenna. The extent of such
competition is dependent upon the quality and quantity of broadcast signals
available through "off-air" reception compared to the
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services provided by the local cable system. Accordingly, cable operators in
rural areas, where "off-air" reception is more limited, generally achieve higher
penetration rates than do operators in most major metropolitan areas, where
numerous, high quality "off-air" signals are available. The 1996 Telecom Act
directed the Federal Communications Commission to establish, and the Federal
Communications Commission has adopted, regulations and policies for the issuance
of licenses for digital television, known as DTV, to incumbent television
broadcast licensees. DTV is expected to deliver high definition television
pictures and multiple digital-quality program streams, as well as advanced
digital services such as subscription video.
- DBS. Direct broadcast satellite, known as DBS, has emerged as
significant competition to cable systems. The DBS industry has grown rapidly
over the last several years, far exceeding the growth rate of the cable
television industry, and now serves approximately 10 million subscribers
nationwide. DBS service allows the subscriber to receive video services directly
via satellite using a relatively small dish antenna. Moreover, video compression
technology allows DBS providers to offer more than 100 digital channels, thereby
surpassing the typical cable system. DBS providers offer most of the same
programming as cable television, but also offer certain sports packages not
available through cable systems and a wide array of pay-per-view movies. DBS,
however, is limited in the local programming it can provide because of the
current capacity limitations of satellite technology. In addition, existing
copyright rules restrict the ability of DBS providers to offer local broadcast
programming. At least one DBS provider is now attempting to provide this
programming in certain major markets. Congress is now considering legal action
that would remove these legal obstacles. After recent mergers, the two primary
DBS providers are DirecTV, Inc., and EchoStar Communications Corporation. In
addition, there are several companies licensed to operate a DBS system who have
yet to begin service.
- TRADITIONAL OVERBUILDS. Cable television systems are operated under
non-exclusive franchises granted by local authorities. More than one cable
system may legally be built in the same area. Although still relatively
uncommon, it is possible that a franchising authority might grant a second
franchise to another cable operator and that franchise might contain terms and
conditions more favorable than those afforded us. Well financed businesses from
outside the cable industry, such as the public utilities may over time become
competitors. There has been a recent increase in the number of cities that have
constructed their own cable systems, in a manner similar to city-provided
utility services. Although the total number of municipal overbuild cable systems
remains small, the potential profitability of a cable system is adversely
affected if the local subscriber base is divided among multiple cable systems.
Additionally, constructing a competing cable system is a capital intensive
process which involves a high degree of risk. We believe that in order to be
successful, a competitor's overbuild would need to be able to serve the homes
and businesses in the overbuilt area on a more cost-effective basis than us. Any
such overbuild operation would require either significant access to capital or
access to facilities already in place that are capable of delivering cable
television programming.
We are aware of overbuild situations in six of our systems located in
Newnan, Columbus and West Point, Georgia; Barron, Wisconsin; and Lanett and
Valley, Alabama. Approximately 44,000 basic customers, approximately 1.9% of our
total basic customers, are passed by these overbuilds. Additionally, we have
been notified that franchises have been awarded, and present potential overbuild
situations, in four of our systems located in Southlake, Roanoke and Keller,
Texas and Willimantic, Connecticut. These potential overbuild areas service an
aggregate of approximately 45,000 basic customers or
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approximately 1.9% of our total basic customers. In response to such overbuilds,
these systems have been designated priorities for the upgrade of cable plant and
the launch of new and enhanced services. We have upgraded each of these systems
to at least 750 megahertz two-way HFC architecture, with the exceptions of our
systems in Columbus, Georgia, and Willimantic, Connecticut. Upgrades to at least
750 megahertz two-way HFC architecture with respect to these two systems are
expected to be completed by December 31, 2000 and December 31, 2001,
respectively.
- TELEPHONE COMPANIES. The competitive environment has been significantly
affected both by technological developments and regulatory changes enacted in
The Telecommunications Act of 1996 which were designed to enhance competition in
the cable television and local telephone markets. Federal cross-ownership
restrictions historically limited entry by local telephone companies into the
cable television business. The 1996 Telecom Act modified this cross-ownership
restriction, making it possible for local exchange carriers who have
considerable resources to provide a wide variety of video services competitive
with services offered by cable systems.
As we expand our offerings to include telecommunications services, we will
be subject to competition from other telecommunications providers. The
telecommunications industry is highly competitive and includes competitors with
greater financial and personnel resources, who have brand name recognition and
long-standing relationships with regulatory authorities. Moreover, mergers,
joint ventures and alliances among franchise, wireless or private cable
television operators, local exchange carriers and others may result in providers
capable of offering cable television and telecommunications services in direct
competition with us.
Several telephone companies have obtained or are seeking cable television
franchises from local governmental authorities and are constructing cable
systems. SNET PersonalVision, Inc. has a cable television franchise to offer
cable service in the entire state of Connecticut and has begun offering cable
television service in certain communities. Cross-subsidization by local exchange
carriers of video and telephony services poses a strategic advantage over cable
operators seeking to compete with local exchange carriers that provide video
services. In addition, local exchange carriers provide facilities for the
transmission and distribution of voice and data services, including Internet
services, in competition with our existing or potential interactive services
ventures and businesses, including Internet service, as well as data and other
non-video services. We cannot predict the likelihood of success of the broadband
services offered by our competitors or the impact on us of such competitive
ventures. The entry of telephone companies as direct competitors in the video
marketplace, however, is likely to become more widespread and could adversely
affect the profitability and valuation of the systems.
- SMATV. Additional competition is posed by satellite master antenna
television systems known as "SMATV systems" serving multiple dwelling units,
referred to in the cable industry as "MDU's" such as condominiums, apartment
complexes, and private residential communities. These private cable systems may
enter into exclusive agreements with such MDUs, which may preclude operators of
franchise systems from serving residents of such private complexes, although
certain states mandate that franchised cable operators have access to MDUs. Due
to the widespread availability of satellite earth stations, such private cable
systems can offer both improved reception of local television stations and many
of the same satellite-delivered program services which are offered by cable
systems. SMATV systems currently benefit from operating advantages not available
to franchised cable systems, including fewer regulatory burdens and no
requirement to
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service low density or economically depressed communities. It is possible that,
as a result of the expansion under the 1996 Telecom Act of the scope of entities
which are exempt from regulation as "cable systems," some SMATV systems
previously regulated as "cable systems" are now exempt from regulation under the
Communications Act of 1934, as amended. Exemption from regulation may provide a
competitive advantage to certain of our current and potential competitors.
- WIRELESS DISTRIBUTION. Cable television systems also compete with
wireless program distribution services such as multi-channel multipoint
distribution systems or "wireless cable", known as MMDS. MMDS uses low-power
microwave frequencies to transmit television programming over-the-air to paying
customers. Wireless distribution services generally provide many of the
programming services provided by cable systems, and digital compression
technology is likely to increase significantly the channel capacity of their
systems. However, most MMDS operators continue to program in analog technology
due to the significant capital cost in upgrading to digital technology, combined
with a high disconnect ratio for this service. Analog MMDS is limited to
approximately 33 channels. Additionally, both analog and digital MMDS services
require unobstructed "line of sight" transmission paths. While no longer as
significant a competitor, analog MMDS has impacted our customer growth in
Riverside and Sacramento, California and Missoula, Montana. Digital MMDS is a
more significant competitor, presenting potential challenges to us in Los
Angeles, California and Atlanta, Georgia.
- OPEN-VIDEO SYSTEMS. The 1996 Telecom Act established the open video
system, known as "OVS," as a new legal framework for the delivery of video
programming. Under the statute and the Federal Communication Commission's rules,
a local exchange carrier or other entrant, other than a cable system operator,
may distribute video programming to customers, without the requirement to obtain
a local franchise, although the OVS operator must provide non-discriminatory
access to unaffiliated programmers on a portion of its channel capacity. The
Federal Communications Commission has to date certified several different
companies to provide OVS in various parts of the United States. The Fifth
Circuit Court of Appeals, however, recently invalidated certain of the Federal
Communication Commission's OVS rules, including the Federal Communication
Commission's rule preempting local franchise requirements. The Fifth Circuit
decision may be subject to further appeal.
- PUBLIC UTILITY HOLDING COMPANIES. The 1996 Telecom Act also authorizes
registered utility holding companies and their subsidiaries to provide video
programming services, notwithstanding the applicability of the Public Utility
Holding Company Act. Electric utilities have the potential to become significant
competitors in the video marketplace, as many of them already possess fiber
optic and other transmission lines in areas they serve. In the last year,
several utilities have announced, commenced, or moved forward with ventures
involving multichannel video programming distribution. See "Regulation and
Legislation."
PROPERTIES
Our principal physical assets consist of cable television plant and
equipment, including signal receiving, encoding and decoding devices, headend
reception facilities, distribution systems and customer drop equipment for each
of its cable television systems. Our cable television plant and related
equipment are generally attached to utility poles under pole rental agreements
with local public utilities and telephone companies, and in certain locations
are buried in underground ducts or trenches. The physical components of our
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cable television systems require maintenance and periodic upgrading to keep pace
with technological advances. We own or lease real property for signal reception
sites and business offices in many of the communities served by its systems and
for its principal executive offices. We own most of our service vehicles.
We own the real property housing our regional data center in Town &
Country, Missouri, as well as the regional office for the Northeast Region in
Newtown, Connecticut and additional owned real estate located in Hickory, North
Carolina; Hammond, Louisiana; and West Sacramento and San Luis Obispo,
California. In addition, we lease space for our regional data center located in
Dallas, Texas and additional locations for business offices throughout our
operating regions. Our headend locations are generally located on owned or
leased parcels of land, and we generally own the towers on which our equipment
is located.
All of our properties and assets are subject to liens securing payment of
indebtedness under the existing credit facilities. We believe that our
properties are in good operating condition and are suitable and adequate for our
business operations.
EMPLOYEES
Neither Charter Holdings nor Charter Capital has any employees. As of March
31, 1999, we had approximately 4,770 full-time equivalent employees of which 265
were represented by the International Brotherhood of Electrical Workers. We
believe we have an excellent relationship with our employees and have never
experienced a work stoppage.
INSURANCE
We have insurance to cover risks incurred in the ordinary course of
business, including general liability, property coverage, business interruption
and workers' compensation insurance in amounts typical of similar operators in
the cable industry and with reputable insurance providers. As is typical in the
cable industry, we do not insure our underground plant. We believe our insurance
coverage is adequate.
LEGAL PROCEEDINGS
We are involved from time to time in routine legal matters incidental to
our business. We believe that the resolution of such matters will not have a
material adverse impact on our financial position or results of operations.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-4 to register this exchange offer. This prospectus, which
forms a part of the registration statement, does not contain all the information
included in that registration statement. For further information about us and
the new notes offered in this prospectus, you should refer to the registration
statement and its exhibits. You may read and copy any document we file with the
Securities and Exchange Commission at the public reference facilities maintained
by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's regional offices at 3475 Lenox Road, N.E., Suite 1000,
Atlanta, Georgia 30326-1232. Copies of such material may be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. You can also review such material
by accessing the Commission's internet web site at http://www.sec.gov. This site
contains
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reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission.
We intend to furnish to each holder of the new notes annual reports
containing audited financial statements and quarterly reports containing
unaudited financial information for the first three quarters of each fiscal
year. We will also furnish to each holder of the new notes such other reports as
may be required by law.
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REGULATION AND LEGISLATION
The following summary addresses the key regulatory developments and
legislation affecting the cable television industry.
The operation of a cable system is extensively regulated by the Federal
Communications Commission, some state governments and most local governments.
The 1996 Telecom Act has altered the regulatory structure governing the nation's
communications providers. It removes barriers to competition in both the cable
television market and the local telephone market. Among other things, it also
reduces the scope of cable rate regulation and encourages additional competition
in the video programming industry by allowing local telephone companies to
provide video programming in their own telephone service areas.
The 1996 Telecom Act requires the Federal Communications Commission to
undertake a host of implementing rulemakings. Moreover, Congress and the Federal
Communications Commission have frequently revisited the subject of cable
regulation. Future legislative and regulatory changes could adversely affect our
operations, and there have been calls in Congress and at the Federal
Communications Commission to maintain or even tighten cable regulation in the
absence of widespread effective competition.
CABLE RATE REGULATION. The 1992 Cable Act imposed an extensive rate
regulation regime on the cable television industry, which limited the ability of
cable companies to increase subscriber fees. Under that regime, all cable
systems are subject to rate regulation, unless they face "effective competition"
in their local franchise area. Federal law now defines "effective competition"
on a community-specific basis as requiring either:
(1) low subscriber penetration, less than 30%, by the incumbent cable
operator;
(2) appreciable subscriber penetration, more than 15%, by competing
multichannel video providers;
(3) a municipally-affiliated multichannel video provider offering
service to 50% of the community; or
(4) a competing multichannel video provider affiliated with a local
telephone company offering service to the community.
Although the Federal Communications Commission has established the
underlying regulatory scheme, local government units, commonly referred to as
local franchising authorities, are primarily responsible for administering the
regulation of the lowest level of cable -- the basic service tier, which
typically contains local broadcast stations and public, educational, and
government access channels. Before a local franchising authority begins basic
service rate regulation, it must certify to the Federal Communications
Commission that it will follow applicable federal rules. Many local franchising
authorities have voluntarily declined to exercise their authority to regulate
basic service rates. Local franchising authorities also have primary
responsibility for regulating cable equipment rates. Under federal law, charges
for various types of cable equipment must be unbundled from each other and from
monthly charges for programming services.
The Federal Communications Commission itself directly administers rate
regulation of any cable programming service tier which typically contains
satellite-delivered programming. Under the 1996 Telecom Act, the Federal
Communications Commission can regulate cable programming service tier rates only
if a local franchising authority first receives at least two rate complaints
from local subscribers and then files a formal
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complaint with the Federal Communications Commission. When new cable programming
service tier rate complaints are filed, the Federal Communications Commission
considers only whether the incremental increase is justified and it will not
reduce the previously established cable programming service tier rate. We
currently have 45 rate complaints relating to approximately 400,000 subscribers
pending at the Federal Communications Commission. Significantly, the Federal
Communications Commission's authority to regulate cable programming service tier
rates expired on March 31, 1999. The Federal Communications Commission has taken
the position that it will still adjudicate cable programming service tier
complaints filed after this sunset date, but no later than 180 days after the
last cable programming service tier rate increase imposed prior to March 31,
1999, and will strictly limit its review, and possibly refund orders, to the
time period predating the sunset date. We do not believe any adjudications
regarding these pre-sunset complaints will have a material adverse effect on our
business. The elimination of cable programming service tier regulation in a
prospective basis affords us substantially greater pricing flexibility.
Under the FCC's rate regulations, most cable systems were required to
reduce their basic service tier and cable programming service tier rates in 1993
and 1994, and have since had their rate increases governed by a complicated
price cap scheme that allows for the recovery of inflation and certain increased
costs, as well as providing some incentive for expanding channel carriage. The
Federal Communications Commission has modified its rate adjustment regulations
to allow for annual rate increases and to minimize previous problems associated
with regulatory lag. Operators also have the opportunity to bypass this
"benchmark" regulatory scheme in favor of traditional "cost-of-service"
regulation in cases where the latter methodology appears favorable. Premium
cable services offered on a per-channel or per-program basis remain unregulated,
as do affirmatively marketed packages consisting entirely of new programming
product. However, federal law requires that the basic service tier be offered to
all cable subscribers and limits the ability of operators to require purchase of
any cable programming service tier if a customer seeks to purchase premium
services offered on a per-channel or per-program basis, subject to a technology
exception which sunsets in 2002.
As of March 31, 1999, local franchising authorities covering approximately
42% of our systems' subscribers were certified to regulate basic tier rates. The
1992 Cable Act permits communities to certify and regulate rates at any time, so
that it is possible that additional localities served by the systems may choose
to certify and regulate rates in the future.
The Federal Communications Commission and Congress have provided various
forms of rate relief for smaller cable systems owned by smaller operators. If
requisite eligibility criteria are satisfied, a cable operator may be allowed to
rely on a vastly simplified cost-of-service rate justification and/or may be
allowed to avoid regulation of cable programming service tier rates entirely.
Under Federal Communications Commission regulations, cable systems serving
15,000 or fewer subscribers, which are owned by or affiliated with a cable
company serving in the aggregate no more than 400,0000 subscribers, can submit a
simplified cost-of-service filing under which the regulated rate, including
equipment charges, will be presumed reasonable if it equates to no more than
$1.24 per channel. Eligibility for this relief continues if the small cable
system is subsequently acquired by a larger cable operator, but is lost when and
if the individual system serves in excess of 15,000 subscribers. The 1996
Telecom Act immediately deregulated the cable programming service tier rates of
cable systems serving communities with fewer than 50,000 subscribers, which are
owned by or affiliated with entities serving, in the aggregate,
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no more than one percent of the nation's cable customers and having no more than
$250 million in annual revenues.
As noted above, FCC regulation of cable programming service tier rates for
all systems, regardless of size, sunset pursuant to the 1996 Telecom Act on
March 31, 1999. Certain legislators, however, have called for new rate
regulations if unregulated cost rates increase dramatically. The 1996 Telecom
Act also relaxes existing "uniform rate" requirements by specifying that uniform
rate requirements do not apply where the operator faces "effective competition,"
and by exempting bulk discounts to multiple dwelling units, although complaints
about predatory pricing still may be made to the Federal Communications
Commission.
CABLE ENTRY INTO TELECOMMUNICATIONS. The 1996 Telecom Act creates a more
favorable environment for us to provide telecommunication services beyond
traditional video delivery. It provides that no state or local laws or
regulations may prohibit or have the effect of prohibiting any entity from
providing any interstate or intrastate telecommunications service. A cable
operator is authorized under the 1996 Telecom Act to provide telecommunication
services without obtaining a separate local franchise. States are authorized,
however, to impose "competitively neutral" requirements regarding universal
service, public safety and welfare, service quality, and consumer protection.
State and local governments also retain their authority to manage the public
rights-of-way and may require reasonable, competitively neutral compensation for
management of the public rights-of-way when cable operators provide
telecommunications service. The favorable pole attachment rates afforded cable
operators under federal law can be gradually increased by utility companies
owning the poles, beginning in 2001, if the operator provides telecommunications
service, as well as cable service, over its plant. The Federal Communications
Commission recently clarified that a cable operator's favorable pole rates are
not endangered by the provision of Internet access.
Cable entry into telecommunications will be affected by the regulatory
landscape now being developed by the Federal Communications Commission and state
regulators. One critical component of the 1996 Telecom Act to facilitate the
entry of new telecommunications providers, including cable operators, is the
interconnection obligation imposed on all telecommunications carriers. In July
1997, the Eighth Circuit Court of Appeals vacated certain aspects of the Federal
Communications Commission initial interconnection order but most of that
decision was reversed by the U.S. Supreme Court in January 1999. The Supreme
Court effectively upheld most of the Federal Communications Commission
interconnection regulations. Although these regulations should enable new
telecommunications entrants to reach viable interconnection agreements with
incumbent carriers, many issues, including whether the Federal Communications
Commission ultimately can mandate that incumbent carriers make available
specific network elements, remains subject to further Federal Communications
Commission review. Aggressive regulation by the Federal Communications
Commission in this area, if upheld by the courts, would make it easier for us to
provide telecommunications service.
INTERNET SERVICE. Although there is at present no significant federal
regulation of cable system delivery of Internet services, and the Federal
Communications Commission recently issued a report to Congress finding no
immediate need to impose such regulation, this situation may change as cable
systems expand their broadband delivery of Internet services. In particular,
proposals have been advanced at the Federal Communications Commission and
Congress that would require cable operators to provide access to unaffiliated
Internet service providers and online service providers. Certain Internet
service
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providers also are attempting to use existing commercial leased access
provisions to gain access to cable system delivery. A petition on this issue is
now pending before the Federal Communications Commission. Finally, some local
franchising authorities are considering the imposition of mandatory Internet
access requirements as part of cable franchise renewals or transfers. A federal
district court in Oregon recently upheld the legal ability of local franchising
authority to impose such conditions, but an appeal is anticipated. These
developments could broaden the capacity of cable systems and complicate our own
plans for providing Internet service.
TELEPHONE COMPANY ENTRY INTO CABLE TELEVISION. The 1996 Telecom Act allows
telephone companies to compete directly with cable operators by repealing the
historic telephone company/cable cross-ownership ban. Local exchange carriers,
including the regional telephone companies, can now compete with cable operators
both inside and outside their telephone service areas with certain regulatory
safeguards. Because of their resources, local exchange carriers could be
formidable competitors to traditional cable operators, and certain local
exchange carriers have begun offering cable service. As described above, we are
now witnessing the beginning of local exchange carrier competition in certain
metropolitan areas.
Various local exchange carriers currently are seeking to provide video
programming services within their telephone service areas through a variety of
distribution methods, including both the deployment of broadband wire facilities
and the use of wireless transmission. In Connecticut, the Department of Public
Utility Control granted Southern New England Telephone, or SNET, a franchise to
serve the entire state of Connecticut. SNET is operational, with approximately
21,000 cable subscribers in several Connecticut communities, including one in
which we provide cable television service. Pursuant to the terms of SNET's
franchise, its services must pass all homes in Connecticut within eleven years.
Under the 1996 Telecom Act, local exchange carriers or any other cable
competitor providing video programming to subscribers through broadband wire
should be regulated as a traditional cable operator, subject to local
franchising and federal regulatory requirements, unless the local exchange
carrier or other cable competitor elects to deploy its broadband plant as an
open video system. To qualify for favorable open video system status, the
competitor must reserve two-thirds of the system's activated channels for
unaffiliated entities. The Fifth Circuit Court of Appeals recently reversed
certain of the Federal Communications Commission's open video system rules,
including its preemption of local franchising. That decision may be subject to
further appeal. It is unclear what effect this ruling will have on the entities
pursuing open video system operation.
Although local exchange carriers and cable operators can now expand their
offerings across traditional service boundaries, the general prohibition remains
on local exchange carrier buyouts that is, any ownership interest exceeding 10
percent, of co-located cable systems, cable operator buyouts of co-located local
exchange carrier systems, and joint ventures between cable operators and local
exchange carriers in the same market. The 1996 Telecom Act provides a few
limited exceptions to this buyout prohibition, including a carefully
circumscribed "rural exemption." The 1996 Telecom Act also provides the Federal
Communications Commission with the limited authority to grant waivers of the
buyout prohibition.
ELECTRIC UTILITY ENTRY INTO TELECOMMUNICATIONS/CABLE TELEVISION. The 1996
Telecom Act provides that registered utility holding companies and subsidiaries
may provide telecommunications services, including cable television,
notwithstanding the Public Utility
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Holding Company Act. Electric utilities must establish separate subsidiaries,
known as "exempt telecommunications companies" and must apply to the Federal
Communications Commission for operating authority. Like telephone companies,
electric utilities have substantial resources at their disposal, and could be
formidable competitors to traditional cable systems. Several such utilities have
been granted broad authority by the Federal Communications Commission to engage
in activities which could include the provision of video programming.
ADDITIONAL OWNERSHIP RESTRICTIONS. The 1996 Telecom Act eliminates
statutory restrictions on broadcast/cable cross-ownership, including broadcast
network/cable restrictions, but leaves in place existing Federal Communications
Commission regulations prohibiting local cross-ownership between co-located
television stations and cable systems.
Pursuant to the 1992 Cable Act, the Federal Communications Commission
adopted rules precluding a cable system from devoting more than 40% of its
activated channel capacity to the carriage of affiliated national video program
services. Although the 1992 Cable Act also precluded any cable operator from
serving more than 30% of all U.S. domestic cable subscribers, this provision has
been stayed pending further judicial review and Federal Communications
Commission rulemaking.
MUST CARRY/RETRANSMISSION CONSENT. The 1992 Cable Act contains broadcast
signal carriage requirements that, among other things, allow local commercial
television broadcast stations to elect once every three years between a "must
carry" requirement, which requires a cable system to carry the station, or a
"retransmission consent," where such stations negotiate for payments for
granting permission to the cable operator to carry the station. Less popular
stations typically elect must carry, and more popular stations, such as those
affiliated with a national network, typically elect retransmission consent. Must
carry requests can dilute the appeal of a cable system's programming offerings
because a cable system with limited channel capacity may be required to forego
carriage of popular channels in favor of less popular broadcast stations
electing must carry. Retransmission consent demands may require substantial
payments or other concessions. Either option has a potentially adverse effect on
our business. The burden associated with must carry may increase substantially
if broadcasters proceed with planned conversion to digital transmission and the
Federal Communications Commission determines that cable systems must carry all
analog and digital broadcasts in their entirety. This burden would reduce
capacity available for more popular video programming and new internet and
telecommunication offerings. A rulemaking is now pending at the Federal
Communications Commission regarding the imposition of dual digital and analog
must carry.
ACCESS CHANNELS. Local franchising authorities can include franchise
provisions requiring cable operators to set aside certain channels for public,
educational and governmental access programming. Federal law also requires cable
systems to designate a portion of their channel capacity, up to 15% in some
cases, for commercial leased access by unaffiliated third parties. The Federal
Communications Commission has adopted rules regulating the terms, conditions and
maximum rates a cable operator may charge for commercial leased access use. We
believe that requests for commercial leased access carriages have been
relatively limited. A new request has been forwarded to the Federal
Communications Commission, however, noting that unaffiliated Internet service
providers be found eligible for commercial leased access. Although we do not
believe such use is in accord with the governing statute, a contrary ruling
could lead to substantial leased activity by Internet service providers and
disrupt our own plans for Internet service.
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ACCESS TO PROGRAMMING. To spur the development of independent cable
programmers and competition to incumbent cable operators, the 1992 Cable Act
imposed restrictions on the dealings between cable operators and cable
programmers. Of special significance from a competitive business posture, the
1992 Cable Act precludes video programmers affiliated with cable companies from
favoring their affiliated cable operators over competitors and requires such
programmers to sell their programming to other multichannel video distributors.
This provision limits the ability of vertically integrated cable programmers to
offer exclusive programming arrangements to cable companies. Recently, there has
been increased interest in further restricting the marketing practices of cable
programmers, including subjecting programmers who are not affiliated with cable
operators to all of the existing program access requirements, and subjecting
terrestrially delivered programming to the program access requirements. These
changes should not have a dramatic impact on us, but would limit potential
competitive advantages we now enjoy.
INSIDE WIRING; SUBSCRIBER ACCESS. In a 1997 Order, the Federal
Communications Commission established rules that require an incumbent cable
operator upon expiration of a multiple dwelling unit service contract to sell,
abandon, or remove "home run" wiring that was installed by the cable operator in
a multiple dwelling unit building. These inside wiring rules are expected to
assist building owners in their attempts to replace existing cable operators
with new programming providers who are willing to pay the building owner a
higher fee, where such a fee is permissible. The Federal Communications
Commission has also proposed abrogating all exclusive multiple dwelling unit
service agreements held by incumbent operators, but allowing such contracts when
held by new entrants. In another proceeding, the Federal Communications
Commission has preempted restrictions on the deployment of private antenna on
rental property within the exclusive use of a tenant, such as balconies and
patios. This Federal Communications Commission ruling may limit the extent to
which we along with multiple dwelling unit owners may enforce certain aspects of
multiple dwelling unit agreements which otherwise prohibit, for example,
placement of digital broadcast satellite receiver antennae in multiple dwelling
unit areas under the exclusive occupancy of a renter. These developments may
make it even more difficult for us to provide service in multiple dwelling unit
complexes.
OTHER FCC REGULATIONS. In addition to the Federal Communications
Commission regulations noted above, there are other FCC regulations covering
such areas as:
- equal employment opportunity,
- subscriber privacy,
- programming practices, including, among other things, syndicated program
exclusivity, network program nonduplication, local sports blackouts,
indecent programming, lottery programming, political programming,
sponsorship identification, children's programming advertisements, and
closed captioning,
- registration of cable systems and facilities licensing,
- maintenance of various records and public inspection files,
- aeronautical frequency usage,
- lockbox availability,
- antenna structure notification,
- tower marking and lighting,
- consumer protection and customer service standards,
- technical standards,
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- consumer electronics equipment compatibility, and
- emergency alert systems.
The Federal Communications Commission recently ruled that cable customers
must be allowed to purchase cable converters from third parties and established
a multi-year phase-in during which security functions, which would remain in the
operator's exclusive control, would be unbundled from basic converter functions,
which could then be satisfied by third party vendors. The Federal Communications
Commission has the authority to enforce its regulations through the imposition
of substantial fines, the issuance of cease and desist orders and/or the
imposition of other administrative sanctions, such as the revocation of Federal
Communications Commission licenses needed to operate certain transmission
facilities used in connection with cable operations.
COPYRIGHT. Cable television systems are subject to federal copyright
licensing covering carriage of television and radio broadcast signals. In
exchange for filing certain reports and contributing a percentage of their
revenues to a federal copyright royalty pool, that varies depending on the size
of the system, the number of distant broadcast television signals carried, and
the location of the cable system, cable operators can obtain blanket permission
to retransmit copyrighted material included in broadcast signals. The possible
modification or elimination of this compulsory copyright license is the subject
of continuing legislative review and could adversely affect our ability to
obtain desired broadcast programming. We cannot predict the outcome of this
legislative activity. Copyright clearances for nonbroadcast programming services
are arranged through private negotiations.
Cable operators distribute locally originated programming and advertising
that use music controlled by the two principal major music performing rights
organizations, the Association of Songwriters, Composers, Artists and Producers
and Broadcast Music, Inc.. The cable industry and Broadcast Music have reached a
standard licensing agreement, and negotiations with the Association of
Songwriters are ongoing. Although we cannot predict the ultimate outcome of
these industry negotiations or the amount of any license fees we may be required
to pay for past and future use of association-controlled music, we do not
believe such license fees will be significant to our business and operations.
STATE AND LOCAL REGULATION. Cable television systems generally are
operated pursuant to nonexclusive franchises granted by a municipality or other
state or local government entity in order to cross public rights-of-way. Federal
law now prohibits local franchising authorities from granting exclusive
franchises or from unreasonably refusing to award additional franchises. Cable
franchises generally are granted for fixed terms and in many cases include
monetary penalties for non-compliance and may be terminable if the franchisee
failed to comply with material provisions.
The specific terms and conditions of franchises vary materially between
jurisdictions. Each franchise generally contains provisions governing cable
operations, service rates, franchising fees, system construction and maintenance
obligations, system channel capacity, design and technical performance, customer
service standards, and indemnification protections. A number of states,
including Connecticut, subject cable systems to the jurisdiction of centralized
state governmental agencies, some of which impose regulation of a character
similar to that of a public utility. Although local franchising authorities have
considerable discretion in establishing franchise terms, there are certain
federal limitations. For example, local franchising authorities cannot insist on
franchise fees exceeding 5% of the system's gross cable-related revenues, cannot
dictate the particular technology used by
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the system, and cannot specify video programming other than identifying broad
categories of programming.
Federal law contains renewal procedures designed to protect incumbent
franchisees against arbitrary denials of renewal. Even if a franchise is
renewed, the local franchising authority may seek to impose new and more onerous
requirements such as significant upgrades in facilities and service or increased
franchise fees as a condition of renewal. Similarly, if a local franchising
authority's consent is required for the purchase or sale of a cable system or
franchise, such local franchising authority may attempt to impose more
burdensome or onerous franchise requirements in connection with a request for
consent. Historically, most franchises have been renewed for and consents
granted to cable operators that have provided satisfactory services and have
complied with the terms of their franchise.
Under the 1996 Telecom Act, cable operators are not required to obtain
franchises for the provision of telecommunications services, and local
franchising authorities are prohibited from limiting, restricting, or
conditioning the provision of such services. In addition, local franchising
authorities may not require a cable operator to provide any telecommunications
service or facilities, other than institutional networks under certain
circumstances, as a condition of an initial franchise grant, a franchise
renewal, or a franchise transfer. The 1996 Telecom Act also provides that
franchising fees are limited to an operator's cable-related revenues and do not
apply to revenues that a cable operator derives from providing new
telecommunications services.
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MANAGEMENT
Charter Holdings is a holding company with no operations. Charter Capital
is a direct wholly owned finance subsidiary of Charter Holdings that exists
solely for the purpose of serving as co-obligor of the notes and has no
operations. Neither Charter Holdings nor Charter Capital has any employees. We
are managed by Charter Communications, Inc. pursuant to a management agreement
between Charter Communications, Inc. and Charter Operating, covering all of our
operating subsidiaries. See "Certain Relationships and Related Transactions."
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors (the "Executive Officers") who are responsible for
providing significant services with respect to our management and operations.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS AND DIRECTORS AGE POSITION
- -------------------------------- --- --------
<S> <C> <C>
Paul G. Allen............................. 46 Chairman of the Board of Charter Communications,
Inc.
William D. Savoy.......................... 34 Director of Charter Holdings and Charter
Communications, Inc.
Jerald L. Kent............................ 42 President, Chief Executive Officer and Director
of Charter Holdings, Charter Capital and Charter
Communications, Inc.
Barry L. Babcock.......................... 52 Vice Chairman of Charter Communications, Inc.
Howard L. Wood............................ 60 Vice Chairman of Charter Communications, Inc.
David G. Barford.......................... 40 Senior Vice President Operations of Charter
Communications, Inc. -- Western Division
Mary Pat Blake............................ 43 Senior Vice President -- Marketing and
Programming of Charter Communications, Inc.
Eric A. Freesmeier........................ 46 Senior Vice President -- Administration of
Charter Communications, Inc.
Thomas R. Jokerst......................... 49 Senior Vice President -- Advanced Technology
Development of Charter Communications, Inc.
Kent D. Kalkwarf.......................... 39 Senior Vice President and Chief Financial Officer
of Charter Holdings, Charter Capital and Charter
Communications, Inc.
Ralph G. Kelly............................ 42 Senior Vice President -- Treasurer of Charter
Holdings, Charter Capital and Charter
Communications, Inc.
David L. McCall........................... 43 Senior Vice President Operations of Charter
Communications, Inc. -- Eastern Division
John C. Pietri............................ 49 Senior Vice President -- Engineering of Charter
Communications, Inc.
Steven A. Schumm.......................... 46 Executive Vice President, Assistant to the
President of Charter Holdings, Charter Capital
and Charter Communications, Inc.
Curtis S. Shaw............................ 50 Senior Vice President, General Counsel and
Secretary of Charter Holdings, Charter Capital
and Charter Communications, Inc.
</TABLE>
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The following sets forth certain biographical information with respect to
the individuals named in the chart above.
PAUL G. ALLEN is the Chairman of the Board of Directors of Charter
Communications, Inc. Mr. Allen has been a private investor for more than five
years, with interests in a wide variety of companies, many of which focus on
multimedia digital communications such as Interval Research Corporation, of
which Mr. Allen is the controlling shareholder and a director. In addition, Mr.
Allen is the owner and the Chairman of the Board of the Portland Trail Blazers
of the National Basketball Association, and is the owner and the Chairman of the
Board of the Seattle Seahawks of the National Football League. Mr. Allen
currently serves as a director of Microsoft Corporation and USA Networks, Inc.
and also serves as a director of various private corporations.
WILLIAM D. SAVOY is a director of Charter Holdings and Charter
Communications, Inc. Mr. Savoy is also President of Vulcan Northwest Inc.,
managing the personal finances of Paul G. Allen, and Vice President of Vulcan
Ventures Inc., a venture capital fund wholly owned by Mr. Allen, since 1990.
From 1987 until November 1990, Mr. Savoy was employed by Layered, Inc. and
became its President in 1988. Mr. Savoy serves on the Advisory Board of
DreamWorks SKG and also serves as director of CNET, Inc., Harbinger Corporation,
High Speed Access Corp., Metricom, Inc., Telescan, Inc., Ticketmaster
Online -- CitySearch, U.S. Satellite Broadcasting Co., Inc., and USA Networks,
Inc. Mr. Savoy holds a B.S. in Computer Science, Accounting and Finance from
Atlantic Union College.
JERALD L. KENT is a co-founder of Charter Communications, Inc., and
President and Chief Executive Officer and director of Charter Holdings, Charter
Capital and Charter Communications, Inc. and has previously held the position of
Chief Financial Officer of Charter Communications, Inc. Prior to co-founding
Charter Communications, Inc., Mr. Kent was associated with Cencom Cable
Associates, Inc., where he served as Executive Vice President and Chief
Financial Officer. Mr. Kent also served Cencom as Senior Vice President of
Finance from May 1987, Senior Vice President of Acquisitions and Finance from
July 1988, and Senior Vice President and Chief Financial Officer from January
1989. Mr. Kent is a member of the Board of Directors of High Speed Access Corp.
and Cable Television Laboratories. Prior to that time, Mr. Kent was employed by
Arthur Andersen LLP, certified public accountants, where he attained the
position of tax manager. Mr. Kent, a certified public accountant, received his
undergraduate and M.B.A. degrees with honors from Washington University (St.
Louis).
BARRY L. BABCOCK is a co-founder of Charter Communications, Inc. and Vice
Chairman of Charter Communications, Inc. and has been involved in the cable
industry since 1979. Prior to founding Charter Communications, Inc. in 1994, Mr.
Babcock was associated with Cencom, where he served as the Executive Vice
President from February 1986 to September 1991, and was named Chief Operating
Officer in May of 1986. Mr. Babcock was one of the founders of Cencom Cable
Associates, Inc. and, prior to the duties he assumed in early 1986, was
responsible for all of Cencom's in-house legal work, contracts and governmental
relations. Mr. Babcock serves as the Chairman of the Board of Directors of
Community Telecommunications Association. He also serves as a director of the
National Cable Television Association, Cable in the Classroom and Mercantile
Bank -- St. Louis. Mr. Babcock, an attorney, received his undergraduate and J.D.
degrees from the University of Oklahoma.
HOWARD L. WOOD is a co-founder of Charter Communications, Inc. and Vice
Chairman of Charter Communications, Inc. Prior to founding Charter
Communications,
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Inc., Mr. Wood was associated with Cencom. Mr. Wood joined Cencom as President,
Chief Financial Officer and Director and assumed the additional position of
Chief Executive Officer effective January 1, 1989. Prior to that time, Mr. Wood
was a partner in Arthur Andersen LLP, certified public accountants, where he
served as Partner-in-Charge of the St. Louis Tax Division from 1973 until
joining Cencom. Mr. Wood is a certified public accountant and a member of the
American Institute of Certified Public Accountants. He also serves as a director
of VanLiner Group, Inc., First State Bank and Gaylord Entertainment Company. Mr.
Wood also serves as Commissioner for the Missouri Department of Conservation. He
is also a past Chairman of the Board and former director of the St. Louis
College of Pharmacy. Mr. Wood graduated with honors from Washington University
(St. Louis) School of Business.
DAVID G. BARFORD is Senior Vice President Operations of Charter
Communications, Inc. -- Western Division, where he has primary responsibility
for all cable operations in the Central, Western, North Central and MetroPlex
Regions. Prior to joining Charter Communications, Inc., he served as Vice
President of Operations and New Business Development for Comcast Cable, where he
held various senior marketing and operating roles over an eight-year period. Mr.
Barford received a B.A. degree from California State University, Fullerton and
an M.B.A. from National University in La Jolla, California.
MARY PAT BLAKE is Senior Vice President -- Marketing and Programming of
Charter Communications, Inc. and is responsible for all aspects of marketing,
sales and programming and advertising sales. Prior to joining Charter in August
1995, Ms. Blake was active in the emerging business sector, and formed Blake
Investments, Inc. in September 1993, which created, operated and sold a branded
coffeehouse and bakery. From September 1990 to August 1993, Ms. Blake served as
Director -- Marketing for Brown Shoe Company. Ms. Blake has 18 years of
experience with senior management responsibilities in marketing, sales, finance,
systems, and general management with companies such as The West Coast Group,
Pepsico Inc.-Taco Bell Division, General Mills, Inc. and ADP Network Services,
Inc. Ms. Blake received a B.S. degree from the University of Minnesota, and an
M.B.A. degree from the Harvard Business School.
ERIC A. FREESMEIER joined Charter Communications, Inc. as Senior Vice
President -- Administration in April 1998 and is responsible for human
resources, public relations and communications, corporate facilities and
aviation. From 1986 until joining Charter Communications, Inc., he served in
various executive management positions at Edison Brothers Stores, Inc., a
specialty retail company. His most recent position was Executive Vice
President -- Human Resources and Administration. From 1974 to 1986, Mr.
Freesmeier held management and executive positions with Montgomery Ward, a
national mass merchandise retailer, and its various subsidiaries. Mr. Freesmeier
holds Bachelor of Business degrees in marketing and industrial relations from
the University of Iowa and a Masters of Management degree in finance from
Northwestern University's Kellogg Graduate School of Management.
THOMAS R. JOKERST is Senior Vice President -- Advanced Technology
Development of Charter Communications, Inc. Prior to his appointment to this
position, Mr. Jokerst held the position of Senior Vice President -- Engineering
since December 1993. Prior to joining Charter, from March 1991 to March 1993,
Mr. Jokerst served as Vice President -- Office of Science and Technology for
CableTelevision Laboratories in Boulder, Colorado. From June 1976 to March 1993,
Mr. Jokerst was Director of Engineering for the midwest region of Continental
Cablevision. Mr. Jokerst participates in professional activities with the NCTA,
SCTE and Cable Television Laboratories. Mr. Jokerst is a graduate of Ranken
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Technical Institute in St. Louis with a degree in Communications Electronics and
Computer Technology and of Southern Illinois University in Carbondale, Illinois
with a degree in Electronics Technology.
KENT D. KALKWARF is Senior Vice President and Chief Financial Officer of
Charter Holdings, Charter Capital and Charter Communications, Inc. Prior to
joining Charter Communications, Inc., Mr. Kalkwarf was a senior tax manager for
Arthur Andersen LLP, from 1982 to July 1995. Mr. Kalkwarf has extensive
experience in cable, real estate and international tax issues. Mr. Kalkwarf has
a B.S. degree from Illinois Wesleyan University and is a certified public
accountant.
RALPH G. KELLY is Senior Vice President -- Treasurer of Charter Holdings,
Charter Capital and Charter Communications, Inc. Mr. Kelly joined Charter
Communications, Inc. in 1993 as Vice President -- Finance, a position he held
until early 1994 when he became Chief Financial Officer of CableMaxx, Inc., a
wireless cable television operator. Mr. Kelly returned to Charter
Communications, Inc. as Senior Vice President -- Treasurer in February 1996, and
has responsibility for treasury operations, investor relations and financial
reporting. From 1984 to 1993, Mr. Kelly was associated with Cencom where he held
the positions of Controller from 1984 to 1989 and Treasurer from 1990 to 1993.
Mr. Kelly is a certified public accountant and was in the audit division of
Arthur Andersen LLP from 1979 to 1984. Mr. Kelly received his undergraduate
degree in accounting from the University of Missouri -- Columbia and his M.B.A.
from Saint Louis University.
DAVID L. MCCALL is Senior Vice President Operations of Charter
Communications, Inc. -- Eastern Division. Mr. McCall joined Charter
Communications, Inc. in January 1995 as Regional Vice President Operations and
he has primary responsibility for all cable system operations managed by Charter
Communications, Inc. in the Southeast, Southern and Northeast Regions of the
United States. Prior to joining Charter Communications, Inc., Mr. McCall was
associated with Crown Cable and its predecessor company, Cencom, from 1983 to
1994. As a Regional Manager of Cencom, Mr. McCall's responsibilities included
supervising all aspects of operations for systems located in North Carolina,
South Carolina and Georgia, consisting of over 142,000 customers. From 1977 to
1982, Mr. McCall was System Manager of Coaxial Cable Developers (known as
Teleview Cablevision) in Simpsonville, South Carolina. Mr. McCall has served as
a director of the South Carolina Cable Television Association for the past ten
years.
JOHN C. PIETRI joined Charter Communications, Inc. in November 1998 as
Senior Vice President -- Engineering. Prior to joining Charter Communications,
Inc., Mr. Pietri was with Marcus in Dallas, Texas for eight years, most recently
serving as Senior Vice President and Chief Technical Officer. Prior to Marcus,
Mr. Pietri served as Regional Technical Operations Manager for West Marc
Communications in Denver, Colorado, and before that he served as Operations
Manager with Minnesota Utility Contracting. Mr. Pietri attended the University
of Wisconsin-Oshkosh.
STEVEN A. SCHUMM is Executive Vice President, Assistant to the President of
Charter Holdings, Charter Capital and Charter Communications, Inc. Mr. Schumm
joined Charter Communications, Inc. in December 1998 and currently directs the
MIS Regulatory and Financial Controls Groups. Prior to joining Charter
Communications, Inc., Mr. Schumm was managing partner of the St. Louis office of
Ernst & Young LLP. Mr. Schumm was with Ernst & Young LLP for 24 years and was a
partner of the firm for 14 of those years. Mr. Schumm held various management
positions with Ernst & Young LLP, including the Director of Tax Services for the
three-city area of St. Louis, Kansas City and Wichita and then National Director
of Industry Tax Services. He served as one of 10 members
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comprising the Firm's National Tax Committee. Mr. Schumm earned a B.S. degree
from St. Louis University with a major in accounting.
CURTIS S. SHAW is Senior Vice President, General Counsel and Secretary of
Charter Holdings, Charter Capital and Charter Communications, Inc. and is
responsible for all legal aspects of their business, government relations and
the duties of the corporate secretary. Mr. Shaw joined Charter Communications,
Inc. in February 1997. Prior to joining Charter Communications, Inc., Mr. Shaw
served as corporate Counsel to NYNEX since 1988. From 1983 until 1988 Mr. Shaw
served as Associate General Counsel for Occidental Chemical Corporation, and,
from 1986 until 1988, also as Vice President and General Counsel of its largest
operating division. Mr. Shaw has 25 years of experience as a corporate lawyer,
specializing in mergers and acquisitions, joint ventures, public offerings,
financings, and federal securities and antitrust law. Mr. Shaw received a B.A.
with honors from Trinity College and a J.D. from Columbia University School of
Law.
DIRECTOR COMPENSATION
The directors of Charter Holdings and Charter Capital are not entitled to
any compensation for serving as a director, nor are they paid any fees for
attendance at any meeting of the Board of Directors. Directors may be reimbursed
for the actual reasonable costs incurred in connection with attendance at such
Board meetings.
EXECUTIVE COMPENSATION
None of the Executive Officers listed above has ever received any
compensation from Charter Holdings or Charter Capital, nor do such individuals
expect to receive compensation from Charter Holdings or Charter Capital at any
time in the future. Such Executive Officers receive their compensation from
Charter Communications, Inc., except for Mr. McCall, who is compensated by an
operating subsidiary. Charter Communications, Inc. is entitled to receive
management fees from us for providing its management and consulting services.
See "Certain Relationships and Related Transactions."
OPTION PLAN
Charter Operating has adopted a plan providing for the grant of options to
purchase up to an aggregate of 10% of the equity value of Charter Operating. The
plan provides for grants of options to employees, officers, directors and
consultants of Charter Operating and its affiliates. The plan is intended to
promote the long-term financial interest of Charter Operating and its affiliates
by encouraging eligible individuals to acquire an ownership position in Charter
Operating and its affiliates and provides incentives for performance. The plan
was originally adopted by us and was assumed by Charter Operating. Options
granted under the plan will vest one-fourth on the 15-month anniversary of the
date of grant. One forty-fifth of the remaining options vest each month after
the initial vesting. However, if there have not been a public offering of the
equity interests of Charter Operating or an affiliate, vesting will occur only
upon termination of employment for any reason other than for cause or
disability. The options expire after ten years from the date of grant.
LIMITATION OF DIRECTORS' LIABILITY AND INDEMNIFICATION MATTERS
The Limited Liability Company Agreement of Charter Holdings and the
Certificate of Incorporation of Charter Capital limit the liability of their
respective directors to the maximum extent permitted by Delaware law. The
Delaware General Corporation Law
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provides that a limited liability company and a corporation may eliminate or
limit the personal liability of a director for monetary damages for breach of
fiduciary duty as a director, except for liability for:
(1) any breach of the director's duty of loyalty to the corporation
and its stockholders;
(2) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
(3) unlawful payments of dividends or unlawful stock purchases or
redemptions; or
(4) any transaction from which the director derived an improper
personal benefit.
The Limited Liability Company Agreement of Charter Holdings and the Bylaws
of Charter Capital provide that directors and officers shall be indemnified for
acts or omissions performed or omitted that are determined, in good faith, to be
in our best interest. No such indemnification is available for actions
constituting bad faith, willful misconduct or fraud.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Charter Holdings
and Charter Capital pursuant to the foregoing provisions, we have been informed
that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
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PRINCIPAL EQUITY HOLDERS
Charter Holdings is a direct, wholly owned subsidiary of Charter
Communications Holding Company, LLC which, in turn, is a direct, wholly owned
subsidiary of Charter Communications, Inc. The beneficial ownership of the
equity of Charter Communications, Inc. is as set forth in the table below.
Charter Capital is a direct wholly owned finance subsidiary of Charter Holdings.
<TABLE>
<CAPTION>
NAME AND ADDRESS CLASS HELD AMOUNT HELD PERCENTAGE HELD
- ---------------- ------------ ----------- ---------------
<S> <C> <C> <C>
Paul G. Allen..................... Common Stock 165,347.9488 96.06%
110 110th Street, N.E
Suite 500
Bellevue, WA 98004
Jerald L. Kent.................... Common Stock 4,029.4359(1) 2.34%
c/o Charter Communications, Inc.
12444 Powerscourt Drive
St. Louis, MO 63131
Barry L. Babcock.................. Common Stock 1,962.9574 1.14%
c/o Charter Communications, Inc.
12444 Powerscourt Drive
St. Louis, MO 63131
Howard L. Wood.................... Common Stock 785.1830 0.46%
c/o Charter Communications, Inc.
12444 Powerscourt Drive
St. Louis, MO 63131
</TABLE>
- ---------------
(1) Includes 1,281.3315 shares of Common Stock issuable upon the exercise of
options that are currently exercisable.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The following sets forth certain transactions that we and our directors,
executive officers and affiliates are involved in. We believe that each of the
transactions described below was on terms no less favorable to us than could
have been obtained from independent third parties.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
MERGER WITH MARCUS
On April 23, 1998, Paul G. Allen acquired approximately 99% of the
non-voting economic interests in Marcus, and agreed to acquire the remaining
interests in Marcus Cable and assume voting control. The aggregate purchase
price was approximately $1.4 billion, excluding $1.8 billion in debt assumed. On
March 31, 1999, Mr. Allen did acquire such remaining interests and assumed
voting control of Marcus Cable. On February 22, 1999, Marcus Holdings was formed
and all of Mr. Allen's interests in Marcus Cable were transferred to Marcus
Holdings.
On December 23, 1998, Mr. Allen acquired approximately 94% of the equity of
Charter Communications, Inc. for an aggregate purchase price of approximately
$2.2 billion, excluding $2.0 billion in debt assumed. On February 9, 1999,
Charter Holdings was formed as a wholly owned subsidiary of Charter
Communications, Inc. On February 10, 1999, Charter Operating was formed as a
wholly owned subsidiary of Charter Holdings. All of Charter Communications,
Inc.'s equity interests in its operating subsidiaries were transferred to
Charter Operating. On May 25, 1999, Charter Communications Holding Company, LLC
was formed as a wholly owned subsidiary of Charter Communications, Inc. All of
Charter Communications, Inc.'s equity interests in Charter Holdings were
transferred to Charter Communications Holding Company, LLC.
In March 1999, we paid an affiliate of Mr. Allen $20,000,000 for
reimbursement of direct costs incurred in connection with his acquisition of
Marcus Cable. Such costs were principally comprised of financial, advisory,
legal and accounting fees.
On April 7, 1999, Mr. Allen merged Marcus Holdings into Charter Holdings.
Charter Holdings survived the merger, and the operating subsidiaries of Marcus
Holdings became subsidiaries of Charter Holdings.
At the time we issued the original notes, this merger had not yet occurred.
Consequently, Marcus Holdings was a party to the indentures governing the notes
as a guarantor of our obligations. Charter Holdings loaned some of the proceeds
from the sale of the original notes to Marcus Holdings, which amounts were used
to complete the cash tender offers for certain outstanding notes of subsidiaries
of Marcus Holdings. Marcus Holdings issued a promissory note in favor of Charter
Holdings, secured by a pledge of the equity interests in Marcus Cable as
collateral. Charter Holdings pledged this promissory note to the trustee under
the indentures as collateral for the equal and ratable benefit of the holders of
the notes. Upon the closing of the merger, and in accordance with the terms of
the notes and the indentures:
- the guarantee issued by Marcus Holdings was automatically terminated;
- the promissory note issued by Marcus Holdings was automatically
extinguished; and
- the pledge in favor of Charter Holdings of the equity interests in Marcus
Cable as collateral under the promissory note and the pledge in favor of
the trustee of the promissory note as collateral for the notes were
automatically released.
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MANAGEMENT AGREEMENTS
PREVIOUS MANAGEMENT AGREEMENTS. Prior to March 18, 1999, pursuant to a
series of management agreements with certain of our subsidiaries, Charter
Communications, Inc. provided management and consulting services to us. In
exchange for these services, Charter Communications, Inc. was entitled to
receive management fees of 3% to 5% of the gross revenues of all of our systems
plus reimbursement of expenses. However, our previous credit facilities limited
such management fees to 3% of gross revenues. The balance of management fees
payable under the previous management agreements were accrued. Following the
closing of our current credit facilities, the previous management agreements
were replaced by a new management agreement. The other material terms of our
previous management agreements are substantially similar to the material terms
of the new management agreement.
The total management fees, including expenses, earned by Charter
Communications, Inc. under the previous management agreements during the last
three years were as follows:
<TABLE>
<CAPTION>
TOTAL FEES
YEAR FEES PAID EARNED
- ---- --------- ----------
(IN THOUSANDS)
<S> <C> <C>
March 31, 1999................................... $ 5,323 $10,015
1998............................................. $17,073 $24,159
1997............................................. 14,772 20,290
1996............................................. 11,792 15,443
</TABLE>
Deferred portions of certain management fees bore interest at the rate of
10% per annum.
PREVIOUS MANAGEMENT AGREEMENT WITH MARCUS. On October 6, 1998, Marcus
entered into a Management Consulting Agreement with Charter Communications, Inc.
pursuant to which Charter Communications, Inc. agreed to provide certain
management and consulting services to Marcus Cable and its subsidiaries, in
exchange for a fee equal to 3% of the gross revenues of Marcus Cable's systems
plus reimbursement of expenses. Management fees expensed by Marcus Cable during
the period from October 1998 to December 31, 1998 were approximately $3.3
million, which were accrued and unpaid at December 31, 1998. Management fees
paid to Charter Communications, Inc. for the three months ended March 31, 1999
totaled approximately $5,323. Upon our merger with Marcus Holdings and the
closing of our current credit facilities, this agreement was terminated and the
subsidiaries of Marcus Cable now receive management and consulting services from
Charter Communications, Inc. under the new management agreement.
THE NEW MANAGEMENT AGREEMENT. On February 23, 1999, Charter
Communications, Inc. entered into a new management agreement with Charter
Operating, which was amended and restated as of March 17, 1999. Upon the closing
of our current credit facilities on March 18, 1999, our previous management
agreements and the Management Consulting Agreement with Marcus Cable terminated
and the new management agreement became operative. Pursuant to the new
management agreement, Charter Communications, Inc. has agreed to manage and
operate the cable television systems owned by our subsidiaries, as well as any
cable television systems we may subsequently acquire in the future. The term of
the new management agreement is ten years.
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The new management agreement provides that we will reimburse Charter
Communications, Inc. for all expenses, costs, losses, liabilities or damages
incurred by it in connection with our ownership or operation of our cable
television systems. If Charter Communications, Inc. pays or incurs any such
expenses, costs, losses, liabilities or damages, it will be reimbursed. In
addition to any reimbursement of expenses, Charter Communications, Inc. is paid
a yearly management fee equal to 3.5% of our gross revenues. Gross revenues
include all revenues from the operation of our cable systems, including, without
limitation, subscriber payments, advertising revenues, and revenues from other
services provided by our cable systems. Gross revenues do not include interest
income or income from investments unrelated to our cable systems.
Payment of the management fee to Charter Communications, Inc. is permitted
under our current credit facilities, but ranks below our payment obligations
under our current credit facilities. In the event any portion of the management
fee due and payable is not paid by us, it is deferred and accrued as a
liability. Any deferred amount of the management fee will bear interest at the
rate of 10% per annum, compounded annually, from the date it was due and payable
until the date it is paid.
The management fee is payable to Charter Communications, Inc. quarterly in
arrears. If the current management agreement is terminated, Charter
Communications, Inc. is entitled to receive the fee payable for an entire
quarter, even if termination occurred before the end of that quarter.
Additionally, Charter Communications, Inc. is entitled to receive payment of any
deferred amount. The accrual of such management fee commenced on February 23,
1999.
Pursuant to the terms of the new management agreement, we have agreed to
indemnify and hold harmless Charter Communications, Inc. and its shareholders,
directors, officers and employees. This indemnity extends to any and all claims
or expenses, including reasonable attorneys' fees, incurred by them in
connection with any action not constituting gross negligence or willful
misconduct taken by them in good faith in the discharge of their duties to us.
BUSINESS RELATIONSHIPS
Paul G. Allen or certain affiliates of Mr. Allen, own equity interests or
warrants to purchase equity interests in various entities which provide us with
services or programming. Among these entities are High Speed Access, WorldGate,
Wink, ZDTV, LLC, USA Networks and Oxygen Media, Inc. These affiliates include
Charter Communications, Inc. and Vulcan Ventures, Inc., a company founded by Mr.
Allen in 1986 to research and implement his investments. Mr. Allen owns 100% of
the equity of Vulcan Ventures, and is the President, Chief Executive Officer and
Chairman of the Board. William B. Savoy, another of our directors, is also a
Vice President and a director of Vulcan Ventures.
HIGH SPEED ACCESS. High Speed Access is a provider of high-speed Internet
access over cable modems. In November 1998, Charter Communications, Inc. entered
into a Systems Access and Investment Agreement with Vulcan Ventures and High
Speed Access and a related Network Services Agreement with High Speed Access.
Additionally, Vulcan Ventures and High Speed Access entered into a Programming
Content Agreement. Under these agreements, we committed to provide High Speed
Access exclusive access to at least 750,000 homes passed. We can terminate our
exclusivity rights, on a system-by-system basis, if High Speed Access fails to
meet performance benchmarks or otherwise breaches the agreements including their
commitment to provide content designated by Vulcan Ventures. During the term of
the agreements, High Speed Access has agreed not to deploy
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WorldGate, Web TV, digital television or related products in the market areas of
any committed system or in any area in which we operate a cable system. The
agreements will continue until High Speed Access ceases to provide services to
an end user residing in a home passed in a committed system.
Concurrently with entering into these agreements, High Speed Access issued
8 million shares of Series B convertible preferred stock to Vulcan Ventures at a
purchase price of $2.50 per share, which it acquired for $20 million in cash.
Vulcan Ventures also subscribed to purchase 2.5 million shares of Series C
convertible preferred stock at a purchase price of $5.00 per share on or before
November 25, 2000, and received an option to purchase an additional 2.5 million
shares of Series C convertible preferred stock at a purchase price of $5.00 per
share on or before November 25, 2000. In April 1999, Vulcan Ventures purchased
the entire 5 million shares of Series C convertible preferred stock for $25
million in cash. The shares of Series B and Series C convertible preferred stock
issued to Vulcan Ventures automatically converted at a price of $3.23 per share
into 20.15 million shares of common stock upon completion of High Speed Access'
initial public offering in June 1999. Additionally, High Speed Access granted
Vulcan Ventures warrants to purchase up to 5 million shares of common stock at a
purchase price of $5.00 per share. Vulcan Ventures subsequently assigned the
warrants to Charter Communications, Inc.
In addition, Jerald L. Kent, our President and Chief Executive Officer and
a director of Charter Holdings, Mr. Savoy and another individual, who performs
management services for the issuers, are also directors of High Speed Access
Corp.
WORLDGATE. WorldGate is a provider of Internet access through cable
television systems. On November 24, 1997, Charter Communications, Inc. signed an
Affiliation Agreement with WorldGate pursuant to which we will offer the
WorldGate service to our customers. Pursuant to the agreement, we have agreed to
use our reasonable best efforts to deploy the WorldGate Internet access service
within our cable television systems and to install the appropriate headend
equipment in all of our major markets. Major markets for purposes of this
agreement include those in which we have more than 25,000 customers. In
addition, we have agreed to use our reasonable best efforts to deploy such
service in all non-major markets that are technically capable of providing
interactive pay-per-view service, to the extent we determine that it is
economically practical. When WorldGate has a telephone return path service
available, we will, if economically practical, use all reasonable efforts to
install the appropriate headend equipment and deploy the WorldGate service in
our remaining markets. We have also agreed to market the WorldGate service
within our market areas.
On November 24, 1997, Charter Communications, Inc. acquired 70,423 shares
of WorldGate's Series B Preferred Stock at a purchase price of $7.10 per share.
On February 3, 1999, a subsidiary of Charter Holdings acquired 90,909 shares of
Series C Preferred Stock at a purchase price of $11.00 per share.
WINK. Wink offers an enhanced broadcasting system that adds interactivity
and electronic commerce opportunities to traditional programming and
advertising. Viewers can, among other things, find news, weather and sports
information on-demand and order products through use of a remote control. On
October 8, 1997, Charter Communications, Inc. signed a Cable Affiliation
Agreement with Wink to deploy this enhanced broadcasting technology in our
systems. Pursuant to the agreement, Wink granted us the non-exclusive license to
use their software to deliver the enhanced broadcasting to all of our cable
systems. We agreed to promote and market the Wink service to our customers
within the area of each system in which such service is being provided. The term
of the agreement is
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three years. Either party has the right to terminate the agreement for the other
party's failure to comply with any of its respective material obligations under
the agreement.
On November 30, 1998, Vulcan Ventures acquired 1,162,500 shares of Wink's
Series C Preferred Stock for approximately $9.3 million. Additionally, Microsoft
Corporation, of which Mr. Allen is a director, also owns an equity interest in
Wink.
ZDTV. ZDTV operates a cable television channel which broadcasts shows
about technology and the Internet. Pursuant to a programming agreement with
Charter Communication, Inc., ZDTV has agreed to provide us with their
programming for broadcast via our cable television systems. On February 5, 1999,
Vulcan Programming, Inc., another affiliate of Mr. Allen, acquired an
approximate one-third interest in ZDTV. The remaining approximate two-thirds is
owned by Ziff-Davis Inc. Vulcan Ventures acquired approximately 3% of the
interests in Ziff-Davis. The total investment made by Vulcan Programming and
Vulcan Ventures was $54 million.
USA NETWORKS. USA Networks operates USA Network and The Sci-Fi Channel,
which are cable television networks. USA Networks also operates Home Shopping
Network, which is a retail sales program available via cable television systems.
Pursuant to a programming agreement with Charter Communications, Inc., USA
Networks has agreed to provide their programming for broadcast via our cable
television systems. Mr. Allen and Mr. Savoy are also directors of USA Networks.
OXYGEN MEDIA, INC. Oxygen expects to begin providing content aimed at the
female audience for distribution over the Internet and cable television systems.
Vulcan Ventures has agreed to invest up to $100 million in Oxygen. In addition,
Charter Communications, Inc. has agreed to enter into a carriage agreement with
Oxygen pursuant to which we intend to carry Oxygen programming content on our
cable systems.
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DESCRIPTION OF THE CREDIT FACILITIES
On March 18, 1999, all of our then-existing senior indebtedness, consisting
of seven separate credit facilities, was refinanced with proceeds of the sale of
the original notes and proceeds of our initial senior secured credit facilities.
The borrower under our initial senior secured credit facilities is Charter
Operating. The initial senior secured credit facilities were arranged by The
Chase Manhattan Bank, NationsBank, N.A., Toronto Dominion (Texas), Inc., Fleet
Bank, N.A. and Credit Lyonnais New York Branch. The initial senior secured
credit facilities provided for borrowings of up to $2.75 billion.
The initial senior secured credit facilities were increased on April 30,
1999 by $1.35 billion of additional senior secured credit facilities.
Obligations under the credit facilities are guaranteed by Charter Operating's
parent, Charter Holdings, and by Charter Operatings' subsidiaries. The
obligations under the credit facilities are secured by pledges by Charter
Operating of inter-company obligations and the ownership interests of Charter
Operating in its subsidiaries, but are not secured by the other assets of
Charter Operating or its subsidiaries. The guarantees are secured by pledges of
inter-company obligations and the ownership interests of Charter Holdings in
Charter Operating, but are not secured by the other assets of Charter Holdings
or Charter Operating.
The initial senior secured credit facilities of $4.1 billion consist of:
- an eight and one-half year reducing revolving loan in the amount of $1.25
billion;
- an eight and one-half year Tranche A term loan in the amount of $1.0
billion; and
- a nine-year Tranche B term loan in the amount of $1.85 billion.
The credit facilities provide for the amortization of the principal amount
of the Tranche A term loan facility and the reduction of the revolving loan
facility beginning on June 30, 2002 with respect to the Tranche A term loan and
on March 31, 2004 with respect to the revolving credit facility, with a final
maturity date of September 18, 2007. The amortization of the principal amount of
the Tranche B term loan facility is substantially "back-ended," with more than
ninety percent of the principal balance due in the year of maturity. The credit
facilities also provide for an incremental term facility, which is conditioned
upon receipt of additional new commitments from lenders. If the incremental term
facility becomes available, 50% of the borrowings under it will be repaid on
terms substantially similar to that of the Tranche A term loan and 50% on terms
substantially similar to the Tranche B term loan. After an initial period in
which interest rate margins will be fixed, interest rates for the credit
facilities will depend upon performance measured by a "leverage ratio," or, the
ratio of indebtedness to annualized operating cash flow. Annualized operating
cash flow is defined as the immediately preceding quarter's operating cash flow,
before management fees, multiplied by four. This leverage ratio is based on the
indebtedness of Charter Operating and its subsidiaries, exclusive of the
outstanding notes and other indebtedness for money borrowed, including
guarantees by Charter Operating and its subsidiaries by Charter Holdings.
The credit facilities provide Charter Operating with two interest rate
options, to which a margin is added: a base rate, generally, the "prime rate" of
interest option and an interest rate option based on the London InterBank
Offered Rate. The credit facilities contain representations and warranties,
affirmative and negative covenants, information requirements, events of default
and financial covenants. The financial covenants, which are generally tested on
a quarterly basis, measure performance against standards set for leverage, debt
service coverage, and operating cash flow coverage of cash interest expense.
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Under most circumstances, acquisitions and investments may be made without
the consent of the lenders as long as our operating cash flow for the four
complete quarters preceding the acquisition or investment equals or exceeds 1.75
times the sum of our cash interest expense plus any restricted payments, on a
pro forma basis after giving effect to the acquisition or investment.
The credit facilities also contain a change of control provision, making it
an event of default, and permitting acceleration of the indebtedness, in the
event that either:
(1) Paul G. Allen, including his estate, heirs and certain other related
entities, fails to maintain a 51% direct or indirect voting and economic
interest in Charter Operating, provided that after the consummation of an
initial public offering by Charter Holdings or an affiliate of Charter Holdings,
the economic interest percentage may be reduced to 35%, or
(2) a change of control occurs under the indentures governing the notes.
The various negative covenants place limitations on our ability and the
ability of our subsidiaries to, among other things, incur debt, pay dividends,
incur liens, make acquisitions, investments or asset sales, or enter into
transactions with affiliates. Distributions by Charter Operating under the
credit facilities to Charter Holdings to pay interest on the notes are generally
permitted, except during the existence of a default under the credit facilities.
If the 8.250% notes are not refinanced prior to six months before their maturity
date, the entire amount outstanding of the credit facilities will become due and
payable. This summary is qualified in its entirety by reference to the credit
agreement and the related documents pertaining to the credit facilities.
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DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions."
The original notes were issued and the new notes will be issued under three
separate indentures, each dated as of March 17, 1999, among the issuers, Marcus
Cable Operating, LLC, Marcus Holdings, as guarantor and Harris Trust and Savings
Bank, as trustee. The terms of the notes include those stated in the indentures
and those made part of the indentures by reference to the Trust Indenture Act of
1939, as amended.
The form and terms of the new notes are the same in all material respects
to the form and terms of the original notes, except that the new notes will have
been registered under the Securities Act of 1933 and, therefore, will not bear
legends restricting the transfer thereof. The original notes have not been
registered under the Securities Act of 1933 and are subject to certain transfer
restrictions.
The original notes were sold prior to our merger with Marcus Holdings. At
the sale of the original notes, Marcus Holdings guaranteed the notes and issued
a promissory note to Charter Holdings for certain amounts loaned by Charter
Holdings to subsidiaries of Marcus Holdings. When we merged with Marcus Holdings
both the guarantee and the promissory note issued automatically became, under
the terms of the indentures, ineffective. Consequently, all references in the
indentures and the notes to the guarantor, the guarantee or the promissory note,
and all matters related thereto, including, without limitation, the pledges of
any collateral are no longer applicable.
The following description is a summary of the material provisions of the
indentures. It does not restate the indentures in their entirety. We urge you to
read the indentures because they, and not this description, define your rights
as holders of these notes. Copies of the indentures are available as set forth
under "Business -- Additional Information."
BRIEF DESCRIPTION OF THE NOTES
The notes:
- are general unsecured obligations of the issuers;
- are effectively subordinated in right of payment to all existing and
future secured Indebtedness of the issuers to the extent of the value of
the assets securing such Indebtedness and to all liabilities, including
trade payables, of Charter Holdings' Subsidiaries, other than Charter
Capital;
- are equal in right of payment to all existing and future unsubordinated,
unsecured Indebtedness of the issuers; and
- are senior in right of payment to any future subordinated Indebtedness of
the issuers.
PRINCIPAL, MATURITY AND INTEREST OF NOTES
8.250% NOTES
The 8.250% notes are limited in aggregate principal amount to $600 million,
and will be issued in denominations of $1,000 and integral multiples of $1,000.
The 8.250% notes will mature on April 1, 2007.
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Interest on the 8.250% notes will accrue at the rate of 8.250% per annum
and will be payable semi-annually in arrears on April 1 and October 1,
commencing on October 1, 1999. The issuers will make each interest payment to
the holders of record of these 8.250% notes on the immediately preceding March
15 and September 15.
Interest on the 8.250% notes will accrue from the date of original issuance
of the original notes or, if interest has already been paid, from the date it
was most recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
8.625% NOTES
The 8.625% notes are limited in aggregate principal amount to $1.5 billion,
and will be issued in denominations of $1,000 and integral multiples of $1,000.
The 8.625% notes will mature on April 1, 2009.
Interest on the 8.625% notes will accrue at the rate of 8.625% per annum
and will be payable semi-annually in arrears on April 1 and October 1,
commencing on October 1, 1999. The issuers will make each interest payment to
the holders of record of these 8.625% notes on the immediately preceding March
15 and September 15.
Interest on the 8.625% notes will accrue from the date of original issuance
of the original notes or, if interest has already been paid, from the date it
was most recently paid. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
9.920% NOTES
The 9.920% notes are limited in aggregate principal amount at maturity to
$1.475 billion and originally were issued at an issue price of $613.94 per
$1,000 principal amount at maturity, representing a yield to maturity of 9.920%,
calculated on a semi-annual bond equivalent basis, calculated from March 17,
1999. The issuers will issue 9.920% notes, in denominations of $1,000 principal
amount at maturity and integral multiples of $1,000 principal amount at
maturity. The 9.920% notes will mature on April 1, 2011.
Cash interest on the 9.920% notes will not accrue prior to April 1, 2004.
Thereafter, cash interest on the 9.920% notes will accrue at a rate of 9.920%
per annum and will be payable semi-annually in arrears on April 1 and October 1,
commencing on October 1, 2004. The issuers will make each interest payment to
the holders of record of the 9.920% notes on the immediately preceding March 15
and September 15. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months.
The 9.920% notes will accrete at a rate of 9.920% per year to an aggregate
amount of $1.475 billion as of April 1, 2004. For United States federal income
tax purposes, holders of the 9.920% notes will be required to include amounts in
gross income in advance of the receipt of the cash payments to which the income
is attributable. See "Certain Federal Tax Considerations."
RANKING
As a holding company, Charter Holdings does not hold substantial assets
other than its direct or indirect investments in and advances to its operating
subsidiaries. Our subsidiaries conduct all of our consolidated operations and
own substantially all of our consolidated assets. As a result, our cash flow and
our ability to meet our debt service obligations on the notes will depend upon
the cash flow of our subsidiaries and the
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payment of funds by our subsidiaries to us in the form of loans, equity
distributions or otherwise. Our subsidiaries are not obligated to make funds
available to us for payment on the notes. In addition, our subsidiaries' ability
to make any such loans or distributions to us will depend on their earnings, the
terms of their indebtedness, business and tax considerations and legal
restrictions. Our credit facilities place limitations on the ability of our
subsidiaries to pay dividends and enter into certain transactions with
affiliates. Our credit facilities also contain financial covenants that could
limit the payment of dividends. However distributions generally will be
permitted by the credit facilities to pay interest on the notes except during
the existence of a default under the credit facilities.
Because of our holding company structure, the notes will be subordinate to
all liabilities of our subsidiaries. Creditors of our subsidiaries will have the
right to be paid before holders of the notes from any assets of our
subsidiaries. At March 31, 1999, on a pro forma basis giving effect to the
acquisitions and our credit facilities, all of our outstanding indebtedness,
including our credit facilities, was incurred by our subsidiaries. At that date,
our subsidiaries' liabilities totaled approximately $4.0 billion and all such
liabilities would have ranked senior to the new notes. In the event of
bankruptcy, liquidation or dissolution of a subsidiary, following payment by the
subsidiary of its liabilities, such subsidiary may not have sufficient assets
remaining to make payments to us as a shareholder or otherwise.
OPTIONAL REDEMPTION
8.250% NOTES
The 8.250% notes are not redeemable at the issuers' option prior to
maturity.
8.625% NOTES
At any time prior to April 1, 2002, the issuers may, on any one or more
occasions, redeem up to 35% of the aggregate principal amount of the 8.625%
notes on a pro rata basis or nearly as pro rata as practicable, at a redemption
price of 108.625% of the principal amount thereof, plus accrued and unpaid
interest to the redemption date, with the net cash proceeds of one or more
Equity Offerings; provided that
(1) at least 65% of the aggregate principal amount of 8.625% notes
remains outstanding immediately after the occurrence of such redemption
excluding 8.625% notes held by Charter Holdings and its Subsidiaries; and
(2) the redemption must occur within 60 days of the date of the
closing of such Equity Offering.
Except pursuant to the preceding paragraph, the 8.625% notes will not be
redeemable at the issuers' option prior to April 1, 2004.
On or after April 1, 2004, the issuers may redeem all or a part of the
8.625% notes upon not less than 30 nor more than 60 days notice, at the
redemption prices, expressed as percentages of principal amount, set forth below
plus accrued and unpaid interest thereon,
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if any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on April 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004........................................................ 104.313%
2005........................................................ 102.875%
2006........................................................ 101.438%
2007 and thereafter......................................... 100.000%
</TABLE>
9.920% NOTES
At any time prior to April 1, 2002, the issuers may, on any one or more
occasions, redeem up to 35% of the aggregate principal amount at maturity of the
9.920% notes on a pro rata basis or nearly as pro rata as practicable, at a
redemption price of 109.920% of the Accreted Value thereof, with the net cash
proceeds of one or more Equity Offerings; provided that
(1) at least 65% of the aggregate principal amount at maturity of
9.920% notes remains outstanding immediately after the occurrence of such
redemption, excluding 9.920% notes held by Charter Holdings and its
Subsidiaries; and
(2) the redemption must occur within 60 days of the date of the
closing of such Equity Offering.
Except pursuant to the preceding paragraph, the 9.920% notes will not be
redeemable at the Issuers' option prior to April 1, 2004.
On or after April 1, 2004, the issuers may redeem all or a part of the
9.920% notes upon not less than 30 nor more than 60 days notice, at the
redemption prices, expressed as percentages of principal amount, set forth below
plus accrued and unpaid interest thereon, if any, to the applicable redemption
date, if redeemed during the twelve-month period beginning on April 1 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2004........................................................ 104.960%
2005........................................................ 103.307%
2006........................................................ 101.653%
2007 and thereafter......................................... 100.000%
</TABLE>
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, each holder of notes will have the right to
require the Issuers to repurchase all or any part, equal to $1,000 or an
integral multiple thereof, of that holder's notes pursuant to a "Change of
Control Offer." In the Change of Control Offer, the issuers will offer a "Change
of Control Payment" in cash equal to
(x) with respect to the 8.250% notes and the 8.625% notes, 101% of the
aggregate principal amount thereof repurchased plus accrued and unpaid interest
thereon, if any, to the date of purchase and
(y) with respect to the 9.920% notes, 101% of the Accreted Value plus, for
any Change of Control Offer occurring after the Full Accretion Date, accrued and
unpaid
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interest, if any, on the date of purchase. Within ten days following any Change
of Control, the issuers will mail a notice to each holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase notes on a certain date, the "Change of Control Payment Date",
specified in such notice, pursuant to the procedures required by the Indentures
and described in such notice. The issuers will comply with the requirements of
Rule 14e-1 under the Securities Exchange Act of 1934 or any successor rules, and
any other securities laws and regulations thereunder to the extent such laws and
regulations are applicable in connection with the repurchase of the notes as a
result of a Change of Control.
On the Change of Control Payment Date, the issuers will, to the extent
lawful:
(1) accept for payment all notes or portions thereof properly tendered
pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all notes or portions thereof so tendered;
and
(3) deliver or cause to be delivered to the trustee the notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of notes or portions thereof being purchased by the
issuers.
The Paying Agent will promptly mail to each holder of notes so tendered the
Change of Control Payment for such notes, and the trustee will promptly
authenticate and mail, or cause to be transferred by book entry, to each holder
a new note equal in principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each such new note will be in a principal
amount at maturity of $1,000 or an integral multiple thereof.
The provisions described above that require the issuers to make a Change of
Control Offer following a Change of Control will be applicable regardless of
whether or not any other provisions of the indentures are applicable. Except as
described above with respect to a Change of Control, the indentures do not
contain provisions that permit the Holders of the notes to require that the
issuers repurchase or redeem the notes in the event of a takeover,
recapitalization or similar transaction.
The issuers will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the indentures applicable to a Change of Control Offer made by the issuers
and purchases all notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Charter Holdings and its Subsidiaries, taken as a whole.
Although there is a limited body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a holder of notes to require
the Issuers to repurchase such notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of Charter
Holdings and its Subsidiaries, taken as a whole, another Person or group may be
uncertain.
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ASSET SALES
Charter Holdings will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) Charter Holdings or a Restricted Subsidiary of Charter Holdings
receives consideration at the time of such Asset Sale at least equal to the
fair market value of the assets or Equity Interests issued or sold or
otherwise disposed of;
(2) such fair market value is determined by Charter Holdings' Board of
Directors and evidenced by a resolution of such Board of Directors set
forth in an Officers' certificate delivered to the trustee; and
(3) at least 75% of the consideration therefor received by Charter
Holdings or such Restricted Subsidiary is in the form of cash, Cash
Equivalents or readily marketable securities.
For purposes of this provision, each of the following shall be deemed to be
cash:
(a) any liabilities shown on Charter Holdings' or such Restricted
Subsidiary's most recent balance sheet, other than contingent liabilities
and liabilities that are by their terms subordinated to the notes, that are
assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases Charter Holdings or such Restricted
Subsidiary from further liability;
(b) any securities, notes or other obligations received by Charter
Holdings or any such Restricted Subsidiary from such transferee that are
converted by Charter Holdings or such Restricted Subsidiary into cash, Cash
Equivalents or readily marketable securities within 60 days after receipt
thereof, to the extent of the cash, Cash Equivalents or readily marketable
securities received in that conversion; and
(c) Productive Assets.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
Charter Holdings or a Restricted Subsidiary of Charter Holdings may apply such
Net Proceeds at its option:
(1) to repay debt under the Credit Facilities or any other
Indebtedness of the Restricted Subsidiaries, other than Indebtedness
represented by a guarantee of a Restricted Subsidiary of Charter Holdings;
or
(2) to invest in Productive Assets; provided that any Net Proceeds
which Charter Holdings or a Restricted Subsidiary of Charter Holdings has
committed to invest in Productive Assets within 365 days of the applicable
Asset Sale may be invested in Productive Assets within two years of such
Asset Sale.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $25.0 million, the issuers will make
an Asset Sale Offer to all holders of notes and all holders of other
Indebtedness that is pari passu with the notes containing provisions requiring
offers to purchase or redeem with the proceeds of sales of assets to purchase
the maximum principal amount of notes and such other pari passu Indebtedness
that may be purchased out of the Excess Proceeds, which amount includes the
entire amount of the Net Proceeds. The offer price in any Asset Sale Offer will
be payable in cash and equal to
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(x) with respect to the 8.250% notes and the 8.625% notes, 100% of
principal amount plus accrued and unpaid interest, if any, to the date of
purchase, and
(y) with respect to the 9.925% notes, 100% of the Accreted Value thereof
plus, after the Full Accretion Date, accrued and unpaid interest, if any, to the
date of purchase. If any Excess Proceeds remain after consummation of an Asset
Sale Offer, Charter Holdings may use such Excess Proceeds for any purpose not
otherwise prohibited by the indentures. If the aggregate principal amount of
notes and such other pari passu Indebtedness tendered into such Asset Sale Offer
exceeds the amount of Excess Proceeds, the applicable Trustee shall select the
notes and such other pari passu Indebtedness to be purchased on a pro rata
basis. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds
shall be reset at zero.
SELECTION AND NOTICE
If less than all of the notes are to be redeemed at any time, the trustee
will select notes for redemption as follows:
(1) if the notes are listed, in compliance with the requirements of
the principal national securities exchange on which the notes are listed;
or
(2) if the notes are not so listed, on a pro rata basis, by lot or by
such method as the trustee shall deem fair and appropriate.
No notes of $1,000 or less shall be redeemed in part. Notices of redemption
shall be mailed by first class mail at least 30 but not more than 60 days before
the redemption date to each holder of notes to be redeemed at its registered
address. Notices of redemption may not be conditional.
If any note is to be redeemed in part only, the notice of redemption that
relates to that note shall state the portion of the principal amount thereof to
be redeemed. A new note in principal amount equal to the unredeemed portion of
the original note will be issued in the name of the holder thereof upon
cancellation of the original note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date, interest ceases to
accrue on, or the Accreted Value ceases to increase on, as the case may be,
notes or portions of them called for redemption.
CERTAIN COVENANTS
Set forth in this section are summaries of certain covenants contained in
the indentures. The covenants summarized are the following:
- Limitations on restricted payments by Charter Holdings and its Restricted
Subsidiaries. Restricted payments include
- dividends and other distributions on equity interests,
- purchases, redemptions on other acquisitions of equity interests, and
- purchases, redemptions, defeasance or other acquisitions of
subordinated debt;
- Limitations on restricted investments by Charter Holdings or its
Restricted Subsidiaries. Restricted investments include investments other
than
- investments in Restricted Subsidiaries, cash equivalents,
- non-cash consideration from an asset sale made in compliance with the
indenture,
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- investments with the net cash proceeds of the issuance and sale of
equity interests,
- investments in productive assets not to exceed in the $150 million,
- other investments not exceeding $50 million in any person,
- investments in customers and suppliers which either generate accounts
receivable or are accepted in settlement of bona fide disputes, and
- the investment in Marcus Cable Holdings LLC.
This covenant also limits the Company from allowing any Restricted
Subsidiary from becoming an Unrestricted Subsidiary;
- Limitations on the occurrence of Indebtedness and issuance of preferred
stock generally unless the leverage ratio is not greater than 8.75 to 1.0
on a pro forma basis. This does not prohibit the incurrence of permitted
debt which includes:
- borrowings up to $3.5 billion under the credit facilities,
- existing indebtedness,
- capital lease obligations, mortgage financings or purchase money
obligations in an aggregate amount of up to $25 million at any one
time outstanding for the purchase, construction or improvement of
productive assets,
- permitted refinancing indebtedness,
- intercompany indebtedness,
- hedging obligations,
- up to $300 million of additional indebtedness,
- additional indebtedness not exceeding 200% of the net cash proceeds
from the sale of equity interests to the extent not used to make
restricted payments or permitted investments, and
- the accretion or amortization of original issue discount and the write
up of indebtedness in accordance with purchase accounting;
- Prohibitions against the creation of liens except permitted liens;
- Prohibitions against restrictions on the ability of any Restricted
Subsidiary to pay dividends or make other distributions on its capital
stock to Charter Holdings or any Restricted Subsidiary, make loans or
advances to Charter Holdings or its Restricted Subsidiaries or transfer
properties or assets to Charter Holdings or any of its Restricted
Subsidiaries. This covenant, however, does not prohibit restrictions
under
- existing indebtedness,
- the notes and the indentures,
- applicable law,
- the terms of indebtedness or capital stock of a person acquired by
Charter Holdings or any of its Restricted Subsidiaries,
- customary non-assignment provisions in leases,
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- purchase money obligations,
- agreements for the sale or other disposition of a Restricted
Subsidiary restricting distributions pending its sale,
- permitted refinancing indebtedness,
- liens securing indebtedness permitted under the indentures,
- joint venture agreements,
- under ordinary course contracts with customers that restrict cash,
other deposits or net worth,
- indebtedness permitted under the indentures, and
- restrictions that are not materially more restrictive than customary
provisions in comparable financings which management determines will
not materially impair Charter Holdings' ability to make payments
required under the notes;
- Prohibitions against mergers, consolidations or the sale of all or
substantially all of an issuer's assets unless
- the issuer is the surviving corporation or the person formed by the
merger or consolidation or acquiring the assets is organized under the
law of the United States, any state or the District of Columbia,
- such person assumes all obligations under the notes and the
indentures,
- no default or event of default exists, and
- Charter Holdings or the person formed by the merger or consolidation
or acquiring all or substantially all the assets could incur at least
$1.00 of additional indebtedness under the leverage ratio or have a
leverage ratio after giving effect to the transaction no greater than
the leverage ratio of the issuer immediately prior to the transaction;
- Prohibitions against transactions with affiliates, unless Charter
Holdings delivers to the trustee
- for transactions exceeding $15.0 million a resolution approved by
a majority of the board of directors certifying that the
transaction complies with the covenant and
- for transactions exceeding $50.0 million a fairness opinion of an
accounting, appraisal or investment banking firm of national
standing.
Certain transactions are not subject to the covenant including:
- existing employment agreements and new employment agreements
entered into in the ordinary course of business and consistent
with past practice;
- management fees under agreements existing at the issue date or
after the issue date if the percentage fees are not higher than
those under agreements existing on the issue date.
- Limitations on sale and leaseback transactions exceeding three years; and
- Prohibitions against consent payments to holders of notes unless paid to
all consenting holders.
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During any period of time that
(a) either the 8.250% notes, the 8.625% notes or the 9.920% notes have
Investment Grade Ratings from both Rating Agencies and
(b) no Default or Event of Default has occurred and is continuing under the
applicable indenture.
Charter Holdings and its Restricted Subsidiaries will not be subject to the
provisions of the indenture described under
- "-- Incurrence of Indebtedness and Issuance of preferred stock,"
- "-- Restricted Payments,"
- "-- Asset Sales,"
- "-- Sale and Leaseback Transactions,"
- "-- Dividend and Other Payment Restrictions Affecting Subsidiaries,"
- "-- Transactions with Affiliates,"
- "-- Investments" and
- clause (4) of the first paragraph of "-- Merger, Consolidation and
Sale of Assets".
If Charter Holdings and its Restricted Subsidiaries are not subject to
these covenants for any period of time and, subsequently, one or both of the
Rating Agencies withdraws its ratings or downgrades the ratings assigned to the
applicable notes below the required Investment Grade Ratings or a Default or
Event of Default occurs and is continuing, then Charter Holdings and its
Restricted Subsidiaries will be subject again to these covenants. Compliance
with the covenant with respect to Restricted Payments made after the time of
such withdrawal, downgrade, Default or Event of Default will be calculated as if
such covenant had been in effect during the entire period of time from the issue
date.
RESTRICTED PAYMENTS
Charter Holdings will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of Charter Holdings' or any of its Restricted
Subsidiaries' Equity Interests, including, without limitation, any payment
in connection with any merger or consolidation involving Charter Holdings
or any of its Restricted Subsidiaries, or to the direct or indirect holders
of Charter Holdings' or any of its Restricted Subsidiaries' Equity
Interests in their capacity as such, other than dividends or distributions
payable in Equity Interests, other than Disqualified Stock, of Charter
Holdings or, in the case of Charter Holdings and its Restricted
Subsidiaries, to Charter Holdings or a Restricted Subsidiary of Charter
Holdings;
(2) purchase, redeem or otherwise acquire or retire for value,
including, without limitation, in connection with any merger or
consolidation involving Charter Holdings, any Equity Interests of Charter
Holdings or any direct or indirect parent of Charter Holdings or any
Restricted Subsidiary of Charter Holdings, other than, in the case of
Charter Holdings and its Restricted Subsidiaries, any such Equity Interests
owned by Charter Holdings or any Restricted Subsidiary of Charter Holdings;
or
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(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the notes, other than the notes, except a payment of
interest or principal at the Stated Maturity thereof, all such payments and
other actions set forth in clauses (1) through (3) above being collectively
referred to as "Restricted Payments", unless, at the time of and after
giving effect to such Restricted Payment:
(4) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(5) Charter Holdings would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Leverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "-- Incurrence of Indebtedness and
Issuance of preferred stock"; and
(6) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Charter Holdings and each of its
Restricted Subsidiaries after the date of the indentures, excluding
Restricted Payments permitted by clauses (2), (3), (4), (5), (6), (7) and
(8) of the next succeeding paragraph, shall not exceed, at the date of
determination, the sum of:
(a) an amount equal to 100% of combined Consolidated EBITDA of
Charter Holdings since the date of the indentures to the end of Charter
Holdings' most recently ended full fiscal quarter for which internal
financial statements are available, taken as a single accounting period,
less the product of 1.2 times the combined Consolidated Interest Expense
of Charter Holdings since the date of the indentures to the end of
Charter Holdings' most recently ended full fiscal quarter for which
internal financial statements are available, taken as a single
accounting period, plus
(b) an amount equal to 100% of Capital Stock Sale Proceeds less any
such Capital Stock Sale Proceeds used in connection with (i) an
Investment made pursuant to clause (6) of the definition of "Permitted
Investments" or (ii) the incurrence of Indebtedness pursuant to clause
(10) of "Incurrence of Indebtedness and Issuance of preferred stock,"
plus
(c) $100.0 million.
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the indentures;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of Charter Holdings in
exchange for, or out of the net proceeds of the substantially concurrent
sale, other than to a Subsidiary of Charter Holdings, of, Equity Interests
of Charter Holdings, other than Disqualified Stock; provided that the
amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (3)(b) of the preceding paragraph;
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(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of Charter Holdings or any of its Restricted
Subsidiaries with the net cash proceeds from an incurrence of Permitted
Refinancing Indebtedness;
(4) regardless of whether a Default then exists, the payment of any
dividend or distribution to the extent necessary to permit direct or
indirect beneficial owners of shares of Capital Stock of Charter Holdings
to pay federal, state or local income tax liabilities that would arise
solely from income of Charter Holdings or any of its Restricted
Subsidiaries, as the case may be, for the relevant taxable period and
attributable to them solely as a result of Charter Holdings, and any
intermediate entity through which the holder owns such shares or any of
their Restricted Subsidiaries being a limited liability company,
partnership or similar entity for federal income tax purposes;
(5) regardless of whether a Default then exists, the payment of any
dividend by a Restricted Subsidiary of Charter Holdings to the holders of
its common Equity Interests on a pro rata basis;
(6) the payment of any dividend on Charter Holdings preferred stock or
the redemption, repurchase, retirement or other acquisition of Charter
Holdings preferred stock in an amount not in excess of its aggregate
liquidation value;
(7) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of Charter Holdings held by any member of
Charter Holdings' management pursuant to any management equity subscription
agreement or stock option agreement in effect as of the date of the
indentures; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $10 million in any fiscal year of Charter Holdings; and
(8) payment of fees in connection with any acquisition, merger or
similar transaction in an amount that does not exceed an amount equal to
1.25% of the transaction value of such acquisition, merger or similar
transaction.
The amount of all Restricted Payments, other than cash shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by Charter Holdings or any of its
Restricted Subsidiaries pursuant to the Restricted Payment. The fair market
value of any assets or securities that are required to be valued by this
covenant shall be determined by the Board of Directors of Charter Holdings whose
resolution with respect thereto shall be delivered to the Trustee. Such Board of
Directors' determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $100 million. Not later than the date of making any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this "Restricted Payments"
covenant were computed, together with a copy of any fairness opinion or
appraisal required by the indentures.
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INVESTMENTS
Charter Holdings will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) make any Restricted Investment; or
(2) allow any Restricted Subsidiary of Charter Holdings to become an
Unrestricted Subsidiary, unless, in each case:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) Charter Holdings would, at the time of, and after giving effect
to, such Restricted Investment or such designation of a Restricted
Subsidiary as an unrestricted Subsidiary, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Leverage Ratio test
set forth in the first paragraph of the covenant described below under the
caption "-- Incurrence of Indebtedness and Issuance of preferred stock."
An Unrestricted Subsidiary may be redesignated as a Restricted Subsidiary
if such redesignation would not cause a Default.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
(a) Charter Holdings will not, and will not permit any of its Restricted
Subsidiaries to directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness, including Acquired
Debt, and Charter Holdings will not issue any Disqualified Stock and will not
permit any of its Restricted Subsidiaries to issue any shares of preferred stock
unless the Leverage Ratio would have been not greater than 8.75 to 1.0
determined on a pro forma basis, including a pro forma application of the net
proceeds therefrom, as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of the
most recently ended fiscal quarter.
So long as no Default shall have occurred and be continuing or would be
caused thereby, the first paragraph of this covenant will not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by Charter Holdings and its Restricted Subsidiaries
of Indebtedness under the Credit Facilities; provided that the aggregate
principal amount of all Indebtedness of Charter Holdings and its Restricted
Subsidiaries outstanding under the Credit Facilities, after giving effect
to such incurrence, does not exceed an amount equal to $3.5 billion less
the aggregate amount of all Net Proceeds of Asset Sales applied by Charter
Holdings or any of its Subsidiaries in the case of an Asset Sale since the
date of the Indentures to repay Indebtedness under the Credit Facilities,
pursuant to the covenant described above under the caption "-- Asset
Sales";
(2) the incurrence by Charter Holdings and its Restricted Subsidiaries
of Existing Indebtedness, other than the Credit Facilities;
(3) the incurrence on the Issue Date by Charter Holdings and its
Restricted Subsidiaries of Indebtedness represented by the Notes;
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(4) the incurrence by Charter Holdings or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case, incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement, including, without limitation, the cost of
design, development, construction, acquisition, transportation,
installation, improvement, and migration, of Productive Assets of Charter
Holdings or any of its Restricted Subsidiaries in an aggregate principal
amount not to exceed $75 million at any time outstanding;
(5) the incurrence by Charter Holdings or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace, in whole or
in part, Indebtedness, other than intercompany Indebtedness, that was
permitted by the indentures to be incurred under the first paragraph of
this covenant or clauses (2) or (3) of this paragraph;
(6) the incurrence by Charter Holdings or any of its Restricted
Subsidiaries, of intercompany Indebtedness between or among Charter
Holdings and any of its Wholly Owned Restricted Subsidiaries; provided,
that this clause does not permit Indebtedness between Charter Holdings or
any of its Restricted Subsidiaries, as creditor or debtor, as the case may
be, unless otherwise permitted by the indentures; provided, further, that:
(a) if Charter Holdings is the obligor on such Indebtedness, such
Indebtedness must be expressly subordinated to the prior payment in full
in cash of all Obligations with respect to the notes; and
(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than
Charter Holdings or a Wholly Owned Restricted Subsidiary thereof, and
(ii) any sale or other transfer of any such Indebtedness to a Person
that is not either Charter Holdings or a Wholly Owned Restricted
Subsidiary thereof, shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by Charter Holdings or any of its
Restricted Subsidiaries, as the case may be, that was not permitted by
this clause (6);
(7) the incurrence by Charter Holdings or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of the indentures to be
outstanding;
(8) the guarantee by Charter Holdings of Indebtedness of Charter
Holdings or a Restricted Subsidiary of Charter Holdings, that was permitted
to be incurred by another provision of this covenant;
(9) the incurrence by Charter Holdings or any of its Restricted
Subsidiaries, of additional Indebtedness in an aggregate principal amount
at any time outstanding, not to exceed $300 million;
(10) the incurrence by Charter Holdings or any of its Restricted
Subsidiaries, of additional Indebtedness in an aggregate principal amount
at any time outstanding, not to exceed 200% of the net cash proceeds
received by Charter Holdings from the sale of its Equity Interests, other
than Disqualified Stock, after the date of the Indentures to the extent
such net cash proceeds have not been applied to make Restricted Payments or
to effect other transactions pursuant to the covenant described above
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under the subheading "-- Restricted Payments" or to make Permitted
Investments pursuant to clause (6) of the definition thereof;
(11) the accretion or amortization of original issue discount and the
write up of Indebtedness in accordance with purchase accounting.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (12) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant,
Charter Holdings will be permitted to classify and from time to time to
reclassify such item of Indebtedness on the date of its incurrence in any manner
that complies with this covenant. For avoidance of doubt, Indebtedness incurred
pursuant to a single agreement, instrument, program, facility or line of credit
may be classified as Indebtedness arising in part under one of the clauses
listed above, and in part under any one or more of the clauses listed above, to
the extent that such Indebtedness satisfies the criteria for such clauses.
(b) Notwithstanding the foregoing, in no event shall any Restricted
Subsidiary of Charter Holdings consummate a Subordinated Debt Financing or a
preferred stock Financing. A "Subordinated Debt Financing" or a "preferred stock
Financing", as the case may be, with respect to any Restricted Subsidiary of
Charter Holdings shall mean a public offering or private placement, whether
pursuant to Rule 144A under the Securities Act or otherwise, of Subordinated
Notes or preferred stock, whether or not such preferred stock constitutes
Disqualified Stock, as the case may be, of such Restricted Subsidiary to one or
more purchasers, other than to one or more Affiliates of Charter Holdings.
"Subordinated Notes" with respect to any Restricted Subsidiary of Charter
Holdings shall mean Indebtedness of such Restricted Subsidiary that is
contractually subordinated in right of payment to any other Indebtedness of such
Restricted Subsidiary, including, without limitation, Indebtedness under the
Credit Facilities. The foregoing limitation shall not apply to (i) any
Indebtedness or preferred stock of any Person existing at the time such Person
is merged with or into or became a Subsidiary of Charter Holdings; provided that
such Indebtedness or preferred stock was not incurred or issued in connection
with, or in contemplation of, such Person merging with or into, or becoming a
Subsidiary of, Charter Holdings and (ii) any Indebtedness or preferred stock of
a Restricted Subsidiary issued in connection with, and as part of the
consideration for, an acquisition, whether by stock purchase, asset sale, merger
or otherwise, in each case involving such Restricted Subsidiary, which
Indebtedness or preferred stock is issued to the seller or sellers of such stock
or assets; provided that such Restricted Subsidiary is not obligated to register
such Indebtedness or preferred stock under the Securities Act of 1933 or
obligated to provide information pursuant to Rule 144A under the Securities Act
of 1933.
LIENS
Charter Holdings will not, directly or indirectly, create, incur, assume or
suffer to exist any Lien of any kind securing Indebtedness, Attributable Debt or
trade payables on any asset now owned or hereafter acquired, except Permitted
Liens.
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DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
Charter Holdings will not, directly or indirectly, create or permit to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary of Charter Holdings, to:
(1) pay dividends or make any other distributions on its Capital Stock
to Charter Holdings or any of its Restricted Subsidiaries, or with respect
to any other interest or participation in, or measured by, its profits, or
pay any indebtedness owed to Charter Holdings or any of its Restricted
Subsidiaries;
(2) make loans or advances to Charter Holdings or any of its
Restricted Subsidiaries or any of its Restricted Subsidiaries; or
(3) transfer any of its properties or assets to Charter Holdings or
any of its Restricted Subsidiaries.
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of the indentures,
including, without limitation, the Credit Facilities and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof; provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole,
with respect to such dividend and other payment restrictions than those
contained in such Existing Indebtedness, as in effect on the date of the
Indentures;
(2) the indentures and the notes;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a Person
acquired by Charter Holdings or any of its Restricted Subsidiaries as in
effect at the time of such acquisition, except to the extent such
Indebtedness was incurred in connection with or in contemplation of such
acquisition, which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired; provided that, in the
case of Indebtedness, such Indebtedness was permitted by the terms of the
Indentures to be incurred;
(5) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary of Charter Holdings that restricts distributions by such
Restricted Subsidiary pending its sale or other disposition;
(8) Permitted Refinancing Indebtedness; provided that the restrictions
contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those
contained in the agreements governing the Indebtedness being refinanced;
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(9) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under the
caption "-- Liens" that limit the right of Charter Holdings or any of its
Restricted Subsidiaries to dispose of the assets subject to such Lien;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business;
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(12) restrictions contained in the terms of Indebtedness permitted to
be incurred under the covenant "-- Incurrence of Indebtedness and Issuance
of preferred stock"; provided that such restrictions are no more
restrictive than the terms contained in the Credit Facilities as in effect
on the Issue Date; and
(13) restrictions that are not materially more restrictive than
customary provisions in comparable financings and the management of Charter
Holdings determines that such restrictions will not materially impair
Charter Holdings' ability to make payments as required under the notes.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
Neither of the issuers may, directly or indirectly:
(1) consolidate or merge with or into another Person, whether or not
such issuer is the surviving corporation; or
(2) sell, assign, transfer, convey or otherwise dispose of all or
substantially all of its properties or assets, in one or more related
transactions, to another Person; unless:
(1) either:
(a) such issuer, is the surviving corporation; or
(b) the Person formed by or surviving any such consolidation or
merger, if other than such issuer, or to which such sale, assignment,
transfer, conveyance or other disposition shall have been made is a
Person organized or existing under the laws of the United States, any
state thereof or the District of Columbia, provided that if the Person
formed by or surviving any such consolidation or merger with either
issuer is a limited liability company or other Person other than a
corporation, a corporate co-issuer shall also be an obligor with respect
to the Notes;
(2) the Person formed by or surviving any such consolidation or
merger, if other than Charter Holdings, or the Person to which such
sale, assignment, transfer, conveyance or other disposition shall have
been made assumes all the obligations of the Company under the notes, in
the case of Charter Holdings, and the indentures pursuant to agreements
reasonably satisfactory to the Trustee;
(3) immediately after such transaction no Default or Event of
Default exists; and
(4) Charter Holdings or the Person formed by or surviving any such
consolidation or merger, if other than Charter Holdings, will, on the
date of such transaction after giving pro forma effect thereto and any
related financing
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transactions as if the same had occurred at the beginning of the
applicable four-quarter period, either
(A) be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Leverage Ratio test set forth in the
first paragraph of the covenant described above under the caption
"-- Incurrence of Indebtedness and Issuance of preferred stock" or
(B) have a Leverage Ratio immediately after giving effect to
such consolidation or merger no greater than the Leverage Ratio
immediately prior to such consolidation or merger.
In addition, Charter Holdings may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Merger, Consolidation, or Sale of
Assets" covenant will not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among Charter Holdings and any of its
Wholly Owned Subsidiaries.
TRANSACTIONS WITH AFFILIATES
Charter Holdings will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to Charter Holdings or the relevant Restricted Subsidiary than those that
would have been obtained in a comparable transaction by Charter Holdings or
such Restricted Subsidiary with an unrelated Person; and
(2) Charter Holdings delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$15.0 million, a resolution of the Board of Directors of Charter
Holdings set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with this covenant and that such
Affiliate Transaction has been approved by a majority of the members of
the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$50.0 million, an opinion as to the fairness to the holders of such
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, will not be subject to the provisions of the prior paragraph:
(1) existing employment agreement entered into by Charter Holdings or
any of its Subsidiaries and any employment agreement entered into by
Charter Holdings or any of its Restricted Subsidiaries in the ordinary
course of business and consistent with the past practice of Charter
Holdings or such Restricted Subsidiary;
(2) transactions between or among Charter Holdings and/or its
Restricted Subsidiaries;
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(3) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of Charter Holdings, and customary indemnification and
insurance arrangements in favor of directors, regardless of affiliation
with Charter Holdings, or any of its Restricted Subsidiaries;
(4) payment of management fees pursuant to management agreements
either (A) existing on the Issue Date or (B) entered into after the Issue
Date, to the extent that such management agreements provide for percentage
fees no higher than the percentage fees existing under the management
agreements existing on the Issue Date;
(5) Restricted Payments that are permitted by the provisions of the
indentures described above under the caption "-- Restricted Payments"; and
(6) Permitted Investments.
SALE AND LEASEBACK TRANSACTIONS
Charter Holdings will not, and will not permit any of its Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided that
Charter Holdings may enter into a sale and leaseback transaction if:
(1) Charter Holdings could have
(a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction under the Leverage Ratio
test in the first paragraph of the covenant described above under the
caption "-- Incurrence of Additional Indebtedness and Issuance of preferred
stock" and
(b) incurred a Lien to secure such Indebtedness pursuant to the
covenant described above under the caption "-- Liens"; and
(2) the transfer of assets in that sale and leaseback transaction is
permitted by, and Charter Holdings applies the proceeds of such transaction
in compliance with, the covenant described above under the caption
"-- Asset Sales."
The foregoing restrictions do not apply to a sale and leaseback transaction
if the lease is for a period, including renewal rights, of not in excess of
three years.
LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
Charter Holdings will not permit any of its Restricted Subsidiaries,
directly or indirectly, to Guarantee or pledge any assets to secure the payment
of any other Indebtedness of Charter Holdings, except in respect of the Credit
Facilities (the "Guaranteed Indebtedness") unless
(1) such Restricted Subsidiary of Charter Holdings simultaneously executes
and delivers a supplemental indenture providing for the Guarantee (a "Subsidiary
Guarantee") of the payment of the notes by such Restricted Subsidiary and
(2) until one year after all the notes have been paid in full in cash, such
Restricted Subsidiary waives and will not in any manner whatsoever claim or take
the benefit or advantage of, any rights of reimbursement, indemnity or
subrogation or any other rights against Charter Holdings or any other Restricted
Subsidiary of Charter Holdings as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any Guarantee or any Restricted Subsidiary that existed at
the time such Person became a Restricted Subsidiary and was
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not Incurred in connection with, or in contemplation of, such Person becoming a
Restricted Subsidiary. If the Guaranteed Indebtedness is subordinated to the
Notes, then the Guarantee of such Guaranteed Indebtedness shall be subordinated
to the Subsidiary Guarantee at least to the extent that the Guaranteed
Indebtedness is subordinated to the Notes.
PAYMENTS FOR CONSENT
Charter Holdings will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any holder of Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indentures or the Notes
unless such consideration is offered to be paid and is paid to all holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
REPORTS
Whether or not required by the Commission, so long as any Notes are
outstanding, Charter Holdings will furnish to the holders of Notes, within the
time periods specified in the Commission's rules and regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if Charter Holdings were required to file such Forms, including a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and, with respect to the annual information only, a report on
the annual financial statements by Charter Holdings' certified independent
accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if Charter Holdings were required to file such
reports.
If Charter Holdings has designated any of its Subsidiaries as Unrestricted
Subsidiaries, then the quarterly and annual financial information required by
the preceding paragraph shall include a reasonably detailed presentation, either
on the face of the financial statements or in the footnotes thereto, and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of Charter
Holdings and its Restricted Subsidiaries separate from the financial condition
and results of operations of the Unrestricted Subsidiaries of Charter Holdings.
In addition, whether or not required by the Securities and Exchange
Commission, Charter Holdings will file a copy of all of the information and
reports referred to in clauses (1) and (2) above with the Commission for public
availability within the time periods specified in the Commission's rules and
regulations, unless the Securities and Exchange Commission will not accept such
a filing, and make such information available to securities analysts and
prospective investors upon request.
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of interest on the
notes;
(2) default in payment when due of the principal of or premium, if
any, on the notes;
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(3) failure by Charter Holdings or any of its Restricted Subsidiaries,
to comply with the provisions described under the captions "-- Change of
Control" or "-- Merger, Consolidation, or Sale of Assets";
(4) failure by Charter Holdings or any of its Restricted Subsidiaries,
for 30 days after written notice thereof has been given to Charter Holdings
by the Trustee or to Charter Holdings and the Trustee by holders of at
least 25% of the aggregate principal amount of the notes outstanding to
comply with any of their other covenants or agreements in the indentures;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Charter Holdings or any of its
Restricted Subsidiaries, or the payment of which is guaranteed by Charter
Holdings or any of its Restricted Subsidiaries, whether such Indebtedness
or guarantee now exists, or is created after the date of the indentures, if
that default:
(a) is caused by a failure to pay at final stated maturity the
principal amount on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default
(a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the
maturity of which has been so accelerated, aggregates $100.0 million or
more;
(6) failure by Charter Holdings or any of its Restricted Subsidiaries
to pay final judgments which are non-appealable aggregating in excess of
$100.0 million, net of applicable insurance which has not been denied in
writing by the insurer, which judgments are not paid, discharged or stayed
for a period of 60 days; and
(7) certain events of bankruptcy or insolvency with respect to Charter
Holdings or any of its Significant Subsidiaries.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to Charter Holdings, all outstanding
notes will become due and payable immediately without further action or notice.
If any other Event of Default occurs and is continuing, the trustee or the
holders of at least 25% in principal amount of the then outstanding notes may
declare all the notes to be due and payable immediately.
Holders of the notes may not enforce the indentures or the notes except as
provided in the indentures. Subject to certain limitations, holders of a
majority in principal amount of the then outstanding notes may direct the
trustee in its exercise of any trust or power. The trustee may withhold from
holders of the notes notice of any continuing Default or Event of Default,
except a Default or Event of Default relating to the payment of principal or
interest, if it determines that withholding notice is in their interest.
The holders of a majority in aggregate principal amount of the notes then
outstanding by notice to the Trustee may on behalf of the holders of all of the
notes waive any existing Default or Event of Default and its consequences under
the indentures except a continuing Default or Event of Default in the payment of
interest on, or the principal of, the notes.
Charter Holdings will be required to deliver to the trustee annually a
statement regarding compliance with the indentures. Upon becoming aware of any
Default or Event
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of Default, Charter Holdings will be required to deliver to the trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, MEMBERS AND
STOCKHOLDERS
No director, officer, employee, incorporator, member or stockholder of
Charter Holdings, as such, shall have any liability for any obligations of
Charter Holdings under the notes, the indentures, or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each holder of
notes by accepting a note waives and releases all such liability. The waiver and
release will be part of the consideration for issuance of the notes. The waiver
may not be effective to waive liabilities under the federal securities laws.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Charter Holdings may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding notes ("Legal
Defeasance") except for:
(1) the rights of holders of outstanding notes to receive payments in
respect of the Accreted Value or principal of, premium, if any, and
interest on such notes when such payments are due from the trust referred
to below;
(2) Charter Holdings' obligations with respect to the notes concerning
issuing temporary notes, registration of notes, mutilated, destroyed, lost
or stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee,
and Charter Holdings' obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indentures.
In addition, Charter Holdings may, at its option and at any time, elect to
have the obligations of Charter Holdings released with respect to certain
covenants that are described in the indentures ("Covenant Defeasance") and
thereafter any omission to comply with those covenants shall not constitute a
Default or Event of Default with respect to the notes. In the event Covenant
Defeasance occurs, certain events, not including non-payment, bankruptcy,
receivership, rehabilitation and insolvency events, described under "Events of
Default" will no longer constitute an Event of Default with respect to the
notes.
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) Charter Holdings must irrevocably deposit with the trustee, in
trust, for the benefit of the holders of the notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest on the outstanding notes on the stated maturity or on
the applicable redemption date, as the case may be, and Charter Holdings
must specify whether the notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, Charter Holdings shall have
delivered to the trustee an Opinion of Counsel reasonably acceptable to the
trustee confirming that
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(a) Charter Holdings has received from, or there has been published
by, the Internal Revenue Service a ruling or
(b) since the date of the indentures, there has been a change in
the applicable federal income tax law, in either case to the effect
that, and based thereon such opinion of counsel shall confirm that, the
holders of the outstanding notes will not recognize income, gain or loss
for federal income tax purposes as a result of such Legal Defeasance and
will be subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, Charter Holdings shall have
delivered to the trustee an Opinion of Counsel reasonably acceptable to the
trustee confirming that the holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing either:
(a) on the date of such deposit, other than a Default or Event of
Default resulting from the borrowing of funds to be applied to such
deposit; or
(b) or insofar as Events of Default from bankruptcy or insolvency
events are concerned, at any time in the period ending on the 91st day
after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument, other than the indentures, to which Charter
Holdings or any of its Restricted Subsidiaries is a party or by which
Charter Holdings or any of its Restricted Subsidiaries is bound;
(6) Charter Holdings must have delivered to the trustee an Opinion of
Counsel to the effect that after the 91st day assuming no intervening
bankruptcy, that no holder is an insider of Charter Holdings following the
deposit and that such deposit would not be deemed by a court of competent
jurisdiction a transfer for the benefit of either issuer in its capacity as
such, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally;
(7) Charter Holdings must deliver to the trustee an Officers'
certificate stating that the deposit was not made by Charter Holdings with
the intent of preferring the holders of Notes over the other creditors of
the Company with the intent of defeating, hindering, delaying or defrauding
creditors of Charter Holdings or others; and
(8) Charter Holdings must deliver to the trustee an Officers'
certificate and an opinion of counsel, each stating that all conditions
precedent relating to the Legal Defeasance or the Covenant Defeasance have
been complied with.
Notwithstanding the foregoing, the Opinion of Counsel required by clause
(2) above with respect to a Legal Defeasance need not be delivered if all notes
not theretofore delivered to the trustee for cancellation
(a) have become due and payable or
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(b) will become due and payable on the maturity date within one year under
arrangements satisfactory to the trustee for the giving of notice of redemption
by the trustee in the name, and at the expense, of the issuers.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the indentures or
the notes may be amended or supplemented with the consent of the holders of at
least a majority in principal amount, in the case of the 8.250% notes and the
8.625% notes, and aggregate principal amount at maturity, in the case of the
9.920% notes, of the notes of such series then outstanding, including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, notes, and any existing Default or compliance with any
provision of the indentures or the notes may be waived with the consent of the
holders of a majority in principal amount, in the case of the 8.250% notes and
the 8.625% notes, and aggregate principal amount at maturity, in the case of the
9.920% notes, of the notes of such series then outstanding, including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, notes without the consent of each holder affected, an
amendment or waiver may not, with respect to any notes held by a non-consenting
holder:
(1) reduce the principal amount of notes whose holders must consent to
an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note
or alter the payment provisions with respect to the redemption of the
notes, other than provisions relating to the covenants described above
under the caption "-- Repurchase at the Option of holders";
(3) reduce the rate of or extend the time for payment of interest on
any note;
(4) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the notes, except a rescission of
acceleration of the notes by the holders of at least a majority in
aggregate principal amount of the notes and a waiver of the payment default
that resulted from such acceleration;
(5) make any note payable in money other than that stated in the
notes;
(6) make any change in the provisions of the indentures relating to
waivers of past Defaults or the rights of holders of notes to receive
payments of Accreted Value or principal of, or premium, if any, or interest
on the notes;
(7) waive a redemption payment with respect to any note, other than a
payment required by one of the covenants described above under the caption
"-- Repurchase at the Option of Holders";
(8) make any change in the preceding amendment and waiver provisions.
Notwithstanding the preceding, without the consent of any holder of notes,
Charter Holdings and the trustee may amend or supplement the indentures or the
notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated Notes;
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(3) to provide for the assumption of Charter Holdings' obligations to
holders of notes in the case of a merger or consolidation or sale of all or
substantially all of Charter Holdings' assets;
(4) to make any change that would provide any additional rights or
benefits to the holders of notes or that does not adversely affect the
legal rights under the Indentures of any such holder; or
(5) to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indentures under the Trust Indenture
Act or otherwise as necessary to comply with applicable law.
GOVERNING LAW
The Indentures and the notes will be governed by the laws of the State of
New York.
CONCERNING THE TRUSTEE
If the Trustee becomes a creditor of Charter Holdings, the indentures limit
its right to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue or resign.
The holders of a majority in principal amount of the then outstanding notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The indentures provide that in case an Event of Default
shall occur and be continuing, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indentures at the request of any
holder of notes, unless such holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the indentures
without charge by writing to Charter Communications, Inc., 12444 Powerscourt
Drive, Suite 100, St. Louis, Missouri 63131, Attention: Corporate Secretary.
BOOK-ENTRY, DELIVERY AND FORM
The notes will initially be issued in the form of global securities held in
book-entry form. The notes will be deposited with the trustee as custodian for
the Depository Trust Company, and Depository Trust Company or its nominee will
initially be the sole registered holder of the notes for all purposes under the
indentures. Unless it is exchanged in whole or in part for debt securities in
definitive form as described below, a global security may not be transferred.
However, transfers of the whole security between DTC and its nominee or their
respective successors are permitted.
Upon the issuance of a global security, Depository Trust Company or its
nominee will credit on its internal system the principal amount at maturity of
the individual beneficial interest represented by the global security acquired
by the persons in this offering. Ownership of beneficial interests in a global
security will be limited to persons that have accounts with Depository Trust
Company or persons that hold interests through
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participants. Ownership of beneficial interests will be shown on, and the
transfer of that ownership interest will be effected only through, records
maintained by Depository Trust Company or its nominee relating to interests of
participants and the records of participants relating to interests of persons
other than participants. The laws of some jurisdictions require that some
purchasers of securities take physical delivery of the securities in definitive
form. These limits and laws may impair the ability to transfer beneficial
interests in a global security.
Principal and interest payments on global securities registered in the name
of Depository Trust Company's nominee will be made in immediate available funds
to Depository Trust Company's nominee as the registered owner of the global
securities. The issuers and the trustee will treat Depository Trust Company's
nominee as the owner of the global securities for all other purposes as well.
Accordingly, the issuers, the trustee, any paying agent and the Initial
Purchasers will have no direct responsibility or liability for any aspect of the
records relating to payments made on account of beneficial interests in the
global securities or for maintaining, supervising or reviewing any records
relating to these beneficial interests. It is Depository Trust Company's current
practice, upon receipt of any payment of principal or interest, to credit direct
participants' accounts on the payment date according to their respective
holdings of beneficial interests in the global securities. These payments will
be the responsibility of the direct and indirect participants and not of
Depository Trust Company, the issuers, the Trustee or the Initial Purchasers.
So long as Depository Trust Company or its nominee is the registered owner
or holder of the global security, Depository Trust Company or its nominee, as
the case may be, will be considered the sole owner or holder of the notes
represented by the global security for the purposes of:
(1) receiving payment on the notes;
(2) receiving notices; and
(3) for all other purposes under the indentures and the notes.
Beneficial interests in the notes will be evidenced only by, and transfers of
the notes will be effected only through, records maintained by Depository Trust
Company and its participants.
Except as described above, owners of beneficial interests in a global
security will not be entitled to receive physical delivery of certificated notes
in definitive form and will not be considered the holders of the global security
for any purposes under the indentures. Accordingly, each person owning a
beneficial interest in a global security must rely on the procedures of
Depository Trust Company. And, if that person is not a participant, the person
must rely on the procedures of the participant through which that person owns
its interest, to exercise any rights of a holder under the indentures. Under
existing industry practices, if the issuers request any action of holders or an
owner of a beneficial interest in a global security desires to take any action
under the indentures, Depository Trust Company would authorize the participants
holding the relevant beneficial interest to take that action. The participants
then would authorize beneficial owners owning through the participants to take
the action or would otherwise act upon the instructions of beneficial owners
owning through them.
Depository Trust Company has advised the issuers that it will take any
action permitted to be taken by a holder of notes only at the direction of one
or more participants to whose account with DTC interests in the global security
are credited. Further,
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Depository Trust Company will take action only as to the portion of the
aggregate principal amount at maturity of the notes as to which the participant
or participants has or have given the direction.
Although Depository Trust Company has agreed to the procedures described
above in order to facilitate transfers of interests in global securities among
participants of Depository Trust Company, it is under no obligation to perform
these procedures, and the procedures may be discontinued at any time. None of
the issuers, the Trustee, any agent of the issuers or the Initial Purchasers
will have any responsibility for the performance by Depository Trust Company or
its participants or indirect participants of their respective obligations under
the rules and procedures governing their operations.
Depository Trust Company has provided the following information to us.
Depository Trust Company is a:
(1) limited-purpose trust company organized under the New York Banking Law;
(2) a banking organization within the meaning of the New York Banking Law;
(3) a member of the U.S. Federal Reserve System;
(4) a clearing corporation within the meaning of the New York Uniform
Commercial Code; and
(5) a clearing agency registered under the provisions of Section 17A of the
Securities Exchange Act.
CERTIFICATED NOTES
Notes represented by a global security are exchangeable for certificated
notes only if:
(1) Depository Trust Company notifies the issuers that it is unwilling or
unable to continue as depository or if Depository Trust Company ceases
to be a registered clearing agency, and a successor depository is not
appointed by the issuers within 90 days;
(2) the issuers determine not to require all of the notes to be represented
by a global security and notifies the Trustee of its decision; or
(3) an Event of Default or an event which, with the giving of notice or
lapse of time, or both, would constitute an Event of Default relating
to the notes represented by the global security has occurred and is
continuing.
Any global security that is exchangeable for certificated notes in
accordance with the preceding sentence will be transferred to, and registered
and exchanged for, certificated notes in authorized denominations and registered
in the names as Depository Trust Company or its nominee may direct. However, a
global security is only exchangeable for a global security of like denomination
to be registered in the name of Depository Trust Company or its nominee. If a
global security becomes exchangeable for certificated notes:
(1) certificated notes will be issued only in fully registered form in
denominations of $1,000 or integral multiples of $1,000;
(2) payment of principal, premium, if any, and interest on the certificated
notes will be payable, and the transfer of the certificated notes will
be registrable, at the office or agency of the issuers maintained for
these purposes; and
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(3) no service charge will be made for any issuance of the certificated
notes, although the issuers may require payment of a sum sufficient to
cover any tax or governmental charge imposed in connection with the
issuance.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indentures. Reference
is made to the indentures for a full disclosure of all such terms, as well as
any other capitalized terms used herein for which no definition is provided.
"ACCRETED VALUE" is defined to mean, for any Specific Date, the amount
calculated pursuant to (1), (2), (3) or (4) for each $1,000 of principal amount
at maturity of the 9.920% notes:
(i) if the Specified Date occurs on one or more of the following
dates, each a "Semi-Annual Accrual Date", the Accreted Value will equal the
amount set forth below for such Semi-Annual Accrual Date:
<TABLE>
<CAPTION>
SEMI-ANNUAL
ACCRUAL DATE ACCRETED VALUE
- ------------ --------------
<S> <C>
Issue Date....................................... $ 613.94
October 1, 1999.................................. 646.88
April 1, 2000.................................... 678.96
October 1, 2000.................................. 712.64
April 1, 2001.................................... 747.99
October 1, 2001.................................. 785.09
April 1, 2002.................................... 824.03
October 1, 2002.................................. 864.90
April 1, 2003.................................... 907.80
October 1, 2003.................................. 952.82
April 1, 2004.................................... $1,000.00
</TABLE>
(2) if the Specified Date occurs before the first Semi-Annual Accrual
Date, the Accreted Value will equal the sum of
(a) $613.94 and
(b) an amount equal to the product of
(x) the Accreted Value for the first Semi-Annual Accrual Date
less $613.94 multiplied by (y) a fraction, the numerator of which
is the number of days from the Issue Date of the notes to the
Specified Date, using a 360-day year of twelve 30-day months, and
the denominator of which is the number of days elapsed from the
issue date of the notes to the first Semi-Annual Accrual Date,
using a 360-day year of twelve 30-day months;
(3) if the Specified Date occurs between two Semi-Annual Accrual
Dates, the Accreted Value will equal the sum of
(a) the Accreted Value for the Semi-Annual Accrual Date immediately
preceding such Specified Date and
(b) an amount equal to the product of
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(1) the Accreted Value for the immediately following
Semi-Annual Accrual Date less the Accreted Value for the
immediately preceding Semi-Annual Accrual Date multiplied by (2) a
fraction, the numerator of which is the number of days from the
immediately preceding Semi-Annual Accrual Date to the Specified
Date, using a 360-day year of twelve 30-day months, and the
denominator of which is 180; or
(4) if the Specified Date occurs after the last Semi-Annual Accrual
Date, the Accreted Value will equal $1,000.
"ACQUIRED DEBT" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with, or
in contemplation of, such other Person merging with or into, or becoming a
Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"ASSET ACQUISITION" means
(a) an Investment by Charter Holdings or any of its Restricted
Subsidiaries, in any other Person pursuant to which such Person shall become a
Restricted Subsidiary of Charter Holdings or any of its Restricted Subsidiaries,
or shall be merged with or into Charter Holdings or any of its Restricted
Subsidiaries, or
(b) the acquisition by Charter Holdings or any of its Restricted
Subsidiaries, of the assets of any Person which constitute all or substantially
all of the assets of such Person, any division or line of business of such
Person or any other properties or assets of such Person other than in the
ordinary course of business.
"ASSET SALE" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, other than sales of inventory in the ordinary course of business
consistent with past practices; provided that the sale, conveyance or other
disposition of all or substantially all of the assets of Charter Holdings
and its Restricted Subsidiaries, taken as a whole, will be governed by the
provisions of the indentures described above under the caption "-- Change
of Control" and/or the provisions described above under the caption
"-- Merger, Consolidation or Sale of Assets" and not by the provisions of
the Asset Sale covenant; and
(2) the issuance of Equity Interests by any of Charter Holdings'
Restricted Subsidiaries or the sale of Equity Interests in any of Charter
Holdings' Restricted Subsidiaries.
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Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) any single transaction or series of related transactions that:
(a) involves assets having a fair market value of less than $100
million; or
(b) results in net proceeds to Charter Holdings and its Restricted
Subsidiaries of less than $100 million;
(2) a transfer of assets between or among Charter Holdings and its
Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary of Charter Holdings to Charter Holdings or to another Wholly
Owned Restricted Subsidiary of Charter Holdings;
(4) a Restricted Payment that is permitted by the covenant described
above under the caption "-- Restricted Payments" and a Restricted
Investment that is permitted by the covenant described above under the
caption "-- Investments"; and
(5) the incurrence of Permitted Liens and the disposition of assets
related to such Permitted Liens by the secured party pursuant to a
foreclosure.
"ASSET SALE OFFER" means a situation in which the issuers commence an offer
to all holders to purchase notes pursuant to Section 4.11 of the indentures.
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessee, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"BENEFICIAL OWNER" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person," as such term is used in Section 13(d)(3)
of the Exchange Act, such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire, whether such
right is currently exercisable or is exercisable only upon the occurrence of a
subsequent condition.
"CABLE RELATED BUSINESS" means the business of owning cable television
systems and businesses ancillary, complementary and related thereto.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents, however
designated, of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests, whether general or limited; and
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(4) any other interest, other than any debt obligation, or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"CAPITAL STOCK SALE PROCEEDS" means the aggregate net cash proceeds,
including the fair market value of the non-cash proceeds, as determined by an
independent appraisal firm, received by Charter Holdings since the date of the
indentures
(x) as a contribution to the common equity capital or from the issue
or sale of Equity Interests of Charter Holdings, other than Disqualified
Stock, or
(y) from the issue or sale of convertible or exchangeable Disqualified
Stock or convertible or exchangeable debt securities of Charter Holdings
that have been converted into or exchanged for such Equity Interests, other
than Equity Interests or Disqualified Stock or debt securities sold to a
Subsidiary of the Company.
"CASH EQUIVALENTS" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof,
provided that the full faith and credit of the United States is pledged in
support thereof, having maturities of not more than twelve months from the
date of acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of twelve months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any domestic commercial bank having combined
capital and surplus in excess of $500 million and a Thompson Bank Watch
Rating at the time of acquisition of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above;
(5) commercial paper having a rating of at least "P-1" from Moody's or
at least "A-1" from S&P and in each case maturing within twelve months
after the date of acquisition;
(6) corporate debt obligations maturing within twelve months after the
date of acquisition thereof, rated at the time of acquisition at least
"Aaa" or "P-1" by Moody's or "AAA" or "A-1" by S&P;
(7) auction-rate preferred stocks of any corporation maturing not
later than 45 days after the date of acquisition thereof, rated at the time
of acquisition at least "Aaa" by Moody's or "AAA" by S&P;
(8) securities issued by any state, commonwealth or territory of the
United States, or by any political subdivision or taxing authority thereof,
maturing not later than six months after the date of acquisition thereof,
rated at the time of acquisition at least "A" by Moody's or S&P; and
(9) money market or mutual funds at least 90% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (1) through
(8) of this definition.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition, other than by
way of merger or consolidation, in one or a series of related transactions,
of all or substantially all of the assets of Charter Holdings and its
Subsidiaries, taken as a
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whole, to any "person," as such term is used in Section 13(d)(3) of the
Exchange Act, other than the Principal or a Related Party of the Principal;
(2) the adoption of a plan relating to the liquidation or dissolution
of Charter Holdings;
(3) the consummation of any transaction, including, without
limitation, any merger or consolidation, the result of which is that any
"person," as defined above, other than the Principal and Related Parties
and any entity formed for the purpose of owning Capital Stock of Charter
Holdings, becomes the Beneficial Owner, directly or indirectly, of more
than 35% of the Voting Stock of Charter Holdings, measured by voting power
rather than number of shares, unless the Principal or a Related Party
Beneficially Owns, directly or indirectly a greater percentage of Voting
Stock of Charter Holdings, measured by voting power rather than the number
of shares, than such person;
(4) after Charter Holdings' initial public offering, the first day on
which a majority of the members of the Board of Directors of Charter
Holdings are not Continuing Directors; or
(5) Charter Holdings consolidates with, or merges with or into, any
Person, or any Person consolidates with, or merges with or into, Charter
Holdings, in any such event pursuant to a transaction in which any of the
outstanding Voting Stock of Charter Holdings is converted into or exchanged
for cash, securities or other property, other than any such transaction
where the Voting Stock of Charter Holdings outstanding immediately prior to
such transaction is converted into or exchanged for Voting Stock, other
than Disqualified Stock, of the surviving or transferee Person constituting
a majority of the outstanding shares of such Voting Stock of such surviving
or transferee Person immediately after giving effect to such issuance.
"CHARTER CAPITAL" means Charter Communications Holdings Capital
Corporation, a Delaware corporation.
"CHARTER HOLDINGS" means Charter Communications Holdings, LLC, a Delaware
limited liability company.
"COMPANY PREFERRED STOCK" means the 10% cumulative convertible redeemable
preferred stock of the Company with an aggregate liquidation value of $25
million.
"CONSOLIDATED EBITDA" means with respect to any Person, for any period, the
net income of such Person and its Restricted Subsidiaries for such period plus,
to the extent such amount was deducted in calculating such net income:
(1) Consolidated Interest Expense;
(2) income taxes;
(3) depreciation expense;
(4) amortization expense;
(5) all other non-cash items, extraordinary items, nonrecurring and
unusual items and the cumulative effects of changes in accounting
principles reducing such net income, less all non-cash items, extraordinary
items, nonrecurring and unusual items and cumulative effects of changes in
accounting principles increasing such net income, all as determined on a
consolidated basis for Charter Holdings and its Restricted Subsidiaries in
conformity with GAAP;
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(6) amounts actually paid during such period pursuant to a deferred
compensation plan; and
(7) for purposes of the covenant "-- Incurrence of Indebtedness and
Issuance of preferred stock" only, Management Fees;
provided that Consolidated EBITDA shall not include:
(x) the net income, or net loss, of any Person that is not a
Restricted Subsidiary ("Other Person"), except (I) with respect to net
income, to the extent of the amount of dividends or other distributions
actually paid to such Person or any of its Restricted Subsidiaries by
such Other Person during such period and (II) with respect to net
losses, to the extent of the amount of investments made by such Person
or any Restricted Subsidiary of such Person in such Other Person during
such period;
(y) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (3) of the covenant
described under the subheading "Certain Covenants -- Restricted
Payments," and in such case, except to the extent includable pursuant to
clause (x) above, the net income or net loss, of any Other Person
accrued prior to the date it becomes a Restricted Subsidiary or is
merged into or consolidated with such Person or any Restricted
Subsidiaries or all or substantially all of the property and assets of
such Other Person are acquired by such Person or any of its Restricted
Subsidiaries; and
(z) the net income of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary, other than any agreement or
instrument evidencing Indebtedness or preferred stock outstanding on the
date of the Indenture or incurred or issued thereafter in compliance
with the covenant described under the caption "Certain Covenants --
Incurrence of Indebtedness and Issuance of preferred stock"; provided
that the terms of any such agreement restricting the declaration and
payment of dividends or similar distributions apply only in the event of
a default with respect to a financial covenant or a covenant relating to
payment, beyond any applicable period of grace, contained in such
agreement or instrument and provided such terms are determined by such
Person to be customary in comparable financings and such restrictions
are determined by the Company not to materially affect the Company's
ability to make principal or interest payments on the notes when due.
"CONSOLIDATED INDEBTEDNESS" means, with respect to any Person as of any
date of determination, the sum, without duplication, of:
(1) the total amount of outstanding Indebtedness of such Person and
its Restricted Subsidiaries, plus
(2) the total amount of Indebtedness of any other Person, that has
been Guaranteed by the referent Person or one or more of its Restricted
Subsidiaries, plus
(3) the aggregate liquidation value of all Disqualified Stock of such
Person and all preferred stock of Restricted Subsidiaries of such Person,
in each case, determined on a consolidated basis in accordance with GAAP.
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"CONSOLIDATED INTEREST EXPENSE" means, with respect to any Person for any
period, without duplication, the sum of:
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued,
including, without limitation, amortization or original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net payments, if any, pursuant to Hedging Obligations; and
(2) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and
(3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries,
whether or not such Guarantee or Lien is called upon;
excluding, however, any amount of such interest of any Restricted Subsidiary if
the net income of such Restricted Subsidiary is excluded in the calculation of
Consolidated EBITDA pursuant to clause (z) of the definition thereof, but only
in the same proportion as the net income of such Restricted Subsidiary is
excluded from the calculation of Consolidated EBITDA pursuant to clause (z) of
the definition thereof, in each case, on a consolidated basis and in accordance
with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member
of the Board of Directors of Charter Holdings who:
(1) was a member of such Board of Directors on the date of the
Indentures; or
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election or whose
election or appointment was previously so approved.
"CREDIT FACILITIES" means, with respect to Charter Holdings, and/or its
Restricted Subsidiaries, one or more debt facilities or commercial paper
facilities, in each case with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing, including through the
sale of receivables to such lenders or to special purpose entities formed to
borrow from such lenders against such receivables, or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or refinanced
in whole or in part from time to time.
"DEFAULT" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"DISPOSITION" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person, whether or not such Person
is the Surviving Person, or the sale, assignment, or transfer, lease conveyance
or other disposition of all or substantially all of such Person's assets or
Capital Stock.
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms, or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof, or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable
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at the option of the holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the notes mature. Notwithstanding
the preceding sentence, any Capital Stock that would constitute Disqualified
Stock solely because the holders thereof have the right to require Charter
Holdings to repurchase such Capital Stock upon the occurrence of a change of
control or an asset sale shall not constitute Disqualified Stock if the terms of
such Capital Stock provide that Charter Holdings may not repurchase or redeem
any such Capital Stock pursuant to such provisions unless such repurchase or
redemption complies with the covenant described above under the caption
"-- Certain Covenants -- Restricted Payments."
"EVENTS OF DEFAULTS" means:
(1) the issuers default in the payment when due of interest on the
notes and such default continues for a period of 30 days;
(2) the issuers default in payment when due of the principal of or
premium, if any, on the notes;
(3) the Company or any of its Restricted Subsidiaries, or the
guarantor or any of its Restricted Subsidiaries, fails to comply with any
of the provisions of Sections 4.16 or 5.01;
(4) the Company or any of its Restricted Subsidiaries, or the
guarantor or any of its Restricted Subsidiaries, fails to comply with any
of their other covenants or agreements in the indentures for 30 days after
written notice thereof has been given to the Company by the trustee or to
the Company and the trustee by holders of at least 25% of the aggregate
principal amount of the notes outstanding;
(5) the Company or any of its Restricted Subsidiaries, or the
guarantor or any of its Restricted Subsidiaries, defaults under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money
borrowed, or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries, or by the Guarantor or any of its Restricted
Subsidiaries, whether such Indebtedness or guarantee now exists or is
created after the date of the indentures, if that default:
(a) is caused by a failure to pay at final stated maturity the
principal amount on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default,
a "Payment Default"; or
(b) results in the acceleration of such Indebtedness prior to its
express maturity;
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness under
which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $100.0 million or more;
(6) the Company or any of its Restricted Subsidiaries, or the
guarantor or any of its Restricted Subsidiaries, fails to pay final
judgments which are non-appealable aggregating in excess of $100.0 million,
net of applicable insurance which has not been denied in writing by the
insurer, which judgments are not paid, discharged or stayed for a period of
60 days;
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(7) the Company, the guarantor or any of their Significant
Subsidiaries pursuant to or within the meaning of Bankruptcy Law:
(a) commences a voluntary case,
(b) consents to the entry of an order for relief against it in an
involuntary case,
(c) consents to the appointment of a custodian of it or for all or
substantially all of its property, or
(d) makes a general assignment for the benefit of its creditors; or
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(a) is for relief against the Company, the guarantor or any of
their Significant Subsidiaries in an involuntary case;
(b) appoints a custodian of the Company, the guarantor or any of
their Significant Subsidiaries or for all or substantially all of the
property of the Company, the guarantor or any of their Significant
Subsidiaries; or
(c) orders the liquidation of the Company, the guarantor or any of
their Significant Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
(9) except as permitted by the indenture, the Guarantee of the
guarantor shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or the
guarantor, or any Person acting on behalf of the guarantor, shall deny or
disaffirm its obligations under the Guarantee;
(10) except as permitted by this Indenture, any of the pledge
documents cease to be in full force and effect, other than in accordance
with their respective terms or the terms of the Indenture, or any of the
pledge documents cease to give the trustee or the Company, as the case may
be, the Liens purported to be created thereby, or any pledge document is
declared null and void, or the Company or the guarantor shall repudiate or
deny in writing that it has any liability or obligation under any pledge
document.
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock, but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.
"EQUITY OFFERING" means any private or underwritten public offering of
Qualified Capital Stock of Charter Holdings which the gross proceeds to the
Company are at least $25 million.
"EXCESS PROCEEDS" means any Net Proceeds from Asset Sales that are not
applied to repay debt under the Credit Facilities or other Indebtedness or
invested in Productive Assets, in accordance with the indenture.
"EXISTING INDEBTEDNESS" means Indebtedness of Charter Holdings and its
Restricted Subsidiaries in existence on the date of the Indentures, until such
amounts are repaid.
"FULL ACCRETION DATE" means April 1, 2004, the first date on which the
Accreted Value of the 9.920% notes has accreted to an amount equal to the
principal amount at maturity of the 9.920% notes.
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"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect on the Issue Date.
"GUARANTEE" or "GUARANTEE" means a guarantee other than by endorsement of
negotiable instruments for collection in the ordinary course of business, direct
or indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness, measured as the lesser of the
aggregate outstanding amount of the Indebtedness so guaranteed and the face
amount of the guarantee.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements;
(2) interest rate option agreements, foreign currency exchange
agreements, foreign currency swap agreements; and
(3) other agreements or arrangements designed to protect such Person
against fluctuations in interest and currency exchange rates.
"INDEBTEDNESS" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit, or reimbursement agreements in respect thereof;
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
(5) in respect of the balance deferred and unpaid of the purchase
price of any property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing the notional amount of any Hedging Obligations,
if and to the extent any of the preceding items, other than letters of credit
and Hedging Obligations, would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person, whether or not such Indebtedness is assumed by
the specified Person, and, to the extent not otherwise included, the guarantee
by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
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"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons, including Affiliates, in the forms of direct or
indirect loans, including guarantees of Indebtedness or other obligations,
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business,
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"INVESTMENT GRADE RATING" means a rating equal to or higher than Baa3, or
the equivalent, by Moody's and BBB-, or the equivalent, by S&P.
"ISSUE DATE" means the date on which the notes are initially issued.
"LEVERAGE RATIO" means, as of any date, the ratio of:
(1) the Consolidated Indebtedness of the Company on such date to
(2) the aggregate amount of combined Consolidated EBITDA for Charter
Holdings for the most recently ended fiscal quarter for which internal
financial statements are available multiplied by four (the "Reference
Period").
In addition to the foregoing, for purposes of this definition,
"Consolidated EBITDA" shall be calculated on a pro forma basis after giving
effect to
(1) the issuance of the notes;
(2) the incurrence of the Indebtedness or the issuance of the
Disqualified Stock or other preferred stock of a Restricted Subsidiary, and
the application of the proceeds therefrom, giving rise to the need to make
such calculation and any incurrence or issuance, and the application of the
proceeds therefrom, or repayment of other Indebtedness or Disqualified
Stock or other preferred stock or a Restricted Subsidiary, other than the
incurrence or repayment of Indebtedness for ordinary working capital
purposes, at any time subsequent to the beginning of the Reference Period
and on or prior to the date of determination, as if such incurrence, and
the application of the proceeds thereof, or the repayment, as the case may
be, occurred on the first day of the Reference Period;
(3) any Dispositions or Asset Acquisitions, including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted
Subsidiaries, including any person that becomes a Restricted Subsidiary as
a result of such Asset Acquisition, incurring, assuming or otherwise
becoming liable for or issuing Indebtedness, Disqualified Stock or
Preferred Stock, made on or subsequent to the first day of the Reference
Period and on or prior to the date of determination, as if such
Disposition, Asset Acquisition, including the incurrence, assumption or
liability for any such Indebtedness Disqualified Stock or preferred stock
and also including any Consolidated EBITDA associated with such Asset
Acquisition, including any cost savings adjustments in compliance with
Regulation S-X promulgated by the Commission, had occurred on the first day
of the Reference Period.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code, or equivalent statutes, of any jurisdiction.
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"MANAGEMENT FEES" means the fee payable to Charter Communications, Inc.
pursuant to the management agreement between Charter Communications, Inc. and
Charter Communications Operating LLC, as such agreement exists on the Issue
Date, including any amendment or replacement thereof, provided that any such
amendment or replacement is not more disadvantageous to the holders of the notes
in any material respect from such management agreement existing on the Issue
Date.
"MARCUS COMBINATION" means the consolidation or merger of the Guarantor
with and into the Company or any of its Restricted Subsidiaries.
"MOODY'S" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"NET PROCEEDS" means the aggregate cash proceeds received by Charter
Holdings or any of its Restricted Subsidiaries in respect of any Asset Sale,
including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale, net of the
direct costs relating to such Asset Sale, including, without limitation, legal,
accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof or taxes paid or payable as a
result thereof, including amounts distributable in respect of owners', partners'
or members' tax liabilities resulting from such sale, in each case after taking
into account any available tax credits or deductions and any tax sharing
arrangements and amounts required to be applied to the repayment of
Indebtedness.
"NON-RECOURSE DEBT" means Indebtedness:
(1) as to which neither Charter Holdings nor any of its Restricted
Subsidiaries
(a) provides credit support of any kind, including any undertaking,
agreement or instrument that would constitute Indebtedness,
(b) is directly or indirectly liable as a guarantor or otherwise,
or
(c) constitutes the lender;
(2) no default with respect to which, including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary, would permit upon notice, lapse of time or both any holder of
any other Indebtedness, other than the notes, of Charter Holdings or any of
its Restricted Subsidiaries to declare a default on such other Indebtedness
or cause the payment thereof to be accelerated or payable prior to its
stated maturity; and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of Charter Holdings or
any of its Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PAYING AGENT" means an office or agency where notes may be presented for
payment.
"PERMITTED INVESTMENTS" means:
(1) any Investment by Charter Holdings in a Restricted Subsidiary of
Charter Holdings, or any Investment by a Restricted Subsidiary of Charter
Holdings in Charter Holdings;
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(2) any Investment in Cash Equivalents;
(3) any Investment by Charter Holdings or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of Charter
Holdings; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, Charter Holdings or a Restricted Subsidiary of Charter
Holdings;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"-- Repurchase at the Option of Holders -- Asset Sales";
(5) Investment made out of the net cash proceeds of the issue and
sale, other than to a Subsidiary of Charter Holdings, of Equity Interests,
other than Disqualified Stock, of Charter Holdings to the extent that such
net cash proceeds have not been applied to make a Restricted Payment or to
effect other transactions pursuant to the covenant described above under
the subheading "-- Restricted Payments" or to the extent such net cash
proceeds have not been used to incur Indebtedness pursuant to clause (10)
of the covenant described above under the subheading "-- Incurrence of
Indebtedness and Issuance of preferred stock";
(6) Investments in Productive Assets having an aggregate fair market
value, measured on the date each such Investment was made and without
giving effect to subsequent changes is value, when taken together with all
other Investments made pursuant to this clause (6) since the Issue Date,
not to exceed $150 million; provided that either Charter Holdings or any of
its Restricted Subsidiaries, after giving effect to such Investments, will
own at least 20% of the Voting Stock of such Person;
(7) other Investments in any Person having an aggregate fair market
value, measured on the date each such Investment was made and without
giving effect to subsequent changes in value, when taken together with all
other Investments made pursuant to this clause (7) since the date of the
indentures, not to exceed $50 million;
(8) Investments in customers and suppliers in the ordinary course of
business which either (A) generate accounts receivable or (B) are accepted
in settlement of bona fide disputes; and
(9) Charter Holdings' investment in Marcus Cable Holdings, LLC, as
outstanding on the Issue Date.
"PERMITTED LIENS" means:
(1) Liens on the assets of Charter Holdings securing Indebtedness and
other Obligations under clause (1) of the covenant "-- Incurrence of
Indebtedness and Issuance of preferred stock";
(2) Liens in favor of Charter Holdings and Liens on the assets of any
Restricted Subsidiary of Charter Holdings in favor of any other Restricted
Subsidiary of Charter Holdings;
(3) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with Charter Holdings; provided that
such Liens were in existence prior to the contemplation of such merger or
consolidation and do not
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extend to any assets other than those of the Person merged into or
consolidated with Charter Holdings;
(4) Liens on property existing at the time of acquisition thereof by
Charter Holdings; provided that such Liens were in existence prior to the
contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) purchase money mortgages or other purchase money liens, including
without limitation any Capitalized Lease Obligations, incurred by Charter
Holdings upon any fixed or capital assets acquired after the Issue Date or
purchase money mortgages, including without limitation Capitalized Lease
Obligations, on any such assets, whether or not assumed, existing at the
time of acquisition of such assets, whether or not assumed, so long as
(a) such mortgage or lien does not extend to or cover any of the
assets of Charter Holdings, except the asset so developed, constructed,
or acquired, and directly related assets such as enhancements and
modifications thereto, substitutions, replacements, proceeds, including
insurance proceeds, products, rents and profits thereof, and
(b) such mortgage or lien secures the obligation to pay the
purchase price of such asset, interest thereon and other charges, costs
and expenses, including, without limitation, the cost of design,
development, construction, acquisition, transportation, installation,
improvement, and migration, and incurred in connection therewith, or the
obligation under such Capitalized Lease Obligation, only;
(7) Liens existing on the date of the Indentures, other than in
connection with the Credit Facilities;
(8) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(9) statutory and common law Liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen or other similar
Liens arising in the ordinary course of business and with respect to
amounts not yet delinquent or being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for
which a reserve or other appropriate provision, if any, as shall be
required in conformity with GAAP shall have been made;
(10) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security;
(11) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligation, bankers'
acceptance, surety and appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of a similar nature incurred in
the ordinary course of business, exclusive of obligations for the payment
of borrowed money;
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(12) easements, rights-of-way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of Charter
Holdings or any of its Restricted Subsidiaries or the Guarantor or any of
its Restricted Subsidiaries;
(13) Liens of franchisors or other regulatory bodies arising in the
ordinary course of business;
(14) Liens arising from filing Uniform Commercial Code financing
statements regarding leases or other Uniform Commercial Code financing
statements for precautionary purposes relating to arrangements not
constituting Indebtedness;
(15) Liens arising from the rendering of a final judgment or order
against Charter Holdings or any of its Restricted Subsidiaries that does
not give rise to an Event of Default;
(16) Liens securing reimbursement obligations with respect to letters
of credit that encumber documents and other property relating to such
letters of credit and the products and proceeds thereof;
(17) Liens encumbering customary initial deposits and margin deposits,
and other Liens that are within the general parameters customary in the
industry and incurred in the ordinary course of business, in each case,
securing Indebtedness under Hedging Obligations and forward contracts,
options, future contracts, future options or similar agreements or
arrangements designed solely to protect Charter Holdings or any of its
Restricted Subsidiaries from fluctuations in interest rates, currencies or
the price of commodities;
(18) Liens consisting of any interest or title of licensor in the
property subject to a license;
(19) Liens on the Capital Stock of Unrestricted Subsidiaries;
(20) Liens arising from sales or other transfers of accounts
receivable which are past due or otherwise doubtful of collection in the
ordinary course of business;
(21) Liens incurred in the ordinary course of business of Charter
Holdings, with respect to obligations which in the aggregate do not exceed
$50 million at any one time outstanding;
(22) Liens in favor of the Trustee arising under the provisions in the
Indentures under the subheading "-- Compensation and Indemnity"; and
(23) Liens in favor of the Trustee for its benefit and the benefit of
holders of the Notes, as their respective interests appear.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of Charter
Holdings or any of its Restricted Subsidiaries, issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of Charter Holdings or any of its Restricted
Subsidiaries, other than intercompany Indebtedness, provided that unless
permitted otherwise by the Indentures, no Indebtedness of Charter Holdings or
any of its Restricted Subsidiaries may be issued in exchange for, or the net
proceeds of are used to extend, refinance, renew, replace, defease or refund
Indebtedness of Charter Holdings or any of its Restricted Subsidiaries;
provided, further, that:
(1) the principal amount, or accreted value, if applicable, of such
Permitted Refinancing Indebtedness does not exceed the principal amount of,
or accreted value,
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if applicable, plus accrued interest and premium, if any, on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded, plus the amount of reasonable expenses incurred in connection
therewith;
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the Notes, such
Permitted Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the
Notes on terms at least as favorable to the holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by Charter Holdings or by any
of its Restricted Subsidiaries who is the obligor on the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded.
"PERSON" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
"PRINCIPAL" means Paul G. Allen.
"PRODUCTIVE ASSETS" means assets, including assets of a referent Person
owned directly or indirectly through ownership of Capital Stock, of a kind used
or useful in the Cable Related Business.
"QUALIFIED CAPITAL STOCK" means any Capital Stock that is not Disqualified
Stock.
"RATING AGENCIES" means Moody's and S&P.
"RELATED PARTY" means:
(1) the spouse or an immediate family member, estate or heir of the
Principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of the
Principal and/or such other Persons referred to in the immediately
preceding clause (1).
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Service, a division of the
McGraw-Hill Companies, Inc. or any successor to the rating agency business
thereof.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary of the Company
which is a "Significant Subsidiary" as defined in Rule 1-02(w) of Regulation S-X
under the Securities Act.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was
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scheduled to be paid in the documentation governing such Indebtedness on the
Issue Date, or, if none, the original documentation governing such Indebtedness,
and shall not include any contingent obligations to repay, redeem or repurchase
any such interest or principal prior to the date originally scheduled for the
payment thereof.
"SUBORDINATED DEBT FINANCING" means, with respect to any restricted
subsidiary of Charter Holdings or the guarantor, a public offering or private
placement, whether pursuant to Rule 144A under the Securities Act or otherwise,
of subordinated notes or preferred stock, whether or not such preferred stock
constitutes disqualified stock, as the case may be, of such restricted
subsidiary to one or more purchasers, other than to one or more affiliates of
Charter Holdings or the guarantor.
"SUBSIDIARY" means, with respect to any Person:
(1) any corporation, association or other business entity of which at
least 50% of the total voting power of shares of Capital Stock entitled,
without regard to the occurrence of any contingency, to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such Person or one or more of the
other Subsidiaries of that Person, or a combination thereof, and, in the
case of any such entity of which 50% of the total voting power of shares of
Capital Stock is so owned or controlled by such Person or one or more of
the other Subsidiaries of such Person, such Person and its Subsidiaries
also has the right to control the management of such entity pursuant to
contract or otherwise; and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or of one or more
Subsidiaries of such Person, or any combination thereof.
"UNRESTRICTED SUBSIDIARY" means any Subsidiary of Charter Holdings that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution, but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with Charter Holdings or any Restricted Subsidiary of Charter
Holdings unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to Charter Holdings or any Restricted
Subsidiary than those that might be obtained at the time from Persons who
are not Affiliates of Charter Holdings unless such terms constitute
Investments permitted by the covenant described above under the heading
"-- Investments";
(3) is a Person with respect to which neither Charter Holdings nor any
of its Restricted Subsidiaries has any direct or indirect obligation
(a) to subscribe for additional Equity Interests or
(b) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of Charter Holdings or any of its
Restricted Subsidiaries; and
(5) has at least one director on its board of directors that is not a
director or executive officer of Charter Holdings or any of its Restricted
Subsidiaries or has at
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least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries.
Any designation of a Subsidiary of Charter Holdings as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described above under the
caption "Certain Covenants -- Investments." If, at any time, any Unrestricted
Subsidiary would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of the Indentures and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of Charter Holdings as of such
date and, if such Indebtedness is not permitted to be incurred as of such date
under the covenant described under the caption "Incurrence of Indebtedness and
Issuance of preferred stock," Charter Holdings shall be in default of such
covenant. The Board of Directors of Charter Holdings may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of Charter Holdings of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation shall only be permitted if
(1) such Indebtedness is permitted under the covenant described under the
caption "Certain Covenants -- Incurrence of Indebtedness and Issuance of
preferred stock," calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period; and
(2) no Default or Event of Default would be in existence following such
designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the board of
directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by
(b) the number of years, calculated to the nearest one-twelfth,
that will elapse between such date and the making of such payment; by
(2) the then outstanding principal amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which, other than directors' qualifying shares, shall at
the time be owned by such Person and/or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
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CERTAIN FEDERAL TAX CONSIDERATIONS
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
Set forth below are the material United States federal income tax
consequences relevant to, in the opinion of Paul, Hastings, Janofsky & Walker,
LLP, our legal counsel, of the exchange offer. Except where noted, the following
deals only with notes held as capital assets within the meaning of section 1221
of the Internal Revenue Code of 1986, as amended by a holder of notes that is an
individual citizen or resident of the United States or a United States
corporation that purchased the notes pursuant to their original issue. The
following does not deal with special situations, such as those of
broker-dealers, tax-exempt organizations, individual retirement accounts and
other tax deferred accounts, financial institutions, insurance companies, or
persons holding notes as part of a hedging or conversion transaction or a
straddle. Furthermore, the following is based upon the provisions of the
Internal Revenue Code and regulations, rulings and judicial decisions
promulgated under the Internal Revenue Code as of the date hereof. Such
authorities may be repealed, revoked, or modified, possibly with retroactive
effect, so as to result in United States federal income tax consequences
different from those discussed below. In addition, except as otherwise
indicated, the following does not consider the effect of any applicable foreign,
state, local or other tax laws or estate or gift tax considerations.
As used herein, a "United States person" is
(1) a citizen or resident of the U.S.,
(2) a corporation, partnership or other entity created or organized in or
under the laws of the U.S. or any political subdivision thereof,
(3) an estate the income of which is subject to U.S. federal income
taxation regardless of its source,
(4) a trust if
(A) a United States court is able to exercise primary supervision over
the administration of the trust and
(B) one or more United States persons have the authority to control
all substantial decisions of the trust,
(5) a certain type of trust in existence on August 20, 1996, which was
treated as a United States person under the Internal Revenue Code in effect
immediately prior to such date and which has made a valid election to be treated
as a United States person under the Internal Revenue Code and
(6) any person otherwise subject to U.S. federal income tax on a net income
basis in respect of its worldwide taxable income.
A U.S. holder is a beneficial owner of a note who is a United States
person. A non-U.S. holder is a beneficial owner of a note that is not a U.S.
holder.
THE EXCHANGE OFFER
The exchange of new notes pursuant to the exchange offer will be treated as
a continuation of the corresponding original notes because the terms of the new
notes are not materially different from the terms of the original notes.
Accordingly:
(1) such exchange will not constitute a taxable event to a U.S. holder,
(2) no gain or loss will be realized by a U.S. holder upon receipt of a new
note,
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(3) the holding period of the new note will include the holding period of
the original note exchanged therefor and
(4) the adjusted tax basis of the new notes will be the same as the
adjusted tax basis of the original notes exchange.
The filing of a shelf registration statement should not result in a taxable
exchange to us or any holder of a note.
UNITED STATES FEDERAL INCOME TAXATION OF U.S. HOLDERS
PAYMENTS OF INTEREST ON THE 8.250% NOTES AND THE 8.625% NOTES.
Interest on the 8.250% notes and the 8.625% notes, as the case may be, will
be taxable to a U.S. holder as ordinary income from domestic sources at the time
it is paid or accrued in accordance with the U.S. holder's regular method of
accounting for tax purposes.
ORIGINAL ISSUE DISCOUNT ON THE 9.920% NOTES
The 9.920% notes will be issued with original issue discount. This means
that such notes will be issued at an issue price which is substantially less
than their stated principal amount at maturity, and because interest on such
notes will not be payable until October 1, 2004. Each U.S. holder will be
required to include in income in each year, in advance of receipt of cash
payments on such notes to which such income is attributable, original issue
discount income as described below.
The amount of original issue discount with respect to the 9.920% notes will
be equal to the excess of
(1) the note's "stated redemption price at maturity" over
(2) its "issue price."
The issue price of the 9.920% notes will be equal to the price to the
public at which a substantial amount of such notes is initially sold for money,
excluding any sales to a bond house, broker or similar person or organization
acting in the capacity of an underwriter, placement agent or wholesaler. The
stated redemption price at maturity of such a note is the total of all payments
provided by the 9.920% notes, including stated interest payments.
A U.S. holder of such a note is required to include in gross income for
U.S. federal income tax purposes an amount equal to the sum of the "daily
portions" of such original issue discount for all days during the taxable year
on which the holder holds such note. The daily portions of original issue
discount required to be included in such holder's gross income in a taxable year
will be determined on a constant yield basis. A pro rata portion of the original
issue discount on such note which is attributable to the "accrual period" in
which such day is included will be allocated to each day during the taxable year
in which the holder holds the 9.920% notes. Accrual periods with respect to such
a note may be of any length and may vary in length over the term of the 9.920%
notes as long as
(1) no accrual period is longer than one year and
(2) each scheduled payment of interest or principal on such note occurs on
either the first or final day of an accrual period. The amount of original issue
discount attributable to each accrual period will be equal to the product of
(1) the "adjusted issue price" at the beginning of such accrual period and
(2) the "yield to maturity" of the instrument, stated in a manner
appropriately taking into account the length of the accrual period.
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The yield to maturity is the discount rate that, when used in computing the
present value of all payments to be made under the 9.920% notes, produces an
amount equal to the issue price of such notes. The adjusted issue price of such
a note at the beginning of an accrual period is generally defined as the issue
price of such note plus the aggregate amount of original issue discount that
accrued in all prior accrual periods, less any cash payments made on the 9.920%
notes. Accordingly, a U.S. holder of such a note will be required to include
original issue discount in gross income for U.S. federal income tax purposes in
advance of the receipt of cash attributable to such income. The amount of
original issue discount allocable to an initial short accrual period may be
computed using any reasonable method if all other accrual periods, other than a
final short accrual period, are of equal length. The amount of original issue
discount allocable to the final accrual period at maturity of a 9.920% note is
the difference between
(A) the amount payable at the maturity of such note and
(B) such note's adjusted issue price as of the beginning of the final
accrual period.
Payments on the 9.920% notes, including principal and stated interest
payments, are not separately included in a U.S. holder's income. Such payments
are treated first as payments of accrued original issue discount to the extent
of such accrued original issue discount and the excess as payments of principal,
which reduce the U.S. holder's adjusted tax basis in such notes.
EFFECT OF MANDATORY AND OPTIONAL REDEMPTION ON ORIGINAL ISSUE DISCOUNT
In the event of a change of control, we will be required to offer to redeem
all of the notes, at redemption prices specified elsewhere in this prospectus.
If we receive net proceeds from one or more equity offerings, we may, at our
option, use all or a portion of such net proceeds to redeem in the aggregate up
to 35% of the aggregate principal amount at maturity of the 8.625% notes and up
to 35% of the aggregate principal amount at maturity of the 9.920% notes,
provided that at least 65% of the aggregate principal amount of the 8.625% notes
and of the aggregate principal amount at maturity of the 9.920% notes remains
outstanding after each such redemption. Computation of the yield and maturity of
the notes is not affected by such redemption rights and obligations if, based on
all the facts and circumstances as of the issue date, the stated payment
schedule of the notes, that does not reflect the change of control event or
equity offering event, is significantly more likely than not to occur. We have
determined that, based on all of the facts and circumstances as of the issue
date, it is significantly more likely than not that the notes will be paid
according to their stated schedule.
We may redeem the 8.625% notes and the 9.920% notes, in whole or in part,
at any time on or after April 1, 2004, at redemption prices specified plus
accrued and unpaid stated interest, if any, on the notes so redeemed but
excluding the date of redemption. The United States Treasury Regulations contain
rules for determining the "maturity date" and the stated redemption price at
maturity of an instrument that may be redeemed prior to its stated maturity date
at the option of the issuer. Under United States Treasury Regulations, solely
for the purposes of the accrual of original issue discount, it is assumed that
an issuer will exercise any option to redeem a debt instrument if such exercise
would lower the yield to maturity of the debt instrument. We will not be
presumed to redeem the notes prior to their stated maturity under these rules
because the exercise of such options would not lower the yield to maturity of
the notes.
U.S. holders may wish to consult their own tax advisors regarding the
treatment of such contingencies.
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SALE, EXCHANGE OR RETIREMENT OF THE NOTES
Upon the sale, exchange, retirement or other taxable disposition of a note,
the holder will recognize gain or loss in an amount equal to the difference
between
(1) the amount of cash and the fair market value of other property received
in exchange. Amounts attributable to accrued but unpaid interest on the 8.250%
notes and the 8.625% notes will be treated as ordinary interest income and
(2) the holder's adjusted tax basis in such note. A holder's adjusted tax
basis in a note will equal the purchase price paid by such holder for the note
increased in the case of a 9.920% note by any original issue discount previously
included in income by such holder with respect to such note, and decreased in
the case of a 9.920% note by any payments received on such note.
Gain or loss realized on the sale, exchange, retirement or other taxable
disposition of a note will be capital gain or loss and will be long-term capital
gain or loss if at the time of sale, exchange, retirement, or other taxable
disposition, the note has been held for more than 12 months. The maximum rate of
tax on long-term capital gains with respect to notes held by an individual is
20%. The deductibility of capital losses is subject to certain limitations.
MARKET DISCOUNT
A holder receives a "market discount" when it
(1) purchases an 8.250% note or an 8.625% Note for an amount below the
issue price, or
(2) purchases a 9.920% note for an amount below the adjusted issue price on
the date of purchase, as determined in accordance with the original issue
discount rules above.
Under the market discount rules, a U.S. holder will be required to treat
any partial principal payment on, or any gain on the sale, exchange, retirement
or other disposition of, a note as ordinary income to the extent of the market
discount which has not previously been included in income and is treated as
having accrued on such note at the time of such payment or disposition. In
addition, the U.S. holder may be required to defer, until the maturity of the
note or its earlier disposition in a taxable transaction, the deduction of a
portion of the interest expense on any indebtedness incurred or continued to
purchase or carry such notes.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the note, unless the U.S.
holder elects to accrue such discount on a constant interest rate method. A U.S.
holder may elect to include market discount in income currently as it accrues,
on either a ratable or constant interest rate method. If this election is made,
the holder's basis in the note will be increased to reflect the amount of income
recognized and the rules described above regarding deferral of interest
deductions will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired on or
after the first taxable year to which the election applies and may not be
revoked without the consent of the Internal Revenue Service.
AMORTIZABLE BOND PREMIUM; ACQUISITION PREMIUM
A U.S. holder that:
(1) purchases an 8.250% note or an 8.625% note for an amount in excess of
the principal amount, or
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(2) purchases a 9.920% note for an amount in excess of the stated
redemption price
will be considered to have purchased such note with "amortizable bond
premium." A U.S. holder generally may elect to amortize the premium over the
remaining term of the note on a constant yield method as applied with respect to
each accrual period of the note, and allocated ratably to each day within an
accrual period in a manner substantially similar to the method of calculating
daily portions of original issue discount, as described above. However, because
the notes may be optionally redeemed for an amount that is in excess of their
principal amount, special rules apply that could result in a deferral of the
amortization of bond premium until later in the term of the note. The amount
amortized in any year will be treated as a reduction of the U.S. holder's
interest income, including original issue discount income, from the note. Bond
premium on a note held by a U.S. holder that does not make such an election will
decrease the gain or increase the loss otherwise recognized upon disposition of
the note. The election to amortize premium on a constant yield method, once
made, applies to all debt obligations held or subsequently acquired by the
electing U.S. holder on or after the first day of the first taxable year to
which the election applies and may not be revoked without the consent of the
Internal Revenue Service.
A U.S. holder that purchases a 9.920% note for an amount that is greater
than the adjusted issue price of such note on the date of purchase, as
determined in accordance with the original issue discount rules, above, will be
considered to have purchased such note at an "acquisition premium." A holder of
a 9.920% note that is purchased at an acquisition premium may reduce the amount
of the original issue discount otherwise includible in income with respect to
such note by the "acquisition premium fraction." The acquisition premium
fraction is that fraction the numerator of which is the excess of the holder's
adjusted tax basis in such note immediately after its acquisition over the
adjusted issue price of such note, and the denominator of which is the excess of
the sum of all amounts payable on such note after the purchase date over the
adjusted issue price of such note. Alternatively, a holder of a 9.920% note that
is purchased at an acquisition premium may elect to compute the original issue
discount accrual on such note by treating the purchase as a purchase of such
note at original issuance, treating the purchase price as the issue price, and
applying the original issue discount rules thereto using a constant yield
method.
UNITED STATES FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS
The payment to a non-U.S. holder of interest on a note will not be subject
to U.S. federal withholding tax pursuant to the "portfolio interest exception,"
provided that
(1) the non-U.S. holder does not actually or constructively own 10% or more
of the capital or profits interest in us and is not a controlled foreign
corporation that is related to us within the meaning of the Internal Revenue
Code and
(2) either
(A) the beneficial owner of the notes certifies to us or our agent,
under penalties of perjury, that it is not a U.S. holder and provides its
name and address on U.S. Treasury Form W-8, or a suitable substitute form,
or
(B) a securities clearing organization, bank or other financial
institution that holds the notes on behalf of such non-U.S. holder in the
ordinary course of its trade or business certifies under penalties of
perjury that such a Form W-8, or suitable substitute form, has been
received from the beneficial owner by it or by a financial institution
between it and the beneficial owner and furnishes the payor with a copy
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thereof. Recently adopted Treasury Regulations that will be effective
January 1, 2001 provide alternative methods for satisfying the
certification requirement described in (2) above. These regulations will
generally require, in the case of notes held by a foreign partnership, that
the certificate described in (2) above be provided by the partners rather
than by the foreign partnership, and that the partnership provide certain
information including a U.S. tax identification number. For purposes of the
U.S. federal withholding tax, payment of interest includes the amount of
any payment that is attributable to original issue discount that accrued
while such non-U.S. holder held the note.
If a non-U.S. holder cannot satisfy the requirements of the portfolio
interest exception described above, payments of interest made to such non-U.S.
holder will be subject to a 30% withholding tax, unless the beneficial owner of
the note provides us or our paying agent, as the case may be, with a properly
executed
(1) Internal Revenue Service Form 1001, or successor form, claiming an
exemption from or reduction in the rate of withholding under the benefit of a
tax treaty or
(2) Internal Revenue Service Form 4224, or successor form, stating that
interest paid on the note is not subject to withholding tax because it is
effectively connected with the beneficial owner's conduct of a trade or business
in the United States.
If a non-U.S. holder of a note is engaged in a trade or business in the
United States and interest on the note is effectively connected with the conduct
of such trade or business, such non-U.S. holder, will be subject to U.S. federal
income tax on such interest including original issue discount in the same manner
as if it were a U.S. holder. In addition, if such non-U.S. holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% of its
effectively connected earnings and profits, subject to adjustment, for that
taxable year unless it qualifies for a lower rate under an applicable income tax
treaty.
Any capital gain realized on the sale, redemption, retirement or other
taxable disposition of a note by a person other than a U.S. holder generally
will not be subject to U.S. federal income tax provided
(1) such gain is not effectively connected with the conduct by such holder
of a trade or business in the United States,
(2) in the case of gains derived by an individual, such individual is not
present in the United States for 183 days or more in the taxable year of the
disposition and certain other conditions are met and
(3) the non-U.S. holder is not subject to tax pursuant to the provisions of
U.S. federal income tax law applicable to certain expatriates.
FEDERAL ESTATE TAX
Subject to applicable estate tax treaty provisions, notes held by an
individual who is not a citizen or resident of the United States for federal
estate tax purposes at the time of his or her death will not be subject to U.S.
federal estate tax if the interest on the notes qualifies for the portfolio
interest exemption from U.S. federal income tax under the rules described above.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Backup withholding and information reporting requirements may apply to
certain payments of principal, premium, if any, and interest, including accruals
of original issue discount, on a note, and to the proceeds of the sale or
redemption of a note before
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maturity. We, our agent, a broker, the trustee or the paying agent under the
indentures governing the notes, as the case may be, will be required to withhold
from any payment that is subject to backup withholding a tax equal to 31% of
such payment if a U.S. holder fails to furnish his taxpayer identification
number, certify that such number is correct, certify that such holder is not
subject to backup withholding or otherwise comply with the applicable backup
withholding rules. Certain U.S. holders, including all corporations, are not
subject to backup withholding and information reporting requirements.
Non-U.S. holders other than corporations may be subject to backup
withholding and information reporting requirements. However, backup withholding
and information reporting requirements do not apply to payments of portfolio
interest, including original issue discount, made by us or a paying agent to
non-U.S. holders if the appropriate certification is received, provided that the
payor does not have actual knowledge that the holder is a U.S. holder. If any
payments of principal and interest are made to the beneficial owner of a note by
or through the foreign office of a foreign custodian, foreign nominee or other
foreign agent of such beneficial owner, or if the foreign office of a foreign
"broker," as defined in the applicable Treasury Regulations, pays the proceeds
of the sale, redemption or other disposition of note or a coupon to the seller
of such note or coupon, backup withholding and information reporting
requirements will not apply. Information reporting requirements, but not backup
withholding, will apply, however, to a payment by a foreign office of a broker
that is a U.S. person or is a foreign person that derives 50% of more of its
gross income for certain periods from the conduct of a trade or business in the
United States, or that is a "controlled foreign corporation," that is, a foreign
corporation controlled by certain U.S. shareholders, with respect to the United
States unless the broker has documentary evidence in its records that the holder
is a non-U.S. holder and certain other conditions are met or the holder
otherwise establishes an exemption. Payment by a U.S. office of a broker is
subject to both backup withholding at a rate of 31% and information reporting
unless the holder certifies under penalties of perjury that it is a non-U.S.
holder or otherwise establishes an exemption.
In October 1997, Treasury regulations were issued which alter the foregoing
rules in certain respects and which generally will apply to any payments in
respect of a note or proceeds from the sale of a note that are made after
December 31, 2000. Among other things, such regulations expand the number of
foreign intermediaries that are potentially subject to information reporting and
address certain documentary evidence requirements relating to exemption from the
backup withholding requirements. Holders of the notes should consult their tax
advisers concerning the possible application of such regulations to any payments
made on or with respect to the notes.
Any amounts withheld under the backup withholding rules from a payment to a
holder of the notes will be allowed as a refund or a credit against such
holder's U.S. federal income tax liability, provided that the required
information is furnished to the IRS.
We must report annually to the IRS and to each non-U.S. holder any interest
that is subject to withholding, or that is exempt from U.S. withholding tax
pursuant to a tax treaty, or interest that is exempt from U.S. tax under the
portfolio interest exception. Copies of these information returns may also be
made available under the provisions of a specific treaty or agreement to the tax
authorities of the country in which the non-U.S. holder resides.
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PLAN OF DISTRIBUTION
A broker-dealer that is the holder of original notes that were acquired for
the account of such broker-dealer as a result of market-making or other trading
activities, other than original notes acquired directly from us or any of our
affiliates may exchange such original notes for new notes pursuant to the
exchange offer. This is true so long as each broker-dealer that receives new
notes for its own account in exchange for original notes, where such original
notes were acquired by such broker-dealer as a result of market-making or other
trading activities acknowledges that it will deliver a prospectus in connection
with any resale of such new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for original notes where such
original notes were acquired as a result of market-making activities or other
trading activities. We have agreed that for a period of 180 days after
consummation of the exchange offer or such time as any broker-dealer no longer
owns any registrable securities, we will make this prospectus, as it may be
amended or supplemented from time to time, available to any broker-dealer for
use in connection with any such resale. All dealers effecting transactions in
the new notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of new notes by
broker-dealers or any other holder of new notes. New notes received by
broker-dealers for their own account in the exchange offer may be sold from time
to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the new notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such new
notes. Any broker-dealer that resells new notes that were received by it for its
own account pursuant to the exchange offer and any broker or dealer that
participates in a distribution of such new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of new notes and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Securities Act.
The letter of transmittal states that by acknowledging that it will deliver and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after consummation of the exchange offer or such
time as any broker-dealer no longer owns any registrable securities, we will
promptly send additional copies of this prospectus and any amendment or
supplement to this prospectus to any broker-dealer that requests such documents
in the letter of transmittal. We have agreed to pay all expenses incident to the
exchange offer and to our performance of, or compliance with, the registration
rights agreements (other than commissions or concessions of any brokers or
dealers) and will indemnify the holders of the notes (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The legality of the notes offered hereby and certain other matters will be
passed upon for us by Paul, Hastings, Janofsky & Walker LLP, New York, New York.
181
<PAGE> 185
CHARTER COMMUNICATIONS HOLDINGS, LLC
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES:
Report of Independent Public Accountants.................. F-6
Consolidated Balance Sheet as of December 31, 1998........ F-7
Consolidated Statement of Operations for the Period from
December 24, 1998, Through December 31, 1998........... F-8
Consolidated Statement of Cash Flows for the Period from
December 24, 1998, Through December 31, 1998........... F-9
Notes to Consolidated Financial Statements................ F-10
Report of Independent Public Accountants.................. F-24
Consolidated Balance Sheet as of December 31, 1997........ F-25
Consolidated Statements of Operations for the Period From
January 1, 1998, Through December 23, 1998 and for the
Years Ended December 31, 1997 and 1996................. F-26
Consolidated Statements of Shareholder's Investment for
the Period From January 1, 1998 Through December 23,
1998 and for the Years Ended December 31, 1997 and
1996................................................... F-27
Consolidated Statements of Cash Flows for the Period From
January 1, 1998, Through December 23, 1998 and for the
Years Ended December 31, 1997 and 1996................. F-28
Notes to Consolidated Financial Statements................ F-29
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES:
Independent Auditors' Report.............................. F-38
Consolidated Balance Sheet as of December 31, 1997........ F-39
Consolidated Statements of Operations for the Periods From
April 23 to December 23, 1998 and January 1 to April
22, 1998 and for the Years in the Two-Year Period Ended
December 31, 1997...................................... F-40
Consolidated Statements of Partners' Capital (Deficit) for
the Period From January 1, 1998 to April 22, 1998 and
for Each of the Years in the Two-Year Period Ended
December 31, 1997...................................... F-41
Consolidated Statement of Members' Equity from April 23,
1998 to December 23, 1998.............................. F-42
Consolidated Statements of Cash Flows for the Period from
April 23, 1998 to December 23, 1998, From January 1,
1998 to April 22, 1998 and for the Years Ended December
31, 1997 and 1996...................................... F-43
Notes to Consolidated Financial Statements................ F-44
CCA GROUP:
Report of Independent Public Accountants.................. F-56
Combined Balance Sheet as of December 31, 1997............ F-57
Combined Statements of Operations for the Period From
January 1, 1998, Through December 23, 1998 and for the
Years Ended December 31, 1997 and 1996................. F-58
Combined Statements of Shareholders' Deficit for the
Period From January 1, 1998, Through December 23, 1998
and for the Years Ended December 31, 1997 and 1996..... F-59
Combined Statements of Cash Flows for the Period From
January 1, 1998, Through December 23, 1998 and for the
Years Ended December 31, 1997 and 1996................. F-60
Notes to Combined Financial Statements.................... F-61
</TABLE>
F-1
<PAGE> 186
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CHARTERCOMM HOLDINGS, L.P.:
Report of Independent Public Accountants.................. F-76
Consolidated Balance Sheet as of December 31, 1997........ F-77
Consolidated Statements of Operations for the Period From
January 1, 1998 Through December 23, 1998 and for the
Years Ended December 31, 1997 and 1996................. F-78
Consolidated Statements of Partner's Capital for the
Period From January 1, 1998 Through December 23, 1998
and for the Years Ended December 31, 1997 and 1996..... F-79
Consolidated Statements of Cash Flows for the Period From
January 1, 1998 Through December 23, 1998 and for the
Years Ended December 31, 1997 and 1996................. F-80
Notes to Consolidated Financial Statements................ F-81
GREATER MEDIA CABLEVISION SYSTEMS:
Report of Independent Public Accountants.................. F-95
Combined Balance Sheets as of March 31, 1999 (unaudited),
September 30, 1998 and 1997............................ F-96
Combined Statements of Income for the Six Months Ended
March 31, 1999 and 1998 (unaudited) and for the Years
Ended September 30, 1998, 1997 and 1996................ F-97
Combined Statements of Changes in Net Assets for the Six
Months Ended March 31, 1999 (unaudited) and for the
Years Ended September 30, 1996, 1997 and 1998.......... F-98
Combined Statements of Cash Flows for the Six Months Ended
March 31, 1999 and 1998 (unaudited) and for the Years
Ended September 30, 1998, 1997 and 1996................ F-99
Notes to Combined Financial Statements.................... F-100
RENAISSANCE MEDIA GROUP LLC:
Report of Independent Auditors............................ F-106
Consolidated Balance Sheet as of December 31, 1998........ F-107
Consolidated Statement of Operations for the Year Ended
December 31, 1998...................................... F-108
Consolidated Statement of Changes in Members' Equity for
the Year Ended December 31, 1998....................... F-109
Consolidated Statement of Cash Flows for the Year Ended
December 31, 1998...................................... F-110
Notes to Consolidated Financial Statements for the Year
Ended December 31, 1998................................ F-111
PICAYUNE MS, LAFOURCHE, LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA AND JACKSON TN CABLE TELEVISION SYSTEMS:
Report of Independent Auditors............................ F-121
Combined Balance Sheet as of April 8, 1998................ F-122
Combined Statement of Operations for the Period from
January 1, 1998 through April 8, 1998.................. F-123
Combined Statement of Changes in Net Assets for the Period
from January 1, 1998 through April 8, 1998............. F-124
Combined Statement of Cash Flows for the Period from
January 1, 1998 through April 8, 1998.................. F-125
Notes to Combined Financial Statements.................... F-126
Report of Independent Auditors............................ F-133
Combined Balance Sheets as of December 31, 1996 and
1997................................................... F-134
Combined Statements of Operations for the Years Ended
December 31, 1995, 1996 and 1997....................... F-135
Combined Statements of Changes in Net Assets for the Years
Ended December 31, 1996 and 1997....................... F-136
Combined Statements of Cash Flows for the Years Ended
1995, 1996 and 1997.................................... F-137
Notes to Combined Financial Statements.................... F-138
</TABLE>
F-2
<PAGE> 187
<TABLE>
<CAPTION>
PAGE
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<S> <C>
HELICON PARTNERS I, L.P. AND AFFILIATES:
Independent Auditors' Report.............................. F-146
Combined Balance Sheets as of December 31, 1997 and
1998................................................... F-147
Combined Statements of Operations for Each of the Years in
the Three-Year Period Ended December 31, 1998.......... F-148
Combined Statements of Changes in Partners' Deficit for
Each of the Years in the Three-Year Period Ended
December 31, 1998...................................... F-149
Combined Statements of Cash Flows for Each of the Years in
the Three-Year Period Ended December 31, 1998.......... F-150
Notes to Combined Financial Statements.................... F-151
INTERMEDIA CABLE SYSTEMS (comprised of components of
InterMedia Partners and InterMedia Capital Partners IV,
L.P.):
Report of Independent Accountants......................... F-165
Combined Balance Sheets at December 31, 1998 and 1997..... F-166
Combined Statements of Operations for the Years Ended
December 31, 1998 and 1997............................. F-167
Combined Statement of Changes in Equity for the Years
Ended December 31, 1998 and 1997....................... F-168
Combined Statements of Cash Flows for the Years Ended
December 31, 1998 and 1997............................. F-169
Notes to Combined Financial Statements.................... F-170
RIFKIN CABLE INCOME PARTNERS L.P.:
Report of Independent Accountants......................... F-183
Balance Sheet at December 31, 1997 and 1998............... F-184
Statement of Operations for Each of the Three Years in the
Period Ended December 31, 1998......................... F-185
Statement of Partners' Equity (Deficit) for Each of the
Three Years in the Period Ended December 31, 1998...... F-186
Statement of Cash Flows for Each of the Three Years in the
Period Ended December 31, 1998......................... F-187
Notes to Financial Statements............................. F-188
RIFKIN ACQUISITION PARTNERS, L.L.L.P.:
Report of Independent Accountants......................... F-192
Consolidated Balance Sheet at December 31, 1998 and
1997................................................... F-193
Consolidated Statement of Operations for Each of the Three
Years in the Period Ended December 31, 1998............ F-194
Consolidated Statement of Cash Flows for Each of the Three
Years in the Period Ended December 31, 1998............ F-195
Consolidated Statement of Partners' Capital (Deficit) for
Each of the Three Years in the Period Ended December
31, 1998............................................... F-196
Notes to Consolidated Financial Statements................ F-197
INDIANA CABLE ASSOCIATES, LTD.:
Report of Independent Auditors............................ F-211
Balance Sheet as December 31, 1997 and 1998............... F-212
Statement of Operations for the Years Ended December 31,
1996, 1997 and 1998.................................... F-213
Statement of Partners' Deficit for the Years Ended
December 31, 1996, 1997 and 1998....................... F-214
Statement of Cash Flows for the Years Ended December 31,
1996, 1997 and 1998.................................... F-215
Notes to Financial Statements............................. F-216
</TABLE>
F-3
<PAGE> 188
<TABLE>
<CAPTION>
PAGE
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<S> <C>
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP:
Report of Independent Auditors............................ F-221
Consolidated Balance Sheet as of December 31, 1997 and
1998................................................... F-222
Consolidated Statement of Operations for the Years Ended
December 31, 1996, 1997 and 1998....................... F-223
Consolidated Statement of Partners' Equity (Deficit) for
the Years Ended December 31, 1996, 1997 and 1998....... F-224
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1996, 1997 and 1998....................... F-225
Notes to Consolidated Financial Statements................ F-226
SONIC COMMUNICATIONS CABLE TELEVISION SYSTEMS:
Report of Independent Public Accountants.................. F-230
Statement of Operations and Changes in Net Assets for the
Period from April 1, 1998, through May 20, 1998........ F-231
Statement of Cash Flows for the Period from April 1, 1998,
through May 20, 1998................................... F-232
Notes to Financial Statements............................. F-233
LONG BEACH ACQUISITION CORP.:
Report of Independent Public Accountants.................. F-236
Statement of Operations for the Period from April 1, 1997,
through May 23, 1997................................... F-237
Statement of Stockholder's Equity for the Period from
April 1, 1997, through May 23, 1997.................... F-238
Statement of Cash Flows for the Period from April 1, 1997,
through May 23, 1997................................... F-239
Notes to Financial Statements............................. F-240
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
Condensed Consolidated Balance Sheets as of March 31, 1999
(unaudited) and December 31, 1998...................... F-245
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 1998
(unaudited)............................................ F-246
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998
(unaudited)............................................ F-247
Notes to Condensed Consolidated Financial Statements...... F-248
RENAISSANCE MEDIA GROUP LLC:
Consolidated Balance Sheets as of March 31, 1999
(unaudited) and December 31, 1998...................... F-253
Consolidated Statement of Operations for the Three Months
Ended March 31, 1999 (unaudited)....................... F-254
Consolidated Statement of Changes in Members' Equity for
the Three Months Ended March 31, 1999 (unaudited)...... F-255
Consolidated Statement of Cash Flows for the Three Months
Ended March 31, 1999 (unaudited)....................... F-256
Notes to Consolidated Financial Statements................ F-257
HELICON PARTNERS I, L.P. AND AFFILIATES:
Unaudited Condensed Combined Balance Sheet as of March 31,
1999................................................... F-260
Unaudited Condensed Combined Statements of Operations for
the Three-Month Periods Ended March 31, 1998 and
1999................................................... F-261
Unaudited Condensed Combined Statements of Changes in
Partners' Deficit for the Three-Month Period Ended
March 31, 1999......................................... F-262
Unaudited Condensed Combined Statements of Cash Flows for
the Three-Month Periods Ended March 31, 1998 and
1999................................................... F-263
Notes to Unaudited Condensed Combined Financial
Statements............................................. F-265
</TABLE>
F-4
<PAGE> 189
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTERMEDIA CABLE SYSTEMS (comprised of components of
InterMedia Partners and InterMedia Capital Partners IV,
L.P.):
Combined Balance Sheets as of March 31, 1999 (unaudited)
and December 31, 1998.................................. F-267
Combined Statements of Operations for the Three Months
Ended March 31, 1999 and 1998 (unaudited).............. F-268
Combined Statement of Changes in Equity for the Three
Months Ended March 31, 1999 and for the Year Ended
December 31, 1998 (unaudited).......................... F-269
Combined Statements of Cash Flows for the Three Months
Ended March 31, 1999 and 1998 (unaudited).............. F-270
Notes to Combined Financial Statements (unaudited)........ F-271
RIFKIN CABLE INCOME PARTNERS L.P.:
Balance Sheet at December 31, 1998 and March 31, 1999
(unaudited)............................................ F-278
Statement of Operations for the Quarters Ended March 31,
1998 and 1999 (unaudited).............................. F-279
Statement of Partners' Equity for the Quarters Ended March
31, 1998 and 1999 (unaudited).......................... F-280
Statement of Cash Flows for the Quarters Ended March 31,
1998 and 1999 (unaudited).............................. F-281
Notes to Financial Statements............................. F-282
RIFKIN ACQUISITION PARTNERS, L.L.L.P.:
Consolidated Balance Sheet at March 31, 1999 (unaudited)
and December 31, 1998.................................. F-284
Consolidated Statement Of Operations for the Three Months
Ended March 31, 1999 and 1998 (unaudited).............. F-285
Consolidated Statement of Cash Flow for the Three Months
Ended March 31, 1999 and 1998 (unaudited).............. F-286
Consolidated Statements of Partners' Capital (Deficit) for
the Three Months Ended March 31, 1999 and 1998
(unaudited)............................................ F-287
Notes to Consolidated Financial Statements................ F-288
INDIANA CABLE ASSOCIATES, LTD.:
Balance Sheet as of March 31, 1999 (unaudited)............ F-290
Statement of Operations for the Three Months Ended March
31, 1998 and 1999 (unaudited).......................... F-291
Statement of Cash Flows for the Three Months Ended March
31, 1998 and 1999 (unaudited).......................... F-292
Notes to Financial Statement (unaudited).................. F-293
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
Consolidated Balance Sheet as of March 31, 1999
(unaudited)............................................ F-294
Consolidated Statement of Operations for the Three Months
Ended March 31, 1998 and 1999 (unaudited).............. F-295
Consolidated Statement of Cash Flows for the Three Months
Ended March 31, 1998 and 1999 (unaudited).............. F-296
Notes to Consolidated Financial Statement (unaudited)..... F-297
</TABLE>
F-5
<PAGE> 190
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Charter Communications Holdings, LLC:
We have audited the accompanying consolidated balance sheet of Charter
Communications Holdings, LLC and subsidiaries as of December 31, 1998, and the
related consolidated statements of operations and cash flows for the period from
December 24, 1998, through December 31, 1998. We did not audit the balance sheet
of Marcus Cable Company, L.L.C. and subsidiaries as of December 31, 1998, that
is included in the consolidated balance sheet of Charter Communications
Holdings, LLC and subsidiaries and reflects total assets of 40% of the
consolidated totals. This balance sheet was audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for Marcus Cable Company, L.L.C. and subsidiaries, is based
solely on the report of the other auditors. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Charter Communications Holdings, LLC and subsidiaries
as of December 31, 1998, and the results of their operations and their cash
flows for the period from December 24, 1998, through December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
St. Louis, Missouri,
February 5, 1999 (except with respect to the
matters discussed in Notes 1 and 12,
as to which the date is April 19, 1999)
F-6
<PAGE> 191
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 10,386
Accounts receivable, net of allowance for doubtful
accounts of $3,528..................................... 31,163
Prepaid expenses and other................................ 8,613
----------
Total current assets................................... 50,162
----------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment............................. 1,473,727
Franchises, net of accumulated amortization of $112,122... 5,705,420
----------
7,179,147
----------
OTHER ASSETS................................................ 6,347
----------
$7,235,656
==========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 87,950
Accounts payable and accrued expenses..................... 199,831
Payable to related party.................................. 20,000
Payables to manager of cable television systems -- related
party.................................................. 7,675
----------
Total current liabilities.............................. 315,456
----------
LONG-TERM DEBT.............................................. 3,435,251
----------
DEFERRED MANAGEMENT FEES -- RELATED PARTY................... 15,561
----------
OTHER LONG-TERM LIABILITIES................................. 40,097
----------
MEMBERS' EQUITY -- 100 UNITS ISSUED AND OUTSTANDING......... 3,429,291
----------
$7,235,656
==========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-7
<PAGE> 192
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 24,
1998, THROUGH
DECEMBER 31,
1998
-------------
<S> <C>
REVENUES.................................................... $23,450
-------
OPERATING EXPENSES:
Operating costs........................................... 9,957
General and administrative................................ 2,722
Depreciation and amortization............................. 13,811
Corporate expense charges -- related party................ 766
-------
27,256
-------
Loss from operations................................... (3,806)
-------
OTHER INCOME (EXPENSE):
Interest income........................................... 133
Interest expense.......................................... (5,051)
-------
(4,918)
-------
Net loss............................................... $(8,724)
=======
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-8
<PAGE> 193
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 24,
1998, THROUGH
DECEMBER 31,
1998
--------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (8,724)
Adjustments to reconcile net loss to net cash provided by
operating activities --
Depreciation and amortization.......................... 13,811
Changes in assets and liabilities --
Receivables, net..................................... (8,753)
Prepaid expenses and other........................... (587)
Accounts payable and accrued expenses................ 4,961
Payables to manager of cable television systems...... 473
Other operating activities........................... 2,021
----------
Net cash provided by operating activities......... 3,202
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment................ (13,672)
----------
Net cash used in investing activities............. (13,672)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt.............................. 15,620
----------
Net cash provided by financing activities......... 15,620
----------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 5,150
CASH AND CASH EQUIVALENTS, beginning of period.............. 5,236
----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 10,386
==========
CASH PAID FOR INTEREST...................................... $ 6,155
==========
NONCASH TRANSACTION -- Transfer of cable television
operating subsidiaries from the parent company (see Note
1)........................................................ $3,438,015
==========
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
F-9
<PAGE> 194
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
Charter Communications Holdings, LLC (Charter Holdings), a Delaware limited
liability company, was formed in February 1999 as a wholly owned subsidiary of
Charter Communications, Inc. (Charter). Charter, through its wholly owned cable
television operating subsidiary, Charter Communications Properties, LLC (CCP),
commenced operations with the acquisition of a cable television system on
September 30, 1995.
Effective December 23, 1998, through a series of transactions, Paul G.
Allen acquired approximately 94% of Charter for an aggregate purchase price of
$2.2 billion, excluding $2.0 billion in debt assumed (the "Paul Allen
Transaction"). In conjunction with the Paul Allen Transaction, Charter acquired
controlling interests in CharterComm Holdings, LLC (CharterComm Holdings) and
CCA Group (comprised of CCA Holdings Corp., CCT Holdings Corp. and Charter
Communications Long Beach Inc.), all cable television operating companies, from
unrelated third parties for fair value. Charter previously managed and owned
minority interests in these companies. These acquisitions were accounted for
using the purchase method of accounting, and accordingly, results of operations
of CharterComm Holdings and CCA Group are included in the financial statements
from the date of acquisition. In February 1999, Charter transferred all of its
cable television operating subsidiaries to a wholly owned subsidiary of Charter
Holdings, Charter Communications Operating, LLC (Charter Operating). This
transfer was accounted for as a reorganization of entities under common control
similar to a pooling of interests.
As a result of the change in ownership of CCP, CharterComm Holdings and CCA
Group, Charter Holdings has applied push-down accounting in the preparation of
the consolidated financial statements. Accordingly, Charter Holdings increased
its members' equity by $2.2 billion to reflect the amounts paid by Paul G. Allen
and Charter. The purchase price was allocated to assets acquired and liabilities
assumed based on their relative fair values. The excess of the purchase price
over the amounts assigned to net tangible assets was $3.6 billion and is
included in franchises. The allocation of the purchase price is based, in part,
on preliminary information which is subject to adjustment upon obtaining
complete valuation information of intangible assets. The valuation information
is expected to be finalized in the third quarter of 1999. However, no
significant adjustments are anticipated.
On April 7, 1999, the cable television operating subsidiaries of Marcus
Cable Company, L.L.C. (Marcus) were transferred to Charter Operating. As a
result of the Marcus transfer, Charter Holdings is owned 54% by Charter and 46%
by companies controlled by Paul G. Allen giving Paul G. Allen a 97% direct and
indirect ownership interest in Charter Holdings. The transfer was accounted for
as a reorganization of entities under common control similar to a pooling of
interests since Paul G. Allen and a company controlled by Paul G. Allen
purchased substantially all of the outstanding partnership interests in Marcus
in April 1998, and purchased the remaining interest in Marcus on April 7, 1999.
F-10
<PAGE> 195
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The consolidated financial statements of Charter Holdings include the
accounts of Charter Operating and CCP and the accounts of CharterComm Holdings
and CCA Group and their subsidiaries since December 23, 1998 (date acquired by
Charter), and the accounts of Marcus since December 23, 1998 (date Paul G. Allen
controlled both Charter and Marcus), and are collectively referred to as the
"Company" herein. All subsidiaries are wholly owned. All material intercompany
transactions and balances have been eliminated. The Company derives its primary
source of revenues by providing various levels of cable television programming
and services to residential and business customers. As of December 31, 1998, the
Company provided cable television services to customers in 22 states in the U.S.
The consolidated financial statements of Charter Holdings for periods prior
to December 24, 1998, are not presented herein since, as a result of the Paul
Allen Transaction and the application of push down accounting, the financial
information as of December 31, 1998, and for the period from December 24, 1998,
through December 31, 1998, is presented on a different cost basis than the
financial information as of December 31, 1997, and for the periods prior to
December 24, 1998. Such information is not comparable.
The accompanying financial statements have been retroactively restated to
include the accounts of Marcus beginning December 24, 1998, using historical
carrying amounts. Previously reported revenues and net loss of the Company,
excluding Marcus, was $13,713 and $4,432, respectively, for the period from
December 24, 1998, through December 31, 1998. Revenues and net loss of Marcus
for the period from December 24, 1998 through December 31, 1998, included in the
accompanying financial statements, was $9,737 and $4,292, respectively.
Previously reported members' equity of the Company, excluding Marcus, was $2.1
billion as of December 31, 1998.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. At December 31, 1998,
cash equivalents consist primarily of repurchase agreements. These investments
are carried at cost that approximates market value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost, including all direct and
certain indirect costs associated with the construction of cable television
transmission and distribution facilities, and the cost of new customer
installations. The costs of disconnecting a customer are charged to expense in
the period incurred. Expenditures for repairs and maintenance are charged to
expense as incurred, and equipment replacement and betterments are capitalized.
F-11
<PAGE> 196
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation is provided on the straight-line basis over the estimated
useful lives of the related assets as follows:
<TABLE>
<S> <C>
Cable distribution systems................................ 3-15 years
Buildings and leasehold improvements...................... 5-15 years
Vehicles and equipment.................................... 3-5 years
</TABLE>
FRANCHISES
Costs incurred in obtaining and renewing cable franchises are deferred and
amortized over the lives of the franchises. Costs relating to unsuccessful
franchise applications are charged to expense when it is determined that the
efforts to obtain the franchise will not be successful. Franchise rights
acquired through the purchase of cable television systems represent the excess
of the cost of properties acquired over the amounts assigned to net tangible
assets at the date of acquisition and are generally amortized using the
straight-line method over a period of 15 years.
IMPAIRMENT OF ASSETS
If facts and circumstances suggest that a long-lived asset may be impaired,
the carrying value is reviewed. If a review indicates that the carrying value of
such asset is not recoverable based on projected undiscounted cash flows related
to the asset over its remaining life, the carrying value of such asset is
reduced to its estimated fair value.
REVENUES
Cable television revenues from basic and premium services are recognized
when the related services are provided.
Installation revenues are recognized to the extent of direct selling costs
incurred. The remainder, if any, is deferred and amortized to income over the
estimated average period that customers are expected to remain connected to the
cable television system. As of December 31, 1998, no installation revenue has
been deferred, as direct selling costs have exceeded installation revenue.
Fees collected from programmers to guarantee carriage are deferred and
amortized to income over the life of the contracts. Local governmental
authorities impose franchise fees on the Company ranging up to a federally
mandated maximum of 5.0% of gross revenues. On a monthly basis, such fees are
collected from the Company's customers and are periodically remitted to local
franchises. Franchise fees collected and paid are reported as revenues.
INTEREST RATE HEDGE AGREEMENTS
The Company manages fluctuations in interest rates by using interest rate
hedge agreements, as required by certain debt agreements. Interest rate swaps,
caps and collars are accounted for as hedges of debt obligations, and
accordingly, the net settlement amounts are recorded as adjustments to interest
expense in the period incurred. Premiums paid for interest rate caps are
deferred, included in other assets, and are amortized over the original term of
the interest rate agreement as an adjustment to interest expense.
F-12
<PAGE> 197
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's interest rate swap agreements require the Company to pay a
fixed rate and receive a floating rate thereby creating fixed rate debt.
Interest rate caps and collars are entered into by the Company to reduce the
impact of rising interest rates on floating rate debt.
The Company's participation in interest rate hedging transactions involves
instruments that have a close correlation with its debt, thereby managing its
risk. Interest rate hedge agreements have been designed for hedging purposes and
are not held or issued for speculative purposes.
INCOME TAXES
Income taxes are the responsibility of the individual members or partners
and are not provided for in the accompanying consolidated financial statements.
In addition, certain subsidiaries are corporations subject to income taxes but
have no operations and, therefore, no material income tax liabilities or assets.
SEGMENTS
In 1998, Charter Holdings adopted SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information." Segments have been identified based
upon management responsibility. Charter Holdings operates in one segment, cable
services.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. PRO FORMA FINANCIAL INFORMATION (UNAUDITED):
In addition to the acquisitions by Charter of CharterComm Holdings and CCA
Group, the Company acquired cable television systems for an aggregate purchase
price, net of cash acquired, of $291,800 and $342,100 in 1998 and 1997,
respectively, and completed the sale of certain cable television systems for an
aggregate sales price of $405,000 in 1998, all prior to December 24, 1998. The
Company also refinanced substantially all of its long-term debt in March 1999
(see Note 12).
F-13
<PAGE> 198
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Unaudited pro forma operating results as though the acquisitions and
refinancing discussed above, including the Paul Allen Transaction and the
combination with Marcus, had occurred on January 1, 1997, with adjustments to
give effect to amortization of franchises, interest expense and certain other
adjustments are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
-----------------------
1998 1997
---------- ---------
<S> <C> <C>
Revenues....................................... $1,059,882 $ 971,924
Loss from operations........................... (143,557) (185,051)
Net loss....................................... (599,953) (631,592)
</TABLE>
The unaudited pro forma financial information has been presented for
comparative purposes and does not purport to be indicative of the results of
operations or financial position of the Company had these transactions been
completed as of the assumed date or which may be obtained in the future.
3. MEMBERS' EQUITY:
For the period from December 24, 1998, through December 31, 1998, members'
equity consisted of the following:
<TABLE>
<S> <C>
Balance, December 24, 1998................................. $3,438,015
Net loss................................................... (8,724)
----------
Balance, December 31, 1998................................. $3,429,291
==========
</TABLE>
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following at December 31,
1998:
<TABLE>
<S> <C>
Cable distribution systems................................. $1,439,182
Land, buildings and leasehold improvements................. 41,321
Vehicles and equipment..................................... 61,237
----------
1,541,740
Less -- Accumulated depreciation........................... (68,013)
----------
$1,473,727
==========
</TABLE>
For the period from December 24, 1998, through December 31, 1998,
depreciation expense was $5,029.
F-14
<PAGE> 199
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following at December
31, 1998:
<TABLE>
<S> <C>
Accrued interest............................................ $ 34,561
Franchise fees.............................................. 21,441
Programming costs........................................... 21,395
Capital expenditures........................................ 17,343
Accrued income taxes........................................ 15,205
Accounts payable............................................ 7,439
Other accrued liabilities................................... 82,447
--------
$199,831
========
</TABLE>
6. LONG-TERM DEBT:
Long-term debt consists of the following at December 31, 1998:
<TABLE>
<S> <C>
Charter:
Credit Agreements (including CCP, CCA Group and
CharterComm Holdings)................................. $1,726,500
Senior Secured Discount Debentures....................... 109,152
11 1/4% Senior Notes..................................... 125,000
Marcus:
Senior Credit Facility................................... 808,000
13 1/2% Senior Subordinated Discount Notes............... 383,236
14 1/4% Senior Discount Notes............................ 241,183
----------
3,393,071
Current maturities....................................... (87,950)
Unamortized net premium.................................. 130,130
----------
$3,435,251
==========
</TABLE>
CCP CREDIT AGREEMENT
CCP maintains a credit agreement (the "CCP Credit Agreement"), which
provides for two term loan facilities, one with the principal amount of $60,000
that matures on June 30, 2006, and the other with the principal amount of
$80,000 that matures on June 30, 2007. The CCP Credit Agreement also provides
for a $90,000 revolving credit facility with a maturity date of June 30, 2006.
Amounts under the CCP Credit Agreement bear interest at the LIBOR Rate or Base
Rate, as defined, plus a margin up to 2.88%. The variable interest rates ranged
from 7.44% to 8.19% at December 31, 1998.
F-15
<PAGE> 200
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CC-I, CC-II COMBINED CREDIT AGREEMENT
Charter Communications, LLC and Charter Communications II, LLC,
subsidiaries of CharterComm Holdings, maintains a combined credit agreement (the
"Combined Credit Agreement"), which provides for two term loan facilities, one
with the principal amount of $200,000 that matures on June 30, 2007, and the
other with the principal amount of $150,000 that matures on December 31, 2007.
The Combined Credit Agreement also provides for a $290,000 revolving credit
facility, with a maturity date of June 30, 2007. Amounts under the Combined
Credit Agreement bear interest at the LIBOR Rate or Base Rate, as defined, plus
a margin up to 2.0%. The variable interest rates ranged from 6.69% to 7.31% at
December 31, 1998. A quarterly commitment fee of between 0.25% and 0.375% per
annum is payable on the unborrowed balance of the revolving credit facility.
CHARTERCOMM HOLDINGS -- SENIOR SECURED DISCOUNT DEBENTURES
CharterComm Holdings issued $146,820 of Senior Secured Discount Debentures
(the "Debentures") for proceeds of $75,000. The Debentures are effectively
subordinated to the claims and creditors of CharterComm Holdings' subsidiaries,
including the lenders under the Combined Credit Agreement. The Debentures are
redeemable at the Company's option at amounts decreasing from 107% to 100% of
principal, plus accrued and unpaid interest to the redemption date, beginning on
March 15, 2001. The issuer is required to make an offer to purchase all of the
Debentures, at a purchase price equal to 101% of the principal amount, together
with accrued and unpaid interest, upon a Change in Control, as defined in the
Debentures Indenture. No interest is payable on the Debentures prior to March
15, 2001. Thereafter, interest on the Debentures is payable semiannually in
arrears beginning September 15, 2001, until maturity on March 15, 2007.
CHARTERCOMM HOLDINGS -- 11 1/4% SENIOR NOTES
CharterComm Holdings issued $125,000 aggregate principal amount of 11 1/4%
Senior Notes (the "11 1/4% Notes"). The Notes are effectively subordinated to
the claims of creditors of CharterComm Holdings' subsidiaries, including the
lenders under the Combined Credit Agreements. The 11 1/4% Notes are redeemable
at the Company's option at amounts decreasing from 106% to 100% of principal,
plus accrued and unpaid interest to the date of redemption, beginning on March
15, 2001. The issuer is required to make an offer to purchase all of the 11 1/4%
Notes, at a purchase price equal to 101% of the principal amount, together with
accrued and unpaid interest, upon a Change in Control, as defined in the 11 1/4%
Notes indenture. Interest is payable semiannually on March 15 and September 15
until maturity on March 15, 2006.
As of December 24, 1998, the Debentures and 11 1/4% Notes were recorded at
their estimated fair values resulting in an increase in the carrying values of
the debt and an unamortized net premium as of December 31, 1998. The premium
will be amortized to interest expense over the estimated remaining lives of the
debt using the interest method. As of December 31, 1998, the effective interest
rates on the Debentures and 11 1/4% Notes were 10.7% and 9.6%, respectively.
F-16
<PAGE> 201
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CCE-I CREDIT AGREEMENT
Charter Communications Entertainment I LLC, a subsidiary of CCA Group,
maintains a credit agreement (the "CCE-I Credit Agreement"), which provides for
a $280,000 term loan that matures on September 30, 2006, and $85,000 fund loan
that matures on March 31, 2007, and a $175,000 revolving credit facility with a
maturity date of September 30, 2006. Amounts under the CCE-I Credit Agreement
bear interest at either the LIBOR Rate or Base Rate, as defined, plus a margin
up to 2.75%. The variable interest rates ranged from 6.88% to 8.06% at December
31, 1998. A quarterly commitment fee of between 0.375% and 0.5% per annum is
payable on the unborrowed balance of the revolving credit facility.
CCE-II COMBINED CREDIT AGREEMENT
Charter Communications Entertainment II, LLC and Long Beach LLC,
subsidiaries of CCA Group, maintain a credit agreement (the "CCE-II Combined
Credit Agreement"), which provides for two term loan facilities, one with the
principal amount of $100,000 that matures on March 31, 2005, and the other with
the principal amount of $90,000 that matures on March 31, 2006. The CCE-II
Combined Credit Agreement also provides for a $185,000 revolving credit
facility, with a maturity date of March 31, 2005. Amounts under the CCE-II
Combined Credit Agreement bear interest at either the LIBOR Rate or Base Rate,
as defined, plus a margin up to 2.5%. The variable rates ranged from 6.56% to
7.59% at December 31, 1998. A quarterly commitment fee of between 0.25% and
0.375% per annum is payable on the unborrowed balance of the revolving credit
facility.
CCE CREDIT AGREEMENT
Charter Communications Entertainment, LLC, a subsidiary of CCA Group,
maintains a credit agreement (the "CCE Credit Agreement") which provides for a
term loan facility with the principal amount of $130,000 that matures on
September 30, 2007. Amounts under the CCE Credit Agreement bear interest at the
LIBOR Rate or Base Rate, as defined, plus a margin up to 3.25%. The variable
interest rate at December 31, 1998, was 8.62%.
CCE-II HOLDINGS CREDIT AGREEMENT
CCE-II Holdings, LLC, a subsidiary of CCA Group, entered into a credit
agreement (the "CCE-II Holdings Credit Agreement"), which provides for a term
loan facility with the principal amount of $95,000 that matures on September 30,
2006. Amounts under the CCE-II Holdings Credit Agreement bear interest at either
the LIBOR Rate or Base Rate, as defined, plus a margin up to 3.25%. The variable
rate at December 31, 1998, was 8.56%.
MARCUS -- SENIOR CREDIT FACILITY
Marcus maintains a senior credit facility (the "Senior Credit Facility"),
which provides for two term loan facilities, one with a principal amount of
$490,000 that matures on December 31, 2002 (Tranche A) and the other with a
principal amount of $300,000 that matures on April 30, 2004 (Tranche B). The
Senior Credit Facility provides for
F-17
<PAGE> 202
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
scheduled amortization of the two term loan facilities which began in September
1997. The Senior Credit Facility also provides for a $360,000 revolving credit
facility ("Revolving Credit Facility"), with a maturity date of December 31,
2002. Amounts outstanding under the Senior Credit Facility bear interest at
either the (i) Eurodollar rate, (ii) prime rate or (iii) CD base rate or Federal
Funds rate, plus a margin up to 2.25%, which is subject to certain quarterly
adjustments based on the ratio of the issuer's total debt to annualized
operating cash flow, as defined. The variable interest rates ranged from 6.23%
to 7.75% at December 31, 1998. A quarterly commitment fee ranging from 0.250% to
0.375% per annum is payable on the unused commitment under the Senior Credit
Facility.
MARCUS -- 13 1/2% SENIOR SUBORDINATED DISCOUNT NOTES
Marcus issued $413,461 face amount of 13 1/2% Senior Subordinated Discount
Notes due August 1, 2004 (the "13 1/2% Notes") for net proceeds of $215,000. The
13 1/2% Notes are unsecured, are guaranteed by Marcus and are redeemable, at the
option of Marcus, at amounts decreasing from 105% to 100% of par beginning on
August 1, 1999. No interest is payable on the 13 1/2% Notes until February 1,
2000. Thereafter, interest is payable semiannually until maturity. The discount
on the 13 1/2% Notes is being accreted using the effective interest method and
the effective interest rate as of December 31, 1998 was 10.0%. The unamortized
discount was $30,225 at December 31, 1998.
MARCUS -- 14 1/4% SENIOR DISCOUNT NOTES
Marcus issued $299,228 of 14 1/4% Senior Discount Notes due December 15,
2005 (the "14 1/4% Notes") for net proceeds of $150,003. The 14 1/4% Notes are
unsecured and are redeemable at the option of Marcus at amounts decreasing from
107% to 100% of par beginning on June 15, 2000. No interest is payable until
December 15, 2000. Thereafter, interest is payable semiannually until maturity.
The discount on the 14 1/4% Notes is being accreted using the effective interest
method and the effective interest rate as of December 31, 1998 was 14.1%. The
unamortized discount was $53,545 at December 31, 1998.
The debt agreements require the Company and/or its subsidiaries to comply
with various financial and other covenants, including the maintenance of certain
operating and financial ratios. These debt instruments also contain substantial
limitations on, or prohibitions of, distributions, additional indebtedness,
liens, asset sales and certain other items.
F-18
<PAGE> 203
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Based upon outstanding indebtedness at December 31, 1998, and the
amortization of term and fund loans, and scheduled reductions in available
borrowings of the revolving credit facilities, aggregate future principal
payments on the total borrowings under all debt agreements at December 31, 1998,
are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- ----------
<S> <C>
1999....................................................... $ 87,950
2000....................................................... 110,245
2001....................................................... 148,950
2002....................................................... 393,838
2003....................................................... 295,833
Thereafter................................................. 2,482,193
----------
$3,519,009
==========
</TABLE>
7. FAIR VALUE OF FINANCIAL INSTRUMENTS:
A summary of debt and the related interest rate hedge agreements at
December 31, 1998, is as follows:
<TABLE>
<CAPTION>
CARRYING NOTIONAL FAIR
DEBT VALUE AMOUNT VALUE
- ---- ---------- ---------- ----------
<S> <C> <C> <C>
Charter:
Charter Credit Agreements (including
CCP, CCA Group and CharterComm
Holdings)........................... $1,726,500 $ -- $1,726,500
Senior Secured Discount Debentures..... 138,102 -- 138,102
11 1/4% Senior Notes................... 137,604 -- 137,604
Marcus:
Senior Credit Facility................. 808,000 -- 808,000
13 1/2% Senior Subordinated Discount
Notes............................... 425,812 -- 418,629
14 1/4% Senior Discount Notes.......... 287,183 -- 279,992
INTEREST RATE HEDGE AGREEMENTS
Swaps.................................... (22,092) 1,505,000 (28,977)
Caps..................................... -- 15,000 --
Collars.................................. (4,174) 310,000 (4,174)
</TABLE>
As the long-term debt under the credit agreements bears interest at current
market rates, their carrying amount approximates market value at December 31,
1998. The fair values of the 11 1/4% Notes, the Debentures, the 13 1/2% Notes
and the 14 1/2% Notes are based on quoted market prices.
The weighted average interest pay rate for the Company's interest rate swap
agreements was 7.1% at December 31, 1998. The weighted average interest rate for
the Company's interest rate cap agreements was 8.45% at December 31, 1998. The
weighted
F-19
<PAGE> 204
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
average interest rates for the Company's interest rate collar agreements were
8.63% and 7.31% for the cap and floor components, respectively, at December 31,
1998.
The notional amounts of interest rate hedge agreements do not represent
amounts exchanged by the parties and, thus, are not a measure of the Company's
exposure through its use of interest rate hedge agreements. The amounts
exchanged are determined by reference to the notional amount and the other terms
of the contracts.
The fair value of interest rate hedge agreements generally reflects the
estimated amounts that the Company would receive or pay (excluding accrued
interest) to terminate the contracts on the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts. Dealer
quotations are available for the Company's interest rate hedge agreements.
Management believes that the sellers of the interest rate hedge agreements
will be able to meet their obligations under the agreements. In addition, some
of the interest rate hedge agreements are with certain of the participating
banks under the Company's credit facilities, thereby reducing the exposure to
credit loss. The Company has policies regarding the financial stability and
credit standing of major counterparties. Nonperformance by the counterparties is
not anticipated nor would it have a material adverse effect on the Company's
consolidated financial position or results of operations.
8. RELATED-PARTY TRANSACTIONS:
Charter provides management services to the Company including centralized
customer billing services, data processing and related support, benefits
administration and coordination of insurance coverage and self-insurance
programs for medical, dental and workers' compensation claims. Actual costs of
certain services are charged directly to the Company and are included in
operating costs. Such costs totaled $128 for the period from December 24, 1998,
through December 31, 1998. All other costs incurred by Charter on behalf of the
Company are recorded as expenses in the accompanying consolidated financial
statements and are included in corporate expense charges -- related party.
Management believes that costs incurred by Charter on Charter Holdings behalf
and included in the accompanying financial statements are not materially
different than costs Charter Holdings would have incurred as a stand alone
entity.
Charter utilizes a combination of excess insurance coverage and
self-insurance programs for its medical, dental and workers' compensation
claims. Charges are made to Charter Holdings as determined by independent
actuaries at the present value of the actuarially computed present and future
liabilities for such benefits. Medical coverage provides for $2,435 aggregate
stop loss protection and a loss limitation of $100 per person per year. Workers'
compensation coverage provides for $800 aggregate stop loss protection and a
loss limitation of $150 per person per year.
The Company is charged a management fee based on percentages of revenues or
a flat fee plus additional fees based on percentages of operating cash flows, as
stipulated in the management agreements between Charter and the operating
subsidiaries. To the extent management fees charged to the Company are
greater(less) than the corporate expenses incurred by Charter, the Company will
record distributions to(capital contributions from) Charter. For the period from
December 24, 1998, through December 31, 1998, the
F-20
<PAGE> 205
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
management fee charged to the Company approximated the corporate expenses
incurred by Charter on behalf of the Company. As of December 31, 1998,
management fees currently payable of $7,675 are included in payables to manager
of cable television systems-related party. Beginning in 1999, the management fee
will be based on 3.5% of revenues as permitted by the new debt agreements of the
Company (see Note 12).
The payable to related party represents the reimbursement of costs incurred
by Paul G. Allen in connection with the acquisition of Marcus by Paul G. Allen.
9. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases certain facilities and equipment under noncancelable
operating leases. Leases and rental costs charged to expense for the period from
December 24, 1998, through December 31, 1998, were $144. Future minimum lease
payments are as follows:
<TABLE>
<S> <C>
1999........................................................ $5,898
2000........................................................ 4,070
2001........................................................ 3,298
2002........................................................ 1,305
2003........................................................ 705
Thereafter.................................................. 3,395
</TABLE>
The Company also rents utility poles in its operations. Generally, pole
rentals are cancelable on short notice, but the Company anticipates that such
rentals will recur. Rent expense incurred for pole rental attachments for the
period from December 24, 1998, through December 31, 1998, was $226.
LITIGATION
The Company is a party to lawsuits that arose in the ordinary course of
conducting its business. In the opinion of management, after consulting with
legal counsel, the outcome of these lawsuits will not have a material adverse
effect on the Company's consolidated financial position or results of
operations.
REGULATION IN THE CABLE TELEVISION INDUSTRY
The cable television industry is subject to extensive regulation at the
federal, local and, in some instances, state levels. The Cable Communications
Policy Act of 1984 (the "1984 Cable Act"), the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act" and together with
the 1984 Cable Act, the "Cable Acts"), and the Telecommunications Act of 1996
(the "1996 Telecom Act"), establish a national policy to guide the development
and regulation of cable television systems. The Federal Communications
Commission (FCC) has principal responsibility for implementing the policies of
the Cable Acts. Many aspects of such regulation are currently the subject of
judicial proceedings and administrative or legislative proposals. Legislation
and regulations continue to change, and the Company cannot predict the impact of
future developments on the cable television industry.
F-21
<PAGE> 206
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The 1992 Cable Act and the FCC's rules implementing that act generally have
increased the administrative and operational expenses of cable television
systems and have resulted in additional regulatory oversight by the FCC and
local or state franchise authorities. The Cable Acts and the corresponding FCC
regulations have established rate regulations.
The 1992 Cable Act permits certified local franchising authorities to order
refunds of basic service tier rates paid in the previous twelve-month period
determined to be in excess of the maximum permitted rates. As of December 31,
1998, the amount refunded by the Company has been insignificant. The Company may
be required to refund additional amounts in the future.
The Company believes that it has complied in all material respects with the
provisions of the 1992 Cable Act, including the rate setting provisions
promulgated by the FCC. However, in jurisdictions that have chosen not to
certify, refunds covering the previous twelve-month period may be ordered upon
certification if the Company is unable to justify its basic rates. The Company
is unable to estimate at this time the amount of refunds, if any, that may be
payable by the Company in the event certain of its rates are successfully
challenged by franchising authorities or found to be unreasonable by the FCC.
The Company does not believe that the amount of any such refunds would have a
material adverse effect on the consolidated financial position or results of
operations of the Company.
The 1996 Telecom Act, among other things, immediately deregulated the rates
for certain small cable operators and in certain limited circumstances rates on
the basic service tier, and as of March 31, 1999, deregulates rates on the cable
programming service tier (CPST). The FCC is currently developing permanent
regulations to implement the rate deregulation provisions of the 1996 Telecom
Act. The Company cannot predict the ultimate effect of the 1996 Telecom Act on
the Company's consolidated financial position or results of operations.
The FCC may further restrict the ability of cable television operators to
implement rate increases or the United States Congress may enact legislation
that could delay or suspend the scheduled March 1999 termination of CPST rate
regulation. This continued rate regulation, if adopted, could limit the rates
charged by the Company.
A number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. State governmental agencies are
required to follow FCC rules when prescribing rate regulation, and thus, state
regulation of cable television rates is not allowed to be more restrictive than
the federal or local regulation. The Company is subject to state regulation in
Connecticut.
10. EMPLOYEE BENEFIT PLANS:
The Company's employees may participate in 401(k) plans (the "401(k)
Plans"). Employees that qualify for participation can contribute up to 15% of
their salary, on a before tax basis, subject to a maximum contribution limit as
determined by the Internal Revenue Service. The Company made contributions to
the 401(k) Plans totaling $30 for the period from December 24, 1998, through
December 31, 1998.
F-22
<PAGE> 207
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. ACCOUNTING STANDARD NOT YET IMPLEMENTED:
In June 1998, the Financial Accounting Standards Board adopted SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999. The Company has
not yet quantified the impacts of adopting SFAS No. 133 on its consolidated
financial statements nor has it determined the timing or method of its adoption
of SFAS No. 133. However, SFAS No. 133 could increase volatility in earnings
(loss).
12. SUBSEQUENT EVENTS:
Through April 19, 1999, the Company has entered into definitive agreements
to purchase eight cable television companies, including a swap of cable
television systems, for approximately $4.6 billion. The swap of cable television
systems will be recorded at the fair value of the systems exchanged. The
acquisitions are expected to close during 1999.
In March 1999, concurrent with the issuance of $600.0 million 8.250% Senior
Notes due 2007, $1.5 billion 8.625% Senior Notes due 2009 and $1.475 billion
9.920% Senior Discount Notes due 2011 (collectively, the "CCH Notes"), the
Company extinguished substantially all long-term debt, excluding borrowings of
the Company under its credit agreements, and refinanced substantially all
existing credit agreements at various subsidiaries with a new credit agreement
(the "CCO Credit Agreement") entered into by Charter Operating. Charter Holdings
expects to record an extraordinary loss of approximately $4 million in
conjunction with the extinguishment of substantially all long-term debt and the
refinancing of its credit agreements.
The CCO Credit Agreement provides for two term facilities, one with a
principal amount of $1.0 billion that matures September 2008 (Term A), and the
other with the principal amount of $1.85 billion that matures on March 2009
(Term B). The CCO Credit Agreement also provides for a $1.25 billion revolving
credit facility with a maturity date of September 2008. Amounts under the CCO
Credit Agreement bear interest at the Base Rate or the Eurodollar rate, as
defined, plus a margin up to 2.75%. A quarterly commitment fee of between 0.25%
and 0.375% per annum is payable on the unborrowed balance of Term A and the
revolving credit facility. On March 17, 1999, the Company borrowed $1.75 billion
under Term B and invested the excess cash of $1.0 billion in short-term
investments.
Charter Communications Holdings Capital Corporation (CCHC) is a co-issuer
of the CCH Notes. CCHC is a wholly owned finance subsidiary of Charter Holdings
with no independent assets or operations.
F-23
<PAGE> 208
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Charter Communications Holdings, LLC:
We have audited the accompanying consolidated balance sheet of Charter
Communications Holdings, LLC and subsidiaries as of December 31, 1997, and the
related consolidated statements of operations, shareholder's investment and cash
flows for the period from January 1, 1998, through December 23, 1998, and for
the years ended December 31, 1997 and 1996. These consolidated 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 Charter Communications
Holdings, LLC and subsidiaries as of December 31, 1997, and the results of their
operations and their cash flows for the period from January 1, 1998, through
December 23, 1998, and for the years ended December 31, 1997 and 1996, in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
St. Louis, Missouri,
February 5, 1999 (except with respect to
the matters discussed in Note 1, as to
which the date is April 7, 1999)
F-24
<PAGE> 209
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1997
------------
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 626
Accounts receivable, net of allowance for doubtful
accounts of $52........................................ 579
Prepaid expenses and other................................ 32
-------
Total current assets................................... 1,237
-------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment............................. 25,530
Franchises, net of accumulated amortization of $3,829..... 28,195
-------
53,725
-------
OTHER ASSETS................................................ 849
-------
$55,811
=======
LIABILITIES AND SHAREHOLDER'S INVESTMENT
CURRENT LIABILITIES:
Accounts payable and accrued expenses..................... $ 3,082
Payables to manager of cable television systems -- related
party.................................................. 114
-------
Total current liabilities.............................. 3,196
-------
LONG-TERM DEBT.............................................. 41,500
-------
NOTE PAYABLE TO RELATED PARTY, including accrued interest... 13,090
-------
SHAREHOLDER'S INVESTMENT:
Common stock, $.01 par value, 100 shares authorized, one
issued and outstanding................................. --
Paid-in capital........................................... 5,900
Accumulated deficit....................................... (7,875)
-------
Total shareholder's investment......................... (1,975)
-------
$55,811
=======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-25
<PAGE> 210
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, YEAR ENDED
1998, THROUGH DECEMBER 31
DECEMBER 23, ------------------
1998 1997 1996
------------- ------- -------
<S> <C> <C> <C>
REVENUES....................................... $ 49,731 $18,867 $14,881
-------- ------- -------
OPERATING EXPENSES:
Operating costs.............................. 18,751 9,157 5,888
General and administrative................... 7,201 2,610 2,235
Depreciation and amortization................ 16,864 6,103 4,593
Corporate expense allocation -- related
party..................................... 6,176 566 446
-------- ------- -------
48,992 18,436 13,162
-------- ------- -------
Income from operations.................... 739 431 1,719
-------- ------- -------
OTHER INCOME (EXPENSE):
Interest income.............................. 44 41 20
Interest expense............................. (17,277) (5,120) (4,415)
Other, net................................... (728) 25 (47)
-------- ------- -------
(17,961) (5,054) (4,442)
-------- ------- -------
Net loss.................................. $(17,222) $(4,623) $(2,723)
======== ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-26
<PAGE> 211
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S INVESTMENT
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
------ ------- ----------- --------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995........ $-- $ 1,500 $ (529) $ 971
Capital contributions........... -- 4,400 -- 4,400
Net loss........................ -- -- (2,723) (2,723)
-- ------- -------- --------
BALANCE, December 31, 1996........ -- 5,900 (3,252) 2,648
Net loss........................ -- -- (4,623) (4,623)
-- ------- -------- --------
BALANCE, December 31, 1997........ -- 5,900 (7,875) (1,975)
Capital contributions........... -- 10,800 -- 10,800
Net loss........................ -- -- (17,222) (17,222)
-- ------- -------- --------
BALANCE, December 23, 1998........ $-- $16,700 $(25,097) $ (8,397)
== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-27
<PAGE> 212
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, YEAR ENDED
1998, THROUGH DECEMBER 31
DECEMBER 23, -------------------
1998 1997 1996
------------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................. $ (17,222) $(4,623) $ (2,723)
Adjustments to reconcile net loss to net cash
provided by operating activities --
Depreciation and amortization...................... 16,864 6,103 4,593
Loss on sale of cable television system............ -- 1,363 --
Amortization of debt issuance costs, debt discount
and interest rate cap agreements................. 267 123 --
(Gain) loss on disposal of property, plant and
equipment........................................ (14) 130 --
Changes in assets and liabilities, net of effects
from acquisitions --
Receivables, net................................. 10 (227) 6
Prepaid expenses and other....................... (125) 18 312
Accounts payable and accrued expenses............ 16,927 894 3,615
Payables to manager of cable television
systems....................................... 5,288 (153) 160
Other operating activities....................... 569 -- --
--------- ------- --------
Net cash provided by operating activities........ 22,564 3,628 5,963
--------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment........... (15,364) (7,880) (5,894)
Payments for acquisitions, net of cash acquired...... (167,484) -- (34,069)
Proceeds from sale of cable television system........ -- 12,528 --
Other investing activities........................... (486) -- 64
--------- ------- --------
Net cash provided by (used in) investing
activities.................................... (183,334) 4,648 (39,899)
--------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt......................... 217,500 5,100 31,375
Repayments of long-term debt......................... (60,200) (13,375) (1,000)
Capital contributions................................ 7,000 -- 4,400
Payment of debt issuance costs....................... (3,487) (12) (638)
--------- ------- --------
Net cash provided by (used in) financing
activities.................................... 160,813 (8,287) 34,137
--------- ------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS... 43 (11) 201
CASH AND CASH EQUIVALENTS, beginning of period......... 626 637 436
--------- ------- --------
CASH AND CASH EQUIVALENTS, end of period............... $ 669 $ 626 $ 637
========= ======= ========
CASH PAID FOR INTEREST................................. $ 7,679 $ 3,303 $ 2,798
========= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-28
<PAGE> 213
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION
Charter Communications Holdings, LLC (Charter Holdings), a Delaware limited
liability company, was formed in February 1999 as a wholly owned subsidiary of
Charter Communications, Inc. (Charter). Charter, through its wholly owned cable
television operating subsidiary, Charter Communications Properties, LLC (CCP),
commenced operations with the acquisition of a cable television system on
September 30, 1995.
Effective December 23, 1998, through a series of transactions, Paul G.
Allen acquired approximately 94% of Charter for an aggregate purchase price of
$2.2 billion, excluding $2.0 billion in debt assumed (the "Paul Allen
Transaction"). In conjunction with the Paul Allen Transaction, Charter acquired
controlling interests in CharterComm Holdings, LLC (CharterComm Holdings) and
CCA Group (comprised of CCA Holdings Corp., CCT Holdings Corp. and Charter
Communications Long Beach Inc.), all cable television operating companies, from
unrelated third parties for fair value. Charter previously managed and owned
minority interests in these companies. These acquisitions were accounted for
using the purchase method of accounting, and accordingly results of operations
of CarterComm Holdings and CCA Group are included in the financial statements of
Charter Holdings from the date of acquisition. In February 1999, Charter
transferred all of its cable television operating subsidiaries to a wholly owned
subsidiary of Charter Holdings, Charter Communications Operating, LLC (Charter
Operating). The transfer was accounted for as a reorganization of entities under
common control similar to a pooling of interests.
On April 7, 1999, the cable television operating subsidiaries of Marcus
Cable Company, L.L.C. (Marcus) were transferred to Charter Operating. The
transfer was accounted for as a reorganization of entities under common control
similar to a pooling of interests, since Paul G. Allen and a company controlled
by Paul G. Allen purchased substantially all of the outstanding partnership
interests in Marcus in April 1998, and purchased the remaining interests in
Marcus on April 7, 1999.
The accompanying financial statements include the accounts of CCP,
Charter's wholly owned cable operating subsidiary, representing the financial
statements of Charter Holdings and subsidiaries (the Company) for all periods
presented. The accounts of CharterComm Holdings and CCA Group are not included
since these companies were not owned and controlled by Charter prior to December
23, 1998. The accounts of Marcus are not included since both Charter and Marcus
were not owned and controlled by the same party prior to December 23, 1998.
As a result of the change in ownership of CCP, CharterComm Holdings and CCA
Group, Charter Holdings has applied push-down accounting in the preparation of
the consolidated financial statements effective December 23, 1998. Accordingly,
the financial statements of Charter Holdings for periods ended on or before
December 23, 1998, are presented on a different cost basis than the financial
statements for the periods after December 23, 1998 (not presented herein), and
are not comparable.
F-29
<PAGE> 214
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. At December 31, 1997,
cash equivalents consist primarily of repurchase agreements. These investments
are carried at cost that approximates market value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost, including all direct and
certain indirect costs associated with the construction of cable television
transmission and distribution facilities, and the cost of new customer
installations. The costs of disconnecting a customer are charged to expense in
the period incurred. Expenditures for repairs and maintenance are charged to
expense as incurred, and equipment replacement and betterments are capitalized.
Depreciation is provided on the straight-line basis over the estimated
useful lives of the related assets as follows:
<TABLE>
<S> <C>
Cable distribution systems................................ 3-15 years
Buildings and leasehold improvements...................... 5-15 years
Vehicles and equipment.................................... 3-5 years
</TABLE>
In 1997, the Company shortened the useful lives from 10 years to 5 years of
certain plant and equipment included in cable distribution systems associated
with costs of new customer installations. As a result, additional depreciation
of $550 was recorded during 1997. The estimated useful lives were shortened to
be more reflective of average customer lives.
FRANCHISES
Costs incurred in obtaining and renewing cable franchises are deferred and
amortized over the lives of the franchises. Costs relating to unsuccessful
franchise applications are charged to expense when it is determined that the
efforts to obtain the franchise will not be successful. Franchise rights
acquired through the purchase of cable television systems represent the excess
of the cost of properties acquired over the amounts assigned to net tangible
assets at the date of acquisition and are generally amortized using the
straight-line method over a period of 15 years.
IMPAIRMENT OF ASSETS
If facts and circumstances suggest that a long-lived asset may be impaired,
the carrying value is reviewed. If a review indicates that the carrying value of
such asset is not recoverable based on projected undiscounted cash flows related
to the asset over its remaining life, the carrying value of such asset is
reduced to its estimated fair value.
REVENUES
Cable television revenues from basic and premium services are recognized
when the related services are provided.
Installation revenues are recognized to the extent of direct selling costs
incurred. The remainder, if any, is deferred and amortized to income over the
estimated average period that customers are expected to remain connected to the
cable television system. As of
F-30
<PAGE> 215
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1997, no installation revenue has been deferred, as direct selling
costs have exceeded installation revenue.
Fees collected from programmers to guarantee carriage are deferred and
amortized to income over the life of the contracts. Local governmental
authorities impose franchise fees on the Company ranging up to a federally
mandated maximum of 5.0% of gross revenues. On a monthly basis, such fees are
collected from the Company's customers and are periodically remitted to local
franchises. Franchise fees collected and paid are reported as revenues.
INTEREST RATE HEDGE AGREEMENTS
The Company manages fluctuations in interest rates by using interest rate
hedge agreements, as required by certain debt agreements. Interest rate swaps,
caps and collars are accounted for as hedges of debt obligations, and
accordingly, the net settlement amounts are recorded as adjustments to interest
expense in the period incurred. Premiums paid for interest rate caps are
deferred, included in other assets, and are amortized over the original term of
the interest rate agreement as an adjustment to interest expense.
The Company's interest rate swap agreements require the Company to pay a
fixed rate and receive a floating rate thereby creating fixed rate debt.
Interest rate caps and collars are entered into by the Company to reduce the
impact of rising interest rates on floating rate debt.
The Company's participation in interest rate hedging transactions involves
instruments that have a close correlation with its debt, thereby managing its
risk. Interest rate hedge agreements have been designed for hedging purposes and
are not held or issued for speculative purposes.
INCOME TAXES
The Company files a consolidated income tax return with Charter. Income
taxes are allocated to the Company in accordance with the tax-sharing agreement
between the Company and Charter.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. ACQUISITIONS:
In 1998, the Company acquired cable television systems for an aggregate
purchase price, net of cash acquired, of $228,400, comprising $167,500 in cash
and $60,900 in a note payable to Seller. The excess of cost of properties
acquired over the amounts assigned to net tangible assets at the date of
acquisition was $207,600 and is included in franchises.
In 1996, the Company acquired cable television systems for an aggregate
purchase price, net of cash acquired, of $34,100. The excess of the cost of
properties acquired over the amounts assigned to net tangible assets at the date
of acquisition was $24,300 and is included in franchises.
F-31
<PAGE> 216
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The above acquisitions were accounted for using the purchase method of
accounting, and accordingly, results of operations of the acquired assets have
been included in the financial statements from the dates of acquisition. The
purchase prices were allocated to tangible and intangible assets based on
estimated fair values at the acquisition dates.
Unaudited pro forma operating results as though the acquisition discussed
above, excluding the Paul Allen Transaction, had occurred on January 1, 1997,
with adjustments to give effect to amortization of franchises, interest expense
and certain other adjustments are as follows:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1, 1998,
THROUGH YEAR ENDED
DECEMBER 23, 1998 1997
----------------- ----------
(UNAUDITED)
<S> <C> <C>
Revenues.......................................... $ 67,007 $ 63,909
Loss from operations.............................. (7,097) (7,382)
Net loss.......................................... (24,058) (26,099)
</TABLE>
The unaudited pro forma information has been presented for comparative
purposes and does not purport to be indicative of the results of operations had
these transactions been completed as of the assumed date or which may be
obtained in the future.
3. SALE OF FT. HOOD SYSTEM:
In February 1997, the Company sold the net assets of the Ft. Hood system,
which served customers in Texas, for an aggregate sales price of approximately
$12,500. The sale of the Ft. Hood system resulted in a loss of $1,363, which is
included in operating costs in the accompanying statement of operations for the
year ended December 31, 1997.
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following at December 31,
1997:
<TABLE>
<S> <C>
Cable distribution systems.................................. $29,061
Land, buildings and leasehold improvements.................. 447
Vehicles and equipment...................................... 1,744
-------
31,252
Less- Accumulated depreciation.............................. (5,722)
-------
$25,530
=======
</TABLE>
For the period from January 1, 1998, through December 23, 1998, and for the
years ended December 31, 1997 and 1996, depreciation expense was $6,249, $3,898
and $2,371, respectively.
F-32
<PAGE> 217
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following at December
31, 1997:
<TABLE>
<S> <C>
Accrued interest............................................ $ 292
Capital expenditures........................................ 562
Franchise fees.............................................. 426
Programming costs........................................... 398
Accounts payable............................................ 298
Other....................................................... 1,012
------
$2,988
======
</TABLE>
6. LONG-TERM DEBT:
The Company maintained a revolving credit agreement (the "Old Credit
Agreement") with a consortium of banks for borrowings up to $47,500, of which
$41,500 was outstanding at December 31, 1997. In 1997, the Credit Agreement was
amended to reflect the impact of the sale of a cable television system. The debt
bears interest, at the Company's option, at rates based on the prime rate of the
Bank of Montreal (the agent bank), or LIBOR, plus the applicable margin based
upon the Company's leverage ratio at the time of the borrowings. The variable
interest rates ranged from 7.44% to 7.63% at December 31, 1997.
In May 1998, the Company entered into a credit agreement (the "CCP Credit
Agreement"), which provides for two term loan facilities, one with the principal
amount of $60,000 that matures on June 30, 2006, and the other with the
principal amount of $80,000 that matures on June 30, 2007. The CCP Credit
Agreement also provides for a $90,000 revolving credit facility with a maturity
date of June 30, 2006. Amounts under the CCP Credit Agreement bear interest at
the LIBOR Rate or Base Rate, as defined, plus a margin of up to 2.88%.
Commencing March 31, 1999, and at the end of each quarter thereafter,
available borrowings under the revolving credit facility shall be reduced on an
annual basis by 3.5% in 1999, 7.0% in 2000, 9.0% in 2001, 10.5% in 2002 and
16.5% in 2003. Commencing March 31, 2000, and at the end of each quarter
thereafter, available borrowings under the term loan shall be reduced on an
annual basis by 6.0% in 2000, 8.0% in 2001, 11.0% in 2002 and 16.5% in 2003.
Commencing March 31, 2000, and at the end of each quarter thereafter, available
borrowings under the other term loan shall be reduced on an annual basis by 1.0%
in 2000, 1.0% in 2001, 1.0% in 2002 and 1.0% in 2003.
7. NOTE PAYABLE TO RELATED PARTY:
As of December 31, 1997, the Company holds a promissory note payable to CCT
Holdings Corp., a company managed by Charter and acquired by Charter effective
December 23, 1998. The promissory note bears interest at the rates paid by CCT
Holdings Corp. on a note payable to a third party. Principal and interest are
due on September 29, 2005.
F-33
<PAGE> 218
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. FAIR VALUE OF FINANCIAL INSTRUMENTS:
A summary of debt and the related interest rate hedge agreements at
December 31, 1997, is as follows:
<TABLE>
<CAPTION>
CARRYING NOTIONAL FAIR
VALUE AMOUNT VALUE
-------- -------- -------
<S> <C> <C> <C>
Debt
CCP Credit Agreement............................. $41,500 $ -- $41,500
Interest Rate Hedge Agreements
Caps............................................. -- 15,000 --
Collars.......................................... -- 20,000 (74)
</TABLE>
As the long-term debt under the credit agreements bears interest at current
market rates, its carrying amount approximates market value at December 31,
1997.
The notional amounts of interest rate hedge agreements do not represent
amounts exchanged by the parties and, thus, are not a measure of the Company's
exposure through its use of interest rate hedge agreements. The amounts
exchanged are determined by reference to the notional amount and the other terms
of the contracts.
The fair value of interest rate hedge agreements generally reflects the
estimated amounts that the Company would receive or pay (excluding accrued
interest) to terminate the contracts on the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts. Dealer
quotations are available for the Company's interest rate hedge agreements.
Management believes that the sellers of the interest rate hedge agreements
will be able to meet their obligations under the agreements. The Company has
policies regarding the financial stability and credit standing of major
counterparties. Nonperformance by the counterparties is not anticipated nor
would it have a material adverse effect on the Company's financial position or
results of operations.
9. INCOME TAXES:
At December 31, 1997, the Company had net operating loss carryforwards of
$9,594, which if not used to reduce taxable income in future periods, expire in
the years 2010 through 2012. As of December 31, 1997, the Company's deferred
income tax assets were offset by valuation allowances and deferred income tax
liabilities resulting primarily from differences in accounting for depreciation
and amortization.
10. RELATED-PARTY TRANSACTIONS:
Charter provides management services to the Company including centralized
customer billing services, data processing and related support, benefits
administration and coordination of insurance coverage and self-insurance
programs for medical, dental and workers' compensation claims. Actual costs of
certain services are charged directly to the Company and are included in
operating costs. Such costs totaled $437, $220 and $131, respectively for the
period from January 1, 1998, through December 23, 1998, and the years ended
December 31, 1997 and 1996. All other costs incurred by Charter on behalf of the
Company are expensed in the accompanying financial statements and are included
in corporate expense allocations -- related party. The cost of these services is
allocated based
F-34
<PAGE> 219
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
on the number of basic customers. Management considers this allocation to be
reasonable for the operations of the Company.
Charter utilizes a combination of excess insurance coverage and
self-insurance programs for its medical, dental and workers' compensation
claims. Charges are made to Charter Holdings as determined by independent
actuaries, at the present value of the actuarially computed present and future
liabilities for such benefits. Medical coverage provides for $2,435 aggregate
stop loss protection and a loss limitation of $100 per person per year. Workers'
compensation coverage provides for $800 aggregate stop loss protection and a
loss limitation of $150 per person per year.
The Company is charged a management fee based on percentages of revenues as
stipulated in the management agreement between Charter and the Company. For the
period from January 1, 1998, through December 23, 1998, and the years ended
December 31, 1997 and 1996, the management fee charged to the Company
approximated the corporate expenses incurred by Charter on behalf of the
Company. Management fees currently payable of $114 are included in payables to
manager of cable television systems -- related party as of December 31, 1997.
11. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases certain facilities and equipment under noncancelable
operating leases. Leases and rental costs charged to expense for the period from
January 1, 1998, through December 23, 1998, and for the years ended December 31,
1997 and 1996, were $278, $130 and $91, respectively.
The Company also rents utility poles in its operations. Generally, pole
rentals are cancelable on short notice, but the Company anticipates that such
rentals will recur. Rent expense incurred for pole rental attachments for the
period from January 1, 1998, through December 23, 1998, and for the years ended
December 31, 1997 and 1996, was $421, $271 and $174, respectively.
LITIGATION
The Company is a party to lawsuits that arose in the ordinary course of
conducting its business. In the opinion of management, after consulting with
legal counsel, the outcome of these lawsuits will not have a material adverse
effect on the Company's financial position or results of operations.
REGULATION IN THE CABLE TELEVISION INDUSTRY
The cable television industry is subject to extensive regulation at the
federal, local and, in some instances, state levels. The Cable Communications
Policy Act of 1984 (the "1984 Cable Act"), the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act" and together with
the 1984 Cable Act, the "Cable Acts"), and the Telecommunications Act of 1996
(the "1996 Telecom Act"), establish a national policy to guide the development
and regulation of cable television systems. The Federal Communications
Commission (FCC) has principal responsibility for implementing the policies of
the Cable Acts. Many aspects of such regulation are currently the subject of
judicial proceedings and administrative or legislative proposals. Legislation
and regulations
F-35
<PAGE> 220
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
continue to change, and the Company cannot predict the impact of future
developments on the cable television industry.
The 1992 Cable Act and the FCC's rules implementing that act generally have
increased the administrative and operational expenses of cable television
systems and have resulted in additional regulatory oversight by the FCC and
local or state franchise authorities. The Cable Acts and the corresponding FCC
regulations have established rate regulations.
The 1992 Cable Act permits certified local franchising authorities to order
refunds of basic service tier rates paid in the previous twelve-month period
determined to be in excess of the maximum permitted rates. As of December 31,
1998, the amount refunded by the Company has been insignificant. The Company may
be required to refund additional amounts in the future.
The Company believes that it has complied in all material respects with the
provisions of the 1992 Cable Act, including the rate setting provisions
promulgated by the FCC. However, in jurisdictions that have chosen not to
certify, refunds covering the previous twelve-month period may be ordered upon
certification if the Company is unable to justify its basic rates. The Company
is unable to estimate at this time the amount of refunds, if any, that may be
payable by the Company in the event certain of its rates are successfully
challenged by franchising authorities or found to be unreasonable by the FCC.
The Company does not believe that the amount of any such refunds would have a
material adverse effect on the financial position or results of operations of
the Company.
The 1996 Telecom Act, among other things, immediately deregulated the rates
for certain small cable operators and in certain limited circumstances rates on
the basic service tier, and as of March 31, 1999, deregulates rates on the cable
programming service tier (CPST). The FCC is currently developing permanent
regulations to implement the rate deregulation provisions of the 1996 Telecom
Act. The Company cannot predict the ultimate effect of the 1996 Telecom Act on
the Company's financial position or results of operations.
The FCC may further restrict the ability of cable television operators to
implement rate increases or the United States Congress may enact legislation
that could delay or suspend the scheduled March 1999 termination of CPST rate
regulation. This continued rate regulation, if adopted, could limit the rates
charged by the Company.
A number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. State governmental agencies are
required to follow FCC rules when prescribing rate regulation, and thus, state
regulation of cable television rates is not allowed to be more restrictive than
the federal or local regulation. The Company is subject to state regulation in
Connecticut.
12. EMPLOYEE BENEFIT PLAN:
401(K) PLAN
The Company's employees may participate in the Charter Communications, Inc.
401(k) Plan (the "401(k) Plan"). Employees that qualify for participation can
contribute up to 15% of their salary, on a before tax basis, subject to a
maximum contribution limit as determined by the Internal Revenue Service. The
Company contributes an amount
F-36
<PAGE> 221
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
equal to 50% of the first 5% of contributions by each employee. The Company
contributed $74, $29 and $22 for the period from January 1, 1998, through
December 23, 1998, and for the years ended December 31, 1997 and 1996,
respectively.
APPRECIATION RIGHTS PLAN
Certain employees of Charter participate in the 1995 Charter
Communications, Inc. Appreciation Rights Plan (the "Plan"). The Plan permits
Charter to grant 1,500,000 units to certain key employees, of which 1,251,500
were outstanding at December 31, 1997. Units received by an employee vest at a
rate of 20% per year, unless otherwise provided in the participant's
Appreciation Rights Unit Agreement. The appreciation rights entitle the
participants to receive payment, upon termination or change in control of
Charter, of the excess of the unit value over the base value (defined as the
appreciation value) for each vested unit. The unit value is based on Charter's
adjusted equity, as defined in the Plan. Deferred compensation expense recorded
by Charter is based on the appreciation value since the grant date and is being
amortized over the vesting period.
As a result of the acquisition of Charter by Paul G. Allen, the Plan will
be terminated and all amounts will be paid by Charter in 1999. The cost of this
plan was allocated to the Company based on the number of basic customers.
Management considers this allocation to be reasonable for the operations of the
Company. For the period January 1, 1998, through December 23, 1998, the Company
expensed $3,800, included in corporate expense allocation, for the cost of this
plan.
13. ACCOUNTING STANDARD NOT YET IMPLEMENTED:
In June 1998, the Financial Accounting Standards Board adopted SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999. The Company has
not yet quantified the impacts of adopting SFAS No. 133 on its consolidated
financial statements nor has it determined the timing or method of its adoption
of SFAS No. 133. However, SFAS No. 133 could increase volatility in earnings
(loss).
F-37
<PAGE> 222
INDEPENDENT AUDITORS' REPORT
The Members
Marcus Cable Company, L.L.C.:
We have audited the accompanying consolidated balance sheets of Marcus
Cable Company, L.L.C. and subsidiaries as of December 31, 1998 and 1997 (which
December 31, 1998 balance sheet is not presented separately herein) and the
related consolidated statements of operations, members' equity and cash flows
for the period from April 23, 1998 to December 23, 1998 and the consolidated
statements of operations, partners' capital (deficit), and cash flows for the
period from January 1, 1998 to April 22, 1998 and for each of the years in the
two-year period ended December 31, 1997. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Marcus Cable
Company, L.L.C. and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for the periods from April 23,
1998 to December 23, 1998 and from January 1, 1998 to April 22, 1998 and for
each of the years in the two-year period ended December 31, 1997, in conformity
with generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements,
substantially all of Marcus Cable Company, L.L.C. was acquired by Vulcan Cable,
Inc. and Paul G. Allen as of April 22, 1998 in a business combination accounted
for as a purchase. As a result of the application of purchase accounting, the
consolidated financial statements of Marcus Cable Company, L.L.C. and
subsidiaries for the period from April 23, 1998 to December 23, 1998 are
presented on a different cost basis than those for periods prior to April 23,
1998, and accordingly, are not directly comparable.
/s/ KPMG LLP
Dallas, Texas
February 19, 1999
(except for the tenth paragraph of Note 1
which is as of April 7, 1999)
F-38
<PAGE> 223
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR (NOTE 1)
--------------------
1997
----
<S> <C>
ASSETS
- ----------------------------------------------------------------------------------
Current assets:
Cash and cash equivalents................................. $ 1,607
Accounts receivable, net of allowance of $1,800 in 1998
and $1,904 in 1997..................................... 23,935
Prepaid expenses and other................................ 2,105
----------
Total current assets.............................. 27,647
Investment in cable television systems:
Property, plant and equipment............................. 706,626
Franchises................................................ 972,440
Noncompetition agreements................................. 6,770
Other assets................................................ 36,985
----------
$1,750,468
==========
LIABILITIES AND PARTNERS' CAPITAL
- ----------------------------------------------------------------------------------
Current liabilities:
Current maturities of long-term debt...................... $ 67,499
Accrued liabilities....................................... 68,754
----------
Total current liabilities......................... 136,253
Long-term debt.............................................. 1,531,927
Other long-term liabilities................................. 2,261
Partners' capital........................................... 80,027
----------
$1,750,468
==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-39
<PAGE> 224
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR (NOTE 1)
SUCCESSOR (NOTE 1) -----------------------------------------------
-------------------- YEAR ENDED DECEMBER 31
PERIOD FROM APRIL 23 PERIOD FROM JANUARY 1 -----------------------
TO DECEMBER 23, 1998 TO APRIL 22, 1998 1997 1996
-------------------- --------------------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Cable services.......... $ 332,139 $ 157,389 $ 473,701 $ 432,172
Management fees --
related party........ 181 374 5,614 2,335
--------- --------- --------- ---------
Total
revenues...... 332,320 157,763 479,315 434,507
--------- --------- --------- ---------
Operating expenses:
Selling, service and
system management.... 129,435 60,501 176,515 157,197
General and
administrative....... 51,912 24,245 72,351 73,017
Transaction and
severance costs...... 16,034 114,167 -- --
Management fees --
related party........ 3,048 -- -- --
Depreciation and
amortization......... 174,968 64,669 188,471 166,429
--------- --------- --------- ---------
Total operating
expenses...... 375,397 263,582 437,337 396,643
--------- --------- --------- ---------
Operating income
(loss)........ (43,077) (105,819) 41,978 37,864
--------- --------- --------- ---------
Other (income) expense:
Interest expense........ 93,103 49,905 151,207 144,376
Gain on sale of
assets............... -- (43,662) -- (6,442)
--------- --------- --------- ---------
Total other
expense....... 93,103 6,243 151,207 137,934
--------- --------- --------- ---------
Loss before
extraordinary
item.......... (136,180) (112,062) (109,229) (100,070)
Extraordinary item -- gain
on early retirement of
debt.................... (2,384) -- -- --
--------- --------- --------- ---------
Net loss........ $(133,796) $(112,062) $(109,229) $(100,070)
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-40
<PAGE> 225
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR (NOTE 1)
----------------------------------
CLASS B
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- -------- -----
<S> <C> <C> <C>
Balance at December 31, 1995.................... $(21,396) $ 310,722 $ 289,326
Net loss...................................... (200) (99,870) (100,070)
-------- --------- ---------
Balance at December 31, 1996.................... (21,596) 210,852 189,256
Net loss...................................... (218) (109,011) (109,229)
-------- --------- ---------
Balance at December 31, 1997.................... (21,814) 101,841 80,027
Net loss -- January 1, 1998 to April 22,
1998....................................... (224) (111,838) (112,062)
-------- --------- ---------
Balance at April 22, 1998....................... $(22,038) $ (9,997) $ (32,035)
======== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-41
<PAGE> 226
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR (NOTE 1)
----------------------------------------
MARCUS
CABLE
PROPERTIES, VULCAN
L.L.C. CABLE, INC. TOTAL
----------- ----------- ----------
<S> <C> <C> <C>
Initial capitalization (note 3)................ $53,200 $1,346,800 $1,400,000
Capital contribution (note 3).................. -- 20,000 20,000
Net loss -- April 23, 1998 to December 23,
1998......................................... (5,084) (128,712) (133,796)
------- ---------- ----------
Balance at December 23, 1998................... $48,116 $1,238,088 $1,286,204
======= ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-42
<PAGE> 227
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR (NOTE 1) PREDECESSOR (NOTE 1)
-------------------- ---------------------------------------------------
YEAR ENDED DECEMBER 31,
PERIOD FROM APRIL 23 PERIOD FROM JANUARY 1 --------------------------
TO DECEMBER 23, 1998 TO APRIL 22, 1998 1997 1996
-------------------- --------------------- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................. $(133,796) $(112,062) $(109,229) $(100,070)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Extraordinary item -- gain on early
retirement of debt.................... (2,384) -- -- --
Gain on sale of assets.................. -- (43,662) -- (6,442)
Depreciation and amortization........... 174,969 64,669 188,471 166,429
Non cash interest expense............... 52,942 24,819 72,657 63,278
Amortization of carrying value
premium............................... (11,043) -- -- --
Changes in assets and liabilities, net
of working capital adjustments for
acquisitions:
Accounts receivable, net.............. 6,550 1,330 (6,439) (70)
Prepaid expenses and other............ (1,356) (1,855) 95 (574)
Other assets.......................... -- (16) (385) (502)
Payables to related party............. 3,048 -- -- --
Accrued liabilities................... (1,504) 90,804 9,132 (3,063)
--------- --------- --------- ---------
Net cash provided by operating
activities:...................... 87,426 24,027 154,302 118,986
--------- --------- --------- ---------
Cash flows from investing activities:
Acquisition of cable systems.............. -- (57,500) (53,812) (10,272)
Proceeds from sale of assets, net of cash
acquired and selling costs.............. 340,568 64,564 -- 20,638
Additions to property, plant and
equipment............................... (158,388) (65,715) (197,275) (110,639)
Other..................................... (648) (42) -- --
--------- --------- --------- ---------
Net cash provided by (used in)
investing activities:............ 181,532 (58,693) (251,087) (100,273)
--------- --------- --------- ---------
Cash flows from financing activities:
Borrowings under Senior Credit Facility... 158,750 59,000 226,000 65,000
Repayments under Senior Credit Facility... (343,250) (16,250) (131,250) (95,000)
Repayments of notes and debentures........ (109,344) -- -- --
Payment of debt issuance costs............ -- (99) (1,725) --
Cash contributed by member................ 20,000 -- -- --
Payments on other long-term liabilities... (550) (321) (667) (88)
--------- --------- --------- ---------
Net cash provided by (used in)
financing activities............. (274,394) 42,330 92,358 (30,088)
--------- --------- --------- ---------
Net decrease in cash and cash equivalents... (5,436) 7,664 (4,427) (11,375)
Cash and cash equivalents at the beginning
of the period............................. 9,271 1,607 6,034 17,409
--------- --------- --------- ---------
Cash and cash equivalents at the end of the
period.................................... $ 3,835 $ 9,271 $ 1,607 $ 6,034
========= ========= ========= =========
Supplemental disclosure of cash flow
information:
Interest paid............................. $ 52,631 $ 28,517 $ 81,155 $ 83,473
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-43
<PAGE> 228
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND BASIS OF PRESENTATION
Marcus Cable Company, L.L.C. ("MCCLLC") and subsidiaries (collectively, the
"Company") is a Delaware limited liability company, formerly Marcus Cable
Company, L.P. ("MCCLP"). MCCLP was formed as a Delaware limited partnership and
was converted to a Delaware limited liability company on June 9, 1998 (note 3).
The Company derives its primary source of revenues by providing various levels
of cable television programming and services to residential and business
customers. The Company's operations are conducted through Marcus Cable Operating
Company, L.L.C. ("MCOC"), a wholly-owned subsidiary of the Company. The Company
has operated its cable television systems primarily in Texas, Wisconsin,
Indiana, California and Alabama.
The accompanying consolidated financial statements include the accounts of
MCCLLC and its subsidiary limited liability companies and corporations. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
On April 23, 1998, Vulcan Cable, Inc. and Paul G. Allen (collectively
referred to as "Vulcan") acquired all of the outstanding limited partnership
interests and substantially all of the general partner interest in MCCLP. Under
the terms of the purchase agreement, the owner of the remaining 0.6% general
partner interest (the "Minority Interest") in the Company can cause Vulcan to
purchase the 0.6% general partner interest under certain conditions, or Vulcan
can cause the Minority Interest to sell its interest to Vulcan under certain
conditions, at a fair value of not less than $8,000.
As a result of this acquisition (the "Vulcan Acquisition"), the Company has
applied purchase accounting in the preparation of the accompanying consolidated
financial statements. Accordingly, MCCLP adjusted its equity as of April 23,
1998 to reflect the amount paid in the Vulcan Acquisition and has allocated that
amount to assets acquired and liabilities assumed based on their relative fair
values. The excess of the purchase price over the fair value of MCCLP's tangible
and separately identifiable intangible assets less liabilities was allocated as
franchises. The allocation of the purchase price is based, in part, on
preliminary information which is subject to adjustment upon completion of
certain appraisal and valuation information.
The total transaction was valued at $3,243,475 and was allocated as
follows:
<TABLE>
<S> <C>
Franchises............................. $2,492,375
Property, plant and equipment.......... 735,832
Noncompetition agreements.............. 6,343
Other assets........................... 8,925
----------
$3,243,475
==========
</TABLE>
The transaction was initially funded through cash payments of $1,392,000
from Vulcan and the assumption of $1,809,621 in net liabilities. In addition,
Vulcan incurred direct costs of the acquisition (principally financial advisory,
legal and accounting fees) of $20,000, which will be reimbursed by the Company.
In addition, the Company recorded the fair value of the Minority Interest of
$8,000 in equity and $13,854 in direct transaction costs.
In connection with the Vulcan Acquisition, the Company incurred transaction
costs of approximately $114,167, comprised of $90,167 paid to employees of the
Company in
F-44
<PAGE> 229
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
settlement of specially designated Class B units in MCCLP ("EUnit") granted in
past periods by the general partner of MCCLP, and $24,000 of transaction fees
paid to certain equity partners for investment banking services. These
transaction costs have been included in the accompanying consolidated statement
of operations for the period from January 1, 1998 to April 22, 1998.
As a result of the Vulcan Acquisition and the application of purchase
accounting, financial information in the accompanying consolidated financial
statements and notes thereto for the period from April 23, 1998 to December 23,
1998 (the "Successor Period") are presented on a different cost basis than the
financial information as of December 31, 1997 and for the period from January 1,
1998 to April 22, 1998 and for the years ended December 31, 1997 and 1996 (the
"Predecessor Period"), and therefore, such information is not comparable.
Effective December 23, 1998, through a series of transactions, Paul G.
Allen acquired approximately 94% of Charter Communications, Inc. ("Charter").
In March 1999, Charter transferred all of its cable television operating
subsidiaries to a subsidiary, Charter Communications Holdings, LLC (Charter
Holdings) in connection with the issuance of Senior Notes and Senior Discount
Notes totaling $3.6 billion. These operating subsidiaries were then transferred
to Charter Communications Operating, LLC ("Charter Operating"). On April 7,
1999, the cable operations of the Company were transferred to Charter Operating
subsequent to the purchase by Paul G. Allen of the Minority Interest. The
transfer was accounted for as a reorganization of entities under common control
similar to a pooling of interests. For periods subsequent to December 23, 1998
(the date Paul G. Allen controlled both Charter and the Company), the accounts
of the Company will be included in the consolidated financial statements of
Charter Holdings at historical carrying amounts.
As a result of the combination of the Company and Charter, the Company
recognized severance and stay-on bonus compensation of $16,034, which is
included in Transaction and Severance Costs in the accompanying statement of
operations for the period from April 22, 1998 to December 23, 1998. As of
December 23, 1998, 35 employees and officers of the Company had been terminated
and $13,634 had been paid under severance and bonus arrangements. By March 31,
1999, an additional 50 employees will be terminated. The remaining balance of
$2,400 is to be paid by April 30, 1999 and an additional $400 in stay-on bonuses
will be recorded as compensation in 1999 as the related services are provided.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. At December 31, 1997,
cash equivalents consist of certificates of deposit and money market funds.
These investments are carried at cost which approximates market value.
(b) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost, including all direct and
certain indirect costs associated with the construction of cable television
transmission and distribution facilities, and the cost of new customer
installation. The costs of disconnecting
F-45
<PAGE> 230
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
a customer are charged to expense in the period incurred. Expenditures for
maintenance and repairs are charged to expense as incurred and equipment
replacements and betterments are capitalized.
Depreciation is provided by the straight-line method over the estimated
useful lives of the related assets as follows:
<TABLE>
<S> <C>
Cable distribution systems............. 3-10 years
Buildings and leasehold improvements... 5-15 years
Vehicles and equipment................. 3-5 years
</TABLE>
(c) FRANCHISES
Costs incurred in obtaining and renewing cable franchises are deferred and
amortized over the estimated lives of the franchises. Costs relating to
unsuccessful franchise applications are charged to expense when it is determined
that the efforts to obtain the franchise will not be successful. Franchise
rights acquired through the purchase of cable television systems, including the
Vulcan Acquisition, represent the excess of the cost of properties acquired over
the amounts assigned to net tangible and identifiable intangible assets at date
of acquisition and are amortized using the straight-line method over a period of
15 years. Accumulated amortization was $264,600 at December 31, 1997.
The historical cost of $37,274 and the related accumulated amortization of
$9,959 for the going concern value of acquired cable television systems as of
December 31, 1997 has been reflected in the caption "Franchises" in the
accompanying consolidated balance sheet. This asset was amortized in the
Predecessor Period using the straight-line method over a period of up to 15
years.
(d) NONCOMPETITION AGREEMENTS
Noncompetition agreements are amortized using the straight-line method over
the term of the respective agreements. Accumulated amortization was $19,144 at
December 31, 1997.
(e) OTHER ASSETS
Debt issuance costs were amortized to interest expense over the term of the
related debt. Debt issuance costs associated with debt outstanding at the Vulcan
Acquisition date were eliminated in connection with pushdown accounting.
(f) IMPAIRMENT OF ASSETS
If facts and circumstances suggest that a long-lived asset may be impaired,
the carrying value is reviewed. If a review indicates that the carrying value of
such asset is not recoverable based on projected undiscounted cash flows related
to the asset over its remaining life, the carrying value of such asset is
reduced to its estimated fair value.
(g) REVENUES
Cable television revenues from basic and premium services are recognized
when the related services are provided.
Installation revenues are recognized to the extent of direct selling costs
incurred. The remainder, if any, is deferred and amortized to income over the
estimated average period that customers are expected to remain connected to the
cable television system. As of
F-46
<PAGE> 231
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1997, no installation revenue has been deferred, as direct selling
costs exceeded installation revenue.
Management fee revenues are recognized concurrently with the recognition of
revenues by the managed cable television system, or as a specified monthly
amount as stipulated in the management agreement. Incentive management fee
revenue is recognized upon performance of specified actions as stipulated in the
management agreement.
(h) INCOME TAXES
Income taxes are the responsibility of the individual members and are not
provided for in the accompanying financial statements. The Company's subsidiary
corporations are subject to federal income tax but have had no operations and
therefore, no taxable income since inception.
(i) INTEREST RATE HEDGE AGREEMENTS
The Company manages fluctuations in interest rates by using interest rate
hedge agreements, as required by certain of its debt agreements. Interest rate
swaps and caps are accounted for as hedges of debt obligations, and accordingly,
the net settlement amounts are recorded as adjustments to interest expense in
the period incurred.
The Company's interest rate swap agreements require the Company to pay a
fixed rate and receive a floating rate thereby creating thereby creating fixed
rate debt. Interest rate caps are entered into by the Company to reduce the
impact of rising interest rates on floating rate debt.
The Company's participation in interest rate hedging transactions involves
instruments that have a close correlation with its debt, thereby managing its
risk. Interest rate hedge agreements have been designed for hedging purposes and
are not held or issued for speculative purposes.
(j) USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(k) ACCOUNTING STANDARD NOT IMPLEMENTED
In June 1998, the Financial Accounting Standards Boards adopted Statement
of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative
Financial Instruments and Hedging Activities. SFAS No. 133 establishes
accounting and reporting standards requiring that every derivative instrument
(including certain derivative instruments embedded in other contracts) be
recorded in the balance sheet as either an asset or liability measured at its
fair value and that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. Special
accounting for qualifying hedges allows a derivative's gains and losses to
offset related results on the hedged item in the income statement, and requires
that a company must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. SFAS No. 133 is effective for fiscal
years beginning after June 15, 1999.
F-47
<PAGE> 232
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company has not yet quantified the impacts of adopting SFAS No. 133 on its
consolidated financial statements nor has it determined the timing or method of
its adoption of SFAS No. 133. However, SFAS No. 133 could increase volatility of
earnings (loss).
(3) CAPITAL STRUCTURE
PARTNERS' CAPITAL
(a) CLASSES OF PARTNERSHIP INTERESTS
The MCCLP partnership agreement (the "Partnership Agreement") provided for
Class B Units and Convertible Preference Units. Class B Units consisted of
General Partner Units ("GP Units") and Limited Partner Units ("LP Units"). To
the extent that GP Units had the right to vote, GP Units voted as Class B Units
together with Class B LP Units. Voting rights of Class B LP Units were limited
to items specified under the Partnership Agreement. Prior to the dissolution of
the Partnership on June 9, 1998, there were 18,848.19 GP Units and 294,937.67
Class B LP Units outstanding.
The Partnership Agreement also provided for the issuance of a class of
Convertible Preference Units. These units were entitled to a general
distribution preference over the Class B LP Units and were convertible into
Class B LP Units. The Convertible Preference Units could vote together with
Class B Units as a single class, and the voting percentage of each Convertible
Preference Unit, at a given time, was based on the number of Class B LP Units
into which such Convertible Preference Unit is then convertible. MCCLP had
issued 7,500 Convertible Preference Units with a distribution preference and
conversion price of two thousand dollars per unit.
The Partnership Agreement permitted the General Partner, at its sole
discretion, to issue up to 31,517 Employee Units (classified as Class B Units)
to key individuals providing services to the Company. Employee Units were not
entitled to distributions until such time as all units have received certain
distributions as calculated under provisions of the Partnership Agreement
("subordinated thresholds"). At December 31, 1997 28,033.20 Employee Units were
outstanding with a subordinated threshold ranging from $1,600 to $1,750 per unit
(per unit amounts in whole numbers). In connection with the Vulcan Acquisition,
the amount paid to EUnit holders of $90,167 was recognized as Transaction and
Severance Costs in the period from January 1, 1998 to April 22, 1998.
(b) ALLOCATION OF INCOME AND LOSS TO PARTNERS
MCCLP incurred losses from inception. Losses were allocated as follows:
(1) First, among the partners whose capital accounts exceed their
unreturned capital contributions in proportion to such excesses until each such
partner's capital account equals its unreturned capital contribution; and
(2) Next, to the holders of Class B Units in accordance with their
unreturned capital contribution percentages.
The General Partner was allocated a minimum of 0.2% to 1% of income or loss
at all times, depending on the level of capital contributions made by the
partners.
F-48
<PAGE> 233
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MEMBERS' EQUITY
Upon completion of the Vulcan Acquisition, Vulcan collectively owned 99.4%
of MCCLP through direct ownership of all LP Units and through 80% ownership of
Marcus Cable Properties, Inc. ("MCPI"), the general partner of Marcus Cable
Properties, L.P. ("MCPLP"), the general partner of MCCLP. The Minority Interest
owned the voting common stock, or the remaining 20% of MCPI. In connection with
the Vulcan Acquisition, historical partners' capital at April 22, 1998 was
eliminated and the Successor entity was initially recapitalized at $1,400,000
(see note 1). In July 1998, Vulcan contributed $20,000 in cash to the Company
relating to certain employee severance arrangements.
On June 9, 1998, MCCLP was converted into a Delaware limited liability
company with two members: Vulcan Cable, Inc., with 96.2% ownership, and Marcus
Cable Properties, L.L.C. ("MCPLLC") (formerly MCPLP), with 3.8% ownership.
Vulcan Cable, Inc. owns approximately 25.6% and MCPI owns approximately 74.4% of
MCPLLC, with Vulcan's interest in MCPI unchanged. As there was no change in
ownership interests, the historical partners' capital balances at June 9, 1998
were transferred to and became the initial equity of MCCLLC, and thus the
accompanying statement of members' equity from April 22, 1998 to December 23,
1998 has been presented as if the conversion of MCCLP into MCCLLC occurred on
April 23, 1998.
As of December 23, 1998, MCCLLC has 100 issued and outstanding membership
units. Income and losses of MCCLLC are allocated to the members in accordance
with their ownership interests. Members are not personally liable for
obligations of MCCLLC.
(4) ACQUISITIONS AND DISPOSITIONS
In 1998, the Company acquired cable television systems in the Birmingham,
Alabama area for a purchase price of $57,500. The excess of the cost of
properties acquired over the amounts assigned to net tangible assets and
noncompetition agreements as of the date of acquisition was approximately
$44,603 and is included in franchises.
Additionally, in 1998, the Company completed the sale of certain cable
television systems for an aggregate sales price of $405,132, resulting in a gain
of $43,662. No gains or losses were recognized on the sale of the cable
television systems divested after the Vulcan Acquisition as such amounts are
considered to be an adjustment of the purchase price allocation as these systems
were designated as assets to be sold at the date of the Vulcan Acquisition.
In 1997, the Company acquired cable television systems in the Dallas-Ft.
Worth, Texas area for a purchase price of $35,263. The excess of the cost of
properties acquired over the amounts assigned to net tangible assets as of the
date of acquisition was $15,098 and is included in franchises.
Additionally, in July 1997, the Company completed an exchange of cable
television systems in Indiana and Wisconsin. According to the terms of the trade
agreement, in addition to the contribution of its systems, the Company paid
$18,549.
In 1996, the Company acquired cable television systems in three separate
transactions for an aggregate purchase price of $10,272. The excess of the cost
of properties acquired over the amounts assigned to net tangible assets as of
the date of acquisition was $4,861 and is included in franchises.
F-49
<PAGE> 234
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Additionally, in 1996, the Company completed the sale of cable television
systems in Washington, D.C. for a sale price of $20,638. The sale resulted in a
gain of $6,442.
The above acquisitions, which were completed during the Predecessor Period,
were accounted for using the purchase method of accounting and, accordingly,
results of operations of the acquired assets have been included in the
accompanying consolidated financial statements from the dates of acquisition.
The purchase prices were allocated to tangible and intangible assets based on
estimated fair market values at the dates of acquisition. The cable system trade
discussed above was accounted for as a nonmonetary exchange and, accordingly,
the additional cash contribution was allocated to tangible and intangible assets
based on recorded amounts of the nonmonetary assets relinquished.
Unaudited pro forma operating results as though 1998 and 1997 acquisitions
and divestitures discussed above, including the Vulcan Acquisition, had occurred
on January 1, 1997, with adjustments to give effect to amortization of
franchises, interest expense and certain other adjustments is as follows:
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1 TO YEAR ENDED
DECEMBER 23, DECEMBER 31,
1998 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
Revenues................................. $444,738 $ 421,665
Operating loss........................... (51,303) (56,042)
Net loss................................. (187,342) (190,776)
</TABLE>
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31,
1997:
<TABLE>
<CAPTION>
(PREDECESSOR)
-------------
<S> <C>
Cable distribution systems............................ $878,721
Vehicles and other.................................... 37,943
Land and buildings.................................... 17,271
--------
933,935
Accumulated depreciation.............................. (227,309)
--------
$706,626
========
</TABLE>
Depreciation expense for the periods from January 1, 1998 to April 22, 1998
and from April 23, 1998 to December 23, 1998 and for the years ended December
31, 1997 and 1996 was $35,929, $70,538, $96,220, and $72,281, respectively.
(6) OTHER ASSETS
Other assets consist of the following at December 31, 1997:
<TABLE>
<CAPTION>
(PREDECESSOR)
-------------
<S> <C>
Debt issuance costs................................... $45,225
Other................................................. 1,090
-------
46,315
Accumulated amortization.............................. (9,330)
-------
$36,985
=======
</TABLE>
F-50
<PAGE> 235
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1997:
<TABLE>
<CAPTION>
(PREDECESSOR)
-------------
<S> <C>
Accrued operating liabilities......................... $27,923
Accrued programming costs............................. 9,704
Accrued franchise fees................................ 10,131
Accrued property taxes................................ 5,125
Accrued interest...................................... 7,949
Other accrued liabilities............................. 7,922
-------
$68,754
=======
</TABLE>
(8) LONG-TERM DEBT
The Company has outstanding the following borrowings on long-term debt
arrangements at December 31, 1997:
<TABLE>
<CAPTION>
(PREDECESSOR)
-------------
<S> <C>
Senior Credit Facility................................ $ 949,750
13 1/2% Senior Subordinated Discount Notes............ 336,304
14 1/4% Senior Discount Notes......................... 213,372
11 7/8% Senior Debentures............................. 100,000
----------
1,599,426
Less current maturities............................... 67,499
----------
$1,531,927
==========
</TABLE>
In conjunction with the Vulcan Acquisition and in accordance with purchase
accounting, the Company recorded its outstanding debt at its fair value. As a
result, the Company recognized a carrying value premium (fair market value of
outstanding debt less historical carrying amount) of $108,292 as of the date of
the Vulcan Acquisition. The carrying value premium is being amortized to
interest expense over the estimated remaining lives of the related indebtedness
using the effective interest method.
The Company, through MCOC, maintains a senior credit facility ("Senior
Credit Facility"), which provides for two term loan facilities, one with a
principal amount of $490,000 that matures on December 31, 2002 ("Tranche A") and
the other with a principal amount of $300,000 million that matures on April 30,
2004 ("Tranche B"). The Senior Credit Facility provides for scheduled
amortization of the two term loan facilities which began in September 1997. The
Senior Credit Facility also provides for a $360,000 revolving credit facility
("Revolving Credit Facility"), with a maturity date of December 31, 2002.
Amounts outstanding under the Senior Credit Facility bear interest at either
the: i) Eurodollar rate, ii) prime rate, or iii) CD base rate or Federal Funds
rate, plus a margin of up to 2.25%, which is subject to certain quarterly
adjustments based on the ratio of MCOC's total debt to annualized operating cash
flow, as defined. The variable interest rates ranged from 6.23% to 7.75% and
5.97% to 8.00% at December 23, 1998, and December 31, 1997, respectively. A
quarterly commitment fee ranging from 0.250% to 0.375% per annum is payable on
the unused commitment under the Senior Credit Facility.
On October 16, 1998, the Company entered into an agreement to amend its
Senior Credit Facility. The amendment provides for, among other items, a
reduction in the permitted leverage and cash flow ratios, a reduction in the
interest rate charge under the Senior Credit Facility and a change in the
restriction related to the use of cash proceeds from asset sales to allow such
proceeds to be used to redeem the 11 7/8% Senior Debentures.
F-51
<PAGE> 236
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In 1995, the Company issued $299,228 of 14 1/4% Senior Discount Notes due
December 15, 2005 (the "14 1/4% Notes") for net proceeds of $150,003. The
14 1/4% Notes are unsecured and rank pari passu to the 11 7/8% Debentures
(defined below). The 14 1/4% Notes are redeemable at the option of MCCLLC at
amounts decreasing from 107% to 100% of par beginning on June 15, 2000. No
interest is payable until December 15, 2000. Thereafter interest is payable
semi-annually until maturity. The discount on the 14 1/4% Notes is being
accreted using the effective interest method. The unamortized discount was
$85,856 at December 31, 1997.
In 1994, the Company, through MCOC, issued $413,461 face amount of 13 1/2%
Senior Subordinated Discount Notes due August 1, 2004 (the "13 1/2% Notes") for
net proceeds of $215,000. The 13 1/2% Notes are unsecured, are guaranteed by
MCCLLC and are redeemable, at the option of MCOC, at amounts decreasing from
105% to 100% of par beginning on August 1, 1999. No interest is payable on the
13 1/2% Notes until February 1, 2000. Thereafter, interest is payable
semi-annually until maturity. The discount on the 13 1/2% Notes is being
accreted using the effective interest method. The unamortized discount was
$77,157 at December 31, 1997.
In 1993, the Company issued $100,000 principal amount of 11 7/8% Senior
Debentures due October 1, 2005 (the "11 7/8% Debentures"). The 11 7/8%
Debentures were unsecured and were redeemable at the option of the Company on or
after October 1, 1998 at amounts decreasing from 105.9% to 100% of par at
October 1, 2002, plus accrued interest, to the date of redemption. Interest on
the 11 7/8% Debentures was payable semi-annually each April 1 and October 1
until maturity.
On July 1, 1998, $4,500 face amount of the 14 1/4% Notes and $500 face
amount of the 11 7/8% Notes were tendered for gross tender payments of $3,472
and $520 respectively. The payments resulted in a gain on the retirement of the
debt of $753. On December 11, 1998, the 11 7/8% Notes were redeemed for a gross
payment of $107,668, including accrued interest. The redemption resulted in a
gain on the retirement of the debt of $1,631.
The 14 1/4% Notes, 13 1/2% Notes, 11 7/8% Debentures and Senior Credit
Facility are all unsecured and require the Company and/or its subsidiaries to
comply with various financial and other covenants, including the maintenance of
certain operating and financial ratios. These debt instruments also contain
substantial limitations on, or prohibitions of, distributions, additional
indebtedness, liens, asset sales and certain other items.
(9) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying and fair values of the Company's significant financial
instruments as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
(PREDECESSOR)
-------------------
CARRYING FAIR
VALUE VALUE
-------- -----
<S> <C> <C>
Senior Credit Facility...................................... $949,750 $949,750
13 1/2% Notes............................................... 336,304 381,418
14 1/4% Notes............................................... 213,372 258,084
11 7/8% Debentures.......................................... 100,000 108,500
</TABLE>
The carrying amount of the Senior Credit Facility approximates fair value
as the outstanding borrowings bear interest at market rates. The fair values of
the 14 1/4% Notes, 13 1/2% Notes, and 11 7/8% Debentures, are based on quoted
market prices. The Company had interest rate swap agreements covering a notional
amount of $500,000 at December 31, 1997.
F-52
<PAGE> 237
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The weighted average interest pay rate for the interest rate swap
agreements was 5.7% at December 31, 1997. Certain of these agreements allow for
optional extension by the counterparty or for automatic extension in the event
that one month LIBOR exceeds a stipulated rate on any monthly reset date.
Approximately $100,000 notional amount included in the $500,000 notional amount
described above is also modified by an interest rate cap agreement which resets
monthly.
The notional amounts of the interest rate hedge agreements do not represent
amounts exchanged by the parties and, thus, are not a measure of the Company's
exposure through its use of interest rate hedge agreements. The amounts
exchanged are determined by reference to the notional amount and the other terms
of the contracts.
The fair values of the interest rate hedge agreements generally reflect the
estimated amounts that the Company would receive or (pay) (excluding accrued
interest) to terminate the contracts on the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts. Dealer
quotations are available for the Company's interest rate hedge agreements.
Management believes that the sellers of the interest rate hedge agreements
will be able to meet their obligations under the agreements. In addition, some
of the interest rate hedge agreements are with certain of the participating
banks under the Company's Senior Credit Facility thereby reducing the exposure
to credit loss. The Company has policies regarding the financial stability and
credit standing of the major counterparties. Nonperformance by the
counterparties is not anticipated nor would it have a material adverse effect on
the Company's consolidated financial position or results of operations.
(10) RELATED PARTY TRANSACTIONS
The Company and Charter entered into a management agreement on October 6,
1998 whereby Charter began to manage the day-to-day operations of the Company.
In consideration for the management consulting services provided by Charter,
Marcus pays Charter an annual fee equal to 3% of the gross revenues of the cable
system operations, plus expenses. From October 6, 1998 to December 23, 1998,
management fees under this agreement were $3,048.
Prior to the consummation of the Vulcan Acquisition, affiliates of Goldman
Sachs owned limited partnership interests in MCCLP. Maryland Cable Partners,
L.P. ("Maryland Cable"), which was controlled by an affiliate of Goldman Sachs,
owned the Maryland Cable systems. MCOC managed the Maryland Cable systems under
the Maryland Cable Agreement. Pursuant to such agreement, MCOC earned a
management fee equal to 4.7% of the revenues of Maryland Cable.
Effective January 31, 1997, Maryland Cable was sold to a third party.
Pursuant to the Maryland Cable Agreement, MCOC recognized incentive management
fees of $5,069 during the twelve months ended December 31, 1997 in conjunction
with the sale. Although MCOC is no longer involved in the active management of
the Maryland Cable systems, MCOC has entered into an agreement with Maryland
Cable to oversee the activities, if any, of Maryland Cable through the
liquidation of the partnership. Pursuant to such agreement, MCOC earns a nominal
monthly fee. During the periods from January 1, 1998 to April 22, 1998 and from
April 23, 1998 to December 23, 1998, MCOC earned total management fees of $374
and $181, respectively. Including the incentive management fees noted above,
during the years ended December 31, 1997 and 1996, MCOC earned total management
fees of $5,614 and $2,335, respectively.
F-53
<PAGE> 238
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) EMPLOYEE BENEFIT PLAN
The Company sponsors a 401(k) plan for its employees whereby employees that
qualify for participation under the plan can contribute up to 15% of their
salary, on a before tax basis, subject to a maximum contribution limit as
determined by the Internal Revenue Service. The Company matches participant
contributions up to a maximum of 2% of a participant's salary. For the periods
from January 1, 1998 to April 22, 1998 and from April 23, 1998 to December 23,
1998, and for the years ended December 31, 1997 and 1996, the Company made
contributions to the plan of $329, $536, $761 and $480, respectively.
(12) COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases certain facilities and equipment under noncancelable
operating leases. Lease and rental costs charged to expense for the periods from
January 1, 1998 to April 22, 1998 and from April 23, 1998 to December 23, 1998,
and for the years ended December 31, 1997 and 1996 were $1,098, $2,222, $3,230,
and $2,767, respectively. The Company also rents utility poles in its
operations. Generally, pole rentals are cancelable on short notice, but the
Company anticipates that such rentals will recur. Rent expense for pole
attachments for the periods from January 1, 1998 to April 22, 1998 and from
April 23, 1998 to December 23, 1998 and for the years ended December 31, 1997
and 1996 were $1,372 , $2,620, $4,314, and $4,008, respectively.
REGULATION IN THE CABLE TELEVISION INDUSTRY
The cable television industry is subject to extensive regulation at the
federal, local and, in some instances, state levels. The Cable Communications
Policy Act of 1984 (the "1984 Cable Act"), the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act" and together with
the 1984 Cable Act, the "Cable Acts"), and the Telecommunications Act of 1996
(the "1996 Telecom Act"), establish a national policy to guide the development
and regulation of cable television systems. The Federal Communications
Commission (FCC) has principal responsibility for implementing the policies of
the Cable Acts. Many aspects of such regulation are currently the subject of
judicial proceedings and administrative or legislative proposals. Legislation
and regulations continue to change, and the Company cannot predict the impact of
future developments on the cable television industry.
The 1992 Cable Act and the FCC's rules implementing that act generally have
increased the administrative and operational expenses of cable television
systems and have resulted in additional regulatory oversight by the FCC and
local or state franchise authorities. The Cable Acts and the corresponding FCC
regulations have established rate regulations.
The 1992 Cable Act permits certified local franchising authorities to order
refunds of basic service tier rates paid in the previous twelve-month period
determined to be in excess of the maximum permitted rates. As of December 23,
1998, the amount returned by the Company has been insignificant. The Company may
be required to refund additional amounts in the future.
The Company believes that it has complied in all material respects with the
provisions of the 1992 Cable Act, including the rate setting provisions
promulgated by the FCC. However, in jurisdictions that have chosen not to
certify, refunds covering the previous
F-54
<PAGE> 239
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
twelve-month period may be ordered upon certification if the Company is unable
to justify its basic rates. The Company is unable to estimate at this time the
amount of refunds, if any, that may be payable by the Company in the event
certain of its rates are successfully challenged by franchising authorities or
found to be unreasonable by the FCC. The Company does not believe that the
amount of any such refunds would have a material adverse effect on the financial
position or results of operations of the Company.
The 1996 Telecom Act, among other things, immediately deregulated the rates
for certain small cable operators and in certain limited circumstances rates on
the basic service tier, and as of March 31, 1999, deregulates rates on the cable
programming service tier (CPST). The FCC is currently developing permanent
regulations to implement the rate deregulation provisions of the 1996 Telecom
Act. The Company cannot predict the ultimate effect of the 1996 Telecom Act on
the Company's financial position or results of operations.
The FCC may further restrict the ability of cable television operators to
implement rate increases or the United States Congress may enact legislation
that could delay or suspend the scheduled March 1999 termination of CPST rate
regulation. This continued rate regulation, if adopted, could limit the rates
charged by the Company.
A number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. State governmental agencies are
required to follow FCC rules when prescribing rate regulation, and thus, state
regulation of cable television rates is not allowed to be more restrictive than
the federal or local regulation.
LITIGATION
In Alabama, Indiana, Texas and Wisconsin, customers have filed punitive
class action lawsuits on behalf of all person residing in those respective
states who are or were potential customers of the Company's cable television
service, and who have been charged a processing fee for delinquent payment of
their cable bill. The actions challenge the legality of the processing fee and
seek declaratory judgment, injunctive relief and unspecified damages. In Alabama
and Wisconsin, the Company has entered into joint speculation and case
management orders with attorneys for plaintiffs. A Motion to Dismiss is pending
in Indiana. The Company intends to vigorously defend the actions. At this stage
of the actions, the Company is not able to project the expenses of defending the
actions or the potential outcome of the actions, including the impact on the
consolidated financial position or results of operations.
The Company is also party to lawsuits which are generally incidental to its
business. In the opinion of management, after consulting with legal counsel, the
outcome of these lawsuits will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
(13) SUBSEQUENT EVENT (UNAUDITED)
In March 1999, concurrent with the issuance of Senior Notes and Senior
Discount Notes, the combined company (Charter and the Company, see note 1)
extinguished all long-term debt, excluding borrowings of Charter and the Company
under their respective credit agreements, and refinanced all existing credit
agreements at various subsidiaries of the Company and Charter with a new credit
agreement entered into by a wholly owned subsidiary of the combined company.
F-55
<PAGE> 240
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CCA Group:
We have audited the accompanying combined balance sheet of CCA Holdings
Corp., CCT Holdings Corp. and Charter Communications Long Beach, Inc.
(collectively CCA Group) and subsidiaries as of December 31, 1997, and the
related combined statements of operations, shareholders' deficit and cash flows
for the period from January 1, 1998, through December 23, 1998, and for the
years ended December 31, 1997 and 1996. These combined 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 combined financial position of CCA Group and
subsidiaries as of December 31, 1997, and the combined results of their
operations and their cash flows for the period from January 1, 1998, through
December 23, 1998, and for the years ended December 31, 1997 and 1996, in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
St. Louis, Missouri,
February 5, 1999
F-56
<PAGE> 241
CCA GROUP
COMBINED BALANCE SHEET -- DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 4,501
Accounts receivable, net of allowance for doubtful
accounts of $926....................................... 9,407
Prepaid expenses and other................................ 1,988
Deferred income tax asset................................. 5,915
----------
Total current assets.............................. 21,811
----------
RECEIVABLE FROM RELATED PARTY, including accrued interest... 13,090
----------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment............................. 352,860
Franchises, net of accumulated amortization of $132,871... 806,451
----------
1,159,311
----------
OTHER ASSETS................................................ 13,731
----------
$1,207,943
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 25,625
Accounts payable and accrued expenses..................... 48,554
Payables to manager of cable television systems -- related
party.................................................. 1,975
----------
Total current liabilities......................... 76,154
----------
DEFERRED REVENUE............................................ 1,882
----------
DEFERRED INCOME TAXES....................................... 117,278
----------
LONG-TERM DEBT, less current maturities..................... 758,795
----------
DEFERRED MANAGEMENT FEES.................................... 4,291
----------
NOTES PAYABLE, including accrued interest................... 348,202
----------
SHAREHOLDERS' DEFICIT:
Common stock.............................................. 1
Additional paid-in capital................................ 128,499
Accumulated deficit....................................... (227,159)
----------
Total shareholders' deficit....................... (98,659)
----------
$1,207,943
==========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-57
<PAGE> 242
CCA GROUP
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1998, YEAR ENDED
THROUGH DECEMBER 31
DECEMBER 23, --------------------
1998 1997 1996
------------ ---- ----
<S> <C> <C> <C>
REVENUES........................................ $ 324,432 $289,697 $233,392
--------- -------- --------
EXPENSES:
Operating costs............................... 135,705 122,917 102,977
General and administrative.................... 28,440 26,400 18,687
Depreciation and amortization................. 136,689 116,080 96,547
Management fees -- related parties............ 17,392 11,414 8,634
--------- -------- --------
318,226 276,811 226,845
--------- -------- --------
Income from operations..................... 6,206 12,886 6,547
--------- -------- --------
OTHER INCOME (EXPENSE):
Interest income............................... 4,962 2,043 1,883
Interest expense.............................. (113,824) (108,122) (88,999)
Other, net.................................... (294) 171 (2,504)
--------- -------- --------
(109,156) (105,908) (89,620)
--------- -------- --------
Net loss................................... $(102,950) $(93,022) $(83,073)
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-58
<PAGE> 243
CCA GROUP
COMBINED STATEMENTS OF SHAREHOLDERS' DEFICIT
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
------ ---------- ----------- -----
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995........... $ 1 $ 99,999 $ (51,064) $ 48,936
Net loss........................... -- -- (83,073) (83,073)
--- -------- --------- ---------
BALANCE, December 31, 1996........... 1 99,999 (134,137) (34,137)
Capital contributions.............. -- 28,500 -- 28,500
Net loss........................... -- -- (93,022) (93,022)
--- -------- --------- ---------
BALANCE, December 31, 1997........... 1 128,499 (227,159) (98,659)
Capital contributions.............. -- 5,684 -- 5,684
Net loss........................... -- -- (102,950) (102,950)
--- -------- --------- ---------
BALANCE, December 23, 1998........... $ 1 $134,183 $(330,109) $(195,925)
=== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-59
<PAGE> 244
CCA GROUP
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1998, YEAR ENDED
THROUGH DECEMBER 31
DECEMBER 23, ---------------------
1998 1997 1996
------------ ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................................. $(102,950) $(93,022) $ (83,073)
Adjustments to reconcile net loss to net cash provided
by operating activities --
Depreciation and amortization...................... 136,689 116,080 96,547
Amortization of debt issuance costs and non cash
interest cost.................................... 44,701 49,107 39,927
(Gain) loss on sale of property, plant and
equipment........................................ 511 (156) 1,257
Changes in assets and liabilities, net of effects
from acquisitions --
Accounts receivable, net......................... 4,779 222 (1,393)
Prepaid expenses and other....................... 243 (175) 216
Accounts payable and accrued expenses............ 3,849 8,797 3,855
Payables to manager of cable television systems,
including deferred management fees............ 3,485 784 448
Deferred revenue................................. 1,336 559 (236)
Other operating activities....................... 5,583 (3,207) 1,372
--------- -------- ---------
Net cash provided by operating activities........ 98,226 78,989 58,920
--------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment............ (95,060) (82,551) (56,073)
Payments for acquisitions, net of cash acquired....... -- (147,187) (122,017)
Other investing activities............................ (2,898) (1,296) 54
--------- -------- ---------
Net cash used in investing activities.............. (97,958) (231,034) (178,036)
--------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt.......................... 300,400 162,000 127,000
Repayments of long-term debt.......................... (64,120) (39,580) (13,100)
Payments of debt issuance costs....................... (8,442) (3,360) (3,126)
Repayments under notes payable........................ (230,994) -- --
Capital contributions................................. -- 28,500 --
--------- -------- ---------
Net cash provided by (used in) financing
activities....................................... (3,156) 147,560 110,774
--------- -------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS............... (2,888) (4,485) (8,342)
CASH AND CASH EQUIVALENTS, beginning of period.......... 4,501 8,986 17,328
--------- -------- ---------
CASH AND CASH EQUIVALENTS, end of period................ $ 1,613 $ 4,501 $ 8,986
========= ======== =========
CASH PAID FOR INTEREST.................................. $ 179,781 $ 49,687 $ 51,434
========= ======== =========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-60
<PAGE> 245
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION
CCA Group consists of CCA Holdings Corp. (CCA Holdings), CCT Holdings Corp.
(CCT Holdings) and Charter Communications Long Beach, Inc. (CC-LB), all Delaware
corporations (collectively referred to as "CCA Group" or the "Company") and
their subsidiaries. The combined financial statements of each of these companies
have been combined by virtue of their common ownership and management. All
material intercompany transactions and balances have been eliminated.
CCA Holdings commenced operations in January 1995 in connection with
consummation of the Crown Transaction (as defined below). The accompanying
financial statements include the accounts of CCA Holdings; its wholly-owned
subsidiary, CCA Acquisition Corp. (CAC); CAC's wholly-owned subsidiary, Cencom
Cable Entertainment, Inc. (CCE); and Charter Communications Entertainment I,
L.P. (CCE-I), which is controlled by CAC through its general partnership
interest. Through December 23, 1998, CCA Holdings was approximately 85% owned by
Kelso Investment Associates V, L.P., an investment fund, together with an
affiliate (collectively referred to as "Kelso" herein) and certain other
individuals and approximately 15% by Charter Communications, Inc. (Charter),
manager of CCE-I's cable television systems.
CCT Holdings was formed on January 6, 1995. CCT Holdings commenced
operations in September 1995 in connection with consummation of the Gaylord
Transaction (as defined below). The accompanying financial statements include
the accounts of CCT Holdings and Charter Communications Entertainment II, L.P.
(CCE-II), which is controlled by CCT Holdings through its general partnership
interest. Through December 23, 1998, CCT Holdings was owned approximately 85% by
Kelso and certain other individuals and approximately 15% by Charter, manager of
CCE-II's cable television systems.
In January 1995, CAC completed the acquisition of certain cable television
systems from Crown Media, Inc. (Crown), a subsidiary of Hallmark Cards,
Incorporated (Hallmark) (the "Crown Transaction"). On September 29, 1995, CAC
and CCT Holdings entered into an Asset Exchange Agreement whereby CAC exchanged
a 1% undivided interest in all of its assets for a 1.22% undivided interest in
certain assets to be acquired by CCT Holdings from an affiliate of Gaylord
Entertainment Company, Inc. (Gaylord). Effective September 30, 1995, CCT
Holdings acquired certain cable television systems from Gaylord (the "Gaylord
Transaction"). Upon execution of the Asset Purchase Agreement, CAC and CCT
Holdings entered into a series of agreements to contribute the assets acquired
under the Crown Transaction to CCE-I and certain assets acquired in the Gaylord
acquisition to CCE-II. Collectively, CCA Holdings and CCT Holdings own 100% of
CCE-I and CCE-II.
CC-LB was acquired by Kelso and Charter in May 1997. The accompanying
financial statements include the accounts of CC-LB and its wholly owned
subsidiary, Long Beach Acquisition Corp. (LBAC) from the date of acquisition.
Through December 23, 1998, CC-LB was owned approximately 85% by Kelso and
certain other individuals and approximately 15% by Charter, manager of LBAC's
cable television systems.
F-61
<PAGE> 246
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Effective December 23, 1998, Paul G. Allen acquired 94% of Charter through
a series of transactions. In conjunction with Mr. Allen's acquisition, Charter
acquired 100% of the outstanding stock of CCA Holdings, CCT Holdings and CC-LB
on December 23, 1998.
In 1998, CCE-I provided cable television service to customers in
Connecticut, Illinois, Massachusetts, Missouri and New Hampshire, CCE-II
provided cable television service to customers in California and LBAC provided
cable television service to customers in Long Beach, California, and certain
surrounding areas.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. At December 31, 1997,
cash equivalents consist primarily of repurchase agreements. These investments
are carried at cost that approximates market value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost, including all direct and
certain indirect costs associated with the construction of cable television
transmission and distribution facilities, and the cost of new customer
installation. The costs of disconnecting a residence are charged to expense in
the period incurred. Expenditures for repairs and maintenance are charged to
expense as incurred, and equipment replacement costs and betterments are
capitalized.
Depreciation is provided on the straight-line basis over the estimated
useful lives of the related assets as follows:
<TABLE>
<S> <C>
Cable distribution systems........................... 3-15 years
Buildings and leasehold improvements................. 5-15 years
Vehicles and equipment............................... 3-5 years
</TABLE>
In 1997, the Company shortened the estimated useful lives of certain property,
plant and equipment for depreciation purposes. As a result, additional
depreciation of $8,123 was recorded during 1997.
FRANCHISES
Costs incurred in obtaining and renewing cable franchises are deferred and
amortized over the lives of the franchises. Costs relating to unsuccessful
franchise applications are charged to expense when it is determined that the
efforts to obtain the franchise will not be successful. Franchise rights
acquired through the purchase of cable television systems represent the excess
of the cost of properties acquired over the amounts assigned to net tangible
assets at date of acquisition and are amortized using the straight-line method
over 15 years.
OTHER ASSETS
Debt issuance costs are amortized to interest expense over the term of the
related debt. The interest rate cap costs are being amortized over the terms of
the agreement, which approximates three years.
F-62
<PAGE> 247
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
Income taxes are recorded in accordance with SFAS No. 109, "Accounting for
Income Taxes."
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. ACQUISITIONS:
In 1997, CC-LB acquired the stock of LBAC for an aggregate purchase price,
net of cash acquired, of $147,200. In connection with the completion of this
acquisition, LBAC recorded $55,900 of deferred income tax liabilities resulting
from differences between the financial reporting and tax basis of certain assets
acquired. The excess of the cost of properties acquired over the amounts
assigned to net tangible assets at the date of acquisition was $190,200 and is
included in franchises.
In 1996, the Company acquired cable television systems in three separate
transactions for an aggregate purchase price, net of cash acquired, of $122,000.
The excess of the cost of properties acquired over the amounts assigned to net
tangible assets at the dates of acquisition was $100,200 and is included in
franchises.
The above acquisitions were accounted for using the purchase method of
accounting, and accordingly, results of operations of the acquired assets have
been included in the financial statements from the dates of the acquisitions.
Unaudited pro forma operating results for the 1997 acquisitions as though
the acquisitions had been made on January 1, 1997, with pro forma adjustments to
give effect to amortization of franchises, interest expense and certain other
adjustments as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
(UNAUDITED)
-------------
<S> <C>
Revenues............................................ $303,797
Income from operations.............................. 14,108
Net loss............................................ (94,853)
</TABLE>
The unaudited pro forma information has been presented for comparative
purposes and does not purport to be indicative of the results of operations had
these transactions been completed as of the assumed date or which may be
obtained in the future.
3. RECEIVABLE FROM RELATED PARTY:
In connection with the transfer of certain assets acquired in the Gaylord
Transaction to Charter Communications Properties, Inc. (CCP), Charter
Communications Properties Holding Corp. (CCP Holdings), the parent of CCP and a
wholly owned subsidiary of Charter, entered into a $9,447 promissory note with
CCT Holdings. The promissory note
F-63
<PAGE> 248
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
bears interest at the rates paid by CCT Holdings on the Gaylord Seller Note.
Principal and interest are due on September 29, 2005. Interest income has been
accrued based on an average rate of interest over the life of the Gaylord Seller
Note, which approximates 15.4% and totaled $1,899 for the period from January 1,
1998, through December 23, 1998, and $1,806 and $1,547 for the years ended
December 31, 1997 and 1996, respectively. As of December 31, 1997, interest
receivable totaled $3,643.
4. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following at December 31,
1997:
<TABLE>
<S> <C>
Cable distribution systems............................ $ 426,241
Land, buildings and leasehold improvements............ 15,443
Vehicles and equipment................................ 24,375
---------
466,059
Less -- Accumulated depreciation...................... (113,199)
---------
$ 352,860
=========
</TABLE>
Depreciation expense for the period from January 1, 1998, through December
23, 1998, and for the years ended December 31, 1997 and 1996, was $72,914,
$59,599 and $39,575, respectively.
5. OTHER ASSETS:
Other assets consists of the following at December 31, 1997:
<TABLE>
<S> <C>
Debt issuance costs..................................... $13,416
Note receivable......................................... 2,100
Other................................................... 1,342
-------
16,858
Less -- Accumulated amortization........................ (3,127)
-------
$13,731
=======
</TABLE>
6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following at December
31, 1997:
<TABLE>
<S> <C>
Accrued interest........................................ $ 8,389
Franchise fees.......................................... 6,434
Programming expenses.................................... 5,855
Accounts payable........................................ 4,734
Public education and governmental costs................. 4,059
Salaries and related benefits........................... 3,977
Capital expenditures.................................... 3,629
Other................................................... 11,477
-------
$48,554
=======
</TABLE>
F-64
<PAGE> 249
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. LONG-TERM DEBT:
Long-term debt consists of the following at December 31, 1997:
<TABLE>
<S> <C>
CCE-I:
Term loans............................................. $274,120
Fund loans............................................. 85,000
Revolving credit facility.............................. 103,800
--------
462,920
--------
CCE-II:
Term loans............................................. 105,000
Revolving credit facility.............................. 123,500
--------
228,500
--------
LBAC:
Term loans............................................. 85,000
Revolving credit facility.............................. 8,000
--------
93,000
--------
Total debt..................................... 784,420
Less -- Current maturities............................... (25,625)
--------
Total long-term debt........................... $758,795
========
</TABLE>
CCE-I CREDIT AGREEMENT
CCE-I maintains a credit agreement (the "CCE-I Credit Agreement"), which
provides for a $280,000 term loan that matures on September 30, 2006, an $85,000
fund loan that matures on March 31, 2007, and a $175,000 revolving credit
facility with a maturity date of September 30, 2006. Amounts under the CCE-I
Credit Agreement bear interest at either the LIBOR Rate or Base Rate, as
defined, plus a margin of up to 2.75%. The variable interest rate ranged from
6.88% to 8.06% at December 23, 1998, and from 7.63% to 8.50% and 7.63% to 8.38%
at December 31, 1997 and 1996, respectively.
Commencing June 30, 2002, and at the end of each calendar quarter
thereafter, available borrowings under the revolving credit facility and the
term loan shall be reduced on an annual basis by 12.0% in 2002 and 15.0% in
2003. Commencing June 30, 2002, and at the end of each calendar quarter
thereafter, the available borrowings for the fund loan shall be reduced on an
annual basis by 0.75% in 2002 and 1.0% in 2003. A quarterly commitment fee of
between 0.375% and 0.5% per annum is payable on the unborrowed balance of the
revolving credit facility.
COMBINED CREDIT AGREEMENT
CCE-II and LBAC maintain a credit agreement (the "Combined Credit
Agreement") which provides for two term loan facilities, one with the principal
amount of $100,000 that matures on March 31, 2005, and the other with the
principal amount of $90,000 that matures on March 31, 2006. The Combined Credit
Agreement also provides for a $185,000 revolving credit facility, with a
maturity date of March 31, 2005. Amounts under the Combined Credit Agreement
bear interest at either the LIBOR Rate or Base
F-65
<PAGE> 250
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Rate, as defined, plus a margin of up to 2.5%. The variable interest rate ranged
from 6.56% to 7.59% at December 23, 1998, and from 7.50% to 8.38% at December
31, 1997, respectively.
Commencing March 31, 2001, and at the end of each quarter thereafter,
available borrowings under the revolving credit facility and one term loan shall
be reduced on an annual basis by 5.0% in 2001, 15.0% in 2002 and 18.0% in 2003.
Commencing in December 31, 1999, and at the end of each quarter thereafter,
available borrowings under the other term loan shall be reduced on annual basis
by 0.5% in 1999, 0.8% in 2000, 1.0% in 2001, 1.0% in 2002 and 1.0% in 2003. A
quarterly commitment fee of between 0.25% and 0.375% per annum, based upon the
intercompany indebtedness of the Company, is payable on the unborrowed balance
of the revolving credit facility.
CCE CREDIT AGREEMENT
In October 1998, Charter Communications Entertainment, L.P. (CCE L.P.), a
98% direct and indirect owner of CCE-I and CCE-II and indirectly owned
subsidiary of the Company, entered into a credit agreement (the "CCE L.P. Credit
Agreement") which provides for a term loan facility with the principal amount of
$130,000 that matures on September 30, 2007. Amounts under the CCE L.P. Credit
Agreement bear interest at the LIBOR Rate or Base Rate, as defined, plus a
margin of up to 3.25%. The variable interest rate at December 23, 1998, was
8.62%.
Commencing June 30, 2002, and the end of each calendar quarter thereafter,
the available borrowings for the term loan shall be reduced on an annual basis
by 0.75% in 2002 and 1.0% in 2003.
CCE-II HOLDINGS CREDIT AGREEMENT
CCE-II Holdings, LLC (CCE-II Holdings), a wholly owned subsidiary of CCE
L.P. and the parent of CCE-II, entered into a credit agreement (the "CCE-II
Holdings Credit Agreement") in November 1998, which provides for a term loan
facility with the principal amount of $95,000 that matures on September 30,
2006. Amounts under the CCE-II Holdings Credit Agreement bear interest at either
the LIBOR Rate or Base Rate, as defined, plus a margin of up to 3.25%. The
variable rate at December 23, 1998, was 8.56%.
Commencing June 30, 2002, and at the end of each quarter thereafter,
available borrowings under the revolving credit facility and one term loan shall
be reduced on an annual basis by 0.5% in 2002 and 1.0% in 2003.
The credit agreements require the Company to comply with various financial
and nonfinancial covenants, including the maintenance of annualized operating
cash flow to fixed charge ratio, as defined, not to exceed 1.0 to 1.0. These
debt instruments also contain substantial limitations on, or prohibitions of,
distributions, additional indebtedness, liens asset sales and certain other
items.
F-66
<PAGE> 251
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
8. NOTES PAYABLE:
Notes payable consists of the following at December 31, 1997:
<TABLE>
<S> <C>
HC Crown Note............................................ $ 82,000
Accrued interest on HC Crown Note........................ 36,919
Gaylord Seller Note...................................... 165,688
Accrued interest on Gaylord Seller Note.................. 63,595
--------
Total.......................................... $348,202
========
</TABLE>
In connection with the Crown Transaction, the Company entered into an
$82,000 senior subordinated loan agreement with a subsidiary of Hallmark, HC
Crown Corp., and pursuant to such loan agreement issued a senior subordinated
note (the "HC Crown Note"). The HC Crown Note was an unsecured obligation. The
HC Crown Note was limited in aggregate principal amount to $82,000 and has a
stated maturity date of December 31, 1999 (the "Stated Maturity Date"). Interest
has been accrued at 13% per annum, compounded semiannually, payable upon
maturity. In October 1998, the Crown Note and accrued interest was paid in full.
In connection with the Gaylord Transaction, CCT Holdings entered into a
$165,700 subordinated loan agreement with Gaylord (the "Gaylord Seller Note").
Interest expense has been accrued based on an average rate of interest over the
life of the Gaylord Seller Note, which approximated 15.4%.
In connection with the Gaylord Transaction, CCT Holdings, CCE L.P. and
Gaylord entered into a contingent payment agreement (the "Contingent
Agreement"). The Contingent Agreement indicates CCE L.P. will pay Gaylord 15% of
any amount distributed to CCT Holdings in excess of the total of the Gaylord
Seller Note, Crown Seller Note and $450,000. In conjunction with the Paul G.
Allen acquisition of Charter and the Company, Gaylord was paid an additional
$132,000 pursuant to the Contingent Agreement and the Gaylord Seller Note was
paid in full.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS:
A summary of debt and the related interest rate hedge agreements at
December 31, 1997, is as follows:
<TABLE>
<CAPTION>
1997
--------------------------------
CARRYING NOTIONAL FAIR
VALUE AMOUNT VALUE
-------- -------- -----
<S> <C> <C> <C>
DEBT
Debt under credit agreements...................... $784,420 $ -- $784,420
HC Crown Note (including accrued interest)........ 118,919 -- 118,587
Gaylord Seller Note (including accrued
interest)....................................... 229,283 -- 214,074
INTEREST RATE HEDGE AGREEMENTS
Swaps............................................. -- 405,000 (1,214)
Caps.............................................. -- 120,000 --
Collars........................................... -- 190,000 (437)
</TABLE>
F-67
<PAGE> 252
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
As the long-term debt under the credit agreements bear interest at current
market rates, their carrying amount approximates fair market value at December
31, 1997. Fair value of the HC Crown Note is based upon trading activity at
December 31, 1997. Fair value of the Gaylord Seller Note is based on current
redemption value.
The weighted average interest pay rate for the Company's interest rate swap
agreements was 7.82% at December 31, 1997. The weighted average interest rate
for the Company's interest rate cap agreements was 8.49% at December 31, 1997.
The weighted average interest rates for the Company's interest rate collar
agreements were 9.04% and 7.57% for the cap and floor components, respectively,
at December 31, 1997.
The notional amounts of interest rate hedge agreements do not represent
amounts exchanged by the parties and, thus, are not a measure of the Company's
exposure through its use of interest rate hedge agreements. The amounts
exchanged are determined by reference to the notional amount and the other terms
of the contracts.
The fair value of interest rate hedge agreements generally reflects the
estimated amounts that the Company would receive or pay (excluding accrued
interest) to terminate the contracts on the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts. Dealer
quotations are available for the Company's interest rate hedge agreements.
Management believes that the sellers of the interest rate hedge agreements
will be able to meet their obligations under the agreements. In addition, some
of the interest rate hedge agreements are with certain of the participating
banks under the Company's Senior Credit Facility thereby reducing the exposure
to credit loss. The Company has policies regarding the financial stability and
credit standing of major counterparties. Nonperformance by the counterparties is
not anticipated nor would it have a material adverse effect on the results of
operations or the financial position of the Company.
F-68
<PAGE> 253
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
10. COMMON STOCK:
The Company's common stock consist of the following at December 31, 1997:
<TABLE>
<S> <C>
CCA Holdings:
Common stock -- Class A, voting, $.01 par value, 100,000
shares authorized; 75,515 shares issued and
outstanding............................................ $ 1
Common stock -- Class B, voting, $.01 par value, 20,000
shares authorized; 4,300 shares issued and
outstanding............................................ --
Common stock -- Class C, nonvoting, $.01 par value, 5,000
shares authorized; 185 shares issued and outstanding... --
---
1
---
CCT Holdings:
Common stock -- Class A, voting, $.01 par value, 20,000
shares authorized; 16,726 shares issued and
outstanding............................................ --
Common stock -- Class B, voting, $.01 par value, 4,000
shares authorized; 3,000 shares issued and
outstanding............................................ --
Common stock -- Class C, nonvoting, $.01 par value, 1,000
shares authorized; 275 shares issued and outstanding... --
---
CC-LB:
Common stock -- Class A, voting, $.01 par value, 31,000
shares authorized, 27,850 shares issued and
outstanding............................................ --
Common stock -- Class B, voting, $.01 par value, 2,000
shares authorized, 1,500 shares issued and
outstanding............................................ --
Common stock -- Class C, nonvoting, $.01 par value, 2,000
shares authorized, 650 shares issued and outstanding... --
---
Total common stock................................ $ 1
===
</TABLE>
CCA HOLDINGS
The Class A Voting Common Stock (CCA Class A Common Stock) and Class C
Nonvoting Common Stock (CCA Class C Common Stock) have certain preferential
rights upon liquidation of CCA Holdings. In the event of liquidation,
dissolution or "winding up" of CCA Holdings, holders of CCA Class A and Class C
Common Stock are entitled to a preference of $1,000 per share. After such amount
is paid, holders of Class B Voting Common Stock (CCA Class B Common Stock) are
entitled to receive $1,000 per share. Thereafter, Class A and Class C
shareholders shall ratably receive the remaining proceeds.
If upon liquidation, dissolution or "winding up" the assets of CCA Holdings
are insufficient to permit payment to Class A and Class C shareholders for their
full preferential amounts, all assets of CCA Holdings shall then be distributed
ratably to Class A and Class C shareholders. Furthermore, if the proceeds from
liquidation are inadequate to pay Class B shareholders their full preferential
amounts, the proceeds are to be distributed on a pro rata basis to Class B
shareholders.
Upon the occurrence of any Conversion Event (as defined within the Amended
and Restated Certificate of Incorporation) Class C shareholders may convert any
or all of their outstanding shares into the same number of Class A shares.
Furthermore, CCA Holdings
F-69
<PAGE> 254
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
may automatically convert outstanding Class C shares into the same number of
Class A shares.
CCA Holdings is restricted from making cash dividends on its common stock
until the balance outstanding under the HC Crown Note is repaid.
Charter and Kelso entered into a Stockholders' Agreement providing for
certain restrictions on the transfer, sale or purchase of CCA Holdings' common
stock.
CCT HOLDINGS
The Class A Voting Common Stock (CCT Class A Common Stock) and Class C
Nonvoting Common Stock (CCT Class C Common Stock) have certain preferential
rights upon liquidation of CCT Holdings. In the event of liquidation,
dissolution or "winding up" of CCT Holdings, holders of CCT Class A Common Stock
and Class C Common Stock are entitled to a preference of $1,000 per share. After
such amount is paid, holders of Class B Voting Common Stock (CCT Class B Common
Stock) are entitled to receive $1,000 per share. Thereafter, Class A and Class C
shareholders shall ratably receive the remaining proceeds.
If upon liquidation, dissolution or "winding up" the assets of CCT Holdings
are insufficient to permit payment to Class A Common Stock and Class C
shareholders for their full preferential amount, all assets of the Company shall
then be distributed ratably to Class A and Class C shareholders. Furthermore, if
the proceeds from liquidation are inadequate to pay Class B shareholders their
full preferential amount, the proceeds are to be distributed on a pro rata basis
to Class B shareholders.
Upon the occurrence of any Conversion Event (as defined within the Amended
and Restated Certificate of Incorporation), Class C shareholders may convert any
or all of their outstanding shares into the same number of Class A shares.
Furthermore, CCT Holdings may automatically convert outstanding Class C shares
into the same number of Class A shares.
CCT Holdings is restricted from making cash dividends on its common stock
until the balance outstanding under the note payable to seller is repaid.
Charter and Kelso entered into a Stockholders' Agreement providing for
certain restrictions on the transfer, sale or purchase of CCT Holdings' common
stock.
CC-LB
The Class A Voting Common Stock (CC-LB Class A Common Stock) and Class C
Nonvoting Common Stock (CC-LB Class C Common Stock) have certain preferential
rights upon liquidation of CC-LB. In the event of liquidation, dissolution or
"winding up" of CC-LB, holders of CC-LB Class A Common Stock and Class C Common
Stock are entitled to a preference of $1,000 per share. After such amount is
paid, holders of Class B Voting Common Stock (CC-LB Class B Common Stock) are
entitled to receive $1,000 per share. Thereafter, Class A, Class B and Class C
shareholders shall ratably receive the remaining proceeds.
If upon liquidation, dissolution or "winding up" the assets of CC-LB are
insufficient to permit payment to Class A and Class C shareholders for their
full preferential amount,
F-70
<PAGE> 255
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
all assets of the Company shall then be distributed ratably to Class A and Class
C shareholders. Furthermore, if the proceeds from liquidation are inadequate to
pay Class B shareholders their full preferential amount, the proceeds are to be
distributed on a pro rata basis to Class B shareholders.
CC-LB Class C Common Stock may be converted into CC-LB Class A Common Stock
upon the transfer of CC-LB Class C Common Stock to a person not affiliated with
the seller. Furthermore, CC-LB may automatically convert outstanding Class C
shares into the same number of Class A shares.
11. RELATED PARTY TRANSACTIONS:
Charter provides management services to the Company under the terms of a
contract which provides for annual base fees equal to $9,277 and $9,485 for the
period from January 1, 1998, through December 23, 1998, and for the year ended
December 31, 1997, respectively, plus an additional fee equal to 30% of the
excess, if any, of operating cash flow (as defined in the management agreement)
over the projected operating cash flow. Payment of the additional fee is
deferred due to restrictions provided within the Company's credit agreements.
Deferred management fees bear interest at 8.0% per annum. The additional fees
for the periods from January 1, 1998, through December 23, 1998, and the years
ended December 31, 1997 and 1996, totaled $2,160, $1,990 and $1,255,
respectively. In addition, the Company receives financial advisory services from
an affiliate of Kelso, under terms of a contract which provides for fees equal
to $1,064 and $1,113 per annum as of January 1, 1998, through December 23, 1998,
and December 31, 1997, respectively. Management and financial advisory service
fees currently payable of $2,281 are included in payables to manager of cable
television systems -- related party at December 31, 1997.
The Company pays certain acquisition advisory fees to an affiliate of Kelso
and Charter, which typically equal approximately 1% of the total purchase price
paid for cable television systems acquired. Total acquisition fees paid to the
affiliate of Kelso for the period from January 1, 1998, through December 23,
1998, were $-0-. Total acquisition fees paid to the affiliate of Kelso in 1997
and 1996 were $-0- and $1,400, respectively. Total acquisition fees paid to
Charter for the period from January 1, 1998, through December 23, 1998, were
$-0-. Total acquisition fees paid to Charter in 1997 and 1996 were $-0- and
$1,400, respectively.
The Company and all entities managed by Charter collectively utilize a
combination of insurance coverage and self-insurance programs for medical,
dental and workers' compensation claims. Medical coverage provides for $2,435
aggregate stop loss protection and a loss limitation of $100 per person per
year. Workers' compensation coverage provides for $800 aggregate stop loss
protection and a loss limitation of $150 per person per year. Charges are
determined by independent actuaries at the present value of the actuarially
computed present and future liabilities for such benefits. The Company is
allocated its share of the charges monthly based upon its total number of
employees, historical claims and medical cost trend rates. Management considers
this allocation to be reasonable for the operations of the Company. For the
period from January 1, 1998, through December 23, 1998, the Company expensed
$1,950 relating to insurance allocations. During 1997 and 1996, the Company
expensed $1,689 and $2,065, respectively, relating to insurance allocations.
F-71
<PAGE> 256
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Beginning in 1996, the Company and other entities managed by Charter
employed the services of Charter's National Data Center (the "National Data
Center"). The National Data Center performs certain customer billing services
and provides computer network, hardware and software support to the Company and
other affiliated entities. The cost of these services is allocated based on the
number of customers. Management considers this allocation to be reasonable for
the operations of the Company. For the period from January 1, 1998, through
December 23, 1998, the Company expensed $843 relating to these services. During
1997 and 1996, the Company expensed $723 and $466 relating to these services,
respectively.
CCE-I maintains a regional office. The regional office performs certain
operational services on behalf of CCE-I and other affiliated entities. The cost
of these services is allocated to CCE-I and affiliated entities based on their
number of customers. Management considers this allocation to be reasonable for
the operations of CCE-I. From the period January 1, 1998, through December 23,
1998, the Company expensed $1,926 relating to these services. During 1997 and
1996, CCE-I expensed $861 and $799, respectively, relating to these services.
12. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases certain facilities and equipment under noncancelable
operating leases. Lease and rental costs charged to expense for the period from
January 1, 1998, through December 23, 1998, was $2,222. Rent expense incurred
under these leases during 1997 and 1996 was $1,956 and $1,704, respectively.
The Company also rents utility poles in its operations. Generally, pole
rentals are cancelable on short notice, but the Company anticipates that such
rentals will recur. Rent expensed incurred for pole attachments for the period
from January 1, 1998, through December 23, 1998, was $2,430. Rent expense
incurred for pole attachments during 1997 and 1996 was $2,601 and $2,330,
respectively.
LITIGATION
The Company is a party to lawsuits that arose in the ordinary course of
conducting its business. In the opinion of management, after consulting with
legal counsel, the outcome of these lawsuits will not have a material adverse
effect on the Company's consolidated financial position or results of
operations.
13. REGULATION IN THE CABLE TELEVISION INDUSTRY:
The cable television industry is subject to extensive regulation at the
federal, local and, in some instances, state levels. The Cable Communications
Policy Act of 1984 (the "1984 Cable Act"), the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act" and together with
the 1984 Cable Act, the "Cable Acts"), and the Telecommunications Act of 1996
(the "1996 Telecom Act"), establish a national policy to guide the development
and regulation of cable television systems. The Federal Communications
Commission (FCC) has principal responsibility for implementing the policies of
the Cable Acts. Many aspects of such regulation are currently the subject of
F-72
<PAGE> 257
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
judicial proceedings and administrative or legislative proposals. Legislation
and regulations continue to change, and the Company cannot predict the impact of
future developments on the cable television industry.
The 1992 Cable Act and the FCC's rules implementing that act generally have
increased the administrative and operational expenses of cable television
systems and have resulted in additional regulatory oversight by the FCC and
local or state franchise authorities. The Cable Acts and the corresponding FCC
regulations have established rate regulations.
The 1992 Cable Act permits certified local franchising authorities to order
refunds of basic service tier rates paid in the previous twelve-month period
determined to be in excess of the maximum permitted rates. As of December 23,
1998, the amount refunded by the Company has been insignificant. The Company may
be required to refund additional amounts in the future.
The Company believes that it has complied in all material respects with the
provisions of the 1992 Cable Act, including the rate setting provisions
promulgated by the FCC. However, in jurisdictions that have chosen not to
certify, refunds covering the previous twelve-month period may be ordered upon
certification if the Company is unable to justify its basic rates. The Company
is unable to estimate at this time the amount of refunds, if any, that may be
payable by the Company in the event certain of its rates are successfully
challenged by franchising authorities or found to be unreasonable by the FCC.
The Company does not believe that the amount of any such refunds would have a
material adverse effect on the financial position or results of operations of
the Company.
The 1996 Telecom Act, among other things, immediately deregulated the rates
for certain small cable operators and in certain limited circumstances rates on
the basic service tier, and as of March 31, 1999, deregulates rates on the cable
programming service tier (CPST). The FCC is currently developing permanent
regulations to implement the rate deregulation provisions of the 1996 Telecom
Act. The Company cannot predict the ultimate effect of the 1996 Telecom Act on
the Company's financial position or results of operations.
The FCC may further restrict the ability of cable television operators to
implement rate increases or the United States Congress may enact legislation
that could delay or suspend the scheduled March 1999 termination of CPST rate
regulation. This continued rate regulation, if adopted, could limit the rates
charged by the Company.
A number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. State governmental agencies are
required to follow FCC rules when prescribing rate regulation, and thus, state
regulation of cable television rates is not allowed to be more restrictive than
the federal or local regulation. The Company is subject to state regulation in
Connecticut.
14. INCOME TAXES:
Deferred tax assets and liabilities are recognized for the estimated future
tax consequence attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred income tax assets
F-73
<PAGE> 258
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
and liabilities are measured using the enacted tax rates in effect for the year
in which those temporary differences are expected to be recovered or settled.
Deferred income tax expense or benefit is the result of changes in the liability
or asset recorded for deferred taxes. A valuation allowance must be established
for any portion of a deferred tax asset for which it is more likely than not
that a tax benefit will not be realized.
For the period from January 1, 1998, through December 23, 1998, and the
years ended December 31, 1997 and 1996, no current provision (benefit) for
income taxes was recorded. The effective income tax rate is less than the
federal rate of 35% primarily due to providing a valuation allowance on deferred
income tax assets.
Deferred taxes are comprised of the following at December 31, 1997:
<TABLE>
<S> <C>
Deferred income tax assets:
Accounts receivable................................... $ 252
Other assets.......................................... 7,607
Accrued expenses...................................... 4,740
Deferred revenue...................................... 624
Deferred management fees.............................. 1,654
Tax loss carryforwards................................ 80,681
Tax credit carryforward............................... 1,360
Valuation allowance................................... (40,795)
---------
Total deferred income tax assets.............. 56,123
---------
Deferred income tax liabilities:
Property, plant and equipment......................... (38,555)
Franchise costs....................................... (117,524)
Other................................................. (11,407)
---------
Total deferred income tax liabilities......... (167,486)
---------
Net deferred income tax liability............. $(111,363)
=========
</TABLE>
At December 31, 1997, the Company had net operating loss (NOL)
carryforwards for regular income tax purposes aggregating $204,400, which expire
in various years from 1999 through 2012. Utilization of the NOLs carryforwards
is subject to certain limitations.
15. EMPLOYEE BENEFIT PLANS:
The Company's employees may participate in the Charter Communications, Inc.
401(k) Plan (the "401(k) Plan"). Employees that qualify for participation can
contribute up to 15% of their salary, on a before tax basis, subject to a
maximum contribution limit as determined by the Internal Revenue Service. The
Company contributes an amount equal to 50% of the first 5% of contributions by
each employee. For the period from January 1, 1998, through December 23, 1998,
the Company contributed $585 to the 401(k) plan. During 1997 and 1996, the
Company contributed approximately $499 and $435 to the 401(k) Plan,
respectively.
Certain employees of the Company are participants in the 1996 Charter
Communications/Kelso Group Appreciation Rights Plan (the "Plan"). The Plan
covers certain key employees and consultants within the group of companies and
partnerships
F-74
<PAGE> 259
CCA GROUP
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
controlled by affiliates of Kelso and managed by Charter. The Plan permits the
granting of up to 1,000,000 units, of which 705,000 were outstanding at December
31, 1997. Unless otherwise provided in a particular instance, units vest at a
rate of 20% per annum. The Plan entitles participants to receive payment of the
appreciated unit value for vested units, upon the occurrence of certain events
specified in the Plan (i.e. change in control, employee termination) The units
do not represent a right to an equity interest to any entities within the CCA
Group. Compensation expense is based on the appreciated unit value and is
amortized over the vesting period.
As a result of the acquisition of Charter and the Company, the Plan will be
terminated and all amounts will be paid by Charter in 1999. For the period from
January 1, 1998, through December 23, 1998, the Company recorded $5,684 of
expense, included in management fees, and a contribution from Charter related to
the Appreciation Rights Plan.
16. ACCOUNTING STANDARD NOT YET IMPLEMENTED:
In June 1998, the Financial Accounting Standards Board adopted SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999. The Company has
not yet quantified the impacts of adopting SFAS No. 133 on its consolidated
financial statements nor has it determined the timing or method of its adoption
of SFAS No. 133. However, SFAS No. 133 could increase volatility in earnings
(loss).
17. SUBSEQUENT EVENT:
Subsequent to December 23, 1998, CCA Holdings, CCT Holdings and CC-LB
converted to limited liability companies and are now known as CCA Holdings LLC,
CCT Holdings LLC and Charter Communications Long Beach, LLC, respectively.
F-75
<PAGE> 260
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CharterComm Holdings, L.P.:
We have audited the accompanying consolidated balance sheet of CharterComm
Holdings, L.P. and subsidiaries as of December 31, 1997, and the related
consolidated statements of operations, partners' capital and cash flows for the
period from January 1, 1998, through December 23, 1998, and for the years ended
December 31, 1997 and 1996. These consolidated 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 CharterComm Holdings, L.P.
and subsidiaries as of December 31, 1997, and the results of their operations
and their cash flows for the period from January 1, 1998, through December 23,
1998, and for the years ended December 31, 1997 and 1996, in conformity with
generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
St. Louis, Missouri,
February 5, 1999
F-76
<PAGE> 261
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET -- DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents................................. $ 2,742
Accounts receivable, net of allowance for doubtful
accounts of $330....................................... 3,158
Prepaid expenses and other................................ 342
--------
Total current assets.............................. 6,242
--------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment............................. 235,808
Franchises, net of accumulated amortization of $119,968... 480,201
--------
716,009
--------
OTHER ASSETS................................................ 16,176
--------
$738,427
========
</TABLE>
LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<S> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt...................... $ 5,375
Accounts payable and accrued expenses..................... 30,507
Payables to manager of cable television systems -- related
party.................................................. 1,120
--------
Total current liabilities......................... 37,002
--------
DEFERRED REVENUE............................................ 1,719
--------
LONG-TERM DEBT, less current maturities..................... 666,662
--------
DEFERRED MANAGEMENT FEES.................................... 7,805
--------
DEFERRED INCOME TAXES....................................... 5,111
--------
REDEEMABLE PREFERRED LIMITED UNITS -- 577.81 units,
issued and outstanding.................................... 20,128
--------
PARTNERS' CAPITAL:
General Partner........................................... --
Common Limited Partners -- 220.24 units issued and
outstanding............................................ --
--------
Total partners' capital........................... --
--------
$738,427
========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-77
<PAGE> 262
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1998, YEAR ENDED
THROUGH DECEMBER 31
DECEMBER 23, --------------------
1998 1997 1996
------------ ---- ----
<S> <C> <C> <C>
REVENUES........................................ $196,801 $175,591 $120,280
-------- -------- --------
OPERATING EXPENSES:
Operating costs............................... 83,745 75,728 50,970
General and administrative.................... 14,586 12,607 9,327
Depreciation and amortization................. 86,741 76,535 53,133
Management fees -- related party.............. 14,780 8,779 6,014
-------- -------- --------
199,852 173,649 119,444
-------- -------- --------
Income (loss) from operations.............. (3,051) 1,942 836
-------- -------- --------
OTHER INCOME (EXPENSE):
Interest income............................... 211 182 233
Interest expense.............................. (66,121) (61,498) (41,021)
Other, net.................................... (1,895) 17 (468)
-------- -------- --------
(67,805) (61,299) (41,256)
-------- -------- --------
Loss before extraordinary item............. (70,856) (59,357) (40,420)
EXTRAORDINARY ITEM -- Loss on early retirement
of debt....................................... (6,264) -- --
-------- -------- --------
Net loss................................... (77,120) (59,357) (40,420)
REDEMPTION PREFERENCE ALLOCATION:
Special Limited Partner units................. -- -- (829)
Redeemable Preferred Limited units............ -- -- (4,081)
NET LOSS ALLOCATED TO REDEEMABLE PREFERRED
LIMITED UNITS................................. 20,128 2,553 4,063
-------- -------- --------
Net loss applicable to partners' capital
accounts................................. $(56,992) $(56,804) $(41,267)
======== ======== ========
NET LOSS ALLOCATION TO PARTNERS' CAPITAL
ACCOUNTS:
General Partner............................... $(56,992) $(21,708) $(38,391)
Common Limited Partners....................... -- (35,096) (2,876)
-------- -------- --------
$(56,992) $(56,804) $(41,267)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-78
<PAGE> 263
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
GENERAL LIMITED
PARTNER PARTNERS TOTAL
------- -------- -----
<S> <C> <C> <C>
BALANCE, December 31, 1995........................ $ 29,396 $ 2,202 $ 31,598
Capital contributions........................... 30,703 2,300 33,003
Allocation of net loss.......................... (38,391) (2,876) (41,267)
-------- -------- --------
BALANCE, December 31, 1996........................ 21,708 1,626 23,334
Capital contributions........................... -- 33,470 33,470
Allocation of net loss.......................... (21,708) (35,096) (56,804)
-------- -------- --------
BALANCE, December 31, 1997........................ -- -- --
Capital contributions........................... 4,920 -- 4,920
Allocation of net loss.......................... (56,992) -- (56,992)
-------- -------- --------
BALANCE, December 23, 1998........................ $(52,072) $ -- $(52,072)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-79
<PAGE> 264
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
1998,
THROUGH YEAR ENDED DECEMBER 31,
DECEMBER 23, -----------------------
1998 1997 1996
------------ ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................ $ (77,120) $ (59,357) $ (40,420)
Adjustments to reconcile net loss to net cash
provided by operating activities --
Extraordinary item -- Loss on early
retirement of debt......................... 6,264 -- --
Depreciation and amortization................ 86,741 76,535 53,133
Amortization of debt issuance costs, debt
discount and interest rate cap
agreements................................. 14,563 14,212 9,564
Loss on disposal of property, plant and
equipment.................................. 1,714 203 367
Changes in assets and liabilities, net of
effects from acquisition --
Accounts receivable, net................... 2,000 369 (303)
Prepaid expenses and other................. (203) 943 245
Accounts payable and accrued expenses...... (1,970) 3,988 9,911
Payables to manager of cable television
systems, including deferred management
fees.................................... 9,456 3,207 3,479
Deferred revenue........................... 770 (82) 452
Other operating activities................. 5,378 -- --
--------- --------- ---------
Net cash provided by operating
activities.............................. 47,593 40,018 36,428
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment...... (85,044) (72,178) (48,324)
Payments for acquisitions, net of cash
acquired..................................... (5,900) (159,563) (145,366)
Other investing activities...................... 5,280 1,577 (2,089)
--------- --------- ---------
Net cash used in investing activities........ (85,664) (230,164) (195,779)
--------- --------- ---------
</TABLE>
<TABLE>
CASH FLOWS FROM FINANCING ACTIVITIES:
<S> <C> <C> <C>
Borrowings of long-term debt.................... 547,400 231,250 260,576
Repayments of long-term debt.................... (505,300) (67,930) (34,401)
Partners' capital contributions................. -- 29,800 --
Payment of debt issuance costs.................. (3,651) (3,593) (11,732)
Payment of Special Limited Partnership units.... -- -- (43,243)
Repayments of note payable -- related party..... -- -- (15,000)
Payments for interest rate cap agreements....... -- -- (35)
--------- --------- ---------
Net cash provided by financing activities.... 38,449 189,527 156,165
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS..................................... 378 (619) (3,186)
CASH AND CASH EQUIVALENTS, beginning of period.... 2,742 3,361 6,547
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of period.......... $ 3,120 $ 2,742 $ 3,361
========= ========= =========
CASH PAID FOR INTEREST............................ $ 61,559 $ 42,538 $ 28,860
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-80
<PAGE> 265
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION
CharterComm Holdings, L.P. (CharterComm Holdings) was formed in March 1996
with the contributions of Charter Communications Southeast Holdings, L.P.
(Southeast Holdings), Charter Communications, L.P. (CC-I) and Charter
Communications II, L.P. (CC-II). This contribution was accounted for as a
reorganization under common control and, accordingly, the consolidated financial
statements and notes have been restated to include the results and financial
position of Southeast Holdings, CC-I and CC-II.
Through December 23, 1998, CharterComm Holdings was owned 75.3% by
affiliates of Charterhouse Group International, Inc., a privately owned
investment firm (collectively referred to herein as "Charterhouse"), indirectly
owned 5.7% by Charter Communications, Inc. (Charter), manager of the
Partnership's (as defined below) cable television systems, and owned 19.0%
primarily by other institutional investors.
Effective December 23, 1998, Paul G. Allen acquired 94% of Charter through
a series of transactions. In conjunction with Mr. Allen's acquisition, Charter
acquired 100% of the outstanding partnership interests in CharterComm Holdings
on December 23, 1998.
The accompanying consolidated financial statements include the accounts of
CharterComm Holdings and its subsidiaries collectively referred to as the
"Partnership" herein. All significant intercompany balances and transactions
have been eliminated in consolidation.
In 1998, the Partnership through its subsidiaries provided cable television
service to customers in Alabama, Georgia, Kentucky, Louisiana, North Carolina,
South Carolina and Tennessee.
CASH EQUIVALENTS
The Partnership considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. At December 31, 1997,
cash equivalents consist primarily of repurchase agreements. These investments
are carried at cost that approximates market value.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost, including all direct and
certain indirect costs associated with the construction of cable television
transmission and distribution facilities, and the cost of new customer
installation. The costs of disconnecting a customer are charged to expense in
the period incurred. Expenditures for repairs and maintenance are charged to
expense as incurred, and equipment replacement and betterments are capitalized.
F-81
<PAGE> 266
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation is provided on the straight-line basis over the estimated
useful lives of the related assets as follows:
<TABLE>
<S> <C>
Cable distribution systems............................. 3-15 years
Buildings and leasehold improvements................... 5-15 years
Vehicles and equipment................................. 3-5 years
</TABLE>
In 1997, the Partnership shortened the estimated useful lives of certain
property, plant and equipment for depreciation purposes. As a result, an
additional $4,775 of depreciation was recorded during 1997.
FRANCHISES
Costs incurred in obtaining and renewing cable franchises are deferred and
amortized over the lives of the franchises. Costs relating to unsuccessful
franchise applications are charged to expense when it is determined that the
efforts to obtain the franchise will not be successful. Franchise rights
acquired through the purchase of cable television systems represent the excess
of the cost of properties acquired over the amounts assigned to net tangible
assets at date of acquisition and are generally amortized using the
straight-line method over a period of 15 years. In addition, approximately
$100,000 of franchise rights are being amortized over a period of 3 to 11 years.
OTHER ASSETS
Debt issuance costs are being amortized to interest expense over the term
of the related debt. The interest rate cap costs are being amortized over the
terms of the agreement, which approximates three years.
IMPAIRMENT OF ASSETS
If facts and circumstances suggest that a long-lived asset may be impaired,
the carrying value is reviewed. If a review indicates that the carrying value of
such asset is not recoverable based on projected undiscounted cash flows related
to the asset over its remaining life, the carrying value of such asset is
reduced to its estimated fair value.
REVENUES
Cable television revenues from basic and premium services are recognized
when the related services are provided.
Installation revenues are recognized to the extent of direct selling costs
incurred. The remainder, if any, is deferred and amortized to income over the
estimated average period that customers are expected to remain connected to the
cable television system. As of December 31, 1997, no installation revenue has
been deferred, as direct selling costs exceeded installation revenue.
Fees collected from programmers to guarantee carriage are deferred and
amortized to income over the life of the contracts. Local governmental
authorities impose franchise fees on the Partnership ranging up to a federally
mandated maximum of 5.0% of gross revenues. On a monthly basis, such fees are
collected from the Partnership's customers and
F-82
<PAGE> 267
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are periodically remitted to local franchises. Franchise fees collected and paid
are reported as revenue.
INTEREST RATE HEDGE AGREEMENTS
The Partnership manages fluctuations in interest rates by using interest
rate hedge agreements, as required by certain debt agreements. Interest rate
swaps, caps and collars are accounted for as hedges of debt obligations, and
accordingly, the net settlement amounts are recorded as adjustments to interest
expense in the period incurred. Premiums paid for interest rate caps are
deferred, included in other assets, and are amortized over the original term of
the interest rate agreement as an adjustment to interest expense.
The Partnership's interest rate swap agreements require the Partnership to
pay a fixed rate and receive a floating rate thereby creating fixed rate debt.
Interest rate caps and collars are entered into by the Partnership to reduce the
impact of rising interest rates on floating rate debt.
The Partnership's participation in interest rate hedging transactions
involves instruments that have a close correlation with its debt, thereby
managing its risk. Interest rate hedge agreements have been designed for hedging
purposes and are not held or issued for speculative purposes.
OTHER INCOME (EXPENSE)
Other, net includes gain and loss on disposition of property, plant and
equipment, and other miscellaneous items, all of which are not directly related
to the Partnership's primary line of business. In 1996, the Partnership recorded
$367 of nonoperating losses for its portion of insurance deductibles pertaining
to damage caused by hurricanes to certain cable television systems.
INCOME TAXES
Income taxes are the responsibility of the partners and are not provided
for in the accompanying financial statements except for Peachtree Cable TV, Inc.
(Peachtree), an indirect wholly owned subsidiary, which is a C corporation and
for which taxes are presented in accordance with SFAS No. 109.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. ACQUISITIONS:
In 1998, the Partnership acquired cable television systems in one
transaction for a purchase price net of cash acquired, of $5,900. The excess
cost of properties acquired over
F-83
<PAGE> 268
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the amounts assigned to net tangible assets at the date of acquisition was
$5,000 and is included in franchises.
In 1997, the Partnership acquired cable television systems in three
separate transactions for an aggregate purchase price, net of cash acquired, of
$159,600. The excess of the cost of properties acquired over the amounts
assigned to net tangible assets at the date of acquisition was $126,400 and is
included in franchises.
In 1996, the Partnership acquired cable television systems in three
separate transactions for an aggregate purchase price, net of cash acquired, of
$145,400. The excess of the cost of properties acquired over the amounts
assigned to net tangible assets at the date of acquisition was $118,200 and is
included in franchises.
The above acquisitions were accounted for using the purchase method of
accounting, and accordingly, results of operations of the acquired assets have
been included in the financial statements from the dates of acquisition.
Unaudited pro forma operating results for the 1997 acquisitions as though
the acquisitions had been made on January 1, 1997, with pro forma adjustments to
give effect to amortization of franchises, interest expense and certain other
adjustments are as follows.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
(UNAUDITED)
<S> <C>
Revenues............................................... $182,770
Income from operations................................. 2,608
Net loss............................................... (61,389)
</TABLE>
The unaudited pro forma information does not purport to be indicative of
the results of operations had these transactions been completed as of the
assumed date or which may be obtained in the future.
3. DISTRIBUTIONS AND ALLOCATIONS:
For financial reporting purposes, redemption preference allocations,
profits and losses are allocated to partners in accordance with the liquidation
provision of the applicable partnership agreement.
As stated in the Partnership Agreement, the Partnership may make
distributions to the partners out of all available funds at such times and in
such amounts as the General Partner may determine in its sole discretion.
4. REDEEMABLE PREFERRED LIMITED UNITS:
As of December 31, 1995, certain Redeemable Preferred Limited Partner units
of CC-I and CC-II were outstanding. During 1996, the Partnership issued certain
Redeemable Preferred Limited Partner units of CharterComm Holdings.
The Preferred Limited Partners' preference return has been reflected as an
addition to the Redeemable Preferred Limited Partner units, and the decrease has
been allocated to
F-84
<PAGE> 269
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the General Partner and Common Limited Partner consistent with the liquidation
and distribution provisions in the partnership agreements.
At December 23, 1998, the balance related to the CharterComm Holdings
Preferred Limited Partner units was as follows:
<TABLE>
<S> <C>
Contribution, March 1996................................. $ 20,052
1996 redemption preference allocation.................. 2,629
Allocation of net loss................................. --
--------
Balance, December 31, 1996............................... 22,681
1997 redemption preference allocation.................. --
Allocation of net loss................................. (2,553)
--------
Balance, December 31, 1997............................... 20,128
1998 redemption preference allocation.................. --
Allocation of net loss................................. (20,128)
--------
Balance, December 23, 1998............................... $ --
========
</TABLE>
The 1998 and 1997 redemption preference allocations of $4,617 and $4,020,
respectively, have not been reflected in the Preferred Limited Partners' capital
accounts since the General Partner and Common Limited Partners' capital accounts
have been reduced to $-0-.
5. SPECIAL LIMITED PARTNER UNITS (CC-I):
Prior to March 28, 1996, certain Special Limited Partner units of CC-I were
outstanding. CC-I's profits were allocated to the Special Limited Partners until
allocated profits equaled the unrecovered preference amount (preference amounts
range from 6% to 17.5% of the unrecovered initial cost of the partnership units
and unrecovered preference amounts per annum). When there was no profit to
allocate, the preference return was reflected as a decrease in Partners'
Capital.
In accordance with a purchase agreement and through the use of a capital
contribution from Charter Communications Southeast, L.P. (Southeast), a wholly
owned subsidiary of Southeast Holdings, resulting from the proceeds of the Notes
(see Note 9), CC-I paid the Special Limited Partners $43,243 as full
consideration for their partnership interests on March 28, 1996.
6. PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment consists of the following at December 31,
1997:
<TABLE>
<S> <C>
Cable distribution systems............................... $274,837
Land, buildings and leasehold improvements............... 5,439
Vehicles and equipment................................... 14,669
--------
294,945
Less -- Accumulated depreciation......................... (59,137)
--------
$235,808
========
</TABLE>
F-85
<PAGE> 270
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation expense for the period from January 1, 1998, through December
23, 1998, and for the years ended December 31, 1997 and 1996, was $44,307,
$33,634 and $16,997, respectively.
7. OTHER ASSETS:
Other assets consist of the following at December 31, 1997:
<TABLE>
<S> <C>
Debt issuance costs....................................... $18,385
Other assets.............................................. 3,549
-------
21,934
Less -- Accumulated amortization.......................... (5,758)
-------
$16,176
=======
</TABLE>
As a result of the payment and termination of the CC-I Credit Agreement and
CC-II Credit Agreement (see Note 9), debt issuance costs of $6,264 were written
off as an extraordinary loss on early retirement of debt for the period from
January 1, 1998, through December 23, 1998.
8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES:
Accounts payable and accrued expenses consist of the following at December
31, 1997:
<TABLE>
<S> <C>
Accrued interest.......................................... $ 9,804
Franchise fees............................................ 3,524
Programming costs......................................... 3,391
Accounts payable.......................................... 2,479
Capital expenditures...................................... 2,099
Salaries and related benefits............................. 2,079
Other..................................................... 7,131
-------
$30,507
=======
</TABLE>
9. LONG-TERM DEBT:
Long-term debt consists of the following at December 31, 1997:
<TABLE>
<S> <C>
Senior Secured Discount Debentures....................... $146,820
11 1/4% Senior Notes..................................... 125,000
Credit Agreements:
CC-I................................................... 112,200
CC-II.................................................. 339,500
--------
723,520
Less:
Current maturities..................................... (5,375)
Unamortized discount................................... (51,483)
--------
$666,662
========
</TABLE>
F-86
<PAGE> 271
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SENIOR SECURED DISCOUNT DEBENTURES
On March 28, 1996, Southeast Holdings and CharterComm Holdings Capital
Corporation (Holdings Capital), a wholly owned subsidiary of Southeast Holdings
(collectively the "Debentures Issuers"), issued $146,820 of Senior Secured
Discount Debentures (the "Debentures") for proceeds of $75,000. Proceeds from
the Debentures were used to pay fees and expenses related to the issuance of the
Debentures and the balance of $72,400 was a capital contribution to Southeast.
The Debentures are secured by all of Southeast Holdings' ownership interest in
Southeast and rank pari passu in right and priority of payment to all other
existing and future indebtedness of the Debentures Issuers. The Debentures are
effectively subordinated to the claims of creditors of Southeast Holdings'
subsidiaries, including the Combined Credit Agreement (as defined herein). The
Debentures are redeemable at the Debentures Issuers' option at amounts
decreasing from 107% to 100% of principal, plus accrued and unpaid interest to
the redemption date, beginning on March 15, 2001. The Debentures Issuers are
required to make an offer to purchase all of the Debentures, at a purchase price
equal to 101% of the principal amount, together with accrued and unpaid
interest, upon a Change in Control, as defined in the Debentures Indenture. No
interest is payable on the Debentures prior to March 15, 2001. Thereafter,
interest on the Debentures is payable semiannually in arrears beginning
September 15, 2001, until maturity on March 15, 2007. The discount on the
Debentures is being accreted using the effective interest method at an interest
rate of 14% from the date of issuance to March 15, 2001.
11 1/4% SENIOR NOTES
Southeast and CharterComm Capital Corporation (Southeast Capital), a wholly
owned subsidiary of Southeast (collectively the "Notes Issuers"), issued
$125,000 aggregate principal amount of 11 1/4% Senior Notes (the "Notes"). The
Notes are senior unsecured obligations of the Notes Issuers and rank pari passu
in right and priority of payment to all other existing and future indebtedness
of the Notes Issuers. The Notes are effectively subordinated to the claims of
creditors of Southeast's subsidiaries, including the lenders under the Combined
Credit Agreement. The Notes are redeemable at the Notes Issuers' option at
amounts decreasing from 105.625% to 100% of principal, plus accrued and unpaid
interest to the date of redemption, beginning on March 15, 2001. The Notes
Issuers are required to make an offer to purchase all of the Notes, at a
purchase price equal to 101% of the principal amount, together with accrued and
unpaid interest, upon a Change in Control, as defined in the Notes Indenture.
Interest is payable semiannually on March 15 and September 15 until maturity on
March 15, 2006.
Southeast and Southeast Holdings are holding companies with no significant
assets other than their direct and indirect investments in CC-I and CC-II.
Southeast Capital and Holdings Capital were formed solely for the purpose of
serving as co-issuers and have no operations. Accordingly, the Notes Issuers and
Debentures Issuers must rely upon distributions from CC-I and CC-II to generate
funds necessary to meet their obligations, including the payment of principal
and interest on the Notes and Debentures.
F-87
<PAGE> 272
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
COMBINED CREDIT AGREEMENT
In June 1998, CC-I and CC-II (the "Borrowers") replaced their existing
credit agreements and entered into a combined credit agreement (the "Combined
Credit Agreement"), which provides for two term loan facilities, one with the
principal amount of $200,000 that matures on June 30, 2007, and the other with
the principal amount of $150,000 that matures on December 31, 2007. The Combined
Credit Agreement also provides for a $290,000 revolving credit facility, with a
maturity date of June 30, 2007. Amounts under the Combined Credit Agreement bear
interest at the LIBOR Rate or Base Rate, as defined, plus a margin of up to
2.0%. The variable interest rates ranged from 6.69% to 7.31% at December 23,
1998.
Commencing March 31, 2002, and at the end of each calendar quarter
thereafter, the available borrowings for the revolving credit facility and the
$200,000 term loan shall be reduced on an annual basis by 11.0% in 2002 and
14.6% in 2003. Commencing March 31, 2002, and at the end of each calendar
quarter thereafter, the available borrowings for the $150,000 term loan shall be
reduced on an annual basis by 1.0% in 2002 and 1.0% in 2003. A quarterly
commitment fee of between 0.25% and 0.375% per annum is payable on the
unborrowed balance of the revolving credit facility.
The Debentures, Notes and Combined Credit Agreement require the Partnership
to comply with various financial and nonfinancial covenants including the
maintenance of a ratio of debt to annualized operating cash flow, as defined,
not to exceed 5.25 to 1 at December 23, 1998. These debt instruments also
contain substantial limitations on, or prohibitions of, distributions,
additional indebtedness, liens, asset sales and certain other items.
CC-I CREDIT AGREEMENT
CC-I maintained a credit agreement (the "CC-I Credit Agreement") with a
consortium of banks for borrowings up to $127,200, consisting of a revolving
line of credit of $63,600 and a term loan of $63,600. Interest accrued, at
CC-I's option, at rates based upon the Base Rate, as defined in the CC-I Credit
Agreement, LIBOR, or prevailing bid rates of certificates of deposit plus the
applicable margin based upon CC-I's leverage ratio at the time of the
borrowings. The variable interest rates ranged from 7.75% to 8.00% and 7.44% to
7.50% at December 31, 1997 and 1996, respectively.
In June 1998, the CC-I Credit Agreement was repaid and terminated in
conjunction with the establishment of the Combined Credit Agreement.
CC-II CREDIT AGREEMENT
CC-II maintained a credit agreement (the "CC-II Credit Agreement") with a
consortium of banks for borrowings up to $390,000, consisting of a revolving
credit facility of $215,000, and two term loans totaling $175,000. Interest
accrued, at CC-II's option, at rates based upon the Base Rate, as defined in the
CC-II Credit Agreement, LIBOR, or prevailing bid rates of certificates of
deposit plus the applicable margin based upon CC-II's leverage ratio at the time
of the borrowings. The variable interest rates ranged from 7.63% to 8.25% and
7.25% to 8.125% at December 31, 1997 and 1996, respectively.
F-88
<PAGE> 273
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1998, the CC-II Credit Agreement was repaid and terminated in
conjunction with the establishment of the Combined Credit Agreement.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS:
A summary of debt and the related interest rate hedge agreements at
December 31, 1997, is as follows:
<TABLE>
<CAPTION>
CARRYING NOTIONAL FAIR
VALUE AMOUNT VALUE
-------- -------- -----
<S> <C> <C> <C>
DEBT
Senior Secured Discount Debentures........ $ 95,337 $ -- $115,254
11 1/4% Senior Notes...................... 125,000 -- 136,875
CC-I Credit Agreement..................... 112,200 -- 112,200
CC-II Credit Agreement.................... 339,500 -- 339,500
INTEREST RATE HEDGE AGREEMENTS
CC-I:
Swaps................................... -- 100,000 (797)
CC-II:
Swaps................................... -- 170,000 (1,030)
Caps.................................... -- 70,000 --
Collars................................. -- 55,000 (166)
</TABLE>
As the CC-I and CC-II Credit Agreements bear interest at current market
rates, their carrying amounts approximate fair market values at December 31,
1997. The fair value of the Notes and the Debentures is based on current
redemption value.
The weighted average interest pay rate for CC-I interest rate swap
agreements was 8.07% at December 31, 1997.
The weighted average interest pay rate for CC-II interest rate swap
agreements was 8.03% at December 31, 1997. The weighted average interest rate
for CC-II interest cap agreements was 8.48% at December 31, 1997. The weighted
average interest rates for CC-II interest rate collar agreements were 9.01% and
7.61% for the cap and floor components, respectively, at December 31, 1997.
The notional amounts of interest rate hedge agreements do not represent
amounts exchanged by the parties and, thus, are not a measure of the
Partnership's exposure through its use of interest rate hedge agreements. The
amounts exchanged are determined by reference to the notional amount and the
other terms of the contracts.
The fair value of interest rate hedge agreements generally reflects the
estimated amounts that the Partnership would receive or pay (excluding accrued
interest) to terminate the contracts on the reporting date, thereby taking into
account the current unrealized gains or losses of open contracts. Dealer
quotations are available for the Partnership's interest rate hedge agreements.
Management believes that the sellers of the interest rate hedge agreements
will be able to meet their obligations under the agreements. In addition, some
of the interest rate hedge agreements are with certain of the participating
banks under the Partnership's credit
F-89
<PAGE> 274
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
facilities thereby reducing the exposure to credit loss. The Partnership has
policies regarding the financial stability and credit standing of major
counterparties. Nonperformance by the counterparties is not anticipated nor
would it have a material adverse effect on the results of operations or the
financial position of the Partnership.
11. INCOME TAXES:
The book value of the Partnership's net assets (excluding Peachtree)
exceeds its tax reporting basis by $2,919 as of December 31, 1997.
As of December 31, 1997, temporary differences and carryforwards that gave
rise to deferred income tax assets and liabilities for Peachtree are as follows:
<TABLE>
<S> <C>
Deferred income tax assets:
Accounts receivable..................................... $ 4
Accrued expenses........................................ 29
Deferred management fees................................ 111
Deferred revenue........................................ 24
Tax loss carryforwards.................................. 294
Tax credit carryforwards................................ 361
-------
Total deferred income tax assets................ 823
-------
Deferred income tax liabilities:
Property, plant and equipment........................... (1,372)
Franchises and other assets............................. (4,562)
-------
Total deferred income tax liabilities........... (5,934)
-------
Net deferred income tax liability............... $(5,111)
=======
</TABLE>
12. RELATED PARTY TRANSACTIONS:
Charter provides management services to the Partnership under the terms of
contracts which provide for fees equal to 5% of the Partnership's gross service
revenues. The debt agreements prohibit payment of a portion of such management
fees (40% for both CC-I and CC-II) until repayment in full of the outstanding
indebtedness. The remaining 60% of management fees, are paid quarterly through
December 31, 1998. Thereafter, the entire fee may be deferred if a multiple of
EBITDA, as defined, does not exceed outstanding indebtedness of CC-I and CC-II.
In addition, payments due on the Notes and Debentures shall be paid before any
deferred management fees are paid. Expenses recognized under the contracts for
the period from January 1, 1998, through December 23, 1998, were $9,860.
Expenses recognized under the contracts during 1997 and 1996 were $8,779 and
$6,014, respectively. Management fees currently payable of $1,432 are included
in payables to manager of cable television systems -- related party at December
31, 1997.
The Partnership and all entities managed by Charter collectively utilize a
combination of insurance coverage and self-insurance programs for medical,
dental and workers' compensation claims. Medical coverage provides for $2,435
aggregate stop loss protection and a loss limitation of $100 per person per
year. Workers' compensation coverage provides for $800 aggregate stop loss
protection and a loss limitation of $150 per person per year.
F-90
<PAGE> 275
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Charges are determined by independent actuaries at the present value of the
actuarially computed present and future liabilities for such benefits. The
Partnership is allocated its share of the charges monthly based upon its total
number of employees, historical claims and medical cost trend rates. Management
considers this allocation to be reasonable for the operations of the
Partnership. For the period from January 1, 1998, through December 23, 1998, the
Partnership expensed $1,831 relating to insurance allocations. During 1997 and
1996, the Partnership expensed $1,524 and $1,136, respectively, relating to
insurance allocations.
The Partnership employs the services of Charter's National Data Center (the
"National Data Center"). The National Data Center performs certain customer
billing services and provides computer network, hardware and software support
for the Partnership and other entities managed by Charter. The cost of these
services is allocated based on the number of basic customers. Management
considers this allocation to be reasonable for the operations of the
Partnership. For the period from January 1, 1998, through December 23, 1998, the
Partnership expensed $685 relating to these services. During 1997 and 1996, the
Partnership expensed $606 and $345, respectively, relating to these services.
CC-I, CC-II and other entities managed by Charter maintain regional
offices. The regional offices perform certain operational services. The cost of
these services is allocated based on number of basic customers. Management
considers this allocation to be reasonable for the operations of the
Partnership. For the period from January 1, 1998, through December 23, 1998, the
Partnership expensed $3,009 relating to these services. During 1997 and 1996,
the Partnership expensed $1,992 and $1,294, respectively, relating to these
services.
The Partnership pays certain acquisition advisory fees to Charter and
Charterhouse for cable television systems acquired. Total acquisition fees paid
to Charter for the period from January 1, 1998, through December 23, 1998, were
$-0-. Total acquisition fees paid to Charter in 1997 and 1996 were $982 and
$1,738, respectively. Total acquisition fees paid to Charterhouse for the period
from January 1, 1998, through December 23, 1998, were $-0-. Total acquisition
fees paid to Charterhouse in 1997 and 1996 were $982 and $1,738, respectively.
During 1997, the ownership of CharterComm Holdings changed as a result of
CharterComm Holdings receiving a $25,000 cash contribution from an institutional
investor, a $3,000 cash contribution from Charterhouse and a $2,000 cash
contribution from Charter, as well as the transfer of assets and liabilities of
a cable television system through a series of transactions initiated by Charter
and Charterhouse. Costs of $200 were incurred in connection with the cash
contributions. These contributions were contributed to Southeast Holdings which,
in turn, contributed them to Southeast.
13. COMMITMENTS AND CONTINGENCIES:
LEASES
The Partnership leases certain facilities and equipment under noncancelable
operating leases. Lease and rental costs charged to expense for the period from
January 1, 1998,
F-91
<PAGE> 276
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
through December 23, 1998, was $642. Rent expense incurred under leases during
1997 and 1996 was $615 and $522, respectively.
The Partnership also rents utility poles in its operations. Generally, pole
rentals are cancelable on short notice, but the Partnership anticipates that
such rentals will recur. Rent expense incurred for pole rental attachments for
the period from January 1, 1998, through December 23, 1998, was $3,261. Rent
expense incurred for pole attachments during 1997 and 1996 was $2,930 and
$2,092, respectively.
LITIGATION
The Partnership is a party to lawsuits that arose in the ordinary course of
conducting its business. In the opinion of management, after consulting with
legal counsel, the outcome of these lawsuits will not have a material adverse
effect on the Partnership's consolidated financial position or results of
operations.
REGULATION IN THE CABLE TELEVISION INDUSTRY
The cable television industry is subject to extensive regulation at the
federal, local and, in some instances, state levels. The Cable Communications
Policy Act of 1984 (the "1984 Cable Act"), the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act" and together with
the 1984 Cable Act, the "Cable Acts"), and the Telecommunications Act of 1996
(the "1996 Telecom Act"), establish a national policy to guide the development
and regulation of cable television systems. The Federal Communications
Commission (FCC) has principal responsibility for implementing the policies of
the Cable Acts. Many aspects of such regulation are currently the subject of
judicial proceedings and administrative or legislative proposals. Legislation
and regulations continue to change, and the Company cannot predict the impact of
future developments on the cable television industry.
The 1992 Cable Act and the FCC's rules implementing that act generally have
increased the administrative and operational expenses of cable television
systems and have resulted in additional regulatory oversight by the FCC and
local or state franchise authorities. The Cable Acts and the corresponding FCC
regulations have established rate regulations.
The 1992 Cable Act permits certified local franchising authorities to order
refunds of basic service tier rates paid in the previous twelve-month period
determined to be in excess of the maximum permitted rates. As of December 23,
1998, the amount returned by the Company has been insignificant. The Company may
be required to refund additional amounts in the future.
The Company believes that it has complied in all material respects with the
provisions of the 1992 Cable Act, including the rate setting provisions
promulgated by the FCC. However, in jurisdictions that have chosen not to
certify, refunds covering the previous twelve-month period may be ordered upon
certification if the Company is unable to justify its basic rates. The Company
is unable to estimate at this time the amount of refunds, if any, that may be
payable by the Company in the event certain of its rates are successfully
challenged by franchising authorities or found to be unreasonable by the FCC.
The
F-92
<PAGE> 277
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company does not believe that the amount of any such refunds would have a
material adverse effect on the financial position or results of operations of
the Company.
The 1996 Telecom Act, among other things, immediately deregulated the rates
for certain small cable operators and in certain limited circumstances rates on
the basic service tier, and as of March 31, 1999, deregulates rates on the cable
programming service tier (CPST). The FCC is currently developing permanent
regulations to implement the rate deregulation provisions of the 1996 Telecom
Act. The Company cannot predict the ultimate effect of the 1996 Telecom Act on
the Company's financial position or results of operations.
The FCC may further restrict the ability of cable television operators to
implement rate increases or the United States Congress may enact legislation
that could delay or suspend the scheduled March 1999 termination of CPST rate
regulation. This continued rate regulation, if adopted, could limit the rates
charged by the Company.
A number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. State governmental agencies are
required to follow FCC rules when prescribing rate regulation, and thus, state
regulation of cable television rates is not allowed to be more restrictive than
the federal or local regulation.
14. EMPLOYEE BENEFIT PLANS:
The Partnership's employees may participate in Charter Communications, Inc.
401(k) Plan (the "401(k) Plan"). Employees that qualify for participation can
contribute up to 15% of their salary, on a before tax basis, subject to a
maximum contribution limit as determined by the Internal Revenue Service. The
Partnership contributes an amount equal to 50% of the first 5% of contributions
by each employee. For the period from January 1, 1998, through December 23,
1998, the Partnership contributed $305. During 1997 and 1996, the Partnership
contributed $262 and $149, respectively.
Certain Partnership employees participate in the 1996 Charter
Communications/ Charterhouse Group Appreciation Rights Plan (the "Appreciation
Rights Plan"). The Appreciation Rights Plan covers certain key employees and
consultants within the group of companies and partnerships controlled by
Charterhouse and managed by Charter. The Plan permits the granting of up to
1,000,000 units, of which 925,000 were outstanding at December 31, 1997. Unless
otherwise provided in a particular instance, units vest at a rate of 20% per
annum. The Plan entitles participants to receive payment of the appreciated unit
value for vested units, upon the occurrence of certain events specified in the
Plan (i.e. change in control, employee termination). The units do not represent
a right to an equity interest in CharterComm Holdings. Compensation expense is
based on the appreciated unit value and is amortized over the vesting period.
As a result of the acquisition of Charter and the Partnership, the Plan
will be terminated and all amounts will be paid by Charter in 1999. For the
period from January 1, 1998, through December 23, 1998, the Partnership recorded
$4,920 of expense, included in management fees, and a contribution from Charter
related to the Appreciation Rights Plan.
F-93
<PAGE> 278
CHARTERCOMM HOLDINGS, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. ACCOUNTING STANDARD NOT YET IMPLEMENTED:
In June 1998, the Financial Accounting Standards Board adopted SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No.
133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate and
assess the effectiveness of transactions that receive hedge accounting. SFAS No.
133 is effective for fiscal years beginning after June 15, 1999. The Partnership
has not yet quantified the impacts of adopting SFAS No. 133 on its consolidated
financial statements nor has it determined the timing or method of its adoption
of SFAS No. 133. However, SFAS No. 133 could increase volatility in earnings
(loss).
16. SUBSEQUENT EVENT:
Subsequent to December 31, 1998, CharterComm Holdings, L.P. and all of its
subsidiaries converted to limited liability companies and are now known as
CharterComm Holdings LLC and subsidiaries.
F-94
<PAGE> 279
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Greater Media, Inc.:
We have audited the accompanying combined balance sheets of Greater Media
Cablevision Systems (see Note 1) (collectively, the "Combined Systems") included
in Greater Media, Inc., as of September 30, 1998 and 1997, and the related
combined statements of income, changes in net assets, and cash flows for each of
the three years in the period ended September 30, 1998. These combined financial
statements are the responsibility of management. Our responsibility is to
express an opinion on these combined financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Combined Systems, as of September 30, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1998, in conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
Roseland, New Jersey
March 2, 1999
F-95
<PAGE> 280
GREATER MEDIA CABLEVISION SYSTEMS (SEE NOTE 1)
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 31, ------------------
1999 1998 1997
--------- ---- ----
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 2,440 $ 4,080 $ 3,680
Accounts receivable (less allowance for doubtful
accounts of $308 (unaudited), $244 and
$337)........................................ 2,577 2,755 2,739
Prepaid expenses and other current assets....... 3,052 2,746 1,949
------- ------- -------
Total current assets.................... 8,069 9,581 8,368
Property and equipment, net....................... 58,196 54,468 41,971
Intangible assets, net............................ 2,653 2,690 1,647
Other assets...................................... 80 77 103
------- ------- -------
Total assets............................ $68,998 $66,816 $52,089
======= ======= =======
LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable and accrued expenses........... $ 6,022 $ 7,125 $ 5,299
Customers' prepayments and deferred installation
revenue...................................... 1,904 1,910 1,815
------- ------- -------
Total current liabilities............... 7,926 9,035 7,114
Other long-term liabilities....................... 3,618 3,650 3,920
Net assets........................................ 57,454 54,131 41,055
------- ------- -------
Total liabilities and net assets........ $68,998 $66,816 $52,089
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined balance
sheets.
F-96
<PAGE> 281
GREATER MEDIA CABLEVISION SYSTEMS (SEE NOTE 1)
COMBINED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
----------------- ---------------------------
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET REVENUES....................... $40,515 $37,389 $77,127 $73,436 $66,816
------- ------- ------- ------- -------
OPERATING EXPENSES:
Operating expenses............... 17,356 16,009 32,665 31,115 29,460
General and administrative....... 5,850 5,313 10,869 11,211 10,321
Corporate charges................ 2,057 1,882 3,888 3,696 3,365
Depreciation and amortization.... 4,628 3,631 8,183 7,368 7,353
------- ------- ------- ------- -------
29,891 26,835 55,605 53,390 50,499
------- ------- ------- ------- -------
Income from operations........ 10,624 10,554 21,522 20,046 16,317
OTHER EXPENSES:
Interest expense, net.............. (297) (177) (504) (307) (764)
Other.............................. 17 (15) (532) (957) (366)
------- ------- ------- ------- -------
INCOME BEFORE PROVISION IN LIEU OF
INCOME TAXES..................... 10,344 10,362 20,486 18,782 15,187
Provision in lieu of income taxes
(Note 6)......................... 4,199 4,025 8,008 7,964 5,987
------- ------- ------- ------- -------
Net income......................... $ 6,145 $ 6,337 $12,478 $10,818 $ 9,200
======= ======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-97
<PAGE> 282
GREATER MEDIA CABLEVISION SYSTEMS (SEE NOTE 1)
COMBINED STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
-----
<S> <C>
Balance, September 30, 1995................................. $ 42,185
Net income................................................ 9,200
Provision in lieu of income taxes......................... 5,987
Net payments to affiliates................................ (17,038)
--------
Balance, September 30, 1996................................. 40,334
Net income................................................ 10,818
Provision in lieu of income taxes......................... 7,964
Net payments to affiliates................................ (18,061)
--------
Balance, September 30, 1997................................. 41,055
Net income................................................ 12,478
Provision in lieu of income taxes......................... 8,008
Net payments to affiliates................................ (7,410)
--------
Balance, September 30, 1998................................. 54,131
Net income (unaudited).................................... 6,145
Provision in lieu of income taxes (unaudited)............. 4,199
Net payments to affiliates (unaudited).................... (7,021)
--------
Balance, March 31, 1999 (unaudited)......................... $ 57,454
========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-98
<PAGE> 283
GREATER MEDIA CABLEVISION SYSTEMS (SEE NOTE 1)
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
MARCH 31, YEAR ENDED SEPTEMBER 30,
------------------- ----------------------------
1999 1998 1998 1997 1996
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income............................ $ 6,145 $ 6,337 $12,478 $10,818 $ 9,200
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision in lieu of income taxes... 4,199 4,025 8,008 7,964 5,987
Depreciation and amortization....... 4,628 3,631 8,183 7,368 7,353
(Gain) loss on sale of fixed
assets........................... -- (19) 300 715 274
Changes in assets and liabilities:
Accounts receivable, prepaid
expenses and other assets........ (129) (3,277) (813) (1,115) (498)
Other assets........................ (3) 27 24 (30) (11)
Accounts payable and accrued
expenses......................... (1,103) 700 1,825 (440) (1,900)
Customers' prepayments and deferred
installation revenue............. (6) 25 96 367 94
Customers' deposits and deferred
revenue.......................... (32) (67) (270) (69) 466
-------- -------- ------- ------- --------
Net cash provided by operating
activities.......................... 13,699 11,382 29,831 25,578 20,965
-------- -------- ------- ------- --------
Cash flow from investing activities:
Capital expenditures.................. (8,319) (10,447) (21,049) (7,587) (5,122)
Proceeds from disposition of property
and equipment....................... -- 19 72 -- 128
Purchase of licenses.................. -- (50) (1,044) (99) --
-------- -------- ------- ------- --------
Net cash used in investing
activities.......................... (8,319) (10,478) (22,021) (7,686) (4,994)
-------- -------- ------- ------- --------
Cash flow from financing activities:
Net payments to affiliates............ (7,020) (1,759) (7,410) (18,061) (17,038)
-------- -------- ------- ------- --------
Net increase (decrease) in cash....... (1,640) (855) 400 (169) (1,067)
Cash and cash equivalents, beginning
of year............................. 4,080 3,680 3,680 3,849 4,916
-------- -------- ------- ------- --------
Cash and cash equivalents, end of
year................................ $ 2,440 $ 2,825 $ 4,080 $ 3,680 $ 3,849
======== ======== ======= ======= ========
Supplemental disclosure of cash flow
information:
Non-affiliate interest paid during
the year......................... $ 65 $ 90 $ 296 $ 155 $ 447
======== ======== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of these combined statements.
F-99
<PAGE> 284
GREATER MEDIA CABLEVISION SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION, BASIS OF PRESENTATION AND OPERATIONS
Greater Media Cablevision Systems is the owner and operator of the
following Massachusetts-based cable television systems: Auburn, Boylston,
Chicopee, Dudley, East Longmeadow, Easthampton, Grafton, Hampden, Holden,
Leicester, Ludlow, Millbury, Northborough, Northbridge, Oxford, Paxton,
Southampton, Southborough, Southbridge, Spencer, Sturbridge, Upton, Webster,
West Boylston, West Brookfield, Westborough, Wilbraham and Worcester ("the
Combined Systems"). The Combined Systems are wholly-owned by Greater Media
Cablevision, Inc. ("the Company"). The combined financial statements do not
include the accounts of Greater Philadelphia Cablevision, Inc. or Greater
Philadelphia Cablevision Limited Partnership (the "Philadelphia System"), which
are also wholly-owned by the Company. The Company is a wholly-owned subsidiary
of Greater Media, Inc. ("the Parent"). In February, 1999 the Parent and the
Company entered into an agreement ("Sales Agreement") to sell the net assets of
the Company including the Combined Systems but excluding the Philadelphia
Systems to Charter Communications Holdings, LLC.
Significant intercompany accounts and transactions between the Combined
Systems have been eliminated in the combined financial statements. Significant
accounts and transactions with the Parent and other affiliates are disclosed as
related party transactions (See Note 7).
The Combined Systems primarily provide cable television services to
subscribers in central and western Massachusetts.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
PROPERTY AND EQUIPMENT
Maintenance and repair costs are expensed when incurred. For financial
reporting purposes, depreciation is provided on the straight-line method based
on the following estimated useful lives:
<TABLE>
<CAPTION>
CLASSIFICATION YEARS
-------------- -----
<S> <C>
Land improvements........................................ 20
Buildings................................................ 15-40
Furniture, fixtures and equipment........................ 3-15
Trunk and distribution systems........................... 7-12
</TABLE>
INTANGIBLE ASSETS
Intangible assets consist primarily of goodwill amortized over forty years
and costs incurred in obtaining and renewing cable franchises which are
amortized over the life of the respective franchise agreements.
F-100
<PAGE> 285
GREATER MEDIA CABLEVISION SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
REVENUES
Cable revenues from basic and premium services are recognized when the
related services are provided.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
QUARTERLY RESULTS
The financial statements included herein as of December 31, 1998 and for
the three months ended December 31, 1998 and 1997 have been prepared by the
Company without audit. In the opinion of management, all adjustments have been
made which are of a normal recurring nature necessary to present fairly the
Combined Systems' financial position as of December 31, 1998 and the results of
operations, changes in net assets and cash flows for the three months ended
December 31, 1998 and 1997. Certain information and footnote disclosures have
been condensed or omitted for these periods. The results for interim periods are
not necessarily indicative of results for the entire year.
2. PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid and other current assets consist of the following at September 30:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Franchise grant.................................. $1,445 $ 604
Corporate business tax........................... 1,015 882
Other............................................ 286 463
------ ------
Prepaid expenses and other current assets........ $2,746 $1,949
====== ======
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at September 30:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Land and land improvements................... $ 1,229 $ 1,134
Buildings.................................... 4,521 4,521
Furniture, fixtures and equipment............ 5,503 4,822
Trunk and distribution systems............... 109,253 97,042
Construction in progress..................... 9,026 4,450
-------- --------
129,532 111,969
Accumulated depreciation..................... 75,064 69,998
-------- --------
Property and equipment, net.................. $ 54,468 $ 41,971
======== ========
</TABLE>
F-101
<PAGE> 286
GREATER MEDIA CABLEVISION SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Depreciation expense for the years ended September 30, 1998, 1997 and 1996
was $8,081, $7,337, and $7,314, respectively. Construction in progress results
primarily from costs to upgrade the systems to fiber optic technologies in the
areas served by the Combined Systems.
4. INTANGIBLE ASSETS
Intangible assets consist of the following at September 30:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Franchise agreements............................. $3,230 $2,883
Customer lists................................... 1,751 1,751
Organization expenses............................ 146 146
Goodwill......................................... 2,260 1,510
Covenant not to compete.......................... 40 40
------ ------
7,427 6,330
Accumulated amortization......................... 4,737 4,683
------ ------
Intangible assets, net........................... $2,690 $1,647
====== ======
</TABLE>
Amortization expense for the years ended September 30, 1998, 1997 and 1996
was $102, $31 and $39, respectively.
5. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following at September
30:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Accounts payable................................. $4,733 $3,544
Rate refund liability............................ 923 481
Programming expenses............................. 586 557
Other............................................ 883 717
------ ------
$7,125 $5,299
====== ======
</TABLE>
6. INCOME TAXES
The Combined Systems are included in the consolidated federal income tax
return of the Parent. However, the Parent is responsible for tax payments
applicable to the Combined Systems. The combined financial statements reflect a
provision in lieu of income taxes as if the combined systems were filing on a
separate company basis. Accordingly, the Combined Systems have included the
provision in lieu of income taxes as a component of net assets for all periods
presented.
The provision in lieu of income taxes approximates the amount of tax
computed using U.S. statutory rates, after reflecting state income tax expense
of $2,053, $1,924 and $1,486, for 1998, 1997 and 1996, respectively.
F-102
<PAGE> 287
GREATER MEDIA CABLEVISION SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
As the Sales Agreement represents a sale of assets, Charter Communications
Holdings, LLC will have new tax basis in the Combined Systems' assets and
liabilities acquired.
7. RELATED PARTY TRANSACTIONS
The Company and each of its subsidiaries are guarantors of the Parent
Company's debt.
The combined statements include the charge for certain corporate expenses
incurred by the Parent on behalf of the Combined Systems. Such charges amounted
to $3,888, $3,696, and $3,365 for the three years ended September 30, 1998, 1997
and 1996. Management believes that these costs are reasonable and reflect costs
of doing business that the Combined Systems would have incurred on a stand-alone
basis.
The Combined Systems charge an affiliate interest on certain balances,
aggregating $15,000 per year, at an annual rate of 12%. Interest income on such
balances amounted to $1,800 for each of the three years in the period ended
September 30, 1998. In addition, the Combined Systems are required to pay the
Parent interest on certain balances, at an annual rate of 12%. Interest expense
on such balances amounted to $2,340 for each of these years in the period ended
September 30, 1998, all which were due during the periods presented. The amounts
described above and certain non-interest bearing amounts due affiliates are
included in Net Assets in the Combined Systems balance sheet. As a result of the
Sales Agreement, such amounts will be assumed by the Parent. The interest income
and expense have been netted in the accompanying statement of operations.
8. EMPLOYEE BENEFIT PLAN
401(k) PLAN
The Combined Systems' employees participate in the Greater Media, Inc.
401(k) Plan (the "401(k) Plan"). Employees that qualify for participation can
contribute up to 12% of their salary, on a before tax basis, subject to a
maximum contribution limit as determined by the Internal Revenue Service. The
Parent contributes an amount equal to 50% of the participant's contribution,
limited to the lessor of 3% of the participant's compensation or $1 per year.
The Combined Systems expense relating to the 401(k) Plan was $140, $127,
and $96 in 1998, 1997, and 1996, respectively.
PENSION
Employees of the Combined Systems participate in a pension plan sponsored
by the Parent. The Combined Systems allocable share of the pension expense
amounted to $105, $204 and $217 during the years ended September 30, 1998, 1997
and 1996, respectively. As a result of the Sales Agreement, the Combined
Systems' employees will be fully vested with respect to their plan benefits,
although no additional benefits will accrue to such employees in the future. In
addition, the Parent will be responsible for the allocable pension liability
($838 at September 30, 1998) and will continue to administer the plan on behalf
of the Combined Systems' employees after the sale is consummated.
F-103
<PAGE> 288
GREATER MEDIA CABLEVISION SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
9. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases certain facilities and equipment under noncancellable
operating leases. Leases and rental costs charged to expense for the years ended
September 30, 1998, 1997 and 1996, was $2,124, $2,133 and $1,636, respectively.
Rent expense incurred under leases for the years ended September 30, 1998, 1997
and 1996, was $678, $665 and $660, respectively. Future minimum lease payments
are as follows:
<TABLE>
<S> <C>
1999........................................ $ 690
2000........................................ 618
2001........................................ 524
2002........................................ 402
2003........................................ 396
Thereafter.................................. 3,267
</TABLE>
The Company also rents utility poles in its operations. Generally, pole
rentals are cancelable on short notice, but the Company anticipates that such
rentals will recur. Rent expense incurred for pole rental attachments for the
years ended September 30, 1998, 1997 and 1996, was $1,008, $840 and $578,
respectively.
LITIGATION
The Company is party to lawsuits that arise in the ordinary course of
conducting its business. In the opinion of management, after consulting with
legal counsel, the outcome of these lawsuits will not have a material adverse
effect on the Company's combined financial position or results of operations.
REGULATION IN THE CABLE TELEVISION INDUSTRY
The cable television industry is subject to extensive regulation at the
federal, local and, in some instances, state levels. The Cable Communications
Policy Act of 1984 (the "1984 Cable Act"), the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act" and together with
the 1984 Cable Act, the "Cable Acts"), and the Telecommunications Act of 1996
(the "1996 Telecom Act"), establish a national policy to guide the development
and regulation of cable television systems. The Federal Communications
Commission (FCC) has principal responsibility for implementing the policies of
the Cable Acts. Many aspects of such regulation are currently the subject of
judicial proceedings and administrative or legislative proposals. Legislation
and regulations continue to change, and the Company cannot predict the impact of
future developments on the cable television industry.
The 1992 Cable Act and the FCC's rules implementing that act generally have
increased the administrative and operational expenses of cable television
systems and have resulted in additional regulatory oversight by the FCC and
local or state franchise authorities. The Cable Acts and the corresponding FCC
regulations have established rate regulations.
F-104
<PAGE> 289
GREATER MEDIA CABLEVISION SYSTEMS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The 1992 Cable Act permits certified local franchising authorities to order
refunds of basic service tier rates paid in the previous twelve-month period
determined to be in excess of the maximum permitted rates. The Company may be
required to refund additional amounts in the future.
The Combined Systems believe that they have complied in all material
respects with the provisions of the 1992 Cable Act, including the rate setting
provisions promulgated by the FCC. However, in jurisdictions that have chosen
not to certify, refunds covering the previous twelve-month period may be ordered
upon certification if a company is unable to justify its basic rates. The
Combined Systems are unable to estimate at this time the amount of refunds, if
any, that may be payable by the Combined Systems in the event certain of its
rates are successfully challenged by franchising authorities or found to be
unreasonable by the FCC. The Combined Systems do not believe that the amount of
any such refunds would have a material adverse effect on their financial
position or results of operations.
The 1996 Telecom Act, among other things, immediately deregulated the rates
for certain small cable operators and in certain limited circumstances rates on
the basic service tier, and as of March 31, 1999, deregulates rates on the cable
programming service tier (CPST). The FCC is currently developing permanent
regulations to implement the rate deregulation provisions of the 1996 Telecom
Act. The Combined Systems cannot predict the ultimate effect of the 1996 Telecom
Act on their financial position or results of operations.
The FCC may further restrict the ability of cable television operators to
implement rate increases or the United States Congress may enact legislation
that could delay or suspend the scheduled March 1999 termination of CPST rate
regulation. This continued rate regulation, if adopted, could limit the rates
charged by the Combined Systems.
A number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. State governmental agencies are
required to follow FCC rules when prescribing rate regulation, and thus, state
regulation of cable television rates is not allowed to be more restrictive than
the federal or local regulation. The Combined Systems are subject to state
regulation in Massachusetts.
F-105
<PAGE> 290
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
Renaissance Media Group LLC
We have audited the accompanying consolidated balance sheet of Renaissance
Media Group LLC as of December 31, 1998 and the related consolidated statements
of operations, changes in members' equity, and cash flows for the year ended
December 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Renaissance
Media Group LLC at December 31, 1998, and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
February 22, 1999
except for Note 11, as to which
the date is February 24, 1999
F-106
<PAGE> 291
RENAISSANCE MEDIA GROUP LLC
CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 8,482
Accounts receivable -- trade (less allowance for doubtful
accounts of $92).......................................... 726
Accounts receivable -- other................................ 584
Prepaid expenses and other assets........................... 340
Escrow deposit.............................................. 150
Investment in cable television systems:
Property, plant and equipment............................. 71,246
Less: Accumulated depreciation............................ (7,294)
--------
63,952
--------
Cable television franchises............................... 236,489
Less: Accumulated amortization............................ (11,473)
--------
225,016
--------
Intangible assets......................................... 17,559
Less: Accumulated amortization............................ (1,059)
--------
16,500
--------
Total investment in cable television systems......... 305,468
--------
Total assets...................................... $315,750
========
LIABILITIES AND MEMBERS' EQUITY
Accounts payable............................................ $ 2,042
Accrued expenses(a)......................................... 6,670
Subscriber advance payments and deposits.................... 608
Deferred marketing support.................................. 800
Advances from Holdings...................................... 135
Debt........................................................ 209,874
--------
Total Liabilities................................. 220,129
--------
Members' Equity:
Paid in capital............................................. 108,600
Accumulated deficit......................................... (12,979)
--------
Total members' equity................................ 95,621
--------
Total liabilities and members' equity............. $315,750
========
</TABLE>
- ---------------
(a) includes accrued costs from transactions with affiliated companies of $921.
See accompanying notes to financial statements.
F-107
<PAGE> 292
RENAISSANCE MEDIA GROUP LLC
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES.................................................... $ 41,524
--------
COSTS & EXPENSES
Service Costs(a).......................................... 13,326
Selling, General & Administrative......................... 7,711
Depreciation & Amortization............................... 19,107
--------
Operating Income....................................... 1,380
Interest Income........................................ 158
Interest (Expense) (b)................................. (14,358)
--------
(Loss) Before Provision for Taxes...................... (12,820)
Provision for Taxes.................................... 135
--------
Net (Loss)............................................. $(12,955)
========
</TABLE>
- ---------------
(a) includes costs from transactions with affiliated companies of $7,523.
(b) includes $676 of amortization of deferred financing costs.
See accompanying notes to financial statements.
F-108
<PAGE> 293
RENAISSANCE MEDIA GROUP LLC
CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PAID TOTAL
IN ACCUMULATED MEMBER'S
CAPITAL (DEFICIT) EQUITY
------- ----------- --------
<S> <C> <C> <C>
Contributed Members' Equity -- Renaissance Media
Holdings LLC and Renaissance Media LLC......... $ 15,000 $ (24) $14,976
Additional capital contributions................. 93,600 -- 93,600
Net (Loss)....................................... -- (12,955) (12,955)
-------- -------- -------
Balance December 31, 1998........................ $108,600 $(12,979) $95,621
======== ======== =======
</TABLE>
See accompanying notes to financial statements.
F-109
<PAGE> 294
RENAISSANCE MEDIA GROUP LLC
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES:
Net (loss).................................................. $(12,955)
Adjustments to non-cash and non-operating items:
Depreciation and amortization............................. 19,107
Accretion on Senior Discount Notes........................ 7,363
Other non-cash charges.................................... 730
Changes in operating assets and liabilities:
Accounts receivable -- trade, net...................... (726)
Accounts receivable -- other........................... (584)
Prepaid expenses and other assets...................... (338)
Accounts payable....................................... 2,031
Accrued expenses....................................... 6,660
Subscriber advance payments and deposits............... 608
Deferred marketing support............................. 800
--------
Net cash provided by operating activities................... 22,696
--------
INVESTING ACTIVITIES:
Purchased cable television systems:
Property, plant and equipment.......................... (65,580)
Cable television franchises............................ (235,412)
Cash paid in excess of identifiable assets............. (8,608)
Escrow deposit............................................ (150)
Capital expenditures...................................... (5,683)
Cable television franchises............................... (1,077)
Other intangible assets................................... (526)
--------
Net cash (used in) investing activities..................... (317,036)
--------
FINANCING ACTIVITIES:
Debt acquisition costs.................................... (8,323)
Principal repayments on bank debt......................... (7,500)
Advances from Holdings.................................... 33
Proceeds from bank debt................................... 110,000
Proceeds from 10% Senior Discount Notes................... 100,012
Capital contributions..................................... 108,600
--------
Net cash provided by financing activities................... 302,822
--------
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 8,482
CASH AND CASH EQUIVALENTS AT DECEMBER 31, 1997.............. --
--------
CASH AND CASH EQUIVALENTS AT DECEMBER 31, 1998.............. $ 8,482
========
SUPPLEMENTAL DISCLOSURES:
INTEREST PAID............................................. $ 4,639
========
</TABLE>
See accompanying notes to financial statements.
F-110
<PAGE> 295
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
1. ORGANIZATION AND BASIS OF PRESENTATION
Renaissance Media Group LLC ("Group") was formed on March 13, 1998 by
Renaissance Media Holdings LLC ("Holdings"). Holdings is owned by Morgan Stanley
Capital Partners III, L.P. ("MSCP III"), Morgan Stanley Capital Investors, L.P.
("MSCI"), MSCP III 892 Investors, L.P. ("MSCP Investors" and, collectively, with
its affiliates, MSCP III and MSCI and their respective affiliates, the "Morgan
Stanley Entities"), Time Warner and the Management Investors. On March 20, 1998,
Holdings contributed to Group its membership interests in two wholly-owned
subsidiaries; Renaissance Media (Louisiana) LLC ("Louisiana") and Renaissance
Media (Tennessee) LLC ("Tennessee"), which were formed on January 7, 1998.
Louisiana and Tennessee acquired a 76% interest and 24% interest, respectively,
in Renaissance Media LLC ("Media") from Morgan Stanley Capital Partners III,
Inc. ("MSCP"), on February 13, 1998 through an acquisition of entities under
common control accounted for as if it were a pooling of interests. As a result,
Media became a subsidiary of Group and Holdings. Group and its aforementioned
subsidiaries are collectively referred to as the "Company". On April 9, 1998,
the Company acquired (the "Acquisition") six cable television systems (the
"Systems") from TWI Cable, Inc. ("TWI Cable"), a subsidiary of Time Warner Inc.
("Time Warner"). See Note 3. Prior to this Acquisition, the Company had no
operations other than start-up related activities.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NEW ACCOUNTING STANDARDS
During fiscal 1998, the Financial Accounting Standards Board ("FASB")
issued Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133").
FAS 133 provides a comprehensive and consistent standard for the
recognition and measurement of derivatives and hedging activities. The Company
will adopt FAS 133 as of January 1, 2000. The impact of the adoption on the
Company's consolidated financial statements is not expected to be material.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts
of the Company and its wholly owned subsidiaries. Significant intercompany
accounts and transactions have been eliminated.
CONCENTRATION OF CREDIT RISK
A significant portion of the customer base is concentrated within the local
geographical area of each of the individual cable television systems. The
Company generally extends credit to customers and the ultimate collection of
accounts receivable could be affected by the local economy. Management performs
continuous credit evaluations of its customers and may require cash in advance
or other special arrangements from certain customers. Management does not
believe that there is any significant credit risk which could have a material
effect on the Company's financial condition.
F-111
<PAGE> 296
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
REVENUE AND COSTS
Subscriber fees are recorded as revenue in the period the related services
are provided and advertising revenues are recognized in the period the related
advertisements are exhibited. Rights to exhibit programming are purchased from
various cable networks. The costs of such rights are generally expensed as the
related services are made available to subscribers.
ADVERTISING COSTS
Advertising costs are expensed upon the first exhibition of the related
advertisements. Advertising expense amounted to $491 in 1998.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and investments in short-term,
highly liquid securities, which have maturities when purchased of three months
or less.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at purchased and capitalized
cost. Capitalized internal costs principally, consist of employee costs and
interest on funds borrowed during construction. Capitalized labor, materials and
associated overhead amounted to approximately $1,429 in 1998. Replacements,
renewals and improvements to installed cable plant are capitalized. Maintenance
and repairs are charged to expense as incurred. Depreciation expense for the
year ended December 31, 1998 amounted to $7,314. Property, plant and equipment
is depreciated using the straight-line method over the following estimated
service lives:
<TABLE>
<S> <C>
Buildings and leasehold improvements........................ 5 - 30 years
Cable systems, equipment and subscriber devices............. 5 - 30 years
Transportation equipment.................................... 3 - 5 years
Furniture, fixtures and office equipment.................... 5 - 10 years
</TABLE>
Property, plant and equipment at December 31, 1998 consisted of:
<TABLE>
<S> <C>
Land...................................................... $ 432
Buildings and leasehold improvements...................... 1,347
Cable systems, equipment and subscriber devices........... 62,740
Transportation equipment.................................. 2,181
Furniture, Fixtures and office equipment.................. 904
Construction in progress.................................. 3,642
-------
71,246
Less: accumulated depreciation.............................. (7,294)
-------
Total............................................. $63,952
=======
</TABLE>
F-112
<PAGE> 297
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
CABLE TELEVISION FRANCHISES AND INTANGIBLE ASSETS
Cable television franchise costs include the assigned fair value, at the
date of acquisition, of the franchises from purchased cable television systems.
Intangible assets include goodwill, deferred financing and other intangible
assets. Cable television franchises and intangible assets are amortized using
the straight-line method over the following estimated useful lives:
<TABLE>
<S> <C>
Cable television franchises................................. 15 years
Goodwill.................................................... 25 years
Deferred financing and other intangible assets.............. 2 - 10 years
</TABLE>
Intangible assets at December 31, 1998 consisted of:
<TABLE>
<S> <C>
Goodwill.................................................... $ 8,608
Deferred Financing Costs.................................... 8,323
Other intangible assets..................................... 628
-------
17,559
Less: accumulated amortization.............................. (1,059)
-------
Total............................................. $16,500
=======
</TABLE>
The Company periodically reviews the carrying value of its long-lived
assets, including property, plant and equipment, cable television franchises and
intangible assets, whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. To the extent the estimated future cash
inflows attributable to the asset, less estimated future cash outflows, is less
than the carrying amount, an impairment loss is recognized to the extent that
the carrying value of such asset is greater than its fair value.
ESTIMATES USED IN FINANCIAL STATEMENT PRESENTATION
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, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
3. ACQUISITIONS
TWI CABLE
On April 9, 1998, the Company acquired six cable television systems from
TWI Cable. The systems are clustered in southern Louisiana, western Mississippi
and western Tennessee. This Acquisition represented the first acquisition by the
Company. The purchase price for the systems was $309,500 which was paid as
follows: TWI Cable received $300,000 in cash, inclusive of an escrow deposit of
$15,000, and a $9,500 (9,500 units) equity interest in Renaissance Media
Holdings LLC, the parent company of Group. In addition to the purchase price,
the Company incurred approximately $1,385 in transaction costs, exclusive of
financing costs.
F-113
<PAGE> 298
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
The Acquisition was accounted for using the purchase method and,
accordingly, results of operations are reported from the date of the Acquisition
(April 9, 1998). The excess of the purchase price over the estimated fair value
of the tangible assets acquired has been allocated to cable television
franchises and goodwill in the amount of $235,387 and $8,608, respectively.
DEFFNER CABLE
On August 31, 1998, the Company acquired the assets of Deffner Cable, a
cable television company located in Gadsden, Tennessee. The purchase price was
$100 and was accounted for using the purchase method. The allocation of the
purchase price is subject to change, although management does not believe that
any material adjustment to such allocation is expected.
BAYOU VISION, INC.
On February 3, 1999, Media acquired the cable television assets of Bayou
Vision, Inc. and Gulf South Cable, Inc. serving approximately 1,950 subscribers
in the Villages of Estherwood, Morse and Mermentau and Acadia and Livingston
Parish, Louisiana. The cash purchase price was approximately $2,700 and was paid
out of available Company funds.
Unaudited Pro Forma summarized results of operations for the Company for
the year ended December 31, 1998 and 1997, assuming the Acquisition, Notes (as
hereinafter defined) offering and Credit Agreement (as hereinafter defined) had
been consummated on January 1, 1998 and 1997, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
1997 1998
---- ----
<S> <C> <C>
Revenues............................................. $ 50,987 $ 56,745
Expenses............................................. 53,022 55,210
-------- --------
Operating (loss) income.............................. (2,035) 1,535
Interest expense and other expenses.................. (19,740) (19,699)
-------- --------
Net (Loss)........................................... $(21,775) $(18,164)
======== ========
</TABLE>
4. DEBT
As of December 31, 1998, debt consisted of:
<TABLE>
<S> <C>
10.00% Senior Discount Notes at Accreted Value(a)........... $107,374
Credit Agreement(b)......................................... 102,500
--------
$209,874
========
</TABLE>
(a) On April 9, 1998, in connection with the Acquisition described in Note
3, the Company issued $163,175 principal amount at maturity, $100,012 initial
accreted value, of 10.00% senior discount notes due 2008 ("Notes"). The Notes
pay no interest until April 15, 2003. From and after April 15, 2003 the Notes
will bear interest, payable semi-
F-114
<PAGE> 299
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
annually in cash, at a rate of 10% per annum on April 15 and October 15 of each
year, commencing October 15, 2003. The Notes are due on April 15, 2008.
(b) On April 9, 1998, Renaissance Media entered into a credit agreement
among Morgan Stanley & Co. Incorporated as Placement Agent, Morgan Stanley
Senior Funding Inc., as Syndication Agent, the Lenders, CIBC Inc., as
Documentation Agent and Bankers Trust Company as Administrative Agent (the
"Credit Agreement"). The aggregate commitments under the Credit Agreement total
$150,000, consisting of a $40,000 revolver, $60,000 Tranche A Term Loans and
$50,000 Tranche B Term Loans (collectively the "Term Loans"). The revolving
credit and term loans are collateralized by a first lien position on all present
and future assets and the member's interest of Media, Louisiana and Tennessee.
The Credit Agreement provides for interest at varying rates based upon various
borrowing options and the attainment of certain financial ratios and for
commitment fees of 1/2% on the unused portion of the revolver. The effective
interest rate, including commitment fees and amortization of related deferred
financing costs and the interest-rate cap, for the year ended December 31, 1998
was 8.82%.
On April 9, 1998, $110,000 was borrowed under the Credit Agreement's
Tranche A and B Term Loans. On June 23, 1998, $7,500 was repaid resulting in
$102,500 of outstanding Tranche A and B Term Loans as of December 31, 1998.
As of December 31, 1998, the Company had unrestricted use of the $40,000
revolver. No borrowings had been made by the Company under the revolver through
that date.
Annual maturities of borrowings under the Credit Agreement for the years
ending December 31 are as follows:
<TABLE>
<S> <C>
1999........................................................ $ 776
2000........................................................ 1,035
2001........................................................ 2,701
2002........................................................ 9,506
2003........................................................ 11,590
2004........................................................ 11,590
Thereafter.................................................. 65,302
--------
102,500
Less: Current portion....................................... (776)
--------
$101,724
========
</TABLE>
The Credit Agreement and the Indenture pursuant to which the Notes were
issued contain restrictive covenants on the Company and subsidiaries regarding
additional indebtedness, investment guarantees, loans, acquisitions, dividends
and merger or sale of the subsidiaries and require the maintenance of certain
financial ratios.
Total interest cost incurred for the year ended December 31, 1998,
including commitment fees and amortization of deferred financing and
interest-rate cap costs was $14,358, net of capitalized interest of $42.
F-115
<PAGE> 300
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
5. INTEREST RATE-CAP AGREEMENT
The Company purchases interest-rate cap agreements that are designed to
limit its exposure to increasing interest rates and are designated to its
floating rate debt. The strike price of these agreements exceeds the current
market levels at the time they are entered into. The interest rate indices
specified by the agreements have been and are expected to be highly correlated
with the interest rates the Company incurs on its floating rate debt. Payments
to be received as a result of the specified interest rate index exceeding the
strike price are accrued in other assets and are recognized as a reduction of
interest expense (the accrual accounting method). The cost of these agreements
is included in other assets and amortized to interest expense ratably during the
life of the agreement. Upon termination of an interest-rate cap agreement, any
gain is deferred in other liabilities and amortized over the remaining term of
the original contractual life of the agreement as a reduction of interest
expense.
On December 1, 1997, the Company purchased an interest-rate cap agreement
from Morgan Stanley Capital Services Inc. The carrying value as of December 31,
1998 was $47. The fair value of the interest-rate cap, which is based upon the
estimated amount that the Company would receive or pay to terminate the cap
agreement as of December 31, 1998, taking into consideration current interest
rates and the credit worthiness of the counterparties, approximates its carrying
value.
The following table summarizes the interest-rate cap agreement:
<TABLE>
<CAPTION>
NOTIONAL INITIAL
PRINCIPAL EFFECTIVE TERMINATION CONTRACT FIXED RATE
AMOUNT TERM DATE DATE COST (PAY RATE)
- --------- ---- --------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
$100,000 2 years 12/1/97 12/1/99 $100 7.25%
</TABLE>
6. TAXES
For the year ended December 31, 1998, the provision for income taxes has
been calculated on a separate company basis. The components of the provision for
income taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1998
-----------------
<S> <C>
Federal:
Current.................................................. $ --
Deferred................................................. --
State:
Current.................................................. 135
Deferred................................................. --
----
Provision for income taxes............................ $135
====
</TABLE>
The Company's current state tax liability results from its obligation to
pay franchise tax in Tennessee and Mississippi and tax on capital in New York.
F-116
<PAGE> 301
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
The Company has a net operating loss ("NOL") carryforward for income tax
purposes which is available to offset future taxable income. This NOL totals
approximately $14,900 and expires in the year 2018. The Company has established
a valuation allowance to offset the entire potential future tax benefit of the
NOL carryforward and, therefore, has recognized no deferred tax asset with
respect to the NOL.
Louisiana and Tennessee have elected to be treated as corporations for
federal income tax purposes and have not recorded any tax benefit for their
losses as the realization of theses losses by reducing future taxable income in
the carry forward period is uncertain at this time.
7. RELATED PARTY TRANSACTIONS
(a) TRANSACTIONS WITH MORGAN STANLEY ENTITIES
In connection with the Acquisition, Media entered into the Credit Agreement
with Morgan Stanley Senior Funding Inc. and Morgan Stanley & Co. Incorporated
acted as the Placement Agent for the Notes. In connection with these services
the Morgan Stanley Entities received customary fees and expense reimbursement.
(b) TRANSACTIONS WITH TIME WARNER AND RELATED PARTIES
In connection with the Acquisition, Media entered into an agreement with
Time Warner, pursuant to which Time Warner manages the Company's programming in
exchange for providing the Company access to certain Time Warner programming
arrangements.
(c) Transactions with Management
Prior to the consummation of the Acquisition described in Note 3, Media
paid fees in 1998 to six senior executives of the Company who are investors in
the Company (the "Management Investors") for services rendered prior to their
employment by Media relating to the Acquisition and the Credit Agreement. These
fees totaled $287 and were recorded as transaction and financing costs.
(d) DUE TO MANAGEMENT INVESTORS
Prior to the formation of the Company, the Management Investors advanced
$1,000 to Holdings, which was used primarily for working capital purposes. Upon
formation of the Company, Holdings contributed certain assets and liabilities to
Group and the $1,000 advance from the Management Investors was recorded as paid
in capital.
(e) TRANSACTIONS WITH BOARD MEMBER
The Company has utilized the law firm of one of its board members for legal
services for the Acquisition, financing agreements and various ongoing legal
matters. These fees totaled approximately $1,348 for the year ended December 31,
1998.
F-117
<PAGE> 302
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
8. ACCRUED EXPENSES
Accrued expenses as of December 31, 1998 consist of the following:
<TABLE>
<S> <C>
Accrued programming costs................................... $1,986
Accrued interest............................................ 1,671
Accrued franchise fees...................................... 1,022
Accrued legal and professional fees,........................ 254
Accrued salaries, wages and benefits........................ 570
Accrued property and sales tax.............................. 637
Other accrued expenses...................................... 530
------
$6,670
======
</TABLE>
9. EMPLOYEE BENEFIT PLAN
Effective April 9, 1998, the Company began sponsoring a defined
contribution plan which covers substantially all employees (the "Plan"). The
Plan provides for contributions from eligible employees up to 15% of their
compensation. The Company's contribution to the Plan is limited to 50% of each
eligible employee's contribution up to 10% of his or her compensation. The
Company has the right in any year to set the amount of the Company's
contribution percentage. Company matching contributions to the Plan for the year
ended December 31, 1998 were approximately $97. All participant contributions
and earnings are fully vested upon contribution and company contributions and
earnings vest 20% per year of employment with the Company, becoming fully vested
after five years.
10. COMMITMENTS AND CONTINGENCIES
(a) LEASES
The Company had rental expense under various lease and rental agreements
primarily for offices, tower sites and warehouses of approximately $125 in 1998.
In addition, the Company rents utility poles in its operations generally under
short term arrangements, but the Company expects these arrangements to recur.
Total rent expense for utility poles was approximately $620 in 1998. Future
minimum annual rental payments under noncancellable leases are as follows:
<TABLE>
<S> <C>
1999...................................... $162
2000...................................... 38
2001...................................... 24
2002...................................... 20
2003 and thereafter....................... 66
----
Total................................ $310
====
</TABLE>
(b) EMPLOYMENT AGREEMENTS
Media has entered into employment agreements with six senior executives who
are also investors in Holdings. Under the conditions of five of the agreements
the employment term is five years, expiring in April 2003 and requires Media to
continue salary payments
F-118
<PAGE> 303
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
(including any bonus) through the term if the executive's employment is
terminated by Media without cause, as defined in the employment agreement.
Media's obligations under the employment agreements may be reduced in certain
situations based on actual operating performance relative to the business plan,
death or disability or by actions of the other senior executives.
The employment agreement for one senior executive has a term of one year
and may be renewed annually. This agreement has been renewed through April 8,
2000.
(c) OTHER AGREEMENTS
In exchange for certain flexibility in establishing cable rate pricing
structures for regulated services that went into effect on January 1, 1996, Time
Warner agreed with the Federal Communications Commission ("FCC") to invest in
certain upgrades to its cable infrastructure (consisting primarily of materials
and labor in connection with the plant upgrades up to 750 megahertz) by 1999
(approximately $23 million). This agreement with the FCC has been assumed by the
Company as part of the Acquisition.
11. SUBSEQUENT EVENT
On February 23, 1999, Holdings entered into an agreement with Charter
Communications, LLC and Charter Communications, Inc., to sell 100% of its
members' equity in the Company for approximately $459,000, subject to certain
closing conditions. This transaction is expected to close during the third
quarter of 1999.
12. YEAR 2000 ISSUES (UNAUDITED)
The Company relies on computer systems, related software applications and
other control devices in operating and monitoring all major aspects of its
business, including, but not limited to, its financial systems (such as general
ledger, accounts payable, payroll and fixed asset modules), subscriber billing
systems, internal networks and telecommunications equipment. The Company also
relies, directly and indirectly, on the external systems of various independent
business enterprises, such as its suppliers and financial organizations, for the
accurate exchange of data.
The Company continues to assess the likely impact of Year 2000 issues on
its business operations, including its material information technology ("IT")
and non-IT applications. These material applications include all billing and
subscriber information systems, general ledger software, payroll systems,
accounting software, phone switches and certain headend applications, all of
which are third party supported.
The Company believes it has identified all systems that may be affected by
Year 2000 Issues. Concurrent with the identification phase, the Company is
securing compliance determinations relative to all identified systems. For those
systems that the Company believes are material, compliance programs have been
received or such systems have been certified by independent parities as Year
2000 compliant. For those material systems that are subject to compliance
programs, the Company expects to receive Year 2000 certifications from
independent parties by the second quarter 1999. Determinations of Year
F-119
<PAGE> 304
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1998
(ALL DOLLAR AMOUNTS IN THOUSANDS)
2000 compliance requirements for less mission critical systems are in progress
and are expected to be completed in the second quarter of 1999.
With respect to third parties with which the Company has a material
relationship, the Company believes its most significant relationships are with
financial institutions, who receive subscriber monthly payments and maintain
Company bank accounts, and subscriber billing and management systems providers.
We have received compliance programs which if executed as planned should provide
a high degree of assurance that all Year 2000 issues will be addressed by mid
1999.
The Company has not incurred any material Year 2000 costs to date, and
excluding the need for contingency plans, does not expect to incur any material
Year 2000 costs in the future because most of its applications are maintained by
third parties who have borne Year 2000 compliance costs.
The Company cannot be certain that it or third parties supporting its
systems have resolved or will resolve all Year 2000 issues in a timely manner.
Failure by the Company or any such third party to successfully address the
relevant Year 2000 issues could result in disruptions of the Company's business
and the incurrence of significant expenses by the Company. Additionally, the
Company could be affected by any disruption to third parties with which the
Company does business if such third parties have not successfully addressed
their Year 2000 issues.
Failure to resolve Year 2000 issues could result in improper billing to the
Company's subscribers which could have a major impact on the recording of
revenue and the collection of cash as well as create significant customer
dissatisfaction. In addition, failure on the part of the financial institutions
with which the Company relies on for its cash collection and management services
could also have a significant impact on collections, results of operations and
the liquidity of the Company.
The Company has not yet finalized contingency plans necessary to handle the
most likely worst case scenarios. Before concluding as to possible contingency
plans, the Company must determine whether the material service providers
contemplate having such plans in place. In the event that contingency plans from
material service providers are not in place or are deemed inadequate, management
expects to have such plans in place by the third quarter of 1999.
F-120
<PAGE> 305
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
TWI Cable, Inc.
We have audited the accompanying combined balance sheet of the Picayune MS,
Lafourche LA, St. Tammany LA, St. Landry LA, Pointe Coupee LA, and Jackson TN
cable television systems, (collectively, the "Combined Systems") included in TWI
Cable, Inc. ("TWI Cable"), as of April 8, 1998, and the related combined
statements of operations, changes in net assets and cash flows for the period
from January 1, 1998 through April 8, 1998. These combined financial statements
are the responsibility of the Combined Systems' management. Our responsibility
is to express an opinion on these combined financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Combined Systems, included in TWI Cable, at April 8, 1998, and the combined
results of their operations and their cash flows for the period from January 1,
1998 through April 8, 1998, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
New York, New York
February 22, 1999
F-121
<PAGE> 306
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
COMBINED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 8, 1998
-------------
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 7
Receivables, less allowance of $116......................... 576
Prepaid expenses and other assets........................... 438
Property, plant and equipment, net.......................... 35,992
Cable television franchises, net............................ 195,907
Goodwill and other intangibles, net......................... 50,023
--------
Total assets...................................... $282,943
========
LIABILITIES AND NET ASSETS
Accounts payable............................................ $ 63
Accrued programming expenses................................ 978
Accrued franchise fees...................................... 616
Subscriber advance payments and deposits.................... 593
Deferred income taxes....................................... 61,792
Other liabilities........................................... 747
--------
Total liabilities................................. 64,789
Total net assets.................................. 218,154
--------
Total liabilities and net assets.................. $282,943
========
</TABLE>
See accompanying notes to combined financial statements.
F-122
<PAGE> 307
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
COMBINED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
JANUARY 1, 1998
THROUGH
APRIL 8, 1998
---------------
<S> <C>
REVENUES.................................................... $15,221
COSTS AND EXPENSES:
Operating and programming................................... 3,603
Selling, general and administrative......................... 4,134
Depreciation and amortization............................... 5,031
(Gain) on disposal of fixed assets.......................... (96)
-------
Total costs and expenses.......................... 12,672
-------
Operating income............................................ 2,549
Provision for income taxes.................................. 1,191
-------
Net income.................................................. $ 1,358
=======
</TABLE>
See accompanying notes to combined financial statements.
F-123
<PAGE> 308
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
COMBINED STATEMENT OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<S> <C>
Balance at December 31, 1997................................ $224,546
Repayment of advances from Parent......................... (17,408)
Advances from Parent...................................... 9,658
Net income................................................ 1,358
--------
Balance at April 8, 1998.................................... $218,154
========
</TABLE>
See accompanying notes to combined financial statements.
F-124
<PAGE> 309
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
COMBINED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE
PERIOD FROM
JANUARY 1, 1998
THROUGH
APRIL 8, 1998
---------------
<S> <C>
OPERATING ACTIVITIES:
Net income.................................................. $ 1,358
Adjustments for noncash and nonoperating items:
Income tax expense........................................ 1,191
Depreciation and amortization............................. 5,031
(Gain) on disposal of fixed assets........................ (96)
Changes in operating assets and liabilities:
Receivables, prepaids and other assets................. 289
Accounts payable, accrued expenses and other
liabilities........................................... (770)
Other balance sheet changes............................ (4)
--------
Net cash provided by operations............................. 6,999
--------
INVESTING ACTIVITIES:
Capital expenditures........................................ (613)
--------
Net cash used in investing activities....................... (613)
--------
FINANCING ACTIVITIES:
Net repayment of advances from Parent....................... (7,750)
--------
Net cash (used in) financing activities..................... (7,750)
INCREASE IN CASH AND CASH EQUIVALENTS....................... (1,364)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 1,371
--------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 7
========
</TABLE>
See accompanying notes to combined financial statements.
F-125
<PAGE> 310
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The cable television systems operating in the metropolitan areas of
Picayune, Mississippi; Lafourche, Louisiana; St. Tammany, Louisiana; St. Landry,
Louisiana; Pointe Coupee, Louisiana; and Jackson, Tennessee (the "Combined
Systems") are principally engaged in the cable television business under
non-exclusive franchise agreements, which expire at various times beginning in
1999. The Combined Systems' operations consist primarily of selling video
programming which is distributed to subscribers for a monthly fee through a
network of coaxial and fiber-optic cables.
Prior to January 4, 1996, the Combined Systems were included in certain
subsidiaries of Cablevision Industries Corporation ("CVI"). On January 4, 1996,
CVI merged into a wholly owned subsidiary of Time Warner Inc. (the "CVI
Merger"). On October 1, 1996, Time Warner Inc. ("Time Warner") completed a
reorganization amongst certain of its wholly owned cable television subsidiaries
whereby CVI was renamed TWI Cable Inc. ("TWI Cable").
BASIS OF PRESENTATION
TWI Cable has sold the Combined Systems to Renaissance Media Holdings LLC
("Renaissance") pursuant to an Asset Purchase Agreement with Renaissance, dated
November 14, 1997 (see Note 8). Accordingly, the accompanying combined financial
statements of the Combined Systems reflect the "carved out" historical financial
position, results of operations, cash flows and changes in net assets of the
operations of the Combined Systems as if they had been operating as a separate
company. Effective as of January 1, 1996, the Combined Systems' financial
statements reflect the new basis of accounting arising from Time Warner's merger
with CVI. Based on Time Warner's allocation of the purchase price, the assets
and liabilities of the Combined Systems were revalued resulting in goodwill
allocated to the Combined Systems of approximately $52,971,000, which is being
amortized over its estimated life of 40 years. In addition, approximately
$220,981,000 was allocated to cable television franchises and other intangible
assets, which is being amortized over periods up to 20 years.
The combined statements have been adjusted to include the allocation of
certain corporate expenses incurred by Time Warner Cable and/or TWI Cable on the
Combined Systems' behalf, based upon the number of Combined System subscribers
managed by Time Warner Cable and the ratio of Combined System subscribers to
total TWI Cable subscribers, respectively. These allocations reflect all costs
of doing business that the Combined Systems would have incurred on a stand alone
basis as disclosed in Note 3. Management believes that these allocations are
reasonable.
BASIS OF COMBINATION
The combined financial statements include the assets, liabilities,
revenues, expenses, income, loss and cash flows of the Combined Systems, as if
the Combined Systems were a single company. Significant intercompany accounts
and transactions between the Combined
F-126
<PAGE> 311
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Systems have been eliminated. Significant accounts and transactions with Time
Warner and its affiliates are disclosed as related party transactions (see Note
3).
USE OF ESTIMATES
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the combined financial
statements and footnotes thereto. Actual results could differ from those
estimates.
CONCENTRATION OF CREDIT RISK
A significant portion of the customer base is concentrated within the local
geographical area of each of the individual cable television systems. The
Combined Systems generally extend credit to customers and the ultimate
collection of accounts receivable could be affected by the local economy.
Management performs continuous credit evaluations of its customers and may
require cash in advance or other special arrangements from certain customers.
Management does not believe that there is any significant credit risk which
could have a material effect on the financial condition of the Combined Systems.
REVENUE AND COSTS
Subscriber fees are recorded as revenue in the period the related services
are provided and advertising revenues are recognized in the period the related
advertisements are exhibited. Rights to exhibit programming are purchased from
various cable networks. The costs of such rights are generally expensed as the
related services are made available to subscribers.
FRANCHISE FEES
Local governmental authorities impose franchise fees on the cable
television systems owned by the Combined Systems ranging up to a federally
mandated maximum of 5.0% of gross revenues. On a monthly basis, such fees are
collected from the Combined Systems' customers and such fees are not included as
revenue or as a franchise fee expense.
ADVERTISING COSTS
Advertising costs are expensed upon the first exhibition of the related
advertisements. Advertising expense amounted to $105,000 for the period from
January 1, 1998 through April 8, 1998.
STATEMENT OF CASH FLOWS
The Combined Systems participate in a cash management system with
affiliates whereby cash receipts are transferred to a centralized bank account
from which centralized payments to various suppliers and creditors are made on
behalf of the Combined Systems. The excess of such cash receipts over payments
is included in net assets. Amounts shown
F-127
<PAGE> 312
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
as cash represent the Combined Systems' net cash receipts not transferred to the
centralized account as of December 31, 1996 and 1997. The average net
intercompany payable balances was $166,522,000 for the period from January 1,
1998 through April 8, 1998.
For purposes of this statement, cash and cash equivalents includes all
highly liquid investments purchased with original maturities of three months or
less.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Additions to property,
plant and equipment generally include material, labor, overhead and interest.
Depreciation is provided on the straight-line method over estimated useful lives
as follows:
<TABLE>
<S> <C>
Buildings and improvements........................... 5-20 years
Cable television equipment........................... 5-15 years
Furniture, fixtures and other equipment.............. 3-10 years
</TABLE>
Property, plant and equipment consist of:
<TABLE>
<CAPTION>
APRIL 8, 1998
-------------
(IN THOUSANDS)
<S> <C>
Land and buildings.................................. $ 2,255
Cable television equipment.......................... 40,276
Furniture, fixtures and other equipment............. 2,308
Construction in progress............................ 1,183
--------
46,022
Less accumulated depreciation....................... (10,030)
--------
Total..................................... $ 35,992
========
</TABLE>
INTANGIBLE ASSETS
The Combined Systems amortized goodwill over periods up to 40 years and
cable television franchises over periods up to 20 years, both using the
straight-line method. For the period from January 1, 1998 through April 8, 1998
amortization of goodwill amounted to $360,000 and amortization of cable
television franchises amounted to $3,008,000. Accumulated amortization of
intangible assets amounted to $28,114,000 at April 8, 1998.
IMPAIRMENT
Management separately reviews the carrying value of acquired long-lived
assets for each acquired entity on a quarterly basis to determine whether an
impairment may exist. Management considers relevant cash flow and profitability
information, including estimated future operating results, trends and other
available information, in assessing whether the carrying value of long-lived
assets can be recovered. Upon a determination that the carrying value of
long-lived assets will not be recovered from the undiscounted future cash flows
of the acquired business, the carrying value of such long-lived assets would be
considered impaired and would be reduced by a charge to operations in the amount
of the
F-128
<PAGE> 313
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
impairment. An impairment charge is measured as a deficiency in estimated
discounted future cash flows of the acquired business to recover the carrying
value related to the long-lived assets.
INCOME TAXES
Income taxes have been provided using the liability method prescribed by
FASB Statement No. 109, "Accounting for Income Taxes." Under the liability
method, deferred income taxes reflect tax carryforwards and the net tax effects
of temporary differences between the carrying amount of assets and liabilities
for financial statements and income tax purposes, as determined under enacted
tax laws and rates.
2. EMPLOYEE BENEFIT PLANS
Following the CVI Merger, the Combined Systems began participation in the
Time Warner Cable Pension Plan (the "Pension Plan"), a non-contributory defined
benefit pension plan, and the Time Warner Cable Employee Savings Plan (the
"Savings Plan") which are administered by a committee appointed by the Board of
Representatives of Time Warner Entertainment Company, L.P. ("TWE"), an affiliate
of Time Warner, and which cover substantially all employees.
Benefits under the Pension Plan are determined based on formulas which
reflect an employee's years of service and compensation levels during the
employment period. Pension expense for the period from January 1, 1998 through
April 8, 1998 totaled $61,000.
The Combined Systems' contributions to the Savings Plan are limited to
6.67% of an employee's eligible compensation during the plan year. The Board of
Representatives of TWE has the right in any year to set the maximum amount of
the Combined Systems' contribution. Defined contribution plan expense for the
period from January 1, 1998 through April 8, 1998 totaled $38,000.
The Combined Systems have no material obligations for other post retirement
benefits.
3. RELATED PARTIES
In the normal course of conducting business, the Combined Systems had
various transactions with Time Warner and its affiliates, generally on terms
resulting from a negotiation between the affected units that in management's
view resulted in reasonable allocations.
PROGRAMMING
Included in the Combined Systems' operating expenses are charges for
programming and promotional services provided by Home Box Office, Turner
Broadcasting System, Inc. and other affiliates of Time Warner. These charges are
based on customary rates and are in the ordinary course of business. These
charges totaled $1,164,000 for the period from January 1, 1998 through April 8,
1998. Accrued related party expenses for these
F-129
<PAGE> 314
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
programming and promotional services included in accrued programming expenses
approximated $409,000 for the period from January 1, 1998 through April 8, 1998.
MANAGEMENT FEES
TWI Cable entered into a management service arrangement with Time Warner
Cable ("TWC"), pursuant to which TWC is responsible for the management and
operation of TWI Cable, which includes the Combined Systems. The management fees
paid to TWC by TWI Cable are based on an allocation of the corporate expenses of
TWC's cable division in proportion to the respective number of subscribers of
all cable systems managed by TWC's cable division. The allocation of the TWI
Cable management fee to the Combined Systems approximated $486,000 for the
period from January 1, 1998 through April 8, 1998.
Other divisional expenses allocated to the Combined Systems approximated
$299,000 for the period from January 1, 1998 through April 8, 1998.
4. INTEREST EXPENSE
Prior to the CVI Merger, the Jackson, Tennessee system was included in
Cablevision Industries Limited Partnership and Combined Entities ("CILP"). The
Jackson system was charged interest expense in connection with CILP's (a) senior
and subordinated bank credit agreements; and (b) senior unsecured subordinated
Series A and Series B notes payable to CVI. The remaining five systems
comprising the Combined Systems were included in Cablevision Industries of the
Southeast, Inc. and Combined Entities ("CIOS"). These systems were charged
interest expense in connection with CIOS's (a) bank revolving credit agreement;
and (b) junior and senior subordinated debt to CVI.
5. INCOME TAXES
Effective January 4, 1996, the Combined Systems are included in the
consolidated federal income tax return of Time Warner. Prior to January 4, 1996,
the Combined Systems were included in the consolidated federal income tax return
of CVI. The provision for income taxes has been calculated on a separate company
basis. The components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
FROM JANUARY 1, 1998
THROUGH
APRIL 8, 1998
--------------------
(IN THOUSANDS)
<S> <C>
Federal:
Current........................................ $ --
Deferred....................................... 962
State:
Current........................................ --
Deferred....................................... 229
------
Net provision for income taxes.............. $1,191
======
</TABLE>
F-130
<PAGE> 315
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Combined Systems did not, and will not, have a tax sharing agreement
with either Time Warner, TWI Cable or CVI. Therefore, the Combined Systems have
not and will not be compensated for the utilization of the Combined Systems' tax
losses, by Time Warner, TWI Cable or CVI. In addition, the Combined Systems have
not and will not be required to make payments to either Time Warner or TWI Cable
for the current tax provision of the Combined Systems.
The differences between the income tax provision expected at the U.S.
federal statutory income tax rate and the total income tax provision are due to
nondeductible goodwill amortization and state taxes.
Significant components of the Combined Systems' deferred tax assets and
liabilities, as calculated on a separate company basis, are as follows:
<TABLE>
<CAPTION>
APRIL 8, 1998
-------------
(IN THOUSANDS)
<S> <C>
Deferred tax liabilities:
Amortization..................................... $57,817
Depreciation..................................... 4,181
-------
Total gross deferred tax liabilities..... 61,998
-------
Deferred tax assets:
Tax loss carryforwards........................... 160
Allowance for doubtful accounts.................. 46
-------
Total deferred tax assets................ 206
-------
Net deferred tax liability............... $61,792
=======
</TABLE>
On a separate company basis, the Combined Systems have tax loss
carryforwards of approximately $400,000 at April 8, 1998. However, if the
Combined Systems are acquired in an asset purchase, the tax loss carryforwards,
and net deferred tax liabilities relating to temporary differences will not
carry over to Renaissance (see Note 8).
6. COMMITMENTS AND CONTINGENCIES
The Combined Systems had rental expense of approximately $244,000 for the
period from January 1, 1998 through April 8, 1998 under various lease and rental
agreements for offices, utility poles, warehouses and computer equipment. Future
minimum annual rental payments under noncancellable leases will approximate
$1,000,000 annually over the next five years.
In exchange for certain flexibility in establishing cable rate pricing
structures for regulated services that went into effect on January 1, 1996, TWC
has agreed with the Federal Communications Commission ("FCC") to invest in
certain upgrades to its cable infrastructure (consisting primarily of materials
and labor in connection with the plant upgrades up to 750 megahertz) over the
next three years (approximately $25 million at December 31, 1997). This
agreement with the FCC, which extends to the Combined Systems, will be assumed
by Renaissance as it relates to the Combined Systems in accordance with the
Asset Purchase Agreement.
F-131
<PAGE> 316
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. OTHER LIABILITIES
Other liabilities consist of:
<TABLE>
<CAPTION>
APRIL 8, 1998
-------------
(IN THOUSANDS)
<S> <C>
Compensation........................................ $279
Data Processing Costs............................... 161
Sales and other taxes............................... 146
Copyright Fees...................................... 35
Pole Rent........................................... 93
Other............................................... 33
----
Total..................................... $747
====
</TABLE>
8. SUBSEQUENT EVENT
The sale of the Combined Systems, in connection with the Asset Purchase
Agreement with Renaissance, closed on April 9, 1998 at the purchase price of
$309,500,000.
F-132
<PAGE> 317
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors of
TWI Cable Inc.
We have audited the accompanying combined balance sheets of the Picayune
MS, Lafourche LA, St. Tammany LA, St. Landry LA, Pointe Coupee LA, and Jackson
TN cable television systems, (collectively, the "Combined Systems") included in
TWI Cable, Inc. ("TWI Cable"), as of December 31, 1996 and 1997, the related
combined statements of operations, changes in net assets and cash flows for the
years then ended. In addition, we have audited the combined statement of
operations and cash flows for the year ended December 31, 1995 of the
Predecessor Combined Systems. These combined financial statements are the
responsibility of the Combined Systems' or the Predecessor's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Combined
Systems, included in TWI Cable or the Predecessor, at December 31, 1996 and
1997, and the combined results of their operations and their cash flows for the
years ended December 31, 1995, 1996 and 1997, in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
New York, New York
March 16, 1998
F-133
<PAGE> 318
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
COMBINED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1996 1997
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 570 $ 1,371
Receivables, less allowance of $71 and $116 for the years
ended December 31, 1996 and 1997, respectively............ 794 1,120
Prepaid expenses and other assets........................... 45 183
Property, plant and equipment, net.......................... 36,966 36,944
Cable television franchises, net............................ 209,952 198,913
Goodwill and other intangibles, net......................... 51,722 50,383
-------- --------
Total assets...................................... $300,049 $288,914
======== ========
LIABILITIES AND NET ASSETS
Accounts payable............................................ $ 1,640 $ 652
Accrued programming expenses................................ 847 904
Accrued franchise fees...................................... 736 835
Subscriber advance payments and deposits.................... 66 407
Deferred income taxes....................................... 58,340 60,601
Other liabilities........................................... 945 969
-------- --------
Total liabilities................................. 62,574 64,368
Total net assets.................................. 237,475 224,546
-------- --------
Total liabilities and net assets.................. $300,049 $288,914
======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-134
<PAGE> 319
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995 1996 1997
---- ---- ----
(PREDECESSOR) (INCLUDED IN TWI CABLE INC.)
<S> <C> <C> <C>
REVENUES..................................... $43,549 $47,327 $50,987
COSTS AND EXPENSES:
Operating and programming.................... 13,010 12,413 12,101
Selling, general and administrative.......... 9,977 12,946 13,823
Depreciation and amortization................ 17,610 18,360 18,697
(Gain) loss on disposal of fixed assets...... -- (244) 620
------- ------- -------
Total costs and expenses........... 40,597 43,475 45,241
------- ------- -------
Operating income............................. 2,952 3,852 5,746
Interest expense............................. 11,871 -- --
------- ------- -------
(Loss) income before income tax (benefit)
expense.................................... (8,919) 3,852 5,746
Income tax (benefit) expense................. (3,567) 1,502 2,262
------- ------- -------
Net (loss) income............................ $(5,352) $ 2,350 $ 3,484
======= ======= =======
</TABLE>
See accompanying notes to combined financial statements.
F-135
<PAGE> 320
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
COMBINED STATEMENTS OF CHANGES IN NET ASSETS
(IN THOUSANDS)
<TABLE>
<S> <C>
Contribution by Parent...................................... $250,039
Repayment of advances from Parent......................... (47,895)
Advances from Parent...................................... 32,981
Net income................................................ 2,350
--------
Balance at December 31, 1996................................ 237,475
Repayment of advances from Parent......................... (50,661)
Advances from Parent...................................... 34,248
Net income................................................ 3,484
--------
Balance at December 31, 1997................................ $224,546
========
</TABLE>
See accompanying notes to combined financial statements.
F-136
<PAGE> 321
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1996 1997
---- ---- ----
(PREDECESSOR) (INCLUDED IN TWI CABLE INC.)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income............................... $(5,352) $ 2,350 $ 3,484
Adjustments for noncash and nonoperating
items:
Income tax (benefit) expense............... (3,567) 1,502 2,262
Depreciation and amortization.............. 17,610 18,360 18,697
(Gain) loss on disposal
of fixed assets.......................... -- (244) 620
Changes in operating assets and
liabilities:
Receivables, prepaids and other
assets................................ (196) 944 (464)
Accounts payable, accrued expenses and
other liabilities..................... (972) 176 (466)
Other balance sheet changes.............. -- -- (529)
------- --------- --------
Net cash provided by operations................. 7,523 23,088 23,604
INVESTING ACTIVITIES:
Purchase of Predecessor cable systems, net of
cash acquired................................. -- (249,473) --
Capital expenditures............................ (7,376) (8,170) (6,390)
------- --------- --------
Net cash used in investing activities........... (7,376) (257,643) (6,390)
FINANCING ACTIVITIES:
Advance from Parent for purchase of
Predecessor................................... -- 250,039 --
Net repayment of advances from Parent........... -- (14,914) (16,413)
------- --------- --------
Net cash provided by (used in) financing
activities.................................... -- 235,125 (16,413)
INCREASE IN CASH AND CASH EQUIVALENTS........... 147 570 801
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD........................................ 419 0 570
------- --------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...... $ 566 $ 570 $ 1,371
======= ========= ========
</TABLE>
See accompanying notes to combined financial statements.
F-137
<PAGE> 322
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The cable television systems operating in the metropolitan areas of
Picayune, Mississippi; Lafourche, Louisiana; St. Tammany, Louisiana; St. Landry,
Louisiana; Pointe Coupee, Louisiana; and Jackson, Tennessee (the "Combined
Systems") are principally engaged in the cable television business under
non-exclusive franchise agreements, which expire at various times beginning in
1999. The Combined Systems' operations consist primarily of selling video
programming which is distributed to subscribers for a monthly fee through a
network of coaxial and fiber-optic cables.
Prior to January 4, 1996, the Combined Systems were included in certain
subsidiaries of Cablevision Industries Corporation ("CVI"). On January 4, 1996,
CVI merged into a wholly owned subsidiary of Time Warner Inc. (the "CVI
Merger"). On October 1, 1996, Time Warner Inc. ("Time Warner") completed a
reorganization amongst certain of its wholly owned cable television subsidiaries
whereby CVI was renamed TWI Cable Inc. ("TWI Cable").
BASIS OF PRESENTATION
TWI Cable has committed to sell the Combined Systems to Renaissance Media
Holdings LLC ("Renaissance") pursuant to an Asset Purchase Agreement with
Renaissance, dated November 14, 1997. Accordingly, the accompanying combined
financial statements of the Combined Systems reflect the "carved out" historical
financial position, results of operations, cash flows and changes in net assets
of the operations of the Combined Systems as if they had been operating as a
separate company. Effective as of January 1, 1996, the Combined Systems'
financial statements reflect the new basis of accounting arising from Time
Warner's merger with CVI. Based on Time Warner's allocation of the purchase
price, the assets and liabilities of the Combined Systems were revalued
resulting in goodwill allocated to the Combined Systems of approximately
$52,971,000, which is being amortized over its estimated life of 40 years. In
addition, approximately $220,981,000 was allocated to cable television
franchises and other intangible assets, which is being amortized over periods up
to 20 years. The Combined Systems' financial statements through December 31,
1995 reflect the historical cost of their assets and liabilities and results of
their operations.
The combined statements have been adjusted to include the allocation of
certain corporate expenses incurred by Time Warner Cable and/or TWI Cable on the
Combined Systems' behalf, based upon the number of Combined System subscribers
managed by Time Warner Cable and the ratio of Combined System subscribers to
total TWI Cable subscribers, respectively. These allocations reflect all costs
of doing business that the Combined Systems would have incurred on a stand alone
basis as disclosed in Note 3. Management believes that these allocations are
reasonable.
F-138
<PAGE> 323
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
BASIS OF COMBINATION
The combined financial statements include the assets, liabilities,
revenues, expenses, income, loss and cash flows of the Combined Systems, as if
the Combined Systems were a single company. Significant intercompany accounts
and transactions between the Combined Systems have been eliminated. Significant
accounts and transactions with Time Warner and its affiliates are disclosed as
related party transactions (see Note 3).
USE OF ESTIMATES
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the combined financial
statements and footnotes thereto. Actual results could differ from those
estimates.
CONCENTRATION OF CREDIT RISK
A significant portion of the customer base is concentrated within the local
geographical area of each of the individual cable television systems. The
Combined Systems generally extend credit to customers and the ultimate
collection of accounts receivable could be affected by the local economy.
Management performs continuous credit evaluations of its customers and may
require cash in advance or other special arrangements from certain customers.
Management does not believe that there is any significant credit risk which
could have a material effect on the financial condition of the Combined Systems.
REVENUE AND COSTS
Subscriber fees are recorded as revenue in the period the related services
are provided and advertising revenues are recognized in the period the related
advertisements are exhibited. Rights to exhibit programming are purchased from
various cable networks. The costs of such rights are generally expensed as the
related services are made available to subscribers.
FRANCHISE FEES
Local governmental authorities impose franchise fees on the cable
television systems owned by the Combined Systems ranging up to a federally
mandated maximum of 5.0% of gross revenues. On a monthly basis, such fees are
collected from the Combined Systems' customers. Prior to January 1997, franchise
fees were not separately itemized on customers' bills. Such fees were considered
part of the monthly charge for basic services and equipment, and therefore were
reported as revenue and expense in the Combined Systems' financial results.
Management began the process of itemizing such fees on all customers' bills
beginning in January 1997. In conjunction with itemizing these charges, the
Combined Systems began separately collecting the franchise fee on all revenues
subject to franchise fees. As a result, such fees are no longer included as
revenue or as franchise
F-139
<PAGE> 324
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
fee expense. The net effect of this change is a reduction in 1997 revenue and
franchise fee expense of approximately $1,500,000 versus the comparable period
in 1996.
ADVERTISING COSTS
Advertising costs are expensed upon the first exhibition of the related
advertisements. Advertising expense amounted to $308,000, $632,000 and $510,000
for the years ended 1995, 1996 and 1997, respectively.
STATEMENT OF CASH FLOWS
The Combined Systems participate in a cash management system with
affiliates whereby cash receipts are transferred to a centralized bank account
from which centralized payments to various suppliers and creditors are made on
behalf of the Combined Systems. The excess of such cash receipts over payments
is included in net assets. Amounts shown as cash represent the Combined Systems'
net cash receipts not transferred to the centralized account as of December 31,
1996 and 1997. The average net intercompany payable balances were $173,348,000
and $170,438,000 for the years ended December 31, 1996 and 1997, respectively.
For purposes of this statement, cash and cash equivalents includes all
highly liquid investments purchased with original maturities of three months or
less.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Additions to property,
plant and equipment generally include material, labor, overhead and interest.
Depreciation is provided on the straight-line method over estimated useful lives
as follows:
<TABLE>
<S> <C>
Buildings and improvements............................. 5-20 years
Cable television equipment............................. 5-15 years
Furniture, fixtures and other equipment................ 3-10 years
</TABLE>
Property, plant and equipment consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
---- ----
<S> <C> <C>
Land and buildings..................................... $ 2,003 $ 2,265
Cable television equipment............................. 32,324 39,589
Furniture, fixtures and other equipment................ 1,455 2,341
Construction in progress............................... 5,657 1,028
------- -------
41,439 45,223
Less accumulated depreciation.......................... (4,473) (8,279)
------- -------
Total........................................ $36,966 $36,944
======= =======
</TABLE>
F-140
<PAGE> 325
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
INTANGIBLE ASSETS
During 1996 and 1997, the Combined Systems amortized goodwill over periods
up to 40 years and cable television franchises over periods up to 20 years, both
using the straight-line method. Prior to the CVI Merger, goodwill and cable
television franchises were amortized over 15 years using the straight-line
method. For the years ended 1995, 1996, and 1997, amortization of goodwill
amounted to $8,199,000, $1,325,000, and $1,325,000, respectively, and
amortization of cable television franchises amounted to $1,284,000, $11,048,000,
and $11,048,000, respectively. Accumulated amortization of intangible assets at
December 31, 1996 and 1997 amounted to $12,373,000 and $24,746,000,
respectively.
IMPAIRMENT
Management separately reviews the carrying value of acquired long-lived
assets for each acquired entity on a quarterly basis to determine whether an
impairment may exist. Management considers relevant cash flow and profitability
information, including estimated future operating results, trends and other
available information, in assessing whether the carrying value of long-lived
assets can be recovered. Upon a determination that the carrying value of
long-lived assets will not be recovered from the undiscounted future cash flows
of the acquired business, the carrying value of such long-lived assets would be
considered impaired and would be reduced by a charge to operations in the amount
of the impairment. An impairment charge is measured as a deficiency in estimated
discounted future cash flows of the acquired business to recover the carrying
value related to the long-lived assets.
INCOME TAXES
Income taxes have been provided using the liability method prescribed by
FASB Statement No. 109, "Accounting for Income Taxes." Under the liability
method, deferred income taxes reflect tax carryforwards and the net tax effects
of temporary differences between the carrying amount of assets and liabilities
for financial statements and income tax purposes, as determined under enacted
tax laws and rates.
2. EMPLOYEE BENEFIT PLANS
Following the CVI Merger, the Combined Systems began participation in the
Time Warner Cable Pension Plan (the "Pension Plan"), a non-contributory defined
benefit pension plan, and the Time Warner Cable Employee Savings Plan (the
"Savings Plan") which are administered by a committee appointed by the Board of
Representatives of Time Warner Entertainment Company, L.P. ("TWE"), an affiliate
of Time Warner, and which cover substantially all employees.
Benefits under the Pension Plan are determined based on formulas which
reflect an employee's years of service and compensation levels during the
employment period. Pension expense for the years ended December 31, 1996 and
1997 totaled $184,000 and $192,000, respectively.
F-141
<PAGE> 326
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Combined Systems' contributions to the Savings Plan are limited to
6.67% of an employee's eligible compensation during the plan year. The Board of
Representatives of TWE has the right in any year to set the maximum amount of
the Combined Systems' contribution. Defined contribution plan expense for the
years ended December 31, 1996 and 1997 totaled $107,000 and $117,000,
respectively.
Prior to the CVI Merger, substantially all employees were eligible to
participate in a profit sharing plan or a defined contribution plan. The profit
sharing plan provided that the Combined Systems may contribute, at the
discretion of their board of directors, an amount up to 15% of compensation for
all eligible participants out of its accumulated earnings and profits, as
defined. Profit sharing expense amounted to approximately $31,000 for the year
ended December 31, 1995.
The defined contribution plan contained a qualified cash or deferred
arrangement pursuant to Internal Revenue Code Section 401(k). This plan provided
that eligible employees may contribute from 2% to 10% of their compensation to
the plan. The Combined Systems matched contributions of up to 4% of the
employees' compensation. The expense for this plan amounted to approximately
$96,000 for the year ended December 31, 1995.
The Combined Systems have no material obligations for other post retirement
benefits.
3. RELATED PARTIES
In the normal course of conducting business, the Combined Systems had
various transactions with Time Warner and its affiliates, generally on terms
resulting from a negotiation between the affected units that in management's
view resulted in reasonable allocations.
PROGRAMMING
Included in the Combined Systems' 1996 and 1997 operating expenses are
charges for programming and promotional services provided by Home Box Office,
Turner Broadcasting System, Inc. and other affiliates of Time Warner. These
charges are based on customary rates and are in the ordinary course of business.
For the year ended December 31, 1996 and 1997, these charges totaled $3,260,000
and $3,458,000, respectively. Accrued related party expenses for these
programming and promotional services included in accrued programming expenses
approximated $327,000 and $291,000 for the years ended December 31, 1996 and
1997, respectively. There were no such programming and promotional service
related party transactions in 1995.
MANAGEMENT FEES
TWI Cable entered into a management service arrangement with Time Warner
Cable ("TWC"), pursuant to which TWC is responsible for the management and
operation of TWI Cable, which includes the Combined Systems. The management fees
paid to TWC by TWI Cable are based on an allocation of the corporate expenses of
TWC's cable
F-142
<PAGE> 327
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
division in proportion to the respective number of subscribers of all cable
systems managed by TWC's cable division. The allocation of the TWI Cable
management fee to the Combined Systems approximated $1,432,000 and $1,715,000
for the years ended December 31, 1996 and 1997, respectively.
Other divisional expenses allocated to the Combined Systems approximated
$1,301,000 and $1,067,000 for the years ended December 31, 1996 and 1997,
respectively.
4. INTEREST EXPENSE
Prior to the CVI Merger, the Jackson, Tennessee system was included in
Cablevision Industries Limited Partnership and Combined Entities ("CILP"). The
Jackson system was charged interest expense in connection with CILP's (a) senior
and subordinated bank credit agreements; and (b) senior unsecured subordinated
Series A and Series B notes payable to CVI. The remaining five systems
comprising the Combined Systems were included in Cablevision Industries of the
Southeast, Inc. and Combined Entities ("CIOS"). These systems were charged
interest expense in connection with CIOS's (a) bank revolving credit agreement;
and (b) junior and senior subordinated debt to CVI.
5. INCOME TAXES
Effective January 4, 1996, the Combined Systems are included in the
consolidated federal income tax return of Time Warner. Prior to January 4, 1996,
the Combined Systems were included in the consolidated federal income tax return
of CVI. The provision (benefit) for income taxes has been calculated on a
separate company basis. The components of the provision (benefit) for income
taxes are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1996 1997
---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C>
FEDERAL:
Current...................... $ -- $ -- $ --
Deferred..................... (2,881) 1,213 1,826
STATE:
Current...................... -- -- --
Deferred..................... (686) 289 436
------- ------ ------
Net provision (benefit) for
income taxes.............. $(3,567) $1,502 $2,262
======= ====== ======
</TABLE>
The Combined Systems did not, and will not, have a tax sharing agreement
with either Time Warner, TWI Cable or CVI. Therefore, the Combined Systems have
not and will not be compensated for the utilization of the Combined Systems' tax
losses, by Time Warner, TWI Cable or CVI. In addition, the Combined Systems have
not and will not be required to make payments to either Time Warner or TWI Cable
for the current tax provision of the Combined Systems.
F-143
<PAGE> 328
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The differences between the income tax provision (benefit) expected at the
U.S. federal statutory income tax rate and the total income tax provision
(benefit) are due to nondeductible goodwill amortization and state taxes.
Significant components of the Combined Systems' deferred tax assets and
liabilities, as calculated on a separate company basis, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
DEFERRED TAX LIABILITIES:
Amortization....................... $61,266 $58,507
Depreciation....................... 3,576 4,060
------- -------
Total gross deferred tax
liabilities.............. 64,842 62,567
------- -------
DEFERRED TAX ASSETS:
Tax loss carryforwards............. 6,474 1,920
Allowance for doubtful accounts.... 28 46
------- -------
Total deferred tax
assets................... 6,502 1,966
------- -------
Net deferred tax liability......... $58,340 $60,601
======= =======
</TABLE>
On a separate company basis, the Combined Systems have tax loss
carryforwards of approximately $4.8 million at December 31, 1997. However, if
the Combined Systems are acquired in an asset purchase, the tax loss
carryforwards, and net deferred tax liabilities relating to temporary
differences will not carry over to Renaissance (see Note 8).
6. COMMITMENTS AND CONTINGENCIES
The Combined Systems had rental expense of approximately $642,000,
$824,000, and $843,000 for the years ended December 31, 1995, 1996 and 1997,
respectively, under various lease and rental agreements for offices, utility
poles, warehouses and computer equipment. Future minimum annual rental payments
under noncancellable leases will approximate $1,000,000 annually over the next
five years.
In exchange for certain flexibility in establishing cable rate pricing
structures for regulated services that went into effect on January 1, 1996, TWC
has agreed with the Federal Communications Commission ("FCC") to invest in
certain upgrades to its cable infrastructure (consisting primarily of materials
and labor in connection with the plant upgrades up to 750 megahertz) over the
next three years (approximately $22 million). This agreement with the FCC, which
extends to the Combined Systems, will be assumed by Renaissance as it relates to
the Combined Systems in accordance with the Asset Purchase Agreement.
F-144
<PAGE> 329
PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
(INCLUDED IN TWI CABLE INC.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
7. OTHER LIABILITIES
Other liabilities consist of:
<TABLE>
<CAPTION>
DECEMBER 31,
------------
1996 1997
---- ----
(IN THOUSANDS)
<S> <C> <C>
Compensation............................................ $217 $250
Data Processing Costs................................... 100 90
Sales and other taxes................................... 101 90
Copyright Fees.......................................... 85 83
Pole Rent............................................... 66 63
Other................................................... 376 393
---- ----
Total.............................................. $945 $969
==== ====
</TABLE>
8. SUBSEQUENT EVENT (UNAUDITED)
The sale of the Combined Systems, in connection with the Asset Purchase
Agreement with Renaissance, closed on April 9, 1998 at the purchase price of
$309,500,000.
F-145
<PAGE> 330
INDEPENDENT AUDITORS' REPORT
The Partners
Helicon Partners I, L.P.:
We have audited the accompanying combined balance sheets of Helicon Partners I,
L.P. and affiliates as of December 31, 1997 and 1998, and the related combined
statements of operations, changes in partners' deficit, and cash flows for each
of the years in the three-year period ended December 31, 1998. These combined
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Helicon Partners I,
L.P. and affiliates as of December 31, 1997 and 1998 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.
/s/ KPMG LLP
New York, New York
March 26, 1999
F-146
<PAGE> 331
HELICON PARTNERS I, L.P. AND AFFILIATES
COMBINED BALANCE SHEETS
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
------------- -------------
<S> <C> <C>
ASSETS (NOTES 8 AND 9)
Cash and cash equivalents (note 2).............. $ 4,372,281 $ 5,130,561
Receivables from subscribers.................... 1,439,720 1,631,931
Prepaid expenses and other assets............... 2,205,794 3,469,228
Property, plant and equipment, net (notes 3, 4,
and 11)....................................... 80,104,377 86,737,580
Intangible assets and deferred costs, net (notes
3 and 5)...................................... 85,066,665 94,876,847
------------- -------------
Total assets.......................... $ 173,188,837 $ 191,846,147
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.............................. $ 7,416,901 $ 8,037,193
Accrued expenses.............................. 1,539,116 1,589,240
Subscriptions received in advance............. 1,018,310 819,564
Accrued interest.............................. 3,760,360 3,742,456
Due to principal owner (note 7)............... 5,000,000 5,000,000
Senior secured notes (note 8)................. 115,000,000 115,000,000
Loans payable to banks (note 9)............... 85,776,641 120,266,922
12% subordinated notes, net of unamortized
discount of $2,889,541 in 1997 and
$2,543,869 in 1998 (note 10)............... 37,249,948 42,672,085
Redeemable partnership interests (note 10).... 6,437,142 16,253,906
Other notes payable (note 11)................. 5,747,076 5,448,804
Due to affiliates, net (note 6)............... 71,474 247,042
------------- -------------
Total liabilities..................... 269,016,968 319,077,212
------------- -------------
Commitments (notes 8, 9, 10, 11 and 13)
Partners' deficit (note 12):
Preferred limited partners.................... 7,649,988 8,567,467
Accumulated partners' deficit................. (103,477,119) (135,797,532)
Less capital contribution receivable.......... (1,000) (1,000)
------------- -------------
Total partners' deficit............... (95,828,131) (127,231,065)
------------- -------------
Total liabilities and partners'
deficit............................ $ 173,188,837 $ 191,846,147
============= =============
</TABLE>
See accompanying notes to combined financial statements.
F-147
<PAGE> 332
HELICON PARTNERS I, L.P. AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Revenues............................... $ 42,061,537 $ 59,957,434 $ 75,576,810
------------ ------------ ------------
Operating expenses:
Operating expenses (note 13)......... 11,395,509 17,408,265 22,687,850
General and administrative expenses
(notes 6 and 13).................. 7,244,663 9,762,931 13,365,824
Marketing expenses................... 1,235,553 2,266,627 3,521,893
Depreciation and amortization........ 12,556,023 19,411,813 24,290,088
Management fee charged by affiliate
(note 6).......................... 2,103,077 2,997,872 3,496,271
Corporate and other expenses......... 426,672 549,222 602,987
------------ ------------ ------------
Total operating expenses..... 34,961,497 52,396,730 67,964,913
------------ ------------ ------------
Operating income..................... 7,100,040 7,560,704 7,611,897
------------ ------------ ------------
Interest expense (note 7).............. (17,418,266) (23,586,227) (27,633,714)
Interest income........................ 563,362 154,037 92,967
------------ ------------ ------------
(16,854,904) (23,432,190) (27,540,747)
------------ ------------ ------------
Loss before extraordinary item....... (9,754,864) (15,871,486) (19,928,850)
------------ ------------ ------------
Extraordinary item -- write-off of
deferred financing costs (note 9).... -- -- (1,657,320)
------------ ------------ ------------
Net loss............................. $ (9,754,864) $(15,871,486) $(21,586,170)
============ ============ ============
</TABLE>
See accompanying notes to combined financial statements.
F-148
<PAGE> 333
HELICON PARTNERS I, L.P. AND AFFILIATES
COMBINED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
PARTNERS' DEFICIT
-------------------------
PREFERRED CLASS A CAPITAL
LIMITED GENERAL LIMITED CONTRIBUTION
PARTNERS PARTNER PARTNERS RECEIVABLE TOTAL
---------- --------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995........ $ -- $(307,994) $ (67,144,287) $(1,000) $ (67,453,281)
Issuance of preferred limited
partnership interests (note 10)... 6,250,000 (62,500) (6,187,500) -- --
Partner capital contributions (note
10)............................... -- 1,500 -- -- 1,500
Distribution of additional preferred
partnership interests (note 10)... 558,430 (5,584) (552,846) -- --
Net loss............................ -- (97,549) (9,657,315) -- (9,754,864)
---------- --------- ------------- ------- -------------
Balance at December 31, 1996........ 6,808,430 (472,127) (83,541,948) (1,000) (77,206,645)
Distribution of additional preferred
partnership interests (note 10)... 841,558 (8,416) (833,142) -- --
Accretion of redeemable partnership
interests (note 10)............... -- (27,500) (2,722,500) -- (2,750,000)
Net loss............................ -- (158,715) (15,712,771) -- (15,871,486)
---------- --------- ------------- ------- -------------
Balance at December 31, 1997........ 7,649,988 (666,758) (102,810,361) (1,000) (95,828,131)
Distribution of additional preferred
partnership interests (note 10)... 917,479 (9,175) (908,304) -- --
Accretion of redeemable partnership
interests (note 10)............... -- (98,168) (9,718,596) -- (9,816,764)
Net loss............................ -- (215,861) (21,370,309) -- (21,586,170)
---------- --------- ------------- ------- -------------
Balance at December 31, 1998........ $8,567,467 $(989,962) $(134,807,570) $(1,000) $(127,231,065)
========== ========= ============= ======= =============
</TABLE>
See accompanying notes to combined financial statements.
F-149
<PAGE> 334
HELICON PARTNERS I, L.P. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
<TABLE>
<CAPTION>
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss.................................................. $ (9,754,864) $(15,871,486) $(21,586,170)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Extraordinary item...................................... -- -- 1,657,320
Depreciation and amortization........................... 12,556,023 19,411,813 24,290,088
Gain on sale of equipment............................... (20,375) (1,069) (29,323)
Interest on 12% subordinated notes paid through the
issuance of additional notes.......................... 1,945,667 4,193,819 4,961,241
Interest on other notes payable added to principal...... 168,328 185,160 --
Amortization of debt discount and deferred financing
costs................................................. 2,115,392 849,826 919,439
Change in operating assets and liabilities, net of
acquisitions:
Decrease (increase) in receivables from subscribers... 176,432 (496,146) (79,535)
Increase in prepaid expenses and other assets......... (269,156) (976,491) (1,255,018)
Increase in financing costs incurred.................. (4,525,331) (434,000) (2,200,000)
Increase in accounts payable and accrued expenses..... 2,182,762 2,957,524 681,037
Increase (decrease) in subscriptions received in
advance............................................ 119,277 325,815 (208,803)
Increase (decrease) in accrued interest............... 1,613,630 376,158 (17,904)
------------ ------------ ------------
Total adjustments.................................. 16,062,649 26,392,409 28,718,542
------------ ------------ ------------
Net cash provided by operating activities.......... 6,307,785 10,520,923 7,132,372
------------ ------------ ------------
Cash flows from investing activities:
Purchases of property, plant and equipment................ (8,987,766) (15,824,306) (13,538,978)
Proceeds from sale of equipment........................... 21,947 23,270 118,953
Cash paid for net assets of cable television systems
acquired................................................ (35,829,389) (70,275,153) (26,063,284)
Cash paid for net assets of internet businesses
acquired................................................ (40,000) (993,760) --
Increase in intangible assets and deferred costs.......... (127,673) (308,759) (183,018)
------------ ------------ ------------
Net cash used in investing activities.............. (44,962,881) (87,378,708) (39,666,327)
------------ ------------ ------------
Cash flows from financing activities:
Capital contributions..................................... 1,500 -- --
Decrease in restricted cash............................... -- 1,000,000 --
Proceeds from issuance of 12% subordinated notes and
redeemable partnership interests........................ 34,000,000 -- --
Proceeds from bank loans.................................. 8,900,000 77,285,000 104,000,000
Repayment of bank loans................................... (952,777) (1,505,581) (69,509,719)
Repayment of other notes payable.......................... (527,514) (1,145,989) (1,362,995)
Advances to affiliates.................................... (3,207,996) (3,412,411) (8,856,491)
Repayments of advances to affiliates...................... 3,479,336 2,986,778 9,021,440
------------ ------------ ------------
Net cash provided by financing activities.......... 41,692,549 75,207,797 33,292,235
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents...................................... 3,037,453 (1,649,988) 758,280
Cash and cash equivalents at beginning of year.............. 2,984,816 6,022,269 4,372,281
------------ ------------ ------------
Cash and cash equivalents at end of year.................... $ 6,022,269 $ 4,372,281 $ 5,130,561
============ ============ ============
Supplemental cash flow information:
Interest paid............................................. $ 11,575,250 $ 17,981,264 $ 21,770,938
============ ============ ============
Other non-cash items:
Acquisition of property, plant and equipment through
issuance of other notes payable....................... $ 1,222,000 $ 917,815 $ 1,025,319
============ ============ ============
Issuance of notes payable in connection with the
acquisition of cable television and internet systems,
net of imputed interest............................... $ 569,500 $ 1,914,479 --
============ ============ ============
</TABLE>
See accompanying notes to combined financial statements.
F-150
<PAGE> 335
HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998
1. ORGANIZATION AND NATURE OF BUSINESS
Helicon Partners I, L.P. ("the Partnership") was organized as a limited
partnership on November 30, 1994 under the laws of the State of Delaware. On
April 8, 1996, Baum Investments, Inc. acquired a 1% general partnership interest
in the Partnership through an initial capital contribution of $1,500 and the
existing limited partners of The Helicon Group, L.P. ("THGLP"), formed in 1993,
exchanged their limited partnership interests in THGLP for all Class A Common
Limited Partnership Interests and Preferred Limited Partnership Interests in the
Partnership. As a result of this exchange, THGLP became 99% owned by the
Partnership. The Partnership now owns all of the limited partnership interests
in THGLP and Baum Investments, Inc. continues to be the general partner of THGLP
and to own a 1% general partnership interest in THGLP. The Partnership also owns
a 99% interest and THGLP a 1% interest in HPI Acquisition Co., LLC ("HPIAC"), a
Delaware limited liability company formed on February 7, 1996. The Partnership
also owned an 89% limited partnership interest and Baum Investments, Inc. a 1%
general partnership interest in Helicon OnLine, L. P. ("HOL"), a Delaware
limited partnership formed May 31, 1997. On June 29, 1998, the net assets of HOL
were transferred to THGLP in settlement of the inter-company loans THGLP had
made to HOL. The Partnership, THGLP, HPIAC and HOL are referred to collectively
herein as the Company.
On March 22, 1999, Helicon Partners I, L. P. (HPI), Baum Investments, Inc.
and all the holders of partnership interests in HPI entered into a purchase
agreement by and among Charter Communications, Inc, Charter Communications, LLC
and Charter Helicon, LLC (collectively the "Charter Entities") providing for the
sale of all such partnership interests and Helicon Corp.'s interest in the
management agreements with THGLP and HPIAC to the Charter Entities. The sale
price is $550 million which amount will be reduced by any outstanding
indebtedness assumed by the Charter Entities.
The Company operates cable television systems located in Pennsylvania, West
Virginia, North Carolina, South Carolina, Louisiana, Vermont, New Hampshire,
Georgia and Tennessee. The Company also offers a broad range of Internet access
service, including dial-up access, dedicated high speed access, both two-way and
asymmetrical ("Hybrid"), high speed cable modem access, World Wide Web design
and hosting services and other value added services such as paging and private
network systems within the Company's cable service and contiguous areas.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) PRINCIPLES OF COMBINATION
The accompanying financial statements include the accounts of the
Partnership, THGLP and HPIAC and HOL which have been combined because of common
ownership and control. They also reflect the accounts of THGLP's subsidiary,
Helicon Capital Corp. ("HCC"), which has nominal assets and no operations since
its incorporation. All intercompany accounts and transactions have been
eliminated in combination.
F-151
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HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
b) PARTNERSHIP PROFITS, LOSSES AND DISTRIBUTIONS
Under the terms of the partnership agreements of the Partnership and THGLP,
profits, losses and distributions will be made to the general and Class A
Limited Partners pro-rata based on their respective partnership interest.
Holders of Preferred Limited Partnership Interests are entitled to an
aggregate preference on liquidation of $6,250,000 plus cumulative in-kind
distributions of additional Preferred Limited Partnership interests at an annual
rate of 12%.
c) REVENUE RECOGNITION
Revenue is recognized as services are provided to subscribers. Subscription
revenues billed in advance for services are deferred and recorded as income in
the period in which services are rendered.
d) Property, Plant and Equipment
Property, plant and equipment are carried at cost and are depreciated using
the straight-line method over the estimated useful lives of the respective
assets.
e) INTANGIBLE ASSETS AND DEFERRED COSTS
Intangible assets and deferred costs are carried at cost and are amortized
using the straight-line method over the estimated useful lives of the respective
assets. The Company periodically reviews the amortization periods of their
intangible assets and deferred costs. The Company evaluates whether there has
been a permanent impairment in the value of these assets by considering such
factors including projected undiscounted cash flows, current market conditions
and changes in the cable television industry that would impact the
recoverability of such assets, among other things.
f) INCOME TAXES
No provision for Federal or state income taxes has been made in the
accompanying combined financial statements since any liability for such income
taxes is that of the partners and not of the Partnership or its affiliates.
Certain assets have a basis for income tax purposes that differs from the
carrying value for financial reporting purposes, primarily due to differences in
depreciation methods. As a result of these differences, at December 31, 1997 and
1998 the net carrying value of these assets for financial reporting purposes
exceeded the net basis for income tax purposes by approximately $22 million and
$27 million respectively.
g) CASH AND CASH EQUIVALENTS
Cash and cash equivalents, consisting of amounts on deposit in money market
accounts, checking accounts and certificates of deposit, were $4,372,281 and
$5,130,561 at December 31, 1997 and 1998, respectively.
h) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets, liabilities, revenues, expenses and the
disclosure of contingent assets and liabilities to prepare these combined
financial statements in
F-152
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HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
i) INTEREST RATE CAP AGREEMENTS
The cost paid is amortized over the life of the agreements.
j) DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and Cash Equivalents, Receivables, Accounts Payable and Accrued Expenses
The carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, current receivables, notes receivable, accounts payable,
and accrued expenses approximate fair values.
Senior Secured Notes and Long-term Debt
For the Senior Secured Notes, fair values are based on quoted market
prices. The fair market value at December 31, 1997 and 1998 was approximately
$123,000,000 and $120,000,000, respectively. For long-term debt, their values
approximate carrying value due to the short-term maturity of the debt and/or
fluctuating interest.
Comprehensive Income
On January 1, 1998, the Company adopted SFAS No. 130, Reporting
Comprehensive Income. SFAS No. 130 establishes standards for reporting and
presentation of comprehensive income and its components in a full set of
financial statements. Comprehensive income consists of net income and net
unrealized gains (losses) on securities and is presented in the consolidated
statements of stockholder's equity and comprehensive income. The Statement
requires only additional disclosures in the consolidated financial statements;
it does not affect the Company's financial position or results of operations.
The Company has no items that qualify as comprehensive income.
3. ACQUISITIONS
Cable Acquisitions
On January 31, 1995, THGLP acquired a cable television system, serving
approximately 1,100 (unaudited) subscribers in the Vermont communities of
Bradford, South Royalton and Chelsea. The aggregate purchase price was
approximately $350,000 and was allocated to the net assets acquired which
included property and equipment and intangible assets.
In June and July, 1996, HPIAC completed the acquisitions of all the
operating assets of the cable television systems, serving approximately 26,000
(unaudited) subscribers, in the areas of Jasper and Skyline, Tennessee and
Summerville, Trenton, Menlo, Decatur and Chatsworth, Georgia (collectively
referred to as the Tennessee cluster).
F-153
<PAGE> 338
HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The aggregate purchase price of $36,398,889, including acquisition costs of
$742,837, was allocated to the net assets acquired based on their estimated fair
value. Such allocation is summarized as follows:
<TABLE>
<S> <C>
Land............................................ $ 25,000
Cable television system......................... 17,876,244
Other property, plant and equipment............. 185,000
Subscriber lists................................ 17,474,762
Noncompete agreement............................ 1,000
Other intangible assets......................... 742,837
Other net operating items....................... 94,046
-----------
Total aggregate purchase price.................. $36,398,889
===========
</TABLE>
A portion of the purchase price was paid through the issuance of notes to
the sellers of one of the systems totaling $750,000. Such notes were reported
net of imputed interest of $180,500 computed at 9% per annum (see note 11).
On January 16, 1997, HPIAC acquired an adjacent cable television system
serving approximately 2,256 (unaudited) subscribers in the communities of Ten
Mile and Hamilton, Tennessee. The aggregate purchase price was approximately
$2,960,294 and was allocated to the net assets acquired which included property,
equipment and intangible assets, based on their estimated fair value.
On January 31, 1997, THGLP acquired a cable television system, serving
approximately 823 (unaudited) subscribers in the West Virginia counties of Wirt
and Wood. The aggregate purchase price was approximately $1,053,457, and was
allocated to the net assets acquired which included property, equipment and
intangible assets, based on their estimated fair value.
On April 18, 1997, HPIAC acquired a cable television system serving
approximately 839 (unaudited) subscribers in the communities of Charleston and
Calhoun, Tennessee. The aggregate purchase price was approximately $1,055,693
and was allocated to the net assets acquired which included property and
equipment and intangible assets, based on their estimated fair value.
On June 26, 1997, HPIAC acquired the net assets of cable television systems
serving approximately 21,500 (unaudited) subscribers primarily in the North
Carolina communities of Avery County and surrounding areas and in the South
Carolina community of Anderson County. The aggregate purchase price was
approximately $45,258,279, including acquisition costs of $547,235, and was
allocated to the net assets acquired which included property, plant, equipment
and intangible assets, based on their estimated fair value.
On June 26, 1997, THGLP acquired the net assets of a cable television
system serving approximately 11,000 (unaudited) subscribers in the North
Carolina communities of Watauga County, Blowing Rock, Beech Mountain and the
town of Boone. The aggregate purchase price was $19,947,430 and was allocated to
the net assets acquired which included, property, plant, equipment and
intangible assets, based on their estimated fair value.
F-154
<PAGE> 339
HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The aggregate purchase price of the 1997 cable acquisitions was $70,275,153
and was allocated to the net assets acquired based on their estimated fair
market value as follows:
<TABLE>
<S> <C>
Land.............................................. $ 158,500
Cable television system........................... 21,320,900
Vehicles.......................................... 1,473,600
Computer equipment................................ 240,000
Subscriber lists.................................. 46,925,173
Organization and other costs...................... 688,816
Other net operating items......................... (531,836)
-----------
Total aggregate purchase price.................... $70,275,153
===========
</TABLE>
On December 31, 1998, HPIAC acquired the net assets of cable television
systems serving approximately 11,225 (unaudited) subscribers primarily in the
North Carolina community of Roanoke Rapids. The aggregate purchase price was
$26,063,284 including acquisition costs of $535,875 and was allocated to the net
assets acquired, which included, property, equipment and intangible assets,
based on their estimated fair value.
<TABLE>
<S> <C>
Land.............................................. $ 250,000
Cable television system........................... 4,258,000
Other property, plant and equipment............... 1,103,375
Subscriber lists.................................. 19,805,000
Organization and other costs...................... 535,875
Other net operating items......................... 111,034
-----------
Total aggregate purchase price.................... $26,063,284
===========
</TABLE>
Internet Acquisitions
On March 22, 1996, THGLP acquired the net assets of a telephone dial-up
internet access provider ("ISP") serving approximately 350 (unaudited) customers
in and around the area of Uniontown, Pennsylvania. The aggregate purchase price
was approximately $40,000.
On April 1, 1997, the Partnership acquired the net assets of a telephone
dial-up ISP serving approximately 2,500 (unaudited) customers in and around the
area of Uniontown, Pennsylvania. The aggregate purchase price was $757,029.
On May 31, 1997, the Partnership acquired the net assets of a telephone
dial-up ISP serving approximately 1,800 (unaudited) customers in and around the
area of Uniontown, Pennsylvania. The aggregate purchase price was $213,629.
On November 14, 1997, HOL acquired the net assets of a telephone dial-up
ISP serving approximately 1,744 (unaudited) customers in and around the area of
Johnstown, Pennsylvania. The aggregate purchase price was $348,927.
F-155
<PAGE> 340
HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
On December 17, 1997, HOL acquired the net assets of a telephone dial-up
ISP serving 1,571 (unaudited) customers in and around the area of Plainfield,
Vermont. The aggregate purchase price was $497,307.
On December 17, 1997, HOL acquired the net assets of a telephone dial-up
ISP serving approximately 2,110 (unaudited) customers in and around the area of
Wells River, Vermont. The aggregate purchase price was $673,170.
The aggregate purchase price of the 1997 ISP acquisitions was $2,490,062
and was allocated to the net assets acquired, based on their estimated fair
value. Such allocation is summarized as follows:
<TABLE>
<S> <C>
Internet service equipment......................... $ 237,064
Customer lists..................................... 1,409,768
Non-compete Agreement.............................. 883,097
Other intangible assets............................ 35,000
Other net operating items.......................... (74,867)
----------
Total aggregate purchase price..................... $2,490,062
==========
</TABLE>
A portion of the purchase price was paid through the issuance of notes to
the Sellers totaling $1,801,000. Such notes were reported net of imputed
interest of $304,698 computed at 9% per annum (see Note 11).
The operating results relating to the above acquisitions, effective with
their acquisition dates, are included in the accompanying combined financial
statements.
F-156
<PAGE> 341
HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net is summarized as follows at December 31:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
1997 1998 LIFE IN YEARS
------------ ------------ ----------------
<S> <C> <C> <C>
Land...................... $ 121,689 $ 320,689 --
Cable television system... 124,684,403 140,441,324 5 to 20
Internet service
equipment............... 1,281,362 2,483,602 2 to 3
Office furniture and
fixtures................ 677,672 728,253 5 and 10
Vehicles.................. 3,536,358 4,570,990 3 and 5
Building.................. 805,525 1,585,384 5 and 10
Building and leasehold
Improvements............ 398,843 445,820 1 to 5
Computers................. 3,232,355 4,159,506 3 to 5
------------ ------------
134,738,207 154,735,568
Less accumulated
depreciation............ (54,633,830) (67,997,988)
------------ ------------
$ 80,104,377 $ 86,737,580
============ ============
</TABLE>
5. INTANGIBLE ASSETS AND DEFERRED COSTS
Intangible assets and deferred costs are summarized as follows at December
31:
<TABLE>
<CAPTION>
ESTIMATED USEFUL
1997 1998 LIFE IN YEARS
------------ ------------ ----------------
<S> <C> <C> <C>
Covenants not-to-compete.... $ 14,270,120 $ 14,270,120 5
Franchise agreements........ 19,650,889 19,650,889 9 to 17
Goodwill.................... 1,703,760 1,703,760 20
Subscriber lists............ 82,292,573 102,097,573 6 to 10
Financing costs............. 9,414,809 9,291,640 8 to 10
Organization and other
costs..................... 3,631,650 4,306,777 5 to 10
------------ ------------
130,963,801 151,320,760
Less accumulated
amortization.............. (45,897,136) (56,443,913)
------------ ------------
$ 85,066,665 $ 94,876,847
============ ============
</TABLE>
6. TRANSACTIONS WITH AFFILIATES
Amounts due from/to affiliates result from management fees, expense
allocations and temporary non-interest bearing loans. The affiliates are related
to the Company through common-ownership.
F-157
<PAGE> 342
HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Partnership is managed by Helicon Corp., an affiliated management
company. During 1996, 1997 and 1998, the Partnership was charged management fees
of $2,103,077, $2,997,872, and $3,496,271, respectively. In 1997 and 1998,
$2,685,172 and $3,231,362 of the management fees were paid and $312,700 and
$172,476 were deferred, in accordance with the terms of the Partnership's credit
agreements, respectively. Management fees are calculated based on the gross
revenues of the systems. Additionally, during 1996, 1997 and 1998, THGLP was
also charged $980,000, $713,906, and $1,315,315, respectively, for certain costs
incurred by this related party on their behalf.
In May 1997, immediately after the formation of HOL, HPI sold 10% of its
limited partner interest in HOL to certain employees of Helicon Corp. Such
interests were sold at HPI's proportionate carrying value of HOL of $83,631 in
exchange for notes receivable from these individuals. These notes are due upon
the liquidation of HOL or the sale of all or substantially all of its assets.
On June 26, 1998, the notes were cancelled in consideration of the return
by the Helicon employees of their 10% limited partnership interests.
7. DUE TO PRINCIPAL OWNER
Mr. Theodore Baum, directly or indirectly, is the principal owner of 96.17%
of the general and limited partnership interests of the Partnership (the
"Principal Owner"). Due to Principal Owner consists of $5,000,000 at December
31, 1997 and 1998 payable by THGLP. Beginning on November 3, 1993, interest on
the $5,000,000 due to the Principal Owner did not accrue and in accordance with
the provisions of the Senior Secured Notes was not paid for twenty four months.
Interest resumed on November 3, 1995 (see Note 8). The principal may only be
repaid thereafter subject to the passage of certain limiting tests under the
covenants of the Senior Secured Notes. Prior to the issuance of the Senior
Secured Notes, amounts due to Principal Owner bore interest at varying rates per
annum based on the prime rate and were due on demand. Interest expense includes
$521,701 in 1996 and $530,082 in 1997 and $524,880 in 1998 related to this debt.
8. SENIOR SECURED NOTES
On November 3, 1993, THGLP and HCC (the "Issuers"), through a private
placement offering, issued $115,000,000 aggregate principal amount of 11% Senior
Secured Notes due 2003 (the "Senior Secured Notes"), secured by substantially
all the assets of THGLP. The Senior Secured Notes were issued at a substantial
discount from their principal amount and generated net proceeds to the Issuers
of approximately $105,699,000. Interest is payable on a semi-annual basis in
arrears on November 1 and May 1, beginning on May 1, 1994. Until November 1,
1996 the Senior Secured Notes bore interest at the rate of 9% per annum. After
November 1, 1996, the Senior Secured Notes bear interest at the rate of 11% per
annum. The discount on the Senior Secured Notes has been amortized over the term
of the Senior Secured Notes so as to result in an effective interest rate of 11%
per annum.
The Senior Secured Notes may be redeemed at the option of the Issuers in
whole or in part at any time on or after November 1, 1997 at the redemption
price of 108% reducing ratably to 100% of the principal amount, in each case
together with accrued
F-158
<PAGE> 343
HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
interest to the redemption date. The Issuers are required to redeem $25,000,000
principal amount of the Senior Secured Notes on each of November 1, 2001 and
November 1, 2002. The indenture under which the Senior Secured Notes were issued
contains various restrictive covenants, the more significant of which are,
limitations on distributions to partners, the incurrence or guarantee of
indebtedness, the payment of management fees, other transactions with officers,
directors and affiliates, and the issuance of certain types of equity interests
or distributions relating thereto.
9. LOANS PAYABLE TO BANKS
On July 12, 1996, HPIAC entered into $85,000,000 of senior secured credit
facilities ("Facilities") with a group of banks and The First National Bank of
Chicago, as agent. The Facilities were comprised of a $55,000,000 senior secured
two and one-half year revolving credit facility, converting on December 31, 1998
to a five and one-half year amortizing term loan due June 30, 2004 ("Facility
A"); and, a $30,000,000 senior secured, amortizing, multiple draw nine year term
loan facility due June 30, 2005 ("Facility B"). The Facilities financed certain
permitted acquisitions, transaction expenses and general corporate purposes.
Interest on outstanding borrowings was payable at specified margins over either
LIBOR or the higher of the corporate base rate of The First National Bank of
Chicago or the rates on overnight Federal funds transactions with members of the
Federal Reserve System. The margins varied based on the Company's total leverage
ratio, as defined, at the time of an advance. As of December 31, 1997, the
amounts outstanding were $30,000,000 under Facility B and $35,500,000
outstanding under Facility A. Interest was payable at LIBOR plus 3.50% for
Facility B and LIBOR plus 3.00% for Facility A. In addition, HPIAC paid a
commitment fee of .5% of the unused balance of the Facilities.
On December 15, 1998, the Facilities were repaid in full together with
accrued interest thereon from the proceeds of the new credit agreements (see
below).
In connection with the early retirement of the aforementioned bank debt,
HPIAC wrote off related unamortized deferred financing costs totaling
$1,657,320. Such amount has been classified as an extraordinary item in the
accompanying 1998 combined statement of operations.
In connection with the aforementioned Facilities, HPIAC entered into an
interest rate cap agreement to reduce its exposure to interest rate risk.
Interest rate cap transactions generally involve the exchange of fixed and
floating rate interest payment obligations and provide for a ceiling on interest
to be paid, respectively, without the exchange of the underlying notional
principal amount. These types of transactions involve risk of counterpart
nonperformance under the terms of the contract. At December 31, 1997, HPIAC had
cap agreements with aggregate notional amounts of $42,500,000 expiring through
March 29, 2000. On December 15, 1998, in connection with the early retirement of
the related bank debt, the cap agreements were terminated and HPIAC wrote off
the unamortized costs of these cap agreements.
On December 15, 1998, HPIAC entered into credit agreements with a group of
banks and Paribas, as agent, providing maximum borrowings of $110,000,000 (the
1998 Credit Facilities). The agreements include (i) a senior secured Credit
Agreement consisting of a $35,000,000 A Term Loan, maturing on December 31,
2005, $45,000,000 B Term Loan,
F-159
<PAGE> 344
HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
maturing on December 31, 2006 and a $10,000,000 Revolving Commitment, maturing
on December 31, 2005 and (ii) a Loan Agreement consisting of a $20,000,000
Hybrid Facility, maturing on December 31, 2007.
As of December 31, 1998, the A Term Loan, B Term Loan and Hybrid Facility
were fully drawn down and there was nothing outstanding under the Revolving
Commitment. The principal cash payments required under the Company's credit
agreements for the fiscal years ended December 31, 1999, 2000, 2001, 2002 and
2003 are estimated to aggregate $0, $812,500, $3,950,000, $5,700,000 and
$7,450,000, respectively.
Interest is payable at LIBOR plus an applicable margin, which is based on a
ratio of loans outstanding to annualized EBITDAM, as defined in the agreement
and can not exceed 3.00% for A Term Loan and Revolving Commitments, 3.25% for B
Term Loan and 4.50% for the Hybrid Facility. In addition, the Company pays a
commitment fee of .50% of the unused balance of the Revolving Commitment.
The 1998 Credit Facilities are secured by a first perfected security
interest in all of the assets of HPIAC and a pledge of all equity interests of
HPIAC. The credit agreement contains various restrictive covenants that include
the achievement of certain financial ratios relating to interest, fixed charges,
leverage, limitations on capital expenditures, incurrence or guarantee of
indebtedness, other transactions with affiliates and distributions to members.
In addition, management fees in the aggregate cannot exceed 5% of gross revenues
of HPIAC.
On June 26, 1997, THGLP entered into a $20,000,000 senior secured credit
facility with Banque Paribas, as Agent (the 1997 Credit Facility). On January 5,
1999, the 1997 Credit Facility was restated and amended. The facility is
non-amortizing and is due November 1, 2000. Borrowings under the facility
financed the acquisition of certain cable television assets in North Carolina
(see note 3). Interest on the $20,000,000 outstanding is payable at specified
margins over either LIBOR or the rate of interest publicly announced in New York
City by The Chase Manhattan Bank from time to time as its prime commercial
lending rate. The margins vary based on the THGLP's total leverage ratio, as
defined, at the time of an advance. Currently interest is payable at LIBOR plus
2.75%.
The 1997 Credit Facility is secured by a first perfected security interest
in all of the assets of the Partnership and a pledge of all equity interests of
the THGLP. The credit agreement contains various restrictive covenants that
include the achievement of certain financial ratios relating to interest, fixed
charges, leverage, limitations on capital expenditures, incurrence or guarantee
of indebtedness, transactions with affiliates, distributions to members and
management fees which accrue at 5% of gross revenues.
Also included in loans payable to banks is a mortgage note of $266,922
payable to a bank that is secured by THGLP's office building in Vermont. The
interest is payable at Prime plus 1% and the mortgage note is due March 1, 2012.
F-160
<PAGE> 345
HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Principal payments on the mortgage note are summarized as follows at
December 31, 1998:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31 AMOUNT
- ----------------------- --------
<S> <C>
1999................................................. $ 10,581
2000................................................. 11,631
2001................................................. 12,786
2002................................................. 14,055
2003 and thereafter.................................. 217,869
--------
$266,922
========
</TABLE>
10. SUBORDINATED NOTES AND REDEEMABLE PARTNERSHIP INTERESTS
In April 1996 the Partnership sold to unrelated investors, $34,000,000
aggregate principal amount of its 12% Subordinated Notes (the "Subordinated
Notes") and warrants to purchase 2,419.1 units (the "Units") of Class B Common
Limited Partnership Interests representing in the aggregate 24.191% of the
outstanding limited partner interests of the Partnership on a fully diluted
basis (the "Warrants"). Of the $34,000,000 of gross proceeds, $3,687,142 was
determined to be the value of the Warrants, and $30,312,858 was allocated to the
Subordinated Notes. The discount on the Subordinated Notes is being amortized
over the term of these Notes.
The Subordinated Notes are subordinated to the senior indebtedness of the
Partnership and are due April 1, 2004. Interest is payable semi-annually on each
October 1 and April 1 in cash or through the issuance of additional Subordinated
Notes, at the option of the Partnership. In October 1996, April 1997, October
1997, April 1998 and October 1998, the Partnership elected to satisfy interest
due through the issuance of $1,945,667, $2,156,740, $2,037,079, $2,408,370 and
$2,552,871, respectively, additional Subordinated Notes. After September 2001, a
holder or holders of no less than 33 1/3% of the aggregate principal amount of
the Subordinated Notes can require the Partnership to repurchase their
Subordinated Notes at a price equal to the principal amount thereof plus accrued
interest. The Partnership has an option to redeem the Subordinated Notes at 102%
of the aggregate principal amount after the fifth anniversary of their issuance,
at 101% of the aggregate principal amount after the sixth anniversary of
issuance and at 100% of the aggregate principal amount after the seventh
anniversary of issuance.
Holders of the Warrants have the right to acquire the Units at any time for
a price of $1,500 per Unit. After September 2001, a holder or holders of at
least 33 1/3% of the Warrants can require the Partnership to either purchase
their Warrants at their interest in the Net Equity Value of the Partnership or
seek a purchaser for all of the assets or equity interests of the Partnership.
Net Equity Value pursuant to the terms of the underlying agreements is the
estimated amount of cash that would be available for distribution to the
Partnership interests upon a sale of all of the assets of the Partnership and
its subsequent dissolution and liquidation. The Net Equity Value is the amount
agreed to by the Partnership and 66 2/3% of the holders of the Subordinated
Notes and Warrants or, absent such agreement, determined through a specified
appraisal process.
F-161
<PAGE> 346
HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Partnership estimated the Net Equity Value of the Warrants to be
approximately $43,250,000 at December 31, 1998 and $16,750,000 at December 31,
1997. Such estimate as of December 31, 1998 reflects the amount that the holders
of the warrants have agreed to accept for their interests assuming the proposed
sale of all of the interests of the partnership is consummated (see note 14).
The increase in the estimated Net Equity Value over the original carrying value
of the Warrants is being accreted evenly over the period beginning with the date
of the increase and September 2001. Such accretion is being reflected in the
accompanying financial statements as an increase in the carrying value of the
Warrants and a corresponding reduction in the carrying value of the capital
accounts of the General and Class A Limited Partners.
The agreements underlying the Subordinated Notes and the Warrants contain
various restrictive covenants that include limitations on incurrence or
guarantee of indebtedness, transactions with affiliates, and distributions to
partners. In addition, management fees in the aggregate cannot exceed 5% of
gross revenues of the Partnership.
11. OTHER NOTES PAYABLE
Other Notes payable consists of the following at December 31:
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Promissory note in consideration for acquisition of a
cable television system, accruing interest at 10%
per annum on principal and accrued interest which is
added to principal on certain specified dates;
interest becomes payable on January 1, 1998 and the
principal is payable in full on August 20, 2000 $2,036,765 $2,036,765
Non-interest bearing promissory notes issued in
connection with the acquisition of a cable
television system. Principal payments begin on July
16, 1997, in the amount of $70,000 and four
installments in the amount of $170,000 on each July
16 thereafter. Such notes are reported net of
imputed interest of $141,116 and $101,732 in 1997
and 1998, respectively, computed at 9% per annum 538,884 408,268
Non-interest bearing promissory notes issued in
connection with the acquisitions of the internet
businesses. Principal payments are due in January,
February, and March of each year and continue
quarterly thereafter through June, 2001. Such notes
are reported net of imputed interest of $180,727 and
$146,441 in the 1997 and 1998, respectively,
computed at 9% per annum 1,398,478 1,021,474
Installment notes, collateralized by vehicles and
other equipment and payable in monthly installments,
at interest rates between 5.5% to 14.25% per annum,
through January, 2003 1,772,949 1,982,297
---------- ----------
$5,747,076 $5,448,804
========== ==========
</TABLE>
F-162
<PAGE> 347
HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Principal payments due on the above notes payable are summarized as follows
at December 31, 1998:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31 AMOUNT
- ----------------------- ----------
<S> <C>
1999............................................. $1,337,476
2000............................................. 3,276,529
2001............................................. 678,349
2002............................................. 140,944
2003............................................. 15,506
----------
$5,448,804
==========
</TABLE>
12. PARTNERS' DEFICIT
During 1993, the Principal Owner contributed a $6,500,000 unsecured,
non-interest bearing personal promissory note due on demand to the general
partner of THGLP. Additionally, the Principal Owner contributed to THGLP an
unsecured, non-interest bearing personal promissory note in the aggregate
principal amount of $24,000,000 (together with the $6,500,000 note, the "Baum
Notes"). The Baum Notes have been issued for the purpose of THGLP's credit
enhancement. Although the Baum Notes are unconditional, they do not become
payable except (i) in increasing amounts presently up to $19,500,000 and in
installments thereafter to a maximum of $30,500,000 on December 16, 1996 and
(ii) at such time after such dates as THGLP's creditors shall have exhausted all
claims against THGLP's assets.
13. COMMITMENTS
The Partnership and affiliates leases telephone and utility poles on an
annual basis. The leases are self renewing. Pole rental expense for the years
ended December 31, 1996, 1997 and 1998 was $609,075, $873,264 and $982,306,
respectively.
In connection with certain lease and franchise agreements, the Partnership,
from time to time, issues security bonds.
F-163
<PAGE> 348
HELICON PARTNERS I, L.P. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The Partnership and affiliates utilizes certain office space under
operating lease agreements which expire at various dates through August 2013 and
contain renewal options. At December 31, 1998 the future minimum rental
commitments under such leases were as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31
- -----------------------
<S> <C>
1999............................................. $ 166,825
2000............................................. 142,136
2001............................................. 141,727
2002............................................. 147,912
2003............................................. 151,412
Thereafter....................................... 1,418,017
----------
$2,168,029
==========
</TABLE>
Office rent expense was $102,801 in 1996, $203,506 in 1997 and $254,955 in
1998.
14. SUBSEQUENT EVENTS
On March 22, 1999, Helicon Partners I, L. P. (HPI), Baum Investments, Inc.
and all the holders of partnership interests in HPI entered into a purchase
agreement by and among Charter Communications, Inc, Charter Communications, LLC
and Charter Helicon, LLC (collectively the "Charter Entities") providing for the
sale of all such partnership interests and Helicon Corp.'s interest in the
management agreements with THGLP and HPIAC to the Charter Entities. The sale
price is $550 million which amount will be reduced by any outstanding
indebtedness assumed by the Charter Entities.
F-164
<PAGE> 349
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of InterMedia Partners
and InterMedia Capital Partners IV, L.P.
In our opinion, the accompanying combined balance sheets and the related
combined statements of operations, of changes in equity and of cash flows
present fairly, in all material respects, the financial position of InterMedia
Cable Systems (comprised of components of InterMedia Partners and InterMedia
Capital Partners IV, L.P.), at December 31, 1998 and 1997, and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles. These financial statements are
the responsibility of the management of InterMedia Partners and InterMedia
Capital Partners IV, L.P.; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
San Francisco, California
April 20, 1999
F-165
<PAGE> 350
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Accounts receivable, net of allowance for doubtful accounts
of $899 and $680, respectively........................... $ 14,425 $ 13,017
Receivables from affiliates................................ 5,623 1,719
Prepaid expenses........................................... 423 626
Other current assets....................................... 350 245
-------- --------
Total current assets............................. 20,821 15,607
Intangible assets, net..................................... 255,356 283,562
Property and equipment, net................................ 218,465 179,681
Deferred income taxes...................................... 12,598 14,221
Other non-current assets................................... 2,804 1,140
-------- --------
Total assets..................................... $510,044 $494,211
======== ========
LIABILITIES AND EQUITY
Accounts payable and accrued liabilities................... $ 19,230 $ 20,934
Deferred revenue........................................... 11,104 8,938
Payables to affiliates..................................... 3,158 2,785
Income taxes payable....................................... 285
-------- --------
Total current liabilities........................ 33,492 32,942
Note payable to InterMedia Partners IV, L.P................ 396,579 387,213
Deferred channel launch revenue............................ 4,045 2,104
-------- --------
Total liabilities................................ 434,116 422,259
-------- --------
Commitments and contingencies..............................
Mandatorily redeemable preferred shares.................... 14,184 13,239
Equity..................................................... 61,744 58,713
-------- --------
Total liabilities and equity..................... $510,044 $494,211
======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-166
<PAGE> 351
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
REVENUES
Basic and cable services................................... $125,920 $112,592
Pay services............................................... 23,975 24,467
Other services............................................. 26,167 25,519
-------- --------
176,062 162,578
COSTS AND EXPENSES
Program fees............................................... 39,386 33,936
Other direct expenses...................................... 16,580 16,500
Selling, general and administrative expenses............... 30,787 29,181
Management and consulting fees............................. 3,147 2,870
Depreciation and amortization.............................. 85,982 81,303
-------- --------
175,882 163,790
-------- --------
Profit/(loss) from operations.............................. 180 (1,212)
-------- --------
OTHER INCOME (EXPENSE)
Interest expense........................................... (25,449) (28,458)
Gain on sale/exchange of cable systems..................... 26,218 10,006
Interest and other income.................................. 341 429
Other expense.............................................. (3,188) (1,431)
-------- --------
(2,078) (19,454)
Loss before income tax benefit (expense)................... (1,898) (20,666)
Income tax benefit (expense)............................... (1,623) 4,026
-------- --------
NET LOSS................................................... $ (3,521) $(16,640)
======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-167
<PAGE> 352
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
COMBINED STATEMENT OF CHANGES IN EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Balance at December 31, 1996................................ $ 69,746
Net loss.................................................... (16,640)
Accretion for mandatorily redeemable preferred shares....... (882)
Net contributions from parent............................... 6,489
--------
Balance at December 31, 1997................................ 58,713
Net loss.................................................... (3,521)
Accretion for mandatorily redeemable preferred shares....... (945)
Net cash contributions from parent.......................... 6,350
In-kind contribution from parent............................ 1,147
--------
Balance at December 31, 1998................................ $ 61,744
========
</TABLE>
See accompanying notes to combined financial statements.
F-168
<PAGE> 353
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------
1998 1997
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................... $ (3,521) $(16,640)
Adjustments to reconcile net loss to cash flows from
operating activities:
Depreciation and amortization....................... 85,982 81,303
Loss and disposal of fixed assets................... 3,177 504
Gain on sale/exchange of cable systems.............. (26,218) (10,006)
Changes in assets and liabilities:
Accounts receivable............................... (1,395) (2,846)
Receivables from affiliates....................... (3,904) (639)
Prepaid expenses.................................. 203 (251)
Other current assets.............................. (106) (10)
Deferred income taxes............................. 1,623 (4,311)
Other non-current assets.......................... (517) (58)
Accounts payable and accrued liabilities.......... (2,073) 4,436
Deferred revenue.................................. 1,208 1,399
Payables to affiliates............................ 373 469
Accrued interest.................................. 25,449 28,458
Deferred channel launch revenue................... 2,895 2,817
-------- --------
Cash flows from operating activities........... 83,176 84,625
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment................. (72,673) (87,253)
Sale/exchange of cable systems...................... (398) 11,157
Intangible assets................................... (372) (506)
-------- --------
Cash flows from investing activities........... (73,443) (76,602)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net contributions from parent....................... 6,350 6,489
Net repayment of borrowings......................... (16,083) (14,512)
-------- --------
Cash flows from financing activities........... (9,733) (8,023)
-------- --------
Net change in cash....................................... -- --
-------- --------
CASH AT BEGINNING OF PERIOD.............................. -- --
-------- --------
CASH AT END OF PERIOD.................................... $ -- $ --
======== ========
</TABLE>
See accompanying notes to combined financial statements.
F-169
<PAGE> 354
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
THE CHARTER TRANSACTIONS
InterMedia Partners, a California limited partnership ("IP-I"), and
InterMedia Capital Partners IV, L.P., a California limited partnership,
("ICP-IV", together with IP-I, "InterMedia") are affiliated through common
control and management. Robin Media Group, Inc., a Nevada corporation, ("RMG")
is a majority owned subsidiary of ICP-IV. On April 20, 1999, InterMedia and
certain of its affiliates entered into agreements (the "Agreements") with
affiliates of Charter Communications, Inc. ("Charter") to sell and exchange
certain of their cable television systems ("the Charter Transactions").
Specifically, ICP-IV and its affiliates have agreed to sell certain of
their cable television systems in Tennessee and Gainsville, Georgia through a
combination of asset sales and the sale of its equity interests in RMG, and to
exchange their systems in and around Greenville and Spartanburg, South Carolina
for Charter systems located in Indiana, Kentucky, Utah and Montana. Immediately
upon Charter's acquisition of RMG, IP-I will exchange its cable television
systems in Athens, Georgia, Asheville and Marion, North Carolina and Cleveland,
Tennessee for RMG's cable television systems located in middle Tennessee.
The Charter Transactions are expected to close during the third or fourth
quarter of 1999. The cable systems retained by Charter upon consummation of the
Charter Transactions, together with RMG, are referred to as the "InterMedia
Cable Systems," or the "Systems."
PRESENTATION
The accompanying combined financial statements represent the financial
position of the InterMedia Cable Systems as of December 31, 1998 and 1997 and
the results of their operations and their cash flows for the years then ended.
The Systems being sold or exchanged do not individually or collectively comprise
a separate legal entity. Accordingly, the combined financial statements have
been carved-out from the historical accounting records of InterMedia.
CARVE-OUT METHODOLOGY
Throughout the periods covered by the combined financial statements, the
individual cable systems were operated and accounted for separately. However,
the Charter Transactions exclude certain systems (the "Excluded Systems") which
were operated as part of the Marion, North Carolina and western Tennessee
systems throughout 1997 and 1998. For purposes of carving out and excluding the
results of operations and financial position of the Excluded Systems from the
combined financial statements, management has estimated the revenues, expenses,
assets and liabilities associated with each Excluded System based on the ratio
of each Excluded System's basic subscribers to the total basic subscribers
served by the Marion, North Carolina and western Tennessee systems,
respectively. Management believes the basis used for these allocations is
reasonable. The
F-170
<PAGE> 355
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Systems' results of operations are not necessarily indicative of future
operating results or the results that would have occurred if the Systems were a
separate legal entity.
Management and consulting fees represent an allocation of management fees
charged to IP-I and ICP-IV by InterMedia Capital Management, a California
limited partnership ("ICM") and InterMedia Management, Inc. ("IMI"),
respectively. Prior to January 1, 1998, InterMedia Capital Management IV, L.P.
("ICM-IV") provided such management and consulting services to ICP-IV. ICM and
ICM-IV are limited partners of IP-I and ICP-IV, respectively. IMI is the
managing member of each of the general partners of IP-I and ICP-IV. These fees
are charged at a fixed amount per annum and have been allocated to the Systems
based upon the allocated contributed capital of the individual systems as
compared to the total contributed capital of InterMedia's subsidiaries.
As more fully described in Note 9 -- "Related Party Transactions," certain
administrative services are also provided by IMI and are charged to all
affiliates based on relative basic subscriber percentages.
CASH AND INTERCOMPANY ACCOUNTS
Under InterMedia's centralized cash management system, cash requirements of
its individual operating units were generally provided directly by InterMedia
and the cash generated or used by the Systems was transferred to/from
InterMedia, as appropriate, through intercompany accounts. The intercompany
account balances between InterMedia and the individual operating units, except
RMG's intercompany note payable to InterMedia Partners IV, L.P. ("IP-IV") as
described in Note 7 -- "Note Payable to InterMedia Partners IV, L.P." are not
intended to be settled. Accordingly, the balances, other than RMG's note payable
to IP-IV, are included in equity and all net cash generated from operations,
investing activities and financing activities have been included in the Systems'
net contribution from parent in the combined statements of cash flows.
IP-I and ICP-IV or its subsidiaries maintain all external debt to fund and
manage InterMedia's operations on a centralized basis. The combined financial
statements present only the debt and related interest expense of RMG, which is
assumed and repaid by Charter pursuant to the Charter Transactions. See Note
7 -- "Note Payable to InterMedia Partners IV, L.P." Debt, unamortized debt issue
costs and interest expense related to the financing of the cable systems not
owned by RMG have not been allocated to the InterMedia Cable Systems. As such,
the level of debt, unamortized debt issue costs and related interest expense
presented in the combined financial statements are not representative of the
debt that would be required or interest expenses incurred if InterMedia Cable
Systems were a separate legal entity.
F-171
<PAGE> 356
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Cable television service revenue is recognized in the period in which
services are provided to customers. Deferred revenue generally represents
revenue billed in advance and deferred until cable service is provided.
PROPERTY AND EQUIPMENT
Additions to property and equipment, including new customer installations,
are recorded at cost. Self-constructed fixed assets include materials, labor and
overhead. Costs of disconnecting and reconnecting cable service are expensed.
Expenditures for maintenance and repairs are charged to expense as incurred.
Expenditures for major renewals and improvements are capitalized. Capitalized
fixed assets are written down to recoverable values whenever recoverability
through operations or sale of the systems becomes doubtful. Gains and losses on
disposal of property and equipment are included in the Systems' statements of
operations when the assets are sold or retired from service.
Depreciation is computed using the double-declining balance method over the
following estimated useful lives:
<TABLE>
<CAPTION>
YEARS
------
<S> <C>
Cable television plant...................................... 5 - 10
Buildings and improvements.................................. 10
Furniture and fixtures...................................... 3 - 7
Equipment and other......................................... 3 - 10
</TABLE>
INTANGIBLE ASSETS
The Systems have franchise rights to operate cable television systems in
various towns and political subdivisions. Franchise rights are being amortized
over the lesser of the remaining franchise lives or the base ten and twelve-year
terms of IP-I and ICP-IV, respectively. The remaining lives of the franchises
range from one to eighteen years.
Goodwill represents the excess of acquisition costs over the fair value of
net tangible and franchise assets acquired and liabilities assumed and is being
amortized on a straight-line basis over the base ten or twelve-year term of IP-I
and ICP-IV, respectively.
Capitalized intangibles are written down to recoverable values whenever
recoverability through operations or sale of the systems becomes doubtful. Each
year, the Systems evaluate the recoverability of the carrying value of their
intangible assets by assessing whether the projected cash flows, including
projected cash flows from sale of the systems, is sufficient to recover the
unamortized costs of these assets.
F-172
<PAGE> 357
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
INCOME TAXES
Income taxes reported in InterMedia Cable Systems' combined financial
statements represent the tax effects of RMG's results of operations. RMG as a
corporation is the only entity within InterMedia Cable Systems which reports a
provision/benefit for income taxes. No provision or benefit for income taxes is
reported by any of the other cable systems within the InterMedia Cable Systems
structure because these systems are currently owned by various partnerships,
and, as such, the tax effects of these cable systems' results of operations
accrue to the partners.
RMG accounts for income taxes using the asset and liability approach which
requires the recognition of deferred tax assets and liabilities for the tax
consequences of temporary differences by applying enacted statutory tax rates
applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of receivables, payables, deferred revenue and accrued
liabilities approximates fair value due to their short maturity.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income (FAS
130), which establishes standards for reporting and disclosure of comprehensive
income and its components. FAS 130 is effective for fiscal years beginning after
December 15, 1997 and requires reclassification of financial statements for
earlier periods to be provided for comparative purposes. The Systems' total
comprehensive loss for all periods presented herein did not differ from those
amounts reported as net loss in the combined statement of operations.
F-173
<PAGE> 358
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
3. SALE AND EXCHANGE OF CABLE PROPERTIES
SALE
On December 5, 1997, RMG sold its cable television assets serving
approximately 7,400 (unaudited) basic subscribers in and around Royston and
Toccoa, Georgia. The sale resulted in a gain, calculated as follows:
<TABLE>
<S> <C>
Proceeds from sale.......................................... $11,212
Net book value of assets sold............................... (1,206)
-------
Gain on sale................................................ $10,006
=======
</TABLE>
EXCHANGE
On December 31, 1998, certain of the Systems' cable television assets
located in and around western and eastern Tennessee ("Exchanged Assets"),
serving approximately 10,600 (unaudited) basic subscribers, plus cash of $398
were exchanged for other cable television assets located in and around western
and eastern Tennessee, serving approximately 10,000 (unaudited) basic
subscribers.
The cable television assets received have been recorded at fair market
value, allocated as follows:
<TABLE>
<S> <C>
Property and equipment...................................... $ 5,141
Franchise rights............................................ 24,004
-------
Total............................................. $29,145
=======
</TABLE>
The exchange resulted in a gain of $26,218 calculated as the difference
between the fair value of the assets received and the net book value of the
Exchanged Assets less cash paid of $398.
4. INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
--------- --------
<S> <C> <C>
Franchise rights..................................... $ 332,157 $302,308
Goodwill............................................. 58,505 58,772
Other................................................ 345 6,392
--------- --------
391,007 367,472
Accumulated amortization............................. (135,651) (83,910)
--------- --------
$ 255,356 $283,562
========= ========
</TABLE>
F-174
<PAGE> 359
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
5. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Land.................................................. $ 1,068 $ 1,898
Cable television plant................................ 231,937 138,117
Building and improvements............................. 5,063 4,657
Furniture and fixtures................................ 3,170 2,009
Equipment and other................................... 25,396 21,808
Construction-in-progress.............................. 18,065 49,791
-------- --------
284,699 218,280
Accumulated depreciation.............................. (66,234) (38,599)
-------- --------
$218,465 $179,681
======== ========
</TABLE>
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1997
------- -------
<S> <C> <C>
Accounts payable......................................... $ 1,780 $ 2,996
Accrued program costs.................................... 1,897 1,577
Accrued franchise fees................................... 4,676 4,167
Accrued copyright fees................................... 406 762
Accrued capital expenditures............................. 5,215 5,179
Accrued payroll costs.................................... 1,784 1,789
Accrued property and other taxes......................... 862 1,851
Other accrued liabilities................................ 2,610 2,613
------- -------
$19,230 $20,934
======= =======
</TABLE>
7. NOTE PAYABLE TO INTERMEDIA PARTNERS IV, L.P.
RMG's note payable to IP-IV consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
<S> <C> <C>
Intercompany revolving credit facility, $1,200,000
commitment as of December 31, 1998, interest
currently at 6.86% payable on maturity, matures
December 31, 2006................................ $396,579 $387,213
======== ========
</TABLE>
F-175
<PAGE> 360
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
RMG's debt is outstanding under an intercompany revolving credit facility
executed with IP-IV. The revolving credit facility currently provides for
$1,200,000 of available credit.
RMG's intercompany revolving credit facility requires repayment of the
outstanding principal and accrued interest on the earlier of (i) December 31,
2006, or (ii) acceleration of any of IP-IV's obligations to repay under its bank
debt outstanding under its revolving credit facility ("IP-IV Revolving Credit
Facility") and term loan agreement ("IP-IV Term Loan", together with the IP-IV
Revolving Credit Facility, the "IP-IV Bank Facility") dated July 30, 1996.
Interest rates under RMG's intercompany revolving credit facility are
calculated monthly and are referenced to those made available under the IP-IV
Bank Facility. Interest rates ranged from 6.84% to 7.92% during 1998.
Charter has an obligation to assume and repay RMG's intercompany revolving
credit facility pursuant to the Charter Transactions.
Advances under the IP-IV Bank Facility are available under interest rate
options related to the base rate of the administrative agent for the IP-IV Bank
Facility ("ABR") or LIBOR. Effective October 20, 1997, pursuant to an amendment
to the IP-IV Bank Facility, interest rates on borrowings under the IP-IV Term
Loan vary from LIBOR plus 1.75% to LIBOR plus 2.00% or ABR plus 0.50% to ABR
plus 0.75% based on IP-IV's ratio of debt outstanding to annualized quarterly
operating cash flow ("Senior Debt Ratio"). Interest rates vary on borrowings
under the IP-IV Revolving Credit Facility from LIBOR plus 0.625% to LIBOR plus
1.50% or ABR to ABR plus 0.25% based on IP-IV's Senior Debt Ratio. Prior to the
amendment, interest rates on borrowings under the IP-IV Term Loan were at LIBOR
plus 2.375% or ABR plus 1.125%; and, interest rates on borrowings under the
IP-IV Revolving Credit Facility varied from LIBOR plus 0.75% to LIBOR plus 1.75%
or ABR to ABR plus 0.50% based on IP-IV's Senior Debt Ratio. The IP-IV Bank
Facility requires quarterly payment of fees on the unused portion of the IP-IV
Revolving Credit Facility of 0.375% per annum when the Senior Debt Ratio is
greater than 4.0:1.0 and at 0.25% when the Senior Debt Ratio is less than or
equal to 4.0:1.0.
The terms and conditions of RMG's intercompany debt agreement are not
necessarily indicative of the terms and conditions which would be available if
the Systems were a separate legal entity.
8. MANDATORILY REDEEMABLE PREFERRED SHARES
RMG has Redeemable Preferred Stock outstanding at December 31, 1998 and
1997, which has an annual dividend of 10.0% and participates in any dividends
paid on the common stock at 10.0% of the dividend per share paid on the common
stock. The Redeemable Preferred Stock bears a liquidation preference of $12,000
plus any accrued but unpaid dividends at the time of liquidation and is
mandatorily redeemable on September 30, 2006 at the liquidation preference
amount. Under the Agreements, upon
F-176
<PAGE> 361
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
consummation of the Charter Transactions, Charter has an obligation to redeem
RMG's Redeemable Preferred Stock at the liquidation preference amount.
9. RELATED PARTY TRANSACTIONS
ICM and IMI provide certain management services to IP-I and ICP-IV,
respectively, for per annum fixed fees, of which 20% per annum is deferred and
payable in each following year in order to support InterMedia's debt. Prior to
January 1, 1998, ICM-IV provided such management services to ICP-IV.
InterMedia's management fees for the years ended December 31, 1998 and 1997
amounted to $5,410, and $6,395, respectively, of which $3,147 and $2,870,
respectively, has been charged to the Systems.
IMI has entered into agreements with both IP-I and ICP-IV to provide
accounting and administrative services at cost. Under the terms of the
agreements, the expenses associated with rendering these services are charged to
the Systems and other affiliates based upon relative basic subscriber
percentages. Management believes this method to be reflective of the actual
cost. During 1998 and 1997, IMI administrative fees charged to the Systems
totaled $3,657 and $4,153, respectively. Receivable from affiliates at December
31, 1998 and 1997 includes $52 and $1,080, respectively, of advances to IMI, net
of administrative fees charged by IMI and operating expenses paid by IMI on
behalf of the Systems.
IP-I is majority-owned, and ICP-IV is owned in part, by
Tele-Communications, Inc. ("TCI"). As affiliates of TCI, IP-I and ICP-IV are
able to purchase programming services from a subsidiary of TCI. Management
believes that the overall programming rates made available through this
relationship are lower than the Systems could obtain separately. Such volume
rates may not continue to be available in the future should TCI's ownership
interest in InterMedia significantly decrease. Program fees charged by the TCI
subsidiary to the Systems for the years ended December 31, 1998 and 1997
amounted to $30,884 and $26,815, respectively. Payable to affiliates includes
programming fees payable to the TCI subsidiary of $2,918 and $2,335 at December
31, 1998 and 1997, respectively.
On January 1, 1998 an affiliate of TCI entered into agreements with
InterMedia to manage the Systems' advertising business and related services for
an annual fixed fee per advertising sales subscriber as defined by the
agreements. In addition to the annual fixed fee TCI is entitled to varying
percentage shares of the incremental growth in annual cash flows from
advertising sales above specified targets. Management fees charged by the TCI
subsidiary for the year ended December 31, 1998 amount to $292. Receivable from
affiliates at December 31, 1998 includes $3,437 of receivable from TCI for
advertising sales.
As part of its normal course of business the Systems are involved in
transactions with affiliates of InterMedia which own and operate cable
television systems. Such transactions include purchases and sales of inventories
used in construction of cable plant at cost. Receivable from affiliates at
December 31, 1998 and 1997 includes $2,134 and $639,
F-177
<PAGE> 362
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
respectively, of receivables from affiliated systems. Payable to affiliates at
December 31, 1998 and 1997 includes $208 and $181, respectively, of payables to
affiliated systems.
10. CABLE TELEVISION REGULATION
Cable television legislation and regulatory proposals under consideration
from time to time by Congress and various federal agencies have in the past, and
may in the future, materially affect the Systems and the cable television
industry.
The cable industry is currently regulated at the federal and local levels
under the Cable Act of 1984, the Cable Act of 1992 ("the 1992 Act"), the
Telecommunications Act of 1996 (the "1996 Act") and regulations issued by the
Federal Communications Commission ("FCC") in response to the 1992 Act. FCC
regulations govern the determination of rates charged for basic, expanded basic
and certain ancillary services, and cover a number of other areas including
customer services and technical performance standards, the required transmission
of certain local broadcast stations and the requirement to negotiate
retransmission consent from major network and certain local television stations.
Among other provisions, the 1996 Act eliminated rate regulation on the expanded
basic tier effective March 31, 1999.
Current regulations issued in conjunction with the 1992 Act empower the FCC
and/or local franchise authorities to order reductions of existing rates which
exceed the maximum permitted levels and to require refunds measured from the
date a complaint is filed in some circumstances or retroactively for up to one
year in other circumstances. Management believes it has made a fair
interpretation of the 1992 Act and related FCC regulations in determining
regulated cable television rates and other fees based on the information
currently available. However, complaints have been filed with the FCC on rates
for certain franchises and certain local franchise authorities have challenged
existing and prior rates. Further complaints and challenges could be
forthcoming, some of which could apply to revenue recorded in 1998, 1997 and
prior years. Management believes that the effect, if any, of these complaints
and challenges will not be material to the Systems' financial position or
results of operations.
Many aspects of regulation at the federal and local levels are currently
the subject of judicial review and administrative proceedings. In addition, the
FCC is required to conduct rulemaking proceedings to implement various
provisions of the 1996 Act. It is not possible at this time to predict the
ultimate outcome of these reviews or proceedings or their effect on the Systems.
11. COMMITMENTS AND CONTINGENCIES
The Systems are committed to provide cable television services under
franchise agreements with remaining terms of up to eighteen years. Franchise
fees of up to 5% of gross revenues are payable under these agreements.
F-178
<PAGE> 363
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Current FCC regulations require that cable television operators obtain
permission to retransmit major network and certain local television station
signals. The Systems have entered into long-term retransmission agreements with
all applicable stations in exchange for in-kind and/or other consideration.
InterMedia has been named in purported and certified class actions in
various jurisdictions concerning late fee charges and practices. Certain cable
systems owned by InterMedia charge late fees to customers who do not pay their
cable bills on time. These late fee cases challenge the amount of the late fees
and the practices under which they are imposed. The Plaintiffs raise claims
under state consumer protection statutes, other state statutes, and common law.
Plaintiffs generally allege that the late fees charged by InterMedia's cable
systems, including the Systems in the States of Tennessee, South Carolina and
Georgia are not reasonably related to the costs incurred by the cable systems as
a result of the late payment. Plaintiffs seek to require cable systems to reduce
their late fees on a prospective basis and to provide compensation for alleged
excessive late fee charges for past periods. These cases are either at the early
stages of the litigation process or are subject to a case management order that
sets forth a process leading to mediation. Based upon the facts available
management believes that, although no assurances can be given as to the outcome
of these actions, the ultimate disposition of these matters should not have a
material adverse effect upon the financial condition of the Systems.
Under existing Tennessee laws and regulations, the Systems pay an Amusement
Tax in the form of a sales tax on programming service revenues generated in
Tennessee in excess of charges for the basic and expanded basic levels of
service. Under the existing statute, only the service charges or fees in excess
of the charges for the "basic cable" television service package are exempt from
the Amusement Tax. Related regulations clarify the definition of basic cable to
include two tiers of service, which InterMedia's management and other operators
in Tennessee have interpreted to mean both the basic and expanded basic level of
services.
The Tennessee Department of Revenue ("TDOR") has proposed legislation which
would replace the Amusement Tax under the existing statute with a new sales tax
on all cable service revenues in excess of twelve dollars per month. The new tax
would be computed at a rate approximately equal to the existing effective tax
rate.
Unless InterMedia and other cable operators in Tennessee support the
proposed legislation, the TDOR has suggested that it would assess additional
taxes on prior years' expanded basic service revenues. The TDOR can issue an
assessment for prior periods up to three years. Management estimates that the
amount of such an assessment for the Systems, if made for all periods not
previously audited, would be approximately $5.4 million. InterMedia's management
believes that it is possible but not likely that the TDOR can make such an
assessment and prevail in defending it.
InterMedia's management believes it has made a valid interpretation of the
current Tennessee statute and regulations and that it has properly determined
and paid all sales taxes due. InterMedia further believes that the legislative
history of the current statute and
F-179
<PAGE> 364
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
related regulations, as well as the TDOR's history of not making assessments
based on audits of prior periods, support InterMedia's interpretation.
InterMedia and other cable operators in Tennessee are aggressively defending
their past practices on calculation and payment of the Amusement Tax and are
discussing with the TDOR modifications to their proposed legislation which would
clarify the statute and would minimize the impact of such legislation on the
Systems' results of operations.
The Systems are subject to other claims and litigation in the ordinary
course of business. In the opinion of management, the ultimate outcome of any
existing litigation or other claims will not have a material effect on the
Systems' financial position or results of operations.
The Systems have entered into pole rental agreements and lease certain of
its facilities and equipment under non-cancelable operating leases. Minimum
rental commitments at December 31, 1998 for the next five years and thereafter
under non-cancelable operating leases related to the Systems are as follows:
<TABLE>
<S> <C>
1999........................................................ $155
2000........................................................ 144
2001........................................................ 136
2002........................................................ 35
2003........................................................ 7
----
$477
====
</TABLE>
Rent expense, including pole rental agreements, for the years ended
December 31, 1998 and 1997 was $2,817 and $2,828, respectively.
12. INCOME TAXES
Income tax (expense) benefit consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1998 1997
------- ------
<S> <C> <C>
Current federal....................................... $ -- $ (285)
Deferred federal...................................... (1,454) 3,813
Deferred state........................................ (169) 498
------- ------
$(1,623) $4,026
======= ======
</TABLE>
F-180
<PAGE> 365
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Deferred income taxes relate to temporary differences as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1998 1997
-------- ---------
<S> <C> <C>
Property and equipment............................ $ (7,258) $ (6,786)
Intangible assets................................. (12,930) (8,336)
-------- ---------
(20,188) (15,122)
Loss carryforward - federal....................... 31,547 29,058
Loss carryforward - state......................... 297 --
Other............................................. 942 285
-------- ---------
$ 12,598 $ 14,221
======== =========
</TABLE>
At December 31, 1998, RMG had net operating loss carryforwards for federal
income tax purposes aggregating $92,785, which expire through 2018. RMG is a
loss corporation as defined in Section 382 of the Internal Revenue Code.
Therefore, if certain substantial changes in RMG's ownership should occur, there
could be a significant annual limitation on the amount of loss carryforwards
which can be utilized.
InterMedia's management has not established a valuation allowance to reduce
the deferred tax assets related to RMG's unexpired net operating loss
carryforwards. Due to an excess of appreciated asset value over the tax basis of
RMG's net assets, management believes it is more likely than not that the
deferred tax assets related to unexpired net operating losses will be realized.
A reconciliation of the tax benefit computed at the statutory federal rate
and the tax (expense) benefit reported in the accompanying combined statements
of operations is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1998 1997
------- --------
<S> <C> <C>
Tax benefit at federal statutory rate............... $ 626 $ 4,454
State taxes, net of federal benefit................. 73 498
Goodwill amortization............................... (2,309) (2,056)
Realization of acquired tax benefit................. -- 346
Other............................................... (13) 784
------- --------
$(1,623) $ 4,026
======= ========
</TABLE>
13. CHANNEL LAUNCH REVENUE
During the years ended December 31, 1998 and 1997, the Systems were
credited $2,646 and $5,072, respectively, representing their share of payments
received by IP-I and ICP-IV from certain programmers to launch and promote their
new channels. Also, during 1998 the Systems recorded a receivable from a
programmer, of which $1,791 remains outstanding at December 31, 1998, for the
launch and promotion of its new channel. Of
F-181
<PAGE> 366
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
the total amount credited the Systems recognized advertising revenue of $586 and
$1,182 during the year ended December 31, 1998 and 1997, respectively, for
advertisements provided by the Systems to promote the new channels. The
remaining payments and receivable credited from the programmers are being
amortized over the respective terms of the program agreements which range
between five and ten years. For the years ended December 31, 1998 and 1997, the
Systems amortized and recorded as other service revenue $956 and $894
respectively.
14. SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
In connection with RMG's sale of its cable television assets located in
Royston and Toccoa, Georgia in December 1997, as described in Note 3 -- "Sale
and Exchange of Cable Properties," net cash proceeds received were as follows:
<TABLE>
<CAPTION>
<S> <C>
Proceeds from sale.......................................... $11,212
Receivable from buyer....................................... (55)
-------
Net proceeds received from buyer.................. $11,157
=======
</TABLE>
In connection with the exchange of certain cable assets in and around
western and eastern Tennessee on December 31, 1998, as described in Note 3, the
Systems paid cash of $398.
In December 1998, IP-IV contributed its 4.99% partner interest in a limited
partnership to RMG. The book value of the investment at the time of the
contribution was $1,147.
Total accretion on RMG's Redeemable Preferred Stock for the years ended
December 31, 1998 and 1997 amounted to $945 and $882, respectively.
15. EMPLOYEE BENEFIT PLANS
The Systems participate in the InterMedia Partners Tax Deferred Savings
Plan which covers all full-time employees who have completed at least six months
of employment. The plan provides for a base employee contribution of 1% and a
maximum of 15% of compensation. The Systems' matching contributions under the
plan are at the rate of 50% of the employee's contribution, up to a maximum of
5% of compensation.
F-182
<PAGE> 367
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Rifkin Cable Income Partners L.P.
In our opinion, the accompanying balance sheet and the related statements of
operations, of partners' equity (deficit) and of cash flows present fairly, in
all material respects, the financial position of Rifkin Cable Income Partners
L.P. (the "Partnership") at December 31, 1997 and 1998, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Partnership's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICEWATERHOUSECOOPERS LLP
Denver, Colorado
March 19, 1999
F-183
<PAGE> 368
RIFKIN CABLE INCOME PARTNERS L. P.
BALANCE SHEET
<TABLE>
<CAPTION>
12/31/97 12/31/98
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................... $ 381,378 $ 65,699
Customer accounts receivable, net of allowance for
doubtful accounts of $12,455 in 1997 and $18,278
in 1998........................................... 49,585 51,523
Other receivables................................... 123,828 133,278
Prepaid expenses and deposits....................... 81,114 70,675
Property, plant and equipment, at cost:
Cable television transmission and distribution
systems and related equipment.................. 8,536,060 8,758,525
Land, buildings, vehicles and furniture and
fixtures....................................... 618,671 623,281
----------- -----------
9,154,731 9,381,806
Less accumulated depreciation..................... (3,847,679) (4,354,685)
----------- -----------
Net property, plant and equipment.............. 5,307,052 5,027,121
Franchise costs and other intangible assets, net of
accumulated amortization of $1,819,324 in 1997 and
$2,033,405 in 1998................................ 2,005,342 1,772,345
----------- -----------
Total assets.............................. $ 7,948,299 $ 7,120,641
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued liabilities............ $ 365,392 $ 396,605
Customer deposits and prepayments................... 177,307 126,212
Interest payable.................................... 58,093 --
Long-term debt...................................... 4,914,000 --
Interpartnership debt............................... -- 2,865,426
----------- -----------
Total liabilities......................... 5,514,792 3,388,243
Commitments and contingencies (Notes 4 and 8)
Partners' equity:
General partner................................... 263,171 822,837
Limited partners.................................. 2,170,336 2,909,561
----------- -----------
Total partner's equity.................... 2,433,507 3,732,398
----------- -----------
Total liabilities and partners' equity.... $ 7,948,299 $ 7,120,641
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-184
<PAGE> 369
RIFKIN CABLE INCOME PARTNERS L.P.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------
12/31/96 12/31/97 12/31/98
---------- ---------- ----------
<S> <C> <C> <C>
REVENUE:
Service...................................... $4,104,841 $4,491,983 $4,790,052
Installation and other....................... 206,044 239,402 345,484
---------- ---------- ----------
Total revenue...................... 4,310,885 4,731,385 5,135,536
COSTS AND EXPENSES:
Operating expense............................ 643,950 691,700 671,968
Programming expense.......................... 787,124 879,939 1,077,540
Selling, general and administrative
expense.................................... 683,571 663,903 622,774
Depreciation................................. 535,559 602,863 628,515
Amortization................................. 377,749 332,770 199,854
Management fees.............................. 215,544 236,569 256,777
Loss (gain) on disposal of assets............ 1,530 2,980 (2,138)
---------- ---------- ----------
Total costs and expenses........... 3,245,027 3,410,724 3,455,290
---------- ---------- ----------
Operating income............................. 1,065,858 1,320,661 1,680,246
Interest expense............................. 533,294 448,530 362,439
---------- ---------- ----------
Net income before extraordinary item......... 532,564 872,131 1,317,807
Extraordinary item -- Loss on early
retirement of debt (Note 1)................ -- -- 18,916
---------- ---------- ----------
Net income................................... $ 532,564 $ 872,131 $1,298,891
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-185
<PAGE> 370
RIFKIN CABLE INCOME PARTNERS L.P.
STATEMENT OF PARTNERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
--------- ---------- ----------
<S> <C> <C> <C>
Partners' equity (deficit), December 31,
1995.................................... $(299,131) $1,427,630 $1,128,499
Net income................................ 229,471 303,093 532,564
Equity distribution....................... (42,953) (56,734) (99,687)
--------- ---------- ----------
Partners' equity (deficit), December 31,
1996.................................... (112,613) 1,673,989 1,561,376
Net income................................ 375,784 496,347 872,131
--------- ---------- ----------
Partners' equity, December 31, 1997....... 263,171 2,170,336 2,433,507
Net income................................ 559,666 739,225 1,298,891
--------- ---------- ----------
Partners' equity December 31, 1998........ $ 822,837 $2,909,561 $3,732,398
========= ========== ==========
</TABLE>
The partners' capital accounts for financial reporting purposes vary from
the tax capital accounts.
The accompanying notes are an integral part of the financial statements.
F-186
<PAGE> 371
RIFKIN CABLE INCOME PARTNERS L.P.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------
12/31/96 12/31/97 12/31/98
----------- ---------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................. $ 532,564 $ 872,131 $ 1,298,891
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization....... 913,308 935,633 828,369
Amortization of deferred loan
cost.............................. 18,970 18,970 14,228
Loss on early retirement of debt.... -- -- 18,916
Loss (gain) on disposal of fixed
assets............................ 1,530 2,980 (2,138)
Decrease (increase) in customer
accounts receivables.............. 521 (5,729) (1,938)
Increase in other receivables....... (45,274) (56,059) (9,450)
Decrease in prepaid expense and
other............................. 40,737 13,230 10,439
Increase (decrease) in accounts
payable and accrued liabilities... (207,035) 61,625 31,213
Increase (decrease) in customer
deposits and prepayment........... 673 (63,524) (51,095)
Increase (decrease) in interest
payable........................... 35,638 (3,145) (58,093)
----------- ---------- -----------
Net cash provided by operating
activities..................... 1,291,632 1,776,112 2,079,342
----------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and
equipment........................... (824,359) (679,394) (415,534)
Additions to other intangible assets,
net of refranchises................. -- (112) --
Net proceeds from the sale of assets... 18,255 57,113 69,087
Sales tax related to Florida assets
sold in 1994........................ (14,694) -- --
----------- ---------- -----------
Net cash used in investing
activities..................... (820,798) (622,393) (346,447)
----------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from interpartnership debt.... -- -- 4,265,426
Payments of long-term debt............. (715,000) (871,000) (4,914,000)
Payments of interpartnership debt...... -- -- (1,400,000)
Partners' capital distributions........ (99,687) -- --
----------- ---------- -----------
Net cash used in financing
activities..................... (814,687) (871,000) (2,048,574)
----------- ---------- -----------
Net increase (decrease) in cash and cash
equivalents............................ (343,853) 282,719 (315,679)
Cash and cash equivalents at beginning of
period................................. 442,512 98,659 381,378
----------- ---------- -----------
Cash and cash equivalents at end of
period................................. $ 98,659 $ 381,378 $ 65,699
=========== ========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid.......................... $ 455,124 $ 431,722 $ 406,304
=========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-187
<PAGE> 372
RIFKIN CABLE INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Rifkin Cable Income Partners L.P. (the "Partnership") was formed in 1986 as
a limited partnership under the laws of the State of Delaware. The Partnership
owns, operates and develops cable television systems in Missouri and New Mexico.
Rifkin Cable Management Partners L.P., an affiliate of Rifkin & Associates, Inc.
(Note 3), is the general partner of the Partnership.
The Partnership Agreement (the "Agreement") establishes the respective
rights, obligations and interests of the partners. The Agreement provides that
net income or loss, certain capital events, and cash distributions (all as
defined in the Agreement) are generally allocated 43% to the general partner and
57% to the limited partners.
ACQUISITION BY INTERLINK COMMUNICATIONS PARTNERS, LLLP
During 1998, Interlink Communications Partners, LLLP ("ICP") agreed to
purchase all of the interests of the Partnership. ICP acquired the limited
partner interests, effective December 31, 1998, and is currently in the process
of obtaining the necessary consents to transfer all of the Partnership's
franchises to ICP. Once obtained, ICP will then purchase the general partner
interest in the Partnership, and the Partnership will, by operation of law, be
consolidated into ICP.
REVENUE RECOGNITION
Customer fees are recorded as revenue in the period the service is
provided. The cost to acquire the rights to the programming generally is
recorded when the product is initially available to be viewed by the customer.
ADVERTISING AND PROMOTION EXPENSES
Advertising and promotion expenses are charged to income during the year in
which they are incurred and were not significant for the periods shown.
PROPERTY, PLANT AND EQUIPMENT
Additions to property, plant and equipment are recorded at cost, which in
the case of assets constructed includes amounts for material, labor, overhead
and capitalized interest, if applicable. Upon sale or retirement of an asset,
the related costs and accumulated depreciation are removed from the accounts and
any gain or loss is recognized.
Depreciation expense is calculated using the straight-line method over the
estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings.......................................... 21-30 years
Cable television transmission and distribution
systems and related equipment.................... 3-15 years
Vehicles and furniture and fixtures................ 3-5 years
</TABLE>
F-188
<PAGE> 373
RIFKIN CABLE INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
FRANCHISE COSTS
Franchise costs are amortized using the straight-line method over the
remaining lives of the franchises as of the date they were acquired, ranging
from eight to twenty-five years. The carrying value of intangibles is assessed
for recoverability by management based on an analysis of undiscounted expected
future cash flows. The Partnership's management believes that there has been no
impairment thereof as of December 31, 1998.
OTHER INTANGIBLE ASSETS
Loan costs of the Partnership have been deferred and have been amortized to
interest expense utilizing the straight-line method over the term of the related
debt. Use of the straight-line method approximates the results of the
application of the interest method. The net amount remaining at December 31,
1997 was $37,886.
On December 30, 1998, the loan with a financial institution was paid in
full (Note 2). The related deferred loan costs and associated accumulated
amortization were written off and an extraordinary loss of $18,916 was recorded.
CASH AND CASH EQUIVALENTS
All highly liquid debt instruments purchased with an original maturity of
three months or less are considered to be cash equivalents.
INCOME TAXES
No provision for Federal or State income taxes is necessary in the
financial statements of the Partnership, because as a partnership, it is not
subject to Federal or State income tax as the tax effect of its activities
accrues to the partners.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENT
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-5 "Reporting on the Costs of Start-Up
Activities," which requires the Partnership to expense all start up costs
related to opening a new facility, introduction of anew product or service, or
conducting business with a new class of customer or in a new territory. This
standard is effective for the Partnership's 1999 fiscal year. Management
believes that SOP 98-5 will have no material effect on its financial position or
the results of operations.
F-189
<PAGE> 374
RIFKIN CABLE INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to the 1996 and 1997 financial
statements to conform with the 1998 financial statement presentation.
2. DEBT
The Partnership had a term loan with a financial institution which required
varying quarterly payments. At December 31, 1997, the term loan had a balance of
$4,914,000. At December 30, 1998, the term loan had a balance of $4,216,875; at
that date, the total balance and accrued interest were paid in full.
On that same date, the Partnership obtained a new interpartnership loan
with ICP (Note 1). Borrowing under the interpartnership loan, as well as
interest and principle payments are due at the discretion of the management of
ICP, resulting in no minimum required annual principle payments. The balance of
the interpartnership loan at December 31, 1998 was $2,865,426. The effective
interest rate at December 31, 1998 was 8.5%.
3. MANAGEMENT AGREEMENT
The Partnership has entered into a management agreement with Rifkin and
Associates, Inc. (Rifkin). The management agreement provides that Rifkin shall
act as manager of the Partnership's CATV systems, and shall be entitled to
annual compensation of 5% of the Partnership's CATV revenues, net of certain
CATV programming costs. Effective September 1, 1998, Rifkin conveyed its CATV
management business to R & A Management, LLC (RML). The result of this
transaction included the conveyance of the Rifkin management agreement (Rifkin
Agreement) to RML (RML Agreement). Expenses incurred pursuant to the Rifkin
Agreement and the RML Agreement are disclosed in total on the Statement of
Operations.
4. COMMITMENTS AND RENTAL EXPENSE
The Partnership leases certain real and personal property under
noncancelable operating leases expiring through the year 2001. Future minimum
lease payments under such noncancelable leases as of December 31, 1998 are:
$30,000 for each year 1999, 2000 and 2001, totaling $90,000.
Total rental expense for the years ended December 31, 1996, 1997 and 1998
was $60,323, $68,593 and $68,776, respectively, including $27,442, $36,822 and
$36,716, respectively, relating to cancelable pole rental agreements.
5. RETIREMENT BENEFITS
The Partnership has a 401(k) plan for its employees that have been employed
by the Partnership for at least one year. Employees of the Partnership can
contribute up to 15% of their salary, on a before-tax basis, with a maximum 1998
contribution of $10,000 (as set by the Internal Revenue Service). The
Partnership matches participant contributions up to a maximum of 50% of the
first 3% of a participant's salary contributed. All participant contributions
and earnings are fully vested upon contribution and Partnership contributions
F-190
<PAGE> 375
RIFKIN CABLE INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
and earnings vest 20% per year of employment with the Partnership, becoming
fully vested after five years. The Partnership's matching contributions for the
years ended December 31, 1996, 1997 and 1998 were $2,693, $3,653 and $2,680,
respectively.
6. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Partnership has a number of financial instruments, none of which are
held for trading purposes. The following method and assumptions were used by the
Partnership to estimate the fair values of financial instruments as disclosed
herein:
Cash and Cash Equivalents, Customer Accounts Receivable, Other Receivables,
Accounts Payable and Accrued Liabilities and Customer Deposits and Prepayments:
The carrying value amount approximates fair value because of the short period to
maturity.
Debt: The carrying value amount approximates the fair value because the
Partnership's interpartnership debt was obtained on December 30, 1998.
7. CABLE REREGULATION
Congress enacted the Cable Television Consumer Protection and Competition
Act of 1992 (the Cable Act) and has amended it at various times since.
The total effects of the present law are, at this time, still unknown.
However, one provision of the present law further redefines a small cable
system, and exempts these systems from rate regulation on the upper tiers of
cable service. The Partnership is awaiting an FCC rulemaking implementing the
present law to determine whether its systems qualify as small cable systems.
8. LITIGATION
The Partnership could possibly be named as defendant in various actions and
proceedings arising from the normal course of business. In all such cases, the
Partnership will vigorously defend itself against the litigation and, where
appropriate, will file counterclaims. Although the eventual outcome of potential
lawsuits cannot be predicted, it is management's opinion that any such lawsuit
will not result in liabilities that would have a material affect on the
Partnership's financial position or results of operations.
F-191
<PAGE> 376
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of
Rifkin Acquisition Partners, L.L.L.P.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, partners' capital (deficit) and cash
flows present fairly, in all material respects, the financial position of Rifkin
Acquisition Partners, L.L.L.P. and its subsidiaries (the "Company") at December
31, 1998 and 1997, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998 in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
Denver, Colorado
March 19, 1999
F-192
<PAGE> 377
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
12/31/98 12/31/97
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents......................... $ 2,324,892 $ 1,902,555
Customer accounts receivable, net of allowance for
doubtful accounts of $444,839 in 1998 and
$425,843 in 1997................................ 1,932,140 1,371,050
Other receivables................................. 5,637,771 4,615,089
Prepaid expenses and other........................ 2,398,528 1,753,257
Property, plant and equipment at cost:
Cable television transmission and distribution
systems and related equipment................ 149,376,914 131,806,310
Land, buildings, vehicles and furniture and
fixtures..................................... 7,421,960 7,123,429
------------ ------------
156,798,874 138,929,739
Less accumulated depreciation................... (35,226,773) (26,591,458)
------------ ------------
Net property, plant and equipment....... 121,572,101 112,338,281
Franchise costs and other intangible assets, net
of accumulated amortization of $67,857,545 in
1998 and $53,449,637 in 1997.................... 183,438,197 180,059,655
------------ ------------
Total assets............................ $317,303,629 $302,039,887
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities.......... $ 11,684,594 $ 11,690,894
Customer deposits and prepayments................. 1,676,900 1,503,449
Interest payable.................................. 7,242,954 7,384,509
Deferred tax liability, net....................... 7,942,000 12,138,000
Notes payable..................................... 224,575,000 229,500,000
------------ ------------
Total liabilities....................... 253,121,448 262,216,852
Commitments and contingencies (Notes 8 and 14)
Redeemable partners' interests.................... 10,180,400 7,387,360
Partners' capital (deficit):
General partner................................. (1,991,018) (1,885,480)
Limited partners................................ 55,570,041 34,044,912
Preferred equity interest....................... 422,758 276,243
------------ ------------
Total partners' capital........................... 54,001,781 32,435,675
------------ ------------
Total liabilities and partners'
capital.............................. $317,303,629 $302,039,887
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-193
<PAGE> 378
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
12/31/98 12/31/97 12/31/96
----------- ------------ ------------
<S> <C> <C> <C>
REVENUE:
Service................................. $82,498,638 $ 78,588,503 $ 66,433,321
Installation and other.................. 7,422,675 5,736,412 4,852,124
----------- ------------ ------------
Total revenue................. 89,921,313 84,324,915 71,285,445
COSTS AND EXPENSES:
Operating expense....................... 13,305,376 14,147,031 10,362,671
Programming expense..................... 18,020,812 15,678,977 14,109,527
Selling, general and administrative
expense............................... 13,757,090 12,695,176 11,352,870
Depreciation............................ 15,109,327 14,422,631 11,725,246
Amortization............................ 22,104,249 24,208,169 23,572,457
Management fees......................... 3,147,246 2,951,372 2,475,381
Loss on disposal of assets.............. 3,436,739 7,834,968 1,357,180
----------- ------------ ------------
Total costs and expenses...... 88,880,839 91,938,324 74,955,332
----------- ------------ ------------
Operating income (loss)................. 1,040,474 (7,613,409) (3,669,887)
Gain from the sale of assets (Note 4)... (42,863,060) -- --
Interest expense........................ 23,662,248 23,765,239 21,607,174
----------- ------------ ------------
Income (loss) before income taxes....... 20,241,286 (31,378,648) (25,277,061)
Income tax benefit...................... (4,177,925) (5,335,000) (3,645,719)
----------- ------------ ------------
Net income (loss)....................... $24,419,211 $(26,043,648) $(21,631,342)
=========== ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-194
<PAGE> 379
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------
12/31/98 12/31/97 12/31/96
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................. $ 24,419,211 $(26,043,648) $(21,631,342)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization................... 37,213,576 38,630,800 35,297,703
Amortization of deferred loan costs............. 989,760 989,760 970,753
Gain on sale of assets (Note 4)................. (42,863,060) -- --
Loss on disposal of fixed assets................ 3,436,739 7,834,968 1,357,180
Deferred tax benefit............................ (4,196,000) (5,335,000) (3,654,000)
Increase in customer accounts receivables....... (300,823) (186,976) (117,278)
Increase in other receivables................... (474,599) (1,992,714) (994,681)
(Increase) decrease in prepaid expenses and
other......................................... (684,643) 23,015 (494,252)
Increase in accounts payable and accrued
liabilities................................... 34,073 1,753,656 3,245,736
Increase (decrease) in customer deposits and
prepayments................................... (86,648) 231,170 164,824
Increase (decrease) in interest payable......... (141,555) 600,248 6,692,988
------------ ------------ ------------
Net cash provided by operating
activities.............................. 17,346,031 16,505,279 20,837,631
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of cable systems, net (Note 3)......... (2,212,958) (19,359,755) (71,797,038)
Additions to property, plant and equipment......... (26,354,756) (28,009,253) (16,896,582)
Additions to cable television franchises, net of
retirements..................................... (151,695) 72,162 (1,182,311)
Net proceeds from the sale of cable systems (Note
4).............................................. 16,533,564 -- --
Net proceeds from the other sales of assets........ 247,216 306,890 197,523
------------ ------------ ------------
Net cash used in investing activities...... (11,938,629) (46,989,956) (89,678,408)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from isssuance of senior subordinated
notes........................................... -- -- 125,000,000
Proceeds from long-term bank debt.................. 22,500,000 38,000,000 18,000,000
Deferred loan costs................................ -- -- (6,090,011)
Payments of long-term bank debt.................... (27,425,000) (7,000,000) (82,000,000)
Partners' capital contributions.................... -- -- 15,000,000
Equity distributions to partners................... (60,065) -- --
------------ ------------ ------------
Net cash provided by (used in) financing
activities.............................. (4,985,065) 31,000,000 69,909,989
------------ ------------ ------------
Net increase in cash................................. 422,337 515,323 1,069,212
Cash and cash equivalents at beginning of period..... 1,902,555 1,387,232 318,020
------------ ------------ ------------
Cash and cash equivalents at end of period........... $ 2,324,892 $ 1,902,555 $ 1,387,232
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid...................................... $ 22,737,443 $ 22,098,732 $ 13,866,995
============ ============ ============
Noncash investing activities:
Proceeds from the sale of Michigan assets held
in escrow..................................... $ 500,000 $ -- $ --
============ ============ ============
Trade value related to the trade sale of
Tennessee assets.............................. $ 46,668,000 $ -- $ --
============ ============ ============
Trade value related to trade acquisition of
Tennessee assets.............................. $(46,668,000) $ -- $ --
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-195
<PAGE> 380
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
PREFERRED GENERAL LIMITED
EQUITY INTEREST PARTNER PARTNERS TOTAL
--------------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Partners' capital (deficit)
at December 31, 1995..... $ 562,293 $(1,085,311) $ 69,421,043 $ 68,898,025
Partners' capital
contributions............ -- 150,000 14,850,000 15,000,000
Accretion of redeemable
partners' interest....... -- (157,730) (1,104,110) (1,261,840)
Net loss................... (129,788) (216,313) (21,285,241) (21,631,342)
--------- ----------- ------------ ------------
Partners' capital (deficit)
at December 31, 1996..... 432,505 (1,309,354) 61,881,692 61,004,843
Accretion of redeemable
partners' interest....... -- (315,690) (2,209,830) (2,525,520)
Net loss................... (156,262) (260,436) (25,626,950) (26,043,648)
--------- ----------- ------------ ------------
Partners' capital (deficit)
at December 31, 1997..... 276,243 (1,885,480) 34,044,912 32,435,675
Accretion of redeemable
partners' interest....... -- (349,130) (2,443,910) (2,793,040)
Net income................. 146,515 244,192 24,028,504 24,419,211
Partners' equity
distribution............. -- (600) (59,465) (60,065)
--------- ----------- ------------ ------------
Partners' capital (deficit)
at December 31, 1998..... $ 422,758 $(1,991,018) $ 55,570,041 $ 54,001,781
========= =========== ============ ============
</TABLE>
The Partners' capital accounts for financial reporting purposes vary from
the tax capital accounts.
The accompanying notes are an integral part of the consolidated financial
statements.
F-196
<PAGE> 381
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL INFORMATION
Rifkin Acquisition Partners, L.L.L.P. ("the Partnership") was formed
pursuant to the laws of the State of Colorado. The Partnership and its
subsidiaries are hereinafter referred to on a consolidated basis as the
"Company." The Company owns, operates, and develops cable television systems in
Georgia, Tennessee, and Illinois. Rifkin Acquisition Management, L.P., an
affiliate of Rifkin & Associates, Inc. (Note 7), is the general partner of the
Partnership ("General Partner").
The Partnership operates under a limited liability limited partnership
agreement (the "Partnership Agreement") which establishes contribution
requirements, enumerates the rights and responsibilities of the partners and
advisory committee, provides for allocations of income, losses and
distributions, and defines certain items relating thereto. The Partnership
Agreement provides that net income or loss, certain defined capital events, and
cash distributions, all as defined in the Partnership Agreement, are generally
allocated 99% to the limited partners and 1% to the general partner.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the following
entities:
<TABLE>
<S> <C>
- - Rifkin Acquisition Partners, - Cable Equities of Colorado, Ltd.
L.L.L.P. (CEC)
- - Cable Equities of Colorado - Cable Equities, Inc. (CEI)
Management Corp. (CEM) - Rifkin Acquisition Capital Corp.
(RACC)
</TABLE>
The financial statements for 1997 and 1996 also included the following
entities:
<TABLE>
<S> <C>
- - Rifkin/Tennessee, Ltd. (RTL) - FNI Management Corp. (FNI)
</TABLE>
Effective January 1, 1998, both the RTL and FNI entities were dissolved and
the assets were transferred to the Partnership.
All significant intercompany accounts and transactions have been
eliminated.
REVENUE AND PROGRAMMING
Customer fees are recorded as revenue in the period the service is
provided. The cost to acquire the rights to the programming generally is
recorded when the product is initially available to be viewed by the customer.
ADVERTISING AND PROMOTION EXPENSES
Advertising and promotion expenses are charged to income during the year in
which they are incurred and were not significant for the periods shown.
PROPERTY, PLANT AND EQUIPMENT
Additions to property, plant and equipment are recorded at cost, which in
the case of assets constructed, includes amounts for material, labor, overhead
and interest, if applicable. Upon sale or retirement of an asset, the related
costs and accumulated
F-197
<PAGE> 382
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
depreciation are removed from the accounts and any gain or loss is recognized.
Capitalized interest was not significant for the periods shown.
Depreciation expense is calculated using the straight-line method over the
estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings.......................................... 27-30 years
Cable television transmission and distribution
systems and related equipment.................... 3-15 years
Vehicles and furniture and fixtures................ 3-5 years
</TABLE>
Expenditures for maintenance and repairs are expensed as incurred.
FRANCHISE COSTS
Franchise costs are amortized using the straight-line method over the
remaining lives of the franchises as of the date they were acquired, ranging
from one to twenty years. The carrying value of franchise costs is assessed for
recoverability by management based on an analysis of undiscounted future
expected cash flows from the underlying operations of the Company. Management
believes that there has been no impairment thereof as of December 31, 1998.
OTHER INTANGIBLE ASSETS
Certain loan costs have been deferred and are amortized to interest expense
utilizing the straight-line method over the remaining term of the related debt.
Use of the straight-line method approximates the results of the application of
the interest method. The net amounts remaining at December 31, 1998 and 1997
were $6,176,690 and $7,166,450, respectively.
CASH AND CASH EQUIVALENTS
All highly liquid debt instruments purchased with an original maturity of
three months or less are considered to be cash equivalents.
REDEEMABLE PARTNERS' INTERESTS
The Partnership Agreement provides that if a certain partner dies or
becomes disabled, that partner (or his personal representative) shall have the
option, exercisable by notice given to the partners at any time within 270 days
after his death or disability (except that if that partner dies or becomes
disabled prior to August 31, 2000, the option may not be exercised until August
31, 2000 and then by notice by that partner or his personal representative given
to the partners within 270 days after August 31, 2000) to sell, and require the
General Partner and certain trusts controlled by that partner to sell, and the
Partnership to purchase, up to 50% of the partnership interests owned by any of
such partners and certain current and former members of management of Rifkin &
Associates, Inc. that requests to sell their interest, for a purchase price
equal to the fair market value of those interests determined by appraisal in
accordance with the Partnership Agreement. Accordingly, the current fair value
of such partnership interests have been reclassified outside of partners'
capital.
F-198
<PAGE> 383
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENT
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-5 "Reporting on the Costs of Start-Up
Activities," which requires the Partnership to expense all start up costs
related to organizing a new business. This new standard also includes one-time
activities related to opening a new facility, introduction of a new product or
service, or conducting business with a new class of customer or in a new
territory. This standard is effective for the Partnership's 1999 fiscal year.
Management believes that SOP 98-5 will have no material effect on its financial
position or the results of operations.
RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to the 1997 and 1996 financial
statements to conform with the 1998 financial statement presentation. Such
reclassification had no effect on the net loss as previously stated.
2. SUBSEQUENT EVENT
On February 12, 1999, the Company signed a letter of intent for the
partners to sell all of their partnership interests to Charter Communications
("Charter"). The Company and Charter are expected to sign a purchase agreement
and complete the sale during the third quarter of 1999.
3. ACQUISITION OF CABLE PROPERTIES
1998 ACQUISITIONS
At various times during the second half of 1998, the Company completed
three separate acquisitions of cable operating assets. Two of the acquisitions
serve communities in Gwinnett County, Georgia (the "Georgia Systems"). These
acquisitions were accounted for using the purchase method of accounting.
The third acquisition resulted from a trade of the Company's systems
serving the communities of Paris and Piney Flats, Tennessee for the operating
assets of another cable operator serving primarily the communities of Lewisburg
and Crossville, Tennessee (the "Tennessee Trade"). The trade was for cable
systems that are similar in size and was accounted for based on fair market
value. Fair market value was established at $3,000 per customer relinquished,
which was based on recent sales transactions of similar cable systems. The
transaction included the payment of approximately $719,000, net, of additional
cash (Note 4).
F-199
<PAGE> 384
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The combined purchase price was allocated based on estimated fair values
from an independent appraisal to property, plant and equipment and franchise
cost as follows (dollars in thousands):
<TABLE>
<CAPTION>
GEORGIA TENNESSEE
SYSTEMS TRADE TOTAL
------- --------- -------
<S> <C> <C> <C>
Fair value of assets relinquished (Note 4)...... $ -- $46,668 $46,668
Cash paid....................................... 1,392 719 2,111
Acquisition Costs (appraisal, transfer fees and
direct costs)................................. 26 76 102
------ ------- -------
Total acquisition cost.......................... $1,418 $47,463 $48,881
====== ======= =======
Allocation:
Current assets.................................. $ (2) $ 447 $ 445
Current liabilities............................. (1) (397) (398)
Property, plant and equipment................... 333 11,811 12,144
Franchise Cost.................................. 1,088 35,602 36,690
------ ------- -------
Total cost allocated............................ $1,418 $47,463 $48,881
====== ======= =======
</TABLE>
The fair value of assets relinquished from the Tennessee Trade was treated
as a noncash transaction on the Consolidated Statement of Cash Flows. The cash
acquisition costs were funded by proceeds from the Company's reducing revolving
loan with a financial institution.
The following combined pro forma information presents a summary of
consolidated results of operations for the Company as if the Tennessee Trade
acquisitions had occurred at the beginning of 1997, with pro forma adjustments
to show the effect on depreciation and amortization for the acquired assets,
management fees on additional revenues and interest expense on additional debt
(dollars in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------
12/31/98 12/31/97
-------- -----------
(UNAUDITED)
<S> <C> <C>
Total revenues.......................... $89,921 $ 84,325
Net income (loss)....................... 19,447 (29,631)
</TABLE>
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the Tennessee Trade actually been
acquired on January 1, 1997.
1997 ACQUISITIONS
On April 1, 1997, the Company acquired the cable operating assets of two
cable systems serving the Tennessee communities of Shelbyville and Manchester
(the "Manchester Systems"), for an aggregate purchase price of approximately
$19.7 million of which $495,000 was paid as escrow in 1996. The acquisition was
accounted for using the
F-200
<PAGE> 385
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchase method of accounting, and was funded by proceeds from the Company's
reducing revolving loan with a financial institution. No pro forma information
giving the effect of the acquisitions is shown due to the results being
immaterial.
1996 ACQUISITIONS
On March 1, 1996, the Company acquired certain cable operating assets
("Mid-Tennessee Systems") from Mid-Tennessee CATV, L.P., and on April 1, 1996
acquired the cable operating assets ("RCT Systems") from Rifkin Cablevision of
Tennessee, Ltd. Both Mid-Tennessee CATV, L.P. and Rifkin Cablevision of
Tennessee, Ltd. were affiliates of the General Partner. The acquisition costs
were funded by $15 million of additional partner contributions and the remainder
from a portion of the proceeds received from the issuance of $125 million of
11 1/8% Senior Subordinated Notes due 2006 (see Note 6).
The acquisitions were recorded using the purchase method of accounting. The
results of operations of the Mid-Tennessee Systems have been included in the
consolidated financial statements since March 1, 1996, and the results of the
RCT Systems have been included in the consolidated financial statements since
April 1, 1996. The combined purchase price was allocated based on estimated fair
values from an independent appraisal to property, plant and equipment and
franchise cost as follows (dollars in thousands):
<TABLE>
<S> <C>
Cash paid, net of acquired cash....................... $71,582
Acquisition costs (appraisal, transfer fees, and
direct costs)....................................... 215
-------
Total acquisition cost................................ $71,797
=======
Allocation:
Current assets........................................ $ 624
Current liabilities................................... (969)
Property, plant and equipment......................... 24,033
Franchise cost and other intangible assets............ 48,109
-------
Total cost allocated.................................. $71,797
=======
</TABLE>
The following combined pro forma information presents a summary of
consolidated results of operations for the Company as if the Mid-Tennessee
Systems and the RCT Systems acquisitions had occurred at the beginning of 1996,
with pro forma adjustments to show the effect on depreciation and amortization
for the acquired assets, management fees on additional revenues and interest
expense on additional debt (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
-----------
12/31/96
-----------
(UNAUDITED)
<S> <C>
Total revenues..................................... $ 74,346
Net loss........................................... (22,558)
</TABLE>
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the Mid-Tennessee Systems and the
RCT Systems actually been acquired on January 1, 1996.
F-201
<PAGE> 386
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. SALE OF ASSETS
On February 4, 1998, the Company sold all of its operating assets in the
state of Michigan (the "Michigan Sale") to another cable operator for cash. In
addition, on December 31, 1998, the Company traded certain cable systems in
Tennessee (the "Tennessee Trade") for similar-sized cable systems (Note 3). Both
sales resulted in a gain recognized by the Company as follows (dollars in
thousands):
<TABLE>
<CAPTION>
MICHIGAN TENNESSEE
SALE TRADE TOTAL
-------- --------- -------
<S> <C> <C> <C>
Fair value of assets relinquished...... $ -- $46,668 $46,668
Original cash proceeds................. 16,931 -- 16,931
Adjustments for value of assets and
liabilities assumed.................. 120 (17) 103
------- ------- -------
Net proceeds........................... 17,051 46,651 63,702
Net book value of assets sold.......... 11,061 9,778 20,839
------- ------- -------
Net gain from sale..................... $ 5,990 $36,873 $42,863
======= ======= =======
</TABLE>
The Michigan Sale proceeds amount includes $500,000 that is currently being
held in escrow. This amount and the fair value of assets relinquished, related
to the Tennessee Trade, were both treated as noncash transactions on the
Consolidated Statement of Cash Flows.
The cash proceeds from the Michigan Sale were used by the Company to reduce
its revolving and term loans with a financial institution.
5. INCOME TAXES
Although the Partnership is not a taxable entity, two corporations (the
"subsidiaries") are included in the consolidated financial statements. These
subsidiaries are required to pay taxes on their taxable income, if any.
F-202
<PAGE> 387
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following represents a reconciliation of pre-tax losses as reported in
accordance with generally accepted accounting principles and the losses
attributable to the partners and included in their individual income tax
returns:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
12/31/98 12/31/97 12/31/96
------------ ------------ ------------
<S> <C> <C> <C>
Pre-tax income (loss) as
reported......................... $ 20,241,286 $(31,378,648) $(25,277,061)
(Increase) decrease due to:
Separately taxed book results of
corporate subsidiaries........ 9,397,000 15,512,000 9,716,000
Effect of different depreciation
and amortization methods for
tax and book purposes......... (1,360,000) (2,973,000) (3,833,000)
Additional tax gain from the sale
of Michigan(Note 4).............. 2,068,000 -- --
Book gain from trade sale of
Tennessee assets(Note 4)......... (36,873,000) -- --
Additional tax loss from
dissolution of FNI stock......... (7,235,000) -- --
Other.............................. 81,714 (45,052) (22,539)
------------ ------------ ------------
Tax loss attributed to the
partners......................... $(13,680,000) $(18,884,700) $(19,416,600)
============ ============ ============
</TABLE>
The Company accounts for income taxes under the liability method. Under
this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse.
As a result of a change in control in 1995, the book value of the Company's
net assets was increased to reflect their fair market value. In connection with
this revaluation, a deferred income tax liability in the amount of $22,801,000
was established to provide for future taxes payable on the revised valuation of
the net assets. A deferred tax benefit of $4,196,000, $5,335,000 and $3,654,000
was recognized for the years ended December 31, 1998, 1997 and 1996,
respectively, reducing the liability to $7,942,000.
Deferred tax assets (liabilities) were comprised of the following at
December 31, 1998 and 1997:
<TABLE>
<CAPTION>
12/31/98 12/31/97
------------ ------------
<S> <C> <C>
Deferred tax assets resulting from
loss carryforwards.............. $ 11,458,000 $ 9,499,000
Deferred tax liabilities resulting
from depreciation and
amortization.................... (19,400,000) (21,637,000)
------------ ------------
Net deferred tax liability........ $ (7,942,000) $(12,138,000)
============ ============
</TABLE>
F-203
<PAGE> 388
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
As of December 31, 1998 and 1997, the subsidiaries have net operating loss
carryforwards ("NOLs") for income tax purposes of $30,317,000 and $25,264,000,
respectively, substantially all of which are limited. The NOLs will expire at
various times between the years 2000 and 2013.
In 1998, one of the corporate entities was dissolved. The existing NOL's
were used to offset taxable income down to $87,751, resulting in a current tax
for 1998 of $18,075.
Under the Internal Revenue Code of 1986, as amended (the "Code"), the
subsidiaries generally would be entitled to reduce their future federal income
tax liabilities by carrying the unused NOLs forward for a period of 15 years to
offset their future income taxes. The subsidiaries' ability to utilize any NOLs
in future years may be restricted, however, in the event the subsidiaries
undergo an "ownership change" as defined in Section 382 of the Code. In the
event of an ownership change, the amount of NOLs attributable to the period
prior to the ownership change that may be used to offset taxable income in any
year thereafter generally may not exceed the fair market value of the subsidiary
immediately before the ownership change (subject to certain adjustments)
multiplied by the applicable long-term, tax exempt rate published by the
Internal Revenue Service for the date of the ownership change. Two of the
subsidiaries underwent an ownership change on September 1, 1995 pursuant to
Section 382 of the Code. As such, the NOLs of the subsidiaries are subject to
limitation from that date forward. It is the opinion of management that the NOLs
will be released from this limitation prior to their expiration dates and, as
such, have not been limited in their calculation of deferred taxes.
The provision for income tax expense (benefit) differs from the amount
which would be computed by applying the statutory federal income tax rate of 35%
to pre-tax income before extraordinary loss as a result of the following:
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
12/31/98 12/31/97 12/31/96
------------ ------------ -----------
<S> <C> <C> <C>
Tax expense (benefit) computed at
statutory rate...................... $ 7,084,450 $(10,982,527) $(8,846,971)
Increase (decrease) due to:
Tax benefit (expense) for
non-corporate loss............... (10,373,252) 5,900,546 5,446,721
Permanent differences between
financial statement income and
taxable income................... (36,200) 84,500 48,270
State income tax.................... (247,000) (377,500) (252,590)
Tax benefit from dissolved
corporation...................... (148,925) -- --
Other............................... (456,998) 39,981 (41,149)
------------ ------------ -----------
Income Tax Benefit.................. $ (4,177,925) $ (5,335,000) $(3,645,719)
============ ============ ===========
</TABLE>
F-204
<PAGE> 389
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. NOTES PAYABLE
Debt consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
Senior Subordinated Notes......... $125,000,000 $125,000,000
Tranche A Term Loan............... 21,575,000 25,000,000
Tranche B Term Loan............... 40,000,000 40,000,000
Reducing Revolving Loan........... 35,000,000 36,500,000
Senior Subordinated Debt.......... 3,000,000 3,000,000
------------ ------------
$224,575,000 $229,500,000
============ ============
</TABLE>
The Notes and loans are collateralized by substantially all of the assets
of the Company.
On January 26, 1996, the Company and its wholly-owned subsidiary, RACC (the
"Issuers"), co-issued $125,000,000 of 11 1/8% Senior Subordinated Notes (the
"Notes") to institutional investors. These notes were subsequently exchanged on
June 18, 1996 for publicly registered notes with identical terms. Interest on
the Notes is payable semi-annually on January 15 and July 15 of each year. The
Notes, which mature on January 15, 2006, can be redeemed in whole or in part, at
the Issuers' option, at any time on or after January 15, 2001, at redeemable
prices contained in the Notes plus accrued interest. In addition, at any time on
or prior to January 15, 1999, the Issuers, at their option, may redeem up to 25%
of the principle amount of the Notes issued to institutional investors of not
less than $25,000,000. At December 31, 1998 and 1997, all of the Notes were
outstanding (see also Note 10).
The Company has a $25,000,000 Tranche A term loan with a financial
institution. This loan requires quarterly payments of $1,875,000 plus interest
commencing on March 31, 2000. Any unpaid balance is due March 31, 2003. The
agreement requires that what it defines as excess proceeds from the sale of a
cable system be used to retire Tranche A term debt. As a result of the Michigan
sale (Note 4), there was $3,425,000 of excess proceeds used to pay principal in
1998. The interest rate on the Tranche A term loan is either the bank's prime
rate plus .25% to 1.75% or LIBOR plus 1.5% to 2.75%.
The specific rate is dependent upon the senior funded debt ratio which is
recalculated quarterly. The weighted average effective interest rate at December
31, 1998 and 1997 was 7.59% and 8.24%, respectively.
In addition, the Company has a $40,000,000 Tranche B term loan, which
requires principal payments of $2,000,000 on March 31, 2002, $18,000,000 on
March 31, 2003, and $20,000,000 on March 31, 2004. The Tranche B term loan bears
an interest rate of 9.75% and is payable quarterly.
The Company also has a reducing revolving loan providing for borrowing up
to $20,000,000 at the Company's discretion, subject to certain restrictions, and
an additional $60,000,000 available to finance acquisitions subject to certain
restrictions. On March 4,
F-205
<PAGE> 390
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
1998, the reducing revolving loan agreement was amended to revise the scheduled
reduction in revolving commitments. The additional financing amounts available
at December 31, 1998 and 1997 were $45,000,000 and $52,500,000, respectively. At
December 31, 1998, the full $20,000,000 available had been borrowed, and
$15,000,000 had been drawn against the $45,000,000 commitment. At December 31,
1997, the full $20,000,000 available had been borrowed, and $16,500,000 had been
drawn against the $52,500,000 commitment. The amount available for borrowing
will decrease annually during its term with changes over the four years
following December 31, 1998 as follows: 1999 -- $2,500,000 reduction per
quarter, and 2000 through 2002 -- $3,625,000 per quarter. Any unpaid balance is
due on March 31, 2003. The revolving loan bears an interest rate of either the
bank's prime rate plus .25% to 1.75% or LIBOR plus 1.5% to 2.75%. The specific
rate is dependent upon the senior funded debt ratio which is recalculated
quarterly. The weighted average effective interest rates at December 31, 1998
and 1997 was 8.08% and 8.29%, respectively. The reducing revolving loan includes
a commitment fee of 1/2% per annum on the unborrowed balance.
Certain mandatory prepayments may also be required, commencing in fiscal
1997, on the Tranche A term loan, the Tranche B term loan, and the reducing
revolving credit based on the Company's cash flow calculations, proceeds from
the sale of a cable system or equity contributions. Based on the 1998
calculation and the Michigan sale, $3,425,000 of prepayments were required.
Optional prepayments are allowed, subject to certain restrictions. The related
loan agreement contains covenants limiting additional indebtedness, dispositions
of assets, investments in securities, distribution to partners, management fees
and capital expenditures. In addition, the Company must maintain certain
financial levels and ratios. At December 31, 1998, the Company was in compliance
with these covenants.
The Company also has $3,000,000 of senior subordinated debt payable to a
Rifkin Partner. The debt has a scheduled maturity, interest rate and interest
payment schedule identical to that of the Notes, as discussed above.
Based on the outstanding debt as of December 31, 1998, the minimum
aggregate maturities for the five years following 1998 are none in 1999,
$7,500,000 in 2000, $16,500,000 in 2001, $23,075,000 in 2002 and $29,500,000 in
2003.
7. RELATED PARTY TRANSACTIONS
The Company entered into a management agreement with Rifkin & Associates,
Inc. (Rifkin). The management agreement provides that Rifkin will act as manager
of the Company's CATV systems and be entitled to annual compensation of 3.5% of
the Company's revenue. Effective September 1, 1998, Rifkin conveyed its CATV
management business to R & A Management, LLC (RML). The result of this
transaction included the conveyance of the Rifkin management agreement (Rifkin
Agreement) to RML (RML Agreement). Expenses incurred pursuant to the Rifkin
Agreement and the RML Agreement are disclosed in total on the Consolidated
Statement of Operations.
The Company is associated with a company to purchase certain cable
television programming at a discount. Rifkin acted as the agent and held the
deposit funds required for the Company to participate.
F-206
<PAGE> 391
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Effective September 1, 1998, Rifkin conveyed this contract and deposit
amount to RML. The deposit amount recorded at December 31, 1998 and 1997 was
$2,139,274 and $1,225,274, respectively. The Company subsequently received
$1,225,274 of the December 31, 1998 balance.
The Company paid approximately $550,000 to a law firm in connection with
the public offering in 1996. A partner of this law firm is a relative of one of
the Company's partners.
8. COMMITMENTS AND RENTAL EXPENSE
The Company leases certain real and personal property under noncancelable
operating leases expiring through the year 2007. Future minimum lease payments
under such noncancelable leases as of December 31, 1998 are: $316,091 in 1999;
$249,179 in 2000; $225,768 in 2001; $222,669 in 2002; and $139,910 in 2003; and
$344,153 thereafter, totaling $1,497,770.
Total rental expense and the amount included therein which pertains to
cancelable pole rental agreements were as follows for the periods indicated:
<TABLE>
<CAPTION>
TOTAL CANCELABLE
RENTAL POLE RENTAL
PERIOD EXPENSE EXPENSE
- ------ ---------- -----------
<S> <C> <C>
Year Ended December 31, 1998.......... $1,592,080 $1,109,544
Year Ended December 31, 1997.......... $1,577,743 $1,061,722
Year Ended December 31, 1996.......... $1,294,084 $ 874,778
</TABLE>
9. COMPENSATION PLANS AND RETIREMENT PLANS
EQUITY INCENTIVE PLAN
In 1996, the Company implemented an Equity Incentive Plan (the "Plan") in
which certain Rifkin & Associates' executive officers and key employees, and
certain key employees of the Company are eligible to participate. Plan
participants in the aggregate, have the right to receive (i) cash payments of up
to 2.0% of the aggregate value of all partnership interests of the Company (the
"Maximum Incentive Percentage"), based upon the achievement of certain annual
Operating Cash Flow (as defined in the Plan) targets for the Company for each of
the calendar years 1996 through 2000, and (ii) an additional cash payment equal
to up to 0.5% of the aggregate value of all partnership interests of the Company
(the "Additional Incentive Percentage"), based upon the achievement of certain
cumulative Operating Cash Flow targets for the Company for the five-year period
ended December 31, 2000. Subject to the achievement of such annual targets and
the satisfaction of certain other criteria based on the Company's operating
performance, up to 20% of the Maximum Incentive Percentage will vest in each
such year; provided, that in certain events vesting may accelerate. Payments
under the Plan are subject to certain restrictive covenants contained in the
Notes.
No amounts are payable under the Plan except upon (i) the sale of
substantially all of the assets or partnership interests of the Company or (ii)
termination of a Plan participant's employment with Rifkin & Associates or the
Company, as applicable, due to
F-207
<PAGE> 392
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(a) the decision of the Advisory Committee to terminate such participant's
employment due to disability, (b) the retirement of such participant with the
Advisory Committee's approval or (c) the death of such Participant. The value of
amounts payable pursuant to clause (i) above will be based upon the aggregate
net proceeds received by the holders of all of the partnership interests in the
Company, as determined by the Advisory Committee, and the amounts payable
pursuant to clause (ii) above will be based upon the Enterprise Value determined
at the time of such payment. For purposes of the Plan, Enterprise Value
generally is defined as Operating Cash Flow for the immediately preceding
calendar year times a specified multiple and adjusted based on the Company's
working capital.
The amount expensed for the years ended December 31, 1998, 1997 and 1996
relating to this plan were $1,119,996, $859,992 and $660,000, respectively.
RETIREMENT BENEFITS
The Company has a 401(k) plan for employees that have been employed by the
Company for at least one year. Employees of the Company can contribute up to 15%
of their salary, on a before-tax basis, with a maximum 1998 contribution of
$10,000 (as set by the Internal Revenue Service). The Company matches
participant contributions up to a maximum of 50% of the first 3% of a
participant's salary contributed. All participant contributions and earnings are
fully vested upon contribution and Company contributions and earnings vest 20%
per year of employment with the Company, becoming fully vested after five years.
The Company's matching contributions for the years ended December 31, 1998, 1997
and 1996 were $50,335, $72,707 and $42,636, respectively.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company has a number of financial instruments, none of which are held
for trading purposes. The following method and assumptions were used by the
Company to estimate the fair values of financial instruments as disclosed
herein:
Cash and Cash Equivalents, Customer Accounts Receivable, Other Receivables,
Accounts Payable and Accrued Liabilities and Customer Deposits and Prepayments:
The carrying value amount approximates fair value because of the short period to
maturity.
Debt: The fair value of bank debt is estimated based on interest rates for
the same or similar debt offered to the Company having the same or similar
remaining maturities and collateral requirements. The fair value of public
Senior Subordinated Notes is based on the market quoted trading value. The fair
value of the Company's debt is estimated at $236,137,500 and is carried on the
balance sheet at $224,575,000.
11. CABLE REREGULATION
Congress enacted the Cable Television Consumer Protection and Competition
Act of 1992 (the Cable Act) and has amended it at various times since.
The total effects of the present law are, at this time, still unknown.
However, one provision of the present law further redefines a small cable
system, and exempts these systems from rate regulation on the upper tiers of
cable service. The Partnership is
F-208
<PAGE> 393
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
awaiting an FCC rulemaking implementing the present law to determine whether its
systems qualify as small cable systems.
12. SUMMARIZED FINANCIAL INFORMATION
CEM, CEI and CEC (collective, the "Guarantors") are all wholly-owned
subsidiaries of the Company and, together with RACC, constitute all of the
Partnership's direct and indirect subsidiaries. As discussed in Note 1, RTL and
FNI were dissolved on January 1, 1998 and the assets were transferred to the
Company, however, prior thereto, RTL and FNI, as wholly-owned subsidiaries of
the Company, were Guarantors. Each of the Guarantors provides a full,
unconditional, joint and several guaranty of the obligations under the Notes
discussed in Note 6. Separate financial statements of the Guarantors are not
presented because management has determined that they would not be material to
investors.
The following tables present summarized financial information of the
Guarantors on a combined basis as of December 31, 1998 and 1997 and for the
years ended December 31, 1998, and 1997 and 1996.
<TABLE>
<CAPTION>
12/31/98 12/31/97
BALANCE SHEET ------------ ------------
<S> <C> <C> <C>
Cash....................... $ 373,543 $ 780,368
Accounts and other
receivables, net......... 3,125,830 3,012,571
Prepaid expenses........... 791,492 970,154
Property, plant and
equipment net............ 48,614,536 66,509,120
Franchise costs and other
intangible assets, net... 56,965,148 103,293,631
Accounts payable and
accrued liabilities...... 22,843,354 18,040,588
Other liabilities.......... 980,536 1,122,404
Deferred taxes payable..... 7,942,000 12,138,000
Notes payable.............. 140,050,373 167,200,500
Equity (deficit)........... (61,945,714) (23,935,648)
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
12/31/98 12/31/97 12/31/96
STATEMENTS OF OPERATIONS ------------ ------------ ------------
<S> <C> <C> <C>
Total revenue.............. $ 29,845,826 $ 47,523,592 $ 42,845,044
Total costs and
expenses...... (31,190,388) (53,049,962) (43,578,178)
Interest expense........... (14,398,939) (17,868,497) (16,238,221)
Income tax benefit......... 4,177,925 5,335,000 3,645,719
------------ ------------ ------------
Net loss................... $(11,565,576) $(18,059,867) $(13,325,636)
============ ============ ============
</TABLE>
F-209
<PAGE> 394
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
13. QUARTERLY INFORMATION (UNAUDITED)
The following interim financial information of the Company presents the
1998 and 1997 consolidated results of operations on a quarterly basis (in
thousands):
<TABLE>
<CAPTION>
QUARTERS ENDED 1998
------------------------------------------------
MARCH 31(A) JUNE 30 SEPT. 30 DEC. 31(B)
----------- ------- -------- ----------
<S> <C> <C> <C> <C>
Revenue.................. $22,006 $22,296 $22,335 $23,284
Operating income
(loss)................. 295 511 (1,522) 1,756
Net income (loss)........ 1,437 (4,458) (5,907) 33,347
</TABLE>
- -------------------------
(a) First quarter includes a $5,900 gain from the sale of Michigan assets
(Note 4).
(b) Fourth quarter includes a $36,873 gain from the trade sale of certain
Tennessee assets (Note 4).
<TABLE>
<CAPTION>
QUARTERS ENDED 1997
------------------------------------------
MARCH 31 JUNE 30 SEPT. 30 DEC. 31
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Revenue....................... $19,337 $21,331 $21,458 $22,199
Operating loss................ (1,220) (2,818) (2,777) (798)
Net loss...................... (5,998) (6,890) (8,127) (5,029)
</TABLE>
14. LITIGATION
The Company could possibly be named as defendant in various actions and
proceedings arising from the normal course of business. In all such cases, the
Company will vigorously defend itself against the litigation and, where
appropriate, will file counterclaims. Although the eventual outcome of potential
lawsuits cannot be predicted, it is management's opinion that any such lawsuit
will not result in liabilities that would have a material affect on the
Company's financial position or results of operations.
F-210
<PAGE> 395
REPORT OF INDEPENDENT AUDITORS
The Partners
Indiana Cable Associates, Ltd.
We have audited the accompanying balance sheet of Indiana Cable Associates, Ltd.
as of December 31, 1997 and 1998, and the related statements of operations,
partners' deficit and cash flows for the years ended December 31, 1996, 1997 and
1998. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Indiana Cable Associates, Ltd.
at December 31, 1997 and 1998, and the results of its operations and its cash
flows for the years ended December 31, 1996, 1997 and 1998 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
Denver, Colorado
February 19, 1999
F-211
<PAGE> 396
INDIANA CABLE ASSOCIATES, LTD.
BALANCE SHEET
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
ASSETS (PLEDGED)
Cash and cash equivalents........................... $ 82,684 $ 108,619
Customer accounts receivable, less allowance for
doubtful accounts of $18,311 in 1997 and $24,729
in 1998........................................... 87,154 85,795
Other receivables................................... 257,236 295,023
Prepaid expenses and deposits....................... 172,614 152,575
Property, plant and equipment, at cost:
Buildings......................................... 78,740 91,682
Transmission and distribution systems and related
equipment...................................... 10,174,650 11,336,892
Office furniture and equipment.................... 144,137 161,327
Spare parts and construction inventory............ 435,554 742,022
----------- -----------
10,833,081 12,331,923
Less accumulated depreciation..................... 7,624,570 8,008,158
----------- -----------
Net property, plant and equipment.............. 3,208,511 4,323,765
Other assets, at cost less accumulated amortization
(Note 3).......................................... 5,817,422 5,083,029
----------- -----------
Total assets.............................. $ 9,625,621 $10,048,806
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable and accrued liabilities.......... $ 718,716 $ 897,773
Customer prepayments.............................. 50,693 47,458
Interest payable.................................. 32,475 --
Long-term debt (Note 4)........................... 10,650,000 --
Interpartnership debt (Note 4).................... -- 9,606,630
----------- -----------
Total liabilities......................... 11,451,884 10,551,861
Commitments (Notes 5 and 6)
Partners' deficit:
General partner................................... (66,418) (20,106)
Limited partner................................... (1,759,845) (482,949)
----------- -----------
Total partners' deficit............................. (1,826,263) (503,055)
----------- -----------
Total liabilities and partners' deficit... $ 9,625,621 $10,048,806
=========== ===========
</TABLE>
See accompanying notes.
F-212
<PAGE> 397
INDIANA CABLE ASSOCIATES, LTD.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------
12/31/96 12/31/97 12/31/98
---------- ---------- ----------
<S> <C> <C> <C>
REVENUE:
Service...................................... $6,272,049 $$6,827,504 $7,165,843
Installation and other....................... 538,158 622,699 773,283
---------- ---------- ----------
Total revenue...................... 6,810,207 7,450,203 7,939,126
COSTS AND EXPENSES:
Operating expense............................ 989,456 1,142,932 974,617
Programming expense.......................... 1,474,067 1,485,943 1,727,089
Selling, general and administrative
expense.................................... 1,112,441 1,142,247 1,128,957
Depreciation................................. 889,854 602,554 537,884
Amortization................................. 718,334 718,335 707,539
Management fees.............................. 340,510 372,510 396,956
Loss on disposal of assets................... 6,266 639 74,714
---------- ---------- ----------
Total costs and expenses........... 5,530,928 5,465,160 5,547,756
---------- ---------- ----------
Operating income............................. 1,279,279 1,985,043 2,391,370
Interest expense............................. 1,361,415 1,292,469 970,160
---------- ---------- ----------
Net income (loss) before extraordinary
item....................................... (82,136) 692,574 1,421,210
Extraordinary item--loss on early retirement
of debt (Note 3 and 4)..................... -- -- 98,002
---------- ---------- ----------
Net income (loss)............................ $ (82,136) $ 692,574 $1,323,208
========== ========== ==========
</TABLE>
See accompanying notes.
F-213
<PAGE> 398
INDIANA CABLE ASSOCIATES, LTD.
STATEMENT OF PARTNERS' DEFICIT
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
-------- ----------- -----------
<S> <C> <C> <C>
Partners' deficit at December 31, 1995... $(87,783) $(2,348,918) $(2,436,701)
Net loss for the year ended December
31, 1996............................ (2,875) (79,261) (82,136)
-------- ----------- -----------
Partners' deficit at December 31, 1996... (90,658) (2,428,179) (2,518,837)
Net income for the year ended December
31, 1997............................ 24,240 668,334 692,574
-------- ----------- -----------
Partners' deficit at December 31, 1997... (66,418) (1,759,845) (1,826,263)
Net income for the year ended December
31, 1998............................ 46,312 1,276,896 1,323,208
-------- ----------- -----------
Partners' deficit at December 31, 1998... $(20,106) $ (482,949) $ (503,055)
======== =========== ===========
</TABLE>
The partners' capital accounts for financial reporting purposes vary from
the tax capital accounts.
See accompanying notes.
F-214
<PAGE> 399
INDIANA CABLE ASSOCIATES, LTD.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------
12/31/96 12/31/97 12/31/98
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................... $ (82,136) $ 692,574 $ 1,323,208
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization..................... 1,608,188 1,320,889 1,245,423
Amortization of deferred loan costs............... 48,764 72,922 23,149
Loss on disposal of assets........................ 6,266 639 74,714
Loss on write-off of deferred loan cost associated
with early retirement of debt................... -- -- 95,832
Decrease (increase) in customer accounts
receivable...................................... (13,110) 1,536 1,359
Increase in other receivables..................... (80,843) (108,256) (37,787)
Decrease (increase) in prepaid expenses and
deposits........................................ (53,259) (5,928) 20,039
Increase (decrease) in accounts payable and
accrued liabilities............................. (190,357) (147,971) 179,057
Increase (decrease) in customer prepayments....... 16,355 (13,190) (3,235)
Decrease in interest payable...................... (12,314) (39,471) (32,475)
----------- ----------- ------------
Net cash provided by operating activities.... 1,247,554 1,773,744 2,889,284
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment........... (675,244) (592,685) (1,732,831)
Proceeds from sale of assets......................... 227,025 23,662 4,979
----------- ----------- ------------
Net cash used in investing activities........ (448,219) (569,023) (1,727,852)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt......................... 2,000,000 1,450,000 10,636,421
Proceeds from interpartnership debt.................. -- -- 9,606,630
Deferred loan cost................................... (70,000) (29,776) (92,127)
Payments of long-term debt........................... (2,200,000) (3,100,000) (21,286,421)
----------- ----------- ------------
Net cash used in financing activities........ (270,000) (1,679,776) (1,135,497)
----------- ----------- ------------
Net increase (decrease) in cash and cash equivalents... 529,335 (475,055) 25,935
Cash and cash equivalents at beginning of year......... 28,404 557,739 82,684
----------- ----------- ------------
Cash and cash equivalents at end of year............... $ 557,739 $ 82,684 $ 108,619
=========== =========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid........................................ $ 1,324,965 $ 1,258,078 $ 947,606
=========== =========== ============
</TABLE>
See accompanying notes.
F-215
<PAGE> 400
INDIANA CABLE ASSOCIATES, LTD.
NOTES TO FINANCIAL STATEMENTS
1. GENERAL INFORMATION
GENERAL INFORMATION:
Indiana Cable Associates, Ltd. (the "Partnership"), a Colorado limited
partnership, was organized in March 1987 for the purpose of acquiring and
operating cable television systems and related operations in Indiana and
Illinois.
For financial reporting purposes, Partnership profits or losses are
allocated 3.5% to the general partners and 96.5% to the limited partners.
Limited partners are not required to fund any losses in excess of their capital
contributions.
ACQUISITION BY INTERLINK COMMUNICATIONS PARTNERS, LLLP:
Interlink Communications Partners, LLLP ("ICP") agreed to purchase all of
the interests of the Partnership. ICP acquired all of the limited partner
interests, effective December 31, 1998, and is currently in the process of
obtaining the necessary consents to transfer all of the Partnership's franchises
to ICP. Once these are obtained, ICP will then purchase the general partner
interest in the Partnership, and the Partnership will, by operation of law, be
consolidated into ICP.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PROPERTY, PLANT AND EQUIPMENT:
The Partnership records additions to property, plant and equipment at cost,
which in the case of assets constructed includes amounts for material, labor,
overhead and capitalized interest, if applicable.
For financial reporting purposes, the Partnership uses the straight-line
method of depreciation over the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings and improvements......................... 5-30 years
Transmission and distribution systems and related
equipment........................................ 3-15 years
Office furniture and equipment..................... 5 years
</TABLE>
OTHER ASSETS:
Other assets are carried at cost and are amortized on a straight-line basis
over the following lives:
<TABLE>
<S> <C> <C>
Franchises -- the terms of the franchises
(10-19 1/2 years)
Goodwill -- the term of the Partnership
agreement (12 3/4 years)
Deferred loan costs -- the term of the debt (1-6 years)
Organization costs -- 5 years
</TABLE>
F-216
<PAGE> 401
INDIANA CABLE ASSOCIATES, LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES:
No provision for the payment or refund of income taxes has been provided
for the Partnership since the partners are responsible for reporting their
distributive share of Partnership net income or loss in their personal
capacities.
CASH AND CASH EQUIVALENTS:
The Partnership considers all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.
REVENUE RECOGNITION:
Customer fees are recorded as revenue in the period the service is
provided.
FAIR VALUE OF FINANCIAL INVESTMENTS:
The carrying values of cash and cash equivalents, customer accounts
receivable, accounts payable and interpartnership debt approximate fair value.
USE OF ESTIMATES:
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
IMPACT OF YEAR 2000 (UNAUDITED):
The Partnership recognizes that certain of its time-sensitive computer
programs and product distribution equipment may be affected by conversion to the
year 2000. During 1998, management began their evaluation of the information
systems, product distribution facilities, and vendor and supplier readiness. To
date, considerable progress has been made to complete the evaluation process, to
integrate and test compliance installations, and to prepare contingency plans.
In addition, third party suppliers are either fully compliant or are expected to
be compliant by December 31, 1999. Management expects to have all systems
compliant, or have a contingency plan in effect that will result in minimal
impact on the operations.
NEW ACCOUNTING PRONOUNCEMENT:
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-5 "Reporting on the Costs of Start-Up
Activities," which requires the Partnerships to expense all start-up costs
related to organizing a new business. This new standard also includes one-time
activities related to opening a new facility, introduction of a new product or
service, or conducting business with a new class of customer or in a new
territory. This standard is effective for the Partnerships' 1999 fiscal year.
Organization costs are all fully amortized resulting in SOP 98-5 having no
material effect on its financial position or the results of operations.
F-217
<PAGE> 402
INDIANA CABLE ASSOCIATES, LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION:
Certain reclassifications have been made to the 1996 and 1997 financial
statements to conform with the 1998 financial statement presentation. Such
reclassifications had no effect on the net income or loss as previously stated.
3. OTHER ASSETS
At December 31, 1997 and 1998, other assets consisted of the following:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Franchises.................................. $13,144,332 $12,996,580
Goodwill.................................... 378,336 378,336
Deferred loan costs......................... 26,854 --
Organization costs.......................... 63,393 63,393
----------- -----------
13,612,915 13,438,309
Less accumulated amortization............... 7,795,493 8,355,280
----------- -----------
$ 5,817,422 $ 5,083,029
=========== ===========
</TABLE>
On December 31, 1997, the loan agreement with a financial institution was
amended (Note 4). At that time, the original loan's costs, which were fully
amortized, and the accumulated amortization were written off. The bank loan
amendment required the payment of additional loan costs which will be amortized
over the remaining term of the bank loan.
On August 31, 1998, the loan with a financial institution and the
subordinated debt loan with two investor groups were paid in full (Note 4). The
related deferred loan costs and associated accumulated amortization were written
off and $9,263 was recorded as an extraordinary loss. On December 30, 1998, the
new loan agreement with a financial institution was paid in full (Note 4). The
related deferred loan costs and associated accumulated amortization were written
off and $86,569 was recorded as an extraordinary loss.
4. DEBT
The Partnership had a revolving credit agreement with a financial
institution which provided for borrowing up to $7,000,000 with a maturity date
of December 31, 1997, at which time the balance of the loan was $4,650,000. On
December 31, 1997, the credit agreement was amended to reduce the amount
available to borrow to $5,200,000 and extend the maturity date to December 31,
1998. The Partnership also had subordinated term notes with two investors
totalling $6,000,000 at December 31, 1997. Total outstanding loans at December
31, 1997 were $10,650,000. On August 31, 1998, the revolving credit loan and
subordinated term notes had a balance of $3,450,000 and $6,000,000,
respectively; at that date, the total balance of $10,650,000 and accrued
interest were paid in full. On that same date, the Partnership obtained a new
credit agreement with a financial institution. The new credit agreement provided
for a senior term note payable in the amount of $7,500,000 and a revolving
credit loan which provided for borrowing up to
F-218
<PAGE> 403
INDIANA CABLE ASSOCIATES, LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
$7,500,000. At December 30, 1998, the term note and revolving credit had a
balance of $7,500,000 and $1,950,000, respectively; at that date, the total
balance of $9,450,000 and accrued interest were paid in full. The Partnership
also incurred a LIBOR break fee of $2,170 in conjunction with the retirement of
debt which was recorded as an extraordinary item.
Also on December 30, 1998, the Partnership obtained a new interpartnership
loan agreement with ICP (Note 1). Borrowing under the interpartnership loan, as
well as interest and principal payments are due at the discretion of the
management of ICP, resulting in no minimum required annual principal payments.
The balance of the interpartnership loan at December 31, 1998 was $9,606,630.
The effective interest rate at December 31, 1998 was 8.5%.
5. MANAGEMENT AGREEMENT
The Partnership has entered into a management agreement with Rifkin and
Associates, Inc., (Rifkin) whose sole stockholder is affiliated with a general
partner of the Partnership. The agreement provides that Rifkin shall manage the
Partnership and shall receive annual compensation equal to 2 1/2% of gross
revenues and an additional 2 1/2% if a defined cash flow level is met. Effective
September 1, 1998, Rifkin conveyed its CATV management business to R & A
Management, LLC (RML). The result of this transaction was the conveyance of the
Rifkin management agreement (Rifkin Agreement) to RML (RML Agreement). Expenses
incurred pursuant to the Rifkin Agreement and the RML Agreement are disclosed on
the Statement of Operations.
6. LEASE COMMITMENTS
At December 31, 1998, the Partnership had lease commitments under long-term
operating leases as follows:
<TABLE>
<S> <C>
1999.................................................. $27,408
2000.................................................. 6,300
2001.................................................. 2,700
2002.................................................. 1,500
2003.................................................. 1,500
Thereafter............................................ 10,500
-------
Total....................................... $49,908
=======
</TABLE>
Rent expense, including pole rent, was as follows for the periods
indicated:
<TABLE>
<CAPTION>
TOTAL
RENTAL
PERIOD EXPENSE
- ------ --------
<S> <C>
Year Ended December 31, 1996......................... $105,590
Year Ended December 31, 1997......................... 98,693
Year Ended December 31, 1998......................... 104,155
</TABLE>
F-219
<PAGE> 404
INDIANA CABLE ASSOCIATES, LTD.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
7. RETIREMENT BENEFITS
The Partnership has a 401(k) plan for its employees that have been employed
by the Partnership for at least one year. Employees of the Partnership can
contribute up to 15% of their salary, on a before-tax basis, with a maximum 1998
contribution of $10,000 (as set by the Internal Revenue Service). The
Partnership matches participant contributions up to a maximum of 50% of the
first 3% of a participant's salary contributed. All participant contributions
and earnings are fully vested upon contribution and Partnership contributions
and earnings vest 20% per year of employment with the Partnership, becoming
fully vested after five years. The Partnership's matching contributions for the
years ended December 31, 1996, 1997 and 1998 were $4,723, $8,769 and $8,639,
respectively.
F-220
<PAGE> 405
REPORT OF INDEPENDENT AUDITORS
The Partners
R/N South Florida Cable Management
Limited Partnership
We have audited the accompanying consolidated balance sheet of R/N South Florida
Cable Management Limited Partnership as of December 31, 1997 and 1998, and the
related consolidated statements of operations, partners' equity (deficit) and
cash flows for the years ended December 31, 1996, 1997 and 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of R/N
South Florida Cable Management Limited Partnership at December 31, 1997 and
1998, and the consolidated results of its operations and its cash flows for the
years ended December 31, 1996, 1997 and 1998 in conformity with generally
accepted accounting principles.
/s/ ERNST & YOUNG LLP
Denver, Colorado
February 19, 1999
F-221
<PAGE> 406
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 AND 1998
<TABLE>
<CAPTION>
1997 1998
ASSETS (PLEDGED) ----------- -----------
<S> <C> <C>
Cash and cash equivalents........................... $ 362,619 $ 678,739
Customer accounts receivable, less allowance for
doubtful accounts of $85,867 in 1997 and $84,474
in 1998........................................... 569,296 455,339
Other receivables................................... 1,180,507 1,691,593
Prepaid expenses and deposits....................... 416,455 393,022
Property, plant and equipment, at cost:
Transmission and distribution system and related
equipment......................................... 22,836,588 27,981,959
Office furniture and equipment...................... 704,135 755,398
Leasehold improvements.............................. 546,909 549,969
Construction in process and spare parts inventory... 718,165 744,806
----------- -----------
24,805,797 30,032,132
Less accumulated depreciation....................... 9,530,513 11,368,764
----------- -----------
Net property, plant and equipment......... 15,275,284 18,663,368
Other assets, at cost less accumulated amortization
(Note 2).......................................... 6,806,578 5,181,012
----------- -----------
Total assets.............................. $24,610,739 $27,063,073
=========== ===========
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities:
Accounts payable and accrued liabilities............ $ 2,994,797 $ 2,356,540
Interest payable.................................... 287,343 --
Customer prepayments................................ 699,332 690,365
Long-term debt (Note 3)............................. 29,437,500 --
Interpartnership debt (Note 3)...................... -- 31,222,436
----------- -----------
Total liabilities......................... 33,418,972 34,269,341
Commitments (Notes 4 and 5)
Partners' equity (deficit):
General partner................................... (96,602) (81,688)
Limited partner................................... (9,582,050) (8,104,718)
Special limited partner........................... 870,419 980,138
----------- -----------
Total partners' equity (deficit).................... (8,808,233) (7,206,268)
----------- -----------
Total liabilities and partners' deficit... $24,610,739 $27,063,073
=========== ===========
</TABLE>
See accompanying notes.
F-222
<PAGE> 407
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------
12/31/96 12/31/97 12/31/98
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES:
Service................................... $16,615,767 $17,520,883 $18,890,202
Installation and other.................... 1,732,681 2,425,742 3,158,742
----------- ----------- -----------
18,348,448 19,946,625 22,048,944
COSTS AND EXPENSES:
Operating expense......................... 2,758,704 3,489,285 3,707,802
Programming expense....................... 4,075,555 4,014,850 4,573,296
Selling, general and administrative
expense................................. 3,979,002 4,087,845 4,537,535
Depreciation.............................. 1,787,003 1,912,905 2,256,765
Amortization.............................. 1,350,195 1,287,588 1,293,674
Management fees........................... 733,938 797,863 881,958
Loss on disposal of assets................ 373,860 513,177 178,142
----------- ----------- -----------
Total costs and expenses........ 15,058,257 16,103,513 17,429,172
----------- ----------- -----------
Operating income.......................... 3,290,191 3,843,112 4,619,772
Interest expense.......................... 2,528,617 2,571,976 2,583,338
----------- ----------- -----------
Net income before extraordinary item...... 761,574 1,271,136 2,036,434
Extraordinary item -- loss on early
retirement of debt (Note 2)............. -- -- 434,469
----------- ----------- -----------
Net income................................ $ 761,574 $ 1,271,136 $ 1,601,965
=========== =========== ===========
</TABLE>
See accompanying notes.
F-223
<PAGE> 408
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF PARTNERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SPECIAL
GENERAL LIMITED LIMITED
PARTNERS PARTNERS PARTNERS TOTAL
--------- ------------ -------- ------------
<S> <C> <C> <C> <C>
Partners' equity (deficit) at
December 31, 1995.............. $(115,526) $(11,456,616) $731,199 $(10,840,943)
Net income for the year ended
December 31, 1996........... 7,090 702,324 52,160 761,574
--------- ------------ -------- ------------
Partners' equity (deficit) at
December 31, 1996.............. (108,436) (10,754,292) 783,359 (10,079,369)
Net income for the year ended
December 31, 1997........... 11,834 1,172,242 87,060 1,271,136
--------- ------------ -------- ------------
Partners' equity (deficit) at
December 31, 1997.............. (96,602) (9,582,050) 870,419 (8,808,233)
Net income for the year ended
December 31, 1998........... 14,914 1,477,332 109,719 1,601,965
--------- ------------ -------- ------------
Partners' equity (deficit) at
December 31, 1998.............. $ (81,688) $ (8,104,718) $980,138 $ (7,206,268)
========= ============ ======== ============
</TABLE>
The partners' capital accounts for financial reporting purposes vary from
the tax capital accounts.
See accompanying notes.
F-224
<PAGE> 409
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED
------------------------------------------
12/31/96 12/31/97 12/31/98
----------- ----------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................. $ 761,574 $ 1,271,136 $ 1,601,965
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............ 3,137,198 3,200,493 3,550,439
Amortization of deferred loan cost....... 68,898 79,108 89,788
Loss on early retirement of debt......... -- -- 434,469
Loss on disposal of assets............... 373,860 513,177 178,142
Decrease (increase) in customer accounts
receivable............................. 1,420 (152,229) 113,957
Increase in other receivables............ (377,553) (506,325) (511,086)
Decrease (increase) in prepaid expenses
and deposits........................... (114,720) 115,734 23,433
Increase (decrease) in accounts payable
and accrued liabilities................ 122,512 513,839 (638,257)
Increase (decrease) in customer
prepayments............................ 362 208,021 (8,967)
Increase (decrease) in interest
payable................................ 180 16,207 (287,343)
----------- ----------- ------------
Net cash provided by operating
activities....................... 3,973,731 5,259,161 4,546,540
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and
equipment................................ (4,000,631) (4,288,776) (5,915,434)
Additions to other assets, net of
refranchises............................. (10,600) (164,560) (186,790)
Proceeds from the sale of assets............ 16,674 70,865 92,443
----------- ----------- ------------
Net cash used in investing
activities....................... (3,994,557) (4,382,471) (6,009,781)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt................ 2,750,000 3,850,000 5,550,000
Proceeds from interpartnership debt......... -- -- 31,222,436
Payments of long-term debt.................. (2,604,913) (4,562,500) (34,987,500)
Deferred loan costs......................... -- (132,727) (5,575)
----------- ----------- ------------
Net cash provided by (used in)
financing activities............. 145,087 (845,227) 1,779,361
----------- ----------- ------------
Net increase in cash and cash equivalents..... 124,261 31,463 316,120
Cash and cash equivalents at beginning of the
year........................................ 206,895 331,156 362,619
----------- ----------- ------------
Cash and cash equivalents at end of year...... $ 331,156 $ 362,619 $ 678,739
=========== =========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................... $ 2,412,038 $ 2,441,662 $ 2,780,893
=========== =========== ============
</TABLE>
See accompanying notes
F-225
<PAGE> 410
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND ORGANIZATION:
The accompanying consolidated financial statements include the accounts of
R/N South Florida Cable Management Limited Partnership (the "Partnership") and
its substantially wholly-owned subsidiary Rifkin/Narragansett South Florida CATV
Limited Partnership (the "Operating Partnership"). Each partnership is a Florida
Limited Partnership. The Partnership was organized in 1988 for the purpose of
being the general partner to the Operating Partnership which is engaged in the
installation, ownership, operation and management of cable television systems in
Florida.
In 1992, the Partnership adopted an amendment to the Partnership agreement
(the "Amendment") and entered into a Partnership Interest Purchase Agreement
whereby certain Special Limited Partnership interests were issued in the
aggregate amount of $1,250,000. These new Special Limited Partners are
affiliated with the current General and Limited Partners of the Partnership. The
Amendment provides for the methods under which the gains, losses, adjustments
and distributions are allocated to the accounts of the Special Limited Partners.
For financial reporting purposes, partnership profits or losses are
allocated to the limited partners, special limited partners and general partners
in the following ratios: 92.22%, 6.849% and .931%, respectively. Limited
partners and special limited partners are not required to fund any losses in
excess of their capital contributions.
ACQUISITION BY INTERLINK COMMUNICATIONS PARTNERS, LLLP:
InterLink Communications Partners, LLLP ("ICP") agreed to purchase all of
the interests of the Partnerships. ICP acquired all of the limited partner
interests of the Operating Partnership, effective December 31, 1998, and is
currently in the process of obtaining the necessary consents to transfer all of
the Operating Partnership's franchises to ICP. Once obtained, ICP will then
purchase the general partner interest, and the Partnership, by operation of law,
will consolidate into ICP.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment additions are recorded at cost, which in the
case of assets constructed includes amounts for material, labor, overhead and
capitalized interest, if applicable.
For financial reporting purposes, the Operating Partnership uses the
straight-line method of depreciation over the estimated useful lives of the
assets as follows:
<TABLE>
<S> <C>
Transmission and distribution systems and related
equipment....................................... 15 years
Office furniture and equipment.................... 3-15 years
Leasehold improvements............................ 5-8 years
</TABLE>
F-226
<PAGE> 411
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OTHER ASSETS:
Other assets are carried at cost and are amortized on a straight-line basis
over the following lives:
<TABLE>
<S> <C>
Franchises.............. -- the terms of the franchises (3-13
years)
Goodwill................ -- 40 years
Organization costs...... -- 5 years
Deferred loan costs..... -- the term of the debt (8 years)
</TABLE>
INCOME TAXES:
No provision for the payment or refund of income taxes has been provided
since the partners are responsible for reporting their distributive share of
partnerships net income or loss in their personal capacities.
CASH AND CASH EQUIVALENTS:
The Partnerships consider all highly liquid debt instruments purchased with
a maturity of three months or less to be cash equivalents.
REVENUE RECOGNITION:
Customer fees are recorded as revenue in the period the service is
provided.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying values of cash and cash equivalents, customer accounts
receivable, accounts payable and interpartnership debt approximate fair value.
USE OF ESTIMATES:
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
IMPACT OF YEAR 2000 (UNAUDITED):
The Partnerships recognize that certain of its time-sensitive computer
programs and product distribution equipment may be affected by conversion to the
year 2000. During 1998, management began their evaluation of the information
systems, product distribution facilities, and vendor and supplier readiness. To
date, considerable progress has been made to complete the evaluation process, to
integrate and test compliance installations, and to prepare contingency plans.
In addition, third party suppliers are either fully compliant or are expected to
be compliant by December 31, 1999. Management expects to have all systems
compliant, or have a contingency plan in effect that will result in minimal
impact on the operations.
NEW ACCOUNTING PRONOUNCEMENT:
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-5 "Reporting on the costs of Start-Up
Activities," which requires the Partnerships to expense all start-up costs
related to organizing a new business. This new standard also includes one-time
activities related to opening a new facility, introduction of
F-227
<PAGE> 412
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
a new product or service, or conducting business with a new class of customer or
in a new territory. This standard is effective for the Partnerships' 1999 fiscal
year. The organization costs are fully amortized, resulting in SOP 98-5 having
no material effect on its financial position or the results of operations.
RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION:
Certain reclassifications have been made to the 1996 and 1997 financial
statements to conform with the 1998 financial statement presentation. Such
reclassifications had no effect on the net income as previously stated.
2. OTHER ASSETS
At December 31, 1997 and 1998, other assets consisted of the following:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Franchises and other................ $14,348,984 $14,535,774
Goodwill............................ 3,429,845 3,429,845
Deferred loan costs................. 694,819 --
Organization costs.................. 23,218 23,218
----------- -----------
18,496,866 17,988,837
Less accumulated amortization....... 11,690,288 12,807,825
----------- -----------
$ 6,806,578 $ 5,181,012
=========== ===========
</TABLE>
On December 30, 1998, the Partnerships' loan with a financial institution
was paid in full (Note 3). The related deferred loan costs and associated
accumulated amortization were written off and an extraordinary loss of $434,469
was recorded.
3. DEBT
The Partnerships had senior term note payable and a revolving credit loan
agreement with a financial institution. The senior term note payable was a
$29,500,000 loan which required varying quarterly payments which commenced on
September 30, 1996. On June 30, 1997, the loan agreement was amended to defer
the June 30, 1997 and September 30, 1997 principal payments and restructured the
required principal payment amounts due through December 31, 2003. The revolving
credit loan provided for borrowing up to $3,000,000 at the discretion of the
Partnerships. On June 30, 1997, the loan agreement was amended to increase the
amount provided for borrowing under the revolving credit loan to $3,750,000. At
December 31, 1997, the term notes and the revolving credit loan had a balance of
$28,387,500 and $1,050,000, respectively, with a total balance of $29,437,500.
At December 30, 1998, the term notes and the revolving credit loan had a balance
of $27,637,500 and $3,300,000, respectively; at that date, the total balance of
$30,937,500 and accrued interest were paid in full.
Also on December 30, 1998, the Partnerships obtained a new interpartnership
loan agreement with ICP (Note 1). Borrowing under the interpartnership loan, as
well as interest and principal payments are due at the discretion of the
management of ICP, resulting in no minimum required annual principal payments.
The balance of the
F-228
<PAGE> 413
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interpartnership loan at December 31, 1998 was $31,222,436. The effective
interest rate at December 31, 1998 was 8.5%.
4. MANAGEMENT AGREEMENT
The Partnerships have entered into a management agreement with Rifkin &
Associates, Inc. (Rifkin). The management agreement provides that Rifkin shall
manage the Operating Partnership and shall be entitled to annual compensation of
4% of gross revenues. Effective September 1, 1998, Rifkin conveyed its CATV
management business to R & A Management, LLC (RML). The result of this
transaction was the conveyance of the Rifkin management agreement (Rifkin
Agreement) to RML (RML Agreement). Expenses incurred pursuant to the Rifkin
Agreement and the RML Agreement are disclosed on the Consolidated Statement of
Operations.
5. LEASE COMMITMENTS
At December 31, 1998, the Operating Partnership had lease commitments under
long-term operating leases as follows:
<TABLE>
<S> <C>
1999................................................. $195,437
2000................................................. 189,643
2001................................................. 116,837
--------
Total...................................... $501,917
========
</TABLE>
Rent expense, including pole rent, was as follows for the periods
indicated:
<TABLE>
<CAPTION>
TOTAL
RENTAL
PERIOD EXPENSE
- ------ --------
<S> <C>
Year Ended December 31, 1996....................... $262,231
Year Ended December 31, 1997....................... 279,655
Year Ended December 31, 1998....................... 295,107
</TABLE>
6. RETIREMENT BENEFITS
The Operating Partnership has a 401(k) plan for its employees that have
been employed by the Operating Partnership for at least one year. Employees of
the Operating Partnership can contribute up to 15% of their salary, on a
before-tax basis, with a maximum 1998 contribution of $10,000 (as set by the
Internal Revenue Service). The Operating Partnership matches participant
contributions up to a maximum of 50% of the first 3% of a participant's salary
contributed. All participant contributions and earnings are fully vested upon
contribution and Operating Partnership contributions and earnings vest 20% per
year of employment with the Operating Partnership, becoming fully vested after
five years. The Operating Partnership's matching contributions for the years
ended December 31, 1996, 1997 and 1998 were $15,549, $23,292 and $20,652,
respectively.
F-229
<PAGE> 414
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Charter Communications Holdings, LLC:
We have audited the accompanying statements of operations and changes in
net assets and cash flows of Sonic Communications Cable Television Systems for
the period from April 1, 1998, through May 20, 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Sonic
Communications Cable Television Systems for the period from April 1, 1998,
through May 20, 1998, in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
St. Louis, Missouri,
February 5, 1999
F-230
<PAGE> 415
SONIC COMMUNICATIONS CABLE TELEVISION SYSTEMS
STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS
FOR THE PERIOD FROM APRIL 1, 1998, THROUGH MAY 20, 1998
<TABLE>
<S> <C>
REVENUES.................................................... $ 6,343,226
-----------
OPERATING EXPENSES:
Operating costs........................................... 1,768,393
General and administrative................................ 1,731,471
Depreciation and amortization............................. 1,112,057
-----------
4,611,921
-----------
Income from operations................................. 1,731,305
INTEREST EXPENSE............................................ 289,687
-----------
Income before provision for income taxes............... 1,441,618
PROVISION IN LIEU OF INCOME TAXES........................... 602,090
-----------
Net income............................................. 839,528
NET ASSETS, April 1, 1998................................... 55,089,511
-----------
NET ASSETS, May 20, 1998.................................... $55,929,039
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-231
<PAGE> 416
SONIC COMMUNICATIONS CABLE TELEVISION SYSTEMS
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM APRIL 1, 1998, THROUGH MAY 20, 1998
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................ $ 839,528
Adjustments to reconcile net loss to net cash provided by
operating activities --
Depreciation and amortization.......................... 1,112,057
Changes in assets and liabilities --
Accounts receivable, net............................. 49,980
Prepaid expenses and other........................... 171,474
Accounts payable and accrued expenses................ (1,479,682)
-----------
Net cash provided by operating activities......... 693,357
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment................ (470,530)
Payments of franchise costs............................... (166,183)
-----------
Net cash used in investing activities............. (636,713)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt................................ (41,144)
-----------
Net cash used in financing activities............. (41,144)
NET INCREASE IN CASH AND CASH EQUIVALENTS................... 15,500
-----------
CASH AND CASH EQUIVALENTS, beginning of period.............. 532,238
-----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 547,738
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-232
<PAGE> 417
SONIC COMMUNICATIONS CABLE TELEVISION SYSTEMS
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION
Sonic Communications Cable Television Systems (the Company) operates cable
television systems in California and Utah.
Effective May 21, 1998, the Company's net assets were acquired by Charter
Communications Holdings, LLC.
CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
PROPERTY, PLANT AND EQUIPMENT
The Company depreciates its cable distribution systems using the
straight-line method over estimated useful lives of 5 to 15 years for systems
acquired on or after April 1, 1981. Systems acquired before April 1, 1981, are
depreciated using the declining balance method over estimated useful lives of 8
to 20 years.
Vehicles, machinery, office, and data processing equipment and buildings
are depreciated using the straight-line or declining balance method over
estimated useful lives of 3 to 25 years. Capital leases and leasehold
improvements are amortized using the straight-line or declining balance method
over the shorter of the lease term or the estimated useful life of the asset.
INTANGIBLES
The excess of amounts paid over the fair values of tangible and
identifiable intangible assets acquired in business combinations are amortized
using the straight-line method over the life of the franchise. Identifiable
intangible assets such as franchise rights, noncompete agreements and subscriber
lists are amortized using the straight-line method over their useful lives,
generally 3 to 15 years.
REVENUES
Cable television revenues from basic and premium services are recognized
when the related services are provided.
Installation revenues are recognized to the extent of direct selling costs
incurred. The remainder, if any, is deferred and amortized to income over the
estimated average period that customers are expected to remain connected to the
cable television system. As of May 20, 1998, no installation revenue has been
deferred, as direct selling costs exceeded installation revenue.
INTEREST EXPENSE
Interest expense relates to a note payable to a stockholder of the Company,
which accrues interest at 7.8% per annum.
F-233
<PAGE> 418
SONIC COMMUNICATIONS CABLE TELEVISION SYSTEMS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
2. COMMITMENTS AND CONTINGENCIES:
FRANCHISES
The Company has committed to provide cable television services under
franchise agreements with various governmental bodies for remaining terms up to
13 years. Franchise fees of up to 5% of gross revenues are payable under these
agreements.
LEASES
The Company leases certain facilities and equipment under noncancelable
operating leases. Leases and rental costs charged to expense for the period from
April 1, 1998, through May 20, 1998, were $59,199.
The Company also rents utility poles in its operations. Generally, pole
rentals are cancelable on short notice, but the Company anticipates that such
rentals will recur. Rent expense incurred for pole rental attachments for the
period from April 1, 1998, through May 20, 1998, was $64,159.
3. INCOME TAXES:
The results of the Company are included in the consolidated federal income
tax return of its parent, Sonic Enterprises, Inc., which is responsible for tax
payments applicable to the Company. The financial statements reflect a provision
in lieu of income taxes as if the Company was filing on a separate company
basis. Accordingly, the Company has included the provision in lieu of income
taxes in the accompanying statement of operations.
The provision in lieu of income taxes approximates the amount of tax
computed using U.S. statutory rates, after reflecting state income tax expense
of $132,510 for the period from April 1, 1998, through May 20, 1998.
4. REGULATION IN THE CABLE TELEVISION INDUSTRY:
The cable television industry is subject to extensive regulation at the
federal, local and, in some instances, state levels. The Cable Communications
Policy Act of 1984 (the "1984 Cable Act"), the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act") and together with
the 1984 Cable Act, the "Cable Acts"), and the Telecommunications Act of 1996
(the "1996 Telecom Act"), establish a national policy to guide the development
and regulation of cable television systems. The Federal Communications
Commission (FCC) has principal responsibility for implementing the policies of
the Cable Acts. Many aspects of such regulation are currently the subject to
judicial proceeding and administrative or legislative proposals. Legislation and
regulations
F-234
<PAGE> 419
SONIC COMMUNICATIONS CABLE TELEVISION SYSTEMS
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
continue to change, and the Company cannot predict the impact of future
developments on the cable television industry.
The 1992 Cable Act and the FCC's rules implementing that act generally have
increased the administrative and operational expenses of cable television
systems and have resulted in additional regulatory oversight by the FCC and
local or state franchise authorities. The Cable Acts and the corresponding FCC
regulations have established rate regulations.
The 1992 Cable Act permits certified local franchising authorities to order
refunds of basic service tier rates paid in the previous twelve-month period
determined to be in excess of the maximum permitted rates. For the period from
April 1, 1998, through May 20, 1998, the amount refunded by the Company has been
insignificant. The Company may be required to refund additional amounts in the
future.
The Company believes that it has complied in all material respects with the
ownership of the 1992 Cable Act, including the rate setting provisions
promulgated by the FCC. However, in jurisdictions that have chosen not to
certify, refunds covering the previous twelve-month period may be ordered upon
certification if the Company are unable to justify its basic rates. The Company
is unable to estimate at this time the amount of refunds, if any, that may be
payable by the Company in the event certain of its rates are successfully
challenged by franchising authorities or found to be unreasonable by the FCC.
The Company does not believe that the amount of any such refunds would have a
material adverse effect on the financial position or results of operations of
the Company.
The 1996 Telecom Act, among other things, immediately deregulated the rates
for certain small cable operators and in certain limited circumstances rates on
the basic service tier, and as of March 31, 1999, deregulates rates on the cable
programming service tier (CPST). The FCC is currently developing permanent
regulations to implement the rate deregulation provisions of the 1996 Telecom
Act. The Company cannot predict the ultimate effect of the 1996 Telecom Act on
the Company's financial position or results of operations.
The FCC may further restrict the ability of cable television operators to
implement rate increases or the United States Congress may enact legislation
that could delay or suspend the scheduled March 1999 termination of CPST rate
regulation. This continued rate regulation, if adopted, could limit the rates
charged by the Systems.
A number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. State governmental agencies are
required to follow FCC rules when prescribing rate regulation, and thus, state
regulation of cable television rates is not allowed to be more restrictive than
the federal or local regulation.
F-235
<PAGE> 420
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Long Beach Acquisition Corp.:
We have audited the accompanying statements of operations, stockholder's
equity and cash flows of Long Beach Acquisition Corp. (a Delaware corporation)
for the period from April 1, 1997, through May 23, 1997. 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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Long Beach
Acquisition Corp. for the period from April 1, 1997, through May 23, 1997, in
conformity with generally accepted accounting principles.
/s/ ARTHUR ANDERSEN LLP
St. Louis, Missouri,
July 31, 1998
F-236
<PAGE> 421
LONG BEACH ACQUISITION CORP.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM APRIL 1, 1997, THROUGH MAY 23, 1997
<TABLE>
<S> <C>
SERVICE REVENUES............................................ $ 5,313,282
-----------
EXPENSES:
Operating costs........................................... 1,743,493
General and administrative................................ 1,064,841
Depreciation and amortization............................. 3,576,166
Management fees -- related parties........................ 230,271
-----------
6,614,771
-----------
Loss from operations................................... (1,301,489)
INTEREST EXPENSE............................................ 753,491
-----------
Net loss............................................... $(2,054,980)
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-237
<PAGE> 422
LONG BEACH ACQUISITION CORP.
STATEMENT OF STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM APRIL 1, 1997, THROUGH MAY 23, 1997
<TABLE>
<CAPTION>
CLASS A, SENIOR
VOTING REDEEMABLE ADDITIONAL TOTAL
COMMON PREFERRED PAID-IN ACCUMULATED STOCKHOLDER'S
STOCK STOCK CAPITAL DEFICIT EQUITY
-------- ----------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
BALANCE,
April 1, 1997....... $100 $11,000,000 $33,258,723 $(51,789,655) $(7,530,832)
Net loss............ -- -- -- (2,054,980) (2,054,980)
---- ----------- ----------- ------------ -----------
BALANCE,
May 23, 1997........ $100 $11,000,000 $33,258,723 $(53,844,635) $(9,585,812)
==== =========== =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-238
<PAGE> 423
LONG BEACH ACQUISITION CORP.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM APRIL 1, 1997, THROUGH MAY 23, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(2,054,980)
Adjustments to reconcile net loss to net cash provided by
operating activities-
Depreciation and amortization.......................... 3,576,166
Changes in assets and liabilities, net of effects from
acquisition-
Accounts receivable, net............................. (830,725)
Prepaid expenses and other........................... (19,583)
Accounts payable and accrued expenses................ (528,534)
Other current liabilities............................ 203,282
-----------
Net cash provided by operating activities......... 345,626
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment................ (596,603)
-----------
Net cash used in investing activities............. (596,603)
-----------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (250,977)
CASH AND CASH EQUIVALENTS, beginning of period.............. 3,544,462
-----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 3,293,485
===========
CASH PAID FOR INTEREST...................................... $ 1,316,462
===========
</TABLE>
The accompanying notes are an integral part of this statement.
F-239
<PAGE> 424
LONG BEACH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS
MAY 23, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION
Long Beach Acquisition Corp. (LBAC or the "Company") was a wholly owned
corporation of KC Cable Associates, L.P., a partnership formed through a joint
venture agreement between Kohlberg, Kravis, Roberts & Co. (KKR) and Cablevision
Industries Corporation (CVI). The Company was formed to acquire cable television
systems serving Long Beach, California, and surrounding areas.
On May 23, 1997, the Company executed a stock purchase agreement with
Charter Communications Long Beach, Inc. (CC-LB) whereby CC-LB purchased all of
the outstanding stock of the Company for an aggregate purchase price, net of
cash acquired, of $150.9 million. Concurrent with this stock purchase, CC-LB was
acquired by Charter Communications, Inc. (Charter) and Kelso Investment
Associates V, L.P., an investment fund (Kelso).
As of May 23, 1997, LBAC provided cable television service to subscribers
in southern California.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost, including all direct and
certain indirect costs associated with the construction of cable transmission
and distribution facilities, and the cost of new customer installation. The
costs of disconnecting a customer are charged to expense in the period incurred.
Expenditures for repairs and maintenance are charged to expense as incurred, and
equipment replacement costs and betterments are capitalized.
Depreciation is provided on a straight-line basis over the estimated useful
life of the related asset as follows:
<TABLE>
<S> <C>
Leasehold improvements........................... Life of respective lease
Cable systems and equipment...................... 5-10 years
Subscriber devices............................... 5 years
Vehicles......................................... 5 years
Furniture, fixtures and office equipment......... 5-10 years
</TABLE>
FRANCHISES
Franchises include the assigned fair value of the franchise from purchased
cable television systems. These franchises are amortized on a straight-line
basis over six years, the remaining life of the franchise at acquisition.
F-240
<PAGE> 425
LONG BEACH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INTANGIBLE ASSETS
Intangible assets include goodwill, which is amortized over fifteen years;
subscriber lists, which are amortized over seven years; a covenant not to
compete which is amortized over five years; organization costs which are
amortized over five years and debt issuance costs which are amortized over ten
years, the life of the loan.
IMPAIRMENT OF ASSETS
If facts and circumstances suggest that a long-lived asset may be impaired,
the carrying value is reviewed. If a review indicates that the carrying value of
such asset is not recoverable based on projected undiscounted cash flows related
to the asset over its remaining life, the carrying value of such asset is
reduced to its estimated fair value.
REVENUES
Cable television revenues from basic and premium services are recognized
when the related services are provided.
Installation revenues are recognized to the extent of direct selling costs
incurred. The remainder, if any, is deferred and amortized to income over the
average estimated period that customers are expected to remain connected to the
cable television system. As of May 23, 1997, no installation revenue has been
deferred, as direct selling costs have exceeded installation service revenues.
INCOME TAXES
LBAC's income taxes are recorded in accordance with SFAS No. 109,
"Accounting for Income Taxes."
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-241
<PAGE> 426
LONG BEACH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. STOCKHOLDER'S EQUITY:
For the period from April 1, 1997, through May 23, 1997, stockholder's
equity consisted of the following:
<TABLE>
<S> <C>
Stockholder's (deficit) equity:
Common stock -- Class A, voting $1 par value, 100 shares
authorized, issued and outstanding..................... $ 100
Common stock -- Class B, nonvoting, $1 par value, 1,000
shares authorized, no shares issued.................... --
Senior redeemable preferred stock, no par value, 110,000
shares authorized, issued and outstanding, stated at
redemption value....................................... 11,000,000
Additional paid-in capital................................ 33,258,723
Accumulated deficit....................................... (53,844,635)
------------
Total stockholder's (deficit) equity................... $ (9,585,812)
============
</TABLE>
3. INTEREST EXPENSE:
The Company has the option of paying interest at either the Base Rate of
the Eurodollar rate, as defined, plus a margin which is based on the attainment
of certain financial ratios. The weighted average interest rate for the period
from April 1, 1997, through May 23, 1997, was 7.3%.
4. REGULATION IN THE CABLE TELEVISION INDUSTRY:
The cable television industry is subject to extensive regulation at the
federal, local and, in some instances, state levels. The Cable Communications
Policy Act of 1984 (the "1984 Cable Act"), the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act") and together with
the 1984 Cable Act, the "Cable Acts"), and the Telecommunications Act of 1996
(the "1996 Telecom Act"), establish a national policy to guide the development
and regulation of cable television systems. The Federal Communications
Commission (FCC) has principal responsibility for implementing the policies of
the Cable Acts. Many aspects of such regulation are currently the subject to
judicial proceeding and administrative or legislative proposals. Legislation and
regulations continue to change, and the Company cannot predict the impact of
future developments on the cable television industry.
The 1992 Cable Act and the FCC's rules implementing that act generally have
increased the administrative and operational expenses of cable television
systems and have resulted in additional regulatory oversight by the FCC and
local or state franchise authorities. The Cable Acts and the corresponding FCC
regulations have established rate regulations.
The 1992 Cable Act permits certified local franchising authorities to order
refunds of basic service tier rates paid in the previous twelve-month period
determined to be in excess of the maximum permitted rates. As of May 23, 1997,
the amount refunded by the Company has been insignificant. The Company may be
required to refund additional amounts in the future.
F-242
<PAGE> 427
LONG BEACH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The Company believes that it has complied in all material respects with the
ownership of the 1992 Cable Act, including the rate setting provisions
promulgated by the FCC. However, in jurisdictions that have chosen not to
certify, refunds covering the previous twelve-month period may be ordered upon
certification if the Company are unable to justify its basic rates. The Company
is unable to estimate at this time the amount of refunds, if any, that may be
payable by the Company in the event certain of its rates are successfully
challenged by franchising authorities or found to be unreasonable by the FCC.
The Company does not believe that the amount of any such refunds would have a
material adverse effect on the financial position or results of operations of
the Company.
The 1996 Telecom Act, among other things, immediately deregulated the rates
for certain small cable operators and in certain limited circumstances rates on
the basic service tier, and as of March 31, 1999, deregulates rates on the cable
programming service tier (CPST). The FCC is currently developing permanent
regulations to implement the rate deregulation provisions of the 1996 Telecom
Act. The Company cannot predict the ultimate effect of the 1996 Telecom Act on
the Company's financial position or results of operations.
The FCC may further restrict the ability of cable television operators to
implement rate increases or the United States Congress may enact legislation
that could delay or suspend the scheduled March 1999 termination of CPST rate
regulation. This continued rate regulation, if adopted, could limit the rates
charged by the Company.
A number of states subject cable television systems to the jurisdiction of
centralized state governmental agencies, some of which impose regulation of a
character similar to that of a public utility. State governmental agencies are
required to follow FCC rules when prescribing rate regulation, and thus, state
regulation of cable television rates is not allowed to be more restrictive than
the federal or local regulation.
5. RELATED-PARTY TRANSACTIONS:
The Company has entered into a management agreement (the "Management
Agreement") with CVI under which CVI manages the operations of the Company for
an annual management fee equal to 4% of gross operating revenues, as defined.
Management fees under this agreement amounted to $210,100 for the period from
April 1, 1997, through May 23, 1997. In addition, the Company has agreed to pay
a monitoring fee of two dollars per basic subscriber, as defined, per year for
services provided by KKR. Monitoring fees amounted to $20,171 for the period
from April 1, 1997, through May 23, 1997.
6. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases certain facilities and equipment under noncancelable
operating leases. Rent expense incurred under these leases for the period from
April 1, 1997, through May 23, 1997, was $67,600.
The Company rents utility poles in its operations. Generally, pole rental
agreements are short term, but LBAC anticipates that such rentals will recur.
Rent expense for pole attachments for the period from April 1, 1997, through May
23, 1997, was $12,700.
F-243
<PAGE> 428
LONG BEACH ACQUISITION CORP.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
LITIGATION
The Company is a party to lawsuits which are generally incidental to its
business. In the opinion of management, after consulting with legal counsel, the
outcome of these lawsuits will not have a material adverse effect on the
Company's financial position or results of operations.
7. INCOME TAXES:
The Company has not recognized the tax benefit associated with its taxable
loss for the period from April 1, 1997, through May 23, 1997, as the Company
believes the benefit will likely not be realized.
8. EMPLOYEE BENEFIT PLANS:
Substantially all employees of the Company are eligible to participate in a
defined contribution plan containing a qualified cash or deferred arrangement
pursuant to IRC Section 401(k). The plan provides that eligible employees may
contribute up to 10% of their compensation to the plan. The Company made no
contributions to the plan for the period from April 1, 1997, through May 23,
1997.
F-244
<PAGE> 429
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR
---------------------------
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......................... $1,038,360 $ 10,386
Accounts receivable, net of allowance for doubtful
accounts of $3,171 and $3,528, respectively..... 30,314 31,163
Prepaid expenses and other......................... 15,882 8,613
---------- ----------
Total current assets....................... 1,084,556 50,162
---------- ----------
INVESTMENT IN CABLE TELEVISION PROPERTIES:
Property, plant and equipment...................... 1,533,197 1,473,727
Franchises......................................... 5,607,539 5,705,420
---------- ----------
7,140,736 7,179,147
---------- ----------
OTHER ASSETS......................................... 131,990 6,347
---------- ----------
$8,357,282 $7,235,656
========== ==========
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt............... $ -- $ 87,950
Accounts payable and accrued expenses.............. 216,397 199,831
Payable to related party........................... -- 20,000
Payables to manager of cable television systems -
related party................................... 12,554 23,236
---------- ----------
Total current liabilities.................. 228,951 331,017
---------- ----------
LONG-TERM DEBT....................................... 4,754,018 3,435,251
---------- ----------
OTHER LONG-TERM LIABILITIES.......................... 48,171 40,097
---------- ----------
MEMBERS' EQUITY...................................... 3,326,142 3,429,291
---------- ----------
$8,357,282 $7,235,656
========== ==========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
F-245
<PAGE> 430
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------------
1999 1998
SUCCESSOR PREDECESSOR
------------------------
<S> <C> <C>
REVENUES................................................ $286,135 $4,782
-------- ------
OPERATING EXPENSES:
Operating, general and administrative................. 152,075 2,638
Depreciation and amortization......................... 153,747 1,605
Corporate expense charges -- related party............ 5,323 143
-------- ------
311,145 4,386
(Loss) income from operations...................... (25,010) 396
-------- ------
OTHER INCOME (EXPENSE):
Interest income....................................... 1,733 8
Interest expense...................................... (71,591) (1,329)
Other, net............................................ 15 2
-------- ------
(69,843) (1,319)
Loss before extraordinary item..................... (94,853) (923)
EXTRAORDINARY ITEM- Loss from early extinguishment of
debt.................................................. 3,604 --
-------- ------
Net loss........................................... $(98,457) $ (923)
======== ======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
F-246
<PAGE> 431
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------------
1999 1998
SUCCESSOR PREDECESSOR
------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................... $ (98,457) $ (923)
---------- ------
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization....................... 153,747 1,605
Amortization of non-cash interest expense........... 12,277 31
Gain (loss) on disposal of property, plant and
equipment......................................... (15) --
Loss from early extinguishment of debt.............. 3,604 --
Changes in assets and liabilities, net of effects from
acquisition --
Accounts receivable, net............................ 862 274
Prepaid expenses and other.......................... (3,369) 10
Accounts payable and accrued expenses............... (27,141) (550)
Payables to manager of cable television systems,
including deferred management fees................ 4,879 (41)
Other operating activities.......................... (563) --
---------- ------
Net cash provided by operating activities......... 45,824 406
---------- ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment............. (109,629) (821)
Purchase of cable television system.................... (2,752) --
Other investing activities............................. (4,419) --
---------- ------
Net cash used in investing activities............. (116,800) (821)
---------- ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings of long-term debt........................... 4,854,188 900
Repayments of long-term debt........................... (3,641,666) (900)
Payments for debt issuance costs....................... (88,880) --
Distributions.......................................... (4,692) --
Payment to related party............................... (20,000) --
---------- ------
Net cash used in financing activities............. 1,098,950 --
---------- ------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..... 1,027,974 (415)
CASH AND CASH EQUIVALENTS, beginning of period........... 10,386 626
---------- ------
CASH AND CASH EQUIVALENTS, end of period................. $1,038,360 $ 211
========== ======
CASH PAID FOR INTEREST................................... $ 91,672 $1,013
========== ======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
F-247
<PAGE> 432
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND BASIS OF PRESENTATION
Charter Communications Holdings, LLC (Charter Holdings), a Delaware limited
liability company, was formed in February 1999 as a wholly owned subsidiary of
Charter Communications, Inc. (Charter). Charter, through its wholly owned cable
television operating subsidiary, Charter Communications Properties, LLC (CCP),
commenced operations with the acquisition of a cable television system on
September 30, 1995.
Effective December 23, 1998, through a series of transactions, Paul G.
Allen acquired approximately 94% of Charter for an aggregate purchase price of
$2.2 billion, excluding $2.0 billion in debt assumed (the "Paul Allen
Transaction"). In conjunction with the Paul Allen Transaction, Charter acquired
controlling interests in CharterComm Holdings, LLC (CharterComm Holdings) and
CCA Group (comprised of CCA Holdings Corp., CCT Holdings Corp. and Charter
Communications Long Beach, Inc.), all cable television operating companies, from
unrelated third parties for fair value. Charter previously managed and owned
minority interests in these companies. These acquisitions were accounted for
using the purchase method of accounting, and accordingly, results of operations
of CharterComm Holdings and CCA Group are included in the financial statements
from the date of acquisition. In February 1999, Charter transferred all of its
cable television operating subsidiaries to a wholly owned subsidiary of Charter
Holdings, Charter Communications Operating, LLC (Charter Operating). This
transfer was accounted for as a reorganization of entities under common control
similar to a pooling of interests.
As a result of the change in ownership of CCP, CharterComm Holdings and CCA
Group, Charter Holdings has applied push-down accounting in the preparation of
the consolidated financial statements. Accordingly, Charter Holdings increased
its members' equity by $2.2 billion to reflect the amounts paid by Paul G. Allen
and Charter. The purchase price was allocated to assets acquired and liabilities
assumed based on their relative fair values. The excess of the purchase price
over the amounts assigned to net tangible assets was $3.6 billion and is
included in franchises. The allocation of the purchase price is based, in part,
on preliminary information which is subject to adjustment upon obtaining
complete appraisal and valuation information of intangible assets. The valuation
information is expected to be finalized in the third quarter of 1999. However,
no significant adjustments are anticipated.
On April 7, 1999, the cable television operating subsidiaries of Marcus
Cable Company, L.L.C. (Marcus) were transferred to Charter Operating. As a
result of the Marcus transfer, Charter Holdings is owned 54% by Charter and 46%
by companies controlled by Paul G. Allen giving Paul G. Allen a 97% direct and
indirect ownership interest in Charter Holdings. The transfer was accounted for
as a reorganization of entities under common control similar to a pooling of
interests since Paul G. Allen and a company controlled by Paul G. Allen
purchased substantially all of the outstanding partnership interests in Marcus
in April 1998, and purchased the remaining interest in Marcus on April 7, 1999.
F-248
<PAGE> 433
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The consolidated financial statements of Charter Holdings include the
accounts of Charter Operating and CCP, the accounts of CharterComm Holdings and
CCA Group and their subsidiaries since December 23, 1998 (date acquired by
Charter), and the accounts of Marcus since December 23, 1998 (date Paul G. Allen
controlled both Charter and Marcus), and are collectively referred to as the
"Company" herein. All subsidiaries are wholly owned. All material intercompany
transactions and balances have been eliminated.
As a result of the Paul Allen Transaction and application of push-down
accounting, the financial information of the Company in the accompanying
financial statements and notes thereto as of December 31, 1998, and March 31,
1999, and for the Successor Period (January 1, 1999, through March 31, 1999) is
presented on a different cost basis than the financial information of the
Company for the Predecessor Period (January 1, 1998, through March 31, 1998) and
therefore, such information is not comparable.
The accompanying unaudited financial statements of Charter Holdings have
been prepared in accordance with the rules and regulations of the Securities and
Exchange Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS:
The accompanying financial statements are unaudited; however, in the
opinion of management, such statements include all adjustments necessary for a
fair presentation of the results for the periods presented. The interim
financial statements should be read in conjunction with the financial statements
and notes thereto as of and for the period ended December 31, 1998. Interim
results are not necessarily indicative of results for a full year.
3. ACQUISITIONS:
In addition to the Paul Allen Transaction and the acquisitions by Charter
of CharterComm Holdings and CCA Group, the Company acquired cable television
systems for an aggregate purchase price, net of cash acquired, of $291,800 in
1998, and completed the sale of certain cable television systems for an
aggregate sales price of $405,000 in 1998, all prior to December 24, 1998. The
Company also refinanced substantially all of its long-term debt in March 1999
(see Note 4).
The above acquisitions were accounted for using the purchase method of
accounting, and accordingly, results of operations of the acquired assets have
been included in the financial statements from the dates of acquisition. The
purchase prices were allocated to tangible and intangible assets based on
estimated fair values at the acquisition dates.
Unaudited pro forma operating results as though the acquisitions and
dispositions discussed above, including the Paul Allen Transaction and the
combination with Marcus, and the refinancing discussed herein, had occurred on
January 1, 1998, with adjustments to
F-249
<PAGE> 434
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
give effect to amortization of franchises, interest expense and certain other
adjustments are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C>
Revenues....................................... $ 286,135 $ 264,971
Loss from operations........................... (25,010) (35,889)
Net loss....................................... (102,633) (149,988)
</TABLE>
The unaudited pro forma information has been presented for comparative
purposes and does not purport to be indicative of the results of operations had
these transactions been completed as of the assumed date or which may be
obtained in the future.
4. LONG-TERM DEBT:
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ------------
<S> <C> <C>
Charter:
Credit Agreements (including CCP, CCA
Group and CharterComm Holdings)......... $ -- $1,726,500
Senior Secured Discount Debentures......... -- 109,152
11 1/4% Senior Notes....................... 25 125,000
Marcus:
Senior Credit Facility..................... -- 808,000
13 1/2% Senior Subordinated Discount
Notes................................... 1,010 383,236
14 1/4% Senior Discount Notes.............. 50 241,183
Charter Holdings:
8.250% Senior Notes........................ 600,000 --
8.625% Senior Notes........................ 1,500,000 --
9.920% Senior Discount Notes............... 909,055 --
CCO Credit Agreement....................... 1,750,000 --
---------- ----------
4,760,140 3,393,071
Current maturities......................... -- (87,950)
Unamortized net premium (discount)......... (6,122) 130,130
---------- ----------
$4,754,018 $3,435,251
========== ==========
</TABLE>
In March 1999, the Company extinguished substantially all existing
long-term debt, excluding borrowings of the Company under its credit agreements,
and refinanced substantially all existing credit agreements at various
subsidiaries with a new credit
F-250
<PAGE> 435
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
agreement entered into by Charter Operating (the "CCO Credit Agreement"). The
excess of the amount paid over the carrying value of the Company's long-term
debt was recorded as Extraordinary item -- loss on early extinguishment of debt
in the accompanying statement of operations.
CCH NOTES
In March 1999, the Company issued $600.0 million 8.250% Senior Notes due
2007 (the "8.250% Senior Notes") for net proceeds of $598.4 million, $1.5
billion 8.625% Senior Notes due 2009 (the "8.625% Senior Notes") for net
proceeds of $1,495.4 million, and $1,475.0 million 9.920% Senior Discount Notes
due 2011 (the "9.920% Senior Discount Notes") for net proceeds of $905.6
million, (collectively with the 8.250% Senior Notes and the 8.625% Senior Notes,
referred to as the "CCH Notes").
The 8.250% Senior Notes are not redeemable prior to maturity. Interest is
payable semiannually in arrears on April 1 and October 1 beginning October 1,
1999 until maturity.
The 8.625% Senior Notes are redeemable at the option of the Company at
amounts decreasing from 104.313% to 100% of par beginning on April 1, 2004, plus
accrued and unpaid interest, to the date of redemption. At any time prior to
April 1, 2002, the Company may redeem up to 35% of the aggregate principal
amount of the 8.625% Senior Notes at a redemption price of 108.625% of the
principal amount under certain conditions. Interest is payable semiannually in
arrears on April 1 and October 1, beginning October 1, 1999 until maturity.
The 9.920% Senior Discount Notes are redeemable at the option of the
Company at amounts decreasing from 104.960% to 100% of accreted value beginning
April 1, 2004. At any time prior to April 1, 2002, the Company may redeem up to
35% of the aggregate principal amount of the 9.920% Senior Discount Notes at a
redemption price of 109.920% of the accreted value under certain conditions. No
interest will be payable until April 1, 2004. Thereafter, interest is payable
semiannually in arrears on April 1 and October 1 beginning April 1, 2004 until
maturity. The discount on the 9.920% Senior Discount Notes is being accreted
using the effective interest method at a rate of 9.920% per year. The
unamortized discount was $565.9 million at March 31, 1999.
The CCH Notes rank equally with current and future unsecured and
unsubordinated indebtedness (including trade payables of the Company). The
Company is required to make an offer to purchase all of the CCH Notes, at a
price equal to 101% of the aggregate principal or 101% of the accreted value,
together with accrued and unpaid interest, upon a Change of Control as defined.
CCO CREDIT AGREEMENT
The CCO Credit Agreement provides for two term facilities, one with a
principal amount of $1.0 billion that matures September 2008 (Term A), and the
other with the principal amount of $1.85 billion that matures on March 2009
(Term B). The CCO Credit Agreement also provides for a $1.25 billion revolving
credit facility with a maturity date of September 2008. Amounts under the CCO
Credit Agreement bear interest at the
F-251
<PAGE> 436
CHARTER COMMUNICATIONS HOLDINGS, LLC AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Base Rate or the Eurodollar rate, as defined, plus a margin up to 2.75%. A
quarterly commitment fee of between 0.25% and 0.375% per annum is payable on the
unborrowed balance of Term A and the revolving credit facility.
The indentures governing the debt agreements require the Company and/or its
subsidiaries to comply with various financial and other covenants, including the
maintenance of certain operating and financial ratios. These debt instruments
also contain substantial limitations on, or prohibitions of distributions,
additional indebtedness, liens, asset sales and certain other items.
Based upon outstanding indebtedness at March 31, 1999, and the amortization
of term and fund loans, and scheduled reductions in available borrowings of the
revolving credit facility, aggregate future principal payments on the total
borrowings under all debt agreements at March 31, 1999, are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- ----------
<S> <C>
2000....................................................... $ --
2001....................................................... --
2002....................................................... 17,500
2003....................................................... 17,500
2004....................................................... 18,510
Thereafter................................................. 4,706,630
----------
$4,760,140
==========
</TABLE>
5. RELATED-PARTY TRANSACTIONS:
The Company is charged a management fee equal to 3.5% percent of gross
revenues payable quarterly. To the extent management fees charged to the Company
are greater (less) than the corporate expenses incurred by Charter, the Company
records a distribution to (capital contributions from) parent. For the three
months ended March 31, 1999, the Company recorded a distribution of $4,692. As
of March 31, 1999, management fees currently payable of $10,015 are included in
payables to manager of cable television systems-related party.
6. SUBSEQUENT EVENT:
In the second quarter of 1999, the Company acquired cable television
systems in two separate transactions for an aggregate purchase price of $699.0
million. The Company has also entered into definitive agreements to purchase
additional cable television systems, including a exchange of cable television
systems, for approximately $3.9 billion. The exchange of cable television
systems will be recorded at the fair value of the systems exchanged. The
additional six acquisitions are expected to close during 1999.
F-252
<PAGE> 437
RENAISSANCE MEDIA GROUP LLC
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents............................. $ 8,901 $ 8,482
Accounts receivable -- trade (less allowance for
doubtful accounts of $76 in 1999 and $94 in 1998)... 731 726
Accounts receivable -- other.......................... 552 584
Prepaid expenses and other assets..................... 381 340
Escrow deposit........................................ -- 150
Investment in cable television systems:
Property, plant and equipment....................... 74,435 71,246
Less: accumulated depreciation..................... (9,841) (7,294)
-------- --------
64,594 63,952
-------- --------
Cable television franchises......................... 238,407 236,489
Less: accumulated amortization..................... (15,436) (11,473)
-------- --------
222,971 225,016
-------- --------
Intangible assets................................... 17,540 17,559
Less: accumulated amortization..................... (1,411) (1,059)
-------- --------
16,129 16,500
-------- --------
Total investment in cable television systems.......... 303,694 305,468
-------- --------
TOTAL ASSETS.......................................... $314,259 $315,750
======== ========
LIABILITIES AND MEMBERS' EQUITY
Accounts payable...................................... $ 587 $ 2,042
Accrued expenses...................................... 7,062 6,670
Subscriber advance payments and deposits.............. 651 608
Deferred marketing support............................ 755 800
Advances from affiliates.............................. 135 135
Debt.................................................. 212,503 209,874
-------- --------
TOTAL LIABILITIES..................................... 221,693 220,129
-------- --------
MEMBERS' EQUITY:
Paid-in capital....................................... 108,600 108,600
Accumulated deficit................................... (16,034) (12,979)
-------- --------
Total members' equity................................. 92,566 95,621
-------- --------
TOTAL LIABILITIES AND MEMBERS' EQUITY................. $314,259 $315,750
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-253
<PAGE> 438
RENAISSANCE MEDIA GROUP LLC
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
1999
------------
(UNAUDITED)
<S> <C>
Revenues.................................................... $15,254
Cost and expenses:
Service costs............................................. 4,596
Selling, general and administrative....................... 2,293
Depreciation and amortization............................. 6,655
-------
Operating income............................................ 1,710
-------
Interest (income)......................................... (90)
Interest expense.......................................... 4,797
-------
Loss before provision for taxes............................. (2,997)
-------
Provision for taxes......................................... 58
-------
Net loss.................................................... $(3,055)
=======
</TABLE>
See accompanying notes to consolidated financial statements.
F-254
<PAGE> 439
RENAISSANCE MEDIA GROUP LLC
CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
PAID-IN ACCUMULATED MEMBERS'
CAPITAL DEFICIT EQUITY
-------- ----------- --------
<S> <C> <C> <C>
Balance December 31, 1998 (Audited)......... $108,600 $(12,979) $95,621
Net loss (Unaudited)........................ -- (3,055) (3,055)
-------- -------- -------
Balance March 31, 1999 (Unaudited).......... $108,600 $(16,034) $92,566
======== ======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-255
<PAGE> 440
RENAISSANCE MEDIA GROUP LLC
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
1999
---------------
(UNAUDITED)
<S> <C>
Operating Activities:
Net loss.................................................. $(3,055)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 6,655
Accretion on senior discount notes and non-cash
interest expense...................................... 2,630
Other non-cash expenses................................ 239
Deferred marketing support............................. (45)
Changes in operating assets and liabilities, net of
effects from acquisitions
Accounts receivable -- trade, net...................... (5)
Accounts receivable -- other........................... 32
Prepaid expenses and other assets...................... (41)
Accounts payable....................................... (1,455)
Accrued expenses....................................... 392
Subscriber advance payments and deposits............... 43
-------
Net cash provided by operating activities............ 5,390
-------
Investing Activities:
Purchases of cable television systems:
Property, plant and equipment.......................... (830)
Cable television franchises............................... (1,918)
Escrow deposit............................................ 150
Capital expenditures...................................... (2,393)
Other intangible assets................................... 20
-------
Net cash used in investing activities.................. (4,971)
-------
Financing Activities:
Net cash provided by financing activities.............. --
-------
Net increase in cash and cash equivalents................... 419
Cash and cash equivalents at beginning of period............ 8,482
=======
Cash and cash equivalents at end of period.................. $ 8,901
=======
</TABLE>
See accompanying notes to consolidated financial statements.
F-256
<PAGE> 441
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(DOLLARS IN THOUSANDS EXCEPT WHERE INDICATED)
(UNAUDITED)
1. ORGANIZATION
Renaissance Media Group LLC ("Group") was formed on March 13, 1998 by
Renaissance Media Holdings LLC ("Holdings"). Holdings formed Renaissance Media
Capital Corporation on March 12, 1998. On March 20, 1998, Holdings contributed
to Group its membership interests in two wholly owned subsidiaries; Renaissance
Media (Louisiana) LLC ("Louisiana") and Renaissance Media (Tennessee) LLC
("Tennessee"), both of which were formed on January 7, 1998. Louisiana and
Tennessee acquired a 76% interest and 24% interest, respectively, in Renaissance
Media LLC ("Media") from Morgan Stanley Capital Partners III, Inc. ("MSCP III")
on February 13, 1998 for a nominal amount. As a result, Media became a
subsidiary of Holdings. The transfer was accounted for as a reorganization of
entities under common control similar to a pooling of interests since an entity
affiliated with MSCP III had a controlling interest in Holdings. Group and its
aforementioned subsidiaries are collectively referred to as the "Company"
herein. On April 9, 1998, the Company acquired (the "Acquisition") six cable
television systems (the "TWI Systems") from TWI Cable, Inc. ("TWI Cable") a
subsidiary of Time Warner Inc. ("Time Warner"). Prior to this Acquisition, the
Company had no operations other than start-up related activities. For further
information, refer to the Company's Annual Report on Form 10-K for the year
ended December 31, 1998 for additional disclosures and information regarding the
formation of the Company.
2. BASIS OF PRESENTATION
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles. The interim financial statements
are unaudited but include all adjustments, which are of normal recurring nature
that the Company considers necessary for a fair presentation of the financial
position and the results of operations and cash flows for such period. Operating
results of interim periods are not necessarily indicative of results for a full
year.
3. SALE OF THE COMPANY
On February 23, 1999, Holdings, Charter Communications, Inc. ("Charter")
and Charter Communications, LLC ("Buyer") executed a purchase agreement (the
"Charter Purchase Agreement"), providing for Holdings to sell and Buyer to
purchase, all the outstanding limited liability company membership interests in
Group held by Holdings (the "Charter Transaction") subject to certain covenants
and restrictions pending closing and satisfaction of certain conditions prior to
closing. On April 30, 1999, the Charter Transaction was consummated. In
connection therewith all amounts outstanding, including accrued interest and
fees, under the Credit Agreement, (as defined herein, see Note 5), were paid in
full and the Credit Agreement was terminated on April 30, 1999.
F-257
<PAGE> 442
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 1999
(DOLLARS IN THOUSANDS EXCEPT WHERE INDICATED)
(UNAUDITED)
4. ACQUISITIONS
On April 9, 1998, the Company commenced operations with the acquisition of
the TWI Systems (the "TWI Acquisition"). Unaudited pro forma summarized results
of operations for the Company for the three months ended March 31, 1998,
assuming the TWI Acquisition had been consummated on January 1, 1998 are as
follows:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31,
1998
------------
<S> <C>
Revenues.................................................... $13,973
Costs and expenses.......................................... 13,531
-------
Operating income............................................ 442
Interest and other expenses................................. 4,954
=======
Net loss.................................................... $(4,512)
=======
</TABLE>
5. DEBT
Media maintained a credit agreement (the "Credit Agreement"). The aggregate
commitments under the Credit Agreement totaled $150,000, consisted of a $40,000
revolver, $60,000 Tranche A Term Loans and $50,000 Tranche B Term Loans. The
revolving credit facility and term loans were collateralized by a first lien
position on all present and future assets and members' interest of Media,
Louisiana and Tennessee. The Credit Agreement provided for interest at varying
rates based upon various borrowing options and the attainment of certain
financial ratios and for commitment fees of 1/2% on the unused portion of the
revolver. The effective interest rate for the quarter ended March 31, 1999 was
7.67%.
On April 9, 1998, $110,000 was borrowed under the Credit Agreement's
Tranche A and B Term Loans. On June 23, 1998, $7,500 was repaid resulting in
$102,500 of outstanding Tranche A and B Term Loans as of March 31, 1999.
On March 31, 1999, the Company had unrestricted use of the $40,000
revolver. No borrowings had been made by the Company through that date.
As required by the Credit Agreement, Media purchased an interest rate cap
agreement from Morgan Stanley Capital Services Inc., an affiliate of MSCP III.
The agreement effectively fixed or set a maximum LIBOR rate of 7.25% on bank
debt borrowings up to $100,000 through December 1999. As of March 31, 1999, the
fair value of the interest rate cap agreement was $0.
As a result of the Charter Transaction (i.e., change of control) and in
accordance with the terms and conditions of the indenture governing the 10%
senior discount notes
F-258
<PAGE> 443
RENAISSANCE MEDIA GROUP LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MARCH 31, 1999
(DOLLARS IN THOUSANDS EXCEPT WHERE INDICATED)
(UNAUDITED)
due 2008 (the "Notes"), the Company will offer to repurchase the Notes at a
redemption price of 101% of Accreted Value (as defined in the indenture) plus
accrued interest.
6. RELATED PARTY TRANSACTIONS
In connection with the Acquisition, Media entered into an agreement with
Time Warner, pursuant to which Time Warner manages the Company's programming in
exchange for providing the Company access to certain Time Warner programming
arrangements. Management believes that these programming rates made available
through its relationship with Time Warner are lower than the Company could
obtain separately. Such volume rates will not continue to be available after the
Charter Transaction.
For the quarter ended March 31, 1999, the Company incurred approximately
$2,009 for programming services under this agreement. In addition, the Company
has incurred programming costs of approximately $713 for programming services
owned directly or indirectly by Time Warner entities for the quarter ended March
31, 1999.
The Company has utilized the law firm of one of its board members for
various ongoing legal matters. These fees totaled approximately $154 for the
quarter ended March 31, 1999.
7. EMPLOYEE BENEFIT PLAN
The Company sponsors a defined contribution plan that covers substantially
all employees (the "Plan"). The Plan provides for contributions from eligible
employees up to 15% of their compensation subject to a maximum limit as
determined by the Internal Revenue Service. The Company's contribution to the
Plan is limited to 50% of each eligible employee's contribution up to 10% of his
or her compensation. The Company has the right to change the amount of the
Company's matching contribution percentage. The Company matching contributions
approximated $38 for the quarter ended March 31, 1999.
F-259
<PAGE> 444
HELICON PARTNERS I, L.P. AND AFFILIATES
UNAUDITED CONDENSED COMBINED BALANCE SHEET
MARCH 31, 1999
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 11,463,984
Receivables from subscribers................................ 1,619,055
Prepaid expenses and other assets........................... 2,866,831
Property, plant and equipment, net.......................... 88,723,374
Intangible assets and deferred costs, net................... 95,641,669
------------
Total assets........................................... $200,314,913
============
LIABILITIES AND PARTNERS' DEFICIT
Liabilities:
Accounts payable.......................................... $ 6,318,658
Accrued expenses.......................................... 839,902
Subscriptions received in advance......................... 954,732
Accrued interest.......................................... 8,381,948
Due to principal owner.................................... 5,000,000
Senior secured notes...................................... 115,000,000
Loans payable to banks.................................... 120,264,288
Senior subordinated loans payable to banks................ 12,000,000
12% subordinated notes, net of unamortized discount of
$2,313,425............................................. 42,787,309
Redeemable partnership interests.......................... 18,708,097
Other notes payable....................................... 5,293,908
Due to affiliates, net.................................... 136,952
------------
Total liabilities...................................... 335,685,794
------------
Commitments
Partners' deficit:
Preferred limited partners................................ 8,824,491
Accumulated partners' deficit............................. (144,194,372)
Less capital contribution receivable...................... (1,000)
------------
Total partners' deficit................................ (135,370,881)
------------
Total liabilities and partners' deficit................ $200,314,913
============
</TABLE>
See accompanying notes to unaudited condensed combined financial statements.
F-260
<PAGE> 445
HELICON PARTNERS I, L.P. AND AFFILIATES
UNAUDITED CONDENSED COMBINED STATEMENTS OF OPERATIONS
THREE-MONTH PERIODS ENDED MARCH 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Revenues............................................ $18,348,297 $21,251,906
----------- -----------
Operating expenses:
Operating expenses................................ 5,576,707 6,724,757
General and administrative expenses............... 3,138,482 3,365,652
Marketing expenses................................ 820,971 1,094,800
Depreciation and amortization..................... 5,774,012 6,828,410
Management fee charged by affiliate............... 635,485 1,063,597
Corporate and other expenses...................... 63,751 90,977
----------- -----------
Total operating expenses....................... 16,009,408 19,168,193
----------- -----------
Operating income.................................. 2,338,889 2,083,713
----------- -----------
Interest expense.................................... (6,844,969) (7,821,042)
Interest income..................................... 30,314 51,704
----------- -----------
(6,814,655) (7,769,338)
----------- -----------
Net loss.......................................... ($4,475,766) ($5,685,625)
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed combined financial statements.
F-261
<PAGE> 446
HELICON PARTNERS I, L.P. AND AFFILIATES
UNAUDITED CONDENSED COMBINED STATEMENTS OF
CHANGES IN PARTNERS' DEFICIT
THREE-MONTH PERIOD ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
PARTNERS' DEFICIT
PREFERRED ----------------------------- CAPITAL
LIMITED GENERAL CLASS A LIMITED CONTRIBUTION
PARTNERS PARTNER PARTNERS RECEIVABLE TOTAL
---------- ----------- --------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998...... $8,567,467 $ (989,962) $(134,807,570) $(1,000) $(127,231,065)
Distribution of additional
preferred partnership
interests....................... 257,024 (2,570) (254,454) -- 0
Accretion of redeemable
partnership interests........... -- (24,542) (2,429,649) -- (2,454,191)
Net loss.......................... -- (56,856) (5,628,769) -- (5,685,625)
---------- ----------- ------------- ------- -------------
Balance at March 31, 1999......... $8,824,491 $(1,073,930) $(143,120,442) $(1,000) $(135,370,881)
========== =========== ============= ======= =============
</TABLE>
See accompanying notes to unaudited condensed combined financial statements.
F-262
<PAGE> 447
HELICON PARTNERS I, L.P. AND AFFILIATES
UNAUDITED CONDENSED COMBINED STATEMENTS OF CASH FLOWS
THREE-MONTHS PERIOD ENDED MARCH 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss.......................................... ($4,475,766) ($5,685,625)
----------- -----------
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization.................. 5,774,012 6,828,410
Amortization of debt discount and deferred
financing costs.............................. 230,005 241,605
Gain on sale of equipment...................... (1,498) (6,000)
Change in operating assets and liabilities:
Decrease in receivables from subscribers..... 285,217 39,303
(Increase) decrease in prepaid expenses and
other assets.............................. (756,438) 605,752
Increase in financing costs incurred......... (37,500) (240,000)
Decrease in accounts payable and accrued
expenses.................................. (1,125,646) (2,501,877)
Increase in subscriptions received in
advance................................... 137,562 135,169
Increase in accrued interest................. 4,356,122 4,639,494
----------- -----------
Total adjustments......................... 8,861,836 9,741,856
----------- -----------
Net cash provided by operating
activities............................. 4,386,070 4,056,231
----------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment........ (1,725,789) (3,229,629)
Proceeds from sale of equipment................... 91,128 6,000
Cash paid for net assets of cable television
systems acquired............................... -- (5,951,453)
Increase in intangible assets and deferred
costs.......................................... (47,088) (172,593)
----------- -----------
Net cash used in investing activities..... (1,681,749) (9,347,675)
----------- -----------
Cash flows from financing activities:
Proceeds from bank loans.......................... 1,000,000 12,000,000
Repayment of bank loans........................... (2,511) (2,633)
Repayment of other notes payable.................. (307,889) (262,410)
Advances to affiliates............................ (895,633) (2,596,997)
Repayments of advances to affiliates.............. 364,141 2,486,907
----------- -----------
Net cash provided by financing
activities............................. 158,108 11,624,867
----------- -----------
Net increase in cash and cash
equivalents............................ 2,862,429 6,333,423
Cash and cash equivalents at beginning of period.... 4,372,281 5,130,561
----------- -----------
Cash and cash equivalents at end of period.......... $ 7,234,710 $11,463,984
=========== ===========
</TABLE>
F-263
<PAGE> 448
<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Supplemental cash flow information:
Interest paid..................................... $ 2,258,842 $ 2,939,944
=========== ===========
Other non-cash items:
Acquisition of property, plant and equipment
through issuance of other notes payable...... $ 17,686 $ 97,666
=========== ===========
</TABLE>
See accompanying notes to unaudited condensed combined financial statements.
F-264
<PAGE> 449
HELICON PARTNERS I, L.P AND AFFILIATES
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
MARCH 31, 1999
1. ORGANIZATION AND NATURE OF BUSINESS
Helicon Partners I, L.P. ("the Partnership") was organized as a limited
partnership on November 30, 1994 under the laws of the State of Delaware. On
April 8, 1996, Baum Investments, Inc. acquired a 1% general partnership interest
in the Partnership through an initial capital contribution of $1,500 and the
existing limited partners of The Helicon Group, L.P. ("THGLP"), formed in 1993,
exchanged their limited partnership interests in THGLP for all Class A Common
Limited Partnership Interests and Preferred Limited Partnership Interests in the
Partnership. As a result of this exchange, THGLP became 99% owned by the
Partnership. The Partnership now owns all of the limited partnership interests
in THGLP and Baum Investments, Inc. continues to be the general partner of THGLP
and to own a 1% general partnership interest in THGLP. The Partnership also owns
a 99% interest and THGLP a 1% interest in HPI Acquisition Co., LLC ("HPIAC"), a
Delaware limited liability company formed on February 7, 1996. The Company also
owns a 89% limited partnership interest and Baum Investments, Inc. a 1% general
partnership interest in Helicon OnLine, L. P. ("HOL"), a Delaware limited
partnership formed May 31, 1997. The Partnership, THGLP, HPIAC and HOL are
referred to collectively herein as the Company.
The Partnership operates in one business segment offering cable television
services in the states of Pennsylvania, West Virginia, North Carolina, South
Carolina, Louisiana, Vermont and New Hampshire, Georgia and Tennessee. The
Company also offers to customers advanced services, such as paging, cable modems
and private data network systems under the name of "Helicon Network Solutions",
as well as, dial up internet service in Pennsylvania and Vermont under the name
of "Helicon OnLine".
On March 22, 1999, the Partnership, Baum Investments, Inc. and all the
holders of partnership interests in the Partnership entered into a purchase
agreement by and among Charter Communications, Inc, Charter Communications, LLC
and Charter Helicon, LLC (collectively the "Charter Entities") providing for the
sale of all such partnership interests and Helicon Corp.'s interest in the
management agreements with THGLP and HPIAC to the Charter Entities. The sale
price is $550 million which amount will be reduced by any outstanding
indebtedness assumed by the Charter Entities.
In the opinion of management, the accompanying unaudited condensed combined
financial statements of the Partnership reflect all adjustments, consisting of
normal recurring accruals, necessary to present fairly the Partnership's
combined financial position as of March 31, 1999, and their results of
operations and cash flows for the three-month periods ended March 31, 1998 and
1999. The results of operations for the three-month period ended March 31, 1999
are not necessarily indicative of the results for a full year.
2. ACQUISITIONS
On December 31, 1998, HPIAC acquired the net assets of cable television
systems serving approximately 11,225 (unaudited) subscribers primarily in the
North Carolina community of Roanoke Rapids. The aggregate purchase price was
$26,063,284 including acquisition costs of $535,875 and was allocated to the net
assets acquired, which included property, equipment and intangible assets, based
on their estimated fair value.
F-265
<PAGE> 450
HELICON PARTNERS I, L.P AND AFFILIATES
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
On January 7, 1999, THGLP acquired the cable television systems, serving
approximately 4,350 (unaudited) subscribers in the North Carolina counties of
Carter, Johnson and Unicol. The aggregate purchase price was approximately
$5,228,097 and was allocated to the net assets acquired, which included property
and equipment and intangible assets.
On March 1, 1999, HPIAC acquired a cable television system serving
approximately 551 (unaudited) subscribers in the communities of Abbeville,
Donalds and Due West, South Carolina. The aggregate purchase price was
approximately $723,356 and was allocated to the net assets acquired, which
included property, equipment and intangible assets, based on their estimated
fair value.
The operating results relating to the above acquisitions, effective with
their acquisition dates, are included in the accompanying unaudited condensed
combined financial statements.
On April 6, 1999, the HPIAC acquired a cable television system serving
approximately 314 (unaudited) subscribers in the communities of Mentone and part
of DeKalb, Alabama. The aggregate purchase price was approximately $265,690 and
was allocated to the net assets acquired, which included property, equipment and
intangible assets, based on their estimated fair value.
3. LOANS PAYABLE TO BANKS
On January 5, 1999, THGLP entered into a $12,000,000 Senior Subordinated
Loan Agreement with Paribas Capital Funding, LLC ("the 1999 Credit Facility").
The Facility is non-amortizing and is due January 5, 2003. Initial borrowings of
$7,000,000 under this Facility financed the acquisition of certain cable
television assets in North Carolina. On February 19, 1999, the Company borrowed
the remainder $5,000,000 available under the 1999 Credit Facility. Interest on
the $12,000,000 is payable at 11.5% per annum.
F-266
<PAGE> 451
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Accounts receivable, net of allowance for doubtful
accounts of $948 and $899, respectively.............. $ 13,949 $ 14,425
Receivables from affiliates............................ 5,038 5,623
Prepaid expenses....................................... 847 423
Other current assets................................... 206 350
-------- --------
Total current assets......................... 20,040 20,821
Intangible assets, net................................. 240,567 255,356
Property and equipment, net............................ 225,682 218,465
Deferred income taxes.................................. 13,994 12,598
Investments and other non-current assets............... 3,697 2,804
-------- --------
Total assets................................. $503,980 $510,044
======== ========
LIABILITIES AND EQUITY
Accounts payable and accrued liabilities............... $ 19,030 $ 19,230
Deferred revenue....................................... 11,944 11,104
Payables to affiliates................................. 3,057 3,158
-------- --------
Total current liabilities.................... 34,031 33,492
Note payable to InterMedia Partners IV, L.P. .......... 412,436 396,579
Deferred channel launch revenue........................ 3,900 4,045
-------- --------
Total liabilities............................ 450,367 434,116
-------- --------
Commitments and contingencies
Mandatorily redeemable preferred shares................ 14,430 14,184
Equity................................................. 39,183 61,744
-------- --------
Total liabilities and equity................. $503,980 $510,044
======== ========
</TABLE>
See accompanying notes to the condensed combined financial statements.
F-267
<PAGE> 452
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1999 1998
-------- -------
(UNAUDITED)
<S> <C> <C>
REVENUES
Basic and cable services.................................... $ 34,215 $30,103
Pay services................................................ 6,436 6,070
Other services.............................................. 7,637 5,961
-------- -------
48,288 42,134
COSTS AND EXPENSES
Program fees................................................ 11,598 9,616
Other direct expenses....................................... 4,763 4,177
Selling, general and administrative expenses................ 9,719 8,183
Management and consulting fees.............................. 781 781
Depreciation and amortization............................... 26,100 20,353
-------- -------
52,961 43,110
-------- -------
Loss from operations........................................ (4,673) (976)
-------- -------
OTHER INCOME (EXPENSE)
Interest expense............................................ (5,778) (6,734)
Interest and other income................................... 77 49
Other expense............................................... -- (24)
-------- -------
(5,701) (6,709)
-------- -------
Loss before income tax benefit.............................. (10,374) (7,685)
Income tax benefit.......................................... 1,396 1,595
-------- -------
NET LOSS.................................................... $ (8,978) $(6,090)
======== =======
</TABLE>
See accompanying notes to the condensed combined financial statements.
F-268
<PAGE> 453
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
COMBINED STATEMENT OF CHANGES IN EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
Balance at January 1, 1998.................................. $ 58,713
Net loss.................................................... (3,521)
Accretion for mandatorily redeemable preferred shares....... (945)
Net cash contributions from parent.......................... 6,350
In-kind contribution from parent............................ 1,147
--------
Balance at December 31, 1998................................ 61,744
Net loss (unaudited)........................................ (8,978)
Accretion for mandatorily redeemable preferred shares
(unaudited)............................................... (246)
Net cash distributions to parent (unaudited)................ (13,337)
--------
Balance at March 31, 1999 (unaudited)....................... $ 39,183
========
</TABLE>
See accompanying notes to the condensed combined financial statements.
F-269
<PAGE> 454
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss............................................... $ (8,978) $ (6,090)
Adjustments to reconcile net loss to cash flows from
operating activities:
Depreciation and amortization....................... 26,100 20,353
Loss on disposal of fixed assets.................... -- 4
Changes in assets and liabilities:
Accounts receivable............................... 476 242
Receivables from affiliates....................... 585 (1,092)
Prepaid expenses.................................. (424) (183)
Other current assets.............................. 144 52
Deferred income taxes............................. (1,396) (1,595)
Investments and other non-current assets.......... (893) 138
Accounts payable and accrued liabilities.......... (713) (5,272)
Deferred revenue.................................. (220) 522
Payables to affiliates............................ (101) (53)
Accrued interest.................................. 5,532 6,505
Deferred channel launch revenue................... 915 591
-------- --------
Cash flows from operating activities........... 21,027 14,122
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment................. (17,895) (18,069)
Intangible assets................................... (120) (161)
-------- --------
Cash flows from investing activities........... (18,015) (18,230)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Net (distributions) contributions to/from parent.... (13,337) 5,431
Net (repayments) borrowings of intercompany debt.... 10,325 (1,323)
-------- --------
Cash flows from financing activities........... (3,012) 4,108
-------- --------
Net change in cash....................................... -- --
-------- --------
CASH AT BEGINNING OF PERIOD.............................. -- --
-------- --------
CASH AT END OF PERIOD.................................... $ -- $ --
======== ========
</TABLE>
See accompanying notes to the condensed combined financial statements.
F-270
<PAGE> 455
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
THE CHARTER TRANSACTIONS
InterMedia Partners, a California limited partnership ("IP-I"), and
InterMedia Capital Partners IV, L.P., a California limited partnership,
("ICP-IV", together with IP-I, "InterMedia") are affiliated through common
control and management. Robin Media Group, Inc. , a Nevada corporation, ("RMG")
is a majority owned subsidiary of ICP-IV. On April 20, 1999 InterMedia and
certain of its affiliates entered into agreements (the "Agreements") with
affiliates of Charter Communications, Inc. ("Charter") to sell and exchange
certain of their cable television systems ("the Charter Transactions").
Specifically, ICP-IV and its affiliates have agreed to sell certain of
their cable television systems in Tennessee and Gainesville, Georgia through a
combination of asset sales and the sale of their equity interests in RMG, and to
exchange their systems in and around Greenville and Spartanburg, South Carolina
for Charter systems located in Indiana, Kentucky, Utah and Montana. Immediately
upon Charter's acquisition of RMG, IP-I will exchange its cable television
systems in Athens, Georgia, Asheville and Marion, North Carolina and Cleveland,
Tennessee for RMG's cable television systems located in middle Tennessee.
The Charter Transactions are expected to close during the third or fourth
quarter of 1999. The cable systems retained by Charter upon consummation of the
Charter Transactions, together with RMG, are referred to as the "InterMedia
Cable Systems," or the "Systems."
PRESENTATION
The Systems being sold or exchanged do not individually or collectively
comprise a separate legal entity. Accordingly, the accompanying condensed
combined financial statements have been carved-out from the historical
accounting records of InterMedia.
The accompanying unaudited interim condensed combined financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, certain footnote disclosures
have been condensed or omitted. In the management's opinion, the interim
unaudited combined financial statements reflect all adjustments (consisting of
only normal recurring adjustments) necessary for a fair presentation of the
Systems' financial position as of March 31, 1999 and their results of operations
and cash flows for the three months ended March 31, 1999 and 1998. The results
of operations and cash flows for the three months ended March 31, 1999 are not
necessarily indicative of results that may be expected for the year ending
December 31, 1999. These condensed combined financial statements should be read
in conjunction with the Systems' audited combined financial statements and notes
thereto for the year ended December 31, 1998.
F-271
<PAGE> 456
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (UNAUDITED) -- (CONTINUED)
(DOLLARS IN THOUSANDS)
CARVE-OUT METHODOLOGY
Throughout the periods covered by the condensed combined financial
statements, the individual cable systems were operated and accounted for
separately. However, the Charter Transactions exclude certain systems (the
"Excluded Systems") which were operated as part of the Marion, North Carolina
and western Tennessee systems throughout 1998 and 1999. For purposes of carving
out and excluding the results of operations and financial position of the
Excluded Systems from the condensed combined financial statements, management
has estimated the revenues, expenses, assets and liabilities associated with
each Excluded System based on the ratio of each Excluded System's basic
subscribers to the total basic subscribers served by the Marion, North Carolina
and western Tennessee systems, respectively. Management believes the basis used
for these allocations is reasonable. The Systems' results of operations are not
necessarily indicative of future operating results or the results that would
have occurred if the Systems were a separate legal entity.
Management and consulting fees represent an allocation of management fees
charged to IP-I and ICP-IV by InterMedia Capital Management, a California
limited partnership ("ICM") and InterMedia Management, Inc. ("IMI"),
respectively. ICM is a limited partner of IP-I. IMI is the managing member of
each of the general partners of IP-I and ICP-IV. These fees are charged at a
fixed amount per annum and have been allocated to the Systems based upon the
allocated contributed capital of the individual systems as compared to the total
contributed capital of InterMedia's subsidiaries.
As more fully described in Note 4 -- "Related Party Transactions," certain
administrative services are also provided by IMI and are charged to all
affiliates based on relative basic subscriber percentages.
CASH AND INTERCOMPANY ACCOUNTS
Under InterMedia's centralized cash management system, cash requirements of
its individual operating units were generally provided directly by InterMedia
and the cash generated or used by the Systems was transferred to/from
InterMedia, as appropriate, through intercompany accounts. The intercompany
account balances between InterMedia and the individual operating units, except
RMG's intercompany note payable to InterMedia Partners IV, L.P. ("IP-IV"), as
described in Note 3 -- "Note Payable to InterMedia Partners IV, L.P.," are not
intended to be settled. Accordingly, the balances, other than RMG's note payable
to IP-IV, are included in equity and all net cash generated from operations,
investing activities and financing activities have been included in the Systems'
net (distributions) contributions to/from parent in the combined statements of
cash flows.
IP-I and ICP-IV or its subsidiaries maintain all external debt to fund and
manage InterMedia's operations on a centralized basis. The condensed combined
financial statements present only the debt and related interest expense of RMG,
which is assumed
F-272
<PAGE> 457
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (UNAUDITED) -- (CONTINUED)
(DOLLARS IN THOUSANDS)
and repaid by Charter pursuant to the Charter Transactions. See Note 3 -- "Note
Payable to InterMedia Partners IV, L.P." Debt, unamortized debt issue costs and
interest expense related to the financing of the cable systems not owned by RMG
have not been allocated to the InterMedia Cable Systems. As such, the level of
debt, unamortized debt issue costs and related interest expense presented in the
condensed combined financial statements are not representative of the debt that
would be required or interest expense incurred if InterMedia Cable Systems were
a separate legal entity.
Use of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
2. EXCHANGE OF CABLE PROPERTIES
EXCHANGE
On December 31, 1998, certain of the Systems' cable television assets
located in and around western and eastern Tennessee ("Exchanged Assets"),
serving approximately 10,600 (unaudited) basic subscribers, plus cash of $398
were exchanged for other cable television assets located in and around western
and eastern Tennessee, serving approximately 10,000 (unaudited) basic
subscribers.
The exchange resulted in a gain of $26,218 calculated as the difference
between the fair value of the assets received and the net book value of the
Exchanged Assets less cash paid of $398.
3. NOTE PAYABLE TO INTERMEDIA PARTNERS IV, L.P.
RMG's note payable to IP-IV consists of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
--------- ------------
<S> <C> <C>
Intercompany revolving credit facility, $1,200,000
commitment as of March 31, 1999, interest currently at
6.84% payable on maturity, matures December 31, 2006... $412,436 $396,579
</TABLE>
RMG's debt is outstanding under an intercompany revolving credit facility
executed with IP-IV. The revolving credit facility currently provides for
$1,200,000 of available credit.
RMG's intercompany revolving credit facility requires repayment of the
outstanding principal and accrued interest on the earlier of (i) December 31,
2006, or (ii) acceleration of any of IP-IV's obligations to repay under its bank
debt outstanding under its revolving
F-273
<PAGE> 458
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (UNAUDITED) -- (CONTINUED)
(DOLLARS IN THOUSANDS)
credit facility ("IP-IV Revolving Credit Facility") and term loan agreement
("IP-IV Term Loan", together with the IP-IV Revolving Credit Facility, the
"IP-IV Bank Facility") dated July 30, 1996.
Interest rates under RMG's intercompany revolving credit facility are
calculated monthly and are referenced to those made available under the IP-IV
Bank Facility. Interest rates ranged from 6.21% to 6.84% during the three months
ended March 31, 1999.
Charter has an obligation to assume and repay RMG's intercompany revolving
credit facility pursuant to the Charter Transactions.
Advances under the IP-IV Bank Facility are available under interest rate
options related to the base rate of the administrative agent for the IP-IV Bank
Facility ("ABR") or LIBOR. Interest rates on borrowings under the IP-IV Term
Loan vary from LIBOR plus 1.75% to LIBOR plus 2.00% or ABR plus 0.50% to ABR
plus 0.75% based on IP-IV's ratio of debt outstanding to annualized quarterly
operating cash flow ("Senior Debt Ratio"). Interest rates on borrowings under
the IP-IV Revolving Credit Facility also vary from LIBOR plus 0.625% to LIBOR
plus 1.50% or ABR to ABR plus 0.25% based on IP-IV's Senior Debt Ratio. The
IP-IV Bank Facility requires quarterly payment of fees on the unused portion of
the IP-IV Revolving Credit Facility of 0.375% per annum when the Senior Debt
Ratio is greater than 4.0:1.0 and at 0.25% when the Senior Debt Ratio is less
than or equal to 4.0:1.0.
The terms and conditions of RMG's intercompany debt agreement are not
necessarily indicative of the terms and conditions which would be available if
the Systems were a separate legal entity.
4. RELATED PARTY TRANSACTIONS
ICM and IMI provide certain management services to IP-I and ICP-IV,
respectively, for per annum fixed fees, of which 20% per annum is deferred and
payable in each following year in order to support InterMedia's debt.
InterMedia's management fees for the three months ended March 31, 1999 and 1998
amounted to $1,353, of which $781 has been charged to the Systems.
IMI has entered into agreements with both IP-I and ICP-IV to provide
accounting and administrative services at cost. Under the terms of the
agreements, the expenses associated with rendering these services are charged to
the Systems and other affiliates based upon relative basic subscriber
percentages. Management believes this method to be reflective of the actual
cost. During the three months ended March 31, 1999 and 1998, IMI administrative
fees charged to the Systems totaled $859 and $1,206, respectively. Receivables
from affiliates at March 31, 1999 and December 31, 1998 include $405 and $52,
respectively, of advances to IMI, net of administrative fees charged by IMI and
operating expenses paid by IMI on behalf of the Systems.
F-274
<PAGE> 459
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (UNAUDITED) -- (CONTINUED)
(DOLLARS IN THOUSANDS)
IP-I is majority-owned, and ICP-IV is owned in part, by AT&T Broadband &
Internet Services ("AT&TBIS"), formerly Tele-Communications, Inc. As affiliates
of AT&TBIS, IP-I and ICP-IV are able to purchase programming services from a
subsidiary of AT&TBIS. Management believes that the overall programming rates
made available through this relationship are lower than the Systems could obtain
separately. Such volume rates may not continue to be available in the future
should AT&TBIS's ownership interest in InterMedia significantly decrease.
Program fees charged by the AT&TBIS subsidiary to the Systems for the three
months ended March 31, 1999 and 1998 amounted to $8,505 and $6,624,
respectively. Payables to affiliates include programming fees payable to the
AT&TBIS subsidiary of $2,846 and $2,918 at March 31, 1999 and December 31, 1998,
respectively.
On January 1, 1998 an affiliate of AT&TBIS entered into agreements with
InterMedia to manage the Systems' advertising business and related services for
an annual fixed fee per advertising sales subscriber as defined by the
agreements. In addition to the annual fixed fee AT&TBIS is entitled to varying
percentage shares of the incremental growth in annual cash flows from
advertising sales above specified targets. Management fees charged by the
AT&TBIS subsidiary for the three months ended March 31, 1999 amounted to $90.
Receivables from affiliates at March 31, 1999 and December 31, 1998 include
$4,119 and $3,437, respectively, of receivable from AT&TBIS for advertising
sales.
As part of its normal course of business the Systems are involved in
transactions with affiliates of InterMedia which own and operate cable
television systems. Such transactions include purchases and sales at cost of
inventories used in construction of cable plant. Receivables from affiliates at
March 31, 1999 and December 31, 1998 include $514 and $2,134, respectively, of
receivables from affiliated systems. Payables to affiliates at March 31, 1999
and December 31, 1998 include $172 and $208, respectively, of payables to
affiliated systems.
5. COMMITMENTS AND CONTINGENCIES
The Systems are committed to provide cable television services under
franchise agreements with remaining terms of up to eighteen years. Franchise
fees of up to 5% of gross revenues are payable under these agreements.
Current FCC regulations require that cable television operators obtain
permission to retransmit major network and certain local television station
signals. The Systems have entered into long-term retransmission agreements with
all applicable stations in exchange for in-kind and/or other consideration.
InterMedia has been named in purported and certified class actions in
various jurisdictions concerning late fee charges and practices. Certain cable
systems owned by InterMedia charge late fees to customers who do not pay their
cable bills on time. These late fee cases challenge the amount of the late fees
and the practices under which they are imposed. The plaintiffs raise claims
under state consumer protection statutes, other state
F-275
<PAGE> 460
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (UNAUDITED) -- (CONTINUED)
(DOLLARS IN THOUSANDS)
statutes and common law. The plaintiffs generally allege that the late fees
charged by InterMedia's cable systems, including the Systems in the States of
Tennessee, South Carolina and Georgia are not reasonably related to the costs
incurred by the cable systems as a result of the late payment. The plaintiffs
seek to require cable systems to reduce their late fees on a prospective basis
and to provide compensation for alleged excessive late fee charges for past
periods. These cases are either at the early stages of the litigation process or
are subject to a case management order that sets forth a process leading to
mediation. Based upon the facts available management believes that, although no
assurances can be given as to the outcome of these actions, the ultimate
disposition of these matters should not have a material adverse effect upon the
financial condition of the Systems.
Under existing Tennessee laws and regulations, the Systems pay an Amusement
Tax in the form of a sales tax on programming service revenues generated in
Tennessee in excess of charges for the basic and expanded basic levels of
service. Under the existing statute, only the service charges or fees in excess
of the charges for the "basic cable" television service package are subject to
the Amusement Tax. Related regulations clarify the definition of basic cable to
include two tiers of service, which InterMedia's management and other operators
in Tennessee have interpreted to mean both the basic and expanded basic level of
services.
The Tennessee Department of Revenue ("TDOR") has proposed legislation which
would replace the Amusement Tax under the existing statute with a new sales tax
on all cable service revenues in excess of twelve dollars per month. The new tax
would be computed at a rate approximately equal to the existing effective tax
rate.
Unless InterMedia and other cable operators in Tennessee support the
proposed legislation, the TDOR has suggested that it would assess additional
taxes on prior years' expanded basic service revenues. The TDOR can issue an
assessment for prior periods up to three years. Management estimates that the
amount of such an assessment for the Systems, if made for all periods not
previously audited, would be approximately $5.4 million. InterMedia's management
believes that it is possible but not likely that the TDOR can make such an
assessment and prevail in defending it.
InterMedia's management believes it has made a valid interpretation of the
current Tennessee statute and regulations and that it has properly determined
and paid all sales taxes due. InterMedia further believes that the legislative
history of the current statute and related regulations, as well as the TDOR's
history of not making assessments based on audits of prior periods, support
InterMedia's interpretation. InterMedia and other cable operators in Tennessee
are aggressively defending their past practices on calculation and payment of
the Amusement Tax and are discussing with the TDOR modifications to their
proposed legislation which would clarify the statute and would minimize the
impact of such legislation on the Systems' results of operations. See Note
8 -- Subsequent Events.
The Systems are subject to other claims and litigation in the ordinary
course of business. In the opinion of management, the ultimate outcome of any
existing litigation or
F-276
<PAGE> 461
INTERMEDIA CABLE SYSTEMS
(COMPRISED OF COMPONENTS OF INTERMEDIA PARTNERS AND
INTERMEDIA CAPITAL PARTNERS IV, L.P.)
NOTES TO CONDENSED COMBINED FINANCIAL
STATEMENTS (UNAUDITED) -- (CONTINUED)
(DOLLARS IN THOUSANDS)
other claims will not have a material effect on the Systems' financial position
or results of operations.
6. CHANNEL LAUNCH REVENUE
During 1997 and 1998, the Systems were credited with amounts representing
their share of payments received or to be received by InterMedia from certain
programmers to launch and promote their new channels. Of the total amount
credited the Systems recognized advertising revenue of $333 during the three
months ended March 31, 1999 for advertisements provided by the Systems to
promoted the new channels. The remaining amounts credited to the Systems are
being amortized over the respective terms of the program agreements which range
between five to ten years. For the three months ended March 31, 1999 and 1998
the Systems amortized and recorded as other service revenues of $218 and $179,
respectively.
7. SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Total accretion on RMG's Redeemable Preferred Stock for the three months
ended March 31, 1999 and 1998 amounted to $246 and $230, respectively.
8. SUBSEQUENT EVENT
In late May 1999, both Houses of the Tennessee legislature passed new
legislation which replaces the existing Amusement Tax with a new sales tax on
cable service revenues effective September 1, 1999. Under the new legislation,
all cable service revenues in excess of fifteen dollars are subject to tax at a
rate which approximates the existing tax rate. The new legislation reflects
certain amendments to the TDOR's proposed legislation described in Note
5 -- Commitments and Contingencies, including the change in the amount of cable
service revenues which are exempt from sales tax from twelve dollars per month
to fifteen dollars per month.
F-277
<PAGE> 462
RIFKIN CABLE INCOME PARTNERS, L. P.
BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
12/31/98 3/31/99
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................... $ 65,699 $ 76,892
Customer accounts receivable, net of allowance for
doubtful accounts of $18,278 in 1998 and $6,406 in
1999.............................................. 51,523 34,147
Other receivables................................... 133,278 100,057
Prepaid expenses and deposits....................... 70,675 18,731
Property, plant and equipment, at cost:
Cable television transmission and distribution
systems and related equipment.................. 8,758,525 11,010,643
Land, buildings, vehicles and furniture and
fixtures....................................... 623,281 449,299
----------- -----------
9,381,806 11,459,942
Less accumulated depreciation..................... (4,354,685) (293,664)
----------- -----------
Net property, plant and equipment.............. 5,027,121 11,166,278
Franchise costs and other intangible assets, net of
accumulated amortization of $2,033,405 in 1998 and
$281,821 in 1999.................................. 1,772,345 13,197,093
----------- -----------
Total assets.............................. $ 7,120,641 $24,593,198
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued liabilities............ $ 396,605 $ 299,110
Customer deposits and prepayments................... 126,212 102,492
Interest payable.................................... -- 3,231
Interpartnership debt............................... 2,865,426 2,312,776
----------- -----------
Total liabilities......................... 3,388,243 2,717,609
Partners' equity:
General partner................................... 822,837 8,784,068
Limited partners.................................. 2,909,561 13,091,521
----------- -----------
Total partner's equity.................... 3,732,398 21,875,589
----------- -----------
Total liabilities and partners' equity.... $ 7,120,641 $24,593,198
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-278
<PAGE> 463
RIFKIN CABLE INCOME PARTNERS L.P.
STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED
------------------------
3/31/98 3/31/99
---------- ----------
<S> <C> <C>
REVENUE:
Service............................................... $1,189,030 $1,249,886
Installation and other................................ 76,220 101,437
---------- ----------
Total revenue............................... 1,265,250 1,351,323
COSTS AND EXPENSES:
Operating expense..................................... 198,322 134,256
Programming expense................................... 275,393 305,007
Selling, general and administrative expense........... 119,236 166,467
Depreciation.......................................... 155,000 293,767
Amortization.......................................... 50,072 281,548
Management fees....................................... 63,262 67,497
Loss on disposal of assets -- 8,578
---------- ----------
Total costs and expenses.................... 861,285 1,257,120
---------- ----------
Operating income...................................... 403,965 94,203
Interest expense...................................... 98,537 55,708
---------- ----------
Net income............................................ $ 305,428 $ 38,495
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-279
<PAGE> 464
RIFKIN CABLE INCOME PARTNERS L.P.
STATEMENT OF PARTNERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
---------- ----------- -----------
<S> <C> <C> <C>
Partners' equity, December 31, 1997.... $ 263,171 $ 2,170,336 $ 2,433,507
Net income............................. 131,603 173,825 305,428
---------- ----------- -----------
Partners' equity, March 31, 1998....... 394,774 2,344,161 2,738,935
========== =========== ===========
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
Partners' equity, December 31, 1998.... 822,837 2,909,561 3,732,398
Partners' contribution................. 7,944,340 10,160,356 18,104,696
Net income............................. 16,891 21,604 38,495
---------- ----------- -----------
Partners' equity March 31, 1999........ $8,784,068 $13,091,521 $21,875,589
========== =========== ===========
</TABLE>
The partners' capital accounts for financial reporting purposes vary from
the tax capital accounts.
The accompanying notes are an integral part of the financial statements.
F-280
<PAGE> 465
RIFKIN CABLE INCOME PARTNERS L.P.
STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------------
3/31/98 3/31/99
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $305,428 $ 38,495
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 205,072 575,315
Amortization of deferred loan cost................. 4,743 --
Loss on disposal of fixed assets................... -- 8,578
Decrease in customer accounts receivables.......... 9,781 17,376
Decrease in other receivables...................... 52,995 33,221
Decrease (increase) in prepaid expense and other... (22,190) 51,944
Decrease in accounts payable and accrued
liabilities...................................... (46,448) (97,495)
Decrease in customer deposits and prepayment....... (15,329) (23,720)
Increase (decrease) in interest payable............ (4,924) 3,231
-------- ---------
Net cash provided by operating activities........ 489,128 606,945
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment............ (99,234) (44,602)
Proceeds from the sale of assets...................... -- 1,500
-------- ---------
Net cash used in investing activities............ (99,234) (43,102)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from interpartnership debt................... -- 55,000
Payments of long-term debt............................ (232,375) --
Payments of interpartnership debt..................... -- (607,650)
-------- ---------
Net cash used in financing activities............ (232,375) (552,650)
-------- ---------
Net increase in cash and cash equivalents............... 157,519 11,193
Cash and cash equivalents at beginning of period........ 381,378 65,699
-------- ---------
Cash and cash equivalents at end of period.............. $538,897 $ 76,892
======== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid......................................... $ 98,718 $ 52,350
======== =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-281
<PAGE> 466
RIFKIN CABLE INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Rifkin Cable Income Partners L.P. (the "Partnership") was formed in 1986 as
a limited partnership under the laws of the State of Delaware. The Partnership
owns, operates and develops cable television systems in Missouri and New Mexico.
Rifkin Cable Management Partners L.P., an affiliate of Rifkin & Associates,
Inc., is the general partner of the Partnership.
The Partnership Agreement (the "Agreement") establishes the respective
rights, obligations and interests of the partners. The Agreement provides that
net income or loss, certain capital events, and cash distributions (all as
defined in the Agreement) are generally allocated 43% to the general partner and
57% to the limited partners.
ACQUISITION BY INTERLINK COMMUNICATIONS PARTNERS, LLLP
Effective December 31, 1998, InterLink Communications Partners, LLLP
("ICP") acquired 100% of the Partnership. This transaction was accounted for as
a purchase, as such, assets and liabilities were written up to their fair market
value. The December 31, 1998 audited financial statements represent the
Partnership just prior to this transaction. The March 31, 1999 unaudited
financial statements represent the new basis of accounting as property, plant
and equipment and franchise cost which were written up by $6,398,400 and
$11,701,600, respectively.
Accordingly, the March 31, 1999 unaudited financial statements of the
Partnership are not comparable to the December 31, 1998 audited financial
statements of the Partnership, which are based upon historic costs.
BASIS OF PRESENTATION
The accompanying condensed financial statements are unaudited. However, in
the opinion of management, the financial statements reflect all adjustments,
consisting of normal recurring adjustments, necessary for fair presentation in
accordance with generally accepted accounting principles applicable to interim
periods. The results of operations for the three months ended March 31, 1999 are
not necessarily indicative of the results that may be achieved for the full
fiscal year and cannot be used to indicate financial performance for the entire
year. The accompanying financial statements should be read in conjunction with
the December 31, 1998 audited financial statements of Rifkin Cable Income
Partners, L.P.
ACQUISITION BY CHARTER COMMUNICATIONS
On February 12, 1999, ICP signed a letter of intent to sell all of ICP's
partnership interests to Charter Communications, Inc. ("Charter"). On April 26,
1999, ICP signed a definitive Purchase and Sale Agreement with Charter for the
sale of the individual partners' interest. ICP and Charter are expected to
complete the sale during the third quarter of 1999.
F-282
<PAGE> 467
RIFKIN CABLE INCOME PARTNERS L.P.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
2. LITIGATION
The Partnership could possibly be named as defendant in various actions and
proceedings arising from the normal course of business. In all such cases, the
Partnership will vigorously defend itself against the litigation and, where
appropriate, will file counterclaims. Although the eventual outcome of potential
lawsuits cannot be predicted, it is management's opinion that any such lawsuit
will not result in liabilities that would have a material affect on the
Partnership's financial position or results of operations.
F-283
<PAGE> 468
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Cash.............................................. $ 4,397,931 $ 2,324,892
Subscriber accounts receivable, net of allowance
for doubtful accounts of $286,228 in 1999 and
$444,839 in 1998............................. 1,438,418 1,932,140
Other receivables................................. 3,743,948 5,637,771
Prepaid expenses and other........................ 1,479,094 2,398,528
Property, plant and equipment at cost:
Cable television transmission and distribution
systems and related equipment................ 154,357,916 149,376,914
Land, building, vehicles and furniture and
fixtures..................................... 7,895,440 7,421,960
------------ ------------
162,253,356 156,798,874
Less accumulated depreciation................... (39,125,222) (35,226,773)
------------ ------------
Net property, plant and equipment....... 123,128,134 121,572,101
Franchise costs and other intangible assets, net
of accumulated amortization of $72,059,022 in
1999 and $67,857,545 in 1998.................... 176,785,191 183,438,197
------------ ------------
Total assets............................ $310,972,716 $317,303,629
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued liabilities.......... $ 13,513,817 $ 11,684,594
Subscriber deposits and prepayments............... 645,379 1,676,900
Interest payable.................................. 3,651,571 7,242,954
Deferred taxes payable............................ 7,405,000 7,942,000
Notes payable..................................... 226,575,000 224,575,000
------------ ------------
Total liabilities....................... 251,790,767 253,121,448
Commitments:
Redeemable partners' interests.................... 16,732,480 10,180,400
Partners' capital (deficit):
General partner................................. (2,860,031) (1,991,018)
Limited partners................................ 44,916,743 55,570,041
Preferred equity interest....................... 392,757 422,758
------------ ------------
Total partners' capital........................... 42,449,469 54,001,781
------------ ------------
Total liabilities and partners'
capital.............................. $310,972,716 $317,303,629
============ ============
</TABLE>
See accompanying notes to financial statements.
F-284
<PAGE> 469
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------------
1999 1998
----------- -----------
<S> <C> <C>
REVENUE:
Service............................................. $21,827,094 $20,535,417
Installation and other.............................. 2,190,189 1,470,093
----------- -----------
Total revenue............................. 24,017,283 22,005,510
COSTS AND EXPENSES:
Operating expense................................... 3,461,852 3,546,468
Programming expense................................. 5,396,599 4,941,131
Selling, general and administrative expense......... 3,380,966 2,748,970
Depreciation........................................ 4,010,219 3,625,474
Amortization........................................ 6,383,145 5,817,358
Management fees..................................... 840,605 770,193
Loss on disposal of assets.......................... 76,798 260,912
----------- -----------
Total costs and expenses.................. 23,550,184 21,710,506
----------- -----------
Operating income.................................... 467,099 295,004
Gain on sale of Michigan assets..................... -- (5,989,846)
Interest expense.................................... 5,892,724 5,945,495
----------- -----------
Income (loss) before income taxes and cumulative
effect of accounting change....................... (5,425,625) 339,355
Income tax benefit.................................. (537,000) (1,098,000)
----------- -----------
Income (loss) before cumulative effect of accounting
change............................................ (4,888,625) 1,437,355
Cumulative effect of accounting change for
organizational costs.............................. 111,607 --
----------- -----------
Net income (loss)................................... $(5,000,232) $ 1,437,355
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-285
<PAGE> 470
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF CASH FLOW (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1999 1998
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................ $(5,000,232) $ 1,437,355
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization................. 10,393,364 9,442,832
Amortization of deferred loan cost............ 235,956 247,440
Gain on sale of Michigan assets............... -- (5,989,846)
Loss on disposal of fixed assets.............. 76,798 260,912
Cumulative effect of accounting change for
organizational costs........................ 111,607 --
Deferred taxes benefit........................ (537,000) (1,098,000)
Decrease in subscriber accounts receivable.... 493,722 309,085
Decrease in other receivables................. 1,893,823 593,691
Decrease (increase) in prepaid expenses and
other....................................... 919,434 (205,882)
Increase (decrease) in accounts payable and
accrued liabilities......................... 1,829,223 (900,090)
Increase (decrease) in subscriber deposits and
prepayment.................................. (1,031,521) 15,946
Decrease in interest payable.................. (3,591,383) (3,702,056)
----------- ------------
Net cash provided by operating
activities............................ 5,793,791 411,387
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of cable systems, net............... (13,812) --
Additions to property, plant and equipment....... (5,722,161) (6,727,584)
Additions to cable television franchises, net of
retirements and changes in other intangible
assets........................................ (63,890) (38,349)
Net proceeds from sale of Michigan assets........ -- 17,050,564
Net proceeds from the disposal of assets (other
than Michigan)................................ 79,111 92,664
----------- ------------
Net cash provided by (used in) investing
activities............................ (5,720,752) 10,377,295
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term bank debt................ 8,000,000 8,500,000
Payments of long term-bank debt.................. (6,000,000) (20,000,000)
----------- ------------
Net cash provided by (used in) financing
activities............................ 2,000,000 (11,500,000)
----------- ------------
NET INCREASE (DECREASE) IN CASH.................... 2,073,039 (711,318)
CASH AT BEGINNING OF QUARTER....................... 2,324,892 1,902,555
----------- ------------
CASH AT END OF QUARTER............................. $ 4,397,931 $ 1,191,237
=========== ============
</TABLE>
See accompanying notes to financial statements.
F-286
<PAGE> 471
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<CAPTION>
PREFERRED GENERAL LIMITED
EQUITY INTEREST PARTNER PARTNERS TOTAL
--------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Partners' capital (deficit) at
12/31/98............................. $422,758 $(1,991,018) $55,570,041 $54,001,781
Net loss for the quarter ended
3/31/99.............................. (30,001) (50,003) (4,920,228) (5,000,232)
Accretion of redeemable partners'
interest............................. -- (819,010) (5,733,070) (6,552,080)
-------- ----------- ----------- -----------
Partners' capital (deficit) at
3/31/99.............................. $392,757 $(2,860,031) $44,916,743 $42,449,469
======== =========== =========== ===========
Partners' capital (deficit) at
12/31/97............................. $276,243 $(1,885,480) $34,044,912 $32,435,675
Net income for the quarter ended
3/31/98.............................. 8,624 14,374 1,414,357 1,437,355
Accretion of redeemable partners'
interest............................. -- (140,880) (986,160) (1,127,040)
-------- ----------- ----------- -----------
Partners' capital (deficit) at
3/31/98.............................. $284,867 $(2,011,986) $34,473,109 $32,745,990
======== =========== =========== ===========
</TABLE>
See accompanying notes to financial statement.
F-287
<PAGE> 472
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL INFORMATION
Rifkin Acquisition Partners, L.P. ("RAP L.P.") was formed on December 16,
1988, pursuant to the laws of the State of Colorado, for the purpose of
acquiring and operating cable television (CATV) systems. On September 1, 1995,
RAP L.P. registered as a limited liability limited partnership, Rifkin
Acquisition Partners, L.L.L.P. (the "Partnership"), pursuant to the laws of the
State of Colorado. Rifkin Acquisition Management, L.P., was the general partner
of RAP L.P. and is the general partner of the Partnership ("General Partner").
The Partnership and its subsidiaries are hereinafter referred to on a
consolidated basis as the "Company."
The Partnership operates under a limited liability limited partnership
agreement (the "Partnership Agreement") which establishes contribution
requirements, enumerates the rights and responsibilities of the partners and
advisory committee, provides for allocations of income, losses and
distributions, and defines certain items relating thereto.
These statements have been completed in conformity with the SEC
requirements for unaudited consolidated financial statements for the Company and
does not contain all of the necessary footnote disclosures required for a fair
presentation of the balance sheets, statements of operations, of partners'
capital(deficit), and of cash flows in conformity with generally accepted
accounting principles. However, in the opinion of management, this data includes
all adjustments, consisting of normal recurring accruals necessary to present
fairly the Company's consolidated financial position at March 31, 1999, December
31, 1998 and March 31,1998, and its consolidated results of operations and cash
flows for the three months ended March 31, 1999 and 1998. The results of
operations for the three months ended March 31, 1999 are not necessarily
indicative of the results that may be achieved for the full fiscal year and
cannot be used to indicate financial performance for the entire year. The
consolidated financial statements should be read in conjunction with the
Company's annual consolidated financial statements and notes thereto included on
Form 10-K, No. 333-3084, for the year ended December 31, 1998.
2. SUBSEQUENT EVENT
On February 12, 1999, the Company signed a letter of intent for the
partners to sell their partnership interests to Charter Communications, Inc.
("Charter"). On April 26, 1999, the Company signed a definitive Purchase and
Sale Agreement with Charter for the sale of the individual partners' interest.
Subsequently, Charter assigned this contract to Charter Communications Holdings,
LLC (CCH). The company and CCH are expected to complete the sale during the
third quarter of 1999.
3. ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT
Effective January 1, 1999, the Company adopted the Accounting Standards
Executive Committee's Statement of Position (SOP)98-5 "Reporting on the Costs of
Start-Up Activities," which requires the Company to expense all start-up costs
related to organizing a new business. During the first quarter of 1999, the
Company wrote off the organization costs capitalized in prior years along with
the accumulated amortization, resulting in the recognition of a cumulative
effect of accounting change loss of $111,607.
F-288
<PAGE> 473
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. RECLASSIFICATION OF FINANCIAL STATEMENT PRESENTATION
Certain reclassifications have been made to the 1998 Consolidated Statement
of Operations to conform with the Audited Consolidated Statement of Operations
for the year ended December 31, 1998.
5. SENIOR SUBORDINATED NOTES
On January 26, 1996, the Company and its wholly-owned subsidiary, Rifkin
Acquisition Capital Corp (RAC), co-issued a $125 million aggregate principal
amount of 11 1/8% Senior Subordinated Notes (the "Notes") to institutional
investors. These Notes were subsequently exchanged on June 18, 1996 for publicly
registered notes with identical terms. Interest on the Notes is payable in cash,
semi-annually on January 15 and July 15 of each year, commencing on July 15,
1996. The Notes, which mature on January 15, 2006, can be redeemed in whole or
in part, at the Issuers' option, at any time on or after January 15, 2001, at
redeemable prices contained in the Notes plus accrued interest. In addition, at
any time on or prior to January 15, 1999, the Issuers, at their option, were
allowed to redeem up to 25% of the principle amount of the notes issued to
institutional investors of not less than $25 million. Such redemption did not
take place. The Senior Subordinated Notes had a balance of $125 million at March
31, 1999 and 1998.
F-289
<PAGE> 474
INDIANA CABLE ASSOCIATES, LTD.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
3/31/99
-----------
<S> <C>
ASSETS (PLEDGED)
Cash and cash equivalents................................... $ 111,665
Customer accounts receivable, less allowance for doubtful
accounts of $2,017........................................ 64,223
Other receivables........................................... 163,272
Prepaid expenses and deposits............................... 39,535
Property, plant and equipment:
Buildings................................................. 19,155
Transmission and distribution systems and related
equipment.............................................. 11,238,219
Office furniture and equipment............................ 57,153
Spare parts and construction inventory.................... 742,022
-----------
12,056,549
Less accumulated depreciation............................. 351,158
-----------
Net property, plant and equipment...................... 11,705,391
Other assets, less accumulated amortization................. 20,799,833
-----------
Total assets...................................... $32,883,919
===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities.................. $ 687,332
Customer prepayments...................................... 23,157
Interest payable.......................................... 20,644
Interpartnership debt..................................... 9,513,888
-----------
Total liabilities................................. 10,245,021
Partners' equity:
General partner........................................... 789,862
Limited partner........................................... 21,849,036
-----------
Total partners' equity...................................... 22,638,898
-----------
Total liabilities and partners' equity............ $32,883,919
===========
</TABLE>
See accompanying notes.
F-290
<PAGE> 475
INDIANA CABLE ASSOCIATES, LTD.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C> <C>
</TABLE>
<TABLE>
THREE MONTHS ENDED
------------------------
3/31/98 3/31/99
---------- ----------
<S> <C> <C>
REVENUE:
Service............................................... $1,828,568 $1,885,201
Installation and other................................ 171,518 216,944
---------- ----------
Total revenue............................... 2,000,086 2,102,145
COSTS AND EXPENSES:
Operating expense..................................... 322,881 212,173
Programming expense................................... 452,606 465,569
Selling, general and administrative expense........... 263,679 285,549
Depreciation.......................................... 128,089 351,257
Amortization.......................................... 178,279 1,034,849
Management fees....................................... 100,004 105,103
Loss on disposal of assets............................ 24,924 8,897
---------- ----------
Total costs and expenses.................... 1,470,462 2,463,397
---------- ----------
Operating income (loss)............................... 529,624 (361,252)
Interest expense...................................... 293,941 203,002
---------- ----------
Net income (loss)..................................... $ 235,683 $ (564,254)
========== ==========
</TABLE>
See accompanying notes.
F-291
<PAGE> 476
INDIANA CABLE ASSOCIATES, LTD.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<S> <C> <C>
</TABLE>
<TABLE>
THREE MONTHS ENDED
----------------------
3/31/98 3/31/99
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 235,683 $(564,254)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation........................................... 128,089 351,257
Amortization........................................... 178,279 1,034,849
Amortization of deferred loan costs.................... 6,947 --
Loss on disposal of assets............................. 24,924 8,897
Decrease in customer accounts receivable............... 20,138 21,572
Decrease in other receivables.......................... 52,089 131,751
Decrease in prepaid expenses and deposits.............. 126 113,040
Increase (decrease) in accounts payable and accrued
liabilities........................................... 14,651... (210,441)
Increase (decrease) in customer prepayments............ 633 (24,301)
Increase (decrease) in interest payable................ (1,448) 20,644
--------- ---------
Net cash provided by operating activities......... 660,111 883,014
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment................ (142,080) (787,226)
--------- ---------
Net cash used in investing activities............. (142,080) (787,226)
Cash flows from financing activities:
Proceeds from long-term debt.............................. 150,000 --
Payments of long-term debt................................ (400,000) --
Payments of interpartnership debt......................... -- (92,742)
Deferred loan cost........................................ (934) --
--------- ---------
Net cash used in financing activities............. (250,934) (92,742)
--------- ---------
Net increase in cash and cash equivalents................... 267,097 3,046
Cash and cash equivalents at beginning of period............ 82,684 108,619
--------- ---------
Cash and cash equivalents at end of period.................. $ 349,781 $ 111,665
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid............................................. $ 288,442 $ 182,358
========= =========
</TABLE>
See accompanying notes.
F-292
<PAGE> 477
INDIANA CABLE ASSOCIATES, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are unaudited.
However, in the opinion of management, the financial statements reflect all
adjustments, consisting of normal recurring adjustments, necessary for fair
presentation in accordance with generally accepted accounting principles
applicable to interim periods. Interim results of operations are not indicative
of results for the full year. The accompanying financial statements should be
read in conjunction with the audited consolidated financial statements of
Indiana Cable Associates, L.P. (the "Partnership").
2. ACQUISITION BY INTERLINK COMMUNICATIONS PARTNERS, LLLP
InterLink Communications Partners, LLLP ("ICP") agreed to purchase all of
the Partnership interests as of December 31, 1998, for a total purchase price of
approximately $32,693,781. The acquisition of the Partnership by ICP was
accounted for as a purchase and a new basis of accounting was established
effective January 1, 1999. The new basis resulted in assets and liabilities
being recorded at their fair market value resulting in an increase in property,
plant, and equipment and franchise costs of $6,952,385 and $16,751,653,
respectively. Accordingly, the 1999 interim unaudited financial statements are
not comparable to the 1998 interim unaudited financial statements of the
Partnership, which are based on historical costs.
3. DEBT
On December 30, 1998, the Partnership obtained an interpartnership loan
agreement with ICP. Borrowings under the interpartnership loan, as well as
interest and principal payments are due at the discretion of the management of
ICP. The balance of the interpartnership loan at March 31, 1999 was $9,513,888.
The interest rate was 8.5% on March 31, 1999.
4. ACQUISITION BY CHARTER COMMUNICATIONS HOLDINGS, LLC
On February 12, 1999, ICP signed a letter of intent to sell all of ICP's
partnership interests to Charter Communications Holdings, LLC ("Charter"). On
April 26, 1999, ICP signed a definitive Purchase and Sale Agreement with Charter
for the sale of the individual partners' interest. ICP and Charter are expected
to complete the sale during the third quarter of 1999.
F-293
<PAGE> 478
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
3/31/99
ASSETS (PLEDGED) ------------
<S> <C>
Cash and cash equivalents................................... $ 886,775
Customer accounts receivable, less allowance for doubtful
accounts of $15,315....................................... 225,562
Other receivables........................................... 1,108,404
Prepaid expenses and deposits............................... 198,634
Property, plant and equipment:
Transmission and distribution system and related
equipment................................................. 23,861,716
Office furniture and equipment.............................. 244,959
Construction in process and spare parts inventory........... 1,000,389
------------
25,107,064
Less accumulated depreciation............................... 689,851
------------
Net property, plant and equipment................. 24,417,213
Other assets, less accumulated amortization................. 76,223,185
------------
Total assets...................................... $103,059,773
============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Accounts payable and accrued liabilities.................... $ 2,464,391
Interest payable............................................ 42,298
Customer prepayments........................................ 493,169
Interpartnership debt....................................... 30,272,414
------------
Total liabilities................................. 33,272,272
Partners' equity:
General partner........................................... 635,124
Limited partner........................................... 62,898,936
Special limited partner................................... 6,253,441
------------
Total partners' equity...................................... 69,787,501
------------
Total liabilities and partners' equity............ $103,059,773
============
</TABLE>
See accompanying notes.
F-294
<PAGE> 479
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<S> <C> <C>
</TABLE>
<TABLE>
THREE MONTHS ENDED
-------------------------
3/31/98 3/31/99
---------- -----------
<S> <C> <C>
REVENUES:
Service.............................................. $4,621,902 $ 5,199,389
Installation and other............................... 759,252 946,223
---------- -----------
5,381,154 6,145,612
COSTS AND EXPENSES:
Operating expense.................................... 1,178,431 1,018,808
Programming expense.................................. 1,257,362 1,267,120
Selling, general and administrative expense.......... 912,931 1,074,086
Depreciation......................................... 543,852 692,889
Amortization......................................... 322,652 6,231,423
Management fees...................................... 215,246 245,824
Loss on disposal of assets........................... 17,917 138,643
---------- -----------
Total costs and expenses................... 4,448,391 10,668,793
---------- -----------
Operating income (loss).............................. 932,763 (4,523,181)
Interest expense..................................... 637,986 607,692
---------- -----------
Net income (loss).................................... $ 294,777 $(5,130,873)
========== ===========
</TABLE>
See accompanying notes.
F-295
<PAGE> 480
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<S> <C> <C>
</TABLE>
<TABLE>
THREE MONTHS ENDED
--------------------------
3/31/98 3/31/99
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................. $ 294,777 $(5,130,873)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation................................... 543,852 692,889
Amortization................................... 322,652 6,231,423
Amortization of deferred loan cost............. 22,329 --
Loss on disposal of assets..................... 17,917 138,643
Decrease in customer accounts receivable....... 172,099 229,777
Decrease (increase) in other receivables....... (61,849) 583,189
Decrease (increase) in prepaid expenses and
deposits..................................... (11,708) 194,388
Increase in accounts payable and accrued
liabilities.................................. 454,505 107,851
Decrease in customer prepayments............... (200,756) (197,196)
Increase (decrease) in interest payable........ (10,308) 42,298
----------- -----------
Net cash provided by operating
activities............................. 1,543,510 2,892,389
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment........ (2,326,765) (1,619,609)
Additions to other assets, net of refranchises.... (117,090) (135,252)
Proceeds from the sale of assets.................. 4,442 20,530
----------- -----------
Net cash used in investing activities..... (2,439,413) (1,734,331)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt...................... 2,900,000 --
Payments of long-term debt........................ (1,900,000) --
Payments of interpartnership debt................. -- (950,022)
Deferred loan costs............................... (132,727) --
----------- -----------
Net cash provided by (used in) financing
activities............................. 1,000,000 (950,022)
----------- -----------
Net increase in cash and cash equivalents........... 104,097 208,036
Cash and cash equivalents at beginning of period.... 362,619 678,739
----------- -----------
Cash and cash equivalents at end of period.......... $ 466,716 $ 886,775
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid..................................... $ 617,214 $ 565,395
=========== ===========
</TABLE>
See accompanying notes.
F-296
<PAGE> 481
R/N SOUTH FLORIDA CABLE MANAGEMENT LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements are unaudited. However,
in the opinion of management, the financial statements reflect all adjustments,
consisting of normal recurring adjustments, necessary for fair presentation in
accordance with generally accepted accounting principles applicable to interim
periods. Interim results of operations are not indicative of results for the
full year. The accompanying financial statements should be read in conjunction
with the audited consolidated financial statements of R/N South Florida Cable
Management Limited Partnership (the "Partnership").
2. ACQUISITION BY INTERLINK COMMUNICATIONS PARTNERS, LLLP
InterLink Communications Partners, LLLP ("ICP") agreed to purchase all of
the Partnership interests as of December 31, 1998, for a total purchase price of
approximately $105,447,622. The acquisition of the Partnership by ICP was
accounted for as a purchase and a new basis of accounting was established
effective January 1, 1999. The new basis resulted in assets and liabilities
being recorded at their fair market value resulting in a increase in property,
plant, and equipment and franchise costs of $4,986,298 and $77,273,596,
respectively. Accordingly, the 1999 interim unaudited financial statements are
not comparable to the 1998 interim unaudited financial statements of the
Partnership, which are based on historical costs.
3. DEBT
On December 30, 1998, the Partnership obtained an interpartnership loan
agreement with ICP. Borrowings under the interpartnership loan, as well as
interest and principal payments are due at the discretion of the management of
ICP. The balance of the interpartnership loan at March 31, 1999 was $30,272,414.
The interest rate at March 31, 1999 was 8.5%
4. ACQUISITION BY CHARTER COMMUNICATIONS HOLDINGS, LLC
On February 12, 1999, ICP signed a letter of intent to sell all of ICP's
partnership interests to Charter Communications Holdings, LLC ("Charter"). On
April 26, 1999, ICP signed a definitive Purchase and Sale Agreement with Charter
for the sale of the individual partners' interest. ICP and Charter are expected
to complete the sale during the third quarter of 1999.
F-297
<PAGE> 482
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$3,575,000,000
OFFER TO EXCHANGE
8.250% SENIOR NOTES DUE 2007,
8.625% SENIOR NOTES DUE 2009 AND
9.920% SENIOR DISCOUNT NOTES DUE 2011
FOR ANY AND ALL OUTSTANDING
8.250% SENIOR NOTES DUE 2007,
8.625% SENIOR NOTES DUE 2009 AND
9.920% SENIOR DISCOUNT NOTES DUE 2011,
RESPECTIVELY, OF
CHARTER COMMUNICATIONS
HOLDINGS, LLC
AND
CHARTER COMMUNICATIONS
HOLDINGS CAPITAL CORPORATION
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY
INFORMATION OR TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST
NOT RELY ON ANY UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS
AN OFFER TO ISSUE ONLY THE EXCHANGE NOTES OFFERED HEREBY, BUT ONLY UNDER
CIRCUMSTANCES AND IN JURISDICTIONS WHERE IT IS LAWFUL TO DO SO. THE INFORMATION
CONTAINED IN THIS PROSPECTUS IS CURRENT ONLY AS OF ITS DATE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 483
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
INDEMNIFICATION UNDER THE LIMITED LIABILITY COMPANY AGREEMENT OF CHARTER
HOLDINGS.
The Limited Liability Company Agreement of Charter Holdings, entered into
as of February 9, 1999, by Charter Communications, Inc., as the initial member,
provides that the members, the manager, the directors, their affiliates or any
person who at any time serves or has served as a director, officer, employee or
other agent of any member or any such affiliate, and who, in such capacity,
engages or has engaged in activities on behalf of Charter Holdings, shall be
indemnified and held harmless by Charter Holdings to the fullest extent
permitted by law from and against any losses, damages, expenses, including
attorneys' fees, judgments and amounts paid in settlement actually and
reasonably incurred by or in connection with any claim, action, suit or
proceeding arising out of or incidental to such indemnifiable person's conduct
or activities on behalf of Charter Holdings. Notwithstanding the foregoing, no
indemnification is available under the Limited Liability Company Agreement in
respect of any such claim adjudged to be primarily the result of bad faith,
willful misconduct or fraud of an indemnifiable person. Payment of these
indemnification obligations shall be made from the assets of Charter Holdings
and the members shall not be personally liable to an indemnifiable person for
payment of indemnification.
INDEMNIFICATION UNDER THE DELAWARE LIMITED LIABILITY COMPANY ACT.
Section 18-108 of the Delaware Limited Liability Company Act authorizes a
limited liability company to indemnify and hold harmless any member or manager
or other person from and against any and all claims and demands whatsoever,
subject to such standards and restrictions, if any, as are set forth in its
limited liability company agreement.
INDEMNIFICATION UNDER THE BY-LAWS OF CHARTER CAPITAL.
The By-Laws of Charter Capital provide that Charter Capital, to the
broadest and maximum extent permitted by applicable law, will indemnify each
person who was or is a party, or is threatened to be made a party, to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person is or was a director or officer of Charter Capital, or is or was serving
at the request of Charter Capital as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding. To the extent that a director, officer,
employee or agent of Charter Capital has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in the
preceding paragraph, or in defense of any claim, issue or matter, such person
will be indemnified against expenses, including attorneys' fees, actually and
reasonably incurred by such person. Expenses, including attorneys' fees,
incurred by a director or officer in defending any civil or criminal action,
suit or proceeding may be paid by Charter Capital in advance of the final
disposition of such action, suit or proceeding, as authorized by the Board of
Directors of Charter Capital, upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if it shall ultimately be
determined that such
II-1
<PAGE> 484
director or officer was not entitled to be indemnified by Charter Capital as
authorized in the By-Laws of Charter Capital. The indemnification and
advancement of expenses provided by, or granted pursuant to, the By-Laws of
Charter Capital will not be deemed exclusive and are declared expressly to be
non-exclusive of any other rights to which those seeking indemnification or
advancements of expenses may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding an
office, and, unless otherwise provided when authorized or ratified, will
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of such person.
INDEMNIFICATION UNDER THE DELAWARE GENERAL CORPORATION LAW
Section 145 of the Delaware General Corporation Law, authorizes a
corporation to indemnify any person who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that the person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by the person in connection with such action, suit or proceeding, if the person
acted in good faith and in a manner the person reasonably believed to be in, or
not opposed to, the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the person's
conduct was unlawful. In addition, the Delaware General Corporation Law does not
permit indemnification in any threatened, pending or completed action or suit by
or in the right of the corporation in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the corporation,
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability, but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses, which such court
shall deem proper. To the extent that a present or former director or officer of
a corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to above, or in defense of any claim, issue
or matter, such person shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred by such person. Indemnity is
mandatory to the extent a claim, issue or matter has been successfully defended.
The Delaware General Corporation Law also allows a corporation to provide for
the elimination or limit of the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision shall not eliminate or limit
the liability of a director
(i) for any breach of the director's duty of loyalty to the corporation or
its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
(iii) for unlawful payments of dividends or unlawful stock purchases or
redemptions, or
II-2
<PAGE> 485
(iv) for any transaction from which the director derived an improper
personal benefit. These provisions will not limit the liability of
directors or officers under the federal securities laws of the United
States.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBITS
<TABLE>
<S> <C>
1.1 Purchase Agreement, dated as of March 12, 1999, by and among
Charter Communications Holdings, LLC, Charter Communications
Holdings Capital Corporation, Goldman, Sachs & Co., Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, Bear, Stearns & Co. Inc., NationsBanc
Montgomery Securities LLC, Salomon Smith Barney Inc., Credit
Lyonnais Securities (USA), Inc., First Union Capital Markets
Corp., Prudential Securities Incorporated, TD Securities
(USA) Inc., CIBC Oppenheimer Corp. and Nesbitt Burns
Securities Inc.
2.1 Merger Agreement, dated March 31, 1999, by and between
Charter Communications Holdings, LLC and Marcus Cable
Holdings, LLC
2.2(a) Membership Purchase Agreement, dated as of January 1, 1999,
by and between ACEC Holding Company, LLC and Charter
Communications, Inc.*
2.2(b) Assignment of Membership Purchase Agreement, dated as of
February 23, 1999, by and between Charter Communications,
Inc. and Charter Communications Entertainment II, LLC*
2.3(a) Asset Purchase Agreement, dated as of February 17, 1999,
among Greater Media, Inc., Greater Media Cablevision, Inc.
and Charter Communications, Inc.*
2.3(b) Assignment of Asset Purchase Agreement, dated as of February
23, 1999, by and between Charter Communications, Inc. and
Charter Communications Entertainment I, LLC*
2.4 Purchase Agreement, dated as of February 23, 1999, by and
among Charter Communications, Inc., Charter Communications,
LLC, Renaissance Media Holdings LLC and Renaissance Media
Group LLC*
2.5 Purchase Agreement, dated as of March 22, 1999, among
Charter Communications, Inc., Charter Communications, LLC,
Charter Helicon, LLC, Helicon Partners I, L.P., Baum
Investments, Inc. and the limited partners of Helicon
Partners I, L.P.*
2.6(a) Asset and Stock Purchase Agreement, dated April 20, 1999,
between Intermedia Partners of West Tennessee, L.P. and
Charter Communications, LLC
2.6(b) Stock Purchase Agreement, dated April 20, 1999, between TCID
1P-V, Inc. and Charter Communications, LLC
2.6(c) RMG Purchase Agreement, dated as of April 20, 1999, between
Robin Media Group, Inc., InterMedia Partners of West
Tennessee, L.P. and Charter RMG, LLC.
2.6(d) Asset Exchange Agreement, dated April 20, 1999, among
InterMedia Partners Southeast Charter Communications, LLC,
Charter Communications Properties, LLC, and Marcus Cable
Associates, L.L.C.
2.6(e) Asset Exchange Agreement, dated April 20, 1999, among
InterMedia Partners, a California Limited Partnership,
Brenmor Cable Partners, L.P. and Robin Media Group, Inc.
2.6(f) Common Agreement, dated April 20, 1999, between InterMedia
Partners, InterMedia Partners Southeast, InterMedia Partners
of West Tennessee, L.P., InterMedia Capital Partners IV,
L.P., InterMedia Partners IV, L.P., Brenmor Cable Partners,
L.P., TCID IP-V, Inc., Charter Communications, LLC, Charter
Communications Properties, LLC, Marcus Cable Associates,
L.L.C. and Charter RMG, LLC**
</TABLE>
II-3
<PAGE> 486
<TABLE>
<S> <C>
2.7(a) Purchase and Sale Agreement, dated as of April 26, 1999, by and among Interlink
Communications Partners, LLLP, the sellers listed therein and Charter Communications, Inc.
2.7(b) Purchase and Sale Agreement, dated as of April 26, 1999, by and among Rifkin Acquisition
Partners, L.L.L.P., the sellers listed therein and Charter Communications, Inc.*
2.7(c) RAP Indemnity Agreement, dated April 26, 1999, by and among the sellers listed therein and
Charter Communications, Inc.*
2.7(d) Assignment of Purchase Agreement with Interlink*
2.7(e) Assignment of Purchase Agreement with Rifkin*
2.7(f) Assignment of RAP Indemnity Agreement*
3.1 Certificate of Formation of Charter Communications Holdings, LLC
3.2 Limited Liability Company Agreement of Charter Communications Holdings, LLC
3.3 Certificate of Incorporation of Charter Communications Holdings Capital Corporation
3.4 By-Laws of Charter Communications Holdings Capital Corporation
4.1(a) Indenture relating to the 8.250% Senior Notes due 2007, dated as of March 17, 1999, between
Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation
and Harris Trust and Savings Bank
4.1(b) Form of 8.250% Senior Note due 2007 (included in Exhibit No. 4.1(a))
4.1(c) Exchange and Registration Rights Agreement, dated March 17, 1999, by and among Charter
Communications Holdings, LLC, Charter Communications Holdings Capital Corporation, Goldman,
Sachs & Co., Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
Bear, Stearns & Co. Inc., NationsBanc Montgomery Securities LLC, Salomon Smith Barney Inc.,
Credit Lyonnais Securities (USA), Inc., First Union Capital Markets Corp., Prudential
Securities Incorporated, TD Securities (USA) Inc., CIBC Oppenheimer Corp. and Nesbitt Burns
Securities Inc., relating to the 8.250% Senior Notes due 2007
4.2(a) Indenture relating to the 8.625% Senior Notes due 2009, dated as of March 17, 1999, among
Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation
and Harris Trust and Savings Bank
4.2(b) Form of 8.625% Senior Note due 2009 (included in Exhibit No. 4.2(a))
4.2(c) Exchange and Registration Rights Agreement, dated March 17, 1999, by and among Charter
Communications Holdings, LLC, Charter Communications Holdings Capital Corporation, Goldman,
Sachs & Co., Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
Bear, Stearns & Co. Inc., NationsBanc Montgomery Securities LLC, Salomon Smith Barney Inc.,
Credit Lyonnais Securities (USA), Inc., First Union Capital Markets Corp., Prudential
Securities Incorporated, TD Securities (USA) Inc., CIBC Oppenheimer Corp. and Nesbitt Burns
Securities Inc., relating to the 8.625% Senior Notes due 2009
4.3(a) Indenture relating to the 9.920% Senior Discount Notes due 2011, dated as of March 17, 1999,
among Charter Communications Holdings, LLC, Charter Communications Holdings Capital
Corporation and Harris Trust and Savings Bank
4.3(b) Form of 9.920% Senior Discount Note due 2011 (included in Exhibit No. 4.3(a))
</TABLE>
II-4
<PAGE> 487
<TABLE>
<S> <C>
4.3(c) Exchange and Registration Rights Agreement, dated March 17, 1999, by and among Charter
Communications Holdings, LLC, Charter Communications Holdings Capital Corporation, Goldman,
Sachs & Co., Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
Bear, Stearns & Co. Inc., NationsBanc Montgomery Securities LLC, Salomon Smith Barney Inc.,
Credit Lyonnais Securities (USA), Inc., First Union Capital Markets Corp., Prudential
Securities Incorporated, TD Securities (USA) Inc., CIBC Oppenheimer Corp. and Nesbitt Burns
Securities Inc., relating to the 9.920% Senior Discount Notes due 2011
5.1 Opinion of Paul, Hastings, Janofsky & Walker LLP regarding legality*
8.1 Opinion of Paul, Hastings, Janofsky & Walker LLP regarding tax matters*
10.1 Credit Agreement, dated as of March 18, 1999, between Charter Communications Operating, LLC
and certain lenders and agents named therein
10.2 Amended and Restated Management Agreement, dated March 17, 1999, between Charter
Communications Operating, LLC and Charter Communications, Inc.*
10.3 Consulting Agreement, dated as of March 10, 1999, by and between Vulcan Northwest Inc.,
Charter Communications, Inc. and Charter Communications Holdings, LLC*
12.1 Predecessor of Charter Communications Holdings, LLC, Ratio of Earnings to Fixed Charges
Calculation
12.2 Charter Communications Holdings, LLC, Ratio of Earnings to Fixed Charges Calculation
21.1 Subsidiaries of Charter Communications Holdings, LLC and Charter Communications Holdings
Capital Corporation
23.1 Consent of Paul, Hastings, Janofsky & Walker LLP (contained in Exhibit No. 5.1)*
23.2 Consent of Arthur Andersen LLP
23.3 Consent of KPMG LLP
23.4 Consent of Ernst & Young LLP
23.5 Consent of KPMG LLP
23.6 Consent of PricewaterhouseCoopers LLP
23.7 Consent of PricewaterhouseCoopers LLP
23.8 Consent of Ernst & Young LLP
23.9 Consent of Ernst & Young LLP
23.10 Consent of Ernst & Young LLP
24.1 Power of Attorney (included in Part II of Amendment No. 2 to the Registration Statement on
the signature page)
25.1 Statement of Eligibility of and Qualification (Form T-1) of Harris Trust and Savings Bank
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
</TABLE>
- ---------------
* To be filed by amendment.
* Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.
II-5
<PAGE> 488
FINANCIAL STATEMENT SCHEDULES
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required by
such omitted schedules is set forth in the financial statements or the notes
thereto.
ITEM 22. UNDERTAKINGS.
The undersigned Registrants hereby undertake that:
(1) Prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to the reofferings by persons who may be
deemed underwriters, in addition to the information called for by the other
items of the applicable form.
(2) Every prospectus: (i) that is filed pursuant to the immediately
preceding paragraph or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrants of expenses incurred or
paid by a director, officer or controlling person of the Registrants in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrants will, unless in the opinion of their counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by then is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
II-6
<PAGE> 489
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Charter
Communications Holdings, LLC has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of St. Louis, State of Missouri on the twenty-first day of June 1999.
CHARTER COMMUNICATIONS HOLDINGS, LLC
By: CHARTER COMMUNICATIONS HOLDING
COMPANY, LLC, its Member
By: CHARTER COMMUNICATIONS, INC., its Member
and Manager, and the Manager of Charter
Communications Holdings, LLC
By: /s/ CURTIS S. SHAW
------------------------------------------
Name: Curtis S. Shaw
Title: Senior Vice President, General
Counsel
and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Curtis S. Shaw his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this registration statement, and to file the same with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in, and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent or his substitute and substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
CAPACITY WITH CHARTER COMMUNICATIONS, INC.
THE MANAGER OF CHARTER COMMUNICATIONS HOLDINGS, LLC
AND THE MANAGER AND SOLE MEMBER OF CHARTER
COMMUNICATIONS HOLDINGS COMPANY,
LLC, THE SOLE MEMBER OF CHARTER
SIGNATURE COMMUNICATIONS HOLDINGS, LLC DATE
--------- --------------------------------------------------- ----
<S> <C> <C>
/s/ WILLIAM D. SAVOY Director June 21, 1999
- ------------------------------------
William D. Savoy
/s/ JERALD L. KENT President, Chief Executive Officer and Director June 21, 1999
- ------------------------------------
Jerald L. Kent
/s/ KENT D. KALKWARF Senior Vice President and Chief Financial Officer June 21, 1999
- ------------------------------------
Kent D. Kalkwarf
</TABLE>
II-7
<PAGE> 490
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Charter
Communications Holdings Capital Corporation has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of St. Louis, State of Missouri on the twenty-first day
of June 1999.
CHARTER COMMUNICATIONS HOLDINGS CAPITAL
CORPORATION
By: /s/ CURTIS S. SHAW
------------------------------------------
Name: Curtis S. Shaw
Title: Senior Vice President, General
Counsel
and Secretary
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each individual whose signature
appears below constitutes and appoints Curtis S. Shaw his true and lawful
attorney-in-fact and agent with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments to this registration statement, and to file the same with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing requisite and
necessary to be done in, and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<S> <C> <C>
/s/ WILLIAM D. SAVOY Director June 21, 1999
- ------------------------------------
William D. Savoy
/s/ JERALD L. KENT President, Chief Executive Officer and Director June 21, 1999
- ------------------------------------
Jerald L. Kent
/s/ KENT D. KALKWARF Senior Vice President and Chief Financial June 21, 1999
- ------------------------------------ Officer
Kent D. Kalkwarf
</TABLE>
II-8
<PAGE> 491
EXHIBIT INDEX
<TABLE>
<S> <C>
1.1 Purchase Agreement, dated as of March 12, 1999, by and among
Charter Communications Holdings, LLC, Charter Communications
Holdings Capital Corporation, Goldman, Sachs & Co., Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, Bear, Stearns & Co. Inc., NationsBanc
Montgomery Securities LLC, Salomon Smith Barney Inc., Credit
Lyonnais Securities (USA), Inc., First Union Capital Markets
Corp., Prudential Securities Incorporated, TD Securities
(USA) Inc., CIBC Oppenheimer Corp. and Nesbitt Burns
Securities Inc.
2.1 Merger Agreement, dated March 31, 1999, by and between
Charter Communications Holdings, LLC and Marcus Cable
Holdings, LLC
2.2(a) Membership Purchase Agreement, dated as of January 1, 1999,
by and between ACEC Holding Company, LLC and Charter
Communications, Inc.*
2.2(b) Assignment of Membership Purchase Agreement, dated as of
February 23, 1999, by and between Charter Communications,
Inc. and Charter Communications Entertainment II, LLC*
2.3(a) Asset Purchase Agreement, dated as of February 17, 1999,
among Greater Media, Inc., Greater Media Cablevision, Inc.
and Charter Communications, Inc.*
2.3(b) Assignment of Asset Purchase Agreement, dated as of February
23, 1999, by and between Charter Communications, Inc. and
Charter Communications Entertainment I, LLC*
2.4 Purchase Agreement, dated as of February 23, 1999, by and
among Charter Communications, Inc., Charter Communications,
LLC, Renaissance Media Holdings LLC and Renaissance Media
Group LLC*
2.5 Purchase Agreement, dated as of March 22, 1999, among
Charter Communications, Inc., Charter Communications, LLC,
Charter Helicon, LLC, Helicon Partners I, L.P., Baum
Investments, Inc. and the limited partners of Helicon
Partners I, L.P.*
2.6(a) Asset and Stock Purchase Agreement, dated April 20, 1999,
between InterMedia Partners of West Tennessee, L.P. and
Charter Communications, LLC
2.6(b) Stock Purchase Agreement, dated April 20, 1999, between TCID
1P-V, Inc. and Charter Communications, LLC
2.6(c) RMG Purchase Agreement, dated as of April 20, 1999, between
Robin Media Group, Inc., InterMedia Partners of West
Tennessee, L.P. and Charter RMG, LLC
2.6(d) Asset Exchange Agreement, dated April 20, 1999, among
InterMedia Partners Southeast, Charter Communications, LLC,
Charter Communications Properties, LLC, and Marcus Cable
Associates, L.L.C.
2.6(e) Asset Exchange Agreement, dated April 20, 1999, among
InterMedia Partners, a California Limited Partnership,
Brenmor Cable Partners, L.P. and Robin Media Group, Inc.
2.6(f) Common Agreement, dated April 20, 1999, between InterMedia
Partners, InterMedia Partners Southeast, InterMedia Partners
of West Tennessee, L.P., InterMedia Capital Partners IV,
L.P., InterMedia Partners IV, L.P., Brenmor Cable Partners,
L.P., TCID IP-V, Inc., Charter Communications, LLC, Charter
Communications Properties, LLC, Marcus Cable Associates,
L.L.C. and Charter RMG, LLC**
2.7(a) Purchase and Sale Agreement, dated as of April 26, 1999, by
and among Interlink Communications Partners, LLLP, the
sellers listed therein and Charter Communications, Inc.
</TABLE>
<PAGE> 492
<TABLE>
<S> <C>
2.7(b) Purchase and Sale Agreement, dated as of April 26, 1999, by and among Rifkin Acquisition
Partners, L.L.L.P., the sellers listed therein and Charter Communications, Inc.*
2.7(c) RAP Indemnity Agreement, dated April 26, 1999, by and among the sellers listed therein and
Charter Communications, Inc.*
2.7(d) Assignment of Purchase Agreement with Interlink*
2.7(e) Assignment of Purchase Agreement with Rifkin*
2.7(f) Assignment of RAP Indemnity Agreement*
3.1 Certificate of Formation of Charter Communications Holdings, LLC
3.2 Limited Liability Company Agreement of Charter Communications Holdings, LLC
3.3 Certificate of Incorporation of Charter Communications Holdings Capital Corporation
3.4 By-Laws of Charter Communications Holdings Capital Corporation
4.1(a) Indenture relating to the 8.250% Senior Notes due 2007, dated as of March 17, 1999, between
Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation
and Harris Trust and Savings Bank
4.1(b) Form of 8.250% Senior Note due 2007 (included in Exhibit No. 4.1(a))
4.1(c) Exchange and Registration Rights Agreement, dated March 17, 1999, by and among Charter
Communications Holdings, LLC, Charter Communications Holdings Capital Corporation, Goldman,
Sachs & Co., Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
Bear, Stearns & Co. Inc., NationsBanc Montgomery Securities LLC, Salomon Smith Barney Inc.,
Credit Lyonnais Securities (USA), Inc., First Union Capital Markets Corp., Prudential
Securities Incorporated, TD Securities (USA) Inc., CIBC Oppenheimer Corp. and Nesbitt Burns
Securities Inc., relating to the 8.250% Senior Notes due 2007
4.2(a) Indenture relating to the 8.625% Senior Notes due 2009, dated as of March 17, 1999, among
Charter Communications Holdings, LLC, Charter Communications Holdings Capital Corporation
and Harris Trust and Savings Bank
4.2(b) Form of 8.625% Senior Note due 2009 (included in Exhibit No. 4.2(a))
4.2(c) Exchange and Registration Rights Agreement, dated March 17, 1999, by and among Charter
Communications Holdings, LLC, Charter Communications Holdings Capital Corporation, Goldman,
Sachs & Co., Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
Bear, Stearns & Co. Inc., NationsBanc Montgomery Securities LLC, Salomon Smith Barney Inc.,
Credit Lyonnais Securities (USA), Inc., First Union Capital Markets Corp., Prudential
Securities Incorporated, TD Securities (USA) Inc., CIBC Oppenheimer Corp. and Nesbitt Burns
Securities Inc., relating to the 8.625% Senior Notes due 2009
4.3(a) Indenture relating to the 9.920% Senior Discount Notes due 2011, dated as of March 17,
1999, among Charter Communications Holdings, LLC, Charter Communications Holdings Capital
Corporation and Harris Trust and Savings Bank
4.3(b) Form of 9.920% Senior Discount Note due 2011 (included in Exhibit No. 4.3(a))
</TABLE>
<PAGE> 493
<TABLE>
<S> <C>
4.3(c) Exchange and Registration Rights Agreement, dated March 17, 1999, by and among Charter
Communications Holdings, LLC, Charter Communications Holdings Capital Corporation, Goldman,
Sachs & Co., Chase Securities Inc., Donaldson, Lufkin & Jenrette Securities Corporation,
Bear, Stearns & Co. Inc., NationsBanc Montgomery Securities LLC, Salomon Smith Barney Inc.,
Credit Lyonnais Securities (USA), Inc., First Union Capital Markets Corp., Prudential
Securities Incorporated, TD Securities (USA) Inc., CIBC Oppenheimer Corp. and Nesbitt Burns
Securities Inc., relating to the 9.920% Senior Discount Notes due 2011
5.1 Opinion of Paul, Hastings, Janofsky & Walker LLP regarding legality*
8.1 Opinion of Paul, Hastings, Janofsky & Walker LLP regarding tax matters*
10.1 Credit Agreement, dated as of March 18, 1999, between Charter Communications Operating, LLC
and certain lenders and agents named therein
10.2 Amended and Restated Management Agreement, dated March 17, 1999, between Charter
Communications Operating, LLC and Charter Communications, Inc.*
10.3 Consulting Agreement, dated as of March 10, 1999, by and between Vulcan Northwest Inc.,
Charter Communications, Inc. and Charter Communications Holdings, LLC*
12.1 Predecessor of Charter Communications Holdings, LLC, Ratio of Earnings to Fixed Charges
Calculation
12.2 Charter Communications Holdings, LLC, Ratio of Earnings to Fixed Charges Calculation
21.1 Subsidiaries of Charter Communications Holdings, LLC and Charter Communications Capital
Holdings Corporation
23.1 Consent of Paul, Hastings, Janofsky & Walker LLP (contained in Exhibit No. 5.1)*
23.2 Consent of Arthur Andersen LLP
23.3 Consent of KPMG LLP
23.4 Consent of Ernst & Young LLP
23.5 Consent of KPMG LLP
23.6 Consent of PricewaterhouseCoopers LLP
23.7 Consent of PricewaterhouseCoopers LLP
23.8 Consent of Ernst & Young LLP
23.9 Consent of Ernst & Young LLP
23.10 Consent of Ernst & Young LLP
24.1 Power of Attorney (included in Part II of Amendment No. 2 to the Registration Statement on
the signature page)
25.1 Statement of Eligibility of and Qualification (Form T-1) of Harris Trust and Savings Bank
99.1 Form of Letter of Transmittal*
99.2 Form of Notice of Guaranteed Delivery*
</TABLE>
- -------------------------
* To be filed by amendment.
** Portions of this exhibit have been omitted pursuant to a request for
confidential treatment.
<PAGE> 1
Exhibit 1.1
CHARTER COMMUNICATIONS HOLDINGS, LLC
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
$600,000,000 8.250% Senior Notes due 2007
$1,500,000,000 8.625% Senior Notes due 2009
$1,475,000,000 9.920% Senior Discount Notes due 2011
----------
Purchase Agreement
March 12, 1999
Goldman, Sachs & Co.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Bear, Stearns & Co. Inc.
NationsBanc Montgomery Securities LLC
Salomon Smith Barney Inc.
Credit Lyonnais Securities (USA), Inc.
First Union Capital Markets Corp.
Prudential Securities Incorporated
TD Securities (USA) Inc.
CIBC Oppenheimer Corp.
Nesbitt Burns Securities Inc.
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Charter Communications Holdings, LLC, a Delaware limited liability
company (the "Company"), and Charter Communications Holdings Capital
Corporation, a Delaware corporation ("Charter Capital" and, together with the
Company, the "Issuers"), propose, subject to the terms and conditions stated
herein, to issue and sell to the Purchasers named in Schedule I hereto (the
"Purchasers") (i) an aggregate of $600,000,000 principal amount of 8.250% Senior
Notes due 2007 (the "Eight-Year Senior Notes"), (ii) an aggregate of
$1,500,000,000 principal amount of 8.625% Senior Notes due 2009 (the "Ten-Year
Senior Notes" and, together with the Eight-Year Senior Notes, the "Senior
Notes") and (iii) an aggregate of $1,475,000,000 principal amount at maturity
(approximately $905,561,500 gross proceeds) of 9.920% Senior Discount Notes due
2011 (the "Senior Discount Notes" and, together with the Senior Notes, the
"Notes"). The Eight-Year Senior Notes will be unconditionally guaranteed (the
"Eight-Year Senior Note Guarantees" and, together with the Eight-Year Senior
Notes, the "Eight-Year Senior Securities"), the Ten-Year Senior Notes will be
unconditionally guaranteed (the "Ten-Year Senior Note Guarantees" and, together
with the Ten-Year Senior Notes, the "Ten-Year Senior Securities"), and the
Senior Discount Notes will be unconditionally guaranteed (the "Senior Discount
Guarantees" and, together with the Senior Discount Notes, the "Senior Discount
Securities"), each as to payment of principal, premium (if any) and interest on
a senior unsecured basis by Marcus Cable Holdings, LLC, a Delaware limited
liability company (the "Guarantor"). For the purposes of this agreement, the
term
<PAGE> 2
"Senior Note Guarantees" means the Eight-Year Senior Note Guarantees and the
Ten-Year Senior Note Guarantees, collectively; the term "Guarantees" means the
Senior Note Guarantees and the Senior Discount Guarantees, collectively; the
term "Senior Securities" means the Eight-Year Senior Securities and the Ten-Year
Senior Securities, collectively; and the term "Securities" means the Senior
Securities and the Senior Discount Securities, collectively. The Notes will be
equally and ratably secured by a pledge by the Company of the senior note of the
Guarantor due April 1, 2007 in the principal amount of approximately $1.5
billion (the "Mirror Note") pursuant to a pledge agreement (the "Company Pledge
Agreement") to be dated March 17, 1999. The Mirror Note will be secured by the
pledge by the Guarantor to the Company of all of the membership interests of
Marcus Cable Company, L.L.C., a wholly owned subsidiary of the Guarantor,
pursuant to a pledge agreement (the "Guarantor Pledge Agreement" and, together
with the Company Pledge Agreement, the "Pledge Agreements"), to be dated March
17, 1999. The Pledge Agreements and the Mirror Note are herein referred to as
the "Pledge Documents." If the merger of the Guarantor with and into the Company
(the "Marcus Combination") has occurred prior to the issuance of the Notes, then
the related Guarantees will not be issued and the Pledge Documents will not be
executed.
1. The Issuers and the Guarantor represent and warrant to, and agree
with, each of the Purchasers that:
(a) A preliminary offering circular, dated February 24, 1999 (the
"Preliminary Offering Circular") and an offering circular, dated March 12,
1999 (the "Offering Circular") have been prepared in connection with the
offering of the Securities. The Preliminary Offering Circular and the
Offering Circular and any amendments or supplements thereto did not and
will not, as of their respective dates, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the
Issuers by a Purchaser through Goldman, Sachs & Co. expressly for use
therein;
(b) None of the Issuers, the Guarantor or any of their subsidiaries
has sustained since the date of the latest audited financial statements
included in the Offering Circular any material loss or interference with
its business from fire, explosion, flood or other calamity, whether or not
covered by insurance, otherwise than as set forth or contemplated in the
Offering Circular; and, since the respective dates as of which information
is given in the Offering Circular, there has not been any change in the
capital stock or other ownership interests or long-term debt of the
Issuers, the Guarantor or any of their subsidiaries or any material
adverse change, or any development involving a prospective material
adverse change, in or affecting the general affairs, management, financial
position, members' or stockholders' equity or results of operations of the
Issuers, the Guarantor and their subsidiaries, otherwise than as set forth
or contemplated in the Offering Circular;
(c) Each of the Issuers, the Guarantor and their subsidiaries has
good and marketable title in fee simple to all real property and good and
valid title to all personal property owned by it reflected as owned in the
financial statements or elsewhere
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<PAGE> 3
in the Offering Circular, in each case free and clear of all liens,
encumbrances and defects except such as are described in the Offering
Circular or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such
property by the Issuers, the Guarantor and their subsidiaries; and any
real property and buildings held under lease by the Issuers, the Guarantor
and their subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Issuers, the Guarantor and their subsidiaries;
(d) Each of the Company and the Guarantor has been duly formed and
is validly existing as a limited liability company in good standing under
the laws of the State of Delaware, and Charter Capital has been duly
incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware; each of the Issuers and the
Guarantor has power and authority to own its properties and conduct its
business as described in the Offering Circular, and has been duly
qualified as a foreign corporation or limited liability company, as the
case may be, for the transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification, or is
subject to no liability or disability by reason of the failure to be so
qualified in any such jurisdiction, except such as would not, individually
or in the aggregate, have a material adverse effect on the current or
future financial position, members' or stockholders' equity or results of
operations of the Issuers, the Guarantor and their subsidiaries taken as a
whole (a "Material Adverse Effect"); and each subsidiary of the Issuers
and the Guarantor (other than Charter Capital) has been duly formed and is
validly existing as a corporation or limited liability company, as the
case may be, in good standing under the laws of its jurisdiction of
formation;
(e) All of the outstanding ownership interests of the Issuers and
the Guarantor have been duly and validly authorized and issued and are
fully paid and non-assessable; and all of the outstanding ownership
interests of each subsidiary of the Issuers have been duly and validly
authorized and issued, are fully paid and non-assessable and (except as
otherwise set forth in the Offering Circular) are owned directly or
indirectly by the Issuers and the Guarantor, free and clear of all liens,
encumbrances, equities or claims;
(f) The Eight-Year Senior Notes have been duly authorized and, when
executed by the Issuers and authenticated by the Trustee (as defined) in
accordance with the provisions of the Eight-Year Senior Note Indenture (as
defined) and when delivered to, and paid for, by the Purchasers in
accordance with the terms of this Agreement, will have been duly executed,
authenticated, issued and delivered and will constitute valid and legally
binding obligations of the Issuers entitled to the benefits provided by
the indenture to be dated as of March 17, 1999 (the "Eight-Year Senior
Note Indenture") between the Issuers, the Guarantor and Harris Trust and
Savings Bank, as trustee (the "Trustee"), under which they are to be
issued and enforceable against the Issuers in accordance with their terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting creditors'
rights and to general equity principles;
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<PAGE> 4
(g) The Ten-Year Senior Notes have been duly authorized and, when
executed by the Issuers and authenticated by the Trustee in accordance
with the provisions of the Ten-Year Senior Note Indenture (as defined) and
when delivered to, and paid for, by the Purchasers in accordance with the
terms of this Agreement, will have been duly executed, authenticated,
issued and delivered and will constitute valid and legally binding
obligations of the Issuers entitled to the benefits provided by the
indenture to be dated as of March 17, 1999 (the "Ten-Year Senior Note
Indenture" and, together with the Eight-Year Senior Note Indenture, the
"Senior Note Indentures") between the Issuers, the Guarantor and the
Trustee, under which they are to be issued and enforceable against the
Issuers in accordance with their terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles;
(h) The Senior Discount Notes have been duly authorized and, when
executed by the Issuers and authenticated by the Trustee in accordance
with the provisions of the Senior Discount Note Indenture (as defined) and
when delivered to, and paid for, by the Purchasers in accordance with the
terms of this Agreement, will have been duly executed, authenticated,
issued and delivered and will constitute valid and legally binding
obligations of the Issuers entitled to the benefits provided by the
indenture to be dated as of March 17, 1999 (the "Senior Discount Note
Indenture" and, together with the Senior Note Indentures, the
"Indentures") between the Issuers, the Guarantor and the Trustee, under
which they are to be issued and enforceable against the Issuers in
accordance with their terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and the Notes will conform to the descriptions thereof in the
Offering Circular and will be in substantially the form previously
delivered to you;
(i) The Guarantees have been duly authorized by the Guarantor, and
when the Notes are executed by the Issuers and authenticated by the
Trustee in accordance with the provisions of the Indentures and, in the
case of the Notes, delivered to and paid for by the Purchasers in
accordance with the provisions of this Agreement, will constitute legal,
valid and binding obligations of the Guarantor entitled to the benefits
provided by the Indentures and enforceable against the Guarantor in
accordance with their terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and the Guarantees will conform in all material respects to
the descriptions thereof in the Offering Circular;
(j) The Indentures have been duly authorized and, when executed and
delivered by the Issuers and the Guarantor (and assuming the due execution
and delivery thereof by the Trustee), the Indentures will constitute valid
and legally binding instruments, enforceable against the Issuers and the
Guarantor in accordance with their terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and to general
equity principles; the Indentures meet the requirements for qualification
under the Trust Indenture Act; and the Indentures will conform in all
material respects to the descriptions thereof in the Offering Circular;
-4-
<PAGE> 5
(k) The exchange and registration rights agreements to be entered
into between the Issuers, the Guarantor and the Purchasers relating to the
Securities, substantially in the form of Exhibits A, B and C hereto (the
"Registration Rights Agreements"), have been duly authorized by the
Issuers and the Guarantor, and when executed and delivered by the Issuers
and the Guarantor (assuming the due execution and delivery thereof by the
Purchasers), will constitute valid and legally binding instruments,
enforceable against the Issuers and the Guarantor in accordance with their
terms, except that (A) the enforcement thereof may be subject to (i)
bankruptcy, insolvency, reorganization and other laws of general
applicability relating to creditors' rights and (ii) general principles of
equity, and (B) any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy
considerations; and the Registration Rights Agreements will conform in all
material respects to the descriptions thereof in the Offering Circular;
(l) The Exchange Notes (as defined in each of the Registration
Rights Agreements) have been duly authorized by the Issuers and the
Guarantor and, when executed, authenticated, issued and delivered in
accordance with the Indentures and the Registration Rights Agreements
(assuming the due authorization, execution and delivery of the Indentures
by the Trustee), will constitute valid and legally binding instruments,
entitled to the benefits provided by the Indentures under which they are
to be issued, and enforceable against the Issuers and the Guarantor in
accordance with their terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and the Exchange Notes will conform in all material respects
to the descriptions thereof in the Offering Circular;
(m) The Mirror Note has been duly authorized by the Guarantor and,
when executed by the Guarantor, will constitute the legal, valid and
binding obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(n) The Company Pledge Agreement, when duly executed and delivered
by the parties thereto, will create and constitute a valid and enforceable
security interest in, lien upon or pledge of the Mirror Note, subject to
no other security interest, claim, lien, encumbrance or adverse interest
of any nature and no right or option to acquire the same in favor of any
other person or entity, except as permitted by the Company Pledge
Agreement. Upon the filing of UCC-1 financing statements in appropriate
form in the requisite filing offices, the security interest, lien or
pledge created by the Company Pledge Agreement will be a perfected
security interest with respect to that portion of such pledged collateral
in which a security interest can be perfected by the filing of a financing
statement, prior to all other claims or security interests therein except
as permitted by the Company Pledge Agreement. The Company Pledge Agreement
has been duly and validly authorized by the Company and, when executed and
delivered by the Company, will constitute a valid and legally binding
agreement of the Company enforceable against the Company in accordance
with its terms, subject, as to enforcement, to bankruptcy, insolvency,
reorganization or other laws of general applicability affecting creditors'
rights and to general equity principles;
-5-
<PAGE> 6
(o) The Guarantor Pledge Agreement, when duly executed and delivered
by the parties thereto, will create and constitute a valid and enforceable
security interest in, lien upon or pledge of the capital stock of Marcus
Cable Company, L.L.C., subject to no other security interest, claim, lien,
encumbrance or adverse interest of any nature and no right or option to
acquire the same in favor of any other person or entity, except as
permitted by the Guarantor Pledge Agreement. Upon the filing of UCC-1
financing statements in appropriate form in the requisite filing offices,
the security interest, lien or pledge created by the Guarantor Pledge
Agreement will be a perfected security interest with respect to that
portion of such pledged collateral in which a security interest can be
perfected by the filing of a financing statement, prior to all other
claims or security interests therein except as permitted by the Guarantor
Pledge Agreement. The Guarantor Pledge Agreement has been duly and validly
authorized by the Guarantor and, when executed and delivered by the
Guarantor, will constitute a valid and legally binding agreement of the
Guarantor enforceable against the Guarantor in accordance with its terms,
subject, as to enforcement, to bankruptcy, insolvency, reorganization or
other laws of general applicability affecting creditors' rights and to
general equity principles;
(p) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the sale of
the Securities) will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934 (the "Exchange Act"), or any regulation
promulgated thereunder, including, without limitation, Regulations T, U,
and X of the Board of Governors of the Federal Reserve System;
(q) Prior to the date hereof, none of the Issuers, the Guarantor or
any of their affiliates has taken any action which is designed to or which
has constituted or which might have been expected to cause or result in
stabilization or manipulation of the price of any security of the Issuers
or the Guarantor in connection with the offering of the Securities;
(r) The issue and sale of the Securities and the compliance by the
Issuers and the Guarantor with all of the provisions of the Securities,
the Indentures, the Registration Rights Agreements, the Pledge Documents
and this Agreement and the consummation of the transactions herein and
therein contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement, lease,
license, franchise agreement, permit or other agreement or instrument to
which the Issuers, the Guarantor or any of their subsidiaries is a party
or by which the Issuers, the Guarantor or any of their subsidiaries is
bound or to which any of the property or assets of the Issuers, the
Guarantor or any of their subsidiaries is subject, other than such
conflicts, breaches, violations or defaults which would not, individually
or in the aggregate, have a Material Adverse Effect, nor will such action
result in any violation of the provisions of the Charter or by-laws (or
other organizational document) of the Issuers or the Guarantor nor will
such action result in any violation of any statute or any order, rule or
regulation of any court or governmental agency or body, including without
limitation, the Federal Communications Act of 1934, as amended, the Cable
Communications Policy Act of 1984, the Cable Television Consumer
Protection and Competition Act of 1992 and the Telecommunications Reform
Act of 1996 (collectively, the
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<PAGE> 7
"Cable Acts") or any order, rule or regulation of the Federal
Communications Commission (the "FCC"), having jurisdiction over the
Issuers, the Guarantor or any of their subsidiaries or any of their
properties, other than such violations which would not, individually or in
the aggregate, have a Material Adverse Effect; and no consent, approval,
authorization, order, registration or qualification of or with any such
court or governmental agency or body is required, including, without
limitation, under the Cable Acts or any order, rule or regulation of the
FCC, for the issue and sale of the Securities or the consummation by the
Issuers and the Guarantor of the transactions contemplated by this
Agreement, the Indentures, the Registration Rights Agreements or the
Pledge Documents, except such consents, approvals, authorizations,
registrations or qualifications as have been made and except as may be
required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Securities by the Purchasers and except
such as will be made in the case of the Registration Rights Agreements or
such as may be required by the National Association of Securities Dealers,
Inc. ("NASD");
(s) None of the Issuers, the Guarantor or any of their subsidiaries
is (a) in violation of its Charter or by-laws (or other organizational
document), (b) in default in the performance of any obligation, covenant
or condition contained in any indenture, mortgage, deed of trust, loan
agreement, lease, license, permit or other agreement or instrument to
which it is a party or by which it or any of its properties may be bound
or (c) in violation of any law, statute, rule or regulation or any
judgment, decree or order, in any such case, of any domestic or foreign
court or governmental or regulatory agency or other body having
jurisdiction over the Issuers, the Guarantor or their subsidiaries, or any
of their properties or assets, including, without limitation, the Cable
Acts or any order, rule or regulation of the FCC, except, in the case of
clauses (b) and (c), such as would not individually or in the aggregate
have a Material Adverse Effect;
(t) The statements set forth in the Offering Circular under the
captions "Description of Notes," insofar as they purport to constitute a
summary of the terms of the Securities, under the captions "Risk Factors,"
"Business," "Regulation and Legislation," "Certain Relationships and
Related Transactions," "Description of the Credit Facilities" and "Certain
Federal Tax Considerations," insofar as they purport to describe the
provisions of the laws and documents referred to therein, are accurate in
all material respects;
(u) Other than as set forth in the Offering Circular, there are no
legal or governmental proceedings pending to which the Issuers, the
Guarantor or any of their subsidiaries is a party or of which any property
of the Issuers, the Guarantor or any of their subsidiaries is the subject
which, if determined adversely to the Issuers, the Guarantor or any of
their subsidiaries, would individually or in the aggregate have a Material
Adverse Effect; and, to the best knowledge of the Issuers and the
Guarantor and except as disclosed in the Offering Circular, no such
proceedings are threatened or contemplated by governmental authorities or
threatened by others;
(v) Each of the Issuers and the Guarantor carries insurance
(including self-insurance) in such amounts and covering such risks as in
its reasonable determination is adequate for the conduct of its business
and the value of its properties;
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<PAGE> 8
(w) Except as set forth in the Offering Circular, there is no
strike, labor dispute, slowdown or work stoppage with the employees of any
of the Issuers or the Guarantor or their subsidiaries which is pending or,
to the best knowledge of the Issuers and the Guarantor, threatened which
would, individually or in the aggregate, have a Material Adverse Effect;
(x) None of the Issuers or the Guarantor is, or after giving effect
to the offering and sale of the Securities will be, an "investment
company," as such term is defined in the United States Investment Company
Act of 1940, as amended (the "Investment Company Act");
(y) None of the Issuers, the Guarantor or any of their subsidiaries,
or any person acting on its or their behalf (other than the Purchasers, as
to whom the Issuers, the Guarantor and their subsidiaries make no
representation) has offered or sold the Securities by means of any general
solicitation or general advertising within the meaning of Rule 502(c)
under the Securities Act of 1933 (the "Act") or, with respect to
Securities sold outside the United States to non-U.S. persons (as defined
in Rule 902 under the Act), by means of any directed selling efforts
within the meaning of Rule 902 under the Act and the Issuers, the
Guarantor, any affiliate of the Issuers or the Guarantor and any person
acting on its or their behalf (other than the Purchasers, as to whom the
Issuers, the Guarantor and their subsidiaries make no representation) has
complied with and will implement the "offering restriction" within the
meaning of such Rule 902;
(z) Within the preceding six months, none of the Issuers, the
Guarantor or any other person acting on behalf of the Issuers or the
Guarantor has offered or sold to any person any Securities, or any
securities of the same or a similar class as the Securities, other than
Securities offered or sold to the Purchasers hereunder. The Issuers and
the Guarantor will take reasonable precautions designed to insure that any
offer or sale, direct or indirect, in the United States or to any U.S.
person (as defined in Rule 902 under the Act) of any Securities or any
substantially similar security issued by the Issuers and the Guarantor,
within six months subsequent to the date on which the distribution of the
Securities has been completed (as notified to the Issuers by Goldman,
Sachs & Co.), is made under restrictions and other circumstances
reasonably designed not to affect the status of the offer and sale of the
Securities in the United States and to U.S. persons contemplated by this
Agreement as transactions exempt from the registration provisions of the
Act;
(aa) The audited consolidated financial statements of the Issuers,
the Guarantor and their subsidiaries included in the Offering Circular
present fairly in all material respects the consolidated financial
position, results of operations and cash flows of the Issuers, the
Guarantor and their subsidiaries at the dates and for the periods to which
they relate and have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis, except as otherwise
stated therein. The summary and selected financial and statistical data in
the Offering Circular present fairly in all material respects the
information shown therein and have been prepared and compiled on a basis
consistent with the audited financial statements included therein, except
as otherwise stated therein;
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<PAGE> 9
(bb) The pro forma financial statements (including the notes
thereto) and the other pro forma financial information included in the
Offering Circular (i) comply as to form in all material respects with the
applicable requirements of Regulation S-X for Form S-1 promulgated under
the Exchange Act, as amended, and (ii) have been properly computed on the
bases described therein; the assumptions used in the preparation of the
pro forma financial data and other pro forma financial information
included in the Offering Circular are reasonable and the adjustments used
therein are appropriate to give effect to the transactions or
circumstances referred to therein;
(cc) Arthur Andersen LLP and KPMG LLP, who have certified certain
financial statements of the Issuers, the Guarantor and their subsidiaries,
are, based upon such representations by such firms to us, each independent
public accountants as required by the Act and the rules and regulations of
the Commission thereunder; and Ernst & Young LLP, who have certified
certain financial statements of Renaissance Media Group LLC and the
combined statements of the Picayune, MS, Lafourche, LA, St. Tammany, LA,
St. Landry, LA, Point Coupee, LA and Jackson, TN cable television systems,
are, based upon such representation by such firm to us, independent public
accountants as required by the Act and the rules and regulations
thereunder;
(dd) The Issuers and the Guarantor have reviewed their operations
and those of their subsidiaries to evaluate the extent to which the
business or operations of the Issuers, the Guarantor or any of their
subsidiaries will be affected by the Year 2000 Problem. As a result of
such review, except as disclosed in the Offering Circular the Issuers and
the Guarantor have no reason to believe that the Year 2000 Problem will
have a Material Adverse Effect or result in any material loss or
interference with the business or operations of either of the Issuers or
the Guarantor or their subsidiaries. The "Year 2000 Problem" as used
herein means any significant risk that computer hardware or software used
in the receipt, transmission, processing, manipulation, storage,
retrieval, retransmission or other utilization of data or in the operation
of mechanical or electrical systems of any kind will not, in the case of
dates or time periods occurring after December 31, 1999, function at least
as effectively as in the case of dates or time periods occurring prior to
January 1, 2000;
(ee) The Issuers, the Guarantor and their subsidiaries own or
possess, or can acquire on reasonable terms, adequate licenses,
trademarks, service marks, trade names, copyrights and know-how (including
trade secrets and other proprietary or confidential information, systems
or procedures) (collectively, "intellectual property") necessary to
conduct the business now or proposed to be operated by each of them as
described in the Offering Circular, except where the failure to own,
possess or have the ability to acquire any such intellectual property
would not, individually or in the aggregate, have a Material Adverse
Effect; and none of the Issuers, the Guarantor or any of their
subsidiaries has received any notice of infringement of or conflict with
(and none actually knows of any such infringement of or conflict with)
asserted rights of others with respect to any of such intellectual
property which, if any such assertions of infringement or conflict were
sustained, individually or in the aggregate, would have a Material Adverse
Effect;
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<PAGE> 10
(ff) Except as described in the Offering Circular, the Issuers, the
Guarantor and their subsidiaries have obtained all consents, approvals,
orders, certificates, licenses, permits, franchises and other
authorizations of and from, and have made all declarations and filings
with, all governmental and regulatory authorities (including, without
limitation, the FCC), all self-regulatory organizations and all courts and
other tribunals legally necessary to own, lease, license and use their
respective properties and assets and to conduct their respective
businesses in the manner described in the Offering Circular, except to the
extent that the failure to so obtain or file, individually or in the
aggregate, would not have a Material Adverse Effect;
(gg) The Issuers, the Guarantor and their subsidiaries have filed
all necessary federal, state and foreign income and franchise tax returns
required to be filed as of the date hereof, except where the failure to so
file such returns would not result, individually or in the aggregate, in a
Material Adverse Effect, and have paid all taxes shown as due thereon; and
there is no tax deficiency that has been asserted against the Issuers, the
Guarantor or any of their subsidiaries that could reasonably be expected
to result, individually or in the aggregate, in a Material Adverse Effect;
(hh) The Issuers, the Guarantor and their subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (A) transactions are executed in accordance with
management's general or specific authorization; (B) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
accountability for assets; (C) access to assets is permitted only in
accordance with management's general or specific authorization; and (D)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences; and
(ii) Each of the franchises held by the Issuers, the Guarantor and
their subsidiaries that are material to the Issuers, the Guarantor and
their subsidiaries taken as a whole is in full force and effect, with no
material restrictions or qualifications; such franchises constitute all of
the franchises necessary for the Issuers and the Guarantor to conduct
their business in the manner and to the full extent now operated and as
described in the Offering Circular; and to the best knowledge of the
Issuers and the Guarantor, no event has occurred which permits, or with
notice or lapse of time or both would permit, the revocation or
non-renewal of any franchises, assuming the filing of timely renewal
applications and the timely payment of all applicable filing and
regulatory fees to the applicable franchising authority, or which might
result, individually or in the aggregate, in any other material impairment
of the rights of the Issuers, the Guarantor and their subsidiaries in the
franchises. Except as described in the Offering Circular, the Issuers and
the Guarantor have no reason to believe that any franchise that is
required for the operation of the Issuers, the Guarantor and their
subsidiaries will not be renewed in the ordinary course.
2. (a) Subject to the terms and conditions herein set forth, the
Issuers agree to issue and sell to each of the Purchasers, and each of the
Purchasers agrees, severally and not jointly, to purchase from the Issuers, at a
purchase price of 97.733% of the principal amount thereof, plus accrued
interest, if any, from March 17, 1999 to the Time of Delivery
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<PAGE> 11
hereunder, the principal amount of Eight-Year Senior Notes set forth opposite
the name of such Purchaser in Schedule I hereto.
(b) Subject to the terms and conditions herein set forth, the
Issuers agree to issue and sell to each of the Purchasers, and each of the
Purchasers agrees, severally and not jointly, to purchase from the Issuers, at a
purchase price of 97.695 % of the principal amount thereof, plus accrued
interest, if any, from March 17, 1999 to the Time of Delivery hereunder, the
principal amount of Ten-Year Senior Notes set forth opposite the name of such
Purchaser in Schedule I hereto.
(c) Subject to the terms and conditions herein set forth, the
Issuers agree to issue and sell to each of the Purchasers, and each of the
Purchasers agrees, severally and not jointly, to purchase from the Issuers, at a
purchase price of 60.0126% of the principal amount at maturity thereof, plus
accretion, if any, from March 17, 1999 to the Time of Delivery hereunder, the
principal amount at maturity of Senior Discount Notes set forth opposite the
name of such Purchaser in Schedule I hereto.
3. Upon the authorization by you of the release of the Securities,
the several Purchasers propose to offer the Securities for sale upon the terms
and conditions set forth in this Agreement and the Offering Circular and each
Purchaser hereby represents and warrants to, and agrees with the Issuers that:
(a) It will offer and sell the Securities only: (i) to persons who
it reasonably believes are "qualified institutional buyers" ("QIBs")
within the meaning of Rule 144A under the Act in transactions meeting the
requirements of Rule 144A or (ii) upon the terms and conditions set forth
in Annex I to this Agreement;
(b) It is a QIB; and
(c) It has not offered and will not offer or sell the Securities by
any form of general solicitation or general advertising, including but not
limited to the methods described in Rule 502(c) under the Act.
4. (a) The Securities to be purchased by each Purchaser hereunder
will be represented by definitive global Securities in book-entry form which
will be deposited by or on behalf of the Issuers with The Depository Trust
Company ("DTC") or its designated custodian. The Issuers will deliver the
Securities to Goldman, Sachs & Co., for the account of each Purchaser, against
payment by or on behalf of such Purchaser of the purchase price therefor by wire
transfer of same day funds wired in accordance with the written instructions of
the Company, by causing DTC to credit the Securities to the account of Goldman,
Sachs & Co. at DTC. The Issuers will cause the certificates representing the
Securities to be made available to Goldman, Sachs & Co. for checking at least
twenty-four hours prior to the Time of Delivery (as defined below) at the office
of DTC or its designated custodian (the "Designated Office"). The time and date
of such delivery and payment shall be 9:30 a.m., New York City time, on March
17, 1999 or such other time and date as Goldman, Sachs & Co. and the Issuers may
agree upon in writing. Such time and date are herein called the "Time of
Delivery."
(b) The documents to be delivered at the Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the
cross-receipt for the Securities
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<PAGE> 12
and any additional documents requested by the Purchasers pursuant to Section
7(h) hereof, will be delivered at such time and date at the offices of Cahill
Gordon & Reindel, 80 Pine Street, New York, New York 10005 or such other
location as the parties mutually agree (the "Closing Location"), and the
Securities will be delivered at the Designated Office, all at the Time of
Delivery. A meeting will be held at the Closing Location at 3 p.m., New York
City time, on the New York Business Day next preceding the Time of Delivery, at
which meeting the final drafts of the documents to be delivered pursuant to the
preceding sentence will be available for review by the parties hereto. For the
purposes of this Section 4, "New York Business Day" shall mean each Monday,
Tuesday, Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. Each of the Issuers and the Guarantor agree with each of the
Purchasers:
(a) To prepare the Offering Circular in a form approved by you; to
make no amendment or any supplement to the Offering Circular which shall
be disapproved by you promptly after reasonable notice thereof; and to
furnish you with copies thereof;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities for offering and sale under
the securities laws of such jurisdictions as you may request and to comply
with such laws so as to permit the continuance of sales and dealings
therein in such jurisdictions for as long as may be necessary to complete
the distribution of the Securities, provided that in connection therewith
neither the Issuers nor the Guarantor shall be required to qualify as a
foreign corporation or limited liability company, as the case may be, or
to file a general consent to service of process in any jurisdiction;
(c) To furnish the Purchasers with copies of the Offering Circular
and each amendment or supplement thereto signed by an authorized officer
of each of the Issuers and the Guarantor with the independent accountants'
report(s) in the Offering Circular, and any amendment or supplement
containing amendments to the financial statements covered by such
report(s), signed by the accountants, and additional copies thereof in
such quantities as you may from time to time reasonably request, and if,
at any time prior to the expiration of nine months after the date of the
Offering Circular, any event shall have occurred as a result of which the
Offering Circular as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances
under which they were made when such Offering Circular is delivered, not
misleading, or, if for any other reason it shall be necessary or desirable
during such same period to amend or supplement the Offering Circular, to
notify you and upon your request to prepare and furnish without charge to
each Purchaser and to any dealer in securities as many copies as you may
from time to time reasonably request of an amended Offering Circular or a
supplement to the Offering Circular which will correct such statement or
omission or effect such compliance;
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<PAGE> 13
(d) During the period beginning from the date hereof and continuing
until the date six months after the Time of Delivery, not to offer, sell,
contract to sell or otherwise dispose of, except as provided hereunder,
any securities of the Issuers or the Guarantor that are substantially
similar to the Securities;
(e) Not to be or become, at any time prior to the expiration of two
years after the Time of Delivery, an open-end investment company, unit
investment trust, closed-end investment company or face-amount certificate
company that is or is required to be registered under Section 8 of the
Investment Issuers Act;
(f) At any time when the Issuers or the Guarantor is not subject to
Section 13 or 15(d) of the Exchange Act, for the benefit of holders from
time to time of Securities, to furnish at its expense, upon request, to
holders of Securities and prospective purchasers of securities information
(the "Additional Issuer Information") satisfying the requirements of
subsection (d)(4)(i) of Rule 144A under the Act;
(g) To use its best efforts to cause the Securities to be eligible
for the PORTAL trading system of the NASD;
(h) To furnish to the holders of the Securities as soon as
practicable after the end of each fiscal year an annual report (including
a balance sheet and statements of income, members' or stockholders' equity
and cash flows of the Issuers and the Guarantor and their consolidated
subsidiaries certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the date of
the Offering Circular), to make available to holders of the Securities
consolidated summary financial information of the Issuers, the Guarantor
and their subsidiaries for such quarter in reasonable detail;
(i) During a period of three years from the date of the Offering
Circular, to furnish to you copies of all reports or other communications
(financial or other) furnished to holders of ownership interests of the
Issuers and the Guarantor for which the Issuers and the Guarantor
otherwise would be required to file Form 8-K under the Exchange Act if
they were subject to the reporting requirements of the Exchange Act and to
deliver to you (i) as soon as they are available, copies of any reports
and financial statements furnished to or filed with the Commission or any
securities exchange on which the Securities or any class of securities of
the Issuers or the Guarantor is listed; and (ii) such additional
information concerning the business and financial condition of the Issuers
and the Guarantor as you may from time to time reasonably request (such
financial statements to be on a consolidated basis to the extent the
accounts of the Issuers, the Guarantor and their subsidiaries are
consolidated in reports furnished to the holders of their ownership
interests generally or to the Commission);
(j) During the period of two years after the Time of Delivery, none
of the Issuers or the Guarantor will, and none will permit any of its
"affiliates" (as defined in Rule 144 under the Act) to, resell any of the
Securities which constitute "restricted securities" under Rule 144 that
have been reacquired by any of them;
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<PAGE> 14
(k) To use the net proceeds received by it from the sale of the
Securities pursuant to this Agreement in the manner specified in the
Offering Circular under the caption "Use of Proceeds"; and
(l) If the Marcus Combination has not been consummated on or prior
to the Closing Date, then the Issuers and the Guarantor will take all
commercially reasonable actions necessary to consummate the Marcus
Combination as soon as is reasonably practicable thereafter.
6. Each of the Issuers and the Guarantor covenants and agrees with
the several Purchasers that the Issuers and the Guarantor will pay or cause to
be paid the following: (i) the fees, disbursements and expenses of the Issuers'
and the Guarantor's counsel and accountants in connection with the issue of the
Securities and all other expenses in connection with the preparation, printing
and filing of the Preliminary Offering Circular and the Offering Circular and
any amendments and supplements thereto and the mailing and delivering of copies
thereof to the Purchasers and dealers; (ii) the cost of printing or producing
any Agreement among Purchasers, this Agreement, the Indentures, the Registration
Rights Agreements, the Pledge Documents, the Blue Sky and Legal Investment
Memoranda, closing documents (including any compilations thereof) and any other
documents in connection with the offering, purchase, sale and delivery of the
Securities; (iii) all expenses in connection with the qualification of the
Securities for offering and sale under state securities laws as provided in
Section 5(b) hereof, including the fees and disbursements of counsel for the
Purchasers in connection with such qualification and in connection with the Blue
Sky and legal investment surveys; (iv) any fees charged by securities rating
services for rating the Securities; (v) the cost of preparing the Securities;
(vi) the fees and expenses of the Trustee and any agent of the Trustee and the
fees and disbursements of counsel for the Trustee in connection with the
Indentures and the Securities; (vii) any cost incurred in connection with the
designation of the Securities for trading in PORTAL; and (viii) all other costs
and expenses incident to the performance of its obligations hereunder which are
not otherwise specifically provided for in this Section. It is understood,
however, that, except as provided in this Section, and Sections 8 and 11 hereof,
the Purchasers will pay all of their own costs and expenses, including the fees
of their counsel, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Purchasers hereunder shall be subject, in
their discretion, to the condition that all representations and warranties and
other statements of the Issuers and the Guarantor herein are, at and as of the
Time of Delivery, true and correct, the condition that the Issuers and the
Guarantor shall have performed all of their obligations hereunder theretofore to
be performed, and the following additional conditions:
(a) Cahill Gordon & Reindel, counsel for the Purchasers, shall have
furnished to you such opinion or opinions, dated the Time of Delivery,
with respect to such matters as you may reasonably request.
(b) Paul, Hastings, Janofsky & Walker LLP, counsel for the Issuers,
shall have furnished to you their written opinion, dated the Time of
Delivery, in form and substance satisfactory to you, to the effect that:
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<PAGE> 15
(i) The Company has been duly formed and is validly existing
as a limited liability company in good standing under the laws of
the State of Delaware, and Charter Capital has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the State of Delaware; each of the
Issuers has the organizational power and authority to own its
properties and conduct its business as described in the Offering
Circular;
(ii) Each of the subsidiaries of the Issuers (other than
Charter Capital) listed on Schedule A attached to such counsel's
opinion (the "Charter Subsidiaries") has been duly incorporated or
formed, as the case may be, and is validly existing as a corporation
or limited liability company, as the case may be, in good standing
under the laws of its jurisdiction of formation;
(iii) To the best of such counsel's knowledge and other than
as set forth in the Offering Circular, there are no legal or
governmental proceedings pending to which the Issuers or any of the
Charter Subsidiaries is a party or of which any property of the
Issuers or any of the Charter Subsidiaries is the subject which, if
determined adversely to the Issuers or any of the Charter
Subsidiaries, would individually or in the aggregate have a Material
Adverse Effect; and, to the best of such counsel's knowledge and
other than as set forth in the Offering Circular, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(iv) This Agreement has been duly authorized, executed and
delivered by the Issuers;
(v) The Notes have been duly authorized by the Issuers, and,
when executed and authenticated in accordance with the provisions of
the Indentures and delivered to and paid for by the Purchasers in
accordance with the terms of this Agreement, will be valid and
legally binding obligations of the Issuers, entitled to the benefits
provided by the Indentures and enforceable against the Issuers in
accordance with their terms, subject, as to enforcement, to
applicable bankruptcy, reorganization, insolvency or other similar
laws affecting creditors' rights generally and to general equity
principles;
(vi) Assuming the Guarantees have been duly authorized by the
Guarantor, the Guarantees, when the Notes are executed by the
Issuers and authenticated by the Trustee in accordance with the
provisions of the Indentures (assuming the due authorization,
execution and delivery thereof by the Trustee) and, in the case of
the Notes, delivered to and paid for by the Purchasers in accordance
with this Agreement, will constitute a legal, valid and binding
obligation of the Guarantor entitled to the benefits provided by the
Indentures and enforceable against the Guarantor in accordance with
their terms, subject, as to enforcement, to applicable bankruptcy,
reorganization, insolvency or other similar laws affecting
creditors' rights generally and to general equity principles;
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<PAGE> 16
(vii) Assuming the Mirror Note has been duly authorized and
executed by the Guarantor, the Mirror Note will constitute a legal,
valid and binding obligation of the Guarantor entitled to the
benefits provided by the Mirror Note and enforceable against the
Guarantor in accordance with its terms, subject, as to enforcement,
to applicable bankruptcy, reorganization, insolvency or other
similar laws affecting creditors' rights generally and to general
equity principles;
(viii) The Company Pledge Agreement has been duly authorized
and executed by the Company. The Company Pledge Agreement, together
with the delivery of the Mirror Note to the Trustee in the State of
New York, will create in favor of the Trustee a valid and perfected
security interest therein as security for the Secured Obligations
(as defined in the Company Pledge Agreement). Assuming that the
Trustee took delivery of the Mirror Note without notice of any
adverse claim (within the meaning of the Uniform Commercial Code as
in effect in the State of New York as of the date hereof (the
"UCC")), the Trustee will acquire its interest in the Mirror Note
free of any adverse claim;
(ix) The Guarantor Pledge Agreement, together with the
delivery of the certificates evidencing membership interests of
Marcus Cable Company, L.L.C., duly endorsed in the name of the
Company or in blank (or accompanied by a document of assignment duly
executed in the name of the Company or in blank), to the Company in
the State of New York, will create in favor of the Company a valid
and perfected security interest therein as security for the Secured
Obligations (as defined in the Guarantor Pledge Agreement). Assuming
that the Company took delivery of such certificates without notice
of any adverse claim (within the meaning of the UCC), the Company
will acquire its interest in such certificates free of any adverse
claim;
(x) The Indentures have been duly authorized, executed and
delivered by the Issuers and (assuming the due authorization,
execution and delivery by the Guarantor and the due execution and
delivery thereof by the Trustee) constitute valid and legally
binding instruments, enforceable against the Issuers and the
Guarantor in accordance with their terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general equity principles;
(xi) The Registration Rights Agreements have been duly
authorized, executed and delivered by the Issuers and (assuming the
due authorization, execution and delivery by the Guarantor and the
due execution and delivery thereof by the Purchasers) constitute
valid and legally binding instruments, enforceable against the
Issuers and the Guarantor in accordance with their terms, except
that (A) the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to creditors' rights and (ii) general principles of equity,
and (B) any rights to indemnity or contribution thereunder may be
limited by federal and state securities laws and public policy
considerations;
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<PAGE> 17
(xii) The Exchange Notes have been duly authorized by the
Issuers and (assuming the due authorization by the Guarantor), when
executed, authenticated, issued and delivered in accordance with the
Indentures and the Registration Rights Agreements (assuming the due
authorization, execution and delivery of the Indentures by the
Trustee), will constitute valid and legally binding instruments,
entitled to the benefits provided by the Indentures under which they
are to be issued, and enforceable against the Issuers in accordance
with their terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles;
(xiii) The Securities, the Exchange Notes, the Indentures, the
Registration Rights Agreements and the Pledge Documents conform in
all material respects to the descriptions thereof in the Offering
Circular;
(xiv) The issue and sale of the Securities and the compliance
by the Issuers with all of the provisions of the Securities, the
Indentures, the Registration Rights Agreements, the Pledge Documents
and this Agreement and the consummation of the transactions herein
and therein contemplated will not, to the best of our knowledge,
result in a breach or violation of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust, loan agreement, lease, license, permit or other agreement or
instrument specifically identified to such counsel by the Issuers as
material to the Issuers on a schedule, nor do any such actions
result in any violation of the provisions of the charter or by-laws
(or other organizational document) of the Issuers or any Federal or
New York State statute or any order, rule or regulation of any
Federal or New York State court or governmental agency or body
having jurisdiction over the Issuers or any of the Charter
Subsidiaries or any of their properties;
(xv) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or
body is required for the issue and sale of the Securities or the
consummation by the Issuers of the transactions contemplated by this
Agreement, the Indentures, the Registration Rights Agreements or the
Pledge Documents, except such consents, approvals, authorizations,
registrations or qualifications as have been obtained or as may be
required under state securities or Blue Sky laws in connection with
the purchase and distribution of the Securities by the Purchasers;
(xvi) The statements set forth in the Offering Circular under
the caption "Description of Notes," insofar as they purport to
constitute a summary of the terms of the Securities, and under the
captions "Certain Relationships and Related Transactions --
Management Agreements -- Management Agreements Relating to the
Charter Companies and -- The New Management Agreement," "Description
of the Credit Facilities" and "Certain Federal Tax Considerations,"
insofar as they purport to describe the provisions of the laws and
documents referred to therein, fairly summarize the provisions of
any such laws and documents in all material respects;
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<PAGE> 18
(xvii) Assuming the accuracy of the representations and
warranties of the Issuers and the Guarantor contained in Sections
1(y) and (z) of this Agreement and the representations and
warranties of the Purchasers contained in Section 3 of this
Agreement, no registration of the Securities under the Act, and no
qualification of an indenture under the United States Trust
Indenture Act of 1939 with respect thereto, is required for the
offer, sale and initial resale of the Securities by the Purchasers
in the manner contemplated by this Agreement; and
(xviii) Neither of the Issuers is an "investment company," as
such term is defined in the Investment Company Act.
Such opinion shall also state that such counsel has no reason to
believe that the Offering Circular and any further amendments or
supplements thereto made by the Issuers prior to the Time of Delivery
(other than the financial statements therein, as to which such counsel
need express no opinion) contained as of its date or contains as of the
Time of Delivery an untrue statement of a material fact or omitted or
omits, as the case may be, to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(c) Cole, Raywid & Braverman, L.L.P., special communications counsel
to the Issuers and the Guarantor, shall have furnished to you their
written opinion, dated the Time of Delivery, in form and substance
reasonably satisfactory to you, to the effect that:
(i) The issue and sale of the Securities and the compliance by
the Issuers and the Guarantor with all of the provisions of the
Securities, the Indentures, the Registration Rights Agreements, the
Pledge Documents and this Agreement and the consummation of the
transactions herein and therein contemplated do not and will not
contravene the Cable Acts or any order, rule or regulation of the
FCC, having jurisdiction over the Issuers and the Guarantor or any
of their subsidiaries or over any of their property;
(ii) To the best of such counsel's knowledge, no consent,
approval, authorization or order of, or registration, qualification
or filing with, any court or regulatory authority or other
governmental agency or instrumentality is required under the Cable
Acts or any order, rule or regulation of the FCC in connection with
the issue and sale of the Securities and the compliance by the
Issuers and the Guarantor with all of the provisions of the
Securities, the Indentures, the Registration Rights Agreements, the
Pledge Documents and this Agreement and the consummation of the
transactions herein and therein contemplated;
(iii) The statements set forth in the Offering Circular under
the captions "Risk Factors -- Risks Associated with Regulation of
the Cable Industry" and "Regulation and Legislation," insofar as
they constitute summaries of laws referred to therein, including the
Cable Acts and the published rules, regula-
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<PAGE> 19
tions and policies promulgated by the FCC thereunder, fairly
summarize the matters described therein;
(iv) To the knowledge of such counsel based solely upon its
review of publicly available records of the FCC and operational
information provided by the Company's management, the Company, the
Guarantor and their subsidiaries hold all FCC licenses for Cable
Antennae Relay Services necessary to conduct the business of the
Company, the Guarantor and their subsidiaries as currently
conducted, except to the extent the failure to hold such FCC
licenses would not, individually or in the aggregate, be reasonably
expected to have a Material Adverse Effect;
(v) To the knowledge of such counsel based solely upon its
review of publicly available records of the FCC and operational
information provided by the Company's management, during the time
the cable systems of the Company and its subsidiaries have been
owned by the Company and its subsidiaries and except for those
systems previously owned or controlled by the Guarantor, all
registration statements have been filed with the FCC; all
frequencies within the restricted aeronautical and navigational
bands (i.e., 108-136 and 225-400 MHz) which are currently being used
in connection with the operation of the cable systems of the Company
and its subsidiaries have been authorized for such use by the FCC
except to the extent failure to have such authorization would not,
individually or in the aggregate, be reasonably expected to have a
Material Adverse Effect; and each of the cable systems of the
Company and its subsidiaries subject to EEO compliance certification
by the FCC has been certified by the FCC for annual EEO compliance
during the time such cable systems of the Company and its
subsidiaries have been owned by the Company and its subsidiaries;
except for 1998 EEO filings, for which EEO certification is still
pending, and except to the extent failure to have such certification
would not, individually or in the aggregate, be reasonably expected
to have a Materially Adverse Effect; and
(vi) Except as disclosed in the Offering Circular and except
with respect to rate regulation matters, and general rulemakings and
similar matters relating generally to the cable television industry,
to such counsel's knowledge, based solely upon its review of the
publicly available records of the FCC and upon inquiry of the
Company's, the Guarantor's and their subsidiaries' management,
during the time the cable systems of the Company, the Guarantor and
their subsidiaries have been owned by the Company, the Guarantor and
their subsidiaries (A) there has been no adverse FCC judgment, order
or decree issued by the FCC relating to the ongoing operations of
any of the Company, the Guarantor or one of their subsidiaries that
has had or could reasonably be expected to have a Material Adverse
Effect; and (B) there are no actions, suits, proceedings, inquiries
or investigations by or before the FCC pending or threatened in
writing against or specifically affecting the Company, the Guarantor
or any of their subsidiaries or any cable system of the Company, the
Guarantor or any of their subsidiaries which could, individually or
in the aggregate, be reasonably expected to result in a Material
Adverse Effect.
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<PAGE> 20
(d) Irell & Manella LLP, counsel for the Guarantor, shall have
furnished to you their written opinion, dated the Time of Delivery, in
form and substance satisfactory to you, to the effect that:
(i) The Guarantor has been duly formed and is validly existing
as a limited liability company in good standing under the laws of
the State of Delaware; the Guarantor has the organizational power
and authority to own its properties and conduct its business as
described in the Offering Circular;
(ii) Each of the subsidiaries of the Guarantor listed on
Schedule A attached to such counsel's opinion (the "Marcus
Subsidiaries") has been duly incorporated or formed, as the case may
be, and is validly existing as a corporation or limited liability
company, as the case may be, in good standing under the laws of its
jurisdiction of formation;
(iii) To the best of such counsel's knowledge and other than
as set forth in the Offering Circular, there are no legal or
governmental proceedings pending to which the Guarantor or any of
the Marcus Subsidiaries is a party or of which any property of the
Guarantor or any of the Marcus Subsidiaries is the subject which, if
determined adversely to the Guarantor or any of the Marcus
Subsidiaries, would individually or in the aggregate have a Material
Adverse Effect; and, to the best of such counsel's knowledge and
other than as set forth in the Offering Circular, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(iv) This Agreement has been duly authorized, executed and
delivered by the Guarantor;
(v) The Guarantees have been duly authorized by the Guarantor;
(vi) The Indentures have been duly authorized, executed and
delivered by the Guarantor;
(vii) The Registration Rights Agreements have been duly
authorized, executed and delivered by the Guarantor;
(viii) The Exchange Notes have been duly authorized by the
Guarantor;
(ix) The Mirror Note has been duly authorized, executed and
delivered by the Guarantor;
(x) The Guarantor Pledge Agreement has been duly authorized
and executed by the Guarantor;
(xi) The issue and sale of the Securities and the compliance
by the Guarantor with all of the provisions of the Securities, the
Indentures, the Registration Rights Agreements, the Pledge Documents
and this Agreement and the consummation of the transactions herein
and therein contemplated will not, to the best of such counsel's
knowledge, result in a breach or violation of any
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<PAGE> 21
of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement, lease, license,
permit or other agreement or instrument specifically identified to
such counsel by the Guarantor as material to the Guarantor, nor do
any such actions result in any violation of the provisions of the
Charter or by-laws (or other organizational document) of the
Guarantor or any Federal or California State statute or any order,
rule or regulation of any Federal or California State court or
governmental agency or body having jurisdiction over the Guarantor
or any of the Marcus Subsidiaries or any of their properties;
(xii) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency or
body is required for the consummation by the Guarantor of the
transactions contemplated by this Agreement, the Indentures, the
Registration Rights Agreements or the Pledge Documents, except such
consents, approvals, authorizations, registrations or qualifications
as have been obtained or as may be required under state securities
or Blue Sky laws in connection with the purchase and distribution of
the Securities by the Purchasers;
(xiii) The statements set forth in the Offering Circular under
the caption "Certain Relationships and Related Transactions --
Management Agreements -- Management Agreement Relating to the Marcus
Companies," insofar as they purport to describe the documents
referred to therein, fairly summarize the provisions of such
documents in all material respects; and
(xiv) The Guarantor is not an "investment company," as such
term is defined in the Investment Company Act.
(e) Curtis Shaw, Esq., General Counsel of Charter Communications,
Inc., shall have furnished to you his written opinion, dated the Time of
Delivery, in form and substance satisfactory to you, to the effect that:
(i) All of the outstanding ownership interests of the Issuers
have been duly and validly authorized and issued and, assuming
receipt by the Issuers of the requisite consideration therefor, are
fully paid and non-assessable;
(ii) The Issuers and their subsidiaries have been duly
qualified as a foreign corporation or limited liability company, as
the case may be, in those jurisdictions set forth in a schedule to
such counsel's opinion; and
(iii) All of the outstanding ownership interests of each
subsidiary of the Issuers (other than Charter Capital) have been
duly and validly authorized and issued and, assuming receipt by the
Issuers of the requisite consideration therefor, are fully paid and
non-assessable.
(f) On the date of the Offering Circular prior to the execution of
this Agreement and also at the Time of Delivery, each of Arthur Andersen
LLP, KPMG LLP and Ernst & Young LLP shall have furnished to you a letter
or letters, dated the respective dates of delivery thereof, in form and
substance satisfactory to you.
-21-
<PAGE> 22
(g) (i) None of the Issuers, the Guarantor or any of their
subsidiaries shall have sustained since the date of the latest audited
financial statements included in the Offering Circular any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, otherwise than as set forth
or contemplated in the Offering Circular, and (ii) since the respective
dates as of which information is given in the Offering Circular there
shall not have been any change in the capital stock or long-term debt of
the Issuers, the Guarantor or any of their subsidiaries or any change, or
any development involving a prospective change, in or affecting the
general affairs, management, financial position, stockholders' equity or
results of operations of the Issuers, the Guarantor and their
subsidiaries, otherwise than as set forth or contemplated in the Offering
Circular, the effect of which, in any such case described in clause (i) or
(ii), is in the judgment of the Purchasers so material and adverse as to
make it impracticable or inadvisable to proceed with the public offering
or the delivery of the Securities on the terms and in the manner
contemplated in this Agreement and in the Offering Circular.
(h) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the debt securities of either of the
Issuers or the Guarantor by any "nationally recognized statistical rating
organization," as that term is defined by the Commission for purposes of
Rule 436(g)(2) under the Act, and (ii) no such organization shall have
publicly announced that it has under surveillance or review, with possible
negative implications, its rating of any of the debt securities of either
of the Issuers or the Guarantor.
(i) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a general
moratorium on commercial banking activities declared by either Federal or
New York State authorities; (iii) the outbreak or escalation of
hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event
specified in this clause (iii) in the judgment of the Purchasers makes it
impracticable or inadvisable to proceed with the offering or the delivery
of the Securities on the terms and in the manner contemplated in the
Offering Circular; or (iv) the occurrence of any material adverse change
in the existing financial, political or economic conditions in the United
States or elsewhere, which in the judgment of the Purchasers, would
materially and adversely affect the financial markets or the market for
the Securities and other debt securities.
(j) The Securities shall have been designated for trading on PORTAL.
(k) The Issuers and the Guarantor shall have furnished or caused to
be furnished to you at the Time of Delivery certificates of officers of
each of the Issuers and the Guarantor satisfactory to you as to the
accuracy of the representations and warranties of the Issuers and the
Guarantor herein at and as of such Time of Delivery, as to the performance
by the Issuers and the Guarantor of all of their obligations hereunder to
be performed at or prior to such Time of Delivery, as to the matters set
forth in subsections (g) and (h) of this Section and as to such other
matters as you may reasonably request.
-22-
<PAGE> 23
8. (a) The Issuers and the Guarantor, jointly and severally, will
indemnify and hold harmless each Purchaser against any losses, claims, damages
or liabilities, joint or several, to which such Purchaser may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Circular or the Offering Circular, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact necessary to make the statements
therein not misleading, and will reimburse each Purchaser for any legal or other
expenses reasonably incurred by such Purchaser in connection with investigating
or defending any such action or claim as such expenses are incurred; provided,
however, that the Issuers and the Guarantor shall not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Offering Circular or the Offering
Circular or any such amendment or supplement in reliance upon and in conformity
with written information furnished to the Issuers by any Purchaser through
Goldman, Sachs & Co. expressly for use therein.
(b) The Purchasers, severally and not jointly, will indemnify and
hold harmless the Issuers and the Guarantor against any losses, claims, damages
or liabilities to which the Issuers and the Guarantor may become subject, under
the Act or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an untrue statement
or alleged untrue statement of a material fact contained in any Preliminary
Offering Circular or the Offering Circular, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent, that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in any Preliminary Offering Circular or the Offering Circular or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Issuers by such Purchaser through Goldman, Sachs &
Co. expressly for use therein; and will reimburse the Issuers and the Guarantor
for any legal or other expenses reasonably incurred by the Issuers and the
Guarantor in connection with investigating or defending any such action or claim
as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
-23-
<PAGE> 24
than reasonable costs of investigation. Any indemnifying party shall not, in
connection with any one action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) for all indemnified
parties. The Issuers and the Guarantor shall not be required to indemnify the
Purchasers for any amounts paid or payable by the Purchasers in the settlement
of any action, proceeding or investigation without the written consent of the
Company, which consent shall not be unreasonably withheld. No indemnifying party
shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to, or an admission of, fault,
culpability or a failure to act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Issuers and the Guarantor on the one hand and
the Purchasers on the other from the offering of the Securities. If, however,
the allocation provided by the immediately preceding sentence is not permitted
by applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Issuers and the Guarantor on the one hand and the Purchasers on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions in respect thereof), as well
as any other relevant equitable considerations. The relative benefits received
by the Issuers and the Guarantor on the one hand and the Purchasers on the other
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Issuers and the Guarantor
bear to the total underwriting discounts and commissions received by the
Purchasers, in each case as set forth in the Offering Circular. The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the Issuers
and the Guarantor on the one hand or the Purchasers on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Issuers, the Guarantor and
the Purchasers agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this
-24-
<PAGE> 25
subsection (d), no Purchaser shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities
underwritten by it and distributed to investors were offered to investors
exceeds the amount of any damages which such Purchaser has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. The Purchasers' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Issuers and the Guarantor under this
Section 8 shall be in addition to any liability which the Issuers and the
Guarantor may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Purchaser within the
meaning of the Act; and the obligations of the Purchasers under this Section 8
shall be in addition to any liability which the respective Purchasers may
otherwise have and shall extend, upon the same terms and conditions, to each
officer and director of the Issuers and the Guarantor and to each person, if
any, who controls the Issuers and the Guarantor within the meaning of the Act.
9. (a) If any Purchaser shall default in its obligation to purchase
the Securities which it has agreed to purchase hereunder, you may in your
discretion arrange for you or another party or other parties to purchase such
Securities on the terms contained herein. If within thirty-six hours after such
default by any Purchaser you do not arrange for the purchase of such Securities,
then the Issuers and the Guarantor shall be entitled to a further period of
thirty-six hours within which to procure another party or other parties
satisfactory to you to purchase such Securities on such terms. In the event
that, within the respective prescribed periods, you notify the Issuers that you
have so arranged for the purchase of such Securities, or the Issuers and the
Guarantor notify you that they have so arranged for the purchase of such
Securities, you or the Issuers and the Guarantor shall have the right to
postpone the Time of Delivery for a period of not more than seven days, in order
to effect whatever changes may thereby be made necessary in the Offering
Circular, or in any other documents or arrangements, and the Issuers and the
Guarantor agree to prepare promptly any amendments to the Offering Circular
which in your opinion may thereby be made necessary. The term "Purchaser" as
used in this Agreement shall include any person substituted under this Section
with like effect as if such person had originally been a party to this Agreement
with respect to such Securities.
(b) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Purchaser or Purchasers by you and the Issuers
and the Guarantor as provided in subsection (a) above, the aggregate principal
amount of such Securities which remains unpurchased does not exceed one-tenth of
the aggregate principal amount of all the Securities, then the Issuers and the
Guarantor shall have the right to require each non-defaulting Purchaser to
purchase the principal amount of Securities which such Purchaser agreed to
purchase hereunder and, in addition, to require each non-defaulting Purchaser to
purchase its pro rata share (based on the principal amount of Securities which
such Purchaser agreed to purchase hereunder) of the Securities of such
defaulting Purchaser or Purchasers for which such arrangements have not been
made; but nothing herein shall relieve a defaulting Purchaser from liability for
its default.
(c) If, after giving effect to any arrangements for the purchase of
the Securities of a defaulting Purchaser or Purchasers by you and the Issuers
and the Guarantor as pro-
-25-
<PAGE> 26
vided in subsection (a) above, the aggregate principal amount of Securities
which remains unpurchased exceeds one-tenth of the aggregate principal amount of
all the Securities, or if the Issuers and the Guarantor shall not exercise the
right described in subsection (b) above to require non-defaulting Purchasers to
purchase Securities of a defaulting Purchaser or Purchasers, then this Agreement
shall thereupon terminate, without liability on the part of any non-defaulting
Purchaser or the Issuers and the Guarantor, except for the expenses to be borne
by the Issuers, the Guarantor and the Purchasers as provided in Section 6 hereof
and the indemnity and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Purchaser from liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Issuers, the Guarantor and the several
Purchasers, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Purchaser or any controlling person of any
Purchaser, or the Issuers and the Guarantor, or any officer or director or
controlling person of the Issuers or the Guarantor, and shall survive delivery
of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, the Issuers and the Guarantor shall not then be under any liability to
any Purchaser except as provided in Sections 6 and 8 hereof; but, if for any
other reason other than a termination pursuant to Section 7(i), the Securities
are not delivered by or on behalf of the Issuers and the Guarantor as provided
herein, the Issuers and the Guarantor will reimburse the Purchasers through you
for all out-of-pocket expenses approved in writing by you, including fees and
disbursements of counsel, reasonably incurred by the Purchasers in making
preparations for the purchase, sale and delivery of the Securities, but the
Issuers and the Guarantor shall then be under no further liability to any
Purchaser except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of
the Purchasers, and the parties hereto shall be entitled to act and rely upon
any statement, request, notice or agreement on behalf of any Purchaser made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as Purchasers.
All statements, requests, notices and agreements hereunder shall be
in writing, and if to the Purchasers shall be delivered or sent by mail, telex
or facsimile transmission to you as Purchasers in care of Goldman, Sachs & Co.,
32 Old Slip, 9th Floor, New York, New York 10005, Attention: Registration
Department; and if to the Issuers or the Guarantors shall be delivered or sent
by mail, telex or facsimile transmission to the address of the Issuers and the
Guarantor set forth in the Offering Circular, Attention: Secretary; provided,
however, that any notice to a Purchaser pursuant to Section 8(c) hereof shall be
delivered or sent by mail, telex or facsimile transmission to such Purchaser at
its address set forth in its Purchasers' Questionnaire, or telex constituting
such Questionnaire, which address will be supplied to the Issuers and the
Guarantor by you upon request. Any such statements, requests, notices or
agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Purchasers, the Issuers, the Guarantor and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Issuers,
the Guarantor and the Purchasers and each
-26-
<PAGE> 27
person who controls the Issuers, the Guarantor or any Purchaser, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Securities from any Purchaser shall be
deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York without giving effect to the principles
of conflicts of law thereof.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such respective counterparts shall together constitute one and
the same instrument.
If the foregoing is in accordance with your understanding, please
sign and return to us counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Purchasers, this letter and such acceptance hereof
shall constitute a binding agreement between each of the Purchasers, the Issuers
and the Guarantor. It is understood that your acceptance of this letter on
behalf of each of the Purchasers is pursuant to the authority set forth in a
form of Agreement among Purchasers, the form of which shall be submitted to the
Issuers and the Guarantor for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
-27-
<PAGE> 28
Very truly yours,
CHARTER COMMUNICATIONS HOLDINGS, LLC
By: /s/ ELOISE ENGMAN
-------------------------------------
Name: Eloise Engman
Title: Vice President
CHARTER COMMUNICATIONS HOLDINGS
CAPITAL CORPORATION
By: /s/ ELOISE ENGMAN
-------------------------------------
Name: Eloise Engman
Title: Vice President
MARCUS CABLE HOLDINGS, LLC,
as Guarantor
By: Marcus Cable Properties L.L.C.,
as Manager
By: Marcus Cable Properties, Inc.,
as Manager
By: /s/ MARCY LIFTON
-------------------------------------
Name: Marcy Lifton
Title: Senior Vice President and
Assistant Secretary
-28-
<PAGE> 29
Accepted as of the date hereof:
Goldman, Sachs & Co.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Bear, Stearns & Co. Inc.
NationsBanc Montgomery Securities LLC
Salomon Smith Barney Inc.
Credit Lyonnais Securities (USA), Inc.
First Union Capital Markets Corp.
Prudential Securities Incorporated
TD Securities (USA) Inc.
CIBC Oppenheimer Corp.
Nesbitt Burns Securities Inc.
By: Goldman, Sachs & Co.
By: /s/ GOLDMAN, SACHS & CO.
-----------------------------------
Name:
Title:
-29-
<PAGE> 30
SCHEDULE I
<TABLE>
<CAPTION>
Principal Amount of
Eight-Year Senior Notes
Purchaser to Be Purchased
- --------- ---------------
<S> <C>
Goldman, Sachs & Co. ............................ $120,000,000
Chase Securities Inc. ........................... 120,000,000
Donaldson, Lufkin & Jenrette
Securities Corporation ........................ 120,000,000
Bear, Stearns & Co. Inc. ........................ 60,000,000
NationsBanc Montgomery Securities LLC ........... 60,000,000
Salomon Smith Barney Inc. ....................... 60,000,000
Credit Lyonnais Securities (USA) Inc. ........... 12,000,000
First Union Capital Markets Corp. ............... 12,000,000
Prudential Securities Incorporated .............. 12,000,000
TD Securities (USA) Inc. ........................ 12,000,000
CIBC Oppenheimer Corp. .......................... 6,000,000
Nesbitt Burns Securities Inc. ................... 6,000,000
------------
Total ............................. $600,000,000
============
<CAPTION>
Principal Amount of
Ten-Year Senior Notes
Purchaser to Be Purchased
- --------- ---------------
<S> <C>
Goldman, Sachs & Co. ............................ $300,000,000
Chase Securities Inc. ........................... 300,000,000
Donaldson, Lufkin & Jenrette
Securities Corporation ........................ 300,000,000
Bear, Stearns & Co. Inc. ........................ 150,000,000
NationsBanc Montgomery Securities LLC ........... 150,000,000
Salomon Smith Barney Inc. ....................... 150,000,000
Credit Lyonnais Securities (USA) Inc. ........... 30,000,000
First Union Capital Markets Corp. ............... 30,000,000
Prudential Securities Incorporated .............. 30,000,000
TD Securities (USA) Inc. ........................ 30,000,000
CIBC Oppenheimer Corp. .......................... 15,000,000
Nesbitt Burns Securities Inc. ................... 15,000,000
--------------
Total ............................. $1,500,000,000
==============
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
Principal Amount At
Maturity of
Senior Discount Notes
Purchaser to be Purchased
- --------- ---------------
<S> <C>
Goldman, Sachs & Co. ............................ $295,000,000
Chase Securities Inc. ........................... 295,000,000
Donaldson, Lufkin & Jenrette
Securities Corporation ........................ 295,000,000
Bear, Stearns & Co. Inc. ........................ 147,500,000
NationsBanc Montgomery Securities LLC ........... 147,500,000
Salomon Smith Barney Inc. ....................... 147,500,000
Credit Lyonnais Securities (USA) Inc............. 29,500,000
First Union Capital Markets Corp. ............... 29,500,000
Prudential Securities Incorporated .............. 29,500,000
TD Securities (USA) Inc. ........................ 29,500,000
CIBC Oppenheimer Corp. .......................... 14,750,000
Nesbitt Burns Securities Inc. ................... 14,750,000
--------------
Total ............................. $1,475,000,000
==============
</TABLE>
<PAGE> 32
ANNEX I
(1) The Securities have not been and will not be registered under
the Act and may not be offered or sold within the United States or to, or for
the account or benefit of, U.S. persons except in accordance with Regulation S
under the Act or pursuant to an exemption from the registration requirements of
the Act. Each Purchaser represents that it has offered and sold the Securities,
and will offer and sell the Securities (i) as part of their distribution at any
time and (ii) otherwise until 40 days after the later of the commencement of the
offering and the Time of Delivery, only in accordance with Rule 903 of
Regulation S or Rule 144A or pursuant to Paragraph 2 of this Annex I under the
Act. Accordingly, each Purchaser agrees that neither it, its affiliates nor any
persons acting on its or their behalf has engaged or will engage in any directed
selling efforts with respect to the Securities, and it and they have complied
and will comply with the offering restrictions requirement of Regulation S. Each
Purchaser agrees that, at or prior to confirmation of sale of Securities (other
than a sale pursuant to Rule 144A, it will have sent to each distributor, dealer
or person receiving a selling concession, fee or other remuneration that
purchases Securities from it during the restricted period a confirmation or
notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
U.S. Securities Act of 1933 (the "Securities Act") and may not be offered
and sold within the United States or to, or for the account or benefit of,
U.S. persons (i) as part of their distribution at any time or (ii)
otherwise until 40 days after the later of the commencement of the
offering and the closing date, except in either case in accordance with
Regulation S (or Rule 144A if available) under the Securities Act. Terms
used above have the meaning given to them by Regulation S."
Terms used in this paragraph have the meanings given to them by Regulation S.
Each Purchaser further agrees that it has not entered and will not
enter into any contractual arrangement with respect to the distribution or
delivery of the Securities, except with its affiliates or with the prior written
consent of the Issuers.
(2) Notwithstanding the foregoing, Securities in registered form may
be offered, sold and delivered by the Purchasers in the United States and to
U.S. persons pursuant to Section 3 of this Agreement without delivery of the
written statement required by paragraph (1) above.
(3) Each Purchaser further represents and agrees that (i) it has not
offered or sold and prior to the date six months after the date of issue of the
Securities will not offer or sell any Securities to persons in the United
Kingdom except to persons whose ordinary activities involve them in acquiring,
holding, managing or disposing of investments (as principal or agent) for the
purposes of their businesses or otherwise in circumstances which have not
re-
A-I-1
<PAGE> 33
sulted and will not result in an offer to the public in the United Kingdom
within the meaning of the Public Offers of Securities Regulations 1995, (b) it
has complied, and will comply, with all applicable provisions of the Financial
Services Act of 1986 of Great Britain with respect to anything done by it in
relation to the Securities in, from or otherwise involving the United Kingdom,
and (c) it has only issued or passed on and will only issue or pass on in the
United Kingdom any document received by it in connection with the issuance of
the Securities to a person who is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996
of Great Britain or is a person to whom the document may otherwise lawfully be
issued or passed on.
(4) Each Purchaser agrees that it will not offer, sell or deliver
any of the Securities in any jurisdiction outside the United States except under
circumstances that will result in compliance with the applicable laws thereof,
and that it will take at its own expense whatever action is required to permit
its purchase and resale of the Securities in such jurisdictions. Each Purchaser
understands that no action has been taken to permit a public offering in any
jurisdiction outside the United States where action would be required for such
purpose. Each Purchaser agrees not to cause any advertisement of the Securities
to be published in any newspaper or periodical or posted in any public place and
not to issue any circular relating to the Securities, except in any such case
with Goldman, Sachs & Co.'s express written consent and then only at its own
risk and expense.
A-I-2
<PAGE> 34
EXHIBIT A
FORM OF EIGHT-YEAR SENIOR NOTE
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
A-1
<PAGE> 35
EXHIBIT B
FORM OF TEN-YEAR SENIOR NOTE
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
B-1
<PAGE> 36
EXHIBIT C
FORM OF SENIOR DISCOUNT NOTE
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
C-1
<PAGE> 1
Exhibit 2.1
MERGER AGREEMENT
BETWEEN MARCUS CABLE HOLDINGS, LLC AND CHARTER
COMMUNICATIONS HOLDINGS LLC
This Merger Agreement (this "AGREEMENT") is entered into as of this
31st day of March 1999, by and between MARCUS CABLE HOLDINGS, LLC ("MCH") and
CHARTER COMMUNICATIONS HOLDINGS LLC ("CCH").
RECITALS
WHEREAS, MCH is a limited liability company organized under
the laws of the State of Delaware;
WHEREAS, CCH is a limited liability company organized under
the laws of the State of Delaware; and
WHEREAS, MCH and CCH intend to merge into a single entity
pursuant to this Agreement and the applicable laws of the State of Delaware, and
for the surviving entity to be a limited liability company.
NOW THEREFORE, MCH and CCH hereby agree that MCH shall be
merged (the "MERGER") with and into CCH in accordance with the applicable laws
of the State of Delaware, with CCH being the surviving entity (which, in its
capacity as the surviving entity, is sometimes referred to herein as "SURVIVING
LLC"), that the name of the surviving entity shall not be changed as a result of
the Merger, and that the terms and conditions of the Merger and the mode of
carrying it into effect shall be as follows:
1. Effective Date. The Merger shall be effective upon the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware (the
"EFFECTIVE DATE").
2. Certificate of Formation. The Certificate of Formation of CCH is not
amended by this Agreement, and shall be the Certificate of Formation of
Surviving LLC from and after the Effective Date, subject to the right of
Surviving LLC to amend its Certificate of Formation in accordance with the laws
of the State of Delaware.
3. Equity Interests of MCH. Each 1% membership interest of MCH ("MCH
INTEREST") prior to the Merger shall be converted into 883,227.165 membership
units of the Surviving LLC ("SURVIVING LLC UNITS"), such that following the
Merger, Marcus Cable Properties LLC, a Delaware limited liability company shall
hold 3,337,362.2 Surviving LLC Units, and Vulcan Cable, Inc., a Washington
corporation, shall hold 84,985,354.3 Surviving LLC Units.
4. [INTENTIONALLY OMITTED]
<PAGE> 2
5. Effect of the Merger. On the Effective Date, the separate existence
of MCH shall cease, and it shall be merged with and into Surviving LLC. All the
property, real, personal and mixed, of each of MCH and CCH, and all debts due to
either of them, shall be transferred to or retained in, as the case may be, and
vested in Surviving LLC, without further act or deed. Surviving LLC shall
thenceforth be responsible and liable for all the liabilities and obligations of
each of MCH and CCH, and any claim or judgment against either of MCH or CCH may
be enforced against Surviving LLC.
6. Approvals. This Agreement shall be submitted for the requisite
approvals to be obtained by MCH and by CCH in accordance with their respective
governing documents and in accordance with the laws of the State of Delaware.
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law.
8. Counterparts. This Agreement may be executed in counterparts, each
of which shall constitute an original and all of which, taken together, shall
constitute one and the same instrument.
9. Sections and Headings. The division of this Agreement into sections
and the insertion of headings are for reference purposes only and shall not
affect the interpretation of this Agreement.
MARCUS CABLE HOLDINGS, LLC
By: MARCUS CABLE PROPERTIES, L.L.C.
By: Marcus Cable Properties, Inc.
Its: Manager
By: /s/ Ralph Kelly
------------------------------------
Ralph Kelly
Vice President and Asst. Secretary
CHARTER COMMUNICATIONS HOLDINGS LLC
By: /s/ Curtis S. Shaw
------------------------------------------
Name: Curtis S. Shaw
Title: Senior Vice President
<PAGE> 1
Exhibit 2.6(a)
ASSET AND STOCK PURCHASE AGREEMENT
dated as of April 20, 1999
by and between
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
and
CHARTER COMMUNICATIONS, LLC
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS. ....................................................... 2
1.1. 1992 Cable Act................................................. 2
1.2. Affiliate...................................................... 2
1.3. Agreement...................................................... 2
1.4. Intentionally Omitted.......................................... 2
1.5. Assets......................................................... 2
1.6. Basic Services................................................. 2
1.7. Books and Records.............................................. 2
1.8. Business Day................................................... 3
1.9. Cable Act...................................................... 3
1.10. Cable Business................................................. 3
1.11. Charter Required Consents...................................... 3
1.12. Closing........................................................ 3
1.13. Closing Time................................................... 3
1.14. Communications Act............................................. 3
1.15. Contract....................................................... 3
1.16. Code........................................................... 3
1.17. Environmental Law.............................................. 3
1.18. ERISA.......................................................... 3
1.19. ERISA Affiliate................................................ 3
1.20. Expanded Basic Services........................................ 3
1.21. FCC............................................................ 4
1.22. Governmental Authority......................................... 4
1.23. Hazardous Substances........................................... 4
1.24. HSR Act........................................................ 4
1.25. Intellectual Property.......................................... 4
1.26. IP-IV.......................................................... 4
1.27. IPSE........................................................... 4
1.28. IPWT Required Consents......................................... 4
1.29. IPWT's Cable Business.......................................... 5
1.30. Judgment....................................................... 5
1.31. Kingsport System............................................... 5
1.32. Knowledge...................................................... 5
1.33. Leased Property................................................ 5
1.34. Legal Requirement.............................................. 5
1.35. Lien........................................................... 5
1.36. Litigation..................................................... 6
1.37. Losses......................................................... 6
1.38. MVPD........................................................... 6
1.39. Other Intangibles.............................................. 6
1.40. Other Real Property Interests.................................. 6
1.41. Owned Property................................................. 6
1.42. Party.......................................................... 6
1.43. Pay TV......................................................... 6
1.44. Permitted Liens................................................ 6
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<PAGE> 3
1.45. Person......................................................... 7
1.46. Required Consents.............................................. 7
1.47. RMG Assets..................................................... 7
1.48. Six-Month Date................................................. 7
1.49. Systems Contracts.............................................. 7
1.50. Systems Franchises............................................. 7
1.51. Systems Licenses............................................... 7
1.52. Tangible Personal Property..................................... 7
1.53. Taxes.......................................................... 8
1.54. Third Party.................................................... 8
1.55. Transaction Documents.......................................... 8
1.56. Other Definitions.............................................. 8
1.57. Usage.......................................................... 9
2. SALE OF ASSETS AND STOCK............................................. 10
2.1. Sale of Assets and Stock....................................... 10
3. CONSIDERATION........................................................ 10
3.1. Purchase Price................................................. 10
3.2. Allocation of Purchase Price................................... 10
4. EXCLUDED ASSETS AND ASSUMED LIABILITIES.............................. 11
4.1. Excluded Assets................................................ 11
4.2. Charter's Assumed Obligations and Liabilities.................. 12
4.3. Indemnification with respect to RMG Residual Liabilities....... 12
5. IPWT'S REPRESENTATIONS AND WARRANTIES................................ 13
5.1. Organization and Qualification of IPWT, its general
partner and RMG................................................ 13
5.2. Authority and Validity......................................... 13
5.3. No Conflict; Required Consents................................. 14
5.4. Title to the Shares............................................ 14
5.5. Capitalization................................................. 15
5.6. Assets......................................................... 15
5.7. Systems Franchises, Systems Licenses, Systems Contracts and
Other Real Property Interests.................................. 16
5.8. Real Property.................................................. 17
5.9. Environmental.................................................. 17
5.10. Compliance with Legal Requirements............................. 18
5.11. Intellectual Property.......................................... 21
5.12. Financial Statements........................................... 21
5.13. Absence of Certain Changes or Events........................... 21
5.14. Litigation..................................................... 22
5.15. Taxes.......................................................... 22
5.16. Employment Matters............................................. 23
5.17. Systems Information............................................ 27
5.18. Taxpayer Identification Number................................. 27
5.19. Finder and Brokers............................................. 27
5.20. Related Party Transactions..................................... 27
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<PAGE> 4
5.21. Representations and Warranties of RMG in IP-I/Charter Exchange
Agreement...................................................... 28
6. CHARTER'S REPRESENTATIONS AND WARRANTIES............................. 28
6.1. Organization and Qualification of Charter...................... 28
6.2. Authority and Validity......................................... 28
6.3. No Conflict; Required Consents................................. 28
6.4. Finder and Brokers............................................. 29
6.5. Litigation..................................................... 29
6.6. Qualification.................................................. 29
6.7. Securities Law Matters......................................... 29
6.8. Taxpayer Identification Number................................. 29
7. ADDITIONAL COVENANTS................................................. 29
7.1. Access to Premises and Records................................. 29
7.2. Continuity and Maintenance of Operations, Certain Deliveries
and Notice..................................................... 30
7.3. Employees...................................................... 32
7.4. Leased Vehicles; IPWT Other Capital Leases..................... 35
7.5. Required Consents; Franchise Renewal........................... 35
7.6. Title Commitments and Surveys.................................. 38
7.7. HSR Notification............................................... 39
7.8. Sales and Transfer Taxes....................................... 39
7.9. Programming.................................................... 39
7.10. Updated Schedules.............................................. 39
7.11. Use of Name and Logo........................................... 40
7.12. Transitional Billing Services.................................. 40
7.13. Confidentiality and Publicity.................................. 41
7.14. Bulk Transfer.................................................. 42
7.15. Lien Searches.................................................. 42
7.16. Further Assurances............................................. 42
7.17. Post-Closing Cooperation as to Rates........................... 42
7.18. Distant Broadcast Signals...................................... 43
7.19. Environmental Assessment....................................... 43
7.20. Year 2000 Matters.............................................. 45
7.21. Satisfaction of Conditions..................................... 47
7.22. Offers......................................................... 47
7.23. Retention of Books and Records................................. 47
7.24. Taxes.......................................................... 48
7.25. Compliance with Covenants of RMG in IP-I/Charter Exchange
Agreement; Access to Information; Information; No Waivers or
Amendments without Consent..................................... 48
8. CONDITIONS PRECEDENT................................................. 48
8.1. Conditions to Charter's Obligations............................ 48
8.2. Conditions to Obligations of IPWT.............................. 49
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<PAGE> 5
9. THE CLOSING.......................................................... 50
9.1. The Closing; Time and Place.................................... 50
9.2. IPWT's Delivery Obligations.................................... 50
9.3. Charter's Delivery Obligations................................. 51
10. TERMINATION AND DEFAULT.............................................. 52
10.1. Termination Events............................................. 52
10.2. Effect of Termination.......................................... 52
11. SURVIVAL; REMEDIES................................................... 53
11.1. Survival of Representations, Warranties, Covenants and
Agreements..................................................... 53
11.2. Exclusive Remedy............................................... 53
11.3. Nonrecourse.................................................... 53
12. MISCELLANEOUS PROVISIONS............................................. 54
12.1. Parties Obligated and Benefitted............................... 54
12.2. Notices........................................................ 54
12.3. Right to Specific Performance.................................. 54
12.4. Waiver......................................................... 54
12.5. Captions....................................................... 54
12.6. Governing Law.................................................. 54
12.7. Time........................................................... 54
12.8. Late Payments.................................................. 54
12.9. Counterparts................................................... 54
12.10.Entire Agreement............................................... 55
12.11.Severability................................................... 55
12.12.Construction................................................... 55
12.13.Expenses....................................................... 55
12.14.Risk of Loss................................................... 55
12.15.Tax Consequences............................................... 55
12.16.Commercially Reasonable Efforts................................ 56
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<PAGE> 6
Exhibits:
Exhibit 9.2.1 - Bill of Sale and Assignment and Assumption Agreement
Schedules:
Schedule 1.33 - Leased Property
Schedule 1.40 - Other Real Property Interests
Schedule 1.41 - Owned Property
Schedule 1.49 - Systems Contracts
Schedule 1.50 - Systems Franchises
Schedule 1.51 - Systems Licenses
Schedule 1.52 - Tangible Personal Property
Schedule 3.2 - Allocation Schedule
Schedule 4.1(a) - Excluded Assets
Schedule 4.1(b) - Exceptions to Excluded Assets
Schedule 4.3 - Credit, Loan or Other Agreements
Schedule 5.3 - IPWT Required Consents
Schedule 5.4 - Title Matters
Schedule 5.5 - Capitalization Matters
Schedule 5.6.1 - IPWT Liens and Permitted Liens
Schedule 5.6.3 - IPWT Other Operators
Schedule 5.7.2 - IPWT Franchise Matters
Schedule 5.7.3 - IPWT Contract Matters
Schedule 5.8 - IPWT Real Property Matters
Schedule 5.9 - IPWT Environmental Matters
Schedule 5.10 - IPWT Compliance with Legal Requirements
Schedule 5.12.1 - IPWT Statements of Income
Schedule 5.12.2 - RMG Statements of Income
Schedule 5.13 - IPWT Changes and Events
Schedule 5.14 - IPWT Litigation
Schedule 5.15.1 - IPWT Tax Matters
Schedule 5.15.2 - RMG Tax Matters
Schedule 5.15.3 - Tax Return Extensions
Schedule 5.15.4 - Joint Venture, Partnership or Other Arrangements
Schedule 5.15.5 - Tax Elections
Schedule 5.15.6 - Tax Sharing Agreements
Schedule 5.15.7 - Consolidated Tax Returns or Reports
Schedule 5.16 - IPWT Plans; Employee Matters
Schedule 5.17.1-A - IPWT Systems Information
Schedule 5.17.1-B - RMG Systems Information
Schedule 5.17.2-A - IPWT Systems
Schedule 5.17.2-B - RMG Systems
Schedule 5.20 - IPWT Related Party Transactions
Schedule 6.3 - Charter Required Consents
Schedule 6.5 - Charter Litigation
Schedule 7.2(a) - Exceptions to Ordinary Course
Schedule 7.2(b) - IPWT's 1999 Capital Budget
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<PAGE> 7
Schedule 7.2(c) - IPWT's 1999 Operating Budget
Schedule 7.20.1(b)-A - IPWT Year 2000 High-Level Inventory, Assessment
and Remediation Decisions
Schedule 7.20.1(b)-B - IPSE Year 2000 High-Level Inventory, Assessment
and Remediation Decisions
Schedule 7.20.1(b)-C - RMG Year 2000 High-Level Inventory, Assessment
and Remediation Decisions
Schedule 7.20.1(c)-A - IPWT's Year 2000 Plan
Schedule 7.20.1(c)-B - IPSE's Year 2000 Plan
Schedule 7.20.1(c)-C - RMG's Year 2000 Plan
Schedule 7.25 - Assigned RMG Excluded Assets
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<PAGE> 8
ASSET AND STOCK PURCHASE AGREEMENT
THIS ASSET AND STOCK PURCHASE AGREEMENT is made as of April 20, 1999 by
and between InterMedia Partners of West Tennessee, L.P., a California limited
partnership ("IPWT"), and CHARTER COMMUNICATIONS, LLC, a Delaware limited
liability company ("Charter").
RECITALS
A. Following the consummation of certain transactions which will occur
concurrently with the transactions contemplated by this Agreement (each as more
fully described in the Common Agreement (as defined in Recital D below)), IPWT
(i) will own and operate cable television systems which are franchised or hold
other operating authority and operate in and around West Tennessee and
Kingsport, Tennessee as listed on Schedule 5.17.2-A (the "IPWT Systems") and
(ii) will be the beneficial owner of all of the issued and outstanding shares of
the Class A Common Stock, $100 par value per share (the "Shares"), of Robin
Media Group, Inc., a Nevada corporation ("RMG").
B. RMG owns and operates cable television systems which are franchised or
hold other operating authority and operate in and around East Tennessee and
Gainesville, Georgia as listed on Schedule 5.17.2-B (the "RMG Systems" and,
collectively with the IPWT Systems, the "Systems"), as well as in and around
Brentwood, Tennessee (the "Brentwood Systems"), and, at Closing, Tennessee LLC,
a Delaware limited liability company ("Tennessee LLC"), will own the RMG Systems
located in and around East Tennessee.
C. This Agreement sets forth the terms and conditions upon which IPWT will
sell or cause to be sold, and Charter will purchase or cause to be purchased (i)
substantially all of the Assets comprising or used or useful in the Cable
Business associated with the IPWT Systems (the "IPWT Assets") and (ii) the
Shares.
D. IPWT, Charter and certain of their respective Affiliates have entered
into that certain Common Agreement (the "Common Agreement") pursuant to which
they have agreed to certain issues common to each of the transfers made pursuant
to this Agreement and to certain other related transactions (each as more fully
described in the Common Agreement). The common issues addressed include revenue
and working capital adjustments, closing conditions, and indemnification for
breaches of representations, warranties, covenants and agreements.
AGREEMENTS
In consideration of the covenants and agreements set forth herein and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Parties hereby agree as follows:
1. DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, the following capitalized terms or terms otherwise defined in this
Section 1 shall have the meanings set forth below:
1.1. 1992 Cable Act. The Cable Television Consumer Protection and
Competition Act of 1992, as amended, and the FCC rules and regulations
promulgated thereunder.
<PAGE> 9
1.2. Affiliate. With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. As used in this
Agreement, "control" means the ownership, directly or indirectly, of voting
securities representing the right generally to elect a majority of the directors
(or similar officials) of a Person or the possession, by contract or otherwise,
of the authority to direct the management and policies of a Person.
Notwithstanding the foregoing, prior to the Closing Date, neither (a) AT&T
Corporation, Tele-Communications, Inc., nor any of their direct or indirect
subsidiaries (collectively, the "AT&T Affiliates"), shall be considered
Affiliates of IPWT for any purpose herein or hereunder; (b) neither Paul Allen,
Vulcan Cable, Inc., Vulcan Cable II, Inc., Marcus Cable Properties, L.L.C. nor
any other Person directly or indirectly controlled by Paul Allen that is not
engaged in the cable television business (collectively, the "Allen Affiliates")
shall be considered Affiliates of Charter for any purpose herein or hereunder;
and (c) InterMedia Partners, a California limited partnership, Brenmor Cable
Partners, L.P. and TCID IP-V, Inc., on the one hand, and InterMedia Partners
Southeast, IPWT, InterMedia Partners IV, L.P., and Robin Media Group, Inc., on
the other hand, shall not be deemed Affiliates of each other.
1.3. Agreement. This Asset and Stock Purchase Agreement.
1.4. Intentionally Omitted
1.5. Assets. All of the assets, privileges, contracts, licenses, permits,
franchises, authorizations, rights, interests, claims and other properties, real
and personal, tangible and intangible, of every type and description (a) which
are owned, leased, held for, used or useful in, or otherwise related to the
Cable Business, (b) in which IPWT, RMG or any of their Affiliates has any right,
title or interest or in which IPWT, RMG or any of their Affiliates acquires any
right, title or interest on or before the Closing Time, and (c) which are not
Excluded Assets. The Assets include the Tangible Personal Property, Owned
Property, Leased Property, Other Real Property Interests, Systems Franchises,
Systems Licenses, Systems Contracts, Books and Records and Other Intangibles,
but not the Shares.
1.6. Basic Services. The lowest tier of service offered to subscribers of
a System.
1.7. Books and Records. All engineering records, files, data, drawings,
blueprints, schematics, reports, lists, plans and procedures and all other files
of correspondence, lists, records and reports concerning the Cable Business,
including subscribers and prospective subscribers of the Systems, signal and
program carriage and dealings with Governmental Authorities with respect to the
Systems, including all reports filed with respect to the Systems by or on behalf
of IPWT, RMG or any of their Affiliates with the FCC and statements of account
filed with respect to the Systems by or on behalf of IPWT, RMG or any of their
Affiliates with the U.S. Copyright Office, but excluding all documents, reports
and records relating to any employee of the IPWT Systems who has not given
consent to disclosure of such documents, reports and records.
1.8. Business Day. Any day other than a Saturday, Sunday or a day on which
the banking institutions in New York, New York, Denver, Colorado, San Francisco,
California or St. Louis, Missouri are required or authorized to be closed.
1.9. Cable Act. The Cable Communications Policy Act of 1984, as amended,
and the FCC rules and regulations promulgated thereunder.
1.10. Cable Business. The cable television businesses and other
revenue-generating businesses and operations relating to the Systems conducted
by IPWT, RMG or any of their Affiliates through the Systems.
<PAGE> 10
1.11. Charter Required Consents. Any and all consents, authorizations and
approvals under or in connection with Charter's business or any Contract, Lien
or Legal Requirement by which Charter, any of its Affiliates or their respective
assets are bound, required for Charter to purchase the IPWT Assets and the
Shares and to otherwise perform its obligations under this Agreement and the
Transaction Documents.
1.12. Closing. The closing of the transactions contemplated by this
Agreement.
1.13. Closing Time. 11:59 p.m., Eastern time, on the Closing Date.
1.14. Communications Act. The Communications Act of 1934, as amended, and
the FCC rules and regulations promulgated thereunder.
1.15. Contract. Any contract, mortgage, deed of trust, bond, indenture,
lease, license, note, franchise, certificate, option, warrant, right or other
instrument, document, obligation or agreement, whether written or oral.
1.16. Code. United States Internal Revenue Code of 1986, as amended.
1.17. Environmental Law. Any Legal Requirement relating to pollution or
the protection of public health, safety, welfare or the environment, including
CERCLA, OSHA and RCRA and including Legal Requirements relating to emissions,
discharges, releases or threatened releases of Hazardous Substances into the
environment (including ambient air, surface water, ground water or land) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances.
1.18. ERISA. The Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder and published
interpretations with respect thereto.
1.19. ERISA Affiliate. As to any Person, any trade or business, whether or
not incorporated, which together with such Person would be deemed a single
employer within the meaning of Section 4001 of ERISA.
1.20. Expanded Basic Services. Any video programming provided over a cable
television system, regardless of service tier, other than Basic Services and Pay
TV.
1.21. FCC. The Federal Communications Commission.
1.22. Governmental Authority. The United States of America, any state,
commonwealth, territory or possession of the United States of America and any
political subdivision or quasi-governmental authority of any of the same,
including any court, tribunal, department, commission, board, bureau, agency,
body, county, municipality, province, parish or other instrumentality of any of
the foregoing.
1.23. Hazardous Substances. Any pollutant, contaminant, chemical,
industrial, toxic, hazardous or noxious substance or waste which is regulated by
a Governmental Authority, including (a) any petroleum or petroleum compounds
(refined or crude), flammable substances, explosives, radioactive materials or
any other materials or pollutants which pose a significant hazard or potential
significant hazard to the Owned Property or Other Real Property Interests or to
Persons in or about the
<PAGE> 11
Owned Property or Other Real Property Interests or cause the Owned Property or
Other Real Property Interests to be in violation of any Legal Requirements; (b)
any "hazardous waste" as defined by the Resource Conservation and Recovery Act
of 1976 (RCRA) (42 U.S.C. ss.ss. 6901) and the rules and regulations promulgated
thereunder; (c) any "hazardous substance" as defined by the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. 9601
et seq.) (CERCLA), as amended, and the rules and regulations promulgated
thereunder; (d) any substance regulated by the Toxic Substances Control Act
(TSCA) (42 U.S.C. ss. 2601 et seq.) or the Insecticide, Fungicide and
Rodenticide Act (IFRA) (7 U.S.C. ss. 136 et seq.), each, as amended, and the
rules and regulations promulgated thereunder; (e) asbestos or
asbestos-containing material of any kind or character; (f) polychlorinated
biphenyls; (g) any substances regulated under the provisions of Subtitle I of
RCRA relating to underground storage tanks; (h) any materials or substances
designated as "hazardous substances" pursuant to the Clean Water Act (33 U.S.C.
ss. 1251 et seq.); (i) "economic poison," as defined in the Federal Insecticide,
Fungicide and Rodenticide Act (7 U.S.C. ss. 135 et seq.); (j) any substance the
presence, use, handling, treatment, storage or disposal of which on the Owned
Property or Leased Property is regulated or prohibited by any Environmental Law;
and (k) any other substance which by any Environmental Law requires special
handling, reporting or notification of any Governmental Authority in its
collection, storage, use, treatment or disposal.
1.24. HSR Act. The Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
1.25. Intellectual Property. With respect to the Cable Business, any (a)
trademarks, trade dress, trade names, service marks, logos and other similar
proprietary rights, (b) domain names, (c) copyrights and (d) patents and
patentable know-how, inventions and processes, in each case used in the Cable
Business.
1.26. IP-IV. InterMedia Partners IV, L.P., a California limited
partnership and Affiliate of IPWT.
1.27. IPSE. InterMedia Partners Southeast, a California general
partnership and Affiliate of IPWT.
1.28. IPWT Required Consents. Any and all consents, authorizations and
approvals under or in connection with the Assets (including the Systems
Franchises, Systems Licenses, and Systems Contracts) or any Contract, Lien or
Legal Requirement by which IPWT, RMG, any of their Affiliates or any of their
respective Assets are bound, required (a) for IPSE to distribute the Kingsport
System to IP-IV, (b) for IP-IV to contribute the Kingsport System and the Shares
to IPWT, (c) for IPWT to transfer the IPWT Assets and the Shares to Charter
pursuant to this Agreement and to otherwise perform its obligations under this
Agreement and the Transaction Documents, (d) for Charter to operate the IPWT
Systems and to own, lease, use and operate the IPWT Assets and the IPWT Systems
at the places and in the manner in which the IPWT Assets are used and the IPWT
Systems are operated as of the date of this Agreement and as of the Closing, (e)
for Charter to own and hold the Shares or (f) for Charter to assume and perform
the Systems Franchises, the Systems Licenses, the Systems Contracts and the
Assumed Obligations and Liabilities relating to the IPWT Systems and the IPWT
Assets.
1.29. IPWT's Cable Business. The cable television and other
revenue-generating businesses and operations related to the IPWT Systems.
<PAGE> 12
1.30. Judgment. Any judgment, writ, order, injunction, award or decree of
any court, judge, justice or magistrate, including any bankruptcy court or judge
or the arbitrator in any binding arbitration, and any order of or by any
Governmental Authority.
1.31. Kingsport System. Those cable television systems which are
franchised or hold other operating authority and operate in and around
Kingsport, Tennessee, which are being transferred to Charter pursuant to this
Agreement.
1.32. Knowledge. (a) in the case of any System, the actual knowledge of a
particular matter with respect to any such System of Frank S. Crawford, Robert
J. Lewis, Rodney M. Royse, Edon V. Smith, Thomas R. Stapleton or the general
manager or one or more of the managers of such System, (b) in the case of the
Shares, the actual knowledge of a particular matter with respect to the Shares
of Robert J. Lewis, Rodney M. Royse, Edon V. Smith or Thomas R. Stapleton and
(c) in the case of Charter, the actual knowledge of a particular matter of
Jerald L. Kent, Kent D. Kalkwarf, Curtis S. Shaw or David G. Barford.
1.33. Leased Property. The leaseholds of real property included among the
Assets and described as Leased Property on Schedule 1.33.
1.34. Legal Requirement. Applicable common law and any statute, ordinance,
code or other law, rule, regulation, order, technical or other written standard,
requirement or procedure enacted, adopted, promulgated, applied or followed by
any Governmental Authority, including any Judgment.
1.35. Lien. Any security interest, security agreement, financing statement
filed with any Governmental Authority, conditional sale or other title retention
agreement, any lease, consignment or bailment given for purposes of security,
any mortgage, lien (including any lien for Taxes), indenture, pledge, option,
encumbrance, adverse interest, constructive trust or other trust, claim,
attachment, exception to, defect in, or other condition adversely affecting
title or other ownership interest (including reservations, rights of entry,
possibilities of reverter, encroachments, protrusions, easements, rights-of-way,
rights of first refusal, restrictive covenants, leases and licenses) of any
kind, which constitutes an interest in or claim against property, whether
arising pursuant to any Legal Requirement, Systems License, Systems Franchise,
Systems Contract or otherwise.
1.36. Litigation. Any claim, action, suit, proceeding, arbitration,
investigation or hearing that could result in a Judgment, any other activity or
procedure that could reasonably be expected to result in a Judgment, or any
notice of any of the foregoing.
1.37. Losses. Any claims, losses, liabilities, damages, penalties, costs
and expenses, including interest that may be imposed in connection therewith,
expenses of investigation, reasonable fees and disbursements of counsel and
other experts, and, as applicable, the cost to any Person making a claim or
seeking indemnification under this Agreement with respect to funds expended by
such Person by reason of the occurrence of any event or the existence or
assertion of any Liens (other than Permitted Liens) with respect to which
indemnification is sought.
1.38. MVPD. A distributor of cable television services, multichannel multi
point distribution service, direct broadcast satellite service or television
receive-only satellite programming, who makes available for purchase, by
subscribers or customers, multiple channels of video programming, other than
Persons distributing such services only to multiple dwelling unit or other
commercial customers (including hotels, motels, resorts, hospitals, dormitories,
prisons, restaurants, bars and similar establishments).
<PAGE> 13
1.39. Other Intangibles. All intangible assets, other than the Systems
Franchises, Systems Licenses and Systems Contracts, including subscriber lists,
claims (excluding any claims relating to Excluded Assets), and Intellectual
Property, if any, included among the Assets.
1.40. Other Real Property Interests. The easements and rights of access
(other than those relating to multiple dwelling units) and other interests in
real property held by IPWT, RMG or any of their Affiliates in connection with
the Cable Business, including those interests described as Other Real Property
Interests on Schedule 1.40, but not including Leased Property or Owned Property.
1.41. Owned Property. The fee interests in the real property included
among the Assets and described as Owned Property on Schedule 1.41 and all
improvements and towers thereon and appurtenances thereto.
1.42. Party. Charter or IPWT, as the context requires.
1.43. Pay TV. Premium programming services selected by and sold to
subscribers on a per channel or per program basis.
1.44. Permitted Liens. (a) Liens for Taxes, assessments and governmental
charges, in each case not yet due and payable, (b) zoning laws or ordinances or
any similar Legal Requirements, (c) rights reserved to any Governmental
Authority to regulate the affected property, (d) Liens described on Schedule
5.6.1, (e) as to Leased Property or Tangible Personal Property that is leased,
the interests of the lessors thereof, and (f) as to Owned Property, Leased
Property and Other Real Property Interests, any easements, rights-of-way,
servitudes, conditions, covenants, restrictions and minor imperfections or
irregularities in title, in each case, which are reflected in the public records
and which do not individually or in the aggregate interfere with the right or
ability of the applicable Party to own, use, enjoy or operate the Owned
Property, Leased Property or Other Real Property Interests in the manner
currently used or to convey good, marketable and indefeasible fee simple title
to the same; provided that "Permitted Liens" will not include any Lien which
could prevent or inhibit in any way (other than as permitted under clause (f))
the conduct of the business of the affected System, and provided further that
classification of any Lien as a "Permitted Lien" will not affect any liability
which a Party may have for any such Lien, including pursuant to any indemnity
obligation under this Agreement.
1.45. Person. Any natural person, Governmental Authority, corporation,
general or limited partnership, limited liability company, joint venture, trust,
association or unincorporated entity of any kind.
1.46. Required Consents. The Charter Required Consents or the IPWT
Required Consents, as the context requires.
1.47. RMG Assets. The assets comprising or used or useful in the Cable
Business associated with the RMG Systems.
1.48. Six-Month Date. The date that is six months after the Closing Date.
1.49. Systems Contracts. All Contracts (other than Systems Franchises and
Systems Licenses) that are included among the Assets, including the lease
agreements for Tangible Personal Property, pole attachment agreements,
underground conduit agreements, crossing agreements,
<PAGE> 14
retransmission consent agreements, multiple dwelling, bulk billing or commercial
service agreements and other Contracts described on Schedule 1.49 and the
Contracts documenting Leased Property and Other Real Property Interests
described on Schedules 1.33 and 1.40.
1.50. Systems Franchises. The franchises, permits and similar
authorizations included among the Assets (other than Systems Licenses) described
on Schedule 1.50, and all rights and benefits of IPWT, RMG and their Affiliates
pertaining thereto, including the rights and benefits arising under Section 626
of the Communications Act (47 U.S.C. 546) to the extent applicable to Systems
Franchise.
1.51. Systems Licenses. The intangible cable television channel
distribution rights, cable television relay service (CARS), business radio and
other licenses, earth station registrations, authorizations, consents or permits
issued by the FCC or any other Governmental Authority included among the Assets
and described on Schedule 1.51 (other than the Systems Franchises and Systems
Contracts) and all rights and benefits of IPWT, RMG and their Affiliates
pertaining thereto.
1.52. Tangible Personal Property. All tangible personal property included
among the Assets, including towers (other than towers on Owned Property which
are fixtures thereon and a part thereof), tower equipment, aboveground and
underground cable, distribution systems, headend amplifiers, line amplifiers,
microwave equipment, converters, testing equipment, motor vehicles, office
equipment, computers and billing equipment, furniture, fixtures, supplies,
inventory and other physical assets, the principal items of which are identified
and described on Schedule 1.52.
1.53. Taxes. Levies and assessments of any kind or nature imposed by any
Governmental Authority, including all income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes and levies or assessments related to
unclaimed property, together with any interest thereon and any penalties,
additions to tax or additional amounts applicable thereto. For purposes of
determining any Tax cost or Tax benefit to any Person, such amount will be the
actual cost or benefit recognized by such Person at the time of actual payment
of the additional Tax or actual receipt of the Tax benefit. In the event that
any Loss, payment or other amount is required to be determined on an after-Tax
basis, such payment or other amount will be determined without regard to any Tax
cost or Tax benefit not actually recognized at the time of the determination,
and appropriate adjustments will be made when and to the extent that such Tax
cost or Tax benefit is actually recognized.
1.54. Third Party. Any Person other than IPWT, RMG and their Affiliates or
Charter and its Affiliates.
1.55. Transaction Documents. The Common Agreement and all instruments and
documents described in Sections 9.2 and 9.3 which are being executed and
delivered by or on behalf of Charter or IPWT in connection with this Agreement
or the transactions contemplated hereby.
1.56. Other Definitions. The following terms have the meanings set forth
in the sections indicated in the table below:
Term Section
---- -------
Adjusted Value 3.1
Agent's Fees 5.19
Allen Affiliates 1.2
ALTA 7.6
Antitrust Division 7.7
<PAGE> 15
AT&T Affiliates 1.2
Base Value 3.1
Brentwood Systems Recital B
Charter First Paragraph
Charter's Assumed Obligations and Liabilities 4.2
Closing Date 9.1
commercially reasonable efforts 12.16
Common Agreement Recital D
Computer and Other Systems 7.20.1(a)
Confidential Information 7.13.1
Copyright Act 5.11
Cost of Service Election 5.10.4
Excluded Assets 4.1
FTC 7.7
Hired Employee 7.3.6(a)
IPWT First Paragraph
IPWT Assets Recital C
IPWT Retained Franchise 7.5.5(a)
IPWT Systems Recital A
New Properties 7.10(b)
Nonrecourse 11.3
Operating Agreements 7.5.5(c)
Phase I Assessment 7.19.1
Phase II Assessment 7.19.1
Post-Closing Y2K Budget 7.20.3(e)
Primary Transfer 7.5.5(d)
Replacement Cost Estimate 12.14
RMG Recital A
RMG Systems Recital B
Shares Recital A
Subsequent Transfer 7.5.5(e)
Surveys 7.6
Survival Period 11.1
Systems Recital B
System Employees 7.3.1
Taking 12.14
Third Party Testing 7.20.2(c)
Title Commitments 7.6
Title Company 7.6
Title Defect 7.6
Transitional Billing Services 7.12
WARN 5.16.1
Year 2000 High-Level Inventory, Assessment
and Remediation Decisions 7.20.1(b)
Year 2000 Plan 7.20.1(c)
Year 2000 Ready or Year 2000 Readiness 7.20.1(d)
Year 2000 Remediation Program 7.20.1(e)
1.57. Usage. The definitions in Article 1 shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the
<PAGE> 16
corresponding masculine, feminine and neuter forms. All references herein to
Articles, Sections, Exhibits and Schedules shall be deemed to be references to
Articles and Sections of, and Exhibits and Schedules to, this Agreement unless
the context shall otherwise require. All Exhibits and Schedules attached hereto
shall be deemed incorporated herein as if set forth in full herein and, unless
otherwise defined therein, all terms used in any Exhibit or Schedule shall have
the meaning ascribed to such term in this Agreement. The words "include,"
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation." 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. Unless otherwise expressly
provided herein, any agreement, instrument or statute defined or referred to
herein or in any agreement or instrument that is referred to herein means such
agreement, instrument or statute as from time to time amended, modified or
supplemented, including (in the case of agreements or instruments) by waiver or
consent and (in the case of statutes) by succession of comparable successor
statutes and references to all attachments thereto and instruments incorporated
therein. All accounting terms not otherwise defined in this Agreement will have
the meanings ascribed to them under generally acceptable accounting principles
as in effect from time to time in the United States, consistently applied.
2. SALE OF ASSETS AND STOCK.
2.1. Sale of Assets and Stock. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, IPWT will sell to
Charter, and Charter will purchase from IPWT, all of the IPWT Assets and the
Shares, in each case free and clear of all Liens (except Permitted Liens).
3. CONSIDERATION.
3.1. Purchase Price. For purposes of this Agreement, the base purchase
price for the IPWT Assets and the Shares, collectively, shall be eight hundred
seventy-two million seven hundred thousand dollars ($872,700,000), less: (a) the
principal amount of the outstanding indebtedness and the accrued interest
thereon owed by RMG to IP-IV at the time of the Closing,(b) the liquidation
value of then outstanding Series A Voting Preferred Stock of RMG plus accrued
and unpaid dividends through the Closing and purchase price of the Class B
Common Stock of RMG as specified in the TCID IP-V/Charter Stock Purchase
Agreement (as defined in the Common Agreement), (c) the amount paid for the
Tennessee LLC Interest under the RMG Purchase Agreement (as defined in the
Common Agreement), (d) the amount necessary to make the deposits described in
Section 2.1(b)(vi) of the Common Agreement; and (e) the amount of any
liabilities, which are required to be included on the balance sheet of RMG
prepared in accordance with GAAP and not otherwise included in the adjustments
(the "Base Value"). The Base Value shall be adjusted in accordance with the
provisions of the Common Agreement (as adjusted, the "Adjusted Value"). At the
Closing, Charter (or its permitted assignees) will pay to IPWT (or its permitted
assignees) an amount in cash equal to the Adjusted Value as determined pursuant
to the Common Agreement, which payment shall then be deemed made pursuant and
subject to this Agreement. Preliminary and final determinations of the Adjusted
Value will be made in accordance with the Common Agreement.
3.2. Allocation of Purchase Price. The aggregate amount of the Final
Adjusted Value of the Systems and Charter's Assumed Obligations and Liabilities
("the Purchase Consideration") shall be allocated among the Systems in
accordance with a schedule (the "Allocation Schedule") to be prepared by Charter
and delivered within ninety (90) days after determination of such Final Adjusted
Value under the Common Agreement to IPWT for the approval of IPWT. IPWT and
Charter shall cooperate and use commercially reasonable efforts to reach a
mutually satisfactory agreement regarding the Allocation Schedule. The final
Allocation Schedule, determined in the manner described in this Section
<PAGE> 17
3.2, shall comply with the provisions of Section 1060 of the Code and each of
IPWT and Charter shall timely file any forms required to be filed under Section
1060 of the Code and any corresponding provision of state of local Tax law in
accordance with the final Allocation Schedule. Charter and IPWT each agree (i)
to reflect the Systems on their respective books for tax reporting purposes in
accordance with the Allocation Schedule, (ii) to file all Tax Returns and
determine all Taxes (including, without limitation, for purposes of Section 1060
of the Code) in accordance with and based upon the Allocation Schedule and (iii)
not to take any position inconsistent with such Allocation Schedule in any audit
or judicial or administrative proceeding or otherwise.
4. EXCLUDED ASSETS AND ASSUMED LIABILITIES.
4.1. Excluded Assets. "Excluded Assets" means, with respect to the IPWT
Assets: (a) the Letter Agreement dated June 1, 1996 between Bravo Company and
InterMedia Partners; the Affiliation Agreement dated April, 1999 among Viewer's
Choice LLC, InterMedia Partners, InterMedia Partners Southeast, InterMedia
Partners of West Tennessee, L.P. and Robin Media Group, Inc.; and the
Affiliation Agreement dated February 24, 1999 between FX Networks, LLC and
InterMedia Management, Inc.; (b) except as set forth on Schedule 4.1(b), each
employee benefit plan (as defined in Section 3(3) of ERISA) or any multiemployer
plan (as defined in Section 3(37) of ERISA) with respect to which IPWT or any of
its ERISA Affiliates (other than RMG) has any liability or in which any
employees or agents, or any former employees or agents, of IPWT or any of its
ERISA Affiliates (other than RMG) participate; (c) except as provided in Section
12.14, all insurance policies and rights and claims thereunder with respect to
the IPWT Assets; (d) all bonds, letters of credit, surety instruments and other
similar items with respect to the IPWT Assets; (e) all cash and cash
equivalents, including cash relating to subscriber prepayments and deposits, and
notes receivable of IPWT; (f) except as set forth on Schedule 4.1(b) and subject
to Section 7.11, all Intellectual Property held by IPWT or any of its Affiliates
(other than RMG); (g) the On/Line Operating and License Agreement between US
Computer Services dba Cable Data and InterMedia Partners, a California limited
partnership dated as of October 3, 1996 (other than RMG); (h) except for any
items for which the purchase price payable under Section 2.1(b)(iv) of the
Common Agreement is increased or the Adjusted Value is increased under Section
2.2 of the Common Agreement, all claims, rights, and interest in and to any
refunds of Taxes or fees of any nature, or other claims against third parties,
relating to the operation of the IPWT Systems prior to the Closing Time; (i) all
account books of original entry, general ledgers, financial records, minute
books, stock ledgers, organizational documents and, to the extent not included
in the Books and Records, personnel files and records, in each case used in
connection with the IPWT Systems; (j) the Amended and Restated Management
Agreement for Advertising Sales Business between InterMedia Capital Partners IV,
a California limited partnership, and TCI Cable Management Corporation, a
Colorado corporation doing business as TCI Media Services, dated as of January
1, 1998; (k) to the extent licensed pursuant to a master license agreement or
not otherwise transferable, all software of IPWT or any Affiliate of IPWT (other
than RMG) and licenses relating to Third Party software; (l) the Warrant
Purchase Agreement dated as of January 1, 1999 between At Home Corporation and
InterMedia Management, Inc., on behalf of InterMedia Partners, Inc., a
California limited partnership, InterMedia Partners IV, L.P. and InterMedia
Partners of Kentucky, L.P., and the Distribution Agreement dated as of January
1, 1999 between At Home Corporation, InterMedia Partners, L.P., a California
limited partnership, InterMedia Partners IV, L.P. and InterMedia Partners VI,
L.P.; (m) except for the IP-I/Charter Exchange Agreement (as defined in the
Common Agreement), and except as set forth on Schedule 4.1(b), all Contracts
between IPWT, RMG or IPSE, on the one hand, and any Affiliate thereof, on the
other hand; and (q) other rights, assets and properties described on Schedule
4.1(a). There are no "Excluded Assets" with respect to RMG, except for those
listed on Schedule 4.1(a) and the following: the Amended and Restated Management
Agreement for Advertising Sales Business between InterMedia Capital Partners IV,
a California limited partnership, and TCI Cable Management Corporation, a
Colorado corporation doing business as TCI Media Services, dated as of January
1, 1998; the Warrant Purchase Agreement dated as of January 1, 1999 between At
Home Corporation and InterMedia Management, Inc., on behalf of InterMedia
Partners, Inc., a California limited partnership, InterMedia Partners IV, L.P.
and InterMedia Partners of Kentucky, L.P., and the Distribution Agreement dated
as of January 1, 1999 between At Home Corporation, InterMedia Partners, L.P., a
California limited partnership, InterMedia Partners IV, L.P. and InterMedia
Partners VI, L.P.; Letter Agreement dated June 1, 1996 between Bravo Company and
InterMedia Partners; Affiliation Agreement dated April, 1999 among Viewer's
Choice LLC, InterMedia Partners, InterMedia Partners Southeast, InterMedia
Partners of West Tennessee, L.P. and Robin Media Group, Inc.; Affiliation
Agreement dated February 24, 1999 between FX Networks, LLC and InterMedia
Management, Inc.;
<PAGE> 18
Encore Media Group, LLC Affiliation Agreement dated January 26, 1999, between
Encore and InterMedia Management, Inc.; WTBS Retransmission Consent Agreement
with SSI; and Programming Transport Agreement between National Digital
Television Center Inc., a Colorado corporation d/b/a Headend in the Sky, and
InterMedia Management, Inc., a California corporation providing for the
transmission by HITS to such systems of compressed and encrypted digital
programming signals and other services, dated November 18, 1997. IPWT (or an
affiliate thereof) shall cause RMG to be released of all liability, after
closing, arising from all of the forementioned contracts and those listed on
Schedule 4.1(a).
4.2. Charter's Assumed Obligations and Liabilities. At the Closing and
effective as of the Closing Time, Charter will assume and after the Closing
Date, Charter will pay, discharge and perform the following (collectively,
"Charter's Assumed Obligations and Liabilities"): (a) those obligations and
liabilities with respect to the ownership, use or operation of the IPWT Assets
accruing and relating to periods after the Closing Time which were assigned and
transferred to Charter at the Closing; (b) those obligations and liabilities for
subscriber prepayments and deposits related to the IPWT Systems existing at the
Closing Time; (c) other obligations and liabilities of IPWT only to the extent
that the Adjusted Value of the Systems was decreased with respect thereto
pursuant to Section 2.2 of the Common Agreement; and (d) all other obligations
and liabilities accruing and relating to periods after the Closing Time and
arising out of Charter's ownership, use or operation of the IPWT Assets
(including those items listed or described on Schedule 4.1(b)) or its operation
of, or the conduct of business through, the IPWT Systems after the Closing
(including with respect to late fees that may be charged by Charter after the
Closing to subscribers of the IPWT Systems), except to the extent that such
obligations or liabilities relate to any Excluded Asset. All obligations and
liabilities arising out of or relating to the IPWT Assets, the IPWT Systems or
IPWT's Cable Business other than Charter's Assumed Obligations and Liabilities
will remain and be the obligations and liabilities solely of IPWT including any
obligation, liability or claims relating to or arising pursuant to (w) Taxes
(including franchise fees) arising out of or relating to the IPWT Assets and
with respect to periods or portions thereof ending on or prior to the Closing
Date, (x) refunds of rates, charges or late fees arising out of or relating to
the IPWT Assets and with respect to periods through and including the Closing
Date, (y) Litigation arising out of or relating to the IPWT Assets and
commenced, or related to an event occurring, on or prior to the Closing Date, or
(z) credit, loan or other agreements arising out of or relating to the IPWT
Assets and pursuant to which IPWT or IPSE has created, incurred, assumed or
guaranteed indebtedness for borrowed money or under which any Lien securing such
indebtedness has been or may be imposed on any IPWT Asset. Notwithstanding
anything to the contrary contained in this paragraph, for purposes of the Common
Agreement Charter's Assumed Obligations and Liabilities shall include all
obligations and liabilities of RMG other than those related to the Brentwood
Systems and the Residual Liabilities.
4.3. Indemnification with respect to RMG Residual Liabilities. Following
the Closing, RMG, Charter and their Affiliates shall be entitled to
indemnification as set forth in the Common Agreement for any Losses attributable
to or arising from any RMG Residual Liabilities. "RMG Residual Liabilities"
shall mean all obligations and liabilities of RMG attributable to or arising out
of any period prior to the Closing to the extent that no adjustment was made
pursuant to Section 2.1(b)(iv) or Section 2.2 of the Common Agreement, including
any obligation, liability or claims relating to or arising pursuant to (v) the
Excluded Assets, (w) Taxes (including franchise fees) with respect to periods or
portions thereof ending on or prior to the Closing Date, (x) refunds of rates,
charges or late fees with respect to periods through and including the Closing
Date, (y) Litigation commenced, or relating to an event occurring, on or prior
to the Closing Date, or (z) other than as set forth on Schedule 4.3, credit,
loan or other agreements pursuant to which RMG has created, incurred, assumed or
guaranteed indebtedness for borrowed money or under which any Lien securing such
indebtedness has been or may be imposed on any RMG Asset.
<PAGE> 19
5. IPWT'S REPRESENTATIONS AND WARRANTIES.
IPWT represents and warrants to Charter as of the date of this Agreement
and as of the Closing, as follows:
5.1. Organization and Qualification of IPWT, its general partner and RMG.
5.1.1. IPWT is a limited partnership, duly formed, validly existing
and in good standing under the laws of the State of California. IPWT has all
requisite power and authority to own, lease and use the Assets owned, leased or
used by it and to conduct its Cable Business as it is currently being conducted
by it. As of the date of this Agreement, IPWT is qualified to do business and is
in good standing under the laws of each jurisdiction in which the ownership,
leasing or use of the Assets owned, leased or used by it or the nature of its
activities in connection with the Systems makes such qualification necessary.
5.1.2. InterMedia Capital Management, LLC, the sole general partner
of IPWT, is a limited liability company, duly formed, validly existing, and in
good standing under the laws of the State of Delaware, and has all requisite
power and authority to own all of its assets and to conduct its business as
currently conducted. InterMedia Capital Management, LLC is duly qualified to do
business and in good standing under the laws of each jurisdiction in which the
nature of its activities or its ownership, lease or use of its assets makes such
qualification necessary.
5.1.3. RMG is a corporation, duly formed, validly existing and in
good standing under the laws of the State of Nevada. RMG has all requisite power
and authority to own, lease and use the Assets owned, leased or used by it and
to conduct its Cable Business as it is currently being conducted by it. As of
the date of this Agreement, RMG is qualified to do business and is in good
standing under the laws of each jurisdiction in which the ownership, leasing or
use of the assets owned, leased or used by it or the nature of its activities in
connection with the Systems makes such qualification necessary.
5.2. Authority and Validity.
5.2.1. IPWT has all requisite power and authority to execute and
deliver, and to perform its obligations under, and to consummate the
transactions contemplated by, this Agreement and the Transaction Documents to
which it is a party. The execution and delivery by IPWT of, the performance of
IPWT under, and the consummation by IPWT of the transactions contemplated by,
this Agreement and the Transaction Documents to which IPWT is a party have been
duly and validly authorized by all action by or on behalf of IPWT. This
Agreement has been, and when executed and delivered by IPWT the Transaction
Documents to which IPWT is a party will be, duly and validly executed and
delivered by IPWT and the valid and binding obligations of IPWT, enforceable
against IPWT in accordance with their terms, except as the same may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to the enforcement of creditors' rights
generally or by principles governing the availability of equitable remedies.
5.2.2. IPSE and IP-IV, respectively, have all requisite corporate
power and authority to execute and deliver, to perform their obligations under,
and to consummate the transactions contemplated by, the IPSE Distribution
Agreement and the IP-IV Contribution Agreement (each as defined in the Common
Agreement), respectively. The execution and delivery by IPSE and IP-IV of,
<PAGE> 20
their performance under, and their consummation of the transactions contemplated
by the IPSE Distribution Agreement and the IP-IV Contribution Agreement,
respectively, have been duly and validly authorized by all action by or on
behalf of IPSE and IP-IV, respectively.
5.3. No Conflict; Required Consents. Except as set forth on Schedule 5.3,
and assuming any consents referenced on Schedule 6.3 have been obtained and the
expiration or earlier termination of the waiting period under the HSR Act has
occurred, (x) the execution and delivery by IPWT, the performance of IPWT under,
and the consummation by IPWT of the transactions contemplated by, this
Agreement, the IP-IV/IPWT Contribution Agreement and the Transaction Documents
to which IPWT is a party and (y) the execution and delivery by IPSE and IP-IV
of, their performance under, and their consummation of the transactions
contemplated by, the IPSE Distribution Agreement and the IP-IV/IPWT Contribution
Agreement, respectively, do not and will not: (a) conflict with or violate any
provision of the organizational documents of IPSE, IP-IV, IPWT or RMG; (b)
violate any provision of any Legal Requirement; (c) require any consent,
approval or authorization of, or filing of any certificate, notice, application,
report or other document with, any Governmental Authority or other Person; or
(d) (i) conflict with, violate, result in a breach of or constitute a default
under (without regard to requirements of notice, lapse of time or elections of
other Persons or any combination thereof), (ii) permit or result in the
termination, suspension or modification of, (iii) result in the acceleration of
(or give any Person the right to accelerate) the performance of, IPSE, IP-IV,
IPWT or RMG, as the case may be, under, or (iv) result in the creation or
imposition of any Lien under any Systems Contract, Systems Franchise, Systems
License, or other instrument evidencing any of the Assets or by which IPSE,
IP-IV, IPWT or RMG, as the case may be, or any of their assets is bound or
affected, except for purposes of clauses (c) and (d) such consents, approvals,
authorizations and filings that, if not obtained or made, would not, and such
violations, conflicts, breaches, defaults, terminations, suspensions,
modifications and accelerations as would not, individually or in the aggregate,
have an adverse effect on any System, the Cable Business, IPWT or RMG, or on the
ability of IPWT to perform its obligations under this Agreement or the
Transaction Documents to which IPWT is a party.
5.4. Title to the Shares. IPWT is the record and beneficial owner and
holder of, and has good title to, the Shares, free and clear of all Liens other
than Permitted Liens. Except as set forth in Schedule 5.4, there are no existing
agreements, options, warrants, rights, calls or commitments of any character to
which IPWT or any Affiliate is a party or by which it is bound providing for the
repurchase or redemption of the Shares.
5.5. Capitalization. The authorized capital stock of RMG consists of three
thousand two hundred eighty-five (3,285) shares of Class A Common Stock, $100
par value per share, all of which are issued and outstanding and held of record
by IPWT, three hundred sixty-five (365) shares of Class B Common Stock, $100 par
value per share, all of which are issued and outstanding, and twelve thousand
(12,000) shares of Series A Voting Preferred Stock, $1,000 par value per share,
all of which are issued and outstanding. The Shares have been duly authorized,
validly issued and are fully paid and nonassessable, with no preemptive rights.
Except as set forth in Schedule 5.5, there are no (i) existing agreements,
options, warrants, rights, calls or commitments of any character to which RMG or
any Affiliate is a party or by which it is bound providing for the issuance of
any additional shares of RMG's capital stock or for the repurchase or redemption
of the Shares, (ii) outstanding securities or other instruments convertible into
or exchangeable for the Shares and no commitments to issue such securities or
instruments or (iii) voting trust, voting agreement or other agreement, proxy or
understanding with respect to the voting of the Shares.
<PAGE> 21
5.6. Assets.
5.6.1. IPWT, IPSE or RMG, as the case may be, has good and
marketable title to (or, in the case of Assets that are leased, valid leasehold
interests in) the Assets. None of the AT&T Affiliates has any right, title or
interest in or to any of the Assets. The Assets are free and clear of all Liens,
except Permitted Liens and rights of first refusal which will be waived by the
Person holding such right at or prior to Closing. All of the Liens described on
Schedule 5.6.1 (except for those marked with an asterisk on Schedule 5.6.1) will
be terminated, released or, in the case of rights of first refusal (except for
those listed on Schedule 5.6.1), waived, as appropriate, at or prior to Closing.
Except as described on Schedule 1.52, the Tangible Personal Property, as an
integrated system and in its component parts, is in good operating condition and
repair (ordinary wear and tear and routine failures excepted) and is usable and
adequate for the operation of the Cable Business.
5.6.2. Except for items included in the Excluded Assets, the Assets
constitute substantially all the assets necessary (a) to conduct the Cable
Business as it is being conducted on the date of this Agreement and in
compliance with all applicable Legal Requirements, (b) to operate the Systems as
they are being operated on the date of this Agreement and in compliance with all
applicable Legal Requirements and (c) to perform all of the Assumed Obligations
and Liabilities.
5.6.3. Except as described on Schedule 5.6.3, and other than direct
broadcast satellite and satellite master antenna television, with respect to
each area in which the Systems currently provide cable television service: (i)
no Person is operating a cable television system or other non-satellite MVPD
other than a System in such area; (ii) no local franchising authority has
awarded a cable television franchise in such area to any Person other than IPWT,
IPSE or RMG, as the case may be; and (iii) to the Knowledge of IPWT, no MVPD has
applied for a cable television franchise to serve such area.
5.7. Systems Franchises, Systems Licenses, Systems Contracts and Other
Real Property Interests.
5.7.1. Except as described on Schedules 1.33, 1.40, 1.49, 1.50 and
1.51, and except for the Excluded Assets, neither IPWT nor IPSE (but only to the
extent related primarily or in whole to the Cable Business) nor RMG is bound or
affected by any of the following: (a) leases of real property or capital leases
of personal property; (b) operating leases of personal property that are
terminable upon more than thirty (30) days' notice and that contemplate annual
lease payments in excess of twenty thousand dollars ($20,000); (c) franchises
for the construction or operation of cable television systems or System
Contracts of substantially equivalent effect; (d) licenses, authorizations,
consents or permits of the FCC; (e) other licenses, authorizations, consents or
permits of any other Governmental Authority, individually or in the aggregate,
material to the Systems; (f) easements or rights of access, individually or in
the aggregate, material to the Systems; (g) pole attachment agreements,
underground conduit agreements, crossing agreements, retransmission consent
agreements, or bulk or commercial service agreements, individually or in the
aggregate, material to the Systems; (h) any Contract under which RMG has
borrowed or loaned any money or issued any note, bond, indenture or other
evidence of indebtedness or directly or indirectly guaranteed the indebtedness,
liabilities or obligations of others; or (i) in the case of IPWT or IPSE, any
Systems Contract and, in the case of RMG, any Systems Contract or other
Contract, other than those described in any other clause of this Section 5.7.1
which contemplate payments by or to IPWT, IPSE or RMG, as the case may be, in
any twelve (12) month period exceeding twenty-five thousand dollars ($25,000)
under any single contract or one hundred thousand dollars ($100,000) in the
aggregate.
<PAGE> 22
5.7.2. Complete and correct copies of the Systems Franchises and
Systems Licenses have been provided to Charter. Except as set forth on Schedule
5.7.2, (a) the Systems Franchises contain all of the commitments and obligations
of IPWT, IPSE or RMG, as the case may be, to the applicable Governmental
Authority granting such Franchises with respect to the construction, ownership
and operation of the Systems, and (b) other than as set forth in the Systems
Franchises, neither IPWT, IPSE nor RMG has made any commitment to any local
franchising authority to make any material expenditure or capital addition or
betterment to any System or the Assets that will not be fulfilled or satisfied
prior to the Closing Time. The Systems Franchises and Systems Licenses are
currently in full force and effect, are not in default and are valid under all
applicable Legal Requirements according to their terms. No event has occurred
that, with notice or lapse of time or both, would constitute a breach, violation
or default by IPWT, IPSE or RMG, as the case may be, and to IPWT's Knowledge, no
event has occurred that, with notice or lapse of time or both, would constitute
a breach, violation or default by any other Person, of any material obligations
under any such Systems Franchises or Systems Licenses. Except for routine
filings with Governmental Authorities and as described on Schedule 5.7.2, there
are no applications relating to any Systems Franchise or Systems License pending
before any Governmental Authority which are material to any System or the Cable
Business. Except where a request for renewal has been timely filed under Section
626(a) of the Cable Act, since December 31, 1998, no Systems Franchise or
Systems License has been surrendered by IPWT, IPSE or RMG or has expired or
otherwise terminated without the issuance of a replacement Systems Franchise or
Systems License. There is no legal action, governmental proceeding or
investigation pending or, to IPWT's Knowledge, threatened to terminate, suspend
or modify any Systems Franchise or Systems License. Except as set forth on
Schedule 5.7.2, IPWT, IPSE or RMG, as the case may be, is, or will be as of the
Closing Date, in material compliance with the terms and conditions of all the
Systems Franchises and Systems Licenses and other applicable requirements of all
Governmental Authorities (including the FCC and the U.S. Copyright Office)
relating to the Systems Franchises and Systems Licenses, including all
requirements for notification, filing, reporting, posting and maintenance of
logs and records.
5.7.3. IPWT has delivered to Charter true and complete copies of all
Systems Contracts (including each Contract relating to Leased Property and Other
Real Property Interests), including any amendments thereto (or, in the case of
oral Contracts, true and complete written summaries thereof) and each document
evidencing the ownership of IPWT, IPSE or RMG, as the case may be, of the Owned
Property. Except as described in Schedule 5.7.3, IPWT, IPSE or RMG, as the case
may be, has fulfilled when due, or has taken all action necessary to enable it
to fulfill when due, all of its obligations under each of its Contracts and, to
the Knowledge of IPWT, there has not occurred any default (without regard to
requirements of notice, lapse of time, elections of other Persons, or any
combination thereof) by any other Person of any material obligations under any
of its or RMG's Contracts or Other Real Property Interests.
5.8. Real Property. All the Assets consisting of Owned Property, Leased
Property and material Other Real Property Interests (and, with respect to RMG,
all other material real property interests of RMG) are described on Schedules
1.33, 1.40, and 1.41. Except for ordinary wear and tear and routine repairs and
as set forth on Schedule 5.8, all of the improvements, leasehold improvements
and the premises of the Owned Property and the premises demised under the leases
and other documents evidencing the Leased Property are in good condition and
repair and are suitable for the purposes used. Each parcel of Owned Property and
each parcel of Leased Property and any improvements thereon (a) has access to
and over public streets or private streets for which IPWT, IPSE or RMG, as the
case may be, has a valid right of ingress and egress, (b) except as set forth on
Schedule 1.33 or 1.40, conforms in its current use and occupancy to all material
zoning requirements without reliance upon a variance issued by a Governmental
Authority or a classification of the parcel in
<PAGE> 23
question as a nonconforming use, (c) conforms in all material respects in its
current use to all restrictive covenants, if any, or other Liens affecting all
or part of such parcel (of record, with respect to Owned Property, or of record
or as set forth in an agreement listed on Schedule 1.33 or 1.40, with respect to
Leased Property or Other Real Property Interests), and (d) is available for
immediate use in the conduct of the business or operations of the Systems. There
are no pending condemnation, expropriation, eminent domain or similar
proceedings of which either IPWT, IPSE or RMG has received notice or IPWT has
Knowledge affecting, in any material respect, all or any portion of the Owned
Property, Leased Property, or Other Real Property Interests. IPWT, IPSE or RMG,
as the case may be, has good and marketable title to each such parcel of real
property included in the Owned Property and in all buildings, structures and
improvements thereon, in each case free and clear of all Liens except for
Permitted Liens.
5.9. Environmental.
5.9.1. Except as described on Schedule 5.9, IPWT, IPSE and RMG, as
the case may be, is in material compliance with (i) with respect to IPWT and
IPSE, all Environmental Laws insofar as they relate to Owned Property or Leased
Property and (ii) with respect to RMG, all Environmental Laws. Except as
described on Schedule 5.9, neither IPWT, IPSE nor RMG has received any notice
of, and IPWT has no Knowledge of, any alleged, actual, or potential
responsibility for, or any inquiry regarding, (i) any release or threatened
release of any Hazardous Substances from or on Owned Property or Leased Property
(and, with respect to RMG, any other property or assets of RMG), or (ii) any
material violation of any Environmental Laws associated with Owned Property or
Leased Property (and, with respect to RMG, any other property or assets of RMG).
Except as described on Schedule 5.9, to IPWT's Knowledge, IPSE's and IPWT's
operations on their Other Real Property Interests (and RMG's operations on its
Other Real Property Interests or otherwise) do not violate any Environmental
Laws in any material respect, and IPWT, IPSE or RMG, as the case may be, has
received no notice of any such violation. Except as described on Schedule 5.9,
neither IPWT, IPSE nor RMG has received any notice of, and IPWT has no Knowledge
of, circumstances relating to, any past, present or future events, conditions,
circumstances, activities, practices or incidents (including the presence, use,
generation, manufacture, disposal, release or threatened release of any
Hazardous Substances from or on Owned Property or Leased Property), which could
interfere with or prevent continued compliance, or which are reasonably likely
to give rise to any liability, based upon or related to the processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge, release or threatened release into the environment, of any
Hazardous Substance from or attributable to Owned Property or Leased Property
(and, with respect to RMG, any other property or assets of RMG).
5.9.2. Except as described on Schedule 5.9, to IPWT's Knowledge, (a)
no aboveground or underground storage tanks are currently or have been located
on any Owned Property or Leased Property (or, with respect to RMG, on any other
property or assets of RMG) and (b) no Owned Property or Leased Property (or,
with respect to RMG, any other property or assets of RMG) 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.
5.9.3. Complete and correct copies of (a) all studies, reports,
surveys or other similar written materials in the possession of IPWT, IPSE or
RMG or to which any of them, to the Knowledge of IPWT, has access relating to
the presence or alleged presence of Hazardous Substances at, on, under or
affecting the Owned Property or Leased Property (or, with respect to RMG, any
other property or assets of RMG), (b) all notices (other than general notices
made by general publication) in the possession of either of IPWT, IPSE or RMG or
to which IPWT, to its Knowledge, has access that were
<PAGE> 24
received from any Governmental Authority having the power to administer or
enforce any Environmental Laws relating to current or past ownership, use or
operation of the Owned Property or Leased Property (or, with respect to RMG, any
other property or assets of RMG) or activities at the Owned Property or Leased
Property (or, with respect to RMG, any other property or assets of RMG) and (c)
all notices and related materials in the possession of IPWT, IPSE or RMG or to
which any of them, to the Knowledge of IPWT, has access relating to any
Litigation concerning any Environmental Law to which IPWT, IPSE or RMG, as the
case may be, is a party or written allegation by any private Third Party
concerning any Environmental Law and IPWT, IPSE or RMG, as the case may be, have
been provided to Charter (other than those materials constituting
attorney-client privileged communications).
5.10. Compliance with Legal Requirements.
5.10.1. Except as set forth on Schedule 5.10, the operation of each
System as currently conducted does not violate or infringe any Legal Requirement
currently in effect in any material respect (other than Legal Requirements
described in Sections 5.9, 5.10.3 and 5.10.4, as to which the representations
and warranties set forth in those subsections will apply) or the grounding
requirements of the National Electrical Safety Code, and RMG in the conduct of
its business does not otherwise violate or infringe any Legal Requirement in any
material respect. Except as set forth on Schedule 5.10, neither IPWT, IPSE nor
RMG has received any notice of, and IPWT has no Knowledge of, any material
violation by IPWT, IPSE or RMG or any System of any Legal Requirement applicable
to the installation, ownership and operation of the Systems as currently
conducted, and knows of no basis for the allegation of any such violation.
5.10.2. Except as set forth on Schedule 5.10, without limiting the
generality of the foregoing, since IPWT or RMG, as the case may be, acquired
such Systems: IPWT or RMG, as the case may be, has submitted to the FCC all
filings, including cable television registration statements, annual reports and
aeronautical frequency usage notices and paid all regulatory fees, that are
required under the rules and regulations of the FCC; the operation of the
Systems has been and is in material compliance with the rules and regulations of
the FCC, and neither IPWT nor RMG has received any notice from the FCC of any
violation of its rules and regulations; IPWT or RMG, as the case may be, is and
since 1986 (or since its acquisition, if later) has been certified as in
compliance with the FCC's equal employment opportunity rules; the Systems are in
material compliance with all signal leakage criteria prescribed by the FCC; and
for each relevant semi-annual reporting period since its or RMG's, as the case
may be, acquisition of a System, IPWT, IPSE or RMG, as the case may be, have
timely filed with the United States Copyright Office all required Statements of
Account in true and correct form, has paid when due all required copyright
royalty fee payments in correct amount, relating to the Systems' carriage of
television broadcast signals and is otherwise in material compliance with all
applicable rules and regulations of the Copyright Office. Except as set forth on
Schedule 5.10, IPWT has no Knowledge, with respect to any System acquired since
January 1, 1996, of any previous owner's failure to comply with the copyright
licensing requirements with respect to such System or any written claim or
inquiry from any Person which questions such System's failure to comply. IPWT
has delivered to Charter copies (with respect to all of the Systems) of: (i) all
reports, filings and correspondence made or filed with the FCC or pursuant to
the FCC rules and regulations for the past year; and (ii) all reports, filings
and correspondence made or filed with the Copyright Office or pursuant to
Copyright Office rules and regulations for the past three years. Except as set
forth on Schedule 5.10, (i) 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 expiring within thirty-six (36) months after the date
of this Agreement; and (ii) neither IPWT, IPSE nor RMG has received
<PAGE> 25
written notice from any Governmental Authority that it has determined or intends
to deny renewal of any Systems Franchise to which it is a party.
5.10.3. Except as set forth on Schedule 5.10 and as otherwise
provided in this Section, each of IPWT, IPSE and RMG has used commercially
reasonable efforts to comply in all material respects with the provisions of the
Cable Act and the 1992 Cable Act pertaining to the carriage of television
broadcast signals, as such Legal Requirements relate to the operation of the
Systems. Each of IPWT, IPSE and RMG has complied in all material respects with
the must carry and retransmission consent provisions of the 1992 Cable Act,
including (i) duly and timely notifying "local commercial television stations"
of inadequate signal strength or increased copyright liability, if applicable,
(ii) duly and timely notifying non-commercial educational stations of the
location of the System's principal headend, (iii) duly and timely notifying
subscribers of changes in the channel alignment on the Systems, (iv) duly and
timely notifying "local commercial and non-commercial television stations" of
the broadcast signals carried on the Systems and their channel positions, (v)
maintaining the requisite public file identifying broadcast signal carriage,
(vi) carrying the broadcast signals after June 1, 1993, on the Systems for all
"local commercial television stations" which elected must carry status and, if
required, up to two "qualified low power stations" and (vii) obtaining
retransmission consents for all broadcast signals carried on the Systems after
October 5, 1993, except for the non-exempt signals carried pursuant to a must
carry election. No must carry complaint is pending against any System at the
FCC, nor, to IPWT's Knowledge, is any threatened except as set forth in Schedule
5.10. IPWT has delivered to Charter copies of any pending petitions that IPWT,
IPSE or RMG has on file with the FCC, including requests for market
modifications or petitions for special relief or any market modification
requests or special relief petitions affecting any System that have been served
on IPWT, IPSE or RMG, as the case may be. The FCC has not issued any decision
with respect to a must carry complaint finding any System in violation of the
must carry rules except as set forth on Schedule 5.10.
5.10.4. Each of IPWT, IPSE and RMG has used commercially reasonable
efforts to establish rates charged and a la carte packages provided to
subscribers, effective as of September 1, 1993, that would be allowable under
rules and regulations promulgated by the FCC under the 1992 Cable Act, and any
authoritative interpretation thereof, whether or not such rates or packages were
subject to regulation at that date by any Governmental Authority, including any
state regulatory agency, local franchising authority and/or the FCC.
Notwithstanding the foregoing, IPWT makes no representation or warranty that
either the rates charged to subscribers or the a la carte packages provided
would be allowable under any rules and regulations of the FCC, or any
authoritative interpretation thereof, promulgated after the date of the Closing.
IPWT has delivered to Charter complete and correct copies of the most recent FCC
Forms 328, 329, 393, 1200, 1205, 1210, 1215, 1220, 1235 and 1240 and other FCC
rate forms (collectively, the "FCC Rate Forms") filed with the local franchising
authority and/or the FCC and will deliver as soon as available all such FCC
forms that are prepared with respect to the Systems, (ii) all historical FCC
Rate Forms with respect to any System in which there is currently a rate issue
pending, including any accounting order or any rate order on appeal, (iii)
copies of all complaints, petitions, answers, responses and other filings made
with or by any Governmental Authority in connection with any rate orders issued
by such Governmental Authority or any appeal therefrom, and (iv) any
documentation supporting an exemption from the rate regulation provisions of the
1992 Cable Act claimed by IPWT, IPSE or RMG, as the case may be, with respect to
the Systems. Except as set forth on Schedule 5.10, neither IPWT, IPSE nor RMG
has made an election with respect to any cost of service proceeding conducted in
accordance with Part 76.922 of Title 47 of the Code of Federal Regulations or
any similar proceeding (a "Cost of Service Election") with respect to any of the
Systems.
1
<PAGE> 26
5.10.5. Except as set forth on Schedule 5.10, all necessary FAA
approvals have been obtained and all necessary FCC tower registrations have been
filed with respect to the height and location of towers used in connection with
the operation of the Systems, and such towers are being operated in compliance
in all material respects with applicable FCC and FAA rules. The ownership,
height (with and without appurtenances), location (address, latitude, longitude
and ground elevation), structure type and FCC call signs of each tower used in
connection with the operation of the Systems are correctly described on Schedule
5.10. To the extent applicable, IPWT has delivered to Charter true and correct
copies of the FAA final determinations that are available and FCC registrations
for all such towers.
5.11. Intellectual Property. Except for Intellectual Property which
constitutes Excluded Assets and the Intellectual Property described on Schedule
4.1(b), neither IPWT, IPSE nor RMG possesses any Intellectual Property related
to or material to the operation of the Systems and neither IPWT, IPSE nor RMG is
a party to any license or royalty agreement with respect to any such
Intellectual Property, except for licenses respecting program material, licenses
incidental to any Systems Contracts and obligations under the Copyright Act of
1976, as amended, including all rules, regulations, orders and policies of the
U.S. Copyright Office thereunder (the "Copyright Act") applicable to cable
television systems generally. To the Knowledge of IPWT, the Systems and the
Cable Business have been operated, and RMG has otherwise operated its business,
in such a manner so as not to violate or infringe upon the rights, or give rise
to any rightful claim of any Person for copyright, trademark, service mark,
patent or license infringement or the like.
5.12. Financial Statements.
5.12.1. The unaudited statements of income of West Tennessee
Systems, the Dickson, Joelton and Lynchburg Systems and the Kingsport Systems
for the years ended December 31, 1997 and 1998, attached hereto as Schedule
5.12.1, are in accordance with the books and records of IPWT, IPSE or RMG, as
appropriate, were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods covered thereby,
and, except as may be described therein, present fairly the operating results of
the West Tennessee Systems, the Dickson, Joelton and Lynchburg Systems and the
Kingsport Systems on a System-by-System basis, for the periods indicated,
subject only to standard year-end adjustments and the omission of footnotes
thereto. The unaudited statements of income of RMG for the years ended December
31, 1997 and 1998, together with the unaudited balance sheet of RMG as of
December 31, 1998, attached hereto as Schedule 5.12.2, are in accordance with
the books and records of RMG and were prepared in accordance with generally
accepted accounting principles, except as may be described therein, applied on a
consistent basis throughout the periods covered thereby. Within thirty (30) days
of the date hereof, IPWT will deliver to Charter unaudited statements of income
of RMG (excluding the Brentwood System) for the years ended December 31, 1997
and 1998. Except as may be described therein, (i) such unaudited statements of
income present fairly the operating results of RMG for the periods indicated,
and (ii) such unaudited balance sheet presents fairly the financial condition,
assets and liabilities, and shareholders' equity of RMG as of December 31, 1998,
subject, in each case, only to standard year-end adjustments and the omission of
footnotes thereto.
5.13. Absence of Certain Changes or Events. Except as set forth on
Schedule 5.13, since December 31, 1998, there has been no (i) material adverse
change in, nor has any event or events (other than any affecting the cable
television industry generally) occurred that, individually or in the aggregate,
are reasonably likely to result in a material adverse change in the Assets, the
Cable Business, the operations, condition (financial or otherwise) or results of
operations of the Systems, taken as a whole and (ii) material change in
accounting principles or practices with respect to the
<PAGE> 27
Systems or revaluation by IPWT, IPSE or RMG, as the case may be, of the Assets
for financial reporting, property tax or other purposes. From December 31, 1998
to the date of this Agreement, the Cable Business has been conducted only in the
usual, regular and ordinary course, except as disclosed on Schedule 5.13 and
except where the failure to conduct business in such manner would not have a
material adverse effect on the Assets, the Cable Business, the operations,
condition (financial or otherwise) or results of operations of the Systems taken
as a whole or on the ability of IPWT to perform its obligations under this
Agreement.
5.14. Litigation. Except as set forth on Schedule 5.14: (a) there is no
Litigation pending or, to IPWT's Knowledge, threatened against IPWT, IPSE, RMG
or any of their Affiliates which, if adversely determined, would (i) materially
and adversely affect the financial condition or operations of the Cable
Business, any of the Systems, the Assets, RMG or the ability of IPWT to perform
its obligations under this Agreement or (ii) result in the modification,
revocation, termination, suspension or other limitation of any of the Systems
Franchises, Systems Licenses, or Systems Contracts; and (b) there is not in
existence any Judgment requiring IPWT, IPSE, RMG or any of their Affiliates to
take any action of any kind with respect to the Assets, the operation of any of
the Systems or, with respect to RMG, the operation of RMG's business, or to
which IPWT or IPSE (with respect to the Systems) or RMG (with respect to its
property and assets), any of the Systems or the Assets are subject or by which
they are bound or affected, that has not been fully complied with by IPWT, IPSE
or RMG, as the case may be.
5.15. Taxes.
5.15.1. Each of IPWT and IPSE has duly and timely filed in correct
form all federal, state, local and foreign Tax returns and other Tax reports
required to be filed by it, and has timely paid all Taxes which have become due
and payable, whether or not so shown on any such return or report, the failure
of which to be filed or paid could affect or result in the imposition of a Lien
upon the Assets or create any transferee or other liability upon Charter, except
such amounts as are being contested diligently and in good faith and are not in
the aggregate material. Except as set forth on Schedule 5.15.1, neither IPWT nor
IPSE has received any notice of, nor does IPWT have any Knowledge of, any
deficiency, assessment or audit, or proposed deficiency, assessment or audit
from any taxing Governmental Authority which could affect, or result in the
imposition of a Lien upon, any of the Assets or transferee or other liability
upon Charter.
5.15.2. RMG has timely filed all federal, state, local and foreign
Tax returns and other Tax reports required to be filed by it through the date
hereof and shall timely file all Tax returns and Tax reports required to be
filed at or before the Closing. Except as set forth on Schedule 5.15.2, such
reports and returns are and will be true, correct and complete in all material
respects and RMG has paid and discharged all Taxes due from it, other than such
taxes that are being contested in good faith by appropriate proceedings and are
adequately reserved as shown on its unaudited balance sheet dated December 31,
1998. Neither the Internal Revenue Service (the "IRS") nor any other taxing
authority or agency, domestic or foreign, is now asserting by notice to IPWT or
RMG or, to the knowledge of IPWT, threatening to assert against RMG, any
deficiency or material claim for additional Taxes. Moreover, neither IPWT nor
RMG has knowledge of any facts on the basis of which taxing authorities could
assert deficiencies or claims described in the preceding sentence. RMG has
withheld or collected and paid over to the appropriate taxing authorities or is
properly holding for such payment all Taxes required by law to be withheld or
collected. RMG does not have any liability for the Taxes of any person pursuant
to Section 1.1502-6 of the Treasury Regulations promulgated under the Code or
comparable provisions of any taxing authority in respect of a consolidated or
combined Tax Return, except with respect to an entity which has merged or
dissolved into RMG. There are no material Liens for Taxes upon the assets of RMG
other than Liens for current Taxes not yet due and payable and
<PAGE> 28
Liens for Taxes set forth on Schedule 5.15.2 that are being contested in good
faith by appropriate proceedings.
5.15.3. Except as set forth on Schedule 5.15.3, there are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any Tax Returns required to be filed by, or which include or are
treated as including, RMG.
5.15.4. Except as set forth on Schedule 5.15.4, RMG is not involved
in or subject to any joint venture, partnership or other arrangement or contract
which is treated as a partnership for federal, state, local or foreign income
tax purposes (a "Tax Partnership").
5.15.5. All material elections with respect to Taxes affecting RMG
as of the date hereof are set forth in Schedule 5.15.5. No consent to the
application of section 341(f)(2) of the Code has been filed with respect to any
property or assets held, acquired, or to be acquired by RMG.
5.15.6. Except as set forth on Schedule 5.15.6, there are no tax
sharing agreements or similar arrangements with respect to or involving RMG.
5.15.7. Except as set forth in Schedule 5.15.7, RMG was not included
or includable in any consolidated or unitary Tax return or report, other than
Tax returns or reports that included only RMG and entities which have since
merged or dissolved into RMG.
5.15.8. RMG has not agreed to and is not required to make any
material adjustment under section 481(a) of the Code.
5.15.9. RMG has not entered into any compensatory agreements with
respect to the performance of services which payment thereunder would result in
a non-deductible expense to such company pursuant to Section 280G of the Code or
an excise Tax to the recipient of such payment pursuant to Section 4999 of the
Code.
5.16. Employment Matters.
5.16.1. Each of IPWT, IPSE and RMG has complied in all material
respects with all applicable Legal Requirements relating to the employment of
labor, including the Worker Adjustment and Retraining Notification Act, 29
U.S.C. ss. 2101, et seq. ("WARN"), continuation coverage requirements with
respect to group health plans and those relating to wages, hours, collective
bargaining, unemployment insurance, workers' compensation, equal employment
opportunity, age, sex, race and disability discrimination, immigration control
and the payment and withholding of Taxes.
5.16.2. There are no Liens against the Assets under Section 412(n)
of the Code or Sections 302(f) or 4068 of ERISA. At the Closing, Charter and its
ERISA Affiliates will have no obligation to contribute to, or any liability in
respect of, (i) any employee benefit plan within the meaning of Section 3(3) of
ERISA, or (ii) any similar employment, severance or other arrangement or policy
(whether written or oral) providing for insurance coverage (including
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, fringe benefits or
retirement benefits, or for profit sharing, deferred compensation, bonuses,
stock options, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits, sponsored or maintained by
IPWT, IPSE, RMG or any of their ERISA Affiliates, or to which IPWT, IPSE, RMG or
any of their ERISA Affiliates was obligated to contribute. Neither IPWT, IPSE
nor RMG will, in connection with the transactions contemplated by
<PAGE> 29
this Agreement, cease to provide any group health plan coverage to its employees
in a manner which would cause Charter or any of its ERISA Affiliates to be
deemed a successor employer of IPWT, IPSE or RMG, as the case may be, within the
meaning of Proposed Treasury Regulations Section 54.4980B-9 Q&A8(c). With
respect to any multi- employer plan within the meaning of Section 3(37) of
ERISA, or any plan subject to Title IV of ERISA, to which IPWT, IPSE, RMG or any
of their ERISA Affiliates is or ever was obligated to contribute, (a) there has
been no material "reportable event" described in Sections 4043(c)(1), (2), (3),
(5), (6), (7), (10), or (13) of ERISA, (b) no "accumulated funding deficiency"
(as defined in Section 302 of ERISA) or "withdrawal liability" (as determined
under Section 4201 et seq. of ERISA) has occurred, exists or is continuing with
respect to any such plan other than a multi- employer plan (as defined in
Section 3(37) of ERISA), or, to the Knowledge of IPWT, IPSE, RMG or any of their
ERISA Affiliates, with respect to any such plan which is a multi-employer plan
(as defined in Section 3(37) of ERISA), (c) no such plan has been terminated
other than in accordance with ERISA or at a time when such plan was not
sufficiently funded, and (d) there has been no (i) withdrawal by IPWT, IPSE, RMG
or any of their ERISA Affiliates that is a substantial employer from a
single-employer plan and that has two or more contributing sponsors at least two
of whom are not under common control, as referred to in Section 4063(b) of
ERISA, or (ii) cessation by IPWT, IPSE, RMG or any of their ERISA Affiliates of
operations at a facility causing more than twenty percent (20%) of plan
participants to be separated from employment, as referred to in Section 4062(e)
of ERISA. With respect to any plan maintained, sponsored by, or contributed to
by IPWT, IPSE or RMG, as the case may be, which is intended to comply with the
provisions of Section 401(k) of the Code, and from which any similar plan
maintained or sponsored by Charter or any of its ERISA Affiliates accepts a
plan-to-plan transfer under Section 7.3.3, (I) such plan has received a
favorable determination letter from Internal Revenue Service, and none of IPWT,
IPSE, RMG nor any of their ERISA Affiliates has any Knowledge of any fact which
could adversely affect the qualified status of such plan, and (II) such plan has
been administered and maintained in material compliance with ERISA, the Code and
all other applicable laws.
5.16.3. Except as set forth on Schedule 5.16, there are no
collective bargaining agreements applicable to any Person employed by IPWT or
IPSE, as the case may be, that renders services in connection with the Systems,
or to any Person employed by RMG, and neither IPWT, IPSE nor RMG has a duty to
bargain with any labor organization with respect to any such Person. Except as
set forth on Schedule 5.16, there are not pending any unfair labor practice
charges against IPWT, IPSE or RMG, any demand for recognition or any other
request or demand from a labor organization for representative status with
respect to any Person employed by IPWT or IPSE that renders services in
connection with the Systems or with respect to any Person employed by RMG.
Except as described on Schedule 5.16, neither IPWT or IPSE, with respect to any
employee of the Systems, nor RMG, with respect to any of employees of RMG, has
employment agreements, either written or oral, with any such employee and none
of the employment agreements listed on Schedule 5.16 requires IPWT, IPSE or RMG,
or will require Charter or any Affiliate of Charter, to employ any Person after
the Closing.
<PAGE> 30
5.16.4. With respect to RMG and RMG Plans (as defined below):
(a) Except as is disclosed on Schedule 5.16, (i) neither RMG
nor any of its ERISA Affiliates maintains or sponsors (or ever maintained or
sponsored), or makes or is required to make contributions to, any RMG Plans,
(ii) none of the RMG Plans is or was a "multi-employer plan," as defined in
Section 3(37) of ERISA, (iii) none of the RMG Plans is or was a "defined benefit
pension plan" within the meaning of Section 3(35) of ERISA, (iv) none of the RMG
Plans provides or provided post-retirement medical or health benefits (except as
required by Section 4980B of the Code or similar Laws), (v) none of the RMG
Plans is or was a "welfare benefit fund," as defined in Section 419(e) of the
Code, or an organization described in Sections 501(c)(9) or 501(c)(20) of the
Code, and (vi) neither RMG nor any RMG ERISA Affiliate has announced or
otherwise made any commitment to create or amend any RMG Plan. There is no RMG
Plan which RMG will not be able to terminate immediately after the Closing in
accordance with its terms and ERISA. RMG has delivered to Charter true and
complete copies of: (i) each of the RMG Plans and any related funding agreements
thereto (including insurance contracts) including all amendments, (ii) the
currently effective Summary Plan Description pertaining to each of the RMG
Plans, (iii) the most recent annual report for each of the RMG Plans (including
all relevant schedules), and (iv) the most recent Internal Revenue Service
determination letter for each RMG Plan which is intended to constitute a
qualified RMG Plan under Section 401 of the Code, (v) the most recently filed
PBGC Form 1, if applicable, (vi) for each funded RMG Plan, financial statements
consisting of (A) the consolidated statement of assets and liabilities of such
RMG Plan as of its most recent valuation date, and (B) the statement of changes
in fund balance and in financial position or the statement of changes in net
assets available for benefits under such RMG Plan for the most recently-ended
plan year, which such financial statements shall fairly present the financial
condition and the results of operations of such RMG Plan in accordance with GAAP
as of such dates, and (vii) each amendment to each of the foregoing documents.
(b) Neither RMG nor any RMG ERISA Affiliate is subject to any
liability, tax or penalty whatsoever to any person or agency whomsoever as a
result of engaging in a prohibited transaction under ERISA or the Code, and
neither RMG nor any RMG ERISA Affiliate has any knowledge of any circumstances
which reasonably might result in any liability, tax or penalty, including, but
not limited to, a penalty under Section 502 of ERISA, as a result of a breach of
any duty under ERISA or under other laws. There has been no failure of any RMG
Plan which is required to comply with the provisions of Sections 4980B and 4980C
of the Code, or with the requirements referred to in Section 4980D(a) of the
Code, to comply. No event has occurred which could subject any RMG Plan to tax
under Section 511 of the Code.
(c) Each of the RMG Plans which is intended to be a qualified
plan under Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service. There has been no failure to
administer any of the RMG Plans in material compliance with the terms of such
RMG Plan, ERISA, the Code and all other applicable laws. All contributions
required to be made to each of the RMG Plans under the terms of that RMG Plan,
ERISA, the Code or any other applicable laws have been timely made. The
financial statements of RMG attached hereto as Schedule 5.12 properly reflect
all amounts required to be accrued as liabilities to date under each of the RMG
Plans. Each RMG Plan intended to meet the requirements for tax-favored treatment
under Subchapter B of Chapter 1 of the Code meets such requirements. Except as
set forth on Schedule 5.16, there is no contract, agreement or benefit
arrangement covering any employee of RMG which, individually or collectively,
could give rise to the payment of any amount which would constitute an "excess
parachute payment" (as defined in Section 280G of the Code). Except as set forth
on Schedule 5.16, the execution and performance of this Agreement will not (i)
result in any obligation or liability (with respect to accrued benefits or
otherwise) of RMG to any RMG Plan, or any present or former
<PAGE> 31
employee of RMG or IPWT, (ii) be a trigger event under any RMG Plan that will
result in any payment (whether of severance pay or otherwise) becoming due to
any present or former employee, officer, director, shareholder, contractor, or
consultant, or any of their dependents, or (iii) accelerate the time of payment
or vesting, or increase the amount, of compensation due to any employee,
officer, director, shareholder, contractor, or consultant of RMG or IPWT. With
respect to any insurance policy which provides, or has provided, funding for
benefits under any RMG Plan, (I) there is and will be no liability of RMG or
Charter in the nature of a retroactive or retrospective rate adjustment, loss
sharing arrangement, or actual or contingent liability as of the Closing Date,
nor would there be any such liability if such insurance policy were terminated
as of the Closing Date, and (II) no insurance company issuing any such policy is
in receivership, conservatorship, bankruptcy, liquidation, or similar
proceeding, and, to the knowledge of the RMG, no such proceedings with respect
to any insurer are imminent.
(d) The present value of all accrued benefits under any RMG
Plans subject to Title IV of ERISA shall not, as of the Closing Date, exceed the
value of the assets of such RMG Plans allocated to such accrued benefits, based
upon the applicable provisions of the Code and ERISA, and each such RMG Plan
shall be capable of being terminated as of the Closing Date in a "standard
termination" under Section 4041(b) of ERISA. The transactions contemplated
hereunder, including without limitation the termination of any RMG Plans at or
prior to the Closing, shall not result in any such withdrawal or other liability
under any applicable laws.
(e) Other than routine claims for benefits under the RMG
Plans, there are no pending, or, to the best knowledge of RMG, threatened,
investigations, proceedings, claims, lawsuits, disputes, actions, audits or
controversies involving the RMG Plans, or the fiduciaries, administrators, or
trustees of any of the RMG Plans or RMG or any RMG ERISA Affiliate as the
employer or sponsor under any RMG Plan, with any of the Internal Revenue
Service, the Department of Labor, the Pension Benefit Guaranty Corporation, any
participant in or beneficiary of any RMG Plan or any other person whomsoever. To
the Knowledge of RMG, there is no reasonable basis for any such claim, lawsuit,
dispute, action or controversy.
For purposes of this Section 5.16.4, the term "RMG Plans"
shall mean (i) all "employee benefit plans" (as such term is defined in Section
3(3) of ERISA, of which RMG or any ERISA Affiliate of RMG (an "RMG ERISA
Affiliate") is or ever was a sponsor or participating employer or as to which
RMG or any RMG ERISA Affiliate makes contributions or is required to make
contributions, and (ii) any similar employment, severance or other arrangement
or policy of RMG or of any RMG ERISA Affiliate providing for insurance coverage
(including self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits or retirement
benefits, or for profit sharing, deferred compensation, bonuses, stock options,
stock appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits.
5.17. Systems Information.
5.17.1. Schedules 5.17.1-A and 5.17.1-B set forth a materially true
and accurate description, on a System-by-System basis, of the following
information relating to the IPWT Systems, the Kingsport System and the RMG
Systems, respectively, as of December 31, 1998:
(a) the approximate number of aerial and underground miles of
plant included in the Assets and served by each headend;
<PAGE> 32
(b) the approximate number of single family homes and
residential multiple dwelling units passed by each System;
(c) the MHZ capacity and channel capacity of each headend; and
(d) the number of subscribers served by each System and a
description of the calculation methodology used by IPWT, IPSE or RMG, as the
case may be, to calculate such subscribers.
5.17.2. Schedules 5.17.2-A and 5.17.2-B set forth a materially true
and accurate description of the following information relating to the IPWT
Systems, the Kingsport System and the RMG Systems, respectively, as of the date
of this Agreement:
(a) a description of the Basic Services, the Expanded Basic
Services, Pay TV and a la carte services available from each System, and the
rates charged by IPWT, IPSE or RMG, as the case may be, therefor, including all
rates, tariffs and other charges for cable television or other services provided
by each System;
(b) the stations and signals carried by each System and the
channel position of each such signal and station; and
(c) the cities, towns, villages, boroughs and counties served
by each System.
5.17.3. Each System is capable of providing all channels, stations
and signals reflected as being carried on such System on Schedules 5.17.1-A and
5.17.1-B.
5.18. Taxpayer Identification Number. The U.S. Taxpayer Identification
Number for IPWT is 94-3113517.
5.19. Finder and Brokers. Neither IPWT, IPSE nor RMG has entered into any
Contract with any person which will result in the obligation of Charter to pay
any finder's fees, brokerage or agent's commissions or other like payments
(collectively, "Agent's Fees") in connection with the negotiations leading to
this Agreement or the consummation of the transactions contemplated hereby.
5.20. Related Party Transactions. Set forth on Schedule 5.20 hereto, are
the Contracts, agreements, arrangements or understandings between IPWT, IPSE,
RMG and any of their Affiliates and between IPWT, IPSE, RMG and any AT&T
Affiliates; provided, however, with respect to IPWT, such Contracts, agreements,
arrangements or understandings are set forth only to the extent included in or
related to the Assets.
5.21. Representations and Warranties of RMG in IP-I/Charter Exchange
Agreement. The representations and warranties made by RMG in the IP-I/Charter
Exchange Agreement (as defined in the Common Agreement) are true, complete and
accurate in all respects. This Section 5.21 shall not survive the "Closing"
under the IP-I/Charter Exchange Agreement.
<PAGE> 33
6. CHARTER'S REPRESENTATIONS AND WARRANTIES. Charter represents and
warrants to IPWT as of the date of this Agreement and as of the Closing as
follows:
6.1. Organization and Qualification of Charter. Charter is a limited
liability company duly formed, validly existing and in good standing under the
laws of the State of Delaware. Charter has all requisite power and authority to
own, lease and use the assets owned, leased or used by it and to conduct its
business as it is currently being conducted by it. As of the date of this
Agreement, Charter is duly qualified to do business and is in good standing
under the laws of each jurisdiction in which the ownership, leasing or use of
the assets owned, leased or used by it or the nature of its activities in
connection with its business makes such qualification necessary.
6.2. Authority and Validity. Charter has all requisite corporate power and
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Transaction
Documents. The execution and delivery by Charter of, its performance under, and
its consummation of the transactions contemplated by, this Agreement and the
Transaction Documents have been duly and validly authorized by all action by or
on behalf of Charter. This Agreement has been, and when executed and delivered
by Charter the Transaction Documents will be, duly and validly executed and
delivered by Charter and the valid and binding obligations of Charter,
enforceable against it in accordance with their terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to the enforcement of
creditors' rights generally or by principles governing the availability of
equitable remedies.
6.3. No Conflict; Required Consents. Except as set forth on Schedule 6.3,
and assuming any consents referenced on Schedule 5.3 have been obtained and the
expiration or earlier termination of the waiting period under the HSR Act has
occurred, the execution and delivery by Charter of, its performance under, and
its consummation of the transactions contemplated by, this Agreement and the
Transaction Documents do not and will not: (a) conflict with or violate any
provision of the organizational documents of Charter; (b) violate any provision
of any Legal Requirement; (c) require any consent, approval or authorization of,
or filing of any certificate, notice, application, report or other document
with, any Governmental Authority or other Person; or (d) (i) conflict with,
violate, result in a breach of or constitute a default under (without regard to
requirements of notice, lapse of time or elections of other Persons or any
combination thereof), (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Charter under, or (iv) result in the
creation or imposition of any Lien under any instrument or other agreement to
which Charter is a party or by which Charter or any of its assets is bound or
affected, except for purposes of clauses (c) and (d) such consents, approvals,
authorizations and filings that, if not obtained or made, would not, and such
violations, conflicts, breaches, defaults, terminations, suspensions,
modifications and accelerations as would not, individually or in the aggregate,
have an adverse effect on its ability to perform its obligations under this
Agreement or the Transaction Documents.
6.4. Finder and Brokers. Charter has not entered into any Contract with
any person which will result in the obligation of IPWT to pay any Agent's Fees
in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
6.5. Litigation. Except as set forth on Schedule 6.5, there is no
Litigation pending or, to Charter's Knowledge, threatened against Charter or any
Affiliate of Charter which, if adversely determined, would materially and
adversely affect the ability of Charter to perform its obligations under this
Agreement.
<PAGE> 34
6.6. Qualification. Charter knows of no facts which would disqualify it
from holding the Shares under any Legal Requirement.
6.7. Securities Law Matters. Charter understands and acknowledges that
none of the Shares has been registered or qualified under the federal or
applicable state securities laws and the Shares are being sold to and purchased
by Charter in reliance upon applicable exemptions from such registration and
qualification requirements. Charter is an "accredited investor" within the
meaning of the federal securities laws and acknowledges it has been furnished
with or afforded access to, and has had the opportunity to ask questions and
receive answers concerning, all information pertaining to the Shares. The Shares
are being acquired by Charter for investment only and not with a view to any
public distribution thereof. Charter understands that the Shares are "restricted
securities" within the meaning of the federal securities laws and agrees that it
will not offer to sell or otherwise dispose of any of the Shares in violation of
the registration and qualification requirements of the federal and applicable
state securities laws. All certificates to be delivered at Closing evidencing
ownership of the Shares will contain appropriate legends incorporating these
applicable securities laws restrictions.
6.8. Taxpayer Identification Number. The U.S. Taxpayer Identification
Number for Charter is 43-1659860.
7. ADDITIONAL COVENANTS.
7.1. Access to Premises and Records. Between the date of this Agreement
and the Closing Date, IPWT (a) will, and will cause IPSE and RMG to, give
Charter and its counsel, accountants and other representatives reasonable access
during normal business hours and upon reasonable advance notice to (i) all
premises and books and records of the Cable Business, (ii) all Assets and the
personnel engaged in the management or operation of the Systems and (iii) all
other books and records of RMG; and (b) will, and will cause RMG to, furnish to
Charter and such representatives all such documents, financial information and
other information regarding the Cable Business, the Assets and RMG as Charter
from time to time reasonably may request; provided that no investigation will
affect or limit the scope of any of the representations, warranties, covenants
and indemnities of the other in this Agreement or in any Transaction Document or
limit liability for any breach of any of the foregoing.
7.2. Continuity and Maintenance of Operations, Certain Deliveries and
Notice. Except as set forth on Schedule 7.2(a) or in the 1999 operating budgets
set forth on Schedule 7.2(b) or as Charter may otherwise consent in writing,
between the date of this Agreement and the Closing, IPWT with respect to the
Cable Business, the Systems and the Assets:
7.2.1. will, and will cause IPSE and RMG to, conduct the Cable
Business in good faith and operate the Systems only in the usual, regular and
ordinary course (including making routine capital expenditures and operating
substantially in accordance with the 1999 capital and operating budgets with
respect to each such System (copies of which are set forth on Schedule 7.2(b)),
completing ongoing and planned line extensions, placing conduit or cable in new
developments, fulfilling installation requests, completing disconnection work
orders and disconnecting and discontinuing service to customers whose accounts
are delinquent) and, to the extent consistent with such conduct and operation,
use its commercially reasonable efforts to (a) preserve its current business
intact in all material respects, including preserving existing relationships
with franchising authorities, suppliers, customers and others having business
dealings with the Systems, (b) keep available the services of its employees and
agents providing services in connection with the Cable Business, (c) continue
budgeted marketing, advertising and promotional expenditures with respect to the
Cable
<PAGE> 35
Business, (d) enter into written agreements with respect to all multiple
dwelling unit and bulk billed accounts having greater than 200 individual units,
and (e) operate the Cable Business in material compliance with all Legal
Requirements;
7.2.2. will, and will cause IPSE and RMG to, maintain the Assets in
good operating repair, order and condition, ordinary wear and tear excepted;
will, and will cause IPSE and RMG to, maintain equipment and inventory for the
Systems at normal historical levels consistent with its past practices (as
adjusted to account for abnormally high inventory levels related to periodic
rebuild activity); will, and will cause IPSE and RMG to, maintain in full force
and effect policies of insurance with respect to the Cable Business in such
amounts and with respect to such risks as are currently in effect for the
Systems; and will, and will cause IPSE and RMG to, maintain its books, records
and accounts with respect to the Assets and the operation of the Systems in the
usual, regular and ordinary manner on a basis consistent with its past
practices;
7.2.3. will not, and will cause IPSE and RMG not to, outside the
ordinary course of business or to the extent inconsistent with past practice or
the 1999 operating budget included in Schedule 7.2(b), (a) modify, terminate,
renew, suspend or abrogate any System Contract (other than retransmission
consent System Contracts, System Contracts evidencing Leased Property or Other
Real Property Interests and lease agreements for Tangible Personal Property) or,
with respect to RMG, any other material Contract; (b) modify, terminate, renew,
suspend or abrogate any retransmission consent System Contract, System
Franchise, System Contract evidencing Leased Property or Other Real Property
Interests, lease agreements for Tangible Personal Property or System License
except for renewals (other than renewals of System Franchises) on terms that are
not materially different from those which currently exist and renewals of System
Franchises as otherwise required or permitted under this Agreement; (c) engage
in any marketing, subscriber installation, collection or disconnection
practices; (d) make any Cost of Service Election; (e) other than as set forth on
Schedule 7.2(a), enter into any agreement with or commitment to any competitive
access provider and/or local exchange company or any internet access or on-line
services provider with respect to the use or lease of any of the Assets; (f)
sell, transfer or assign any portion of the Assets other than sales in the
ordinary course of business or permit the creation of a Lien (other than
Permitted Liens) on any of the Assets; (g) decrease the rate charged for any
level of Basic Services, Expanded Basic Services or any Pay TV or, except as
expressly permitted by Schedule 7.2(a), add, delete, retier or repackage any
analog programming services, in each case except to the extent required under
the 1992 Cable Act or any other Legal Requirement; provided, however, that if
rates are decreased in order to so comply, IPWT will provide Charter with copies
of any FCC forms (even if not filed with any Governmental Authority) used to
determine that the new rates were required; (h) convert any of the Systems to
any billing system or otherwise change billing arrangements for any of the
Systems; (i) with respect to IPWT or IPSE, enter into any Contract of any kind
relating to the Cable Business to be assumed by Charter hereunder or, with
respect to RMG, enter into any Contract of any kind that individually or in the
aggregate call for payments pursuant to such Contract's terms or otherwise
involving expenditures in excess of one hundred thousand dollars ($100,000)
(with respect to IPWT or IPSE) or twenty-five thousand dollars ($25,000) (with
respect to RMG), except for the renewal of Contracts that would, but for such
renewal, terminate in accordance with their terms prior to Closing; (j) except
pursuant to or required by plans, agreements or arrangements already in effect
on the date hereof, make any material increase in compensation or benefits
payable or to become payable to employees or make any material change in
personnel policies; (k) take any action with respect to the grant or increase of
severance or termination pay payable after the Closing Date; (l) with respect to
IPWT or IPSE, engage in any material transaction with respect to the Cable
Business or, with respect to RMG, engage in any material transaction; or (m)
agree to do any of the foregoing; provided, however, that no provision of this
Section 7.2.3 shall be interpreted to prohibit or restrict in any way RMG's
right, in its full and absolute
<PAGE> 36
discretion, to take whatever actions it deems appropriate with respect to the
interests it holds in AVR of Tennessee, L.P. and Hyperion of Tennessee, L.P.
provided such actions do not expand RMG's liability beyond that which is set
forth in that certain Purchase Agreement between RMG and Hyperion
Telecommunications, Inc. dated as of February 11, 1999, a copy of which has been
delivered to Charter;
7.2.4. will, and will cause IPSE and RMG to, promptly deliver to
Charter (i) true and complete copies of all monthly statements of income and
such other information with respect to the Systems or the operation of the Cable
Business in a format consistent with the form of report attached hereto as
Schedule 7.2(c) for the period from January 1, 1999, through the Closing, and if
the Closing occurs as of the end of a month, as soon as practicable after
Closing and (ii) such financial information reasonably requested by Charter;
7.2.5. will, and will cause IPSE and RMG to, give or cause to be
given to Charter, as soon as reasonably possible but in any event within five
(5) Business Days after the date of submission to the appropriate Governmental
Authority, copies of all FCC Forms 1200, 1205, 1210, 1215, 1220, 1225, 1235 and
1240 or any other FCC forms required to be filed with any Governmental Authority
under the 1992 Cable Act with respect to rates and prepared with respect to any
of the Systems;
7.2.6. will, and will cause IPSE and RMG to, duly and timely file a
valid notice of renewal under Section 626 of the Cable Act with the appropriate
Governmental Authority with respect to any System Franchise that will expire
within thirty-six (36) months after any date between the date of the Agreement
and the Closing Date;
7.2.7. will, and will cause IPSE and RMG to, promptly notify Charter
of any fact, circumstance, event or action by it or otherwise (a) which, if
known at the date of this Agreement, would have been required to be disclosed by
it in or pursuant to this Agreement or (b) the existence, occurrence or taking
of which would result in the condition of IPWT in Section 8.2.1 (with respect to
the representations and warranties of Charter) or the condition of Charter in
Section 8.1.1 (with respect to the representations and warranties of IPWT) not
being satisfied at any time prior to or on the Closing, and, with respect to
clause (b), use its commercially reasonable efforts to remedy the same and to
satisfy such condition to the other Party's obligation to consummate the
transactions contemplated by this Agreement;
7.2.8. will, and will cause IPSE and RMG to, use its commercially
reasonable efforts to challenge and contest any Litigation brought against or
otherwise involving IPWT, IPSE or RMG that could result in the imposition of
Legal Requirements that could cause the conditions to the Closing not to be
satisfied; and
7.2.9. will, and will cause IPSE and RMG to, cause its appropriate
Affiliates to be bound by and comply with the provisions of this Section 7.2 to
the extent such Affiliates own, operate or manage any of the Assets or Systems.
<PAGE> 37
7.3. Employees.
7.3.1. Except as set forth in this Section 7.3.1, Charter may, but
shall have no obligation to (i) in the case of IPWT, employ or offer employment
to any employee of IPWT's Cable Business and (ii) in the case of RMG, cause RMG
to retain any employee. Within thirty (30) days after the date of execution of
this Agreement, IPWT shall, and shall cause RMG to, provide to Charter a list of
all employees of the Systems and any other employees of RMG (other than those
related to the Brentwood Systems) (collectively the "System Employees") as of a
recent date, showing the original hire date, the then-current positions and
rates of compensation and whether the employee is subject to an employment
agreement, a collective bargaining agreement or represented by a labor
organization. Within sixty (60) days after the date of execution of this
Agreement (but in no event less than thirty (30) days after receipt of such
list), or such other date as the Parties may agree, Charter will provide to IPWT
in writing a list of the System Employees Charter or its Affiliates will employ
following the Closing, subject only to the evaluations permitted by this
Section. IPWT agrees, and shall cause its appropriate Affiliates, to cooperate
in all reasonable respects with Charter to allow Charter or its Affiliates to
evaluate the System Employees to make hiring decisions. In this regard, Charter
shall have the opportunity to make such appropriate prehire investigation of
each of the System Employees, as it deems necessary, including, subject to
obtaining the consent of such System Employee, the right to review personnel
files and conduct background checks and the right to interview such employees
during normal working hours so long as such interviews are conducted after
notice to IPWT, IPSE or RMG, as appropriate, and do not unreasonably interfere
with IPWT's, IPSE's or RMG's operations. IPWT will, and will cause IPSE and RMG
to, use its good faith efforts to obtain the consent of each of its System
Employees to allow Charter to review personnel files and to conduct background
checks in connection with the foregoing. Charter or its Affiliates may, if it
wishes, condition any offer of employment upon the employee's passing a
pre-placement physical examination (including drug screening test) and the
completion of a satisfactory background check. Charter shall bear the expense of
such examination but IPWT shall, and shall cause IPSE and RMG to, upon
reasonable notice, cooperate in the scheduling of such examinations so long as
the examinations do not unreasonably interfere with IPWT's, IPSE's or RMG's
operations. RMG shall terminate, as of the Closing Date, any RMG employee which
Charter (or, with respect to the Brentwood Systems, IP-I or its Affiliates) has
determined not to retain. As of the Closing Date, Charter shall have no
obligation to IPWT, IPSE or RMG or their Affiliates, or to IPWT's, IPSE's or
RMG's employees, with regard to any employee it has determined not to hire or
retain, as the case may be, and IPWT and IPSE shall indemnify and hold Charter
and RMG harmless (pursuant to the Common Agreement) with respect to any Losses
incurred by RMG, Charter or its Affiliates with respect to employees terminated
pursuant to the preceding sentence. Notwithstanding any of the foregoing,
Charter agrees not to solicit for employment, without the written consent of
IPWT, IPSE or RMG, as appropriate, any employee of IPWT, IPSE or RMG whose
position is System manager or higher.
7.3.2. To the extent not included in the calculation of the Base
Value or the Adjusted Value in accordance with the terms of the Common
Agreement, IPWT will, and will cause IPSE and RMG to, pay to all of their
respective Systems Employees all compensation, including salaries, commissions,
bonuses, deferred compensation, severance (to the extent applicable), insurance,
vacation (except for accrued vacation time (not to exceed four weeks) and sick
time (not to exceed ten (10) days) included in the calculation of the Adjusted
Value, and other compensation or benefits to which they are entitled for periods
prior to the Closing, including all amounts, if any, payable on account of the
termination of their employment.
7.3.3. IPWT or its appropriate Affiliates, will be responsible for
maintenance and distribution of benefits accrued under any employee benefit plan
(as defined in ERISA) maintained by
<PAGE> 38
IPWT, IPSE, RMG, or its appropriate Affiliate, pursuant to the provisions of
such plan and any Legal Requirements. Charter will not assume any obligation or
liability for any such accrued benefits or any fiduciary or administrative
responsibility to account for or dispose of any such accrued benefits under any
employee benefit plans maintained by IPWT, IPSE, RMG or any of their Affiliates.
In the event that IPWT determines that the transactions contemplated by this
Agreement will not permit a distribution to be made to a Hired Employee (as
defined below) from IPWT's or IPSE's tax qualified plan in accordance with
Section 401(k)(10) of the Code then Charter may accept a plan-to-plan transfer
of Hired Employees' plan benefits to its own tax qualified plan. If there is no
plan-to-plan transfer, in order to permit IPWT or IPSE or their appropriate
Affiliates to make distributions to any former System Employee of IPWT or IPSE
who becomes a Hired Employee of Charter of the balance of such employee's 401(k)
account in IPWT's or IPSE's or their Affiliate's tax qualified plan, if any, as
soon as legally permitted, Charter shall notify IPWT of the date of termination
of such employee's employment with Charter for any reason.
7.3.4. To the extent not included in the calculation of the Base
Value or the Adjusted Value in accordance with the terms of the Common
Agreement, all claims and obligations under, pursuant to or in connection with
any welfare, medical, insurance, disability or other employee benefit plans of
IPWT, RMG or any of their Affiliates or arising under any Legal Requirement
affecting employees of IPWT, RMG or any of their Affiliates incurred on or
before the Closing Date or resulting from or arising from events or occurrences
occurring or commencing on or before the Closing Date will remain the
responsibility of IPWT or its appropriate Affiliate (other than RMG), whether or
not such employees are hired by Charter as of or after the Closing. Charter will
not have or assume any obligation or liability under or in connection with any
such plan of IPWT, RMG or any Affiliate of IPWT or RMG, as appropriate.
7.3.5. To the extent not included in the calculation of the Base
Value or the Adjusted Value in accordance with the terms of the Common
Agreement, IPWT and IPSE will remain solely responsible for all indemnities in
the Common Agreement, and all salaries and all severance, vacation (except for
accrued vacation time and sick time included in the calculation of the Adjusted
Value), medical, holiday, continuation coverage and other compensation or
benefits to which the employees of IPWT, IPSE, RMG or their Affiliates may be
entitled, whether or not such employees may be hired by Charter, IP-I or any
Affiliate of Charter, as a result of their employment by IPWT, IPSE or RMG, or
any Affiliate of IPWT, IPSE or RMG, as appropriate, on or prior to the Closing
Date, the termination of their employment on or prior to the Closing Date, the
consummation of the transactions contemplated hereby or pursuant to any
applicable Legal Requirement or otherwise relating to their employment prior to
the Closing Date. Any liability under WARN with regard to any employee
terminated on or prior to the Closing Date, or not hired by Charter or retained
by RMG on or after the Closing Date, shall, as a matter of contract between the
parties, be the responsibility of IPWT, IPSE or their Affiliates (other than
RMG) to the extent not included in the calculation of the Base Value or the
Adjusted Value in accordance with the terms of the Common Agreement,. Charter
and its Affiliates shall cooperate with IPWT, IPSE, RMG and their Affiliates, if
requested, in the giving of WARN notices.
<PAGE> 39
7.3.6. Notwithstanding anything to the contrary herein, Charter
shall (or, following the Closing, shall cause RMG to):
(a) credit each System Employee who is offered on or prior to
the Closing employment by Charter and becomes an employee of Charter after the
Closing Date or who remains a System Employee of RMG after the Closing Date (a
"Hired Employee") the amount of vacation time (to a maximum of four (4) weeks)
and sick time (to a maximum of ten (10) days) accrued by him or her as a System
Employee of IPWT, RMG or IPSE, as appropriate, through and including the Closing
Date to the extent the Adjusted Value is decreased pursuant to Section 2.2(c) of
the Common Agreement in the case of System Employees who become employees of
Charter or its Affiliates or RMG; provided, however, that if any Hired Employee
has accrued vacation time and/or sick time in excess of four (4) weeks or ten
(10) days, respectively, then IPWT shall pay to such employee the amount of such
excess and neither Charter nor RMG shall assume any liability or obligation in
respect of such excess;
(b) permit each Hired Employee to participate in Charter's
employee benefit plans to the same extent as similarly situated employees of
Charter and their dependents are permitted to participate;
(c) give each Hired Employee credit for such employee's past
service with IPWT, IPSE or RMG, as appropriate, and their Affiliates as of the
Closing Date (including past service with any prior owner or operator of the
Systems or the Cable Business) for purposes of eligibility and vesting under
Charter's employee benefit and other plans to the same extent as other similarly
situated employees of Charter;
(d) not subject any Hired Employee to any waiting periods or
limitations on benefits for pre-existing conditions under Charter's employee
benefit plans, including any group health and disability plans, except to the
extent such employees were subject to such limitations under the employee
benefit plans of IPWT, IPSE, RMG or any of their Affiliates; and
(e) credit each Hired Employee under any group health plan for
any deductible amount previously met by such Hired Employee as of the Closing
Date under any of the group health plans of IPWT, IPSE, RMG or any of their
Affiliates.
7.3.7. If Charter or RMG discharges any Hired Employee without cause
within one hundred twenty (120) days after Closing, then Charter shall pay
severance benefits to such Hired Employee in accordance with IPWT's, IPSE's or
RMG's severance benefit plan, as the case may be. For purposes of this Section
7.3.7, "cause" shall have the meaning set forth in Charter's employment
policies, procedures or agreements applicable to Charter's employees who are
situated similarly to the discharged Hired Employee.
7.3.8. If IPWT, IPSE or RMG has, or acquires, a duty to bargain with
any labor organization, then IPWT will, and will cause IPSE or RMG to, as
appropriate, (i) give prompt written notice of such development to Charter,
including notice of the date and place of any negotiating sessions as they are
planned or contemplated and permit Charter to have a representative present at
all negotiating sessions with such labor organization and at all meetings
preparatory thereto (including making Charter's representative a representative
of IPWT's, IPSE's or RMG's delegation if required by the labor organization) and
(ii) not, without Charter's written consent, enter into any Contract with such
labor organization that purports to bind Charter, including any successor clause
or other clause which would have this purpose or effect. IPWT acknowledges and
agrees that Charter has not agreed to be bound, and will not be bound, without
an explicit assumption of such liability or responsibility by
<PAGE> 40
Charter, by any provision of any collective bargaining agreement or similar
Contract with any labor organization to which IPWT, IPSE, RMG or any of their
Affiliates are or may become bound.
7.3.9. Nothing in this Section 7.3 or elsewhere in this Agreement
shall be deemed to make any employee of the Systems a third party beneficiary of
this Agreement.
7.3.10. Notwithstanding any other provision of this Agreement, in
respect of wages paid with respect to the 1999 calendar year to employees of
IPWT or IPSE who after the Closing become employees of Charter, the Parties
agree to comply, and to cause their respective Affiliates to comply, with the
alternative procedure set forth in Section 5 of Revenue Procedure 96-60 and
shall cooperate, and shall cause their respective affiliates to cooperate, with
each other in complying with such procedures.
7.4. Leased Vehicles; IPWT Other Capital Leases. To the extent not
included in the calculation of the Base Value or the Adjusted Value in
accordance with the terms of the Common Agreement, except for leases described
in Schedule 4.1(b), IPWT or IPSE will pay the remaining balances on any leases
for vehicles or capital leases included in the Tangible Personal Property and
will deliver title to such vehicles and other Tangible Personal Property to
Charter at the Closing, free and clear of all Liens. At the Closing, RMG will
have good and marketable title to its vehicles and Tangible Personal Property,
free and clear of all Liens.
<PAGE> 41
7.5. Required Consents; Franchise Renewal.
7.5.1. Each Party will use its commercially reasonable efforts to
(i) obtain in writing as promptly as possible and at its expense, all of the
Required Consents and any other consent, authorization or approval required to
be obtained by such Party or its Affiliates in connection with the transactions
contemplated by this Agreement, and deliver to the other Party copies of such
Required Consents and such other consents, authorizations or approvals promptly
after they are obtained by such Party and (ii) give any required written notice
in connection with the transactions; provided, that each Party will afford the
other Party the opportunity to review, approve and revise the form of letter or
application proposed to request the Required Consent or form of written notice
prior to delivery to the Third Party or the Affiliate of a Party whose consent
is sought or to whom such notification is required. All documents delivered or
filed with any Governmental Authority or any Person by or on behalf of such
Party pursuant to this Section 7.5.1, when so delivered or filed, will be
correct, current and complete in all material respects. Each Party will
cooperate with the other Party to obtain all Required Consents and no Party
shall intentionally take any action or steps that would prejudice or jeopardize
the obtaining of any Required Consent. IPWT will, and will cause IPSE and RMG
to, not accept or agree or accede to any modifications or amendments to, or the
imposition of any condition to the transfer of, any of the System Franchises,
System Licenses or System Contracts of the Cable Business that are not
acceptable to Charter. Notwithstanding the foregoing, as soon as practicable
after the date of this Agreement (and in no event more than fifteen (15)
Business Days hereafter), each Party will cooperate with the other to complete,
execute and deliver, or cause to be completed, executed and delivered, to the
appropriate Governmental Authority, a FCC Form 394 with respect to each System
Franchise other than any such Governmental Authority that the Parties have
agreed will not initially receive FCC Form 394; provided, that if either Party
subsequently requests that FCC Form 394 be completed, executed and delivered to
any appropriate Governmental Authority that did not initially receive a FCC Form
394 for any System Franchise, then the Parties will cooperate to complete,
execute and deliver a FCC Form 394 to such Governmental Authority as soon as
practicable but in any event within fifteen (15) Business Days after a Party has
made such request. Without the prior consent of the other Party, neither Party
shall agree with any Governmental Authority to extend or to toll the time limits
applicable to such Governmental Authority's consideration of any FCC Form 394
filed with such Governmental Authority.
7.5.2. Each Party will use commercially reasonable efforts to obtain
and cooperate with the other Party to obtain a renewal or extension of any
System Franchise (for a period expiring no earlier than three years after the
Closing Date) for which a valid notice of renewal pursuant to the formal renewal
procedures established by Section 626 of the Cable Act has not been timely
delivered to the appropriate Governmental Authority and no written confirmation
has been received from such Governmental Authority that the procedures
established by Section 626 nonetheless will be applicable with respect to the
renewal or extension of such System Franchise.
7.5.3. Notwithstanding the provisions of Section 7.5.1, no Party
will have any further obligation to obtain Required Consents: (a) with respect
to license agreements relating to pole attachments where the licensing authority
will not consent to an assignment of such license agreement but requires that
Charter enter into a new agreement with such licensing authority, in which case
Charter shall use its commercially reasonable efforts to enter into such
agreement prior to Closing or as soon as practicable thereafter and IPWT will
cooperate with and assist Charter in obtaining such agreements; (b) for any
business radio license or any private operational fixed service (POFS) microwave
license which IPWT reasonably expects can be obtained within one hundred twenty
(120) days after the Closing and so long as a conditional temporary
authorization (for a business radio license) or a special temporary
authorization (for a POFS license) is obtained by Charter under FCC
<PAGE> 42
rules with respect thereto; (c) with respect to Contracts evidencing Leased
Property, if, with the consent of Charter, IPWT obtains and makes operational
prior to Closing substitute Leased Property that is reasonably satisfactory to
Charter; (d) with respect to Contracts evidencing leased Tangible Personal
Property that is material to the Cable Business, if, with the consent of
Charter, IPWT obtains and makes operational prior to Closing substitute Tangible
Personal Property that is reasonably satisfactory to Charter; and (e) with
respect to Contracts which are not identified with an asterisk (*) on Schedule
5.3 or 6.3, respectively, if IPWT uses its commercially reasonable efforts to
obtain the Required Consent of the other party to such Contract but fails to
obtain such consent on or prior to Closing.
7.5.4. If and to the extent that IPWT and Charter, or either of
them, fails to obtain all Required Consents identified with an asterisk (*) on
Schedule 5.3 or 6.3 (except IPWT Required Consents for the transfer of Systems
Franchises which shall be governed by Section 7.5.5) on or prior to the Closing
(whether or not Charter or IPWT shall have waived satisfaction of the condition
to Closing set forth in Section 8.1.5 or Section 8.2.5, respectively),
subsequent to the Closing, IPWT with respect to the Systems and Assets will
continue to use commercially reasonable efforts to obtain in writing as promptly
as possible such Required Consents and will deliver copies of the same,
reasonably satisfactory in form and substance, to Charter. The obligations set
forth in this Section will survive the Closing and will not be merged in the
consummation of the transactions contemplated hereby.
7.5.5. If less than all of the Required Consents for the transfer of
Systems Franchises are obtained as of the Closing Date, then subject to the
conditions set forth in Section 4.1(c) of the Common Agreement, the following
will occur:
(a) The Parties shall negotiate in good faith to reach
agreement on one or more operating agreements pursuant to which Charter will
operate any IPWT Assets located in the franchise area for the System Franchise
for which a Required Consent has not been obtained ("Retained Franchise") and
will receive the economic benefits of such operation to the extent not
prohibited under the terms thereof, or other compensation as may be agreed upon,
which operating agreements shall also contain any required signal sharing
arrangements that the Parties, each acting in good faith, may determine to be
necessary (the "Operating Agreements").
(b) At the Closing, IPWT shall transfer, convey and assign
(the "Primary Transfer") the Shares and all of the IPWT System Assets other than
any Retained Franchises.
(c) Following the Closing of the Primary Transfer, the parties
will continue to use commercially reasonable efforts to obtain on an expedited
basis the Required Consents for all Retained Franchises. The Operating
Agreements will contain mutually acceptable terms regarding the post-Closing
exchange or transfer (a "Subsequent Transfer") of the Retained Franchises after
the receipt or failure to receive the Required Consents applicable to such
Retained Franchises.
(d) All references in this Agreement to the Closing and the
Closing Date will mean the Closing and Closing Date of the Primary Transfer
except as specifically provided otherwise in this Section 7.5.5(d). Without
limiting the foregoing, all representations and warranties (except as to those
Required Consents that have not been obtained) made in connection with the
Retained Franchises will be made as of the Closing Date rather than the date of
the Subsequent Transfer, the other covenants in Article 7 will not apply to the
Retained Franchises following the Closing Date, and the Survival Period
applicable under Article 11 for all such representations, warranties and
covenants will accrue from the Closing Date; provided, that the parties will
negotiate in good faith to include appropriate covenants in the Operating
Agreements that will apply to the Retained
<PAGE> 43
Franchises following Closing. The closing conditions in Article 8 will not apply
to any Retained Franchise transfer; provided, that the parties will negotiate in
good faith to include appropriate conditions to the later transfer of the
Retained Franchises in the Operating Agreements. Notwithstanding the foregoing,
the adjustments provided for in Article 3 will be made as of the Closing Date
for the Retained Franchises.
(e) If the provisions of this Section 7.5.5 become operative,
the parties agree to use commercially reasonable efforts and act in good faith
in taking such actions and negotiating such additional provisions or other
agreements, including amendments to this Agreement, as may be necessary or
appropriate to carry out the intent of this Section 7.5.5, including keeping
franchise transfers effective.
7.6. Title Commitments and Surveys. Charter will have the option to
obtain, at its own expense, (i) commitments of title insurance ("Title
Commitments") issued by a nationally recognized title insurance company selected
by Charter (the "Title Company") and containing policy limits and other terms
reasonably acceptable to Charter, and photocopies of all recorded items
described as exceptions therein committing to insure (a) fee title in Charter to
each parcel of Owned Property and (b) a leasehold interest in Charter in each
parcel of Leased Property that is the site of a System headend or tower, by
American Land Title Association ("ALTA") (1992) owner's or lessee's policies of
title insurance, and (ii) current ALTA as-built surveys (in accordance with the
Minimum Standard Detail Requirements for Land Title Surveys jointly established
and adopted by ALTA and the American Congress on Surveying and Mapping in 1992)
of each such parcel of Owned Property or Leased Property with monuments placed
at all major corners of the property boundary unless already marked and showing
the location and identification by recorded instrument number of all easements
or rights-of-way burdening or benefiting the property in question and all other
documents and matters referenced as exceptions on the Title Commitment, the
location of all apparent easements and rights-of-way, flood zone designation,
setback lines, if applicable, the location of all substantial visible
improvements on such property and the location of all adjoining streets and
indication of access to a public way such as curb cuts and driveways, in such
form as is reasonably satisfactory to Charter and as is necessary to obtain the
title insurance to be issued pursuant to the Title Commitments with the standard
printed exceptions relating to survey matters deleted (the "Surveys"), certified
to the parties and the Title Company issuing a Title Commitment. If Charter
notifies IPWT within twenty (20) days of this Agreement or, if later, of its
receipt of both the Title Commitments and the Surveys of any Lien (other than a
Permitted Lien) or other matter affecting title to Owned Property or Leased
Property which renders (or presents a material risk of rendering) title to any
parcel of Owned Property not good and marketable or prevents or materially
interferes with (or presents a material risk of preventing or interfering with)
the use of any parcel of Owned Property or Leased Property for the purposes for
which it is currently used or intended to be used by IPWT (each a "Title
Defect"), IPWT will exercise commercially reasonable efforts to remove or, with
the consent of Charter, cause the Title Company to commit to insure over, each
such Title Defect prior to the Closing.
7.7. HSR Notification. As soon as practicable after the execution of this
Agreement, but in any event no later than thirty (30) days after such execution,
Charter and IPWT will each complete and file, or cause to be completed and filed
at its own cost and expense, any notification and report required to be filed
under the HSR Act with respect to the transactions contemplated by this
Agreement and each such filing shall request early termination of the waiting
period imposed by the HSR Act. The Parties shall use their respective
commercially reasonable efforts to respond as promptly as reasonably practicable
to any inquiries received from the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") for
additional information or documentation and to respond as promptly as reasonably
practicable to all inquiries and requests
<PAGE> 44
received from any other Governmental Authority in connection with antitrust
matters. The Parties shall use their respective commercially reasonable efforts
to overcome any objections which may be raised by the FTC, the Antitrust
Division or any other Governmental Authority having jurisdiction over antitrust
matters. Each Party will cooperate to prevent inconsistencies between their
respective filings and between their respective responses to all such inquiries
and responses, and will furnish to each other such necessary information and
reasonable assistance as the other may reasonably request in connection with its
preparation of necessary filings or submissions under the HSR Act.
Notwithstanding the foregoing, no Party shall be required to make any
significant change in the operations or activities of the business (or any
material assets employed therein) of such Party or any of its Affiliates, if a
Party determines in good faith that such change would be materially adverse to
the operations or activities of the business (or any material assets employed
therein) of such Party or any of its Affiliates having significant assets, net
worth or revenue.
7.8. Sales and Transfer Taxes. All sales, use or excise Taxes arising from
or payable by reason of the transfer of any of the Assets ("Transfer Taxes")
will be shared equally by IPWT and Charter. All transfer and similar taxes or
assessments, including transfer fees and similar assessments for or under System
Franchises, System Licenses and System Contracts, arising from or payable by
reason of the conveyance of the Assets and the Shares also will be shared
equally by IPWT and Charter. Tax Returns required to be filed in respect of
Transfer Taxes ("Transfer Tax Returns") shall be prepared and filed by the Party
that has the primary responsibility under applicable law for filing such
Transfer Tax Returns. If neither Party has primary responsibility for filing a
Transfer Tax Return, then Charter shall be responsible for preparing and filing
any such Transfer Tax Return.
7.9. Programming. Charter will execute and deliver such documents and take
such action as may be reasonably requested by IPWT to enable IPWT, IPSE and RMG
to comply with the requirements of their programming agreements with respect to
divestitures and acquisitions of cable television systems; provided, however,
that neither Charter nor, following the Closing, RMG, will be required to
provide specific programming or channels or to assume any liability with respect
to or in connection with the programming agreements of IPWT, IPSE or any of
their Affiliates, except to the extent included on Schedule 4.1(b).
7.10. Updated Schedules.
(a) Schedule and exhibit references contained in this Agreement are
for convenience only and any matter disclosed pursuant to one section,
subsection or other provision of this Agreement, are deemed disclosed for all
purposes of this Agreement, as long as the disclosure with respect to such
matter provides a truthful, accurate and adequate description of all relevant
aspects of such matter.
(b) Not less than ten (10) Business Days prior to Closing, IPWT will
deliver to Charter revised copies of each of its Schedules, except for Schedule
5.16 as it relates to matters addressed in Sections 5.16.1 and 5.16.2
(regardless of whether the original Schedule is as of a certain date) which
shall have been updated and marked to show any changes occurring between the
date of this Agreement and the date of delivery; provided, however, that such
updates are for informational purposes only, and for purposes of determining
whether IPWT's representations, warranties and covenants in this Agreement are
true and correct at Closing, all references to the Schedules will mean the
version of the Schedules attached to this Agreement on the date of signing.
Notwithstanding the foregoing, if the effect of any such updates to Schedules is
to disclose any one or more additional properties, privileges, rights, interests
or claims, in each case acquired after the date of this Agreement ("New
Properties") as Assets that would have been (if owned on the date of this
Agreement) required
<PAGE> 45
by this Agreement to have been disclosed by IPWT in its original Schedules or
that were acquired by IPWT, IPSE or RMG after the date of this Agreement in
breach of this Agreement, then Charter, at or before Closing, will have the
right (to be exercised by written notice to IPWT) to cause any one or more of
such New Properties to be designated as and deemed to constitute Excluded Assets
of IPWT or IPSE for all purposes under this Agreement. If such right is not
exercised by Charter and if Charter waives the applicable condition to Closing
provided in Section 8.1.1 or 8.1.2, Charter shall be deemed to have accepted
such new disclosure with respect to such New Properties and it shall be deemed
incorporated by reference into the Schedules. Notwithstanding anything to the
contrary contained in this Agreement, and except as set forth in the preceding
sentence with respect to New Properties, the waiver of any condition to Closing
by a Party who has knowledge of a breach by the other Party will not be deemed a
waiver of any rights and remedies with respect to such breach under this
Agreement or the Common Agreement.
7.11. Use of Name and Logo. For a period of one hundred eighty (180) days
after the Closing, Charter will be entitled to use the trademarks, trade names,
service marks, service names, logos and similar proprietary rights of IPWT or
IPSE to the extent incorporated in or on the Assets transferred to it at the
Closing on a royalty-free basis, provided that Charter will exercise
commercially reasonable efforts to remove all such names, marks, logos and
similar proprietary rights of the transferor (except to the extent otherwise
permitted by IPWT or IPSE) from the Assets as soon as reasonably practicable,
and in any event within one hundred eighty (180) days, following the Closing.
Notwithstanding the foregoing, nothing in this Section will require Charter to
remove or discontinue using any such name or mark that is affixed to converters
or other items in or to be used in customer homes or properties, or as are used
in a similar fashion making such removal or discontinuation impracticable.
7.12. Transitional Billing Services. IPWT will provide Charter, upon
written request delivered a reasonable amount of time in advance and to the
extent reasonably practicable, access to and the right to use its billing system
computers, software and related fixed assets in connection with the Systems for
a period of up to one hundred fifty (150) days following the Closing to allow
for conversion of existing billing arrangements, including billing and related
arrangements regarding internet access services being provided to customers of a
System on the Closing Date ("Transitional Billing Services"). Charter will
notify IPWT at least thirty (30) days prior to the Closing as to whether it
desires Transitional Billing Services from IPWT. All Transitional Billing
Services, if any, that are requested by Charter will be provided on terms and
conditions reasonably satisfactory to each Party; provided, however, that the
amount to be paid by Charter for such Transitional Billing Services will not
exceed the out-of-pocket cost to IPWT of providing such Transitional Billing
Services. IPWT will notify Charter of the cost to IPWT of providing such
Transitional Billing Services within ten (10) Business Days after receiving
Charter's notice requesting the provision of such Transitional Billing Services.
<PAGE> 46
7.13. Confidentiality and Publicity.
7.13.1. Prior to the Closing, each Party will keep confidential any
non-public information that such Party may obtain from the other in connection
with this Agreement, and following the Closing, each Party will keep
confidential any non-public information that such Party may obtain from the
other in connection with this Agreement unrelated to the Cable Business, Systems
and Shares transferred by IPWT pursuant to this Agreement as well as any
non-public information in the possession of Charter related to the Cable
Business, Systems and Shares transferred by IPWT to Charter pursuant to this
Agreement (any such information that a Party is required to keep confidential
pursuant to this sentence shall be referred to as "Confidential Information").
Charter will not disclose, and will cause its employees, consultants, advisors
and agents not to disclose, any Confidential Information to any other Person
(other than its directors, officers and employees and representatives of its
advisers and lenders whose knowledge thereof is necessary in order to facilitate
the consummation of the transactions contemplated hereby) or use, and will cause
its controlled Affiliates, directors, officers, employees, consultants, advisors
and agents not to use, such Confidential Information to the detriment of the
other; provided that (i) Charter may use and disclose any such Confidential
Information once it has been publicly disclosed (other than by Charter in breach
of its obligations under this Section) or which rightfully has come into the
possession of Charter (other than from IPWT, IPSE or RMG and other than from
another Person in violation of any duty or obligation of confidentiality) and
(ii) to the extent that Charter may, in the reasonable opinion of its counsel,
be compelled by Legal Requirements to disclose any of such Confidential
Information, Charter may disclose such Confidential Information if it will have
used all reasonable efforts, and will have afforded the other the opportunity,
to obtain an appropriate protective order or other satisfactory assurance of
confidential treatment, for the Confidential Information compelled to be
disclosed. In the event of termination of this Agreement, Charter will cause to
be delivered to IPWT, IPSE or RMG, and retain no copies of, any documents, work
papers and other materials obtained by Charter or on its behalf from the other,
whether so obtained before or after the execution hereof.
7.13.2. No Party will issue any press releases or make any other
public announcement concerning this Agreement and the transactions contemplated
hereby, except as required by applicable Legal Requirements, without the prior
written consent and approval of the other Party, which consent and approval may
not be unreasonably withheld.
7.13.3. Each Party expressly agrees that, in addition to any other
right or remedy the other may have, such other Party may seek and obtain
specific performance of the covenants and agreements set forth in or made
pursuant to this Section 7.13 and temporary and permanent injunctive relief to
prevent any breach or violation thereof, and that no bond or other security may
be required from such other parties in connection therewith.
7.14. Bulk Transfer. Each Party waives compliance by each other Party with
Legal Requirements relating to bulk transfers applicable to the transactions
contemplated hereby.
7.15. Lien Searches. IPWT will obtain, at its expense, the results of a
lien search conducted by a professional search company of records in the offices
of the secretaries of state in each state and county clerks in each county where
there exist any Owned Property or Tangible Personal Property, and in the state
and county where IPWT's, IPSE's or RMG's principal offices are located,
including copies of all financing statements or similar notices or filings (and
any continuation statements) discovered by such search company.
<PAGE> 47
7.16. Further Assurances. At or after the Closing, each Party at the
request of the other Party, will promptly execute and deliver, or cause to be
executed and delivered, to the other Party all such documents and instruments,
in addition to those otherwise required by this Agreement, in form and substance
reasonably satisfactory to the other Party as the other Party may reasonably
request in order to carry out or evidence the terms of this Agreement or to
collect any accounts receivable or other claims included in the Assets.
7.17. Post-Closing Cooperation as to Rates.
7.17.1. IPWT will use commercially reasonable efforts to cooperate
with and assist Charter by providing, upon reasonable request, all information
in IPWT's possession (and not previously made available to Charter) relating
directly to the rates set forth on Schedule 5.17.2 or on any of FCC Forms 1200,
1205, 1210, 1220, 1225, 1235 or 1240 or any other FCC Form, that Charter may
reasonably require to justify such rates in response to any inquiry, order or
requirements of any Governmental Authority.
7.17.2. Prior to Closing, IPWT shall not, and shall cause IPSE and
RMG not to, settle or permit to be settled any rate proceeding with respect to
the Systems without the consent of Charter, which consent will not be
unreasonably withheld or delayed, unless the proposed settlement includes
injunctive or other relief that adversely affects the Assets or its ability to
operate such Systems substantially in the manner in which they are operated on
the date of this Agreement (other than changing the rates in question), in which
case consent may be withheld or delayed in Charter's sole discretion.
7.17.3. After the Closing, IPWT will be responsible for and follow
to conclusion any rate order of any Governmental Authority or proceeding with
respect to rates of any of the IPWT Systems charged by it immediately prior to
the Closing; provided, however, that IPWT shall not: (i) agree to any
forward-looking rate adjustment; (ii) submit any refund plan to a Governmental
Authority that would impact any rates charged or impose financial liability on
Charter after the Closing; or (iii) appeal or take any other action with regard
to such proceeding that would impact any rates charged or impose financial
liability on Charter after the Closing, in any case without obtaining the prior
written consent of Charter, which consent shall not be unreasonably withheld.
Each Party will cooperate with and assist the other by providing, upon
reasonable request, all information in its possession (and not previously made
available to the requesting Party) that the requesting Party may reasonably
require to justify rates in response to any inquiry, order or requirements of
any Governmental Authority.
7.17.4. If, following Closing any System is required pursuant to any
Legal Requirement, settlement or otherwise to refund to subscribers any
payments, in whole or in part, made by such subscribers prior to Closing,
including fees for cable television service, equipment charges, late fees and
similar payments, then at the election of Charter and upon IPWT's prior written
consent, which consent shall not be unreasonably withheld: (i) IPWT must fulfill
such refund obligation through a one-time cash payment to subscribers, in which
case IPWT shall provide funds for such payment to Charter, Charter shall
cooperate with IPWT or implement and administer such refund payment through
Charter's billing system, and IPWT shall reimburse Charter for all reasonable
expenses incurred by Charter in connection therewith; (ii) Charter may fulfill
such refund obligation through a cash payment, credit or in-kind or other form
of consideration, at its discretion and subject to any required approval by a
Governmental Authority, and IPWT shall reimburse Charter in the amount of any
payment or in the amount of the cost to Charter of any credit or in-kind or
other form of consideration and all reasonable expenses incurred by Charter in
connection therewith. Without limiting the foregoing,
<PAGE> 48
Charter will provide IPWT with all information in Charter's possession that is
reasonably required by IPWT in connection with such reimbursement.
7.17.5. If Charter is permitted following Closing to pass through to
subscribers of the Systems, the amount of any "franchise fees on franchise fees"
paid by IPWT, IPSE or RMG to the appropriate local franchising authority with
respect to the period prior to Closing, Charter agrees that it will collect for
the benefit of IPWT such amounts specified no later than the Six-Month Date as
paid by IPWT, IPSE or RMG and, except as specified below, will promptly remit
such amounts to IPWT; provided, however, that if a local franchising authority
challenges such collection or orders Charter to refund such fees to subscribers,
then Charter shall not remit the fees to IPWT but shall hold such fees in escrow
and the parties will cooperate reasonably and in good faith to challenge such
local franchising authority action. Upon the final resolution of such local
franchising authority action, the escrowed fees shall be released from escrow
and, to the extent not refunded to subscribers, paid over to IPWT. IPWT agrees
to provide Charter with such documentation as necessary to demonstrate its
payment of the "franchise fees on franchise fees" and to enable Charter to
collect the pass through amounts from subscribers.
7.18. Distant Broadcast Signals. Unless otherwise restricted or prohibited
by any Governmental Authority, applicable Legal Requirements or Contract, IPWT
will, and will cause IPSE and RMG to, if requested by Charter, delete prior to
the Closing any distant broadcast signals which Charter determines will result
in unacceptable liability on the part of Charter for copyright payments with
respect to continued carriage of such signals after the Closing; provided,
however, that IPWT may refuse to honor such a request if such deletion could
reasonably be expected to delay or otherwise jeopardize its ability to complete
the transactions contemplated herein.
<PAGE> 49
7.19. Environmental Assessment.
7.19.1. IPWT acknowledges and agrees, subject to any enforceable
restrictions placed thereon by a Third Party owner or lessor of any real
property involved, that Charter may commission, at Charter's cost and expense, a
so-called "Phase I" environmental site assessment of the Assets or other
property of RMG (a "Phase I Assessment"). If the Phase I Assessment or any other
information known to IPWT (including information disclosed in connection with
the negotiation of this Agreement or described in the Schedules hereto)
indicates that a so-called "Phase II" assessment or other additional testing or
analysis of the Assets or other property of RMG as Charter may deem appropriate
(a "Phase II Assessment") is advisable, then, subject to any enforceable
restrictions placed thereon by a Third Party owner or lessor of any real
property involved, Charter may elect to cause its agents or representatives to
conduct such testing and analysis. IPWT will use its commercially reasonable
efforts to comply with any reasonable request for information made by Charter or
its agents in connection with any such investigation, but in no event will IPWT
be required under this Section 7.19.1 to disclose any materials constituting
attorney-client privileged communications. IPWT covenants that any response to
any such request for information will be complete and correct in all material
respects. IPWT will afford Charter and its agents or representatives access to
all operations of IPWT, and will cause IPSE and RMG to afford Charter and its
agents or representatives access to all operations of IPSE and RMG, at all
reasonable times and in a reasonable manner in connection with any such
investigation subject to any reasonably required approval of IPWT's, IPSE's or
RMG's landlords, as appropriate, which approval IPWT will, and will cause IPSE
and RMG to, use its commercially reasonable efforts to obtain. Should Charter
commission such an investigation, such investigation will have no effect upon
the representations and warranties made by IPWT to Charter under this Agreement
except that if any Phase I Assessment or Phase II Assessment uncovers an
environmental condition which then comprises a breach of IPWT's representations
or warranties herein and such breach is capable of being cured, IPWT shall be
deemed not to have breached such representation or warranty if IPWT cures such
breach in accordance with the provisions of this Agreement. In the event this
Agreement is terminated or fails to close in accordance with its terms, Charter
agrees to repair any damage or disturbance it causes to the Owned Property or
Leased Property (or, in the case of RMG, other property of RMG) in the course of
such investigative activities by returning such Owned Property or Leased
Property (or, in the case of RMG, other property of RMG) to approximately the
same condition as existed prior to such investigative activities. Charter shall
indemnify, protect, defend and hold IPWT, IPSE, RMG and the Assets (or, in the
case of RMG, other property of RMG) free and harmless from and against any and
all claims, actions, causes of action, suits, proceedings, costs, expenses
(including reasonable attorneys' and consultants' fees and costs), liabilities,
damages, and liens of any type arising directly out of any act or omission of
Charter or any of Charter's representatives on or about the Owned Property or
Leased Property (or, in the case of RMG, other property of RMG) in the course of
such investigative activities. However, neither of the two preceding sentences
shall be interpreted to impose any obligation upon Charter with respect to
Hazardous Substances present at, on, in, under or about, or any conditions
existing on, the Owned Property or Leased Property (or, in the case of RMG,
other property of RMG) at the time of such investigative activities, except to
the extent of Charter's negligence or willful misconduct causes a release of
such Hazardous Substances or otherwise exacerbates any such condition in a
manner that leads to liability under any Environmental Law.
7.19.2. All information collected and generated as a result of the
environmental due diligence authorized by Section 7.19.1 will be subject to the
terms and conditions of Section 7.13 of this Agreement. Charter shall provide to
IPWT copies of all draft and final reports, assessments and other information
composed or compiled by Charter's environmental consultants within five (5)
Business Days after Charter's receipt of copies thereof.
<PAGE> 50
7.20. Year 2000 Matters.
7.20.1. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Computer and Other Systems" means any level of hardware
or software, equipment and cable plant, or environmental and security systems
and other facilities used in connection with the Cable Business which are date
dependent or which process date data, including any firmware, embedded systems,
application programs, user interfaces, files and databases, and which might be
adversely affected by any date-related issue or calculation prior to, during or
after January 1, 2000, including any problem related to a leap year.
(b) "Year 2000 High-Level Inventory, Assessment and
Remediation Decisions" means the subject entity's documentation of its Year 2000
inventory, assessment and remediation decisions performed in accordance with its
Year 2000 Plan, consisting of (i) database reports identifying each category of
items inventoried at the subject entity's cable Systems and specifying as
appropriate the manufacturer or vendor and release, version or model number of
each item listed, (ii) risk or critically assessments, (iii) determination and
execution of evaluation approaches with respect to Year 2000 Readiness, (iv)
determination of Year 2000 Readiness based on evaluation approaches employed,
and (v) decisions regarding disposition alternatives (i.e., do nothing, repair,
replace or retire). All such reports have been reviewed at appropriate levels
within the subject entity's organization in accordance with the entity's Year
2000 Plan. Year 2000 High-Level Inventory, Assessment and Remediation Decisions
for IPWT, IPSE and RMG are attached hereto as Schedules 7.20.1(b)-A, 7.20.1(b)-B
and 7.20.1(b)-C, respectively.
(c) "Year 2000 Plan" means the plans adopted in accordance
with IPWT's, IPSE's or RMG's Year 2000 Remediation Program to make Year 2000
Ready by a date no later than August 31, 1999, all of IPWT's, IPSE's or RMG's
respective Computer and Other Systems having a significant impact on IPWT's,
IPSE's or RMG's respective business. Such Year 2000 Plan will include scope of
methodologies and timelines (including objective milestones) for inventory,
assessment, remediation and/or replacement, and testing or evaluation of Third
Party Testing, as applicable, of its Computer and Other Systems having a
significant impact on the Party's business. IPWT's, IPSE's and RMG's Year 2000
Plans are attached hereto as Schedule 7.20.1(c)-A, 7.20.1(c)-B and 7.20.1(c)-C,
respectively.
(d) "Year 2000 Ready" or "Year 2000 Readiness" means that the
referenced component, system, software, equipment or other item is designed or
has been modified to be used prior to, during and after the calendar year 2000
A.D., and that such item will operate at all levels, including microcode,
firmware, application programs, user interfaces, files and databases, during
each such time period without error or interruption relating to, or the product
of, date-related issues or calculations, including date data which represents or
references different centuries or more than one century or leap year.
(e) "Year 2000 Remediation Program" means an enterprise wide
program to make Year 2000 Ready all Computer and Other Systems having a
significant impact on IPWT's, IPSE's or RMG's business, as the case may be. Such
Year 2000 Remediation Program must be conducted by Persons with experience in
issues related to Year 2000 Readiness and such Persons must have organized an
enterprise wide
<PAGE> 51
program management office which reports to, or an enterprise wide program
management structure with oversight by, executive level management and the board
of directors (or committee thereof or other governing body of such entity).
7.20.2. Acknowledgments. The Parties acknowledge the following:
(a) IPWT, IPSE, RMG and certain of their Affiliates have
established a Year 2000 Remediation Program.
(b) Charter has reviewed and approved the Year 2000 Plan and
Year 2000 High-Level Inventory, Assessment and Remediation Decisions for each of
IPWT, IPSE and RMG.
(c) Charter acknowledges and agrees with IPWT's, IPSE's and
RMG's preliminary decision to rely on testing of cable plant and related
equipment to be performed by certain cable industry technical and trade
associations, certain critical vendors or other cable operators ("Third Party
Testing"). IPWT, IPSE and RMG will continue to review the progress of such Third
Party Testing plans and results as they become available. Each of IPWT, IPSE and
RMG has developed test methodologies as part of its Year 2000 Plan to address
implementation of additional testing should IPWT, IPSE and/or RMG and Charter
mutually consider such additional testing to be necessary or prudent.
(d) IPWT makes no representation, warranty or guarantee that
its or RMG's Computer and Other Systems will be Year 2000 Ready at the Closing
Date or thereafter.
7.20.3. Covenants. Notwithstanding any other provision set forth in
this Agreement, the Parties agree as follows:
(a) Through the Closing Date, IPWT will, and will cause IPSE
and RMG to, exercise prudent and reasonable care and diligence to take such
actions with respect to the Cable Business when and as required by its approved
Year 2000 Plan.
(b) Through the Closing Date, IPWT will, and will cause IPSE
and RMG to, cooperate with Charter with respect to the nature and results of its
activities relating to its Year 2000 Plan. Such cooperation shall include
providing Charter with any non-confidential information possessed by IPWT or one
of its Affiliates and reasonably requested by Charter regarding the Year 2000
Readiness of any material component of IPWT's, IPSE's or RMG's Computer and
Other Systems having a significant impact on IPWT's, IPSE's or RMG's business.
(c) IPWT shall, and shall cause IPSE and RMG to, deliver to
Charter on or before July 31, 1999, and again on August 31, 1999 (if Closing has
not occurred prior to such date), a statement, certified by an authorized
officer of IPWT, IPSE or RMG, as appropriate, who is responsible for
implementation of its Year 2000 Plan, setting forth in reasonable detail that as
of such date all of the milestones contained in its Year 2000 Plan to be
completed as of such date have been fully completed (or if not, indicating which
such milestones have not been completed and describing the efforts required to
complete the same).
(d) From the date hereof through the Closing Date, Charter
shall have the opportunity to conduct due diligence regarding the Year 2000
Readiness of IPWT's, IPSE's and RMG's Computer and Other Systems having a
significant impact on IPWT's, IPSE's or RMG's business, as the case may be, in
accordance with this Section 7.20.3(d). Charter may conduct a review of the Year
2000 Ready assessment activities with respect to the Computer and Other Systems
having a
<PAGE> 52
significant impact on IPWT's, IPSE's or RMG's business, as the case may be,
including inspecting individual headend and office sites and reviewing existing
reports, correspondence and related material regarding the Year 2000 Readiness
of the Computer and Other Systems having a significant impact on IPWT's, IPSE's
or RMG's business, as the case may be. Charter shall conduct no more than three
(3) visits to any site of IPWT, IPSE and RMG, and no single site visit shall
exceed three (3) Business Days. Charter shall give at least five (5) Business
Days written notice prior to any visit to any System facilities and, if Charter
intends during such visit to perform testing at a headend, office or other site
of IPWT, IPSE or RMG, Charter also must provide a description of the scope of
work regarding such testing. If IPWT, IPSE or RMG does not notify Charter in
writing of IPWT's, IPSE's or RMG's objection to such proposed site visit and/or
testing within three (3) Business Days after receipt of such notice, IPWT, IPSE
or RMG, as appropriate, shall be deemed to have consented to the proposed site
visit and any described testing. IPWT shall, and shall cause IPSE and RMG to,
not unreasonably object to Charter's request to perform testing. A
representative of IPWT, IPSE or RMG, as appropriate, shall be present at all
times during any such visit and testing. All activities of Charter regarding its
Year 2000 due diligence shall be conducted to minimize any inconvenience or
interruption of the normal use and enjoyment of the Cable Business and Computer
and Other Systems.
7.21. Satisfaction of Conditions. Each Party will use its commercially
reasonable efforts to satisfy, or to cause to be satisfied, the conditions to
the obligations of the other Party to consummate the transactions contemplated
by this Agreement, as set forth in Article 8.
7.22. Offers. IPWT (and its directors, officers, employees,
representatives and agents) shall not (and shall cause IPSE and RMG not to),
directly or indirectly, (i) offer the Assets, the Cable Business or the Shares
for sale, (ii) solicit, encourage or entertain offers for such Assets, the Cable
Business or the Shares, (iii) initiate negotiations or discussions for the sale
of such Assets, the Cable Business or the Shares or (iv) make information about
such Assets, the Cable Business or the Shares available to any Third Party in
connection with the possible sale of such Assets, the Cable Business or the
Shares prior to the Closing Date or the date this Agreement is terminated in
accordance with its terms.
7.23. Retention of Books and Records. At or prior to the Closing, each
Party shall make arrangements reasonably satisfactory to the other Party to
deliver all such Party's Books and Records not located at any of the offices
included in its Owned Property or Leased Property. Following the Closing, each
Party shall give access to the other Party, its counsel, accountants and other
authorized representatives during normal business hours to such Party's
materials, books, records and documents which relate to the operations of such
Party's Cable Business prior to the Closing Date as may be reasonably necessary
in connection with any legitimate purpose (including the preparation of tax
reports and returns and the preparation of financial statements). Such access
will be subject to reasonable advance written notice, will be conducted in a
manner that is not disruptive of such Party's business, and will be subject to
any other reasonable limitations imposed by such Party. The requesting Party
shall have the right to make copies of such materials at its own expense. If
either Party proposes to destroy or otherwise dispose of any of its materials,
books, records or documents that related to the operations of its Cable Business
prior to the Closing Date, it will give no less than thirty (30) days' advance
written notice to the other Party so as to permit such other Party to exercise
its rights under this Section 7.23.
7.24. Taxes. IPWT and Charter shall reasonably cooperate in connection
with the preparation and filing of any Tax Return for which the other is
responsible for preparing and filing with respect to the Systems. Charter shall
prepare, and timely file, after obtaining the consent of IPWT
<PAGE> 53
(which shall have at least ten (10) business days for review), any RMG Tax
Return for any period, or portion thereof, which includes, but does not end on,
the Closing Date.
7.25. Compliance with Covenants of RMG in IP-I/Charter Exchange Agreement;
Access to Information; Information; No Waivers or Amendments without Consent.
IPWT shall cause RMG to comply with and satisfy all covenants of RMG set forth
in the IP-I/Charter Exchange Agreement which are required to be performed by RMG
prior to the Closing of the transactions contemplated by this Agreement. IPWT
shall cause RMG to provide to Charter any and all information and documents (or
access thereto) provided to RMG by IP-I or Brenmor (each as defined in the
Common Agreement) pursuant to the IP-I/Charter Exchange Agreement. IPWT shall
cause RMG not to agree to amend the IP-I/Charter Exchange Agreement (nor to
waive any rights pursuant thereto) without the consent of Charter, which consent
may be withheld in Charter's sole discretion.
8. CONDITIONS PRECEDENT.
8.1. Conditions to Charter's Obligations. The obligations of Charter to
consummate the transactions contemplated by this Agreement will be subject to
the satisfaction, at or before the Closing, of the following conditions, one or
more of which may be waived by Charter:
8.1.1. Accuracy of Representations and Warranties. The
representations and warranties of IPWT in this Agreement and in the Transaction
Documents, without giving effect to any materiality qualifications contained
therein, are true, complete and accurate on and as of the date hereof and at and
as of the Closing with the same effect as if made at and as of the Closing,
except to the extent that all misstatements, omissions and inaccuracies, in the
aggregate, do not have a material adverse effect on RMG, the Assets, the Cable
Business, the operations, condition (financial or otherwise) or results of
operations of the Systems taken as a whole, or on the ability of IPWT to perform
its obligations under this Agreement.
8.1.2. Performance of Agreements. IPWT shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants in this Agreement and in any Transaction Document to
be performed and complied with by it at or before the Closing.
8.1.3. Deliveries. IPWT shall have delivered the items and documents
required to be delivered by it pursuant to this Agreement, including those
required to be delivered to Charter under Section 9.2.
8.1.4. Legal Proceedings. No Legal Requirement of any Governmental
Authority (including any temporary Legal Requirement) shall be in effect which
would prevent or make illegal the consummation of any of the transactions
contemplated by this Agreement or any Transaction Document.
8.1.5. Consents.
(a) Except as otherwise provided in Section 7.5.5, Required
Consents related to all Systems Franchises shall have been obtained in form and
substance reasonably satisfactory to Charter, or the consent of the appropriate
Governmental Authority shall be deemed to have been received in accordance with
Section 617 of the Communications Act (47 U.S.C. ss.537).
<PAGE> 54
(b) Except as otherwise provided in Section 7.5.3, Charter
shall have received evidence, in form and substance reasonably satisfactory to
it, that the Required Consents related to the Systems Licenses and the Systems
Contracts identified with an asterisk (*) on Schedule 5.3 have been obtained.
8.1.6. No Material Adverse Changes. There shall not have been any
material adverse change in the Assets or the condition (financial or otherwise)
or operations of the Cable Business or the Systems, taken as a whole, since
December 31, 1998.
8.1.7. Franchise Renewals. Each Systems Franchise for which (a) a
valid notice of renewal pursuant to the formal renewal procedures established by
Section 626 of the Cable Act has not been timely delivered to the appropriate
Governmental Authority, and (b) with respect to which the appropriate
Governmental Authority has not confirmed in writing that the procedures
established by Section 626 nonetheless shall apply to the renewal or extension
of such Systems Franchise, shall have been renewed or extended for a period
expiring no earlier than three years after the Closing Date.
8.1.8. Common Agreement and Related Closings.
(a) The conditions set forth in Section 4.1 of the Common
Agreement shall have been satisfied or waived.
(b) The transactions contemplated by the IP Agreements and the
Redemption Agreement (each as defined in the Common Agreement) shall have been,
or will be, consummated as set forth in Section 4.4 of the Common Agreement,
except to the extent such Agreements are not consummated as a result of a breach
by Charter or any of its Affiliates of its or their obligation to consummate
such transactions.
8.2. Conditions to Obligations of IPWT. The obligations of IPWT to
consummate the transactions contemplated by this Agreement will be subject to
the satisfaction, at or before the Closing, of the following conditions, one or
more of which may be waived by IPWT:
8.2.1. Accuracy of Representations and Warranties. The
representations and warranties of Charter in this Agreement and in the
Transaction Documents, without giving effect to any materiality qualification
contained therein, are true, complete and accurate on and as of the date hereof
and at and as of the Closing with the same effect as if made at and as of the
Closing, except to the extent that all misstatements, omissions and
inaccuracies, in the aggregate, do not have a material adverse effect on Charter
or on the ability of Charter to perform its obligations under this Agreement.
8.2.2. Performance of Agreements. Charter shall have performed in
all material respects all obligations and agreements and complied in all
material respects with all covenants in this Agreement and in any Transaction
Document to be performed and complied with by it at or before the Closing.
8.2.3. Deliveries. Charter shall have delivered the items and
documents required to be delivered by it pursuant to this Agreement, including
those required to be delivered to IPWT under Section 9.3.
8.2.4. Legal Proceedings. No Legal Requirement of any Governmental
Authority (including any temporary Legal Requirement) shall be in effect which
would prevent or make illegal
<PAGE> 55
the consummation of any of the transactions contemplated by this Agreement or
any Transaction Document.
8.2.5. Common Agreement and Related Closings.
(a) The conditions set forth in Section 4.2 of the Common
Agreement shall have been satisfied or waived.
(b) The transactions contemplated by the IP Agreements and the
Redemption Agreement (each as defined in the Common Agreement) shall have been,
or will be, consummated as set forth in Section 4.4 of the Common Agreement,
except to the extent such Agreements are not consummated as a result of a breach
by IPWT or its Affiliates of its or their obligation to consummate such
transactions.
9. THE CLOSING.
9.1. The Closing; Time and Place. Subject to the terms and conditions of
this Agreement, the Closing shall be held in San Francisco, California, or as
otherwise agreed, at a place mutually agreed upon by the Parties at 10:00 a.m.,
local time, on the last calendar day of the calendar month in which the
conditions set forth in Article 8 (other than Sections 8.1.3 and 8.2.3) shall
have been satisfied or waived (provided that each Party shall have at least ten
(10) days' prior notice of the scheduled Closing Date in order to prepare for
the Closing) or at such other place, date and time as may be mutually agreed
upon by the Parties (the "Closing Date"). The transactions to be consummated at
Closing shall be deemed to have been consummated as of the Closing Time. If the
Closing Date is not a Business Day, then the Closing Date shall be the
immediately preceding Business Day.
9.2. IPWT's Delivery Obligations. At the Closing, IPWT will deliver or
cause to be delivered to Charter the following:
9.2.1. Bill of Sale and Assignment and Assumption Agreement. The
Bill of Sale and Assignment and Assumption Agreement in the form of Exhibit
9.2.1.
9.2.2. Deeds. Special warranty deeds in recordable form conveying to
Charter each parcel of Owned Property, and assignments of leases and easements
in recordable form, with respect to Leased Property and Other Real Property
Interests as to which prior assignments into were recorded in the applicable
real estate records.
9.2.3. Lien Releases. Evidence reasonably satisfactory to Charter
that all Liens (other than Permitted Liens) affecting or encumbering the Assets
have been terminated, released or waived, as appropriate, or original, executed
instruments in form reasonably satisfactory to Charter effecting such
terminations, releases or waivers.
9.2.4. Vehicle Titles. Title certificates to all vehicles included
among the Assets, endorsed for transfer of title to Charter, and separate bills
of sale therefor or other transfer documentation, if required by the laws of the
states in which such vehicles are titled.
9.2.5. Evidence of Authorization Actions. Certified resolutions or
other evidence reasonably satisfactory to Charter that IPWT has taken all action
necessary to authorize the execution of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby.
<PAGE> 56
9.2.6. FIRPTA Certificate. FIRPTA Non-Foreign IPWT Certificate
certifying that IPWT is not a foreign person within the meaning of Section 1445
of the Code reasonably satisfactory in form and substance to Charter.
9.2.7. Officer's Certificate. Charter will have received a
certificate executed by an executive officer of IPWT dated the date of the
Closing, reasonably satisfactory in form and substance to Charter certifying
that the conditions specified in Sections 8.1.1 and 8.1.2 have been satisfied.
9.2.8. Opinions of Counsel. Opinions of Pillsbury Madison & Sutro
LLP, Ross & Hardies and Dow, Lohnes & Albertson PLLC, substantially in the forms
attached as Exhibits C.1, C.3 and C.4 to the Common Agreement.
9.2.9. Stock Certificates. Stock certificates representing the
Shares, accompanied by stock powers duly executed in blank or duly executed
instruments of transfer, and all other documents necessary to transfer to
Charter title to the Shares.
9.2.10. Other. Such other documents and instruments as may be
necessary to effect the intent of this Agreement and to consummate the
transactions contemplated hereby.
9.3. Charter's Delivery Obligations. At the Closing, Charter will deliver
or cause to be delivered to IPWT the following:
9.3.1. Cash Consideration. The Adjusted Value will be paid by
Charter to IPWT in accordance with the Common Agreement.
9.3.2. Bill of Sale and Assignment and Assumption Agreement. The
Bill of Sale and Assignment and Assumption Agreement in the form of Exhibit
9.2.1.
9.3.3. Evidence of Authorization Actions. Certified resolutions of
Charter or other evidence reasonably satisfactory to IPWT that Charter has taken
all action necessary to authorize the execution of this Agreement and the
Transaction Documents and the consummation of the transactions contemplated
hereby.
9.3.4. Officer's Certificate. IPWT will have received a certificate
executed by an executive officer of Charter dated the date of the Closing,
reasonably satisfactory in form and substance to IPWT certifying that the
conditions specified in Sections 8.2.1 and 8.2.2 have been satisfied.
9.3.5. Opinion of Counsel. Opinion of Irell & Manella LLP,
substantially in the form of Exhibit C.2 to the Common Agreement
9.3.6. Other. Such other documents and instruments as may be
necessary to effect the intent of this Agreement and to consummate the
transactions contemplated hereby.
10. TERMINATION AND DEFAULT.
10.1. Termination Events. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
10.1.1. At any time, by the mutual agreement of Charter and IPWT;
<PAGE> 57
10.1.2. By either Charter or IPWT at any time, if the other is in
material breach or default of any of the other's covenants, agreements or other
obligations herein or in any Transaction Document and the defaulting Party has
failed to cure such breach within thirty (30) days of its receipt of notice of
such breach from another Party;
10.1.3. By either Charter or IPWT upon written notice to the other,
if any of the conditions to its obligations set forth in Sections 8.1 and 8.2,
respectively, are not satisfied on or before the later of January 15, 2000, or
nine (9) months after the date of this Agreement, for any reason other than an
intentional and material breach or default by such Party of its respective
covenants, agreements or other obligations under this Agreement, or any of its
representations herein not being true and accurate in all material respects when
made or when otherwise required by this Agreement to be true and accurate in all
material respects;
10.1.4. By either Charter or IPWT if an injunction, restraining
order or decree of any nature of any Governmental Authority of competent
jurisdiction is issued that prohibits the consummation of any of the
transactions contemplated hereby and such injunction, restraining order or
decree is final and nonappealable; provided, however, that the Party seeking to
terminate this Agreement pursuant to this clause has used commercially
reasonable efforts to have such injunction, order or decree vacated or denied;
or
10.1.5. As otherwise provided in the Common Agreement.
10.2. Effect of Termination. If this Agreement is terminated pursuant to
Section 10.1, all obligations of the Parties under this Agreement will
terminate, except for the obligations set forth in Sections 7.13, 7.19 and
12.13. Termination of this Agreement pursuant to Sections 10.1.2, 10.1.3, 10.1.4
or 10.1.5 will not limit or impair any remedies that any of IPWT or Charter may
have pursuant to the terms of this Agreement with respect to a breach or default
by the other of its covenants, agreements or obligations under this Agreement.
11. SURVIVAL; REMEDIES.
11.1. Survival of Representations, Warranties, Covenants and Agreements.
The representations, warranties, covenants and agreements of IPWT and Charter in
this Agreement and in the Transaction Documents will survive Closing for a
period of twelve (12) months after the Closing Date. The period of survival of
the representations, warranties, covenants and agreements prescribed by this
Section 11.1 are referred to as the "Survival Period." The liabilities of each
Party under its respective representations, warranties, covenants and agreements
will expire as of the expiration of the Survival Period; provided, however, that
such expiration will not include, extend or apply to (a) any representation,
warranty, covenant or agreement the breach of which has been asserted by a Party
in a written notice to the other Party before such expiration or about which a
Party has given the other Party written notice before such expiration indicating
that facts or conditions exist that, with the passage of time or otherwise, can
reasonably be expected to result in a breach (and describing such potential
breach in reasonable detail), (b) the Party's obligations under Sections 7.13
and 7.23, or (c) the Party's obligations under Sections 7.16, 7.17.1, 7.17.3 and
7.17.4, but only to the extent reasonably practicable.
11.2. Exclusive Remedy. The Parties hereby agree that the rights set forth
in the Common Agreement shall be each Party's sole and exclusive remedies
against the other Party for any claims
<PAGE> 58
arising after the Closing Time and relating to any breaches of the
representations, warranties or covenants contained in this Agreement other than
based on fraud.
11.3. Nonrecourse. The Parties agree that, notwithstanding any other
provision in this Agreement or in any Transaction Document, and any rule of law
or equity to the contrary, to the fullest extent permitted by law, each Party's
obligations and liabilities under this Agreement will be nonrecourse to all
direct and indirect equity holders or other owners of such Party, except to the
extent of distributions to such Persons, directly or indirectly, from such Party
that are required to be returned, directly or indirectly, to such Party pursuant
to applicable provisions of law; provided, however, that the foregoing shall not
limit or abridge any Party's indemnification rights or obligations pursuant to
the Common Agreement. "Nonrecourse" means that the obligations and liabilities
are limited in recourse solely to the assets of the Parties (for those purposes,
any capital contribution obligations of the equity holders or other owners of
such Party, or any negative capital account balances of such Persons will not be
deemed be assets of such Party) and are not guaranteed, directly or indirectly
by, or the primary obligations of, any owner of such Party in such capacity, and
no partner, member or other owner in such capacity of any successor entity
(including any limited liability company or partnership), either directly or
indirectly, will be personally liable in any respect (except to the extent of
(i) such Person's interests in the assets of such Party and (ii) any
distribution which has been received by such Person and is required by
applicable law to be returned, directly or indirectly, to such Party) for any
obligation or liability of such Party under this Agreement.
12. MISCELLANEOUS PROVISIONS.
12.1. Parties Obligated and Benefitted. Subject to the limitations set
forth below, this Agreement will be binding upon each of the Parties and their
respective assigns and successors in interest and will inure solely to the
benefit of the Parties and their respective assigns and successors in interest,
and no other Person will be entitled to any of the benefits conferred by this
Agreement. Without the prior written consent of the other Parties, no Party will
assign any of its rights under this Agreement or delegate any of its duties
under this Agreement, provided that the appropriate Party may assign any or all
of its rights under this Agreement to an Affiliate, provided that such
assignment will not result in any adverse tax consequences to the other Party,
will not give rise to any material requirements for additional Required
Consents, and will not, in the reasonable judgment of the other Party, delay the
Closing.
12.2. Notices. Any notice, request, demand, waiver or other communication
required or permitted to be given under this Agreement to either Party will be
given as set forth in the Common Agreement.
12.3. Right to Specific Performance. Each Party acknowledges that the
unique nature of the Assets and the Shares to be purchased hereunder pursuant to
this Agreement renders money damages an inadequate remedy and the Parties agree
that either Party shall be entitled to pursue specific performance as a remedy
without the requirement of posting a bond or other security therefor.
12.4. Waiver. This Agreement or any of its provisions may not be waived
except in writing. The failure of any Party to enforce any right arising under
this Agreement on one or more occasions will not operate as a waiver of that or
any other right on that or any other occasion.
12.5. Captions. The section and other captions of this Agreement are for
convenience only and do not constitute a part of this Agreement.
<PAGE> 59
12.6. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (other than its rules of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby).
12.7. Time. Time is of the essence under this Agreement. If the last day
permitted for the giving of any notice or the performance of any act required or
permitted under this Agreement falls on a day which is not a Business Day, the
time for the giving of such notice or the performance of such act will be
extended to the next succeeding Business Day.
12.8. Late Payments. If either Party fails to pay the other any amounts
when due under this Agreement, the amounts due will bear interest from the due
date to the date of payment at the rate per annum publicly announced from time
to time by the Bank of New York as its prime rate (the "Prime Rate") plus two
(2) percentage points, adjusted as and when changes in the Prime Rate are made.
12.9. Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed an original.
12.10. Entire Agreement. This Agreement (including the Transaction
Documents and the Schedules and Exhibits referred to in this Agreement, which
are incorporated in and constitute a part of this Agreement) contains the entire
agreement of the Parties with respect to the subject matter hereof and
supersedes all prior oral or written agreements and understandings with respect
to such subject matter. This Agreement may not be amended or modified except by
a writing signed by all of the Parties.
12.11. Severability. Any term or provision of this Agreement which is
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefitted by such provision or any other
provisions of this Agreement.
12.12. Construction. This Agreement has been negotiated by the Parties and
their respective legal counsel, and legal or other equitable principles that
might require the construction of this Agreement or any provision of this
Agreement against the Party drafting this Agreement will not apply in any
construction or interpretation of this Agreement.
12.13. Expenses. Except as otherwise expressly provided in this Agreement,
each Party will pay all of its expenses, including attorneys' and accountants'
fees, in connection with the negotiation of this Agreement, the performance of
its obligations and the consummation of the transactions contemplated by this
Agreement.
12.14. Risk of Loss. The risk of any loss or damage to the Assets
resulting from fire, theft or other casualty (except reasonable wear and tear)
will be borne by IPWT at all times prior to the Closing Time. In the event of
any such loss or damage after December 31, 1998, IPWT will immediately notify
Charter in writing of that fact. All insurance proceeds paid or payable as a
result of the occurrence of the event resulting in such loss or damage will be
delivered by IPWT to Charter, or the rights thereto will be assigned if not yet
paid over by the insurer to IPWT. The obligations under this Section 12.14 to
pay or assign insurance proceeds will not apply to the extent that any insurance
proceeds are applied to replace or restore such loss or damage prior to Closing.
If, on or prior to the Closing Date, all or any part of or interest in the
Assets is taken or condemned as a result of a Governmental Authority's exercise
of its powers of eminent domain, or if a Governmental Authority having such
power informs IPWT or any Affiliate of IPWT that it intends to
<PAGE> 60
condemn all or any part of the Assets (such event being called, in either case,
a "Taking"), then (i) Charter may elect, in the name of IPWT, IPSE or RMG, as
the case may be, to negotiate for, claim, contest and receive all damages with
respect to the Taking, (ii) IPWT will be relieved of its obligation to convey to
Charter those of the Assets that were the subject of the Taking, (iii) at
Closing, IPWT will assign to Charter all of its rights to damages payable as a
result of the Taking, and will pay Charter all damages previously paid to it in
connection with the Taking, and (iv) following the Closing, IPWT will give to
Charter any further assurances of such rights and assignment with respect to the
Taking as Charter reasonably may request from time to time.
12.15. Tax Consequences. No Party makes any representation or warranty,
express or implied, with respect to the Tax implications of any aspect of this
Agreement on any other Party, and each Party expressly disclaims any such
representation or warranty with respect to any Tax consequences arising under
this Agreement. Each Party has relied solely on its own Tax advisors with
respect to the Tax implications of this Agreement.
12.16. Commercially Reasonable Efforts. For purposes of this Agreement,
"commercially reasonable efforts" will not be deemed to require a Party to
undertake extraordinary or unreasonable measures, including the payment of
amounts in excess of normal and usual filing fees and processing fees, if any or
other payments with respect to any Contract that are significant in the context
of such Contract (or significant on the aggregate basis as to all Contracts).
[The remainder of this page intentionally left blank]
<PAGE> 61
The parties have executed this Agreement as of the day and year first
above written.
CHARTER COMMUNICATIONS, LLC
By: /s/ Curtis S. Shaw
-----------------------------------
Name: Curtis S. Shaw
Title: Senior Vice President
INTERMEDIA PARTNERS OF WEST TENNESSEE,
L.P.
By InterMedia Capital Management, LLC,
Its general partner
By InterMedia Management, Inc.,
Its managing member
By /s/ Robert J. Lewis
------------------------------
Robert J. Lewis
President and
Chief Executive Officer
[Signature Page to Asset and Stock Purchase Agreement
dated as of April 20, 1999 between IPWT and Charter]
<PAGE> 1
Exhibit 2.6(b)
STOCK PURCHASE AGREEMENT
dated as of April 20, 1999
between
TCID IP-V, INC.
and
CHARTER COMMUNICATIONS, LLC
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS.......................................................1
1.1. Affiliate................................................1
1.2. Business Day.............................................2
1.3. Class B Common Stock.....................................2
1.4. Charter Required Consents................................2
1.5. Class B Redemption Price.................................2
1.6. Closing..................................................2
1.7. Closing Time.............................................2
1.8. Contract.................................................2
1.9. FCC......................................................2
1.10. Governmental Authority...................................2
1.11. HSR Act..................................................2
1.12. Judgment.................................................2
1.13. Legal Requirement........................................3
1.14. Lien.....................................................3
1.15. Litigation...............................................3
1.16. Losses...................................................3
1.17. Party....................................................3
1.18. Permitted Stock Restrictions.............................3
1.19. Person...................................................3
1.20. Preferred Stock Liquidation Value........................3
1.21. Required Consents........................................3
1.22. Series A Voting Preferred Stock..........................3
1.23. Six-Month Date...........................................3
1.24. Taxes....................................................3
1.25. TCID Required Consents...................................4
1.26. TCID RMG Shares..........................................4
1.27. Third Party..............................................4
1.28. Transaction Documents....................................4
1.29. Other Definitions........................................4
1.30. Usage....................................................4
2. PURCHASE AND SALE.................................................5
2.1. Purchase and Sale of the TCID RMG Shares.................5
3. CHARTER'S REPRESENTATIONS AND WARRANTIES..........................5
3.1. Organization and Qualification of Charter................5
3.2. Authority and Validity...................................5
3.3. No Conflict; Required Consents...........................6
3.4. Litigation...............................................6
(i)
<PAGE> 3
3.5. Finder and Brokers.......................................6
3.6. Qualification............................................6
3.7. Securities Law Matters...................................7
3.8. Investment Intent........................................7
4. TCID'S REPRESENTATIONS AND WARRANTIES.............................7
4.1. Organization and Qualification...........................7
4.2. Authority and Validity...................................7
4.3. No Conflict; Required Consents...........................8
4.4. Ownership................................................8
4.5. Litigation...............................................8
4.6. Finder and Brokers.......................................8
5. ADDITIONAL COVENANTS..............................................8
5.1. Certain Deliveries and Notice............................9
5.2. Required Consents........................................9
5.3. HSR Notification.........................................9
5.4. Confidentiality and Publicity............................9
5.5. Further Assurances......................................10
5.6. Offers..................................................10
6. CONDITIONS PRECEDENT.............................................11
6.1. Conditions to Charter's Obligations.....................11
6.2. Conditions to TCID's Obligations........................12
7. THE CLOSING......................................................13
7.1. The Closing; Time and Place.............................13
7.2. TCID's Delivery Obligations.............................13
7.3. Charter's Delivery Obligations..........................13
8. TERMINATION AND DEFAULT..........................................14
8.1. Termination Events......................................14
8.2. Effect of Termination...................................15
9. SURVIVAL; REMEDIES...............................................15
9.1. Survival of Representations, Warranties,
Covenants and Agreements................................15
9.2. Exclusive Remedy........................................15
10. MISCELLANEOUS PROVISIONS.........................................15
10.1. Parties Obligated and Benefitted........................15
10.2. Notices.................................................15
10.3. Right to Specific Performance...........................17
10.4. Waiver..................................................17
(ii)
<PAGE> 4
10.5. Captions................................................17
10.6. Governing Law...........................................17
10.7. Time....................................................17
10.8. Late Payments...........................................17
10.9. Counterparts............................................17
10.10. Entire Agreement........................................17
10.11. Severability............................................17
10.12. Construction............................................18
10.13. Expenses................................................18
10.14. Commercially Reasonable Efforts.........................18
(iii)
<PAGE> 5
(iv)
<PAGE> 6
Schedules
3.3 Charter Required Consents
3.4 Charter Litigation/Judgments
4.3 TCID Required Consents
4.6 TCID Litigation/Judgments
(v)
<PAGE> 7
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is made as of April 20, 1999,
by and between TCID IP-V, Inc., a Colorado corporation ("TCID") and Charter
Communications, LLC, a Delaware limited liability company ("Charter").
Recitals
A. Concurrently with the execution of this Agreement, InterMedia
Partners of West Tennessee, L.P. ("IPWT") and Charter have entered into an Asset
and Stock Purchase Agreement (the "IPWT Asset and Stock Purchase Agreement")
pursuant to which IPWT has agreed to sell, and Charter has agreed to purchase,
substantially all of IPWT's assets, including all of the outstanding Class A
Common Stock in Robin Media Group, Inc., a Nevada corporation ("RMG").
B. TCID owns all of the outstanding Class B Common Stock and Series
A Voting Preferred Stock in RMG. Charter wishes to purchase, and TCID wished to
sell, all of such stock in RMG, effective immediately after the Closing under
the IPWT Asset and Stock Purchase Agreement, in accordance with this Agreement.
C. Concurrently with the execution of this Agreement, TCID and
Charter, among others, have entered into a Common Agreement (the "Common
Agreement") pursuant to which they have agreed to certain issues common to each
of the transfers made pursuant to this Agreement, the IPWT Asset and Stock
Purchase Agreement and to certain other related transactions (each as more fully
described in the Common Agreement) that will be consummated concurrently with
this Agreement, including indemnification for breaches of representations,
warranties, covenants and agreements.
Agreement
In consideration of the covenants and agreements set forth herein and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties agree as follows:
1. DEFINITIONS. In addition to the terms defined elsewhere in this Agreement,
the following capitalized terms or terms otherwise defined in this Article 1
will have the meanings set forth below:
1.1. Affiliate. With respect to any Person, any other Person controlling,
controlled by, or under common control with such Person. As used in this
Agreement, "control" means the ownership, directly or indirectly, of voting
securities representing the right generally to elect a majority of the directors
(or similar officials) of a Person or the possession, by contract or otherwise,
of the authority to direct the management and policies of a Person.
Notwithstanding the foregoing, neither InterMedia Partners Southeast, InterMedia
Partners of West Tennessee, L.P., InterMedia
(1)
<PAGE> 8
Capital Partners IV, L.P., InterMedia Capital Management, LLC, nor InterMedia
Partners IV, L.P., will be deemed an Affiliate of TCID.
1.2. Business Day. Any day other than a Saturday, Sunday or a day on which
the banking institutions in Denver, Colorado, New York, New York, San Francisco,
California or St. Louis, Missouri are required or authorized to be closed.
1.3. Class B Common Stock. The 365 issued and outstanding shares of Class
B Common Stock (par value $100 per share) of RMG.
1.4. Charter Required Consents. Any and all consents, authorizations and
approvals which are identified on Schedule 3.3 and required for Charter to
purchase, own and hold the TCID RMG Shares.
1.5. Class B Redemption Price. An amount equal to $36,500 plus an annual
rate of 8% of such amount, from July 29, 1996 through the Closing Date.
1.6. Closing. The closing of the purchase and sale transaction
contemplated by this Agreement.
1.7. Closing Time. 11:59 p.m., Eastern time, on the Closing Date,
immediately following the "Closing Time" as defined in the IPWT Asset and Stock
Purchase Agreement.
1.8. Contract. Any contract, mortgage, deed of trust, bond, indenture,
lease, license, note, franchise, certificate, option, warrant, right or other
instrument, document, obligation or agreement, whether written or oral.
1.9. FCC. The Federal Communications Commission.
1.10. Governmental Authority. The United States of America, any state,
commonwealth, territory or possession of the United States of America and any
political subdivision or quasi-governmental authority of any of the same,
including any court, tribunal, department, commission, board, bureau, agency,
county, municipality, province, parish or other instrumentality of any of the
foregoing.
1.11. HSR Act. The Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
1.12. Judgment. Any judgment, writ, order, injunction, award or decree of
any court, judge, justice or magistrate, including any bankruptcy court or judge
or the arbitrator in any binding arbitration, and any order of or by any
Governmental Authority.
(2)
<PAGE> 9
1.13. Legal Requirement. Applicable common law and any statute, ordinance,
code or other law, rule, regulation, order, technical or other written standard,
requirement or procedure enacted, adopted, promulgated, applied or followed by
any Governmental Authority, including any Judgment.
1.14. Lien. Any lien security interest, security agreement, financing
statement filed with any Governmental Authority, adverse claim or other
encumbrance of any kind whatsoever.
1.15. Litigation. Any claim, action, suit, proceeding, arbitration,
investigation, hearing or other activity or procedure that could reasonably be
expected to result in a Judgment and any notice of any of the foregoing.
1.16. Losses. Any claims, losses, liabilities, damages, penalties, costs
and expenses, including interest that may be imposed in connection therewith,
expenses of investigation, reasonable fees and disbursements of counsel and
other experts, and the cost to any Person making a claim or seeking
indemnification under this Agreement with respect to funds expended by such
Person by reason of the occurrence of any event or the existence or assertion of
any Liens (other than Permitted Liens) with respect to which indemnification is
sought.
1.17. Party. Charter or TCID, as the context requires.
1.18. Permitted Stock Restrictions. Restrictions on transfer of all or any
part of the TCID RMG Shares imposed by cable television franchises owned or
controlled by RMG, the Communications Act of 1934, as amended, and the rules and
regulations of the FCC thereunder, federal and state securities laws, and other
applicable laws.
1.19. Person. Any natural person, Governmental Authority, corporation,
general or limited partnership, limited liability company, joint venture, trust,
association or unincorporated entity of any kind.
1.20. Preferred Stock Liquidation Value. An amount equal to $12,000,000,
plus an annual rate of 10% of such amount, from July 29, 1996 through the
Closing Date.
1.21. Required Consents. The Charter Required Consents or the TCID
Required Consents, as the context requires.
1.22. Series A Voting Preferred Stock. The 12,000 issued and outstanding
shares of Series A Voting Preferred Stock (par value $1,000 per share) of RMG.
1.23. Six-Month Date. The date that is six months after the Closing Date.
1.24. Taxes. Levies and assessments of any kind or nature imposed by any
Governmental Authority, including all income, sales, use, ad valorem, value
added, franchise, severance, net or
(3)
<PAGE> 10
gross proceeds, withholding, payroll, employment, excise or property taxes and
levies or assessments related to unclaimed property, together with any interest
thereon and any penalties, additions to tax or additional amounts applicable
thereto. For purposes of determining any Tax cost or Tax benefit to any Person,
such amount will be the actual cost or benefit recognized by such Person at the
time of actual payment of the additional Tax or actual recognition of the Tax
benefit. In the event that any Loss, payment or other amount is required to be
determined on an after-Tax basis, such payment or other amount will be
determined without regard to any Tax cost or Tax benefit not actually recognized
at the time of the determination, and appropriate adjustments will be made when
and to the extent that such Tax cost or Tax benefit is actually recognized.
1.25. TCID Required Consents. Any and all consents, authorizations and
approvals which are identified on Schedule 4.3 and required for TCID to transfer
the TCID RMG shares to Charter pursuant to this Agreement.
1.26. TCID RMG Shares. The Class B Common Stock and Series A Voting
Preferred Stock.
1.27. Third Party. Any Person other than, with respect to TCID, TCID and
its Affiliates, or, with respect to Charter, Charter and its Affiliates.
1.28. Transaction Documents. The Common Agreement and all instruments and
documents described in Sections 7.2 and 7.3 which are being executed and
delivered by or on behalf of Charter or TCID in connection with this Agreement
or the transactions contemplated hereby.
1.29. Other Definitions. The following terms have the meanings set forth
in the sections indicated in the table below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Agreement First Paragraph
Antitrust Division 5.3
Charter First Paragraph
Closing Date 7.1
FTC 5.3
IPWT Recital A
IPWT Asset and Stock Purchase Agreement Recital A
RMG Recital A
Securities Act 3.5
Survival Period 9.1
TCID First Paragraph
</TABLE>
1.30. Usage. The definitions in Article 1 will apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun will include the corresponding masculine, feminine and
neuter forms. All references herein to Articles, Sections and
(4)
<PAGE> 11
Schedules will be deemed to be references to Articles and Sections of, and
Schedules to, this Agreement unless the context otherwise requires. All
Schedules attached hereto will be deemed incorporated herein as if set forth in
full herein and, unless otherwise defined therein, all terms used in any
Schedule will have the meaning ascribed to such term in this Agreement. The
words "include," "includes" and "including" will be deemed to be followed by the
phrase "without limitation." The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement will refer to this Agreement
as a whole and not to any particular provision of this Agreement. Unless
otherwise expressly provided herein, any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. All accounting terms not otherwise defined in
this Agreement will have the meanings ascribed to them under generally
acceptable accounting principles as in effect from time to time in the United
States, consistently applied.
2. PURCHASE AND SALE.
2.1. Purchase and Sale of the TCID RMG Shares.
2.1.1. At the Closing, TCID will sell, assign, transfer, convey and
deliver to Charter free and clear of all Liens (other than Permitted Stock
Restrictions) all of the Class B Common Stock, and Charter will, as the
consideration for the sale of such Class B Common Stock, pay to TCID the Class B
Redemption Price, by wire transfer of immediately available funds pursuant to
wire transfer instructions delivered by TCID to Charter.
2.1.2. At the Closing, TCID will sell, assign, transfer, convey and
deliver to Charter free and clear of all Liens (other than Permitted Stock
Restrictions) all of the Series A Voting Preferred Stock, and Charter will, as
the consideration for the sale of such Series A Voting Preferred Stock, pay to
TCID the Preferred Stock Liquidation Value, by wire transfer of immediately
available funds pursuant to wire transfer instructions delivered by TCID to
Charter.
3. CHARTER'S REPRESENTATIONS AND WARRANTIES. Charter represents and warrants to
TCID as of the date of this Agreement and as of the Closing, as follows:
3.1. Organization and Qualification of Charter. Charter is a limited
liability company which has been duly formed, validly existing and in good
standing under the laws of the State of Delaware. As of the date of this
Agreement, Charter is duly qualified to do business and is in good standing
under the laws of each jurisdiction in which its activities make such
qualification necessary.
3.2. Authority and Validity. Charter has all requisite power and authority
to execute and deliver, to perform its obligations under, and to consummate the
transactions contemplated by, this Agreement and the Transaction Documents to
which it is a party. The execution and delivery by
(5)
<PAGE> 12
Charter of, the performance of Charter under, and the consummation by Charter of
the transactions contemplated by, this Agreement and the Transaction Documents
to which it is a party have been duly and validly authorized by all action by or
on behalf of Charter. This Agreement has been, and when executed and delivered
by Charter, the Transaction Documents to which it is a party will be, duly and
validly executed and delivered by Charter and the valid and binding obligations
of Charter, enforceable against Charter in accordance with their terms, except
as the same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to the
enforcement of creditors' rights generally or by principles governing the
availability of equitable remedies.
3.3. No Conflict; Required Consents. Except as set forth on Schedule 3.3,
assuming all TCID Required Consents have been obtained and the expiration or
earlier termination of the waiting period under the HSR Act has occurred, the
execution and delivery by Charter of, the performance of Charter under, and the
consummation by Charter of the transactions contemplated by, this Agreement and
the Transaction Documents to which it is a party do not and will not: (a)
conflict with or violate any provision of the organizational documents of
Charter; (b) violate any provision of any Legal Requirement; (c) require any
consent, approval or authorization of, or filing of any certificate, notice,
application, report or other document with, any Governmental Authority or other
Person; or (d) (i) conflict with, violate, result in a breach of or constitute a
default under (without regard to requirements of notice, lapse of time or
elections of other Persons or any combination thereof), (ii) permit or result in
the termination, suspension or modification of, (iii) result in the acceleration
of (or give any Person the right to accelerate) the performance of Charter
under, or (iv) result in the creation or imposition of any Contract or other
instrument by which Charter or any of its assets is bound or affected, except
for purposes of clauses (c) and (d) such consents, approvals, authorizations and
filings that, if not obtained or made, would not, and such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications and
accelerations as would not, individually or in the aggregate, have an adverse
effect on the ability of Charter to perform its obligations under this Agreement
or the Transaction Documents to which it is a party.
3.4. Litigation. Except as set forth in Schedule 3.4: (a) as of the date
of this Agreement, there is no Litigation pending or, to Charter's knowledge,
threatened against Charter or any Affiliate of Charter which, if adversely
determined, would adversely affect the ability of Charter to perform its
obligations under this Agreement; and (b) as of the date of this Agreement,
there is not in existence any Judgment binding Charter or any Affiliate of
Charter that could reasonably be expected to adversely affect the ability of
Charter to perform its obligations under this Agreement.
3.5. Finder and Brokers. Charter has not entered into any Contract with
any person which will result in the obligation of TCID to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.
3.6. Qualification. Charter knows of no facts which would disqualify it
from holding the TCID RMG Shares under any Legal Requirement.
(6)
<PAGE> 13
3.7. Securities Law Matters. Charter understands and acknowledges that
none of the TCID RMG Shares has been registered or qualified under the federal
or applicable state securities laws and the TCID RMG Shares are being sold to
and purchase by Charter in reliance upon applicable exemptions from such
registration and qualification requirements. Charter is an "accredited investor"
within the meaning of the federal securities laws and acknowledges it has been
furnished with or afforded access to, and has had the opportunity to ask
questions and receive answers concerning, all information pertaining to the TCID
RMG Shares. The TCID RMG Shares are being acquired by Charter for investment
only and not with a view to any public distribution thereof. Charter understands
that the TCID RMG Shares are "restricted securities" within the meaning of the
federal securities laws and agrees that it will not offer to sell or otherwise
dispose of any of the TCID RMG Shares in violation of the registration and
qualification requirements of the federal and applicable state securities laws.
All certificates to be delivered at Closing evidencing ownership of the TCID RMG
Shares will contain appropriate legends incorporating these applicable
securities laws restrictions.
3.8. Investment Intent. Charter represents and warrants to TCID that (a)
Charter is an "accredited investor" as defined in Rule 501(a) of Regulation D
under the Securities Act of 1933, as amended (the "Securities Act") and (b)
Charter is acquiring the TCID RMG Shares for its own account, for investment
only and without a view to the distribution thereof except in a transaction
registered or qualified under the Securities Act, and applicable state
securities laws, or unless an exemption from those requirements is available.
4. TCID'S REPRESENTATIONS AND WARRANTIES.
TCID represents and warrants to Charter as of the date of this Agreement
and as of the Closing, as follows:
4.1. Organization and Qualification. TCID is a corporation which has been
duly organized and is validly existing and in good standing under the laws of
the State of Colorado. As of the date of this Agreement, TCID is duly qualified
to do business and is in good standing under the laws of each jurisdiction in
which its activities make such qualification necessary.
4.2. Authority and Validity. TCID has all requisite corporate power and
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Transaction
Documents to which it is a party. The execution and delivery by TCID of, the
performance of TCID under, and the consummation by TCID of the transactions
contemplated by, this Agreement and the Transaction Documents to which it is a
party have been duly and validly authorized by all action by or on behalf of
TCID. This Agreement has been, and when executed and delivered by TCID the
Transaction Documents to which it is a party will be, duly and validly executed
and delivered by TCID and the valid and binding obligations of TCID, enforceable
against TCID in accordance with their terms, except as the same may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar
(7)
<PAGE> 14
laws now or hereafter in effect relating to the enforcement of creditors' rights
generally or by principles governing the availability of equitable remedies.
4.3. No Conflict; Required Consents. Except as set forth on Schedule 4.3,
and assuming all Charter Required Consents have been obtained and the expiration
or earlier termination of the waiting period under the HSR Act has occurred, the
execution and delivery by TCID of, the performance of TCID under, and the
consummation by TCID of the transactions contemplated by, this Agreement and the
Transaction Documents to which it is a party do not and will not: (a) conflict
with or violate any provision of the organizational documents of TCID; (b)
violate any provision of any Legal Requirement; (c) require any consent,
approval or authorization of, or filing of any certificate, notice, application,
report or other document with, any Governmental Authority or other Person; or
(d) (i) conflict with, violate, result in a breach of or constitute a default
under (without regard to requirements of notice, lapse of time or elections of
other Persons or any combination thereof), (ii) permit or result in the
termination, suspension or modification of, (iii) result in the acceleration of
(or give any Person the right to accelerate) the performance of TCID under, or
(iv) result in the creation or imposition of any Contract or other instrument by
which TCID or any of its assets is bound or affected, except for purposes of
clauses (c) and (d) such consents, approvals, authorizations and filings that,
if not obtained or made, would not, and such violations, conflicts, breaches,
defaults, terminations, suspensions, modifications and accelerations as would
not, individually or in the aggregate, have an adverse effect on the ability of
TCID to perform its obligations under this Agreement or the Transaction
Documents to which it is a party.
4.4. Ownership. Except with respect to Liens that will be released or
terminated at or prior to the Closing, TCID owns the TCID RMG Shares,
beneficially and of record, and free and clear of all Liens, other than
Permitted Stock Restrictions. Other than this Agreement and any agreement with
respect to the pledge of the TCID RMG Shares that will be released or terminated
at or prior to the Closing, there is no agreement between TCID and any Person
with respect to the disposition of the TCID RMG Shares that would interfere with
the transactions contemplated by this Agreement.
4.5. Litigation. Except as set forth in Schedule 4.6: (a) as of the date
of this Agreement, there is no Litigation pending or, to TCID's knowledge,
threatened against TCID or any Affiliate of TCID which, if adversely determined,
would adversely affect the ability of TCID to perform its obligations under this
Agreement; and (b) as of the date of this Agreement, there is not in existence
any Judgment binding TCID or any Affiliate of TCID that could reasonably be
expected to adversely affect the ability of TCID to perform its obligations
under this Agreement.
4.6. Finder and Brokers. TCID has not entered into any Contract with any
person which will result in the obligation of Charter to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby.
5. ADDITIONAL COVENANTS.
(8)
<PAGE> 15
5.1. Certain Deliveries and Notice. TCID and Charter each will promptly
notify the other of any fact, circumstance, event or action by it or otherwise
(a) which, if known at the date of this Agreement, would have been required to
be disclosed by it in or pursuant to this Agreement or (b) the existence,
occurrence or taking of which would result in the condition of TCID in Section
6.2.1 (with respect to the representations and warranties of Charter) or the
condition of Charter in Section 6.1.1 (with respect to the representations and
warranties of TCID) not being satisfied at any time prior to or on the Closing,
and, with respect to clause (b), use its commercially reasonable efforts to
remedy the same and to satisfy such condition to the other Party's obligation to
consummate the transactions contemplated by this Agreement.
5.2. Required Consents. Each Party will use its commercially reasonable
efforts to obtain in writing as promptly as possible and at its expense, all of
the Required Consents and any other consent, authorization or approval required
to be obtained by such Party in connection with the transactions contemplated by
this Agreement, and deliver to the other Party copies of such Required Consents
and such other consents, authorizations or approvals promptly after they are
obtained by such Party; provided, that each Party will afford the other Party
the opportunity to review, approve and revise the form of letter or application
proposed to request the Required Consent prior to delivery to the Third Party or
the Affiliate of a Party whose consent is sought. Each Party will cooperate with
the other Party to obtain all Required Consents and no Party will intentionally
take any action or steps that would prejudice or jeopardize the obtaining of any
Required Consent. No Party will accept or agree or accede to any modifications
or amendments to, or the imposition of any condition to the transfer of the TCID
RMG Shares that is not acceptable to the other Party.
5.3. HSR Notification. As soon as practicable after the execution of this
Agreement, but in any event no later than 30 days after such execution, Charter
and TCID will each complete and file, or cause to be completed and filed at its
own cost and expense, any notification and report required to be filed under the
HSR Act with respect to the transactions contemplated by this Agreement and each
such filing will request early termination of the waiting period imposed by the
HSR Act. The Parties will use their respective commercially reasonable efforts
to respond as promptly as reasonably practicable to any inquiries received from
the Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") for additional information or
documentation and to respond as promptly as reasonably practicable to all
inquiries and requests received from any other Governmental Authority in
connection with antitrust matters. The Parties will use their respective
commercially reasonable efforts to overcome any objections which may be raised
by the FTC, the Antitrust Division or any other Governmental Authority having
jurisdiction over antitrust matters. Each Party will cooperate to prevent
inconsistencies between their respective filings and between their respective
responses to all such inquiries and responses, and will furnish to each other
such necessary information and reasonable assistance as the other may reasonably
request in connection with its preparation of necessary filings or submissions
under the HSR Act.
5.4. Confidentiality and Publicity.
(9)
<PAGE> 16
5.4.1. Each Party will use commercially reasonable efforts to assure
that any non public information that such Party may obtain from the other in
connection with this Agreement with respect to the purchase and sale of the TCID
RMG Shares will be kept confidential and, unless and until the Closing occurs,
such Party will not disclose, and will cause its employees, consultants,
advisors and agents not to disclose, any such information to any other Person
(other than its directors, officers and employees and representatives of its
advisers and lenders whose knowledge thereof is necessary in order to facilitate
the consummation of the transactions contemplated hereby) or use, and will cause
its employees, consultants, advisors and agents not to use, such information to
the detriment of the other; provided that (a) such Party may use and disclose
any such information once it has been publicly disclosed (other than by such
Party in breach of its obligations under this Section) or which rightfully has
come into the possession of such Party (other than from the other Party) and (b)
to the extent that such Party may, in the reasonable opinion of its counsel, be
compelled by Legal Requirements to disclose any of such information, such Party
may disclose such information if it will have used all reasonable efforts, and
will have afforded the other the opportunity, to obtain an appropriate
protective order or other satisfactory assurance of confidential treatment, for
the information compelled to be disclosed. The obligation by either Party to
hold information in confidence pursuant to this Section will be satisfied if
such Party exercises the same care with respect to such information as it would
exercise to preserve the confidentiality of its own similar information. In the
event of termination of this Agreement, each Party will use all reasonable
efforts to cause to be delivered to the other, and retain no copies of, any
documents, work papers and other materials obtained by such Party or on its
behalf from the other, whether so obtained before or after the execution hereof
5.4.2. No Party will issue any press releases or make any other
public announcement concerning this Agreement and the transactions contemplated
hereby, except as required by applicable Legal Requirements, without the prior
written consent and approval of the other Party, which consent and approval may
not be unreasonably withheld.
5.5. Further Assurances. At or after the Closing, each Party at the
request of the other Party, will promptly execute and deliver, or cause to be
executed and delivered, to the other Party all such documents and instruments,
in addition to those otherwise required by this Agreement, in form and substance
reasonably satisfactory to the other Party as the other Party may reasonably
request in order to carry out or evidence the terms of this Agreement.
5.6. Offers. TCID (and its directors, officers, employees, representatives
and agents) shall not directly or indirectly, (i) offer the TCID RMG Shares for
sale, (ii) solicit, encourage or entertain offers for such TCID RMG Shares,
(iii) initiate negotiations or discussions for the sale of the TCID RMG Shares
or (iv) make information about the TCID RMG Shares available to any Third Party
in connection with the possible sale of the TCID RMG Shares prior to the Closing
Date or the date this Agreement is terminated in accordance with its terms.
(10)
<PAGE> 17
6. CONDITIONS PRECEDENT.
6.1. Conditions to Charter's Obligations. The obligations of Charter to
consummate the transactions contemplated by this Agreement will be subject to
the satisfaction, at or before the Closing, of the following conditions, one or
more of which may be waived by Charter:
6.1.1. Accuracy of Representations and Warranties. The
representations and warranties of TCID in this Agreement and in any Transaction
Documents, without giving effect to any materiality qualifications contained
therein, are true, complete and accurate on and as of the date hereof and at and
as of the Closing with the same effect as if made at and as of the Closing,
except to the extent that all misstatements, omissions and inaccuracies, in the
aggregate, do not have a material adverse effect on the TCID RMG Shares taken as
a whole, or on the ability of TCID to perform its obligations under this
Agreement.
6.1.2. Performance of Agreement. TCID will have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants in this Agreement and in any Transaction Document to
be performed and complied with by it at or before the Closing.
6.1.3. Deliveries. TCID will have delivered the items and documents
required to be delivered by it pursuant to this Agreement, including those
required to be delivered to Charter under Section 7.2.
6.1.4. Legal Proceedings. No Legal Requirement of any Governmental
Authority (including any temporary Legal Requirement) will be in effect which
would (a) prohibit Charter's ownership of the TCID RMG Shares or (b) prevent or
make illegal the consummation of any of the transactions contemplated by this
Agreement.
6.1.5. Consents. Charter will have received evidence, in form and
substance reasonably satisfactory to it, that the TCID Required Consents have
been obtained.
6.1.6. HSR Act. All filings required under the HSR Act will have
been made and the applicable waiting period will have expired or been earlier
terminated.
6.1.7. Common Agreement and Related Closings.
(a) The conditions set forth in Section 4.1 of the Common
Agreement shall have been satisfied or waived.
(b) The transactions contemplated by the IP Agreements and the
Redemption Agreement (each as defined in the Common Agreement) shall have been,
or will be, consummated concurrently with this Agreement as set forth in Section
4.4 of the Common
(11)
<PAGE> 18
Agreement, except to the extent such Agreements are not consummated as a result
of a breach by Charter or its Affiliates of its or their obligation to
consummate such transactions.
6.2. Conditions to TCID's Obligations. The obligations of TCID to
consummate the transactions contemplated by this Agreement will be subject to
the satisfaction, at or before the Closing, of the following conditions, one or
more of which may be waived by TCID:
6.2.1. Accuracy of Representations and Warranties. The
representations and warranties of Charter in this Agreement and in any
Transaction Documents, without giving effect to any materiality qualifications
contained therein, are true, complete and accurate on and as of the date hereof
and at and as of the Closing with the same effect as if made at and as of the
Closing, except to the extent that all misstatements, omissions and
inaccuracies, in the aggregate, do not have a material adverse effect on the
ability of Charter to perform its obligations under this Agreement.
6.2.2. Performance of Agreements. Charter will have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants in this Agreement and in any Transaction Document to
be performed and complied with by it at or before the Closing.
6.2.3. Deliveries. Charter will have delivered the Class B
Redemption Price and the Preferred Stock Liquidation Value in accordance with
Section 2.1, and the other items and documents required to be delivered by it
pursuant to this Agreement, including those required to be delivered to TCID
under Section 7.3.
6.2.4. Legal Proceedings. No Legal Requirement of any Governmental
Authority (including any temporary Legal Requirement) will be in effect which
would prevent or make illegal the consummation of any of the transactions
contemplated by this Agreement.
6.2.5. Consents. TCID will have received evidence, in form and
substance reasonably satisfactory to it, that the Charter Required Consents have
been obtained.
6.2.6. HSR Act. All filings required under the HSR Act will have
been made and the applicable waiting period will have expired or been earlier
terminated.
6.2.7. Related Closings. The transactions contemplated by the IP
Agreements and the Redemption Agreement (each as defined in the Common
Agreement) shall have been, or will be, consummated concurrently with this
Agreement as set forth in Section 4.4 of the Common Agreement, except to the
extent such Agreements are not consummated as a result of a breach by TCID or
its Affiliates of its or their obligation to consummate such transactions.
(12)
<PAGE> 19
7. THE CLOSING.
7.1. The Closing; Time and Place. Subject to the terms and conditions of
this Agreement, the Closing will be held at the same place and on the same day
as the closing under the IPWT Asset and Stock Purchase Agreement (the "Closing
Date").
7.2. TCID's Delivery Obligations. At the Closing, TCID will deliver or
cause to be delivered to Charter the following:
7.2.1. Stock Certificates. TCID will deliver the originals of all of
the stock certificates representing the TCID RMG Shares accompanied by stock
powers duly executed in blank or duly executed instruments of transfer, and all
other documents necessary to transfer to Charter title to the TCID RMG.
7.2.2. Evidence of Authorization. Certified corporate resolutions or
other evidence reasonably satisfactory to Charter that TCID has taken all action
necessary to authorize the execution of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby.
7.2.3. Officer's Certificate. Charter will have received a
certificate executed by an executive officer of TCID dated the date of the
Closing, reasonably satisfactory in form and substance to Charter certifying
that the conditions specified in Section 6.1.1 and 6.1.2 have been satisfied.
7.2.4. Opinion of Counsel. An opinion of Sherman & Howard L.L.C.,
substantially in the form of Exhibit 7.2.4.
7.2.5. Other. Such other documents and instruments as may be
necessary to effect the intent of this Agreement and to consummate the
transactions contemplated hereby.
7.3. Charter's Delivery Obligations. At the Closing, Charter will deliver
or cause to be delivered to TCID the following:
7.3.1. Cash Consideration. The Class B Redemption Price and the
Preferred Stock Liquidation Value will be paid by Charter to TCID by wire
transfer in immediately available funds in accordance with Section 2.1.
7.3.2. Evidence of Authorization Actions. Certified resolutions of
the Board of Directors of Charter or other evidence reasonably satisfactory to
TCID that Charter has taken all action necessary to authorize the execution of
this Agreement and the Transaction Documents and the consummation of the
transactions contemplated hereby.
(13)
<PAGE> 20
7.3.3. Officer's Certificate. TCID will have received a certificate
executed by an executive officer of Charter dated the date of the Closing,
reasonably satisfactory in form and substance to TCID certifying that the
conditions specified in Sections 6.2.1 and 6.2.2 have been satisfied.
7.3.4. Opinion of Counsel. An opinion of Irell & Manella LLP
substantially in the form of Exhibit 7.3.4.
7.3.5. Other. Such other documents and instruments as may be
necessary to effect the intent of this Agreement and to consummate the
transactions contemplated hereby.
8. TERMINATION AND DEFAULT.
8.1. Termination Events. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
8.1.1. At any time, by the mutual agreement of Charter and TCID;
8.1.2. By either Charter or TCID at any time, if the other is in
material breach or default of any of the other's covenants, agreements or other
obligations herein or in any Transaction Document;
8.1.3. By either Charter or TCID upon written notice to the other,
if any of the conditions to its obligations set forth in Sections 6.1 and 6.2,
respectively, are not satisfied on or before the later of January 15, 2000, or
nine months after the date of this Agreement, for any reason other than an
intentional and material breach or default by such Party of its respective
covenants, agreements or other obligations under this Agreement, or any of its
representations herein not being true and accurate in all material respects when
made or when otherwise required by this Agreement to be true and accurate in all
material respects;
8.1.4. By either Charter or TCID if an injunction, restraining order
or decree of any nature of any Governmental Authority of competent jurisdiction
is issued that prohibits the consummation of any of the transactions
contemplated hereby and such injunction, restraining order or decree is final
and nonappealable; provided, however, that the party seeking to terminate this
Agreement pursuant to this clause has used commercially reasonable efforts to
have such injunction, order or decree vacated or denied;
8.1.5. By either Charter or TCID, upon termination of the IPWT Asset
and Stock Purchase Agreement in accordance with its terms; or
8.1.6. As otherwise provided herein.
(14)
<PAGE> 21
8.2. Effect of Termination. If this Agreement is terminated pursuant to
Section 8.1, all obligations of the Parties under this Agreement will terminate,
except for the obligations set forth in Section 5.5 and Section 10.13.
Termination of this Agreement pursuant to Sections 8.1.2, 8.1.3, 8.1.4, 8.1.5 or
8.1.6 will not limit or impair any remedies that any of TCID or Charter may have
pursuant to the terms of this Agreement with respect to a breach or default by
the other of its covenants, agreements or obligations under this Agreement.
9. SURVIVAL; REMEDIES.
9.1. Survival of Representations, Warranties, Covenants and Agreements.
The representations, warranties, covenants and agreements of TCID and Charter in
this Agreement and in the Transaction Documents will survive Closing for a
period of twelve months after the Closing Date. The period of survival of the
representations, warranties, covenant or agreement prescribed by this Section
9.1 are referred to as the "Survival Period." The liabilities of each Party
under its respective representations, warranties, covenant or agreement, except
Sections 5.4 and 5.5, will expire as of the expiration of the Survival Period;
provided, however, that such expiration will not include, extend or apply to any
representation, warranty, covenant or agreement the breach of which has been
asserted by a Party in a written notice to the other Party before such
expiration or about which a Party has given the other Party written notice
before such expiration indicating that facts or conditions exist that, with the
passage of time or otherwise, can reasonably be expected to result in a breach
(and describing such potential breach in reasonable detail).
9.2. Exclusive Remedy. The Parties hereby agree that the rights set forth
in the Common Agreement will be each Party's sole and exclusive remedies against
the other Party for any claims arising after the Closing Time and relating to
any breaches of the representations, warranties or covenants contained in this
Agreement other than based on fraud.
10. MISCELLANEOUS PROVISIONS.
10.1. Parties Obligated and Benefitted. Subject to the limitations set
forth below, this Agreement will be binding upon each of the Parties and their
respective assigns and successors in interest and will inure solely to the
benefit of the Parties and their respective assigns and successors in interest,
and no other Person will be entitled to any of the benefits conferred by this
Agreement. Without the prior written consent of the other Parties, no Party will
assign any of its rights under this Agreement or delegate any of its duties
under this Agreement, except a Party may assign any or all of its rights under
this Agreement to an Affiliate, provided that such assignment will not result in
any adverse tax consequences to the other Party, will not give rise to any
material requirements for additional Required Consents, and will not, in the
reasonable judgment of the other Party, delay the Closing.
10.2. Notices. Any notice, request, demand, waiver or other communication
required or permitted to be given under this Agreement to either Party will be
in writing and will be deemed to
(15)
<PAGE> 22
have been duly given only if delivered in person or by first class, prepaid,
registered or certified mail, or sent by courier or, if receipt is confirmed, by
telecopier:
To TCID c/o:
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Derek Chang
Telecopy: 303-488-3219
with a copy (which will not constitute notice) to:
Sherman & Howard L.L.C.
633 17th Street, Suite 3000
Denver, Colorado 80202
Attention: Arlene S. Bobrow, Esq.
Telecopy: 303-298-0940
To Charter c/o:
Charter Communications
12444 Powerscourt Drive
St. Louis, Missouri 63131
Attention: Jerald L. Kent, President
Telecopy: (314) 965-8793
with copies (which will not constitute notice) to:
Charter Communications
12444 Powerscourt Drive
St. Louis, Missouri 63131
Attention: Curtis S. Shaw, Esq.,
Senior Vice President & General Counsel
Telecopy: (314) 965-8793
Irell & Manella LLP
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067
Attention: Alvin G. Segel, Esq.
Telecopy: (310) 203-7199
(16)
<PAGE> 23
Any Party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 10.2. All
notices will be deemed to have been received on the date of delivery, which in
the case of deliveries by telecopier will be the date of the sender's
confirmation.
10.3. Right to Specific Performance. Each Party acknowledges that the
unique nature of the transaction pursuant to this Agreement renders money
damages an inadequate remedy for the breach by either Party of its obligations
under this Agreement, and the Parties agree that in the event of such breach,
the Parties will upon proper action instituted by either of them, be entitled to
a decree of specific performance of this Agreement.
10.4. Waiver. This Agreement or any of its provisions may not be waived
except in writing. The failure of any Party to enforce any right arising under
this Agreement on one or more occasions will not operate as a waiver of that or
any other right on that or any other occasion.
10.5. Captions. The section and other captions of this Agreement are for
convenience only and do not constitute a part of this Agreement.
10.6. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware (other than its rules of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby).
10.7. Time. Time is of the essence under this Agreement. If the last day
permitted for the giving of any notice or the performance of any act required or
permitted under this Agreement falls on a day which is not a Business Day, the
time for the giving of such notice or the performance of such act will be
extended to the next succeeding Business Day.
10.8. Late Payments. If either Party fails to pay the other any amounts
when due under this Agreement, the amounts due will bear interest from the due
date to the date of payment at the Prime Rate plus 2%, adjusted as and when
changes in the Prime Rate are made.
10.9. Counterparts. This Agreement may be executed in counterparts, each
of which will be deemed an original.
10.10. Entire Agreement. This Agreement (including the Transaction
Documents and the Schedules referred to in this Agreement, which are
incorporated in and constitute a part of this Agreement) contains the entire
agreement of the Parties with respect to the subject matter hereof and
supersedes all prior oral or written agreements and understandings with respect
to such subject matter. This Agreement may not be amended or modified except by
a writing signed by each of the parties hereto.
10.11. Severability. Any term or provision of this Agreement which is
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without
(17)
<PAGE> 24
rendering invalid or unenforceable the remaining rights of the Person intended
to be benefitted by such provision or any other provisions of this Agreement.
10.12. Construction. This Agreement has been negotiated by the Parties and
their respective legal counsel, and legal or other equitable principles that
might require the construction of this Agreement or any provision of this
Agreement against the Party drafting this Agreement will not apply in any
construction or interpretation of this Agreement.
10.13. Expenses. Except as otherwise expressly provided in this Agreement,
each Party will pay all of its expenses, including attorneys' and accountants'
fees, in connection with the negotiation of this Agreement, the performance of
its obligations and the consummation of the transactions contemplated by this
Agreement.
10.14. Commercially Reasonable Efforts. For purposes of this Agreement,
"commercially reasonable efforts" will not be deemed to require a Party to
undertake extraordinary or unreasonable measures, including the payment of
amounts in excess of normal and usual filing fees and processing fees, if any or
other payments with respect to any Contract that are significant in the context
of such Contract (or significant on the aggregate basis as to all Contracts).
[the remainder of this page intentionally left blank]
(18)
<PAGE> 25
The parties have executed this Stock Purchase Agreement as of the day and
year first above written.
CHARTER COMMUNICATIONS, LLC
By: /s/ Curtis S. Shaw
--------------------------------------------
Title: Vice President
TCID IP-V, INC.
By: /s/ Derek Chang
--------------------------------------------
Title: Vice President
[Signature Page to Stock Purchase Agreement dated
as of April __, 1999 between TCID IP-V, Inc.
and Charter Communications, LLC]
(19)
<PAGE> 1
Exhibit 2.6(c)
RMG PURCHASE AGREEMENT
dated as of April 20, 1999
between
ROBIN MEDIA GROUP, INC.,
INTERMEDIA PARTNERS OF WEST TENNESSEE, L.P.
and
CHARTER RMG, LLC
<PAGE> 2
TABLE OF CONTENTS
Page
----
1. DEFINITIONS.......................................................... 1
1.1 1992 Cable Act................................................. 1
1.2 Affiliate...................................................... 1
1.3 Agreement...................................................... 2
1.4 ............................................................... 2
1.5 Assets......................................................... 2
1.6 Basic Services................................................. 2
1.7 Books and Records.............................................. 2
1.8 Business Day................................................... 2
1.9 Cable Act...................................................... 2
1.10 Cable Business................................................. 3
1.11 Closing........................................................ 3
1.12 Closing Time................................................... 3
1.13 Code........................................................... 3
1.14 Communications Act............................................. 3
1.15 Contract....................................................... 3
1.16 Environmental Law.............................................. 3
1.17 ERISA.......................................................... 3
1.18 ERISA Affiliate................................................ 3
1.19 Expanded Basic Services........................................ 3
1.20 FCC............................................................ 3
1.21 Governmental Authority......................................... 3
1.22 Hazardous Substances........................................... 3
1.23 HSR Act........................................................ 4
1.24 Intellectual Property.......................................... 4
1.25 Judgment....................................................... 4
1.26 Knowledge...................................................... 4
1.27 Leased Property................................................ 4
1.28 Legal Requirement.............................................. 4
1.29 Lien........................................................... 5
1.30 Litigation..................................................... 5
1.31 Losses......................................................... 5
1.32 MVPD........................................................... 5
1.33 Other Intangibles.............................................. 5
1.34 Other Real Property Interests.................................. 5
1.35 Owned Property................................................. 5
1.36 Party.......................................................... 5
1.37 Pay TV......................................................... 6
1.38 Permitted Liens................................................ 6
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<PAGE> 3
1.39 Person......................................................... 6
1.40 Required Consents.............................................. 6
1.41 Six-Month Date................................................. 6
1.42 Statements..................................................... 6
1.43 Systems Contracts.............................................. 6
1.44 Systems Franchises............................................. 7
1.45 Systems Licenses............................................... 7
1.46 Tangible Personal Property..................................... 7
1.47 Taxes.......................................................... 7
1.48 Third Party.................................................... 7
1.49 Transaction Documents.......................................... 7
1.50 Other Definitions.............................................. 7
1.51 Usage.......................................................... 9
2. CONTRIBUTION AND PURCHASE............................................ 9
2.1 Contribution................................................... 9
2.2 Purchase....................................................... 9
3.1 Base and Adjusted Value........................................ 9
3.2 Allocation of Purchase Price................................... 10
4. EXCLUDED ASSETS AND.................................................. 10
4.1 Excluded Assets................................................ 10
4.2 Assumed Obligations and Liabilities............................ 11
5. IPWT'S REPRESENTATIONS AND WARRANTIES................................ 12
5.1 Organization and Qualification of IPWT and RMG................. 12
5.2 Authority and Validity......................................... 12
5.3 No Conflict; Required Consents................................. 12
5.4 Assets......................................................... 13
5.5 System Franchises, Systems Licenses, Systems Contracts and
Other Real Property Interests.................................. 13
5.6 Real Property.................................................. 15
5.7 Environmental.................................................. 15
5.8 Compliance with Legal Requirements............................. 16
5.9 Intellectual Property.......................................... 18
5.10 Financial Statements........................................... 18
5.11 Absence of Certain Changes or Events........................... 19
5.12 Litigation..................................................... 19
5.13 Tax Returns; Other Reports..................................... 19
5.14 Employment Matters............................................. 19
5.15 Systems Information............................................ 21
5.16 Taxpayer Identification Number................................. 21
5.17 Finder and Brokers............................................. 21
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5.18 Related Party Transactions..................................... 22
6. CHARTER'S REPRESENTATIONS AND WARRANTIES............................. 22
6.1 Organization and Qualification of Charter...................... 22
6.2 Authority and Validity......................................... 22
6.3 No Conflict; Required Consents................................. 22
6.4 Taxpayer Identification Number................................. 23
6.5 Finder and Brokers............................................. 23
6.6 Litigation..................................................... 23
6.7 Qualification.................................................. 23
6.8 Securities Law Matters......................................... 23
7. ADDITIONAL COVENANTS................................................. 23
7.1 Access to Premises and Records................................. 23
7.2 Continuity and Maintenance of Operations, Certain Deliveries
and Notice..................................................... 24
7.3 Employees...................................................... 26
7.4 Leased Vehicles; Other Capital Leases.......................... 29
7.5 Required Consents; Franchise Renewal........................... 29
7.6 Title Commitments and Surveys.................................. 31
7.7 HSR Notification............................................... 32
7.8 Sales and Transfer Taxes....................................... 32
7.9 Programming.................................................... 32
7.10 Updated Schedules.............................................. 33
7.11 Use of Name and Logo........................................... 33
7.12 Transitional Billing Services.................................. 34
7.13 Confidentiality and Publicity.................................. 34
7.14 Bulk Transfer.................................................. 35
7.15 Lien Searches.................................................. 35
7.16 Further Assurances............................................. 35
7.17 Post-Closing Cooperation as to Rates........................... 35
7.18 Distant Broadcast Signals...................................... 36
7.19 Environmental Assessment....................................... 37
7.20 Year 2000 Matters.............................................. 38
7.21 Satisfaction of Conditions..................................... 40
7.22 Offers......................................................... 40
7.23 Retention of Books and Records................................. 40
7.24 Formation of Tennessee LLC..................................... 41
7.25 Tax Return Cooperation......................................... 41
8. CONDITIONS PRECEDENT................................................. 41
8.1 Conditions to Charter's Obligations............................ 41
8.2 Conditions to RMG's Obligations................................ 42
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<PAGE> 5
9. THE CLOSING.......................................................... 43
9.1 The Closing; Time and Place.................................... 43
9.2 RMG's Delivery Obligations..................................... 43
9.3 Charter's Delivery Obligations................................. 44
10. TERMINATION AND DEFAULT.............................................. 45
10.1 Termination Events............................................. 45
10.2 Effect of Termination.......................................... 45
11. SURVIVAL; REMEDIES................................................... 46
11.1 Survival of Representations, Warranties Covenants and
Agreements .................................................... 46
11.2 Exclusive Remedy............................................... 46
12. MISCELLANEOUS PROVISIONS............................................. 46
12.1 Parties Obligated and Benefitted............................... 46
12.2 Notices........................................................ 46
12.3 Right to Specific Performance.................................. 47
12.4 Waiver......................................................... 47
12.5 Captions....................................................... 47
12.6 Governing Law.................................................. 47
12.7 Time........................................................... 47
12.8 Late Payments.................................................. 47
12.9 Counterparts................................................... 47
12.10 Entire Agreement............................................... 47
12.11 Severability................................................... 47
12.12 Construction................................................... 47
12.13 Expenses....................................................... 48
12.14 Risk of Loss................................................... 48
12.15 Tax Consequences............................................... 48
12.16 Commercially Reasonable Efforts................................ 48
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<PAGE> 6
Exhibits:
Exhibit 9.2.1 - Bill of Sale and Assignment and Assumption Agreement and
Bill of Sale and General Assignment
Schedules:
Schedule 1.28 - Leased Property
Schedule 1.35 - Other Real Property Interests
Schedule 1.36 - Owned Property
Schedule 1.43 - Systems Contracts
Schedule 1.44 - Systems Franchises
Schedule 1.45 - Systems Licenses
Schedule 1.46 - Tangible Personal Property
Schedule 4.1(a) - Excluded Assets
Schedule 4.1(b) - Exceptions to Excluded Assets
Schedule 5.3 - RMG Required Consents
Schedule 5.4.1 - Liens and Permitted Liens
Schedule 5.4.3 - Other Operators
Schedule 5.5.2 - Franchise Matters
Schedule 5.5.3 - Contract Matters
Schedule 5.6 - Real Property Matters
Schedule 5.7 - Environmental Matters
Schedule 5.8 - Compliance with Legal Requirements
Schedule 5.10 - Statements of Income
Schedule 5.11 - Changes and Events
Schedule 5.12 - RMG Litigation
Schedule 5.13 - Tax Matters
Schedule 5.14 - Plans; Employee Matters
Schedule 5.15.1 - Systems Information
Schedule 5.15.2 - Systems
Schedule 5.18 - Related Party Transactions
Schedule 6.3 - Charter Required Consents
Schedule 6.6 - Charter Litigation
Schedule 7.2 - Exceptions to Ordinary Course
Schedule 7.2.1 - Capital and Operating Budgets
Schedule 7.2.4 - Form of Monthly Report
Schedule 7.20.1(b) - Year 2000 High-Level Inventories, Assessments and
Remediation Decisions
Schedule 7.20.1(c) - Year 2000 Plan
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RMG PURCHASE AGREEMENT
THIS RMG PURCHASE AGREEMENT is made as of the 20th day of April, 1999, by
and among Robin Media Group, Inc., a Nevada corporation ("RMG"), and InterMedia
Partners of West Tennessee, L.P., a California limited partnership ("IPWT"), on
the one hand, and Charter RMG, LLC, a Delaware limited liability company
("Charter"), on the other hand.
RECITALS
A. RMG owns and operates cable television systems which are franchised or
hold other operating authority and operate in and around the municipalities
listed on Schedule 5.15.2 (collectively, the "Systems").
B. This Agreement sets forth the terms upon which RMG will convey, or
cause to be conveyed, to a Delaware limited liability company wholly owned by
RMG ("Tennessee LLC") the assets comprising or used or useful in connection with
the Cable Business associated with the Systems located in East Tennessee, but
excluding any assets relating to RMG's cable television business in Brentwood,
Tennessee, and RMG will transfer to Charter at the Closing a percentage of the
issued and outstanding membership interests in Tennessee LLC as set forth
herein.
C. IPWT, Charter and certain of their respective Affiliates have entered
into that certain Common Agreement (the "Common Agreement") pursuant to which
they have agreed to certain issues common to each of the transfers made pursuant
to this Agreement and to certain other related transactions (each as more fully
described in the Common Agreement). The common issues addressed include revenue
and working capital adjustments, closing conditions, and indemnification for
breaches of representations, warranties, covenants and agreements.
AGREEMENTS
In consideration of the covenants and agreements set forth herein and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Parties hereby agree as follows:
1. DEFINITIONS. In addition to the terms defined elsewhere in this
Agreement, the following capitalized terms or terms otherwise defined in this
Section 1 shall have the meanings set forth below:
1.1 1992 Cable Act. The Cable Television Consumer Protection and
Competition Act of 1992, as amended, and the FCC rules and regulations
promulgated thereunder.
1.2 Affiliate. With respect to any Person, any other Person controlling,
controlled by
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<PAGE> 8
or under common control with such Person. As used in this Agreement, "control"
means the ownership, directly or indirectly, of voting securities representing
the right generally to elect a majority of the directors (or similar officials)
of a Person or the possession, by contract or otherwise, of the authority to
direct the management and policies of a Person. Notwithstanding the foregoing,
prior to the Closing Date, (a) neither AT&T Corporation, Tele-Communications,
Inc., not any of their direct or indirect subsidiaries (collectively, the "AT&T
Affiliates"), shall be considered Affiliates of RMG for any purpose herein or
hereunder; (b) neither Paul Allen, Vulcan Cable, Inc., Vulcan Cable II, Inc.,
Marcus Cable Properties, L.L.C. nor any other Person directly or indirectly
controlled by Paul Allen that is not engaged in the cable television business
(collectively, the "Allen Affiliates") shall be considered Affiliates of Charter
for any purpose herein or hereunder; (c) RMG and Tennessee LLC shall not be
considered Affiliates of IPWT following the Closing; and (d) InterMedia
Partners, a California limited partnership, Brenmor Cable Partners, L.P., and
TCID IP-V, Inc., on the one hand, and InterMedia Partners Southeast, a
California general partnership, IPWT, InterMedia Partners IV, L.P., and RMG, on
the other hand, shall not be deemed Affiliates of each other.
1.3 Agreement. This Asset Purchase Agreement.
1.4 Intentionally omitted
1.5 Assets. All of the assets, privileges, contracts, licenses, permits,
franchises, authorizations, rights, interests, claims and other properties, real
and personal, tangible and intangible, of every type and description (a) which
are owned, leased, held for, used or useful in, or otherwise related to, the
Cable Business, (b) in which RMG or any Affiliate of RMG has any right, title or
interest or in which RMG or any Affiliate of RMG acquires any right, title or
interest on or before the Closing Time, and (c) which are not Excluded Assets.
The Assets include the Tangible Personal Property, Owned Property, Leased
Property, Other Real Property Interests, Systems Franchises, Systems Licenses,
Systems Contracts, Books and Records and Other Intangibles.
1.6 Basic Services. The lowest tier of service offered to subscribers of a
System.
1.7 Books and Records. All engineering records, files, data, drawings,
blueprints, schematics, reports, lists, plans and procedures and all other files
of correspondence, lists, records and reports concerning the Cable Business,
including subscribers and prospective subscribers of the Systems, signal and
program carriage and dealings with Governmental Authorities with respect to the
Systems, including all reports filed with respect to the Systems by or on behalf
of RMG or any Affiliate of RMG with the FCC and statements of account filed with
respect to the Systems by or on behalf of RMG or any Affiliate of RMG with the
U.S. Copyright Office, but excluding all documents, reports and records relating
to any employee of the Systems who has not given consent to disclosure of such
documents, reports and records.
1.8 Business Day. Any day other than a Saturday, Sunday or a day on which
the
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banking institutions in New York, New York, Denver, Colorado, San Francisco,
California or St. Louis, Missouri are required or authorized to be closed.
1.9 Cable Act. The Cable Communications Policy Act of 1984, as amended,
and the FCC rules and regulations promulgated thereunder.
1.10 Cable Business. The cable television businesses and other
revenue-generating businesses and operations relating to the Systems conducted
by RMG or an Affiliate of RMG through the Systems.
1.11 Closing. The closing of the transactions contemplated by this
Agreement.
1.12 Closing Time. 11:59 p.m., Eastern time, on the Closing Date.
1.13 Code. United States Internal Revenue Code, as amended.
1.14 Communications Act. The Communications Act of 1934, as amended, and
the FCC rules and regulations promulgated thereunder.
1.15 Contract. Any contract, mortgage, deed of trust, bond, indenture,
lease, license, note, franchise, certificate, option, warrant, right or other
instrument, document, obligation or agreement, whether written or oral.
1.16 Environmental Law. Any Legal Requirement relating to pollution or the
protection of public health, safety, welfare or the environment, including
CERCLA, OSHA and RCRA and including Legal Requirements relating to emissions,
discharges, releases or threatened releases of Hazardous Substances into the
environment (including ambient air, surface water, ground water or land) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances.
1.17 ERISA. The Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder and published
interpretations with respect thereto.
1.18 ERISA Affiliate. As to any Person, any trade or business, whether or
not incorporated, which together with such Person would be deemed a single
employer within the meaning of Section 4001 of ERISA.
1.19 Expanded Basic Services. Any video programming provided over a cable
television system, regardless of service tier, other than Basic Services and Pay
TV.
1.20 FCC. The Federal Communications Commission.
1.21 Governmental Authority. The United States of America, any state,
commonwealth,
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territory or possession of the United States of America and any political
subdivision or quasi-governmental authority of any of the same, including any
court, tribunal, department, commission, board, bureau, agency, body, county,
municipality, province, parish or other instrumentality of any of the foregoing.
1.22 Hazardous Substances. Any pollutant, contaminant, chemical,
industrial, toxic, hazardous or noxious substance or waste which is regulated by
a Governmental Authority, including (a) any petroleum or petroleum compounds
(refined or crude), flammable substances, explosives, radioactive materials or
any other materials or pollutants which pose a significant hazard or potential
significant hazard to the Owned Property or Other Real Property Interests or to
Persons in or about the Owned Property or Other Real Property Interests or cause
the Owned Property or Other Real Property Interests to be in violation of any
Legal Requirements; (b) any "hazardous waste" as defined by the Resource
Conservation and Recovery Act of 1976 (RCRA) (42 U.S.C. ss.ss.6901) and the
rules and regulations promulgated thereunder; (c) any "hazardous substance" as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. 9601 et seq.) (CERCLA), as amended, and the rules and
regulations promulgated thereunder; (d) any substance regulated by the Toxic
Substances Control Act (TSCA) (42 U.S.C. ss.2601 et seq.) or the Insecticide,
Fungicide and Rodenticide Act (IFRA) (7 U.S.C. ss.136 et seq.), each, as
amended, and the rules and regulations promulgated thereunder; (e) asbestos or
asbestos-containing material of any kind or character; (f) polychlorinated
biphenyls; (g) any substances regulated under the provisions of Subtitle I of
RCRA relating to underground storage tanks; (h) any materials or substances
designated as "hazardous substances" pursuant to the Clean Water Act (33 U.S.C.
ss.1251 et seq.); (i) "economic poison," as defined in the Federal Insecticide,
Fungicide and Rodenticide Act (7 U.S.C. ss.135 et seq.); (j) any substance the
presence, use, handling, treatment, storage or disposal of which on the Owned
Property or Leased Property is regulated or prohibited by any Environmental Law;
and (k) any other substance which by any Environmental Law requires special
handling, reporting or notification of any Governmental Authority in its
collection, storage, use, treatment or disposal.
1.23 HSR Act. The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
1.24 Intellectual Property. With respect to the Cable Business, any (a)
trademarks, trade dress, trade names, service marks, logos and other similar
proprietary rights, (b) domain names, (c) copyrights and (d) patents and
patentable know-how, inventions and processes, in each case used in the Cable
Business.
1.25 Judgment. Any judgment, writ, order, injunction, award or decree of
any court, judge, justice or magistrate, including any bankruptcy court or judge
or the arbitrator in any binding arbitration, and any order of or by any
Governmental Authority.
1.26 Knowledge. The actual knowledge of a particular matter of Frank S.
Crawford, Robert J. Lewis, Rodney M. Royse, Edon V. Smith or Thomas R.
Stapleton, and in addition to
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those Persons described above, the general manager or one or more of the
managers of the Systems.
1.27 Leased Property. The leaseholds of real property included among the
Assets and described as Leased Property on Schedule 1.27.
1.28 Legal Requirement. Applicable common law and any statute, ordinance,
code or other law, rule, regulation, order, technical or other written standard,
requirement or procedure enacted, adopted, promulgated, applied or followed by
any Governmental Authority, including any Judgment.
1.29 Lien. Any security interest, security agreement, financing statement
filed with any Governmental Authority, conditional sale or other title retention
agreement, any lease, consignment or bailment given for purposes of security,
any mortgage, lien (including any lien for Taxes), indenture, pledge, option,
encumbrance, adverse interest, constructive trust or other trust, claim,
attachment, exception to, defect in, or other condition adversely affecting
title or other ownership interest (including reservations, rights of entry,
possibilities of reverter, encroachments, protrusions, easements, rights-of-way,
rights of first refusal, restrictive covenants, leases and licenses) of any
kind, which constitutes an interest in or claim against property, whether
arising pursuant to any Legal Requirement, Systems License, Systems Franchise,
Systems Contract or otherwise.
1.30 Litigation. Any claim, action, suit, proceeding, arbitration,
investigation or hearing that could result in a Judgment, any other activity or
procedure that could reasonably be expected to result in a Judgment, or any
notice of any of the foregoing.
1.31 Losses. Any claims, losses, liabilities, damages, penalties, costs
and expenses, including interest that may be imposed in connection therewith,
expenses of investigation, reasonable fees and disbursements of counsel and
other experts, and, as applicable, the cost to any Person making a claim or
seeking indemnification under this Agreement with respect to funds expended by
such Person by reason of the occurrence of any event or the existence or
assertion of any Liens (other than Permitted Liens) with respect to which
indemnification is sought.
1.32 MVPD. A distributor of cable television services, multichannel multi
point distribution service, direct broadcast satellite service or television
receive-only satellite programming, who makes available for purchase, by
subscribers or customers, multiple channels of video programming, other than
Persons distributing such services only to multiple dwelling unit or other
commercial customers (including hotels, motels, resorts, hospitals, dormitories,
prisons, restaurants, bars and similar establishments).
1.33 Other Intangibles. All intangible assets, other than the Systems
Franchises, Systems Licenses and Systems Contracts, including subscriber lists,
claims (excluding any claims relating to Excluded Assets), and Intellectual
Property, if any, included among the Assets.
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1.34 Other Real Property Interests. The easements and rights of access
(other than those relating to multiple dwelling units) and other interests in
real property held by RMG or any Affiliate of RMG in connection with the Cable
Business, including those interests described as Other Real Property Interests
on Schedule 1.34, but not including Leased Property or Owned Property.
1.35 Owned Property. The fee interests in the real property included among
the Assets and described as Owned Property on Schedule 1.35 and all improvements
and towers thereon and appurtenances thereto.
1.36 Party. Charter, IPWT or RMG, as the context requires.
1.37 Pay TV. Premium programming services selected by and sold to
subscribers on a per channel or per program basis.
1.38 Permitted Liens. (a) Liens for Taxes, assessments and governmental
charges, in each case not yet due and payable, (b) zoning laws or ordinances or
any similar Legal Requirements, (c) rights reserved to any Governmental
Authority to regulate the affected property, (d) Liens described on Schedule
5.4.1, (e) as to Leased Property or Tangible Personal Property that is leased,
the interests of the lessors thereof, and (f) as to Owned Property, Leased
Property and Other Real Property Interests, any easements, rights-of-way,
servitudes, conditions, covenants, restrictions and minor imperfections or
irregularities in title, in each case, which are reflected in the public records
and which do not individually or in the aggregate interfere with the right or
ability of the applicable Party to own, use, enjoy or operate the Owned
Property, Leased Property or Other Real Property Interests in the manner
currently used or to convey good, marketable and indefeasible fee simple title
to the same; provided that "Permitted Liens" will not include any Lien which
could prevent or inhibit in any way (other than as permitted under clause (f))
the conduct of the business of the affected System, and provided further that
classification of any Lien as a "Permitted Lien" will not affect any liability
which a Party may have for any such Lien, including pursuant to any indemnity
obligation under this Agreement.
1.39 Person. Any natural person, Governmental Authority, corporation,
general or limited partnership, limited liability company, joint venture, trust,
association or unincorporated entity of any kind.
1.40 Required Consents. Any and all consents, authorizations and approvals
under or in connection with the Assets (including the Systems Franchises,
Systems Licenses, and Systems Contracts) or any Contract, Lien or Legal
Requirement by which RMG, any of its Affiliates or their respective Assets are
bound, required (a) for RMG to transfer the Assets to Tennessee LLC or the LLC
Interest to Charter pursuant to this Agreement, (b) for Tennessee LLC to operate
the Systems and to own, lease, use and operate the Assets and the Systems at the
places and in the manner in which the Assets are used and the Systems are
operated as of the date of this Agreement
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and as of the Closing, or (c) for Tennessee LLC to assume and perform the
Systems Franchises, the Systems Licenses, the Systems Contracts and the Assumed
Obligations and Liabilities.
1.41 Six-Month Date. The date that is six (6) months after the Closing
Date.
1.42 Statements of Income. Statements of Income of the Systems attached
hereto as Schedule 5.10.
1.43 Systems Contracts. All Contracts (other than Systems Franchises and
Systems Licenses) that are included among the Assets, including the lease
agreements for Tangible Personal Property, pole attachment agreements,
underground conduit agreements, crossing agreements, retransmission consent
agreements, multiple dwelling, bulk billing or commercial service agreements and
other Contracts described on Schedule 1.43 and the Contracts documenting Leased
Property and Other Real Property Interests described on Schedules 1.34 and 1.35.
1.44 Systems Franchises. The franchises, permits and similar
authorizations included among the Assets (other than Systems Licenses) described
on Schedule 1.44, and all rights and benefits of RMG and its Affiliates
pertaining thereto, including the rights and benefits arising under Section 626
of the Communications Act (47 U.S.C. 546) to the extent applicable to a Systems
Franchise.
1.45 Systems Licenses. The intangible cable television channel
distribution rights, cable television relay service (CARS), business radio and
other licenses, earth station registrations, authorizations, consents or permits
issued by the FCC or any other Governmental Authority included among the Assets
and described on Schedule 1.45 (other than the Systems Franchises and Systems
Contracts) and all rights and benefits of RMG and its Affiliates pertaining
thereto.
1.46 Tangible Personal Property. All tangible personal property included
among the Assets, including towers (other than towers on Owned Property which
are fixtures thereon and a part thereof), tower equipment, aboveground and
underground cable, distribution systems, headend amplifiers, line amplifiers,
microwave equipment, converters, testing equipment, motor vehicles, office
equipment, computers and billing equipment, furniture, fixtures, supplies,
inventory and other physical assets, the principal items of which are identified
and described on Schedule 1.46.
1.47 Taxes. Levies and assessments of any kind or nature imposed by any
Governmental Authority, including all income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes and levies or assessments related to
unclaimed property, together with any interest thereon and any penalties,
additions to tax or additional amounts applicable thereto. For purposes of
determining any Tax cost or Tax benefit to any Person, such amount will be the
actual cost or benefit recognized by such Person at the time of actual payment
of the additional Tax or actual receipt of the Tax benefit. In the event that
any Loss, payment or other amount is required to be
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determined on an after-Tax basis, such payment or other amount will be
determined without regard to any Tax cost or Tax benefit not actually recognized
at the time of the determination, and appropriate adjustments will be made when
and to the extent that such Tax cost or Tax benefit is actually recognized.
1.48 Third Party. Any Person other than RMG and its Affiliates, IPWT and
its Affiliates or Charter and its Affiliates.
1.49 Transaction Documents. The Common Agreement and all instruments and
documents described in Sections 9.2 and 9.3 which are being executed and
delivered by or on behalf of Charter, IPWT or RMG in connection with this
Agreement or the transactions contemplated hereby.
1.50 Other Definitions. The following terms have the meanings set forth in
the sections indicated in the table below:
Term Section
---- -------
Agent's Fees 5.17
ALTA 7.6
Antitrust Division 7.7
Assumed Obligations and Liabilities 4.2
AT&T Affiliates 1.2
Base Price 3.1
Charter First Paragraph
Closing Date 9.1
Code 5.14.2
Commercially reasonable efforts 12.16
Common Agreement Recital C
Computer and Other Systems 7.20.1(a)
Confidential Information 7.13.1
Copyright Act 5.9
Cost of Service Election 5.8.4
Excluded Assets 4.1
FCC Rate Forms 5.8.4
FTC 7.7
Hired Employee 7.3.6(a)
IPWT First Paragraph
New Properties 7.10(b)
Nonrecourse 11.3
Operating Agreements 7.5.5(a)
Phase I Assessment 7.19.1
Phase II Assessment 7.19.1
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Primary Transfer 7.5.5(b)
Prime Rate 12.8
Purchase 2.1
Retained Franchise 7.5.5(a)
RMG First Paragraph
Sales Taxes 7.8
Subsequent Transfer 7.5.5(c)
Surveys 7.6
Survival Period 11.1
System Employees 7.3.1
Systems Recital A
Taking 12.14
Tennessee LLC Recital B
Third Party Testing 7.20.2(b)
Title Commitments 7.6
Title Company 7.6
Title Defect 7.6
Transfer Tax Returns 7.8
Transfer Taxes 7.8
Transitional Billing Services 7.12
WARN 5.14.1
Year 2000 High-Level Inventory,
Assessment and Remediation Decisions 7.20.1(b)
Year 2000 Plan 7.20.1(c)
1.51 Usage. The definitions in Article 1 shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed to be references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. All Exhibits and Schedules attached hereto shall be deemed incorporated
herein as if set forth in full herein and, unless otherwise defined therein, all
terms used in any Exhibit or Schedule shall have the meaning ascribed to such
term in this Agreement. The words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation." 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. Unless otherwise expressly provided herein, any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. All accounting terms
not otherwise defined in this Agreement will have the meanings ascribed to them
under generally acceptable accounting
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principles as in effect from time to time in the United States, consistently
applied.
2. CONTRIBUTION AND PURCHASE.
2.1 Contribution. Upon the terms and subject to the conditions set forth
in this Agreement, RMG and Charter agree that prior to the Closing, RMG shall
transfer to Tennessee LLC the Assets, free and clear of all Liens (except
Permitted Liens), including the assignment and transfer of all interests in
Leased Property which are Assets and leased Tangible Personal Property which are
Assets, and RMG shall cause Tennessee LLC to assume the Assumed Obligations and
Liabilities.
2.2 Purchase. Upon the terms and subject to the conditions set forth in
this Agreement, at the Closing, RMG shall sell to Charter, and Charter shall
purchase from RMG, a portion (or all) of the outstanding membership interests in
Tennessee LLC (the "LLC Interest"). No later than twenty (20) days prior to the
Closing, Charter shall notify RMG of the portion of the LLC Interest which it
shall purchase at the Closing.
3. CONSIDERATION. Each Party agrees that cash consideration will be paid
at Closing by Charter to RMG, and that such amount will be determined as
follows:
3.1 Base and Adjusted Value. For the purposes of this Agreement, the base
purchase price of the LLC Interest shall be an amount equal to (x) the
percentage of the outstanding ownership interests in Tennessee LLC purchased by
Charter pursuant to Section 2.2 ("Purchase Percentage"), times (y) one hundred
eighty four million dollars ($184,000,000) (the "Base Value"). At the Closing,
Charter (or its permitted assignees) will pay to RMG (or its permitted assignee)
an amount in cash equal to the Purchase Percentage times the Adjusted Value as
determined pursuant to the Common Agreement, which payment shall then be deemed
made pursuant and subject to this Agreement. Preliminary and final
determinations of the Adjusted Value will be made in accordance with the Common
Agreement.
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3.2 Allocation of Purchase Price. The product of the Purchase Percentage
times the sum of (i) the Final Adjusted Value of the Assets and (ii) the Assumed
Obligations and Liabilities ("the Purchase Consideration") shall be allocated
among the Assets in accordance with a schedule (the "Allocation Schedule") to be
prepared by Charter and delivered within ninety (90) days after the
determination of the Final Adjusted Value under the Common Agreement to RMG for
the approval of RMG. RMG and Charter shall cooperate and use commercially
reasonable efforts to reach a mutually satisfactory agreement regarding the
Allocation Schedule. The final Allocation Schedule, determined in the manner
described in this Section 3.2, shall comply with the provisions of Section 1060
of the Code and each of RMG and Charter shall timely file any forms required to
be filed under Section 1060 of the Code and any corresponding provision of state
of local Tax law in accordance with the final Allocation Schedule. Charter and
RMG each agree (i) to reflect the Assets on their respective books for tax
reporting purposes in accordance with the Allocation Schedule, (ii) to file all
Tax Returns and determine all Taxes (including, without limitation, for purposes
of Section 1060 of the Code) in accordance with and based upon the Allocation
Schedule and (iii) not to take any position inconsistent with such Allocation
Schedule in any audit or judicial or administrative proceeding or otherwise.
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4. EXCLUDED ASSETS AND ASSUMED LIABILITIES
4.1 Excluded Assets. "Excluded Assets" means all: (a) programming
Contracts (including music programming Contracts), cable guide Contracts, and
Contracts to which RMG and one or more Affiliates of RMG or other cable systems
of RMG or its Affiliates are parties (including master retransmission consent
agreements and master billing, collection and related agreements), other than
any such Contracts (such as local programming agreements) listed on Schedule
4.1(b); (b) except as set forth on Schedule 4.1(b), each employee benefit plan
(as defined in Section 3(3) of ERISA) or any multiemployer plan (as defined in
Section 3(37) of ERISA) with respect to which RMG or any of its ERISA Affiliates
has any liability or in which any employees or agents, or any former employees
or agents, of RMG or any of its ERISA Affiliates participate; (c) except as
provided in Section 12.14, insurance policies and rights and claims thereunder;
(d) bonds, letters of credit, surety instruments and other similar items; (e)
cash and cash equivalents, including cash relating to subscriber prepayments and
deposits, and notes receivable; (f) except as set forth on Schedule 4.1(b) and
subject to Section 7.11, Intellectual Property held by RMG or any of its
Affiliates; (g) except as set forth on Schedule 4.1(b), subscriber billing
Contracts and related equipment if not owned by RMG or any Affiliate of RMG; (h)
assets, rights or properties of RMG or its Affiliates used or held for use other
than principally in connection with the Systems; (i) except for any items for
which the Adjusted Value of the Systems is increased under Section 2.2 of the
Common Agreement, claims, rights, and interest in and to any refunds of Taxes or
fees of any nature, or other claims against third parties, relating to the
operation of the Systems prior to the Closing Time; (j) account books of
original entry, general ledgers, financial records, minute books, stock ledgers,
organizational documents and, to the extent not included in the Books and
Records, personnel files and records, in each case used in connection with the
Systems; (k) except for the leases described on Schedule 4.1(b), capital and
vehicle leases; (l) advertising sales agency or representation Contracts
providing any Third Party or Affiliate of RMG the right to sell available
advertising time for a System other than any such Contract listed on Schedule
4.1(b); (m) to the extent licensed pursuant to a master license agreement or not
otherwise transferable, software of RMG or any Affiliate of RMG and licenses
relating to Third Party software; (n) Contracts for any fiber or fiber capacity
lease or use arrangements that provide to any Third Party or Affiliate of RMG
the right to use any fiber or capacity of a System other than any such Contract
listed on Schedule 4.1(b); (o) except as set forth on Schedule 4.1(b), Contracts
for any internet access or on-line services arrangements that provide to any
Third Party or Affiliate of RMG the right to use the transmission capacity of a
System to provide internet access or other on-line services over such System;
(p) except as set forth on Schedule 4.1(b), Contracts between RMG and its
Affiliates; (q) except as set forth on Schedule 4.1(b), any assets relating to
RMG's cable television business in Brentwood, Tennessee; and (r) other rights,
assets and properties described on Schedule 4.1(a).
4.2 Assumed Obligations and Liabilities. At the Closing and effective as
of the Closing Time, RMG shall cause Tennessee LLC to assume, and after the
Closing Date, Charter will cause Tennessee LLC to pay, discharge and perform,
the following (collectively, "Assumed Obligations and Liabilities"): (a) those
obligations and liabilities accruing and relating to periods
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after the Closing Time under or with respect to the Assets assigned and
transferred to Tennessee LLC at the Closing; (b) those obligations and
liabilities of RMG for subscriber prepayments and deposits related to the
Systems transferred to Tennessee LLC existing at the Closing Time; (c) other
obligations and liabilities of RMG relating to the Systems transferred to
Tennessee LLC only to the extent that the Adjusted Value of the Systems, was
decreased with respect thereto pursuant to Section 2.2 of the Common Agreement;
and (d) all other obligations and liabilities accruing and relating to periods
after the Closing Time and arising out of Tennessee LLC's ownership, use or
operation of the Assets (including those items listed or described on Schedule
4.1(b)) or its operation of, or the conduct of business through, the Systems
after the Closing (including with respect to late fees that may be charged by
Tennessee LLC after the Closing to subscribers of the Systems), except to the
extent that such obligations or liabilities relate to any Excluded Asset. All
obligations and liabilities arising out of or relating to the Assets, the
Systems or the Cable Business other than Assumed Obligations and Liabilities
will remain and be the obligations and liabilities solely of RMG, including any
obligation, liability or claims relating to or arising pursuant to (w) Taxes
(including franchise fees) with respect to periods or portions thereof ending on
or prior to the Closing Date, (x) refunds of rates, charges or late fees with
respect to periods through and including the Closing Date, (y) Litigation
commenced, or related to an event occurring, on or prior to the Closing Date, or
(z) credit, loan or other agreements pursuant to which RMG has created,
incurred, assumed or guaranteed indebtedness for borrowed money or under which
any Lien securing such indebtedness has been or may be imposed on any Asset.
5. IPWT'S REPRESENTATIONS AND WARRANTIES.
IPWT represents and warrants to Charter as of the date of this Agreement
and as of the Closing, as follows:
5.1 Organization and Qualification of IPWT and RMG.
5.1.1 RMG is a corporation which has been duly formed under the laws
of the State of Nevada. RMG has all requisite power and authority to own, lease
and use the Assets owned, leased or used by it and to conduct the Cable Business
as it is currently being conducted.
5.1.2 IPWT is a limited partnership, duly formed, validly existing
and in good standing under the laws of the State of California.
5.1.3 When formed, Tennessee LLC shall be a limited liability
company duly formed, validly existing and in good standing under the laws of the
State of Delaware, and will be treated for federal income tax purposes as a
disregarded entity with respect to RMG under Treasury Regulations
ss.301.7701-3(b)(1)(ii).
5.2 Authority and Validity. RMG and IPWT have all requisite power and
authority to execute and deliver, and to perform their obligations under, and to
consummate the transactions
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contemplated by, this Agreement and the Transaction Documents. The execution and
delivery by RMG and IPWT of, the performance of RMG and IPWT under, and the
consummation by RMG and IPWT of the transactions contemplated by, this Agreement
and the Transaction Documents to which RMG or IPWT is a party have been duly and
validly authorized by all action by or on behalf of RMG and IPWT. This Agreement
has been, and when executed and delivered by RMG and IPWT the Transaction
Documents to which RMG or IPWT is a party will be, duly and validly executed and
delivered by RMG and IPWT and the valid and binding obligations of RMG and IPWT,
enforceable against RMG and IPWT in accordance with their terms, except as the
same may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws now or hereafter in effect relating to the
enforcement of creditors' rights generally or by principles governing the
availability of equitable remedies.
5.3 No Conflict; Required Consents. Except as set forth on Schedule 5.3,
and assuming any consents referenced on Schedule 6.3 have been obtained and the
expiration or earlier termination of the waiting period under the HSR Act has
occurred, the execution and delivery by RMG and IPWT, the performance of RMG and
IPWT under, and the consummation by RMG and IPWT of the transactions
contemplated by, this Agreement and the Transaction Documents to which RMG or
IPWT is a party do not and will not: (a) conflict with or violate any provision
of the organizational documents of RMG or IPWT; (b) violate any provision of any
Legal Requirement; (c) require any consent, approval or authorization of, or
filing of any certificate, notice, application, report or other document with,
any Governmental Authority or other Person; or (d) (i) conflict with, violate,
result in a breach of or constitute a default under (without regard to
requirements of notice, lapse of time or elections of other Persons or any
combination thereof), (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of RMG or IPWT under, or (iv) result in the
creation or imposition of any Lien under any Systems Contract, Systems
Franchise, Systems License, or other instrument evidencing any of the Assets or
by which RMG or any of the Assets is bound or affected, except for purposes of
clauses (c) and (d) such consents, approvals, authorizations and filings that,
if not obtained or made, would not, and such violations, conflicts, breaches,
defaults, terminations, suspensions, modifications and accelerations as would
not, individually or in the aggregate, have an adverse effect on any System, the
Cable Business or RMG, or on the ability of RMG or IPWT to perform their
obligations under this Agreement or the Transaction Documents to which RMG or
IPWT is a party.
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5.4 Assets.
5.4.1 RMG has good and marketable title to (or, in the case of
Assets that are leased, valid leasehold interests in) the Assets, and at the
Closing, Tennessee LLC will have good and marketable title to (or in the case of
Assets that are leased, valid leasehold interests in) the Assets. None of the
AT&T Affiliates has any right, title or interest in or to any of the Assets. The
Assets are free and clear of all Liens, except Permitted Liens and rights of
first refusal which will be waived by the Person holding such right at or prior
to Closing. All of the Liens described on Schedule 5.4.1 (except for those
marked with an asterisk on Schedule 5.4.1) will be terminated, released or, in
the case of rights of first refusal (except for those listed on Schedule 5.4.1),
waived, as appropriate at or prior to Closing. Except as described on Schedule
1.46, the Tangible Personal Property, as an integrated system and in its
component parts, is in good operating condition and repair (ordinary wear and
tear and routine failures excepted) and is usable and adequate for the operation
of the Cable Business.
5.4.2 Except for items included in the Excluded Assets, the Assets
constitute substantially all the assets necessary (a) to conduct the Cable
Business as it is being conducted on the date of this Agreement and in
compliance with all applicable Legal Requirements, (b) to operate the Systems as
they are being operated on the date of this Agreement and in compliance with all
applicable Legal Requirements and (c) to perform all of the Assumed Obligations
and Liabilities.
5.4.3 Except as described on Schedule 5.4.3 and other than direct
broadcast satellite and satellite master antenna television, with respect to
each area in which the Systems currently provide cable television service, (i)
no Person is operating a cable television system or other non-satellite MVPD
other than a System in such area; (ii) no local franchising authority has
awarded a cable television franchise in such area to any Person other than RMG;
and (iii) to the Knowledge of RMG, no MVPD has applied for a cable television
franchise to serve such area.
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5.5 System Franchises, Systems Licenses, Systems Contracts and Other
Real Property Interests.
5.5.1 Except as described on Schedules 1.28, 1.35, 1.43, 1.44 and
1.45, and except for the Excluded Assets, RMG is not bound or affected by any of
the following that relate primarily or in whole to the Cable Business: (a)
leases of real property or capital leases of personal property; (b) operating
leases of personal property that are terminable upon more than thirty (30) days'
notice and that contemplate annual lease payments in excess of twenty thousand
dollars ($20,000); (c) franchises for the construction or operation of cable
television systems or System Contracts of substantially equivalent effect; (d)
licenses, authorizations, consents or permits of the FCC; (e) other licenses,
authorizations, consents or permits of any other Governmental Authority,
individually or in the aggregate, material to the Systems; (f) easements or
rights of access, individually or in the aggregate, material to the Systems; (g)
pole attachment agreements, underground conduit agreements, crossing agreements,
retransmission consent agreements, or bulk or commercial service agreements,
individually or in the aggregate, material to the Systems; or (h) Systems
Contracts other than those described in any other clause of this Section 5.5.1
which contemplate payments by or to RMG in any 12-month period exceeding
twenty-five thousand dollars ($25,000) under any single contract or one hundred
thousand dollars ($100,000) in the aggregate.
5.5.2 Complete and correct copies of the Systems Franchises and
Systems Licenses have been provided to Charter. Except as set forth on Schedule
5.5.2, (a) the Systems Franchises contain all of the commitments and obligations
of RMG to the applicable Governmental Authority granting such Franchises with
respect to the construction, ownership and operation of the Systems, and (b)
other than as set forth in the Systems Franchises, RMG has not made any
commitment to any local franchising authority to make any material expenditure
or capital addition or betterment to any System or the Assets that will not be
fulfilled or satisfied prior to the Closing Time. The Systems Franchises and
Systems Licenses are currently in full force and effect, are not in default and
are valid under all applicable Legal Requirements according to their terms. No
event has occurred that, with notice or lapse of time or both, would constitute
a breach, violation or default by RMG, and to RMG's Knowledge, no event has
occurred that, with notice or lapse of time or both, would constitute a breach,
violation or default by any other Person, of any material obligations under any
such Systems Franchises or Systems Licenses. Except for routine filings with
Governmental Authorities and as described on Schedule 5.5.2, there are no
applications relating to any Systems Franchise or Systems License pending before
any Governmental Authority which are material to any System or the Cable
Business. Except where a request for renewal has been timely filed under Section
626(a) of the Cable Act, since December 31, 1998, no Systems Franchise or
Systems License has been surrendered by RMG or has expired or otherwise
terminated without the issuance of a replacement Systems Franchise or Systems
License. There is no legal action, governmental proceeding or investigation
pending or, to RMG's Knowledge, threatened to terminate, suspend or modify any
Systems Franchise or Systems License. Except as set forth on Schedule 5.5.2, RMG
is, or will be as of the Closing Date, in material compliance with the terms and
conditions of all the Systems Franchises and
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<PAGE> 23
Systems Licenses and other applicable requirements of all Governmental
Authorities (including the FCC and the U.S. Copyright Office) relating to the
Systems Franchises and Systems Licenses, including all requirements for
notification, filing, reporting, posting and maintenance of logs and records.
5.5.3 RMG has delivered to Charter true and complete copies of all
Systems Contracts (including each Contract relating to Leased Property and Other
Real Property Interests), including any amendments thereto (or, in the case of
oral Contracts, true and complete written summaries thereof) and each document
evidencing RMG's ownership of the Owned Property. Except as described in
Schedule 5.5.3, RMG has fulfilled when due, or has taken all action necessary to
enable it to fulfill when due, all of its obligations under each of its
Contracts and, to the Knowledge of RMG, there has not occurred any default
(without regard to requirements of notice, lapse of time, elections of other
Persons, or any combination thereof) by any other Person of any material
obligations under any of its Contracts or Other Real Property Interests.
5.6 Real Property. All the Assets consisting of Owned Property, Leased
Property and material Other Real Property Interests are described on Schedules
1.28, 1.35 and 1.36. Except for ordinary wear and tear and routine repairs and
as set forth on Schedule 5.6, all of the improvements, leasehold improvements
and the premises of the Owned Property and the premises demised under the leases
and other documents evidencing the Leased Property are in good condition and
repair and are suitable for the purposes used. Each parcel of Owned Property and
each parcel of Leased Property and any improvements thereon (a) has access to
and over public streets or private streets for which RMG has a valid right of
ingress and egress, (b) except as set forth on Schedule 1.28 or 1.35, conforms
in its current use and occupancy to all material zoning requirements without
reliance upon a variance issued by a Governmental Authority or a classification
of the parcel in question as a nonconforming use, (c) conforms in all material
respects in its current use to all restrictive covenants, if any, or other Liens
affecting all or part of such parcel (of record, with respect to Owned Property,
or of record or as set forth in an agreement listed on Schedule 1.28 or 1.35,
with respect to Leased Property or Other Real Property Interests), and (d) is
available for immediate use in the conduct of the business or operations of the
Systems. There are no pending condemnation, expropriation, eminent domain or
similar proceedings of which RMG has received notice or RMG has Knowledge
affecting, in any material respect, all or any portion of the Owned Property,
Leased Property, or Other Real Property Interests. RMG has good and marketable
title to, and at the Closing, Tennessee LLC will have good and marketable title
to, each such parcel of real property included in the Owned Property and in all
buildings, structures and improvements thereon, in each case free and clear of
all Liens except for Permitted Liens.
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5.7 Environmental.
5.7.1 Except as described on Schedule 5.7, RMG is in material
compliance with all Environmental Laws, insofar as they relate to its Owned
Property or Leased Property. Except as described on Schedule 5.7, RMG has not
received any notice of, and has no Knowledge of, any alleged, actual, or
potential responsibility for, or any inquiry regarding, (i) any release or
threatened release of any Hazardous Substances from or on its Owned Property or
Leased Property, or (ii) any material violation of any Environmental Laws
associated with its Owned Property or Leased Property. Except as described on
Schedule 5.7, to RMG's Knowledge, its own operations on its Other Real Property
Interests do not violate any Environmental Laws in any material respect, and RMG
has received no notice of any such violation. Except as described on Schedule
5.7, RMG has not received any notice of, and has no Knowledge of circumstances
relating to, any past, present or future events, conditions, circumstances,
activities, practices or incidents (including the presence, use, generation,
manufacture, disposal, release or threatened release of any Hazardous Substances
from or on its Owned Property or Leased Property), which could interfere with or
prevent continued compliance, or which are reasonably likely to give rise to any
liability, based upon or related to the processing, distribution, use,
treatment, storage, disposal, transport or handling, or the emission, discharge,
release or threatened release into the environment, of any Hazardous Substance
from or attributable to its Owned Property or Leased Property.
5.7.2 Except as described on Schedule 5.7, to RMG's Knowledge, (a)
no aboveground or underground storage tanks are currently or have been located
on any Owned Property or Leased Property and (b) no Owned Property or Leased
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.
5.7.3 Complete and correct copies of (a) all studies, reports,
surveys or other similar written materials in RMG's possession or to which RMG,
to its Knowledge, has access relating to the presence or alleged presence of
Hazardous Substances at, on, under or affecting the Owned Property or Leased
Property, (b) all notices (other than general notices made by general
publication) in RMG's possession or to which RMG, to its Knowledge, has access
that were received from any Governmental Authority having the power to
administer or enforce any Environmental Laws relating to current or past
ownership, use or operation of the Owned Property or Leased Property or
activities at the Owned Property or Leased Property and (c) all notices and
related materials in RMG's possession or to which RMG, to its Knowledge, has
access relating to any Litigation concerning any Environmental Law to which RMG
is a party or written allegation by any private Third Party concerning any
Environmental Law and RMG, have been provided to Charter (other than those
materials constituting attorney-client privileged communications).
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5.8 Compliance with Legal Requirements.
5.8.1 Except as set forth on Schedule 5.8, the operation of each
System as currently conducted does not violate or infringe any Legal Requirement
currently in effect in any material respect (other than Legal Requirements
described in Sections 5.7, 5.8.3 and 5.8.4, as to which the representations and
warranties set forth in those subsections will apply) or the grounding
requirements of the National Electrical Safety Code. Except as set forth on
Schedule 5.8, RMG has not received any notice and RMG has no Knowledge of any
material violation by it or any System of any Legal Requirement applicable to
the installation, ownership and operation of the Systems as currently conducted,
and knows of no basis for the allegation of any such violation.
5.8.2 Except as set forth on Schedule 5.8, without limiting the
generality of the foregoing, since RMG's acquisition of the Systems: RMG has
submitted to the FCC all filings, including cable television registration
statements, annual reports and aeronautical frequency usage notices and paid all
regulatory fees, that are required under the rules and regulations of the FCC;
the operation of the Systems has been and is in material compliance with the
rules and regulations of the FCC, and RMG has not received any notice from the
FCC of any violation of its rules and regulations; RMG is and since 1986 (or
since its acquisition, if later) has been certified as in compliance with the
FCC's equal employment opportunity rules; the Systems are in material compliance
with all signal leakage criteria prescribed by the FCC; and for each relevant
semi-annual reporting period since its acquisition of a System, RMG has timely
filed with the United States Copyright Office all required Statements of Account
in true and correct form, has paid when due all required copyright royalty fee
payments in correct amount, relating to the Systems' carriage of television
broadcast signals and is otherwise in material compliance with all applicable
rules and regulations of the Copyright Office. Except as set forth on Schedule
5.8, RMG has no Knowledge, with respect to any System acquired since January 1,
1996, of any previous owner's failure to comply with the copyright licensing
requirements with respect to such System or any written claim or inquiry from
any Person which questions such System's failure to comply. RMG has delivered to
Charter copies of: (i) all reports, filings and correspondence made or filed by
RMG with the FCC or pursuant to the FCC rules and regulations for the past year;
and (ii) all reports, filings and correspondence made or filed by RMG with the
Copyright Office or pursuant to Copyright Office rules and regulations for the
past three (3) years. Except as set forth on Schedule 5.8, (i) 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 expiring within
thirty-six (36) months after the date of this Agreement; and (ii) RMG has
received no written notice from any Governmental Authority that it has
determined or intends to deny renewal of any Systems Franchise.
5.8.3 Except as set forth on Schedule 5.8 and as otherwise provided
in this Section, RMG has used commercially reasonable efforts to comply in all
material respects with the provisions of the Cable Act and the 1992 Cable Act
pertaining to the carriage of television broadcast signals, as such Legal
Requirements relate to the operation of the Systems. RMG has
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<PAGE> 26
complied in all material respects with the must carry and retransmission consent
provisions of the 1992 Cable Act, including (i) duly and timely notifying "local
commercial television stations" of inadequate signal strength or increased
copyright liability, if applicable, (ii) duly and timely notifying
non-commercial educational stations of the location of the Systems' principal
headend, (iii) duly and timely notifying subscribers of changes in the channel
alignment on the Systems, (iv) duly and timely notifying "local commercial and
non-commercial television stations" of the broadcast signals carried on the
Systems and their channel positions, (v) maintaining the requisite public file
identifying broadcast signal carriage, (vi) carrying the broadcast signals after
June 1, 1993, on the Systems for all "local commercial television stations"
which elected must carry status and, if required, up to two "qualified low power
stations" and (vii) obtaining retransmission consents for all broadcast signals
carried on the Systems after October 5, 1993, except for the non-exempt signals
carried pursuant to a must carry election. No must carry complaint is pending
against any System at the FCC, nor, to RMG's Knowledge, is any threatened except
as set forth in Schedule 5.8. RMG has delivered to Charter copies of any pending
petitions it has on file with the FCC, including requests for market
modifications or petitions for special relief or any market modification
requests or special relief petitions affecting any System that have been served
on RMG. The FCC has not issued any decision with respect to a must carry
complaint finding any System in violation of the must carry rules except as set
forth on Schedule 5.8.
5.8.4 RMG has used commercially reasonable efforts to establish
rates charged and a la carte packages provided to subscribers, effective as of
September 1, 1993, that would be allowable under rules and regulations
promulgated by the FCC under the 1992 Cable Act, and any authoritative
interpretation thereof, whether or not such rates or packages were subject to
regulation at that date by any Governmental Authority, including any state
regulatory agency, local franchising authority and/or the FCC. Notwithstanding
the foregoing, RMG makes no representation or warranty that either the rates
charged to subscribers or the a la carte packages provided would be allowable
under any rules and regulations of the FCC, or any authoritative interpretation
thereof, promulgated after the date of the Closing. RMG has delivered to Charter
complete and correct copies of (i) the most recent FCC Forms 328, 329, 393,
1200, 1205, 1210, 1215, 1220, 1235 and 1240 and other FCC rate forms
(collectively, the "FCC Rate Forms") filed with the local franchising authority
and/or the FCC and will deliver as soon as available all such FCC forms that are
prepared with respect to the Systems, (ii) all historical FCC Rate Forms with
respect to any System in which there is currently a rate issue pending,
including any accounting order or any rate order on appeal, (iii) copies of all
complaints, petitions, answers, responses and other filings made with or by any
Governmental Authority in connection with any rate orders issued by such
Governmental Authority or any appeal therefrom, and (iv) any documentation
supporting an exemption from the rate regulation provisions of the 1992 Cable
Act claimed by RMG with respect to the Systems. Except as set forth on Schedule
5.8, RMG has not made any election with respect to any cost of service
proceeding conducted in accordance with Part 76.922 of Title 47 of the Code of
Federal Regulations or any similar proceeding (a "Cost of Service Election")
with respect to any of the Systems.
5.8.5 Except as set forth on Schedule 5.8, all necessary FAA
approvals have been
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obtained and all necessary FCC tower registrations have been filed with respect
to the height and location of towers used in connection with the operation of
the Systems, and such towers are being operated in compliance in all material
respects with applicable FCC and FAA rules. The ownership, height (with and
without appurtenances), location (address, latitude, longitude and ground
elevation), structure type and FCC call signs of each tower used in connection
with the operation of the Systems are correctly described on Schedule 5.8. To
the extent applicable, RMG has delivered to Charter true and correct copies of
the FAA final determinations that are available and FCC registrations for all
such towers.
5.9 Intellectual Property. Except for Intellectual Property which
constitutes Excluded Assets and the Intellectual Property described on Schedule
4.1(b), RMG does not possess any Intellectual Property related to or material to
the operation of the Systems and RMG is not a party to any license or royalty
agreement with respect to any such Intellectual Property, except for licenses
respecting program material, licenses incidental to any Systems Contracts and
obligations under the Copyright Act of 1976, as amended, including all rules,
regulations, orders and policies of the U.S. Copyright Office thereunder (the
"Copyright Act") applicable to cable television systems generally. To the
Knowledge of RMG, the Systems and the Cable Business have been operated in such
a manner so as not to violate or infringe upon the rights, or give rise to any
rightful claim of any Person for copyright, trademark, service mark, patent or
license infringement or the like.
5.10 Financial Statements. Statements of income of the Systems for the
years ended December 31, 1997 and 1998, attached hereto as Schedule 5.10, are in
accordance with the books and records of each System, were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered thereby and, except as may be described
therein, present fairly the operating results of the respective Systems on a
System-by-System basis, for the periods indicated, subject only to standard
year-end adjustments and the omission of footnotes thereto.
5.11 Absence of Certain Changes or Events. Except as set forth on Schedule
5.11, since December 31, 1998, there has been no (i) material adverse change in,
nor has any event or events (other than any affecting the cable television
industry generally) occurred that, individually or in the aggregate, are
reasonably likely to result in a material adverse change in the Assets, the
Cable Business, the operations, condition (financial or otherwise) or results of
operations of the Systems, taken as a whole and (ii) material change in
accounting principles or practices with respect to the Systems or revaluation by
RMG of the Assets for financial reporting, property tax or other purposes. From
December 31, 1998 to the date of this Agreement, the Cable Business has been
conducted only in the usual, regular and ordinary course, except as disclosed on
Schedule 5.11 and except where the failure to conduct business in such manner
would not have a material adverse effect on the Assets, the Cable Business, the
operations, condition (financial or otherwise) or results of operations of the
Systems taken as a whole or on the ability of RMG to perform its obligations
under this Agreement.
5.12 Litigation. Except as set forth on Schedule 5.12: (a) there is no
Litigation
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pending or, to RMG's Knowledge, threatened against RMG or any Affiliate of RMG
which, if adversely determined, would (i) materially and adversely affect the
financial condition or operations of the Cable Business, any of the Systems, the
Assets or the ability of RMG to perform its obligations under this Agreement or
(ii) result in the modification, revocation, termination, suspension or other
limitation of any of the System Franchises, Systems Licenses, or Systems
Contracts; and (b) there is not in existence any Judgment requiring RMG or any
Affiliate of RMG to take any action of any kind with respect to the Assets or
the operation of any of the Systems, or to which RMG (with respect to the
Systems), any of the Systems or the Assets are subject or by which they are
bound or affected, that has not been fully complied with by RMG.
5.13 Tax Returns; Other Reports. RMG has duly and timely filed in correct
form all federal, state, local and foreign Tax returns and other Tax reports
required to be filed by RMG, and has timely paid all Taxes which have become due
and payable, whether or not so shown on any such return or report, the failure
of which to be filed or paid could affect or result in the imposition of a Lien
upon the Assets or create any transferee or other liability upon Tennessee LLC
or upon Charter, except such amounts as are being contested diligently and in
good faith and are not in the aggregate material. Except as set forth on
Schedule 5.13, RMG has not received any notice of, nor does RMG have any
Knowledge of, any deficiency, assessment or audit, or proposed deficiency,
assessment or audit from any taxing Governmental Authority which could affect,
or result in the imposition of a Lien upon, any of the Assets or transferee or
other liability upon Tennessee LLC or upon Charter.
5.14 Employment Matters.
5.14.1 RMG has complied in all material respects with all applicable
Legal Requirements relating to the employment of labor, including the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. ss.2101 et seq. ("WARN"),
continuation coverage requirements with respect to group health plans and those
relating to wages, hours, collective bargaining, unemployment insurance,
workers' compensation, equal employment opportunity, age, sex, race and
disability discrimination, immigration control and the payment and withholding
of Taxes.
5.14.2 There are no Liens against the Assets under Section 412(n) of
the Code or Sections 302(f) or 4068 of ERISA. At the Closing, Charter and its
ERISA Affiliates will have no obligation to contribute to, or any liability in
respect of, (i) any employee benefit plan within the meaning of Section 3(3) of
ERISA, or (ii) any similar employment, severance or other arrangement or policy
(whether written or oral) providing for insurance coverage (including
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, fringe benefits or
retirement benefits, or for profit sharing, deferred compensation, bonuses,
stock options, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits, sponsored or maintained by
RMG or any of its ERISA Affiliates, or to which RMG or any of its ERISA
Affiliates was obligated to contribute. RMG will not, in connection with the
transactions contemplated by this
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Agreement, cease to provide any group health plan coverage to its employees in a
manner which would cause Charter or any of its ERISA Affiliates to be deemed a
successor employer of RMG within the meaning of Proposed Treasury Regulations
Section 54.4980B-9 Q&A8(c). With respect to any multi-employer plan within the
meaning of Section 3(37) of ERISA, or any plan subject to Title IV of ERISA, to
which RMG or any of its ERISA Affiliates is or ever was obligated to contribute,
(a) there has been no material "reportable event" described in Sections
4043(c)(1), (2), (3), (5), (6), (7), (10), or (13) of ERISA, (b) no "accumulated
funding deficiency" (as defined in Section 302 of ERISA) or "withdrawal
liability" (as determined under Section 4201 et seq. of ERISA) has occurred,
exists or is continuing with respect to any such plan other than a
multi-employer plan (as defined in Section 3(37) of ERISA), or, to the Knowledge
of RMG or any of its ERISA Affiliates, with respect to any such plan which is a
multi-employer plan (as defined in Section 3(37) of ERISA), (c) no such plan has
been terminated other than in accordance with ERISA or at a time when such plan
was not sufficiently funded, and (d) there has been no (i) withdrawal by RMG or
any of its ERISA Affiliates that is a substantial employer from a
single-employer plan and that has two or more contributing sponsors at least two
of whom are not under common control, as referred to in Section 4063(b) of
ERISA, or (ii) cessation by RMG or any of its ERISA Affiliates of operations at
a facility causing more than twenty percent (20%) of plan participants to be
separated from employment, as referred to in Section 4062(e) of ERISA. With
respect to any plan maintained, sponsored by, or contributed to by RMG, which is
intended to comply with the provisions of Section 401(k) of the Code, and from
which any similar plan maintained or sponsored by Charter or any of its ERISA
Affiliates accepts a plan-to- plan transfer under Section 7.3.3, (i) such plan
has received a favorable determination letter from Internal Revenue Service, and
neither RMG nor any of its ERISA Affiliates has any Knowledge of any fact which
could adversely affect the qualified status of such plan, and (ii) such plan has
been administered and maintained in material compliance with ERISA, the Code and
all other applicable laws.
5.14.3. Except as set forth on Schedule 5.14, there are no
collective bargaining agreements applicable to any Person employed by RMG that
renders services in connection with the Systems and RMG has no duty to bargain
with any labor organization with respect to any such Person. Except as set forth
on Schedule 5.14, there are not pending any unfair labor practice charges
against RMG, any demand for recognition or any other request or demand from a
labor organization for representative status with respect to any Person employed
by RMG that renders services in connection with the Systems. Except as described
on Schedule 5.14, RMG has no employment agreements, either written or oral, with
any employee of the Systems and none of the employment agreements listed on
Schedule 5.14 requires RMG, or will require Tennessee LLC, Charter or any of
their respective Affiliates, to employ any Person after the Closing.
5.15 Systems Information.
5.15.1 Schedule 5.15.1 sets forth a materially true and accurate
description, on a System-by-System basis, of the following information relating
to the Systems as of December 31, 1998:
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(a) the approximate number of aerial and underground miles of
plant included in the Assets and served by each headend;
(b) the approximate number of single family homes and
residential multiple dwelling units passed by the Systems;
(c) the MHZ capacity and channel capacity of each headend; and
(d) the number of subscribers served by the Systems and a
description of the calculation methodology used by RMG to calculate such
subscribers.
5.15.2 Schedule 5.15.2 sets forth a materially true and accurate
description of the following information relating to the Systems as of the date
of this Agreement:
(a) a description of the Basic Services, the Expanded Basic
Services, Pay TV and a la carte services available from the Systems, and the
rates charged by RMG therefor, including all rates, tariffs and other charges
for cable television or other services provided by each System;
(b) the stations and signals carried by the Systems and the
channel position of each such signal and station; and
(c) the cities, towns, villages, boroughs and counties served
by the Systems.
5.15.3 Each System is capable of providing all channels, stations
and signals reflected as being carried on such System on Schedule 5.15.2.
5.16 Taxpayer Identification Number. The U.S. Taxpayer Identification
Number for RMG is 94-3143720.
5.17 Finder and Brokers. RMG has not entered into any Contract with any
person which will result in the obligation of Charter to pay any finder's fees,
brokerage or agent's commissions or other like payments (collectively, "Agent's
Fees") in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
5.18 Related Party Transactions. Set forth on Schedule 5.18 hereto, are
the Contracts, agreements, arrangements or understandings between RMG and any of
its Affiliates and between RMG and any AT&T Affiliates included in or related to
the Assets.
6. CHARTER'S REPRESENTATIONS AND WARRANTIES. Charter represents
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and warrants to RMG and to IPWT as of the date of this Agreement and as of the
Closing as follows:
6.1 Organization and Qualification of Charter. Charter is a limited
liability company duly formed, validly existing and in good standing under the
laws of the State of Delaware. Charter has all requisite power and authority to
own, lease and use the assets owned, leased or used by it and to conduct its
business as it is currently being conducted by it. As of the date of this
Agreement, Charter is duly qualified to do business and is in good standing
under the laws of each jurisdiction in which the ownership, leasing or use of
the assets owned, leased or used by it or the nature of its activities in
connection with its business makes such qualification necessary.
6.2 Authority and Validity. Charter has all requisite corporate power and
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, this Agreement and the Transaction
Documents. The execution and delivery by Charter of, its performance under, and
its consummation of the transactions contemplated by, this Agreement and the
Transaction Documents have been duly and validly authorized by all action by or
on behalf of Charter. This Agreement has been, and when executed and delivered
by Charter the Transaction Documents will be, duly and validly executed and
delivered by Charter and the valid and binding obligations of Charter,
enforceable against it in accordance with their terms, except as the same may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to the enforcement of
creditors' rights generally or by principles governing the availability of
equitable remedies.
6.3 No Conflict; Required Consents. Except as set forth on Schedule 6.3,
and assuming all Required Consents have been obtained and the expiration or
earlier termination of the waiting period under the HSR Act has occurred, the
execution and delivery by Charter of, its performance under, and its
consummation of the transactions contemplated by, this Agreement and the
Transaction Documents do not and will not: (a) conflict with or violate any
provision of the organizational documents of Charter; (b) violate any provision
of any Legal Requirement; (c) require any consent, approval or authorization of,
or filing of any certificate, notice, application, report or other document
with, any Governmental Authority or other Person; or (d) (i) conflict with,
violate, result in a breach of or constitute a default under (without regard to
requirements of notice, lapse of time or elections of other Persons or any
combination thereof), (ii) permit or result in the termination, suspension or
modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Charter under, or (iv) result in the
creation or imposition of any Lien under any instrument or other agreement to
which Charter is a party or by which Charter or any of its assets is bound or
affected, except for purposes of clauses (c) and (d) such consents, approvals,
authorizations and filings that, if not obtained or made, would not, and such
violations, conflicts, breaches, defaults, terminations, suspensions,
modifications and accelerations as would not, individually or in the aggregate,
have an adverse effect on its ability to perform its obligations under this
Agreement or the Transaction Documents.
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6.4 Taxpayer Identification Number. The Taxpayer Identification Number for
Charter is 43-1659860.
6.5 Finder and Brokers. Charter has not entered into any Contract with any
person which will result in the obligation of RMG or IPWT to pay any Agent's
Fees in connection with the negotiations leading to this Agreement or the
consummation of the transactions contemplated hereby.
6.6 Litigation. Except as set forth on Schedule 6.6, there is no
Litigation pending or, to Charter's Knowledge, threatened against Charter or any
Affiliate of Charter which, if adversely determined, would materially and
adversely affect the ability of Charter to perform its obligations under this
Agreement.
6.7 Qualification. Charter knows of no facts which would disqualify it
from holding the LLC Interest under any Legal Requirement.
6.8 Securities Law Matters. Charter understands and acknowledges that the
LLC Interest has not been registered or qualified under the federal or
applicable state securities laws and the LLC Interest is being sold to and
purchased by Charter in reliance upon applicable exemptions from such
registration and qualification requirements. Charter is an "accredited investor"
within the meaning of the federal securities laws and acknowledges it has been
furnished with or afforded access to, and has had the opportunity to ask
questions and receive answers concerning, all information pertaining to the LLC
Interest. The LLC Interest is being acquired by Charter for investment only and
not with a view to any public distribution thereof. Charter understands that the
LLC Interest is a "restricted security" within the meaning of the federal
securities laws and agrees that it will not offer to sell or otherwise dispose
of the LLC Interest in violation of the registration and qualification
requirements of the federal and applicable state securities laws. All
certificates to be delivered at Closing evidencing ownership of the LLC Interest
will contain appropriate legends incorporating these applicable securities laws
restrictions.
7. ADDITIONAL COVENANTS.
7.1 Access to Premises and Records. Between the date of this Agreement and
the Closing Date, RMG (a) will give to Charter and its counsel, accountants and
other representatives reasonable access during normal business hours and upon
reasonable advance notice to the premises and books and records of the Cable
Business and to all of the Assets and the personnel engaged in the management or
operation of the Systems; and (b) will furnish to Charter and such
representatives all such documents, financial information and other information
regarding the Cable Business and the Assets as Charter from time to time
reasonably may request; provided that no investigation will affect or limit the
scope of any of the representations, warranties, covenants and indemnities of
the other in this Agreement or in any Transaction Document or limit liability
for any breach of any of the foregoing.
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7.2 Continuity and Maintenance of Operations, Certain Deliveries and
Notice. Except as set forth on Schedule 7.2, in the 1999 operating budgets set
forth on Schedule 7.2.1, or as Charter may otherwise consent in writing, between
the date of this Agreement and the Closing, RMG:
7.2.1 will conduct the Cable Business in good faith and operate the
Systems only in the usual, regular and ordinary course (including making routine
capital expenditures and operating substantially in accordance with the 1999
capital and operating budgets with respect to each such System (copies of which
are set forth on Schedule 7.2.1), completing ongoing and planned line
extensions, placing conduit or cable in new developments, fulfilling
installation requests, completing disconnection work orders and disconnecting
and discontinuing service to customers whose accounts are delinquent) and, to
the extent consistent with such conduct and operation, use its commercially
reasonable efforts to (a) preserve its current business intact in all material
respects, including preserving existing relationships with franchising
authorities, suppliers, customers and others having business dealings with the
Systems, (b) keep available the services of its employees and agents providing
services in connection with the Cable Business, (c) continue budgeted marketing,
advertising and promotional expenditures with respect to the Cable Business, (d)
enter into written agreements with respect to all multiple dwelling unit and
bulk billed accounts having greater than 200 individual units, and (e) operate
the Cable Business in material compliance with all Legal Requirements;
7.2.2 will maintain the Assets in good operating repair, order and
condition, ordinary wear and tear excepted; will maintain equipment and
inventory for the Systems at normal historical levels consistent with its past
practices (as adjusted to account for abnormally high inventory levels related
to periodic rebuild activity); will maintain in full force and effect policies
of insurance with respect to the Cable Business in such amounts and with respect
to such risks as are currently in effect for the Systems; and will maintain its
books, records and accounts with respect to the Assets and the operation of the
Systems in the usual, regular and ordinary manner on a basis consistent with its
past practices;
7.2.3 will not, outside the ordinary course of business or to the
extent inconsistent with past practice or the 1999 operating budget included in
Schedule 7.2.1 (a) modify, terminate, renew, suspend or abrogate any System
Contract (other than retransmission consent System Contracts, System Contracts
evidencing Leased Property or Other Real Property Interests and lease agreements
for Tangible Personal Property); (b) modify, terminate, renew, suspend or
abrogate any retransmission consent System Contract, System Franchise, System
Contract evidencing Leased Property or Other Real Property Interests, lease
agreements for Tangible Personal Property or System License except for renewals
(other than renewals of System Franchises) on terms that are not materially
different from those which currently exist and renewals of System Franchises as
otherwise required or permitted under this Agreement; (c) engage in any
marketing, subscriber installation, collection or disconnection practices; (d)
make any Cost of Service Election; (e) other than as set forth on Schedule
7.2.1, enter into
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any agreement with or commitment to any competitive access provider and/or local
exchange company or any internet access or on-line services provider with
respect to the use or lease of any of the Assets; (f) sell, transfer or assign
any portion of the Assets other than sales in the ordinary course of business or
permit the creation of a Lien (other than Permitted Liens) on any of the Assets;
(g) decrease the rate charged for any level of Basic Services, Expanded Basic
Services or any Pay TV or, except as expressly permitted by Schedule 7.2.1, add,
delete, retier or repackage any analog programming services, in each case except
to the extent required under the 1992 Cable Act or any other Legal Requirement;
provided, however, that if rates are decreased in order to so comply, RMG will
provide Charter with copies of any FCC forms (even if not filed with any
Governmental Authority) used to determine that the new rates were required; (h)
convert any of the Systems to any billing system or otherwise change billing
arrangements for any of the Systems; (i) enter into any Contract of any kind
relating to the Cable Business to be assumed by Charter hereunder that
individually or in the aggregate call for payments pursuant to such Contract's
terms or otherwise involving expenditures in excess of one hundred thousand
dollars ($100,000), except for the renewal of Contracts that would, but for such
renewal, terminate in accordance with their terms prior to Closing; (j) except
pursuant to or required by plans, agreements or arrangements already in effect
on the date hereof, make any material increase in compensation or benefits
payable or to become payable to employees or make any material change in
personnel policies; (k) take any action with respect to the grant or increase of
severance or termination pay payable after the Closing Date; (l) engage in any
material transaction with respect to the Cable Business; or (m) agree to do any
of the foregoing;
7.2.4 will promptly deliver to Charter (i) true and complete copies
of all monthly statements of income and such other information with respect to
the Systems or the operation of the Cable Business in a format consistent with
the form of report attached hereto as Schedule 7.2.4 for the period from January
1, 1999, through the Closing, and if the Closing occurs as of the end of a
month, as soon as practicable after Closing and (ii) such financial information
reasonably requested by Charter;
7.2.5 will give or cause to be given to Charter, as soon as
reasonably possible but in any event within five (5) Business Days after the
date of submission to the appropriate Governmental Authority, copies of all FCC
Forms 1200, 1205, 1210, 1215, 1220, 1225, 1235 and 1240 or any other FCC forms
required to be filed with any Governmental Authority under the 1992 Cable Act
with respect to rates and prepared with respect to any of the Systems;
7.2.6 will duly and timely file a valid notice of renewal under
Section 626 of the Cable Act with the appropriate Governmental Authority with
respect to any System Franchise that will expire within thirty-six (36) months
after any date between the date of the Agreement and the Closing Date;
7.2.7 will promptly notify Charter of any fact, circumstance, event
or action by it or otherwise (a) which, if known at the date of this Agreement,
would have been required to be disclosed by it in or pursuant to this Agreement
or (b) the existence, occurrence or taking of
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which would result in the conditions of Charter in Section 8.1.1 (with respect
to the representations and warranties of RMG) not being satisfied at any time
prior to or on the Closing, and, with respect to clause (b), use its
commercially reasonable efforts to remedy the same and to satisfy such condition
to Charter's obligation to consummate the transactions contemplated by this
Agreement;
7.2.8 will use its commercially reasonable efforts to challenge and
contest any Litigation brought against or otherwise involving RMG that could
result in the imposition of Legal Requirements that could cause the conditions
to the Closing not to be satisfied; and
7.2.9 will cause its appropriate Affiliates to be bound by and
comply with the provisions of this Section 7.2 to the extent such Affiliates
own, operate or manage any of the Assets or Systems.
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7.3 Employees.
7.3.1 Except as set forth in this Section 7.3.1, Charter may, but
shall have no obligation to, employ or offer employment to any employee of the
Cable Business. Within thirty (30) days after the date of execution of this
Agreement, RMG shall provide to Charter a list of all employees of the Systems
(the "System Employees") as of a recent date, showing the original hire date,
the then-current positions and rates of compensation and whether the employee is
subject to an employment agreement, a collective bargaining agreement or
represented by a labor organization. Within sixty (60) days after the date of
execution of this Agreement (but in no event less than thirty (30) days after
receipt of such list), or such other date as the Parties may agree, Charter will
provide to RMG in writing a list of the System Employees which Tennessee LLC
will employ following the Closing, subject only to the evaluations permitted by
this Section. RMG agrees, and shall cause its appropriate Affiliates, to
cooperate in all reasonable respects with Charter to allow Charter or its
Affiliates to evaluate the System Employees to make hiring decisions. In this
regard, Charter shall have the opportunity to make such appropriate prehire
investigation of each of the System Employees, as it deems necessary, including,
subject to obtaining the consent of such System Employee, the right to review
personnel files and conduct background checks and the right to interview such
employees during normal working hours so long as such interviews are conducted
after notice to RMG and do not unreasonably interfere with RMG's operations. RMG
will use its good-faith efforts to obtain the consent of each of the System
Employees to allow Charter to review personnel files and to conduct background
checks in connection with the foregoing. Charter or its Affiliates may, if they
wish, condition any offer of employment upon the employee's passing a
pre-placement physical examination (including drug screening test) and the
completion of a satisfactory background check. Charter shall bear the expense of
such examination but RMG shall, upon reasonable notice, cooperate in the
scheduling of such examinations so long as the examinations do not unreasonably
interfere with RMG's operations. As of the Closing Date, neither Charter nor
Tennessee LLC shall have any obligation to RMG, its Affiliates or to RMG's
employees, with regard to any employee it has determined not to hire.
Notwithstanding any of the foregoing, prior to the Closing Charter agrees not to
solicit for employment, without the written consent of RMG, any employee of RMG
whose position is System manager or higher.
7.3.2 To the extent not included in the calculation of the Base
Value or the Adjusted Value in accordance with the Common Agreement, IPWT will
pay to all of the System Employees all compensation, including salaries,
commissions, bonuses, deferred compensation, severance (to the extent
applicable), insurance, vacation (except for accrued vacation time (not to
exceed four weeks) and sick time (not to exceed ten (10) days) included in the
calculation of the Adjusted Value of the Systems under the Common Agreement),
and other compensation or benefits to which they are entitled for periods prior
to the Closing, including all amounts, if any, payable on account of the
termination of their employment.
7.3.3 IPWT or its appropriate Affiliate will be responsible for
maintenance and distribution of benefits accrued under any employee benefit plan
(as defined in ERISA) maintained
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by RMG, or its appropriate Affiliate, pursuant to the provisions of such plan
and any Legal Requirements. Charter will not assume any obligation or liability
for any such accrued benefits or any fiduciary or administrative responsibility
to account for or dispose of any such accrued benefits under any employee
benefit plans maintained by RMG or any Affiliate. In the event that RMG
determines that the transactions contemplated by this Agreement will not permit
a distribution to be made to a Hired Employee (as defined below) from RMG's tax
qualified plan in accordance with Section 401(k)(10) of the Code then Charter
may accept a plan-to-plan transfer of Hired Employees' plan benefits to its own
tax qualified plan. If there is no plan-to- plan transfer, in order to permit
IPWT or its appropriate Affiliate to make distributions to any former System
Employee of RMG who becomes a Hired Employee of Tennessee LLC or Charter of the
balance of such employee's 401(k) account in RMG's or its Affiliate's tax
qualified plan, if any, as soon as legally permitted, Charter shall notify IPWT
of the date of termination of such employee's employment with Tennessee LLC or
Charter for any reason.
7.3.4 To the extent not included in the calculation of the Base
Value or the Adjusted Value in accordance with the Common Agreement, all claims
and obligations under, pursuant to or in connection with any welfare, medical,
insurance, disability or other employee benefit plans of RMG or any Affiliate or
arising under any Legal Requirement affecting employees of RMG or any Affiliate
incurred on or before the Closing Date or resulting from or arising from events
or occurrences occurring or commencing on or before the Closing Date will remain
the responsibility of IPWT, or the appropriate Affiliate, whether or not such
employees are hired by Charter as of or after the Closing. Neither Charter nor
Tennessee LLC will have or assume any obligation or liability under or in
connection with any such plan of RMG or any Affiliate of RMG.
7.3.5 To the extent not included in the calculation of the Adjusted
Value in accordance with the Common Agreement, IPWT will remain solely
responsible for all salaries and all severance, vacation (except for accrued
vacation time and sick time included in the calculation of the Adjusted Value of
the Systems under the Common Agreement), medical, holiday, continuation coverage
and other compensation or benefits to which its employees may be entitled,
whether or not such employees may be hired by Tennessee LLC, Charter or any of
their Affiliates, as a result of their employment by RMG or any Affiliate of RMG
on or prior to the Closing Date, the termination of their employment on or prior
to the Closing Date, the consummation of the transactions contemplated hereby or
pursuant to any applicable Legal Requirement or otherwise relating to their
employment prior to the Closing Date. Any liability under WARN with regard to
any employee terminated on or prior to the Closing Date, or not hired by
Tennessee LLC or Charter on or after the Closing Date, shall, as a matter of
contract between the Parties, be the responsibility of IPWT. Charter and its
Affiliates shall cooperate with RMG, IPWT and their other Affiliates, if
requested, in the giving of WARN notices on behalf of the other.
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7.3.6 Notwithstanding anything to the contrary herein, Charter
shall:
(a) credit each System Employee who is offered on or prior to
the Closing employment by Tennessee LLC, Charter or any of their Affiliates and
becomes an employee of Tennessee LLC, Charter or any of their Affiliates after
the Closing Date (a "Hired Employee") the amount of vacation time (to a maximum
of four (4) weeks) and sick time (to a maximum of ten (10) days) accrued by him
or her as a System Employee through and including the Closing Date to the extent
the Adjusted Value is decreased pursuant to Section 2.2(c) of the Common
Agreement in the case of System Employees who become employees of Charter or its
Affiliates; provided, however, that if any Hired Employee has accrued vacation
time and/or sick time in excess of four (4) weeks or ten (10) days,
respectively, then RMG shall, and shall cause its appropriate Affiliate to, pay
to such employee the amount of such excess and Charter shall not assume any
liability or obligation in respect of such excess;
(b) permit each Hired Employee to participate in Charter's
employee benefit plans to the same extent as similarly situated employees of
Charter and their dependents are permitted to participate;
(c) give each Hired Employee credit for such employee's past
service with RMG and its Affiliates as of the Closing Date (including past
service with any prior owner or operator of the Systems or the Cable Business)
for purposes of eligibility and vesting under Charter's employee benefit and
other plans to the same extent as other similarly situated employees of Charter;
(d) not subject any Hired Employee to any waiting periods or
limitations on benefits for pre-existing conditions under Charter's employee
benefit plans, including any group health and disability plans, except to the
extent such employees were subject to such limitations under the employee
benefit plans of RMG or any Affiliate of RMG; and
(e) credit each Hired Employee under any group health plan for
any deductible amount previously met by such Hired Employee as of the Closing
Date under any of the group health plans of RMG or any of its Affiliates.
7.3.7 If Tennessee LLC, Charter or any of their Affiliates
discharges any Hired Employee without cause within one hundred twenty (120) days
after Closing, then Charter shall pay severance benefits to such Hired Employee
in accordance with IPWT's severance benefit plan. For purposes of this Section
7.3.7, "cause" shall have the meaning set forth in Charter's employment
policies, procedures or agreements applicable to Charter's employees who are
situated similarly to the discharged Hired Employee.
7.3.8 If RMG has, or acquires, a duty to bargain with any labor
organization, then RMG will (i) give prompt written notice of such development
to Charter, including notice of the date and place of any negotiating sessions
as they are planned or contemplated and permit Charter
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to have a representative present at all negotiating sessions with such labor
organization and at all meetings preparatory thereto (including making Charter's
representative a representative of RMG's delegation if required by the labor
organization) and (ii) not, without Charter's written consent, enter into any
Contract with such labor organization that purports to bind Charter, including
any successor clause or other clause which would have this purpose or effect.
RMG acknowledges and agrees that Charter has not agreed to be bound, and will
not be bound, without an explicit assumption of such liability or responsibility
by Charter, by any provision of any collective bargaining agreement or similar
Contract with any labor organization to which RMG or any of its Affiliates is or
may become bound.
7.3.9 Nothing in this Section 7.3 or elsewhere in this Agreement
shall be deemed to make any employee of the Systems a third party beneficiary of
this Agreement.
7.3.10 Notwithstanding any other provision of this Agreement, in
respect of wages paid with respect to the 1999 calendar year to employees of RMG
who after the Closing become employees of Tennessee LLC or Charter, the Parties
agree to comply, and to cause their respective Affiliates to comply, with the
alternative procedure set forth in Section 5 of Revenue Procedure 96-60 and
shall cooperate, and shall cause their respective Affiliates to cooperate, with
each other in complying with such procedures.
7.4 Leased Vehicles; Other Capital Leases. To the extent not included in
the calculation of the Base Value or the Adjusted Value in accordance with the
terms of the Common Agreement, except for leases described in Schedule 4.1(b),
IPWT will pay the remaining balances on any leases for vehicles or capital
leases included in the Tangible Personal Property and will deliver title to such
vehicles and other Tangible Personal Property, free and clear of all Liens, to
Tennessee LLC at the Closing.
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7.5 Required Consents; Franchise Renewal.
7.5.1 RMG will use its commercially reasonable efforts to (i) obtain
in writing as promptly as possible and at its expense, all of the Required
Consents and any other consent, authorization or approval required to be
obtained by RMG in connection with the transactions contemplated by this
Agreement, and deliver to Charter copies of such Required Consents and such
other consents, authorizations or approvals promptly after they are obtained by
RMG and (ii) give any required written notice in connection with the
transactions; provided, that RMG will afford Charter the opportunity to review,
approve and revise the form of letter or application proposed to request the
Required Consent or form of written notice prior to delivery to the Third Party
or the Affiliate of RMG whose consent is sought or to whom such notification is
required. All documents delivered or filed with any Governmental Authority or
any Person by or on behalf of RMG pursuant to this Section 7.5.1, when so
delivered or filed, will be correct, current and complete in all material
respects. Charter will cooperate with RMG to obtain all Required Consents and
Charter shall not intentionally take any action or steps that would prejudice or
jeopardize the obtaining of any Required Consent. RMG will not accept or agree
or accede to any modifications or amendments to, or the imposition of any
condition to the transfer of, any of the System Franchises, System Licenses or
System Contracts of the Cable Business that are not acceptable to Charter.
Notwithstanding the foregoing, as soon as practicable after the date of this
Agreement (and in no event more than fifteen (15) Business Days hereafter),
Charter will cooperate with RMG to complete, execute and deliver, or cause to be
completed, executed and delivered, to the appropriate Governmental Authority, a
FCC Form 394 with respect to each System Franchise other than any such
Governmental Authority that the Parties have agreed will not initially receive
FCC Form 394; provided, that if RMG subsequently requests that FCC Form 394 be
completed, executed and delivered to any appropriate Governmental Authority that
did not initially receive a FCC Form 394 for any System Franchise, then the
Parties will cooperate to complete, execute and deliver a FCC Form 394 to such
Governmental Authority as soon as practicable but in any event within fifteen
(15) Business Days after RMG has made such request. Without the prior consent of
the Charter, RMG shall not agree with any Governmental Authority to extend or to
toll the time limits applicable to such Governmental Authority's consideration
of any FCC Form 394 filed with such Governmental Authority.
7.5.2 RMG will use commercially reasonable efforts to obtain and
cooperate with Charter to obtain a renewal or extension of any System Franchise
(for a period expiring no earlier than three (3) years after the Closing Date)
for which a valid notice of renewal pursuant to the formal renewal procedures
established by Section 626 of the Cable Act has not been timely delivered to the
appropriate Governmental Authority and no written confirmation has been received
from such Governmental Authority that the procedures established by Section 626
nonetheless will be applicable with respect to the renewal or extension of such
System Franchise.
7.5.3 Notwithstanding the provisions of Section 7.5.1, neither RMG
nor IPWT will have any further obligation to obtain Required Consents: (a) with
respect to license agreements relating to pole attachments where the licensing
authority will not consent to an
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assignment of such license agreement but requires that Tennessee LLC or Charter
enter into a new agreement with such licensing authority, in which case Charter
shall use its commercially reasonable efforts to enter into such agreement prior
to Closing or as soon as practicable thereafter and RMG will cooperate with and
assist Charter in obtaining such agreements; (b) for any business radio license
or any private operational fixed service (POFS) microwave license which RMG
reasonably expects can be obtained within one hundred twenty (120) days after
the Closing and so long as a conditional temporary authorization (for a business
radio license) or a special temporary authorization (for a POFS license) is
obtained by Charter under FCC rules with respect thereto; (c) with respect to
Contracts evidencing Leased Property, if, with the consent of Charter, RMG
obtains and makes operational prior to Closing substitute Leased Property that
is reasonably satisfactory to Charter; (d) with respect to Contracts evidencing
leased Tangible Personal Property that is material to the Cable Business, if,
with the consent of Charter, RMG obtains and makes operational prior to Closing
substitute Tangible Personal Property that is reasonably satisfactory to
Charter; and (e) with respect to Contracts which are not identified with an
asterisk (*) on Schedule 5.3, if RMG uses its commercially reasonable efforts to
obtain the Required Consent to such Contract but fails to obtain such consent on
or prior to Closing.
7.5.4 If and to the extent that RMG fails to obtain all Required
Consents identified with an asterisk (*) on Schedule 5.3 (except Required
Consents for the transfer of Systems Franchises which shall be governed by
Section 7.5.5) on or prior to the Closing (whether or not Charter shall have
waived satisfaction of the condition to Closing set forth in Section 8.1.5),
subsequent to the Closing, IPWT will continue to use commercially reasonable
efforts to obtain in writing as promptly as possible such Required Consents and
will deliver copies of the same, reasonably satisfactory in form and substance,
to Charter. The obligations set forth in this Section will survive the Closing
and will not be merged in the consummation of the transactions contemplated
hereby.
7.5.5 If less than all of the Required Consents for the transfer of
Systems Franchises are obtained as of the Closing Date and all other conditions
precedent are satisfied or waived, then, subject to the conditions set forth in
Section 4.1(c)(i) and (iii) of the Common Agreement, then the System Franchise
with respect to which consent has not been obtained shall not be transferred to
Tennessee LLC and the Parties shall negotiate a modification to the calculation
of the Base Price as set forth in Section 3.1 to account for the exclusion of
such Franchise.
7.6 Title Commitments and Surveys. Charter will have the option to obtain,
at its own expense, (i) commitments of title insurance ("Title Commitments")
issued by a nationally recognized title insurance company selected by Charter
(the "Title Company") and containing policy limits and other terms reasonably
acceptable to Charter, and photocopies of all recorded items described as
exceptions therein committing to insure (a) fee title in Charter to each parcel
of Owned Property and (b) a leasehold interest in Charter in each parcel of
Leased Property that is the site of a System headend or tower, by American Land
Title Association ("ALTA") (1992) owner's or lessee's policies of title
insurance, and (ii) current ALTA as-built surveys (in
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accordance with the Minimum Standard Detail Requirements for Land Title Surveys
jointly established and adopted by ALTA and the American Congress on Surveying
and Mapping in 1992) of each such parcel of the Owned Property or Leased
Property with monuments placed at all major corners of the property boundary
unless already marked and showing the location and identification by recorded
instrument number of all easements or rights-of-way burdening or benefiting the
property in question and all other documents and matters referenced as
exceptions on the Title Commitment, the location of all apparent easements and
rights-of-way, flood zone designation, setback lines, if applicable, the
location of all substantial visible improvements on such property and the
location of all adjoining streets and indication of access to a public way such
as curb cuts and driveways, in such form as is reasonably satisfactory to
Charter and as is necessary to obtain the title insurance to be issued pursuant
to the Title Commitments with the standard printed exceptions relating to survey
matters deleted (the "Surveys"), certified to the parties and the Title Company
issuing a Title Commitment. If Charter notifies RMG within twenty (20) days of
this Agreement or, if later, of its receipt of both the Title Commitments and
the Surveys of any Lien (other than a Permitted Lien) or other matter affecting
title to the Owned Property or Leased Property which renders (or presents a
material risk of rendering) title to any parcel of the Owned Property not good
and marketable or prevents or materially interferes with (or presents a material
risk of preventing or interfering with) the use of any parcel of Owned Property
or Leased Property for the purposes for which it is currently used or intended
to be used by RMG (each a "Title Defect"), RMG will exercise commercially
reasonable efforts to remove or, with the consent of Charter, cause the Title
Company to commit to insure over, each such Title Defect prior to the Closing.
7.7 HSR Notification. As soon as practicable after the execution of this
Agreement, but in any event no later than thirty (30) days after such execution,
Charter and RMG will each complete and file, or cause to be completed and filed
at its own cost and expense, any notification and report required to be filed
under the HSR Act with respect to the transactions contemplated by this
Agreement and each such filing shall request early termination of the waiting
period imposed by the HSR Act. The Parties shall use their respective
commercially reasonable efforts to respond as promptly as reasonably practicable
to any inquiries received from the Federal Trade Commission (the "FTC") and the
Antitrust Division of the Department of Justice (the "Antitrust Division") for
additional information or documentation and to respond as promptly as reasonably
practicable to all inquiries and requests received from any other Governmental
Authority in connection with antitrust matters. The Parties shall use their
respective commercially reasonable efforts to overcome any objections which may
be raised by the FTC, the Antitrust Division or any other Governmental Authority
having jurisdiction over antitrust matters. Each Party will cooperate to prevent
inconsistencies between their respective filings and between their respective
responses to all such inquiries and responses, and will furnish to each other
such necessary information and reasonable assistance as the other may reasonably
request in connection with its preparation of necessary filings or submissions
under the HSR Act. Notwithstanding the foregoing, no Party shall be required to
make any significant change in the operations or activities of the business (or
any material assets employed therein) of such Party or any of its Affiliates, if
a Party determines in good faith that such change would be materially adverse to
the operations
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or activities of the business (or any material assets employed therein) of such
Party or any of its Affiliates having significant assets, net worth or revenue.
7.8 Sales and Transfer Taxes. All sales, use or excise Taxes arising from
or payable by reason of the transfer of any of the Assets or the LLC Interest
("Sales Taxes") will be shared equally by IPWT and Charter. All transfer and
similar taxes or assessments, including transfer fees and similar assessments
for or under System Franchises, System Licenses and System Contracts, arising
from or payable by reason of the conveyance of the Assets or the LLC Interest
("Transfer Taxes") also will be shared equally by IPWT and Charter. Tax Returns
required to be filed in respect of Sales Taxes and Transfer Taxes ("Transfer Tax
Returns") shall be prepared and filed by the Party that has primary
responsibility under applicable law for filing such Transfer Tax Returns. If no
Party has primary responsibility for filing a Transfer Tax Return, Charter shall
be responsible for preparing and filing any such Transfer Tax Return.
Notwithstanding the foregoing, however, Charter shall be solely responsible for
any Sales Taxes and Transfer Taxes imposed, and the costs associated with any
Transfer Tax Return filed, as a result of the contribution of the Assets by RMG
to Tennessee LLC pursuant to Section 2.1.1 and subsequent sale of the LLC
Interest to Charter pursuant to Section 2.1.2, greater than those Sales Taxes
and Transfer Taxes that would have been imposed, and the costs that would have
been associated with any Transfer Tax Returns filed, in connection with a sale
of the Assets directly from RMG to Charter.
7.9 Programming. Charter will execute and deliver such documents and take
such action as may be reasonably requested by RMG to enable RMG to comply with
the requirements of its programming agreements with respect to divestitures and
acquisitions of cable television systems; provided, however, that Charter will
not be required to provide specific programming or channels or to assume any
liability with respect to or in connection with the programming agreements of
RMG or any Affiliate of RMG, except to the extent included on Schedule 4.2(b).
7.10 Updated Schedules.
(a) Schedule and exhibit references contained in this Agreement are
for convenience only and any matter disclosed pursuant to one section,
subsection or other provision of this Agreement, are deemed disclosed for all
purposes of this Agreement, as long as the disclosure with respect to such
matter provides a truthful, accurate and adequate description of all relevant
aspects of such matter.
(b) Not less than ten (10) Business Days prior to Closing, RMG will
deliver to Charter revised copies of each of its Schedules, except for Schedule
5.14 as it relates to matters addressed in Sections 5.14.1 and 5.14.2
(regardless of whether the original Schedule is as of a certain date) which
shall have been updated and marked to show any changes occurring between the
date of this Agreement and the date of delivery; provided, however, that such
updates are for informational purposes only, and for purposes of determining
whether IPWT's representations, warranties and covenants in this Agreement are
true and correct at Closing, all references to the
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Schedules will mean the version of the Schedules attached to this Agreement on
the date of signing. Notwithstanding the foregoing, if the effect of any such
updates to Schedules is to disclose any one or more additional properties,
privileges, rights, interests or claims, in each case acquired after the date of
this Agreement ("New Properties") as Assets that would have been (if owned on
the date of this Agreement) required by this Agreement to have been disclosed by
RMG in its original Schedules or that were acquired by RMG after the date of
this Agreement in breach of this Agreement, then Charter, at or before Closing,
will have the right (to be exercised by written notice to RMG) to cause any one
or more of such New Properties to be designated as and deemed to constitute
Excluded Assets of RMG for all purposes under this Agreement. If such right is
not exercised by Charter and if Charter waives the applicable condition to
Closing provided in Section 8.1.1 or 8.1.2, Charter shall be deemed to have
accepted such new disclosure with respect to such New Properties and it shall be
deemed incorporated by reference into the Schedules. Notwithstanding anything to
the contrary contained in this Agreement, and except as set forth in the
preceding sentence with respect to New Properties, the waiver of any condition
to Closing by a Party who has knowledge of a breach by the other Party will not
be deemed a waiver of any rights and remedies with respect to such breach under
this Agreement or the Common Agreement.
7.11 Use of Name and Logo. For a period of one hundred eighty (180) days
after the Closing, Charter and Tennessee LLC will be entitled to use the
trademarks, trade names, service marks, service names, logos and similar
proprietary rights of RMG to the extent incorporated in or on the Assets
transferred to it at the Closing on a royalty-free basis, provided that Charter
will exercise commercially reasonable efforts to remove all such names, marks,
logos and similar proprietary rights of RMG (except to the extent otherwise
permitted by RMG) from the Assets as soon as reasonably practicable, and in any
event within one hundred eighty (180) days, following the Closing.
Notwithstanding the foregoing, nothing in this Section will require Charter to
remove or discontinue using any such name or mark that is affixed to converters
or other items in or to be used in customer homes or properties, or as are used
in a similar fashion making such removal or discontinuation impracticable.
7.12 Transitional Billing Services. IPWT will provide Charter, upon
written request delivered a reasonable amount of time in advance and to the
extent reasonably practicable, access to and the right to use its billing system
computers, software and related fixed assets in connection with the Systems for
a period of up to one hundred fifty (150) days following the Closing to allow
for conversion of existing billing arrangements, including billing and related
arrangements regarding internet access services being provided to customers of a
System on the Closing Date ("Transitional Billing Services"). Charter will
notify RMG at least thirty (30) days prior to the Closing as to whether it
desires Transitional Billing Services from RMG. All Transitional Billing
Services, if any, that are requested by Charter will be provided on terms and
conditions reasonably satisfactory to each Party; provided, however, that the
amount to be paid by Charter for such Transitional Billing Services will not
exceed the out-of-pocket cost to IPWT of providing such Transitional Billing
Services. IPWT will notify Charter of the cost to IPWT of providing such
Transitional Billing Services within ten (10) Business Days after receiving
Charter's notice
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requesting the provision of such Transitional Billing Services.
7.13 Confidentiality and Publicity.
7.13.1 Prior to the Closing, each Party will keep confidential any
non-public information that such Party may obtain from the other Parties in
connection with this Agreement, and following the Closing, each Party will keep
confidential any non-public information that such Party may obtain from the
other Parties in connection with this Agreement unrelated to the Cable Business
and Systems as well as any non-public information in the possession of such
Party related to the Cable Business and Systems (any such information that a
Party is required to keep confidential pursuant to this sentence shall be
referred to as "Confidential Information"). No Party will disclose, and each
Party will cause its employees, consultants, advisors and agents not to
disclose, any Confidential Information to any other Person (other than its
directors, officers and employees and representatives of its advisers and
lenders whose knowledge thereof is necessary in order to facilitate the
consummation of the transactions contemplated hereby) or use, and will cause its
controlled Affiliates, directors, officers, employees, consultants, advisors and
agents not to use, such Confidential Information to the detriment of the other
Parties; provided that (i) Charter may use and disclose any such Confidential
Information once it has been publicly disclosed (other than by Charter in breach
of its obligations under this Section) or which rightfully has come into the
possession of Charter (other than from RMG or IPWT and other than from another
Person in violation of any duty or obligation of confidentiality) and (ii) to
the extent that Charter may, in the reasonable opinion of its counsel, be
compelled by Legal Requirements to disclose any of such Confidential
Information, Charter may disclose such Confidential Information if it will have
used all reasonable efforts, and will have afforded the other the opportunity,
to obtain an appropriate protective order or other satisfactory assurance of
confidential treatment, for the Confidential Information compelled to be
disclosed. In the event of termination of this Agreement, Charter will cause to
be delivered to the other, and retain no copies of, any documents, work papers
and other materials obtained by Charter or on its behalf from the other, whether
so obtained before or after the execution hereof.
7.13.2 No Party will issue any press releases or make any other
public announcement concerning this Agreement and the transactions contemplated
hereby, except as required by applicable Legal Requirements, without the prior
written consent and approval of the other Party, which consent and approval may
not be unreasonably withheld.
7.13.3 Each Party expressly agrees that, in addition to any other
right or remedy the other may have, such other Party may seek and obtain
specific performance of the covenants and agreements set forth in or made
pursuant to this Section 7.13 and temporary and permanent injunctive relief to
prevent any breach or violation thereof, and that no bond or other security may
be required from such other parties in connection therewith.
7.14 Bulk Transfer. Each Party waives compliance by each other Party with
Legal Requirements relating to bulk transfers applicable to the transactions
contemplated hereby.
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7.15 Lien Searches. RMG will obtain, at its expense, the results of a lien
search conducted by a professional search company of records in the offices of
the secretaries of state in each state and county clerks in each county where
there exist any Owned Property or Tangible Personal Property, and in the state
and county where RMG's principal offices are located, including copies of all
financing statements or similar notices or filings (and any continuation
statements) discovered by such search company.
7.16 Further Assurances. At or after the Closing, each Party at the
request of the other Party, will promptly execute and deliver, or cause to be
executed and delivered, to the other Party all such documents and instruments,
in addition to those otherwise required by this Agreement, in form and substance
reasonably satisfactory to the other Party as the other Party may reasonably
request in order to carry out or evidence the terms of this Agreement or to
collect any accounts receivable or other claims included in the Assets.
7.17 Post-Closing Cooperation as to Rates.
7.17.1 RMG will use commercially reasonable efforts to cooperate
with and assist Charter by providing, upon reasonable request, all information
in RMG's possession (and not previously made available to Charter) relating
directly to the rates set forth on Schedule 5.15.2, or on any of FCC Forms 1200,
1205, 1210, 1220, 1225, 1235 or 1240 or any other FCC Form, that Charter may
reasonably require to justify such rates in response to any inquiry, order or
requirements of any Governmental Authority.
7.17.2 Prior to Closing, RMG shall not settle or permit to be
settled any rate proceeding with respect to the Systems without the consent of
Charter, which consent will not be unreasonably withheld or delayed, unless the
proposed settlement includes injunctive or other relief that adversely affects
the Assets or its ability to operate the Systems substantially in the manner in
which they are operated on the date of this Agreement (other than changing the
rates in question), in which case consent may be withheld or delayed in
Charter's sole discretion.
7.17.3 After the Closing, IPWT will be responsible for and follow to
conclusion any rate order of any Governmental Authority or proceeding with
respect to rates of any of the Systems charged by RMG immediately prior to the
Closing; provided, however, that IPWT shall not: (i) agree to any
forward-looking rate adjustment; (ii) submit any refund plan to a Governmental
Authority that would impact any rates charged or impose financial liability on
Tennessee LLC or Charter after the Closing; or (iii) appeal or take any other
action with regard to such proceeding that would impact any rates charged or
impose financial liability on Tennessee LLC or Charter after the Closing, in any
case without obtaining the prior written consent of Charter, which consent shall
not be unreasonably withheld. Each Party will cooperate with and assist the
other by providing, upon reasonable request, all information in its possession
(and not previously made available to the requesting Party) that the requesting
Party may reasonably require to justify rates in response to any inquiry, order
or requirements of any Governmental
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Authority.
7.17.4 If, following Closing, any System is required pursuant to any
Legal Requirement, settlement or otherwise to refund to subscribers any
payments, in whole or in part, made by such subscribers prior to Closing,
including fees for cable television service, equipment charges, late fees and
similar payments, then at the election of Charter and upon IPWT's prior written
consent, which consent shall not be unreasonably withheld: (i) Charter or
Tennessee LLC must fulfill such refund obligation through a one-time cash
payment to subscribers, in which case IPWT shall provide funds for such payment
to Charter, Charter shall cooperate with IPWT or implement and administer such
refund payment through Charter's billing system, and IPWT shall reimburse
Charter for all reasonable expenses incurred by Charter in connection therewith;
(ii) Charter may fulfill such refund obligation through a cash payment, credit
or in-kind or other form of consideration, at its discretion and subject to any
required approval by a Governmental Authority, and IPWT shall reimburse Charter
in the amount of any payment or in the amount of the cost to Charter of any
credit or in-kind or other form of consideration and all reasonable expenses
incurred by Charter in connection therewith. Without limiting the foregoing,
Charter will provide IPWT with all information in Charter's possession that is
reasonably required by IPWT in connection with such reimbursement.
7.17.5 If either Tennessee LLC or Charter is permitted following
Closing to pass through to subscribers of the Systems, the amount of any
"franchise fees on franchise fees" paid by RMG to the appropriate local
franchising authority with respect to the period prior to Closing, Charter
agrees that it will collect for the benefit of IPWT such amounts specified no
later than the Six-Month Date as paid by RMG and, except as specified below,
will promptly remit such amounts to IPWT; provided, however, that if a local
franchising authority challenges such collection or orders Charter to refund
such fees to subscribers, then Charter shall not remit the fees to IPWT but
shall hold such fees in escrow and the parties will cooperate reasonably and in
good faith to challenge such local franchising authority action. Upon the final
resolution of such local franchising authority action, the escrowed fees shall
be released from escrow and, to the extent not refunded to subscribers, paid
over to IPWT. IPWT agrees to provide Charter with such documentation as
necessary to demonstrate its payment of the "franchise fees on franchise fees"
and to enable Charter to collect the pass through amounts from subscribers.
7.18 Distant Broadcast Signals. Unless otherwise restricted or prohibited
by any Governmental Authority, applicable Legal Requirements or Contract, RMG
will, if requested by Charter, delete prior to the Closing any distant broadcast
signals which Charter determines will result in unacceptable liability on the
part of Charter for copyright payments with respect to continued carriage of
such signals after the Closing; provided, however, that RMG may refuse to honor
such a request if such deletion could reasonably be expected to delay or
otherwise jeopardize RMG's ability to complete the transactions contemplated
herein.
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7.19 Environmental Assessment.
7.19.1 RMG acknowledges and agrees, subject to any enforceable
restrictions placed thereon by a Third Party owner or lessor of any real
property involved, that Charter may commission, at Charter's cost and expense, a
so-called "Phase I" environmental site assessment of the Assets (a "Phase I
Assessment"). If the Phase I Assessment or any other information known to RMG
(including information disclosed in connection with the negotiation of this
Agreement or described in the Schedules hereto) indicates that a so-called
"Phase II" assessment or other additional testing or analysis of the Assets as
Charter may deem appropriate (a "Phase II Assessment") is advisable, then,
subject to any enforceable restrictions placed thereon by a Third Party owner or
lessor of any real property involved, Charter may elect to cause its agents or
representatives to conduct such testing and analysis. RMG will use its
commercially reasonable efforts to comply with any reasonable request for
information made by Charter or its agents in connection with any such
investigation, but in no event will RMG be required under this Section 7.19.1 to
disclose any materials constituting attorney-client privileged communications.
RMG covenants that any response to any such request for information will be
complete and correct in all material respects. RMG will afford Charter and its
agents or representatives access to all operations of RMG at all reasonable
times and in a reasonable manner in connection with any such investigation
subject to any reasonably required approval of RMG's landlords, which approval
RMG will use its commercially reasonable efforts to obtain. Should Charter
commission such an investigation, such investigation will have no effect upon
the representations and warranties made by RMG or IPWT to Charter under this
Agreement except that if any Phase I Assessment or Phase II Assessment uncovers
an environmental condition which then comprises a breach of RMG's
representations or warranties herein and such breach is capable of being cured,
RMG shall be deemed not to have breached such representation or warranty if RMG
cures such breach in accordance with the provisions of this Agreement. In the
event this Agreement is terminated or fails to close in accordance with its
terms, Charter agrees to repair any damage or disturbance it causes to the Owned
Property or Leased Property in the course of such investigative activities by
returning such Owned Property or Leased Property to approximately the same
condition as existed prior to such investigative activities. Charter shall
indemnify, protect, defend, and hold RMG, IPWT, Tennessee LLC and the Assets
free and harmless from and against any and all claims, actions, causes of
action, suits, proceedings, costs, expenses (including reasonable attorneys' and
consultants' fees and costs), liabilities, damages, and liens of any type
arising directly out of any act or omission of Charter or any of Charter's
representatives on or about the Owned Property or Leased Property in the course
of such investigative activities. However, neither of the two preceding
sentences shall be interpreted to impose any obligation upon Charter with
respect to Hazardous Substances present at, on, in, under or about, or any
conditions existing on, the Owned Property or Leased Property at the time of
such investigative activities, except to the extent of Charter's negligence or
willful misconduct causes a release of such Hazardous Substances or otherwise
exacerbates any such condition in a manner that leads to liability under any
Environmental Law.
7.19.2 All information collected and generated as a result of the
environmental due diligence authorized by Section 7.19.1 will be subject to the
terms and conditions of Section
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7.13 of this Agreement. Charter shall provide to RMG copies of all draft and
final reports, assessments and other information composed or compiled by
Charter's environmental consultants within five (5) Business Days after
Charter's receipt of copies thereof.
7.20 Year 2000 Matters.
7.20.1 Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Computer and Other Systems" means any level of hardware
or software, equipment and cable plant, or environmental and security systems
and other facilities used in connection with the Cable Business which are date
dependent or which process date data, including any firmware, embedded systems,
application programs, user interfaces, files and databases, and which might be
adversely affected by any date-related issue or calculation prior to, during or
after January 1, 2000, including any problem related to a leap year.
(b) "Year 2000 High-Level Inventory, Assessment and
Remediation Decisions" means RMG's documentation of its Year 2000 inventory,
assessment and remediation decisions performed in accordance with its Year 2000
Plan, consisting of (i) database reports identifying each category of items
inventoried at RMG's cable Systems and specifying as appropriate the
manufacturer or vendor and release, version or model number of each item listed,
(ii) risk or critically assessments, (iii) determination and execution of
evaluation approaches with respect to Year 2000 Readiness, (iv) determination of
Year 2000 Readiness based on evaluation approaches employed, and (v) decisions
regarding disposition alternatives (do nothing, repair, replace or retire). All
such reports have been reviewed at appropriate levels within RMG's organization
in accordance with RMG's Year 2000 Plan. RMG's Year 2000 High-Level Inventory,
Assessment and Remediation Decisions are attached hereto as Schedule 7.20.1(b).
(c) "Year 2000 Plan" means the plans adopted in accordance
with RMG's Year 2000 Remediation Program to make Year 2000 Ready by a date no
later than August 31, 1999, all of RMG's Computer and Other Systems having a
significant impact on RMG's business. Such Year 2000 Plan will include scope of
methodologies and timelines (including objective milestones) for inventory,
assessment, remediation and/or replacement, and testing or evaluation of Third
Party Testing, as applicable, of its Computer and Other Systems having a
significant impact on RMG's business. RMG's Year 2000 Plan is attached hereto as
Schedule 7.20.1(c).
(d) "Year 2000 Ready" or "Year 2000 Readiness" means that the
referenced component, system, software, equipment or other item is designed or
has been modified to be used prior to, during and after the calendar year 2000
A.D., and that such item will operate at all levels, including microcode,
firmware, application programs, user interfaces, files and databases, during
each such time period without error or interruption relating to, or the product
of, date related issues or calculations, including date data which represents or
references
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different centuries or more than one century or leap year.
(e) "Year 2000 Remediation Program" means an enterprise wide
program to make Year 2000 Ready all Computer and Other Systems having a
significant impact on RMG's business. Such Year 2000 Remediation Program must be
conducted by Persons with experience in issues related to Year 2000 Readiness
and such Persons must have organized an enterprise wide program management
office which reports to, or an enterprise wide program management structure with
oversight by, executive level management and the board of directors (or
committee thereof or other governing body of such entity).
7.20.2 Acknowledgments. The Parties acknowledge the following:
(a) RMG and certain of its Affiliates have established a Year
2000 Remediation Program.
(b) Charter has reviewed and approved RMG's Year 2000 Plan and
Year 2000 High-Level Inventory, Assessment and Remediation Decisions.
(c) Charter acknowledges and agrees with RMG's preliminary
decision to rely on testing of cable plant and related equipment to be performed
by certain cable industry technical and trade associations, certain critical
vendors or other cable operators ("Third Party Testing"). RMG will continue to
review the progress of such Third Party Testing plans and results as they become
available. RMG has developed test methodologies as part of its Year 2000 Plan to
address implementation of additional testing should RMG and Charter mutually
consider such additional testing to be necessary or prudent.
(d) RMG makes no representation, warranty or guarantee that
its Computer and Other Systems will be Year 2000 Ready at the Closing Date or
thereafter.
7.20.3 Covenants. Notwithstanding any other provision set forth in
this Agreement, the Parties agree as follows:
(a) Through the Closing Date, RMG will exercise prudent and
reasonable care and diligence to take such actions with respect to the Cable
Business when and as required by its approved Year 2000 Plan.
(b) Through the Closing Date, RMG will cooperate with Charter
with respect to the nature and results of its activities relating to its Year
2000 Plan. Such cooperation shall include providing Charter with any
non-confidential information possessed by RMG or one of its Affiliates and
reasonably requested by Charter regarding the Year 2000 Readiness of any
material component of the Computer and Other Systems having a significant impact
on RMG's business.
(c) RMG shall deliver to Charter on or before July 31, 1999,
and again
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on August 31, 1999 (if Closing has not occurred prior to such date), a
statement, certified by an authorized officer of RMG who is responsible for
implementation of its Year 2000 Plan, setting forth in reasonable detail that as
of such date all of the milestones contained in its Year 2000 Plan to be
completed as of such date have been fully completed (or if not, indicating which
such milestones have not been completed and describing the efforts required to
complete the same).
(d) From the date hereof through the Closing Date, Charter
shall have the opportunity to conduct due diligence regarding the Year 2000
Readiness of the Computer and Other Systems having a significant impact on RMG's
business in accordance with this Section 7.20.3(d). Charter may conduct a review
of the Year 2000 Ready assessment activities with respect to the Computer and
Other Systems having a significant impact on RMG's business, including
inspecting individual headend and office sites and reviewing existing reports,
correspondence and related material regarding the Year 2000 Readiness of the
Computer and Other Systems having a significant impact on RMG's business.
Charter shall conduct no more than three (3) visits to any site of RMG and no
single site visit shall exceed three (3) Business Days. Charter shall give RMG
at least five (5) Business Days written notice prior to any visit to any System
facilities of RMG and, if Charter intends during such visit to perform testing
at a headend, office or other site of RMG, Charter also must provide a
description of the scope of work regarding such testing. If RMG does not notify
Charter in writing of the RMG's objection to such proposed site visit and/or
testing within three (3) Business Days after receipt of such notice, RMG shall
be deemed to have consented to the proposed site visit and any described
testing. RMG shall not unreasonably object to Charter's request to perform
testing. A representative of RMG shall be present at all times during any such
visit and testing. All activities of Charter regarding its Year 2000 due
diligence shall be conducted to minimize any inconvenience or interruption of
the normal use and enjoyment of the Cable Business and Computer and Other
Systems.
7.21 Satisfaction of Conditions. Each Party will use its commercially
reasonable efforts to satisfy, or to cause to be satisfied, the conditions to
the obligations of the other Party to consummate the transactions contemplated
by this Agreement, as set forth in Article 8.
7.22 Offers. RMG (and its directors, officers, employees, representatives
and agents) shall not directly or indirectly, (i) offer the Assets or the Cable
Business for sale, (ii) solicit, encourage or entertain offers for the Assets or
the Cable Business, (iii) initiate negotiations or discussions for the sale of
the Assets or the Cable Business or (iv) make information about the Assets or
the Cable Business available to any Third Party in connection with the possible
sale of the Assets or the Cable Business prior to the Closing Date or the date
this Agreement is terminated in accordance with its terms.
7.23 Retention of Books and Records. At or prior to the Closing, RMG shall
make arrangements reasonably satisfactory to Charter to deliver all Books and
Records not located at any of the offices included in the Owned Property or
Leased Property. Following the Closing, each Party shall give access to the
other Parties, their counsel, accountants and other authorized
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representatives during normal business hours to such Party's materials, books,
records and documents which relate to the operations of the Cable Business prior
to the Closing Date, as may be reasonably necessary in connection with any
legitimate purpose (including the preparation of tax reports and returns and the
preparation of financial statements). Such access will be subject to reasonable
advance written notice, will be conducted in a manner that is not disruptive of
such Party's business, and will be subject to any other reasonable limitations
imposed by such Party. The requesting Party shall have the right to make copies
of such materials at its own expense. If any Party proposes to destroy or
otherwise dispose of any of its materials, books, records or documents that
related to the operations of the Cable Business prior to the Closing Date, it
will give no less than thirty (30) days' advance written notice to the other
Party so as to permit the other Party to exercise its rights under this Section
7.23.
7.24 Formation of Tennessee LLC. RMG shall form Tennessee LLC as a single
member limited liability company solely owned by RMG and pursuant to operating
agreements reasonably acceptable to Charter, and RMG shall cause Tennessee LLC
to not enter into any transactions or assume any liabilities prior to the
Closing except as provided in this Agreement. Charter shall reimburse IPWT for
all monies paid (other than general and administrative expenses) by RMG or IPWT
in connection with forming Tennessee LLC.
7.25 Tax Return Cooperation. RMG, IPWT and Charter shall reasonably
cooperate in connection with the preparation and filing of any Tax Return for
which any other Party is responsible for preparing and filing with respect to
the Systems.
8. CONDITIONS PRECEDENT.
8.1 Conditions to Charter's Obligations. The obligations of Charter to
consummate the transactions contemplated by this Agreement will be subject to
the satisfaction, at or before the Closing, of the following conditions, one or
more of which may be waived by Charter:
8.1.1 Accuracy of Representations and Warranties. The
representations and warranties of IPWT in this Agreement and in the Transaction
Documents, without giving effect to any materiality qualifications contained
therein, are true, complete and accurate on and as of the date hereof and at and
as of the Closing with the same effect as if made at and as of the Closing,
except to the extent that all misstatements, omissions and inaccuracies, in the
aggregate, do not have a material adverse effect on the Assets, the Cable
Business, the operations, condition (financial or otherwise) or results of
operations of the Systems taken as a whole, or on the ability of RMG to perform
its obligations under this Agreement.
8.1.2 Performance of Agreements. RMG shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants in this Agreement and in any Transaction Document to
be performed and complied with by it at or before the Closing.
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8.1.3 Deliveries. RMG shall have delivered the items and documents
required to be delivered by it pursuant to this Agreement, including those
required to be delivered to Charter under Section 9.2.
8.1.4 Legal Proceedings. No Legal Requirement of any Governmental
Authority (including any temporary Legal Requirement) shall be in effect which
would prevent or make illegal the consummation of any of the transactions
contemplated by this Agreement or any Transaction Document.
8.1.5 Consents.
(a) Except as otherwise provided in Section 7.5.5, Required
Consents related to all Systems Franchises shall have been obtained in form and
substance reasonably satisfactory to Charter, or the consent of the appropriate
Governmental Authority shall be deemed to have been received in accordance with
Section 617 of the Communications Act (47 U.S.C. ss.537).
(b) Except as otherwise provided in Section 7.5.3, Charter
shall have received evidence, in form and substance reasonably satisfactory to
it, that the Required Consents related to the Systems Licenses and the Systems
Contracts identified with an asterisk (*) on Schedule 5.3 have been obtained.
8.1.6 No Material Adverse Changes. There shall not have been any
material adverse change in the Assets or the condition (financial or otherwise)
or operations of the Cable Business or the Systems, taken as a whole, since
December 31, 1998.
8.1.7 Franchise Renewals. Each Systems Franchise for which (a) a
valid notice of renewal pursuant to the formal renewal procedures established by
Section 626 of the Cable Act has not been timely delivered to the appropriate
Governmental Authority, and (b) with respect to which the appropriate
Governmental Authority has not confirmed in writing that the procedures
established by Section 626 nonetheless shall apply to the renewal or extension
of such Systems Franchise, shall have been renewed or extended for a period
expiring no earlier than three (3) years after the Closing Date.
8.1.8 Common Agreement and Related Closings.
(a) The conditions set forth in Section 4.1 of the Common
Agreement shall have been satisfied or waived.
(b) The transactions contemplated by the IP Agreements and the
Redemption Agreement (each as defined in the Common Agreement) shall have been,
or will be, consummated as set forth in Section 4.4 of the Common Agreement,
except to the extent such Agreements are not consummated as a result of a breach
by Charter or any of its Affiliates of its
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or their obligation to consummate such transactions.
8.2 Conditions to RMG's Obligations. The obligations of RMG to consummate
the transactions contemplated by this Agreement will be subject to the
satisfaction, at or before the Closing, of the following conditions, one or more
of which may be waived by RMG:
8.2.1 Accuracy of Representations and Warranties. The
representations and warranties of Charter in this Agreement and in the
Transaction Documents, without giving effect to any materiality qualification
contained therein, are true, complete and accurate on and as of the date hereof
and at and as of the Closing with the same effect as if made at and as of the
Closing, except to the extent that all misstatements, omissions and
inaccuracies, in the aggregate, do not have a material adverse effect on the
ability of Charter to perform its obligations under this Agreement.
8.2.2 Performance of Agreements. Charter shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants in this Agreement and in any Transaction Document to
be performed and complied with by it at or before the Closing.
8.2.3 Deliveries. Charter shall have delivered the items and
documents required to be delivered by it pursuant to this Agreement, including
those required to be delivered to RMG under Section 9.3.
8.2.4 Legal Proceedings. No Legal Requirement of any Governmental
Authority (including any temporary Legal Requirement) shall be in effect which
would prevent or make illegal the consummation of any of the transactions
contemplated by this Agreement or any Transaction Document.
8.2.5 Common Agreement and Related Closings.
(a) The conditions set forth in Section 4.2 of the Common
Agreement shall have been satisfied or waived.
(b) The transactions contemplated by the IP Agreements and the
Redemption Agreement (each as defined in the Common Agreement) shall have been,
or will be, consummated as set forth in Section 4.4 of the Common Agreement,
except to the extent that such Agreements are not consummated as a result of a
breach by RMG, IPWT or their Affiliates of its or their obligation to consummate
such transactions.
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9. THE CLOSING.
9.1 The Closing; Time and Place. Subject to the terms and conditions of
this Agreement, the Closing shall be held in San Francisco, California, or as
otherwise agreed, at a place mutually agreed upon by the Parties at 10:00 a.m.,
local time, on the last calendar day of the calendar month in which the
conditions set forth in Article 8 (other than Sections 8.1.3 and 8.2.3) shall
have been satisfied or waived (provided that each Party shall have at least ten
(10) days' prior notice of the scheduled Closing Date in order to prepare for
the Closing) or at such other place, date and time as may be mutually agreed
upon by the Parties (the "Closing Date"). The transactions to be consummated at
Closing shall be deemed to have been consummated as of the Closing Time. If the
Closing Date is not a Business Day, then the Closing Date shall be the
immediately preceding Business Day.
9.2 RMG's Delivery Obligations. At the Closing, RMG will deliver or cause
to be delivered to Charter the following:
9.2.1 Bill of Sale and Assignment and Assumption Agreement. The Bill
of Sale and Assignment and Assumption Agreement with respect to the transfer of
the Assets to Tennessee LLC, and a Bill of Sale with respect to the transfer of
the LLC Interest to Charter in the form of Exhibit 9.2.1.
9.2.2 Deeds. Special warranty deeds in recordable form conveying to
Tennessee LLC each parcel of Owned Property, and assignments of leases and
easements in recordable form, with respect to Leased Property and Other Real
Property Interests as to which prior assignments into RMG were recorded in the
applicable real estate records.
9.2.3 Lien Releases. Evidence reasonably satisfactory to Charter
that all Liens (other than Permitted Liens) affecting or encumbering the Assets
have been terminated, released or waived, as appropriate, or original, executed
instruments in form reasonably satisfactory to Charter effecting such
terminations, releases or waivers.
9.2.4 Vehicle Titles. Title certificates to all vehicles included
among the Assets, endorsed for transfer of title to Tennessee LLC, and separate
bills of sale therefor or other transfer documentation, if required by the laws
of the states in which such vehicles are titled.
9.2.5 Evidence of Authorization Actions. Certified resolutions or
other evidence reasonably satisfactory to Charter that RMG and IPWT have taken
all action necessary to authorize the execution of this Agreement and the
Transaction Documents and the consummation of the transactions contemplated
hereby.
9.2.6 FIRPTA Certificate. FIRPTA Non-Foreign Seller Certificate
certifying that RMG is not a foreign person within the meaning of Section 1445
of the Code reasonably satisfactory in form and substance to Charter.
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9.2.7 Officer's Certificate. Charter will have received a
certificate executed by an executive officer of RMG dated the date of the
Closing, reasonably satisfactory in form and substance to Charter certifying
that the conditions specified in Sections 8.1.1. and 8.1.2 have been satisfied.
9.2.8 Opinions of Counsel. Opinions of Pillsbury Madison & Sutro LLP
and Dow, Lohnes & Albertson, PLLC, substantially in the forms attached as
Exhibits C.1 and C.3 to the Common Agreement.
9.2.9 Other. Such other documents and instruments as may be
necessary to effect the intent of this Agreement and to consummate the
transactions contemplated hereby.
9.3 Charter's Delivery Obligations. At the Closing, Charter will deliver
or cause to be delivered to IPWT the following:
9.3.1 Cash Consideration. The Adjusted Value will be paid by Charter
to RMG in accordance with the Common Agreement.
9.3.2 Evidence of Authorization Actions. Certified resolutions of
Charter or other evidence reasonably satisfactory to RMG and IPWT that Charter
has taken all action necessary to authorize the execution of this Agreement and
the Transaction Documents and the consummation of the transactions contemplated
hereby.
9.3.3 Officer's Certificate. RMG and IPWT will have received a
certificate executed by an executive officer of Charter dated the date of the
Closing, reasonably satisfactory in form and substance to RMG and IPWT
certifying that the conditions specified in Sections 8.2.1 and 8.2.2 have been
satisfied.
9.3.4 Opinion of Counsel. Opinion of Irell & Manella LLP,
substantially in the form of Exhibit C.2 to the Common Agreement.
9.3.5 Other. Such other documents and instruments as may be
necessary to effect the intent of this Agreement and to consummate the
transactions contemplated hereby.
10. TERMINATION AND DEFAULT.
10.1 Termination Events. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
10.1.1 At any time, by the mutual agreement of Charter and RMG;
10.1.2 By either Charter or RMG at any time, if the other is in
material breach
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or default of any of the other's covenants, agreements or other obligations
herein or in any Transaction Document and the defaulting Party has failed to
cure such breach within thirty (30) days of its receipt of notice of such breach
from the other Party;
10.1.3 By either Charter or RMG upon written notice to the other, if
any of the conditions to its obligations set forth in Sections 8.1 and 8.2,
respectively, are not satisfied on or before the later of January 15, 2000, or
nine (9) months after the date of this Agreement, for any reason other than an
intentional and material breach or default by such Party of its respective
covenants, agreements or other obligations under this Agreement, or any of its
representations herein not being true and accurate in all material respects when
made or when otherwise required by this Agreement to be true and accurate in all
material respects;
10.1.4 By either Charter or RMG if an injunction, restraining order
or decree of any nature of any Governmental Authority of competent jurisdiction
is issued that prohibits the consummation of any of the transactions
contemplated hereby and such injunction, restraining order or decree is final
and nonappealable; provided, however, that the Party seeking to terminate this
Agreement pursuant to this clause has used commercially reasonable efforts to
have such injunction, order or decree vacated or denied; or
10.1.5 As otherwise provided in the Common Agreement.
10.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 10.1, all obligations of the Parties under this Agreement will
terminate, except for the obligations set forth in Sections 7.13, 7.19 and
12.13. Termination of this Agreement pursuant to Sections 10.1.2, 10.1.3, 10.1.4
or 10.1.5 will not limit or impair any remedies that any of RMG, IPWT, Tennessee
LLC or Charter may have pursuant to the terms of this Agreement with respect to
a breach or default by another Party of such Party's covenants, agreements or
obligations under this Agreement.
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11. SURVIVAL; REMEDIES.
11.1 Survival of Representations, Warranties Covenants and Agreements. The
representations, warranties, covenants and agreements of RMG, IPWT and Charter
in this Agreement and in the Transaction Documents will survive Closing for a
period of twelve (12) months after the Closing Date. The period of survival of
the representations, warranties, covenants and agreements prescribed by this
Section 11.1 are referred to as the "Survival Period." The liabilities of each
Party under its respective representations, warranties, covenants and agreements
will expire as of the expiration of the Survival Period; provided, however, that
such expiration will not include, extend or apply to (a) any representation,
warranty, covenant or agreement the breach of which has been asserted by a Party
in a written notice to the other Party before such expiration or about which a
Party has given the other Party written notice before such expiration indicating
that facts or conditions exist that, with the passage of time or otherwise, can
reasonably be expected to result in a breach (and describing such potential
breach in reasonable detail), (b) the Party's obligations under Sections 7.13
and 7.23, or (c) the Party's obligations under Sections 7.16 and 7.17.1, but
only to the extent reasonably practicable.
11.2 Exclusive Remedy. The Parties hereby agree that the rights set forth
in the Common Agreement shall be each Party's sole and exclusive remedies
against the other Parties for any claims arising after the Closing Time and
relating to any breaches of the representations, warranties or covenants
contained in this Agreement other than based on fraud.
12. MISCELLANEOUS PROVISIONS.
12.1 Parties Obligated and Benefitted. Subject to the limitations set
forth below, this Agreement will be binding upon each of the Parties and their
respective assigns and successors in interest and will inure solely to the
benefit of the Parties and their respective assigns and successors in interest,
and no other Person will be entitled to any of the benefits conferred by this
Agreement. Subject to the foregoing sentence, without the prior written consent
of the other Parties, no Party will assign any of its rights under this
Agreement or delegate any of its duties under this Agreement, provided that the
appropriate Party may assign any or all of its rights under this Agreement to an
Affiliate, provided that such assignment will not result in any adverse tax
consequences to the other Parties, will not give rise to any material
requirements for additional Required Consents, and will not, in the reasonable
judgment of the other Parties, delay the Closing.
12.2 Notices. Any notice, request, demand, waiver or other communication
required or permitted to be given under this Agreement to any Party will be
given as set forth in the Common Agreement.
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12.3 Right to Specific Performance. Each Party acknowledges that the
unique nature of the Assets and LLC Interest to be contributed or purchased
hereunder pursuant to this Agreement renders money damages an inadequate remedy,
and the Parties agree that any Party shall be entitled to pursue specific
performance as a remedy, without the requirement of posting a bond or other
security therefor.
12.4 Waiver. This Agreement or any of its provisions may not be waived
except in writing. The failure of any Party to enforce any right arising under
this Agreement on one or more occasions will not operate as a waiver of that or
any other right on that or any other occasion.
12.5 Captions. The section and other captions of this Agreement are for
convenience only and do not constitute a part of this Agreement.
12.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (other than its rules of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby).
12.7 Time. Time is of the essence under this Agreement. If the last day
permitted for the giving of any notice or the performance of any act required or
permitted under this Agreement falls on a day which is not a Business Day, the
time for the giving of such notice or the performance of such act will be
extended to the next succeeding Business Day.
12.8 Late Payments. If any Party fails to pay the other Parties any
amounts when due under this Agreement, the amounts due will bear interest from
the due date to the date of payment at the rate per annum publicly announced
from time to time by the Bank of New York as its prime rate (the "Prime Rate")
plus two (2) percentage points, adjusted as and when changes in the Prime Rate
are made.
12.9 Counterparts. This Agreement may be executed in counterparts, each of
which will be deemed an original.
12.10 Entire Agreement. This Agreement (including the Transaction
Documents and the Schedules and Exhibits referred to in this Agreement, which
are incorporated in and constitute a part of this Agreement) contains the entire
agreement of the Parties with respect to the subject matter hereof and
supersedes all prior oral or written agreements and understandings with respect
to such subject matter. This Agreement may not be amended or modified except by
a writing signed by all of the Parties.
12.11 Severability. Any term or provision of this Agreement which is
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefitted by such provision or any other
provisions of this Agreement.
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12.12 Construction. This Agreement has been negotiated by the Parties and
their respective legal counsel, and legal or other equitable principles that
might require the construction of this Agreement or any provision of this
Agreement against the Party drafting this Agreement will not apply in any
construction or interpretation of this Agreement.
12.13 Expenses. Except as otherwise expressly provided in this Agreement,
each Party will pay all of its expenses, including attorneys' and accountants'
fees, in connection with the negotiation of this Agreement, the performance of
its obligations and the consummation of the transactions contemplated by this
Agreement.
12.14 Risk of Loss. The risk of any loss or damage to the Assets resulting
from fire, theft or other casualty (except reasonable wear and tear) will be
borne by RMG at all times prior to the Closing Time. In the event of any such
loss or damage after December 31, 1998, RMG will immediately notify Charter in
writing of that fact. All insurance proceeds paid or payable as a result of the
occurrence of the event resulting in such loss or damage will be delivered by
IPWT to Charter, or the rights thereto will be assigned if not yet paid over by
the insurer to IPWT. The obligations under this Section 12.14 to pay or assign
insurance proceeds will not apply to the extent that any insurance proceeds are
applied to replace or restore such loss or damage prior to Closing.
If, on or prior to the Closing Date, all or any part of or interest in the
Assets is taken or condemned as a result of a Governmental Authority's exercise
of its powers of eminent domain, or if a Governmental Authority having such
power informs RMG that it intends to condemn all or any part of the Assets (such
event being called, in either case, a "Taking"), then (i) Charter may elect, in
the name of RMG, to negotiate for, claim, contest and receive all damages with
respect to the Taking, (ii) RMG will be relieved of its obligation to convey to
Tennessee LLC those of the Assets that were the subject of the Taking, (iii) at
Closing, RMG will assign to Tennessee LLC all of its rights to damages payable
as a result of the Taking, and will pay to Tennessee LLC all damages previously
paid to it in connection with the Taking, and (iv) following the Closing, IPWT
will give to Charter any further assurances of such rights and assignment with
respect to the Taking as Charter reasonably may request from time to time.
12.15 Tax Consequences. No Party makes any representation or warranty,
express or implied, with respect to the Tax implications of any aspect of this
Agreement on any other Party, and each Party expressly disclaims any such
representation or warranty with respect to any Tax consequences arising under
this Agreement. Each Party has relied solely on its own Tax advisors with
respect to the Tax implications of this Agreement.
12.16 Commercially Reasonable Efforts. For purposes of this Agreement,
"commercially reasonable efforts" will not be deemed to require a Party to
undertake extraordinary or unreasonable measures, including the payment of
amounts in excess of normal and usual filing
-54-
<PAGE> 61
fees and processing fees, if any or other payments with respect to any Contract
that are significant in the context of such Contract (or significant on the
aggregate basis as to all Contracts).
[The remainder of this page intentionally left blank]
-55-
<PAGE> 62
The parties have executed this Agreement as of the day and year first above
written.
CHARTER RMG, LLC
/s/ Curtis S. Shaw
By: _____________________________________
Name: Curtis S. Shaw
Title: Vice President
ROBIN MEDIA GROUP, INC.
/s/ Robert J. Lewis
By: _____________________________________
Name: Robert J. Lewis
Title: President and
Chief Executive Officer
INTERMEDIA PARTNERS OF WEST TENNESSEE,
L.P.
By InterMedia Capital Management, LLC,
its general partner
By InterMedia Management, Inc.,
its managing member
/s/ Robert J. Lewis
By _________________________________
Robert J. Lewis
President and
Chief Executive Officer
-56-
<PAGE> 63
[Signature Page to RMG Purchase Agreement dated
as of April 20, 1999 among RMG, IPWT and Charter]
-57-
<PAGE> 1
Exhibit 2.6(d)
ASSET EXCHANGE AGREEMENT
dated as of April 20, 1999
among
INTERMEDIA PARTNERS SOUTHEAST,
on the one hand
and
CHARTER COMMUNICATIONS, LLC, CHARTER COMMUNICATIONS
PROPERTIES, LLC, and
MARCUS CABLE ASSOCIATES, L.L.C.,
on the other hand
IPSE/Charter Asset Exchange Agreement
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS..........................................................2
1.1 1992 Cable Act..............................................2
1.2 Affiliate...................................................2
1.3 Agreement...................................................2
1.4 Antitrust Division..........................................2
1.5 Assets......................................................2
1.6 Basic Services..............................................2
1.7 Business Day................................................2
1.8 Cable Act...................................................3
1.9 Cable Business..............................................3
1.10 Charter Assets..............................................3
1.11 Charter Books and Records...................................3
1.12 Charter Leased Property.....................................3
1.13 Charter Other Intangibles...................................3
1.14 Charter Other Real Property Interests.......................4
1.15 Charter Owned Property......................................4
1.16 Charter Required Consents...................................4
1.17 Charter Systems Contracts...................................4
1.18 Charter Systems Franchises..................................4
1.19 Charter Systems Licenses....................................5
1.20 Charter Tangible Personal Property..........................5
1.21 Charter's Cable Business....................................5
1.22 Closing.....................................................5
1.23 Closing Time................................................5
1.24 Communications Act..........................................5
1.25 Contract....................................................5
1.26 Copyright Act...............................................6
1.27 Environmental Law...........................................6
1.28 ERISA.......................................................6
1.29 ERISA Affiliate.............................................6
1.30 Expanded Basic Services.....................................6
1.31 FCC.........................................................6
1.32 Governmental Authority......................................6
1.33 Hazardous Substances........................................6
1.34 HSR Act.....................................................7
1.35 Intellectual Property.......................................7
1.36 IPSE Assets.................................................7
1.37 IPSE Books and Records......................................7
1.38 IPSE Leased Property........................................8
IPSE/Charter Asset Exchange Agreement
(i)
<PAGE> 3
1.39 IPSE Other Intangibles......................................8
1.40 IPSE Other Real Property Interests..........................8
1.41 IPSE Owned Property.........................................8
1.42 IPSE Required Consents......................................8
1.43 IPSE Systems Contracts......................................8
1.44 IPSE Systems Franchises.....................................8
1.45 IPSE Systems Licenses.......................................9
1.46 IPSE Tangible Personal Property.............................9
1.47 IPSE's Cable Business.......................................9
1.48 Judgment....................................................9
1.49 Knowledge...................................................9
1.50 Leased Property.............................................9
1.51 Legal Requirement...........................................9
1.52 Lien.......................................................10
1.53 Litigation.................................................10
1.54 Losses.....................................................10
1.55 MVPD.......................................................10
1.56 Other Real Property Interests..............................10
1.57 Owned Property.............................................10
1.58 Party......................................................10
1.59 Pay TV.....................................................10
1.60 Permitted Liens............................................11
1.61 Person.....................................................11
1.62 Required Consents..........................................11
1.63 Six-Month Date.............................................11
1.64 System.....................................................11
1.65 Systems Contracts..........................................11
1.66 Systems Franchises.........................................11
1.67 Systems Licenses...........................................11
1.68 Tangible Personal Property.................................11
1.69 Taxes......................................................12
1.70 Third Party................................................12
1.71 Transaction Documents......................................12
1.72 Other Definitions..........................................12
1.73 Usage......................................................14
2. EXCHANGE............................................................14
2.1 Exchange of Assets.........................................14
2.2 Method of Exchange.........................................14
3. CONSIDERATION.......................................................15
3.1 Calculation of Values; Cash Consideration..................15
IPSE/Charter Asset Exchange Agreement
(ii)
<PAGE> 4
4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.............................15
4.1 IPSE's Assumed Obligations and Liabilities.................15
4.2 IPSE Excluded Assets.......................................16
4.3 Charter's Assumed Obligations and Liabilities..............17
4.4 Charter Excluded Assets....................................17
5. CHARTER'S REPRESENTATIONS AND WARRANTIES............................18
5.1 Organization and Qualification of Charter..................18
5.2 Authority and Validity.....................................19
5.3 No Conflict; Required Consents.............................19
5.4 Assets.....................................................20
5.5 Charter Systems Franchises, Charter Systems Licenses,
Charter Systems Contracts and Charter Other Real
Property Interests.........................................20
5.6 Real Property..............................................22
5.7 Environmental..............................................22
5.8 Compliance with Legal Requirements.........................24
5.9 Intellectual Property......................................26
5.10 Financial Statements.......................................26
5.11 Absence of Certain Changes or Events.......................26
5.12 Litigation.................................................27
5.13 Tax Returns; Other Reports.................................27
5.14 Employment Matters.........................................27
5.15 Charter Systems Information................................29
5.16 Taxpayer Identification Number.............................30
5.17 Finder and Brokers.........................................30
5.18 Related Party Transactions.................................30
6. IPSE'S REPRESENTATIONS AND WARRANTIES...............................30
6.1 Organization and Qualification of IPSE.....................30
6.2 Authority and Validity.....................................31
6.3 No Conflict; Required Consents.............................31
6.4 Assets.....................................................32
6.5 IPSE Systems Franchises, IPSE Systems Licenses, IPSE
Systems Contracts and IPSE Other Real Property Interests...32
6.6 Real Property..............................................34
6.7 Environmental..............................................34
6.8 Compliance with Legal Requirements.........................35
6.9 Intellectual Property......................................37
6.10 Financial Statements.......................................38
6.11 Absence of Certain Changes or Events.......................38
6.12 Litigation.................................................38
IPSE/Charter Asset Exchange Agreement
(iii)
<PAGE> 5
6.13 Tax Returns; Other Reports.................................39
6.14 Employment Matters.........................................39
6.15 IPSE Systems Information...................................40
6.16 Taxpayer Identification Number.............................41
6.17 Finder and Brokers.........................................41
6.18 Related Party Transactions.................................41
7. ADDITIONAL COVENANTS................................................41
7.1 Access to Premises and Records.............................41
7.2 Continuity and Maintenance of Operations, Certain
Deliveries and Notice......................................42
7.3 Employees..................................................44
7.4 Leased Vehicles; Other Capital Leases......................48
7.5 Required Consents; Franchise Renewal.......................48
7.6 Title Commitments and Surveys..............................52
7.7 HSR Notification...........................................53
7.8 Sales and Transfer Taxes...................................53
7.9 Programming................................................53
7.10 Updated Schedules..........................................54
7.11 Use of Name and Logo.......................................54
7.12 Transitional Billing Services..............................55
7.13 Confidentiality and Publicity..............................55
7.14 Bulk Transfer..............................................56
7.15 Lien Searches..............................................56
7.16 Further Assurances.........................................56
7.17 Post-Closing Cooperation as to Rates.......................57
7.18 Distant Broadcast Signals..................................58
7.19 Environmental Assessment...................................59
7.20 Year 2000 Matters..........................................60
7.21 Satisfaction of Conditions.................................63
7.22 Offers.....................................................63
7.23 Retention of Books and Records.............................63
7.24 Cooperation................................................63
8. CONDITIONS PRECEDENT................................................63
8.1 Conditions to Charter's Obligations........................63
8.2 Conditions to IPSE's Obligations...........................65
9. THE CLOSING.........................................................66
9.1 The Closing; Time and Place................................66
9.2 IPSE's Delivery Obligations................................67
9.3 Charter's Delivery Obligations.............................68
IPSE/Charter Asset Exchange Agreement
(iv)
<PAGE> 6
10. TERMINATION AND DEFAULT.............................................69
10.1 Termination Events.........................................69
10.2 Effect of Termination......................................70
11. SURVIVAL; REMEDIES..................................................70
11.1 Survival of Representations, Warranties Covenants and
Agreements.................................................70
11.2 Exclusive Remedy...........................................70
11.3 Nonrecourse................................................70
12. MISCELLANEOUS PROVISIONS............................................71
12.1 Parties Obligated and Benefitted...........................71
12.2 Notices....................................................71
12.3 Right to Specific Performance..............................71
12.4 Waiver.....................................................72
12.5 Captions...................................................72
12.6 Governing Law..............................................72
12.7 Time.......................................................72
12.8 Late Payments..............................................72
12.9 Counterparts...............................................72
12.10 Entire Agreement...........................................72
12.11 Severability...............................................72
12.12 Construction...............................................72
12.13 Expenses...................................................73
12.14 Risk of Loss...............................................73
12.15 Tax Consequences...........................................73
12.16 Commercially Reasonable Efforts............................73
IPSE/Charter Asset Exchange Agreement
(v)
<PAGE> 7
IPSE/Charter Asset Exchange Agreement
(vi)
<PAGE> 8
IPSE/Charter Asset Exchange Agreement
(vii)
<PAGE> 9
IPSE/Charter Asset Exchange Agreement
(viii)
<PAGE> 10
Exhibits:
Exhibit 9.2.2 - Bill of Sale and Assignment and Assumption Agreement
Schedules:
Schedule 1.12 - Charter Leased Property
Schedule 1.14 - Charter Other Real Property Interests
Schedule 1.15 - Charter Owned Property
Schedule 1.17 - Charter Systems Contracts
Schedule 1.18 - Charter Systems Franchises
Schedule 1.19 - Charter Systems Licenses
Schedule 1.20 - Charter Tangible Personal Property
Schedule 1.38 - IPSE Leased Property
Schedule 1.40 - IPSE Other Real Property Interests
Schedule 1.41 - IPSE Owned Property
Schedule 1.43 - IPSE Systems Contracts
Schedule 1.44 - IPSE Systems Franchises
Schedule 1.45 - IPSE Systems Licenses
Schedule 1.46 - IPSE Tangible Personal Property
Schedule 3.1.1-A - IPSE System Value
Schedule 3.1.1-B - Charter System Value
Schedule 4.2(a) - IPSE Excluded Assets
Schedule 4.2(b) - Exceptions to IPSE Excluded Assets
Schedule 4.4(a) - Charter Excluded Assets
Schedule 4.4(b) - Exceptions to Charter Excluded Assets
Schedule 5.3 - Charter Required Consents
Schedule 5.4.1 - Charter Liens and Permitted Liens
Schedule 5.4.3 - Charter Other Operators
Schedule 5.5.2 - Charter Franchise Matters
Schedule 5.5.3 - Charter Contract Matters
Schedule 5.6 - Charter Real Property Matters
Schedule 5.7 - Charter Environmental Matters
Schedule 5.8 - Charter Compliance with Legal Requirements
Schedule 5.10 - Charter Statements of Income
Schedule 5.11 - Charter Changes and Events
Schedule 5.12 - Charter Litigation
Schedule 5.13 - Charter Tax Matters
Schedule 5.14 - Charter Employee Matters
Schedule 5.15.1 - Charter Systems Information
Schedule 5.15.2 - Charter Systems
Schedule 5.18 - Charter Related Party Transactions
IPSE/Charter Asset Exchange Agreement
(ix)
<PAGE> 11
Schedule 6.3 - IPSE Required Consents
Schedule 6.4.1 - IPSE Liens and Permitted Liens
Schedule 6.4.3 - IPSE Other Operators
Schedule 6.5.2 - IPSE Franchise Matters
Schedule 6.5.3 - IPSE Contract Matters
Schedule 6.6 - IPSE Real Property Matters
Schedule 6.7 - IPSE Environmental Matters
Schedule 6.8 - IPSE Compliance with Legal Requirements
Schedule 6.10 - IPSE Statements of Income
Schedule 6.11 - IPSE Changes and Events
Schedule 6.12 - IPSE Litigation
Schedule 6.13 - IPSE Tax Matters
Schedule 6.14 - IPSE Employee Matters
Schedule 6.15.1 - IPSE Systems Information
Schedule 6.15.2 - IPSE Systems
Schedule 6.18 - IPSE Related Party Transactions
Schedule 7.2 - Exceptions to Ordinary Course
Schedule 7.2-A - IPSE 1999 Budgets
Schedule 7.2-B - Charter 1999 Budgets
Schedule 7.2.4 - Form of Monthly Report
Schedule 7.20.1(b)-A - IPSE's Year 2000 Assessment, High-Level Inventory
and Remediation Decisions
Schedule 7.20.1(b)-B - Charter's Year 2000 Assessment, High-Level Inventory
and Remediation Decisions
Schedule 7.20.1(c)-A - IPSE's Year 2000 Plan
Schedule 7.20.1(c)-B - Charter's Year 2000 Plan
IPSE/Charter Asset Exchange Agreement
(x)
<PAGE> 12
ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT is made as of April __, 1999, by and among
InterMedia Partners Southeast, a California general partnership ("IPSE"), on the
one hand, and Charter Communications, LLC, a Delaware limited liability company,
Charter Communications Properties, LLC, a Delaware limited liability company,
and Marcus Cable Associates, L.L.C., a Delaware limited liability company (each,
a "Charter Party" and collectively, "Charter"), on the other hand.
RECITALS
A. The Charter Parties own and operate cable television systems that are
franchised or hold other operating authority and operate in and around the
municipalities listed on Schedule 5.15.2 (collectively, the "Charter Systems"
and reference to any Charter Party's Systems will be deemed to refer to the
Charter Systems owned and operated by such Charter Party).
B. IPSE owns and operates cable television systems which are
franchised or hold other operating authority and operate in and around the
municipalities listed on Schedule 6.15.2 (collectively, the "IPSE Systems").
C. This Agreement sets forth the terms and conditions upon which (i)
the Charter Parties will convey, or cause to be conveyed, to IPSE substantially
all of the assets comprising or used or useful in connection with Charter's
Cable Businesses and (ii) IPSE will convey, or cause to be conveyed, to the
Charter Parties substantially all of the assets comprising or used or useful in
connection with IPSE's Cable Business, all in such a manner as to effect, to the
extent reasonably possible, a like-kind exchange of such assets under Section
1031 of the United States Internal Revenue Code, as amended (the "Code").
D. IPSE, Charter and certain of their respective Affiliates have
entered into that certain Common Agreement (the "Common Agreement") pursuant to
which they have agreed to certain issues common to each of the transfers made
pursuant to this Agreement and to certain other related transactions (each as
more fully described in the Common Agreement). The common issues addressed
include revenue and working capital adjustments, closing conditions, and
indemnification for breaches of representations, warranties, covenants and
agreements.
IPSE/Charter Asset Exchange Agreement
1
<PAGE> 13
AGREEMENTS
In consideration of the covenants and agreements set forth herein and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereby agree as follows:
1. DEFINITIONS. In addition to the terms defined elsewhere in this Agreement,
the following capitalized terms or terms otherwise defined in this Section 1
shall have the meanings set forth below:
1.1 1992 Cable Act. The Cable Television Consumer Protection and
Competition Act of 1992, as amended, and the FCC rules and regulations
promulgated thereunder.
1.2 Affiliate. With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. As used in this
Agreement, "control" means the ownership, directly or indirectly, of voting
securities representing the right generally to elect a majority of the directors
(or similar officials) of a Person or the possession, by contract or otherwise,
of the authority to direct the management and policies of a Person.
Notwithstanding the foregoing, prior to the Closing Date, (a) neither AT&T
Corporation, Tele-Communications, Inc., nor any of their direct or indirect
subsidiaries (collectively, the "AT&T Affiliates"), shall be considered
Affiliates of IPSE for any purpose herein or hereunder; (b) neither Paul Allen,
Vulcan Cable, Inc., Vulcan Cable II, Inc., Marcus Cable Properties, L.L.C. nor
any other Person directly or indirectly controlled by Paul Allen that is not
engaged in the cable television business (collectively, the "Allen Affiliates")
shall be considered Affiliates of any Charter Party for any purpose herein or
hereunder; and (c) InterMedia Partners, a California Limited Partnership,
Brenmor Cable Partners, L.P. and TCID IP-V, Inc.,on the one hand, and IPSE,
InterMedia Partners of West Tennessee, L.P., InterMedia Partners IV, L.P., and
Robin Media Group, Inc., on the other hand, shall not be deemed Affiliates of
each other.
1.3 Agreement. This Asset Exchange Agreement.
1.4 Antitrust Division. The Antitrust Division of the United States
Department of Justice.
1.5 Assets. The Charter Assets or the IPSE Assets, as the context
requires.
1.6 Basic Services. The lowest tier of service offered to subscribers of a
System.
1.7 Business Day. Any day other than a Saturday, Sunday or a day on which
the banking institutions in New York, New York, Denver, Colorado, San Francisco,
California or St. Louis, Missouri are required or authorized to be closed.
IPSE/Charter Asset Exchange Agreement
2
<PAGE> 14
1.8 Cable Act. The Cable Communications Policy Act of 1984, as amended,
and the FCC rules and regulations promulgated thereunder.
1.9 Cable Business. Charter's Cable Businesses, or any of them, or IPSE's
Cable Business, as the context requires.
1.10 Charter Assets. All of the assets, privileges, contracts, licenses,
permits, franchises, authorizations, rights, interests, claims and other
properties, real and personal, tangible and intangible, of every type and
description (a) which are owned, leased, held for, used or useful in, or
otherwise related to, Charter's Cable Businesses, (b) in which any Charter Party
or its Affiliate has any right, title or interest or in which any Charter Party
or its Affiliate acquires any right, title or interest on or before the Closing
Time, and (c) which are not Charter Excluded Assets. The Charter Assets include
the Charter Tangible Personal Property, Charter Owned Property, Charter Leased
Property, Charter Other Real Property Interests, Charter Systems Franchises,
Charter Systems Licenses, Charter Systems Contracts, Charter Books and Records
and Charter Other Intangibles. Reference to any Charter Party's Assets will be
deemed to refer to the Charter Assets of such Charter Party.
1.11 Charter Books and Records. All engineering records, files, data,
drawings, blueprints, schematics, reports, lists, plans and procedures and all
other files of correspondence, lists, records and reports concerning Charter's
Cable Businesses, including subscribers and prospective subscribers of the
Charter Systems, signal and program carriage and dealings with Governmental
Authorities with respect to the Charter Systems, including all reports filed
with respect to the Charter Systems by or on behalf of any Charter Party or its
Affiliate with the FCC and statements of account filed with respect to the
Charter Systems by or on behalf of any Charter Party or its Affiliate with the
U.S. Copyright Office, but excluding all documents, reports and records relating
to any employee of the Charter Systems who has not given consent to disclosure
of such documents, reports and records. Reference to any Charter Party's Books
and Records will be deemed to refer to the Charter Books and Records included
among such Charter Party's Assets.
1.12 Charter Leased Property. The leaseholds of real property included
among the Charter Assets and described as Charter Leased Property on Schedule
1.12. Reference to any Charter Party's Leased Property will be deemed to refer
to the Charter Leased Property included among such Charter Party's Assets.
1.13 Charter Other Intangibles. All intangible assets, other than the
Charter Systems Franchises, Charter Systems Licenses and Charter Systems
Contracts, including subscriber lists, claims (excluding any claims relating to
Charter Excluded Assets), and Intellectual Property, if any, included among the
Charter Assets. Reference to any Charter Party's Other Intangibles will be
deemed to refer to the Charter Other Intangibles included among such Charter
Party's Assets.
IPSE/Charter Asset Exchange Agreement
3
<PAGE> 15
1.14 Charter Other Real Property Interests. The easements and rights of
access (other than those relating to multiple dwelling units) and other
interests in real property held by any Charter Party or its Affiliate in
connection with Charter's Cable Business, including those interests described as
Charter Other Real Property Interests on Schedule 1.14, but not including
Charter Leased Property or Charter Owned Property. Reference to any Charter
Party's Other Real Property Interests will be deemed to refer to the Charter
Other Real Property Interests included among such Charter Party's Assets.
1.15 Charter Owned Property. The fee interests in the real property
included among the Charter Assets and described as Charter Owned Property on
Schedule 1.15 and all improvements and towers thereon and appurtenances thereto.
Reference to any Charter Party's Owned Property will be deemed to refer to the
Charter Owned Property included among such Charter Party's Assets.
1.16 Charter Required Consents. Any and all consents, authorizations and
approvals under or in connection with the Charter Assets (including the Charter
Systems Franchises, Charter Systems Licenses, and Charter Systems Contracts) or
any Contract, Lien or Legal Requirement by which any Charter Party, any of its
Affiliates or their respective Assets are bound, required (a) for each Charter
Party to transfer its Assets to IPSE pursuant to this Agreement, (b) for IPSE to
operate the Charter Systems and to own, lease, use and operate the Charter
Assets and the Charter Systems at the places and in the manner in which the
Charter Assets are used and the Charter Systems are operated as of the date of
this Agreement and as of the Closing, or (c) for IPSE to assume and perform the
Charter Systems Franchises, the Charter Systems Licenses, the Charter Systems
Contracts and the IPSE Assumed Obligations and Liabilities.
1.17 Charter Systems Contracts. All Contracts (other than Charter Systems
Franchises and Charter Systems Licenses) that are included among the Charter
Assets, including the lease agreements for Charter Tangible Personal Property,
pole attachment agreements, underground conduit agreements, crossing agreements,
retransmission consent agreements, multiple dwelling, bulk billing or commercial
service agreements and other Contracts described on Schedule 1.17 and the
Contracts documenting Charter Leased Property and Charter Other Real Property
Interests described on Schedules 1.12 and 1.14. Reference to any Charter Party's
Systems Contracts will be deemed to refer to the Charter Systems Contracts
included among such Charter Party's Assets.
1.18 Charter Systems Franchises. The franchises, permits and similar
authorizations included among the Charter Assets (other than the Charter Systems
Licenses) described on Schedule 1.18, and all rights and benefits of the Charter
Parties and their Affiliates pertaining thereto, including the rights and
benefits arising under Section 626 of the Communications Act (47 U.S.C. 546) to
the extent applicable to a Charter Systems Franchise. Reference to any
IPSE/Charter Asset Exchange Agreement
4
<PAGE> 16
Charter Party's Systems Franchises will be deemed to refer to the Charter
Systems Franchises included among such Charter Party's Assets.
1.19 Charter Systems Licenses. The intangible cable television channel
distribution rights, cable television relay service (CARS), business radio and
other licenses, earth station registrations, authorizations, consents or permits
issued by the FCC or any other Governmental Authority included among the Charter
Assets and described on Schedule 1.19 (other than the Charter Systems Franchises
and Charter Systems Contracts) and all rights and benefits of the Charter
Parties and their Affiliates pertaining thereto. Reference to any Charter
Party's Systems Licenses will be deemed to refer to the Charter Systems Licenses
included among such Charter Party's Assets.
1.20 Charter Tangible Personal Property. All tangible personal property
included among the Charter Assets, including towers (other than towers on
Charter Owned Property which are fixtures thereon and a part thereof), tower
equipment, aboveground and underground cable, distribution systems, headend
amplifiers, line amplifiers, microwave equipment, converters, testing equipment,
motor vehicles, office equipment, computers and billing equipment, furniture,
fixtures, supplies, inventory and other physical assets, the principal items of
which are identified and described on Schedule 1.20. Reference to any Charter
Party's Tangible Personal Property will be deemed to refer to the Charter
Tangible Personal Property included among such Charter Party's Assets.
1.21 Charter's Cable Businesses. The cable television businesses and other
revenue-generating businesses and operations relating to the Charter Systems
conducted by the Charter Parties and their Affiliates through the Charter
Systems. Reference to any Charter Party's Cable Business will be deemed to refer
to the Charter's Cable Business operated by such Charter Party.
1.22 Closing. The closing of the exchange transactions contemplated by
this Agreement.
1.23 Closing Time. 11:59 p.m., Eastern time, on the Closing Date.
1.24 Communications Act. The Communications Act of 1934, as amended, and
the FCC rules and regulations promulgated thereunder.
1.25 Contract. Any contract, mortgage, deed of trust, bond, indenture,
lease, license, note, franchise, certificate, option, warrant, right or other
instrument, document, obligation or agreement, whether written or oral.
IPSE/Charter Asset Exchange Agreement
5
<PAGE> 17
1.26 Copyright Act. The Copyright Act of 1976, as amended, including all
rules, regulations, orders and policies of the U.S. Copyright Office thereunder
applicable to cable television systems generally.
1.27 Environmental Law. Any Legal Requirement relating to pollution or the
protection of public health, safety, welfare or the environment, including
CERCLA, OSHA and RCRA and including Legal Requirements relating to emissions,
discharges, releases or threatened releases of Hazardous Substances into the
environment (including ambient air, surface water, ground water or land) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances.
1.28 ERISA. The Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder and published
interpretations with respect thereto.
1.29 ERISA Affiliate. As to any Person, any trade or business, whether or
not incorporated, which together with such Person would be deemed a single
employer within the meaning of Section 4001 of ERISA.
1.30 Expanded Basic Services. Any video programming provided over a cable
television system, regardless of service tier, other than Basic Services and Pay
TV.
1.31 FCC. The Federal Communications Commission.
1.32 Governmental Authority. The United States of America, any state,
commonwealth, territory or possession of the United States of America and any
political subdivision or quasi-governmental authority of any of the same,
including any court, tribunal, department, commission, board, bureau, agency,
body, county, municipality, province, parish or other instrumentality of any of
the foregoing.
1.33 Hazardous Substances. Any pollutant, contaminant, chemical,
industrial, toxic, hazardous or noxious substance or waste which is regulated by
a Governmental Authority, including (a) any petroleum or petroleum compounds
(refined or crude), flammable substances, explosives, radioactive materials or
any other materials or pollutants which pose a significant hazard or potential
significant hazard to the Owned Property or Other Real Property Interests or to
Persons in or about the Owned Property or Other Real Property Interests or cause
the Owned Property or Other Real Property Interests to be in violation of any
Legal Requirements; (b) any "hazardous waste" as defined by the Resource
Conservation and Recovery Act of 1976 (RCRA) (42 U.S.C. ss.ss. 6901) and the
rules and regulations promulgated thereunder; (c) any "hazardous substance" as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. 9601 et seq.) (CERCLA), as amended, and the rules and
regulations promulgated thereunder; (d) any
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substance regulated by the Toxic Substances Control Act (TSCA) (42 U.S.C. ss.
2601 et seq.) or the Insecticide, Fungicide and Rodenticide Act (IFRA) (7 U.S.C.
ss. 136 et seq.), each, as amended, and the rules and regulations promulgated
thereunder; (e) asbestos or asbestos- containing material of any kind or
character; (f) polychlorinated biphenyls; (g) any substances regulated under the
provisions of Subtitle I of RCRA relating to underground storage tanks; (h) any
materials or substances designated as "hazardous substances" pursuant to the
Clean Water Act (33 U.S.C. ss. 1251 et seq.); (i) "economic poison," as defined
in the Federal Insecticide, Fungicide and Rodenticide Act (7 U.S.C. ss. 135 et
seq.); (j) any substance the presence, use, handling, treatment, storage or
disposal of which on the Owned Property or Leased Property is regulated or
prohibited by any Environmental Law; and (k) any other substance which by any
Environmental Law requires special handling, reporting or notification of any
Governmental Authority in its collection, storage, use, treatment or disposal.
1.34 HSR Act. The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
1.35 Intellectual Property. With respect to any Cable Business, any (a)
trademarks, trade dress, trade names, service marks, logos and other similar
proprietary rights, (b) domain names, (c) copyrights and (d) patents and
patentable know-how, inventions and processes, in each case used in such Cable
Business.
1.36 IPSE Assets. All of the assets, privileges, contracts, licenses,
permits, franchises, authorizations, rights, interests, claims and other
properties, real and personal, tangible and intangible, of every type and
description (a) which are owned, leased, held for, used or useful in, or
otherwise related to, IPSE's Cable Business, (b) in which IPSE or any Affiliate
of IPSE has any right, title or interest or in which IPSE or any Affiliate of
IPSE acquires any right, title or interest on or before the Closing Time, and
(c) which are not IPSE Excluded Assets. The IPSE Assets include the IPSE
Tangible Personal Property, IPSE Owned Property, IPSE Leased Property, IPSE
Other Real Property Interests, IPSE Systems Franchises, IPSE Systems Licenses,
IPSE Systems Contracts, IPSE Books and Records and IPSE Other Intangibles.
1.37 IPSE Books and Records. All engineering records, files, data,
drawings, blueprints, schematics, reports, lists, plans and procedures and all
other files of correspondence, lists, records and reports concerning IPSE's
Cable Business, including subscribers and prospective subscribers of the IPSE
Systems, signal and program carriage and dealings with Governmental Authorities
with respect to the IPSE Systems, including all reports filed with respect to
the IPSE Systems by or on behalf of IPSE or any Affiliate of IPSE with the FCC
and statements of account filed with respect to the IPSE Systems by or on behalf
of IPSE or any Affiliate of IPSE with the U.S. Copyright Office, but excluding
all documents, reports and records relating to any employee of the IPSE Systems
who has not given consent to disclosure of such documents, reports and records.
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1.38 IPSE Leased Property. The leaseholds of real property included among
the IPSE Assets and described as IPSE Leased Property on Schedule 1.38.
1.39 IPSE Other Intangibles. All intangible assets, other than the IPSE
Systems Franchises, IPSE Systems Licenses and IPSE Systems Contracts, including
subscriber lists, claims (excluding any claims relating to IPSE Excluded
Assets), and Intellectual Property, if any, included among the IPSE Assets.
1.40 IPSE Other Real Property Interests. The easements and rights of
access (other than those relating to multiple dwelling units) and other
interests in real property held by IPSE or any Affiliate of IPSE in connection
with IPSE's Cable Business, including those interests described as IPSE Other
Real Property Interests on Schedule 1.40, but not including IPSE Leased Property
or IPSE Owned Property.
1.41 IPSE Owned Property. The fee interests in the real property included
among the IPSE Assets and described as IPSE Owned Property on Schedule 1.41 and
all improvements and towers thereon and appurtenances thereto.
1.42 IPSE Required Consents. Any and all consents, authorizations and
approvals under or in connection with the IPSE Assets (including the IPSE
Systems Franchises, IPSE Systems Licenses, and IPSE Systems Contracts) or any
Contract, Lien or Legal Requirement by which IPSE, any of its Affiliates or
their respective Assets are bound, required (a) for IPSE to transfer the IPSE
Assets to the Charter Parties pursuant to this Agreement, (b) for the Charter
Parties to operate the IPSE Systems and to own, lease, use and operate the IPSE
Assets and the IPSE Systems at the places and in the manner in which the IPSE
Assets are used and the IPSE Systems are operated as of the date of this
Agreement and as of the Closing, or (c) for the Charter Parties to assume and
perform the IPSE Systems Franchises, the IPSE Systems Licenses, the IPSE Systems
Contracts and the Charter Assumed Obligations and Liabilities.
1.43 IPSE Systems Contracts. All Contracts (other than IPSE Systems
Franchises and IPSE Systems Licenses) that are included among the IPSE Assets,
including the lease agreements for IPSE Tangible Personal Property, pole
attachment agreements, underground conduit agreements, crossing agreements,
retransmission consent agreements, multiple dwelling, bulk billing or commercial
service agreements and other Contracts described on Schedule 1.43 and the
Contracts documenting IPSE Leased Property and IPSE Other Real Property
Interests described on Schedules 1.38 and 1.40.
1.44 IPSE Systems Franchises. The franchises, permits and similar
authorizations included among the IPSE Assets (other than IPSE Systems Licenses)
described on Schedule 1.44, and all rights and benefits of IPSE and its
Affiliates pertaining thereto,
IPSE/Charter Asset Exchange Agreement
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including the rights and benefits arising under Section 626 of the
Communications Act (47 U.S.C. 546) to the extent applicable to an IPSE Systems
Franchise.
1.45 IPSE Systems Licenses. The intangible cable television channel
distribution rights, cable television relay service (CARS), business radio and
other licenses, earth station registrations, authorizations, consents or permits
issued by the FCC or any other Governmental Authority included among the IPSE
Assets and described on Schedule 1.45 (other than the IPSE Systems Franchises
and IPSE Systems Contracts) and all rights and benefits of IPSE and its
Affiliates pertaining thereto.
1.46 IPSE Tangible Personal Property. All tangible personal property
included among the IPSE Assets, including towers (other than towers on IPSE
Owned Property which are fixtures thereon and a part thereof), tower equipment,
aboveground and underground cable, distribution systems, headend amplifiers,
line amplifiers, microwave equipment, converters, testing equipment, motor
vehicles, office equipment, computers and billing equipment, furniture,
fixtures, supplies, inventory and other physical assets, the principal items of
which are identified and described on Schedule 1.46.
1.47 IPSE's Cable Business. The cable television businesses and other
revenue-generating businesses and operations relating to the IPSE Systems
conducted by IPSE or an Affiliate of IPSE through the IPSE Systems.
1.48 Judgment. Any judgment, writ, order, injunction, award or decree of
any court, judge, justice or magistrate, including any bankruptcy court or judge
or the arbitrator in any binding arbitration, and any order of or by any
Governmental Authority.
1.49 Knowledge. The actual knowledge of a particular matter with respect
to any System of (a) in the case of any Charter System, Jerald L. Kent, Kent D.
Kalkwarf, Curtis S. Shaw, David G. Barford, Greg Nydegger or Charlotte Bragg,
(b) in the case of any IPSE System, Frank S. Crawford, Robert J. Lewis, Rodney
M. Royse, Edon V. Smith or Thomas R. Stapleton, and (c) in addition to those
Persons described in (a) and (b) above, the general manager or one or more of
the managers of the System.
1.50 Leased Property. Charter Leased Property or IPSE Leased Property, as
the context requires.
1.51 Legal Requirement. Applicable common law and any statute, ordinance,
code or other law, rule, regulation, order, technical or other written standard,
requirement or procedure enacted, adopted, promulgated, applied or followed by
any Governmental Authority, including any Judgment.
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1.52 Lien. Any security interest, security agreement, financing statement
filed with any Governmental Authority, conditional sale or other title retention
agreement, any lease, consignment or bailment given for purposes of security,
any mortgage, lien (including any lien for Taxes), indenture, pledge, option,
encumbrance, adverse interest, constructive trust or other trust, claim,
attachment, exception to, defect in, or other condition adversely affecting
title or other ownership interest (including reservations, rights of entry,
possibilities of reverter, encroachments, protrusions, easements, rights-of-way,
rights of first refusal, restrictive covenants, leases and licenses) of any
kind, which constitutes an interest in or claim against property, whether
arising pursuant to any Legal Requirement, Systems License, Systems Franchise,
Systems Contract or otherwise.
1.53 Litigation. Any claim, action, suit, proceeding, arbitration,
investigation or hearing that could result in a Judgment, any other activity or
procedure that could reasonably be expected to result in a Judgment, or any
notice of any of the foregoing.
1.54 Losses. Any claims, losses, liabilities, damages, penalties, costs
and expenses, including interest that may be imposed in connection therewith,
expenses of investigation, reasonable fees and disbursements of counsel and
other experts, and, as applicable, the cost to any Person making a claim or
seeking indemnification under this Agreement with respect to funds expended by
such Person by reason of the occurrence of any event or the existence or
assertion of any Liens (other than Permitted Liens) with respect to which
indemnification is sought.
1.55 MVPD. A distributor of cable television services, multichannel multi
point distribution service, direct broadcast satellite service or television
receive-only satellite programming, who makes available for purchase, by
subscribers or customers, multiple channels of video programming, other than
Persons distributing such services only to multiple dwelling unit or other
commercial customers (including hotels, motels, resorts, hospitals, dormitories,
prisons, restaurants, bars and similar establishments).
1.56 Other Real Property Interests. The Charter Other Real Property
Interests or the IPSE Other Real Property Interests, as the context requires.
1.57 Owned Property. Charter Owned Property or IPSE Owned Property, as the
context requires.
1.58 Party. Charter or IPSE, as the context requires.
1.59 Pay TV. Premium programming services selected by and sold to
subscribers on a per channel or per program basis.
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1.60 Permitted Liens. (a) Liens for Taxes, assessments and governmental
charges, in each case not yet due and payable, (b) zoning laws or ordinances or
any similar Legal Requirements, (c) rights reserved to any Governmental
Authority to regulate the affected property, (d) Liens described on Schedule
5.4.1 (with respect to Charter) and Schedule 6.4.1 (with respect to IPSE), (e)
as to Leased Property or Tangible Personal Property that is leased, the
interests of the lessors thereof, and (f) as to Owned Property, Leased Property
and Other Real Property Interests, any easements, rights-of-way, servitudes,
conditions, covenants, restrictions and minor imperfections or irregularities in
title, in each case, which are reflected in the public records and which do not
individually or in the aggregate interfere with the right or ability of the
applicable Party to own, use, enjoy or operate the Owned Property, Leased
Property or Other Real Property Interests in the manner currently used or to
convey good, marketable and indefeasible fee simple title to the same; provided
that "Permitted Liens" will not include any Lien which could prevent or inhibit
in any way (other than as permitted under clause (f)) the conduct of the
business of the affected System, and provided further that classification of any
Lien as a "Permitted Lien" will not affect any liability which a Party may have
for any such Lien, including pursuant to any indemnity obligation under this
Agreement.
1.61 Person. Any natural person, Governmental Authority, corporation,
general or limited partnership, limited liability company, joint venture, trust,
association or unincorporated entity of any kind.
1.62 Required Consents. The Charter Required Consents or the IPSE Required
Consents, as the context requires.
1.63 Six-Month Date. The date that is six months after the Closing Date.
1.64 System. Any of the Charter Systems or the IPSE Systems, as the
context requires.
1.65 Systems Contracts. The Charter Systems Contracts or the IPSE Systems
Contracts, as the context requires.
1.66 Systems Franchises. The Charter Systems Franchises or the IPSE
Systems Franchises, as the context requires.
1.67 Systems Licenses. The Charter Systems Licenses or the IPSE Systems
Licenses, as the context requires.
1.68 Tangible Personal Property. The Charter Tangible Personal Property or
the IPSE Tangible Personal Property, as the context requires.
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1.69 Taxes. Levies and assessments of any kind or nature imposed by any
Governmental Authority, including all income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes and levies or assessments related to
unclaimed property, together with any interest thereon and any penalties,
additions to tax or additional amounts applicable thereto. For purposes of
determining any Tax cost or Tax benefit to any Person, such amount will be the
actual cost or benefit recognized by such Person at the time of actual payment
of the additional Tax or actual receipt of the Tax benefit. In the event that
any Loss, payment or other amount is required to be determined on an after-Tax
basis, such payment or other amount will be determined without regard to any Tax
cost or Tax benefit not actually recognized at the time of the determination,
and appropriate adjustments will be made when and to the extent that such Tax
cost or Tax benefit is actually recognized.
1.70 Third Party. Any Person other than IPSE and its Affiliates or Charter
and its Affiliates.
1.71 Transaction Documents. The Common Agreement and all instruments and
documents described in Sections 9.2 and 9.3 which are being executed and
delivered by or on behalf of any Charter Party or IPSE in connection with this
Agreement or the transactions contemplated hereby.
1.72 Other Definitions. The following terms have the meanings set forth in
the sections indicated in the table below:
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Agent's Fees 5.17
Allen Affiliates 1.2
ALTA 7.6
AT&T Affiliates 1.2
Cash Consideration 3.1.1
Charter Party First Paragraph
Charter Excluded Assets 4.4
Charter Matching Franchise 7.5.5(a)
Charter Retained Franchise 7.5.5(b)
Charter System Value 3.1.1
Charter Systems Recital A
Charter's Assumed Obligations and Liabilities 4.3
Closing Date 9.1
Code Recital C
commercially reasonable efforts 12.16
Common Agreement Recital D
</TABLE>
IPSE/Charter Asset Exchange Agreement
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<TABLE>
<S> <C>
Computer and Other Systems 7.20.1(a)
Confidential Information 7.13.1
control 1.2
Cost of Service Election 5.8.4
Exchange 2.1
FCC Rate Forms 5.8.4
FTC 7.7
Hired Employee 7.3.6(a)
IPSE First Paragraph
IPSE Excluded Assets 4.2
IPSE Matching Franchise 7.5.5(b)
IPSE Retained Franchise 7.5.5(a)
IPSE System Value 3.1.1
IPSE Systems Recital B
IPSE's Assumed Obligations and Liabilities 4.1
Matching Franchise 7.5.5(a)
New Properties 7.10(b)
Nonrecourse 11.3
Operating Agreements 7.5.5(c)
Phase I Assessment 7.19.1
Phase II Assessment 7.19.1
Primary Transfer 7.5.5(d)
Prime Rate 12.8
Retained Franchise 7.5.5(a)
Subsequent Transfer 7.5.5(e)
Surveys 7.6
Survival Period 11.1
System Employees 7.3.1
Taking 12.14
Third Party Testing 7.20.2(c)
Title Commitments 7.6
Title Company 7.6
Title Defect 7.6
Transfer Tax Returns 7.8
Transfer Taxes 7.8
Transferee Party 7.17.3
Transferor Party 7.17.3
Transitional Billing Services 7.12
WARN 5.14.1
Year 2000 High-Level Inventory,
Assessment and Remediation Decisions 7.20.1(b)
Year 2000 Plan 7.20.1(c)
</TABLE>
IPSE/Charter Asset Exchange Agreement
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<TABLE>
<S> <C>
Year 2000 Ready or Year 2000 Readiness 7.20.1(d)
Year 2000 Remediation Program 7.20.1(e)
</TABLE>
1.73 Usage. The definitions in Article 1 shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed to be references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. All Exhibits and Schedules attached hereto shall be deemed incorporated
herein as if set forth in full herein and, unless otherwise defined therein, all
terms used in any Exhibit or Schedule shall have the meaning ascribed to such
term in this Agreement. The words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation." 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. Unless otherwise expressly provided herein, any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. All accounting terms
not otherwise defined in this Agreement will have the meanings ascribed to them
under generally acceptable accounting principles as in effect from time to time
in the United States, consistently applied.
2. EXCHANGE.
2.1 Exchange of Assets. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing, IPSE and the Charter Parties agree to
exchange simultaneously the IPSE Assets for the Charter Assets, free and clear
of all Liens (except Permitted Liens) (the "Exchange"), including the assignment
and transfer of all interests in Leased Property and leased Tangible Personal
Property. IPSE and the Charter Parties agree to use all reasonable efforts to
structure the Exchange in such a way that to the extent reasonably possible it
will be a tax free exchange of like-kind assets under Section 1031 of the Code,
including either Party's assignment of its rights under this Agreement to a
"qualified intermediary" engaged by such Party to effectuate a deferred
like-kind exchange under Section 1031 of the Code.
2.2 Method of Exchange. The Exchange is to occur as follows: (A) the IPSE
Tangible Personal Property and the Charter Tangible Personal Property are being
exchanged each for the other in "Exchange Groups" as defined under Internal
Revenue Regulations Sections 1.1031(a)-2 and 1.1031(j)-1(b)(2); (B) the IPSE
Owned Property, IPSE Leased Property and IPSE Other Real Property Interests, and
the Charter Owned Property, Charter Leased Property and Charter Other Real
Property Interests, are being exchanged each for the
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other; and (C) the IPSE Systems Contracts, IPSE Systems Franchises, IPSE Systems
Licenses and IPSE Other Intangibles, and the Charter Systems Contracts, Charter
Systems Franchises, Charter Systems Licenses and Charter Other Intangibles, are
being exchanged each for the other, in each case to the maximum extent permitted
by Section 1031 of the Code and the regulations promulgated thereunder.
Liabilities assumed or taken subject to by each Party are being exchanged each
for the other to the maximum extent permitted under Section 1031 of the Code and
regulations thereunder.
3. CONSIDERATION. Each Party agrees that cash consideration will be paid at
Closing by either IPSE to the Charter Parties or by the Charter Parties to IPSE,
and that such amount will be determined as follows:
3.1 Calculation of Values; Cash Consideration.
3.1.1 For the purposes of this Agreement, the gross value of the
IPSE Assets comprising all of the IPSE Systems, in the aggregate, shall be as
set forth on Schedule 3.1.1- A (each, an "IPSE System Value") and the gross
value of the Charter Assets comprising all of the Charter Systems, in the
aggregate, shall be as set forth on Schedule 3.1.1-B (each, a "Charter System
Value"). The gross value of the IPSE Systems and the gross value of the Charter
Systems shall be adjusted in accordance with the provisions of the Common
Agreement. At the Closing, IPSE (or its permitted assignee) will pay to the
Charter Parties (or their permitted assignees), or the Charter Parties (or their
permitted assignees) will pay (without duplication) to IPSE (or its permitted
assignee), as appropriate, an amount in cash to be determined pursuant to the
Common Agreement (the "Cash Consideration"), which payment shall then be deemed
made pursuant and subject to this Agreement. Preliminary and final
determinations of the Cash Consideration will be made in accordance with the
Common Agreement.
4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
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4.1 IPSE's Assumed Obligations and Liabilities. At the Closing and
effective as of the Closing Time, IPSE will assume and after the Closing Date,
IPSE will pay, discharge and perform the following (collectively, "IPSE's
Assumed Obligations and Liabilities"): (a) those obligations and liabilities
accruing and relating to periods after the Closing Time under or with respect to
the Charter Assets assigned and transferred to IPSE at the Closing; (b) those
obligations and liabilities of Charter for subscriber prepayments and deposits
related to the Charter Systems existing at the Closing Time; (c) other
obligations and liabilities of the Charter Parties only to the extent that the
Adjusted Value of the Charter Systems was decreased with respect thereto
pursuant to Section 2.2 of the Common Agreement; and, (d) all other obligations
and liabilities accruing and relating to periods after the Closing Time and
arising out of IPSE's ownership, use or operation of the Charter Assets
(including those items listed or described on Schedule 4.4(b)) or its operation
of, or conduct of business through, the Charter Systems after the Closing
(including with respect to late fees that may be charged by IPSE after the
Closing to subscribers of the Charter Systems) except to the extent that such
obligations or liabilities relate to any Charter Excluded Asset. All obligations
and liabilities arising out of or relating to the Charter Assets, the Charter
Systems or Charter's Cable Businesses other than IPSE's Assumed Obligations and
Liabilities will remain and be the obligations and liabilities solely of the
Charter Parties, including any obligation, liability or claims relating to or
arising pursuant to (w) Taxes (including franchise fees) with respect to periods
or portions thereof ending on or prior to the Closing Date, (x) refunds of
rates, charges or late fees with respect to periods through and including the
Closing Date, (y) Litigation commenced, or related to an event occurring, on or
prior to the Closing Date, or (z) credit, loan or other agreements pursuant to
which the Charter Parties have created, incurred, assumed or guaranteed
indebtedness for borrowed money or under which any Lien securing such
indebtedness has been or may be imposed on any Charter Asset.
4.2 IPSE Excluded Assets. "IPSE Excluded Assets" means all: (a)
programming Contracts (including music programming Contracts), cable guide
Contracts, and Contracts to which IPSE and one or more Affiliates of IPSE or
other cable systems of IPSE or its Affiliates are parties (including master
retransmission consent agreements and master billing, collection and related
agreements), other than any such Contracts (such as local programming
agreements) listed on Schedule 4.2(b); (b) except as set forth on Schedule
4.2(b), each employee benefit plan (as defined in Section 3(3) of ERISA) or any
multiemployer plan (as defined in Section 3(37) of ERISA) with respect to which
IPSE or any of its ERISA Affiliates has any liability or in which any employees
or agents, or any former employees or agents, of IPSE or any of its ERISA
Affiliates participate; (c) except as provided in Section 12.14, insurance
policies and rights and claims thereunder; (d) bonds, letters of credit, surety
instruments and other similar items; (e) cash and cash equivalents, including
cash relating to subscriber prepayments and deposits, and notes receivable; (f)
except as set forth on Schedule 4.2(b) and subject to Section 7.11, Intellectual
Property held by IPSE or any of its Affiliates; (g) except as set forth on
Schedule 4.2(b), subscriber billing Contracts and related equipment if not owned
by IPSE or any Affiliate of IPSE; (h) assets, rights or properties of IPSE or
its
IPSE/Charter Asset Exchange Agreement
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Affiliates used or held for use other than principally in connection with the
IPSE Systems; (i) except for any items for which the Adjusted Value of the IPSE
Systems is increased under Section 2.2 of the Common Agreement, claims, rights,
and interest in and to any refunds of Taxes or fees of any nature, or other
claims against third parties, relating to the operation of the IPSE Systems
prior to the Closing Time; (j) account books of original entry, general ledgers,
financial records, minute books, stock ledgers, organizational documents and, to
the extent not included in the IPSE Books and Records, personnel files and
records, in each case used in connection with the IPSE Systems; (k) except for
the leases described on Schedule 4.2(b), capital and vehicle leases; (l)
advertising sales agency or representation Contracts providing any Third Party
or Affiliate of IPSE the right to sell available advertising time for an IPSE
System other than any such Contract listed on Schedule 4.2(b); (m) to the extent
licensed pursuant to a master license agreement or not otherwise transferable,
software of IPSE or any Affiliate of IPSE and licenses relating to Third Party
software; (n) Contracts for any fiber or fiber capacity lease or use
arrangements that provide to any Third Party or Affiliate of IPSE the right to
use any fiber or capacity of an IPSE System other than any such Contract listed
on Schedule 4.2(b); (o) except as set forth on Schedule 4.2(b), Contracts for
any internet access or on-line services arrangements that provide to any Third
Party or Affiliate of IPSE the right to use the transmission capacity of an IPSE
System to provide internet access or other on-line services over such IPSE
System; (p) except as set forth on Schedule 4.2(b), Contracts between IPSE and
its Affiliates; and (q) other rights, assets and properties described on
Schedule 4.2(a).
4.3 Charter's Assumed Obligations and Liabilities. At the Closing and
effective as of the Closing Time, the Charter Parties will assume and after the
Closing Date, the Charter Parties will pay, discharge and perform the following
(collectively, "Charter's Assumed Obligations and Liabilities"): (a) those
obligations and liabilities accruing and relating to periods after the Closing
Time under or with respect to the IPSE Assets assigned and transferred to the
Charter Parties at the Closing; (b) those obligations and liabilities of IPSE
for subscriber prepayments and deposits related to the IPSE Systems existing at
the Closing Time; (c) other obligations and liabilities of IPSE only to the
extent that the Adjusted Value of the IPSE Systems was decreased with respect
thereto pursuant to Section 2.2 of the Common Agreement; and (d) all other
obligations and liabilities accruing and relating to periods after the Closing
Time and arising out of the Charter Parties' ownership, use or operation of the
IPSE Assets (including those items listed or described on Schedule 4.2(b)) or
its operation of, or the conduct of business through, the IPSE Systems after the
Closing (including with respect to late fees that may be charged by the Charter
Parties after the Closing to subscribers of the IPSE Systems), except to the
extent that such obligations or liabilities relate to any IPSE Excluded Asset.
All obligations and liabilities arising out of or relating to the IPSE Assets,
the IPSE Systems or IPSE's Cable Business other than Charter's Assumed
Obligations and Liabilities will remain and be the obligations and liabilities
solely of IPSE including any obligation, liability or claims relating to or
arising pursuant to (w) Taxes (including franchise fees) with respect to periods
or portions thereof ending on or prior to the Closing Date,
IPSE/Charter Asset Exchange Agreement
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(x) refunds of rates, charges or late fees with respect to periods through and
including the Closing Date, (y) Litigation commenced, or related to an event
occurring, on or prior to the Closing Date, or (z) credit, loan or other
agreements pursuant to which IPSE has created, incurred, assumed or guaranteed
indebtedness for borrowed money or under which any Lien securing such
indebtedness has been or may be imposed on any IPSE Asset.
4.4 Charter Excluded Assets. "Charter Excluded Assets" means all: (a)
programming Contracts (including music programming Contracts), cable guide
Contracts, and Contracts to which the Charter Parties one or more Affiliates of
the Charter Parties or other cable systems of the Charter Parties or their
Affiliates are parties (including master retransmission consent agreements and
master billing, collection and related agreements), other than any such
Contracts (such as local programming agreements) listed on Schedule 4.4(b), (b)
except as set forth on Schedule 4.4(b), each employee benefit plan (as defined
in Section 3(3) of ERISA) or any multiemployer plan (as defined in Section 3(37)
of ERISA) with respect to which any Charter Party or any of their ERISA
Affiliates has any liability or in which any employees or agents, or any former
employees or agents, of any Charter Party or any of their ERISA Affiliates
participate; (c) except as provided in Section 12.14, insurance policies and
rights and claims thereunder; (d) bonds, letters of credit, surety instruments
and other similar items; (e) cash and cash equivalents, including cash relating
to subscriber prepayments and deposits, and notes receivable; (f) except as set
forth on Schedule 4.4(b), and subject to Section 7.11, Intellectual Property
held by Charter or any of its Affiliates; (g) except as set forth on Schedule
4.4(b), subscriber billing Contracts and related equipment if not owned by the
Charter Parties or any Affiliate of the Charter Parties; (h) assets, rights or
properties of the Charter Parties or their Affiliates used or held for use other
than principally in connection with the Charter Systems; (i) except for any
items for which the Adjusted Value of the Charter Systems is increased under
Section 2.2 of the Common Agreement, claims, rights, and interest in and to any
refunds of Taxes or fees of any nature, or other claims against third parties,
relating to the operation of the Charter Systems prior to the Closing Time; (j)
account books of original entry, general ledgers, financial records, minute
books, stock ledgers, organizational documents and, to the extent not included
in the Charter Books and Records, personnel files and records, in each case used
in connection with the Charter Systems; (k) except for the leases described on
Schedule 4.4(b), capital and vehicle leases; (l) advertising sales agency or
representation Contracts providing any Third Party or Affiliate of Charter the
right to sell available advertising time for a Charter System other than any
such Contract listed on Schedule 4.4(b); (m) to the extent licensed pursuant to
a master license agreement or otherwise not transferable, software of the
Charter Parties or any Affiliate of the Charter Parties and licenses relating to
Third Party software; (n) Contracts for any fiber or fiber capacity lease or use
arrangements that provide to any Third Party or Affiliate of Charter the right
to use any fiber or capacity of a Charter System other than any such Contract
listed on Schedule 4.4(b); (o) except as set forth on Schedule 4.4(b), Contracts
for any internet access or on-line services arrangements that provide to any
Third Party or Affiliate of Charter the right to use the transmission capacity
of a Charter System to provide
IPSE/Charter Asset Exchange Agreement
18
<PAGE> 30
internet access or other on-line services over such Charter System; (p) except
as set forth on Schedule 4.4(b), Contracts between any Charter Party and its
Affiliates; and (q) other rights, assets and properties described on Schedule
4.4(a).
5. CHARTER'S REPRESENTATIONS AND WARRANTIES. Each Charter Party represents and
warrants to IPSE, jointly and severally, as of the date of this Agreement and as
of the Closing, as follows:
5.1 Organization and Qualification of Charter. Such Charter Party is a
single-member limited liability company duly formed, validly existing and in
good standing under the laws of the State of Delaware. As of the Closing Date,
such Charter Party will be treated for federal income tax purposes as a
disregarded entity with respect to Charter Communications Operating LLC under
Treasury Regulation ss. 301.7701-3(b)(1)(ii). Such Charter Party has all
requisite power and authority to own, lease and use the Charter Assets owned,
leased or used by it and to conduct its Cable Business as it is currently being
conducted by it. As of the date of this Agreement, such Charter Party is duly
qualified to do business and is in good standing under the laws of each
jurisdiction in which the ownership, leasing or use of the Charter Assets owned,
leased or used by it or the nature of its activities in connection with its
Charter Systems makes such qualification necessary.
5.2 Authority and Validity. Such Charter Party has all requisite corporate
power and authority to execute and deliver, to perform its obligations under,
and to consummate the transactions contemplated by, this Agreement and the
Transaction Documents to which it is a party. The execution and delivery by such
Charter Party of, its performance under, and its consummation of the
transactions contemplated by, this Agreement and the Transaction Documents to
which it is a party have been duly and validly authorized by all action by or on
behalf of such Charter Party. This Agreement has been, and when executed and
delivered by such Charter Party the Transaction Documents to which it is a party
will be, duly and validly executed and delivered by such Charter Party and the
valid and binding obligations of such Charter Party, enforceable against it in
accordance with their terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to the enforcement of creditors' rights generally
or by principles governing the availability of equitable remedies.
5.3 No Conflict; Required Consents. Except as set forth on Schedule 5.3,
and assuming all IPSE Required Consents have been obtained and the expiration or
earlier termination of the waiting period under the HSR Act has occurred, the
execution and delivery by such Charter Party of, its performance under, and its
consummation of the transactions contemplated by, this Agreement and the
Transaction Documents to which it is a party do not and will not: (a) conflict
with or violate any provision of the organizational documents of such Charter
Party; (b) violate any provision of any Legal Requirement; (c) require any
consent, approval or authorization of, or filing of any certificate, notice,
application, report or other
IPSE/Charter Asset Exchange Agreement
19
<PAGE> 31
document with, any Governmental Authority or other Person; or (d) (i) conflict
with, violate, result in a breach of or constitute a default under (without
regard to requirements of notice, lapse of time or elections of other Persons or
any combination thereof), (ii) permit or result in the termination, suspension
or modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of such Charter Party under, or (iv) result
in the creation or imposition of any Lien under any Charter Systems Contract,
Charter Systems Franchise, Charter Systems License, or other instrument
evidencing any of the Charter Assets or by which such Charter Party or any of
its assets is bound or affected, except for purposes of clauses (c) and (d) such
consents, approvals, authorizations and filings that, if not obtained or made,
would not, and such violations, conflicts, breaches, defaults, terminations,
suspensions, modifications and accelerations as would not, individually or in
the aggregate, have an adverse effect on any of such Charter Party's Systems,
its Cable Business or on such Charter Party, or on its ability to perform its
obligations under this Agreement or the Transaction Documents to which it is a
party.
5.4 Assets.
5.4.1 Such Charter Party has good and marketable title to (or, in
the case of Assets that are leased, valid leasehold interests in) its Assets.
None of the Allen Affiliates has any right, title or interest in or to any of
the Charter Assets. The Charter Assets are free and clear of all Liens, except
Permitted Liens and rights of first refusal which will be waived at Closing by
the Person holding such rights. All of the Liens described on Schedule 5.4.1
(except for those marked with an asterisk on Schedule 5.4.1) will be terminated,
released or, in the case of rights of first refusal (except for those listed on
Schedule 5.4.1), waived, as appropriate, at or prior to the Closing. Except as
described on Schedule 1.20, such Charter Party's Tangible Personal Property, as
an integrated system and in its component parts, is in good operating condition
and repair (ordinary wear and tear and routine failures excepted) and is usable
and adequate for the operation of such Charter Party's Cable Business.
5.4.2 Except for items included in the Charter Excluded Assets, such
Charter Party's Assets constitute substantially all the assets necessary to (a)
conduct its Cable Business as it is being conducted on the date of this
Agreement and in compliance with all applicable Legal Requirements, (b) to
operate its Systems as they are being operated on the date of this Agreement and
in compliance with all applicable Legal Requirements and (c) to perform all of
IPSE's Assumed Obligations and Liabilities.
5.4.3 Except as described on Schedule 5.4.3, and other than direct
broadcast satellite and satellite master antenna television, with respect to
each area in which such Charter Party's Systems currently provide cable
television service: (i) no Person is operating a cable television system or
other non-satellite MVPD other than a Charter System in such area; (ii) no local
franchising authority has awarded a cable television franchise in such area to
any
IPSE/Charter Asset Exchange Agreement
20
<PAGE> 32
Person other than a Charter Party; and (iii) to the Knowledge of such Charter
Party, no MVPD has applied for a cable television franchise to serve such area.
5.5 Charter Systems Franchises, Charter Systems Licenses, Charter
Systems Contracts and Charter Other Real Property Interests.
5.5.1 Except as described on Schedules 1.12, 1.14, 1.17, 1.18 and
1.19, and except for the Charter Excluded Assets, Charter is not bound or
affected by any of the following that relate primarily or in whole to its Cable
Business: (a) leases of real property or capital leases of personal property;
(b) operating leases of personal property that are terminable upon more than 30
days notice and that contemplate annual lease payments in excess of $20,000; (c)
franchises for the construction or operation of cable television systems or
Charter Systems Contracts of substantially equivalent effect; (d) licenses,
authorizations, consents or permits of the FCC; (e) other licenses,
authorizations, consents or permits of any other Governmental Authority,
individually or in the aggregate, material to any Charter System; (f) easements
or rights of access, individually or in the aggregate, material to any Charter
System; (g) pole attachment agreements, underground conduit agreements, crossing
agreements, retransmission consent agreements or bulk or commercial service
agreements, individually or in the aggregate, material to any Charter System; or
(h) Charter Systems Contracts other than those described in any other clause of
this Section 5.5.1 which contemplate payments by or to Charter in any 12-month
period exceeding $25,000 under any single contract or $100,000 in the aggregate.
5.5.2 Complete and correct copies of such Charter Party's Systems
Franchises and Systems Licenses have been provided to IPSE. Except as set forth
on Schedule 5.5.2, (a) such Charter Party's Systems Franchises contain all of
the commitments and obligations of such Charter Party to the applicable
Governmental Authority granting such Franchises with respect to the
construction, ownership and operation of its Systems, and (b) other than as set
forth in Charter Party's Systems Franchises, such Charter Party has not made any
commitment to any local franchising authority to make any material expenditure
or capital addition or betterment to any of its Systems or Assets that will not
be fulfilled or satisfied prior to the Closing Time. Such Charter Party's
Systems Franchises and Systems Licenses are currently in full force and effect,
are not in default and are valid under all applicable Legal Requirements
according to their terms. No event has occurred that, with notice or lapse of
time or both, would constitute a breach, violation or default by any such
Charter Party, and to such Charter Party's Knowledge, no event has occurred
that, with notice or lapse of time or both, would constitute a breach, violation
or default by any other Person, of any material obligations under any of such
Charter Party's Systems Franchises or Systems Licenses. Except for routine
filings with Governmental Authorities and as described on Schedule 5.5.2, there
are no applications relating to any of such Charter Party's Systems Franchise or
Systems License pending before any Governmental Authority which are material to
any of its Systems or its Cable Business. Except where a request for renewal has
been timely filed under Section
IPSE/Charter Asset Exchange Agreement
21
<PAGE> 33
626(a) of the Cable Act, since December 31, 1998, no Systems Franchise or
Systems License of such Charter Party has been surrendered by such Charter Party
or has expired or otherwise terminated without the issuance of a replacement
Charter Systems Franchise or Charter Systems License. There is no legal action,
governmental proceeding or investigation pending or, to such Charter Party's
Knowledge, threatened to terminate, suspend or modify any Systems Franchise or
Systems License of such Charter Party. Except as set forth on Schedule 5.5.2,
such Charter Party is, or will be as of the Closing Date, in material compliance
with the terms and conditions of all its Systems Franchises and Systems Licenses
and other applicable requirements of all Governmental Authorities (including the
FCC and the U.S. Copyright Office) relating to such Charter Systems Franchises
and Charter Systems Licenses, including all requirements for notification,
filing, reporting, posting and maintenance of logs and records.
5.5.3 Such Charter Party has delivered to IPSE true and complete
copies of all of such Charter Party's Systems Contracts (including each Contract
relating to Charter Leased Property and Charter Other Real Property Interests),
including any amendments thereto (or, in the case of oral Contracts, true and
complete written summaries thereof) and each document evidencing such Charter
Party's ownership of its Owned Property. Except as described in Schedule 5.5.3,
such Charter Party has fulfilled when due, or has taken all action necessary to
enable it to fulfill when due, all of its obligations under each of its
Contracts and, to the Knowledge of such Charter Party, there has not occurred
any default (without regard to requirements of notice, lapse of time, elections
of other Persons, or any combination thereof) by any other Person of any
material obligations under any of its Contracts or Real Property Interests.
5.6 Real Property. All the Assets of such Charter Party consisting of
Charter Owned Property, Charter Leased Property and material Charter Other Real
Property Interests are described on Schedules 1.12, 1.14 and 1.15. Except for
ordinary wear and tear and routine repairs and as set forth on Schedule 5.6, all
of the improvements, leasehold improvements and the premises of such Charter
Party's Owned Property and the premises demised under the leases and other
documents evidencing such Charter Party's Leased Property and are in good
condition and repair and are suitable for the purposes used. Each parcel of such
Charter Party's Owned Property and each parcel of such Charter Party's Leased
Property and any improvements thereon (a) has access to and over public streets
or private streets for which such Charter Party has a valid right of ingress and
egress, (b) except as set forth on Schedule 1.12 or 1.14, conforms in its
current use and occupancy to all material zoning requirements without reliance
upon a variance issued by a Governmental Authority or a classification of the
parcel in question as a nonconforming use, (c) conforms in all material respects
in its current use to all restrictive covenants, if any, or other Liens
affecting all or part of such parcel (of record, with respect to Charter Owned
Property, or of record or as set forth in an agreement listed on Schedule 1.12
or 1.14 with respect to Charter Leased Property or Charter Other Real Property
Interests), and (d) is available for immediate use in the conduct
IPSE/Charter Asset Exchange Agreement
22
<PAGE> 34
of the business or operations of such Charter Party's Systems. There are no
pending condemnation, expropriation, eminent domain or similar proceedings of
which such Charter Party has received notice or has Knowledge affecting, in any
material respect, all or any portion of such Charter Party's Owned Property,
Leased Property, or Other Real Property Interests. Such Charter Party has good
and marketable title to each such parcel of real property included in its Owned
Property and in all buildings, structures and improvements thereon, in each case
free and clear of all Liens except for Permitted Liens.
5.7 Environmental.
5.7.1 Except as described on Schedule 5.7, such Charter Party is in
material compliance with all Environmental Laws, insofar as they relate to its
Owned Property or Leased Property. Except as described on Schedule 5.7, such
Charter Party has not received any notice of, and has no Knowledge of, any
alleged, actual, or potential responsibility for, or any inquiry regarding, (i)
any release or threatened release of any Hazardous Substances from or on its
Owned Property or Leased Property, or (ii) any material violation of any
Environmental Laws associated with its Owned Property or Leased Property. Except
as described on Schedule 5.7, to such Charter Party's Knowledge, its own
operations on its Other Real Property Interests do not violate any Environmental
Laws in any material respect, and such Charter Party has received no notice of
any such violation. Except as described on Schedule 5.7, such Charter Party has
not received any notice of, and has no Knowledge of circumstances relating to,
any past, present or future events, conditions, circumstances, activities,
practices or incidents (including the presence, use, generation, manufacture,
disposal, release or threatened release of any Hazardous Substances from or on
its Owned Property or Leased Property), which could interfere with or prevent
continued compliance, or which are reasonably likely to give rise to any
liability, based upon or related to the processing, distribution, use,
treatment, storage, disposal, transport or handling, or the emission, discharge,
release or threatened release into the environment, of any Hazardous Substance
from or attributable to its Owned Property or Leased Property.
5.7.2 Except as described on Schedule 5.7, to such Charter Party's
Knowledge, (a) no aboveground or underground storage tanks are currently or have
been located on any Charter Owned Property or Charter Leased Property of such
Charter Party and (b) no Charter Owned Property or Charter Leased Property of
such Charter Party 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.
5.7.3 Complete and correct copies of (a) all studies, reports,
surveys or other similar written materials in Charter's possession or to which
Charter, to its Knowledge, has access relating to the presence or alleged
presence of Hazardous Substances at, on, under or affecting the Charter Owned
Property or Charter Leased Property of such Charter Party, (b) all notices
(other than general notices made by general publication) in Charter's possession
IPSE/Charter Asset Exchange Agreement
23
<PAGE> 35
or to which Charter, to its Knowledge, has access that were received from any
Governmental Authority having the power to administer or enforce any
Environmental Laws relating to current or past ownership, use or operation of
such Charter Party's Owned Property or Leased Property or activities at its
Owned Property or Charter Leased Property and (c) all notices and related
materials in Charter's possession or to which Charter, to its Knowledge, has
access relating to any Litigation concerning any Environmental Law to which such
Charter Party is a party or written allegation by any private Third Party
concerning any Environmental Law and such Charter Party, have been provided to
IPSE (other than those materials constituting attorney-client privileged
communications).
5.8 Compliance with Legal Requirements.
5.8.1 Except as set forth on Schedule 5.8, the operation of such
Charter Party's Systems as currently conducted does not violate or infringe any
Legal Requirement currently in effect in any material respect (other than Legal
Requirements described in Sections 5.7, 5.8.3 and 5.8.4, as to which the
representations and warranties set forth in those subsections will apply) or the
grounding requirements of the National Electrical Safety Code. Except as set
forth on Schedule 5.8, such Charter Party has not received any notice and has no
Knowledge of any material violation by such Charter Party or any of its Systems
of any Legal Requirement applicable to the installation, ownership and operation
of its Systems as currently conducted, and knows of no basis for the allegation
of any such violation.
5.8.2 Except as set forth on Schedule 5.8, without limiting the
generality of the foregoing, since such Charter Party's acquisition of its
Systems: it has submitted to the FCC all filings, including cable television
registration statements, annual reports and aeronautical frequency usage notices
and paid all regulatory fees, that are required under the rules and regulations
of the FCC; the operation of its Systems has been and is in material compliance
with the rules and regulations of the FCC, and it has not received any notice
from the FCC of any violation of its rules and regulations; such Charter Party
is and since 1986 (or since its acquisition, if later) has been certified as in
compliance with the FCC's equal employment opportunity rules; its Systems are in
material compliance with all signal leakage criteria prescribed by the FCC; and
for each relevant semi-annual reporting period since its acquisition of a
Charter System, such Charter Party has timely filed with the United States
Copyright Office all required Statements of Account in true and correct form,
has paid when due all required copyright royalty fee payments in correct amount,
relating to its Systems' carriage of television broadcast signals and is
otherwise in material compliance with all applicable rules and regulations of
the Copyright Office. Except as set forth on Schedule 5.8, such Charter Party
has no Knowledge, with respect to any Charter System acquired by such Charter
Party since January 1, 1996, of any previous owner's failure to comply with the
copyright licensing requirements with respect to such System or any written
claim or inquiry from any Person which questions such System's failure to
comply. Charter has delivered to IPSE copies of all reports, filings and
correspondence made or filed by such Charter Party
IPSE/Charter Asset Exchange Agreement
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<PAGE> 36
with the FCC or pursuant to the FCC rules and regulations for the past year and
all reports, filings and correspondence made or filed by such Charter Party with
the Copyright Office or pursuant to Copyright Office rules and regulations for
the past three years. Except as set forth on Schedule 5.8, (i) 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 Systems Franchise of such
Charter Party expiring within 36 months after the date of this Agreement; and
(ii) such Charter Party has received no written notice from any Governmental
Authority that it has determined or intends to deny renewal of any Charter
Systems Franchise to which it is a party.
5.8.3 Except as set forth on Schedule 5.8 and as otherwise provided
in this Section, such Charter Party has used commercially reasonable efforts to
comply in all material respects with the provisions of the Cable Act and the
1992 Cable Act pertaining to the carriage of television broadcast signals, as
such Legal Requirements relate to the operation of its Systems. Such Charter
Party has complied in all material respects with the must carry and
retransmission consent provisions of the 1992 Cable Act, including (i) duly and
timely notifying "local commercial television stations" of inadequate signal
strength or increased copyright liability, if applicable, (ii) duly and timely
notifying non-commercial educational stations of the location of its System's
principal headend, (iii) duly and timely notifying subscribers of changes in the
channel alignment on its Systems, (iv) duly and timely notifying "local
commercial and non-commercial television stations" of the broadcast signals
carried on its Systems and their channel positions, (v) maintaining the
requisite public file identifying broadcast signal carriage, (vi) carrying the
broadcast signals after June 1, 1993, on its Systems for all "local commercial
television stations" which elected must carry status and, if required, up to two
"qualified low power stations" and (vii) obtaining retransmission consents for
all broadcast signals carried on its Systems after October 5, 1993, except for
the non-exempt signals carried pursuant to a must carry election. No must carry
complaint is pending against any of System such Charter Party at the FCC, nor,
to such Charter Party's Knowledge, is any threatened except as set forth in
Schedule 5.8. Charter has delivered to IPSE copies of any pending petitions such
Charter Party has on file with the FCC, including requests for market
modifications or petitions for special relief or any market modification
requests or special relief petitions affecting any Charter System that have been
served on such Charter Party. The FCC has not issued any decision with respect
to a must carry complaint finding any System of such Charter Party in violation
of the must carry rules except as set forth on Schedule 5.8.
5.8.4 Such Charter Party has used commercially reasonable efforts to
establish rates charged and a la carte packages provided to subscribers,
effective as of September 1, 1993, that would be allowable under rules and
regulations promulgated by the FCC under the 1992 Cable Act, and any
authoritative interpretation thereof, whether or not such rates or packages were
subject to regulation at that date by any Governmental Authority, including any
state regulatory agency, local franchising authority and/or the FCC.
Notwithstanding the foregoing, such Charter Party makes no representation or
warranty that either the rates charged to subscribers or the a la carte packages
provided would be allowable under any rules
IPSE/Charter Asset Exchange Agreement
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<PAGE> 37
and regulations of the FCC, or any authoritative interpretation thereof,
promulgated after the date of the Closing. Charter has delivered to IPSE
complete and correct copies of (i) the most recent FCC Forms 328, 329, 393,
1200, 1205, 1210, 1215, 1220, 1235 and 1240 and other FCC rate forms
(collectively, "FCC Rate Forms") filed by such Charter Party with the local
franchising authority and/or the FCC and will deliver as soon as available all
FCC Rate Forms that are prepared with respect to such Charter Party's Systems,
(ii) all historical FCC Rate Forms with respect to any Charter System in which
there is currently a rate issue pending, including any accounting order or any
rate order on appeal, (iii) copies of all complaints, petitions, answers,
responses and other filings made with or by any Governmental Authority in
connection with any rate orders issued by such Governmental Authority or any
appeal therefrom, and (iv) any documentation supporting an exemption from the
rate regulation provisions of the 1992 Cable Act claimed by such Charter Party
with respect to its Systems. Except as set forth on Schedule 5.8, such Charter
Party has not made any election with respect to any cost of service proceeding
conducted in accordance with Part 76.922 of Title 47 of the Code of Federal
Regulations or any similar proceeding (a "Cost of Service Election") with
respect to any of such Charter Party's Systems.
5.8.5 Except as set forth on Schedule 5.8, all necessary FAA
approvals have been obtained and all necessary FCC tower registrations have been
filed with respect to the height and location of towers used in connection with
the operation of such Charter Party's Systems, and such towers are being
operated in compliance in all material respects with applicable FCC and FAA
rules. The ownership, height (with and without appurtenances), location
(address, latitude, longitude and ground elevation), structure type and FCC call
signs of each tower used in connection with the operation of such Charter
Party's Systems are correctly described on Schedule 5.8. To the extent
applicable, Charter has delivered to IPSE true and correct copies of the FAA
final determinations that are available and FCC registrations for all such
towers.
5.9 Intellectual Property. Except for Intellectual Property which
constitutes Charter Excluded Assets and the Intellectual Property described on
Schedule 4.4(b), such Charter Party does not possess any Intellectual Property
related to or material to the operation of its Systems, and such Charter Party
is not a party to any license or royalty agreement with respect to any such
Intellectual Property, except for licenses respecting program material or
incidental to any Systems Contract and obligations under the Copyright Act. To
the Knowledge of such Charter Party, its Systems and Cable Business have been
operated in such a manner so as not to violate or infringe upon the rights, or
give rise to any rightful claim of any Person for copyright, trademark, service
mark, patent or license infringement or the like.
5.10 Financial Statements. Charter's statements of income for the years
ended December 31, 1997 and 1998, attached hereto as Schedule 5.10, are in
accordance with the books and records of the Charter Systems, were prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods covered
IPSE/Charter Asset Exchange Agreement
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thereby and, except as may be described therein, present fairly the operating
results of the Charter Systems for the periods indicated, subject only to
standard year-end adjustments and the omission of footnotes thereto.
5.11 Absence of Certain Changes or Events. Except as set forth on Schedule
5.11, since December 31, 1998, there has been no (i) material adverse change in,
nor has any event or events (other than any affecting the cable television
industry generally) occurred that, individually or in the aggregate, are
reasonably likely to result in a material adverse change in such Charter Party's
Assets, Cable Business, operations, condition (financial or otherwise) or
results of operations of its Systems, taken as a whole and (ii) material change
in accounting principles or practices with respect to such Charter Party's Cable
Business or revaluation by such Charter Party of its Assets for financial
reporting, property tax or other purposes. From December 31, 1998 to the date of
this Agreement, such Charter Party's Cable Business has been conducted only in
the usual, regular and ordinary course, except as disclosed on Schedule 5.11 and
except where the failure to conduct business in such manner would not have a
material adverse effect on such Charter Party's Assets, Cable Business,
operations, condition (financial or otherwise) or results of operations of its
Systems taken as a whole or on the ability of such Charter Party to perform its
obligations under this Agreement.
5.12 Litigation. Except as set forth on Schedule 5.12: (a) there is no
Litigation pending or, to the Knowledge of such Charter Party, threatened
against such Charter Party or any of its Affiliates which, if adversely
determined, would (i) materially and adversely affect the financial condition or
operations of such Charter Party's Cable Business, any of its Systems or Assets
or the ability of such Charter Party to perform its obligations under this
Agreement or (ii) result in the modification, revocation, termination,
suspension or other limitation of any of such Charter Party's Systems
Franchises, Systems Licenses, or Systems Contracts; and (b) there is not in
existence any Judgment requiring such Charter Party or any of its Affiliates to
take any action of any kind with respect to its Assets or the operation of any
of its Systems, or to which such Charter Party (with respect to its Systems),
any of its Systems or Assets are subject or by which they are bound or affected,
that has not been fully complied with by such Charter Party.
5.13 Tax Returns; Other Reports. Such Charter Party has duly and timely
filed in correct form all federal, state, local and foreign Tax returns and
other Tax reports required to be filed by it, and has timely paid all Taxes
which have become due and payable, whether or not so shown on any such return or
report, the failure of which to be filed or paid could affect or result in the
imposition of a Lien upon its Assets or create any transferee or other liability
upon IPSE, except such amounts as are being contested diligently and in good
faith and are not in the aggregate material. Except as set forth on Schedule
5.13, such Charter Party has not received any notice of, nor does such Charter
Party have any Knowledge of, any deficiency, assessment or audit, or proposed
deficiency, assessment or audit from any taxing
IPSE/Charter Asset Exchange Agreement
27
<PAGE> 39
Governmental Authority which could affect, or result in the imposition of a Lien
upon, any of its Assets or transferee or other liability upon IPSE.
5.14 Employment Matters.
5.14.1 Such Charter Party has complied in all material respects with
all applicable Legal Requirements relating to the employment of labor, including
the Worker Adjustment and Retraining Notification Act, 29 U.S.C. ss. 2101, et
seq. ("WARN"), continuation coverage requirements with respect to group health
plans and those relating to wages, hours, collective bargaining, unemployment
insurance, workers' compensation, equal employment opportunity, age, sex, race
and disability discrimination, immigration control and the payment and
withholding of Taxes.
5.14.2 There are no Liens against such Charter Party's Assets under
Section 412(n) of the Code or Sections 302(f) or 4068 of ERISA. At the Closing,
IPSE and its ERISA Affiliates will have no obligation to contribute to, or any
liability in respect of, (i) any employee benefit plan within the meaning of
Section 3(3) of ERISA, or (ii) any similar employment, severance or other
arrangement or policy (whether written or oral) providing for insurance coverage
(including self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, fringe benefits
or retirement benefits, or for profit sharing, deferred compensation, bonuses,
stock options, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits, sponsored or maintained by
any Charter Party or any of their ERISA Affiliates, or to which any Charter
Party or any of their ERISA Affiliates was obligated to contribute. The Charter
Parties will not, in connection with the transactions contemplated by this
Agreement, cease to provide any group health plan coverage to their employees in
a manner which would cause IPSE or any of its ERISA Affiliates to be deemed a
successor employer of such Charter Party within the meaning of Proposed Treasury
Regulations Section 54.4980B-9 Q&A8(c). With respect to any multi-employer plan
within the meaning of Section 3(37) of ERISA, or any plan subject to Title IV of
ERISA, to which any Charter Party or any of their ERISA Affiliates is or ever
was obligated to contribute, (a) there has been no material "reportable event"
described in Sections 4043(c)(1), (2), (3), (5), (6), (7), (10), or (13) of
ERISA, (b) no "accumulated funding deficiency" (as defined in Section 302 of
ERISA) or "withdrawal liability" (as determined under Section 4201 et seq. of
ERISA) has occurred, exists or is continuing with respect to any such plan other
than a multi-employer plan (as defined in Section 3(37) of ERISA), or, to the
Knowledge of Charter or any of its ERISA Affiliates, with respect to any such
plan which is a multi-employer plan (as defined in Section 3(37) of ERISA), (c)
no such plan has been terminated other than in accordance with ERISA or at a
time when such plan was not sufficiently funded, and (d) there has been no (i)
withdrawal by any Charter Party or any of their ERISA Affiliates that is a
substantial employer from a single-employer plan and that has two or more
contributing sponsors at least two of whom are not under common control, as
referred to in Section
IPSE/Charter Asset Exchange Agreement
28
<PAGE> 40
4063(b) of ERISA, or (ii) cessation by any Charter Party or any of their ERISA
Affiliates of operations at a facility causing more than 20% of plan
participants to be separated from employment, as referred to in Section 4062(e)
of ERISA. With respect to any plan maintained, sponsored by, or contributed to
by any Charter Party, which is intended to comply with the provisions of Section
401(k) of the Code, and from which any similar plan maintained or sponsored by
IPSE or any of its ERISA Affiliates accepts a plan-to-plan transfer under
Section 7.3.3, (I) such plan has received a favorable determination letter from
Internal Revenue Service, and no Charter Party or any of their ERISA Affiliates
has any Knowledge of any fact which could adversely affect the qualified status
of such plan, and (II) such plan has been administered and maintained in
material compliance with ERISA, the Code and all other applicable laws.
5.14.3 Except as set forth on Schedule 5.14, there are no collective
bargaining agreements applicable to any Person employed by such Charter Party
that renders services in connection with its Systems and such Charter Party has
no duty to bargain with any labor organization with respect to any such Person.
Except as set forth on Schedule 5.14, there are not pending any unfair labor
practice charges against such Charter Party, any demand for recognition or any
other request or demand from a labor organization for representative status with
respect to any Person employed by it that renders services in connection with
its Systems. Except as described on Schedule 5.14, such Charter Party has no
employment agreements, either written or oral, with any employee of its Systems
and none of the employment agreements listed on Schedule 5.14 requires such
Charter Party, or will require IPSE or any Affiliate of IPSE, to employ any
Person after the Closing.
5.15 Charter Systems Information.
5.15.1 Schedule 5.15.1 sets forth a materially true and accurate
description, on a System-by-System basis, of the following information relating
to such Charter Party's Systems as of December 31, 1998:
(a) the approximate number of aerial and underground miles of
plant included in the Charter Assets and served by each headend;
(b) the approximate number of single family homes and
residential multiple dwelling units passed by each such Charter System;
(c) the MHZ capacity and channel capacity of each headend; and
(d) the number of subscribers served by each such Charter
System and a description of the calculation methodology used by Charter to
calculate such subscribers.
IPSE/Charter Asset Exchange Agreement
29
<PAGE> 41
5.15.2 Schedule 5.15.2 sets forth a materially true and accurate
description of the following information relating to such Charter Party's
Systems as of the date of this Agreement:
(a) a description of the Basic Services, the Expanded Basic
Services, Pay TV and a la carte services available from each such Charter
System, and the rates charged by such Charter Party therefor, including all
rates, tariffs and other charges for cable television or other services provided
by each such Charter System;
(b) the stations and signals carried by each such Charter
System and the channel position of each such signal and station; and
(c) the cities, towns, villages, boroughs and counties served
by each such Charter System.
5.15.3 Each of such Charter Party's Systems is capable of providing
all channels, stations and signals reflected as being carried on such Charter
System on Schedule 5.15.2.
5.16 Taxpayer Identification Number. The U.S. Taxpayer Identification
Number for the Charter Parties are as follows:
<TABLE>
<S> <C>
Charter Communications, LLC 43-1659860
Charter Communications Properties, LLC 43-1792671
Marcus Cable Associates, L.L.C. 75-2775560
</TABLE>
5.17 Finder and Brokers. Such Charter Party has not entered into any
Contract with any person which will result in the obligation of IPSE to pay any
finder's fees, brokerage or agent's commissions or other like payments
(collectively, "Agent's Fees") in connection with the negotiations leading to
this Agreement or the consummation of the transactions contemplated hereby.
5.18 Related Party Transactions. Set forth on Schedule 5.18 hereto, are
the Contracts, agreements, arrangements or understandings between such Charter
Party and any of its Affiliates and between such Charter Party and any Allen
Affiliate included in or related to the Charter Assets.
6. IPSE'S REPRESENTATIONS AND WARRANTIES.
IPSE represents and warrants to the Charter Parties as of the date of this
Agreement and as of the Closing, as follows:
IPSE/Charter Asset Exchange Agreement
30
<PAGE> 42
6.1 Organization and Qualification of IPSE.
6.1.1 IPSE is a general partnership which has been duly formed under
the laws of the State of California. IPSE has all requisite power and authority
to own, lease and use the IPSE Assets owned, leased or used by it and to conduct
IPSE's Cable Business as it is currently being conducted.
6.1.2 InterMedia Capital Management, LLC, the managing general
partner of IPSE, is a limited liability company duly formed, validly existing,
and in good standing under the laws of the State of Delaware, and has all
requisite power and authority to own all of its assets and to conduct its
business as currently conducted. InterMedia Capital Management, LLC is duly
qualified to do business and in good standing under the laws of each
jurisdiction in which the nature of its activities or its ownership, lease or
use of its assets makes such qualification necessary.
6.2 Authority and Validity. IPSE has all requisite power and authority to
execute and deliver, and to perform its obligations under, and to consummate the
transactions contemplated by, this Agreement and the Transaction Documents to
which it is a party. The execution and delivery by IPSE of, the performance of
IPSE under, and the consummation by IPSE of the transactions contemplated by,
this Agreement and the Transaction Documents to which IPSE is a party have been
duly and validly authorized by all action by or on behalf of IPSE. This
Agreement has been, and when executed and delivered by IPSE the Transaction
Documents to which it is a party will be, duly and validly executed and
delivered by IPSE and the valid and binding obligations of IPSE, enforceable
against IPSE in accordance with their terms, except as the same may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to the enforcement of creditors' rights
generally or by principles governing the availability of equitable remedies.
6.3 No Conflict; Required Consents. Except as set forth on Schedule 6.3,
and assuming all Charter Required Consents have been obtained and the expiration
or earlier termination of the waiting period under the HSR Act has occurred, the
execution and delivery by IPSE, the performance of IPSE under, and the
consummation by IPSE of the transactions contemplated by, this Agreement and the
Transaction Documents to which IPSE is a party do not and will not: (a) conflict
with or violate any provision of the organizational documents of IPSE; (b)
violate any provision of any Legal Requirement; (c) require any consent,
approval or authorization of, or filing of any certificate, notice, application,
report or other document with, any Governmental Authority or other Person; or
(d) (i) conflict with, violate, result in a breach of or constitute a default
under (without regard to requirements of notice, lapse of time or elections of
other Persons or any combination thereof), (ii) permit or result in the
termination, suspension or modification of, (iii) result in the acceleration of
(or give any
IPSE/Charter Asset Exchange Agreement
31
<PAGE> 43
Person the right to accelerate) the performance of IPSE under, or (iv) result in
the creation or imposition of any Lien under any IPSE Systems Contract, IPSE
Systems Franchise, IPSE Systems License, or other instrument evidencing any of
the IPSE Assets or by which IPSE or any of its assets is bound or affected,
except for purposes of clauses (c) and (d) such consents, approvals,
authorizations and filings that, if not obtained or made, would not, and such
violations, conflicts, breaches, defaults, terminations, suspensions,
modifications and accelerations as would not, individually or in the aggregate,
have an adverse effect on any IPSE System, IPSE's Cable Business or IPSE, or on
the ability of IPSE to perform its obligations under this Agreement or the
Transaction Documents to which it is a party.
6.4 Assets.
6.4.1 IPSE has good and marketable title to (or, in the case of IPSE
Assets that are leased, valid leasehold interests in) the IPSE Assets. None of
the AT&T Affiliates has any right, title or interest in or to any of the IPSE
Assets. The IPSE Assets are free and clear of all Liens, except Permitted Liens
and rights of first refusal which will be waived at Closing by the Person
holding such rights. All of the Liens described on Schedule 6.4.1 (except for
those marked with an asterisk on Schedule 6.4.1) will be terminated, released
or, in the case of rights of first refusal (except for those listed on Schedule
6.4.1), waived, as appropriate at or prior to Closing. Except as described on
Schedule 1.46, the IPSE Tangible Personal Property, as an integrated system and
in its component parts, is in good operating condition and repair (ordinary wear
and tear and routine failures excepted) and is usable and adequate for the
operation of IPSE's Cable Business.
6.4.2 Except for items included in the IPSE Excluded Assets, the
IPSE Assets constitute substantially all the assets necessary (a) to conduct
IPSE's Cable Business as it is being conducted on the date of this Agreement and
in compliance with all applicable Legal Requirements, (b) to operate the IPSE
Systems as they are being operated on the date of this Agreement and in
compliance with all applicable Legal Requirements and (c) to perform all of
Charter's Assumed Obligations and Liabilities.
6.4.3 Except as described on Schedule 6.4.3, and other than direct
broadcast satellite and satellite master antenna television, with respect to
each area in which the IPSE Systems currently provide cable television service,
(i) no Person is operating a cable television system or other non-satellite MVPD
other than an IPSE System in such area; (ii) no local franchising authority has
awarded a cable television franchise in such area to any Person other than IPSE;
and (iii) to the Knowledge of IPSE, no MVPD has applied for a cable television
franchise to serve such area.
6.5 IPSE Systems Franchises, IPSE Systems Licenses, IPSE Systems
Contracts and IPSE Other Real Property Interests.
IPSE/Charter Asset Exchange Agreement
32
<PAGE> 44
6.5.1 Except as described on Schedules 1.38, 1.40, 1.43, 1.44 and
1.45, and except for the IPSE Excluded Assets, IPSE is not bound or affected by
any of the following that relate primarily or in whole to IPSE's Cable Business:
(a) leases of real property or capital leases of personal property; (b)
operating leases of personal property that are terminable upon more than 30 days
notice and that contemplate annual lease payments in excess of $20,000; (c)
franchises for the construction or operation of cable television systems or
System Contracts of substantially equivalent effect; (d) licenses,
authorizations, consents or permits of the FCC; (e) other licenses,
authorizations, consents or permits of any other Governmental Authority,
individually or in the aggregate, material to the IPSE Systems; (f) easements or
rights of access, individually or in the aggregate, material to the IPSE
Systems; (g) pole attachment agreements, underground conduit agreements,
crossing agreements, retransmission consent agreements, or bulk or commercial
service agreements, individually or in the aggregate, material to the IPSE
Systems; or (h) IPSE Systems Contracts other than those described in any other
clause of this Section 6.5.1 which contemplate payments by or to IPSE in any
12-month period exceeding $25,000 under any single contract or $100,000 in the
aggregate.
6.5.2 Complete and correct copies of the IPSE Systems Franchises and
IPSE Systems Licenses have been provided to Charter. Except as set forth on
Schedule 6.5.2, (a) the IPSE Systems Franchises contain all of the commitments
and obligations of IPSE to the applicable Governmental Authority granting such
Franchises with respect to the construction, ownership and operation of the IPSE
Systems, and (b) other than as set forth in the IPSE Systems Franchises, IPSE
has not made any commitment to any local franchising authority to make any
material expenditure or capital addition or betterment to any IPSE System or the
IPSE Assets that will not be fulfilled or satisfied prior to the Closing Time.
The IPSE Systems Franchises and IPSE Systems Licenses are currently in full
force and effect, are not in default and are valid under all applicable Legal
Requirements according to their terms. No event has occurred that, with notice
or lapse of time or both, would constitute a breach, violation or default by
IPSE, and to IPSE's Knowledge, no event has occurred that, with notice or lapse
of time or both, would constitute a breach, violation or default by any other
Person, of any material obligations under any such IPSE Systems Franchises or
IPSE Systems Licenses. Except for routine filings with Governmental Authorities
and as described on Schedule 6.5.2, there are no applications relating to any
IPSE Systems Franchise or IPSE Systems License pending before any Governmental
Authority which are material to any IPSE System or IPSE's Cable Business. Except
where a request for renewal has been timely filed under Section 626(a) of the
Cable Act, since December 31, 1998, no IPSE Systems Franchise or IPSE Systems
License has been surrendered by IPSE or has expired or otherwise terminated
without the issuance of a replacement IPSE Systems Franchise or IPSE Systems
License. There is no legal action, governmental proceeding or investigation
pending or, to IPSE's Knowledge, threatened to terminate, suspend or modify any
IPSE Systems Franchise or IPSE Systems License. Except as set forth on Schedule
6.5.2, IPSE is, or will be as of the Closing Date, in material compliance with
the terms and conditions of all the IPSE Systems Franchises and
IPSE/Charter Asset Exchange Agreement
33
<PAGE> 45
IPSE Systems Licenses and other applicable requirements of all Governmental
Authorities (including the FCC and the U.S. Copyright Office) relating to the
IPSE Systems Franchises and IPSE Systems Licenses, including all requirements
for notification, filing, reporting, posting and maintenance of logs and
records.
6.5.3 IPSE has delivered to Charter true and complete copies of all
IPSE Systems Contracts (including each Contract relating to IPSE Leased Property
and IPSE Other Real Property Interests), including any amendments thereto (or,
in the case of oral Contracts, true and complete written summaries thereof) and
each document evidencing IPSE's ownership of the IPSE Owned Property. Except as
described in Schedule 6.5.3, IPSE has fulfilled when due, or has taken all
action necessary to enable it to fulfill when due, all of its obligations under
each of its Contracts and, to the Knowledge of IPSE, there has not occurred any
default (without regard to requirements of notice, lapse of time, elections of
other Persons, or any combination thereof) by any other Person of any material
obligations under any of its Contracts or Real Property Interests.
6.6 Real Property. All the Assets consisting of IPSE Owned Property, IPSE
Leased Property and material IPSE Other Real Property Interests are described on
Schedules 1.38, 1.40 and 1.41. Except for ordinary wear and tear and routine
repairs and as set forth on Schedule 6.6, all of the improvements, leasehold
improvements and the premises of the IPSE Owned Property and the premises
demised under the leases and other documents evidencing the IPSE Leased Property
are in good condition and repair and are suitable for the purposes used. Each
parcel of IPSE Owned Property and each parcel of IPSE Leased Property and any
improvements thereon (a) has access to and over public streets or private
streets for which IPSE has a valid right of ingress and egress, (b) except as
set forth on Schedule 1.38 or 1.40, conforms in its current use and occupancy to
all material zoning requirements without reliance upon a variance issued by a
Governmental Authority or a classification of the parcel in question as a
nonconforming use, (c) conforms in all material respects in its current use to
all restrictive covenants, if any, or other Liens affecting all or part of such
parcel (of record, with respect to IPSE Owned Property, or of record or as set
forth in an agreement listed on Schedule 1.38 or 1.40, with respect to IPSE
Leased Property or IPSE Other Real Property Interests), and (d) is available for
immediate use in the conduct of the business or operations of the IPSE Systems.
There are no pending condemnation, expropriation, eminent domain or similar
proceedings of which IPSE has received notice or IPSE has Knowledge affecting,
in any material respect, all or any portion of the IPSE Owned Property, IPSE
Leased Property, or IPSE Other Real Property Interests. IPSE has good and
marketable title to each such parcel of real property included in the IPSE Owned
Property and in all buildings, structures and improvements thereon, in each case
free and clear of all Liens except for Permitted Liens.
6.7 Environmental.
IPSE/Charter Asset Exchange Agreement
34
<PAGE> 46
6.7.1 Except as described on Schedule 6.7, IPSE is in material
compliance with all Environmental Laws, insofar as they relate to its Owned
Property or Leased Property. Except as described on Schedule 6.7, IPSE has not
received any notice of, and has no Knowledge of, any alleged, actual, or
potential responsibility for, or any inquiry regarding, (i) any release or
threatened release of any Hazardous Substances from or on its Owned Property or
Leased Property, or (ii) any material violation of any Environmental Laws
associated with its Owned Property or Leased Property. Except as described on
Schedule 6.7, to IPSE's Knowledge, its own operations on its Other Real Property
Interests do not violate any Environmental Laws in any material respect, and
IPSE has received no notice of any such violation. Except as described on
Schedule 6.7, IPSE has not received any notice of, and has no Knowledge of
circumstances relating to, any past, present or future events, conditions,
circumstances, activities, practices or incidents (including the presence, use,
generation, manufacture, disposal, release or threatened release of any
Hazardous Substances from or on its Owned Property or Leased Property), which
could interfere with or prevent continued compliance, or which are reasonably
likely to give rise to any liability, based upon or related to the processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge, release or threatened release into the environment, of any
Hazardous Substance from or attributable to its Owned Property or Leased
Property.
6.7.2 Except as described on Schedule 6.7, to IPSE's Knowledge, (a)
no aboveground or underground storage tanks are currently or have been located
on any IPSE Owned Property or IPSE Leased Property and (b) no IPSE Owned
Property or IPSE Leased 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.
6.7.3 Complete and correct copies of (a) all studies, reports,
surveys or other similar written materials in IPSE's possession or to which
IPSE, to its Knowledge, has access relating to the presence or alleged presence
of Hazardous Substances at, on, under or affecting the IPSE Owned Property or
IPSE Leased Property, (b) all notices (other than general notices made by
general publication) in IPSE's possession or to which IPSE, to its Knowledge,
has access that were received from any Governmental Authority having the power
to administer or enforce any Environmental Laws relating to current or past
ownership, use or operation of the IPSE Owned Property or IPSE Leased Property
or activities at the IPSE Owned Property or IPSE Leased Property and (c) all
notices and related materials in IPSE's possession or to which IPSE, to its
Knowledge, has access relating to any Litigation concerning any Environmental
Law to which IPSE is a party or written allegation by any private Third Party
concerning any Environmental Law and IPSE, have been provided to Charter (other
than those materials constituting attorney-client privileged communications).
IPSE/Charter Asset Exchange Agreement
35
<PAGE> 47
6.8 Compliance with Legal Requirements.
6.8.1 Except as set forth on Schedule 6.8, the operation of each
IPSE System as currently conducted does not violate or infringe any Legal
Requirement currently in effect in any material respect (other than Legal
Requirements described in Sections 6.7, 6.8.3 and 6.8.4, as to which the
representations and warranties set forth in those subsections will apply) or the
grounding requirements of the National Electrical Safety Code. Except as set
forth on Schedule 6.8, IPSE has not received any notice and IPSE has no
Knowledge of any material violation by it or any IPSE System of any Legal
Requirement applicable to the installation, ownership and operation of its
Systems as currently conducted, and knows of no basis for the allegation of any
such violation.
6.8.2 Except as set forth on Schedule 6.8, without limiting the
generality of the foregoing, since IPSE's acquisition of its Systems: IPSE has
submitted to the FCC all filings, including cable television registration
statements, annual reports and aeronautical frequency usage notices and paid all
regulatory fees, that are required under the rules and regulations of the FCC;
the operation of its Systems has been and is in material compliance with the
rules and regulations of the FCC, and IPSE has not received any notice from the
FCC of any violation of its rules and regulations; IPSE is and since 1986 (or
since its acquisition, if later) has been certified as in compliance with the
FCC's equal employment opportunity rules; its Systems are in material compliance
with all signal leakage criteria prescribed by the FCC; and for each relevant
semi-annual reporting period since its acquisition of an IPSE System, IPSE has
timely filed with the United States Copyright Office all required Statements of
Account in true and correct form, has paid when due all required copyright
royalty fee payments in correct amount, relating to its Systems' carriage of
television broadcast signals and is otherwise in material compliance with all
applicable rules and regulations of the Copyright Office. Except as set forth on
Schedule 6.8, IPSE has no Knowledge, with respect to any IPSE System acquired
since January 1, 1996, of any previous owner's failure to comply with the
copyright licensing requirements with respect to such System or any written
claim or inquiry from any Person which questions such System's failure to
comply. IPSE has delivered to Charter copies of: (i) all reports, filings and
correspondence made or filed by IPSE with the FCC or pursuant to the FCC rules
and regulations for the past year; and (ii) all reports, filings and
correspondence made or filed by IPSE with the Copyright Office or pursuant to
Copyright Office rules and regulations for the past three years. Except as set
forth on Schedule 6.8, (i) 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 expiring within 36 months after the date of this
Agreement; and (ii) IPSE has received no written notice from any Governmental
Authority that it has determined or intends to deny renewal of any IPSE Systems
Franchise.
6.8.3 Except as set forth on Schedule 6.8 and as otherwise provided
in this Section, IPSE has used commercially reasonable efforts to comply in all
material respects with
IPSE/Charter Asset Exchange Agreement
36
<PAGE> 48
the provisions of the 1984 Cable Act and the 1992 Cable Act pertaining to the
carriage of television broadcast signals, as such Legal Requirements relate to
the operation of its Systems. IPSE has complied in all material respects with
the must carry and retransmission consent provisions of the 1992 Cable Act,
including (i) duly and timely notifying "local commercial television stations"
of inadequate signal strength or increased copyright liability, if applicable,
(ii) duly and timely notifying non-commercial educational stations of the
location of its System's principal headend, (iii) duly and timely notifying
subscribers of changes in the channel alignment on its Systems, (iv) duly and
timely notifying "local commercial and non- commercial television stations" of
the broadcast signals carried on its Systems and their channel positions, (v)
maintaining the requisite public file identifying broadcast signal carriage,
(vi) carrying the broadcast signals after June 1, 1993, on its Systems for all
"local commercial television stations" which elected must carry status and, if
required, up to two "qualified low power stations" and (vii) obtaining
retransmission consents for all broadcast signals carried on its Systems after
October 5, 1993, except for the non-exempt signals carried pursuant to a must
carry election. No must carry complaint is pending against any IPSE System at
the FCC, nor, to IPSE's Knowledge, is any threatened except as set forth in
Schedule 6.8. IPSE has delivered to Charter copies of any pending petitions it
has on file with the FCC, including requests for market modifications or
petitions for special relief or any market modification requests or special
relief petitions affecting any IPSE System that have been served on IPSE. The
FCC has not issued any decision with respect to a must carry complaint finding
any IPSE System in violation of the must carry rules except as set forth on
Schedule 6.8.
6.8.4 IPSE has used commercially reasonable efforts to establish
rates charged and a la carte packages provided to subscribers, effective as of
September 1, 1993, that would be allowable under rules and regulations
promulgated by the FCC under the 1992 Cable Act, and any authoritative
interpretation thereof, whether or not such rates or packages were subject to
regulation at that date by any Governmental Authority, including any state
regulatory agency, local franchising authority and/or the FCC. Notwithstanding
the foregoing, IPSE makes no representation or warranty that either the rates
charged to subscribers or the a la carte packages provided would be allowable
under any rules and regulations of the FCC, or any authoritative interpretation
thereof, promulgated after the date of the Closing. IPSE has delivered to
Charter complete and correct copies of (i) the most recent FCC Rate Forms filed
by IPSE with the local franchising authority and/or the FCC and will deliver as
soon as available all FCC Rate Forms that are prepared with respect to the IPSE
Systems, (ii) all historical FCC Rate Forms with respect to any IPSE System in
which there is currently a rate issue pending, including any accounting order or
any rate order on appeal, (iii) copies of all complaints, petitions, answers,
responses and other filings made with or by any Governmental Authority in
connection with any rate orders issued by such Governmental Authority or any
appeal therefrom, and (iv) any documentation supporting an exemption from the
rate regulation provisions of the 1992 Cable Act claimed by IPSE with respect to
its Systems.
IPSE/Charter Asset Exchange Agreement
37
<PAGE> 49
Except as set forth on Schedule 6.8, IPSE has not made a Cost of Service
Election with respect to any of the IPSE Systems.
6.8.5 Except as set forth on Schedule 6.8, all necessary FAA
approvals have been obtained and all necessary FCC tower registrations have been
filed with respect to the height and location of towers used in connection with
the operation of the IPSE Systems, and such towers are being operated in
compliance in all material respects with applicable FCC and FAA rules. The
ownership, height (with and without appurtenances), location (address, latitude,
longitude and ground elevation), structure type and FCC call signs of each tower
used in connection with the operation of the IPSE Systems are correctly
described on Schedule 6.8. To the extent applicable, IPSE has delivered to
Charter true and correct copies of the FAA final determinations that are
available and FCC registrations for all such towers.
6.9 Intellectual Property. Except for Intellectual Property which
constitutes IPSE Excluded Assets and the Intellectual Property described on
Schedule 4.2(b), IPSE does not possess any Intellectual Property related to or
material to the operation of the IPSE Systems and IPSE is not a party to any
license or royalty agreement with respect to any such Intellectual Property,
except for licenses respecting program material or incidental to any Systems
Contract and obligations under the Copyright Act applicable to cable television
systems generally. To the Knowledge of IPSE, the IPSE Systems and IPSE's Cable
Business have been operated in such a manner so as not to violate or infringe
upon the rights, or give rise to any rightful claim of any Person for copyright,
trademark, service mark, patent or license infringement or the like.
6.10 Financial Statements. IPSE's statements of income for the years ended
December 31, 1997 and 1998, attached hereto as Schedule 6.10, are in accordance
with the books and records of the IPSE Systems, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby and, except as may be described therein,
present fairly the operating results of the IPSE Systems for the periods
indicated, subject only to standard year-end adjustments and the omission of
footnotes thereto.
6.11 Absence of Certain Changes or Events. Except as set forth on Schedule
6.11, since December 31, 1998, there has been no (i) material adverse change in,
nor has any event or events (other than any affecting the cable television
industry generally) occurred that, individually or in the aggregate, are
reasonably likely to result in a material adverse change in the IPSE Assets,
business, operations, condition (financial or otherwise) or results of
operations of the IPSE Systems, taken as a whole and (ii) material change in
accounting principles or practices with respect to the IPSE Systems or
revaluation by IPSE of the IPSE Assets for financial reporting, property tax or
other purposes. From December 31, 1998 to the date of this Agreement, IPSE's
Cable Business has been conducted only in the usual, regular and ordinary
course, except as disclosed on Schedule 6.11 and except where the
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failure to conduct business in such manner would not have a material adverse
effect on the IPSE Assets, IPSE's Cable Business, the operations, condition
(financial or otherwise) or results of operations of the IPSE Systems taken as a
whole or on the ability of IPSE to perform its obligations under this Agreement.
6.12 Litigation. Except as set forth on Schedule 6.12: (a) there is no
Litigation pending or, to IPSE's Knowledge, threatened against IPSE or any
Affiliate of IPSE which, if adversely determined, would (i) materially and
adversely affect the financial condition or operations of IPSE's Cable Business,
any of the IPSE Systems, the IPSE Assets or the ability of IPSE to perform its
obligations under this Agreement or (ii) result in the modification, revocation,
termination, suspension or other limitation of any of the IPSE Systems
Franchises, IPSE Systems Licenses, or IPSE Systems Contracts; and (b) there is
not in existence any Judgment requiring IPSE or any Affiliate of IPSE to take
any action of any kind with respect to the IPSE Assets or the operation of any
of the IPSE Systems, or to which IPSE (with respect to the IPSE Systems), any of
the IPSE Systems or the IPSE Assets are subject or by which they are bound or
affected, that has not been fully complied with by IPSE.
6.13 Tax Returns; Other Reports. IPSE has duly and timely filed in correct
form all federal, state, local and foreign Tax returns and other Tax reports
required to be filed by IPSE, and has timely paid all Taxes which have become
due and payable, whether or not so shown on any such return or report, the
failure of which to be filed or paid could affect or result in the imposition of
a Lien upon the IPSE Assets or create any transferee or other liability upon
Charter, except such amounts as are being contested diligently and in good faith
and are not in the aggregate material. Except as set forth on Schedule 6.13,
IPSE has not received any notice of, nor does IPSE have any Knowledge of, any
deficiency, assessment or audit, or proposed deficiency, assessment or audit
from any taxing Governmental Authority which could affect, or result in the
imposition of a Lien upon, any of the IPSE Assets or transferee or other
liability upon Charter.
6.14 Employment Matters.
6.14.1 IPSE has complied in all material respects with all
applicable Legal Requirements relating to the employment of labor, including
WARN, continuation coverage requirements with respect to group health plans and
those relating to wages, hours, collective bargaining, unemployment insurance,
workers' compensation, equal employment opportunity, age, sex, race and
disability discrimination, immigration control and the payment and withholding
of Taxes.
6.14.2 There are no Liens against the IPSE Assets under Section
412(n) of the Code or Sections 302(f) or 4068 of ERISA. At the Closing, Charter
and its ERISA Affiliates will have no obligation to contribute to, or any
liability in respect of, (i) any employee benefit plan within the meaning of
Section 3(3) of ERISA, or (ii) any similar employment, severance
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or other arrangement or policy (whether written or oral) providing for insurance
coverage (including self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
fringe benefits or retirement benefits, or for profit sharing, deferred
compensation, bonuses, stock options, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits,
sponsored or maintained by IPSE or any of its ERISA Affiliates, or to which IPSE
or any of its ERISA Affiliates was obligated to contribute. IPSE will not, in
connection with the transactions contemplated by this Agreement, cease to
provide any group health plan coverage to their employees in a manner which
would cause any Charter Party or any of their ERISA Affiliates to be deemed a
successor employer of IPSE within the meaning of Proposed Treasury Regulations
Section 54.4980B-9 Q&A8(c). With respect to any multi-employer plan within the
meaning of Section 3(37) of ERISA, or any plan subject to Title IV of ERISA, to
which IPSE or any of its ERISA Affiliates is or ever was obligated to
contribute, (a) there has been no material "reportable event" described in
Sections 4043(c)(1), (2), (3), (5), (6), (7), (10), or (13) of ERISA, (b) no
"accumulated funding deficiency" (as defined in Section 302 of ERISA) or
"withdrawal liability" (as determined under Section 4201 et seq. of ERISA) has
occurred, exists or is continuing with respect to any such plan other than a
multi-employer plan (as defined in Section 3(37) of ERISA), or, to the Knowledge
of IPSE or any of its ERISA Affiliates, with respect to any such plan which is a
multi-employer plan (as defined in Section 3(37) of ERISA), (c) no such plan has
been terminated other than in accordance with ERISA or at a time when such plan
was not sufficiently funded, and (d) there has been no (i) withdrawal by IPSE or
any of its ERISA Affiliates that is a substantial employer from a single-
employer plan and that has two or more contributing sponsors at least two of
whom are not under common control, as referred to in Section 4063(b) of ERISA,
or (ii) cessation by IPSE or any of its ERISA Affiliates of operations at a
facility causing more than 20% of plan participants to be separated from
employment, as referred to in Section 4062(e) of ERISA. With respect to any plan
maintained, sponsored by, or contributed to by IPSE, which is intended to comply
with the provisions of Section 401(k) of the Code, and from which any similar
plan maintained or sponsored by any Charter Party or any of their ERISA
Affiliates accepts a plan-to-plan transfer under Section 7.3.3, (I) such plan
has received a favorable determination letter from Internal Revenue Service, and
neither IPSE nor any of its ERISA Affiliates has any Knowledge of any fact which
could adversely affect the qualified status of such plan, and (II) such plan has
been administered and maintained in material compliance with ERISA, the Code and
all other applicable laws.
6.14.3 Except as set forth on Schedule 6.14, there are no collective
bargaining agreements applicable to any Person employed by IPSE that renders
services in connection with the IPSE Systems and IPSE has no duty to bargain
with any labor organization with respect to any such Person. Except as set forth
on Schedule 6.14, there are not pending any unfair labor practice charges
against IPSE, any demand for recognition or any other request or demand from a
labor organization for representative status with respect to any Person employed
by IPSE that renders services in connection with the IPSE Systems. Except as
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described on Schedule 6.14, IPSE has no employment agreements, either written or
oral, with any employee of the IPSE Systems and none of the employment
agreements listed on Schedule 6.14 requires IPSE, or will require Charter or any
Affiliate of Charter, to employ any Person after the Closing.
6.15 IPSE Systems Information.
6.15.1 Schedule 6.15.1 sets forth a materially true and accurate
description, on a System-by-System basis, of the following information relating
to the IPSE Systems as of December 31, 1998:
(a) the approximate number of aerial and underground miles of
plant included in the IPSE Assets and served by each headend;
(b) the approximate number of single family homes and
residential multiple dwelling units passed by each IPSE System;
(c) the MHZ capacity and channel capacity of each headend; and
(d) the number of subscribers served by each IPSE System and a
description of the calculation methodology used by IPSE to calculate such
subscribers.
6.15.2 Schedule 6.15.2 sets forth a materially true and accurate
description of the following information relating to the IPSE Systems as of the
date of this Agreement:
(a) a description of the Basic Services, the Expanded Basic
Services, Pay TV and a la carte services available from each IPSE System, and
the rates charged by IPSE therefor, including all rates, tariffs and other
charges for cable television or other services provided by each IPSE System;
(b) the stations and signals carried by each IPSE System and
the channel position of each such signal and station; and
(c) the cities, towns, villages, boroughs and counties served
by each IPSE System.
6.15.3 Each IPSE System is capable of providing all channels,
stations and signals reflected as being carried on such IPSE System on Schedule
6.15.2.
6.16 Taxpayer Identification Number. The U.S. Taxpayer Identification
Number for IPSE is 94-3143720.
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6.17 Finder and Brokers. IPSE has not entered into any Contract with any
person which will result in the obligation of Charter to pay any Agent's Fees in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
6.18 Related Party Transactions. Set forth on Schedule 6.18 hereto, are
the Contracts, agreements, arrangements or understandings between IPSE and any
of its Affiliates and between IPSE and any AT&T Affiliates included in or
related to the IPSE Assets.
7. ADDITIONAL COVENANTS.
7.1 Access to Premises and Records. Between the date of this Agreement and
the Closing Date, each Party (a) will give to the other and its counsel,
accountants and other representatives reasonable access during normal business
hours and upon reasonable advance notice to all the premises and books and
records of its Cable Business and to all of its Assets and the personnel engaged
in the management or operation of its Systems; and (b) will furnish to the other
and such representatives all such documents, financial information and other
information regarding its Cable Business and its Assets as the other from time
to time reasonably may request; provided that no investigation will affect or
limit the scope of any of the representations, warranties, covenants and
indemnities of the other in this Agreement or in any Transaction Document or
limit liability for any breach of any of the foregoing.
7.2 Continuity and Maintenance of Operations, Certain Deliveries and
Notice. Except as set forth on Schedule 7.2, in the 1999 operating budgets set
forth on Schedule 7.2-A, with respect to IPSE, and on Schedule 7.2-B, with
respect to Charter, or as the other Party may otherwise consent in writing,
between the date of this Agreement and the Closing, each of IPSE with respect to
IPSE's Cable Business, the IPSE Systems and the IPSE Assets, and each Charter
Party with respect to its Cable Business, Systems and Assets:
7.2.1 will conduct its Cable Business in good faith and operate its
Systems only in the usual, regular and ordinary course (including making routine
capital expenditures and operating substantially in accordance with the 1999
capital and operating budgets with respect to each such System (copies of which
are set forth on Schedule 7.2-A, with respect to IPSE, and on Schedule 7.2-B,
with respect to Charter), completing ongoing and planned line extensions,
placing conduit or cable in new developments, fulfilling installation requests,
completing disconnection work orders and disconnecting and discontinuing service
to customers whose accounts are delinquent) and, to the extent consistent with
such conduct and operation, use its commercially reasonable efforts to (a)
preserve its current business intact in all material respects, including
preserving existing relationships with franchising authorities, suppliers,
customers and others having business dealings with its Systems, (b) keep
available the services of its employees and agents providing services in
connection with its Cable Business, (c) continue budgeted marketing, advertising
and promotional expenditures with
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respect to its Cable Business, (d) enter into written agreements with respect to
all multiple dwelling unit and bulk billed accounts having greater than 200
individual units, and (e) operate its Cable Business in material compliance with
all Legal Requirements;
7.2.2 will maintain its Assets in good operating repair, order and
condition, ordinary wear and tear excepted; will maintain equipment and
inventory for its Systems at normal historical levels consistent with its past
practices (as adjusted to account for abnormally high inventory levels related
to periodic rebuild activity); will maintain in full force and effect policies
of insurance with respect to its Cable Business in such amounts and with respect
to such risks as are currently in effect for its Systems; and will maintain its
books, records and accounts with respect to its Assets and the operation of its
Systems in the usual, regular and ordinary manner on a basis consistent with its
past practices;
7.2.3 will not, outside the ordinary course of business or to the
extent inconsistent with past practice or the 1999 operating budget included in
Schedule 7.2-A (with respect to IPSE) or Schedule 7.2-B (with respect to
Charter), as applicable, (a) modify, terminate, renew, suspend or abrogate any
System Contract (other than retransmission consent System Contracts, System
Contracts evidencing Leased Property or Other Real Property Interests and lease
agreements for Tangible Personal Property); (b) modify, terminate, renew,
suspend or abrogate any retransmission consent System Contract, System
Franchise, System Contract evidencing Leased Property or Other Real Property
Interests, lease agreements for Tangible Personal Property or System License
except for renewals (other than renewals of System Franchises) on terms that are
not materially different from those which currently exist and renewals of System
Franchises as otherwise required or permitted under this Agreement; (c) engage
in any marketing, subscriber installation, collection or disconnection
practices; (d) make any Cost of Service Election; (e) other than as set forth on
Schedule 7.2, enter into any agreement with or commitment to any competitive
access provider and/or local exchange company or any internet access or on-line
services provider with respect to the use or lease of any of its Assets; (f)
sell, transfer or assign any portion of its Assets other than sales in the
ordinary course of business or permit the creation of a Lien (other than
Permitted Liens) on any of its Assets; (g) take any actions that would cause the
transactions contemplated hereby to fail to qualify as a like-kind exchange
under Section 1031 of the Code; (h) decrease the rate charged for any level of
Basic Services, Expanded Basic Services or any Pay TV or, except as expressly
permitted by Schedule 7.2, add, delete, retier or repackage any analog
programming services, in each case except to the extent required under the 1992
Cable Act or any other Legal Requirement; provided, however, that if rates are
decreased in order to so comply, the Party decreasing the rates will provide the
other with copies of any FCC forms (even if not filed with any Governmental
Authority) that such Party used to determine that the new rates were required;
(i) convert any of its Systems to any billing system or otherwise change billing
arrangements for any of its Systems; (j) enter into any Contract of any kind
relating to the Cable Business to be assumed by the other Party hereunder that
individually or in the aggregate call for payments over its terms or otherwise
involving expenditures in excess of
IPSE/Charter Asset Exchange Agreement
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$100,000, except for the renewal of Contracts that would, but for such renewal,
terminate in accordance with their terms prior to Closing; (k) except pursuant
to or required by plans, agreements or arrangements already in effect on the
date hereof, make any material increase in compensation or benefits payable or
to become payable to employees or make any material change in personnel
policies; (l) take any action with respect to the grant or increase of severance
or termination pay payable after the Closing Date; (m) engage in any material
transaction with respect to its Cable Business; or (n) agree to do any of the
foregoing;
7.2.4 will promptly deliver to the other (i) true and complete
copies of all monthly statements of income and such other information with
respect to its Systems or the operation of its Cable Business in a format
consistent with the form of report attached hereto as Schedule 7.2.4 for the
period from January 1, 1999, through the Closing, and if the Closing occurs as
of the end of a month, as soon as practicable after Closing and (ii) such
financial information reasonably requested by such other party in connection
with the qualification, reporting and record-keeping requirements under Section
1031 of the Code (and the revenue regulations thereunder) with respect to the
Exchange;
7.2.5 will give or cause to be given to the other, as soon as
reasonably possible but in any event within five Business Days after the date of
submission to the appropriate Governmental Authority, copies of all FCC Forms
1200, 1205, 1210, 1215, 1220, 1225, 1235 and 1240 or any other FCC forms
required to be filed with any Governmental Authority under the 1992 Cable Act
with respect to rates and prepared with respect to any of its Systems;
7.2.6 will duly and timely file a valid notice of renewal under
Section 626 of the Cable Act with the appropriate Governmental Authority with
respect to any System Franchise that will expire within 36 months after any date
between the date of the Agreement and the Closing Date;
7.2.7 will promptly notify the other of any fact, circumstance,
event or action by it or otherwise (a) which, if known at the date of this
Agreement, would have been required to be disclosed by it in or pursuant to this
Agreement or (b) the existence, occurrence or taking of which would result in
the condition of IPSE in Section 8.2.1 (with respect to the representations and
warranties of the Charter Parties) or the condition of the Charter Parties in
Section 8.1.1 (with respect to the representations and warranties of IPSE) not
being satisfied at any time prior to or on the Closing, and, with respect to
clause (b), use its commercially reasonable efforts to remedy the same and to
satisfy such condition to the other Party's obligation to consummate the
transactions contemplated by this Agreement;
7.2.8 will use its commercially reasonable efforts to challenge and
contest any Litigation brought against or otherwise involving such Party that
could result in the imposition of Legal Requirements that could cause the
conditions to the Closing not to be satisfied; and
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7.2.9 will cause its appropriate Affiliates to be bound by and
comply with the provisions of this Section 7.2 to the extent such Affiliates
own, operate or manage any of the IPSE Assets, IPSE Systems, Charter Assets or
Charter Systems, as the case may be.
7.3 Employees.
7.3.1 Except as set forth in this Section 7.3.1, each Party may, but
shall have no obligation to employ or offer employment to, any employee of the
other Party's Cable Business. Within 30 days after the date of execution of this
Agreement, each Party shall provide to the other a list of all employees of its
Systems (collectively for each Party, its "System Employees") as of a recent
date, showing the original hire date, the then-current positions and rates of
compensation and whether the employee is subject to an employment agreement, a
collective bargaining agreement or represented by a labor organization. Within
60 days after the date of execution of this Agreement (but in no event less than
30 days after receipt of such list), or such other date as the Parties may
agree, the Party receiving such list will provide to the other in writing a list
of the other's System Employees such Party or its Affiliates will employ
following the Closing, subject only to the evaluations permitted by this
Section. Each Party agrees, and shall cause its appropriate Affiliates, to
cooperate in all reasonable respects with the other Party to allow the other
Party or its Affiliates to evaluate its System Employees to make hiring
decisions. In this regard, each Party shall have the opportunity to make such
appropriate prehire investigation of each of such other Party's System
Employees, as it deems necessary, including, subject to obtaining the consent of
such System Employee, the right to review personnel files and conduct background
checks and the right to interview such employees during normal working hours so
long as such interviews are conducted after notice to the other Party and do not
unreasonably interfere with the other Party's operations. Each Party will use
its good faith efforts to obtain the consent of each of its System Employees to
allow the other Party to review personnel files and to conduct background checks
in connection with the foregoing. Each Party or its Affiliates may, if it
wishes, condition any offer of employment upon the employee's passing a
pre-placement physical examination (including drug screening test) and the
completion of a satisfactory background check. The Party requesting such
examination shall bear the expense of such examination but the other Party
shall, upon reasonable notice, cooperate in the scheduling of such examinations
so long as the examinations do not unreasonably interfere with the other Party's
operations. As of the Closing Date, each Party shall have no obligation to the
other Party, its Affiliates or to the other Party's employees, with regard to
any employee it has determined not to hire. Notwithstanding any of the
foregoing, each Party agrees not to solicit for employment, without the written
consent of the other, any employee listed on Schedule 7.3 or any other employee
of the other Party whose position is System manager or higher.
7.3.2 Each Party, or its appropriate Affiliate, will pay to all of
its System Employees all compensation, including salaries, commissions, bonuses,
deferred
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compensation, severance (to the extent applicable), insurance, vacation (except
for accrued vacation time (not to exceed four weeks) and sick time (not to
exceed 10 days) included in the calculation of such Party's Adjusted Value under
the Common Agreement), and other compensation or benefits to which they are
entitled for periods prior to the Closing, including all amounts, if any,
payable on account of the termination of their employment.
7.3.3 Each Party, or its appropriate Affiliate, will be responsible
for maintenance and distribution of benefits accrued under any employee benefit
plan (as defined in ERISA) maintained by such Party, or its appropriate
Affiliate, pursuant to the provisions of such plan and any Legal Requirements.
Neither Party will assume any obligation or liability for any such accrued
benefits or any fiduciary or administrative responsibility to account for or
dispose of any such accrued benefits under any employee benefit plans maintained
by the other Party or any Affiliate. In the event that a transferor Party
determines that the transactions contemplated by this Agreement will not permit
a distribution to be made to a Hired Employee (as defined below) from the
transferor Party's tax qualified plan in accordance with Section 401(k)(10) of
the Code then the other Party may accept a plan-to-plan transfer of Hired
Employees' plan benefits to its own tax qualified plan. If there is no
plan-to-plan transfer, in order to permit a transferor Party, or its appropriate
Affiliate, to make distributions to any former System Employee of such Party who
becomes a Hired Employee of the other Party of the balance of such employee's
401(k) account in the transferor Party's or its Affiliate's tax qualified plan,
if any, as soon as legally permitted, each transferee Party shall notify the
other Party of the date of termination of such employee's employment with the
transferee Party for any reason.
7.3.4 All claims and obligations under, pursuant to or in connection
with any welfare, medical, insurance, disability or other employee benefit plans
of a Party or any Affiliate or arising under any Legal Requirement affecting
employees of such Party or any Affiliate incurred on or before the Closing Date
or resulting from or arising from events or occurrences occurring or commencing
on or before the Closing Date will remain the responsibility of such Party, or
the appropriate Affiliate, whether or not such employees are hired by the other
Party as of or after the Closing. Neither Party will have or assume any
obligation or liability under or in connection with any such plan of the other
Party or any Affiliate of the other Party.
7.3.5 Each Party, or its appropriate Affiliate, will remain solely
responsible for, and will indemnify and hold harmless the other from and against
all Losses arising from or with respect to, all salaries and all severance,
vacation (except for accrued vacation time and sick time included in the
calculation of such Party's Adjusted Value under the Common Agreement), medical,
holiday, continuation coverage and other compensation or benefits to which its
employees may be entitled, whether or not such employees may be hired by the
other Party or any Affiliate of the other Party, as a result of their employment
by such Party or any Affiliate of such Party on or prior to the Closing Date,
the termination of their employment on
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or prior to the Closing Date, the consummation of the transactions contemplated
hereby or pursuant to any applicable Legal Requirement or otherwise relating to
their employment prior to the Closing Date. Any liability under WARN with regard
to any employee terminated on or prior to the Closing Date, or not hired by the
other Party on or after the Closing Date, shall, as a matter of contract between
the Parties, be the responsibility of the Party or its Affiliates by which the
employee was employed prior to the Closing Date. Each Party and its Affiliates
shall cooperate with the other Party and its Affiliates, if requested, in the
giving of WARN notices on behalf of the other.
7.3.6 Notwithstanding anything to the contrary herein, each Party
shall:
(a) credit each System Employee of the other Party who is
offered on or prior to the Closing employment by such Party and becomes an
employee of such Party after the Closing Date (a "Hired Employee") the amount of
vacation time (to a maximum of four weeks) and sick time (to a maximum of 10
days) accrued by him or her as a System Employee of the transferor Party through
and including the Closing Date to the extent the transferor Party's System Value
is decreased pursuant to Section 2.2(c)(ii) of the Common Agreement in the case
of IPSE System Employees who become employees of any Charter Party or its
Affiliates and Section 2.2(c)(ii) of the Common Agreement in the case of Charter
System Employees who become employees of IPSE or its Affiliates, provided,
however, that if any Hired Employee has accrued vacation time and/or sick time
in excess of four weeks or 10 days, respectively, then the transferor Party
shall, and shall cause its appropriate Affiliate to, pay to such employee the
amount of such excess and the transferee Party shall not assume any liability or
obligation in respect of such excess;
(b) permit each Hired Employee to participate in such Party's
employee benefit plans to the same extent as similarly situated employees of
such Party and their dependents are permitted to participate;
(c) give each Hired Employee credit for such employee's past
service with the other Party and its Affiliates as of the Closing Date
(including past service with any prior owner or operator of the other Party's
Systems or Cable Business) for purposes of eligibility and vesting under such
Party's employee benefit and other plans to the same extent as other similarly
situated employees of such Party;
(d) not subject any Hired Employee to any waiting periods or
limitations on benefits for pre-existing conditions under such Party's employee
benefit plans, including any group health and disability plans, except to the
extent such employees were subject to such limitations under the employee
benefit plans of such other Party or any Affiliate of such other Party; and
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(e) credit each Hired Employee under any group health plan for
any deductible amount previously met by such Hired Employee as of the Closing
Date under any of the group health plans of the transferor Party or any of its
Affiliates.
7.3.7 If a transferee Party discharges any Hired Employee without
cause within one hundred twenty days after Closing, then such transferee Party
shall pay severance benefits to such Hired Employee in accordance with such
transferor Party's severance benefit plan. For purposes of this Section 7.3.7,
"cause" shall have the meaning set forth in the transferee Party's employment
policies, procedures or agreements applicable to such transferee Party's
employees who are situated similarly to the discharged Hired Employee.
7.3.8 If a transferor Party has, or acquires, a duty to bargain with
any labor organization, then such transferor Party will (i) give prompt written
notice of such development to the other Party, including notice of the date and
place of any negotiating sessions as they are planned or contemplated and permit
the other Party to have a representative present at all negotiating sessions
with such labor organization and at all meetings preparatory thereto (including
making the transferee Party's representative a representative of the transferor
Party's delegation if required by the labor organization) and (ii) not, without
the transferee Party's written consent, enter into any Contract with such labor
organization that purports to bind the transferee Party, including any successor
clause or other clause which would have this purpose or effect. Each Party (as a
transferor Party) acknowledges and agrees that the other Party has not agreed to
be bound, and will not be bound, without an explicit assumption of such
liability or responsibility by the transferee Party, by any provision of any
collective bargaining agreement or similar Contract with any labor organization
to which the transferor Party or any of its Affiliates is or may become bound.
7.3.9 Nothing in this Section 7.3 or elsewhere in this Agreement
shall be deemed to make any employee of either Party a third party beneficiary
of this Agreement.
7.3.10 Notwithstanding any other provision of this Agreement, in
respect of wages paid with respect to the 1999 calendar year to employees of
Charter who after the Closing become employees of IPSE, or vice versa, IPSE and
Charter agree to comply, and to cause their respective affiliates to comply,
with the alternative procedures set forth in Section 5 of Revenue Procedure
96-60 and shall cooperate, and shall cause their respective affiliates to
cooperate, with each other in complying with such procedures.
7.4 Leased Vehicles; Other Capital Leases. Except for leases described in
Schedule 4.2(b) (with respect to IPSE Tangible Personal Property) or Schedule
4.4(b) (with respect to Charter Tangible Personal Property), each Party will pay
the remaining balances on any leases for vehicles or capital leases included in
its Tangible Personal Property and will
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deliver title to such vehicles and other Tangible Personal Property, free and
clear of all Liens, to the other Party at the Closing.
7.5 Required Consents; Franchise Renewal.
7.5.1 Each Party will use its commercially reasonable efforts to (i)
obtain in writing as promptly as possible and at its expense, all of the
Required Consents and any other consent, authorization or approval required to
be obtained by such Party in connection with the transactions contemplated by
this Agreement, and deliver to the other Party copies of such Required Consents
and such other consents, authorizations or approvals promptly after they are
obtained by such Party and (ii) give any required written notice in connection
with the transactions; provided, that each Party will afford the other Party the
opportunity to review, approve and revise the form of letter or application
proposed to request the Required Consent or form of written notice prior to
delivery to the Third Party or the Affiliate of a Party whose consent is sought
or to whom such notification is required. All documents delivered or filed with
any Governmental Authority or any Person by or on behalf of such Party pursuant
to this Section 7.5.1, when so delivered or filed, will be correct, current and
complete in all material respects. Each Party will cooperate with the other
Party to obtain all Required Consents and no Party shall intentionally take any
action or steps that would prejudice or jeopardize the obtaining of any Required
Consent. No Party will accept or agree or accede to any modifications or
amendments to, or the imposition of any condition to the transfer of, any of the
System Franchises, System Licenses or System Contracts of its Cable Business
that are not acceptable to the other Party. Notwithstanding the foregoing, as
soon as practicable after the date of this Agreement (and in no event more than
15 Business Days hereafter), each Party will cooperate with each other to
complete, execute and deliver, or cause to be completed, executed and delivered,
to the appropriate Governmental Authority, a FCC Form 394 with respect to each
System Franchise other than any such Governmental Authority that the Parties
have agreed will not initially receive FCC Form 394; provided, that if either
Party subsequently requests that FCC Form 394 be completed, executed and
delivered to any appropriate Governmental Authority that did not initially
receive a FCC Form 394 for any System Franchise, then the Parties will cooperate
to complete, execute and deliver a FCC Form 394 to such Governmental Authority
as soon as practicable but in any event within 15 Business Days after a Party
has made such request. Without the prior consent of the other Party, neither
Party shall agree with any Governmental Authority to extend or to toll the time
limits applicable to such Governmental Authority's consideration of any FCC Form
394 filed with such Governmental Authority.
7.5.2 Each Party will use commercially reasonable efforts to obtain
and cooperate with the other Party to obtain a renewal or extension of any
System Franchise (for a period expiring no earlier than three years after the
Closing Date) for which a valid notice of renewal pursuant to the formal renewal
procedures established by Section 626 of the Cable Act has not been timely
delivered to the appropriate Governmental Authority and no written
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confirmation has been received from such Governmental Authority that the
procedures established by Section 626 nonetheless will be applicable with
respect to the renewal or extension of such System Franchise.
7.5.3 Notwithstanding the provisions of Section 7.5.1, no Party will
have any further obligation to obtain Required Consents: (a) with respect to
license agreements relating to pole attachments where the licensing authority
will not consent to an assignment of such license agreement but requires that
the other Party enter into a new agreement with such licensing authority, in
which case the other Party shall use its commercially reasonable efforts to
enter into such agreement prior to Closing or as soon as practicable thereafter
and such Party will cooperate with and assist the other Party in obtaining such
agreements; (b) for any business radio license or any private operational fixed
service (POFS) microwave license which such Party reasonably expects can be
obtained within 120 days after the Closing and so long as a conditional
temporary authorization (for a business radio license) or a special temporary
authorization (for a POFS license) is obtained by the other Party under FCC
rules with respect thereto; (c) with respect to Contracts evidencing Leased
Property, if, with the consent of the other Party, such Party obtains and makes
operational prior to Closing substitute Leased Property that is reasonably
satisfactory to the other Party; (d) with respect to Contracts evidencing leased
Tangible Personal Property that is material to its Cable Business, if, with the
consent of the other Party, such Party obtains and makes operational prior to
Closing substitute Tangible Personal Property that is reasonably satisfactory to
the other Party; and (e) with respect to Contracts which are not identified with
an asterisk (*) on Schedule 5.3 or 6.3, if IPSE, with respect to Contracts
relating to IPSE Systems, or Charter, with respect to Contracts relating to
Charter Systems, uses its commercially reasonable efforts to obtain the Required
Consent of the other party to such Contract but fails to obtain such consent on
or prior to Closing.
7.5.4 If and to the extent that IPSE and the Charter Parties, or any
of them, fails to obtain all Required Consents identified with an asterisk (*)
on Schedule 5.3 (except Required Consents for the transfer of Systems Franchises
which shall be governed by Section 7.5.5) on or prior to the Closing (whether or
not Charter or IPSE shall have waived satisfaction of the condition to Closing
set forth in Section 8.1.5 or Section 8.2.5, respectively), subsequent to the
Closing, each of IPSE with respect to its Systems and Assets and the Charter
Parties with respect to their Systems and Assets will continue to use
commercially reasonable efforts to obtain in writing as promptly as possible
such Required Consents and will deliver copies of the same, reasonably
satisfactory in form and substance, to the other. The obligations set forth in
this Section will survive the Closing and will not be merged in the consummation
of the transactions contemplated hereby.
7.5.5 If less than all of the Required Consents for the transfer of
Systems Franchises are obtained as of the Closing Date, then subject to the
conditions set forth in Sections 4.1(c) and 4.2(d) of the Common Agreement the
following will occur:
IPSE/Charter Asset Exchange Agreement
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(a) With respect to each IPSE Systems Franchise for which an
IPSE Required Consent has not been obtained as of the Closing Date (including
any IPSE Assets that are located in the franchise area for such franchise or
relate exclusively to such franchise, an "IPSE Retained Franchise"), the parties
will negotiate in good faith to reach agreement on a Charter Systems Franchise
(including any Charter Assets that are located in the franchise area for such
franchise or relate exclusively to such franchise, a "Charter Matching
Franchise") that is to the greatest extent possible, like kind to such IPSE
Retained Franchise for purposes of Section 1031 of the Code and the applicable
exchange. A Charter Matching Franchise may also be a Charter Retained Franchise.
For purposes of this Section 7.5.5, a "Retained Franchise" means either an IPSE
Retained Franchise or a Charter Retained Franchise or both, as the context
requires, and a "Matching Franchise" means either an IPSE Matching Franchise or
a Charter Matching Franchise or both, as the context requires.
(b) With respect to each Charter Systems Franchise for which a
Charter Required Consent has not been obtained as of the Closing Date (including
any Charter Assets that are located in the franchise area for such franchise or
relate exclusively to such franchise, a "Charter Retained Franchise"), the
parties will negotiate in good faith to reach agreement on an IPSE Systems
Franchise (including any IPSE Assets that are located in the franchise area for
such franchise or relate exclusively to such franchise, a "IPSE Matching
Franchise") that is to the greatest extent possible, like kind to such Charter
Retained Franchise for purposes of Section 1031 of the Code and the applicable
exchange. An IPSE Matching Franchise may also be an IPSE Retained Franchise.
(c) The parties shall negotiate in good faith to reach
agreement on one or more operating agreements pursuant to which the intended
transferee of each Retained Franchise and Matching Franchise will operate such
Retained Franchise and Matching Franchise to the extent not prohibited under the
terms thereof, and for compensation as may be agreed upon, which operating
agreements shall also contain any required signal sharing arrangements that the
parties, each acting in good faith, may determine to be necessary (the
"Operating Agreements").
(d) At the Closing, the Charter Parties and IPSE shall
transfer, convey and assign (the "Primary Transfer") all of the IPSE System
Assets other than any IPSE Retained Franchises and IPSE Matching Franchises and
all of the Charter System Assets other than any Charter Retained Franchises and
Charter Matching Franchises.
(e) Following the Closing of the Primary Transfer, the parties
will continue to use commercially reasonable efforts to obtain on an expedited
basis the Required Consents for all IPSE Retained Franchises and Charter
Retained Franchises. The Operating Agreements will contain mutually acceptable
terms regarding the post-Closing exchange or transfer (a "Subsequent Transfer")
of the Retained Franchises and Matching Franchises after
IPSE/Charter Asset Exchange Agreement
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the receipt or failure to receive the Required Consents applicable to such
Retained Franchises and Matching Franchises.
(f) All references in this Agreement to the Closing and the
Closing Date will mean the Closing and Closing Date of the Primary Transfer
except as specifically provided otherwise in this Section 7.5.5(f). Without
limiting the foregoing, all representations and warranties (except as to those
Required Consents that have not been obtained) made in connection with the
Retained Franchises and the Matching Franchises will be made as of the Closing
Date rather than the date of the Subsequent Transfer, the other covenants in
Article 7 will not apply to the Retained Franchises or the Matching Franchises
following the Closing Date, and the Survival Period applicable under Article 11
for all such representations, warranties and covenants will accrue from the
Closing Date; provided, that the parties will negotiate in good faith to include
appropriate covenants in the Operating Agreements that will apply to the
Retained Franchises and the Matching Franchises following Closing. The closing
conditions in Article 8 will not apply to any Retained Franchise or Matching
Franchise transfer; provided, that the parties will negotiate in good faith to
include appropriate conditions to the later transfer of the Retained Franchises
and the Matching Franchises in the Operating Agreements. Notwithstanding the
foregoing, the adjustments provided for in Article 3 will be made as of the
Closing Date for both the Retained Franchises and the Matching Franchises.
(g) If the provisions of this Section 7.5.5 become operative,
the parties agree to use commercially reasonable efforts and act in good faith
in taking such actions and negotiating such additional provisions or other
agreements, including amendments to this Agreement, as may be necessary or
appropriate to carry out the intent of this Section 7.5.5, including keeping
franchise transfers effective.
7.6 Title Commitments and Surveys. Each Party will have the option to
obtain, at its own expense, (i) commitments of title insurance ("Title
Commitments") issued by a nationally recognized title insurance company selected
by the requesting party (the "Title Company") and containing policy limits and
other terms reasonably acceptable to the requesting party, and photocopies of
all recorded items described as exceptions therein committing to insure (A) fee
title in the requesting party to each parcel of IPSE Owned Property or Charter
Owned Property, as the case may be, and (B) a leasehold interest in the
requesting party in each parcel of IPSE Leased Property or Charter Leased
Property, as the case may be, that is the site of a System headend or tower, by
American Land Title Association ("ALTA") (1992) owner's or lessee's policies of
title insurance, and (ii) current ALTA as-built surveys (in accordance with the
Minimum Standard Detail Requirements for Land Title Surveys jointly established
and adopted by ALTA and the American Congress on Surveying and Mapping in 1992)
of each such parcel of IPSE or Charter Owned Property or IPSE or Charter Leased
Property with monuments placed at all major corners of the property boundary
unless already marked and showing the location and identification by recorded
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instrument number of all easements or rights-of-way burdening or benefiting the
property in question and all other documents and matters referenced as
exceptions on the Title Commitment, the location of all apparent easements and
rights-of-way, flood zone designation, setback lines, if applicable, the
location of all substantial visible improvements on such property and the
location of all adjoining streets and indication of access to a public way such
as curb cuts and driveways, in such form as is reasonably satisfactory to the
requesting party and as is necessary to obtain the title insurance to be issued
pursuant to the Title Commitments with the standard printed exceptions relating
to survey matters deleted (the "Surveys"), certified to the parties and the
Title Company issuing a Title Commitment. If the requesting party notifies the
other party within 20 days of this Agreement or, if later, of its receipt of
both the Title Commitments and the Surveys of any Lien (other than a Permitted
Lien) or other matter affecting title to IPSE or Charter Owned Property or IPSE
or Charter Leased Property of the other which renders (or presents a material
risk of rendering) title to any parcel of IPSE or Charter Owned Property not
good and marketable or prevents or materially interferes with (or presents a
material risk of preventing or interfering with) the use of any parcel of IPSE
or Charter Owned Property or IPSE or Charter Leased Property for the purposes
for which it is currently used or intended to be used by such Party (each a
"Title Defect"), such party will exercise commercially reasonable efforts to
remove or, with the consent of the requesting party, cause the Title Company to
commit to insure over, each such Title Defect prior to the Closing.
7.7 HSR Notification. As soon as practicable after the execution of this
Agreement, but in any event no later than 30 days after such execution, the
Charter Parties and IPSE will each complete and file, or cause to be completed
and filed at its own cost and expense, any notification and report required to
be filed under the HSR Act with respect to the transactions contemplated by this
Agreement and each such filing shall request early termination of the waiting
period imposed by the HSR Act. The Parties shall use their respective
commercially reasonable efforts to respond as promptly as reasonably practicable
to any inquiries received from the Federal Trade Commission (the "FTC") and the
Antitrust Division for additional information or documentation and to respond as
promptly as reasonably practicable to all inquiries and requests received from
any other Governmental Authority in connection with antitrust matters. The
Parties shall use their respective commercially reasonable efforts to overcome
any objections which may be raised by the FTC, the Antitrust Division or any
other Governmental Authority having jurisdiction over antitrust matters. Each
Party will cooperate to prevent inconsistencies between their respective filings
and between their respective responses to all such inquiries and responses, and
will furnish to each other such necessary information and reasonable assistance
as the other may reasonably request in connection with its preparation of
necessary filings or submissions under the HSR Act. Notwithstanding the
foregoing, no Party shall be required to make any significant change in the
operations or activities of the business (or any material assets employed
therein) of such Party or any of its Affiliates, if a Party determines in good
faith that such change would be materially adverse to
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the operations or activities of the business (or any material assets employed
therein) of such Party or any of its Affiliates having significant assets, net
worth or revenue.
7.8 Sales and Transfer Taxes. All sales, use or excise Taxes arising from
or payable by reason of the transfer of any of the IPSE Assets or any of the
Charter Assets ("Transfer Taxes") will be shared equally by IPSE and Charter.
All transfer and similar taxes or assessments, including transfer fees and
similar assessments for or under System Franchises, System Licenses and System
Contracts, arising from or payable by reason of the conveyance of the IPSE
Assets or the Charter Assets also will be shared equally by IPSE and Charter.
Tax Returns required to be filed in respect of Transfer Taxes ("Transfer Tax
Returns") shall be prepared and filed by the party that has the primary
responsibility under applicable law for filing such Transfer Tax Returns. If no
party has primary responsibility for filing a Transfer Tax Return, then Charter
shall be responsible for preparing and filing any such Transfer Tax Return.
7.9 Programming. Each Party will execute and deliver such documents and
take such action as may be reasonably requested by another 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 neither Party will be required to provide specific programming or
channels or to assume any liability with respect to or in connection with the
programming agreements of the other Party or any Affiliate of the other Party,
except to the extent included on Schedule 4.4(b) (with respect to Charter) or
Schedule 4.2(b) (with respect to IPSE).
7.10 Updated Schedules.
(a) Schedule and exhibit references contained in this Agreement are
for convenience only and any matter disclosed pursuant to one section,
subsection or other provision of this Agreement, are deemed disclosed for all
purposes of this Agreement, as long as the disclosure with respect to such
matter provides a truthful, accurate and adequate description of all relevant
aspects of such matter.
(b) Not less than ten Business Days prior to Closing, each of IPSE
and Charter will deliver to the other revised copies of each of its Schedules,
except for Schedules 5.15 and 6.15 as they relate to matters addressed in
Sections 5.15.1 and 5.15.2, and Sections 6.15.1 and 6.15.2, respectively
(regardless of whether the original Schedule is as of a certain date) which
shall have been updated and marked to show any changes occurring between the
date of this Agreement and the date of delivery; provided, however, that such
updates are for informational purposes only, and for purposes of determining
whether such Party's representations, warranties and covenants in this Agreement
are true and correct at Closing, all references to the Schedules will mean the
version of the Schedules attached to this Agreement on the date of signing.
Notwithstanding the foregoing, if the effect of any such updates to
IPSE/Charter Asset Exchange Agreement
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Schedules is to disclose any one or more additional properties, privileges,
rights, interests or claims, in each case acquired after the date of this
Agreement ("New Properties") as Assets that would have been (if owned on the
date of this Agreement) required by this Agreement to have been disclosed by
such Party in its original Schedules or that were acquired by such Party after
the date of this Agreement in breach of this Agreement, then the other Party, at
or before Closing, will have the right (to be exercised by written notice to
such Party) to cause any one or more of such New Properties to be designated as
and deemed to constitute Excluded Assets of such Party for all purposes under
this Agreement. If such right is not exercised by any Party entitled to exercise
such right and if such Party waives the applicable condition to Closing provided
in Section 8.1.1, 8.1.2, 8.2.1 or 8.2.2, such Party shall be deemed to have
accepted such new disclosure with respect to such New Properties and it shall be
deemed incorporated by reference into the Schedules. Notwithstanding anything to
the contrary contained in this Agreement, and except as set forth in the
preceding sentence with respect to New Properties, the waiver of any condition
to Closing by a Party who has knowledge of a breach by the other Party will not
be deemed a waiver of any rights and remedies with respect to such breach under
this Agreement or the Common Agreement.
7.11 Use of Name and Logo. For a period of 180 days after the Closing,
each of the Charter Parties and IPSE will be entitled to use the trademarks,
trade names, service marks, service names, logos and similar proprietary rights
of the transferor to the extent incorporated in or on the Assets transferred to
it at the Closing on a royalty-free basis, provided that each of the Charter
Parties and IPSE will exercise commercially reasonable efforts to remove all
such names, marks, logos and similar proprietary rights of the transferor
(except to the extent otherwise permitted by Charter or IPSE) from the Assets as
soon as reasonably practicable, and in any event within 180 days, following the
Closing. Notwithstanding the foregoing, nothing in this Section will require any
Party to remove or discontinue using any such name or mark that is affixed to
converters or other items in or to be used in customer homes or properties, or
as are used in a similar fashion making such removal or discontinuation
impracticable.
7.12 Transitional Billing Services. Charter and IPSE will each provide to
the other, upon written request delivered a reasonable amount of time in advance
and to the extent reasonably practicable, access to and the right to use its
billing system computers, software and related fixed assets in connection with
the Systems acquired by the other for a period of up to 150 days following the
Closing to allow for conversion of existing billing arrangements, including
billing and related arrangements regarding internet access services being
provided to customers of a System on the Closing Date ("Transitional Billing
Services"). Each Party will notify the other at least thirty days prior to the
Closing as to whether it desires Transitional Billing Services from the other.
All Transitional Billing Services, if any, that are requested by a Party will be
provided on terms and conditions reasonably satisfactory to each Party;
provided, however, that the amount to be paid by the Party receiving
Transitional Billing Services will not exceed the out-of-pocket cost to the
other Party of providing such Transitional Billing Services. Each Party will
notify the other of the cost to such Party of providing such
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Transitional Billing Services within ten Business Days after receiving the other
Party's notice requesting the provision of such Transitional Billing Services.
7.13 Confidentiality and Publicity.
7.13.1 Prior to the Closing, each Party will keep confidential any
non-public information that such Party may obtain from the other in connection
with this Agreement, and following the Closing, each Party will keep
confidential any non-public information that such Party may obtain from the
other in connection with this Agreement unrelated to the Cable Business and
Systems transferred by the other Party pursuant to this Agreement as well as any
non-public information in the possession of such Party related to the Cable
Business and Systems transferred by such Party to the other Party pursuant to
this Agreement (any such information that a Party is required to keep
confidential pursuant to this sentence shall be referred to as "Confidential
Information"). Each Party will not disclose, and will cause its employees,
consultants, advisors and agents not to disclose, any Confidential Information
to any other Person (other than its directors, officers and employees and
representatives of its advisers and lenders whose knowledge thereof is necessary
in order to facilitate the consummation of the transactions contemplated hereby)
or use, and will cause its controlled Affiliates, directors, officers,
employees, consultants, advisors and agents not to use, such Confidential
Information to the detriment of the other; provided that (i) such Party may use
and disclose any such Confidential Information once it has been publicly
disclosed (other than by such Party in breach of its obligations under this
Section) or which rightfully has come into the possession of such Party (other
than from the other Party and other than from another Person in violation of any
duty or obligation of confidentiality) and (ii) to the extent that such Party
may, in the reasonable opinion of its counsel, be compelled by Legal
Requirements to disclose any of such Confidential Information, such Party may
disclose such Confidential Information if it will have used all reasonable
efforts, and will have afforded the other the opportunity, to obtain an
appropriate protective order or other satisfactory assurance of confidential
treatment, for the Confidential Information compelled to be disclosed. In the
event of termination of this Agreement, each Party will cause to be delivered to
the other, and retain no copies of, any documents, work papers and other
materials obtained by such Party or on its behalf from the other, whether so
obtained before or after the execution hereof.
7.13.2 No Party will issue any press releases or make any other
public announcement concerning this Agreement and the transactions contemplated
hereby, except as required by applicable Legal Requirements, without the prior
written consent and approval of the other Party, which consent and approval may
not be unreasonably withheld.
7.13.3 Each Party expressly agrees that, in addition to any other
right or remedy the other may have, such other Party may seek and obtain
specific performance of the covenants and agreements set forth in or made
pursuant to this Section 7.13 and temporary
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and permanent injunctive relief to prevent any breach or violation thereof, and
that no bond or other security may be required from such other parties in
connection therewith.
7.14 Bulk Transfer. Each Party waives compliance by each other Party with
Legal Requirements relating to bulk transfers applicable to the transactions
contemplated hereby.
7.15 Lien Searches. Each Party will obtain, at its expense, the results of
a lien search conducted by a professional search company of records in the
offices of the secretaries of state in each state and county clerks in each
county where there exist any of its Owned Property or Tangible Personal
Property, and in the state and county where such Party's principal offices are
located, including copies of all financing statements or similar notices or
filings (and any continuation statements) discovered by such search company.
7.16 Further Assurances. At or after the Closing, each Party at the
request of the other Party, will promptly execute and deliver, or cause to be
executed and delivered, to the other Party all such documents and instruments,
in addition to those otherwise required by this Agreement, in form and substance
reasonably satisfactory to the other Party as the other Party may reasonably
request in order to carry out or evidence the terms of this Agreement or to
collect any accounts receivable or other claims included in the Assets
transferred to the other Party. Without limiting the generality of the
foregoing, the Charter Parties and IPSE will take, or cause to be taken, all
actions consistent with the terms of this Agreement, including execution and
delivery of any documents or instruments, as the other may reasonably request to
effect the qualification of the transactions contemplated hereby as a like-kind
exchange under Section 1031 of the Code.
7.17 Post-Closing Cooperation as to Rates.
7.17.1 Each of IPSE and the Charter Parties will use commercially
reasonable efforts to cooperate with and assist the other by providing, upon
reasonable request, all information in that Party's possession (and not
previously made available to the requesting Party) relating directly to the
rates set forth on Schedule 5.15.2 or 6.15.2, as applicable, or on any of FCC
Forms 1200, 1205, 1210, 1220, 1225, 1235 or 1240 or any other FCC Form, that the
requesting Party may reasonably require to justify such rates in response to any
inquiry, order or requirements of any Governmental Authority.
7.17.2 Prior to Closing, neither Party shall settle or permit to be
settled any rate proceeding with respect to its Systems without the consent of
the other Party, which consent will not be unreasonably withheld or delayed,
unless the proposed settlement includes injunctive or other relief that
adversely affects its Assets or its ability of such other Party to operate such
Systems substantially in the manner in which they are operated on the date of
this Agreement (other than changing the rates in question), in which case
consent may be withheld or delayed in such other Party's sole discretion.
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7.17.3 After the Closing, each Party, as a transferor (the
"Transferor Party") will be responsible for and follow to conclusion any rate
order of any Governmental Authority or proceeding with respect to rates of any
of its Systems charged by it immediately prior to the Closing; provided,
however, that the Transferor Party shall not: (i) agree to any forward-looking
rate adjustment; (ii) submit any refund plan to a Governmental Authority that
would impact any rates charged or impose financial liability on the Transferee
Party after the Closing; or (iii) appeal or take any other action with regard to
such proceeding that would impact any rates charged or impose financial
liability on the Transferee Party after the Closing, in any case without
obtaining the prior written consent of the System's current owner (the
"Transferee Party"), which consent shall not be unreasonably withheld. Each
Party will cooperate with and assist the other by providing, upon reasonable
request, all information in its possession (and not previously made available to
the requesting Party) that the requesting Party may reasonably require to
justify rates in response to any inquiry, order or requirements of any
Governmental Authority.
7.17.4 If, following Closing any System is required pursuant to any
Legal Requirement, settlement or otherwise to refund to subscribers any
payments, in whole or in part, made by such subscribers prior to Closing,
including fees for cable television service, equipment charges, late fees and
similar payments, then at the election of the Transferee Party and upon the
Transferor Party's prior written consent, which consent shall not be
unreasonably withheld: (i) the Transferor Party must fulfill such refund
obligation through a one-time cash payment to subscribers, in which case the
Transferor Party shall provide funds for such payment to the Transferee Party,
the Transferee Party shall cooperate with the Transferor Party or implement and
administer such refund payment through the Transferee Party's billing system,
and the Transferor Party shall reimburse the Transferee Party for all reasonable
expenses incurred by the Transferee Party in connection therewith; (ii) the
Transferee Party may fulfill such refund obligation through a cash payment,
credit or in-kind or other form of consideration, at its discretion and subject
to any required approval by a Governmental Authority, and the Transferor Party
shall reimburse the Transferee Party in the amount of any payment or in the
amount of the cost to the Transferee Party of any credit or in-kind or other
form of consideration and all reasonable expenses incurred by the Transferee
Party in connection therewith. Without limiting the foregoing, the Transferee
Party will provide the Transferor Party with all information in the Transferee
Party's possession that is reasonably required by the Transferor Party in
connection with such reimbursement.
7.17.5 If a Transferee Party is permitted following Closing to pass
through to subscribers of Systems acquired by it at Closing, the amount of any
"franchise fees on franchise fees" paid by a Transferor Party to the appropriate
local franchising authority with respect to the period prior to Closing, the
Transferee Party agrees that it will collect for the benefit of the Transferor
Party such amounts specified no later than the Six-Month Date as paid by the
Transferor Party and, except as specified below, will promptly remit such
amounts
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to the Transferor Party; provided, however, that if a local franchising
authority challenges such collection or orders the Transferee Party to refund
such fees to subscribers, then the Transferee Party shall not remit the fees to
the Transferor Party but shall hold such fees in escrow and the parties will
cooperate reasonably and in good faith to challenge such local franchising
authority action. Upon the final resolution of such local franchising authority
action, the escrowed fees shall be released from escrow and, to the extent not
refunded to subscribers, paid over to the Transferor Party. The Transferor Party
agrees to provide the Transferee Party with such documentation as necessary to
demonstrate its payment of the "franchise fees on franchise fees" and to enable
the Transferee Party to collect the pass through amounts from subscribers.
7.18 Distant Broadcast Signals. Unless otherwise restricted or prohibited
by any Governmental Authority, applicable Legal Requirements or Contract, each
Party will, if requested by the other Party, delete prior to the Closing any
distant broadcast signals which such other Party determines will result in
unacceptable liability on the part of the transferee for copyright payments with
respect to continued carriage of such signals after the Closing; provided,
however, that any Party may refuse to honor such a request if such deletion
could reasonably be expected to delay or otherwise jeopardize the Parties'
ability to complete the transactions contemplated herein.
7.19 Environmental Assessment.
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7.19.1 Each Party acknowledges and agrees, subject to any
enforceable restrictions placed thereon by a Third Party owner or lessor of any
real property involved, that the other Party may commission, at such other
Party's cost and expense, a so-called "Phase I" environmental site assessment of
such Party's Assets (a "Phase I Assessment"). If the Phase I Assessment or any
other information known to such Party (including information disclosed in
connection with the negotiation of this Agreement or described in the Schedules
hereto) indicates that a so-called "Phase II" assessment or other additional
testing or analysis of such Party's Assets as the investigating Party may deem
appropriate (a "Phase II Assessment") is advisable, then, subject to any
enforceable restrictions placed thereon by a Third Party owner or lessor of any
real property involved, the other Party may elect to cause its agents or
representatives to conduct such testing and analysis. Each Party will use its
commercially reasonable efforts to comply with any reasonable request for
information made by the other Party or its agents in connection with any such
investigation, but in no event will either Party be required under this Section
7.19.1 to disclose any materials constituting attorney-client privileged
communications. Each Party covenants that any response to any such request for
information will be complete and correct in all material respects. Each Party
will afford the other Party and its agents or representatives access to all
operations of such Party at all reasonable times and in a reasonable manner in
connection with any such investigation subject to any reasonably required
approval of such Party's landlords, which approval such Party will use its
commercially reasonable efforts to obtain. Should the other Party commission
such an investigation, such investigation will have no effect upon the
representations and warranties made by one Party to the other Party under this
Agreement except that if any Phase I Assessment or Phase II Assessment uncovers
an environmental condition which then comprises a breach of a Party's
representations or warranties herein and such breach is capable of being cured,
such Party shall be deemed not to have breached such representation or warranty
if such Party cures such breach in accordance with the provisions of this
Agreement. In the event this Agreement is terminated or fails to close in
accordance with its terms, each Party agrees to repair any damage or disturbance
it causes to the other Party's Owned Property or Leased Property in the course
of such investigative activities by returning such Owned Property or Leased
Property to approximately the same condition as existed prior to such
investigative activities. Each Party shall indemnify, protect, defend, and hold
the other Party and the other Party's Assets free and harmless from and against
any and all claims, actions, causes of action, suits, proceedings, costs,
expenses (including reasonable attorneys' and consultants' fees and costs),
liabilities, damages, and liens of any type arising directly out of any act or
omission of that Party or any of that Party's representatives on or about the
other Party's Owned Property or Leased Property in the course of such
investigative activities. However, neither of the two preceding sentences shall
be interpreted to impose any obligation upon either Party with respect to
Hazardous Substances present at, on, in, under or about, or any conditions
existing on, the other Party's Owner Property or Leased Property at the time of
such investigative activities, except to the extent of a Party's negligence or
willful misconduct causes a release of such Hazardous Substances or otherwise
exacerbates any such condition in a manner that leads to liability under any
Environmental Law.
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7.19.2 All information collected and generated as a result of the
environmental due diligence authorized by Section 7.19.1 will be subject to the
terms and conditions of Section 7.13 of this Agreement. Each Party shall provide
to the other Party copies of all draft and final reports, assessments and other
information composed or compiled by such Party's environmental consultants
within five Business Days after such Party's receipt of copies thereof
7.20 Year 2000 Matters.
7.20.1 Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Computer and Other Systems" means any level of hardware
or software, equipment and cable plant, or environmental and security systems
and other facilities used in connection with IPSE's Cable Business or Charter's
Cable Business, as the case may be, which are date dependent or which process
date data, including any firmware, embedded systems, application programs, user
interfaces, files and databases, and which might be adversely affected by any
date-related issue or calculation prior to, during or after January 1, 2000,
including any problem related to a leap year.
(b) "Year 2000 High-Level Inventory, Assessment and
Remediation Decisions" means the subject entity's documentation of its Year 2000
inventory, assessment and remediation decisions performed in accordance with its
Year 2000 Plan, consisting of (i) database reports identifying each category of
items inventoried at the subject entity's cable Systems and specifying as
appropriate the manufacturer or vendor and release, version or model number of
each item listed, (ii) risk or critically assessments, (iii) determination and
execution of evaluation approaches with respect to Year 2000 Readiness, (iv)
determination of Year 2000 Readiness based on evaluation approaches employed,
and (v) decisions regarding disposition alternatives (i.e., do nothing, repair,
replace or retire). All such reports have been reviewed at appropriate levels
within the subject entity's organization in accordance with the entity's Year
2000 Plan. IPSE's and Charter's Year 2000 High-Level Inventory, Assessment and
Remediation Decisions are attached hereto as Schedules 7.20.1(b)-A and
7.20.1(b)-B, respectively.
(c) "Year 2000 Plan" means the plans adopted in accordance
with a Party's Year 2000 Remediation Program to make Year 2000 Ready by a date
no later than August 31, 1999, all of such Party's Computer and Other Systems
having a significant impact on the Party's business. Such Year 2000 Plan will
include scope of methodologies and timelines (including objective milestones)
for inventory, assessment, remediation and/or replacement, and testing or
evaluation of Third Party Testing, as applicable, of its Computer
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and Other Systems having a significant impact on the Party's business. IPSE's
and Charter's Year 2000 Plans are attached hereto as Schedules 7.20.1(c)-A and
7.20.1(c)-B, respectively.
(d) "Year 2000 Ready" or "Year 2000 Readiness" means that the
referenced component, system, software, equipment or other item is designed or
has been modified to be used prior to, during and after the calendar year 2000
A.D., and that such item will operate at all levels, including microcode,
firmware, application programs, user interfaces, files and databases, during
each such time period without error or interruption relating to, or the product
of, date-related issues or calculations, including date data which represents or
references different centuries or more than one century or leap year.
(e) "Year 2000 Remediation Program" means an enterprise wide
program to make Year 2000 Ready all Computer and Other Systems having a
significant impact on the Party's business. Such Year 2000 Remediation Program
must be conducted by Persons with experience in issues related to Year 2000
Readiness and such Persons must have organized an enterprise wide program
management office which reports to, or an enterprise wide program management
structure with oversight by, executive level management and the board of
directors (or committee thereof or other governing body of such entity).
7.20.2 Acknowledgments. The Parties acknowledge the following:
(a) Each of Charter and certain of its Affiliates, and IPSE
and certain of its Affiliates, have established a Year 2000 Remediation Program.
(b) Each of Charter and IPSE has reviewed and approved the
other's Year 2000 Plan and Year 2000 High-Level Inventory, Assessment and
Remediation Decisions.
(c) Each Party acknowledges and agrees with the other Party's
preliminary decision to rely on testing of cable plant and related equipment to
be performed by certain cable industry technical and trade associations, certain
critical vendors or other cable operators ("Third Party Testing"). Each Party
will continue to review the progress of such Third Party Testing plans and
results as they become available. Each Party has developed test methodologies as
part of its Year 2000 Plan to address implementation of additional testing
should IPSE and Charter mutually consider such additional testing to be
necessary or prudent.
(d) Neither party makes any representation, warranty or
guarantee that its Computer and Other Systems will be Year 2000 Ready at the
Closing Date or thereafter.
7.20.3 Covenants. Notwithstanding any other provision set forth in
this Agreement, the Parties agree as follows:
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(a) Through the Closing Date, each Party will exercise prudent
and reasonable care and diligence to take such actions with respect to its Cable
Business when and as required by its approved Year 2000 Plan.
(b) Through the Closing Date, each of IPSE and Charter will
cooperate with the other with respect to the nature and results of its
activities relating to its Year 2000 Plan. Such cooperation shall include
providing the appropriate Party with any non-confidential information possessed
by a Party or one of its Affiliates and reasonably requested by the other Party
regarding the Year 2000 Readiness of any material component of the Computer and
Other Systems having a significant impact on such Party's business.
(c) Each Party shall deliver to the other Party on or before
July 31, 1999, and again on August 31, 1999 (if Closing has not occurred prior
to such date), a statement, certified by an authorized officer of such Party who
is responsible for implementation of its Year 2000 Plan, setting forth in
reasonable detail that as of such date all of the milestones contained in its
Year 2000 Plan to be completed as of such date have been fully completed (or if
not, indicating which such milestones have not been completed and describing the
efforts required to complete the same).
(d) From the date hereof through the Closing Date, each Party
shall have the opportunity to conduct due diligence regarding the Year 2000
Readiness of the other Party's Computer and Other Systems having a significant
impact on the other Party's business in accordance with this Section 7.20.3(d).
Each Party may conduct a review of the Year 2000 Ready assessment activities
with respect to the Computer and Other Systems having a significant impact on
the other Party's business, including inspecting individual headend and office
sites and reviewing existing reports, correspondence and related material
regarding the Year 2000 Readiness of the Computer and Other Systems having a
significant impact on the other Party's business. Each Party shall conduct no
more than three visits to any site of the other Party, and no single site visit
shall exceed three Business Days. Each Party shall give the other Party at least
five Business Days written notice prior to any visit to any System facilities of
the other Party and, if a Party intends during such visit to perform testing at
a headend, office or other site of the other Party, such Party also must provide
a description of the scope of work regarding such testing. If the other Party
does not notify such Party in writing of the other Party's objection to such
proposed site visit and/or testing within three Business Days after receipt of
such notice, the other Party shall be deemed to have consented to the proposed
site visit and any described testing. A Party shall not unreasonably object to
the other Party's request to perform testing. A representative of the other
Party shall be present at all times during any such visit and testing. All
activities of a Party regarding its Year 2000 due diligence shall be conducted
to minimize any inconvenience or interruption of the normal use and enjoyment of
the other Party's Cable Business and Computer and Other Systems.
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7.21 Satisfaction of Conditions. Each Party will use its commercially
reasonable efforts to satisfy, or to cause to be satisfied, the conditions to
the obligations of the other Party to consummate the transactions contemplated
by this Agreement, as set forth in Article 8.
7.22 Offers. Each Party (and its directors, officers, employees,
representatives and agents) shall not directly or indirectly, (i) offer its
Assets or Cable Business for sale, (ii) solicit, encourage or entertain offers
for such Assets or Cable Business, (iii) initiate negotiations or discussions
for the sale of such Assets or Cable Business or (iv) make information about
such Assets or Cable Business available to any Third Party in connection with
the possible sale of such Assets or Cable Business prior to the Closing Date or
the date this Agreement is terminated in accordance with its terms.
7.23 Retention of Books and Records. At or prior to the Closing, each
Party shall make arrangements reasonably satisfactory to the other Party to
deliver all such Party's Books and Records not located at any of the offices
included in its Owned Property or Leased Property. Following the Closing, each
Party shall give access to the other Party, its counsel, accountants and other
authorized representatives during normal business hours to such Party's
materials, books, records and documents which relate to the operations of such
Party's Cable Business prior to the Closing Date or which relate to the
operations of the other Party's Cable Business after the Closing Date, in each
case as may be reasonably necessary in connection with any legitimate purpose
(including the preparation of tax reports and returns and the preparation of
financial statements). Such access will be subject to reasonable advance written
notice, will be conducted in a manner that is not disruptive of such Party's
business, and will be subject to any other reasonable limitations imposed by
such Party. The requesting Party shall have the right to make copies of such
materials at its own expense. If either Party proposes to destroy or otherwise
dispose of any of its materials, books, records or documents that related to the
operations of its Cable Business prior to the Closing Date, it will give no less
than 30 days advance written notice to the other Party so as to permit such
other Party to exercise its rights under this Section 7.23.
7.24 Cooperation. IPSE and Charter shall reasonably cooperate in
connection with the preparation and filing of any Tax Return for which the other
is responsible for preparing and filing with respect to the Systems.
8. CONDITIONS PRECEDENT.
8.1 Conditions to Charter's Obligations. The obligations of Charter to
consummate the transactions contemplated by this Agreement will be subject to
the satisfaction, at or before the Closing, of the following conditions, one or
more of which may be waived by Charter:
8.1.1 Accuracy of Representations and Warranties. The
representations and warranties of IPSE in this Agreement and in the Transaction
Documents, without giving effect
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to any materiality qualifications contained therein, are true, complete and
accurate on and as of the date hereof and at and as of the Closing with the same
effect as if made at and as of the Closing, except to the extent that all
misstatements, omissions and inaccuracies, in the aggregate, do not have a
material adverse effect on the IPSE Assets, IPSE's Cable Business, the
operations, condition (financial or otherwise) or results of operations of the
IPSE Systems taken as a whole, or on the ability of IPSE to perform its
obligations under this Agreement.
8.1.2 Performance of Agreements. IPSE shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants in this Agreement and in any Transaction Document to
be performed and complied with by it at or before the Closing.
8.1.3 Deliveries. IPSE shall have delivered the items and documents
required to be delivered by it pursuant to this Agreement, including those
required to be delivered to Charter under Section 9.2.
8.1.4 Legal Proceedings. No Legal Requirement of any Governmental
Authority (including any temporary Legal Requirement) shall be in effect which
would prevent or make illegal the consummation of any of the transactions
contemplated by this Agreement or any Transaction Document.
8.1.5 Consents.
(a) Except as otherwise provided in Section 7.5.5, Required
Consents relating to all IPSE System Franchises shall have been obtained in form
and substance reasonably satisfactory to Charter, or the consent of the
appropriate Governmental Authority shall be deemed to have been received in
accordance with Section 617 of the Communications Act (47 U.S.C. ss.537).
(b) Except as otherwise provided in Section 7.5.3, Charter
shall have received evidence, in form and substance reasonably satisfactory to
it, that the IPSE Required Consents relating to the IPSE Systems Licenses and
the IPSE Systems Contracts identified with an asterisk (*) on Schedule 6.3 have
been obtained.
8.1.6 No Material Adverse Changes. There shall not have been any
material adverse change in the IPSE Assets or the condition (financial or
otherwise) or operations of IPSE's Cable Business or the IPSE Systems, taken as
a whole, since December 31, 1998.
8.1.7 Franchise Renewals. Each IPSE Systems Franchise for which (a)
a valid notice of renewal pursuant to the formal renewal procedures established
by Section 626 of the Cable Act has not been timely delivered to the appropriate
Governmental Authority, and (b) with respect to which the appropriate
Governmental Authority has not confirmed in writing
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that the procedures established by Section 626 nonetheless shall apply to the
renewal or extension of such IPSE Systems Franchise, shall have been renewed or
extended for a period expiring no earlier than three years after the Closing
Date.
8.1.8 Common Agreement and Related Closings.
(a) The conditions set forth in Section 4.1 of the Common
Agreement shall have been satisfied or waived.
(b) The transactions contemplated by the IP Agreements and the
Redemption Agreement (each as defined in the Common Agreement) shall have been,
or will be, consummated as set forth in Section 4.4 of the Common Agreement,
except to the extent such Agreements are not consummated as a result of a breach
by any Charter Party or their Affiliates of its or their obligation to
consummate such transactions.
8.2 Conditions to IPSE's Obligations. The obligations of IPSE to
consummate the transactions contemplated by this Agreement will be subject to
the satisfaction, at or before the Closing, of the following conditions, one or
more of which may be waived by IPSE:
8.2.1 Accuracy of Representations and Warranties. The
representations and warranties of Charter in this Agreement and in the
Transaction Documents, without giving effect to any materiality qualification
contained therein, are true, complete and accurate on and as of the date hereof
and at and as of the Closing with the same effect as if made at and as of the
Closing, except to the extent that all misstatements, omissions and
inaccuracies, in the aggregate, do not have a material adverse effect on the
Charter Assets, Charter's Cable Businesses, the operations, condition (financial
or otherwise) or results of operations of the Charter Systems taken as a whole,
or on the ability of any Charter Party to perform its obligations under this
Agreement.
8.2.2 Performance of Agreements. Charter shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants in this Agreement and in any Transaction Document to
be performed and complied with by it at or before the Closing.
8.2.3 Deliveries. Charter shall have delivered the items and
documents required to be delivered by it pursuant to this Agreement, including
those required to be delivered to IPSE under Section 9.3.
8.2.4 Legal Proceedings. No Legal Requirement of any Governmental
Authority (including any temporary Legal Requirement) shall be in effect which
would prevent or make illegal the consummation of any of the transactions
contemplated by this Agreement or any Transaction Document.
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8.2.5 Consents.
(a) Except as otherwise provided in Section 7.5.5, Required
Consents relating to all Charter System Franchises shall have been obtained in
form and substance reasonably satisfactory to IPSE, or the consent of the
appropriate Governmental Authority shall be deemed to have been received in
accordance with Section 617 of the Communications Act (47 U.S.C. ss.537).
(b) Except as otherwise provided in Section 7.5.3, IPSE shall
have received evidence, in form and substance reasonably satisfactory to it,
that the Charter Required Consents relating to the Charter Systems Licenses and
the Charter Systems Contracts identified with an asterisk (*) on Schedule 5.3
have been obtained.
8.2.6 No Material Adverse Changes. There shall not have been any
material adverse change in the Charter Assets or the condition (financial or
otherwise) or operations of Charter's Cable Business or the Charter Systems,
taken as a whole, since December 31, 1998.
8.2.7 Franchise Renewals. Each Charter Systems Franchise for which
(a) a valid notice of renewal pursuant to the formal renewal procedures
established by Section 626 of the Cable Act has not been timely delivered to the
appropriate Governmental Authority, and (b) with respect to which the
appropriate Governmental Authority has not confirmed in writing that the
procedures established by Section 626 nonetheless shall apply to the renewal or
extension of such Charter Systems Franchise, shall have been renewed or extended
for a period expiring no earlier than three years after the Closing Date.
8.2.8 Common Agreement and Related Closings.
(a) The conditions set forth in Section 4.2 of the Common
Agreement shall have been satisfied or waived.
(b) The transactions contemplated by the IP Agreements and the
Redemption Agreement (each as defined in the Common Agreement) shall have been,
or will be, consummated as set forth in Section 4.4 of the Common Agreement,
except to the extent such Agreements are not consummated as a result of a breach
by IPSE or its Affiliates of its or their obligation to consummate such
transactions.
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9. THE CLOSING.
9.1 The Closing; Time and Place. Subject to the terms and conditions of
this Agreement, the Closing shall be held in San Francisco, California, or as
otherwise agreed, at a place mutually agreed upon by the Parties at 10:00 a.m.,
local time, on the last calendar day of the calendar month in which the
conditions set forth in Article 8 (other than Sections 8.1.3 and 8.2.3) shall
have been satisfied or waived (provided that each Party shall have at least 10
days' prior notice of the scheduled Closing Date in order to prepare for the
Closing) or at such other place, date and time as may be mutually agreed upon by
the Parties (the "Closing Date"). The transactions to be consummated at Closing
shall be deemed to have been consummated as of the Closing Time. If the Closing
Date is not a Business Day, then the Closing Date shall be the immediately
preceding Business Day.
9.2 IPSE's Delivery Obligations. At the Closing, IPSE will deliver or
cause to be delivered to Charter the following:
9.2.1 Cash Consideration. If applicable, the Cash Consideration will
be paid (without duplication) by IPSE to the Charter Parties in accordance with
the Common Agreement.
9.2.2 Bill of Sale and Assignment and Assumption Agreement. The Bill
of Sale and Assignment and Assumption Agreement in the form of Exhibit 9.2.2.
9.2.3 Deeds. Special warranty deeds in recordable form conveying to
the applicable Charter Parties each parcel of IPSE Owned Property, and
assignments of leases and easements in recordable form, with respect to IPSE
Leased Property and IPSE Other Real Property Interests as to which prior
assignments into IPSE were recorded in the applicable real estate records.
9.2.4 Lien Releases. Evidence reasonably satisfactory to Charter
that all Liens (other than Permitted Liens) affecting or encumbering the IPSE
Assets have been terminated, released or waived, as appropriate, or original,
executed instruments in form reasonably satisfactory to Charter effecting such
terminations, releases or waivers.
9.2.5 Vehicle Titles. Title certificates to all vehicles included
among the IPSE Assets, endorsed for transfer of title to the applicable Charter
Parties, and separate bills of sale therefor or other transfer documentation, if
required by the laws of the States in which such vehicles are titled.
9.2.6 Evidence of Authorization Actions. Certified resolutions or
other evidence reasonably satisfactory to Charter that IPSE has taken all action
necessary to
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authorize the execution of this Agreement and the Transaction Documents and the
consummation of the transactions contemplated hereby.
9.2.7 FIRPTA Certificate. FIRPTA Non-Foreign Seller Certificate
certifying that IPSE is not a foreign person within the meaning of Section 1445
of the Code reasonably satisfactory in form and substance to Charter.
9.2.8 Officer's Certificate. The Charter Parties will have received
a certificate executed by an executive officer of IPSE dated the date of the
Closing, reasonably satisfactory in form and substance to Charter certifying
that the conditions specified in Sections 8.1.1. and 8.1.2 have been satisfied.
9.2.9 Opinions of Counsel. Opinions of Pillsbury Madison & Sutro LLP
and Dow, Lohnes & Albertson, PLLC, substantially in the forms of Exhibits C.1
and C.3, respectively of the Common Agreement.
9.2.10 Other. Such other documents and instruments as may be
necessary to effect the intent of this Agreement and to consummate the
transactions contemplated hereby.
9.3 Charter's Delivery Obligations. At the Closing, each Charter Party
will deliver or cause to be delivered to IPSE the following:
9.3.1 Cash Consideration. If applicable, the Cash Consideration will
be paid by such Charter Party to IPSE in accordance with the Common Agreement.
9.3.2 Bill of Sale and Assignment and Assumption Agreement. The Bill
of Sale and Assignment and Assumption Agreement in the form of Exhibit 9.2.2.
9.3.3 Deeds. Special warranty deeds in recordable form conveying to
IPSE each parcel of such Charter Party's Owned Property, and assignments of
leases and easements in recordable form, with respect to such Charter Party's
Leased Property and Other Real Property Interests as to which prior assignments
into such Charter Party were recorded in the applicable real estate records.
9.3.4 Lien Releases. Evidence reasonably satisfactory to IPSE that
all Liens (other than Permitted Liens) affecting or encumbering such Charter
Party's Assets have been terminated, released or waived, as appropriate, or
original, executed instruments in form reasonably satisfactory to IPSE effecting
such terminations, releases or waivers.
9.3.5 Vehicle Titles. Title certificates to all vehicles included
among such Charter Party's Assets, endorsed for transfer of title to IPSE, and
separate bills of sale therefor
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or other transfer documentation, if required by the laws of the States in which
such vehicles are titled.
9.3.6 Evidence of Authorization Actions. Certified resolutions of
such Charter Party or other evidence reasonably satisfactory to IPSE that such
Charter Party has taken all action necessary to authorize the execution of this
Agreement and the Transaction Documents and the consummation of the transactions
contemplated hereby.
9.3.7 FIRPTA Certificate. FIRPTA Non-Foreign Seller Certificate
certifying that such Charter Party is not a foreign person within the meaning of
Section 1445 of the Code reasonably satisfactory in form and substance to IPSE.
9.3.8 Officer's Certificate. IPSE will have received a certificate
executed by an executive officer of Charter dated the date of the Closing,
reasonably satisfactory in form and substance to IPSE certifying that the
conditions specified in Sections 8.2.1 and 8.2.2 have been satisfied.
9.3.9 Opinions of Counsel. Opinions of Irell & Manella LLP and
Wiley, Rein & Fielding substantially in the forms of Exhibits C.2 and C.4,
respectively of the Common Agreement.
9.3.10 Other. Such other documents and instruments as may be
necessary to effect the intent of this Agreement and to consummate the
transactions contemplated hereby.
10. TERMINATION AND DEFAULT.
10.1 Termination Events. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
10.1.1 At any time, by the mutual agreement of Charter and IPSE;
10.1.2 By either Charter or IPSE at any time, if the other is in
material breach or default of any of the other's covenants, agreements or other
obligations herein or in any Transaction Document;
10.1.3 By either Charter or IPSE upon written notice to the other,
if any of the conditions to its obligations set forth in Sections 8.1 and 8.2,
respectively, are not satisfied on or before the later of January 15, 2000, or
nine months after the date of this Agreement, for any reason other than an
intentional and material breach or default by such Party of its respective
covenants, agreements or other obligations under this Agreement, or any of its
representations herein not being true and accurate in all material respects when
made or when otherwise required by this Agreement to be true and accurate in all
material respects;
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10.1.4 By either Charter or IPSE if an injunction, restraining order
or decree of any nature of any Governmental Authority of competent jurisdiction
is issued that prohibits the consummation of any of the transactions
contemplated hereby and such injunction, restraining order or decree is final
and nonappealable; provided, however, that the party seeking to terminate this
Agreement pursuant to this clause has used commercially reasonable efforts to
have such injunction, order or decree vacated or denied; or
10.1.5 As otherwise provided in the Common Agreement.
10.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 10.1, all obligations of the Parties under this Agreement will
terminate, except for the obligations set forth in Sections 7.13, 7.19 and
12.13. Termination of this Agreement pursuant to Sections 10.1.2, 10.1.3, 10.1.4
or 10.1.5 will not limit or impair any remedies that any of IPSE or the Charter
Parties may have pursuant to the terms of this Agreement with respect to a
breach or default by the other of its covenants, agreements or obligations under
this Agreement.
11. SURVIVAL; REMEDIES.
11.1 Survival of Representations, Warranties Covenants and Agreements. The
representations, warranties, covenants and agreements of IPSE and Charter in
this Agreement and in the Transaction Documents will survive Closing for a
period of twelve months after the Closing Date. The period of survival of the
representations, warranties, covenants and agreements prescribed by this Section
11.1 are referred to as the "Survival Period." The liabilities of each Party
under its respective representations, warranties, covenants and agreements will
expire as of the expiration of the Survival Period; provided, however, that such
expiration will not include, extend or apply to (a) any representation,
warranty, covenant or agreement the breach of which has been asserted by a Party
in a written notice to the other Party before such expiration or about which a
Party has given the other Party written notice before such expiration indicating
that facts or conditions exist that, with the passage of time or otherwise, can
reasonably be expected to result in a breach (and describing such potential
breach in reasonable detail), (b) the Party's obligations under Sections 7.13
and 7.23, or (c) the Party's obligations under Sections 7.16, 7.17.1, 7.17.3 and
7.17.4, but only to the extent reasonably practicable.
11.2 Exclusive Remedy. The Parties hereby agree that the rights set forth
in the Common Agreement shall be each Party's sole and exclusive remedies
against the other Party for any claims arising after the Closing Time and
relating to any breaches of the representations, warranties or covenants
contained in this Agreement other than based on fraud.
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11.3 Nonrecourse. The Parties agree that, notwithstanding any other
provision in this Agreement or in any Transaction Document, and any rule of law
or equity to the contrary, to the fullest extent permitted by law, each Party's
obligations and liabilities under this Agreement will be nonrecourse to all
direct and indirect equity holders or other owners of such Party, except to the
extent of distributions to such Persons, directly or indirectly, from such Party
that are required to be returned, directly or indirectly, to such Party pursuant
to applicable provisions of law; provided, however, that the foregoing shall not
limit or abridge any Party's indemnification rights or obligations pursuant to
the Common Agreement or the Redemption Agreement. "Nonrecourse" means that the
obligations and liabilities are limited in recourse solely to the assets of the
Parties (for those purposes, any capital contribution obligations of the equity
holders or other owners of such Party, or any negative capital account balances
of such Persons will not be deemed be assets of such Party) and are not
guaranteed, directly or indirectly by, or the primary obligations of, any owner
of such Party in such capacity, and no partner, member or other owner in such
capacity of any successor entity (including any limited liability company or
partnership), either directly or indirectly, will be personally liable in any
respect (except to the extent of (i) such Person's interests in the assets of
such Party and (ii) any distribution which has been received by such Person and
is required by applicable law to be returned, directly or indirectly, to such
Party) for any obligation or liability of such Party under this Agreement.
12. MISCELLANEOUS PROVISIONS.
12.1 Parties Obligated and Benefitted. Subject to the limitations set
forth below, this Agreement will be binding upon each of the Parties and their
respective assigns and successors in interest and will inure solely to the
benefit of the Parties and their respective assigns and successors in interest,
and no other Person will be entitled to any of the benefits conferred by this
Agreement. Without the prior written consent of the other Parties, no Party will
assign any of its rights under this Agreement or delegate any of its duties
under this Agreement, provided that the appropriate Party may assign any or all
of its rights under this Agreement (a) to a "qualified intermediary" engaged by
such Party to effectuate a deferred like-kind exchange under Section 1031 of the
Code, and the other Party agrees in connection with such an assignment to take
such actions and execute such documents as may be reasonably requested by the
assigning Party in order to facilitate such Party's intent to effectuate a
deferred like-kind exchange; provided, however, that no such assignment will
affect the assigning Party's liabilities or obligations pursuant to this
Agreement or (b) to an Affiliate, provided that such assignment will not result
in any adverse tax consequences to the other Party, will not give rise to any
material requirements for additional Required Consents, and will not, in the
reasonable judgment of the other Party, delay the Closing.
12.2 Notices. Any notice, request, demand, waiver or other communication
required or permitted to be given under this Agreement to either Party will be
given as set forth in the Common Agreement.
IPSE/Charter Asset Exchange Agreement
72
<PAGE> 84
12.3 Right to Specific Performance. Each Party acknowledges that the
unique nature of the Assets to be exchanged hereunder pursuant to this Agreement
renders money damages an inadequate remedy, and the Parties agree that either
Party shall be entitled to pursue specific performance as a remedy without the
requirement of posting a bond or other security therefor.
12.4 Waiver. This Agreement or any of its provisions may not be waived
except in writing. The failure of any Party to enforce any right arising under
this Agreement on one or more occasions will not operate as a waiver of that or
any other right on that or any other occasion.
12.5 Captions. The section and other captions of this Agreement are for
convenience only and do not constitute a part of this Agreement.
12.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (other than its rules of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby).
12.7 Time. Time is of the essence under this Agreement. If the last day
permitted for the giving of any notice or the performance of any act required or
permitted under this Agreement falls on a day which is not a Business Day, the
time for the giving of such notice or the performance of such act will be
extended to the next succeeding Business Day.
12.8 Late Payments. If either Party fails to pay the other any amounts
when due under this Agreement, the amounts due will bear interest from the due
date to the date of payment at the rate per annum publicly announced from time
to time by The Bank of New York as its Prime Rate (the "Prime Rate") plus 2%,
adjusted as and when changes in the Prime Rate are made.
12.9 Counterparts. This Agreement may be executed in counterparts, each of
which will be deemed an original.
12.10 Entire Agreement. This Agreement (including the Transaction
Documents and the Schedules and Exhibits referred to in this Agreement, which
are incorporated in and constitute a part of this Agreement) contains the entire
agreement of the Parties with respect to the subject matter hereof and
supersedes all prior oral or written agreements and understandings with respect
to such subject matter. This Agreement may not be amended or modified except by
a writing signed by all of the parties hereto.
12.11 Severability. Any term or provision of this Agreement which is
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without
IPSE/Charter Asset Exchange Agreement
73
<PAGE> 85
rendering invalid or unenforceable the remaining rights of the Person intended
to be benefitted by such provision or any other provisions of this Agreement.
12.12 Construction. This Agreement has been negotiated by the Parties and
their respective legal counsel, and legal or other equitable principles that
might require the construction of this Agreement or any provision of this
Agreement against the Party drafting this Agreement will not apply in any
construction or interpretation of this Agreement.
12.13 Expenses. Except as otherwise expressly provided in this Agreement,
each Party will pay all of its expenses, including attorneys' and accountants'
fees, in connection with the negotiation of this Agreement, the performance of
its obligations and the consummation of the transactions contemplated by this
Agreement.
12.14 Risk of Loss. The risk of any loss or damage to the Charter Assets
or IPSE Assets resulting from fire, theft or other casualty (except reasonable
wear and tear) will be borne by Charter or IPSE respectively, at all times prior
to the Closing Time. In the event of any such loss or damage after December 31,
1998, Charter or IPSE as appropriate, will immediately notify the other in
writing of that fact. All insurance proceeds paid or payable as a result of the
occurrence of the event resulting in such loss or damage will be delivered by
the Party transferring such Assets to the other Party, or the rights thereto
will be assigned if not yet paid over by the insurer to the Party transferring
such Assets. The obligations under this Section 12.14 to pay or assign insurance
proceeds will not apply to the extent that any insurance proceeds are applied to
replace or restore such loss or damage prior to Closing.
If, on or prior to the Closing Date, all or any part of or interest in the
Charter Assets or the IPSE Assets, as appropriate, is taken or condemned as a
result of a Governmental Authority's exercise of its powers of eminent domain,
or if a Governmental Authority having such power informs a Party that it intends
to condemn all or any part of such Party's Assets (such event being called, in
either case, a "Taking"), then (i) IPSE, in the case of a Taking of Charter
Assets, or Charter, in the case of a Taking of IPSE Assets, may elect, in the
name of the other Party, to negotiate for, claim, contest and receive all
damages with respect to the Taking, (ii) the Party whose Assets were the subject
of the Taking will be relieved of its obligation to convey to the other Party
those of its Assets that were the subject of the Taking, (iii) at Closing, the
Party whose Assets were the subject of the Taking will assign to the other Party
all of its rights to damages payable as a result of the Taking, and will pay to
the other Party all damages previously paid to it in connection with the Taking,
and (iv) following the Closing, the Party whose Assets were the subject of the
Taking will give to the other Party any further assurances of such rights and
assignment with respect to the Taking as the other Party reasonably may request
from time to time.
12.15 Tax Consequences. No Party makes any representation or warranty,
express or implied, with respect to the Tax implications of any aspect of this
Agreement on any other Party, and each Party expressly disclaims any such
representation or warranty with respect to
IPSE/Charter Asset Exchange Agreement
74
<PAGE> 86
any Tax consequences arising under this Agreement. Each Party has relied solely
on its own Tax advisors with respect to the Tax implications of this Agreement.
12.16 Commercially Reasonable Efforts. For purposes of this Agreement,
"commercially reasonable efforts" will not be deemed to require a Party to
undertake extraordinary or unreasonable measures, including the payment of
amounts in excess of normal and usual filing fees and processing fees, if any or
other payments with respect to any Contract that are significant in the context
of such Contract (or significant on the aggregate basis as to all Contracts).
[the remainder of this page intentionally left blank]
IPSE/Charter Asset Exchange Agreement
75
<PAGE> 87
The parties have executed this Agreement as of the day and year first above
written.
CHARTER COMMUNICATIONS, LLC
By: /s/ Curtis S. Shaw
----------------------------------------------
Name: Curtis S. Shaw
Title: Senior Vice President
CHARTER COMMUNICATIONS PROPERTIES,
LLC
By: /s/ Curtis S. Shaw
----------------------------------------------
Name: Curtis S. Shaw
Title: Senior Vice President
MARCUS CABLE ASSOCIATES, L.L.C.
By: /s/ Curtis S. Shaw
----------------------------------------------
Name: Curtis S. Shaw
Title: Senior Vice President
INTERMEDIA PARTNERS SOUTHEAST
By: InterMedia Capital Management, LLC, its
managing general partner
By: InterMedia Management, Inc., its
managing member
By: /s/ Robert J. Lewis
---------------------------------
Robert J. Lewis, President
and Chief Executive Officer
IPSE/Charter Asset Exchange Agreement
76
<PAGE> 1
Exhibit 2.6(e)
ASSET EXCHANGE AGREEMENT
dated as of April 20, 1999
among
INTERMEDIA PARTNERS, A CALIFORNIA LIMITED PARTNERSHIP
BRENMOR CABLE PARTNERS, L.P.
on the one hand
and
ROBIN MEDIA GROUP, INC.
on the other hand
<PAGE> 2
TABLE OF CONTENTS
1. DEFINITIONS.............................................................2
1.1 1992 Cable Act....................................................2
1.2 Affiliate.........................................................2
1.3 Agreement.........................................................2
1.4 Antitrust Division. .............................................2
1.5 Assets............................................................2
1.6 Basic Services....................................................2
1.7 Business Day......................................................2
1.8 Cable Act.........................................................2
1.9 Cable Business....................................................2
1.10 Closing...........................................................3
1.11 Closing Time......................................................3
1.12 Communications Act................................................3
1.13 Contract..........................................................3
1.15 Environmental Law.................................................3
1.16 ERISA.............................................................3
1.17 ERISA Affiliate...................................................3
1.18 Expanded Basic Services...........................................3
1.19 FCC...............................................................3
1.20 Governmental Authority............................................3
1.21 Hazardous Substances..............................................4
1.22 HSR Act...........................................................4
1.23 Intellectual Property.............................................4
1.24 IP-I Assets.......................................................4
1.25 IP-I Books and Records............................................5
1.26 IP-I Leased Property..............................................5
1.27 IP-I Other Intangibles............................................5
1.28 IP-I Other Real Property Interests................................5
1.29 IP-I Owned Property...............................................5
1.30 IP-I Required Consents............................................5
1.31 IP-I Systems Contracts............................................6
1.32 IP-I Systems Franchises...........................................6
1.33 IP-I Systems Licenses.............................................6
1.34 IP-I Tangible Personal Property...................................6
1.35 IP-I's Cable Business.............................................6
1.36 Judgment..........................................................7
1.37 Knowledge.........................................................7
1.38 Leased Property...................................................7
1.39 Legal Requirement.................................................7
1.40 Lien..............................................................7
(i)
<PAGE> 3
1.41 Litigation........................................................7
1.42 Losses............................................................7
1.43 MVPD..............................................................7
1.44 Other Real Property Interests.....................................8
1.45 Owned Property....................................................8
1.46 Party.............................................................8
1.47 Pay TV............................................................8
1.48 Permitted Liens...................................................8
1.49 Person............................................................8
1.50 Required Consents.................................................8
1.51 RMG Assets........................................................8
1.52 RMG Books and Records.............................................9
1.53 RMG Leased Property...............................................9
1.54 RMG Other Intangibles.............................................9
1.55 RMG Other Real Property Interests.................................9
1.56 RMG Owned Property................................................9
1.57 RMG Required Consents.............................................9
1.58 RMG Systems Contracts............................................10
1.59 RMG Systems Franchises...........................................10
1.60 RMG Systems Licenses.............................................10
1.61 RMG Tangible Personal Property...................................10
1.62 RMG's Cable Business.............................................10
1.63 Six-Month Date...................................................10
1.64 System...........................................................10
1.65 Systems Contracts................................................10
1.66 Systems Franchises...............................................11
1.67 Systems Licenses.................................................11
1.68 Tangible Personal Property.......................................11
1.69 Taxes............................................................11
1.70 Third Party......................................................11
1.71 Transaction Documents............................................11
1.72 Other Definitions................................................11
1.73 Usage............................................................13
2. EXCHANGE...............................................................13
2.1 Exchange of Assets...............................................13
2.2 Method of Exchange...............................................14
3. CONSIDERATION..........................................................14
3.1 Calculation of Values; Cash Consideration........................14
4. ASSUMED LIABILITIES AND EXCLUDED ASSETS................................15
4.1 RMG's Assumed Obligations and Liabilities........................15
(ii)
<PAGE> 4
4.2 RMG Excluded Assets..............................................15
4.3 IP-I's Assumed Obligations and Liabilities.......................15
4.4 IP-I Excluded Assets.............................................16
5. IP-I'S REPRESENTATIONS AND WARRANTIES..................................17
5.1 Organization and Qualification of IP-I...........................17
5.2 Authority and Validity...........................................17
5.3 No Conflict; Required Consents...................................17
5.4 Assets...........................................................18
5.5 IP-I Systems Franchises, IP-I Systems Licenses, IP-I Systems
Contracts and IP-I Other Real Property Interests.................18
5.6 Real Property....................................................20
5.7 Environmental....................................................20
5.8 Compliance with Legal Requirements...............................21
5.9 Intellectual Property............................................24
5.10 Financial Statements.............................................24
5.11 Absence of Certain Changes or Events.............................24
5.12 Litigation.......................................................24
5.13 Tax Returns; Other Reports.......................................25
5.14 Employment Matters...............................................25
5.15 IP-I Systems Information.........................................26
5.16 Taxpayer Identification Number...................................27
5.17 Finder and Brokers...............................................27
5.18 Related Party Transactions.......................................27
6. RMG'S REPRESENTATIONS AND WARRANTIES...................................28
6.1 Organization and Qualification of RMG............................28
6.2 Authority and Validity...........................................28
6.3 No Conflict; Required Consents...................................28
6.4 Assets...........................................................29
6.5 RMG Systems Franchises, RMG Systems Licenses, RMG Systems
Contracts and RMG Other Real Property Interests..................29
6.6 Real Property....................................................31
6.7 Environmental....................................................31
6.8 Compliance with Legal Requirements...............................32
6.9 Intellectual Property............................................34
6.10 Financial Statements.............................................35
6.11 Absence of Certain Changes or Events.............................35
6.12 Litigation.......................................................35
6.13 Tax Returns; Other Reports.......................................35
6.14 Employment Matters...............................................36
6.15 RMG Systems Information..........................................37
6.16 Taxpayer Identification Number...................................38
(iii)
<PAGE> 5
6.17 Finder and Brokers...............................................38
6.18 Related Party Transactions.......................................38
7. ADDITIONAL COVENANTS...................................................38
7.1 Access to Premises and Records...................................38
7.2 Continuity and Maintenance of Operations, Certain
Deliveries and Notice............................................38
7.3 Employees........................................................41
7.4 Leased Vehicles; Other Capital Leases............................44
7.5 Required Consents; Franchise Renewal.............................45
7.6 Title Commitments and Surveys....................................48
7.7 HSR Notification.................................................49
7.8 Sales and Transfer Taxes.........................................49
7.9 Programming......................................................50
7.10 Updated Schedules................................................50
7.11 Use of Name and Logo.............................................51
7.12 Transitional Billing Services....................................51
7.13 Confidentiality and Publicity....................................51
7.14 Bulk Transfer....................................................52
7.15 Lien Searches....................................................52
7.16 Further Assurances...............................................52
7.17 Post-Closing Cooperation as to Rates.............................53
7.18 Distant Broadcast Signals........................................54
7.19 Environmental Assessment.........................................55
7.20 Year 2000 Matters................................................56
7.21 Satisfaction of Conditions.......................................58
7.22 Offers...........................................................58
7.23 Retention of Books and Records...................................59
7.24 Cooperation......................................................59
7.25 Post-Closing Holding Period......................................59
8. CONDITIONS PRECEDENT...................................................59
8.1 Conditions to IP-I's Obligations.................................59
8.2 Conditions to RMG's Obligations..................................61
9. THE CLOSING............................................................62
9.1 The Closing; Time and Place......................................62
9.2 RMG's Delivery Obligations.......................................63
9.3 IP-I's Delivery Obligations......................................64
10. TERMINATION AND DEFAULT................................................65
10.1 Termination Events...............................................65
10.2 Effect of Termination............................................65
(iv)
<PAGE> 6
11. SURVIVAL; REMEDIES.....................................................65
11.1 Survival of Representations, Warranties Covenants
and Agreements...................................................65
11.2 Exclusive Remedy.................................................66
11.3 Nonrecourse......................................................66
12. MISCELLANEOUS PROVISIONS...............................................67
12.1 Parties Obligated and Benefitted.................................67
12.2 Notices..........................................................67
12.3 Right to Specific Performance....................................67
12.4 Waiver...........................................................67
12.5 Captions.........................................................67
12.6 Governing Law....................................................67
12.7 Time.............................................................68
12.8 Late Payments....................................................68
12.9 Counterparts.....................................................68
12.10 Entire Agreement.................................................68
12.11 Severability.....................................................68
12.12 Construction.....................................................68
12.13 Expenses.........................................................68
12.14 Risk of Loss.....................................................68
12.15 Tax Consequences.................................................69
12.16 Commercially Reasonable Efforts..................................69
(v)
<PAGE> 7
Exhibits:
Exhibit 9.2.2 - Bill of Sale and Assignment and Assumption Agreement
Exhibit 9.2.9 - Forms of Opinions
Schedules:
Schedule 1.26 - IP-I Leased Property
Schedule 1.28 - IP-I Other Real Property Interests
Schedule 1.29 - IP-I Owned Property
Schedule 1.31 - IP-I Systems Contracts
Schedule 1.32 - IP-I Systems Franchises
Schedule 1.33 - IP-I Systems Licenses
Schedule 1.34 - IP-I Tangible Personal Property
Schedule 1.53 - RMG Leased Property
Schedule 1.55 - RMG Other Real Property Interests
Schedule 1.56 - RMG Owned Property
Schedule 1.58 - RMG Systems Contracts
Schedule 1.59 - RMG Systems Franchises
Schedule 1.60 - RMG Systems Licenses
Schedule 1.61 - RMG Tangible Personal Property
Schedule 2.1 - Exchanges
Schedule 3.1.1-A - RMG System Value
Schedule 3.1.1-B - IP-I System Value
Schedule 4.2 - RMG Excluded Assets
Schedule 4.4(a) - IP-I Excluded Assets
Schedule 4.4(b) - Exceptions to IP-I Excluded Assets
Schedule 5.3 - IP-I Required Consents
Schedule 5.4.1 - IP-I Liens and Permitted Liens
Schedule 5.4.3 - IP-I Other Operators
Schedule 5.5.2 - IP-I Franchise Matters
Schedule 5.5.3 - IP-I Contract Matters
Schedule 5.6 - IP-I Real Property Matters
Schedule 5.7 - IP-I Environmental Matters
Schedule 5.8 - IP-I Compliance with Legal Requirements
Schedule 5.10 - IP-I Statements of Income
Schedule 5.11 - IP-I Changes and Events
Schedule 5.12 - IP-I Litigation
Schedule 5.13 - IP-I Tax Matters
Schedule 5.14 - IP-I Employee Matters
Schedule 5.15.1 - IP-I Systems Information
Schedule 5.15.2 - IP-I Systems
Schedule 5.18 - IP-I Related Party Transactions
(vi)
<PAGE> 8
Schedule 6.3 - RMG Required Consents
Schedule 6.4.1 - RMG Liens and Permitted Liens
Schedule 6.4.3 - RMG Other Operators
Schedule 6.5.2 - RMG Franchise Matters
Schedule 6.5.3 - RMG Contract Matters
Schedule 6.6 - RMG Real Property Matters
Schedule 6.7 - RMG Environmental Matters
Schedule 6.8 - RMG Compliance with Legal Requirements
Schedule 6.10 - RMG Statements of Income
Schedule 6.11 - RMG Changes and Events
Schedule 6.12 - RMG Litigation
Schedule 6.13 - RMG Tax Matters
Schedule 6.14 - RMG Employee Matters
Schedule 6.15.1 - RMG Systems Information
Schedule 6.15.2 - RMG Systems
Schedule 6.18 - RMG Related Party Transactions
Schedule 7.2 - Exceptions to Ordinary Course
Schedule 7.2-A - RMG 1999 Budgets
Schedule 7.2-B - IP-I 1999 Budgets
Schedule 7.2.4 - Form of Monthly Report
Schedule 7.20.1(b)-A - RMG's Year 2000 Assessment, High-Level
Inventory and Remediation Decisions
Schedule 7.20.1(b)-B - IP-I's Year 2000 Assessment, High-Level
Inventory and Remediation Decisions
Schedule 7.20.1(c)-A - RMG's Year 2000 Plan
Schedule 7.20.1(c)-B - IP-I's Year 2000 Plan
(vii)
<PAGE> 9
ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT is made as of the April __, 1999, by and
among InterMedia Partners, a California Limited Partnership ("IP-I Parent") and
Brenmor Cable Partners, L.P., a California limited partnership ("Brenmor," each
of IP-I Parent and Brenmor being referred to as an "IP-I Party" and
collectively, "IP-I"), on the one hand, and Robin Media Group, Inc., a Nevada
corporation ("RMG"), on the other hand.
RECITALS
A. The IP-I Parties own and operate cable television systems that are franchised
or hold other operating authority and operate in and around the municipalities
listed on Schedule 5.15.2 (collectively, the "IP-I Systems" and reference to any
IP-I Party's Systems will be deemed to refer to the IP-I Systems owned and
operated by such IP-I Party).
B. RMG owns and operates cable television systems which are
franchised or hold other operating authority and operate in and around the
municipalities listed on Schedule 6.15.2 (collectively, the "RMG Systems").
C. This Agreement sets forth the terms and conditions upon which (i)
the IP-I Parties will convey, or cause to be conveyed, to RMG substantially all
of the assets comprising or used or useful in connection with IP-I's Cable
Businesses and (ii) RMG will convey, or cause to be conveyed, to the IP-I
Parties substantially all of the assets comprising or used or useful in
connection with RMG's Cable Business, all in such a manner as to effect, to the
extent reasonably possible, a like-kind exchange of such assets under Section
1031 of the United States Internal Revenue Code, as amended (the "Code").
D. Charter Communications, LLC, Charter Communications Properties,
LLC, and Marcus Cable Associates, L.L.C. (collectively, the "Charter Parties"),
IP-I, RMG, and certain of their respective Affiliates have entered into that
certain Common Agreement (the "Common Agreement") pursuant to which they have
agreed to certain issues common to each of the transfers made pursuant to this
Agreement and to certain other related transactions (each as more fully
described in the Common Agreement). The common issue addressed include certain
revenue and working capital adjustments, closing conditions, and indemnification
for breaches of representations, warranties, covenants and agreements. Certain
other revenue and working capital adjustments will be made pursuant to that
certain Exchange and Redemption Agreement dated the same date as this Agreement
and consummated as described in the Common Agreement (the "Redemption
Agreement").
1
<PAGE> 10
AGREEMENTS
In consideration of the covenants and agreements set forth herein and for
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereby agree as follows:
1. DEFINITIONS. In addition to the terms defined elsewhere in this Agreement,
the following capitalized terms or terms otherwise defined in this Section 1
shall have the meanings set forth below:
1.1 1992 Cable Act. The Cable Television Consumer Protection and
Competition Act of 1992, as amended, and the FCC rules and regulations
promulgated thereunder.
1.2 Affiliate. With respect to any Person, any other Person controlling,
controlled by or under common control with such Person. As used in this
Agreement, "control" means the ownership, directly or indirectly, of voting
securities representing the right generally to elect a majority of the directors
(or similar officials) of a Person or the possession, by contract or otherwise,
of the authority to direct the management and policies of a Person.
Notwithstanding the foregoing, prior to the Closing Date, (a) neither AT&T
Corporation, Tele-Communications, Inc., nor any of their direct or indirect
subsidiaries (collectively, the "AT&T Affiliates"), shall be considered
Affiliates of any IP-I Party for any purpose herein or hereunder; and (b) IP-I,
Brenmor and TCIP IP-V, Inc., on the one hand, and InterMedia Partners Southeast,
InterMedia Partners of West Tennessee, L.P., InterMedia Partners IV, L.P., and
Robin Media Group, Inc., on the other hand, shall not be deemed Affiliates of
each other.
1.3 Agreement. This Asset Exchange Agreement.
1.4 Antitrust Division. The Antitrust Division of the United States
Department of Justice.
1.5 Assets. The IP-I Assets or the RMG Assets, as the context requires.
1.6 Basic Services. The lowest tier of service offered to subscribers of a
System.
1.7 Business Day. Any day other than a Saturday, Sunday or a day on which
the banking institutions in New York, New York, Denver, Colorado, San Francisco,
California or St. Louis, Missouri are required or authorized to be closed.
1.8 Cable Act. The Cable Communications Policy Act of 1984, as amended,
and the FCC rules and regulations promulgated thereunder.
1.9 Cable Business. IP-I's Cable Businesses, or any of them, or RMG's
Cable Business, as the context requires.
2
<PAGE> 11
1.10 Closing. The closing of the exchange transactions contemplated by
this Agreement.
1.11 Closing Time. 11:59 p.m., Eastern time, on the Closing Date.
1.12 Communications Act. The Communications Act of 1934, as amended, and
the FCC rules and regulations promulgated thereunder.
1.13 Contract. Any contract, mortgage, deed of trust, bond, indenture,
lease, license, note, franchise, certificate, option, warrant, right or other
instrument, document, obligation or agreement, whether written or oral.
1.14 Copyright Act. The Copyright Act of 1976, as amended, including all
rules, regulations, orders and policies of the U.S. Copyright Office thereunder
applicable to cable television systems generally.
1.15 Environmental Law. Any Legal Requirement relating to pollution or the
protection of public health, safety, welfare or the environment, including
CERCLA, OSHA and RCRA and including Legal Requirements relating to emissions,
discharges, releases or threatened releases of Hazardous Substances into the
environment (including ambient air, surface water, ground water or land) or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Substances.
1.16 ERISA. The Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder and published
interpretations with respect thereto.
1.17 ERISA Affiliate. As to any Person, any trade or business, whether or
not incorporated, which together with such Person would be deemed a single
employer within the meaning of Section 4001 of ERISA.
1.18 Expanded Basic Services. Any video programming provided over a cable
television system, regardless of service tier, other than Basic Services and Pay
TV.
1.19 FCC. The Federal Communications Commission.
1.20 Governmental Authority. The United States of America, any state,
commonwealth, territory or possession of the United States of America and any
political subdivision or quasi-governmental authority of any of the same,
including any court, tribunal, department, commission, board, bureau, agency,
body, county, municipality, province, parish or other instrumentality of any of
the foregoing.
3
<PAGE> 12
1.21 Hazardous Substances. Any pollutant, contaminant, chemical,
industrial, toxic, hazardous or noxious substance or waste which is regulated by
a Governmental Authority, including (a) any petroleum or petroleum compounds
(refined or crude), flammable substances, explosives, radioactive materials or
any other materials or pollutants which pose a significant hazard or potential
significant hazard to the Owned Property or Other Real Property Interests or to
Persons in or about the Owned Property or Other Real Property Interests or cause
the Owned Property or Other Real Property Interests to be in violation of any
Legal Requirements; (b) any "hazardous waste" as defined by the Resource
Conservation and Recovery Act of 1976 (RCRA) (42 U.S.C. ss.ss. 6901) and the
rules and regulations promulgated thereunder; (c) any "hazardous substance" as
defined by the Comprehensive Environmental Response, Compensation and Liability
Act of 1980 (42 U.S.C. 9601 et seq.) (CERCLA), as amended, and the rules and
regulations promulgated thereunder; (d) any substance regulated by the Toxic
Substances Control Act (TSCA) (42 U.S.C. ss. 2601 et seq.) or the Insecticide,
Fungicide and Rodenticide Act (IFRA) (7 U.S.C. ss. 136 et seq.), each, as
amended, and the rules and regulations promulgated thereunder; (e) asbestos or
asbestos-containing material of any kind or character; (f) polychlorinated
biphenyls; (g) any substances regulated under the provisions of Subtitle I of
RCRA relating to underground storage tanks; (h) any materials or substances
designated as "hazardous substances" pursuant to the Clean Water Act (33 U.S.C.
ss. 1251 et seq.); (i) "economic poison," as defined in the Federal Insecticide,
Fungicide and Rodenticide Act (7 U.S.C. ss. 135 et seq.); (j) any substance the
presence, use, handling, treatment, storage or disposal of which on the Owned
Property or Leased Property is regulated or prohibited by any Environmental Law;
and (k) any other substance which by any Environmental Law requires special
handling, reporting or notification of any Governmental Authority in its
collection, storage, use, treatment or disposal.
1.22 HSR Act. The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder.
1.23 Intellectual Property. With respect to any Cable Business, any (a)
trademarks, trade dress, trade names, service marks, logos and other similar
proprietary rights, (b) domain names, (c) copyrights and (d) patents and
patentable know-how, inventions and processes, in each case used in such Cable
Business.
1.24 IP-I Assets. All of the assets, privileges, contracts, licenses,
permits, franchises, authorizations, rights, interests, claims and other
properties, real and personal, tangible and intangible, of every type and
description (a) which are owned, leased, held for, used or useful in, or
otherwise related to, IP-I's Cable Businesses, (b) in which any IP-I Party or
its Affiliate has any right, title or interest or in which any IP-I Party or its
Affiliate acquires any right, title or interest on or before the Closing Time,
and (c) which are not IP-I Excluded Assets. The IP-I Assets include the IP-I
Tangible Personal Property, IP-I Owned Property, IP-I Leased Property, IP-I
Other Real Property Interests, IP-I Systems Franchises, IP-I Systems Licenses,
IP-I Systems Contracts, IP-I Books and Records and IP-I Other Intangibles.
Reference to any IP-I Party's Assets will be deemed to refer to the IP-I Assets
of such IP-I Party.
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1.25 IP-I Books and Records. All engineering records, files, data,
drawings, blueprints, schematics, reports, lists, plans and procedures and all
other files of correspondence, lists, records and reports concerning IP-I's
Cable Businesses, including subscribers and prospective subscribers of the IP-I
Systems, signal and program carriage and dealings with Governmental Authorities
with respect to the IP-I Systems, including all reports filed with respect to
the IP-I Systems by or on behalf of any IP-I Party or its Affiliate with the FCC
and statements of account filed with respect to the IP-I Systems by or on behalf
of any IP-I Party or its Affiliate with the U.S. Copyright Office, but excluding
all documents, reports and records relating to any employee of the IP-I Systems
who has not given consent to disclosure of such documents, reports and records.
Reference to any IP-I Party's Books and Records will be deemed to refer to the
IP-I Books and Records included among such IP-I Party's Assets.
1.26 IP-I Leased Property. The leaseholds of real property included among
the IP-I Assets and described as IP-I Leased Property on Schedule 1.26.
Reference to any IP-I Party's Leased Property will be deemed to refer to the
IP-I Leased Property included among such IP-I Party's Assets.
1.27 IP-I Other Intangibles. All intangible assets, other than the IP-I
Systems Franchises, IP-I Systems Licenses and IP-I Systems Contracts, including
subscriber lists, claims (excluding any claims relating to IP-I Excluded
Assets), and Intellectual Property, if any, included among the IP-I Assets.
Reference to any IP-I Party's Other Intangibles will be deemed to refer to the
IP-I Other Intangibles included among such IP-I Party's Assets.
1.28 IP-I Other Real Property Interests. The easements and rights of
access (other than those relating to multiple dwelling units) and other
interests in real property held by any IP-I Party or its Affiliate in connection
with IP-I's Cable Business, including those interests described as IP-I Other
Real Property Interests on Schedule 1.28, but not including IP-I Leased Property
or IP-I Owned Property. Reference to any IP-I Party's Other Real Property
Interests will be deemed to refer to the IP-I Other Real Property Interests
included among such IP-I Party's Assets.
1.29 IP-I Owned Property. The fee interests in the real property included
among the IP-I Assets and described as IP-I Owned Property on Schedule 1.29 and
all improvements and towers thereon and appurtenances thereto. Reference to any
IP-I Party's Owned Property will be deemed to refer to the IP-I Owned Property
included among such IP-I Party's Assets.
1.30 IP-I Required Consents. Any and all consents, authorizations and
approvals under or in connection with the IP-I Assets (including the IP-I
Systems Franchises, IP-I Systems Licenses, and IP-I Systems Contracts) or any
Contract, Lien or Legal Requirement by which any IP-I Party, any of its
Affiliates or their respective Assets are bound, required (a) for each IP-I
Party to transfer its Assets to RMG pursuant to this Agreement, (b) for RMG to
operate the IP-I Systems and to own, lease, use and operate the IP-I Assets and
the IP-I Systems at the places and in the manner in which the IP-I Assets are
used and the IP-I Systems are operated as of the date of this Agreement and as
of the Closing, or (c) for RMG to assume and perform the IP-I Systems
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<PAGE> 14
Franchises, the IP-I Systems Licenses, the IP-I Systems Contracts and the RMG
Assumed Obligations and Liabilities.
1.31 IP-I Systems Contracts. All Contracts (other than IP-I Systems
Franchises and IP-I Systems Licenses) that are included among the IP-I Assets,
including the lease agreements for IP-I Tangible Personal Property, pole
attachment agreements, underground conduit agreements, crossing agreements,
retransmission consent agreements, multiple dwelling, bulk billing or commercial
service agreements and other Contracts described on Schedule 1.31 and the
Contracts documenting IP-I Leased Property and IP-I Other Real Property
Interests described on Schedules 1.26 and 1.28. Reference to any IP-I Party's
Systems Contracts will be deemed to refer to the IP-I Systems Contracts included
among such IP-I Party's Assets.
1.32 IP-I Systems Franchises. The franchises, permits and similar
authorizations included among the IP-I Assets (other than the IP-I Systems
Licenses) described on Schedule 1.32, and all rights and benefits of the IP-I
Parties and their Affiliates pertaining thereto, including the rights and
benefits arising under Section 626 of the Communications Act (47 U.S.C. 546) to
the extent applicable to a IP-I Systems Franchise. Reference to any IP-I Party's
Systems Franchises will be deemed to refer to the IP-I Systems Franchises
included among such IP-I Party's Assets.
1.33 IP-I Systems Licenses. The intangible cable television channel
distribution rights, cable television relay service (CARS), business radio and
other licenses, earth station registrations, authorizations, consents or permits
issued by the FCC or any other Governmental Authority included among the IP-I
Assets and described on Schedule 1.33 (other than the IP-I Systems Franchises
and IP-I Systems Contracts) and all rights and benefits of the IP-I Parties and
their Affiliates pertaining thereto. Reference to any IP-I Party's Systems
Licenses will be deemed to refer to the IP-I Systems Licenses included among
such IP-I Party's Assets.
1.34 IP-I Tangible Personal Property. All tangible personal property
included among the IP-I Assets, including towers (other than towers on IP-I
Owned Property which are fixtures thereon and a part thereof), tower equipment,
aboveground and underground cable, distribution systems, headend amplifiers,
line amplifiers, microwave equipment, converters, testing equipment, motor
vehicles, office equipment, computers and billing equipment, furniture,
fixtures, supplies, inventory and other physical assets, the principal items of
which are identified and described on Schedule 1.34. Reference to any IP-I
Party's Tangible Personal Property will be deemed to refer to the IP-I Tangible
Personal Property included among such IP-I Party's Assets.
1.35 IP-I's Cable Businesses. The cable television businesses and other
revenue-generating businesses and operations relating to the IP-I Systems
conducted by the IP-I Parties and their Affiliates through the IP-I Systems.
Reference to any IP-I Party's Cable Business will be deemed to refer to the
IP-I's Cable Business operated by such IP-I Party.
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1.36 Judgment. Any judgment, writ, order, injunction, award or decree of
any court, judge, justice or magistrate, including any bankruptcy court or judge
or the arbitrator in any binding arbitration, and any order of or by any
Governmental Authority.
1.37 Knowledge. The actual knowledge of a particular matter with respect
to any IP-I System or RMG System of Frank S. Crawford, Robert J. Lewis, Rodney
M. Royse, Edon V. Smith or Thomas R. Stapleton, and the general manager or one
or more of the managers of the System.
1.38 Leased Property. IP-I Leased Property or RMG Leased Property, as the
context requires.
1.39 Legal Requirement. Applicable common law and any statute, ordinance,
code or other law, rule, regulation, order, technical or other written standard,
requirement or procedure enacted, adopted, promulgated, applied or followed by
any Governmental Authority, including any Judgment.
1.40 Lien. Any security interest, security agreement, financing statement
filed with any Governmental Authority, conditional sale or other title retention
agreement, any lease, consignment or bailment given for purposes of security,
any mortgage, lien (including any lien for Taxes), indenture, pledge, option,
encumbrance, adverse interest, constructive trust or other trust, claim,
attachment, exception to, defect in, or other condition adversely affecting
title or other ownership interest (including reservations, rights of entry,
possibilities of reverter, encroachments, protrusions, easements, rights-of-way,
rights of first refusal, restrictive covenants, leases and licenses) of any
kind, which constitutes an interest in or claim against property, whether
arising pursuant to any Legal Requirement, Systems License, Systems Franchise,
Systems Contract or otherwise.
1.41 Litigation. Any claim, action, suit, proceeding, arbitration,
investigation or hearing that could result in a Judgment, any other activity or
procedure that could reasonably be expected to result in a Judgment, or any
notice of any of the foregoing.
1.42 Losses. Any claims, losses, liabilities, damages, penalties, costs
and expenses, including interest that may be imposed in connection therewith,
expenses of investigation, reasonable fees and disbursements of counsel and
other experts, and, as applicable, the cost to any Person making a claim or
seeking indemnification under this Agreement with respect to funds expended by
such Person by reason of the occurrence of any event or the existence or
assertion of any Liens (other than Permitted Liens) with respect to which
indemnification is sought.
1.43 MVPD. A distributor of cable television services, multichannel multi
point distribution service, direct broadcast satellite service or television
receive-only satellite programming, who makes available for purchase, by
subscribers or customers, multiple channels
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of video programming, other than Persons distributing such services only to
multiple dwelling unit or other commercial customers (including hotels, motels,
resorts, hospitals, dormitories, prisons, restaurants, bars and similar
establishments).
1.44 Other Real Property Interests. The IP-I Other Real Property Interests
or the RMG Other Real Property Interests, as the context requires.
1.45 Owned Property. IP-I Owned Property or RMG Owned Property, as the
context requires.
1.46 Party. IP-I or RMG, as the context requires.
1.47 Pay TV. Premium programming services selected by and sold to
subscribers on a per channel or per program basis.
1.48 Permitted Liens. (a) Liens for Taxes, assessments and governmental
charges, in each case not yet due and payable, (b) zoning laws or ordinances or
any similar Legal Requirements, (c) rights reserved to any Governmental
Authority to regulate the affected property, (d) Liens described on Schedule
5.4.1 (with respect to IP-I) and Schedule 6.4.1 (with respect to RMG), (e) as to
Leased Property or Tangible Personal Property that is leased, the interests of
the lessors thereof, and (f) as to Owned Property, Leased Property and Other
Real Property Interests, any easements, rights-of-way, servitudes, conditions,
covenants, restrictions and minor imperfections or irregularities in title, in
each case, which are reflected in the public records and which do not
individually or in the aggregate interfere with the right or ability of the
applicable Party to own, use, enjoy or operate the Owned Property, Leased
Property or Other Real Property Interests in the manner currently used or to
convey good, marketable and indefeasible fee simple title to the same; provided
that "Permitted Liens" will not include any Lien which could prevent or inhibit
in any way (other than as permitted under clause (f)) the conduct of the
business of the affected System, and provided further that classification of any
Lien as a "Permitted Lien" will not affect any liability which a Party may have
for any such Lien, including pursuant to any indemnity obligation under this
Agreement.
1.49 Person. Any natural person, Governmental Authority, corporation,
general or limited partnership, limited liability company, joint venture, trust,
association or unincorporated entity of any kind.
1.50 Required Consents. The IP-I Required Consents or the RMG Required
Consents, as the context requires.
1.51 RMG Assets. All of the assets, privileges, contracts, licenses,
permits, franchises, authorizations, rights, interests, claims and other
properties, real and personal, tangible and intangible, of every type and
description (a) which are owned, leased, held for, used or useful in, or
otherwise related to, RMG's Cable Business, (b) in which RMG or any Affiliate of
RMG has
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any right, title or interest or in which RMG or any Affiliate of RMG acquires
any right, title or interest on or before the Closing Time, and (c) which are
not RMG Excluded Assets. The RMG Assets include the RMG Tangible Personal
Property, RMG Owned Property, RMG Leased Property, RMG Other Real Property
Interests, RMG Systems Franchises, RMG Systems Licenses, RMG Systems Contracts,
RMG Books and Records and RMG Other Intangibles.
1.52 RMG Books and Records. All engineering records, files, data,
drawings, blueprints, schematics, reports, lists, plans and procedures and all
other files of correspondence, lists, records and reports concerning RMG's Cable
Business, including subscribers and prospective subscribers of the RMG Systems,
signal and program carriage and dealings with Governmental Authorities with
respect to the RMG Systems, including all reports filed with respect to the RMG
Systems by or on behalf of RMG or any Affiliate of RMG with the FCC and
statements of account filed with respect to the RMG Systems by or on behalf of
RMG or any Affiliate of RMG with the U.S. Copyright Office, but excluding all
documents, reports and records relating to any employee of the RMG Systems who
has not given consent to disclosure of such documents, reports and records.
1.53 RMG Leased Property. The leaseholds of real property included among
the RMG Assets and described as RMG Leased Property on Schedule 1.53.
1.54 RMG Other Intangibles. All intangible assets, other than the RMG
Systems Franchises, RMG Systems Licenses and RMG Systems Contracts, including
subscriber lists, claims (excluding any claims relating to RMG Excluded Assets),
and Intellectual Property, if any, included among the RMG Assets.
1.55 RMG Other Real Property Interests. The easements and rights of access
(other than those relating to multiple dwelling units) and other interests in
real property held by RMG or any Affiliate of RMG in connection with RMG's Cable
Business, including those interests described as RMG Other Real Property
Interests on Schedule 1.55, but not including RMG Leased Property or RMG Owned
Property.
1.56 RMG Owned Property. The fee interests in the real property included
among the RMG Assets and described as RMG Owned Property on Schedule 1.56 and
all improvements and towers thereon and appurtenances thereto.
1.57 RMG Required Consents. Any and all consents, authorizations and
approvals under or in connection with the RMG Assets (including the RMG Systems
Franchises, RMG Systems Licenses, and RMG Systems Contracts) or any Contract,
Lien or Legal Requirement by which RMG, any of its Affiliates or their
respective Assets are bound, required (a) for RMG to transfer the RMG Assets to
the IP-I Parties pursuant to this Agreement, (b) for the IP-I Parties to operate
the RMG Systems and to own, lease, use and operate the RMG Assets and the RMG
Systems at the places and in the manner in which the RMG Assets are used and the
RMG Systems are operated as of the date of this Agreement and as of the Closing,
or (c) for the IP-I
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Parties to assume and perform the RMG Systems Franchises, the RMG Systems
Licenses, the RMG Systems Contracts and the IP-I Assumed Obligations and
Liabilities.
1.58 RMG Systems Contracts. All Contracts (other than RMG Systems
Franchises and RMG Systems Licenses) that are included among the RMG Assets,
including the lease agreements for RMG Tangible Personal Property, pole
attachment agreements, underground conduit agreements, crossing agreements,
retransmission consent agreements, multiple dwelling, bulk billing or commercial
service agreements and other Contracts described on Schedule 1.58 and the
Contracts documenting RMG Leased Property and RMG Other Real Property Interests
described on Schedules 1.53 and 1.55.
1.59 RMG Systems Franchises. The franchises, permits and similar
authorizations included among the RMG Assets (other than RMG Systems Licenses)
described on Schedule 1.59, and all rights and benefits of RMG and its
Affiliates pertaining thereto, including the rights and benefits arising under
Section 626 of the Communications Act (47 U.S.C. 546) to the extent applicable
to an RMG Systems Franchise.
1.60 RMG Systems Licenses. The intangible cable television channel
distribution rights, cable television relay service (CARS), business radio and
other licenses, earth station registrations, authorizations, consents or permits
issued by the FCC or any other Governmental Authority included among the RMG
Assets and described on Schedule 1.60 (other than the RMG Systems Franchises and
RMG Systems Contracts) and all rights and benefits of RMG and its Affiliates
pertaining thereto.
1.61 RMG Tangible Personal Property. All tangible personal property
included among the RMG Assets, including towers (other than towers on RMG Owned
Property which are fixtures thereon and a part thereof), tower equipment,
aboveground and underground cable, distribution systems, headend amplifiers,
line amplifiers, microwave equipment, converters, testing equipment, motor
vehicles, office equipment, computers and billing equipment, furniture,
fixtures, supplies, inventory and other physical assets, the principal items of
which are identified and described on Schedule 1.61.
1.62 RMG's Cable Business. The cable television businesses and other
revenue-generating businesses and operations relating to the RMG Systems
conducted by RMG or an Affiliate of RMG through the RMG Systems.
1.63 Six-Month Date. The date that is six months after the Closing Date.
1.64 System. Any of the IP-I Systems or the RMG Systems, as the context
requires.
1.65 Systems Contracts. The IP-I Systems Contracts or the RMG Systems
Contracts, as the context requires.
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1.66 Systems Franchises. The IP-I Systems Franchises or the RMG Systems
Franchises, as the context requires.
1.67 Systems Licenses. The IP-I Systems Licenses or the RMG Systems
Licenses, as the context requires.
1.68 Tangible Personal Property. The IP-I Tangible Personal Property or
the RMG Tangible Personal Property, as the context requires.
1.69 Taxes. Levies and assessments of any kind or nature imposed by any
Governmental Authority, including all income, sales, use, ad valorem, value
added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes and levies or assessments related to
unclaimed property, together with any interest thereon and any penalties,
additions to tax or additional amounts applicable thereto. For purposes of
determining any Tax cost or Tax benefit to any Person, such amount will be the
actual cost or benefit recognized by such Person at the time of actual payment
of the additional Tax or actual receipt of the Tax benefit. In the event that
any Loss, payment or other amount is required to be determined on an after-Tax
basis, such payment or other amount will be determined without regard to any Tax
cost or Tax benefit not actually recognized at the time of the determination,
and appropriate adjustments will be made when and to the extent that such Tax
cost or Tax benefit is actually recognized.
1.70 Third Party. Any Person other than RMG and its Affiliates or IP-I and
its Affiliates.
1.71 Transaction Documents. The Common Agreement and all instruments and
documents described in Sections 9.2 and 9.3 which are being executed and
delivered by or on behalf of any IP-I Party or RMG in connection with this
Agreement or the transactions contemplated hereby.
1.72 Other Definitions. The following terms have the meanings set forth in
the sections indicated in the table below:
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Agent's Fees 5.18
ALTA 7.6
AT&T Affiliates 1.2
Brenmor First Paragraph
Cash Consideration 3.1.1
Charter Parties Recital D
Closing Date 9.1
Code Recital C
</TABLE>
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<TABLE>
<S> <C>
commercially reasonable efforts 12.16
control 1.2
Common Agreement Recital D
Computer and Other Systems 7.20.1(a)
Confidential Information 7.13.1
Cost of Service Election 5.8.4
Exchange 2.1
FCC Rate Forms 5.8.4
FTC 7.7
Hired Employee 7.3.6(a)
IP-I First Paragraph
IP-I Parent First Paragraph
IP-I Party First Paragraph
IP-I Excluded Assets 4.4
IP-I Matching Franchise 7.5.5(a)
IP-I Retained Franchise 7.5.5(b)
IP-I System Value 3.1.1
IP-I Systems Recital A
IP-I's Assumed Obligations and Liabilities 4.3
Matching Franchise 7.5.5(a)
New Properties 7.10(b)
Nonrecourse 11.3
Operating Agreements 7.5.5(c)
Phase I Assessment 7.19.1
Phase II Assessment 7.19.1
Primary Transfer 7.5.5(d)
Prime Rate 12.8
Redemption Agreement Recital D
Retained Franchise 7.5.5(a)
RMG First Paragraph
RMG Excluded Assets 4.2
RMG Matching Franchise 7.5.5(b)
RMG Retained Franchise 7.5.5(a)
RMG System Value 3.1.1
RMG Systems Recital B
RMG's Assumed Obligations and Liabilities 4.1
Specified RMG Obligations 11.2
Subsequent Transfer 7.5.5(e)
Surveys 7.6
Survival Period 11.1
System Employees 7.3.1
Taking 12.14
Third Party Testing 7.20.2(c)
</TABLE>
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<TABLE>
<S> <C>
Title Commitments 7.6
Title Company 7.6
Title Defect 7.6
Transfer Tax Returns 7.8
Transfer Taxes 7.8
Transferee Party 7.17.3
Transferor Party 7.17.3
Transitional Billing Services 7.12
WARN 5.14.1
Year 2000 High-Level Inventory,
Assessment and Remediation Decisions 7.20.1(b)
Year 2000 Plan 7.20.1(c)
Year 2000 Ready or Year 2000 Readiness 7.20.1(d)
Year 2000 Remediation Program 7.20.1(e)
</TABLE>
1.73 Usage. The definitions in Article 1 shall apply equally to both the
singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed to be references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. All Exhibits and Schedules attached hereto shall be deemed incorporated
herein as if set forth in full herein and, unless otherwise defined therein, all
terms used in any Exhibit or Schedule shall have the meaning ascribed to such
term in this Agreement. The words "include," "includes" and "including" shall be
deemed to be followed by the phrase "without limitation." 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. Unless otherwise expressly provided herein, any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. All accounting terms
not otherwise defined in this Agreement will have the meanings ascribed to them
under generally acceptable accounting principles as in effect from time to time
in the United States, consistently applied.
2. EXCHANGE.
2.1 Exchange of Assets. Upon the terms and subject to the conditions set
forth in this Agreement, at the Closing, RMG and the IP-I Parties agree to
exchange simultaneously (a) certain RMG Assets for the IP-I Assets held by IP-I
Parent, as set forth on Schedule 2.1, and (b) certain RMG Assets for the IP-I
Assets held by Brenmor, as set forth in Schedule 2.1, in each case free and
clear of all Liens (except Permitted Liens) (the "Exchanges"), including the
assignment and transfer of all interests in Leased Property and leased Tangible
Personal
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Property. RMG and the IP-I Parties agree to use all reasonable efforts to
structure the Exchanges in such a way that to the extent reasonably possible it
will be a tax free exchange of like-kind assets under Section 1031 of the Code,
including either Party's assignment of its rights under this Agreement to a
"qualified intermediary" engaged by such Party to effectuate a deferred
like-kind exchange under Section 1031 of the Code. Schedule 2.1 will be attached
to this Agreement in form and substance mutually satisfactory to the Parties
prior to Closing, and when attached to this Agreement will be deemed for all
purposes to be attached as of the date hereof.
2.2 Method of Exchange. Each Exchange of Assets as described in Schedule
2.1 is to occur as follows: (A) the RMG Tangible Personal Property and the IP-I
Tangible Personal Property are being exchanged each for the other in "Exchange
Groups" as defined under Internal Revenue Regulations Sections 1.1031(a)-2 and
1.1031(j)-1(b)(2); (B) the RMG Owned Property, RMG Leased Property and RMG Other
Real Property Interests, and the IP-I Owned Property, IP-I Leased Property and
IP-I Other Real Property Interests, are being exchanged each for the other; and
(C) the RMG Systems Contracts, RMG Systems Franchises, RMG Systems Licenses and
RMG Other Intangibles, and the IP-I Systems Contracts, IP-I Systems Franchises,
IP-I Systems Licenses and IP-I Other Intangibles, are being exchanged each for
the other, in each case to the maximum extent permitted by Section 1031 of the
Code and the regulations promulgated thereunder. Liabilities assumed or taken
subject to by each Party are being exchanged each for the other to the maximum
extent permitted under Section 1031 of the Code and regulations thereunder.
3. CONSIDERATION. Each Party agrees that cash consideration will be paid at
Closing by either RMG (or its designee) to the IP-I Parties or by the IP-I
Parties to RMG, and that such amount will be determined as follows:
3.1 Calculation of Values; Cash Consideration.
3.1.1 For the purposes of this Agreement, the gross value of the RMG
Assets comprising each RMG System shall be as set forth on Schedule 3.1.1-A
(each, an "RMG System Value") and the gross value of the IP-I Assets comprising
each IP-I System shall be as set forth on Schedule 3.1.1-B (each, a "IP-I System
Value"). The RMG System Value for each RMG System shall be adjusted in
accordance with the provisions of the Redemption Agreement, and the IP-I System
Value for each IP-I System shall be adjusted in accordance with the provisions
of the Common Agreement. At the Closing, the appropriate Person will pay to the
IP-I Parties or RMG, as the case may be (or their permitted assignees) an amount
of cash to be determined pursuant to the Redemption Agreement or the Common
Agreement (in each case, the "Cash Consideration"), which payments shall then be
deemed made pursuant and subject to this Agreement. Preliminary and final
determinations of the Cash Consideration will be made in accordance with the
Common Agreement.
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4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 RMG's Assumed Obligations and Liabilities. At the Closing and
effective as of the Closing Time, RMG will assume and after the Closing Date,
RMG will pay, discharge and perform the following (collectively, "RMG's Assumed
Obligations and Liabilities"): (a) those obligations and liabilities accruing
and relating to periods after the Closing Time under or with respect to the IP-I
Assets assigned and transferred to RMG at the Closing; (b) those obligations and
liabilities of IP-I for subscriber prepayments and deposits related to the IP-I
Systems existing at the Closing Time; (c) other obligations and liabilities of
the IP-I Parties only to the extent that the Adjusted Value of the IP-I Systems
was decreased with respect thereto pursuant to Section 2.2 of the Common
Agreement; and, (d) all other obligations and liabilities accruing and relating
to periods after the Closing Time and arising out of RMG's ownership, use or
operation of the IP-I Assets (including those items listed or described on
Schedule 4.4(b)) or its operation of, or conduct of business through, the IP-I
Systems after the Closing (including with respect to late fees that may be
charged by RMG after the Closing to subscribers of the IP-I Systems) except to
the extent that such obligations or liabilities relate to any IP-I Excluded
Asset. All obligations and liabilities arising out of or relating to the IP-I
Assets, the IP-I Systems or IP-I's Cable Businesses other than RMG's Assumed
Obligations and Liabilities will remain and be the obligations and liabilities
solely of the IP-I Parties, including any obligation, liability or claims
relating to or arising pursuant to (w) Taxes (including franchise fees) with
respect to periods or portions thereof ending on or prior to the Closing Date,
(x) refunds of rates, charges or late fees with respect to periods through and
including the Closing Date, (y) Litigation commenced, or related to an event
occurring, on or prior to the Closing Date, or (z) credit, loan or other
agreements pursuant to which the IP-I Parties have created, incurred, assumed or
guaranteed indebtedness for borrowed money or under which any Lien securing such
indebtedness has been or may be imposed on any IP-I Asset.
4.2 RMG Excluded Assets. "RMG Excluded Assets" means all: (a) cash and
cash equivalents; (b) minute books, stock ledgers, organizational documents and,
to the extent not included in the RMG Books and Records, personnel files and
records; and (c) rights, assets and properties described on Schedule 4.2.
4.3 IP-I's Assumed Obligations and Liabilities. At the Closing and
effective as of the Closing Time, the IP-I Parties will assume and after the
Closing Date, the IP-I Parties will pay, discharge and perform the following
(collectively, "IP-I's Assumed Obligations and Liabilities"): (a) those
obligations and liabilities under or with respect to the RMG Assets assigned and
transferred to the IP-I Parties at the Closing; (b) those obligations and
liabilities of RMG for subscriber prepayments and deposits related to the RMG
Systems existing at the Closing Time; (c) other obligations and liabilities of
RMG to the extent that the Adjusted Value of the RMG Systems was decreased with
respect thereto pursuant to the Redemption Agreement; and (d) all other
obligations and liabilities related to or arising out of RMG's or the IP-I
Parties' ownership, use or operation of the RMG Assets or their operation of, or
the conduct of business through, the RMG Systems (including with respect to late
fees that may be charged by the IP-I Parties after
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the Closing to subscribers of the RMG Systems), except to the extent that such
obligations or liabilities relate to any RMG Excluded Asset. All obligations and
liabilities not arising out of or relating to the RMG Assets, the RMG Systems or
RMG's Cable Business will remain and be the obligations and liabilities solely
of RMG including any obligation, liability or claims relating to or arising
pursuant to (x) Taxes (other than franchise fees or Taxes with respect to the
RMG Assets) with respect to periods or portions thereof ending on or prior to
the Closing Date, or (y) credit, loan or other agreements pursuant to which RMG
has created, incurred, assumed or guaranteed indebtedness for borrowed money or
under which any Lien securing such indebtedness has been or may be imposed on
any RMG Asset.
4.4 IP-I Excluded Assets. "IP-I Excluded Assets" means all: (a)
programming Contracts (including music programming Contracts), cable guide
Contracts, and Contracts to which the IP-I Parties one or more Affiliates of the
IP-I Parties or other cable systems of the IP-I Parties or their Affiliates are
parties (including master retransmission consent agreements and master billing,
collection and related agreements), other than any such Contracts (such as local
programming agreements) listed on Schedule 4.4(b), (b) except as set forth on
Schedule 4.4(b), each employee benefit plan (as defined in Section 3(3) of
ERISA) or any multiemployer plan (as defined in Section 3(37) of ERISA) with
respect to which any IP-I Party or any of their ERISA Affiliates has any
liability or in which any employees or agents, or any former employees or
agents, of any IP-I Party or any of their ERISA Affiliates participate; (c)
except as provided in Section 12.14, insurance policies and rights and claims
thereunder; (d) bonds, letters of credit, surety instruments and other similar
items; (e) cash and cash equivalents, including cash relating to subscriber
prepayments and deposits, and notes receivable; (f) except as set forth on
Schedule 4.4(b), and subject to Section 7.11, Intellectual Property held by IP-I
or any of its Affiliates; (g) except as set forth on Schedule 4.4(b), subscriber
billing Contracts and related equipment if not owned by the IP-I Parties or any
Affiliate of the IP-I Parties; (h) assets, rights or properties of the IP-I
Parties or their Affiliates used or held for use other than principally in
connection with the IP-I Systems; (i) except for any items for which the
Adjusted Value of the IP-I Systems is increased under Section 2.2 of the Common
Agreement, claims, rights, and interest in and to any refunds of Taxes or fees
of any nature, or other claims against third parties, relating to the operation
of the IP-I Systems prior to the Closing Time; (j) account books of original
entry, general ledgers, financial records, minute books, stock ledgers,
organizational documents and, to the extent not included in the IP-I Books and
Records, personnel files and records, in each case used in connection with the
IP-I Systems; (k) except for the leases described on Schedule 4.4(b), capital
and vehicle leases; (l) advertising sales agency or representation Contracts
providing any Third Party or Affiliate of IP-I the right to sell available
advertising time for a IP-I System other than any such Contract listed on
Schedule 4.4(b); (m) to the extent licensed pursuant to a master license
agreement or otherwise not transferable, software of the IP-I Parties or any
Affiliate of the IP-I Parties and licenses relating to Third Party software; (n)
Contracts for any fiber or fiber capacity lease or use arrangements that provide
to any Third Party or Affiliate of IP-I the right to use any fiber or capacity
of a IP-I System other than any such Contract listed on Schedule 4.4(b); (o)
except as set forth on Schedule 4.4(b), Contracts for any internet access or
on-line services arrangements that provide to any Third Party or Affiliate of
IP-I the right to use
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the transmission capacity of a IP-I System to provide internet access or other
on-line services over such IP-I System; (p) except as set forth on Schedule
4.4(b), Contracts between any IP-I Party and its Affiliates; and (q) other
rights, assets and properties described on Schedule 4.4(a).
5. IP-I'S REPRESENTATIONS AND WARRANTIES. Each IP-I Party represents and
warrants to RMG, jointly and severally, as of the date of this Agreement and as
of the Closing, as follows:
5.1 Organization and Qualification of IP-I. Such IP-I Party is a limited
partnership duly formed, validly existing and in good standing under the laws of
the State of California. Such IP-I Party has all requisite power and authority
to own, lease and use the IP-I Assets owned, leased or used by it and to conduct
its Cable Business as it is currently being conducted by it. As of the date of
this Agreement, such IP-I Party is duly qualified to do business and is in good
standing under the laws of each jurisdiction in which the ownership, leasing or
use of the IP-I Assets owned, leased or used by it or the nature of its
activities in connection with its IP-I Systems makes such qualification
necessary.
5.2 Authority and Validity. Such IP-I Party has all requisite corporate
power and authority to execute and deliver, to perform its obligations under,
and to consummate the transactions contemplated by, this Agreement and the
Transaction Documents to which it is a party. The execution and delivery by such
IP-I Party of, its performance under, and its consummation of the transactions
contemplated by, this Agreement and the Transaction Documents to which it is a
party have been duly and validly authorized by all action by or on behalf of
such IP-I Party. This Agreement has been, and when executed and delivered by
such IP-I Party the Transaction Documents to which it is a party will be, duly
and validly executed and delivered by such IP-I Party and the valid and binding
obligations of such IP-I Party, enforceable against it in accordance with their
terms, except as the same may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to the enforcement of creditors' rights generally or by principles governing the
availability of equitable remedies.
5.3 No Conflict; Required Consents. Except as set forth on Schedule 5.3,
and assuming all RMG Required Consents have been obtained and the expiration or
earlier termination of the waiting period under the HSR Act has occurred, the
execution and delivery by such IP-I Party of, its performance under, and its
consummation of the transactions contemplated by, this Agreement and the
Transaction Documents to which it is a party do not and will not: (a) conflict
with or violate any provision of the organizational documents of such IP-I
Party; (b) violate any provision of any Legal Requirement; (c) require any
consent, approval or authorization of, or filing of any certificate, notice,
application, report or other document with, any Governmental Authority or other
Person; or (d) (i) conflict with, violate, result in a breach of or constitute a
default under (without regard to requirements of notice, lapse of time or
elections of other Persons or any combination thereof), (ii) permit or result in
the termination, suspension or modification of, (iii) result in the acceleration
of (or give any Person the right to accelerate)
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the performance of such IP-I Party under, or (iv) result in the creation or
imposition of any Lien under any IP-I Systems Contract, IP-I Systems Franchise,
IP-I Systems License, or other instrument evidencing any of the IP-I Assets or
by which such IP-I Party or any of its assets is bound or affected, except for
purposes of clauses (c) and (d) such consents, approvals, authorizations and
filings that, if not obtained or made, would not, and such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications and
accelerations as would not, individually or in the aggregate, have an adverse
effect on any of such IP-I Party's Systems, its Cable Business or on such IP-I
Party, or on its ability to perform its obligations under this Agreement or the
Transaction Documents to which it is a party.
5.4 Assets.
5.4.1 Such IP-I Party has good and marketable title to (or, in the
case of Assets that are leased, valid leasehold interests in) its Assets. None
of the AT&T Affiliates has any right, title or interest in or to any of the IP-I
Assets. The IP-I Assets are free and clear of all Liens, except Permitted Liens
and rights of first refusal which will be waived at Closing by the Person
holding such rights. All of the Liens described on Schedule 5.4.1 (except for
those marked with an asterisk on Schedule 5.4.1) will be terminated, released
or, in the case of rights of first refusal (except for those listed on Schedule
5.4.1), waived, as appropriate, at or prior to the Closing. Except as described
on Schedule 1.34, such IP-I Party's Tangible Personal Property, as an integrated
system and in its component parts, is in good operating condition and repair
(ordinary wear and tear and routine failures excepted) and is usable and
adequate for the operation of such IP-I Party's Cable Business.
5.4.2 Except for items included in the IP-I Excluded Assets, such
IP-I Party's Assets constitute substantially all the assets necessary to (a)
conduct its Cable Business as it is being conducted on the date of this
Agreement and in compliance with all applicable Legal Requirements, (b) to
operate its Systems as they are being operated on the date of this Agreement and
in compliance with all applicable Legal Requirements and (c) to perform all of
RMG's Assumed Obligations and Liabilities.
5.4.3 Except as described on Schedule 5.4.3, and other than direct
broadcast satellite and satellite master antenna television, with respect to
each area in which such IP-I Party's Systems currently provide cable television
service: (i) no Person is operating a cable television system or other
non-satellite MVPD other than a IP-I System in such area; (ii) no local
franchising authority has awarded a cable television franchise in such area to
any Person other than a IP-I Party; and (iii) to the Knowledge of such IP-I
Party, no MVPD has applied for a cable television franchise to serve such area.
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5.5 IP-I Systems Franchises, IP-I Systems Licenses, IP-I Systems
Contracts and IP-I Other Real Property Interests.
5.5.1 Except as described on Schedules 1.26, 1.28, 1.31, 1.32 and
1.33, and except for the IP-I Excluded Assets, IP-I is not bound or affected by
any of the following that relate primarily or in whole to its Cable Business:
(a) leases of real property or capital leases of personal property; (b)
operating leases of personal property that are terminable upon more than 30 days
notice and that contemplate annual lease payments in excess of $20,000; (c)
franchises for the construction or operation of cable television systems or IP-I
Systems Contracts of substantially equivalent effect; (d) licenses,
authorizations, consents or permits of the FCC; (e) other licenses,
authorizations, consents or permits of any other Governmental Authority,
individually or in the aggregate, material to any IP-I System; (f) easements or
rights of access, individually or in the aggregate, material to any IP-I System;
(g) pole attachment agreements, underground conduit agreements, crossing
agreements, retransmission consent agreements or bulk or commercial service
agreements, individually or in the aggregate, material to any IP-I System; or
(h) IP-I Systems Contracts other than those described in any other clause of
this Section 5.5.1 which contemplate payments by or to IP-I in any 12-month
period exceeding $25,000 under any single contract or $100,000 in the aggregate.
5.5.2 Complete and correct copies of such IP-I Party's Systems
Franchises and Systems Licenses have been provided to the Charter Parties.
Except as set forth on Schedule 5.5.2, (a) such IP-I Party's Systems Franchises
contain all of the commitments and obligations of such IP-I Party to the
applicable Governmental Authority granting such Franchises with respect to the
construction, ownership and operation of its Systems, and (b) other than as set
forth in IP-I Party's Systems Franchises, such IP-I Party has not made any
commitment to any local franchising authority to make any material expenditure
or capital addition or betterment to any of its Systems or Assets that will not
be fulfilled or satisfied prior to the Closing Time. Such IP-I Party's Systems
Franchises and Systems Licenses are currently in full force and effect, are not
in default and are valid under all applicable Legal Requirements according to
their terms. No event has occurred that, with notice or lapse of time or both,
would constitute a breach, violation or default by any such IP-I Party, and to
such IP-I Party's Knowledge, no event has occurred that, with notice or lapse of
time or both, would constitute a breach, violation or default by any other
Person, of any material obligations under any of such IP-I Party's Systems
Franchises or Systems Licenses. Except for routine filings with Governmental
Authorities and as described on Schedule 5.5.2, there are no applications
relating to any of such IP-I Party's Systems Franchise or Systems License
pending before any Governmental Authority which are material to any of its
Systems or its Cable Business. Except where a request for renewal has been
timely filed under Section 626(a) of the Cable Act, since December 31, 1998, no
Systems Franchise or Systems License of such IP-I Party has been surrendered by
such IP-I Party or has expired or otherwise terminated without the issuance of a
replacement IP-I Systems Franchise or IP-I Systems License. There is no legal
action, governmental proceeding or investigation pending or, to such IP-I
Party's Knowledge, threatened to terminate, suspend or modify any Systems
Franchise or Systems License of such IP-I Party. Except as set forth on Schedule
5.5.2, such IP-I Party is, or will be as of the Closing Date, in material
compliance with the terms and conditions of all its Systems Franchises and
Systems Licenses and other applicable requirements of all Governmental
Authorities (including the FCC and the U.S. Copyright Office) relating to such
IP-I Systems
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Franchises and IP-I Systems Licenses, including all requirements for
notification, filing, reporting, posting and maintenance of logs and records.
5.5.3 Such IP-I Party has delivered to the Charter Parties true and
complete copies of all of such IP-I Party's Systems Contracts (including each
Contract relating to IP-I Leased Property and IP-I Other Real Property
Interests), including any amendments thereto (or, in the case of oral Contracts,
true and complete written summaries thereof) and each document evidencing such
IP-I Party's ownership of its Owned Property. Except as described in Schedule
5.5.3, such IP-I Party has fulfilled when due, or has taken all action necessary
to enable it to fulfill when due, all of its obligations under each of its
Contracts and, to the Knowledge of such IP-I Party, there has not occurred any
default (without regard to requirements of notice, lapse of time, elections of
other Persons, or any combination thereof) by any other Person of any material
obligations under any of its Contracts or Real Property Interests.
5.6 Real Property. All the Assets of such IP-I Party consisting of IP-I
Owned Property, IP-I Leased Property and material IP-I Other Real Property
Interests are described on Schedules 1.26, 1.28 and 1.29. Except for ordinary
wear and tear and routine repairs and as set forth on Schedule 5.6, all of the
improvements, leasehold improvements and the premises of such IP-I Party's Owned
Property and the premises demised under the leases and other documents
evidencing such IP-I Party's Leased Property and are in good condition and
repair and are suitable for the purposes used. Each parcel of such IP-I Party's
Owned Property and each parcel of such IP-I Party's Leased Property and any
improvements thereon (a) has access to and over public streets or private
streets for which such IP-I Party has a valid right of ingress and egress, (b)
except as set forth on Schedule 1.26 or 1.28, conforms in its current use and
occupancy to all material zoning requirements without reliance upon a variance
issued by a Governmental Authority or a classification of the parcel in question
as a nonconforming use, (c) conforms in all material respects in its current use
to all restrictive covenants, if any, or other Liens affecting all or part of
such parcel (of record, with respect to IP-I Owned Property, or of record or as
set forth in an agreement listed on Schedule 1.26 or 1.28 with respect to IP-I
Leased Property or IP-I Other Real Property Interests), and (d) is available for
immediate use in the conduct of the business or operations of such IP-I Party's
Systems. There are no pending condemnation, expropriation, eminent domain or
similar proceedings of which such IP-I Party has received notice or has
Knowledge affecting, in any material respect, all or any portion of such IP-I
Party's Owned Property, Leased Property, or Other Real Property Interests. Such
IP-I Party has good and marketable title to each such parcel of real property
included in its Owned Property and in all buildings, structures and improvements
thereon, in each case free and clear of all Liens except for Permitted Liens.
5.7 Environmental.
5.7.1 Except as described on Schedule 5.7, such IP-I Party is in
material compliance with all Environmental Laws, insofar as they relate to its
Owned Property or Leased Property. Except as described on Schedule 5.7, such
IP-I Party has not received any notice of,
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and has no Knowledge of, any alleged, actual, or potential responsibility for,
or any inquiry regarding, (i) any release or threatened release of any Hazardous
Substances from or on its Owned Property or Leased Property, or (ii) any
material violation of any Environmental Laws associated with its Owned Property
or Leased Property. Except as described on Schedule 5.7, to such IP-I Party's
Knowledge, its own operations on its Other Real Property Interests do not
violate any Environmental Laws in any material respect, and such IP-I Party has
received no notice of any such violation. Except as described on Schedule 5.7,
such IP-I Party has not received any notice of, and has no Knowledge of
circumstances relating to, any past, present or future events, conditions,
circumstances, activities, practices or incidents (including the presence, use,
generation, manufacture, disposal, release or threatened release of any
Hazardous Substances from or on its Owned Property or Leased Property), which
could interfere with or prevent continued compliance, or which are reasonably
likely to give rise to any liability, based upon or related to the processing,
distribution, use, treatment, storage, disposal, transport or handling, or the
emission, discharge, release or threatened release into the environment, of any
Hazardous Substance from or attributable to its Owned Property or Leased
Property.
5.7.2 Except as described on Schedule 5.7, to such IP-I Party's
Knowledge, (a) no aboveground or underground storage tanks are currently or have
been located on any IP-I Owned Property or IP-I Leased Property of such IP-I
Party and (b) no IP-I Owned Property or IP-I Leased Property of such IP-I Party
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.
5.7.3 Complete and correct copies of (a) all studies, reports,
surveys or other similar written materials in IP-I's possession or to which
IP-I, to its Knowledge, has access relating to the presence or alleged presence
of Hazardous Substances at, on, under or affecting the IP-I Owned Property or
IP-I Leased Property of such IP-I Party, (b) all notices (other than general
notices made by general publication) in IP-I's possession or to which IP-I, to
its Knowledge, has access that were received from any Governmental Authority
having the power to administer or enforce any Environmental Laws relating to
current or past ownership, use or operation of such Carter Party's Owned
Property or Leased Property or activities at its Owned Property or IP-I Leased
Property and (c) all notices and related materials in IP-I's possession or to
which IP-I, to its Knowledge, has access relating to any Litigation concerning
any Environmental Law to which such IP-I Party is a party or written allegation
by any private Third Party concerning any Environmental Law and such IP-I Party,
have been provided to RMG (other than those materials constituting
attorney-client privileged communications).
5.8 Compliance with Legal Requirements.
5.8.1 Except as set forth on Schedule 5.8, the operation of such
IP-I Party's Systems as currently conducted does not violate or infringe any
Legal Requirement currently in effect in any material respect (other than Legal
Requirements described in Sections 5.7, 5.8.3 and 5.8.4, as to which the
representations and warranties set forth in those subsections will
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apply) or the grounding requirements of the National Electrical Safety Code.
Except as set forth on Schedule 5.8, such IP-I Party has not received any notice
and has no Knowledge of any material violation by such IP-I Party or any of its
Systems of any Legal Requirement applicable to the installation, ownership and
operation of its Systems as currently conducted, and knows of no basis for the
allegation of any such violation.
5.8.2 Except as set forth on Schedule 5.8, without limiting the
generality of the foregoing, since such IP-I Party's acquisition of its Systems:
it has submitted to the FCC all filings, including cable television registration
statements, annual reports and aeronautical frequency usage notices and paid all
regulatory fees, that are required under the rules and regulations of the FCC;
the operation of its Systems has been and is in material compliance with the
rules and regulations of the FCC, and it has not received any notice from the
FCC of any violation of its rules and regulations; such IP-I Party is and since
1986 (or since its acquisition, if later) has been certified as in compliance
with the FCC's equal employment opportunity rules; its Systems are in material
compliance with all signal leakage criteria prescribed by the FCC; and for each
relevant semi-annual reporting period since its acquisition of a IP-I System,
such IP-I Party has timely filed with the United States Copyright Office all
required Statements of Account in true and correct form, has paid when due all
required copyright royalty fee payments in correct amount, relating to its
Systems' carriage of television broadcast signals and is otherwise in material
compliance with all applicable rules and regulations of the Copyright Office.
Except as set forth on Schedule 5.8, such IP-I Party has no Knowledge, with
respect to any IP-I System acquired by such IP-I Party since January 1, 1996, of
any previous owner's failure to comply with the copyright licensing requirements
with respect to such System or any written claim or inquiry from any Person
which questions such System's failure to comply. IP-I has delivered to the
Charter Parties copies of all reports, filings and correspondence made or filed
by such IP-I Party with the FCC or pursuant to the FCC rules and regulations for
the past year and all reports, filings and correspondence made or filed by such
IP-I Party with the Copyright Office or pursuant to Copyright Office rules and
regulations for the past three years. Except as set forth on Schedule 5.8, (i) 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 Systems Franchise of
such IP-I Party expiring within 36 months after the date of this Agreement; and
(ii) such IP-I Party has received no written notice from any Governmental
Authority that it has determined or intends to deny renewal of any IP-I Systems
Franchise to which it is a party.
5.8.3 Except as set forth on Schedule 5.8 and as otherwise provided
in this Section, such IP-I Party has used commercially reasonable efforts to
comply in all material respects with the provisions of the Cable Act and the
1992 Cable Act pertaining to the carriage of television broadcast signals, as
such Legal Requirements relate to the operation of its Systems. Such IP-I Party
has complied in all material respects with the must carry and retransmission
consent provisions of the 1992 Cable Act, including (i) duly and timely
notifying "local commercial television stations" of inadequate signal strength
or increased copyright liability, if applicable, (ii) duly and timely notifying
non-commercial educational stations of the location of its System's principal
headend, (iii) duly and timely notifying subscribers of changes in the
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channel alignment on its Systems, (iv) duly and timely notifying "local
commercial and non-commercial television stations" of the broadcast signals
carried on its Systems and their channel positions, (v) maintaining the
requisite public file identifying broadcast signal carriage, (vi) carrying the
broadcast signals after June 1, 1993, on its Systems for all "local commercial
television stations" which elected must carry status and, if required, up to two
"qualified low power stations" and (vii) obtaining retransmission consents for
all broadcast signals carried on its Systems after October 5, 1993, except for
the non-exempt signals carried pursuant to a must carry election. No must carry
complaint is pending against any of System such IP-I Party at the FCC, nor, to
such IP-I Party's Knowledge, is any threatened except as set forth in Schedule
5.8. IP-I has delivered to the Charter Parties copies of any pending petitions
such IP-I Party has on file with the FCC, including requests for market
modifications or petitions for special relief or any market modification
requests or special relief petitions affecting any IP-I System that have been
served on such IP-I Party. The FCC has not issued any decision with respect to a
must carry complaint finding any System of such IP-I Party in violation of the
must carry rules except as set forth on Schedule 5.8.
5.8.4 Such IP-I Party has used commercially reasonable efforts to
establish rates charged and a la carte packages provided to subscribers,
effective as of September 1, 1993, that would be allowable under rules and
regulations promulgated by the FCC under the 1992 Cable Act, and any
authoritative interpretation thereof, whether or not such rates or packages were
subject to regulation at that date by any Governmental Authority, including any
state regulatory agency, local franchising authority and/or the FCC.
Notwithstanding the foregoing, such IP-I Party makes no representation or
warranty that either the rates charged to subscribers or the a la carte packages
provided would be allowable under any rules and regulations of the FCC, or any
authoritative interpretation thereof, promulgated after the date of the Closing.
IP-I has delivered to the Charter Parties complete and correct copies of (i) the
most recent FCC Forms 328, 329, 393, 1200, 1205, 1210, 1215, 1220, 1235 and 1240
and other FCC rate forms (collectively, "FCC Rate Forms") filed by such IP-I
Party with the local franchising authority and/or the FCC and will deliver as
soon as available all FCC Rate Forms that are prepared with respect to such IP-I
Party's Systems, (ii) all historical FCC Rate Forms with respect to any IP-I
System in which there is currently a rate issue pending, including any
accounting order or any rate order on appeal, (iii) copies of all complaints,
petitions, answers, responses and other filings made with or by any Governmental
Authority in connection with any rate orders issued by such Governmental
Authority or any appeal therefrom, and (iv) any documentation supporting an
exemption from the rate regulation provisions of the 1992 Cable Act claimed by
such IP-I Party with respect to its Systems. Except as set forth on Schedule
5.8, such IP-I Party has not made any election with respect to any cost of
service proceeding conducted in accordance with Part 76.922 of Title 47 of the
Code of Federal Regulations or any similar proceeding (a "Cost of Service
Election") with respect to any of such IP-I Party's Systems.
5.8.5 Except as set forth on Schedule 5.8, all necessary FAA
approvals have been obtained and all necessary FCC tower registrations have been
filed with respect to the height and location of towers used in connection with
the operation of such IP-I Party's Systems,
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and such towers are being operated in compliance in all material respects with
applicable FCC and FAA rules. The ownership, height (with and without
appurtenances), location (address, latitude, longitude and ground elevation),
structure type and FCC call signs of each tower used in connection with the
operation of such IP-I Party's Systems are correctly described on Schedule 5.8.
To the extent applicable, IP-I has delivered to the Charter Parties true and
correct copies of the FAA final determinations that are available and FCC
registrations for all such towers.
5.9 Intellectual Property. Except for Intellectual Property which
constitutes IP-I Excluded Assets and the Intellectual Property described on
Schedule 4.4(b), such IP-I Party does not possess any Intellectual Property
related to or material to the operation of its Systems, and such IP-I Party is
not a party to any license or royalty agreement with respect to any such
Intellectual Property, except for licenses respecting program material or
incidental to any Systems Contract and obligations under the Copyright Act. To
the Knowledge of such IP-I Party, its Systems and Cable Business have been
operated in such a manner so as not to violate or infringe upon the rights, or
give rise to any rightful claim of any Person for copyright, trademark, service
mark, patent or license infringement or the like.
5.10 Financial Statements. IP-I's statements of income for the years ended
December 31, 1997 and 1998, attached hereto as Schedule 5.10, are in accordance
with the books and records of the IP-I Systems, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby and, except as may be described therein,
present fairly the operating results of the IP-I Systems for the periods
indicated, subject only to standard year-end adjustments and the omission of
footnotes thereto.
5.11 Absence of Certain Changes or Events. Except as set forth on Schedule
5.11, since December 31, 1998, there has been no (i) material adverse change in,
nor has any event or events (other than any affecting the cable television
industry generally) occurred that, individually or in the aggregate, are
reasonably likely to result in a material adverse change in such IP-I Party's
Assets, Cable Business, operations, condition (financial or otherwise) or
results of operations of its Systems, taken as a whole and (ii) material change
in accounting principles or practices with respect to such IP-I Party's Cable
Business or revaluation by such IP-I Party of its Assets for financial
reporting, property tax or other purposes. From December 31, 1998 to the date of
this Agreement, such IP-I Party's Cable Business has been conducted only in the
usual, regular and ordinary course, except as disclosed on Schedule 5.11 and
except where the failure to conduct business in such manner would not have a
material adverse effect on such IP-I Party's Assets, Cable Business, operations,
condition (financial or otherwise) or results of operations of its obligations
under this Agreement.
5.12 Litigation. Except as set forth on Schedule 5.12: (a) there is no
Litigation pending or, to the Knowledge of such IP-I Party, threatened against
such IP-I Party or any of its Affiliates which, if adversely determined, would
(i) materially and adversely affect the financial
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condition or operations of such IP-I Party's Cable Business, any of its Systems
or Assets or the ability of such IP-I Party to perform its obligations under
this Agreement or (ii) result in the modification, revocation, termination,
suspension or other limitation of any of such IP-I Party's Systems Franchises,
Systems Licenses, or Systems Contracts; and (b) there is not in existence any
Judgment requiring such IP-I Party or any of its Affiliates to take any action
of any kind with respect to its Assets or the operation of any of its Systems,
or to which such IP-I Party (with respect to its Systems), any of its Systems or
Assets are subject or by which they are bound or affected, that has not been
fully complied with by such IP-I Party.
5.13 Tax Returns; Other Reports. Such IP-I Party has duly and timely filed
in correct form all federal, state, local and foreign Tax returns and other Tax
reports required to be filed by it, and has timely paid all Taxes which have
become due and payable, whether or not so shown on any such return or report,
the failure of which to be filed or paid could affect or result in the
imposition of a Lien upon its Assets or create any transferee or other liability
upon RMG, except such amounts as are being contested diligently and in good
faith and are not in the aggregate material. Except as set forth on Schedule
5.13, such IP-I Party has not received any notice of, nor does such IP-I Party
have any Knowledge of, any deficiency, assessment or audit, or proposed
deficiency, assessment or audit from any taxing Governmental Authority which
could affect, or result in the imposition of a Lien upon, any of its Assets or
transferee or other liability upon RMG.
5.14 Employment Matters.
5.14.1 Such IP-I Party has complied in all material respects with
all applicable Legal Requirements relating to the employment of labor, including
the Worker Adjustment and Retraining Notification Act, 29 U.S.C. ss. 2101, et
seq. ("WARN"), continuation coverage requirements with respect to group health
plans and those relating to wages, hours, collective bargaining, unemployment
insurance, workers' compensation, equal employment opportunity, age, sex, race
and disability discrimination, immigration control and the payment and
withholding of Taxes.
5.14.2 There are no Liens against such IP-I Party's Assets under
Section 412(n) of the Code or Sections 302(f) or 4068 of ERISA. At the Closing,
RMG and its ERISA Affiliates will have no obligation to contribute to, or any
liability in respect of, (i) any employee benefit plan within the meaning of
Section 3(3) of ERISA, or (ii) any similar employment, severance or other
arrangement or policy (whether written or oral) providing for insurance coverage
(including self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, fringe benefits
or retirement benefits, or for profit sharing, deferred compensation, bonuses,
stock options, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits, sponsored or maintained by
any IP-I Party or any of their ERISA Affiliates, or to which any IP-I Party or
any of their ERISA Affiliates was obligated to contribute. The IP-I Parties will
not, in connection with the transactions contemplated by this Agreement, cease
to provide any group
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health plan coverage to their employees in a manner which would cause RMG or any
of its ERISA Affiliates to be deemed a successor employer of such IP-I Party
within the meaning of Proposed Treasury Regulations Section 54.4980B-9 Q&A8(c).
With respect to any multi-employer plan within the meaning of Section 3(37) of
ERISA, or any plan subject to Title IV of ERISA, to which any IP-I Party or any
of their ERISA Affiliates is or ever was obligated to contribute, (a) there has
been no material "reportable event" described in Sections 4043(c)(1), (2), (3),
(5), (6), (7), (10), or (13) of ERISA, (b) no "accumulated funding deficiency"
(as defined in Section 302 of ERISA) or "withdrawal liability" (as determined
under Section 4201 et seq. of ERISA) has occurred, exists or is continuing with
respect to any such plan other than a multi-employer plan (as defined in Section
3(37) of ERISA), or, to the Knowledge of IP-I or any of its ERISA Affiliates,
with respect to any such plan which is a multi-employer plan (as defined in
Section 3(37) of ERISA), (c) no such plan has been terminated other than in
accordance with ERISA or at a time when such plan was not sufficiently funded,
and (d) there has been no (i) withdrawal by any IP-I Party or any of their ERISA
Affiliates that is a substantial employer from a single-employer plan and that
has two or more contributing sponsors at least two of whom are not under common
control, as referred to in Section 4063(b) of ERISA, or (ii) cessation by any
IP-I Party or any of their ERISA Affiliates of operations at a facility causing
more than 20% of plan participants to be separated from employment, as referred
to in Section 4062(e) of ERISA. With respect to any plan maintained, sponsored
by, or contributed to by any IP-I Party, which is intended to comply with the
provisions of Section 401(k) of the Code, and from which any similar plan
maintained or sponsored by RMG or any of its ERISA Affiliates accepts a
plan-to-plan transfer under Section 7.3.3, (I) such plan has received a
favorable determination letter from Internal Revenue Service, and no IP-I Party
or any of their ERISA Affiliates has any Knowledge of any fact which could
adversely affect the qualified status of such plan, and (II) such plan has been
administered and maintained in material compliance with ERISA, the Code and all
other applicable laws.
5.14.3 Except as set forth on Schedule 5.14, there are no collective
bargaining agreements applicable to any Person employed by such IP-I Party that
renders services in connection with its Systems and such IP-I Party has no duty
to bargain with any labor organization with respect to any such Person. Except
as set forth on Schedule 5.14, there are not pending any unfair labor practice
charges against such IP-I Party, any demand for recognition or any other request
or demand from a labor organization for representative status with respect to
any Person employed by it that renders services in connection with its Systems.
Except as described on Schedule 5.14, such IP-I Party has no employment
agreements, either written or oral, with any employee of its Systems and none of
the employment agreements listed on Schedule 5.14 requires such IP-I Party, or
will require RMG or any Affiliate of RMG, to employ any Person after the
Closing.
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5.15 IP-I Systems Information.
5.15.1 Schedule 5.15.1 sets forth a materially true and accurate
description, on a System-by-System basis, of the following information relating
to such IP-I Party's Systems as of December 31, 1998:
(a) the approximate number of aerial and underground miles of
plant included in the IP-I Assets and served by each headend;
(b) the approximate number of single family homes and
residential multiple dwelling units passed by each such IP-I System;
(c) the MHZ capacity and channel capacity of each headend; and
(d) the number of subscribers served by each such IP-I System
and a description of the calculation methodology used by IP-I to calculate such
subscribers.
5.15.2 Schedule 5.15.2 sets forth a materially true and accurate
description of the following information relating to such IP-I Party's Systems
as of the date of this Agreement:
(a) a description of the Basic Services, the Expanded Basic
Services, Pay TV and a la carte services available from each such IP-I System,
and the rates charged by such IP-I Party therefor, including all rates, tariffs
and other charges for cable television or other services provided by each such
IP-I System;
(b) the stations and signals carried by each such IP-I System
and the channel position of each such signal and station; and
(c) the cities, towns, villages, boroughs and counties served
by each such IP-I System.
5.15.3 Each of such IP-I Party's Systems is capable of providing all
channels, stations and signals reflected as being carried on such IP-I System on
Schedule 5.15.2.
5.16 Taxpayer Identification Number. The U.S. Taxpayer Identification
Number for the IP-I Parties are as follows:
<TABLE>
<S> <C>
InterMedia Partners, a California Limited Partnership 94-3069241
Brenmor Cable Partners, L.P. 94-3102690
</TABLE>
5.17 Finder and Brokers. Such IP-I Party has not entered into any Contract
with any person which will result in the obligation of RMG to pay any finder's
fees, brokerage or agent's commissions or other like payments (collectively,
"Agent's Fees") in connection with the negotiations leading to this Agreement or
the consummation of the transactions contemplated hereby.
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5.18 Related Party Transactions. Set forth on Schedule 5.18 hereto, are
the Contracts, agreements, arrangements or understandings between such IP-I
Party and any of its Affiliates and between such IP-I Party and any AT&T
Affiliate included in or related to the IP-I Assets.
6. RMG'S REPRESENTATIONS AND WARRANTIES.
RMG represents and warrants to the IP-I Parties as of the date of this
Agreement and as of the Closing, as follows:
6.1 Organization and Qualification of RMG. RMG is a corporation duly
formed, validly existing and in good standing under the laws of the State of
Nevada. RMG has all requisite power and authority to own, lease and use the RMG
Assets owned, leased or used by it and to conduct its Cable Business as it is
currently being conducted by it. As of the date of this Agreement, RMG is duly
qualified to do business and is in good standing under the laws of each
jurisdiction in which the ownership, leasing or use of the RMG Assets owned,
leased or used by it or the nature of its activities in connection with its RMG
Systems makes such qualification necessary.
6.2 Authority and Validity. RMG has all requisite power and authority to
execute and deliver, and to perform its obligations under, and to consummate the
transactions contemplated by, this Agreement and the Transaction Documents to
which it is a party. The execution and delivery by RMG of, the performance of
RMG under, and the consummation by RMG of the transactions contemplated by, this
Agreement and the Transaction Documents to which RMG is a party have been duly
and validly authorized by all action by or on behalf of RMG. This Agreement has
been, and when executed and delivered by RMG the Transaction Documents to which
it is a party will be, duly and validly executed and delivered by RMG and the
valid and binding obligations of RMG, enforceable against RMG in accordance with
their terms, except as the same may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to the enforcement of creditors' rights generally or by
principles governing the availability of equitable remedies.
6.3 No Conflict; Required Consents. Except as set forth on Schedule 6.3,
and assuming all IP-I Required Consents have been obtained and the expiration or
earlier termination of the waiting period under the HSR Act has occurred, the
execution and delivery by RMG, the performance of RMG under, and the
consummation by RMG of the transactions contemplated by, this Agreement and the
Transaction Documents to which RMG is a party do not and will not: (a) conflict
with or violate any provision of the organizational documents of RMG; (b)
violate any provision of any Legal Requirement; (c) require any consent,
approval or authorization of, or filing of any certificate, notice, application,
report or other document with, any Governmental Authority or other Person; or
(d) (i) conflict with, violate, result in a breach of or constitute a default
under (without regard to requirements of notice, lapse of time or elections of
other Persons or any combination thereof), (ii) permit or result in the
termination, suspension or modification of, (iii) result in the acceleration of
(or give any Person the right to accelerate) the
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performance of RMG under, or (iv) result in the creation or imposition of any
Lien under any RMG Systems Contract, RMG Systems Franchise, RMG Systems License,
or other instrument evidencing any of the RMG Assets or by which RMG or any of
its assets is bound or affected, except for purposes of clauses (c) and (d) such
consents, approvals, authorizations and filings that, if not obtained or made,
would not, and such violations, conflicts, breaches, defaults, terminations,
suspensions, modifications and accelerations as would not, individually or in
the aggregate, have an adverse effect on any RMG System, RMG's Cable Business or
RMG, or on the ability of RMG to perform its obligations under this Agreement or
the Transaction Documents to which it is a party.
6.4 Assets.
6.4.1 RMG has good and marketable title to (or, in the case of RMG
Assets that are leased, valid leasehold interests in) the RMG Assets. The RMG
Assets are free and clear of all Liens, except Permitted Liens and rights of
first refusal which will be waived at Closing by the Person holding such rights.
All of the Liens described on Schedule 6.4.1 (except for those marked with an
asterisk on Schedule 6.4.1) will be terminated, released or, in the case of
rights of first refusal (except for those listed on Schedule 6.4.1), waived, as
appropriate at or prior to Closing. Except as described on Schedule 1.61, the
RMG Tangible Personal Property, as an integrated system and in its component
parts, is in good operating condition and repair (ordinary wear and tear and
routine failures excepted) and is usable and adequate for the operation of RMG's
Cable Business.
6.4.2 Except for items included in the RMG Excluded Assets, the RMG
Assets constitute substantially all the assets necessary (a) to conduct RMG's
Cable Business as it is being conducted on the date of this Agreement and in
compliance with all applicable Legal Requirements, (b) to operate the RMG
Systems as they are being operated on the date of this Agreement and in
compliance with all applicable Legal Requirements and (c) to perform all of
IP-I's Assumed Obligations and Liabilities.
6.4.3 Except as described on Schedule 6.4.3, and other than direct
broadcast satellite and satellite master antenna television, with respect to
each area in which the RMG Systems currently provide cable television service,
(i) no Person is operating a cable television system or other non-satellite MVPD
other than an RMG System in such area; (ii) no local franchising authority has
awarded a cable television franchise in such area to any Person other than RMG;
and (iii) to the Knowledge of RMG, no MVPD has applied for a cable television
franchise to serve such area.
6.5 RMG Systems Franchises, RMG Systems Licenses, RMG Systems Contracts
and RMG Other Real Property Interests.
6.5.1 Except as described on Schedules 1.53, 1.55, 1.58, 1.59 and
1.60, and except for the RMG Excluded Assets, RMG is not bound or affected by
any of the following that
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relate primarily or in whole to RMG's Cable Business: (a) leases of real
property or capital leases of personal property; (b) operating leases of
personal property that are terminable upon more than 30 days notice and that
contemplate annual lease payments in excess of $20,000; (c) franchises for the
construction or operation of cable television systems or System Contracts of
substantially equivalent effect; (d) licenses, authorizations, consents or
permits of the FCC; (e) other licenses, authorizations, consents or permits of
any other Governmental Authority, individually or in the aggregate, material to
the RMG Systems; (f) easements or rights of access, individually or in the
aggregate, material to the RMG Systems; (g) pole attachment agreements,
underground conduit agreements, crossing agreements, retransmission consent
agreements, or bulk or commercial service agreements, individually or in the
aggregate, material to the RMG Systems; or (h) RMG Systems Contracts other than
those described in any other clause of this Section 6.5.1 which contemplate
payments by or to RMG in any 12-month period exceeding $25,000 under any single
contract or $100,000 in the aggregate.
6.5.2 Complete and correct copies of the RMG Systems Franchises and
RMG Systems Licenses have been provided to IP-I. Except as set forth on Schedule
6.5.2, (a) the RMG Systems Franchises contain all of the commitments and
obligations of RMG to the applicable Governmental Authority granting such
Franchises with respect to the construction, ownership and operation of the RMG
Systems, and (b) other than as set forth in the RMG Systems Franchises, RMG has
not made any commitment to any local franchising authority to make any material
expenditure or capital addition or betterment to any RMG System or the RMG
Assets that will not be fulfilled or satisfied prior to the Closing Time. The
RMG Systems Franchises and RMG Systems Licenses are currently in full force and
effect, are not in default and are valid under all applicable Legal Requirements
according to their terms. No event has occurred that, with notice or lapse of
time or both, would constitute a breach, violation or default by RMG, and to
RMG's Knowledge, no event has occurred that, with notice or lapse of time or
both, would constitute a breach, violation or default by any other Person, of
any material obligations under any such RMG Systems Franchises or RMG Systems
Licenses. Except for routine filings with Governmental Authorities and as
described on Schedule 6.5.2, there are no applications relating to any RMG
Systems Franchise or RMG Systems License pending before any Governmental
Authority which are material to any RMG System or RMG's Cable Business. Except
where a request for renewal has been timely filed under Section 626(a) of the
Cable Act, since December 31, 1998, no RMG Systems Franchise or RMG Systems
License has been surrendered by RMG or has expired or otherwise terminated
without the issuance of a replacement RMG Systems Franchise or RMG Systems
License. There is no legal action, governmental proceeding or investigation
pending or, to RMG's Knowledge, threatened to terminate, suspend or modify any
RMG Systems Franchise or RMG Systems License. Except as set forth on Schedule
6.5.2, RMG is, or will be as of the Closing Date, in material compliance with
the terms and conditions of all the RMG Systems Franchises and RMG Systems
Licenses and other applicable requirements of all Governmental Authorities
(including the FCC and the U.S. Copyright Office) relating to the RMG Systems
Franchises and RMG Systems Licenses, including all requirements for
notification, filing, reporting, posting and maintenance of logs and records.
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6.5.3 RMG has delivered to IP-I true and complete copies of all RMG
Systems Contracts (including each Contract relating to RMG Leased Property and
RMG Other Real Property Interests), including any amendments thereto (or, in the
case of oral Contracts, true and complete written summaries thereof) and each
document evidencing RMG's ownership of the RMG Owned Property. Except as
described in Schedule 6.5.3, RMG has fulfilled when due, or has taken all action
necessary to enable it to fulfill when due, all of its obligations under each of
its Contracts and, to the Knowledge of RMG, there has not occurred any default
(without regard to requirements of notice, lapse of time, elections of other
Persons, or any combination thereof) by any other Person of any material
obligations under any of its Contracts or Real Property Interests.
6.6 Real Property. All the Assets consisting of RMG Owned Property, RMG
Leased Property and material RMG Other Real Property Interests are described on
Schedules 1.53, 1.55 and 1.56. Except for ordinary wear and tear and routine
repairs and as set forth on Schedule 6.6, all of the improvements, leasehold
improvements and the premises of the RMG Owned Property and the premises demised
under the leases and other documents evidencing the RMG Leased Property are in
good condition and repair and are suitable for the purposes used. Each parcel of
RMG Owned Property and each parcel of RMG Leased Property and any improvements
thereon (a) has access to and over public streets or private streets for which
RMG has a valid right of ingress and egress, (b) except as set forth on Schedule
1.53 or 1.55, conforms in its current use and occupancy to all material zoning
requirements without reliance upon a variance issued by a Governmental Authority
or a classification of the parcel in question as a nonconforming use, (c)
conforms in all material respects in its current use to all restrictive
covenants, if any, or other Liens affecting all or part of such parcel (of
record, with respect to RMG Owned Property, or of record or as set forth in an
agreement listed on Schedule 1.53 or 1.55, with respect to RMG Leased Property
or RMG Other Real Property Interests), and (d) is available for immediate use in
the conduct of the business or operations of the RMG Systems. There are no
pending condemnation, expropriation, eminent domain or similar proceedings of
which RMG has received notice or RMG has Knowledge affecting, in any material
respect, all or any portion of the RMG Owned Property, RMG Leased Property, or
RMG Other Real Property Interests. RMG has good and marketable title to each
such parcel of real property included in the RMG Owned Property and in all
buildings, structures and improvements thereon, in each case free and clear of
all Liens except for Permitted Liens.
6.7 Environmental.
6.7.1 Except as described on Schedule 6.7, RMG is in material
compliance with all Environmental Laws, insofar as they relate to its Owned
Property or Leased Property. Except as described on Schedule 6.7, RMG has not
received any notice of, and has no Knowledge of, any alleged, actual, or
potential responsibility for, or any inquiry regarding, (i) any release or
threatened release of any Hazardous Substances from or on its Owned Property or
Leased Property, or (ii) any material violation of any Environmental Laws
associated with its Owned Property or Leased Property. Except as described on
Schedule 6.7, to RMG's Knowledge, its
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own operations on its Other Real Property Interests do not violate any
Environmental Laws in any material respect, and RMG has received no notice of
any such violation. Except as described on Schedule 6.7, RMG has not received
any notice of, and has no Knowledge of circumstances relating to, any past,
present or future events, conditions, circumstances, activities, practices or
incidents (including the presence, use, generation, manufacture, disposal,
release or threatened release of any Hazardous Substances from or on its Owned
Property or Leased Property), which could interfere with or prevent continued
compliance, or which are reasonably likely to give rise to any liability, based
upon or related to the processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge, release or
threatened release into the environment, of any Hazardous Substance from or
attributable to its Owned Property or Leased Property.
6.7.2 Except as described on Schedule 6.7, to RMG's Knowledge, (a)
no aboveground or underground storage tanks are currently or have been located
on any RMG Owned Property or RMG Leased Property and (b) no RMG Owned Property
or RMG Leased 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.
6.7.3 Complete and correct copies of (a) all studies, reports,
surveys or other similar written materials in RMG's possession or to which RMG,
to its Knowledge, has access relating to the presence or alleged presence of
Hazardous Substances at, on, under or affecting the RMG Owned Property or RMG
Leased Property, (b) all notices (other than general notices made by general
publication) in RMG's possession or to which RMG, to its Knowledge, has access
that were received from any Governmental Authority having the power to
administer or enforce any Environmental Laws relating to current or past
ownership, use or operation of the RMG Owned Property or RMG Leased Property or
activities at the RMG Owned Property or RMG Leased Property and (c) all notices
and related materials in RMG's possession or to which RMG, to its Knowledge, has
access relating to any Litigation concerning any Environmental Law to which RMG
is a party or written allegation by any private Third Party concerning any
Environmental Law and RMG, have been provided to IP-I (other than those
materials constituting attorney-client privileged communications).
6.8 Compliance with Legal Requirements.
6.8.1 Except as set forth on Schedule 6.8, the operation of each RMG
System as currently conducted does not violate or infringe any Legal Requirement
currently in effect in any material respect (other than Legal Requirements
described in Sections 6.7, 6.8.3 and 6.8.4, as to which the representations and
warranties set forth in those subsections will apply) or the grounding
requirements of the National Electrical Safety Code. Except as set forth on
Schedule 6.8, RMG has not received any notice and RMG has no Knowledge of any
material violation by it or any RMG System of any Legal Requirement applicable
to the installation, ownership and operation of its Systems as currently
conducted, and knows of no basis for the allegation of any such violation.
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6.8.2 Except as set forth on Schedule 6.8, without limiting the
generality of the foregoing, since RMG's acquisition of its Systems: RMG has
submitted to the FCC all filings, including cable television registration
statements, annual reports and aeronautical frequency usage notices and paid all
regulatory fees, that are required under the rules and regulations of the FCC;
the operation of its Systems has been and is in material compliance with the
rules and regulations of the FCC, and RMG has not received any notice from the
FCC of any violation of its rules and regulations; RMG is and since 1986 (or
since its acquisition, if later) has been certified as in compliance with the
FCC's equal employment opportunity rules; its Systems are in material compliance
with all signal leakage criteria prescribed by the FCC; and for each relevant
semi-annual reporting period since its acquisition of an RMG System, RMG has
timely filed with the United States Copyright Office all required Statements of
Account in true and correct form, has paid when due all required copyright
royalty fee payments in correct amount, relating to its Systems' carriage of
television broadcast signals and is otherwise in material compliance with all
applicable rules and regulations of the Copyright Office. Except as set forth on
Schedule 6.8, RMG has no Knowledge, with respect to any RMG System acquired
since January 1, 1996, of any previous owner's failure to comply with the
copyright licensing requirements with respect to such System or any written
claim or inquiry from any Person which questions such System's failure to
comply. RMG has delivered to IP-I copies of: (i) all reports, filings and
correspondence made or filed by RMG with the FCC or pursuant to the FCC rules
and regulations for the past year; and (ii) all reports, filings and
correspondence made or filed by RMG with the Copyright Office or pursuant to
Copyright Office rules and regulations for the past three years. Except as set
forth on Schedule 6.8, (i) 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 expiring within 36 months after the date of this
Agreement; and (ii) RMG has received no written notice from any Governmental
Authority that it has determined or intends to deny renewal of any RMG Systems
Franchise.
6.8.3 Except as set forth on Schedule 6.8 and as otherwise provided
in this Section, RMG has used commercially reasonable efforts to comply in all
material respects with the provisions of the 1984 Cable Act and the 1992 Cable
Act pertaining to the carriage of television broadcast signals, as such Legal
Requirements relate to the operation of its Systems. RMG has complied in all
material respects with the must carry and retransmission consent provisions of
the 1992 Cable Act, including (i) duly and timely notifying "local commercial
television stations" of inadequate signal strength or increased copyright
liability, if applicable, (ii) duly and timely notifying non-commercial
educational stations of the location of its System's principal headend, (iii)
duly and timely notifying subscribers of changes in the channel alignment on its
Systems, (iv) duly and timely notifying "local commercial and non-commercial
television stations" of the broadcast signals carried on its Systems and their
channel positions, (v) maintaining the requisite public file identifying
broadcast signal carriage, (vi) carrying the broadcast signals after June 1,
1993, on its Systems for all "local commercial television stations" which
elected must carry status and, if required, up to two "qualified low power
stations" and (vii) obtaining retransmission consents for all broadcast signals
carried on its Systems after October 5, 1993, except for the non-exempt signals
carried pursuant to a must carry election. No
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must carry complaint is pending against any RMG System at the FCC, nor, to RMG's
Knowledge, is any threatened except as set forth in Schedule 6.8. RMG has
delivered to IP-I copies of any pending petitions it has on file with the FCC,
including requests for market modifications or petitions for special relief or
any market modification requests or special relief petitions affecting any RMG
System that have been served on RMG. The FCC has not issued any decision with
respect to a must carry complaint finding any RMG System in violation of the
must carry rules except as set forth on Schedule 6.8.
6.8.4 RMG has used commercially reasonable efforts to establish
rates charged and a la carte packages provided to subscribers, effective as of
September 1, 1993, that would be allowable under rules and regulations
promulgated by the FCC under the 1992 Cable Act, and any authoritative
interpretation thereof, whether or not such rates or packages were subject to
regulation at that date by any Governmental Authority, including any state
regulatory agency, local franchising authority and/or the FCC. Notwithstanding
the foregoing, RMG makes no representation or warranty that either the rates
charged to subscribers or the a la carte packages provided would be allowable
under any rules and regulations of the FCC, or any authoritative interpretation
thereof, promulgated after the date of the Closing. RMG has delivered to IP-I
complete and correct copies of (i) the most recent FCC Rate Forms filed by RMG
with the local franchising authority and/or the FCC and will deliver as soon as
available all FCC Rate Forms that are prepared with respect to the RMG Systems,
(ii) all historical FCC Rate Forms with respect to any RMG System in which there
is currently a rate issue pending, including any accounting order or any rate
order on appeal, (iii) copies of all complaints, petitions, answers, responses
and other filings made with or by any Governmental Authority in connection with
any rate orders issued by such Governmental Authority or any appeal therefrom,
and (iv) any documentation supporting an exemption from the rate regulation
provisions of the 1992 Cable Act claimed by RMG with respect to its Systems.
Except as set forth on Schedule 6.8, RMG has not made a Cost of Service Election
with respect to any of the RMG Systems.
6.8.5 Except as set forth on Schedule 6.8, all necessary FAA
approvals have been obtained and all necessary FCC tower registrations have been
filed with respect to the height and location of towers used in connection with
the operation of the RMG Systems, and such towers are being operated in
compliance in all material respects with applicable FCC and FAA rules. The
ownership, height (with and without appurtenances), location (address, latitude,
longitude and ground elevation), structure type and FCC call signs of each tower
used in connection with the operation of the RMG Systems are correctly described
on Schedule 6.8. To the extent applicable, RMG has delivered to IP-I true and
correct copies of the FAA final determinations that are available and FCC
registrations for all such towers.
6.9 Intellectual Property. Except for Intellectual Property which
constitutes RMG Excluded Assets, RMG does not possess any Intellectual Property
related to or material to the operation of the RMG Systems and RMG is not a
party to any license or royalty agreement with respect to any such Intellectual
Property, except for licenses respecting program material or incidental to any
Systems Contract and obligations under the Copyright Act applicable to cable
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television systems generally. To the Knowledge of RMG, the RMG Systems and RMG's
Cable Business have been operated in such a manner so as not to violate or
infringe upon the rights, or give rise to any rightful claim of any Person for
copyright, trademark, service mark, patent or license infringement or the like.
6.10 Financial Statements. RMG's statements of income for the years ended
December 31, 1997 and 1998, attached hereto as Schedule 6.10, are in accordance
with the books and records of the RMG Systems, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby and, except as may be described therein,
present fairly the operating results of the RMG Systems for the periods
indicated, subject only to standard year-end adjustments and the omission of
footnotes thereto.
6.11 Absence of Certain Changes or Events. Except as set forth on Schedule
6.11, since December 31, 1998, there has been no (i) material adverse change in,
nor has any event or events (other than any affecting the cable television
industry generally) occurred that, individually or in the aggregate, are
reasonably likely to result in a material adverse change in the RMG Assets,
business, operations, condition (financial or otherwise) or results of
operations of the RMG Systems, taken as a whole and (ii) material change in
accounting principles or practices with respect to the RMG Systems or
revaluation by RMG of the RMG Assets for financial reporting, property tax or
other purposes. From December 31, 1998 to the date of this Agreement, RMG's
Cable Business has been conducted only in the usual, regular and ordinary
course, except as disclosed on Schedule 6.11 and except where the failure to
conduct business in such manner would not have a material adverse effect on the
RMG Assets, RMG's Cable Business, the operations, condition (financial or
otherwise) or results of operations of the RMG Systems taken as a whole or on
the ability of RMG to perform its obligations under this Agreement.
6.12 Litigation. Except as set forth on Schedule 6.12: (a) there is no
Litigation pending or, to RMG's Knowledge, threatened against RMG or any
Affiliate of RMG which, if adversely determined, would (i) materially and
adversely affect the financial condition or operations of RMG's Cable Business,
any of the RMG Systems, the RMG Assets or the ability of RMG to perform its
obligations under this Agreement or (ii) result in the modification, revocation,
termination, suspension or other limitation of any of the RMG Systems
Franchises, RMG Systems Licenses, or RMG Systems Contracts; and (b) there is not
in existence any Judgment requiring RMG or any Affiliate of RMG to take any
action of any kind with respect to the RMG Assets or the operation of any of the
RMG Systems, or to which RMG (with respect to the RMG Systems), any of the RMG
Systems or the RMG Assets are subject or by which they are bound or affected,
that has not been fully complied with by RMG.
6.13 Tax Returns; Other Reports. RMG has duly and timely filed in correct
form all federal, state, local and foreign Tax returns and other Tax reports
required to be filed by RMG, and has timely paid all Taxes which have become due
and payable, whether or not so shown on
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any such return or report, the failure of which to be filed or paid could affect
or result in the imposition of a Lien upon the RMG Assets or create any
transferee or other liability upon IP-I, except such amounts as are being
contested diligently and in good faith and are not in the aggregate material.
Except as set forth on Schedule 6.13, RMG has not received any notice of, nor
does RMG have any Knowledge of, any deficiency, assessment or audit, or proposed
deficiency, assessment or audit from any taxing Governmental Authority which
could affect, or result in the imposition of a Lien upon, any of the RMG Assets
or transferee or other liability upon IP-I.
6.14 Employment Matters.
6.14.1 RMG has complied in all material respects with all applicable
Legal Requirements relating to the employment of labor, including WARN,
continuation coverage requirements with respect to group health plans and those
relating to wages, hours, collective bargaining, unemployment insurance,
workers' compensation, equal employment opportunity, age, sex, race and
disability discrimination, immigration control and the payment and withholding
of Taxes.
6.14.2 There are no Liens against the RMG Assets under Section
412(n) of the Code or Sections 302(f) or 4068 of ERISA. At the Closing, IP-I and
its ERISA Affiliates will have no obligation to contribute to, or any liability
in respect of, (i) any employee benefit plan within the meaning of Section 3(3)
of ERISA, or (ii) any similar employment, severance or other arrangement or
policy (whether written or oral) providing for insurance coverage (including
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, fringe benefits or
retirement benefits, or for profit sharing, deferred compensation, bonuses,
stock options, stock appreciation or other forms of incentive compensation or
post-retirement insurance, compensation or benefits, sponsored or maintained by
RMG or any of its ERISA Affiliates, or to which RMG or any of its ERISA
Affiliates was obligated to contribute. RMG will not, in connection with the
transactions contemplated by this Agreement, cease to provide any group health
plan coverage to their employees in a manner which would cause any IP-I Party or
any of their ERISA Affiliates to be deemed a successor employer of RMG within
the meaning of Proposed Treasury Regulations Section 54.4980B-9 Q&A8(c). With
respect to any multi-employer plan within the meaning of Section 3(37) of ERISA,
or any plan subject to Title IV of ERISA, to which RMG or any of its ERISA
Affiliates is or ever was obligated to contribute, (a) there has been no
material "reportable event" described in Sections 4043(c)(1), (2), (3), (5),
(6), (7), (10), or (13) of ERISA, (b) no "accumulated funding deficiency" (as
defined in Section 302 of ERISA) or "withdrawal liability" (as determined under
Section 4201 et seq. of ERISA) has occurred, exists or is continuing with
respect to any such plan other than a multi-employer plan (as defined in Section
3(37) of ERISA), or, to the Knowledge of RMG or any of its ERISA Affiliates,
with respect to any such plan which is a multi-employer plan (as defined in
Section 3(37) of ERISA), (c) no such plan has been terminated other than in
accordance with ERISA or at a time when such plan was not sufficiently funded,
and (d) there has been no (i) withdrawal by RMG or any of its ERISA Affiliates
that is a
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substantial employer from a single-employer plan and that has two or more
contributing sponsors at least two of whom are not under common control, as
referred to in Section 4063(b) of ERISA, or (ii) cessation by RMG or any of its
ERISA Affiliates of operations at a facility causing more than 20% of plan
participants to be separated from employment, as referred to in Section 4062(e)
of ERISA. With respect to any plan maintained, sponsored by, or contributed to
by RMG, which is intended to comply with the provisions of Section 401(k) of the
Code, and from which any similar plan maintained or sponsored by any IP-I Party
or any of their ERISA Affiliates accepts a plan-to-plan transfer under Section
7.3.3, (I) such plan has received a favorable determination letter from Internal
Revenue Service, and neither RMG nor any of its ERISA Affiliates has any
Knowledge of any fact which could adversely affect the qualified status of such
plan, and (II) such plan has been administered and maintained in material
compliance with ERISA, the Code and all other applicable laws.
6.14.3 Except as set forth on Schedule 6.14, there are no collective
bargaining agreements applicable to any Person employed by RMG that renders
services in connection with the RMG Systems and RMG has no duty to bargain with
any labor organization with respect to any such Person. Except as set forth on
Schedule 6.14, there are not pending any unfair labor practice charges against
RMG, any demand for recognition or any other request or demand from a labor
organization for representative status with respect to any Person employed by
RMG that renders services in connection with the RMG Systems. Except as
described on Schedule 6.14, RMG has no employment agreements, either written or
oral, with any employee of the RMG Systems and none of the employment agreements
listed on Schedule 6.14 requires RMG, or will require IP-I or any Affiliate of
IP-I, to employ any Person after the Closing.
6.15 RMG Systems Information.
6.15.1 Schedule 6.15.1 sets forth a materially true and accurate
description, on a System-by-System basis, of the following information relating
to the RMG Systems as of December 31, 1998:
(a) the approximate number of aerial and underground miles of
plant included in the RMG Assets and served by each headend;
(b) the approximate number of single family homes and
residential multiple dwelling units passed by each RMG System;
(c) the MHZ capacity and channel capacity of each headend; and
(d) the number of subscribers served by each RMG System and a
description of the calculation methodology used by RMG to calculate such
subscribers.
6.15.2 Schedule 6.15.2 sets forth a materially true and accurate
description of the following information relating to the RMG Systems as of the
date of this Agreement:
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(a) a description of the Basic Services, the Expanded Basic
Services, Pay TV and a la carte services available from each RMG System, and the
rates charged by RMG therefor, including all rates, tariffs and other charges
for cable television or other services provided by each RMG System;
(b) the stations and signals carried by each RMG System and
the channel position of each such signal and station; and
(c) the cities, towns, villages, boroughs and counties served
by each RMG System.
6.15.3 Each RMG System is capable of providing all channels,
stations and signals reflected as being carried on such RMG System on Schedule
6.15.2.
6.16 Taxpayer Identification Number. The U.S. Taxpayer Identification
Number for RMG is 54-1342676.
6.17 Finder and Brokers. RMG has not entered into any Contract with any
person which will result in the obligation of IP-I to pay any Agent's Fees in
connection with the negotiations leading to this Agreement or the consummation
of the transactions contemplated hereby.
6.18 Related Party Transactions. Set forth on Schedule 6.18 hereto, are
the Contracts, agreements, arrangements or understandings between RMG and any of
its Affiliates included in or related to the RMG Assets.
7. ADDITIONAL COVENANTS.
7.1 Access to Premises and Records. Between the date of this Agreement and
the Closing Date, each Party (a) will give to the other and its counsel,
accountants and other representatives reasonable access during normal business
hours and upon reasonable advance notice to all the premises and books and
records of its Cable Business and to all of its Assets and the personnel engaged
in the management or operation of its Systems; and (b) will furnish to the other
and such representatives all such documents, financial information and other
information regarding its Cable Business and its Assets as the other from time
to time reasonably may request; provided that no investigation will affect or
limit the scope of any of the representations, warranties, covenants and
indemnities of the other in this Agreement or in any Transaction Document or
limit liability for any breach of any of the foregoing.
7.2 Continuity and Maintenance of Operations, Certain Deliveries and
Notice. Except as set forth on Schedule 7.2, in the 1999 operating budgets set
forth on Schedule 7.2-A, with respect to RMG, and on Schedule 7.2-B, with
respect to IP-I, or as the other Party may otherwise consent in writing, between
the date of this Agreement and the Closing, each of RMG with
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respect to RMG's Cable Business, the RMG Systems and the RMG Assets, and each
IP-I Party with respect to its Cable Business, Systems and Assets:
7.2.1 will conduct its Cable Business in good faith and operate its
Systems only in the usual, regular and ordinary course (including making routine
capital expenditures and operating substantially in accordance with the 1999
capital and operating budgets with respect to each such System (copies of which
are set forth on Schedule 7.2-A, with respect to RMG, and on Schedule 7.2-B,
with respect to IP-I), completing ongoing and planned line extensions, placing
conduit or cable in new developments, fulfilling installation requests,
completing disconnection work orders and disconnecting and discontinuing service
to customers whose accounts are delinquent) and, to the extent consistent with
such conduct and operation, use its commercially reasonable efforts to (a)
preserve its current business intact in all material respects, including
preserving existing relationships with franchising authorities, suppliers,
customers and others having business dealings with its Systems, (b) keep
available the services of its employees and agents providing services in
connection with its Cable Business, (c) continue budgeted marketing, advertising
and promotional expenditures with respect to its Cable Business, (d) enter into
written agreements with respect to all multiple dwelling unit and bulk billed
accounts having greater than 200 individual units, and (e) operate its Cable
Business in material compliance with all Legal Requirements;
7.2.2 will maintain its Assets in good operating repair, order and
condition, ordinary wear and tear excepted; will maintain equipment and
inventory for its Systems at normal historical levels consistent with its past
practices (as adjusted to account for abnormally high inventory levels related
to periodic rebuild activity); will maintain in full force and effect policies
of insurance with respect to its Cable Business in such amounts and with respect
to such risks as are currently in effect for its Systems; and will maintain its
books, records and accounts with respect to its Assets and the operation of its
Systems in the usual, regular and ordinary manner on a basis consistent with its
past practices;
7.2.3 will not, outside the ordinary course of business or to the
extent inconsistent with past practice or the 1999 operating budget included in
Schedule 7.2-A (with respect to RMG) or Schedule 7.2-B (with respect to IP-I),
as applicable, (a) modify, terminate, renew, suspend or abrogate any System
Contract (other than retransmission consent System Contracts, System Contracts
evidencing Leased Property or Other Real Property Interests and lease agreements
for Tangible Personal Property); (b) modify, terminate, renew, suspend or
abrogate any retransmission consent System Contract, System Franchise, System
Contract evidencing Leased Property or Other Real Property Interests, lease
agreements for Tangible Personal Property or System License except for renewals
(other than renewals of System Franchises) on terms that are not materially
different from those which currently exist and renewals of System Franchises as
otherwise required or permitted under this Agreement; (c) engage in any
marketing, subscriber installation, collection or disconnection practices; (d)
make any Cost of Service Election; (e) other than as set forth on Schedule 7.2,
enter into any agreement with or commitment to any competitive access provider
and/or local exchange
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company or any internet access or on-line services provider with respect to the
use or lease of any of its Assets; (f) sell, transfer or assign any portion of
its Assets other than sales in the ordinary course of business or permit the
creation of a Lien (other than Permitted Liens) on any of its Assets; (g) take
any actions that would cause the transactions contemplated hereby to fail to
qualify as a like-kind exchange under Section 1031 of the Code; (h) decrease the
rate charged for any level of Basic Services, Expanded Basic Services or any Pay
TV or, except as expressly permitted by Schedule 7.2, add, delete, retier or
repackage any analog programming services, in each case except to the extent
required under the 1992 Cable Act or any other Legal Requirement; provided,
however, that if rates are decreased in order to so comply, the Party decreasing
the rates will provide the other with copies of any FCC forms (even if not filed
with any Governmental Authority) that such Party used to determine that the new
rates were required; (i) convert any of its Systems to any billing system or
otherwise change billing arrangements for any of its Systems; (j) enter into any
Contract of any kind relating to the Cable Business to be assumed by the other
Party hereunder that individually or in the aggregate call for payments over its
terms or otherwise involving expenditures in excess of $100,000, except for the
renewal of Contracts that would, but for such renewal, terminate in accordance
with their terms prior to Closing; (k) except pursuant to or required by plans,
agreements or arrangements already in effect on the date hereof, make any
material increase in compensation or benefits payable or to become payable to
employees or make any material change in personnel policies; (l) take any action
with respect to the grant or increase of severance or termination pay payable
after the Closing Date; (m) engage in any material transaction with respect to
its Cable Business; or (n) agree to do any of the foregoing;
7.2.4 will promptly deliver to the other (i) true and complete
copies of all monthly statements of income and such other information with
respect to its Systems or the operation of its Cable Business in a format
consistent with the form of report attached hereto as Schedule 7.2.4 for the
period from January 1, 1999, through the Closing, and if the Closing occurs as
of the end of a month, as soon as practicable after Closing and (ii) such
financial information reasonably requested by such other party in connection
with the qualification, reporting and record-keeping requirements under Section
1031 of the Code (and the revenue regulations thereunder) with respect to the
Exchange;
7.2.5 will give or cause to be given to the other, as soon as
reasonably possible but in any event within five Business Days after the date of
submission to the appropriate Governmental Authority, copies of all FCC Forms
1200, 1205, 1210, 1215, 1220, 1225, 1235 and 1240 or any other FCC forms
required to be filed with any Governmental Authority under the 1992 Cable Act
with respect to rates and prepared with respect to any of its Systems;
7.2.6 will duly and timely file a valid notice of renewal under
Section 626 of the Cable Act with the appropriate Governmental Authority with
respect to any System Franchise that will expire within 36 months after any date
between the date of the Agreement and the Closing Date;
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7.2.7 will promptly notify the other of any fact, circumstance,
event or action by it or otherwise (a) which, if known at the date of this
Agreement, would have been required to be disclosed by it in or pursuant to this
Agreement or (b) the existence, occurrence or taking of which would result in
the condition of RMG in Section 8.2.1 (with respect to the representations and
warranties of the IP-I Parties) or the condition of the IP-I Parties in Section
8.1.1 (with respect to the representations and warranties of RMG) not being
satisfied at any time prior to or on the Closing, and, with respect to clause
(b), use its commercially reasonable efforts to remedy the same and to satisfy
such condition to the other Party's obligation to consummate the transactions
contemplated by this Agreement;
7.2.8 will use its commercially reasonable efforts to challenge and
contest any Litigation brought against or otherwise involving such Party that
could result in the imposition of Legal Requirements that could cause the
conditions to the Closing not to be satisfied; and
7.2.9 will cause its appropriate Affiliates to be bound by and
comply with the provisions of this Section 7.2 to the extent such Affiliates
own, operate or manage any of the RMG Assets, RMG Systems, IP-I Assets or IP-I
Systems, as the case may be.
7.3 Employees.
7.3.1 Except as set forth in this Section 7.3.1, each Party may, but
shall have no obligation to employ or offer employment to, any employee of the
other Party's Cable Business. Within 30 days after the date of execution of this
Agreement, each Party shall provide to the other a list of all employees of its
Systems (collectively for each Party, its "System Employees") as of a recent
date, showing the original hire date, the then-current positions and rates of
compensation and whether the employee is subject to an employment agreement, a
collective bargaining agreement or represented by a labor organization. Within
60 days after the date of execution of this Agreement (but in no event less than
30 days after receipt of such list), or such other date as the Parties may
agree, the Party receiving such list will provide to the other in writing a list
of the other's System Employees such Party or its Affiliates will employ
following the Closing, subject only to the evaluations permitted by this
Section. Each Party agrees, and shall cause its appropriate Affiliates, to
cooperate in all reasonable respects with the other Party to allow the other
Party or its Affiliates to evaluate its System Employees to make hiring
decisions. In this regard, each Party shall have the opportunity to make such
appropriate prehire investigation of each of such other Party's System
Employees, as it deems necessary, including, subject to obtaining the consent of
such System Employee, the right to review personnel files and conduct background
checks and the right to interview such employees during normal working hours so
long as such interviews are conducted after notice to the other Party and do not
unreasonably interfere with the other Party's operations. Each Party will use
its good faith efforts to obtain the consent of each of its System Employees to
allow the other Party to review personnel files and to conduct background checks
in connection with the foregoing. Each Party or its Affiliates may, if it
wishes, condition any offer of employment upon the employee's passing a
pre-placement physical examination (including drug screening test) and the
completion
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of a satisfactory background check. The Party requesting such examination shall
bear the expense of such examination but the other Party shall, upon reasonable
notice, cooperate in the scheduling of such examinations so long as the
examinations do not unreasonably interfere with the other Party's operations. As
of the Closing Date, each Party shall have no obligation to the other Party, its
Affiliates or to the other Party's employees, with regard to any employee it has
determined not to hire. Notwithstanding any of the foregoing, each Party agrees
not to solicit for employment, without the written consent of the other, any
employee listed on Schedule 7.3 or any other employee of the other Party whose
position is System manager or higher.
7.3.2 Each Party, or its appropriate Affiliate, will pay to all of
its System Employees all compensation, including salaries, commissions, bonuses,
deferred compensation, severance (to the extent applicable), insurance, vacation
(except for accrued vacation time (not to exceed four weeks) and sick time (not
to exceed 10 days) included in the calculation of such Party's Adjusted Value
under the Common Agreement, with respect to the IP-I Systems, or the Redemption
Agreement, with respect to the RMG Systems), and other compensation or benefits
to which they are entitled for periods prior to the Closing, including all
amounts, if any, payable on account of the termination of their employment.
7.3.3 Each Party, or its appropriate Affiliate, will be responsible
for maintenance and distribution of benefits accrued under any employee benefit
plan (as defined in ERISA) maintained by such Party, or its appropriate
Affiliate, pursuant to the provisions of such plan and any Legal Requirements.
Neither Party will assume any obligation or liability for any such accrued
benefits or any fiduciary or administrative responsibility to account for or
dispose of any such accrued benefits under any employee benefit plans maintained
by the other Party or any Affiliate. In the event that a transferor Party
determines that the transactions contemplated by this Agreement will not permit
a distribution to be made to a Hired Employee (as defined below) from the
transferor Party's tax qualified plan in accordance with Section 401(k)(10) of
the Code then the other Party may accept a plan-to-plan transfer of Hired
Employees' plan benefits to its own tax qualified plan. If there is no
plan-to-plan transfer, in order to permit a transferor Party, or its appropriate
Affiliate, to make distributions to any former System Employee of such Party who
becomes a Hired Employee of the other Party of the balance of such employee's
401(k) account in the transferor Party's or its Affiliate's tax qualified plan,
if any, as soon as legally permitted, each transferee Party shall notify the
other Party of the date of termination of such employee's employment with the
transferee Party for any reason.
7.3.4 All claims and obligations under, pursuant to or in connection
with any welfare, medical, insurance, disability or other employee benefit plans
of a Party or any Affiliate or arising under any Legal Requirement affecting
employees of such Party or any Affiliate incurred on or before the Closing Date
or resulting from or arising from events or occurrences occurring or commencing
on or before the Closing Date will remain the responsibility of such Party, or
the appropriate Affiliate, whether or not such employees are hired by the other
Party as of or after the Closing. Neither Party will have or assume any
obligation or liability under or in connection with any such plan of the other
Party or any Affiliate of the other Party.
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7.3.5 Each Party, or its appropriate Affiliate, will remain solely
responsible for, and will indemnify and hold harmless the other from and against
all Losses arising from or with respect to, all salaries and all severance,
vacation (except for accrued vacation time and sick time included in the
calculation of such Party's Adjusted Value under the Common Agreement, with
respect to the IP-I Systems, or the Redemption Agreement, with respect to the
RMG Systems), medical, holiday, continuation coverage and other compensation or
benefits to which its employees may be entitled, whether or not such employees
may be hired by the other Party or any Affiliate of the other Party, as a result
of their employment by such Party or any Affiliate of such Party on or prior to
the Closing Date, the termination of their employment on or prior to the Closing
Date, the consummation of the transactions contemplated hereby or pursuant to
any applicable Legal Requirement or otherwise relating to their employment prior
to the Closing Date. Any liability under WARN with regard to any employee
terminated on or prior to the Closing Date, or not hired by the other Party on
or after the Closing Date, shall, as a matter of contract between the Parties,
be the responsibility of the Party or its Affiliates by which the employee was
employed prior to the Closing Date. Each Party and its Affiliates shall
cooperate with the other Party and its Affiliates, if requested, in the giving
of WARN notices on behalf of the other.
7.3.6 Notwithstanding anything to the contrary herein, each Party
shall:
(a) credit each System Employee of the other Party who is
offered on or prior to the Closing employment by such Party and becomes an
employee of such Party after the Closing Date (a "Hired Employee") the amount of
vacation time (to a maximum of four weeks) and sick time (to a maximum of 10
days) accrued by him or her as a System Employee of the transferor Party through
and including the Closing Date to the extent the transferor Party's System Value
is decreased pursuant to Section 2.2(b) of the Redemption Agreement in the case
of RMG System Employees who become employees of any IP-I Party or its Affiliates
and Section 2.2(c)(ii) of the Common Agreement in the case of IP-I System
Employees who becomes employees of RMG or its Affiliates, provided, however,
that if any Hired Employee has accrued vacation time and/or sick time in excess
of four weeks or 10 days, respectively, then the transferor Party shall, and
shall cause its appropriate Affiliate to, pay to such employee the amount of
such excess and the transferee Party shall not assume any liability or
obligation in respect of such excess;
(b) permit each Hired Employee to participate in such Party's
employee benefit plans to the same extent as similarly situated employees of
such Party and their dependents are permitted to participate;
(c) give each Hired Employee credit for such employee's past
service with the other Party and its Affiliates as of the Closing Date
(including past service with any prior owner or operator of the other Party's
Systems or Cable Business) for purposes of eligibility and vesting under such
Party's employee benefit and other plans to the same extent as other similarly
situated employees of such Party;
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(d) not subject any Hired Employee to any waiting periods or
limitations on benefits for pre-existing conditions under such Party's employee
benefit plans, including any group health and disability plans, except to the
extent such employees were subject to such limitations under the employee
benefit plans of such other Party or any Affiliate of such other Party; and
(e) credit each Hired Employee under any group health plan for
any deductible amount previously met by such Hired Employee as of the Closing
Date under any of the group health plans of the transferor Party or any of its
Affiliates.
7.3.7 If a transferee Party discharges any Hired Employee without
cause within one hundred twenty days after Closing, then such transferee Party
shall pay severance benefits to such Hired Employee in accordance with such
transferor Party's severance benefit plan. For purposes of this Section 7.3.7,
"cause" shall have the meaning set forth in the transferee Party's employment
policies, procedures or agreements applicable to such transferee Party's
employees who are situated similarly to the discharged Hired Employee.
7.3.8 If a transferor Party has, or acquires, a duty to bargain with
any labor organization, then such transferor Party will (i) give prompt written
notice of such development to the other Party, including notice of the date and
place of any negotiating sessions as they are planned or contemplated and permit
the other Party to have a representative present at all negotiating sessions
with such labor organization and at all meetings preparatory thereto (including
making the transferee Party's representative a representative of the transferor
Party's delegation if required by the labor organization) and (ii) not, without
the transferee Party's written consent, enter into any Contract with such labor
organization that purports to bind the transferee Party, including any successor
clause or other clause which would have this purpose or effect. Each Party (as a
transferor Party) acknowledges and agrees that the other Party has not agreed to
be bound, and will not be bound, without an explicit assumption of such
liability or responsibility by the transferee Party, by any provision of any
collective bargaining agreement or similar Contract with any labor organization
to which the transferor Party or any of its Affiliates is or may become bound.
7.3.9 Nothing in this Section 7.3 or elsewhere in this Agreement
shall be deemed to make any employee of either Party a third party beneficiary
of this Agreement.
7.3.10 Notwithstanding any other provision of this Agreement, in
respect of wages paid with respect to the 1999 calendar year to employees of
IP-I who after the Closing become employees of RMG, or vice versa, RMG and IP-I
agree to comply, and to cause their respective affiliates to comply, with the
alternative procedures set forth in Section 5 of Revenue Procedure 96-60 and
shall cooperate, and shall cause their respective affiliates to cooperate, with
each other in complying with such procedures.
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7.4 Leased Vehicles; Other Capital Leases. Except for leases included in
the IP-I Tangible Personal Property and described in Schedule 4.4(b), IP-I will
pay the remaining balances on any leases for vehicles or capital leases included
in its Tangible Personal Property and will deliver title to such vehicles and
other Tangible Personal Property, free and clear of all Liens, to RMG at the
Closing.
7.5 Required Consents; Franchise Renewal.
7.5.1 Each Party will use its commercially reasonable efforts to (i)
obtain in writing as promptly as possible and at its expense, all of the
Required Consents and any other consent, authorization or approval required to
be obtained by such Party in connection with the transactions contemplated by
this Agreement, and deliver to the other Party copies of such Required Consents
and such other consents, authorizations or approvals promptly after they are
obtained by such Party and (ii) give any required written notice in connection
with the transactions; provided, that each Party will afford the other Party the
opportunity to review, approve and revise the form of letter or application
proposed to request the Required Consent or form of written notice prior to
delivery to the Third Party or the Affiliate of a Party whose consent is sought
or to whom such notification is required. All documents delivered or filed with
any Governmental Authority or any Person by or on behalf of such Party pursuant
to this Section 7.5.1, when so delivered or filed, will be correct, current and
complete in all material respects. Each Party will cooperate with the other
Party to obtain all Required Consents and no Party shall intentionally take any
action or steps that would prejudice or jeopardize the obtaining of any Required
Consent. No Party will accept or agree or accede to any modifications or
amendments to, or the imposition of any condition to the transfer of, any of the
System Franchises, System Licenses or System Contracts of its Cable Business
that are not acceptable to the other Party. Notwithstanding the foregoing, as
soon as practicable after the date of this Agreement (and in no event more than
15 Business Days hereafter), each Party will cooperate with each other to
complete, execute and deliver, or cause to be completed, executed and delivered,
to the appropriate Governmental Authority, a FCC Form 394 with respect to each
System Franchise other than any such Governmental Authority that the Parties
have agreed will not initially receive FCC Form 394; provided, that if either
Party subsequently requests that FCC Form 394 be completed, executed and
delivered to any appropriate Governmental Authority that did not initially
receive a FCC Form 394 for any System Franchise, then the Parties will cooperate
to complete, execute and deliver a FCC Form 394 to such Governmental Authority
as soon as practicable but in any event within 15 Business Days after a Party
has made such request. Without the prior consent of the other Party, neither
Party shall agree with any Governmental Authority to extend or to toll the time
limits applicable to such Governmental Authority's consideration of any FCC Form
394 filed with such Governmental Authority.
7.5.2 Each Party will use commercially reasonable efforts to obtain
and cooperate with the other Party to obtain a renewal or extension of any
System Franchise (for a period expiring no earlier than three years after the
Closing Date) for which a valid notice of renewal pursuant to the formal renewal
procedures established by Section 626 of the Cable Act
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has not been timely delivered to the appropriate Governmental Authority and no
written confirmation has been received from such Governmental Authority that the
procedures established by Section 626 nonetheless will be applicable with
respect to the renewal or extension of such System Franchise.
7.5.3 Notwithstanding the provisions of Section 7.5.1, no Party will
have any further obligation to obtain Required Consents: (a) with respect to
license agreements relating to pole attachments where the licensing authority
will not consent to an assignment of such license agreement but requires that
the other Party enter into a new agreement with such licensing authority, in
which case the other Party shall use its commercially reasonable efforts to
enter into such agreement prior to Closing or as soon as practicable thereafter
and such Party will cooperate with and assist the other Party in obtaining such
agreements; (b) for any business radio license or any private operational fixed
service (POFS) microwave license which such Party reasonably expects can be
obtained within 120 days after the Closing and so long as a conditional
temporary authorization (for a business radio license) or a special temporary
authorization (for a POFS license) is obtained by the other Party under FCC
rules with respect thereto; (c) with respect to Contracts evidencing Leased
Property, if, with the consent of the other Party, such Party obtains and makes
operational prior to Closing substitute Leased Property that is reasonably
satisfactory to the other Party; (d) with respect to Contracts evidencing leased
Tangible Personal Property that is material to its Cable Business, if, with the
consent of the other Party, such Party obtains and makes operational prior to
Closing substitute Tangible Personal Property that is reasonably satisfactory to
the other Party; and (e) with respect to Contracts which are not identified with
an asterisk (*) on Schedule 5.3 or 6.3, if RMG, with respect to Contracts
relating to RMG Systems, or IP-I, with respect to Contracts relating to IP-I
Systems, uses its commercially reasonable efforts to obtain the Required Consent
of the other party to such Contract but fails to obtain such consent on or prior
to Closing.
7.5.4 If and to the extent that RMG and the IP-I Parties, or any of
them, fails to obtain all Required Consents identified with an asterisk (*) on
Schedule 5.3 (except Required Consents for the transfer of Systems Franchises
which shall be governed by Section 7.5.5) on or prior to the Closing (whether or
not IP-I or RMG shall have waived satisfaction of the condition to Closing set
forth in Section 8.1.5 or Section 8.2.5, respectively), subsequent to the
Closing, each of RMG with respect to its Systems and Assets and the IP-I Parties
with respect to their Systems and Assets will continue to use commercially
reasonable efforts to obtain in writing as promptly as possible such Required
Consents and will deliver copies of the same, reasonably satisfactory in form
and substance, to the other. The obligations set forth in this Section will
survive the Closing and will not be merged in the consummation of the
transactions contemplated hereby.
7.5.5 If less than all of the Required Consents for the transfer of
Systems Franchises are obtained as of the Closing Date, then subject to the
conditions set forth in Section 4.1(c) of the Common Agreement and Sections
9.1(c)(ii) and 9.1(c)(iii) of the Redemption Agreement the following will occur:
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(a) With respect to each RMG Systems Franchise for which an
RMG Required Consent has not been obtained as of the Closing Date (including any
RMG Assets that are located in the franchise area for such franchise or relate
exclusively to such franchise, an "RMG Retained Franchise"), the parties will
negotiate in good faith to reach agreement on a IP-I Systems Franchise
(including any IP-I Assets that are located in the franchise area for such
franchise or relate exclusively to such franchise, a "IP-I Matching Franchise")
that is to the greatest extent possible, like kind to such RMG Retained
Franchise for purposes of Section 1031 of the Code and the applicable Exchange.
A IP-I Matching Franchise may also be a IP-I Retained Franchise. For purposes of
this Section 7.5.5, a "Retained Franchise" means either an RMG Retained
Franchise or a IP-I Retained Franchise or both, as the context requires, and a
"Matching Franchise" means either an RMG Matching Franchise or a IP-I Matching
Franchise or both, as the context requires.
(b) With respect to each IP-I Systems Franchise for which a
IP-I Required Consent has not been obtained as of the Closing Date (including
any IP-I Assets that are located in the franchise area for such franchise or
relate exclusively to such franchise, a "IP-I Retained Franchise"), the parties
will negotiate in good faith to reach agreement on an RMG Systems Franchise
(including any RMG Assets that are located in the franchise area for such
franchise or relate exclusively to such franchise, a "RMG Matching Franchise")
that is to the greatest extent possible, like kind to such IP-I Retained
Franchise for purposes of Section 1031 of the Code and the applicable Exchange.
An RMG Matching Franchise may also be an RMG Retained Franchise.
(c) The parties shall negotiate in good faith to reach
agreement on one or more operating agreements pursuant to which the intended
transferee of each Retained Franchise and Matching Franchise will operate such
Retained Franchise and Matching Franchise to the extent not prohibited under the
terms thereof, and for compensation as may be agreed upon, which operating
agreements shall also contain any required signal sharing arrangements that the
parties, each acting in good faith, may determine to be necessary (the
"Operating Agreements").
(d) At the Closing, the IP-I Parties and RMG shall transfer,
convey and assign (the "Primary Transfer") all of the RMG System Assets other
than any RMG Retained Franchises and RMG Matching Franchises and all of the IP-I
System Assets other than any IP-I Retained Franchises and IP-I Matching
Franchises.
(e) Following the Closing of the Primary Transfer, the parties
will continue to use commercially reasonable efforts to obtain on an expedited
basis the Required Consents for all RMG Retained Franchises and IP-I Retained
Franchises. The Operating Agreements will contain mutually acceptable terms
regarding the post-Closing exchange or transfer (a "Subsequent Transfer") of the
Retained Franchises and Matching Franchises after the receipt or failure to
receive the Required Consents applicable to such Retained Franchises and
Matching Franchises.
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(f) All references in this Agreement to the Closing and the
Closing Date will mean the Closing and Closing Date of the Primary Transfer
except as specifically provided otherwise in this Section 7.5.5(f). Without
limiting the foregoing, all representations and warranties (except as to those
Required Consents that have not been obtained) made in connection with the
Retained Franchises and the Matching Franchises will be made as of the Closing
Date rather than the date of the Subsequent Transfer, the other covenants in
Article 7 will not apply to the Retained Franchises or the Matching Franchises
following the Closing Date, and the Survival Period applicable under Article 11
for all such representations, warranties and covenants will accrue from the
Closing Date; provided, that the parties will negotiate in good faith to include
appropriate covenants in the Operating Agreements that will apply to the
Retained Franchises and the Matching Franchises following Closing. The closing
conditions in Article 8 will not apply to any Retained Franchise or Matching
Franchise transfer; provided, that the parties will negotiate in good faith to
include appropriate conditions to the later transfer of the Retained Franchises
and the Matching Franchises in the Operating Agreements. Notwithstanding the
foregoing, the adjustments provided for in Article 3 will be made as of the
Closing Date for both the Retained Franchises and the Matching Franchises.
(g) If the provisions of this Section 7.5.5 become operative,
the parties agree to use commercially reasonable efforts and act in good faith
in taking such actions and negotiating such additional provisions or other
agreements, including amendments to this Agreement, as may be necessary or
appropriate to carry out the intent of this Section 7.5.5, including keeping
franchise transfers effective.
7.6 Title Commitments and Surveys. Each Party will have the option to
obtain, at its own expense, (i) commitments of title insurance ("Title
Commitments") issued by a nationally recognized title insurance company selected
by the requesting party (the "Title Company") and containing policy limits and
other terms reasonably acceptable to the requesting party, and photocopies of
all recorded items described as exceptions therein committing to insure (A) fee
title in the requesting party to each parcel of RMG Owned Property or IP-I Owned
Property, as the case may be, and (B) a leasehold interest in the requesting
party in each parcel of RMG Leased Property or IP-I Leased Property, as the case
may be, that is the site of a System headend or tower, by American Land Title
Association ("ALTA") (1992) owner's or lessee's policies of title insurance, and
(ii) current ALTA as-built surveys (in accordance with the Minimum Standard
Detail Requirements for Land Title Surveys jointly established and adopted by
ALTA and the American Congress on Surveying and Mapping in 1992) of each such
parcel of RMG or IP-I Owned Property or RMG or IP-I Leased Property with
monuments placed at all major corners of the property boundary unless already
marked and showing the location and identification by recorded instrument number
of all easements or rights-of-way burdening or benefiting the property in
question and all other documents and matters referenced as exceptions on the
Title Commitment, the location of all apparent easements and rights-of-way,
flood zone designation, setback lines, if applicable, the location of all
substantial visible improvements on such property and the location of all
adjoining streets and indication of access to a public way such as curb cuts and
driveways, in such form as is reasonably satisfactory to the requesting
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party and as is necessary to obtain the title insurance to be issued pursuant to
the Title Commitments with the standard printed exceptions relating to survey
matters deleted (the "Surveys"), certified to the parties and the Title Company
issuing a Title Commitment. If the requesting party notifies the other party
within 20 days of this Agreement or, if later, of its receipt of both the Title
Commitments and the Surveys of any Lien (other than a Permitted Lien) or other
matter affecting title to RMG or IP-I Owned Property or RMG or IP-I Leased
Property of the other which renders (or presents a material risk of rendering)
title to any parcel of RMG or IP-I Owned Property not good and marketable or
prevents or materially interferes with (or presents a material risk of
preventing or interfering with) the use of any parcel of RMG or IP-I Owned
Property or RMG or IP-I Leased Property for the purposes for which it is
currently used or intended to be used by such Party (each a "Title Defect"),
such party will exercise commercially reasonable efforts to remove or, with the
consent of the requesting party, cause the Title Company to commit to insure
over, each such Title Defect prior to the Closing.
7.7 HSR Notification. As soon as practicable after the execution of this
Agreement, but in any event no later than 30 days after such execution, the IP-I
Parties and RMG will each complete and file, or cause to be completed and filed
at its own cost and expense, any notification and report required to be filed
under the HSR Act with respect to the transactions contemplated by this
Agreement and each such filing shall request early termination of the waiting
period imposed by the HSR Act. The Parties shall use their respective
commercially reasonable efforts to respond as promptly as reasonably practicable
to any inquiries received from the Federal Trade Commission (the "FTC") and the
Antitrust Division for additional information or documentation and to respond as
promptly as reasonably practicable to all inquiries and requests received from
any other Governmental Authority in connection with antitrust matters. The
Parties shall use their respective commercially reasonable efforts to overcome
any objections which may be raised by the FTC, the Antitrust Division or any
other Governmental Authority having jurisdiction over antitrust matters. Each
Party will cooperate to prevent inconsistencies between their respective filings
and between their respective responses to all such inquiries and responses, and
will furnish to each other such necessary information and reasonable assistance
as the other may reasonably request in connection with its preparation of
necessary filings or submissions under the HSR Act. Notwithstanding the
foregoing, no Party shall be required to make any significant change in the
operations or activities of the business (or any material assets employed
therein) of such Party or any of its Affiliates, if a Party determines in good
faith that such change would be materially adverse to the operations or
activities of the business (or any material assets employed therein) of such
Party or any of its Affiliates having significant assets, net worth or revenue.
7.8 Sales and Transfer Taxes. All sales, use or excise Taxes arising from
or payable by reason of the transfer of any of the RMG Assets or any of the IP-I
Assets ("Transfer Taxes") will be shared equally by RMG and IP-I. All transfer
and similar taxes or assessments, including transfer fees and similar
assessments for or under System Franchises, System Licenses and System
Contracts, arising from or payable by reason of the conveyance of the RMG Assets
or the IP-I Assets also will be shared equally by RMG and IP-I. Tax Returns
required to be filed in
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respect of Transfer Taxes ("Transfer Tax Returns") shall be prepared and filed
by the party that has the primary responsibility under applicable law for filing
such Transfer Tax Returns. If no party has primary responsibility for filing a
Transfer Tax Return, then RMG shall be responsible for preparing and filing any
such Transfer Tax Return.
7.9 Programming. Each Party will execute and deliver such documents and
take such action as may be reasonably requested by another 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, RMG will not be required to provide specific programming or channels or
to assume any liability with respect to or in connection with the programming
agreements of the other Party or any Affiliate of IP-I, except to the extent
included on Schedule 4.4(b).
7.10 Updated Schedules.
(a) Schedule and exhibit references contained in this Agreement are
for convenience only and any matter disclosed pursuant to one section,
subsection or other provision of this Agreement, are deemed disclosed for all
purposes of this Agreement, as long as the disclosure with respect to such
matter provides a truthful, accurate and adequate description of all relevant
aspects of such matter.
(b) Not less than ten Business Days prior to Closing, each of RMG
and IP-I will deliver to the other revised copies of each of its Schedules,
except for Schedules 5.15 and 6.15 as they relate to matters addressed in
Sections 5.15.1 and 5.15.2, and Sections 6.15.1 and 6.15.2, respectively
(regardless of whether the original Schedule is as of a certain date) which
shall have been updated and marked to show any changes occurring between the
date of this Agreement and the date of delivery; provided, however, that such
updates are for informational purposes only, and for purposes of determining
whether such Party's representations, warranties and covenants in this Agreement
are true and correct at Closing, all references to the Schedules will mean the
version of the Schedules attached to this Agreement on the date of signing.
Notwithstanding the foregoing, if the effect of any such updates to Schedules is
to disclose any one or more additional properties, privileges, rights, interests
or claims, in each case acquired after the date of this Agreement ("New
Properties") as Assets that would have been (if owned on the date of this
Agreement) required by this Agreement to have been disclosed by such Party in
its original Schedules or that were acquired by such Party after the date of
this Agreement in breach of this Agreement, then the other Party, at or before
Closing, will have the right (to be exercised by written notice to such Party)
to cause any one or more of such New Properties to be designated as and deemed
to constitute Excluded Assets of such Party for all purposes under this
Agreement. If such right is not exercised by any Party entitled to exercise such
right and if such Party waives the applicable condition to Closing provided in
Section 8.1.1, 8.1.2, 8.2.1 or 8.2.2, such Party shall be deemed to have
accepted such new disclosure with respect to such New Properties and it shall be
deemed incorporated by reference into the Schedules. Notwithstanding anything to
the contrary contained in this Agreement, and except as set forth in the
preceding
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sentence with respect to New Properties, the waiver of any condition to Closing
by a Party who has knowledge of a breach by the other Party will not be deemed a
waiver of any rights and remedies with respect to such breach under this
Agreement or the Common Agreement.
7.11 Use of Name and Logo. For a period of 180 days after the Closing,
each of the IP-I Parties and RMG will be entitled to use the trademarks, trade
names, service marks, service names, logos and similar proprietary rights of the
transferor to the extent incorporated in or on the Assets transferred to it at
the Closing on a royalty-free basis, provided that each of the IP-I Parties and
RMG will exercise commercially reasonable efforts to remove all such names,
marks, logos and similar proprietary rights of the transferor (except to the
extent otherwise permitted by IP-I or RMG) from the Assets as soon as reasonably
practicable, and in any event within 180 days, following the Closing.
Notwithstanding the foregoing, nothing in this Section will require any Party to
remove or discontinue using any such name or mark that is affixed to converters
or other items in or to be used in customer homes or properties, or as are used
in a similar fashion making such removal or discontinuation impracticable.
7.12 Transitional Billing Services. IP-I and RMG will each provide to the
other, upon written request delivered a reasonable amount of time in advance and
to the extent reasonably practicable, access to and the right to use its billing
system computers, software and related fixed assets in connection with the
Systems acquired by the other for a period of up to 150 days following the
Closing to allow for conversion of existing billing arrangements, including
billing and related arrangements regarding internet access services being
provided to customers of a System on the Closing Date ("Transitional Billing
Services"). Each Party will notify the other at least thirty days prior to the
Closing as to whether it desires Transitional Billing Services from the other.
All Transitional Billing Services, if any, that are requested by a Party will be
provided on terms and conditions reasonably satisfactory to each Party;
provided, however, that the amount to be paid by the Party receiving
Transitional Billing Services will not exceed the out-of-pocket cost to the
other Party of providing such Transitional Billing Services. Each Party will
notify the other of the cost to such Party of providing such Transitional
Billing Services within ten Business Days after receiving the other Party's
notice requesting the provision of such Transitional Billing Services.
7.13 Confidentiality and Publicity.
7.13.1 Prior to the Closing, each Party will keep confidential any
non-public information that such Party may obtain from the other in connection
with this Agreement, and following the Closing, each Party will keep
confidential any non-public information that such Party may obtain from the
other in connection with this Agreement unrelated to the Cable Business and
Systems transferred by the other Party pursuant to this Agreement as well as any
non-public information in the possession of such Party related to the Cable
Business and Systems transferred by such Party to the other Party pursuant to
this Agreement (any such information that a Party is required to keep
confidential pursuant to this sentence shall be referred to as "Confidential
Information"). Each Party will not disclose, and will cause its employees,
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consultants, advisors and agents not to disclose, any Confidential Information
to any other Person (other than its directors, officers and employees and
representatives of its advisers and lenders whose knowledge thereof is necessary
in order to facilitate the consummation of the transactions contemplated hereby)
or use, and will cause its controlled Affiliates, directors, officers,
employees, consultants, advisors and agents not to use, such Confidential
Information to the detriment of the other; provided that (i) such Party may use
and disclose any such Confidential Information once it has been publicly
disclosed (other than by such Party in breach of its obligations under this
Section) or which rightfully has come into the possession of such Party (other
than from the other Party and other than from another Person in violation of any
duty or obligation of confidentiality) and (ii) to the extent that such Party
may, in the reasonable opinion of its counsel, be compelled by Legal
Requirements to disclose any of such Confidential Information, such Party may
disclose such Confidential Information if it will have used all reasonable
efforts, and will have afforded the other the opportunity, to obtain an
appropriate protective order or other satisfactory assurance of confidential
treatment, for the Confidential Information compelled to be disclosed. In the
event of termination of this Agreement, each Party will cause to be delivered to
the other, and retain no copies of, any documents, work papers and other
materials obtained by such Party or on its behalf from the other, whether so
obtained before or after the execution hereof.
7.13.2 No Party will issue any press releases or make any other
public announcement concerning this Agreement and the transactions contemplated
hereby, except as required by applicable Legal Requirements, without the prior
written consent and approval of the other Party, which consent and approval may
not be unreasonably withheld.
7.13.3 Each Party expressly agrees that, in addition to any other
right or remedy the other may have, such other Party may seek and obtain
specific performance of the covenants and agreements set forth in or made
pursuant to this Section 7.13 and temporary and permanent injunctive relief to
prevent any breach or violation thereof, and that no bond or other security may
be required from such other parties in connection therewith.
7.14 Bulk Transfer. Each Party waives compliance by each other Party with
Legal Requirements relating to bulk transfers applicable to the transactions
contemplated hereby.
7.15 Lien Searches. Each Party will obtain, at its expense, the results of
a lien search conducted by a professional search company of records in the
offices of the secretaries of state in each state and county clerks in each
county where there exist any of its Owned Property or Tangible Personal
Property, and in the state and county where such Party's principal offices are
located, including copies of all financing statements or similar notices or
filings (and any continuation statements) discovered by such search company.
7.16 Further Assurances. At or after the Closing, each Party at the
request of the other Party, will promptly execute and deliver, or cause to be
executed and delivered, to the other Party all such documents and instruments,
in addition to those otherwise required by this Agreement,
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in form and substance reasonably satisfactory to the other Party as the other
Party may reasonably request in order to carry out or evidence the terms of this
Agreement or to collect any accounts receivable or other claims included in the
Assets transferred to the other Party. Without limiting the generality of the
foregoing, the IP-I Parties and RMG will take, or cause to be taken, all actions
consistent with the terms of this Agreement, including execution and delivery of
any documents or instruments, as the other may reasonably request to effect the
qualification of the transactions contemplated hereby as a like-kind exchange
under Section 1031 of the Code.
7.17 Post-Closing Cooperation as to Rates.
7.17.1 Each of RMG and the IP-I Parties will use commercially
reasonable efforts to cooperate with and assist the other by providing, upon
reasonable request, all information in that Party's possession (and not
previously made available to the requesting Party) relating directly to the
rates set forth on Schedule 5.15.2 or 6.15.2, as applicable, or on any of FCC
Forms 1200, 1205, 1210, 1220, 1225, 1235 or 1240 or any other FCC Form, that the
requesting Party may reasonably require to justify such rates in response to any
inquiry, order or requirements of any Governmental Authority.
7.17.2 Prior to Closing, neither Party shall settle or permit to be
settled any rate proceeding with respect to its Systems without the consent of
the other Party, which consent will not be unreasonably withheld or delayed,
unless the proposed settlement includes injunctive or other relief that
adversely affects its Assets or its ability of such other Party to operate such
Systems substantially in the manner in which they are operated on the date of
this Agreement (other than changing the rates in question), in which case
consent may be withheld or delayed in such other Party's sole discretion.
7.17.3 After the Closing, each Party, as a transferor (the
"Transferor Party") will be responsible for and follow to conclusion any rate
order of any Governmental Authority or proceeding with respect to rates of any
of its Systems charged by it immediately prior to the Closing; provided,
however, that the Transferor Party shall not: (i) agree to any forward-looking
rate adjustment; (ii) submit any refund plan to a Governmental Authority that
would impact any rates charged or impose financial liability on the Transferee
Party after the Closing; or (iii) appeal or take any other action with regard to
such proceeding that would impact any rates charged or impose financial
liability on the Transferee Party after the Closing, in any case without
obtaining the prior written consent of the System's current owner (the
"Transferee Party"), which consent shall not be unreasonably withheld. Each
Party will cooperate with and assist the other by providing, upon reasonable
request, all information in its possession (and not previously made available to
the requesting Party) that the requesting Party may reasonably require to
justify rates in response to any inquiry, order or requirements of any
Governmental Authority.
7.17.4 If, following Closing any System is required pursuant to any
Legal Requirement, settlement or otherwise to refund to subscribers any
payments, in whole or in part,
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made by such subscribers prior to Closing, including fees for cable television
service, equipment charges, late fees and similar payments, then at the election
of the Transferee Party and upon the Transferor Party's prior written consent,
which consent shall not be unreasonably withheld: (i) the Transferor Party must
fulfill such refund obligation through a one-time cash payment to subscribers,
in which case the Transferor Party shall provide funds for such payment to the
Transferee Party, the Transferee Party shall cooperate with the Transferor Party
or implement and administer such refund payment through the Transferee Party's
billing system, and the Transferor Party shall reimburse the Transferee Party
for all reasonable expenses incurred by the Transferee Party in connection
therewith; (ii) the Transferee Party may fulfill such refund obligation through
a cash payment, credit or in-kind or other form of consideration, at its
discretion and subject to any required approval by a Governmental Authority, and
the Transferor Party shall reimburse the Transferee Party in the amount of any
payment or in the amount of the cost to the Transferee Party of any credit or
in-kind or other form of consideration and all reasonable expenses incurred by
the Transferee Party in connection therewith. Without limiting the foregoing,
the Transferee Party will provide the Transferor Party with all information in
the Transferee Party's possession that is reasonably required by the Transferor
Party in connection with such reimbursement.
7.17.5 If a Transferee Party is permitted following Closing to pass
through to subscribers of Systems acquired by it at Closing, the amount of any
"franchise fees on franchise fees" paid by a Transferor Party to the appropriate
local franchising authority with respect to the period prior to Closing, the
Transferee Party agrees that it will collect for the benefit of the Transferor
Party such amounts specified no later than the Six-Month Date as paid by the
Transferor Party and, except as specified below, will promptly remit such
amounts to the Transferor Party; provided, however, that if a local franchising
authority challenges such collection or orders the Transferee Party to refund
such fees to subscribers, then the Transferee Party shall not remit the fees to
the Transferor Party but shall hold such fees in escrow and the parties will
cooperate reasonably and in good faith to challenge such local franchising
authority action. Upon the final resolution of such local franchising authority
action, the escrowed fees shall be released from escrow and, to the extent not
refunded to subscribers, paid over to the Transferor Party. The Transferor Party
agrees to provide the Transferee Party with such documentation as necessary to
demonstrate its payment of the "franchise fees on franchise fees" and to enable
the Transferee Party to collect the pass through amounts from subscribers.
7.18 Distant Broadcast Signals. Unless otherwise restricted or prohibited
by any Governmental Authority, applicable Legal Requirements or Contract, each
Party will, if requested by the other Party, delete prior to the Closing any
distant broadcast signals which such other Party determines will result in
unacceptable liability on the part of the transferee for copyright payments with
respect to continued carriage of such signals after the Closing; provided,
however, that any Party may refuse to honor such a request if such deletion
could reasonably be expected to delay or otherwise jeopardize the Parties'
ability to complete the transactions contemplated herein.
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7.19 Environmental Assessment.
7.19.1 Each Party acknowledges and agrees, subject to any
enforceable restrictions placed thereon by a Third Party owner or lessor of any
real property involved, that the other Party may commission, at such other
Party's cost and expense, a so-called "Phase I" environmental site assessment of
such Party's Assets (a "Phase I Assessment"). If the Phase I Assessment or any
other information known to such Party (including information disclosed in
connection with the negotiation of this Agreement or described in the Schedules
hereto) indicates that a so-called "Phase II" assessment or other additional
testing or analysis of such Party's Assets as the investigating Party may deem
appropriate (a "Phase II Assessment") is advisable, then, subject to any
enforceable restrictions placed thereon by a Third Party owner or lessor of any
real property involved, the other Party may elect to cause its agents or
representatives to conduct such testing and analysis. Each Party will use its
commercially reasonable efforts to comply with any reasonable request for
information made by the other Party or its agents in connection with any such
investigation, but in no event will either Party be required under this Section
7.19.1 to disclose any materials constituting attorney-client privileged
communications. Each Party covenants that any response to any such request for
information will be complete and correct in all material respects. Each Party
will afford the other Party and its agents or representatives access to all
operations of such Party at all reasonable times and in a reasonable manner in
connection with any such investigation subject to any reasonably required
approval of such Party's landlords, which approval such Party will use its
commercially reasonable efforts to obtain. Should the other Party commission
such an investigation, such investigation will have no effect upon the
representations and warranties made by one Party to the other Party under this
Agreement except that if any Phase I Assessment or Phase II Assessment uncovers
an environmental condition which then comprises a breach of a Party's
representations or warranties herein and such breach is capable of being cured,
such Party shall be deemed not to have breached such representation or warranty
if such Party cures such breach in accordance with the provisions of this
Agreement. In the event this Agreement is terminated or fails to close in
accordance with its terms, each Party agrees to repair any damage or disturbance
it causes to the other Party's Owned Property or Leased Property in the course
of such investigative activities by returning such Owned Property or Leased
Property to approximately the same condition as existed prior to such
investigative activities. Each Party shall indemnify, protect, defend, and hold
the other Party and the other Party's Assets free and harmless from and against
any and all claims, actions, causes of action, suits, proceedings, costs,
expenses (including reasonable attorneys' and consultants' fees and costs),
liabilities, damages, and liens of any type arising directly out of any act or
omission of that Party or any of that Party's representatives on or about the
other Party's Owned Property or Leased Property in the course of such
investigative activities. However, neither of the two preceding sentences shall
be interpreted to impose any obligation upon either Party with respect to
Hazardous Substances present at, on, in, under or about, or any conditions
existing on, the other Party's Owner Property or Leased Property at the time of
such investigative activities, except to the extent of a Party's negligence or
willful misconduct causes a release of such Hazardous Substances or otherwise
exacerbates any such condition in a manner that leads to liability under any
Environmental Law.
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7.19.2 All information collected and generated as a result of the
environmental due diligence authorized by Section 7.19.1 will be subject to the
terms and conditions of Section 7.13 of this Agreement. Each Party shall provide
to the other Party copies of all draft and final reports, assessments and other
information composed or compiled by such Party's environmental consultants
within five Business Days after such Party's receipt of copies thereof
7.20 Year 2000 Matters.
7.20.1 Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) "Computer and Other Systems" means any level of hardware
or software, equipment and cable plant, or environmental and security systems
and other facilities used in connection with RMG's Cable Business or IP-I's
Cable Business, as the case may be, which are date dependent or which process
date data, including any firmware, embedded systems, application programs, user
interfaces, files and databases, and which might be adversely affected by any
date-related issue or calculation prior to, during or after January 1, 2000,
including any problem related to leap year.
(b) "Year 2000 High-Level Inventory, Assessment and
Remediation Decisions" means the subject entity's documentation of its Year 2000
inventory, assessment and remediation decisions performed in accordance with its
Year 2000 Plan, consisting of (i) database reports identifying each category of
items inventoried at the subject entity's cable Systems and specifying as
appropriate the manufacturer or vendor and release, version or model number of
each item listed, (ii) risk or critically assessments, (iii) determination and
execution of evaluation approaches with respect to Year 2000 Readiness, (iv)
determination of Year 2000 Readiness based on evaluation approaches employed,
and (v) decisions regarding disposition alternatives (i.e., do nothing, repair,
replace or retire). All such reports have been reviewed at appropriate levels
within the subject entity's organization in accordance with the entity's Year
2000 Plan. RMG's and IP-I's Year 2000 High-Level Inventory, Assessment and
Remediation Decisions are attached hereto as Schedules 7.20.1(b)-A and
7.20.1(b)-B, respectively.
(c) "Year 2000 Plan" means the plans adopted in accordance
with a Party's Year 2000 Remediation Program to make Year 2000 Ready by a date
no later than August 31, 1999, all of such Party's Computer and Other Systems
having a significant impact on the Party's business. Such Year 2000 Plan will
include scope of methodologies and timelines (including objective milestones)
for inventory, assessment, remediation and/or replacement, and testing or
evaluation of Third Party Testing, as applicable, of its Computer and Other
Systems having a significant impact on the Party's business. RMG's and IP-I's
Year 2000 Plans are attached hereto as Schedules 7.20.1(c)-A and 7.20.1(c)-B,
respectively.
(d) "Year 2000 Ready" or "Year 2000 Readiness" means that the
referenced component, system, software, equipment or other item is designed or
has been
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modified to be used prior to, during and after the calendar year 2000 A.D., and
that such item will operate at all levels, including microcode, firmware,
application programs, user interfaces, files and databases, during each such
time period without error or interruption relating to, or the product of,
date-related issues or calculations, including date data which represents or
references different centuries or more than one century or leap year.
(e) "Year 2000 Remediation Program" means an enterprise wide
program to make Year 2000 Ready all Computer and Other Systems having a
significant impact on the Party's business. Such Year 2000 Remediation Program
must be conducted by Persons with experience in issues related to Year 2000
Readiness and such Persons must have organized an enterprise wide program
management office which reports to, or an enterprise wide program management
structure with oversight by, executive level management and the board of
directors (or committee thereof or other governing body of such entity).
7.20.2 Acknowledgments. The Parties acknowledge the following:
(a) Each of IP-I and certain of its Affiliates, and RMG and
certain of its Affiliates, have established a Year 2000 Remediation Program.
(b) Each of IP-I and RMG has reviewed and approved the other's
Year 2000 Plan and Year 2000 High-Level Inventory, Assessment and Remediation
Decisions.
(c) Each Party acknowledges and agrees with the other Party's
preliminary decision to rely on testing of cable plant and related equipment to
be performed by certain cable industry technical and trade associations, certain
critical vendors or other cable operators ("Third Party Testing"). Each Party
will continue to review the progress of such Third Party Testing plans and
results as they become available. Each Party has developed test methodologies as
part of its Year 2000 Plan to address implementation of additional testing
should RMG and IP-I mutually consider such additional testing to be necessary or
prudent.
(d) Neither party makes any representation, warranty or
guarantee that its Computer and Other Systems will be Year 2000 Ready at the
Closing Date or thereafter.
7.20.3 Covenants. Notwithstanding any other provision set forth in
this Agreement, the Parties agree as follows:
(a) Through the Closing Date, each Party will exercise prudent
and reasonable care and diligence to take such actions with respect to its Cable
Business when and as required by its approved Year 2000 Plan.
(b) Through the Closing Date, each of RMG and IP-I will
cooperate with the other with respect to the nature and results of its
activities relating to its Year 2000 Plan. Such cooperation shall include
providing the appropriate Party with any non-confidential
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information possessed by a Party or one of its Affiliates and reasonably
requested by the other Party regarding the Year 2000 Readiness of any material
component of the Computer and Other Systems having a significant impact on such
Party's business.
(c) Each Party shall deliver to the other Party on or before
July 31, 1999, and again on August 31, 1999 (if Closing has not occurred prior
to such date), a statement, certified by an authorized officer of such Party who
is responsible for implementation of its Year 2000 Plan, setting forth in
reasonable detail that as of such date all of the milestones contained in its
Year 2000 Plan to be completed as of such date have been fully completed (or if
not, indicating which such milestones have not been completed and describing the
efforts required to complete the same).
(d) From the date hereof through the Closing Date, each Party
shall have the opportunity to conduct due diligence regarding the Year 2000
Readiness of the other Party's Computer and Other Systems having a significant
impact on the other Party's business in accordance with this Section 7.20.3(d).
Each Party may conduct a review of the Year 2000 Ready assessment activities
with respect to the Computer and Other Systems having a significant impact on
the other Party's business, including inspecting individual headend and office
sites and reviewing existing reports, correspondence and related material
regarding the Year 2000 Readiness of the Computer and Other Systems having a
significant impact on the other Party's business. Each Party shall conduct no
more than three visits to any site of the other Party, and no single site visit
shall exceed three Business Days. Each Party shall give the other Party at least
five Business Days written notice prior to any visit to any System facilities of
the other Party and, if a Party intends during such visit to perform testing at
a headend, office or other site of the other Party, such Party also must provide
a description of the scope of work regarding such testing. If the other Party
does not notify such Party in writing of the other Party's objection to such
proposed site visit and/or testing within three Business Days after receipt of
such notice, the other Party shall be deemed to have consented to the proposed
site visit and any described testing. A Party shall not unreasonably object to
the other Party's request to perform testing. A representative of the other
Party shall be present at all times during any such visit and testing. All
activities of a Party regarding its Year 2000 due diligence shall be conducted
to minimize any inconvenience or interruption of the normal use and enjoyment of
the other Party's Cable Business and Computer and Other Systems.
7.21 Satisfaction of Conditions. Each Party will use its commercially
reasonable efforts to satisfy, or to cause to be satisfied, the conditions to
the obligations of the other Party to consummate the transactions contemplated
by this Agreement, as set forth in Article 8.
7.22 Offers. Each Party (and its directors, officers, employees,
representatives and agents) shall not directly or indirectly, (i) offer its
Assets or Cable Business for sale, (ii) solicit, encourage or entertain offers
for such Assets or Cable Business, (iii) initiate negotiations or discussions
for the sale of such Assets or Cable Business or (iv) make information about
such Assets or Cable Business available to any Third Party in connection with
the possible sale of
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such Assets or Cable Business prior to the Closing Date or the date this
Agreement is terminated in accordance with its terms.
7.23 Retention of Books and Records. At or prior to the Closing, each
Party shall make arrangements reasonably satisfactory to the other Party to
deliver all such Party's Books and Records not located at any of the offices
included in its Owned Property or Leased Property. Following the Closing, each
Party shall give access to the other Party, its counsel, accountants and other
authorized representatives during normal business hours to such Party's
materials, books, records and documents which relate to the operations of such
Party's Cable Business prior to the Closing Date or which relate to the
operations of the other Party's Cable Business after the Closing Date, in each
case as may be reasonably necessary in connection with any legitimate purpose
(including the preparation of tax reports and returns and the preparation of
financial statements). Such access will be subject to reasonable advance written
notice, will be conducted in a manner that is not disruptive of such Party's
business, and will be subject to any other reasonable limitations imposed by
such Party. The requesting Party shall have the right to make copies of such
materials at its own expense. If either Party proposes to destroy or otherwise
dispose of any of its materials, books, records or documents that related to the
operations of its Cable Business prior to the Closing Date, it will give no less
than 30 days advance written notice to the other Party so as to permit such
other Party to exercise its rights under this Section 7.23.
7.24 Cooperation. RMG and IP-I shall reasonably cooperate in connection
with the preparation and filing of any Tax Return for which the other is
responsible for preparing and filing with respect to the Systems.
7.25 Post-Closing Holding Period. Each of the Parties agrees to hold the
Assets acquired by it under this Agreement for a period of no less than two
years following the Closing Date; provided, however, that the foregoing shall
not prevent a Party from transferring Assets in a transfer that qualifies under
Section 332 and 337 of the Code.
8. CONDITIONS PRECEDENT.
8.1 Conditions to IP-I's Obligations. The obligations of IP-I to
consummate the transactions contemplated by this Agreement will be subject to
the satisfaction, at or before the Closing, of the following conditions, one or
more of which may be waived by IP-I:
8.1.1 Accuracy of Representations and Warranties. The
representations and warranties of RMG in this Agreement and in the Transaction
Documents, without giving effect to any materiality qualifications contained
therein, are true, complete and accurate on and as of the date hereof and at and
as of the Closing with the same effect as if made at and as of the Closing,
except to the extent that all misstatements, omissions and inaccuracies, in the
aggregate, do not have a material adverse effect on the RMG Assets, RMG's Cable
Business, the operations, condition (financial or otherwise) or results of
operations of the RMG Systems taken as a whole, or on the ability of RMG to
perform its obligations under this Agreement.
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8.1.2 Performance of Agreements. RMG shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants in this Agreement and in any Transaction Document to
be performed and complied with by it at or before the Closing.
8.1.3 Deliveries. RMG shall have delivered the items and documents
required to be delivered by it pursuant to this Agreement, including those
required to be delivered to IP-I under Section 9.2.
8.1.4 Legal Proceedings. No Legal Requirement of any Governmental
Authority (including any temporary Legal Requirement) shall be in effect which
would prevent or make illegal the consummation of any of the transactions
contemplated by this Agreement or any Transaction Document.
8.1.5 Consents.
(a) Except as otherwise provided in Section 7.5.5, Required
Consents relating to all RMG System Franchises shall have been obtained in form
and substance reasonably satisfactory to IP-I, or the consent of the appropriate
Governmental Authority shall be deemed to have been received in accordance with
Section 617 of the Communications Act (47 U.S.C. ss.537).
(b) Except as otherwise provided in Section 7.5.3, IP-I shall
have received evidence, in form and substance reasonably satisfactory to it,
that the RMG Required Consents relating to the RMG Systems Licenses and the RMG
Systems Contracts identified with an asterisk (*) on Schedule 6.3 have been
obtained.
8.1.6 No Material Adverse Changes. There shall not have been any
material adverse change in the RMG Assets or the condition (financial or
otherwise) or operations of RMG's Cable Business or the RMG Systems, taken as a
whole, since December 31, 1998.
8.1.7 Franchise Renewals. Each RMG Systems Franchise for which (a) a
valid notice of renewal pursuant to the formal renewal procedures established by
Section 626 of the Cable Act has not been timely delivered to the appropriate
Governmental Authority, and (b) with respect to which the appropriate
Governmental Authority has not confirmed in writing that the procedures
established by Section 626 nonetheless shall apply to the renewal or extension
of such RMG Systems Franchise, shall have been renewed or extended for a period
expiring no earlier than three years after the Closing Date.
8.1.8 Common Agreement and Related Closings.
(a) The conditions set forth in Section 4.3 of the Common
Agreement shall have been satisfied or waived.
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(b) The transactions contemplated by the IP Agreements (as
defined in the Common Agreement) and the Redemption Agreement shall have been,
or will be, consummated as set forth in Section 4.4 of the Common Agreement,
except to the extent such Agreements are not consummated as a result of a breach
by any IP-I Party or their Affiliates of their obligation to consummate such
transactions.
8.2 Conditions to RMG's Obligations. The obligations of RMG to consummate
the transactions contemplated by this Agreement will be subject to the
satisfaction, at or before the Closing, of the following conditions, one or more
of which may be waived by RMG:
8.2.1 Accuracy of Representations and Warranties. The
representations and warranties of IP-I in this Agreement and in the Transaction
Documents, without giving effect to any materiality qualification contained
therein, are true, complete and accurate on and as of the date hereof and at and
as of the Closing with the same effect as if made at and as of the Closing,
except to the extent that all misstatements, omissions and inaccuracies, in the
aggregate, do not have a material adverse effect on the IP-I Assets, IP-I's
Cable Businesses, the operations, condition (financial or otherwise) or results
of operations of the IP-I Systems taken as a whole, or on the ability of any
IP-I Party to perform its obligations under this Agreement.
8.2.2 Performance of Agreements. IP-I shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants in this Agreement and in any Transaction Document to
be performed and complied with by it at or before the Closing.
8.2.3 Deliveries. IP-I shall have delivered the items and documents
required to be delivered by it pursuant to this Agreement, including those
required to be delivered to RMG under Section 9.3.
8.2.4 Legal Proceedings. No Legal Requirement of any Governmental
Authority (including any temporary Legal Requirement) shall be in effect which
would prevent or make illegal the consummation of any of the transactions
contemplated by this Agreement or any Transaction Document.
8.2.5 Consents.
(a) Except as otherwise provided in Section 7.5.5, Required
Consents relating to all IP-I System Franchises shall have been obtained in form
and substance reasonably satisfactory to RMG, or the consent of the appropriate
Governmental Authority shall be deemed to have been received in accordance with
Section 617 of the Communications Act (47 U.S.C. ss.537).
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(b) Except as otherwise provided in Section 7.5.3, RMG shall
have received evidence, in form and substance reasonably satisfactory to it,
that the IP-I Required Consents relating to the IP-I Systems Licenses and the
IP-I Systems Contracts identified with an asterisk (*) on Schedule 5.3 have been
obtained.
8.2.6 No Material Adverse Changes. There shall not have been any
material adverse change in the IP-I Assets or the condition (financial or
otherwise) or operations of IP-I's Cable Business or the IP-I Systems, taken as
a whole, since December 31, 1998.
8.2.7 Franchise Renewals. Each IP-I Systems Franchise for which (a)
a valid notice of renewal pursuant to the formal renewal procedures established
by Section 626 of the Cable Act has not been timely delivered to the appropriate
Governmental Authority, and (b) with respect to which the appropriate
Governmental Authority has not confirmed in writing that the procedures
established by Section 626 nonetheless shall apply to the renewal or extension
of such IP-I Systems Franchise, shall have been renewed or extended for a period
expiring no earlier than three years after the Closing Date.
8.2.8 Common Agreement and Related Closings.
(a) The conditions set forth in Section 4.1 of the Common
Agreement shall have been satisfied or waived.
(b) The transactions contemplated by the IP Agreements (as
defined in the Common Agreement) and the Redemption Agreement shall have been,
or will be, consummated as set forth in Section 4.4 of the Common Agreement,
except to the extent such Agreements are not consummated as a result of a breach
by RMG or its Affiliates of its or their obligation to consummate such
transactions.
9. THE CLOSING.
9.1 The Closing; Time and Place. Subject to the terms and conditions of
this Agreement, the Closing shall be held in San Francisco, California, or as
otherwise agreed, at a place mutually agreed upon by the Parties at 10:00 a.m.,
local time, on the last calendar day of the calendar month in which the
conditions set forth in Article 8 (other than Sections 8.1.3 and 8.2.3) shall
have been satisfied or waived (provided that each Party shall have at least 10
days' prior notice of the scheduled Closing Date in order to prepare for the
Closing) or at such other place, date and time as may be mutually agreed upon by
the Parties (the "Closing Date"). The transactions to be consummated at Closing
shall be deemed to have been consummated as of the Closing Time. If the Closing
Date is not a Business Day, then the Closing Date shall be the immediately
preceding Business Day.
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9.2 RMG's Delivery Obligations. At the Closing, RMG will deliver or cause
to be delivered to IP-I the following:
9.2.1 Cash Consideration. If applicable, the Cash Consideration will
be paid (without duplication) by RMG (or its designee) to the IP-I Parties in
accordance with the Common Agreement.
9.2.2 Bill of Sale and Assignment and Assumption Agreement. The Bill
of Sale and Assignment and Assumption Agreement in the form of Exhibit 9.2.2.
9.2.3 Deeds. Special warranty deeds in recordable form conveying to
the applicable IP-I Parties each parcel of RMG Owned Property, and assignments
of leases and easements in recordable form, with respect to RMG Leased Property
and RMG Other Real Property Interests as to which prior assignments into RMG
were recorded in the applicable real estate records.
9.2.4 Lien Releases. Evidence reasonably satisfactory to IP-I that
all Liens (other than Permitted Liens) affecting or encumbering the RMG Assets
have been terminated, released or waived, as appropriate, or original, executed
instruments in form reasonably satisfactory to IP-I effecting such terminations,
releases or waivers.
9.2.5 Vehicle Titles. Title certificates to all vehicles included
among the RMG Assets, endorsed for transfer of title to the applicable IP-I
Parties, and separate bills of sale therefor or other transfer documentation, if
required by the laws of the States in which such vehicles are titled.
9.2.6 Evidence of Authorization Actions. Certified resolutions or
other evidence reasonably satisfactory to IP-I that RMG has taken all action
necessary to authorize the execution of this Agreement and the Transaction
Documents and the consummation of the transactions contemplated hereby.
9.2.7 FIRPTA Certificate. FIRPTA Non-Foreign Seller Certificate
certifying that RMG is not a foreign person within the meaning of Section 1445
of the Code reasonably satisfactory in form and substance to IP-I.
9.2.8 Officer's Certificate. The IP-I Parties will have received a
certificate executed by an executive officer of RMG dated the date of the
Closing, reasonably satisfactory in form and substance to IP-I certifying that
the conditions specified in Sections 8.1.1. and 8.1.2 have been satisfied.
9.2.9 Other. Such other documents and instruments as may be
necessary to effect the intent of this Agreement and to consummate the
transactions contemplated hereby.
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9.3 IP-I's Delivery Obligations. At the Closing, each IP-I Party will
deliver or cause to be delivered to RMG the following:
9.3.1 Cash Consideration. If applicable, the Cash Consideration will
be paid by such IP-I Party to RMG in accordance with the Common Agreement.
9.3.2 Bill of Sale and Assignment and Assumption Agreement. The Bill
of Sale and Assignment and Assumption Agreement in the form of Exhibit 9.2.2.
9.3.3 Deeds. Special warranty deeds in recordable form conveying to
RMG each parcel of such IP-I Party's Owned Property, and assignments of leases
and easements in recordable form, with respect to such IP-I Party's Leased
Property and Other Real Property Interests as to which prior assignments into
such IP-I Party were recorded in the applicable real estate records.
9.3.4 Lien Releases. Evidence reasonably satisfactory to RMG that
all Liens (other than Permitted Liens) affecting or encumbering such IP-I
Party's Assets have been terminated, released or waived, as appropriate, or
original, executed instruments in form reasonably satisfactory to RMG effecting
such terminations, releases or waivers.
9.3.5 Vehicle Titles. Title certificates to all vehicles included
among such IP-I Party's Assets, endorsed for transfer of title to RMG, and
separate bills of sale therefor or other transfer documentation, if required by
the laws of the States in which such vehicles are titled.
9.3.6 Evidence of Authorization Actions. Certified resolutions of
such IP-I Party or other evidence reasonably satisfactory to RMG that such IP-I
Party has taken all action necessary to authorize the execution of this
Agreement and the Transaction Documents and the consummation of the transactions
contemplated hereby.
9.3.7 FIRPTA Certificate. FIRPTA Non-Foreign Seller Certificate
certifying that such IP-I Party is not a foreign person within the meaning of
Section 1445 of the Code reasonably satisfactory in form and substance to RMG.
9.3.8 Officer's Certificate. RMG will have received a certificate
executed by an executive officer of IP-I dated the date of the Closing,
reasonably satisfactory in form and substance to RMG certifying that the
conditions specified in Sections 8.2.1 and 8.2.2 have been satisfied.
9.3.9 Opinions of Counsel. Opinions of Pillsbury Madison & Sutro LLP
and Dow, Lohnes & Albertson, PLLC, substantially in the forms of Exhibit C.1 and
C.3, respectively to the Common Agreement.
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9.3.10 Other. Such other documents and instruments as may be
necessary to effect the intent of this Agreement and to consummate the
transactions contemplated hereby.
10. TERMINATION AND DEFAULT.
10.1 Termination Events. This Agreement may be terminated and the
transactions contemplated hereby may be abandoned:
10.1.1 At any time, by the mutual agreement of IP-I and RMG;
10.1.2 By either IP-I or RMG at any time, if the other is in
material breach or default of any of the other's covenants, agreements or other
obligations herein or in any Transaction Document;
10.1.3 By either IP-I or RMG upon written notice to the other, if
any of the conditions to its obligations set forth in Sections 8.1 and 8.2,
respectively, are not satisfied on or before the later of January 15, 2000, or
nine months after the date of this Agreement, for any reason other than an
intentional and material breach or default by such Party of its respective
covenants, agreements or other obligations under this Agreement, or any of its
representations herein not being true and accurate in all material respects when
made or when otherwise required by this Agreement to be true and accurate in all
material respects;
10.1.4 By either IP-I or RMG if an injunction, restraining order or
decree of any nature of any Governmental Authority of competent jurisdiction is
issued that prohibits the consummation of any of the transactions contemplated
hereby and such injunction, restraining order or decree is final and
nonappealable; provided, however, that the party seeking to terminate this
Agreement pursuant to this clause has used commercially reasonable efforts to
have such injunction, order or decree vacated or denied; or
10.1.5 As otherwise provided in the Common Agreement.
10.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 10.1, all obligations of the Parties under this Agreement will
terminate, except for the obligations set forth in Sections 7.13, 7.19 and
12.13. Termination of this Agreement pursuant to Sections 10.1.2, 10.1.3, 10.1.4
or 10.1.5 will not limit or impair any remedies that any of RMG or the IP-I
Parties may have pursuant to the terms of this Agreement with respect to a
breach or default by the other of its covenants, agreements or obligations under
this Agreement.
11. SURVIVAL; REMEDIES.
11.1 Survival of Representations, Warranties Covenants and Agreements.
Subject to Section 11.2, the representations, warranties, covenants and
agreements of RMG and IP-I in this Agreement and in the Transaction Documents
will survive Closing for a period of twelve months
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after the Closing Date. The period of survival of the representations,
warranties, covenants and agreements prescribed by this Section 11.1 are
referred to as the "Survival Period." The liabilities of each Party under its
respective representations, warranties, covenants and agreements will expire as
of the expiration of the Survival Period; provided, however, that such
expiration will not include, extend or apply to (a) any representation,
warranty, covenant or agreement the breach of which has been asserted by a Party
in a written notice to the other Party before such expiration or about which a
Party has given the other Party written notice before such expiration indicating
that facts or conditions exist that, with the passage of time or otherwise, can
reasonably be expected to result in a breach (and describing such potential
breach in reasonable detail), (b) the Party's obligations under Sections 7.13
and 7.23, or (c) the Party's obligations under Sections 7.16, 7.17.1, 7.17.3 and
7.17.4, but only to the extent reasonably practicable.
11.2 Exclusive Remedy. The Parties hereby agree that the respective rights
set forth in the Common Agreement and the Redemption Agreement shall be each
Party's sole and exclusive remedies against any party for any claims arising
after the Closing Time and relating to any breaches of the representations,
warranties or covenants contained in this Agreement other than based on fraud.
Notwithstanding anything to the contrary herein or in any Transaction Document,
each of the IP-I Parties acknowledges and agrees that neither RMG nor any of the
Charter Parties (or any Affiliates thereof) will have any liability arising
after the Closing Time with respect to any of the representations and warranties
made by RMG in Article 5 (which representations and warranties shall merge into
and expire upon the Closing) or with respect to any obligations of RMG under
Article 7 (other than the "Specified RMG Obligations," which shall mean
obligations set forth under Sections 7.3.6, 7.3.7, 7.5.5 (except subsection (e)
thereof), 7.11 (but only to the extent the assets described in Section 7.11 are
owned by RMG), 7.13, 7.14, 7.16, 7.17.5, 7.23 (except the first sentence
thereof), 7.24 and 7.25).
11.3 Nonrecourse. The Parties agree that, notwithstanding any other
provision in this Agreement or in any Transaction Document, and any rule of law
or equity to the contrary, to the fullest extent permitted by law, each Party's
obligations and liabilities under this Agreement will be nonrecourse to all
direct and indirect equity holders or other owners of such Party, except to the
extent of distributions to such Persons, directly or indirectly, from such Party
that are required to be returned, directly or indirectly, to such Party pursuant
to applicable provisions of law; provided, however, that the foregoing shall not
limit or abridge any Party's indemnification rights or obligations pursuant to
the Common Agreement or the Redemption Agreement. "Nonrecourse" means that the
obligations and liabilities are limited in recourse solely to the assets of the
Parties (for those purposes, any capital contribution obligations of the equity
holders or other owners of such Party, or any negative capital account balances
of such Persons will not be deemed be assets of such Party) and are not
guaranteed, directly or indirectly by, or the primary obligations of, any owner
of such Party in such capacity, and no partner, member or other owner in such
capacity of any successor entity (including any limited liability company or
partnership), either directly or indirectly, will be personally liable in any
respect (except to the extent of (i) such Person's interests in the assets of
such Party and (ii) any distribution which has
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been received by such Person and is required by applicable law to be returned,
directly or indirectly, to such Party) for any obligation or liability of such
Party under this Agreement.
12. MISCELLANEOUS PROVISIONS.
12.1 Parties Obligated and Benefitted. Subject to the limitations set
forth below, this Agreement will be binding upon each of the Parties and their
respective assigns and successors in interest and will inure solely to the
benefit of the Parties and their respective assigns and successors in interest,
and no other Person will be entitled to any of the benefits conferred by this
Agreement. Without the prior written consent of the other Parties, no Party will
assign any of its rights under this Agreement or delegate any of its duties
under this Agreement, provided that the appropriate Party may assign any or all
of its rights under this Agreement (a) to a "qualified intermediary" engaged by
such Party to effectuate a deferred like-kind exchange under Section 1031 of the
Code, and the other Party agrees in connection with such an assignment to take
such actions and execute such documents as may be reasonably requested by the
assigning Party in order to facilitate such Party's intent to effectuate a
deferred like-kind exchange; provided, however, that no such assignment will
affect the assigning Party's liabilities or obligations pursuant to this
Agreement or (b) to an Affiliate, provided that such assignment will not result
in any adverse tax consequences to the other Party, will not give rise to any
material requirements for additional Required Consents, and will not, in the
reasonable judgment of the other Party, delay the Closing. Each of the IP-I
Parties consents to the consummation of the transactions contemplated by the
IPWT Purchase Agreement (as defined in the Common Agreement).
12.2 Notices. Any notice, request, demand, waiver or other communication
required or permitted to be given under this Agreement to either Party will be
given as set forth in the Common Agreement.
12.3 Right to Specific Performance. Each Party acknowledges that the
unique nature of the Assets to be exchanged hereunder pursuant to this Agreement
renders money damages an inadequate remedy and the Parties agree that either
Party shall be entitled to pursue specific performance as a remedy without the
requirement of posting a bond or other security therefor.
12.4 Waiver. This Agreement or any of its provisions may not be waived
except in writing. The failure of any Party to enforce any right arising under
this Agreement on one or more occasions will not operate as a waiver of that or
any other right on that or any other occasion.
12.5 Captions. The section and other captions of this Agreement are for
convenience only and do not constitute a part of this Agreement.
12.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware (other than its rules of
conflicts of law to the extent that the application of the laws of another
jurisdiction would be required thereby).
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12.7 Time. Time is of the essence under this Agreement. If the last day
permitted for the giving of any notice or the performance of any act required or
permitted under this Agreement falls on a day which is not a Business Day, the
time for the giving of such notice or the performance of such act will be
extended to the next succeeding Business Day.
12.8 Late Payments. If either Party fails to pay the other any amounts
when due under this Agreement, the amounts due will bear interest from the due
date to the date of payment at the rate per annum publicly announced from time
to time by The Bank of New York as its prime rate (the "Prime Rate") plus 2%,
adjusted as and when changes in the Prime Rate are made.
12.9 Counterparts. This Agreement may be executed in counterparts, each of
which will be deemed an original.
12.10 Entire Agreement. This Agreement (including the Transaction
Documents and the Schedules and Exhibits referred to in this Agreement, which
are incorporated in and constitute a part of this Agreement) contains the entire
agreement of the Parties with respect to the subject matter hereof and
supersedes all prior oral or written agreements and understandings with respect
to such subject matter. This Agreement may not be amended or modified except by
a writing signed by all of the parties hereto.
12.11 Severability. Any term or provision of this Agreement which is
invalid or unenforceable will be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining rights
of the Person intended to be benefitted by such provision or any other
provisions of this Agreement.
12.12 Construction. This Agreement has been negotiated by the Parties and
their respective legal counsel, and legal or other equitable principles that
might require the construction of this Agreement or any provision of this
Agreement against the Party drafting this Agreement will not apply in any
construction or interpretation of this Agreement.
12.13 Expenses. Except as otherwise expressly provided in this Agreement,
each Party will pay all of its expenses, including attorneys' and accountants'
fees, in connection with the negotiation of this Agreement, the performance of
its obligations and the consummation of the transactions contemplated by this
Agreement.
12.14 Risk of Loss. The risk of any loss or damage to the IP-I Assets or
RMG Assets resulting from fire, theft or other casualty (except reasonable wear
and tear) will be borne by IP-I or RMG respectively, at all times prior to the
Closing Time. In the event of any such loss or damage after December 31, 1998,
IP-I or RMG as appropriate, will immediately notify the other in writing of that
fact. All insurance proceeds paid or payable as a result of the occurrence of
the event resulting in such loss or damage will be delivered by the Party
transferring such Assets to the other Party, or the rights thereto will be
assigned if not yet paid over by the insurer to the Party transferring such
Assets. The obligations under this Section 12.14 to pay or assign
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<PAGE> 77
insurance proceeds will not apply to the extent that any insurance proceeds are
applied to replace or restore such loss or damage prior to Closing.
If, on or prior to the Closing Date, all or any part of or interest in the
IP-I Assets or the RMG Assets, as appropriate, is taken or condemned as a result
of a Governmental Authority's exercise of its powers of eminent domain, or if a
Governmental Authority having such power informs a Party that it intends to
condemn all or any part of such Party's Assets (such event being called, in
either case, a "Taking"), then (i) RMG, in the case of a Taking of IP-I Assets,
or IP-I, in the case of a Taking of RMG Assets, may elect, in the name of the
other Party, to negotiate for, claim, contest and receive all damages with
respect to the Taking, (ii) the Party whose Assets were the subject of the
Taking will be relieved of its obligation to convey to the other Party those of
its Assets that were the subject of the Taking, (iii) at Closing, the Party
whose Assets were the subject of the Taking will assign to the other Party all
of its rights to damages payable as a result of the Taking, and will pay to the
other Party all damages previously paid to it in connection with the Taking, and
(iv) following the Closing, the Party whose Assets were the subject of the
Taking will give to the other Party any further assurances of such rights and
assignment with respect to the Taking as the other Party reasonably may request
from time to time.
12.15 Tax Consequences. No Party makes any representation or warranty,
express or implied, with respect to the Tax implications of any aspect of this
Agreement on any other Party, and each Party expressly disclaims any such
representation or warranty with respect to any Tax consequences arising under
this Agreement. Each Party has relied solely on its own Tax advisors with
respect to the Tax implications of this Agreement.
12.16 Commercially Reasonable Efforts. For purposes of this Agreement,
"commercially reasonable efforts" will not be deemed to require a Party to
undertake extraordinary or unreasonable measures, including the payment of
amounts in excess of normal and usual filing fees and processing fees, if any or
other payments with respect to any Contract that are significant in the context
of such Contract (or significant on the aggregate basis as to all Contracts).
[the remainder of this page intentionally left blank]
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The parties have executed this Agreement as of the day and year first above
written.
ROBIN MEDIA GROUP, INC.
By: /s/ Robert J. Lewis
___________________________________________________
Name: Robert J. Lewis
Title: Chief Executive Officer
INTERMEDIA PARTNERS, A CALIFORNIA
LIMITED PARTNERSHIP
By: InterMedia Capital Management, LLC, its managing
general partner
By: InterMedia Management, Inc., its managing member
By: /s/ Robert J. Lewis
___________________________________________________
Robert J. Lewis, President
and Chief Executive Officer
BRENMOR CABLE PARTNERS, L.P.
By: InterMedia Partners, a California Limited
Partnership, its managing general partner
By: InterMedia Capital Management, LLC, its managing
general partner
By: InterMedia Management, Inc., its managing member
By: /s/ Robert J. Lewis
___________________________________________________
Robert J. Lewis, President
and Chief Executive Officer
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<PAGE> 1
Exhibit 2.7(a)
PURCHASE AND SALE AGREEMENT
By and Among
THE SELLERS LISTED ON
THE SIGNATURE PAGES HERETO,
INTERLINK COMMUNICATIONS PARTNERS, LLLP
and
CHARTER COMMUNICATIONS, INC.
Dated as of April 26, 1999
<PAGE> 2
TABLE OF CONTENTS
ARTICLE I DEFINITIONS........................................................1
ARTICLE II PURCHASE AND SALE OF PURCHASED INTERESTS.........................10
2.1 PURCHASE AND SALE OF PURCHASED INTERESTS..............................10
2.2 PURCHASE PRICE........................................................11
2.3 PAYMENT OF PURCHASE PRICE.............................................11
2.4 ADJUSTMENTS AND PRORATIONS............................................11
2.5 INDEMNITY ESCROW......................................................15
ARTICLE III CLOSING.........................................................16
3.1 CLOSING DATE..........................................................16
3.2 DEFAULT; SPECIFIC PERFORMANCE.........................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS........................16
4.1 TITLE TO PURCHASED INTERESTS..........................................17
4.2 ENFORCEABILITY OF AGREEMENT...........................................17
4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS............................17
4.4 STOCK OF CERTAIN CORPORATE PARTNERS OF THE COMPANY....................18
4.5 BROKERS' FEES.........................................................20
4.6 ORGANIZATION AND QUALIFICATION........................................20
4.7 AUTHORITY RELATIVE TO THIS AGREEMENT..................................20
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE COMPANY.....................21
5.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES..........................21
5.2 ORGANIZATIONAL DOCUMENTS..............................................21
5.3 EFFECT OF AGREEMENT...................................................21
5.4 CAPITALIZATION........................................................22
5.5 AUTHORITY RELATIVE TO THIS AGREEMENT..................................23
5.6 FINANCIAL STATEMENTS..................................................23
5.7 UNDISCLOSED LIABILITIES...............................................24
5.8 TAX RETURNS AND AUDITS................................................24
5.9 FRANCHISES AND NECESSARY CONTRACTS....................................25
5.10 MATERIAL AGREEMENTS AND OBLIGATIONS.................................26
5.11 SYSTEMS' CAPACITY, CUSTOMERS AND RATES..............................27
5.12 EMPLOYEES...........................................................28
5.13 ABSENCE OF CERTAIN DEVELOPMENTS.....................................29
5.14 REAL PROPERTY.......................................................30
5.15 TITLE TO ASSETS; PERSONAL PROPERTY..................................31
5.16 COMPLIANCE WITH LAWS................................................31
5.17 TRANSACTIONS........................................................33
5.18 LITIGATION AND LEGAL PROCEEDINGS....................................34
5.19 BROKERS' FEES.......................................................34
5.20 PLANS; ERISA........................................................34
5.21 INSURANCE, SURETY BONDS, DAMAGES....................................36
5.22 ENVIRONMENTAL LAWS..................................................37
5.23 NO OTHER COMMITMENT TO SELL.........................................37
5.24 YEAR 2000...........................................................37
5.25 TRADEMARKS, PATENTS AND COPYRIGHTS..................................38
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER..........................38
6.1 ORGANIZATION..........................................................38
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6.2 AUTHORITY RELATIVE TO THIS AGREEMENT..................................38
6.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS............................39
6.4 FINANCIAL CAPABILITY..................................................39
6.5 LITIGATION............................................................39
6.6 NO VIOLATION OF FCC CROSS OWNERSHIP RULES.............................40
6.7 INVESTMENT INTENT; SOPHISTICATED BUYER................................40
6.8 FINDERS' AND BROKERS' FEES............................................40
ARTICLE VII COVENANTS.......................................................40
7.1 ACCESS................................................................40
7.2 ENVIRONMENTAL ASSESSMENT..............................................41
7.3 INTERIM PERIOD OPERATIONS.............................................41
7.4 DELIVERY OF DOCUMENTS TO BUYER........................................43
7.5 NO IMPAIRMENT OF TITLE................................................44
7.6 NO AMENDMENT TO ORGANIZATIONAL DOCUMENTS..............................45
7.7 FRANCHISE RENEWALS; REQUIRED CONSENTS; HSR FILINGS....................45
7.8 NOTIFICATION..........................................................47
7.9 REASONABLE EFFORTS; ADDITIONAL ACTIONS................................47
7.10 TAX MATTERS.........................................................48
7.11 RESTRUCTURING.......................................................50
7.12 YEAR 2000 REMEDIATION PROGRAM.......................................51
7.13 EXCULPATION AND INDEMNIFICATION.....................................51
7.14 CREDIT FACILITY.....................................................51
7.15 ADMISSION OF BUYER AS A SUBSTITUTE LIMITED PARTNER..................52
7.16 PUBLICITY...........................................................52
7.17 SERVICES PROVIDED BY AND TO ALLIANCE................................52
7.18 CONVEYANCE OF CERTAIN INTERESTS OWNED BY THE COMPANY PRIOR TO
CLOSING ............................................................52
ARTICLE VIII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ALL PARTIES.........52
8.1 ORDERS PROHIBITING CONSUMMATION OF TRANSACTIONS.......................53
8.2 HSR ACT...............................................................53
ARTICLE IX CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS......................53
9.1 COMPLIANCE WITH AGREEMENT.............................................53
9.2 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES.........................53
9.3 NO ADVERSE CHANGE IN BUSINESS OR PROPERTIES...........................53
9.4 CERTIFICATE OF OFFICER................................................54
9.5 PROCEEDINGS AND DOCUMENTS.............................................54
9.6 OPINION OF COUNSEL....................................................54
9.7 OPINION OF FCC COUNSEL................................................54
9.8 CONSENTS..............................................................54
9.9 PURCHASE OF PARTNERSHIP INTERESTS OF RAP..............................54
ARTICLE X CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS......................55
10.1 CORRECTNESS OF REPRESENTATIONS AND WARRANTIES.......................55
10.2 COMPLIANCE WITH AGREEMENT...........................................55
10.3 CERTIFICATE OF OFFICER..............................................55
10.4 PROCEEDINGS AND DOCUMENTS...........................................55
10.5 OPINION OF COUNSEL..................................................55
10.6 SALE OF PARTNERSHIP INTERESTS OF RAP................................55
ARTICLE XI RIGHTS TO TERMINATE; BREACH;.....................................56
11.1 TERMINATION.........................................................56
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ARTICLE XII INDEMNIFICATION.................................................57
12.1 INDEMNIFICATION BY SELLERS WITH RESPECT TO THE COMPANY..............57
12.2 INDEMNIFICATION BY SELLERS FOR SELLER BREACHES......................59
12.3 INDEMNIFICATION BY BUYER............................................60
12.4 EFFECT OF MATERIALITY QUALIFIERS....................................60
12.5 NOTICE AND RIGHT TO DEFEND THIRD PARTY CLAIMS.......................60
12.6 EXCLUSIVE REMEDY; LIMITATION OF LIABILITY...........................61
ARTICLE XIII MISCELLANEOUS..................................................61
13.1 SELLER LIABILITY SEVERAL AND NOT JOINT..............................61
13.2 APPOINTMENT OF SELLERS' REPRESENTATIVE..............................61
13.3 EXPENSES............................................................62
13.4 KNOWLEDGE...........................................................62
13.5 ASSIGNMENT..........................................................62
13.6 SUCCESSORS..........................................................62
13.7 ENTIRE AGREEMENT....................................................62
13.8 THIRD PARTIES.......................................................63
13.9 AMENDMENTS IN WRITING...............................................63
13.10 GOVERNING LAW.......................................................63
13.11 INTERPRETATION......................................................63
13.12 CERTAIN PROVISIONS RELATING TO R&A MANAGEMENT LLC'S 401(K) PLAN.....63
13.13 NOTICES.............................................................65
13.14 SEVERABILITY........................................................66
13.15 COUNTERPARTS........................................................66
iii
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THIS PURCHASE AND SALE AGREEMENT is made and entered into as of April 26,
1999 by and among the sellers listed on the signature pages hereto as of the
date hereof (collectively, "Sellers"), and InterLink Communications Partners,
LLLP, a Colorado registered limited liability limited partnership (the
"Company"), and Charter Communications, Inc., a Delaware corporation ("Buyer").
WHEREAS, Sellers, directly or indirectly, collectively own all of the
outstanding partnership interests in the Company and an affiliate of the
Company, Greenwich Street (RAP) Partners I, L.P., owns a limited partnership
interest (the "RAP Interest") in Rifkin Acquisition Partners, L.L.L.P. ("RAP");
WHEREAS, the Company and its subsidiaries own and operate cable television
systems and businesses in respect thereof serving customers in various areas
throughout the United States (which areas of service are hereinafter
collectively referred to as the "Service Areas");
WHEREAS, Sellers, severally and not jointly, in reliance upon the
representations and warranties of Buyer, desire to sell to Buyer, and Buyer, in
reliance upon the representations and warranties of Sellers and the Company,
desires to purchase from Sellers, (i) all of the outstanding partnership
interests of the Company other those described in clause (ii), and (ii) all of
the issued and outstanding stock of certain corporations that own the remaining
partnership interests of the Company, on the terms and subject to the conditions
set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "1992 Act" means the Cable Television Consumer Protection and
Competition Act of 1992, as amended.
1.2 "Accrued Vacation Pay" means the obligation of the Company to its
employees for accrued vacation pay through the Closing Date.
1.3 "Additional Financial Statements" means (i) as to monthly statements,
the Company's unaudited Statement of Operations for each monthly period after
the period ended December 31, 1998, and (ii) as to quarterly statements, the
Company's unaudited Balance Sheet and related Statements of Operations and
Statements of Changes in Financial Position for each quarterly period after the
period ended December 31, 1998.
1.4 "Affiliate" has the meaning given to such term in the Securities
Exchange Act of 1934, as amended.
1.5 "Assets" means collectively all of the Company's business, assets,
properties and rights used or useful by the Company in conducting its Business.
<PAGE> 6
1.6 "Audited Financial Statements" has the meaning set forth in Section
5.6.
1.7 "Basic Customers" means (i) all bona fide Non-Delinquent CATV
customers of the Systems (i.e., the first connections) that have paid in full,
on a nondiscounted basis (other than senior citizen discounts and seasonal
customer discounts), for at least one Monthly Billing Period for the services
ordered by the respective customer, and to whom the respective System is
rendering its basic (or expanded basic, as the case may be) CATV service
(whether or not in conjunction with any tiered or premium services) at that
System's then applicable monthly rate therefor, plus (ii) all Basic Customer
Equivalents.
1.8 "Basic Customer Equivalents" means equivalent bona fide Non-Delinquent
CATV customers of the Systems that are commercial establishments and
multi-dwelling units (e.g., bars, taverns, apartment buildings, dormitories,
hospitals, etc.) that are billed on a bulk basis for basic (or expanded basic)
service, which have paid in full the charges for at least one Monthly Billing
Period. The number of Basic Customer Equivalents shall be deemed to be equal to
the quotient that is derived from dividing: (a) the gross basic (or, if
applicable, expanded basic) billings to all such commercial establishments,
multi-dwelling units, or other customers that are billed on a bulk basis for
basic (or expanded basic) service (but excluding billings from a la carte tiers
or premium services, installation or other non-recurring charges, converter
rental, any fees or charges for any outlet or connection other than the first
outlet or connection in any single family household or (with respect to a bulk
account, in any residential unit, e.g., an individual apartment or rental unit),
pass-through charges for sales taxes, line-itemized franchise fees, fees charged
by the FCC and the like) attributable to such commercial establishment,
multi-dwelling unit or other customer during the most recent Monthly Billing
Period ended prior to the date of calculation (but excluding billings in excess
of a single Monthly Billing Period's charge) by (b) the rate charged by the
respective System to individual homes as of December 31, 1998, for basic service
(or, (i) if the respective commercial establishment, multi-dwelling unit or
other customer also takes expanded basic service, then by the rate charged by
that System to individual homes as of December 31, 1998, for basic and expanded
basic service and (ii) if the respective commercial establishment,
multi-dwelling unit or other customer takes services which are neither expanded
basic or basic services, then by a rate which is an equivalent retail rate for
such service), exclusive of any charges for the additional services, franchise
fees, taxes, etc. which are excluded from the calculation of gross basic (or, if
applicable, expanded basic) billings set forth in clause (a) above, such rate to
be not less than the respective System's standard rate for such service.
1.9 "Basic Customer Threshold" has the meaning set forth in Section
2.4(a).
1.10 "Basic Services" means the lowest tier of CATV programming sold to
customers of the Systems for which such customers pay a fixed monthly fee,
excluding Expanded Basic Services, a la carte tiers, premium services,
pay-per-view television and any charges for additional outlets and installation
fees and any revenues derived from the rental of converters, remote control
devices and other like charges for equipment.
1.11 "Business" means the provision of CATV and related ancillary services
by the Company Group through the Systems in and around the Service Areas.
2
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1.12 "Buyer" has the meaning set forth in the first paragraph of this
Agreement.
1.13 "Buyer Confidentiality Agreement" means the Confidentiality Agreement
between Buyer and the Company dated as of January 18, 1999.
1.14 "CARS" means CATV relay service.
1.15 "CATV" means cable television.
1.16 "Charter Plan" has the meaning set forth in Section 13.12.
1.17 "Charter Transfer Plan" has the meaning set forth in Section
13.12(c).
1.18 "Closing" has the meaning set forth in Section 3.1.
1.19 "Closing Adjustment Certificate" means the certificate to be
delivered by the Company to Buyer, not less than five business days prior to the
Closing Date, pursuant to Section 2.4(c).
1.20 "Closing Date" has the meaning set forth in Section 3.1.
1.21 "Closing Escrow Agreement" means an indemnification escrow agreement
substantially in the form of Exhibit 2.5 hereto.
1.22 "Communications Act" means the Communications Act of 1934, as
amended.
1.23 "Company Group" means the Company and each of its Subsidiaries.
1.24 "Company's 401(k) Plan" has the meaning set forth in Section 13.12.
1.25 "Computer Systems" means any hardware or software embedded systems,
equipment and cable plant, or headend, building and other facilities used in
connection with the Business, including any firmware, application programs,
billing systems, operating systems, user interfaces, files and databases, that
are date dependent or which process date related data, and that might be
adversely affected by the advent or changeover to the year 2000 or by the advent
or changeover to any leap year.
1.26 "Contract" means any contract, mortgage, deed of trust, bond,
indenture, lease, license, permit, note, Franchise, certificate, option,
warrant, right or other instrument, document, obligation or agreement, whether
written or oral.
1.27 "Continuing Employees" has the meaning set forth in Section 13.12.
1.28 "Credit Facility" means loans to the Company in the maximum principal
amount of $350 million pursuant to a Second Amended and Restated Credit
Agreement dated as of February 1, 1999 among the Company, The First National
Bank of Chicago, individually and as
3
<PAGE> 8
Administrative Agent, Bank of Montreal, individually and as Syndication Agent,
and the lenders party thereto.
1.29 "DeMinimis Agreements" means (i) the Company Group's written or
verbal agreements with customers (other than bulk customers) entered into in the
ordinary course of business for the provision of CATV service at the standard
rates charged by the respective System for such service, and (ii) Contracts that
are not Material Agreements because those Contracts involve payments of less
than $25,000 individually over the life of such Contracts and less than $250,000
in the aggregate for all such Contracts over the life of such Contracts.
1.30 "Disbursement Agent" means R&A Management, LLC, a Colorado limited
liability company.
1.31 "Effective Time" means the time on which the Closing has been
consummated on the Closing Date.
1.32 "Encumbrances" means, collectively, all debts, claims, liabilities,
obligations, taxes, liens, mortgages, security interests and other encumbrances
of any kind, character or description, whether accrued, absolute, contingent or
otherwise (and whether or not reflected or reserved against in the balance
sheets, books of account and records of the Company).
1.33 "Environmental Law" means any applicable federal, state, or local
law, statute, standard, ordinance, rule, regulation, code, license, permit,
authorization, approval, and any consent order, administrative or judicial
order, judgment, decree, injunction, or settlement agreement between any member
of the Company Group and a governmental entity relating to the protection,
preservation or restoration of the environment (including, without limitation,
air, water, land, plant and animal life or any other natural resource).
1.34 "Environmental Permit" means any permit, license, approval, consent
or other authorization required by any applicable Environmental Law.
1.35 "Escrow Agent" means U.S. Bank, National Association.
1.36 "Expanded Basic Services" means an optional tier of video services
offered by any member of the Company Group to its customers under various
different names, as such term is commonly used in the CATV industry.
1.37 "FAA" means the Federal Aviation Administration.
1.38 "FCC" means the Federal Communications Commission.
1.39 "FCC Licenses" means all licenses, permits, earth station
registrations and other authorizations issued by the FCC and used in conjunction
with the operation of any System or the Business.
1.40 "Final Closing Certificate" means the certificate to be delivered by
Buyer to Disbursement Agent within ninety (90) days after the Closing Date
pursuant to Section 2.4(d).
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1.41 "Franchise" means, with respect to any System, the respective
franchise agreement (or, in lieu thereof, the respective license, consent,
permit, approval or authorization) entered into, issued or otherwise granted by
any state or local (e.g., city, county, parish, town or village) governmental
body, for the construction, installation or operation of that System, together
with all relevant instruments, resolutions and franchise-related statutes and
ordinances.
1.42 "GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time set forth in the opinions and
pronouncements of the Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and pronouncements of the
Financial Accounting Standards Board, or in such other statements by such other
entity as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
1.43 "General Partner" means Rifkin, Co., a Colorado corporation, which is
the sole general partner of the Company.
1.44 "Governmental Authority" has the meaning set forth in Section 4.3(b).
1.45 "Greenwich Street" means Greenwich Street (RAP) Partners I, L.P.
1.46 "Hazardous Substance" means any substance or material, whether solid,
liquid or gas, listed, defined, designated or classified as hazardous, toxic,
radioactive or dangerous, or otherwise regulated, under any Environmental Law,
whether by type or by quantity; Hazardous Substance includes, without
limitation, any toxic waste, pollutant, contaminant, hazardous substance, toxic
substance, hazardous waste, special waste, industrial substance or petroleum or
any derivative or by-product thereof, radon, radioactive material, asbestos,
asbestos-containing material, urea formaldehyde foam installation, lead and
polychlorinated biphenyl classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated under any Environmental Law.
1.47 "Homes Passed" means all single family homes, and all residential
units in multi-dwelling units, capable of being serviced by any System without
further trunk or feeder line construction.
1.48 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
1.49 "Improvements" means all buildings, structures, CATV towers and
fixtures, and other improvements now or hereafter actually or constructively
attached to the Real Estate, and all modifications, additions, restorations or
replacements of the whole or any part thereof.
1.50 "Indemnifiable Damages" means any and all liabilities in respect of
losses, suits, proceedings, demands, judgments, damages, expenses and costs
(including, without limitation, reasonable counsel fees and costs and expenses)
incurred in the investigation, defense or settlement of any claims covered by
the indemnification set forth in this Agreement, other than special, incidental,
punitive or consequential damages. For avoidance of doubt, "Indemnifiable
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Damages" does not include any liability that has been fully accrued, accounted
for and satisfied by means of the Final Closing Certificate described in Section
2.4(d).
1.51 "Indemnification Provisions" has the meaning set forth in Section
7.13.
1.52 "Indemnitee" has the meaning set forth in Section 12.5.
1.53 "Indemnitor" has the meaning set forth in Section 12.5.
1.54 "ING Media C Corp." has the meaning set forth in Section 4.4.
1.55 "InterLink Equity Value" has the meaning set forth in Section 2.2.
1.56 "InterLink Indemnity Fund" means a portion of the Purchase Price
equal to $20,000,000, to be deposited by Buyer at the Closing with the Escrow
Agent pursuant to the Closing Escrow Agreement, plus accrued interest thereon,
in order to fund the indemnification obligations of the Sellers under Section
12.1 hereof.
1.57 "Legal Proceedings" has the meaning set forth in Section 5.18.
1.58 "License" means that certain License Agreement between the
Disbursement Agent and an Affiliate of Buyer, dated the Closing Date.
1.59 "Material Adverse Effect" means any effect that is or is reasonably
likely to be materially adverse to the Assets, the Business or the results of
operations or financial condition of the Company Group, taken as a whole, except
for effects due to general economic conditions or changes in regulatory and
competitive conditions affecting the CATV industry generally.
1.60 "Material Agreement" means any Contract of any nature (other than one
required to be listed by Section 5.9) to which any member of the Company Group
is a party, or by which any member of the Company Group or any of their
properties is bound, which (i) by its terms obligates the Company Group to pay
more than $25,000, (ii) in the aggregate with all such Contracts obligates the
Company Group to pay more than $250,000, (iii) provides for the provision of
internet access or internet services to the Company Group's customers, or (iv)
restricts or prohibits a member of the Company Group or any Affiliate of the
Company Group from engaging in any business anywhere in the world.
1.61 "Monthly Billing Period" means the respective monthly period (whether
such period is a calendar month or, as in the case of any System that engages in
cycle billing, any other monthly period) to which any System-generated customer
bill for CATV services relates.
1.62 "Nassau" has the meaning set forth in Section 4.4.
1.63 "Necessary Contract" means any Contract to which any member of the
Company Group is a party and which is necessary for any member of the Company
Group's (i) use of any tower, office or headend site, (ii) pole attachments,
(iii) rights-of-way, (iv) service to any
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residential development or any commercial or residential dwelling unit, (v)
material licenses and easements, or (vi) operation of the Business or the
Systems.
1.64 "Neutral Accounting Firm" shall mean KPMG Peat Marwick.
1.65 "Non-Delinquent" means a customer who does not have a past due
balance of more than two (2) Monthly Billing Periods (except as otherwise set
forth on Schedule 1.1(A) with respect to the bulk accounts itemized thereon)
from the first day of the initial Monthly Billing Period to which a bill relates
(except for past due amounts representing late fees and other minimal ancillary
charges) totaling $5.00 or less.
1.66 "Omega Agreement" means the Asset Purchase and Sale Agreement by and
among Cable Brazil, Inc., Cardinal Telecable Corporation, See-More TV
Corporation, Hoosier Hills Cable T.V. Co., Omega Cable TV of Brown Co. and the
Company.
1.67 "Outside Date" has the meaning set forth in Section 11.1(a)(ii).
1.68 "Partnership Agreement" means the Second Amended and Restated
Agreement of Limited Partnership of the Company dated September 1, 1997, as
amended to date.
1.69 "Permitted Encumbrances" means (a) materialmen's, mechanic's,
carriers', or other like liens arising in the ordinary course of business, or
deposits to obtain the release of such liens, securing obligations aggregating
less than $250,000, (b) liens for current taxes not yet due and payable; (c)
imperfections of title that do not interfere with the use or detract from the
value of such property; (d) liens to be released at or prior to Closing; and (e)
in the case of the Real Estate owned or real property leased by any member of
the Company Group, (i) such leases for real property, (ii) municipal and zoning
ordinances, (iii) such rights of way as do not interfere with the use or detract
from the value of the property, (iv) standard (printed) title insurance
exceptions and (v) easements for public utilities, recorded building and use
restrictions and covenants which do not materially interfere with the present
use of or materially detract from the value of the property, and other minor
encumbrances.
1.70 "Person" means an individual, corporation, limited liability company,
partnership, sole proprietorship, association, joint venture, joint stock
company, trust, incorporated organization, or governmental agency or other
entity.
1.71 "Premium Customer" means a Basic Customer who subscribes to and has
been (or is to be) charged for any optional single channel or a la carte service
for which there is a specified charge.
1.72 "Purchase Price" has the meaning set forth in Section 2.2.
1.73 "Purchase Price Adjustment Holdback" means a portion of the Purchase
Price equal to Two Million Five Hundred Thousand Dollars ($2,500,000 ) to be
paid by Buyer to Disbursement Agent at the Closing and retained by Disbursement
Agent as described in Section 2.3.
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1.74 "Purchase Price Allocation Schedule" means a schedule, to be
delivered by the Company (on behalf of the Sellers) to Buyer at least five (5)
days prior to the Closing, containing (a) each Seller's percentage interest in
the Company, (b) each Seller's indirect percentage interest in RAP for purposes
of certain allocations under this Agreement, the RAP Agreement and the RAP
Indemnity Agreement, and (c) the portion of the Purchase Price to be delivered
to each Seller at the Closing.
1.75 "Purchased Interests" means, collectively, (1) the partnership
interests of the Company owned by Sellers, and (2) all of the issued and
outstanding stock of WS, ING Media C Corp., and Nassau (each of which is a
limited partner of the Company), any options to purchase assets owned by such
corporations which are held by their respective shareholders, and any
outstanding indebtedness of such corporations held by their respective
shareholders, all to be purchased by Buyer pursuant to this Agreement.
1.76 "RAP" means Rifkin Acquisition Partners, L.L.L.P., a Colorado
registered limited liability limited partnership.
1.77 "RAP Agreement" means the Purchase and Sale Agreement by and among
the RAP Sellers, RAP, and Buyer dated as of the date hereof.
1.78 "RAP Equity Value" has the meaning ascribed to that term in the RAP
Agreement.
1.79 "RAP Indemnity Agreement" means the RAP Indemnity Agreement among the
parties hereunder and under the RAP Agreement, delivered pursuant to the RAP
Agreement and attached as an exhibit thereto.
1.80 "RAP Indemnity Fund" means the sum of Twenty Million Dollars
($20,000,000) pursuant to the RAP Agreement to be deposited with the Escrow
Agent by the Buyer (or guaranteed by letters of credit provided by one or more
sellers under the RAP Agreement) pursuant to the RAP Indemnity Agreement in
order to fund the indemnification obligations, under Section 2.1 of the RAP
Indemnity Agreement, of (i) the RAP Sellers, and (ii) the Sellers with respect
to the indirect interest in RAP owned by the Company. A portion of the purchase
price under the RAP Agreement shall be deposited by Buyer with the Escrow Agent
reflecting the RAP Sellers' pro rata portion of the RAP Equity Value, and a
portion of the Purchase Price hereunder shall be deposited by Buyer with the
Escrow Agent reflecting the Company's pro rata portion of the RAP Equity Value
arising out of the Company's indirect interest in RAP.
1.81 "RAP Purchase Price Adjustment Holdback" means the sum of Two Million
Dollars ($2,000,000) pursuant to the RAP Agreement to be paid by Buyer to
Disbursement Agent at the Closing and retained by Disbursement Agent as
described in Section 2.3 of the RAP Agreement. A portion of the purchase price
under the RAP Agreement shall be paid by Buyer to Disbursement Agent reflecting
the pro rata portion of the RAP Purchase Price Adjustment Holdback with respect
to the aggregate interest in RAP owned by the sellers that are parties to the
RAP Agreement, and a portion of the Purchase Price hereunder shall be paid by
Buyer to
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Disbursement Agent reflecting the pro rata portion of the RAP Purchase Price
Adjustment Holdback with respect to the interest in RAP owned indirectly by the
Company.
1.82 "RAP Sellers" has the meaning given the term "Sellers" in the RAP
Agreement.
1.83 "Real Estate" means each parcel of real property owned by a member of
the Company Group at the date hereof together with any other parcels of real
property acquired by a member of the Company Group between the date hereof and
the Closing Date.
1.84 "Required Consents" means those approvals and consents set forth on
Schedule 5.3 separately designated as consents required for Closing.
1.85 "Rifkin Transfer Plan" has the meaning set forth in Section 13.12(c).
1.86 "Scott Agreement" means the Asset Purchase and Sale Agreement dated
as of July 1, 1998 between Scott Cable Communications, Inc. and the Company.
1.87 Section 12.1(c) Damages" has the meaning set forth in Section
12.1(c).
1.88 "Sellers" has the meaning set forth in the first paragraph of this
Agreement.
1.89 "Service Areas" has the meaning set forth in the third paragraph of
this Agreement.
1.90 "Services Agreement" has the meaning set forth in Section 7.17.
1.91 "Signals" has the meaning set forth in Section 5.16(b).
1.92 "Subsidiaries" means, with respect to any Person, any Affiliate
directly or indirectly controlled by such Person.
1.93 "System" means all of the assets, property and business constituting
any CATV system of the Company Group, or to be acquired by the Company Group
under the Omega Agreement, each of which Systems (together with the respective
Service Areas served thereby) is described in Schedule 1.1(B) hereto.
1.94 "Tax" and "Taxes" means all federal, state, local, foreign or other
taxing authority gross income, gross receipts, gains, profits, net income,
franchise, sales, use, ad valorem, property, value added, recording, business
license, possessory interest, payroll, withholding, excise, severance, transfer,
employment, alternative or add-on minimum, stamp, occupation, premium,
environmental or windfall profits taxes, and other taxes, charges, fees, levies,
imposts, customs, duties, licenses or other assessments, together with any
interest and any penalties, additions to tax or additional amounts imposed by
any Governmental Authority.
1.95 "Tax Return" means any return, report, statement, information
statement and the like required to be filed with any Governmental Authority with
respect to Taxes.
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1.96 "Third Party" means any Person other than the Company, Buyer, Sellers
or any Affiliate of Buyer.
1.97 "Third Party Systems" means Computer Systems of any supplier,
distributor, partner, customer or technology infrastructure provider used in
connection with the Business, including, without limitation, such Computer
Systems of electric utilities, telephone companies and offsite data processors
with whom any member of the Company Group has an ongoing or anticipated
contractual or commercial relationship.
1.98 "Threshold Amount" has the meaning set forth in Section 12.1(b).
1.99 "Unaudited Financial Statements" has the meaning set forth in Section
5.6.
1.100 "Vehicles" means the vehicles utilized by the Company in the
operation of the Business as set forth on Schedule 1.1(C).
1.101 "WS" has the meaning set forth in Section 4.4.
1.102 "Year 2000 Ready" or "Year 2000 Readiness" means that the Computer
Systems are designed to be used prior to, during and after the calendar year
2000 A.D., and that such item can successfully manipulate, interpret, accept,
generate or otherwise process date-dependent or date-related data without
generating incorrect or abnormal results, or experiencing a loss or disruption
of functionality due to an inability to correctly handle dates in, or relating
to, the 21st century, including, without limitation, correctly calculating leap
years.
1.103 "Year 2000 Remediation Program" means an enterprise-wide program
implemented by the Company and affecting all members of the Company Group, to
make Year 2000 Ready Computer Systems and other items related to Business. Such
Year 2000 Remediation Program must (i) include a plan for implementing solutions
recommended by vendors, distributors and manufacturers of the Computer Systems,
and (ii) be conducted by Persons with qualifications or experience related to
Year 2000 Readiness and such Persons must have organized an enterprise wide
program management office that reports to, or an enterprise wide program
management structure with oversight by, executive level management.
1.104 "Year Disbursement Amount" has the meaning set forth in Section 2.5.
The plural of any term defined in the singular, and the singular of any
term defined in the plural, shall have a meaning correlative to such defined
term.
ARTICLE II
PURCHASE AND SALE OF PURCHASED INTERESTS
2.1 Purchase and Sale of Purchased Interests.
On the terms and subject to the conditions set forth in this Agreement,
each Seller hereby severally and not jointly agrees to sell to Buyer, and Buyer
hereby agrees to purchase from each
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Seller, the Purchased Interests owned by such Seller, as listed opposite the
name of such Seller on Schedule 2.1 hereof.
2.2 Purchase Price.
The aggregate purchase price payable by the Buyer for the Purchased
Interests (the "Purchase Price") shall be equal to the sum of (x) Eight Hundred
Seventeen Million Dollars ($817,000,000), as adjusted pursuant to Sections
2.4(a) and (b), minus the aggregate principal amount of the Company's
outstanding indebtedness on the Closing Date pursuant to the Credit Facility
(the "InterLink Equity Value"), plus (y) the Company's pro rata portion of the
RAP Equity Value arising out of the Company's indirect interest in RAP.
2.3 Payment of Purchase Price.
The Purchase Price, less (i) the InterLink Indemnity Fund, (ii) the pro
rata portion of the RAP Indemnity Fund with respect to the interest in RAP owned
indirectly by the Company, (iii) the Purchase Price Adjustment Holdback, and
(iv) the pro rata portion of the RAP Purchase Price Adjustment Holdback with
respect to the interest in RAP owned indirectly by the Company, will be paid at
the Closing to the Sellers (by federal wire transfer of immediately available
funds to accounts of Sellers designated in writing to Buyer by the Company (on
behalf of Sellers) at least five (5) business days prior to the Closing) in
accordance with the Purchase Price Allocation Schedule. Concurrently with such
payment, (i) Buyer shall deposit the Purchase Price Adjustment Holdback with the
Disbursement Agent for use and disbursement in accordance with Sections 2.4(f)
and 2.4(g), and (ii) Buyer shall deposit the InterLink Indemnity Fund pursuant
to Section 2.5. Buyer shall be entitled to rely exclusively on the Purchase
Price Allocation Schedule and shall have no responsibility to determine whether
the Purchase Price Allocation Schedule was properly prepared. The aggregate
consideration to Sellers pursuant to clause (x) of Section 2.2 (other than
consideration for Purchased Interests relating to WS, ING and Nassau), and any
liabilities of the Company Group (other than the proportionate amount of
liabilities allocable to the interests in the Company held by WS, ING and
Nassau), in connection with the transactions contemplated hereby shall be
allocated between the tangible assets and Franchises by allocating an amount to
the tangible assets of the Company Group equal to the adjusted basis for federal
income tax purposes of such tangible assets (other than the proportionate amount
of tangible assets relating to the interests in the Company held by WS, ING and
Nassau), and the remainder to the Franchises of the Company Group. The portion
of the Purchase Price attributable to clause (y) of Section 2.2 shall be
allocated to the interests of the Company Group in RAP and to the tangible
assets and Franchises of RAP in accordance with Section 2.3 of the RAP
Agreement. The parties shall not take any tax position inconsistent with such
allocation.
2.4 Adjustments and Prorations.
The InterLink Equity Value shall be adjusted as follows (with a
corresponding adjustment to be made to the Purchase Price hereunder), with all
such adjustments being effective as of the Effective Time:
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(a) The InterLink Equity Value shall be reduced if the number of
Basic Customers is less than the applicable number set forth on Schedule
2.4(A) for the month on which the Closing Date occurs (as adjusted below,
the "Basic Customer Threshold"), by the applicable amount set forth on
Schedule 2.4(A) (for the month in which the Closing occurs) for each Basic
Customer less than the applicable Basic Customer Threshold.
Notwithstanding anything herein to the contrary, in the event that any
commercial establishments or multi-dwelling units that are served pursuant
to a right of entry agreement on December 31, 1998 are subsequently served
pursuant to a bulk agreement, the applicable Basic Customer Threshold
shall be reduced by the number of individual retail customers served
pursuant to such right of entry agreement on the date of conversion to a
bulk agreement, and shall be increased by the number of Basic Customer
Equivalents represented by such bulk agreement.
(b) The InterLink Equity Value shall be increased at Closing if, as
of the Effective Time, the current assets of the Company Group exceed the
current liabilities of the Company Group by the amount by which such
current assets exceed current liabilities. The InterLink Equity Value
shall be decreased at Closing, if, as of the Effective Time, the current
liabilities of the Company Group exceed the current assets of the Company
Group by the amount by which such current liabilities exceed current
assets. Except as otherwise specified herein, current assets and current
liabilities shall be determined in accordance with GAAP with all normal
year end adjustments for GAAP purposes having been completed or posted as
of the Effective Time. Notwithstanding anything else contained herein, for
purposes of making the calculations hereunder:
(i) Without limiting the applicability of GAAP with respect to
other items, current assets shall include (a) cash and cash
equivalents, (b) marketable securities, (c) customer and
advertising accounts receivable determined pursuant to
subsection (iii) below, (d) non-customer deposits and advance
payments, (e) prepaid expenses, and (f) other current assets;
provided, however, that current assets shall not include
inventory.
(ii) Customer accounts receivable of the Company Group shall
be included as current assets in an amount for the Company's
customer accounts receivable for services rendered on or prior
to the Closing Date by the Company Group, equal to 99% of the
face amount of the receivables which, as of the Effective
Time, are sixty (60) days or less past due from the first day
of the respective Monthly Billing Period to which a bill
relates. Payments for any advertising accounts receivable of a
member of the Company Group as current assets shall include
only an amount for any Company Group member's advertising
accounts receivable for advertising run on or prior to the
Closing Date, equal to 95% of all advertising receivables that
are less than 90 days past due from the date of the applicable
invoice;
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(iii) Without limiting the applicability of GAAP with respect
to other items, current liabilities shall include (a) the
amount of customer deposits (and any interest thereon that a
member of the Company Group is required to refund or credit
its customers) and customer prepayments; (b) Accrued Vacation
Pay for those employees who are employees on the Closing Date;
(c) deferred revenue; (d) accruals for franchise fees, pole
rental fees, other rental or similar charges or payments
payable in respect of any Company Group Contracts not being
terminated pursuant hereto, payrolls, payroll taxes, insurance
premiums to the extent that such insurance is not being
terminated pursuant hereto, sales and use taxes payable in
respect of CATV service and equipment furnished in connection
with the operation of the Systems, power and utility charges,
real and personal property taxes and rentals, applicable
copyright or other fees, sales and service charges, taxes and
similar items, in each case relating to periods on or prior to
the Closing Date; and (e) other current liabilities; provided,
however, that current liabilities shall not include (i) the
current portion of any long-term debt, (ii) deferred taxes,
and (iii) the obligations to pay access fees in connection
with the Hidden Bay complex, and any other obligations to pay
access fees in connection with right of entry agreements or
bulk agreements that the Company becomes obligated to pay
after the date hereof, but only to the extent that Buyer has
been informed of such obligations and has granted its consent
in writing to the payment of such access fees.
(iv) Cash flow of the Company Group on the Closing Date shall
be allocated one-half prior to the Effective Time and one-half
after the Effective Time.
(c) The Company shall deliver to Buyer, not less than five (5)
business days prior to the Closing Date, a certificate (the "Closing
Adjustment Certificate") signed by an executive officer of the General
Partner, which shall set forth the Company's reasonable good faith
estimates of the respective amounts of the adjustments set forth in
Sections 2.4(a), and (b), above, as of the Effective Time. The Closing
Adjustment Certificate shall be in form and substance reasonably
acceptable to Buyer, and the Company shall therewith deliver to Buyer a
copy of such supporting evidence as shall be appropriate hereunder and as
Buyer may reasonably request. At the Closing, there will be a settlement
between Buyer and Disbursement Agent with respect to the adjustments set
forth in Sections 2.4(a) and (b) above, with all such adjustments made or
estimated by Disbursement Agent and Buyer and the amounts determined by
Buyer and Disbursement Agent pursuant to the provisions of this Section
2.4 shall be paid to Buyer or Sellers, as appropriate by an increase or
decrease in the InterLink Equity Value, as appropriate on the Closing
Date, with a final settlement within ninety (90) days after the Closing
Date (as provided in Section 2.4(d) below).
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(d) Within ninety (90) days after the Closing Date, Buyer shall
deliver to Disbursement Agent a certificate (the "Final Closing
Certificate") to be signed by an executive officer of Buyer setting forth
any changes to the adjustments made as of the Closing pursuant to Sections
2.4(a) and (b), together with a copy of such supporting evidence as shall
be appropriate hereunder and as Disbursement Agent may reasonably request.
If Disbursement Agent shall conclude that the Final Closing Certificate
does not accurately reflect the changes to be made to the closing
adjustments pursuant to this Section 2.4, Disbursement Agent shall, within
thirty (30) days after its receipt of the Final Closing Certificate,
provide to Buyer its written statement (together with any supporting
documentation as Buyer may reasonably request) of any discrepancy or
discrepancies believed to exist. Disbursement Agent's representatives
shall be permitted reasonable access by Buyer to all personnel, books,
records, billing service reports and other documents reasonably deemed
necessary or appropriate by Disbursement Agent for the determination of
the adjustments and pro rations. Buyer's representatives shall be
permitted reasonable access by Disbursement Agent and the General Partner
to all personnel, books, records, billing service reports and other
documents reasonably deemed necessary or appropriate by Buyer for the
determination of the adjustments and pro rations.
(e) Buyer and Disbursement Agent shall attempt jointly to resolve
any discrepancies within thirty (30) days after receipt of Disbursement
Agent's discrepancy statement, which resolution, if achieved, shall be
binding upon all parties to this Agreement and not subject to dispute or
review. If Buyer and Disbursement Agent cannot resolve the discrepancies
to their mutual satisfaction within such thirty (30) day period, Buyer and
Disbursement Agent shall, within the following ten (10) days, jointly
designate the Neutral Accounting Firm to review the Final Closing
Certificate together with Disbursement Agent's discrepancy statement and
any other relevant documents. The cost of retaining the Neutral Accounting
Firm shall be borne 50% by the Disbursement Agent (on behalf of the
Sellers) and 50% by Buyer. The Neutral Accounting Firm shall report its
conclusions in writing to Buyer and Disbursement Agent and such
conclusions as to adjustments pursuant to this Section 2.4 shall be
conclusive on all parties to this Agreement and not subject to dispute or
review.
(f) The Disbursement Agent will hold the Purchase Price Adjustment
Holdback in a segregated, interest bearing account until the adjustments
required by Sections 2.4(a) and (b) have been determined, and will
disburse the Purchase Price Adjustment Holdback in accordance with Section
2.4(g).
(g) If, after such adjustments, (i) the aggregate InterLink Equity
Value is increased from that delivered at the Closing (treating amounts in
the InterLink Indemnity Fund and the Purchase Price Adjustment Holdback as
having been delivered at the Closing to Sellers), then Buyer shall pay the
Disbursement Agent (for the benefit of the Sellers) such increase in the
InterLink Equity Value in immediately available funds within three (3)
business days of such determination and the Disbursement Agent shall pay
the amount delivered by Buyer, together with the Purchase Price Adjustment
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Holdback, to Sellers in accordance with the percentages set forth on the
Purchase Price Allocation Schedule, (ii) the aggregate InterLink Equity
Value is reduced from that delivered at the Closing (treating amounts in
the InterLink Indemnity Fund and the Purchase Price Adjustment Holdback as
having been delivered at the Closing to Sellers) by an amount that is less
than or equal to the Purchase Price Adjustment Holdback, then the
Disbursement Agent shall pay to Buyer, out of the Purchase Price
Adjustment Holdback, the reduction in the InterLink Equity Value, in
immediately available funds within three (3) business days of such
determination and shall pay any remaining portion of the Purchase Price
Adjustment Holdback to Sellers pro rata in accordance with the percentages
set forth on the Purchase Price Allocation Schedule, or (iii) the
aggregate InterLink Equity Value is reduced from that delivered at the
Closing (treating amounts in the InterLink Indemnity Fund and the Purchase
Price Adjustment Holdback as having been delivered at the Closing to
Sellers) by an amount that is in excess of the Purchase Price Adjustment
Holdback, then each Seller will pay to the Disbursement Agent its pro rata
share of such excess, based on the percentages indicated on the Purchase
Price Allocation Schedule, and the Disbursement Agent shall pay such
excess amount, together with the Purchase Price Adjustment Holdback, to
Buyer in immediately available funds within ten (10) business days of such
determination. The Sellers hereby agree to be bound by Section 2.4(g)(iii)
of the RAP Agreement (and each other provision of the RAP Agreement
referring to the "InterLink Sellers," to the extent applicable to the
InterLink Sellers) and to pay their pro rata share of any amounts required
to be paid under Section 2.4(g)(iii) thereof.
2.5 Indemnity Escrow.
At the Closing, Buyer shall deposit with the Escrow Agent (i) the pro rata
portion of the RAP Indemnity Fund reflecting the pro rata portion of the
interest in RAP owned indirectly by the Company pursuant to the RAP Indemnity
Agreement, and (ii) the InterLink Indemnity Fund pursuant to the Closing Escrow
Agreement. All amounts in the InterLink Indemnity Fund in excess of the sum of
(a) $10,000,000, and (b) the amount of all pending claims made by Buyer for
indemnification pursuant to Section 12.1, shall be paid to Disbursement Agent
(for the benefit of Sellers) at the close of business on the first business day
after the date which is six months after the Closing Date. The remainder of the
InterLink Indemnity Fund, if any, less the amount of all pending claims made by
Buyer for indemnification pursuant to Section 12.1 (the "Year Disbursement
Amount"), shall be paid to Disbursement Agent (for the benefit of Sellers) at
the close of business on the first business day after the date which is one year
after the Closing Date. The Disbursement Agent shall disburse to Sellers, in
accordance with the percentages set forth on the Purchase Price Allocation
Schedule, any amount of the InterLink Indemnity Fund released pursuant to this
Section 2.5. Except as to claims arising from breaches of Sections 5.4, 5.8 and
(to the extent set forth in Section 12.1(b)) 5.22, release of any amounts from
the InterLink Indemnity Fund shall relieve Sellers of obligations under Section
12.1 to the extent of the amounts so released. Sellers expressly agree that any
post-Closing Date adjustments under Section 2.4 shall be paid in the manner
provided in Section 2.4(g) and, unless Buyer so elects (in its sole and absolute
discretion), any amounts owed by Sellers under such sections shall not be paid
from the InterLink Indemnity Fund.
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ARTICLE III
CLOSING
3.1 Closing Date.
Subject to the satisfaction of the terms and conditions of this Agreement,
the closing of the transactions contemplated hereby (the "Closing") shall occur
at 10:00 a.m. Mountain Time, at the offices of Baker & Hostetler LLP in Denver,
Colorado on September 2, 1999, or, if later, as soon as practicable (and in any
event within five (5) business days) following the satisfaction or waiver of the
parties' conditions to the Closing, or such other date as may be mutually
agreeable to the Company and Buyer (the "Closing Date"). At any time after
September 2, 1999, Buyer may demand a Closing upon five (5) days' written notice
waiving all of Buyer's conditions to Closing provided that the conditions to
Closing set forth in Articles VIII and X have been satisfied or waived (other
than conditions to be satisfied at the Closing).
3.2 Default; Specific Performance.
If Sellers or the Company shall fail or refuse to consummate the
transactions set forth in this Agreement on or prior to the Closing Date in
breach of this Agreement, or otherwise breach any other material obligation
hereunder, then, in addition to any other remedies available to Buyer, Buyer
may, at its option, invoke any equitable remedies it may have to enforce the
sale of the Purchased Interests hereunder or such other material provision,
including, without limitation, an action or suit for specific performance. Each
Seller acknowledges that in the event of such Seller's breach of its obligations
hereunder, Buyer will suffer irreparable harm and such Seller hereby irrevocably
waives the defense that Buyer has an adequate remedy at law. If Buyer shall fail
or refuse to consummate the transactions set forth in this Agreement on or prior
to the Closing Date in breach of this Agreement or otherwise breach any other
material obligation hereunder, then, in addition to any other remedies available
to Sellers, any Seller may, at its option, invoke any equitable remedies it may
have to enforce the purchase of the Purchased Interests hereunder, including,
without limitation, an action or suit for specific performance. Buyer
acknowledges that in the event of Buyer's breach of its obligations hereunder,
Sellers will suffer irreparable harm and Buyer hereby irrevocably waives the
defense that Sellers have an adequate remedy at law.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF
SELLERS
Each Seller hereby, severally and not jointly, represents and warrants (as
of the date of this Agreement, except where a prior or future date is indicated)
as follows, and acknowledges that Buyer is relying on such representations and
warranties in connection with the purchase of the Purchased Interests:
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4.1 Title to Purchased Interests.
Such Seller owns, beneficially and of record, all of the Purchased
Interests identified opposite such Seller's name on Schedule 2.1, free and clear
of all liens and encumbrances other than, (i) liens securing obligations under
the Credit Facility, and (ii) if applicable, any liens or encumbrances that will
be terminated or otherwise released prior to the Closing. Upon the Closing, the
Buyer will have valid title to all of the Purchased Interests identified
opposite such Seller's name on Schedule 2.1, free and clear of all liens and
encumbrances, other than any liens or encumbrances created by the Buyer or
arising through Buyer, and other than pledges required by the Credit Facility
(which the lenders are required to release in accordance with the terms of the
Credit Facility and associated pledge documents).
4.2 Enforceability of Agreement.
This Agreement has been duly and validly executed and delivered by such
Seller and constitutes a legal, valid and binding obligation of such Seller,
enforceable against such Seller in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium and other
similar laws or principles affecting the rights of creditors generally and
except for limitations imposed by general principles of equity.
4.3 No Conflict; Required Filings and Consents.
(a) Except as set forth on Schedule 4.3 hereto (and assuming
compliance with the HSR Act), the execution and delivery of this Agreement
by such Seller does not, and the performance by such Seller of its
obligations under this Agreement will not, (i) conflict with or violate
the operating agreement, agreement of limited partnership, certificate of
limited partnership, certificate of incorporation, by-laws or equivalent
organizational documents of such Seller, (ii) assuming receipt of consents
described in Schedule 4.3 or 5.3 hereto, and except as set forth in
Section 4.3(b)(i), conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to such Seller or by which any
property or asset of such Seller is bound or affected or (iii) result in
any breach or violation of, or constitute any default (or an event which
with notice or lapse of time or both would become a default) under, or
give rise to any right of termination, cancellation or acceleration of any
obligation or the loss of a material benefit under, any Contract to which
such Seller is a party or by which such Seller or any property or asset of
such Seller is bound, except as would not impair such Seller's ability to
perform its obligations under this Agreement.
(b) The execution and delivery of this Agreement by such Seller does
not, and the performance of this Agreement by such Seller will not,
require such Seller to obtain or make any consent, approval, authorization
or permit of, or filing with, or notification to, any governmental or
regulatory authority, domestic or foreign, including, without limitation,
any governmental administrative agency or franchising authority (each a
"Governmental Authority"), except for the matters disclosed in Schedule
4.3 hereto or except (i) for applicable requirements, if any, of (A)
federal or state securities or "blue sky" laws, (B) the Communications
Act, and (C) state and local Governmental
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Authorities, including Franchise authorities listed on Schedule 5.3
hereto, and (ii) as required under the HSR Act.
4.4 Stock of Certain Corporate Partners of the Company.
The Purchased Interests include all of the issued and outstanding stock of
the following partners of the Company: (i) ING Media C Corp. ("ING"), WS
InterLink Corp. ("WS"), and Nassau InterLink Corp. ("Nassau"). Each of Sellers
who are shareholders of ING, WS, or Nassau hereby severally (and not jointly)
represents and warrants to Buyer, as follows with respect to the entity of which
it is a shareholder:
(a) Each of ING, WS, and Nassau is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation and has the full corporate power and authority to own, lease
and operate its properties and to carry on its business as it presently is
being conducted. True and complete copies of the certificates of
incorporation and bylaws of such corporations have been delivered to
Buyer. Except as set forth on Schedule 4.4(A) hereto there are no
outstanding subscriptions, options, warrants or rights of any kind to
acquire any stock or other equity interests in, or any assets of, ING, WS,
or Nassau and there are no obligations that require such entities to issue
any such options, warrants, or rights. There are no existing arrangements
that require or permit any interests in ING, WS or Nassau to be voted by,
or at the discretion of, anyone other than their respective shareholders,
and there are no restrictions of any kind on the transfer of any interests
in such entities, except as set forth in the certificate of incorporation
or bylaws of such entity or in the Partnership Agreement, as the case may
be. Schedule 4.4(A) sets forth all of the holders of outstanding stock of
each of ING, WS or Nassau.
(b) Each of ING, WS, and Nassau has no Subsidiaries, and the
partnership interests in the Company owned by each such entity constitutes
the only property, investment or other asset owned, used or held by each
such entity. None of ING, WS, or Nassau has any employees nor any
obligations or liabilities (whether accrued, absolute, contingent,
unliquidated or otherwise, whether or not known, whether due or to become
due and regardless of when asserted), arising out of transactions entered
into at or prior to the Closing, or any action or inaction at or prior to
the Closing, or any state of facts existing at or prior to the Closing.
(c) Except as set forth on Schedule 4.4(C), there is no claim,
litigation, proceeding or governmental investigation pending or, to the
knowledge of the shareholders of ING, WS, or Nassau, threatened; or any
order, injunction or decree outstanding, against ING, WS, or Nassau or any
of their properties or assets, and none of such shareholders knows of any
basis for future claims, litigations, proceedings or investigations
against such entities or any of their properties or assets. ING, WS, or
Nassau are not in violation of any law, regulation or ordinance, or any
other requirement of any Governmental Authority, and no notice has been
received by any of such entity or any of their officers, or employees
alleging any such violation. There is no claim,
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litigation, proceeding or governmental investigation pending or, to the
knowledge of the shareholders of ING, WS, or Nassau, threatened, or any
order, injunction or decree outstanding, against any such entity, or any
of their Affiliates that would prevent the consummation of the
transactions contemplated by this Agreement.
(d) Each of ING, WS, and Nassau has timely filed all material
federal, state, local and foreign Tax Returns required to be filed by it
through the date hereof and shall timely file all Tax Returns required to
be filed at or before the Closing. Such reports and returns are and will
be true, correct and complete in all material respects. Each of ING, WS,
and Nassau has paid and discharged all Taxes due from it, other than such
taxes that are being contested in good faith by appropriate proceedings
and are adequately reserved as shown in the audited consolidated balance
sheet of such entity dated December 31, 1998. Neither the IRS nor any
other taxing authority or agency, domestic or foreign, is now asserting
or, to the knowledge of any shareholder of ING, WS, or Nassau, threatening
to assert against any of ING, WS, or Nassau any material deficiency or
material claim for additional Taxes. Moreover, no shareholder of ING, WS,
or Nassau has knowledge of any facts on the basis of which taxing
authorities could assert material deficiencies or material claims
described in the preceding sentence. Each of ING, WS, and Nassau has
withheld or collected and paid over to the appropriate Governmental
Entities or is properly holding for such payment all Taxes required by law
to be withheld or collected. None of ING, WS, or Nassau has any liability
for the Taxes of any Person pursuant to Section 1.1502-6 of the Treasury
Regulations promulgated under the Code or comparable provisions of any
taxing authority in respect of a consolidated or combined Tax Return.
There are no liens for Taxes upon the assets of any of ING, WS, or Nassau
other than (i) liens for current Taxes not yet due and payable, (ii) liens
for Taxes that are being contested in good faith by appropriate
proceedings and (iii) other liens which, in the aggregate, are not
material.
(e) Each of ING, WS, and Nassau has had and will continue to have
through the Closing Date the federal tax status (i.e., partnership or C
corporation) such entity reported on its December 31, 1997 federal Tax
Returns, except as results from any actions taken pursuant to this
Agreement. There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any Tax Returns required to
be filed by, or which include or are treated as including, any of ING, WS,
or Nassau.
(f) Except as set forth on Schedule 4.4(F), none of ING, WS, or
Nassau is involved in or subject to any joint venture, partnership or
other arrangement or contract which is treated as a partnership for
federal, state, local or foreign income tax purposes, except for the
Company.
(g) No consent to the application of section 341(f)(2) of the Code
has been filed with respect to any property or assets held, acquired, or
to be acquired by any of ING, WS, or Nassau.
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(h) Except as set forth on Schedule 4.4(H), there are no tax sharing
agreements or similar arrangements with respect to or involving any of
ING, WS, or Nassau.
(i) Except as set forth in Schedule 4.4(I), none of ING, WS, or
Nassau was included or is includable in any consolidated or unitary Tax
Return with any entity.
(j) None of ING, WS, or Nassau has agreed to or is required to make
any material adjustment under section 481(a) of the Code.
(k) None of ING, WS, Nassau, or the Company has entered into any
compensatory agreements with respect to the performance of services which
payment thereunder would result in a non-deductible expense to ING, WS, or
Nassau pursuant to Section 280G of the Code or an excise Tax to the
recipient of such payment pursuant to Section 4999 of the Code.
4.5 Brokers' Fees.
Neither such Seller nor anyone authorized to act on his or its behalf has
retained any broker, finder or agent or agreed to pay any brokerage fee,
finder's fee or commission with respect to the transactions contemplated by this
Agreement.
4.6 Organization and Qualification.
Such Seller, if not a natural person, is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its formation and has
the requisite power and authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its business as it is now
being conducted, except where the failure to be so organized, existing or in
good standing or to have such power, authority and governmental approvals would
not materially interfere with such Seller's ability to enter into this Agreement
and perform its obligations hereunder.
4.7 Authority Relative to this Agreement.
Such Seller, if not a natural person, has all necessary power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by such Seller and the consummation by such
Seller of the transactions contemplated hereby have been duly and validly
authorized by all necessary individual or entity action and no other individual
or entity action on the part of such Seller is necessary to authorize this
Agreement or to consummate the transactions contemplated hereby.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, the Company hereby represents and warrants
(as of the date of this Agreement, except where a prior or future date is
indicated, but giving effect to the transactions contemplated by the Omega
Agreement as if consummated as of the date hereof) to Buyer as follows:
5.1 Organization and Qualification; Subsidiaries.
(a) Each member of the Company Group is a partnership, limited
liability company or corporation duly organized, validly existing and/or
in good standing under the laws of the jurisdiction of its incorporation
or organization. Each member of the Company Group has the requisite power
and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as it is now being
conducted except for those which would not, in the aggregate, be material.
Each member of the Company Group is duly qualified or licensed as a
foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except for failures which, in the aggregate would not
be material.
(b) A complete and correct list of the members of the Company Group,
which list sets forth the amount of capital stock of or other equity
interests in such member owned by the Company, directly or indirectly,
together with holdings of all other equity holders (if applicable), is set
forth on Schedule 5.1(B).
5.2 Organizational Documents.
The Company has heretofore delivered to Buyer a complete and correct copy
of each of the agreement of limited partnership, operating agreement, limited
liability company certificate, certificate of limited partnership, certificate
of incorporation and bylaws, or equivalent organizational documents, each as
amended to date, of each member of the Company Group. Such organizational
documents are in full force and effect and constitute all of the organizational
documents relating to the members of the Company Group. No member of the Company
Group is in violation of any provision of its agreement of limited partnership,
certificate of limited partnership, operating agreement, certificate of
incorporation, bylaws or equivalent organizational documents, as applicable.
5.3 Effect of Agreement.
(a) All approvals and consents required under (i) any of the Company
Group's Franchises, FCC Licenses, Necessary Contracts or Material
Agreements, and (ii) any applicable government regulations, in any such
case, in order for the consummation of the sale of the Purchased Interests
to Buyer pursuant to this Agreement are listed in
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Schedule 5.3 hereto, with Franchise and FCC approvals identified as such.
Other than as set forth on Schedule 5.3, the execution and delivery of
this Agreement by Sellers and the Company does not, and the performance of
this Agreement by Sellers and the Company will not, require any member of
the Company Group to obtain or make any consent, approval, authorization
or permit of, or filing with or notification to, any Governmental
Authority, except (i) for applicable requirements, if any, of federal or
state securities or "blue sky" laws, and (ii) as required under the HSR
Act.
(b) Subject to obtaining the requisite approvals and consents listed
in Schedule 5.3 hereto, neither the execution, delivery and performance by
Sellers and the Company of this Agreement nor the consummation of the
transactions contemplated hereby, alone or in conjunction with any other
event (such as a voluntary or involuntary termination of employment), will
(i) conflict with, or result in a breach of the terms of, or constitute a
default under, or a violation of, or give rise to any termination right
under, amendment or extension of, or a loss of any benefit under, any
Material Agreements, Franchises and Necessary Contracts, (ii) result in
the violation of any law, rule, regulation, order, writ, judgment, decree,
determination or award presently in effect or having applicability to a
member of the Company Group (except to the extent of violations which,
individually or in the aggregate would not be material), (iii) conflict
with or violate the certificate of incorporation, by-laws, operating
agreement or partnership agreement of any member of the Company Group, or
(iv) result in any payment becoming due to any employee, former employee,
officer, director, or consultant, or any of their dependents (other than
(1) the signing bonuses or stay put bonuses permitted pursuant to Section
7.3(e) hereof, or (2) any benefits under the severance plans listed on
Schedule 5.20, of each Company Group member or any ERISA Affiliates; (v)
increase any benefits otherwise payable under any Plan; or (vi) result in
the acceleration of the time of payment or vesting of any benefits under
any Plan except as disclosed on Schedule 5.20. Subject to obtaining such
approvals and consents, such execution, delivery, performance or
consummation will not give to others any rights of termination,
acceleration or cancellation in or with respect to, or a loss of any
material benefit under, any Material Agreement of (or relating to the
Business of) the Company Group.
5.4 Capitalization.
The Purchased Interests to be sold to Buyer pursuant to this Agreement, as
identified on Schedule 2.1 hereto, constitute all outstanding partnership
interests of the Company. The Company owns, directly or through one or more
Subsidiaries, free and clear of all liens and encumbrances, and free and clear
of any other limitation or restriction (other than liens securing obligations
under the Credit Facility), all of the outstanding general partner interests,
limited partner interests, and all other outstanding equity interests of each
Subsidiary of the Company. Other than as included in the Purchased Interests,
there are no (i) options, warrants or other rights or Contracts obligating any
member of the Company Group to issue or sell any shares of capital stock of, or
other equity interests in, any member of the Company Group or to pay cash in
lieu thereof, (ii) equity equivalents, stock appreciation rights, performance
shares, interests in the
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ownership or earnings of any member of the Company Group or other similar rights
issued by a Company Group member or (iii) outstanding obligations of any member
of the Company Group to purchase, redeem or otherwise acquire any equity
interest therein. Greenwich Street owns, beneficially and of record, its
interest in RAP as set forth on Schedule 2.1 of the RAP Agreement, free and
clear of all liens and encumbrances (other than liens securing obligations under
the Credit Facility).
5.5 Authority Relative to this Agreement.
The Company has all necessary power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
partnership action and no other partnership proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by the other parties hereto, constitutes a legal, valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, moratorium and similar laws or principles affecting the rights of
creditors generally and except for limitations imposed by general principles of
equity.
5.6 Financial Statements.
Attached hereto as Schedule 5.6 are copies of (i) the Company's Balance
Sheet at December 31, 1998 and related Statement of Operations and Statement of
Changes in Financial Position of the Company for its fiscal year then ended,
which have been audited by the Company's independent certified public accountant
(the "Audited Financial Statements") and (ii) all completed monthly unaudited
statements of operations, together with month-end balance sheets, for the months
of January, and February, 1999 (the "Unaudited Financial Statements"). The
Audited Financial Statements and Unaudited Financial Statements (i) were
prepared in conformity with GAAP consistently applied, and (ii) present fairly
the financial position of the Company at the dates indicated and the results of
operations of the Company and changes in financial position for the periods
indicated, subject to normal quarterly and year-end audit adjustments (none of
which are expected to be material in amount) and footnotes. The Additional
Financial Statements to be delivered pursuant to Section 7.4(ii) that are for
quarterly periods will (i) be prepared in conformity with GAAP applied
consistently with the Audited Financial Statements, and (ii) present fairly the
financial position of the Company at the dates indicated and the results of
operations of the Company and changes in financial position for the periods
indicated, subject to normal year-end and quarter-end audit adjustments (none of
which are expected to be material in amount), and footnotes. The Additional
Financial Statements to be delivered pursuant to Section 7.4(ii) that are for
monthly periods will (i) be prepared in conformity with generally accepted
accounting principles applied consistently with the Audited Financial
Statements, and (ii) present fairly the results of operations of the Company for
the periods indicated, subject to normal year-end and quarter-end audit
adjustments (none of which
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are expected to be material in amount) and footnotes. Whenever references are
made throughout this Agreement to Audited Financial Statements, it will be
understood that all notes and exhibits are included therein, except as herein
otherwise expressly provided.
5.7 Undisclosed Liabilities.
No member of the Company Group has any material liabilities or
obligations, whether accrued, absolute, contingent or otherwise, and whether due
or to become due, and the Company does not know of any basis for any claim
against any member of the Company Group for any such liabilities or obligations,
except (i) to the extent set forth in this Agreement or in the Schedules hereto,
including the Audited Financial Statements attached hereto, (ii) liabilities
under the DeMinimis Agreements, or (iii) liabilities, debts or obligations
incurred in the ordinary course of business of the Company since December 31,
1998, none of which individually or in the aggregate will have a Material
Adverse Effect.
5.8 Tax Returns and Audits.
(a) Each member of the Company Group has timely filed all material
federal, state, local and foreign Tax Returns required to be filed by it
through the date hereof and shall timely file all Tax Returns required to
be filed at or before the Closing. Such reports and returns are and will
be true, correct and complete in all material respects. Each member of the
Company Group has paid and discharged all Taxes due from it, other than
such taxes that are being contested in good faith by appropriate
proceedings and are adequately reserved as shown in the audited
consolidated balance sheet of such entity dated December 31, 1998. Neither
the Internal Revenue Service (the "IRS") nor any other taxing authority or
agency, domestic or foreign, is now asserting or, to the knowledge of any
member of the Company Group, threatening to assert against any member of
the Company Group any material deficiency or material claim for additional
Taxes. Moreover, no member of the Company Group has knowledge of any facts
on the basis of which taxing authorities could assert material
deficiencies or material claims described in the preceding sentence. Each
member of the Company Group has withheld or collected and paid over to the
appropriate Governmental Authorities or is properly holding for such
payment all Taxes required by law to be withheld or collected. No member
of the Company Group has any liability for the Taxes of any Person (other
than a member of the Company Group) pursuant to Section 1.1502-6 of the
Treasury Regulations promulgated under the Code or comparable provisions
of any taxing authority in respect of a consolidated or combined Tax
Return. There are no liens for Taxes upon the assets of any member of the
Company Group other than (i) liens for current Taxes not yet due and
payable, (ii) liens for Taxes that are being contested in good faith by
appropriate proceedings and (iii) other liens which, in the aggregate, are
not material.
(b) Each member of the Company Group has had and will continue to
have through the Closing Date the federal tax status (i.e., partnership or
C corporation) such entity reported on its December 31, 1997 federal Tax
Returns, except as results from any
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actions taken pursuant to this Agreement. There are no outstanding
agreements or waivers extending the statutory period of limitation
applicable to any Tax Returns required to be filed by, or which include or
are treated as including, any member of the Company Group.
(c) Except as set forth on Schedule 5.8, no Member of the Company
Group is involved in or subject to any joint venture, partnership or other
arrangement or contract which is treated as a partnership for federal,
state, local or foreign income tax purposes (a "Tax Partnership"), except
for a Tax Partnership which is a Subsidiary.
(d) No consent to the application of section 341(f)(2) of the Code
has been filed with respect to any property or assets held, acquired, or
to be acquired by any member of the Company Group.
(e) Except as set forth on Schedule 5.8, there are no tax sharing
agreements or similar arrangements with respect to or involving any member
of the Company Group.
(f) Except as set forth in Schedule 5.8, no member of the Company
Group was included or is includable in any consolidated or unitary Tax
Return with any entity other than a Tax Return filed that includes only
members of the Company Group.
(g) No member of the Company Group has agreed to or is required to
make any material adjustment under section 481(a) of the Code.
(h) Except as set forth in Schedule 5.8, no member of the Company
Group has entered into any compensatory agreements with respect to the
performance of services which payment thereunder would result in a
non-deductible expense to such company pursuant to Section 280G of the
Code or an excise Tax to the recipient of such payment pursuant to Section
4999 of the Code.
5.9 Franchises and Necessary Contracts.
Each member of the Company Group has validly and legally obtained and duly
holds the Franchises, the FCC Licenses and the Necessary Contracts. Attached
hereto as Schedule 5.9(A) is a true and accurate list of each Franchise held by
the Company Group (including the member of the Company Group holding each
Franchise, the Franchising Authority which granted each Franchise, the stated
expiration date of each Franchise, and the System to which the Franchise
applies), each pending application relating to any Franchise, and a list of any
System or portion thereof which does not, for the reason set forth on such
Schedule, require a franchise authorizing the installation, construction,
development, ownership or operation of the same, which list is true, correct and
complete. No member of the Company Group is providing CATV service in any area
other than as set forth on Schedule 5.9(A). Attached hereto as Schedule 5.9(B)
is a true and accurate list of each FCC License (including the expiration date
thereof) and each Necessary Contract. The Company Group is in compliance (and
the operations of the Systems and the Assets are being conducted in compliance)
in all material respects with the provisions of all Franchises, FCC Licenses and
the Necessary Contracts, all of the Franchises, the FCC Licenses
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and Necessary Contracts are in full force and effect, and there are no pending
(or to Company's knowledge, threatened) modifications, amendments (other than
extensions of the term) or revocations by the issuers of the Franchises, the FCC
Licenses or any other third parties with respect to the Necessary Contracts. The
Company does not have any knowledge of any material breach of any Franchise or
Necessary Contract by any other parties thereto. Except as disclosed in Schedule
5.9(C) or as specifically contained in the Franchises, the Necessary Contracts,
or other Material Agreements, no promises or commitments which are to be
fulfilled after the Closing Date have been made with respect to capital
improvements relating to the Systems. Except as described on Schedule 5.9(C),
the Company Group holds all of the Franchises and material FCC Licenses
necessary to operate the Business in the manner in which it is currently being
operated. The Company Group has received no notice, either formal or informal,
that any Franchise or FCC License would not be renewed in the ordinary course
and is aware of no basis for the denial, revocation or modification of any
Franchise or FCC License. Pursuant to subsections (a) through (g) of Section 626
of the Cable Communications Policy Act of 1984, as amended, the Company Group
has timely submitted proposals for renewal of all Franchises having a remaining
term of thirty-six (36) months or less as of the date hereof, and has provided
Buyer with copies of all proposals for renewal, preliminary assessments and
franchisor determinations described in subsection (c) of said Section 626.
5.10 Material Agreements and Obligations.
(a) Schedule 5.10(A) hereto lists the Material Agreements. Except
for those contracts listed on the Schedules hereto, the DeMinimis
Agreements, and the Credit Facility, no member of the Company Group is a
party to any written or oral contract with respect to the Systems that is
not cancelable without penalty upon thirty (30) days' notice or less,
including any:
(i) bonus, incentive, pension, profit sharing, retirement,
hospitalization, insurance, or other plan providing for
deferred or other compensation to employees, or any other
employee benefit or "fringe benefit" plan, including, without
limitation, vacation, sick leave, medical or other insurance
plans or any union collective bargaining or any other contract
with any labor union;
(ii) employment contract for any Person on a full-time,
part-time, consulting or other basis;
(iii) agreement or indenture relating to the borrowing of
money or to mortgaging, pledging or otherwise placing a lien
on any asset or group of assets of any member of the Company
Group;
(iv) guarantee of any obligation;
(v) lease or agreement under which it is lessee or lessor, or
holds or operates any property, real or personal, owned by any
other party, except
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for any lease under which the aggregate annual rental payments
do not exceed $25,000;
(vi) Contract or group of related Contracts with the same
party or any group of affiliated parties which requires or may
in the future require aggregate consideration by or to any
member of the Company Group in excess of $25,000;
(vii) Contract in effect between any member of the Company
Group and any Seller (or an Affiliate thereof) or any of the
officers, directors or Affiliates of any member of the Company
Group;
(viii) obligations of any member of the Company Group to make
payments to any Seller (or an Affiliate thereof) or any
Affiliate of any member of the Company Group;
(ix) loans by any member of the Company Group to any Seller
(or any Affiliate thereof) or any of the officers, directors
or Affiliates of each member of the Company Group.
(b) Each member of the Company Group has, in all material respects,
performed all obligations required to be performed by it and is not in
material default under, or in material breach of, or in receipt of any
claim of material default under, any Material Agreement; and the Company
does not have any knowledge of any material breach by the other parties to
any Material Agreement.
(c) There is no term or provision of any Contract not included on
the Schedules hereto to which any member of the Company Group is a party
or by which it or any of its properties is bound that would have a
Material Adverse Effect. There is no term or provision of any federal or
state judgment, decree or order applicable to or binding upon any member
of the Company Group, the enforcement of which would have a Material
Adverse Effect.
5.11 Systems' Capacity, Customers and Rates.
(a) Schedule 5.11(A) hereto lists, as of December 31, 1998 (or as of
the respective date therein specified), (i) the system bandwidth for each
System, (ii) programming offered, (iii) approximate linear miles of aerial
and underground plant (i.e., main trunk and distribution or feeder cable);
provided, that for purposes of this subsection (iii), the term
"approximate" shall allow a variance of plus or minus 10% from the number
of linear miles of aerial and underground plant set forth on Schedule
5.11(A), (iv) the approximate number of Homes Passed, (v) the total number
of retail and bulk equivalent basic customers (including an approximate
breakdown of the number of retail customers among Franchises) as reported
by Cable Data, (vi) the aggregate number of premium units subscribed to by
the Company Group's Premium Subscribers, (vii) subscriber rates for all
services including basic and premium services, tier services,
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additional outlets and converter rental charges in and for each of the
Service Areas, (viii) the community unit identification number ("CUID
Number") for each franchise community; (ix) a list of all free, discount
or other promotional service obligations (other than those free, discount
or other promotional service obligations which are regularly offered or
arise in the ordinary course of business); and (x) the Signals carried by
each System and the channel position of each such Signal and, with respect
to TV station signals, whether carried pursuant to must-carry requirements
or retransmission consent, which information is true and correct, in all
material respects. Except where specifically indicated on Schedule
5.11(A), each of the respective channel lineups set forth in Schedule
5.11(A) is capable of being viewed in its entirety by each Subscriber in
the applicable System (subject to ordinary course service interruptions).
(b) Except as set forth in Schedule 5.11(B), all reports or other
documents, payments (including, without limitation, all franchise fees and
FCC regulatory fees) or submissions required to be filed by the Company
Group with respect to any Franchise or the Business have, in all material
respects, been duly and timely filed and/or paid with the appropriate
authority and were correct in all material respects when filed.
5.12 Employees.
(a) The Company is not aware that any officer, executive employee or
any group of employees of the Company Group has or have any plans to
terminate his, her or their employment with the Company Group. Each member
of the Company Group has complied in all material respects with all
applicable laws relating to the employment of labor, including provisions
thereof relating to wages, hours, equal opportunity, collective bargaining
and the payment of social security and other taxes, and except as set
forth in Schedule 5.12 hereto, no member of the Company Group has received
any notice of any claim at the date of this Agreement and during the
preceding three years that it has not complied in any material respect
with any laws relating to the employment of employees or that it is liable
for any arrearages of wages or any taxes or penalties for failure to
comply with any laws. No member of the Company Group has written policies
and/or employee handbooks or manuals except those set forth in Schedule
5.12.
(b) Except as set forth in Schedule 5.12 hereto, no member of the
Company Group is, and during the 12 months prior to the date of this
Agreement no member of the Company Group has been, involved in any labor
discussion with any unit or group seeking to become the bargaining unit
for any of its employees. Except as set forth in Schedule 5.12 hereto, no
member of the Company Group is a party to any collective bargaining
agreement and there are no unfair labor practice or arbitration
proceedings pending with respect to any member of the Company Group or, to
the knowledge that the Company, threatened and there are no facts or
circumstances known to the Company that could reasonably be expected to
give rise to such a claim. To the knowledge of the Company, there are no
organizational efforts presently underway or threatened involving any
employees of the Company Group or any of the employees performing work for
the Company but provided by an outside employment agency, if any. Within
the last 12
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months, there has been no work stoppage, strike or other consorted
activity by any employees of the Company Group.
(c) Except as set forth in the Schedule 5.12 and as to those
employees (if any) represented by a labor organization, all employees of
the Company Group are employed at-will. Except as set forth in Schedule
5.12, completion of the transactions contemplated by this Agreement will
not result in any payment or increased payment becoming due from any
member of the Company Group to any officer, director, or employee of, or
consultant to, a member of the Company Group.
(d) No member of the Company is a party to any agreement for the
provision of labor from any outside agency except as set forth in Schedule
5.12. To the knowledge of the Company, at the date of this Agreement and
during the preceding three years, there have been no claims by employees
of such outside agencies, if any, with regard to employees assigned to
work for the Company Group, and no claims by any governmental agency with
regard to such employees except as set forth in Schedule 5.12.
5.13 Absence of Certain Developments.
Except as set forth on Schedule 5.13 hereto, and except for the
transactions contemplated by this Agreement, no Company Group member has,
insofar as the Systems or the Assets are concerned, since December 31, 1998:
(i) except for borrowings under the Credit Facility in the
ordinary course of business, borrowed any amount or incurred
or become subject to any liabilities (absolute or contingent)
except liabilities incurred in the ordinary course of
business;
(ii) mortgaged or pledged any of its assets, tangible or
intangible, or subjected them to any lien, charge or other
encumbrance, except Permitted Encumbrances and liens securing
indebtedness under the Credit Facility;
(iii) sold, assigned or transferred any of its tangible
assets, except in the ordinary course of business, or canceled
any debts or claims (other than unpaid subscriber debts and
claims in the ordinary course of business);
(iv) suffered any substantial losses other than consistent
with recent operating history;
(v) except in the ordinary course of business, waived or
released any material right or claim;
(vi) made any changes in employee compensation or personnel
policies, including the establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit
sharing, option, stock purchase or other Plan (as defined
below), declared, paid or committed to
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pay a bonus or additional salary or compensation to any Person
(other than the stay put bonuses or signing bonuses permitted
pursuant to Section 7.3(e) hereof), or made any other increase
in the compensation payable to or to become payable to any
executive officers of any member of the Company Group, except
in the ordinary course of business and consistent with past
practices;
(vii) entered into any other transaction other than in the
ordinary course of business;
(viii) amended or terminated any Contract listed in any
Schedule hereto, except in the ordinary course of business and
except for Contracts that have expired by their own terms;
(ix) suffered any material damage, destruction or casualty
loss, whether or not covered by insurance; or
(x) has suffered a Material Adverse Effect, or has had any
event or events occur that, individually or in the aggregate,
are reasonably likely to result in a Material Adverse Effect;
(xi) materially changed any of its accounting principles or
practices, or revalued such Assets or Systems for financial
reporting, property tax or other purposes;
(xii) entered into any Contract or understanding to do any of
the foregoing.
5.14 Real Property.
Schedule 5.14 hereto contains a legal description of each parcel of Real
Estate owned by the Company Group together with a description of the type of use
of each such parcel. The Company has furnished to Buyer a copy of any title
insurance policy or other evidence of title issued with respect to each owned
parcel of Real Estate owned by the Company Group in the possession of the
Company Group. Except for any Permitted Encumbrances, the Company or a
Subsidiary thereof is the sole owner (both legal and equitable) of, and has good
and marketable title in fee simple absolute to, each parcel of Real Estate
listed on Schedule 5.14 and all buildings, structures and improvements thereon,
and the unfettered right to occupy the leased property free and clear of any
options to lease or purchase. The location and use (i.e., headend, tower or
office site) of each real property leased by the Company Group is identified on
Schedule 5.9(B). All of the Real Estate, and all of the real property leased by
the Company Group, utilized as a headend, office or tower site has unfettered
access to public roads or streets and all utilities and services necessary for
the proper conduct and operation of the Systems. The Real Estate and all of the
real property leased by the Company Group complies and is operated in material
compliance with all applicable laws. There are no defects in the physical
condition of the Real Estate or the improvements located on the Real Estate
which could impair or prevent the current
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<PAGE> 35
or proposed use thereof by the Company Group. No member of the Company Group has
received any notice from any governmental body (a) requiring it to make any
material repairs or changes to the Real Estate or the improvements located on
the Real Estate or (b) giving notice of any material governmental actions
pending. There is no action, proceeding or litigation pending (or, to the best
knowledge of the Company, contemplated or threatened): (i) to take all or any
portion of the Real Estate, or any interest therein, by eminent domain; or (ii)
to modify the zoning of, or other governmental rules or restrictions applicable
to, the Real Estate or the use or development thereof in any manner which could
impair or prevent the current or proposed use thereof by the Company Group.
There are no contracts or other obligations outstanding for the sale, exchange
or transfer of any of the Real Estate.
5.15 Title to Assets; Personal Property.
A member of the Company Group is the sole owner (both legal and equitable)
of and has good and marketable title to the Assets constituting personal
property, tangible and intangible, free and clear of all mortgages, liens,
security interests, charges, claims, restrictions and other encumbrances of
every kind other than with respect to the liens securing the Company Group's
indebtedness and the Permitted Encumbrances. The material items of machinery,
equipment and other tangible assets included in the Assets are in satisfactory
operating condition, reasonable wear and tear excepted, and conform, in all
material respects, to all applicable ordinances, rules, regulations and
technical standards, including the rules, regulations and technical standards of
the FCC and the local franchise authorities, and all applicable building, zoning
and other laws. As of the Closing, the amount of Assets constituting inventory
of set-top cable boxes will be adequate to cover usage projected by the budget
provided to Buyer for thirty days after the Closing Date for each of the
following types of boxes: (i) standard analog, (ii) advanced analog, and (iii)
digital.
5.16 Compliance with Laws.
(a) The operations of the Systems have been, and are being,
conducted in material compliance with all applicable laws, rules,
regulations and other requirements of all federal, state, county or local
governmental authorities or agencies.
(b) (i) The Company Group is permitted under all applicable
Franchises and FCC rules, regulations and orders to distribute the
transmissions (whether television, satellite, radio or otherwise) of video
programming or other information that the Systems make available to
customers of the Systems (the "Signals") presently being carried to such
customers and to utilize all carrier frequencies generated by the
operations of the Systems, and are licensed to operate all the facilities
required by law to be licensed, including without limitation, any business
radio and any CARS system being operated as part of the Systems; and (ii)
other than requests for network nonduplication and syndex protection and
sports league (e.g., NBA, NHL, MLB) blackout requests, no written requests
or orders have been received by any member of the Company Group during the
three years preceding the date of this Agreement from the FCC, the United
States Copyright Office, any local or other television station or system
or from any other Person
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(x) challenging or questioning the legal right of a member of the Company
Group to distribute the Signals, own or operate any System or to own,
operate or use any FCC licensed or registered facility owned, operated
and/or used by the Company Group in conjunction with the Company Group's
operation of any System or (y) requiring any System to carry a television
broadcast signal or to terminate carriage of a television broadcast signal
with which the Company Group has not complied, and (iii) except as
disclosed in Schedule 5.16(B), the Company Group has complied with all
written and bona fide requests or demands received from television
broadcast stations to carry or to terminate carriage of a television
broadcast signal on a System, including, without limitation, all
retransmission consent agreements to which any member of the Company Group
is a party.
(c) The Company Group is in compliance with the applicable
Cumulative Leakage Index and Equal Employment Opportunity requirements of
the FCC.
(d) The Company Group has deposited with the United States Copyright
Office all statements of account and other documents and instruments, and
has paid all such royalties, supplemental royalties, fees and other sums
to the United States Copyright Office with respect to the business and
operations of the Systems as are required under the Copyright Act to
obtain, hold and maintain the compulsory license for CATV systems
prescribed in Section 111 of the Copyright Act. The Company Group and the
Systems are in material compliance with the Copyright Act and the rules
and regulations of the Copyright Office. The Company Group and the Systems
are entitled to hold and do hold the compulsory copyright license
described in Section 111 of the Copyright Act, which compulsory copyright
license is in full force and effect and has not been revoked, canceled,
encumbered or adversely affected in any manner. The carriage, transmission
or use of the Signals has not and does not subject the Systems or any
Company Group member to any FCC proceedings or any suits or actions,
including without limitation, suits or actions for copyright infringement.
(e) All necessary FAA and FCC approvals and registrations have been
obtained and/or filed with respect to the height and location of those
towers owned by the Company or the appropriate member of the Company
Group, and those towers are being operated in material compliance with
applicable FCC and FAA rules.
(f) There is no inquiry, claim, action or demand pending before the
United States Copyright Office or the Copyright Royalty Tribunal which
questions the copyright filings or payments made by any Company Group
member with respect to the Systems other than routine inquiries or
proposed corrections. The Company will provide Buyer with copies of any
and all additional inquiries, claims, actions or demands during the period
between the date of this Agreement and the Closing Date.
(g) Copies of all aeronautical frequency notices filed with the FCC
with respect to the Systems have been delivered to Buyer.
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(h) Schedule 5.16(H) sets forth a list of all Governmental
Authorities that are certified to regulate rates of the Systems pursuant
to the Communications Act and FCC Regulations as of the date of this
Agreement. Except as set forth on Schedule 5.16(H), no rate complaints are
pending with the FCC against the Systems, no Company Group member has
received any written (or to the Company's knowledge other) notice from any
Governmental Authority that it has any obligation or liability to rollback
its rates for Basic or Expanded Basic Service or otherwise to refund to
customers of the Systems any portion of the revenue received by the
Company Group from such customers (excluding revenue with respect to
deposits for converters, encoders, decoders and related equipment and
other prepaid items) that has not been resolved. The Company Group has
made a good faith effort to set its rates in accordance with applicable
statutory provisions, rules, regulations and orders and is aware of no
basis for rollbacks or refunds. The Company has delivered to Buyer
complete and correct copies of all FCC forms relating to rate regulation
of the Systems filed with any Governmental Authority, copies of all
correspondence with any Governmental Authority relating to such rate
regulation and any other documentation justifying the rates charged to
customers of, or otherwise supporting an exemption from the rate
regulation provisions of the Communications Act claimed with respect to,
any of the Systems. The customer records of the Systems contain the names,
addresses and payment histories of, and services delivered to, all Persons
known by the Company to be receiving any CATV service from any member of
the Company Group with respect to the Systems.
(i) Except as set forth on Schedule 5.16(I), as of the date of this
Agreement, (i) no construction programs relating to the provision or
proposed provision of CATV service have been undertaken by any Person in
any of the Service Areas and, to the Company's knowledge, without
investigation but upon inquiry of its regional managers and as should
reasonably be known to a reasonable CATV operation, no such construction
programs are proposed or threatened to be undertaken, (ii) no franchise or
other applications or requests of any Person to provide CATV service in
the Service Areas have been filed or to the Company's knowledge are
threatened or proposed; (iii) there is no other CATV or other video
services provider (excluding DBS providers) within any of the Service
Areas which is providing or, to the Company's knowledge, has applied for a
franchise or otherwise intends to provide CATV services or other video
services (excluding DBS services) to any of the Service Areas in
competition with any of the Systems. Except as set forth in Schedule
5.16(I), no Company Group member is a party to any agreement restricting
the ability of any Third Party to operate CATV systems or any other video
programming distribution business within any of the Service Areas.
5.17 Transactions.
Except as disclosed on Schedule 5.17 hereto, since December 31, 1998, no
member of the Company Group has entered into any transaction outside the
ordinary course of its business, and there has not been any material change in
the manner in which the Company Group conducts its business. Since December 31,
1998, there has not been any Material Adverse Effect.
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5.18 Litigation and Legal Proceedings.
Set forth on Schedule 5.18 hereto is a complete and accurate list and
description of all suits, claims, actions and administrative, arbitration or
other similar proceedings relating to the Company Group (including proceedings
concerning labor disputes or grievances, civil rights discrimination cases and
affirmative action proceedings) and all governmental investigations pending or,
to the knowledge of the Company, threatened, in each case to which any member of
the Company Group is a party, or against its properties or business, and each
judgment, order, injunction, decree or award relating to a member of the Company
Group or the Assets (whether rendered by a court or administrative agency, or by
arbitration pursuant to a grievance or other procedure) to which a member of the
Company Group is a party that is unsatisfied or requires continuing compliance
therewith (such suits, actions, claims, judgments, orders, injunctions, decrees
and awards are herein referred to as "Legal Proceedings"). To the Company's
knowledge, there are no facts or circumstances that would give rise to any
material claims against the Systems or the Assets, other than such claims as may
be applicable to the CATV industry generally. The foregoing warranty
specifically excludes matters undertaken by or pending before Congress, the FCC,
the Copyright Royalty Tribunal or any state governmental authority in any state
in which any System is located which would have applicability to CATV systems in
general but to which no Company Group member is expressly a party.
5.19 Brokers' Fees.
Neither, the General Partner nor any member of the Company Group has
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated by
this Agreement.
5.20 Plans; ERISA.
(a) Existence of Plans. For purposes of this Agreement, the term
"Plans" shall mean (i) all "employee benefit plans" (as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), of which any member of the Company Group, or
any member of the same controlled group as a member of the Company Group
within the meaning of Section 4001(a)(14) of ERISA (an "ERISA Affiliate")
is or ever was a sponsor or participating employer or as to which a member
of the Company Group or any of their ERISA Affiliates makes contributions
or is required to make contributions, and (ii) any similar employment,
severance or other arrangement or policy of any of the Company Group
members or any of their ERISA Affiliates (whether written or oral)
providing for health, life, vision or dental insurance coverage (including
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits or retirement
benefits, fringe benefits, or for profit sharing, deferred compensation,
bonuses, stock options, stock appreciation or other forms of incentive
compensation or post-retirement insurance, compensation or benefits.
Except as disclosed on Schedule 5.20, neither a member of the Company
Group nor any of their respective ERISA Affiliates maintains or sponsors
(or ever maintained or sponsored), or makes or is required to make
contributions to, any Plans. None of the Plans is or was a
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"multi-employer plan," as defined in Section 3(37) of ERISA. None of the
Plans is or was a "defined benefit pension plan" within the meaning of
Section 3(35) of ERISA. None of the Plans provides or provided
post-retirement medical or health benefits. None of the Plans is or was a
"welfare benefit fund," as defined in Section 419(e) of the Code, or an
organization described in Sections 501(c)(9) or 501(c)(20) of the Code. No
member of the Company Group or any ERISA Affiliate is or was a party to
any collective bargaining agreement. Except as disclosed on Schedule 5.20,
no member of the Company Group or any ERISA Affiliate has announced or
otherwise made any commitment to create or amend any Plan. Notwithstanding
any statement or indication in this Agreement to the contrary, except as
disclosed on Schedule 5.20, there are no Plans which the Company will not
be able to terminate immediately after the Closing in accordance with
their terms and ERISA. The Company has made available to Buyer true and
complete copies of: (i) each of the Plans and any related funding
agreements thereto (including insurance contracts) including all
amendments, all of which are legally valid and binding and in full force
and effect and there are no defaults thereunder, (ii) the currently
effective Summary Plan Description pertaining to each of the Plans, as
applicable, (iii) the three (3) most recent annual reports for each of the
Plans (including all related schedules), (iv) the most recent Internal
Revenue Service determination or opinion letter, as applicable, for each
Plan which is intended to constitute a qualified plan under Section 401 of
the Code and each amendment to each of the foregoing documents, and (v)
for each unfunded Plan, financial statements which shall fairly present
the financial condition and the results of operations of such Plan in
accordance with GAAP, consistently applied, as of such dates.
(b) Penalties. To the Company's knowledge, no member of the Company
Group or any of their respective ERISA Affiliates is subject to any
material liability, tax or penalty whatsoever to any Person or agency
whomsoever as a result of engaging in a prohibited transaction under ERISA
or the Code, and no member of the Company Group or any of their respective
ERISA Affiliates has any knowledge of any circumstances which reasonably
might result in any material liability, tax or penalty, including but not
limited to, a penalty under Section 502 of ERISA, as a result of a breach
of any duty under ERISA or under other applicable laws. Each Plan which is
required to comply with the provisions of Sections 4980B and 4980C of the
Code, or with the requirements referred to in Section 4980D of the Code,
has complied in all material respects. No event has occurred which could
subject any Plan to tax under Section 511 of the Code.
(c) Qualification. Each of the Plans which is intended to be a
qualified plan under Section 401(a) of the Code has received a favorable
determination or opinion letter from the Internal Revenue Service, and has
been operated in all material respects in accordance with its terms and
with the provisions of the Code. All of the Plans have been administered
and maintained in substantial compliance with ERISA, the Code and all
other applicable laws. All contributions required to be made to each of
the Plans under the terms of that Plan, ERISA, the Code or any other
applicable laws have been timely made. Each Plan intended to meet the
requirements for tax-favored treatment under Subchapter B of Chapter 1 of
the Code meet such requirements. Except as set forth in Schedule 5.20, the
Company Group members have not made any payments, are not
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obligated to make any payments, and are not parties to any Contract or
Plan that under certain circumstances, considered either individually or
in the aggregate, could require any of them to make any payments, that are
not deductible as a result of the provisions set forth in Section 280G of
the Code or the treasury regulations thereunder or would result in an
excise tax to the recipient of any such payment under Section 4999 of the
Code. The Audited Financial Statements and the Unaudited Financial
Statements properly reflect all amounts required to be accrued as
liabilities to date under each of the Plans. Except as disclosed on
Schedule 5.20 or as set forth in Section 13.12, the execution and
performance of this Agreement will not (i) result in any obligation or
liability (with respect to accrued benefits or otherwise) of any member of
the Company Group or Buyer to any Plan, or any present or former employee
of a member of the Company Group, (ii) be a trigger event under any Plan
that will result in any payment (whether of severance pay or otherwise)
becoming due to any present or former employee, officer, director,
shareholder, contractor, or consultant, or any of their dependents, or
(iii) accelerate the time of payment or vesting, or increase the amount,
of compensation due to any employee, officer, director, shareholder,
contractor, or consultant of a member of the Company Group. With respect
to any insurance policy which provides, or has provided, funding for
benefits under any Plan, (I) there is and will be no liability of the any
member of the Company Group or Buyer in the nature of a retroactive or
retrospective rate adjustment, loss sharing arrangement, or actual or
contingent liability as of the Closing Date, nor would there be any such
liability if such insurance policy were terminated as of the Closing Date,
and (II) no insurance company issuing any such policy is in receivership,
conservatorship, bankruptcy, liquidation, or similar proceeding, and, to
the knowledge of the Company, no such proceedings with respect to any
insurer are imminent.
(d) Litigation. Other than routine claims for benefits under the
Plans, there are no pending, or, to the best knowledge of the Company
Group, threatened, investigations, proceedings, claims, lawsuits,
disputes, actions, audits or controversies involving the Plans, or the
fiduciaries, administrators, or trustees of any of the Plans or the
Company, any Subsidiary or any of their respective ERISA Affiliates as the
employer or sponsor under any Plan, with any of the IRS, the Department of
Labor, the PBGC, any participant in or beneficiary of any Plan or any
other Person whomsoever. The Company Group knows of no reasonable basis
for any such claim, lawsuit, dispute, action or controversy.
5.21 Insurance, Surety Bonds, Damages.
Set forth on Schedule 5.21 hereto is a correct list of all insurance
policies and surety bonds of the Company Group now in effect, including the
names of the insureds and their addresses. The premiums on such insurance
policies and bonds have been currently paid, and such policies and bonds are
valid, outstanding and enforceable, in full force and effect and insure against
risks and liabilities and provide for coverage to the extent and in a manner
required of or deemed reasonably appropriate and sufficient by the Company. The
Company Group will
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maintain coverage of similar kinds and amounts and will pay the premium for such
coverage through the Closing Date.
5.22 Environmental Laws.
Except as set forth in Schedule 5.22: (i) each member of the Company Group
is in material compliance with all Environmental Laws; (ii) no member of the
Company Group has received, since January 1, 1994, any order, directions or
notices relating to any release or threatened release of any Hazardous
Substance, or alleging a violation of any Environmental Law and no government
agency has submitted to any member of the Company Group any request for
information pursuant to any Environmental Law relating to the Systems; (iii) to
the best of the Company's knowledge, there are no material Environmental Permits
required under any Environmental Law in connection with the operation of the
Systems; and (iv) there has been no generation, use, treatment, disposal, or
actual or threatened release of any Hazardous Substance by the Company Group or,
to the Company's knowledge (without any obligation of further investigation), by
any other party at, in, under, or about any of the real property currently or
formerly owned, leased, occupied or used by any member of the Company Group.
Except as set forth on Schedule 5.22, no Company Group member has received,
since January 1, 1994, any notification pursuant to any Environmental Laws that:
(i) any work, repairs, construction or capital expenditures are required to be
made in respect of any of the Assets as a condition of continued compliance with
any Environmental Laws; or (ii) any currently held material Environmental Permit
relating to the Systems is about to be made subject to materially different
limitations or conditions, or is about to be revoked, withdrawn or terminated.
The Company has provided Buyer with complete and correct copies of all studies,
reports or surveys in the possession of the General Partner or any Company Group
member relating to the presence or alleged presence of Hazardous Substances at,
on or affecting the Real Estate or leased or occupied real property.
5.23 No Other Commitment to Sell.
No part of the Systems or any of the Assets is directly or indirectly
subject in any manner to any written or oral commitment or any arrangement for
the sale, transfer, assignment, or disposition thereof, in whole or in part,
except (i) as provided in any of the Company's Franchises or in the general
security provisions of any of the Company's debt instruments, (ii) the sale any
Asset in the ordinary course of business which has been or will be replaced by
the Company on or before the Closing Date with a replacement Asset of equal or
greater value, or (iii) as otherwise set forth in Schedule 5.23 hereto.
5.24 Year 2000.
The Company Group has used diligent efforts to ensure that its Computer
Systems are Year 2000 Ready and that there shall be no Material Adverse Effect
on the Company by reason of the advent of the year 2000. Without limiting the
generality of the foregoing, the Company Group has (A) with respect to its own
Computer Systems, (i) initiated a review and assessment of all Computer Systems;
(ii) developed the Year 2000 Remediation Program delivered to Buyer; (iii) has
complied in all material respects with the Year 2000 Remediation Program
delivered to
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Buyer, and (iv) has taken all steps to date such that it reasonably expects to
complete the Year 2000 Remediation Program by December 31, 1999, and (B) with
respect to Third Party Systems, has no reason to believe, after due inquiry,
that such Third Party Systems will adversely impact the Year 2000 Readiness of
the Computer Systems.
5.25 Trademarks, Patents and Copyrights.
Each member of the Company Group owns or possesses adequate licenses or
other valid rights, title and interest to use all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, copyrights,
service marks, trade secrets, applications for trademarks and for service marks,
know-how and other proprietary rights and information (collectively,
"Intellectual Property") used or held for use in connection with the business of
each member of the Company Group as currently conducted or as contemplated to be
conducted, except for Intellectual Property owned by the Disbursement Agent and
to be licensed to Buyer pursuant to the License. The Company is unaware of any
assertion or claim challenging the validity of any of the foregoing (or any
basis therefor). To the knowledge of the Company, the conduct of the business of
each member of the Company Group as currently conducted does not infringe,
either directly or indirectly, any patent, patent right, license, trademark,
trademark right, trade name, trade name right, service mark or copyright of any
Third Party. To the knowledge of the Company, there are no infringements of any
proprietary rights owned by or licensed by or to each member of the Company
Group. The Disbursement Agent owns all right, title and interest in the
trademarks "Cablevision Communications," "Total TV" and "Total Web," including
without limitation all intellectual property therein, which trademarks will be
licensed to the Company pursuant to the License, covering a period of 180 days
from the Closing Date.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Sellers to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer hereby represents (as of the date of
this Agreement) and warrants as follows:
6.1 Organization.
Buyer is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware and has the power and authority
to own and use its properties and to transact the business in which it is
engaged and to acquire the Purchased Interests pursuant to this Agreement.
6.2 Authority Relative to this Agreement.
Buyer has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Buyer and the consummation by Buyer of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of
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Buyer are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Buyer and, assuming the due authorization, execution
and delivery by the other parties hereto, constitutes a legal, valid and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
6.3 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement and all other
instruments or documents executed by Buyer in connection herewith and the
consummation of the transactions contemplated hereby will not (i) conflict
with or violate the certificate of incorporation, or bylaws of Buyer, (ii)
conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Buyer or by which any property or asset of Buyer is
bound or affected or (iii) result in any breach of or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, any Contract to which Buyer is a party or by which Buyer
or any property or asset of Buyer is bound except, in the case of clauses
(ii) and (iii), for any such conflicts, violations, breaches, defaults or
other occurrences that would not prevent or delay consummation of the
Closing, or otherwise prevent Buyer from performing its obligations under
this Agreement.
(b) The execution and delivery of this Agreement by Buyer does not,
and the performance of this Agreement by Buyer will not, require Buyer to
obtain or make any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority, except (i) for
applicable requirements, if any, of (A) federal or state securities or
"blue sky" laws, (B) the Communications Act, and (C) state and local
governmental authorities, including state and local Franchise authorities,
(ii) as required under the HSR Act and (iii) where failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay consummation of the Closing or
otherwise prevent Buyer from performing its obligations under this
Agreement.
6.4 Financial Capability.
Buyer has the financial ability to purchase the Purchased Interests in
accordance with terms of this Agreement. Buyer has available and will have
available as of the Closing Date funds sufficient to pay the Purchase Price in
accordance with Section 2.2.
6.5 Litigation.
There is no claim, action or proceeding pending or threatened against
Buyer of which Buyer has received notice which if determined adversely would
prevent or delay the consummation of the transactions contemplated by this
Agreement, and no judgement, order or decree has been entered nor any such
liability incurred having such effect.
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6.6 No Violation of FCC Cross Ownership Rules.
On the Closing Date, Buyer will not be in violation of any FCC
restrictions regarding the ownership of competing media and related businesses
that materially adversely affect the ability of Buyer to own the Business.
6.7 Investment Intent; Sophisticated Buyer.
Buyer (a) is an informed sophisticated entity with sufficient knowledge
and experience in investing so as to be able to evaluate the risks and merits of
its investment in securities of the Company to be acquired pursuant hereto, (b)
is financially able to bear the risks of investing in the Company, (c) has had
an opportunity to discuss the business, management and financial affairs of the
Company Group with the management of the Company Group, (d) is acquiring such
securities for its own account for the purpose of investment and not with a view
to or for sale in connection with any distribution thereof, (e) understands that
(i) such securities have not been registered under the Securities Act, (ii) such
securities must be held indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from such registration, (f) has
no present need for liquidity in connection with its purchase of such
securities, (g) understands that the purchase of such securities involves a high
degree of risk, and (h) acknowledges that the purchase of such securities is
consistent with its general investment objectives.
6.8 Finders' and Brokers' Fees.
Except for the fees of Communications Equities Associates, which will be
paid solely by Buyer, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transaction provided for in this Agreement based upon arrangements made by or on
behalf of Buyer.
ARTICLE VII
COVENANTS
7.1 Access.
Between the date of this Agreement and the Closing Date, the Company
shall, and shall cause the General Partner and each other member of the Company
Group and their respective officers and employees to, (i) give Buyer and its
respective officers, employees, accountants, counsel, financing sources and
other agents and representatives full access, during normal business hours, to
all buildings, offices, properties, plants and other facilities and to all
contracts, internal reports, data processing files and records, Federal, state,
local and foreign tax returns and records, commitments, books, records and
affairs of the Company Group, whether located on the premises of the Company or
at another location; (ii) furnish promptly to Buyer a copy of each report,
schedule, registration statement and other document filed or received by any
member of the Company Group during such period pursuant to the requirements of
Federal securities laws or regulations; (iii) permit Buyer to make such
inspections as it may reasonably require; (iv) cause its officers and employees
and the other Company Group officers and employees to
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furnish Buyer such financial, operating, technical and product data and other
information with respect to the business and properties of the Company Group as
Buyer from time to time may reasonably request, including without limitation
financial statements and schedules; (v) allow Buyer the opportunity to interview
such employees and other personnel and Affiliates of the Company Group as they
may reasonably request; and (vi) cooperate with Buyer and its Affiliates and
representatives in arranging for an orderly transition in connection with the
transfer of control of the Company; provided, however, that no investigation
pursuant to this Section 7.1 shall affect or be deemed to modify any
representation or warranty made by the Company herein. Materials furnished to
Buyer pursuant to this Section 7.1 may be used by Buyer for strategic and
integration planning purposes relating to accomplishing the transactions
contemplated hereby. Prior to the Closing, any information provided to Buyer or
its representatives pursuant to this Agreement shall be held by Buyer and its
representatives in confidence in accordance with and subject to the terms of the
Buyer Confidentiality Agreement.
7.2 Environmental Assessment.
Buyer shall have the right to commission, at Buyer's cost and expense, a
so-called "Phase I" environmental site assessment of the Company Group's assets
(a "Phase I Assessment"), provided that no such Phase I Assessment shall be
commenced more than forty-five days after the date hereof. If the Phase I
Assessment indicates that a so-called "Phase II" assessment (a "Phase II
Assessment") or other additional testing or analysis of the Real Estate or other
leased or occupied real property is advisable, then, subject to any enforceable
and reasonably nonnegotiable restrictions placed thereon by a Third Party owner
or lessor of any real property involved, Buyer may elect to cause its agents to
conduct such testing and analysis, provided, however, that to the extent
reasonably requested by the Company, (i) such testing shall be conducted under
the Company's reasonable oversight and in a manner that does not materially
interfere with the Business, and (ii) Buyer shall provide reasonable assurance
that tested property will not be damaged or, if damaged, will be repaired at
Buyer's expense. The Company shall use its commercially reasonable efforts to
comply with any reasonable request for information made by Buyer or its agents
in connection with any such investigation. The Company covenants that any
response to any such request for information will be complete and correct in all
material respects. The Company will afford Buyer and its agents access to all
operations of the Company at all reasonable times and in a reasonable manner in
connection with any such investigation subject to any reasonably required
approval of the Company's landlords, which approval the Company will use its
commercially reasonable efforts to obtain.
7.3 Interim Period Operations.
From the date hereof until the Closing, the Company shall use its
commercially reasonable efforts to operate pursuant to the terms of the budget
previously provided by the Company to Buyer. The Company shall proceed with the
capital expenditure projects set forth on Schedule 7.3(A) in accordance with the
capital expenditure budget provided to Buyer. Notwithstanding anything herein to
the contrary, neither the Sellers nor the Company shall be liable to Buyer for
any delays in connection with such capital expenditure projects due to factors
outside their control including, but not limited to, weather delays, material
shortages, and labor
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strikes. From the date hereof until the Closing, except as otherwise
contemplated by this Agreement or with Buyer's prior consent, not to be
unreasonably withheld, the General Partner and each member of the Company Group
shall carry on its business in the ordinary course consistent with past practice
and use commercially reasonable efforts to preserve intact its business
organizations and material relationships with Third Parties. Without limiting
the generality of the foregoing, the General Partner and each member of the
Company Group shall not without the prior written consent of Buyer, which
consent shall not be unreasonably withheld:
(a) make any material capital expenditures, as determined in
accordance with GAAP, except for capital expenditures referred to in
Schedule 7.3(A) hereto;
(b) agree or commit to dispose of any material assets out of the
ordinary course of business where the proceeds of disposition or the net
book value of the relevant assets exceed $50,000;
(c) merge or consolidate with any Person, acquire any stock or other
ownership interest in any Person or, with the exception of the transaction
contemplated by the Omega Agreement, the assets of any business as an
entirety;
(d) except as required by law, adopt, amend, modify, spin-off,
transfer or assume any of the assets or liabilities of, terminate or
partially terminate any benefit plan;
(e) (i) except in the ordinary course of business consistent with
past practice, (x) make any change in the compensation payable or to
become payable to any officer, director, employee, agent, Affiliate or
consultant, or (y) enter into any severance, termination or other similar
agreement, (ii) enter into or amend any employment agreement, (iii) make
any loans to any of its officers, directors, employees, agents, Affiliates
or consultants, (iv) make any material change in its existing borrowing or
lending arrangements for or on behalf of any of such Persons, or (v)
otherwise enter into any transactions with or make any payment to or for
any Affiliate of any member of the Company Group (other than payment of
management fees consistent with past practice), in each case whether
contingent on consummation of the transactions contemplated hereby or
otherwise. Notwithstanding anything provided herein to the contrary, this
Section 7.3(e) shall not apply with respect to signing bonuses, stay put
bonuses or similar items paid directly or indirectly by Sellers (including
through a resulting adjustment to the InterLink Equity Value under Section
2.4);
(f) declare, set aside or pay any dividend or other distribution
other than a cash distribution, in respect of the equity of any member of
the Company Group (other than any such dividend or distribution paid to
another member of the Company Group), or redeem or otherwise acquire any
of its respective securities;
(g) issue, sell, deliver or agree or commit to issue, sell or
deliver (whether through the issuance or granting of options, warrants,
commitments, subscription, rights to purchase or otherwise) any stock of
any class or any other securities or partnership
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interests of any member of the Company Group or amend any of the terms of
any securities of any member of the Company Group outstanding on the date
hereof ;
(h) except as previously disclosed to Buyer, change the rates or
marketing practices applicable to any System without notifying Buyer;
(i) enter into any Contract or Contracts relating to the Business
that individually or in the aggregate call for payments, or otherwise
involving expenditures, over their terms in excess of $100,000, except in
the ordinary course of business consistent with past practice, and except
for the renewal of any such Contract that would, but for such renewal,
terminate in accordance with its terms prior to Closing;
(j) enter into, or amend in any material respect, any Contract with
@Home or any other party providing for Internet access to the Company
Group's customers;
(k) engage in any line of business, or enter into any Contract,
unrelated to the Business;
(l) incur any debt not having market terms for bank debt and that is
not repayable without penalty or premium within six months of the Closing
Date;
(m) become a guarantor or surety of any indebtedness of any other
Person;
(n) take any action that could reasonably be expected to cause the
condition described in Section 9.2 to become untrue; or
(o) take, or agree in writing or otherwise to take, any of the
foregoing actions or any actions.
7.4 Delivery of Documents to Buyer.
The Company covenants that, to the extent that it has not already done so,
the Company will insofar as practicable deliver or otherwise make available to
Buyer for inspection, at the locations where the General Partner or the Company
Group maintains such information, the following within thirty (30) days after
the date hereof, or as specifically delineated below:
(i) the Company's most recently prepared managerial reports
and customer accounting records, which shall include a
customer accounts receivable aging report summarizing,
respectively, customers whose accounts are at least one, two,
and three or more Monthly Billing Periods overdue, for the
last (or then most recently concluded) regular Monthly Billing
Period. The Company further covenants to deliver to Buyer the
monthly customer accounting records within 20 days after the
end of each calendar month prior to the Closing and to deliver
the managerial reports as soon as practicable.
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(ii) Copies of the Additional Financial Statements as soon as
possible after completion, but in any case, within forty-five
(45) days of the end of the period covered by any such
Additional Financial Statement.
(iii) Copies of such as-built engineering drawings as the
Company has in its possession for the Systems, or, if not
available, such design maps and plant drawings and as-built
engineering drawings as the Company has in its possession will
be made available to Buyer for inspection and at the Closing
will be left on site at the respective System office for
Buyer.
(iv) Copies of any and all bonds in force with regard to the
Systems and the Company Group.
(v) Copies of all written Contracts and other documents listed
in the Schedules hereto, including any and all contracts in
force with any union or collective bargaining unit
representing any employee of any member of the Company Group
together with a certificate of a duly authorized executive
officer, certifying that to the best of such officer's
knowledge the copies so delivered are true and complete in all
material respects.
(vi) Copies of any required Registration Statements filed with
the FCC pursuant to 47 C.F.R. ss.76.12.
(vii) The Initial Notice of Identity and Signal Carriage, and
all subsequent statements of account filed with the Copyright
Office within the past three years and all Notices of Change
of Identity or Signal Carriage filed within the past three
years shall be made available for inspection by Buyer or its
representatives upon reasonable notice.
(viii) Copies of radio licenses, earth station licenses and
CARS licenses.
(ix) Copies of must carry elections and retransmission consent
agreements subject to any confidentiality restrictions
contained in such agreements;
To the extent that any of the items referred to above are received or
filed after a date which is 30 days from the date hereof, the Company covenants
to deliver such items to Buyer as soon as practicable after receipt or filing.
7.5 No Impairment of Title.
From the date hereof until the Closing, no Seller shall sell, dispose of,
mortgage, pledge or otherwise encumber any of the Purchased Interests, except as
required under the current terms of the Credit Facility.
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7.6 No Amendment to Organizational Documents.
From the date hereof until the Closing, the Company shall not, and shall
not permit any other member of the Company Group to amend, in any material
respect, the agreement of limited partnership, certificate of limited
partnership, certificate of incorporation, bylaws or other organizational
documents of such entity.
7.7 Franchise Renewals; Required Consents; HSR Filings.
(a) Until the Closing, the Company shall, and shall cause each other
member of the Company Group to, timely file valid requests for renewal of
the Franchises in accordance with Section 626 of the Communications Act
(47 USC ss. 546) and shall use its diligent, good faith, commercially
reasonable efforts to renew on substantially the same terms any Franchise
that will expire within thirty-six (36) months after the date hereof in
accordance with its terms.
(b) The Company will use, and will cause each member of the Company
Group to use, its diligent, good faith, commercially reasonable efforts to
(i) obtain in writing as promptly as possible and at its expense, all of
the Required Consents and any other consent, authorization or approval
required to be obtained in connection with the transactions contemplated
by this Agreement, and deliver to Buyer copies of such Required Consents
and such other consents, authorizations or approvals promptly after they
are obtained; and (ii) give any required written notice in connection with
the transactions; provided, that the Company will afford Buyer the
opportunity to review, approve and revise the form of letter or
application proposed to request the Required Consent or the form of
written notice prior to delivery to the Third Party or the Affiliate of a
party whose consent is sought or to whom notification is required. The
Company and Buyer will, and the Company will cause each member of the
Company Group to, cooperate with and assist each other in obtaining all
Required Consents and no party shall intentionally take any action or
steps or refrain from taking any action or steps where the result would
prejudice or jeopardize the obtaining of any Required Consent. Without
limiting the generality of the foregoing, the Company and Buyer agree to
attend City Council or similar meetings and hearings before local and
county administrative bodies. If, in connection with the process of
obtaining any Required Consent, a Governmental Authority makes a bona fide
claim that any amount is owed by the franchise holder as a result of a
default under, or breach of, the corresponding Franchise by a member of
the Company Group or any predecessor in interest, the Company Group shall
satisfy all outstanding monetary obligations in respect of any such bona
fide default or breach except to the extent any member of the Company
Group is contesting such claim in good faith. No member of the Company
Group will accept or agree or accede to any material modifications or
amendments to, or the imposition of any material condition to the transfer
of, any of the Franchises, FCC Licenses or Necessary Contracts that are
not acceptable to Buyer. Notwithstanding the foregoing, as soon as
practicable after the date of this Agreement (and in no event more than
twenty (20) business days hereafter), the Buyer will deliver to the
Company, and the Company will cause each member of the
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Company Group to deliver to Buyer, its portion, complete and executed, of
requests or applications for approval of the transfer of control or
assignment of the Franchises, FCC Licenses and Necessary Contracts, and as
soon as practicable thereafter (but in no event more than ten (10)
business days) the Company shall deliver, or cause to be delivered, to the
appropriate Governmental Authority, (i) a FCC Form 394 with respect to
each Franchise other than to any Governmental Authority that the parties
have agreed will not initially receive FCC Form 394; provided, that if
either party subsequently requests that FCC Form 394 be completed,
executed and delivered to any such Governmental Authority that did not
initially receive a FCC Form 394 with respect to any Franchise, then each
party will deliver to the other its portion, completed and executed, of
appropriate FCC Form 394, and the Company shall deliver, or cause to be
delivered, the completed FCC Form 394 to such Governmental Authority as
soon as practicable but in any event within fifteen (15) business days
after a party has made such request; and (ii) such other FCC forms as are
necessary to obtain the FCC's consent to the assignment or transfer of
control of the FCC Licenses. Without the prior consent of the other party,
neither party shall agree with any Governmental Authority to extend or to
toll the time limits applicable to such Governmental Authority's
consideration of any FCC Form 394 filed with such Governmental Authority.
The foregoing notwithstanding, neither party (nor their respective
employees, agents, representatives or any other Person acting on behalf of
a party) shall be precluded from making statements or inquiries to,
attending meetings of, making presentations to, or from responding to
requests initiated by, Governmental Authorities or other Persons from
which a consent is sought, and each party shall apprise the other of all
such requests.
(c) Each of the Company and Buyer, to the extent required, shall
file (or shall cause its ultimate parent entity to file, if applicable) as
soon as practicable (but in any event within thirty (30) days) following
the date of this Agreement, the appropriate notifications required under
the HSR Act in connection with the transactions contemplated by this
Agreement. The Company or Buyer, as the case may be, shall promptly inform
the other of any material communication from the FCC, the Federal Trade
Commission, the Department of Justice or any other Governmental Authority
regarding any matter related to any antitrust or trade regulatory laws of
any Governmental Authority ("Antitrust Laws") as they bear upon the
purchase and sale of the Purchased Interests under this Agreement. If
Buyer or any member of the Company Group receives a request for additional
information or documentary material from any such Governmental Authority
with respect to the transactions contemplated hereby, such party will
endeavor in good faith and will use commercially reasonable efforts to
make or cause to be made, as soon as reasonably practicable and after
consultation with the other party, an appropriate response in compliance
with such request. Buyer and the Company shall, and shall cause their
filing affiliates to, use their respective commercially reasonable efforts
to overcome any objections that may be raised by the Federal Trade
Commission, the Department of Justice or any other Governmental Authority
having jurisdiction over antitrust matters. The Company and Buyer shall,
and shall cause their respective filing affiliates to, cooperate to
prevent inconsistencies between their respective filings and between their
respective responses to all such inquiries and responses, and will furnish
to
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each other such necessary information and reasonable assistance as the
other may reasonably request in connection with its preparation of
necessary filings or submissions under the HSR Act. Notwithstanding the
foregoing, no party shall be required to make any significant change in
the operations or activities of the business (or any material assets
employed therein) of such party or any of its Affiliates, if a party
determines in good faith that such change would be materially adverse to
the operations or activities of the business (or any material assets
employed therein) of such party or any of its Affiliates having
significant assets, net worth or revenue. The Company and Buyer shall
split equally the applicable filing fees under the HSR Act.
7.8 Notification.
The General Partner and each member of the Company Group, on the one
hand, and Buyer, on the other hand, shall:
(a) prior to the Closing, in the event of the occurrence of any fact
or circumstance that would cause or constitute a breach of any of its
representations and warranties set forth herein, give notice thereof to
the other party;
(b) promptly notify the other party of any material notice or other
material communication from any Governmental Authority received by it in
connection with the transactions contemplated by this Agreement.
7.9 Reasonable Efforts; Additional Actions.
Buyer, the Company and, with respect to Sections 9.1, 9.2, and 9.5, each
Seller (as to those matters reasonably within such Seller's control), shall use,
and the Company shall cause each member of the Company Group to use,
commercially reasonable efforts to cause all conditions in Articles VIII, IX and
X to be satisfied and the Closing contemplated hereby to occur. Buyer and each
Seller that is a party to the RAP Agreement (or that controls a party to the RAP
Agreement), to the extent within such Seller's control, shall use commercially
reasonable efforts to cause the transactions contemplated by the RAP Agreement
to be consummated. Without limiting the foregoing, subject to the terms and
conditions of this Agreement, (i) Buyer, the Company and (as to those matters
reasonably within such Seller's control) each Seller shall use and the Company
shall cause each member of the Company Group to use, all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
to remove any injunctions or other impediments or delays, and to consummate the
transactions contemplated by this Agreement and (ii) in any vote of the
Company's limited partners necessary to authorize any action contemplated
hereby, including without limitation the restructurings described in Section
7.11, Sellers agree to vote their Purchased Interests in favor of such action.
In case at any time after the Effective Time any further action is necessary or
desirable to carry out the purposes of this Agreement or to vest Buyer with full
title in and to the Purchased Interests and all properties, assets, rights,
approvals, immunities and Franchises of the Company Group, Sellers and the
proper officers, members, partners and directors of each Person that is a party
to this Agreement shall take all such necessary action.
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7.10 Tax Matters.
(a) Cooperation on Tax Matters.
(i) Buyer and Sellers shall reasonably cooperate in connection
with the preparation and filing of any Tax Return with respect to
members of the Company Group.
(ii) Buyer and the Company further agree, upon request, to use
commercially reasonable efforts to obtain any certificate or other
document from any Governmental Authority or any other Person as may
be necessary to mitigate, reduce or eliminate any Tax that could be
imposed (including Taxes with respect to the transactions
contemplated hereby).
(iii) Buyer and the Company, on one hand, and Sellers, on the
other hand, agree that if any of them receives any notice of an
audit or examination from any Governmental Authority with respect to
Taxes of any Company Group member for any taxable period or portion
thereof ending on or prior to the Closing Date, then the recipient
of such notice shall, within three (3) business days of the receipt
thereof, notify and provide copies of such notice to the other
party, as the case may be, in accordance with the notice provisions
of Section 13.13.
(iv) The Disbursement Agent (on behalf of Sellers) shall
prepare and file all federal and state income tax returns of the
Company Group for all periods ending on or prior to the Closing
Date, and Buyer agrees to cause each Company Group member to execute
each such return applicable to it, except as provided below in this
paragraph. The Disbursement Agent (on behalf of Sellers) shall cause
each such return to be prepared and, together with all related work
papers, delivered to Buyer for review at least 15 business days
prior to the due date for filing of such return. Such returns shall
be prepared in accordance with assumptions and practices for returns
filed by the Company Group in recent years with respect to the
timing of income, deductions, gains and losses to the extent that
such assumptions and practices affect the inclusion of such items in
pre-Closing versus post-Closing taxable periods. If Buyer (x)
reasonably determines that any such return does not comply with the
previous sentence, or that the execution of any such return would
likely subject the applicable Company Group member or the Person
executing the return on behalf of the Company Group to civil or
criminal penalties, and (y) within five business days after receipt
of such return, provides written notice of such determination and
the specific reasons for such determination to the Disbursement
Agent, then such return shall be forwarded to the Neutral Accounting
Firm for review. The Neutral Accounting Firm shall report its
conclusions to the Disbursement Agent and Buyer within seven
business days after receipt of such return indicating whether it
concurs with all or part of Buyer's determination and, if so,
specifying the changes to such return needed to comply with the
requirements of this paragraph and to avoid civil
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or criminal penalties. Buyer shall cause the appropriate Company
Group member to promptly execute such return without any changes
thereto (if the Neutral Accounting Firm does not indicate that
changes are needed) or with the changes specified by the Neutral
Accounting Firm (if the Neutral Accounting Firm indicates that
changes are needed). The conclusions of the Neutral Accounting Firm
shall be conclusive and binding on all parties to this Agreement and
shall not be subject to dispute or review. The cost of retaining the
Neutral Accounting Firm to review any return shall be borne 50% by
the Disbursement Agent (on behalf of the Sellers) and 50% by Buyer.
(b) Section 754 Elections; Allocation of Purchase Price.
(i) To the extent not already in effect, each Company Group
member that is treated as a partnership for federal income tax
purposes shall timely file an election under Section 754 of the Code
so that such entities shall be able to adjust the tax basis of their
assets (collectively, the "Partnership Assets") under Section 743(b)
of the Code as a result of the transactions contemplated herein.
(ii) The aggregate amount described in the penultimate
sentence of Section 2.3 shall be allocated among the Partnership
Assets in an allocation agreement (the "Allocation Agreement") to be
prepared in accordance with Section 2.3 hereof and the rules under
Sections 743(b), 751, 755 and 1060 of the Code. Buyer shall deliver
a draft of the Allocation Agreement to the Company at least thirty
(30) days prior to the Closing Date for approval and consent, and
Buyer and the Company shall mutually agree upon the Allocation
Agreement prior to the Closing Date. Neither Buyer nor the Company
shall unreasonably withhold its approval and consent with respect to
the Allocation Agreement. Buyer and Sellers agree that the
Allocation Agreement shall be amended to reflect any post-Closing
adjustments determined under Section 2.4 of this Agreement. Unless
otherwise required by applicable law, Buyer, Sellers and the Company
Group agree to act, and cause their respective affiliates to act, in
accordance with the computations and allocations contained in the
Allocation Agreement in any relevant Tax Returns or similar filings
(including any forms or reports required to be filed pursuant to
Section 1060 of the Code ("1060 Forms")), to cooperate in the
preparation of any 1060 Forms, to file such 1060 Forms in the manner
required by applicable law and to not take any position inconsistent
with such Allocation Agreement upon examination of any tax refund or
refund claim, in any litigation or otherwise.
(c) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest but excluding any income tax) incurred in connection with the
transactions consummated pursuant to this Agreement shall be borne equally
by Buyer and the Disbursement Agent (on behalf of Sellers). If and to the
extent that such Taxes and fees are included in current liabilities
pursuant to Section 2.4, Seller's share of such Taxes and fees shall be
paid by the
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Company Group. Buyer and Sellers will cooperate in all reasonable respects
to prepare and file all necessary Tax Returns and other documentation with
respect to all such transfer, documentary, sales, use, stamp, registration
and other Taxes and fees.
(d) Tax Elections. From and after the date of this Agreement, the
Company and each Company Group Member shall not without the prior written
consent of the Buyer (which consent shall not be unreasonably withheld)
make, or cause or permit to be made, any Tax election that would bind the
Company or Buyer in any material respect.
(e) Contests.
(i) In the case of an audit or administrative proceeding that
relates to taxable periods ending on or before the Closing Date with
respect to any income Tax Return of the Company, Disbursement Agent
(on behalf of Sellers) shall assume, defend and control the conduct
of such audit or proceeding. In the event that issues relating to a
potential adjustment are required to be dealt with in the same
proceeding as separate issues relating to a potential adjustment for
which the Buyer would be liable, Buyer shall have the right, at its
expense, to control the audit or proceeding with respect to the
latter issues.
(ii) Buyer shall not enter into any compromise or agree to
settle any claim pursuant to any Tax audit or proceeding which would
bind the Company for any pre-Closing period without the written
consent of the Disbursement Agent, which consent shall not be
unreasonably withheld or delayed. Sellers shall not enter into any
compromise or agree to settle any claim pursuant to any Tax audit or
proceeding which would bind the Company or Buyer for any
post-Closing period without the written consent of Buyer, which
consent shall not be unreasonably withheld or delayed. Buyer and
Sellers agree to cooperate, and Buyer agrees to cause the Company
Group to cooperate, in the defense against or compromise of any
claim in any audit or proceeding, at the expense (excluding general
and administrative expenses) of the defending party.
(iii) The members of the Company Group shall not take a
position on any Tax Return with respect to such entity's federal tax
status (i.e., partnership, S corporation or C corporation) different
than that which such entity reported on its 1997 federal Tax
Returns.
7.11 Restructuring.
The Company agrees to cooperate, and to cause each member of the Company
Group to cooperate, with Buyer, at Buyer's cost and expense (other than general
and administrative expenses), prior to the Effective Time in restructuring the
legal form or ownership of any member of the Company Group, changing the form of
equity ownership of any member of the Company Group, permitting Buyer or any of
its Affiliates to purchase interests in, or assets of, Subsidiaries of the
Company from either the Company or a Subsidiary of the Company or effecting
other restructurings of the transactions contemplated herein; provided, however,
that
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such cooperation may be withheld if and to the extent the Company reasonably
determines that such cooperation would likely have an adverse effect (including,
without limitation, with respect to Taxes, but excluding any effect for which
Buyer agrees to provide reasonable compensation) on (i) the Company or RAP
(unless all conditions to Closing under Articles VIII, IX and X have or will be
satisfied or waived prior to the effective time of any proposed restructurings
and such restructurings would be effected on the Closing Date), (ii) any of the
Sellers or RAP Sellers or (iii) any of the direct or indirect owners of the
Sellers or RAP Sellers.
7.12 Year 2000 Remediation Program.
The Company shall, and shall cause the General Partner and each other
member of the Company Group and their respective officers and employees to: (i)
until the Closing Date, use diligent, commercially reasonable efforts to
implement the Year 2000 Remediation Program by the Closing Date, (ii) assist and
cooperate with Buyer in the refinement and implementation of the Year 2000
Remediation Program, (iii) assist and cooperate with Buyer in developing and
implementing plans for Buyer to continue the Year 2000 Remediation Program after
the Closing Date, and (iv) implement all solutions identified as reasonably
necessary to members of the Company Group by vendors, distributors and
manufacturers of the Computer Systems and Third Party Systems in order to ensure
Year 2000 Readiness, except for those solutions that the vendor cannot provide
by the Closing Date.
7.13 Exculpation and Indemnification.
Buyer shall ensure that the Company's obligations provided for in Section
11 of the Company's Partnership Agreement, with respect to the indemnification
of the General Partner, the limited partners of the Company, the members of the
Company's Advisory Committee, and any of their respective partners and
Affiliates (the "Indemnification Provisions") shall continue in effect, and
shall not be amended or eliminated, for a period of at least five years
following the Closing Date. During such five year period, neither the Buyer nor
any of its successors or assigns shall permit any other Person to acquire
effective control of the Company unless (i) such Person undertakes that it will
not permit the Indemnification Provisions to be amended or eliminated during
such period or (ii) Buyer assumes such obligations during such period. Neither
the Company nor any of its successors or assigns will transfer all or the
majority of its assets to any one or more Persons in a single transaction or
series of related transactions (including but not limited to any transfer in
connection with the liquidation or termination of the Company or any merger or
consolidation involving the Company), unless either Buyer or such transferee
agrees to assume and be responsible for the obligations of the Company under the
Indemnification Provisions during the five year period commencing on the Closing
Date. At the Closing, Buyer will assume the obligations of Sellers under the
Company's Partnership Agreement.
7.14 Credit Facility.
The Company, upon Buyer's request and with Buyer's assistance, will use
commercially reasonable efforts, at Buyer's expense, to obtain any consents of
lenders under the Credit Facility that are necessary to permit the Company to
keep the Credit Facility in place following the Closing. Following the
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Closing, Buyer will comply with the terms of the Credit Facility. If the Credit
Facility is required to be prepaid, Buyer agrees to do so at the Closing.
7.15 Admission of Buyer as a Substitute Limited Partner.
Each party will take such action as is required on its part pursuant to
the Company's Partnership Agreement in order that, upon the Closing, Buyer will
be admitted as a Substitute Limited Partner (as defined in the Company's
Partnership Agreement) under the provisions of the Company Partnership
Agreement.
7.16 Publicity.
Except as required by applicable law, prior to the Closing (i) the Company
and Buyer shall consult with and cooperate with the other prior to the Closing
Date with respect to the content and timing of all press releases and other
public announcements concerning this Agreement and the transactions contemplated
hereby and (ii) neither the Company nor Buyer shall make any such release or
announcement without the prior written consent and approval of the other, which
consent and approval shall not be unreasonably withheld. After the Closing Date,
except as required by applicable law, (i) the Disbursement Agent and Buyer shall
consult with and cooperate with the other with respect to the content and timing
of all press releases and other public announcements concerning this Agreement
and the transactions contemplated hereby and (ii) neither the Disbursement Agent
nor Buyer shall make any such release or announcement without the prior written
consent and approval of the other, which consent and approval shall not be
unreasonably withheld.
7.17 Services Provided by and to Alliance.
At the Closing, the Company will execute and deliver, and will cause
Alliance Communications, LLC to execute and deliver, a Services Agreement
substantially in the form of Exhibit 7.17 (the "Services Agreement").
7.18 Conveyance of Certain Interests Owned by the Company prior to
Closing.
Buyer and the Company agree that prior to the Closing, the Company shall
convey (i) its membership interests in Alliance Communications, LLC, and (ii)
its direct and indirect ownership interests in R&A Management, LLC to a Person
designated by the Company and that such ownership interests shall not be
acquired by the Buyer as a result of the acquisition of the Purchased Interests.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ALL PARTIES
The obligations of each of the parties to consummate the transaction
contemplated hereby are subject to the conditions that:
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8.1 Orders Prohibiting Consummation of Transactions.
At the Closing Date, there shall exist no applicable law, rule,
regulation, order, judgment or injunction the effect of which is to prohibit
consummation of the transactions contemplated by this Agreement, other than any
rule, regulation or order relating to Franchises, which shall be governed by
Section 9.8 hereof.
8.2 HSR Act.
All necessary pre-merger notification filings required under the HSR Act
will have been made with the Federal Trade Commission and the United States
Department of Justice and the prescribed waiting periods (and any extensions
thereof) will have expired or been terminated.
ARTICLE IX
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
All obligations of Buyer under this Agreement are subject to the
fulfillment (or waiver in whole or in part by Buyer in writing) on or before the
Closing Date (or such earlier date as may be specified), of each of the
following conditions:
9.1 Compliance with Agreement.
The Company and Sellers shall have performed and complied in all material
respects with all of their obligations under this Agreement to be performed by
them at or prior to Closing and there shall be no material uncured default of
the Company or Sellers under any term of this Agreement. Without limiting the
generality of the foregoing, all Purchased Interests shall have been tendered
for sale to Buyer, using instruments of conveyance in form and substance
reasonably satisfactory to Buyer, accompanied by all certificates, if any exist,
representing certificated Purchased Interests.
9.2 Correctness of Representations and Warranties.
Each of the representations and warranties of the Company and Sellers set
forth in this Agreement shall be true and correct in all respects on the Closing
Date (without giving effect to the materiality or Material Adverse Effect
qualifiers set forth therein) with the same force and effect as if such
representations and warranties had been made on and as of such date (except to
the extent such representations and warranties expressly speak as of an earlier
date (other than the general qualifiers in the lead in to Articles IV, V and
VI)), except for such failures to be true and correct that would not in the
aggregate have a Material Adverse Effect.
9.3 No Adverse Change in Business or Properties.
Since December 31, 1998, there shall not have been a Material Adverse
Effect.
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9.4 Certificate of Officer.
The Company shall deliver to Buyer a certificate of an authorized
executive officer of the General Partner dated the Closing Date, certifying as
to the fulfillment of the conditions set forth in Sections 9.1, 9.2 and 9.3
above, together with a certified authorizing resolution and incumbency
certificate.
9.5 Proceedings and Documents.
All Company Group and Seller corporate and other proceedings, taken in
connection with the transactions contemplated hereby and all documents incident
thereto shall be reasonably satisfactory in form and substance to Buyer and its
counsel.
9.6 Opinion of Counsel.
Buyer shall have received from Baker & Hostetler LLP, a favorable opinion
of such counsel, dated as of the Closing Date, substantially in the form of
Exhibit 9.6 hereto.
9.7 Opinion of FCC Counsel.
Buyer shall have received from Seller's FCC counsel, Cole, Raywid, &
Braverman LLP, a favorable opinion of such counsel, dated as of the Closing
Date, substantially in the form of Exhibit 9.7 hereto.
9.8 Consents.
All consents, waivers, approvals or authorizations of franchisors,
Governmental Authorities and other Third Parties that are Required Consents in
connection with the change of control of the Company to Buyer and the other
transactions contemplated by this Agreement shall have been obtained in
substantially the form set forth in Exhibit 9.8 hereto, and the Company shall
have delivered to Buyer copies of all such consents and approvals so obtained;
provided, however, that with respect to Franchise approvals, this condition
shall have been deemed to have been met if the Franchises with respect to which
such consents, waivers, approvals or authorizations which have not been obtained
do not cover more than five percent (5%) of the customers of the Company Group,
taken as a whole.
9.9 Purchase of Partnership Interests of RAP.
The transactions contemplated by the RAP Agreement shall have been
consummated, or will be consummated simultaneously with the transactions
contemplated hereunder.
9.10 Services Agreement.
Alliance Communications, LLC shall have executed and delivered the
Services Agreement.
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ARTICLE X
CONDITIONS PRECEDENT TO SELLERS' OBLIGATIONS
All obligations of Sellers under this Agreement are subject to fulfillment
(or waiver in whole or in part by Sellers in writing) on or before the Closing
Date (or such earlier date as may be specified) of each of the following
conditions:
10.1 Correctness of Representations and Warranties.
Each of the representations and warranties of Buyer set forth in this
Agreement shall be true and correct in all respects on the Closing Date (without
giving effect to the materiality or Material Adverse Effect qualifiers set forth
therein) with the same force and effect as if such representations and
warranties had been made on and as of such date (except to the extent such
representations and warranties specifically speak as of an earlier date), except
for such failures to be true and correct that would not in the aggregate
materially impair Buyer's ability to perform its obligations hereunder or
subject any Seller to any material liability or loss of benefit.
10.2 Compliance with Agreement.
Buyer shall have performed and complied in all material respects with all
of its obligations under this Agreement to be performed by it at or prior to
Closing and there shall be no material uncured default of the Buyer under any
term of this Agreement.
10.3 Certificate of Officer.
Buyer shall have delivered to Sellers a certificate of an executive
officer dated the Closing Date, certifying as to the fulfillment of the
conditions set forth in Sections 10.1 and 10.2 above, together with a certified
authorizing resolution and incumbency certificate.
10.4 Proceedings and Documents.
All Buyer corporate and other proceedings taken in connection with the
transactions contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in form and substance to the Disbursement Agent, the
Company and the Company's counsel.
10.5 Opinion of Counsel.
Seller shall have received from Buyer's counsel, Irell & Manella LLP, a
favorable opinion of such counsel, dated as of the Closing Date, substantially
in the form of Exhibit 10.5 hereto.
10.6 Sale of Partnership Interests of RAP.
Buyer and the RAP Sellers shall have consummated, or will simultaneously
consummate, the transactions contemplated by the RAP Agreement, except that this
condition shall not apply if one or more RAP Sellers have failed to deliver
their interests in breach of the RAP Agreement
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and Buyer and the remaining RAP Sellers have consummated, or will simultaneously
consummate, the transactions contemplated thereby.
ARTICLE XI
RIGHTS TO TERMINATE; BREACH;
11.1 Termination.
(a) This Agreement may be terminated prior to the Closing:
(i) at any time by mutual consent of the Disbursement Agent
(on behalf of Sellers) and Buyer;
(ii) by either the Disbursement Agent (on behalf of Sellers)
or Buyer by written notice to the others, if the Closing has
not occurred on or prior to December 31, 1999 (the "Outside
Date"); provided further that (x) Buyer shall only be
permitted to terminate this Agreement under this paragraph
(ii) if Buyer is not in material breach of this Agreement or
the RAP Agreement and no prior breach of either such agreement
by Buyer has materially contributed to the delay in the
consummation of the Closing, and (y) the Disbursement Agent
(on behalf of Sellers) shall only be permitted to terminate
this Agreement under this paragraph (ii) if the Company, RAP,
the Sellers and RAP Sellers are not in material breach of this
Agreement or the RAP Agreement and no prior breach of either
such agreement by any such Person has materially contributed
to the delay in the consummation of the Closing;
(iii) by Buyer, upon a breach of one or more representations
or warranties of Company or Sellers herein (without giving
effect to the materiality or Material Adverse Effect
qualifiers set forth therein) such as would, in the aggregate,
have a Material Adverse Effect, or upon any material breach of
any covenant or agreement on the part of the Company or any
Seller set forth in this Agreement, in each case that has not
been cured within 30 days following receipt by the Company of
written notice of such breach;
(iv) by the Disbursement Agent (on behalf of Sellers), upon a
breach of one or more representations or warranties of Buyer
herein (without giving effect to the materiality or Material
Adverse Effect qualifiers set forth therein) such as would, in
the aggregate, materially impair Buyer's ability to perform
its obligations hereunder, or subject any Seller to any
material liability or loss of benefit, or upon any material
breach of any covenant or agreement on the part of Buyer set
forth in this Agreement, in each case that has not been cured
within 30 days following receipt by Buyer of written notice of
such breach.
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(b) In the event either the Disbursement Agent or Buyer shall
terminate this Agreement pursuant to Section 11.1(a), the
terminating party shall give prompt written notice thereof to the
other parties hereto, and this Agreement shall thereupon terminate,
without further action by any of the parties hereto. If the
Agreement is terminated as provided herein:
(i) except as otherwise provided herein, the termination of
this Agreement shall not relieve any party of any liability
for breach of this Agreement prior to the date of termination;
and
(ii) all filings, applications and other submissions relating
to the assignment of the Purchased Interests made pursuant to
this Agreement shall, to the extent practicable, be withdrawn
from the agency or other Person to which made.
ARTICLE XII
INDEMNIFICATION
12.1 Indemnification by Sellers With Respect to the Company.
From and after the Closing, subject to (a), (b), and (c) below, Sellers
shall indemnify Buyer against and hold it harmless from any and all
Indemnifiable Damages which Buyer may suffer or incur by reason of (i) the
Company's breach of any of the Company's representations and warranties
contained in this Agreement or any document, certificate or agreement delivered
pursuant hereto; or (ii) the Company's breach prior to the Closing of any of the
Company's covenants or agreements contained in this Agreement or any document,
certificate or agreement delivered by the Company pursuant hereto. However,
notwithstanding anything contained in this Agreement to the contrary, if Buyer
makes any claim for damages, Buyer will use reasonable efforts to mitigate the
amount and nature thereof in accordance with customary industry maintenance
procedures. Notwithstanding anything to the contrary herein, the foregoing
obligation of Sellers to indemnify Buyer shall be subject to and limited by each
of the following qualifications:
(a) All representations and warranties made by the Company in this
Agreement (or any document, certificate or agreement delivered pursuant
hereto) shall survive the Closing hereunder for a period of one year
thereafter other than (a) the representations and warranties set forth in
Section 5.8, which shall survive for the duration of the applicable
statute of limitations, (b) the representations and warranties set forth
in Section 5.22, which shall survive the Closing for a period of two years
thereafter, and (c) the representations and warranties set forth in
Section 5.4, which shall survive indefinitely. The period of survival of
the respective representations and warranties provided for in this Section
is referred to herein as the "Indemnity Period." No claim for
indemnification for breach of a representation or warranty may be asserted
after the expiration of the Indemnity Period of such representation or
warranty; provided that the written assertion of any claim by a party
against the other hereunder with respect to the breach or alleged breach
of any representation or warranty (or a series of facts stated in
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the written assertion of the claim which would support such breach) shall
extend the Indemnity Period for such representation or warranty with
respect to such claim through the date such claim is conclusively
resolved. No investigation by either party shall relieve the other party
from any liability for any misrepresentation or breach of warranty made by
such other party in this Agreement or any related agreement.
(b) Other than with respect to a breach of Section 5.4 or 5.8, (i)
Sellers shall have no liability to Buyer on or account of any
Indemnifiable Damages provided in Section 12.1 unless and until such
damages in the aggregate exceed Two Million Five Hundred Thousand Dollars
($2,500,000) (the "Threshold Amount"), in which event Buyer shall be
entitled to all (subject to clause (ii) below in this paragraph) of the
Indemnifiable Damages from the first dollar; and (ii) the total liability
of Sellers for their indemnity obligation under this Section 12.1 shall be
limited in all respects to, and shall be payable solely from, and to the
extent of, the InterLink Indemnity Fund and Buyer's sole and exclusive
remedy shall be recourse to the InterLink Indemnity Fund upon and subject
to Buyer's compliance with the terms and conditions of the Closing Escrow
Agreement; provided, however, that (1) if Section 12.1(c) Damages have
been paid from the InterLink Indemnity Fund, and if the amount remaining
in the InterLink Indemnity Fund is as a result insufficient to satisfy
claims payable under this Section 12.1(b), then the Sellers shall pay pro
rata to the Disbursement Agent and the Disbursement Agent shall pay to
Buyer the lesser of (x) the amount of 12.1(c) Damages paid from the
InterLink Indemnity Fund, and (y) the amount by which claims under this
Section 12.1(b) exceed the InterLink Indemnity Fund, and (2) upon release
of the Year Disbursement Amount, each Seller shall thereafter continue to
be severally obligated to satisfy claims for breaches of Section 5.22
brought during the relevant Indemnity Period, in an aggregate amount no
greater than the portion of the Year Disbursement Amount actually received
by such Seller.
(c) With respect to any indemnification sought for a breach of
Sections 5.4 and 5.8, each Seller shall be obligated to indemnify Buyer in
respect of its Indemnifiable Damages pro rata in accordance with the
percentages set forth on the Purchase Price Allocation Schedule.
Notwithstanding paragraph (b) above, such indemnification for breaches of
Section 5.4 and 5.8 (i) shall not be subject to the Threshold Amount set
forth in (b) (i) above and (ii) shall not be limited by the amount of the
InterLink Indemnity Fund. In the event Sellers are obligated to indemnify
Buyer in respect of Indemnifiable Damages for breaches of Section 5.4 or
5.8 ("Section 12.1(c) Damages"), such obligation will be paid first from
the InterLink Indemnity Fund to the extent of any amounts remaining in the
InterLink Indemnity Fund, and if insufficient funds remain in the
Indemnity Fund, then each Seller shall be obligated for, and shall pay to
the Disbursement Agent, its pro rata share of such shortfall, and the
Disbursement Agent shall pay the amount of the shortfall to Buyer.
(d) With respect to any claim for indemnification hereunder that may
reasonably be covered by the indemnification provisions set forth in the
Scott Agreement or Omega Agreement, Buyer will use commercially reasonable
efforts to pursue claims
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under those agreements before pursuing a claim hereunder; provided,
however, that (i) during its pendency, any such claim shall be deemed a
pending claim for purposes of determining the amount of the InterLink
Indemnity Fund to be released pursuant to Section 2.5 hereof, (ii) with
respect to any claim brought hereunder for Indemnifiable Damages not fully
recovered under the Scott Agreement or the Omega Agreement, the date on
which such claim is first made (whether under the Scott Agreement, the
Omega Agreement or hereunder) shall determine whether such claim has been
brought during the applicable Indemnity Period, and (iii) Buyer shall
provide the Disbursement Agent with a copy of any claim for
indemnification made on or after the Closing Date under the Scott
Agreement or the Omega Agreement at the time such claim is first made.
(e) Each Seller makes, constitutes and appoints the Disbursement
Agent as its true and lawful attorney-in-fact, and authorizes it to take
any and all such actions with regard to the disposition and settlement of
any claims for indemnification pursuant to this Section 12.1, on behalf of
such Sellers and grants to Disbursement Agent full power and authority to
do and perform each and every act as the Disbursement Agent may deem
necessary or advisable to carry out fully the intent of the foregoing as
such Seller might or could do personally.
12.2 Indemnification by Sellers for Seller Breaches.
From and after the Closing, each Seller shall indemnify Buyer against and
hold it harmless from any and all Indemnifiable Damages which Buyer may suffer
or incur by reason of (i) inaccuracy of any of the representations or warranties
of such Seller contained in Article IV of this Agreement; or (ii) such Seller's
breach of any of its covenants or agreements contained in this Agreement or any
document, certificate or agreement delivered by such Seller pursuant hereto.
Notwithstanding anything contained in this Section 12.2 to the contrary, if
there is a claim for damages, Buyer will use commercially reasonable efforts to
mitigate the amount and nature of such damages in accordance with customary
industry maintenance procedures. The foregoing obligation of each Seller to
indemnify Buyer shall be subject to and limited by each of the following
qualifications:
(a) Each of the representations, warranties, covenants and
agreements made by such Seller in this Agreement or in any documents or
instruments delivered by such Seller pursuant hereto shall survive the
Closing for a period of one (1) year thereafter, other than the
representations and warranties set forth in Section 4.1, which shall
survive indefinitely. Any claims made by Buyer pursuant to this Section
12.2 shall not be subject to the Threshold Amount. In addition, each
Seller shall be directly liable for all amounts required to be paid by
such Seller under this Section 12.2, and such amounts shall not be paid
from, nor subject to the limits of, the InterLink Indemnity Fund.
(b) Each such Seller individually, and not jointly, will indemnify
Buyer and hold it harmless with respect to Indemnifiable Damages required
to be paid by such Seller under this Section 12.2. Upon the occurrence of
an event to which an individual Seller's indemnity obligation under this
Section 12.2 applies, Buyer shall seek indemnification
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with respect to such Seller's liability for such event only from such
Seller, and not from any other Seller(s).
12.3 Indemnification by Buyer.
From and after the Closing, Buyer shall indemnify Sellers against and hold
them harmless from any and all Indemnifiable Damages which any of the Sellers
may suffer or incur by reason of (i) Buyer's breach of any of Buyer's
representations and warranties contained in this Agreement or any document,
certificate or agreement delivered by the Buyer pursuant hereto; (ii) Buyer's
breach of any of Buyer's covenants, or agreements contained in this Agreement or
any document, certificate or agreement delivered pursuant hereto; or (iii) any
liability for claims made by third parties against any of the Sellers arising
out of the operation of the Systems by Buyer after the Closing Date. Without
limiting the generality of the foregoing, with respect to the measurement of
Indemnifiable Damages, Sellers shall have the right to be put in the same
financial position as they would have been in had Buyer not breached the
respective representation, warranty, covenant or agreement. The foregoing
obligation of Buyer to indemnify Sellers shall be subject to and limited by the
qualification that each of the representations and warranties made by Buyer in
this Agreement shall survive for a period of one (1) year from and after the
Closing Date, unless a claim shall have been commenced prior to such time in
which case the applicable representations and warranties shall survive with
respect to such claim until such claim has been resolved, and thereafter all
such representations and warranties shall be extinguished, and no action for the
enforcement of the foregoing obligation may be commenced with respect to any
claim made more than one year following the Closing Date.
12.4 Effect of Materiality Qualifiers.
For purposes of this Article XII, the determination of whether any breach
of any representation or warranty in Articles IV, V and VI has occurred, as well
as the determination of the Indemnifiable Damages therefrom, shall be made
without regard to any materiality or Material Adverse Effect qualifiers therein.
12.5 Notice and Right to Defend Third Party Claims.
Promptly upon receipt of notice of any claim, demand or assessment made by
any Third Party or the commencement of any suit, action or proceeding brought by
any Third Party in respect of which indemnity may be sought under any provision
of Article XII hereof, the party seeking indemnification (the "Indemnitee") will
give written notice thereof to the party from whom indemnification is sought
(the "Indemnitor") promptly and in any event within sufficient time to enable
the Indemnitor to respond to such claim, demand, or assessment or answer or
otherwise plead in such suit, action or proceeding. The failure or omission of
such Indemnitee to so notify promptly the Indemnitor of any such Third Party
claim, demand, assessment, suit, action or proceeding shall not relieve such
Indemnitor from any liability which it may have to such Indemnitee in connection
therewith, on account of any indemnity agreement contained in Article XII
hereof, except to the extent that the Indemnitor shall have been actually
prejudiced thereby. In case any Third Party claim, demand or assessment shall be
asserted or Third Party
60
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suit, action or proceeding commenced against an Indemnitee, and such Indemnitee
shall notify the Indemnitor of the commencement thereof, the Indemnitor shall be
entitled to participate therein, and, to the extent that it may wish, to assume
the defense, conduct or settlement thereof, with counsel reasonably satisfactory
to the Indemnitee by providing the Indemnitee with written notice within 10
business days after the Indemnitor's receipt of the Indemnitee's notice of the
claim, demand, assessment, suit, action or proceeding. After notice from the
Indemnitor to the Indemnitee of its election so to assume the defense, conduct
or settlement thereof within such 10-business day period, the Indemnitor will
not be liable to the Indemnitee for any legal or other expenses subsequently
incurred by the Indemnitee in connection with the defense, conduct or settlement
thereof. The Indemnitee, at Indemnitor's cost and expense, will cooperate with
the Indemnitor in connection with any such claim, and make personnel, books and
records relevant to the claim available to the Indemnitor. Neither party shall
settle such claim, demand, assessment, suit, action or proceeding without the
consent of the other party, which shall not be unreasonably withheld provided
that in no event shall either party be obligated to consent to any settlement
which (i) arises from or is part of any criminal action, suit or proceeding,
(ii) contains a stipulation to, confession of judgment with respect to, or
admission or acknowledgment of, any liability or wrongdoing on the part of such
party, (iii) provides for injunctive relief, or other relief or finding other
than money damages, which is binding on such party, or (iv) does not contain an
unconditional release of such party.
12.6 Exclusive Remedy; Limitation of Liability.
From and after the Closing Date, the sole and exclusive remedy of any
party hereto for any claim arising under this Agreement (or any certificate,
document or agreement delivered pursuant hereto) against any other party shall
be the indemnification rights provided in this Article XII, provided that
nothing herein shall relieve any party from any liability for actual fraud.
Notwithstanding anything to contrary in Sections 12.1 and 12.2, no Seller shall
be liable to Buyer for Indemnifiable Damages in excess of the pro rata portion
of the Purchase Price received by such Seller.
ARTICLE XIII
MISCELLANEOUS
13.1 Seller Liability Several and not Joint.
Buyer acknowledges and agrees that the obligations of the Sellers under
this Agreement are several and not joint, and wherever this Agreement refers to
the several liability of the Sellers or a Seller's "pro rata portion" of any
amount, such liability or portion shall be determined based on the respective
percentage interest of such Seller in the InterLink Equity Value set forth on
the Purchase Price Allocation Schedule.
13.2 Appointment of Sellers' Representative.
Each of Sellers hereby irrevocably appoints Disbursement Agent as the
agent and attorney-in-fact of such Seller, with full power of substitution and
resubstitution to do such things and to take such actions (including without
limitation to execute on such Seller's behalf
61
<PAGE> 66
the Closing Escrow Agreement regarding Buyer's retention of a portion of the
InterLink Indemnity Fund in certain circumstances), in the name and on behalf of
such Seller, as this Agreement provides may be done or taken on behalf of
Sellers. Each of Sellers acknowledges and agrees that this appointment and power
of attorney is irrevocable during the term of this Agreement and is coupled with
an interest. Each of Sellers hereby agrees to indemnify and hold harmless
Disbursement Agent for all actions or inactions of Disbursement Agent taken or
not taken in good faith in connection with, and permitted under, this Agreement.
13.3 Expenses.
Except as otherwise provided in this Agreement, each party shall pay its
own expenses, taxes and other costs incident to or resulting from this Agreement
whether or not the transactions contemplated hereby are consummated. Buyer's
costs include, but are not limited to, fees for the filing or recording of
instruments of transfer. The Sellers and Buyer shall each pay one-half of any
sales or use tax arising out of or resulting from this Agreement, with the
Sellers' portion being paid pro rata in accordance with the percentages
indicated on the Purchase Price Allocation Schedule.
13.4 Knowledge.
For purposes of this Agreement, the Company shall be deemed to have
knowledge of and be aware of all facts, circumstances and information of which
Monroe M. Rifkin, Kevin B. Allen, Jeffrey D. Bennis, Dale D. Wagner, Peter N.
Smith and Stephen E. Hattrup have knowledge or are aware.
13.5 Assignment.
Neither this Agreement, nor any right hereunder, may be assigned by any of
the parties hereto, except that at any time, Buyer may upon at least seven (7)
days prior written notice to the Company at any time prior to the first filing
of Forms 394 with franchisors assign all of its rights hereunder to an entity
owned and controlled by Paul G. Allen, provided, that, notwithstanding any such
assignment, Buyer shall (with such entity) be and remain liable to Sellers for
the performance and fulfillment of all of Buyer's covenants, duties and
obligations hereunder.
13.6 Successors.
This Agreement shall be binding upon and inure to the benefit of Buyer and
its heirs, successors or assigns, and Sellers and their respective heirs,
successors or permitted assigns, subject in all respects to Section 13.5 hereof.
13.7 Entire Agreement.
This Agreement, including the Schedules and Exhibits hereto, constitutes
the entire agreement of the parties, and supersedes all prior documents,
agreements (including, without limitation, that certain letter of intent between
the Company and Buyer dated February 8, 1999), promises, covenants,
arrangements, communications, representations or warranties, whether oral
62
<PAGE> 67
or written, by or on behalf of either party hereto or any officer, employee,
representative or agent of either party hereto.
13.8 Third Parties.
Except as specifically set forth or referred to herein, nothing herein
expressed or implied is intended or shall be construed to confer upon or give to
any Person, other than the parties hereto and their permitted successors or
assigns, any rights or remedies under or by reason of this Agreement.
13.9 Amendments in Writing.
The terms of this Agreement may not be amended, modified or waived except
by written agreement among the parties. The failure of any party to enforce any
right arising under this Agreement on one or more occasions will not operate as
a waiver of that or any other right on that or any other occasion.
13.10 Governing Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of New York, without regard to the conflicts of laws
provisions thereof.
13.11 Interpretation.
The headings of the Articles and Sections of this Agreement are inserted
for convenience of reference only and shall not constitute a part hereof or
affect in any way the meaning or interpretation of this Agreement. Each of the
parties hereto acknowledges that it has actively participated in the
preparation, drafting and review of this Agreement, and each party hereby waives
any claim that this Agreement or any provision hereof (or any Exhibit or
Schedule hereto) is to be construed against the other party hereto as the
draftsperson thereof.
13.12 Certain Provisions Relating to R&A Management LLC's 401(k) Plan.
(a) As of the Closing Date, the Company or any Affiliate thereof
shall cause the account balances in the Rifkin & Associates, Inc. 401(k)
Retirement Savings Plan, a plan qualified and exempt under Sections
401(a), 401(k) and 501(a) of the Internal Revenue Code of 1986, as amended
("Company's 401(k) Plan") of all participants who continue to be employees
of the Company after the Closing Date ("Continuing Employees") to become
fully vested and nonforfeitable. Each Continuing Employee's period of
service with Company or its Affiliates before the Closing shall be counted
in determining eligibility for, and vesting of, benefits under each
employee benefit plan maintained or sponsored by the Company, Buyer or
their Affiliates after the Closing, or to which the Company, Buyer or
their Affiliates contribute after the Closing. Each Continuing Employee
shall be covered as of the Closing under any employee benefit plan
maintained or sponsored by the Company, Buyer or their Affiliates, or to
which the Company, Buyer, or their Affiliates contribute, providing health
care benefits (whether or
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not through insurance) without regard to any waiting period or any
condition or exclusion based on any pre-existing conditions, medical
history, claims experience, evidence of insurability, or genetic factors.
After the Closing, R&A Management, LLC and its Affiliates will continue to
provide continuation coverage under Section 4980B of the Code to
"qualified beneficiaries" who had "qualifying events" (as such terms are
defined in Section 4980B of the Code) on or before the Closing Date.
(b) As soon as reasonably practicable following the Closing Date, an
amount in cash equal to the aggregate value of the account balances in the
Company's 401(k) Plan attributable to Continuing Employees, which account
balances shall include any employer matching contributions in respect of
employee contributions made prior to the Closing Date and shall be valued,
to the extent administratively feasible, so as to include earnings and
losses to a date not more than thirty (30) days prior to the date of
transfer, will be transferred to the Charter Communications, Inc. 401(k)
Plan (the "Charter Plan"), along with corresponding liabilities to Persons
entitled to payment of benefits pursuant to the terms of Company's 401(k)
Plan; provided, however, that Buyer shall have no obligation to cause the
Charter Plan to accept such a transfer if such a transfer (i) would
violate Section 414(l) of the Code, (ii) could not be accomplished unless
the Charter Plan were amended to provide any form of benefit distribution
not available as of the Closing Date under the Charter Plan, or (iii)
would not be commercially reasonable or administratively practicable.
After the aforesaid transfer of account balances, the payment of benefits
under Charter Plan for Continuing Employees shall be the sole
responsibility of Buyer or any Affiliate thereof, and Buyer acknowledges
and warrants to the Company that neither it nor any Affiliate thereof
shall have any responsibility or obligation whatsoever therefor.
(c) As soon as reasonably practicable following the later of the
Closing Date or the date of the receipt by the Rifkin & Associates, Inc.
Et Al Defined Contribution Transfer Plan (the "Rifkin Transfer Plan") of a
favorable determination letter from the Internal Revenue Service, Charter
shall establish a plan similar to the Rifkin Transfer Plan (the "Charter
Transfer Plan"), and an amount in cash equal to the aggregate value of the
account balances in the Rifkin Transfer Plan attributable to Continuing
Employees, which account balances shall be valued, to the extent
administratively feasible, so as to include earnings and losses to a date
not more than thirty (30) days prior to the date of transfer, will be
transferred to the Charter Transfer Plan, along with corresponding
liabilities to Persons entitled to payment of benefits pursuant to the
terms of the Rifkin Transfer Plan. After the aforesaid transfer of account
balances, the payment of benefits under the Charter Transfer Plan for
Continuing Employees shall be the sole responsibility of Buyer or any
Affiliate thereof, and Buyer acknowledges and warrants to the Company that
neither it nor any Affiliate thereof shall have any responsibility or
obligation whatsoever therefor.
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13.13 Notices.
All notices hereunder shall be in writing and shall be deemed to have been
delivered on the date of the first attempted delivery by (i) the United States
Postal Service, unless otherwise provided herein, to the respective party if
mailed by certified mail, return receipt requested, or (ii) a reputable
overnight delivery service, to the respective party at its address set forth
below or such other address as either party may designate to the other by
written notice in accordance herewith:
If to Sellers:
R&A Management, LLC
360 South Monroe Street, Suite 600
Denver, Colorado 80209
Attention: Kevin B. Allen
Telecopy: (303) 322-3553
with a complete copy under separate cover (which copy by itself shall not
constitute notice) to:
Stuart G. Rifkin, Esq.
Baker & Hostetler
303 East 17th Avenue, Suite 1100
Denver, Colorado 80203
Telecopy: (303) 861-7805
If to Buyer:
Charter Communications, Inc.
12444 Powerscourt Drive
St. Louis, Missouri 63131
Attention: Jerald L. Kent, President
Telecopy: (314) 965-8793
with a complete copy under separate cover (which copy by itself shall not
constitute notice) to:
Charter Communications, Inc.
12444 Powerscourt Drive
St. Louis, Missouri 63131
Attention: Curtis S. Shaw, Esq.
Senior Vice President & General Counsel
Telecopy: (314) 965-8793
65
<PAGE> 70
and to:
Irell & Manella, LLP
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067
Attention: Alvin G. Segel, Esq.
Telecopy: (310) 203-7199
13.14 Severability.
Any provision hereof which is prohibited or unenforceable shall be
ineffective only to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.
13.15 Counterparts.
This Agreement may be executed in one or more counterparts and each
executed copy shall constitute an original.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
66
<PAGE> 71
IN WITNESS WHEREOF, the parties hereunto have duly executed this
Agreement.
BUYER:
CHARTER COMMUNICATIONS, INC.
By: /s/ Curtis S. Shaw
--------------------------------
Name: Curtis S. Shaw
Title: Senior Vice President
COMPANY:
INTERLINK COMMUNICATIONS PARTNERS, LLLP
By: Rifkin, Co., its General Partner
By: /s/ Kevin B. Allen
--------------------------------
Kevin B. Allen, Vice President
DISBURSEMENT AGENT:
R&A MANAGEMENT, LLC
By: Rifkin & Associates Inc., its Manager
By: /s/ Kevin B. Allen
-------------------------------
Kevin B. Allen, Chief Executive Officer
[SIGNATURES CONTINUE ON FOLLOWING PAGE]
67
<PAGE> 72
SELLERS:
RIFKIN, CO.
By: /s/ Kevin B. Allen
-------------------------------
Kevin B. Allen, Vice President
HAMPSHIRE MEDIA PARTNERS II, L.P.
By: LEXINGTON MEDIA PARTNERS II, L.P.,
its General Partner
By: LEXINGTON EQUITY PARTNERS II, INC.,
its General Partner
By: /s/ David H. Morse
-------------------------------
Name: David H. Morse
Title: Vice President
HAMPSHIRE EQUITY PARTNERS CAYMAN D.B. II, L.P.
By: LEXINGTON EQUITY PARTNERS CAYMAN II D.B., L.P.,
its General Partner
By: LEXINGTON EQUITY PARTNERS II, INC.,
its General Partner
By: /s/ David H. Morse
-------------------------------
Name: David H. Morse
Title: Vice President
HAMPSHIRE EQUITY PARTNERS CAYMAN II, L.P.
By: LEXINGTON EQUITY PARTNERS CAYMAN II, L.P.,
its General Partner
By: LEXINGTON EQUITY PARTNERS II, INC.,
its General Partner
By: /s/ David H. Morse
-------------------------------
Name: David H. Morse
Title: Vice President
68
<PAGE> 73
LEXINGTON MEDIA PARTNERS II, L.L.C.
By: LEXINGTON MEDIA PARTNERS II, L.P.,
its Manager
By: LEXINGTON EQUITY PARTNERS II, INC.,
its General Partner
By: /s/ David H. Morse
-------------------------------
Name: David H. Morse
Title: Vice President
THE PERMANENT UNIVERSITY FUND OF THE STATE OF TEXAS
By: UNIVERSITY OF TEXAS INVESTMENT MANAGEMENT
COMPANY,
its Investment Manager
By: /s/ Austin M. Long III
-------------------------------
Name: Austin M. Long III
Title: Managing Director Private Markets
THE BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS
SYSTEM
By: UNIVERSITY OF TEXAS INVESTMENT MANAGEMENT
COMPANY,
its Investment Manager
By: /s/ Austin M. Long III
-------------------------------
Name: Austin M. Long III
Title: Managing Director Private Markets
69
<PAGE> 74
WILLIS STEIN & PARTNERS II, L.P.
By: WILLIS STEIN & PARTNERS MANAGEMENT II, L.P.,
its General Partner
By: WILLIS STEIN & PARTNERS MANAGEMENT II, LLC,
its General Partner
By: /s/ David M. Gill
--------------------------------------
Name: David M. Gill
Title: Managing Director
WILLIS STEIN & PARTNERS DUTCH, L.P.
By: WILLIS STEIN & PARTNERS MANAGEMENT II, L.P.,
its General Partner
By: WILLIS STEIN & PARTNERS MANAGEMENT II, LLC,
its General Partner
By: /s/ David M. Gill
--------------------------------------
Name: David M. Gill
Title: Managing Director
INTERLINK INVESTMENT CORP.
By: /s/ Kevin B. Allen
---------------------------------------
Kevin B. Allen, Vice President
INTERLINK INVESTMENT II, LLC
By: /s/ Kevin B. Allen
---------------------------------------
Kevin B. Allen, Manager
RIFKIN & ASSOCIATES, INC.
By: /s/ Monroe M. Rifkin
---------------------------------------
Monroe M. Rifkin, Chairman of the Board
70
<PAGE> 75
RIFKIN FAMILY INVESTMENT COMPANY, L.L.L.P.
By: its General Partners
/s/ Monroe M. Rifkin
------------------------------------------
Monroe M. Rifkin, General Partner
/s/ Stuart G. Rifkin
------------------------------------------
Stuart G. Rifkin, General Partner
/s/ Bruce A. Rifkin
------------------------------------------
Bruce A. Rifkin, General Partner
/s/ Ruth R. Bennis
------------------------------------------
Ruth R. Bennis, General Partner
MORRIS CHILDREN TRUST
By: /s/ Charles R. Morris, III
------------------------------------------
Charles R. Morris, III, Trustee
CRM II LIMITED PARTNERSHIP, LLLP
By: /s/ Charles R. Morris, III
------------------------------------------
Name: Charles R. Morris, III
Title: GP
71
<PAGE> 76
NAS PARTNERS I L.L.C.
By: /s/ John G. Quigley
--------------------------------------
Name: John G. Quigley
Title: Member
NASSAU CAPITAL PARTNERS II, L.P.
By: NASSAU CAPITAL, LLC,
its General Partner
By: /s/ John G. Quigley
--------------------------------------
Name: John G. Quigley
Title: Member
FIRST UNION INVESTORS, INC.
By: /s/ Scott B. Perper
--------------------------------------
Name: Scott B. Perper
Title: Senior Vice President
NORWEST EQUITY CAPITAL, LLC
By: ITASCA NEC, LLC,
its Member
By: /s/ John P. Wharley
--------------------------------------
Name: John P. Wharley
Title: Managing Administrative Member
72
<PAGE> 77
DLJ FUND INVESTMENT PARTNERS II, L.P.
By: DLJ LBO PLANS MANAGEMENT CORPORATION,
its General Partner
By: /s/ Ivy Dodes
----------------------------------------
Name: Ivy Dodes
Title: Vice President
DLJ PRIVATE EQUITY EMPLOYEES FUND, L.P.
By: DLJ LBO PLANS MANAGEMENT CORPORATION,
its General Partner
By: /s/ Ivy Dodes
----------------------------------------
Name: Ivy Dodes
Title: Vice President
DLJ PRIVATE EQUITY PARTNERS FUND, L.P.
By: WSW CAPITAL INC.,
its General Partner
By: /s/ Ivy Dodes
----------------------------------------
Name: Ivy Dodes
Title: Vice President
DLJ CAPITAL CORPORATION
By: /s/ Ivy Dodes
----------------------------------------
Name: Ivy Dodes
Title: Vice President
DLJ CAPITAL PARTNERS I, LLC
By: DLJ LBO PLANS MANAGEMENT CORPORATION,
its Managing Member
By: /s/ Ivy Dodes
----------------------------------------
Name: Ivy Dodes
Title: Vice President
73
<PAGE> 78
CIP INTERLINK L.L.C.
By: CO-INVESTMENT PARTNERS, L.P.,
its Member
By: CIP PARTNERS LLC,
its General Partner
By: /s/ Walter M. Cain
_____________________________________
Name: Walter M. Cain
Title: Individual Managing Member
PROCIFIC INTERLINK CORPORATION
By:/s/ Hamza Amiri
_______________________________________
Name: Hamza Amiri
Title: Director
____________________________________
INDIANA CABLEVISION MANAGEMENT CORP.
By: /s/ Monroe M. Rifkin
_______________________________________
Monroe M. Rifkin, President
/s/ Monroe M. Rifkin
__________________________________________
MONROE M. RIFKIN
/s/ Kevin B. Allen
__________________________________________
KEVIN B. ALLEN
/s/ Jeffrey D. Bennis
__________________________________________
JEFFREY D. BENNIS
/s/ Stephen E. Hattrup
__________________________________________
STEPHEN E. HATTRUP
/s/ Bruce A. Rifkin
__________________________________________
BRUCE A. RIFKIN
74
<PAGE> 79
/s/ PETER N. SMITH
__________________________________________
PETER N. SMITH
/s/ DALE D. WAGNER
__________________________________________
DALE D. WAGNER
/s/ STUART G. RIFKIN
__________________________________________
STUART G. RIFKIN
/s/ PAUL A. BAMBEI
__________________________________________
PAUL A. BAMBEI
/s/ LUCILLE A. MAUN
__________________________________________
LUCILLE A. MAUN
/s/ RUTH R. BENNIS
__________________________________________
RUTH R. BENNIS
75
<PAGE> 80
INDEX TO EXHIBITS
Exhibit 2.5 Form of Closing Escrow Agreement
Exhibit 7.17 Form of Services Agreement
Exhibit 9.6 Form of Seller's Counsel Opinion
Exhibit 9.7 Form of Seller's FCC Counsel Opinion
Exhibit 9.8 Form of Consent or Approval to Change of Control
Exhibit 10.5 Form of Buyer's Opinion of Counsel
INDEX OF SCHEDULES
Schedule Title
- -------- -----
1.1(A) Slow Pay Bulk Accounts
1.1(B) Description of Systems
1.1(C) Vehicles
2.1 Purchased Interests
2.4(A) Basic Customer Schedule
4.3 Sellers' Required Consents
4.4(A) Outstanding Equity of Certain Corporate Partners
4.4(C) Litigation for Certain Corporate Partners
4.4(F) Ventures of Certain Corporate Partners
4.4(H) Tax Audits for Certain Corporate Partners
4.4(I) Consolidated Returns of Certain Corporate Partners
5.1(B) Subsidiaries
5.3 Company's Required Consents
5.6 Financial Statements
5.8 Taxes
5.9(A) Franchises
5.9(B) Necessary Contracts
5.9(C) Unfulfilled Commitments Under Franchises and Necessary Contracts
5.10(A) Material Agreements
5.11(A) Systems' Capacity, Subscribers and Rates
5.11(B) Unfiled or Untimely Filed Reports
5.12 Labor Matters
5.13 Absence of Certain Developments
5.14 Real Estate
5.16(B) Carriage Noncompliance
5.16(H) Rate Regulating Governmental Authorities
5.16(I) Overbuild and Franchise Competition
5.17 Transactions Outside of Ordinary Course of Business
5.18 Litigation
5.20 Retirement Plans
<PAGE> 81
5.21 Insurance Policies and Surety Bonds
5.22 Noncompliance with Environmental Laws
5.23 Sale Commitments
7.3(A) Capital Expenditure Projects
77
<PAGE> 1
Exhibit 3.1
CERTIFICATE OF FORMATION
OF
CHARTER COMMUNICATIONS HOLDINGS LLC
This Certificate of Formation of Charter Communications Holdings LLC is
being duly executed and filed by the undersigned, as an authorized person, for
the purpose of forming a limited liability company pursuant to the Delaware
Limited Liability Company Act.
FIRST: The name of the limited liability company is Charter
Communications Holdings LLC.
SECOND: The address of its registered office in the State of
Delaware is 30 Old Rudnick Lane, Dover, Delaware 19901, County of Kent. The name
of its registered agent at such address is CorpAmerica, Inc.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation of Charter Communications Holdings LLC this 9th day of February,
1999.
/s/ Edebeatu C. Ibekwe
__________________________________________
Edebeatu C. Ibekwe, Authorized Person
<PAGE> 1
Exhibit 3.2
LIMITED LIABILITY COMPANY AGREEMENT
OF
CHARTER COMMUNICATIONS HOLDINGS LLC
(A DELAWARE LIMITED LIABILITY COMPANY)
This LIMITED LIABILITY COMPANY AGREEMENT OF CHARTER COMMUNICATIONS
HOLDINGS LLC (this "Agreement"), is entered into as of February 9, 1999 by
Charter Communications, Inc., a Delaware corporation ("Charter") as the initial
member (the "Member") of Charter Communications Holdings LLC, a Delaware limited
liability company (the "Company").
W I T N E S S E T H:
WHEREAS, Charter formed the Company under the Delaware Limited
Liability Company Act (6 Del.C. Section 18-101, et. seq.) (the "Delaware Limited
Liability Company Act"); and
WHEREAS, the Certificate of Formation (the "Certificate") of the
Company was executed and filed in the office of the Secretary of State of the
State of Delaware on February 9, 1999;
NOW THEREFORE, in consideration of the terms and provisions set forth
herein, the mutual benefits to be gained by the performance thereof and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
SECTION 1. General.
(a) Effective as of the date and time of filing of the Certificate in
the office of the Secretary of State of the State of Delaware, the parties
hereby form a limited liability company under the Delaware Limited Liability
Company Act. Except as expressly provided herein, the rights and obligations of
the members in connection with the regulation and management of the Company
shall be governed by the Delaware Limited Liability Company Act.
(b) The name of the Company shall be "Charter Communications Holdings
LLC". The business of the Company shall be conducted under such name or any
other name or names that the Manager shall determine from time to time.
(c) The address of the registered office of the Company in the State of
Delaware shall be c/o CorpAmerica, Inc., 30 Old Rudnick Lane, Dover, Delaware
19901. The name and address of the registered agent for service of process on
the Company in the State of Delaware shall be CorpAmerica, Inc., 30 Old Rudnick
Lane, Dover, Delaware 19901. The
<PAGE> 2
registered office or registered agent of the Company may be changed from time to
time by the Manager.
(d) The principal place of business of the Company shall be at 12444
Powerscourt Drive, Suite 400, St. Louis, MO 63131. At any time, the Manager may
change the location of the Company's principal place of business.
(e) The term of the Company will commence on the date of the filing of
the Certificate in the office of the Secretary of State of the State of
Delaware, and will continue and have perpetual existence until dissolved and its
affairs wound up in accordance with the provisions of this Agreement.
(f) The execution of the Certificate by Charter and the filing thereof
in the office of the Secretary of State of the State of Delaware, are hereby
ratified, confirmed and approved by the members.
(g) The Manager shall cause the Company to be qualified, formed or
registered under assumed or fictitious name statutes or similar laws in any
jurisdiction in which the Company transacts business in which such
qualification, formation or registration is required or desirable. The Manager,
as an authorized person within the meaning of the Delaware Limited Liability
Company Act, shall execute, deliver and file any certificates (and any
amendments and/or restatements thereof) necessary for the Company to qualify to
do business in a jurisdiction in which the Company may wish to conduct business.
SECTION 2. Purposes. The Company is formed for the object and purpose
of, and the nature of the business to be conducted by the Company is, engaging
in any lawful act or activity for which limited liability companies may be
formed under the Delaware Limited Liability Company Act and engaging in any and
all activities necessary, convenient, desirable or incidental to the foregoing.
SECTION 3. Powers. The Company shall have all powers necessary,
appropriate or incidental to the accomplishment of its purposes and all other
powers conferred upon a limited liability company pursuant to the Delaware
Limited Liability Company Act.
SECTION 4. Management.
(a) Management by Managers. The Members hereby unanimously elect
Charter Communications, Inc. ("CCI"), a Delaware corporation, or its
successor-in-interest, as the Company's Manager. CCI shall be the Manager until
the Members unanimously elect otherwise. No additional person may be elected as
Manager without the unanimous approval of the Members. Except as otherwise
required by applicable law and as provided below with respect to the Board of
Directors, the powers of the Company shall at all times be exercised by or under
the authority of, and the business, property and affairs of the Company shall be
managed by, or under the direction of, the Manager.
The Manager shall be authorized to elect, remove or replace directors
and officers of the Company, who shall have such authority with respect to the
management of the business
-2-
<PAGE> 3
and affairs of the Company as set forth herein or as otherwise specified by the
Manager in the resolution or resolutions pursuant to which such directors or
officers were elected.
Except as otherwise required by applicable law, CCI, in its capacity as
Manager, shall be authorized to execute or endorse any check, draft, evidence of
indebtedness, instrument, obligation, note, mortgage, contract, agreement,
certificate or other document on behalf of the Company.
No annual or regular meetings of the Manager or the members are
required. The Manager may, by written consent, take any action which it is
otherwise required or permitted to take at a meeting.
(b) Board of Directors.
i) Notwithstanding paragraph (a) above, the Manager may
delegate its power to manage the business of the Company to a Board of Directors
(the "Board") which, subject to the limitations set forth below, shall have the
authority to exercise all such powers of the Company and do all such lawful acts
and things as may be done by a manager of a limited liability company under the
Delaware Limited Liability Company Act and as are not by statute, by the
Certificate, or by this Agreement directed or required to be exercised or done
by the Manager. The rights and duties of the members of the Board may not be
assigned or delegated to any person or entity.
ii) Except as otherwise provided herein, members of the Board
shall possess and may exercise all the powers and privileges and shall have all
of the obligations and duties to the Company and the Members granted to or
imposed on directors of a corporation organized under the laws of the State of
Delaware.
iii) The number of directors shall initially be three (3),
which number may be changed from time to time by the Manager. The initial
directors shall be as set forth on Exhibit A hereto.
iv) Each director shall be appointed by the Manager and shall
serve in such capacity until the earlier of his or resignation or removal or
replacement by the Manager.
v) No director shall be entitled to any compensation for
serving as a director. No fee shall be paid to any director for attendance at
any meeting of the Board; provided, however, that the Company may reimburse
directors for the actual reasonable costs incurred in such attendance.
(c) Consent Required. The affirmative vote, approval, consent or
ratification of the Manager shall be required to:
i) alter the primary purposes of the Company as set forth in
Section 2;
-3-
<PAGE> 4
ii) issue membership interests in the Company to any Person
and admit such Person as a Member;
iii) do any act in contravention of this Agreement or any
resolution of the Members, or cause the Company to engage in any business not
authorized by the Certificate or the terms of this Agreement or that which would
make it impossible to carry on the usual course of business of the Company;
iv) enter into or amend any agreement which provides for the
management of the business or affairs of the Company by a person other than the
Manager;
v) change or reorganize the Company into any other legal form;
vi) amend this Agreement;
vii) approve a merger or consolidation with another Person;
viii) sell all or substantially all of the assets of the
Company;
ix) change the status of the Company from one in which
management is vested in the Manager to one in which management is vested in the
Members or in any other manager, other than as may be delegated to the Board and
the officers hereunder;
x) possess any Company property or assign the rights of the
Company in specific Company property for other than a Company purpose;
xi) operate the Company in such a manner that the Company
becomes an "investment company" for purposes of the Investment Company Act of
1940;
xii) except as otherwise provided or contemplated herein,
enter into any agreement to acquire property or services from any Person who is
a director or officer;
xiii) settle any litigation or arbitration with any third
party, any Member, or any Affiliate of any Member, except for any litigation or
arbitration brought or defended in the ordinary course of business where the
present value of the total settlement amount or damages will exceed $5,000,000;
xiv) materially change any of the tax reporting positions or
elections of the Company;
xv) make or commit to any expenditures which, individually or
in the aggregate, exceed or are reasonably expected to exceed the Company's
total budget (as approved by the Manager) by the greater of 5% of such budget or
Five Million Dollars ($5,000,000); or
-4-
<PAGE> 5
xvi) make or incur any secured or unsecured indebtedness which
individually or in the aggregate exceeds Five Million Dollars ($5,000,000),
provided that this restriction shall not apply to (i) any refinancing of or
amendment to existing indebtedness which does increase total borrowing, (ii) any
indebtedness to (or guarantee of indebtedness of) any company controlled by or
under common control with the Company ("Intercompany Indebtedness"), (iii) the
pledge of any assets to support any otherwise permissible indebtedness of the
Company or any Intercompany Indebtedness or (iv) indebtedness necessary to
finance a transaction or purchase approved by the Manager.
(d) Board of Director Meetings.
i) Regular Meetings. Regular meetings of the Board may be held
without notice at such time and at such place as shall from time to time be
determined by the Board, but not less often than annually.
ii) Special Meetings. Special meetings of the Board may be
called by the president or any member of the Board on twenty-four (24) hours'
notice to each director; special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of Members
holding a majority of the Common Units held by all Members. Notice of a special
meeting may be given by facsimile.
iii) Telephonic Meetings. Members of the Board may participate
in any regular or special meeting of the Board, by means of conference telephone
or similar communications equipment, by means of which all persons participating
in the meeting can hear each other. Participation in a meeting pursuant to this
Section 4.4(c) will constitute presence in person at such meeting.
iv) Quorum. Subject to the provisions of Section 4.3, at all
meetings of the Board, a majority of the directors shall constitute a quorum for
the transaction of business, and the act of a majority of the directors present
at any meeting at which there is a quorum shall be the act of the Board, except
as may be otherwise specifically provided by statute, the Certificate or this
Agreement. If a quorum is not present at any meeting of the Board, the directors
present thereat may adjourn the meeting from time to time until a quorum shall
be present. Notice of such adjournment shall be given to any director not
present at such meeting.
v) Action Without Meeting. Unless otherwise restricted by the
Certificate of Formation or this Agreement, any action required or permitted to
be taken at any meeting of the Board may be taken without a meeting if all
members of the Board consent thereto in writing and such written consent is
filed with the minutes of proceedings of the Board.
(e) Board's Duty of Care. The Board's duty of care in the discharge of
its duties to the Company and the Members is limited to discharging its duties
pursuant to this Agreement in good faith, with the care a corporate director of
like position would exercise under similar circumstances, in the manner it
reasonably believes to be in the best interests of the Company. In discharging
its duties, the Board shall not be liable to the Company or
-5-
<PAGE> 6
to any Member for any mistake or error in judgment or for any act or omission
believed in good faith to be within the scope of authority conferred by this
Agreement or approved by the Manager.
SECTION 5. Officers.
(a) Officers. The officers shall be a President, a Treasurer and a
Secretary, and such other additional officers, including a Chairman of the
Board, one or more Chairmen, Vice Presidents, Assistant Secretaries and
Assistant Treasurers as the Board, the Manager or the President may from time to
time elect. Any two or more offices may be held by the same individual.
(b) Election and Term. The President, Treasurer and Secretary shall be
elected by and shall hold office at the pleasure of the Board or the Manager.
The Board, the Manager or the President may elect such other officers and agents
as it shall deem desirable, who shall hold office at the pleasure of the Board,
the Manager or the President, and who shall have such authority and shall
perform such duties as from time to time shall be prescribed by the Board, the
Manager or the President.
(c) Removal. Any officer may be removed by the affirmative vote of the
Manager or the affirmative vote of at least a majority of the directors then in
office, with or without cause, for any reason or for no reason. Any officer
other than the President, the Treasurer or the Secretary may be removed by the
President, with or without cause, for any reason or for no reason.
(d) Duties and Authority of Officers.
i) President. The President shall be the chief executive
officer and (if no other person has been appointed as such) the chief operating
officer of the Company; shall preside at all meetings of the Members and
directors; shall have general supervision and active management of the business
and finances of the Company; shall see that all orders and resolutions of the
Board or the Manager are carried into effect; subject, however, to the right of
the directors to delegate any specific powers to any other officer or officers.
In the absence of direction by the Board or Manager to the contrary, the
President shall have the power to vote all securities held by the Company and to
issue proxies therefor. In the absence or disability of the President, any
Chairman (if any) or, if there is no Chairman, the most senior available officer
appointed by the Board or the Manager shall perform the duties and exercise the
powers of the President with the same force and effect as if performed by the
President, and shall be subject to all restrictions imposed upon him.
ii) Vice President. Each Vice President, if any, shall perform
such duties as shall be assigned to him or her and shall exercise such powers as
may be granted to him or her by the Manager, the Board or by the President of
the Company. In the absence of direction by the Board, the Manager or the
President to the contrary, the any Senior Vice President shall have the power to
vote all securities held by the Company and to issue proxies therefor.
-6-
<PAGE> 7
iii) The Secretary. The Secretary shall give, or cause to be
given, a notice as required of all meetings of the Members and of the Board. The
Secretary shall keep or cause to be kept, at the principal executive office of
the Company or such other place as the Board may direct, a book of minutes of
all meetings and actions of Directors and Members. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings, the number of shares present or represented at shareholders' meetings,
and the proceedings thereof. The Secretary shall perform such other duties as
may be prescribed from time to time by the Manager or the Board.
iv) The Treasurer. The Treasurer shall have custody of the
Company funds and securities and shall keep or cause to be kept full and
accurate accounts of receipts and disbursements in books of the Company to be
maintained for such purpose; shall deposit all moneys and other valuable effects
of the Company in the name and to the credit of the Company in depositories
designated by the Manager or the Board; and shall disburse the funds of the
Company as may be ordered by the Manager or the Board.
v) The Chairmen. Each Chairman, if any, shall perform such
duties as shall be assigned, and shall exercise such powers as may be granted to
him or her by the Manager or the Board.
SECTION 6. Members.
(a) The members of the Company shall be set forth on Exhibit B hereto.
Other persons may be admitted as members from time to time pursuant to the
provisions of this Agreement.
(b) No member shall be liable for the debts, liabilities and
obligations of the Company, including any debts, liabilities and obligations
under a judgment, decree or order of a court.
(c) Neither a member nor any of its affiliates, partners, members,
directors, managers, officers or employees shall be expressly or impliedly
restricted or prohibited by virtue of this Agreement or the relationships
created hereby from engaging in other activities or business ventures of any
kind or character whatsoever. Except as otherwise agreed in writing, each member
and its affiliates, partners, members, directors, managers, officers and
employees shall have the right to conduct, or to possess a direct or indirect
ownership interest in, activities and business ventures of every type and
description, including activities and business ventures in direct competition
with the Company.
SECTION 7. Percentage Interests. CCI has contributed all of its right,
title and interest in and to its 100% membership interests in the following
entities to the capital of the Company in exchange for its membership interest:
CharterComm Holdings, LLC, Charter Communications Properties Holdings, LLC, CCT
Holdings, LLC, CCA Holdings, LLC, and Charter Communications Long Beach, LLC.
The Percentage Interests or number of membership units held by each Member are
as set forth in Exhibit B attached hereto.
-7-
<PAGE> 8
SECTION 8. Distributions. The Company may from time to time distribute
to the members such amounts in cash and other assets as shall be determined by
the members. Each such distribution, including liquidating distributions, shall
be divided among the members in accordance with their Percentage Interests.
SECTION 9. Allocations. The profits and losses of the Company shall be
allocated to the members in accordance with their Percentage Interests or number
of membership units.
SECTION 10. Dissolution; Winding Up.
(a) The Company shall be dissolved upon (i) the adoption of a plan of
dissolution by the members or (ii) the occurrence of any event required to cause
the dissolution of the Company under the Delaware Limited Liability Company Act.
(b) Any dissolution of the Company shall be effective as of the date on
which the event occurs giving rise to such dissolution, but the Company shall
not terminate unless and until all its affairs have been wound up and its assets
distributed in accordance with the provisions of the Delaware Limited Liability
Company Act.
(c) Upon dissolution of the Company, the Company shall continue solely
for the purposes of winding up its business and affairs as soon as reasonably
practicable. Promptly after the dissolution of the Company, the Manager shall
immediately commence to wind up the affairs of the Company in accordance with
the provisions of this Agreement and the Delaware Limited Liability Company Act.
In winding up the business and affairs of the Company, the Manager may take any
and all actions that they determine in its sole discretion to be in the best
interests of the members, including, but not limited to, any actions relating to
(i) causing written notice by registered or certified mail of the Company's
intention to dissolve to be mailed to each known creditor of and claimant
against the Company, (ii) the payment, settlement or compromise of existing
claims against the Company, (iii) the making of reasonable provisions for
payment of contingent claims against the Company and (iv) the sale or
disposition of the properties and assets of the Company. It is expressly
understood and agreed that a reasonable time shall be allowed for the orderly
liquidation of the assets of the Company and the satisfaction of claims against
the Company so as to enable the Manager to minimize the losses that may result
from a liquidation.
SECTION 11. Transfer. If the Company has more than one member, no
member shall transfer (whether by sale, assignment, gift, pledge, hypothecation,
mortgage, exchange or otherwise) all or any part of his, her or its limited
liability company interest in the Company to any other person without the prior
written consent of each of the other members; provided, however, that this
Section 11 shall not restrict the ability of any member to transfer (at any
time) all or a portion of its limited liability company interest in the Company
to another member. Upon the transfer of a member's limited liability company
interest, the Manager shall provide notice of such transfer to each of the other
members and shall amend Exhibit B hereto to reflect the transfer.
-8-
<PAGE> 9
SECTION 12. Admission of Additional Members. The admission of
additional members to the Company shall be accomplished by the amendment of this
Agreement and, if required by the Delaware Limited Liability Company Act.
SECTION 13. Tax Matters. The members agree that, so long as the Company
is a sole member entity, it is intended that for federal income tax purposes its
assets be deemed to be owned by the sole member in accordance with the
applicable Treasury Regulations. In the event that the Company becomes an entity
that has more than one member, it is intended that the Company shall be treated
as a partnership for purposes of United States federal, state and local income
tax laws, and further agree not to take any position or make any election, in a
tax return or otherwise, inconsistent therewith. So long as the Company is a
partnership for federal income tax purposes, the "tax matters partner" of the
Company (the "Tax Matters Member") for purposes of section 6231(a)(7) of the
Internal Revenue Code of 1986, as amended, shall be as set forth in Exhibit B,
attached hereto. The Tax Matters Member shall have the power to manage and
control, on behalf of the Company, any administrative proceeding at the Company
level with the Internal Revenue Service relating to the determination of any
item of Company income, gain, loss, deduction or credit for federal income tax
purposes.
SECTION 14. Exculpation and Indemnification.
(a) Neither the members, the Manager, the directors, their affiliates,
nor any person who at any time shall serve, or shall have served, as a director,
officer, employee or other agent of any member or any such affiliate and who, in
such capacity, shall engage, or shall have engaged, in activities on behalf of
the Company (a "Specified Agent") shall be liable, in damages or otherwise, to
the Company or to any member for, and neither the Company nor any member shall
take any action against such members, their affiliates or any Specified Agent,
in respect of any loss which arises out of any acts or omissions performed or
omitted by it pursuant to the authority granted by this Agreement, or otherwise
performed on behalf of the Company, if such member, such affiliate, or such
Specified Agent, as applicable, in good faith, determined that such course of
conduct was in the best interests of the Company. Each member shall look solely
to the assets of the Company for return of his, her or its investment, and if
the property of the Company remaining after the discharge of the debts and
liabilities of the Company is insufficient to return such investment, each
member shall have no recourse against the Company, the other members or their
affiliates, except as expressly provided herein; provided, however, that the
foregoing shall not relieve any member of any fiduciary duty or duty of fair
dealing to the other members that it may have under applicable law.
(b) In any threatened, pending or completed claim, action, suit or
proceeding to which a member, any of such member's affiliates, or any Specified
Agent was or is a party or is threatened to be made a party by reason of the
fact that such person is or was engaged in activities on behalf of the Company,
including without limitation any action or proceeding brought under the
Securities Act of 1933, as amended, against a member, any of such member's
affiliates, or any Specified Agent relating to the Company, the Company shall
indemnify and hold harmless the members, any such affiliates, and any such
Specified Agents against losses, damages, expenses (including attorneys' fees),
judgments and amounts paid in settlement actually and reasonably incurred by or
in connection with such
-9-
<PAGE> 10
claim, action, suit or proceeding; provided, however, that none of the members,
any of their affiliates or any Specified Agent shall be indemnified for actions
constituting bad faith, willful misconduct, or fraud. Any act or omission by any
member, any of such member's affiliates or any Specified Agent, if done in
reliance upon the opinion of independent legal counsel or public accountants
selected with reasonable care by such member, such affiliate or such Specified
Agent, as applicable, shall not constitute bad faith, willful misconduct, or
fraud on the part of such member, affiliate or Specified Agent.
(c) The termination of any claim, action, suit or proceeding by
judgment, order or settlement shall not, of itself, create a presumption that
any act or failure to act by a member, such member's affiliate or any Specified
Agent constituted bad faith, willful misconduct or fraud under this Agreement.
(d) Any such indemnification under this Section 13 shall be recoverable
only out of the assets of the Company and not from the members.
SECTION 15. Miscellaneous.
(a) A member's limited liability company interest may be evidenced by a
certificate of limited liability company interest executed by the Manager or an
officer and in substantially the form attached hereto as Exhibit C (or in such
other form as the Manager may approve).
(b) The terms and provisions set forth in this Agreement may be
amended, and compliance with any term or provision set forth herein may be
waived, only by a written instrument executed by each member. No failure or
delay on the part of any member in exercising any right, power or privilege
granted hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
granted hereunder.
(c) This Agreement shall be binding upon and inure to the benefit of
the members and their respective successors and assigns.
(d) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Delaware, without regard to any conflicts of law
principles that would require the application of the laws of any other
jurisdiction.
(e) In the event that any provision contained in this Agreement shall
be held to be invalid, illegal or unenforceable for any reason, the invalidity,
illegality or unenforceability thereof shall not affect any other provision
hereof.
(f) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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<PAGE> 11
IN WITNESS WHEREOF, the party has caused this Agreement to be duly
executed on the date first above written.
CHARTER COMMUNICATIONS, INC.
By: /s/ Curtis S. Shaw
____________________________
Curtis S. Shaw
Senior Vice President
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<PAGE> 12
EXHIBIT A
INITIAL DIRECTORS
Jerald Kent
Barry Babcock
Howard Wood
-12-
<PAGE> 13
EXHIBIT B
<TABLE>
<CAPTION>
MEMBER NAME NUMBER OF UNITS
- ----------- ---------------
<S> <C>
Charter Communications, Inc. 100
</TABLE>
TAX MATTERS MEMBER
Charter Communications, Inc.
-13-
<PAGE> 14
EXHIBIT C
-14-
<PAGE> 1
Exhibit 3.3
CERTIFICATE OF INCORPORATION
OF
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
1. The name of the Corporation is Charter Communications Holdings Capital
Corporation.
2. The address of the registered office of the Corporation in the State of
Delaware is 30 Old Rudnick Lane, Dover, Kent County, Delaware 19901. The name of
its registered agent at such address is CorpAmerica, Inc.
3. The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
4. The Corporation is authorized to issue One Hundred (100) shares of
Common Stock with a par value of $.01 per share.
5. The Corporation is to have perpetual existence.
6. The number of directors which shall constitute the whole Board of
Directors shall be fixed by and in the manner provided in the Bylaws of the
Corporation.
7. In furtherance and not in limitation of the powers conferred by the
statute, the Board of Directors is expressly authorized to make, repeal, alter,
amend and rescind the Bylaws of the Corporation.
8. Election of directors at an annual or special meeting of the
stockholders need not be by written ballot unless the Bylaws of the Corporation
shall so provide.
9. No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director; provided, however, that this Section 9 shall not eliminate
or limit the liability of a director (i) for any breach of the director's duty
of loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of the law, (iii) under Section 174 of the General Corporation Law of the State
of Delaware, or (iv) for any transaction from which the director derives an
improper personal benefit. If the General Corporation Law of the State of
Delaware is amended after the date of filing of this Certificate of
Incorporation to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be
<PAGE> 2
eliminated or limited to the fullest extent permitted by the General Corporation
Law of the State of Delaware as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing in respect of any act or
omission occurring prior to the time of such repeal or modification.
10. The Corporation shall, to the fullest extent now or hereafter
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as amended from time to time, indemnify all persons whom it may
indemnify pursuant thereto.
11. The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by statute, and all rights conferred on stockholders
herein are granted subject to this reservation.
12. The name and mailing address of the incorporator of the Corporation
is:
Name Mailing Address
---- ---------------
Colleen M. Hegarty 12444 Powerscourt Drive, Suite 100
St. Louis, Missouri 63131-3600
IN WITNESS WHEREOF, this Certificate has been signed on this 15th day of
February, 1999.
/s/ Colleen M. Hegarty
----------------------------------
Colleen M. Hegarty, Incorporator
-2-
<PAGE> 1
Exhibit 3.4
BYLAWS
OF
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
a Delaware Corporation
(the "Corporation")
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - OFFICES.................................................... 1
1.01 REGISTERED OFFICE............................................. 1
1.02 OTHER OFFICES................................................. 1
ARTICLE II - MEETINGS OF STOCKHOLDERS.................................. 1
2.01 ANNUAL MEETING................................................ 1
2.02 SPECIAL MEETINGS.............................................. 1
2.03 NOTICE OF MEETING............................................. 2
2.04 LIST OF STOCKHOLDERS.......................................... 2
2.05 QUORUM........................................................ 2
2.06 ADJOURNMENTS.................................................. 2
2.07 VOTING........................................................ 3
2.08 PROXIES....................................................... 4
2.09 JUDGES OF ELECTION............................................ 4
2.10 WRITTEN CONSENT............................................... 4
ARTICLE III - BOARD.................................................... 5
3.01 NUMBER........................................................ 5
3.02 ELECTION AND TERM OF OFFICE................................... 5
3.03 VACANCIES AND ADDITIONAL DIRECTORSHIPS........................ 5
3.04 POWERS........................................................ 5
3.05 RESIGNATION OF DIRECTORS...................................... 5
3.06 REMOVAL OF DIRECTORS.......................................... 5
3.07 COMPENSATION OF DIRECTORS..................................... 6
3.08 RELIANCE ON ACCOUNTS AND REPORTS, ETC......................... 6
ARTICLE IV - MEETINGS OF THE BOARD..................................... 6
4.01 PLACE......................................................... 6
4.02 REGULAR MEETINGS.............................................. 6
4.03 SPECIAL MEETINGS.............................................. 7
4.04 QUORUM........................................................ 7
4.05 ADJOURNED MEETINGS............................................ 7
4.06 WRITTEN CONSENT............................................... 7
4.07 COMMUNICATIONS EQUIPMENT...................................... 7
4.08 WAIVER OF NOTICE.............................................. 7
4.09 OFFICERS OF THE BOARD......................................... 8
ARTICLE V - COMMITTEES OF THE BOARD.................................... 8
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
5.01 DESIGNATION, POWER AND ALTERNATE MEMBERS AND TERM OF OFFICE... 8
5.02 MEETINGS, NOTICES AND RECORDS................................. 8
5.03 QUORUM AND MANNER OF ACTING................................... 9
5.04 RESIGNATIONS.................................................. 9
5.05 REMOVAL....................................................... 9
5.06 VACANCIES..................................................... 9
ARTICLE VI - OFFICERS.................................................. 9
6.01 OFFICERS AND MANAGEMENT COMMITTEE............................ 10
6.02 DUTIES....................................................... 10
6.03 RESIGNATIONS................................................. 11
6.04 REMOVAL...................................................... 11
6.05 VACANCIES.................................................... 11
6.06 SECRETARY.................................................... 11
6.07 ASSISTANT SECRETARIES........................................ 11
6.08 TREASURER.................................................... 12
6.09 ASSISTANT TREASURERS......................................... 12
ARTICLE VII - INDEMNIFICATION......................................... 12
7.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION...... 12
7.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION................ 13
7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION.................... 13
7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY......... 13
7.05 ADVANCE OF EXPENSES.......................................... 14
7.06 OTHER RIGHTS AND REMEDIES.................................... 14
7.07 INSURANCE.................................................... 14
7.08 CONSTITUENT CORPORATIONS..................................... 14
7.09 EMPLOYEE BENEFIT PLANS....................................... 15
7.10 BROADEST LAWFUL INDEMNIFICATION.............................. 15
7.11 TERM......................................................... 16
7.12 SEVERABILITY................................................. 16
7.13 AMENDMENTS................................................... 16
ARTICLE VIII - DEPOSIT OF CORPORATE FUNDS............................. 16
8.01 BORROWING.................................................... 16
8.02 DEPOSITS..................................................... 17
8.03 CHECKS, DRAFTS, ETC.......................................... 17
ARTICLE IX - CERTIFICATES OF STOCK.................................... 17
9.01 STOCK CERTIFICATES........................................... 17
9.02 BOOKS OF ACCOUNT AND RECORD OF STOCKHOLDERS.................. 17
9.03 TRANSFER OF SHARES........................................... 18
</TABLE>
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<TABLE>
<S> <C>
9.04 REGULATIONS.................................................. 18
9.05 LOST, STOLEN OR DESTROYED CERTIFICATES....................... 18
9.06 STOCKHOLDER'S RIGHT OF INSPECTION............................ 18
9.07 REPRESENTATION OF SHARES OF OTHER CORPORATIONS............... 19
ARTICLE X - MISCELLANEOUS............................................. 19
10.01 BUDGETS...................................................... 19
10.02 RECORD DATES................................................ 19
10.03 DIVIDENDS................................................... 19
10.04 FISCAL YEAR................................................. 20
10.05 CORPORATE SEAL............................................. 20
10.06 AMENDMENTS.................................................. 20
</TABLE>
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<PAGE> 5
ARTICLE I - OFFICES
1.01 REGISTERED OFFICE.
The registered office shall be maintained at 30 Old Rudnick Lane, Dover,
Kent County, Delaware 19901 and CorpAmerica, Inc. is the registered agent.
1.02 OTHER OFFICES.
The Corporation may also have other offices, either within or without the
State of Delaware, at such place or places as the Board of Directors (the
"Board") may from time to time appoint or the business of the Corporation may
require.
ARTICLE II - MEETINGS OF STOCKHOLDERS
2.01 ANNUAL MEETING.
The date of the annual meeting of the stockholders for the election of
directors and for the transaction of such other business as properly may come
before such meeting shall be determined by resolution of the Board to be a
specific day in each year, if not a legal holiday, and, if a legal holiday, on
the next succeeding business day, at the time and place and within or without
the State of Delaware as may be designed by the Board and set forth in the
notice of the meeting or a duly executed waiver of notice thereof, provided,
however, that in any year, in advance of the date specified for the annual
meeting, the Board may act to change the meeting date for that year.
2.02 SPECIAL MEETINGS.
Special meetings of the stockholders for any proper purpose or purposes
may be called at any time by the Board or an Executive Officer, to be held on
the date, at the time
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and place within or without the State of Delaware as the Board or an Executive
Officer, whichever has called the meeting, shall direct. A special meeting of
the stockholders also shall be called whenever stockholders owning a majority of
the shares of the Corporation then issued and outstanding and entitled to vote
on all of the matters to be submitted to stockholders of the Corporation at such
special meeting shall make written application to an Executive Officer. Any such
written request shall state a proper purpose or purposes of the meeting and
shall be delivered to an Executive Officer.
2.03 NOTICE OF MEETING.
Notice, signed by the Secretary of the Corporation or an Executive
Officer, of every annual or special meeting of stockholders shall be prepared in
writing and personally delivered; mailed, postage prepaid; or sent by facsimile
transmission to each stockholder entitled to vote at such meeting not less than
ten (10) nor more than sixty (60) days before the meeting, except as otherwise
provided by statute. Every notice of a meeting of the stockholders shall state
the place, date and hour of the meeting, and in the case of a special meeting,
shall also state the purpose or purposes for which the meeting is called. If
mailed, such notice shall be directed to a stockholder at his address as it
shall appear on the stock record book of the Corporation, unless the stockholder
shall have filed with the Secretary a written request that notice intended for
him or her be mailed to some other address, in which case it shall be mailed to
the address designated in such request. Notice shall be deemed given when
personally delivered or deposited in the United States mail, as the case may be;
provided, however, that such notice may also be given by telegram, facsimile or
other means of electronically transmitted written copy and in such case shall be
deemed given when ordered or, if a delayed delivery is ordered, as of such
delayed delivery time.
2.04 LIST OF STOCKHOLDERS.
A complete list of the stockholders entitled to vote at each meeting of
stockholders, arranged in alphabetical order and showing the address of each
such stockholder and the number of shares registered in the name of each such
stockholder, shall be open to the examination of any stockholder, for any
purpose germane to such meeting, during ordinary business hours, for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
such meeting, or, if not specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting and during the whole time thereof, and may be inspected by any
stockholder who is present.
2.05 QUORUM.
The presence at any meeting, in person or by proxy, of the holders of
record of a majority of the shares then issued and outstanding and entitled to
vote shall be necessary and sufficient to constitute a quorum for the
transaction of business, except where otherwise provided by statute.
2.06 ADJOURNMENTS.
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In the absence of a quorum, stockholders representing a majority of the
shares then issued and outstanding and entitled to vote, present in person or by
proxy, or, if no stockholder entitled to vote is present in person or by proxy,
any officer entitled to preside at or act as secretary of such meeting, may
adjourn the meeting from time to time without notice other than announcement at
the meeting, until a quorum shall be present or represented. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting originally noticed.
If the adjournment is for more than thirty (30) days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
2.07 VOTING.
(a) At each meeting of the stockholders, each stockholder shall be
entitled to vote in person or by proxy each share or fractional share of the
stock of the Corporation which has voting rights on the matter in question and
which shall have been held by him or her and registered in his name on the books
of the Corporation:
(i) on the date fixed pursuant to Section 10.02 of these
Bylaws as the record date for the determination of stockholders entitled to
notice of and to vote at such meeting, or
(ii) if no such record date shall have been so fixed, then (x)
at the close of business on the day next preceding the day on which notice of
the meeting shall be given or (y) if notice of the meeting shall be waived, at
the close of business on the day next preceding the day on which the meeting
shall be held.
(b) Shares of its own stock belonging to the Corporation or to
another corporation, if a majority of the shares entitled to vote in the
election of directors in such other corporation is held, directly or indirectly,
by the Corporation, shall neither be entitled to vote nor be counted for quorum
purposes. Persons holding stock of the Corporation in a fiduciary capacity shall
be entitled to vote such stock. Persons whose stock is pledged shall be entitled
to vote, unless in the transfer by the pledgor on the books of the Corporation
he or she shall have expressly empowered the pledgee to vote thereon, in which
case only the pledgee, or his or her proxy, may represent such stock and vote
thereon. Stock having voting power standing of record in the names of two or
more persons, whether fiduciaries, members of a partnership, joint tenants,
tenants in common, tenants by the entirety or otherwise, or with respect to
which two or more persons have the same fiduciary relationship, shall be voted
in accordance with the provisions of the General Corporation Law of Delaware.
(c) At any meeting of the stockholders all matters except as
otherwise provided in the Certificate of Incorporation, in these Bylaws, or by
law, shall be decided by the vote of a majority in voting interest of the
stockholders present in person or by proxy and entitled to vote thereat and
thereon. The vote at any meeting of the stockholders on any question need not be
by ballot, unless so directed by the chairman of the meeting. On a
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vote by ballot, each ballot shall be signed by the stockholder voting, or by his
proxy if there be such proxy, and it shall state the number of shares voted.
2.08 PROXIES.
Any stockholder is entitled to vote by proxy, provided that the instrument
authorizing such proxy to act shall have been executed in writing (which shall
include telegram, facsimile or other means of electronically transmitted written
copy) by the stockholder himself or herself or by his or her duly authorized
attorney-in-fact and delivered to the secretary of the meeting. No proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period.
The attendance at any meeting of a stockholder who may theretofore have
given a proxy shall not have the effect of revoking the same unless he shall in
writing so notify the secretary of the meeting prior to the voting of the proxy.
2.09 JUDGES OF ELECTION.
The Board may appoint judges of election to serve at any election of
directors and at balloting on any other matter that may properly come before a
meeting of stockholders. If no such appointment shall be made, or if any of the
judges so appointed shall fail to attend, or refuse or be unable to serve, then
such appointment may be made by the presiding officer of the meeting at the
meeting.
2.10 WRITTEN CONSENT.
Any action which may be taken at any annual or special meeting of
stockholders may be taken without a meeting and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Whenever any such action is
taken without a meeting by less than unanimous consent, all stockholders who
have not consented in writing must be promptly informed in writing of such
action.
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ARTICLE III - BOARD
3.01 NUMBER.
The number of directors which shall constitute the whole Board shall be
fixed at three (3) persons, until changed from time to time by resolution of the
Board or stockholders at the annual meeting or any special meeting called for
that purpose.
3.02 ELECTION AND TERM OF OFFICE.
Directors shall be elected at the annual meeting of the stockholders
except as provided in Section 3.03 of this Article III. Each director (whether
elected at an annual meeting or to fill a vacancy or otherwise) shall continue
in office until a successor shall have been elected and qualified or until his
or her death, resignation or removal in the manner hereinafter provided,
whichever shall first occur.
3.03 VACANCIES AND ADDITIONAL DIRECTORSHIPS.
If any vacancy shall occur among the directors by reason of death,
resignation, or removal, or as the result of an increase in the number of
directorships, the directors then in office shall continue to act and may fill
any such vacancy by a vote of the majority of directors then in office, though
less than a quorum, and each director so chosen shall hold office until the next
annual election of directors and until his or her successor shall be duly
elected and shall qualify, or until his or her earlier death, resignation or
removal.
3.04 POWERS.
The business of the Corporation shall be managed by its Board, which may
exercise all powers of the Corporation and do all lawful acts and things as are
not by law or by the Certificate of Incorporation or these Bylaws reserved to
the stockholders.
3.05 RESIGNATION OF DIRECTORS.
Any director may resign at any time by giving written notice of such
resignation to the Board or an Executive Officer. Any such resignation shall
take effect at the time specified therein or, if no time be specified, upon
receipt thereof by the Board or an Executive Officer; and unless specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
3.06 REMOVAL OF DIRECTORS.
At the annual meeting or any special meeting of the stockholders, duly
called as provided in these Bylaws, any director or directors may, by the
affirmative vote of the holders of a majority of the shares of stock issued and
outstanding and entitled to vote for the election of directors, be removed from
office, either with or without cause. At such meeting a successor or successors
may be elected by a majority of the votes cast, or if any
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such vacancy is not so filled, it may be filled by the directors as provided in
Section 3.03 of this Article III.
3.07 COMPENSATION OF DIRECTORS.
Directors may receive such reasonable compensation for their services,
whether in the form of salary or a fixed fee for attendance at Board or Board
committee meetings, with expenses, if any, as the Board may from time to time
determine. Nothing herein contained shall be construed to preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor.
3.08 RELIANCE ON ACCOUNTS AND REPORTS, ETC.
A director, or a member of any committee designed by the Board shall, in
the performance of his duties, be fully protected in relying in good faith upon
the records of the Corporation and upon information, opinions, reports or
statements presented to the Corporation by any of the Corporation's officers or
employees, or committees designated by the Board, or by any other person as to
the matters the director or member reasonably believes are within such other
person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Corporation.
ARTICLE IV - MEETINGS OF THE BOARD
4.01 PLACE.
The Board of the Corporation may hold meetings, both regular and special,
either within or without the State of Delaware.
4.02 REGULAR MEETINGS.
The Board by resolution may provide for the holding of regular meetings
and may fix the times and places at which such meetings shall be held. Notice of
regular meetings shall not be required to be given if the time and place has
been fixed by Board resolution, provided that whenever the time or place of
regular meetings shall be fixed or changed, notice of such action shall be
mailed promptly to each director who shall not have been present at the meeting
at which such action was taken. If the time and place for regular meetings has
not been fixed by the Board, then at least 10 days written notice addressed to
him or her at his or her residence or usual place of business, unless he or she
shall have filed with the Secretary a written request that notices intended for
him or her be mailed to some other address, in which case it shall be mailed to
the address designated in such request, or shall be sent to him or her at such
place by telegram, facsimile or other means of electronically transmitted
written copy.
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4.03 SPECIAL MEETINGS.
Special meetings of the Board may be called by any Executive Officer and
shall be called by any Executive Officer at the written request of any director.
Except as otherwise required by statute, notice of each special meeting shall be
given to each director, if by mail, when addressed to him or her at his or her
residence or usual place of business, unless he or she shall have filed with the
Secretary a request that notices intended for him or her be mailed to some other
address, in which case it shall be mailed to the address designated in such
request, at least 72 hours before, or shall be sent to him or her at such place
by telegram, facsimile, telephone or other means of electronically transmitted
written copy, or delivered to him or her personally, at least 48 hours before
the date on which the meeting is to be held. Such notice shall state the time
and place of such meeting, but need not state the purposes thereof, unless
otherwise required by statute, the Certificate of Incorporation of the
Corporation or these Bylaws.
4.04 QUORUM.
At any meeting of the Board two-thirds (2/3) of the whole Board shall
constitute a quorum for the transaction of business, and the act of the majority
of those present at any meeting at which a quorum is present shall be sufficient
for the act of the Board, except as may be otherwise specifically provided by
statute or by the Certificate of Incorporation of the Corporation.
4.05 ADJOURNED MEETINGS.
If a quorum shall not be present at a meeting of the Board, the directors
present thereat may adjourn the meeting from time to time, until a quorum shall
be present. Seventy-two (72) hours' notice of any such adjournment shall be
given personally to each director who was not present at the meeting at which
such adjournment was taken, and unless announced at the meeting, to the other
directors; provided, that then ten (10) days' notice shall be given if notice is
given by mail.
4.06 WRITTEN CONSENT.
Any action required or permitted to be taken at any meeting of the Board
may be taken without a meeting if all the members of the Board consent thereto
in writing, and the writing or writings are filed with the minutes of the
proceedings of the Board.
4.07 COMMUNICATIONS EQUIPMENT.
Any one or more members of the Board may participate in any meeting of the
Board by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
participation by such means shall be deemed to constitute presence in person at
such meeting.
4.08 WAIVER OF NOTICE.
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<PAGE> 12
Notice of any meeting need not be given to any directors who shall attend
such meeting in person or shall waive notice thereof, before or after such
meeting, in writing or by telegram, facsimile or other means of electronically
transmitted written copy.
4.09 OFFICERS OF THE BOARD.
The Board shall have a Chairman of the Board and may, at the discretion of
the Board, have one or more Vice Chairmen. The Chairman of the Board and the
Vice Chairmen shall be appointed from time to time by the Board and shall have
such powers and duties as shall be designated by the Board.
ARTICLE V - COMMITTEES OF THE BOARD
5.01 DESIGNATION, POWER AND ALTERNATE MEMBERS AND TERM OF OFFICE.
The Board may, by resolution passed by a majority of the whole Board,
designate one (1) or more committees. Each such committee shall consist of one
(1) or more of the directors of the Corporation. Any such committee, to the
extent provided in such resolution, shall have and may exercise the power of the
Board in the management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which may
require it. The Board may designate one (1) or more directors as alternate
members of any committee who, in the order specified by the Board, may replace
any absent or disqualified member at any meeting of the committee. If at a
meeting of any committee one (1) or more of the members thereof should be absent
or disqualified, and if either the Board has not so designated any alternate
member or members, or the number of absent or disqualified members exceeds the
number of alternate members who are present at such meeting, then the member or
members of such committee (including alternates) present at any meeting and not
disqualified from voting, whether or not he or she or they constitute a quorum,
may unanimously appoint another director to act at the meetings in the place of
any such absent or disqualified member. The term of office of the members of
each committee shall be as fixed from time to time by the Board, subject to the
term of office of the directors and these Bylaws; provided, however, that any
committee member who ceases to be a member of the Board shall ipso facto cease
to be a committee member. Each committee shall appoint a secretary, who may be
the Secretary or an Assistant Secretary of the Corporation.
5.02 MEETINGS, NOTICES AND RECORDS.
Each committee may provide for the holding of regular meetings, with or
without notice, and a majority of the members of any such committee may fix the
time, place and procedure for any such meeting. Special meetings of each
committee shall be held upon call by or at the direction of its chairman or, if
there be no chairman, by or at the direction of any two (2) of its members, at
the time and place specified in the respective notices or waivers of notice
thereof. Notice of each special meeting of a committee shall be mailed to each
member of such committee, addressed to him or her at his or her residence or
usual place of business, unless he or she shall have filed with the Secretary a
written request that notices intended for him or her be mailed to some other
address, in which case it shall be
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mailed to the address designated in such request, at least 72 hours before the
day on which the meeting is to be held, or shall be sent by telegram, facsimile
or other means of electronically transmitted written copy, addressed to him at
such place, or telephoned or delivered to him or her personally, at least 48
hours before the day on which the meeting is to be held. Notice of any meeting
of a committee need not be given to any member thereof who shall attend the
meeting in person or who shall waive notice thereof by telegram, facsimile or
other means of electronically transmitted written copy. Notice of any adjourned
meeting need not be given. Each committee shall keep a record of its
proceedings.
Each committee may meet and transact any and all business delegated to
that committee by the Board by means of a conference telephone or similar
communications equipment provided that all persons participating in the meeting
are able to hear and communicate with each other. Participation in a meeting by
means of conference telephone or similar communication shall constitute presence
in person at such meeting.
5.03 QUORUM AND MANNER OF ACTING.
At each meeting of any committee the presence of a majority of its members
then in office shall be necessary and sufficient to constitute a quorum for the
transaction of business, and the act of a majority of the members present at any
meeting at which a quorum is present shall be the act of such committee; in the
absence of a quorum, a majority of the members present at the time and place of
any meeting may adjourn the meeting from time to time until a quorum shall be
present. Subject to the foregoing and other provisions of these Bylaws and
except as otherwise determined by the Board, each committee may make rules for
the conduct of its business. Any determination made in writing and signed by all
the members of such committee shall be as effective as if made by such committee
at a meeting.
5.04 RESIGNATIONS.
Any member of a committee may resign at any time by giving written notice
of such resignation to the Corporation, the Board, or an Executive Officer of
the Corporation. Unless otherwise specified in such notice, such resignation
shall take effect upon receipt thereof by the Board or any Executive Officer of
the Corporation.
5.05 REMOVAL.
Any member of any committee may be removed at any time by the affirmative
vote of a majority of the whole Board with or without cause.
5.06 VACANCIES.
If any vacancy shall occur in any committee by reason of death,
resignation, disqualification, removal or otherwise, the remaining members of
such committee, though less than a quorum, shall continue to act until such
vacancy is filled by the Board.
ARTICLE VI - OFFICERS
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6.01 OFFICERS AND MANAGEMENT COMMITTEE.
The Board shall determine the titles and duties of the officers of the
Corporation who shall be responsible for the overall supervision, direction and
control of the business and affairs of the Corporation (hereinafter referred to
as the "Executive Officers"), and shall elect persons to hold such positions.
The Corporation also shall have one or more Executive Vice Presidents and Senior
Vice Presidents, as well as a Treasurer and a Secretary. The Board also may, but
shall not be required to, appoint a Management Committee which shall be
comprised of the Executive Officers plus such other officers as may be selected
by the Board or in the absence of Board action by the Chairman of the Management
Committee. Any Executive Officer or Executive Vice President may, if so
designated by the Board, function in the capacity of Chief Executive Officer,
Chief Financial Officer, or Chief Operating Officer. In the absence or
disability of an elected Executive Officer, another Executive Officer shall
perform such other officer's duties. One of the Executive Officers shall preside
at meetings of stockholders.
The officers of the Corporation may also include one or more Regional or
other Vice Presidents and one or more Assistant Secretaries or Assistant
Treasurers, each of whom shall be elected by the Board or appointed by the
Executive Officers Any number of offices may be held by the same person subject
to any limits imposed by the General Corporation Law of the State of Delaware;
provided that different officers shall have such titles and duties as may be
necessary to enable the Corporation to sign instruments and stock certificates
which comply with Sections 103(a)(2) and 158 of the General Corporation Law of
the State of Delaware.
Each officer of the corporation elected by the Board or appointed by the
Executive Officers shall hold office until his or her successor is duly elected
or appointed and qualified or until his or her earlier resignation or removal.
6.02 DUTIES.
All officers, as between themselves and the Corporation, shall have such
authority and perform such duties in the management of the Corporation as may be
provided in these Bylaws, or, to the extent not so provided, as may be provided
by resolution of the Board or the supervising Executive Officers.
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<PAGE> 15
6.03 RESIGNATIONS.
Any officer may resign at any time by giving written notice of such
resignation to the Board or any Executive Officer. Unless otherwise specified in
such written notice, such resignation shall take effect upon receipt thereof by
the Board or any such Executive Officer.
6.04 REMOVAL.
All officers serve at the sole pleasure and in the sole discretion of the
Board. Any Executive Officer or other officer elected by the Board may be
removed at any time, either with or without cause, by the vote of a majority of
all of the directors then in office. Any officers appointed by an Executive
Officer may be removed at any time by an Executive Officer with or without
cause. Such power of removal from office shall not be abridged by any employment
contract or other agreement.
6.05 VACANCIES.
A vacancy in any office by reason of death, resignation, removal,
disqualification or any other cause shall be filled for the unexpired portion of
the term in the manner prescribed by these Bylaws for regular election or
appointment to such office.
6.06 SECRETARY.
The Secretary shall: (a) record all the proceedings of the meetings of the
stockholders, the Board, and all committees of the Board in a book or books to
be kept for that purpose; (b) cause all notices to be duly given in accordance
with the provisions of these Bylaws as required by statute; (c) whenever any
committee shall be appointed in pursuance of a resolution of the Board, furnish
the chairman of such committee with a copy of such resolution; (d) be custodian
of the records and of the seal of the Corporation, and cause such seal to be
affixed to all certificates representing capital stock of the Corporation prior
to the issuance thereof and to all instruments the execution of which on behalf
of the Corporation under its seal shall have been duly authorized; (e) see that
the lists, books, reports, statements, certificates and other documents and
records required by statute are properly kept and filed; (f) have charge of the
stock record and stock transfer books of the Corporation, and exhibit such stock
books at all reasonable times to such persons who are entitled by statute to
have access thereto; and (g) in general, perform all duties incident to the
office of Secretary and such other duties as are given to him or her by these
Bylaws or as from time to time may be assigned to him or her by the Board or the
Executive Officers.
6.07 ASSISTANT SECRETARIES.
At the request of the Secretary or in his or her absence or disability,
the Assistant Secretary designated by him or her (or in the absence of such
designation, the Assistant Secretary designated by the Board or any Executive
Officer) shall perform all the duties of the Secretary, and, when so acting,
shall have all the powers of and be subject to all
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restrictions upon the Secretary. The Assistant Secretaries shall perform such
other duties as from time to time may be assigned to them by the Board or the
Executive Officers.
6.08 TREASURER.
The Treasurer shall: (a) have charge of and supervision over and be
responsible for the funds, securities, receipts and disbursements of the
Corporation; (b) cause the monies and other valuable effects of the Corporation
to be deposited in the name and to the credit of the Corporation in banks or
trust companies or with bankers or other depositories or to be otherwise dealt
with in such manner as the Board may direct; (c) select authorized depositories
of the Corporation and cause the funds of the Corporation to be disbursed by
checks or drafts upon the authorized depositories of the Corporation, and cause
to be taken and preserved proper vouchers for all monies disbursed; (d) render
to the Board and the Executive Officers, whenever requested, a statement of the
financial condition of the Corporation and of all his or her transactions as
Treasurer; (e) cause to be kept at the Corporation's principal office correct
books of account of all its business and transactions and such duplicate books
of account as he or she shall determine and upon application cause such books or
duplicates thereof to be exhibited to any Director; (f) be empowered, from time
to time, to require from the officers or agents of the Corporation reports or
statements giving such information concerning transactions of the Corporation;
and (g) in general, perform all duties incident to the office of Treasurer and
such other duties as are given to him or her by these Bylaws or as from time to
time may be assigned to him by the Board or the Executive Officers.
6.09 ASSISTANT TREASURERS.
At the request of the Treasurer or any of the Executive Officers, the
Assistant Treasurer shall perform all the duties of the Treasurer and, when so
acting, shall have all the powers of the be subject to all restrictions upon the
Treasurer. The Assistant Treasurer shall perform such other duties as from time
to time may be assigned by the Board, the Executive Officers of the Treasurer.
ARTICLE VII - INDEMNIFICATION
7.01 ACTIONS OTHER THAN BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was or has agreed to become a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise or as a member of any committee or
similar body, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Corporation, and, with respect to any criminal action or
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proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in, or not opposed to, the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, that he had reasonable cause to believe that his conduct was
unlawful.
7.02 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was or has agreed to become a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or as a
member of any committee or similar body, against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
7.03 DETERMINATION OF RIGHT OF INDEMNIFICATION.
Any indemnification under Section 7.01 or 7.02 of these Bylaws (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth in Sections 7.01 and 7.02 of these
Bylaws. Such determination shall be made (a) by the Board by a majority vote of
a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (c) by the stockholders.
7.04 INDEMNIFICATION AGAINST EXPENSES OF SUCCESSFUL PARTY.
Notwithstanding the other provisions of this Article VII, to the extent
that a director, officer, employee or agent of the Corporation has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 7.01 or 7.02 of these Bylaws, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
- 13 -
<PAGE> 18
7.05 ADVANCE OF EXPENSES.
Expenses (including attorneys' fees) incurred by an officer or director in
defending a civil or criminal action, suit or proceeding may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board upon receipt of an undertaking by or on
behalf of the director or officer, to repay such amount if it shall ultimately
be determined that he is not entitled to be indemnified by the Corporation as
authorized in this Article VII. Such expenses (including attorneys' fees)
incurred by other employees and agents may be so paid upon such terms and
conditions, if any, as the Board deems appropriate. The Board may authorize the
Corporation's counsel to represent such director, officer, employee or agent in
any action, suit or proceeding, whether or not the Corporation is a party to
such action, suit or proceeding.
7.06 OTHER RIGHTS AND REMEDIES.
The indemnification and advancement of expenses provided by, or granted
pursuant to, the other Sections of this Article VII shall not be deemed
exclusive and are declared expressly to be nonexclusive of any other rights to
which those seeking indemnification or advancements of expenses may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
7.07 INSURANCE.
Upon resolution passed by the Board, the Corporation may purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or as a member of any
committee or similar body against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article VII.
7.08 CONSTITUENT CORPORATIONS.
For the purposes of this Article VII, references to "the Corporation"
include in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers and employees or agents, so that
any person who is or was a director, officer, employee or agent of such
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or as a member of any
committee or similar body, shall stand in the same position under the provisions
of this Article VII with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
- 14 -
<PAGE> 19
7.09 EMPLOYEE BENEFIT PLANS.
For the purposes of this Article VII, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the 'Corporation' " as referred to in this
Article VII.
7.10 BROADEST LAWFUL INDEMNIFICATION.
In addition to the foregoing, the Corporation shall, to the broadest and
maximum extent permitted by Delaware law, as the same exists from time to time
(but, in case of any amendment to or change in Delaware law, only to the extent
that such amendment or change permits the Corporation to provide broader rights
of indemnification than is permitted to the Corporation prior to such amendment
or change), indemnify each person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that he is or was a director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding. In addition, the Corporation shall, to the broadest
and maximum extent permitted by Delaware law, as the same may exist from time to
time (but, in case of any amendment to or change in Delaware law, only to the
extent that such amendment or change permits the Corporation to provide broader
rights of payment of expenses incurred in advance of the final disposition of an
action, suit or proceeding than is permitted to the Corporation prior to such
amendment or change), pay to such person any and all expenses (including
attorneys' fees) incurred in defending or settling any such action, suit or
proceeding in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer, to repay such amount if it shall ultimately be determined by a final
judgment or other final adjudication that he is not entitled to be indemnified
by the Corporation as authorized in this Section 7.10. The first sentence of
this Section 7.10 to the contrary notwithstanding, the Corporation shall not
indemnify any such person with respect to any of the following matters: (a)
remuneration paid to such person if it shall be determined by a final judgment
or other final adjudication that such remuneration was in violation of law; or
(b) any accounting of profits made from the purchase or sale by such person of
the Corporation's securities within the meaning of Section 16(b) of the
Securities Exchange Act of 1934 and amendments thereto or similar provisions of
any federal, state or local statutory law; or (c) actions brought about or
contributed to by the dishonesty of such person, if a final judgment or other
final adjudication adverse to such person establishes that acts of active and
deliberate dishonesty were committed or attempted by such person
- 15 -
<PAGE> 20
with actual dishonest purpose and intent and were material to the adjudication;
or (d) actions based on or attributable to such person having gained any
personal profit or advantage to which he was not entitled, in the event that a
final judgment or other final adjudication adverse to such person establishes
that such person in fact gained such personal profit or other advantage to which
he was not entitled; or (e) any matter in respect of which a final decision by a
court with competent jurisdiction shall determine that indemnification is
unlawful; provided, however, that the Corporation shall perform its obligations
under the second sentence of this Section 7.10 on behalf of such person until
such time as it shall be ultimately determined by a final judgment or other
final adjudication that he is not entitled to be indemnified by the Corporation
as authorized by the first sentence of this Section 7.10 by virtue of any of the
preceding clauses (a) (b) (c) (d) or (e).
7.11 TERM.
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VII shall, unless otherwise provided when authorized
or ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
7.12 SEVERABILITY.
If any part of this Article VII shall be found, in any action, suit or
proceeding or appeal therefrom or in any other circumstances or as to any
particular officer, director, employee or agent to be unenforceable, ineffective
or invalid for any reason, the enforceability, effect and validity of the
remaining parts or of such parts in other circumstances shall not be affected,
except as otherwise required by applicable law.
7.13 AMENDMENTS.
The foregoing provisions of this Article VII shall be deemed to constitute
an agreement between the Corporation and each of the persons entitled to
indemnification hereunder, for as long as such provisions remain in effect. Any
amendment to the foregoing provisions of this Article VII which limits or
otherwise adversely affects the scope of indemnification or rights of any such
persons hereunder shall, as to such persons, apply only to claims arising, or
causes of action based on actions or events occurring, after such amendment and
delivery of notice of such amendment is given to the person or persons so
affected. Until notice of such amendment is given to the person or persons whose
rights hereunder are adversely affected, such amendment shall have no effect on
such rights of such persons hereunder. Any person entitled to indemnification
under the foregoing provisions of this Article VII shall, as to any act or
omission occurring prior to the date of receipt of such notice, be entitled to
indemnification to the same extent as had such provisions continued as Bylaws of
the Corporation without such amendment.
ARTICLE VIII - DEPOSIT OF CORPORATE FUNDS
8.01 BORROWING.
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<PAGE> 21
No loans or advances shall be obtained or contracted for, by or on behalf
of the Corporation and no negotiable paper shall be issued in its name, unless
and except as authorized by the Board. Such authorization may be general or
confined to specific instances.
8.02 DEPOSITS.
All funds of the Corporation not otherwise employed shall be deposited
from time to time to its credit in such banks or trust companies or with such
bankers or other depositories as the Board may select, or as may be selected by
any officer or officers or agent or agents authorized to do so by the Board.
8.03 CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of money, and all
negotiable and non-negotiable notes or other negotiable or non-negotiable
evidences of indebtedness issued in the name of the Corporation, shall be signed
or endorsed by such person or persons and in such manner as from time to time
shall be determined by the Board or the Executive Officers. The Corporation
shall obtain a fidelity bond for such persons with such signing authority as the
Board or the Executive Officers may require.
ARTICLE IX - CERTIFICATES OF STOCK
9.01 STOCK CERTIFICATES.
Every holder of capital stock of the Corporation shall be entitled to have
a certificate or certificates in such form as shall be approved by the Board,
certifying the number of shares of capital stock of the Corporation owned by him
or her. The certificates representing shares of capital stock shall be signed in
the name of the Corporation by an Executive Officer and by the Secretary, an
Assistant Secretary, the Treasurer or an Assistant Treasurer (which signatures
may be facsimiles) and sealed with the seal of the Corporation (which seal may
be a facsimile). If any officer, transfer agent or registrar who shall have
signed or whose facsimile signatures has been placed upon such certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificates are issued, they may nevertheless be issued by the Corporation with
the same effect as if such officer, transfer agent, or registrar were still such
at the date of their issue.
9.02 BOOKS OF ACCOUNT AND RECORD OF STOCKHOLDERS.
The books and records of the Corporation may be kept at such places,
within or without the State of Delaware, as the Board may from time to time
determine. The stock record books and the blank stock certificate books shall be
kept by the Secretary or by any other officer or by the transfer agent or
registrar, if any, designated by the Board. There shall be entered on the stock
books of the Corporation the number of each certificate issued, the number of
shares represented thereby, the name of the person to whom such certificate was
issued and the date of issuance thereof.
- 17 -
<PAGE> 22
9.03 TRANSFER OF SHARES.
Transfers of shares of capital stock of the Corporation shall be made on
the stock records of the Corporation only upon authorization by the registered
holder thereof, or by his attorney thereunto authorized by power of attorney
duly executed and filed with the Secretary or with the transfer agent, and on
surrender of the certificate or certificates for such shares properly endorsed
or accompanied by a duly executed stock transfer power and the payment of all
taxes thereon, if any. Except as otherwise provided by law, the Corporation
shall be entitled to recognize the exclusive right of a person in whose name any
share or shares stand on the record of stockholders as the owner of such share
or shares for all purposes, including, without limitation, the rights to receive
dividends or other distributions, and to vote as such owner, and the Corporation
shall not be bound to recognize any equitable or legal claim to or interest in
any such share or shares on the part of any other person whether or not the
Corporation shall have express or other notice thereof.
9.04 REGULATIONS.
The Board may make such additional rules and regulations, not inconsistent
with these Bylaws, as it may deem expedient concerning the issue, transfer and
registration of certificates for shares of the capital stock of the Corporation.
It may appoint, or authorize any officer or officers to appoint, one or more
transfer agents or one or more registrars and may further provide that no stock
certificate shall be valid until countersigned by one of such transfer agents
and registered by one of such registrars. Nothing herein shall be construed to
prohibit the Corporation from acting as its own transfer agent or registrar.
9.05 LOST, STOLEN OR DESTROYED CERTIFICATES.
The holder of any certificate representing any share or shares of the
capital stock of the Corporation shall immediately notify the Corporation of any
loss, theft, or destruction of such certificate. The Board may direct that a new
certificate or certificates be issued in the place of any certificate or
certificates theretofore issued by it which the owner thereof shall allege to
have been lost, stolen or destroyed upon the furnishing to the Corporation of an
affidavit to that effect by the person claiming that the certificate has been
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the Board may, in its discretion, require such owner or his or her
legal representatives to give to the Corporation and its transfer agent(s) and
registrar(s) a bond in such sum, limited or unlimited, and in such form and with
such surety or sureties as the Board in its absolute discretion shall determine,
sufficient to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate, or the issuance of a new certificate.
9.06 STOCKHOLDER'S RIGHT OF INSPECTION.
Any stockholder of record of the Corporation, in person or by attorney or
other agent, shall, upon written demand under oath stating the purpose thereof,
have the right during the usual hours for business to inspect for any proper
purpose the Corporation's
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<PAGE> 23
stock ledger, a list of its stockholders, and its other books and records, and
to make copies or extracts therefrom. A proper purpose shall mean a purpose
reasonably related to such person's interest as a stockholder. In every instance
where an attorney or other agent shall be the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing which authorized the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in Delaware or at its principal place of
business.
9.07 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.
Any Executive Officer, Executive Vice President or the Secretary of this
Corporation is authorized to vote, represent and exercise on behalf of this
Corporation all rights incident to all shares of any other corporation or
corporations standing in the name of this Corporation. The authority herein
granted to said officers to vote or represent on behalf of this Corporation any
and all shares held by this Corporation in any other corporation or corporations
may be exercised either by such officers in person or by any person authorized
so to do by proxy or power of attorney duly executed by said officers.
ARTICLE X - MISCELLANEOUS
10.01 BUDGETS.
The Board shall approve all annual and other significant operating budgets
of the Corporation.
10.02 RECORD DATES.
In order that the Corporation may determine the stockholders entitled to
notice of, or to vote at, any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or to receive payment of any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any change, conversion or
exchange of stock or in respect of any other lawful action, the Board may fix,
in advance, a record date, which shall be not more than sixty (60) nor less than
ten (10) days before the date of such meeting, nor more than sixty (60) days
prior to any other action. Only those stockholders of record on the date so
fixed shall be entitled to any of the foregoing rights, notwithstanding the
transfer of any such stock on the books of the Corporation after any such record
date fixed by the Board.
10.03 DIVIDENDS.
Subject to any agreement to which the Corporation is a party or by which
it is bound, the Board may declare to be payable, in cash, in other property or
in stock of the Corporation of any class or series, such dividends in respect of
outstanding stock of the Corporation of any class or series as the Board may at
any time deem to be advisable. Before declaring any such dividend, the Board may
cause to be set aside any funds or other property or assets of the Corporation
legally available for the payment of dividends.
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<PAGE> 24
10.04 FISCAL YEAR.
The fiscal year of the Corporation shall be determined by resolution of
the Board.
10.05 CORPORATE SEAL.
The Corporate Seal shall be circular in form and shall bear the name of
the Corporation and the words and figures denoting its organization under the
laws of the State of Delaware and the year thereof and otherwise shall be in
such form as shall be approved from time to time by the Board.
10.06 AMENDMENTS.
All Bylaws of the Corporation may be amended, altered or repealed, and new
Bylaws may be enacted, by the affirmative vote of the holders of record of a
majority of the issued and outstanding stock of the Corporation entitled to vote
at any annual or special meeting, or by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board.
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<PAGE> 25
CERTIFICATE OF SECRETARY
The undersigned certifies:
(1) That the undersigned is duly elected and acting Secretary of
Charter communications Holding Capital Corporation, a Delaware corporation; and
(2) That the foregoing Bylaws constitute the Bylaws of the
Corporation adopted by the Board on the 16th day of February, 1999.
IN WITNESS WHEREOF, I have hereunto subscribed my name and
affixed the seal of the Corporation this 16th day of February, 1999.
/s/ Curtis S. Shaw
---------------------------------
Curtis S. Shaw, Secretary
[SEAL]
<PAGE> 1
Exhibit 4.1(a)
CHARTER COMMUNICATIONS HOLDINGS, LLC
AND
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
as Issuers
AND
MARCUS CABLE HOLDINGS, LLC
as Guarantor
$600,000,000
8.25% SENIOR NOTES DUE 2007
---------------------
INDENTURE
Dated as of March 17, 1999
HARRIS TRUST AND SAVINGS BANK,
Trustee
---------------------
<PAGE> 2
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310(a)(1)....................................... 7.10
(a)(2)....................................... 7.10
(a)(3)....................................... N.A.
(a)(4)....................................... N.A.
(a)(5)....................................... 7.10
(b).......................................... 7.10
(c).......................................... N.A.
311(a) ......................................... 7.11
(b).......................................... 7.11
(c).......................................... N.A.
312(a) ......................................... 2.05
(b).......................................... 12.03
(c).......................................... 12.03
313(a) ......................................... 7.06
(b)(1)....................................... 12.03
(b)(2)....................................... 7.07;12.03
(c).......................................... 7.06;12.02
(d).......................................... 7.06
314(a) ......................................... 4.03;12.02
(b).......................................... 12.02
(c)(1)....................................... 12.04
(c)(2)....................................... 12.04
(c)(3)....................................... N.A.
(d).......................................... N.A.
(e).......................................... 12.05
(f).......................................... N.A.
315(a) ......................................... 7.01
(b).......................................... 7.05;12.02
(c).......................................... 7.01
(d).......................................... 7.01
(e).......................................... 6.11
316(a) (last sentence) ......................... 2.09
(a)(1)(A).................................... 6.05
(a)(1)(B).................................... 6.04
(a)(2)....................................... N.A.
(b).......................................... 6.07
(c).......................................... 2.12
317(a)(1) ...................................... 6.08
(a)(2)....................................... 6.09
(b).......................................... 2.04
318(a) ......................................... 12.01
(b).......................................... N.A.
(c).......................................... 12.01
N.A. means not applicable.
* This Cross-Reference Table is not part of the Indenture.
-----------------------------------------
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions................................................. 1
Section 1.02. Other Definitions........................................... 21
Section 1.03. Incorporation by Reference of Trust Indenture Act........... 21
Section 1.04. Rules of Construction....................................... 22
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating............................................. 22
Section 2.02. Execution and Authentication................................ 23
Section 2.03. Registrar and Paying Agent.................................. 23
Section 2.04. Paying Agent to Hold Money in Trust......................... 24
Section 2.05. Holder Lists................................................ 24
Section 2.06. Transfer and Exchange....................................... 24
Section 2.07. Replacement Notes........................................... 35
Section 2.08. Outstanding Notes........................................... 36
Section 2.09. Treasury Notes.............................................. 36
Section 2.10. Temporary Notes............................................. 36
Section 2.11. Cancellation................................................ 37
Section 2.12. Defaulted Interest.......................................... 37
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.......................................... 37
Section 3.02. Selection of Notes to Be Redeemed........................... 37
Section 3.03. Notice of Redemption........................................ 38
Section 3.04. Effect of Notice of Redemption.............................. 38
Section 3.05. Deposit of Redemption Price................................. 38
Section 3.06. Notes Redeemed in Part...................................... 39
Section 3.07. Optional Redemption......................................... 39
Section 3.08. Mandatory Redemption........................................ 39
Section 3.09. Offer to Purchase by Application of Excess Proceeds......... 39
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes ........................................... 41
Section 4.02. Maintenance of Office or Agency ............................ 41
Section 4.03. Reports .................................................... 42
Section 4.04. Compliance Certificate ..................................... 42
Section 4.05. Taxes ...................................................... 43
Section 4.06. Stay, Extension and Usury Laws ............................. 43
Section 4.07. Restricted Payments ........................................ 43
Section 4.08. Investments ................................................ 46
Section 4.09. Dividend and Other Payment Restrictions Affecting
Subsidiaries ............................................. 47
i
<PAGE> 4
Section 4.10. Incurrence of Indebtedness and Issuance of Preferred
Stock .................................................... 48
Section 4.11. Limitation on Asset Sales .................................. 51
Section 4.12. Sale and Leaseback Transactions ............................ 52
Section 4.13. Transactions with Affiliates ............................... 53
Section 4.14. Liens ...................................................... 54
Section 4.15. Corporate Existence ........................................ 54
Section 4.16. Repurchase at the Option of Holders upon a Change of
Control .................................................. 54
Section 4.17. Limitations on Issuances of Guarantees of Indebtedness ..... 56
Section 4.18. Payments for Consent ....................................... 56
Section 4.19. Application of Fall-Away Covenants ......................... 56
Section 4.20. Impairment of Security Interest ............................ 57
Section 4.21. Security Interest........................................... 57
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets ................... 57
Section 5.02. Successor Corporation Substituted .......................... 58
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default........................................... 58
Section 6.02. Acceleration ............................................... 60
Section 6.03. Other Remedies ............................................. 60
Section 6.04. Waiver of Existing Defaults ................................ 61
Section 6.05. Control by Majority ........................................ 61
Section 6.06. Limitation on Suits ........................................ 61
Section 6.07. Rights of Holders of Notes to Receive Payment .............. 61
Section 6.08. Collection Suit by Trustee ................................. 62
Section 6.09. Trustee May File Proofs of Claim ........................... 62
Section 6.10. Priorities ................................................. 62
Section 6.11. Undertaking for Costs ...................................... 63
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee .......................................... 63
Section 7.02. Rights of Trustee .......................................... 64
Section 7.03. Individual Rights of Trustee ............................... 65
Section 7.04. Trustee's Disclaimer ....................................... 65
Section 7.05. Notice of Defaults ......................................... 65
Section 7.06. Reports by Trustee to Holders of the Notes ................. 65
Section 7.07. Compensation and Indemnity ................................. 65
Section 7.08. Replacement of Trustee ..................................... 66
Section 7.09. Successor Trustee by Merger, etc. .......................... 67
Section 7.10. Eligibility; Disqualification .............................. 67
Section 7.11. Preferential Collection of Claims Against the Issuers ...... 67
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance ... 68
ii
<PAGE> 5
Section 8.02. Legal Defeasance and Discharge ............................. 68
Section 8.03. Covenant Defeasance ........................................ 68
Section 8.04. Conditions to Legal or Covenant Defeasance ................. 69
Section 8.05. Deposited Money and Government Securities to Be Held in
Trust; Other Miscellaneous Provisions..................... 70
Section 8.06. Repayment to Issuers ....................................... 71
Section 8.07. Reinstatement .............................................. 71
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes ........................ 71
Section 9.02. With Consent of Holders of Notes ........................... 72
Section 9.03. Compliance with Trust Indenture Act ........................ 73
Section 9.04. Revocation and Effect of Consents .......................... 73
Section 9.05. Notation on or Exchange of Notes ........................... 74
Section 9.06. Trustee to Sign Amendments, etc. ........................... 74
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Unconditional Guarantee .................................... 74
Section 10.02. Limitations on this Guarantee .............................. 75
Section 10.03. Execution and Delivery of this Guarantee ................... 75
Section 10.04. Release of Guarantor ....................................... 76
Section 10.05. Waiver of Subrogation ...................................... 76
Section 10.06. Immediate Payment .......................................... 77
Section 10.07. Obligations Continuing ..................................... 77
Section 10.08. Obligations Reinstated ..................................... 77
Section 10.09. Obligations Not Affected ................................... 77
Section 10.10. Waiver ..................................................... 77
Section 10.11. No Obligation To Take Action Against Either Issuer ......... 77
Section 10.12. Dealing With The Company and Others ........................ 78
Section 10.13. Default and Enforcement .................................... 78
Section 10.14. Amendment, Etc. ............................................ 78
Section 10.15. Acknowledgement ............................................ 78
Section 10.16. Costs and Expenses ......................................... 78
Section 10.17. No Waiver; Cumulative Remedies ............................. 79
Section 10.18. Effect of Offset or Counterclaim ........................... 79
Section 10.19. Guarantee in Addition to Other Obligations ................. 79
Section 10.20. Severability ............................................... 79
Section 10.21. Successors and Assigns ..................................... 79
ARTICLE 11
SECURITY
Section 11.01. Security ................................................... 79
Section 11.02. Recording and Opinions ..................................... 80
Section 11.03. Release of Collateral ...................................... 81
Section 11.04. Authorization of Actions To Be Taken by the Trustee ........ 81
Section 11.05. Acknowledgment that Collateral Secures the Other Notes ..... 81
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ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls ............................... 81
Section 12.02. Notices .................................................... 81
Section 12.03. Communication by Holders of Notes with Other Holders
of Notes ................................................. 82
Section 12.04. Certificate and Opinion as to Conditions Precedent ......... 83
Section 12.05. Statements Required in Certificate or Opinion .............. 83
Section 12.06. Rules by Trustee and Agents ................................ 83
Section 12.07. No Personal Liability of Directors, Officers, Employees,
Members and Stockholders ................................. 83
Section 12.08. Governing Law .............................................. 83
Section 12.09. No Adverse Interpretation of Other Agreements .............. 84
Section 12.10. Successors ................................................. 84
Section 12.11. Severability ............................................... 84
Section 12.12. Counterpart Originals ...................................... 84
Section 12.13. Table of Contents, Headings, etc. .......................... 84
ARTICLE 13
SATISFACTION AND DISCHARGE
Section 13.01. Satisfaction and Discharge of Indenture .................... 84
Section 13.02. Application of Trust Money ................................. 85
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E FORM OF GUARANTEE
Exhibit F FORM OF MIRROR NOTE
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INDENTURE dated as of March 17, 1999 among Charter Communications
Holdings, LLC, a Delaware limited liability company (the "Company"), Charter
Communications Holdings Capital Corporation, a company incorporated under the
laws of Delaware ("Charter Capital" and together with the Company, the
"Issuers"), Marcus Cable Holdings, LLC, a Delaware limited liability company, as
guarantor (the "Guarantor"), and Harris Trust and Savings Bank, as trustee (the
"Trustee").
The Issuers, the Guarantor and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 8.25% Senior Notes due 2007 (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note substantially in the form of
Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend
and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in an initial denomination equal
to the outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or becomes a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with,
or in contemplation of, such other Person merging with or into, or
becoming a Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling, "controlled by" and "under common control
with " shall have correlative meanings.
"Agent" means any Registrar or Paying Agent.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Acquisition" means (a) an Investment by the Company or any of the
Company's Restricted Subsidiaries, or the Guarantor or any of the Guarantor's
Restricted Subsidiaries, as the case may be, in any other Person pursuant to
which such Person shall become a Restricted Subsidiary of the Company or any of
the Company's Restricted Subsidiaries, or the Guarantor or any of the
Guarantor's
<PAGE> 8
Restricted Subsidiaries, as the case may be, or shall be merged with or into the
Company or any of the Company's Restricted Subsidiaries, or the Guarantor or any
of the Guarantor's Restricted Subsidiaries, as the case may be, or (b) the
acquisition by the Company or any of the Company's Restricted Subsidiaries, or
the Guarantor or any of the Guarantor's Subsidiaries, as the case may be, of the
assets of any Person which constitute all or substantially all of the assets of
such Person, any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets
or rights, other than sales of inventory in the ordinary course of
business consistent with past practices; provided that the sale,
conveyance or other disposition of all or substantially all of the assets
of the Company and its Restricted Subsidiaries, taken as a whole, and of
the Guarantor and its Restricted Subsidiaries, taken as a whole, shall be
governed by Section 4.16 and/or Section 5.01 and not by the provisions of
Section 4.11; and
(2) the issuance of Equity Interests by any of the Company's or the
Guarantor's Restricted Subsidiaries or the sale of Equity Interests in any
of the Company's or the Guarantor's Restricted Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) any single transaction or series of related transactions that:
(a) involves assets having a fair market value of less than $100 million;
or (b) results in net proceeds to the Company, the Guarantor and their
Restricted Subsidiaries of less than $100 million;
(2) a transfer of assets (i) between or among the Company and its
Restricted Subsidiaries, (ii) between or among the Guarantor and its
Restricted Subsidiaries and (iii) from the Guarantor or any of its
Restricted Subsidiaries to any of the Company or its Restricted
Subsidiaries;
(3) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary of the Company to the Company or to another Wholly Owned
Restricted Subsidiary of the Company, or an issuance of Equity Interests
by a Wholly Owned Restricted Subsidiary of the Guarantor to another Wholly
Owned Restricted Subsidiary of the Guarantor;
(4) a Restricted Payment that is permitted by Section 4.07 and a
Restricted Investment that is permitted by Section 4.08; and
(5) the incurrence of Permitted Liens and the disposition of assets
related to such Permitted Liens by the secured party pursuant to a
foreclosure.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessee, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
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"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or state
law of any jurisdiction relating to bankruptcy, insolvency, winding up,
liquidation, reorganization or relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire, whether such
right is currently exercisable or is exercisable only upon the occurrence of a
subsequent condition.
"Board of Directors" means the Board of Directors of the Company, Charter
Capital or the Guarantor, as the case may be, or any authorized committee of the
Board of Directors of the Company, Charter Capital or the Guarantor, as the case
may be.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company, Charter Capital or the Guarantor, as
the case may be, to have been duly adopted by the Board of Directors of the
Company, Charter Capital or the Guarantor, as the case may be, and to be in full
force and effect on the date of such certification and delivered to the Trustee.
"Business Day" means any day other than a Legal Holiday.
"Cable Related Business" means the business of owning cable television
systems and businesses ancillary, complementary and related thereto.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest (other than any debt obligation) or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Capital Stock Sale Proceeds " means the aggregate net cash proceeds
(including the fair market value of the non-cash proceeds, as determined by an
independent appraisal firm) received by the Company or the Guarantor since the
date of this Indenture (x) as a contribution to the common equity capital or
from the issue or sale of Equity Interests of the Company or the Guarantor
(other than Disqualified Stock) or (y) from the issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt securities
of the Company or the Guarantor that have been converted into or exchanged for
such Equity Interests (other than Equity Interests (or Disqualified Stock or
debt securities) sold to a Subsidiary of the Company or the Guarantor).
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<PAGE> 10
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged
in support thereof) having maturities of not more than twelve months from
the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of twelve months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any domestic commercial bank having combined
capital and surplus in excess of $500 million and a Thompson Bank Watch
Rating at the time of acquisition of "B" or better;
(4) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper having a rating of at least "P-1" from Moody's
or at least "A-1" from S&P and in each case maturing within twelve months
after the date of acquisition;
(6) corporate debt obligations maturing within twelve months after
the date of acquisition thereof, rated at the time of acquisition at least
"Aaa" or "P-1" by Moody's or "AAA" or "A-1" by S&P;
(7) auction-rate preferred stocks of any corporation maturing not
later than 45 days after the date of acquisition thereof, rated at the
time of acquisition at least "Aaa" by Moody's or "AAA" by S&P;
(8) securities issued by any state, commonwealth or territory of the
United States, or by any political subdivision or taxing authority
thereof, maturing not later than six months after the date of acquisition
thereof, rated at the time of acquisition at least "A" by Moody's or S&P;
and
(9) money market or, mutual funds, at least 90% of the assets of
which constitute Cash Equivalents of the kinds described in clauses (1)
through (8) of this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Subsidiaries, taken as a whole, or the Guarantor and its Subsidiaries,
taken as a whole, to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than the Principal or a Related Party
of the Principal;
(2) the adoption of a plan relating to the liquidation or
dissolution of the Company or the Guarantor;
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<PAGE> 11
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principal and Related Parties
and any entity formed for the purpose of owning Capital Stock of the
Company, becomes the Beneficial Owner, directly or indirectly, of more
than 35% of the Voting Stock of the Company or the Guarantor, measured by
voting power rather than number of shares, unless the Principal or a
Related Party Beneficially Owns, directly or indirectly, a greater
percentage of Voting Stock of the Company or the Guarantor, as the case
may be, measured by voting power rather than the number of shares, than
such person;
(4) after the Company's initial public offering, the first day on
which a majority of the members of the Board of Directors of the Company
are not Continuing Directors; or
(5) the Company or the Guarantor consolidates with, or merges with
or into, any Person, or any Person consolidates with, or merges with or
into, the Company or the Guarantor, in any such event pursuant to a
transaction in which any of the outstanding Voting Stock of the Company or
the Guarantor is converted into or exchanged for cash, securities or other
property, other than any such transaction where the Voting Stock of the
Company or the Guarantor outstanding immediately prior to such transaction
is converted into or exchanged for Voting Stock (other than Disqualified
Stock) of the surviving or transferee Person constituting a majority of
the outstanding shares of such Voting Stock of such surviving or
transferee Person immediately after giving effect to such issuance.
"Charter Capital" has the meaning assigned to it in the preamble to this
Indenture.
"Collateral" means the Mirror Note and other collateral which secures the
obligations under the Notes pursuant to the Pledge Documents and the collateral
which secures the obligations under the Mirror Note.
"Commission" or "SEC" means the Securities and Exchange Commission.
"Company" has the meaning assigned to it in the preamble to this
Indenture.
"Company Preferred Stock" means the 10% cumulative convertible redeemable
preferred stock of the Company with an aggregate liquidation value of $25
million.
"Consolidated EBITDA" means with respect to any Person, for any period,
the net income of such Person and its Restricted Subsidiaries for such period
plus, to the extent such amount was deducted in calculating such net income:
(1) Consolidated Interest Expense;
(2) income taxes;
(3) depreciation expense;
(4) amortization expense;
(5) all other non-cash items, extraordinary items, nonrecurring and
unusual items and the cumulative effects of changes in accounting
principles reducing such net income, less all non-cash items,
extraordinary items, nonrecurring and unusual items and cumulative effects
of
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<PAGE> 12
changes in accounting principles increasing such net income, all as
determined on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP;
(6) amounts actually paid during such period pursuant to a deferred
compensation plan; and
(7) for purposes of Section 4.10 only, Management Fees;
provided that Consolidated EBITDA shall not include:
(x) the net income (or net loss) of any Person that is not a
Restricted Subsidiary ("Other Person"), except (I) with respect to net
income, to the extent of the amount of dividends or other distributions
actually paid to such Person or any of its Restricted Subsidiaries by such
Other Person during such period and (II) with respect to net losses, to
the extent of the amount of investments made by such Person or any
Restricted Subsidiary of such Person in such Other Person during such
period;
(y) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (3) of Section 4.07 (and in
such case, except to the extent includable pursuant to clause (x) above),
the net income (or net loss) of any Other Person accrued prior to the date
it becomes a Restricted Subsidiary or is merged into or consolidated with
such Person or any Restricted Subsidiaries or all or substantially all of
the property and assets of such Other Person are acquired by such Person
or any of its Restricted Subsidiaries; and
(z) the net income of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary (other than any agreement or
instrument evidencing Indebtedness or Preferred Stock outstanding on the
date of this Indenture or incurred or issued thereafter in compliance with
Section 4.10; provided that the terms of any such agreement restricting
the declaration and payment of dividends or similar distributions apply
only in the event of a default with respect to a financial covenant or a
covenant relating to payment (beyond any applicable period of grace)
contained in such agreement or instrument and provided such terms are
determined by such Person to be customary in comparable financings and
such restrictions are determined by the Company not to materially affect
the Company's ability to make principal or interest payments on the Notes
when due).
"Consolidated Indebtedness" means, with respect to any Person as of any
date of determination, the sum, without duplication, of:
(1) the total amount of outstanding Indebtedness of such Person and
its Restricted Subsidiaries, plus
(2) the total amount of Indebtedness of any other Person that has
been Guaranteed by the referent Person or one or more of its Restricted
Subsidiaries (excluding Indebtedness of the Company or any of its
Subsidiaries guaranteed by the Guarantor and any of its Subsidiaries which
Indebtedness has been previously counted for the purposes of this
definition), plus
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(3) the aggregate liquidation value of all Disqualified Stock of
such Person and all preferred stock of Restricted Subsidiaries of such
Person, in each case, determined on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization or original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations);
and
(2) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and
(3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries
(whether or not such Guarantee or Lien is called upon);
excluding, however, any amount of such interest of any Restricted Subsidiary if
the net income of such Restricted Subsidiary is excluded in the calculation of
Consolidated EBITDA pursuant to clause (z) of the definition thereof (but only
in the same proportion as the net income of such Restricted Subsidiary is
excluded from the calculation of Consolidated EBITDA pursuant to clause (z) of
the definition thereof), in each case, on a consolidated basis and in accordance
with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the date of this
Indenture; or
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election or whose
election or appointment was previously so approved.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 or such other address as to which the Trustee
may give notice to the Issuers.
"Credit Facilities" means, with respect to the Company, the Guarantor
and/or their respective Restricted Subsidiaries, one or more debt facilities or
commercial paper facilities, in each case with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
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"Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06, substantially in the
form of Exhibit A hereto, except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Global Notes, the Person specified
in Section 2.03 as the Depositary with respect to the Notes, and any and all
successors thereto appointed as depositary hereunder and having become such
pursuant to the applicable provision of this Indenture.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, or transfer, lease conveyance
or other disposition of all or substantially all of such Person's assets or
Capital Stock.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company or the Guarantor, as the
case may be, to repurchase such Capital Stock upon the occurrence of a change of
control or an asset sale shall not constitute Disqualified Stock if the terms of
such Capital Stock provide that the Company or the Guarantor, as the case may
be, may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with Section 4.07.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any private or underwritten public offering of
Qualified Capital Stock of the Company of which the gross proceeds to the
Company are at least $25 million.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f).
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries and the Guarantor and its Restricted Subsidiaries in
existence on the Issue Date, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public
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<PAGE> 15
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, which are in
effect on the Issue Date.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" or "guarantee" means a guarantee other than by endorsement of
negotiable instruments for collection in the ordinary course of business, direct
or indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness, measured as the lesser of the
aggregate outstanding amount of the Indebtedness so guaranteed and the face
amount of the Guarantee.
"Guarantor" has the meaning assigned to it in the preamble to this
Indenture.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements;
(2) interest rate option agreements, foreign currency exchange
agreements, foreign currency swap agreements; and
(3) other agreements or arrangements designed to protect such Person
against fluctuations in interest and currency exchange rates.
"Holder" means a holder of the Notes.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
(5) in respect of the balance deferred and unpaid of the purchase
price of any property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing the notional amount of any Hedging Obligations,
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if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness
issued with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is not also a QIB.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) by Moody's and BBB- (or the equivalent) by S&P.
"Issue Date" means March 17, 1999.
"Issuers" has the meaning assigned to it in the preamble to this
Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Issuers and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Leverage Ratio " means, as of any date, the ratio of:
(1) the combined Consolidated Indebtedness of the Company and the
Guarantor on such date to
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(2) the aggregate amount of combined Consolidated EBITDA for the
Company and the Guarantor for the most recently ended fiscal quarter for
which internal financial statements are available multiplied by four (the
"Reference Period").
In addition to the foregoing, for purposes of this definition,
"Consolidated EBITDA" shall be calculated on a pro forma basis after giving
effect to
(1) the issuance of the Notes;
(2) the incurrence of the Indebtedness or the issuance of the
Disqualified Stock or other Preferred Stock of a Restricted Subsidiary
(and the application of the proceeds therefrom) giving rise to the need to
make such calculation and any incurrence or issuance (and the application
of the proceeds therefrom) or repayment of other Indebtedness or
Disqualified Stock or other Preferred Stock of a Restricted Subsidiary,
other than the incurrence or repayment of Indebtedness for ordinary
working capital purposes, at any time subsequent to the beginning of the
Reference Period and on or prior to the date of determination, as if such
incurrence (and the application of the proceeds thereof), or the
repayment, as the case may be, occurred on the first day of the Reference
Period; and
(3) any Dispositions or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted
Subsidiaries (including any person that becomes a Restricted Subsidiary as
a result of such Asset Acquisition) incurring, assuming or otherwise
becoming liable for or issuing Indebtedness, Disqualified Stock or
Preferred Stock) made on or subsequent to the first day of the Reference
Period and on or prior to the date of determination, as if such
Disposition or Asset Acquisition (including the incurrence, assumption or
liability for any such Indebtedness, Disqualified Stock or Preferred Stock
and also including any Consolidated EBITDA associated with such Asset
Acquisition, including any cost savings adjustments in compliance with
Regulation S-X promulgated by the Commission) had occurred on the first
day of the Reference Period.
For purposes of this definition and calculating the combined Consolidated
Indebtedness for the Company and the Guarantor, in no case will the combined
Consolidated Indebtedness for the Company include (x) Consolidated Indebtedness
of the Company which has already been counted as part of the Consolidated
Indebtedness of the Guarantor and (y) Consolidated Indebtedness of the Guarantor
which has already been counted as the Consolidated Indebtedness of the Company.
Further, for purposes of this definition and calculating combined Consolidated
EBITDA for the Company and the Guarantor, in no case will combined Consolidated
EBITDA for the Company and the Guarantor include (x) Consolidated EBITDA of the
Company which has already been counted as part of the Consolidated EBITDA of the
Guarantor and (y) Consolidated EBITDA of the Guarantor which has already been
counted as the Consolidated EBITDA of the Company.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
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<PAGE> 18
"Management Fees" means the fee payable to Charter Communications, Inc.
pursuant to the management agreement between Charter Communications, Inc. and
Charter Communication Operating LLC, as such agreement exists on the Issue Date,
including any amendment or replacement thereof, provided that any such amendment
or replacement is not more disadvantageous to the Holders of the Notes in any
material respect from such management agreement existing on the Issue Date.
"Marcus Combination" means the consolidation or merger of the Guarantor
with and into the Company or any of its Restricted Subsidiaries.
"Mirror Note" means the senior note of the Guarantor due April 1, 2007
issued to the Company in the principal amount of $1,548,630,855 in the form
attached to this Indenture as Exhibit F, and which will be secured by the pledge
by the Guarantor of all of the Capital Stock of Marcus Cable Company LLC, a
wholly owned Subsidiary of the Guarantor.
"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries or by the Guarantor or any of its
Restricted Subsidiaries, as the case may be, in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof or taxes paid or payable as a
result thereof (including amounts distributable in respect of owners', partners'
or members' tax liabilities resulting from such sale), in each case after taking
into account any available tax credits or deductions and any tax sharing
arrangements and amounts required to be applied to the repayment of
Indebtedness.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted
Subsidiaries , nor the Guarantor or any of its Restricted Subsidiaries, as
the case may be, (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or both
any holder of any other Indebtedness (other than the Notes) of the Company
or any of its Restricted Subsidiaries, or the Guarantor or any of its
Restricted Subsidiaries, as the case may be, to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries or the Guarantor or any of its Restricted
Subsidiaries, as the case may be.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this Indenture.
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<PAGE> 19
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company, Charter Capital or the Guarantor, as the case may be, by two Officers
of the Company, Charter Capital or the Guarantor, as the case may be, one of
whom must be the principal executive officer, the chief financial officer or the
treasurer of the Company, Charter Capital or the Guarantor, as the case may be,
that meets the requirements of Section 12.05.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05. The
counsel may be an employee of or counsel to the Issuers, the Guarantor, any
Subsidiary of the Issuers or the Guarantor or the Trustee.
"Other Notes" means the 8.625% Senior Notes due 2009 of the Issuers in an
aggregate principal amount not to exceed the principal amount issued on the
Issue Date, and the 9.920% Senior Discount Notes due 2011 of the Issuers in an
aggregate principal amount at maturity not to exceed the principal amount at
maturity issued on the Issue Date.
"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Investments" means:
(1) any Investment by the Company in a Restricted Subsidiary of the
Company, or any Investment by the Guarantor in a Restricted Subsidiary of
the Guarantor, the Company or a Restricted Subsidiary of the Company, or
any Investment by a Restricted Subsidiary of the Company or the Guarantor
in the Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the
Company; or
(b) such Person is merged or consolidated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the
Company;
(4) any Investment by the Guarantor or any Restricted Subsidiary of
the Guarantor in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the
Guarantor; or
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<PAGE> 20
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or
is liquidated into, the Guarantor or a Restricted Subsidiary of the
Guarantor;
(5) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.11;
(6) Investment made out of the net cash proceeds of the issue and
sale (other than to a Subsidiary of the Company or the Guarantor) of
Equity Interests (other than Disqualified Stock) of the Company or the
Guarantor to the extent that such net cash proceeds have not been applied
to make a Restricted Payment or to effect other transactions pursuant to
Section 4.07 or to the extent such net cash proceeds have not been used to
incur Indebtedness pursuant to clause (10) of Section 4.10;
(7) Investments in Productive Assets having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with
all other Investments made pursuant to this clause (7) since the Issue
Date, not to exceed $150 million; provided that either the Company or any
of its Restricted Subsidiaries or the Guarantor or any of its Restricted
Subsidiaries, after giving effect to such Investments, will own at least
20% of the Voting Stock of such Person;
(8) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with
all other Investments made pursuant to this clause (8) since the date of
this Indenture, not to exceed $50 million;
(9) Investments in customers and suppliers in the ordinary course of
business which either (A) generate accounts receivable or (B) are accepted
in settlement of bona fide disputes; and
(10) the Company's investment in the Guarantor, as outstanding on
the Issue Date.
"Permitted Liens" means:
(1) Liens on the assets of the Company or the Guarantor securing
Indebtedness and other Obligations under clause (1) of Section 4.10;
(2) Liens in favor of the Company and the Guarantor and Liens on the
assets of any Restricted Subsidiary of the Company or the Guarantor in
favor of any other Restricted Subsidiary of the Company or the Guarantor;
(3) Liens on property of a Person existing at the time such Person
is merged with or into or consolidated with the Company or the Guarantor;
provided that such Liens were in existence prior to the contemplation of
such merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with the Company or the
Guarantor;
(4) Liens on property existing at the time of acquisition thereof by
the Company or the Guarantor; provided that such Liens were in existence
prior to the contemplation of such acquisition;
14
<PAGE> 21
(5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) purchase money mortgages or other purchase money liens
(including without limitation any Capital Lease Obligations) incurred by
the Company or the Guarantor upon any fixed or capital assets acquired
after the Issue Date or purchase money mortgages (including without
limitation Capital Lease Obligations) on any such assets, whether or not
assumed, existing at the time of acquisition of such assets, whether or
not assumed, so long as (i) such mortgage or lien does not extend to or
cover any of the assets of the Company or the Guarantor, except the asset
so developed, constructed, or acquired, and directly related assets such
as enhancements and modifications thereto, substitutions, replacements,
proceeds (including insurance proceeds), products, rents and profits
thereof, and (ii) such mortgage or lien secures the obligation to pay the
purchase price of such asset, interest thereon and other charges, costs
and expenses (including, without limitation, the cost of design,
development, construction, acquisition, transportation, installation,
improvement, and migration) and incurred in connection therewith (or the
obligation under such Capital Lease Obligation) only;
(7) Liens existing on the date of this Indenture (other than in
connection with the Credit Facilities);
(8) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(9) statutory and common law Liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted
and for which a reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made;
(10) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security;
(11) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligation, bankers'
acceptance, surety and appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of a similar nature incurred
in the ordinary course of business (exclusive of obligations for the
payment of borrowed money);
(12) easements, rights-of-way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of the
Company or the Guarantor or any of their Restricted Subsidiaries;
(13) Liens of franchisors or other regulatory bodies arising in the
ordinary course of business;
15
<PAGE> 22
(14) Liens arising from filing Uniform Commercial Code financing
statements regarding leases or other Uniform Commercial Code financing
statements for precautionary purposes relating to arrangements not
constituting Indebtedness;
(15) Liens arising from the rendering of a final judgment or order
against the Company, the Guarantor or any of their Restricted Subsidiaries
that does not give rise to an Event of Default;
(16) Liens securing reimbursement obligations with respect to
letters of credit that encumber documents and other property relating to
such letters of credit and the products and proceeds thereof;
(17) Liens encumbering customary initial deposits and margin
deposits, and other Liens that are within the general parameters customary
in the industry and incurred in the ordinary course of business, in each
case, securing Indebtedness under Hedging Obligations and forward
contracts, options, future contracts, future options or similar agreements
or arrangements designed solely to protect the Company, the Guarantor or
any of their respective Restricted Subsidiaries from fluctuations in
interest rates, currencies or the price of commodities;
(18) Liens consisting of any interest or title of licensor in the
property subject to a license;
(19) Liens on the Capital Stock of Unrestricted Subsidiaries;
(20) Liens arising from sales or other transfers of accounts
receivable which are past due or otherwise doubtful of collection in the
ordinary course of business;
(21) Liens incurred in the ordinary course of business of the
Company or the Guarantor, with respect to obligations which in the
aggregate do not exceed $50 million at any one time outstanding;
(22) Liens in favor of the Trustee arising under the provisions in
this Indenture and in the indentures relating to the Other Notes, in each
case under Section 7.07; and
(23) Liens in favor of the Trustee for its benefit and the benefit
of Holders and the holders of the Other Notes, as their respective
interests appear.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries, or the Guarantor or any of its Restricted
Subsidiaries, as the case may be, issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund, other
Indebtedness of the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, respectively (other than
intercompany Indebtedness); provided that unless permitted otherwise by this
Indenture, no Indebtedness of the Company or any of its Restricted Subsidiaries,
or the Guarantor or any of its Restricted Subsidiaries, may be issued in
exchange for, or the net proceeds of which are used to extend, refinance, renew,
replace, defease or refund Indebtedness of the Guarantor or any of its
Restricted Subsidiaries, or the Company or any of its Restricted Subsidiaries,
respectively; provided, further, that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if
16
<PAGE> 23
applicable), plus accrued interest and premium, if any, on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Notes or the Guarantee such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated
in right of payment to, the Notes or the Guarantee, as the case may be, on
terms at least as favorable to the Holders of Notes as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or by any of
its Restricted Subsidiaries or the Guarantor or by any of its Restricted
Subsidiaries, who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
"Pledge Documents" means, collectively, this Indenture and all pledge
agreements or other instruments evidencing or creating any security interests in
favor of the Trustee in all or any portion of the Collateral, in each case as
amended, supplemented or modified from time to time in accordance with their
terms and the terms of this Indenture.
"Principal" means Paul G. Allen.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i)(A) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Productive Assets" means assets (including assets of a referent Person
owned directly or indirectly through ownership of Capital Stock) of a kind used
or useful in the Cable Related Business.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Stock.
"Rating Agencies" means Moody's and S&P.
"Registration Rights Agreement" means the Exchange and Registration Rights
Agreement dated as of the Issue Date among the Issuers, the Guarantor and the
initial purchasers named therein with respect to the Notes issued on the Issue
Date.
"Regulation S" means Regulation S promulgated under the Securities Act.
17
<PAGE> 24
"Regulation S Global Note" means a global Note bearing the Private
Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee, issued in an initial
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"Related Party" means:
(1) the spouse or an immediate family member, estate or heir of the
Principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of the
Principal and/or such other Persons referred to in the immediately
preceding clause (1).
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) with direct responsibility for the
administration of this Indenture and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"S&P" means Standard & Poor's Ratings Service, a division of the
McGraw-Hill Companies, Inc. or any successor to the rating agency business
thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary of the Company
which is a "Significant Subsidiary" as defined in Rule 1-02(w) of Regulation S-X
under the Exchange Act.
"Special Interest" has the meaning set forth in the Registration Rights
Agreement.
18
<PAGE> 25
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the documentation governing
such Indebtedness on the Issue Date, or, if none, the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which
at least 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned
or controlled, directly or indirectly, by such Person or one or more of
the other Subsidiaries of that Person (or a combination thereof) and, in
the case of any such entity of which 50% of the total voting power of
shares of Capital Stock is so owned or controlled by such Person or one or
more of the other Subsidiaries of such Person, such Person and its
Subsidiaries also has the right to control the management of such entity
pursuant to contract or otherwise; and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Tax" shall mean any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other liabilities
related thereto).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA; provided, however, that in the event the Trust Indenture Act of
1939 is amended after such date, then "TIA" means, to the extent required by
such amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means Harris Trust and Savings Bank until a successor replaces
Harris Trust and Savings Bank in accordance with the applicable provisions of
this Indenture and thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent global Note substantially in
the form of Exhibit A attached hereto that bears the Global Note Legend and that
has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company or the
Guarantor that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a Board Resolution, but only to the extent that such
Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
or the Guarantor or any Restricted Subsidiary of the Guarantor unless the
terms of any such agreement, contract, arrangement or
19
<PAGE> 26
understanding are no less favorable to the Company or any Restricted
Subsidiary or the Guarantor or any Restricted Subsidiary of the Guarantor
than those that might be obtained at the time from Persons who are not
Affiliates of the Company or the Guarantor unless such terms constitute
Investments permitted by the covenant described above under Section 4.08;
(3) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries, nor the Guarantor nor any of its Restricted
Subsidiaries has any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified
levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries or the Guarantor or any of its Restricted
Subsidiaries; and
(5) has at least one director on its board of directors that is not
a director or executive officer of the Company or any of its Restricted
Subsidiaries, or of the Guarantor of any of its Restricted Subsidiaries,
or has at least one executive officer that is not a director or executive
officer of the Company or any of its Restricted Subsidiaries, or of the
Guarantor or any of its Restricted Subsidiaries.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the board of
directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount
of each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person and/or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Affiliate Transaction".................................. 4.13
"Asset Sale Offer"....................................... 3.09
"Authentication Order"................................... 2.02
"Change of Control Offer"................................ 4.16
"Change of Control Payment".............................. 4.16
</TABLE>
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<PAGE> 27
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Change of Control Payment Date"......................... 4.16
"Covenant Defeasance".................................... 8.01
"DTC".................................................... 2.03
"Event of Default"....................................... 6.01
"Excess Proceeds"........................................ 4.12
"incur".................................................. 4.09
"Legal Defeasance"....................................... 8.01
"Offer Period"........................................... 3.09
"Paying Agent"........................................... 2.03
"Payment Default"........................................ 6.01
"Permitted Debt"......................................... 4.10
"Preferred Stock Financing".............................. 4.10
"Purchase Date".......................................... 3.09
"Registrar".............................................. 2.03
"Restricted Payments".................................... 4.07
"Subordinated Debt Financing"............................ 4.10
"Subordinated Notes"..................................... 4.10
"Subsidiary Guarantee"................................... 4.17
"Suspended Covenants".................................... 4.19
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Issuers and any successor obligor upon
the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
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(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include
the singular;
(e) provisions apply to successive events and transactions;
(f) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or rules adopted
by the SEC from time to time;
(g) references to any statute, law, rule or regulation shall be deemed to
refer to the same as from time to time amended and in effect and to any
successor statute, law, rule or regulation; and
(h) references to any contract, agreement or instrument shall mean the
same as amended, modified, supplemented or amended and restated from time to
time, in each case, in accordance with any applicable restrictions contained in
this Indenture.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Issuers and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby. However, to the extent any provision of
any Note conflicts with the express provisions of this Indenture, the provisions
of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibit A attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06.
(c) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Global Notes that are held by
Participants through Euroclear or Cedel Bank.
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Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for each Issuer by manual or facsimile
signature. The Guarantor shall execute the Guarantee in the manner set forth in
Article 10.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuers signed by an
Officer of each of the Issuers (an "Authentication Order"), authenticate Notes
for original issue in the aggregate principal amount of $600,000,000. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07. On the Issue Date, the Issuers will
issue $600,000,000 aggregate principal amount of Notes.
The Trustee may appoint an authenticating agent acceptable to the Issuers
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Issuers.
Section 2.03. Registrar and Paying Agent.
The Issuers shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Issuers may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Issuers may change any
Paying Agent or Registrar without notice to any Holder. The Issuers shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Issuers fail to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Issuers or any of
their Subsidiaries may act as Paying Agent or Registrar.
The Issuers initially appoint The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Issuers initially appoint the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Issuers shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Notes, and shall notify the
Trustee of any default by the Issuers in making any such payment. While any such
default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee. The Issuers at any time may require a Paying Agent to pay
all money held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent (if other than the Issuers or a Subsidiary) shall have no further
liability for the money. If the Issuers or a Subsidiary acts as Paying Agent, it
shall segregate and hold in a separate trust fund for
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the benefit of the Holders all money held by it as Paying Agent. Upon any
bankruptcy or reorganization proceedings relating to the Issuers, the Trustee
shall serve as Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Issuers shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Issuers shall otherwise comply with TIA ss. 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes shall be exchanged
by the Company for Definitive Notes if:
(i) the Issuers deliver to the Trustee notice from the
Depositary that it is unwilling or unable to continue to act
as Depositary or that it is no longer a clearing agency
registered under the Exchange Act and, in either case, a
successor Depositary is not appointed by the Issuers within
120 days after the date of such notice from the Depositary; or
(ii) the Issuers in their sole discretion determine that
the Global Notes (in whole but not in part) should be
exchanged for Definitive Notes and deliver a written notice to
such effect to the Trustee; or
(iii) there shall have occurred and be continuing a
Default or Event of Default with respect to the Notes.
Upon the occurrence of any of the preceding events in (i), (ii) or (iii)
above, Definitive Notes shall be issued in such names as the Depositary shall
instruct the Trustee. Global Notes also may be exchanged or replaced, in whole
or in part, as provided in Sections 2.07 and 2.10. Every Note authenticated and
delivered in exchange for, or in lieu of, a Global Note or any portion thereof,
pursuant to this Section 2.06 or Section 2.07 or 2.10, shall be authenticated
and delivered in the form of, and shall be, a Global Note. A Global Note may not
be exchanged for another Note other than as provided in this Section 2.06(a);
however, beneficial interests in a Global Note may be transferred and exchanged
as provided in Section 2.06(b), (c) or (f).
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
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(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Note in accordance
with the transfer restrictions set forth in the Private Placement
Legend. Beneficial interests in any Unrestricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note. No written
orders or instructions shall be required to be delivered to the
Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i)
above, the transferor of such beneficial interest must deliver to
the Registrar either:
(A)(1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to credit or cause to be credited a
beneficial interest in another Global Note in an amount equal to the
beneficial interest to be transferred or exchanged; and
(A)(2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to be
credited with such increase; or
(B)(1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to cause to be issued a Definitive
Note in an amount equal to the beneficial interest to be transferred or
exchanged; and
(B)(2) instructions given by the Depositary to the Registrar
containing information regarding the Person in whose name such Definitive
Note shall be registered to effect the transfer or exchange referred to in
(1) above.
Upon consummation of an Exchange Offer by the Issuers in
accordance with Section 2.06(f), the requirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt by
the Registrar of the instructions contained in the Letter of
Transmittal delivered by the holder of such beneficial interests in
the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in
Global Notes contained in this Indenture and the Notes or otherwise
applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to Section
2.06(h).
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may
be transferred to a Person who takes delivery thereof in the form of
a beneficial interest in another Restricted Global Note if the
transfer complies with the requirements of Section 2.06(b)(ii) above
and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof; and
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(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may
be exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with
the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and
the holder of the beneficial interest to be transferred, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a broker-dealer pursuant to
the Exchange Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a certificate
from such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet
been issued, the Issuers shall issue (and, in the case of the
Guarantee, the Guarantor shall issue) and, upon receipt of an
Authentication Order in accordance with Section 2.02, the Trustee
shall authenticate one or more Unrestricted Global Notes (with
corresponding Guarantees) in an aggregate
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principal amount equal to the aggregate principal amount of
beneficial interests transferred pursuant to subparagraph (B) or (D)
above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof
in the form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest
in a Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note or to transfer such
beneficial interest to a Person who takes delivery thereof in the
form of a Restricted Definitive Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in
item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the
Issuers or any of their Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(G) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h), and the Issuers shall execute (and, in the case of the
Guarantee, the Guarantor shall execute) and the Trustee shall
authenticate and deliver to the Person designated in the
instructions a Definitive Note (with its
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corresponding Guarantee) in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c) shall be
registered in such name or names and in such authorized denomination
or denominations as the holder of such beneficial interest shall
instruct the Registrar through instructions from the Depositary and
the Participant or Indirect Participant. The Trustee shall deliver
such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c)(i) shall bear the Private Placement Legend and shall
be subject to all restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in
a Restricted Global Note may exchange such beneficial interest for
an Unrestricted Definitive Note or may transfer such beneficial
interest to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and
the holder of such beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable Letter
of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a broker-dealer pursuant to
the Exchange Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
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(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial
interest in an Unrestricted Global Note proposes to exchange such
beneficial interest for a Definitive Note or to transfer such
beneficial interest to a Person who takes delivery thereof in the
form of a Definitive Note, then, upon satisfaction of the conditions
set forth in Section 2.06(b)(ii), the Trustee shall cause the
aggregate principal amount of the applicable Global Note to be
reduced accordingly pursuant to Section 2.06(h), and the Issuers
shall execute (and, in the case of the Guarantee, the Guarantor
shall execute) and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note (with its
corresponding Guarantee) in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest
pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall not bear the
Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests in
Global Notes.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive
Note proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive
Notes to a Person who takes delivery thereof in the form of a
beneficial interest in a Restricted Global Note, then, upon receipt
by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to
an Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable;
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(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case
of clause (A) above, the appropriate Restricted Global Note, in the
case of clause (B) above, the 144A Global Note, in the case of
clause (C) above, the Regulation S Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Restricted Definitive Note to a Person
who takes delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and
the Holder, in the case of an exchange, or the transferee, in the case of
a transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a broker-dealer pursuant to
the Exchange Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in
the form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
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Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel
the Definitive Notes and increase or cause to be increased the
aggregate principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive
Note may exchange such Note for a beneficial interest in an
Unrestricted Global Note or transfer such Definitive Notes to a
Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note at any time. Upon receipt of
a request for such an exchange or transfer, the Trustee shall cancel
the applicable Unrestricted Definitive Note and increase or cause to
be increased the aggregate principal amount of one of the
Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B),
(ii)(D) or (iii) above at a time when an Unrestricted Global Note
has not yet been issued, the Issuers shall issue (and, in the case
of the Guarantee, the Guarantor shall issue) and, upon receipt of an
Authentication Order in accordance with Section 2.02, the Trustee
shall authenticate one or more Unrestricted Global Notes (with
corresponding Guarantees) in an aggregate principal amount equal to
the principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the
form of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule 144A under
the Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of Exhibit
B hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act, then
the transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel required
by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted
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Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and
the Holder, in the case of an exchange, or the transferee, in the case of
a transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Issuers;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a broker-dealer pursuant
to the Exchange Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive Note,
a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Issuers to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder
thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement the Issuers shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Issuers,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Issuers shall execute and the Trustee shall
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authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange therefor
or substitution thereof) shall bear the legend in substantially the
following form:
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (A)(1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS
A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A
UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S
UNDER THE SECURITIES ACT, (3) TO AN INSTITUTIONAL ACCREDITED
INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF
THE UNITED STATES."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06
(and all Notes issued in exchange therefor or substitution thereof) shall
not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend
in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE
TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE
TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE
MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE
DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO SECTION
2.11 OF THE INDENTURE AND (III) THIS GLOBAL
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NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR
WRITTEN CONSENT OF THE ISSUERS."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11. At any
time prior to such cancellation, if any beneficial interest in a Global Note is
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note or for Definitive Notes,
the principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note by the Trustee
or by the Depositary at the direction of the Trustee to reflect such reduction;
and if the beneficial interest is being exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note, such other Global Note shall be increased accordingly and an
endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Issuers shall execute (and, in the case of the Guarantee, the
Guarantor shall execute) and the Trustee shall authenticate Global
Notes and Definitive Notes (each with corresponding Guarantees) upon
the Issuers' order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Issuers
may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other
than any such transfer taxes or similar governmental charge payable
upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09,
4.11, 4.16 and 9.05).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or
in part, except the unredeemed portion of any Note being redeemed in
part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Issuers (and the
Guarantor, in the case of the Guarantee), evidencing the same debt,
and entitled to the same benefits under this Indenture, as the
Global Notes or Definitive Notes (each with a corresponding
Guarantee) surrendered upon such registration of transfer or
exchange.
(v) The Issuers shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 and ending at
the close of business on the day of selection, (B) to register the
transfer of or to exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being
redeemed in part or (C) to register the transfer of or to exchange a
Note between a record date and the next succeeding Interest Payment
Date.
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(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Issuers may
deem and treat the Person in whose name any Note is registered as
the absolute owner of such Note for the purpose of receiving payment
of principal of and interest on such Notes and for all other
purposes, and none of the Trustee, any Agent or the Issuers shall be
affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Issuers and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Issuers shall issue (and, in the case of the Guarantee, the
Guarantor shall issue) and the Trustee, upon receipt of an Authentication Order,
shall authenticate a replacement Note (with corresponding Guarantee) if the
Trustee's requirements are met. If required by the Trustee or the Issuers, an
indemnity bond must be supplied by the Holder that is sufficient in the judgment
of the Trustee and the Issuers to protect the Issuers, the Trustee, any Agent
and any authenticating agent from any loss that any of them may suffer if a Note
is replaced. The Issuers may charge for their expenses in replacing a Note.
Every replacement Note (with corresponding Guarantee) is an additional
obligation of the Issuers and the Guarantor and shall be entitled to all of the
benefits of this Indenture equally and proportionately with all other Notes
(with corresponding Guarantees) duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions, and those described in this Section as not
outstanding. Except as set forth in Section 2.09, a Note does not cease to be
outstanding because either of the Issuers, the Guarantor or an Affiliate of the
Issuers or the Guarantor holds the Note; however, Notes held by an Issuer, the
Guarantor or a Subsidiary of an Issuer or the Guarantor shall not be deemed to
be outstanding for purposes of Section 3.07(b).
If a Note is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01,
it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than an Issuer, a Subsidiary or an Affiliate of
any thereof) holds, on a redemption date or maturity date, money sufficient to
pay Notes payable on that date, then on and after that date such Notes shall be
deemed to be no longer outstanding and shall cease to accrue interest.
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Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by an
Issuer, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with an Issuer, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that a Responsible Officer of the Trustee knows are so owned shall be
so disregarded.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the Issuers
may prepare (and, in the case of the Guarantee, the Guarantor may prepare) and
the Trustee, upon receipt of an Authentication Order, shall authenticate
temporary Notes (with corresponding Guarantees). Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that the
Issuers considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Issuers shall prepare
(and, in the case of the Guarantee, the Guarantor shall prepare) and the Trustee
shall authenticate definitive Notes (with corresponding Guarantees) in exchange
for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Issuers at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes. Certification of the destruction of all canceled Notes shall be
delivered to the Issuers. The Issuers may not issue new Notes to replace Notes
that they have paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Issuers default in a payment of interest on the Notes, they shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01. The Issuers shall notify the Trustee in writing of the
amount of defaulted interest proposed to be paid on each Note and the date of
the proposed payment. The Issuers shall fix or cause to be fixed each such
special record date and payment date; provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Issuers (or, upon
the written request of the Issuers, the Trustee in the name and at the expense
of the Issuers) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
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ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Issuers elect to redeem Notes pursuant to the optional redemption
provisions of Section 3.07, it shall furnish to the Trustee, at least 30 days
but not more than 60 days before a redemption date, an Officers' Certificate
setting forth (i) the clause of this Indenture pursuant to which the redemption
shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, the Trustee shall select the Notes to be redeemed or
purchased among the Holders of the Notes in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Issuers in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09, at least 30 days but not more
than 60 days before a redemption date, the Issuers shall mail or cause to be
mailed, by first class mail, a notice of redemption to each Holder whose Notes
are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
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(f) that, unless the Issuers default in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Issuers' request, the Trustee shall give the notice of redemption
in the Issuers' name and at their expense; provided, however, that each of the
Issuers shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03, Notes
called for redemption become irrevocably due and payable on the redemption date
at the redemption price. A notice of redemption may not be conditional.
Section 3.05. Deposit of Redemption Price.
At or prior to 10:00 a.m., New York City time, on the redemption date, the
Issuers shall deposit with the Trustee or with the Paying Agent money sufficient
to pay the redemption price of and accrued interest on all Notes to be redeemed
on that date. The Trustee or the Paying Agent shall promptly return to the
Issuers any money deposited with the Trustee or the Paying Agent by the Issuers
in excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Notes to be redeemed.
If the Issuers comply with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Issuers to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Issuers shall issue
and, upon the Issuers' written request, the Trustee shall authenticate for the
Holder at the expense of the Issuers a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
The Notes will not be redeemable at the Issuers' option prior to maturity
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Section 3.08. Mandatory Redemption.
Except as otherwise provided in Section 4.11 or Section 4.16 below, the
Issuers shall not be required to make mandatory redemption payments with respect
to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that the Issuers shall be required to commence an offer to
all Holders to purchase Notes pursuant to Section 4.11 (an "Asset Sale Offer"),
they shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Issuers shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.11 (the "Offer Amount") or, if less than the
Offer Amount has been tendered, all Notes tendered in response to the Asset Sale
Offer. Payment for any Notes so purchased shall be made in the same manner as
interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no Special Interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer the Issuers shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.11 and the length of time the Asset Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(d) that, unless the Issuers default in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer or may elect to have Notes purchased in integral multiples of $1,000
only;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Issuers, a depositary, if appointed by
the Issuers, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Issuers, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount
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of the Note the Holder delivered for purchase and a statement that such Holder
is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Issuers shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Issuers so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Issuers shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer or
if less than the Offer Amount has been tendered, all Notes tendered, and shall
deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Issuers in accordance with the
terms of this Section 3.09. The Issuers, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Issuers for purchase, and the Issuers shall promptly issue a new Note, and the
Trustee, upon written request from the Issuers shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Issuers to the Holder thereof. The Issuers
shall publicly announce the results of the Asset Sale Offer on the Purchase
Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Issuers shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Issuers or a Subsidiary thereof,
holds as of 10:00 a.m. New York City time on the due date money deposited by the
Issuers in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Issuers shall pay all
Special Interest, if any, in the same manner on the dates and in the amounts set
forth in the Registration Rights Agreement.
The Issuers shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; they shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
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Section 4.02. Maintenance of Office or Agency.
The Issuers shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Issuers in respect of the Notes and this Indenture may be served. The
Issuers shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Issuers
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Issuers may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Issuers
of their obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Issuers shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Issuers hereby designate the Harris Trust Company of New York, an
affiliate of the Trustee, as one such office or agency of the Issuers in
accordance with Section 2.03.
Section 4.03. Reports.
Whether or not required by the Commission, so long as any Notes are
outstanding, the Issuers and the Guarantor shall furnish to the Holders of
Notes, within the time periods specified in the Commission's rules and
regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Issuers and the Guarantor were required to file such Forms,
including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information
only, a report on the annual financial statements by the Issuers'
certified independent accountants and the Guarantor's certified
independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Issuers or the Guarantor were required to
file such reports.
If the Issuers or the Guarantor has designated any of its Subsidiaries as
Unrestricted Subsidiaries, then the quarterly and annual financial information
required by the preceding paragraph shall include a reasonably detailed
presentation, either on the face of the financial statements or in the footnotes
thereto, and in Management's Discussion and Analysis of Financial Condition and
Results of Operations, of the financial condition and results of operations of
the Issuers or the Guarantor, as the case may be, and their respective
Restricted Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of the Issuers or the Guarantor, as
the case may be.
In addition, whether or not required by the Commission, the Issuers or the
Guarantor shall file a copy of all of the information and reports referred to in
clauses (1) and (2) above with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request.
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Section 4.04. Compliance Certificate.
(a) Each of the Company and the Guarantor shall deliver to the Trustee,
within 90 days after the end of each fiscal year, an Officers' Certificate
stating that a review of the activities of the Company and its Subsidiaries and
the Guarantor and its Subsidiaries, respectively, during the preceding fiscal
year have been made under the supervision of the signing Officers with a view to
determining whether the Company or the Guarantor, as the case may be, has kept,
observed, performed and fulfilled its obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge the Company or the Guarantor, as the case may be,
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company or the
Guarantor, as the case may be, is taking or proposes to take with respect
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of
or interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company or the Guarantor, as the
case may be, is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants or the
Guarantor's independent public accountants, as the case may be, (each of whom
shall be a firm of established national reputation) that in making the
examination necessary for certification of such financial statements, nothing
has come to their attention that would lead them to believe that the Company or
the Guarantor, as the case may be, has violated any provisions of Article 4 or
Article 5 or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation. In the event that, after the Company or the
Guarantor, as the case may be, has used its reasonable best efforts to obtain
the written statement of the Company's independent public accountants or the
Guarantor's independent public accountants, as the case may be, required by the
provisions of this paragraph, such statement cannot be obtained, the Company or
the Guarantor, as the case may be, shall deliver, in satisfaction of its
obligations under this Section 4.04, an Officers' Certificate (A) certifying
that it has used its reasonable best efforts to obtain such required statement
but was unable to do so and (B) attaching the written statement of the Company's
accountants or the Guarantor's accountants, as the case may be, that the Company
or the Guarantor, as the case may be, received in lieu thereof.
(c) Each of the Company and the Guarantor shall, so long as any of the
Notes are outstanding, deliver to the Trustee, forthwith upon any Officer
becoming aware of any Default or Event of Default, an Officers' Certificate
specifying such Default or Event of Default and what action the Company or the
Guarantor, as the case may be, is taking or proposes to take with respect
thereto.
Section 4.05. Taxes.
Each of the Company and the Guarantor shall pay, and shall cause each of
their Subsidiaries to pay, prior to delinquency, all material taxes,
assessments, and governmental levies except such as are contested in good faith
and by appropriate proceedings or where the failure to effect such payment is
not adverse in any material respect to the Holders of the Notes.
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Section 4.06. Stay, Extension and Usury Laws.
Each of the Issuers and the Guarantor covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and each of the
Issuers and the Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other payment or
distribution on account of the Company's, the Guarantor's or any of their
Restricted Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation involving the
Company, the Guarantor or any of their Restricted Subsidiaries) or to the
direct or indirect holders of the Company's, the Guarantor's or any of
their Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other
than Disqualified Stock) of the Company or the Guarantor or, in the case
of the Company and its Restricted Subsidiaries, to the Company or a
Restricted Subsidiary of the Company or in the case of the Guarantor and
its Restricted Subsidiaries, to the Company, the Guarantor or a Restricted
Subsidiary of the Company or the Guarantor);
(b) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company
or the Guarantor or any direct or indirect parent of the Company or the
Guarantor or any Restricted Subsidiary of the Company or the Guarantor
(other than, in the case of the Company and its Restricted Subsidiaries,
any such Equity Interests owned by the Company or any Restricted
Subsidiary of the Company or, in the case of the Guarantor and its
Restricted Subsidiaries, any such Equity Interests owned by the Company,
the Guarantor or any Restricted Subsidiary of the Company or the
Guarantor); or
(c) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or the Guarantees (other than the Notes or the
Guarantees), except a payment of interest or principal at the Stated
Maturity thereof
(all such payments and other actions set forth in clauses (a) through (c) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the
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applicable quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Leverage Ratio test set forth in
the first paragraph of Section 4.10; and
(3) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company, the Guarantor and each
of their Restricted Subsidiaries after the date of this Indenture
(excluding Restricted Payments permitted by clauses (2), (3), (4), (5),
(6), (7) and (8) of the next succeeding paragraph), shall not exceed, at
the date of determination, the sum of:
(a) an amount equal to 100% of the combined Consolidated
EBITDA of the Company and the Guarantor since the date of this
Indenture to the end of the Company's and the Guarantor's most
recently ended full fiscal quarter for which internal financial
statements are available, taken as a single accounting period, less
the product of 1.2 times the combined Consolidated Interest Expense
of the Company and the Guarantor since the date of this Indenture to
the end of the Company's and the Guarantor's most recently ended
full fiscal quarter for which internal financial statements are
available, taken as a single accounting period, plus
(b) an amount equal to 100% of Capital Stock Sale Proceeds
less any such Capital Stock Sale Proceeds used in connection with
(i) an Investment made pursuant to clause (6) of the definition of
"Permitted Investments" or (ii) the incurrence of Indebtedness
pursuant to clause (10) of Section 4.10, plus
(c) $100.0 million.
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions shall not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of this Indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or the
Guarantor in exchange for, or out of the net proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company or the
Guarantor) of, Equity Interests of the Company or the Guarantor (other
than Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause
(3) (b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company, the Guarantor or any of their
Restricted Subsidiaries with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
(4) regardless of whether a Default then exists, the payment of any
dividend or distribution to the extent necessary to permit direct or
indirect beneficial owners of shares of Capital Stock of the Company or
the Guarantor to pay federal, state or local income tax liabilities that
would arise solely from income of the Company or the Guarantor or any of
their Restricted Subsidiaries, as the case may be, for the relevant
taxable period and attributable to them solely as a result of the Company
or the Guarantor (and any intermediate entity through which the Holder
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owns such shares) or any of its Restricted Subsidiaries being a limited
liability company, partnership or similar entity for federal income tax
purposes;
(5) regardless of whether a Default then exists, the payment of any
dividend by a Restricted Subsidiary of the Company or the Guarantor to the
holders of its common Equity Interests on a pro rata basis;
(6) the payment of any dividend on the Company Preferred Stock or
the redemption, repurchase, retirement or other acquisition of the Company
Preferred Stock in an amount not in excess of its aggregate liquidation
value;
(7) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or the Guarantor held by
any member of the Company's or the Guarantor's management pursuant to any
management equity subscription agreement or stock option agreement in
effect as of the date of this Indenture; provided that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $10 million in any fiscal year; and
(8) payment of fees in connection with any acquisition, merger or
similar transaction in an amount that does not exceed an amount equal to
1.25% of the transaction value of such acquisition, merger or similar
transaction.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company, the Guarantor or any of
their Restricted Subsidiaries pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant shall be determined by the Board of Directors of the Company or the
Guarantor, as the case may be, whose resolution with respect thereto shall be
delivered to the Trustee. Such Board of Director's determination must be based
upon an opinion or appraisal issued by an accounting, appraisal or investment
banking firm of national standing if the fair market value exceeds $100 million.
Not later than the date of making any Restricted Payment, the Company or the
Guarantor, as the case may be shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal required by
this Indenture.
Section 4.08. Investments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(1) make any Restricted Investment; or
(2) allow any Restricted Subsidiary of the Company or the Guarantor
to become an Unrestricted Subsidiary,
unless, in each case:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
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(2) the Company would, at the time of, and after giving effect to,
such Restricted Investment or such designation of a Restricted Subsidiary
as an Unrestricted Subsidiary, have been permitted to incur at least $1.00
of additional Indebtedness pursuant to the Leverage Ratio test set forth
in the first paragraph of Section 4.10.
Any designation of a Subsidiary of the Company or the Guarantor as an
Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the preceding conditions and was permitted by this Section 4.08.
If, at any time, any Unrestricted Subsidiary would fail to meet the requirements
as an Unrestricted Subsidiary described in the definition of "Unrestricted
Subsidiary," it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of this Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company or the Guarantor
as of such date and, if such Indebtedness is not permitted to be incurred as of
such date under Section 4.10, the Company or the Guarantor, as the case may be,
shall be in default. The Board of Directors of the Company and the Guarantor may
at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company or the Guarantor,
respectively, of any outstanding Indebtedness of such Unrestricted Subsidiary
and such designation shall only be permitted if (1) such Indebtedness is
permitted under the covenant described under Section 4.10 calculated on a pro
forma basis as if such designation had occurred at the beginning of the
Reference Period; and (2) no Default or Event of Default would be in existence
following such designation.
Section 4.09. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company and the Guarantor shall not, directly or indirectly, create or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company or the Guarantor, as the
case may be, to:
(1) pay dividends or make any other distributions on its Capital
Stock to the Company or any of its Restricted Subsidiaries or to the
Guarantor or any of its Restricted Subsidiaries, or with respect to any
other interest or participation in, or measured by, its profits, or pay
any indebtedness owed to the Company or any of its Restricted Subsidiaries
or to the Guarantor or any of its Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries or to the Guarantor or any of its Restricted Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any
of its Restricted Subsidiaries or to the Guarantor or any of its
Restricted Subsidiaries.
However, the preceding restrictions shall not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of this Indenture
(including, without limitation, the Credit Facilities) and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements,
refinancings, replacements or refinancings are no more restrictive, taken
as a whole, with respect to such dividend and other payment restrictions
than those contained in such Existing Indebtedness, as in effect on the
date of this Indenture;
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(2) this Indenture, the Notes and the Other Notes;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries or to
the Guarantor or any of its Restricted Subsidiaries as in effect at the
time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired; provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred;
(5) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary of either the Company or the Guarantor that restricts
distributions by such Restricted Subsidiary pending its sale or other
disposition;
(8) Permitted Refinancing Indebtedness; provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under Section
4.14 that limit the right of the Company or any of its Restricted
Subsidiaries or the Guarantor or any of its Restricted Subsidiaries to
dispose of the assets subject to such Lien;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business;
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(12) restrictions contained in the terms of Indebtedness permitted
to be incurred under Section 4.10; provided that such restrictions are no
more restrictive than the terms contained in the Credit Facilities as in
effect on the Issue Date; and
(13) restrictions that are not materially more restrictive than
customary provisions in comparable financings and the management of the
Company determines that such restrictions will not materially impair the
Company's ability to make payments as required under the Notes.
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Section 4.10. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt), and the Company and the Guarantor shall
not issue any Disqualified Stock and shall not permit any of their Restricted
Subsidiaries to issue any shares of preferred stock unless the Leverage Ratio
would have been not greater than 8.75 to 1.0 determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of the most recently ended fiscal
quarter.
So long as no Default shall have occurred and be continuing or would be
caused thereby, the first paragraph of this covenant shall not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by the Company and its Restricted Subsidiaries
and the Guarantor and its Restricted Subsidiaries of Indebtedness under
the Credit Facilities; provided that the aggregate principal amount of all
Indebtedness of the Company and its Restricted Subsidiaries and the
Guarantor and its Restricted Subsidiaries outstanding under all Credit
Facilities after giving effect to such incurrence does not exceed an
amount equal to $3.5 billion less the aggregate amount of all Net Proceeds
of Asset Sales applied by the Company or any of its Subsidiaries or the
Guarantor or any of its Subsidiaries, as the case may be, in the case of
an Asset Sale since the date of this Indenture to repay Indebtedness under
a Credit Facility pursuant to Section 4.11;
(2) the incurrence by the Company and its Restricted Subsidiaries
and the Guarantor and its Restricted Subsidiaries of Existing Indebtedness
(other than the Credit Facilities);
(3) the incurrence on the Issue Date by the Company and its
Restricted Subsidiaries and the Guarantor and its Restricted Subsidiaries
of Indebtedness represented by the Notes, the Other Notes and the related
Guarantees;
(4) the incurrence by the Company or any of its Restricted
Subsidiaries or the Guarantor or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case, incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement (including, without limitation, the cost of design,
development, construction, acquisition, transportation, installation,
improvement, and migration) of Productive Assets of the Company or any of
its Restricted Subsidiaries or the Guarantor or any of its Restricted
Subsidiaries, in an aggregate principal amount not to exceed $75 million
at any time outstanding;
(5) the incurrence by the Company or any of its Restricted
Subsidiaries or the Guarantor or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace, in whole or in part,
Indebtedness (other than intercompany Indebtedness) that was permitted by
this Indenture to be incurred under the first paragraph of this covenant
or clauses (2) or (3) of this paragraph;
(6) the incurrence by the Company or any of its Restricted
Subsidiaries or the Guarantor or any of its Restricted Subsidiaries, as
the case may be, of intercompany Indebtedness between
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or among the Company and any of its Wholly Owned Restricted Subsidiaries,
or the Guarantor or any of its Restricted Subsidiaries, respectively;
provided that except for the Mirror Note, this clause does not permit
Indebtedness between the Company or any of its Restricted Subsidiaries, as
creditor or debtor, as the case may be, and the Guarantor or any of its
Restricted Subsidiaries, as debtor or creditor, as the case may be, unless
otherwise permitted by the Indentures; provided, further, that:
(a) if the Company or the Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated to
the prior payment in full in cash of all Obligations with respect to
the Notes in the case of the Company, or the Guarantee of such
Guarantor, in the case of the Guarantor; and
(b)(i) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Wholly Owned Restricted Subsidiary thereof or the Guarantor
or a Wholly Owned Restricted Subsidiary thereof and (ii) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Company or a Wholly Owned Restricted Subsidiary thereof or the Guarantor
or a Wholly Owned Restricted Subsidiary thereof, shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by the Company or
any of its Restricted Subsidiaries or the Guarantor or any of its
Restricted Subsidiaries, respectively, as the case may be, that was not
permitted by this clause (6);
(7) the incurrence by the Company or any of its Restricted
Subsidiaries or the Guarantor or any of its Restricted Subsidiaries, of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of the Indentures to be outstanding;
(8) the guarantee by the Company or the Guarantor of Indebtedness of
the Company or a Restricted Subsidiary of the Company, or Indebtedness of
the Guarantor or a Restricted Subsidiary of the Guarantor, that was
permitted to be incurred by another provision of this Section 4.10;
(9) the incurrence by the Company or any of its Restricted
Subsidiaries, or the Guarantor or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount at any time
outstanding, not to exceed $300 million;
(10) the incurrence by the Company or any of its Restricted
Subsidiaries, or the Guarantor or any of its Restricted Subsidiaries, of
additional Indebtedness in an aggregate principal amount at any time
outstanding, not to exceed 200% of the net cash proceeds received by the
Company from the sale of its Equity Interests (other than Disqualified
Stock) after the date of this Indenture to the extent such net cash
proceeds have not been applied to make Restricted Payments or to effect
other transactions pursuant to Section 4.07 or to make Permitted
Investments pursuant to clause (6) of the definition thereof;
(11) the accretion or amortization of original issue discount and
the write up of Indebtedness in accordance with purchase accounting; and
(12) Indebtedness under the Mirror Note.
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For purposes of determining compliance with this Section 4.10, in the
event that an item of proposed Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (1) through (12) above,
or is entitled to be incurred pursuant to the first paragraph of this covenant,
the Company or the Guarantor, as the case may be, shall be permitted to classify
and from time to time to reclassify such item of Indebtedness on the date of its
incurrence in any manner that complies with this covenant. For avoidance of
doubt, Indebtedness incurred pursuant to a single agreement, instrument,
program, facility or line of credit may be classified as Indebtedness arising in
part under one of the clauses listed above, and in part under any one or more of
the clauses listed above, to the extent that such Indebtedness satisfies the
criteria for such clauses.
Notwithstanding the foregoing, in no event shall any Restricted Subsidiary
of the Company or the Guarantor consummate a Subordinated Debt Financing or a
Preferred Stock Financing. A "Subordinated Debt Financing" or a "Preferred Stock
Financing", as the case may be, with respect to any Restricted Subsidiary of the
Company or the Guarantor shall mean a public offering or private placement
(whether pursuant to Rule 144A under the Securities Act or otherwise) of
Subordinated Notes or preferred stock (whether or not such preferred stock
constitutes Disqualified Stock), as the case may be, of such Restricted
Subsidiary to one or more purchasers (other than to one or more Affiliates of
the Company or the Guarantor). "Subordinated Notes" with respect to any
Restricted Subsidiary of the Company or the Guarantor shall mean Indebtedness of
such Restricted Subsidiary that is contractually subordinated in right of
payment to any other Indebtedness of such Restricted Subsidiary (including,
without limitation, Indebtedness under the Credit Facilities). The foregoing
limitation shall not apply to (i) any Indebtedness or preferred stock of any
Person existing at the time such Person is merged with or into or became a
Subsidiary of the Company or the Guarantor; provided that such Indebtedness or
preferred stock was not incurred or issued in connection with, or in
contemplation of, such Person merging with or into, or becoming a Subsidiary of,
the Company or the Guarantor and (ii) any Indebtedness or preferred stock of a
Restricted Subsidiary issued in connection with, and as part of the
consideration for, an acquisition, whether by stock purchase, asset sale, merger
or otherwise, in each case involving such Restricted Subsidiary, which
Indebtedness or preferred stock is issued to the seller or sellers of such stock
or assets; provided that such Restricted Subsidiary is not obligated to register
such Indebtedness or preferred stock under the Securities Act or obligated to
provide information pursuant to Rule 144A under the Securities Act.
Section 4.11. Limitation on Asset Sales
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) the Company, the Guarantor or a Restricted Subsidiary of the
Company or the Guarantor, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets or Equity Interests issued or sold or otherwise disposed of;
(2) such fair market value is determined by the Company's or the
Guarantor's Board of Directors, as the case may be, and evidenced by a
resolution of such Board of Directors set forth in an Officers'
Certificate delivered to the Trustee; and
(3) at least 75% of the consideration therefor received by the
Company, the Guarantor or such Restricted Subsidiary is in the form of
cash, Cash Equivalents or readily marketable securities.
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For purposes of this Section 4.11, each of the following shall be deemed
to be cash:
(a) any liabilities (as shown on the Company's, the Guarantor's or
such Restricted Subsidiary's most recent balance sheet) of the Company,
the Guarantor or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the
Notes or the Guarantees) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the
Company, the Guarantor or such Restricted Subsidiary from further
liability;
(b) any securities, notes or other obligations received by the
Company, the Guarantor or any such Restricted Subsidiary from such
transferee that are converted by the Company, the Guarantor or such
Restricted Subsidiary into cash, Cash Equivalents or readily marketable
securities within 60 days after receipt thereof (to the extent of the
cash, Cash Equivalents or readily marketable securities received in that
conversion); and
(c) Productive Assets.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company, the Guarantor or a Restricted Subsidiary of the Company or the
Guarantor, as the case may be, may apply such Net Proceeds at its option:
(1) to repay debt under the Credit Facilities or any other
Indebtedness of the Restricted Subsidiaries of the Company (other than
Indebtedness represented by a guarantee of a Restricted Subsidiary of the
Company or the Guarantor); or
(2) to invest in Productive Assets; provided that any Net Proceeds
which the Company, the Guarantor or a Restricted Subsidiary of the Company
or the Guarantor, as the case may be, has committed to invest in
Productive Assets within 365 days of the applicable Asset Sale may be
invested in Productive Assets within two years of such Asset Sale.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph shall constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $25.0 million, the Issuers shall
make an Asset Sale Offer to all Holders of Notes and all holders of other
Indebtedness that is pari passu with the Notes containing provisions requiring
offers to purchase or redeem with the proceeds of sales of assets to purchase
the maximum principal amount of Notes and such other pari passu Indebtedness
that may be purchased out of the Excess Proceeds (which amount includes the
entire amount of the Net Proceeds). The offer price in any Asset Sale Offer
shall be payable in cash and equal to 100% of principal amount plus accrued and
unpaid interest, if any, to the date of purchase. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, the Company may use such Excess
Proceeds for any purpose not otherwise prohibited by this Indenture. If the
aggregate principal amount of Notes and such other pari passu Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other pari passu Indebtedness to be
purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
In the event that the Issuers shall be required to commence an offer to
Holders to purchase Notes pursuant to this Section 4.11, they shall follow the
procedures specified in Section 3.09.
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Section 4.12. Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company or the Guarantor may enter into a sale and leaseback
transaction if:
(1) the Company or the Guarantor, as applicable, could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt relating
to such sale and leaseback transaction under the Leverage Ratio test in
the first paragraph of Section 4.10 and (b) incurred a Lien to secure such
Indebtedness pursuant to Section 4.14; and
(2) the transfer of assets in that sale and leaseback transaction is
permitted by, and the Company or the Guarantor, as the case may be,
applies the proceeds of such transaction in compliance with, the covenant
described above under Section 4.11.
The foregoing restrictions do not apply to a sale and leaseback
transaction if the lease is for a period, including renewal rights, of not in
excess of three years.
Section 4.13. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary or to the
Guarantor or the relevant Restricted Subsidiary, than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary or the Guarantor or such Restricted Subsidiary, as
the case may be, with an unrelated Person; and
(2) the Company, or the Guarantor, as the case may be, delivers to
the Trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $15.0 million, a resolution of the Board of Directors of
the Company or a resolution of the Board of Directors of the
Guarantor, as the case may be, set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with this
covenant and that such Affiliate Transaction has been approved by a
majority of the members of such Board of Directors; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $50.0 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of
national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, shall not be subject to the provisions of the prior paragraph:
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(1) existing employment agreement entered into by the Company, the
Guarantor or any of their Subsidiaries and any employment agreement
entered into by the Company or any of its Restricted Subsidiaries, or any
employment agreement entered into by the Guarantor or any of its
Restricted Subsidiaries in the ordinary course of business and consistent
with the past practice of the Company or such Restricted Subsidiary or the
Guarantor or such Restricted Subsidiary, as the case may be;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries and the transactions between or among the Guarantor and/or
its Restricted Subsidiaries;
(3) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company or the Guarantor, as the case may be,
and customary indemnification and insurance arrangements in favor of
directors, regardless of affiliation with the Company, the Guarantor or
any of their Restricted Subsidiaries;
(4) payment of management fees pursuant to management agreements
either (A) existing on the Issue Date or (B) entered into after the Issue
Date, to the extent that such management agreements provide for percentage
fees no higher than the percentage fees existing under the management
agreements existing on the Issue Date;
(5) Restricted Payments that are permitted by Section 4.07; and
(6) Permitted Investments.
Section 4.14. Liens.
The Company and the Guarantor shall not, directly or indirectly, create,
incur, assume or suffer to exist any Lien of any kind securing Indebtedness,
Attributable Debt or trade payables on any asset now owned or hereafter
acquired, except Permitted Liens.
Section 4.15. Corporate Existence.
Subject to Article 5, each of the Company and the Guarantor shall do or
cause to be done all things necessary to preserve and keep in full force and
effect (i) its corporate existence, and the corporate, partnership or other
existence of each of its Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of the
Company, the Guarantor or any such Subsidiary and (ii) the rights (charter and
statutory), licenses and franchises of the Company, the Guarantor and their
Subsidiaries; provided, however, that neither the Company nor the Guarantor
shall be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of their Subsidiaries (other
than Charter Capital), if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries and the Guarantor and its Subsidiaries, taken
as a whole, and that the loss thereof is not adverse in any material respect to
the Holders of the Notes.
Section 4.16. Repurchase at the Option of Holders upon a Change of Control.
If a Change of Control occurs, each Holder of Notes shall have the right
to require the Issuers to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that Holder's Notes pursuant to a Change of
Control Offer. In the Change of Control Offer, the Issuers shall offer (a
"Change of Control Offer") a payment (the "Change of Control Payment") in cash
equal to 101% of the aggregate
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principal amount of Notes repurchased plus accrued and unpaid interest thereon,
if any, to the date of purchase.
Within ten days following any Change of Control, the Issuers shall mail a
notice to each Holder (with a copy to the Trustee) describing the transaction or
transactions that constitute the Change of Control and stating:
(a) the purchase price and the purchase date, which shall not exceed
30 Business Days from the date such notice is mailed (the "Change of
Control Payment Date");
(b) that any Note not tendered shall continue to accrue interest;
(c) that, unless the Issuers default in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Payment Date;
(d) that Holders electing to have any Notes purchased pursuant to a
Change of Control Offer shall be required to surrender the Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date;
(e) that Holders shall be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount of Notes delivered for purchase, and a
statement that such Holder is withdrawing his election to have the Notes
purchased; and
(f) that Holders whose Notes are being purchased only in part shall
be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof.
The Issuers shall comply with the requirements of Rule 14e-1 under the
Exchange Act (or any successor rules) and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Issuers shall, to the extent
lawful:
(a) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(b) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered;
and
(c) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the
Issuers.
The Paying Agent shall promptly pay to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the
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Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. The Company shall
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
The provisions described above that require the Issuers to make a Change
of Control Offer following a Change of Control shall be applicable regardless of
whether or not any other provisions in this Indenture are applicable. Except as
described above with respect to a Change of Control, this Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Issuers repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
Notwithstanding any other provision of this Section 4.16, the Issuers
shall not be required to make a Change of Control Offer upon a Change of Control
if a third party makes the Change of Control Offer in the manner, at the times
and otherwise in compliance with the requirements set forth in this Indenture
applicable to a Change of Control Offer made by the Issuers and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
Section 4.17. Limitations on Issuances of Guarantees of Indebtedness.
The Company shall not permit any of its Restricted Subsidiaries, directly
or indirectly, and the Guarantor shall not permit any of its Restricted
Subsidiaries, directly or indirectly, to Guarantee or pledge any assets to
secure the payment of any other Indebtedness of the Company or the Guarantor, as
the case may be, except in respect of the Credit Facilities (the "Guaranteed
Indebtedness") unless (i) such Restricted Subsidiary of the Company or the
Guarantor, as the case may be, simultaneously executes and delivers a
supplemental indenture providing for the Guarantee (a "Subsidiary Guarantee") of
the payment of the Notes by such Restricted Subsidiary and (ii) until one year
after all the Notes have been paid in full in cash, such Restricted Subsidiary
waives and will not in any manner whatsoever claim or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any other
rights against the Company, the Guarantor or any other Restricted Subsidiary of
the Company or the Guarantor as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any Guarantee or any Restricted Subsidiary that existed at
the time such Person became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is subordinated to the Notes, then
the Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Notes.
Section 4.18. Payments for Consent.
The Company shall not, and shall not permit any of its Subsidiaries to,
and the Guarantor shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Indenture or the Notes
unless such consideration is offered to be paid and is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
Section 4.19. Application of Fall-Away Covenants.
During any period of time that (a) the Notes have Investment Grade Ratings
from both Rating Agencies and (b) no Default or Event of Default has occurred
and is continuing, the Company and its Restricted Subsidiaries and the Guarantor
and its Restricted Subsidiaries shall not be subject to the
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provisions of Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13 and clause (4)
of the first paragraph of Section 5.01 (collectively, the "Suspended
Covenants"). In the event that the Company and its Restricted Subsidiaries are
not subject to the Suspended Covenants for any period of time as a result of the
preceding sentence and, subsequently, one or both of the Rating Agencies
withdraws its ratings or downgrades the ratings assigned to the Notes below the
required Investment Grade Ratings or a Default or Event of Default occurs and is
continuing, then the Company and its Restricted Subsidiaries and the Guarantor
and its Restricted Subsidiaries shall thereafter again be subject to the
Suspended Covenants and compliance with the Suspended Covenants with respect to
the Restricted Payments made after the time of such withdrawal, downgrade,
Default or Event of Default will be calculated in accordance with the terms of
Section 4.07 as though such covenant had been in effect during the entire period
of time from the Issue Date.
Section 4.20. Impairment of Security Interest.
Neither the Company, the Guarantor nor any of their Subsidiaries shall
take or omit to take any action which action or omission would have the result
of adversely affecting or impairing the security interest in favor of the
Trustee, on behalf of itself and the Holders, with respect to the Collateral,
and neither the Company, the Guarantor nor any of their Subsidiaries shall grant
to any Person, or suffer any Person (other than the Trustee with respect to the
Collateral securing the obligations under the Notes and the Company with respect
to the Collateral securing the obligations under the Mirror Note) to have any
interest whatsoever in the Collateral other than Liens permitted by the Pledge
Documents. Neither the Company nor any of its Subsidiaries shall enter into any
agreement or instrument that by its terms requires the proceeds received from
any sale of Collateral to be applied to repay, redeem, defease or otherwise
acquire or retire any Indebtedness of any Person, other than pursuant to this
Indenture, the Notes and the Pledge Documents.
Section 4.21. Security Interest.
The Company and the Guarantor shall, and shall cause each of their
Restricted Subsidiaries to, undertake to deliver or cause to be delivered to the
Trustee from time to time such other documentation, consents, authorizations,
approvals and orders in form and substance reasonably satisfactory to the
Trustee as the Trustee shall deem necessary or advisable to perfect or maintain
the security interest in the Collateral for the benefit of the Trustee on behalf
of the Holders until any such Collateral is released in accordance with the
terms of this Indenture.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
Neither of the Issuers nor the Guarantor may, directly or indirectly: (1)
consolidate or merge with or into another Person (whether or not such Issuer, or
the Guarantor, as the case may be, is the surviving corporation); or (2) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of its
properties or assets, in one or more related transactions, to another Person;
unless:
(1) either: (a) such Issuer, or the Guarantor, as the case may be,
is the surviving corporation; or (b) the Person formed by or surviving any
such consolidation or merger (if other than such Issuer, or the Guarantor,
as the case may be) or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made is a Person organized
or existing
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under the laws of the United States, any state thereof or the District of
Columbia (provided that if the Person formed by or surviving any such
consolidation or merger with either Issuer is a limited liability company
or other Person other than a corporation, a corporate co-issuer shall also
be an obligor with respect to the Notes);
(2) the Person formed by or surviving any such consolidation or
merger (if other than the Company, or the Guarantor, as the case may be)
or the Person to which such sale, assignment, transfer, conveyance or
other disposition shall have been made assumes all the obligations of the
Company, or the Guarantor, as the case may be, under the Notes in the case
of the Company, or under the Guarantee, in the case of the Guarantor, and
this Indenture pursuant to agreements reasonably satisfactory to the
Trustee;
(3) immediately after such transaction no Default or Event of
Default exists; and
(4) the Company, or the Guarantor, as the case may be, or the Person
formed by or surviving any such consolidation or merger (if other than the
Company, or the Guarantor, as the case may be) will, on the date of such
transaction after giving pro forma effect thereto and any related
financing transactions as if the same had occurred at the beginning of the
applicable four-quarter period, either (A) be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Leverage Ratio test set
forth in the first paragraph of Section 4.10 or (B) have a Leverage Ratio
immediately after giving effect to such consolidation or merger no greater
than the Leverage Ratio immediately prior to such consolidation or merger.
In addition, the Company may not, directly or indirectly, and the
Guarantor may not, directly or indirectly, lease all or substantially all of its
properties or assets, in one or more related transactions, to any other Person.
This Section 5.01 shall not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among the Company and any of its
Wholly-Owned Subsidiaries, or the Guarantor and any of its Wholly-Owned
Subsidiaries, as the case may be.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of either Issuer or the Guarantor, as the case may be, in accordance with
Section 5.01, the successor Person formed by such consolidation or into which
either Issuer or the Guarantor, as the case may be, is merged or to which such
transfer is made shall succeed to and (except in the case of a lease) be
substituted for, and may exercise every right and power of, such Issuer or the
Guarantor, as the case may be, under this Indenture with the same effect as if
such successor Person had been named therein as such Issuer or the Guarantor, as
the case may be, and (except in the case of a lease) such Issuer or the
Guarantor, as the case may be, shall be released from the obligations under the
Notes (or the Guarantee, in the case of the Guarantor) and this Indenture,
except with respect to any obligations that arise from, or are related to, such
transaction.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
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(a) the Issuers default in the payment when due of interest on the
Notes and such default continues for a period of 30 days;
(b) the Issuers default in payment when due of the principal of or
premium, if any, on the Notes;
(c) the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, fails to comply with any
of the provisions of Sections 4.16 or 5.01;
(d) the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, fails to comply with any
of their other covenants or agreements in this Indenture for 30 days after
written notice thereof has been given to the Company by the Trustee or to
the Company and the Trustee by Holders of at least 25% of the aggregate
principal amount of the Notes outstanding;
(e) the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, defaults under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money
borrowed (or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries or by the Guarantor or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists or is
created after the date of this Indenture, if that default:
(1) is caused by a failure to pay at final stated maturity the
principal amount on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such
default (a "Payment Default"); or
(2) results in the acceleration of such Indebtedness prior to
its express maturity,
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $100.0 million or more;
(f) the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, fails to pay final
judgments which are non-appealable aggregating in excess of $100.0 million
(net of applicable insurance which has not been denied in writing by the
insurer), which judgments are not paid, discharged or stayed for a period
of 60 days;
(g) the Company, the Guarantor or any of their Significant
Subsidiaries pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a custodian of it or for
all or substantially all of its property, or
(iv) makes a general assignment for the benefit of its
creditors; or
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(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company, the Guarantor or any of
their Significant Subsidiaries in an involuntary case;
(ii) appoints a custodian of the Company, the Guarantor or any
of their Significant Subsidiaries or for all or substantially all of
the property of the Company, the Guarantor or any of their
Significant Subsidiaries; or
(iii) orders the liquidation of the Company, the Guarantor or
any of their Significant Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
(i) except as permitted by this Indenture, the Guarantee of the
Guarantor shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or
the Guarantor, or any Person acting on behalf of the Guarantor, shall deny
or disaffirm its obligations under the Guarantee;
(j) except as permitted by this Indenture, any of the Pledge
Documents cease to be in full force and effect (other than in accordance
with their respective terms or the terms of the Indenture), or any of the
Pledge Documents cease to give the Trustee or the Company, as the case may
be, the Liens purported to be created thereby, or any Pledge Document is
declared null and void, or the Company or the Guarantor shall repudiate or
deny in writing that it has any liability or obligation under any Pledge
Document.
Section 6.02. Acceleration.
In the case of an Event of Default arising from clause (g) or (h) of
Section 6.01, with respect to the Company or the Guarantor, all outstanding
Notes shall become due and payable immediately without further action or notice.
If any other Event of Default occurs and is continuing, the Trustee by notice to
the Issuers or the Holders of at least 25% in principal amount of the then
outstanding Notes by notice to the Issuers and the Trustee may declare all the
Notes to be due and payable immediately. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by written notice to the Trustee
may on behalf of all of the Holders rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default (except nonpayment of principal, interest or premium
that has become due solely because of the acceleration) have been cured or
waived.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
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constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 6.04. Waiver of Existing Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium, if any, or interest on, the Notes
(including in connection with an offer to purchase) (provided, however, that the
Holders of a majority in aggregate principal amount of the then outstanding
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration). Upon any such waiver,
such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the rights of other Holders of Notes or that may involve the
Trustee in personal liability. The Trustee may take any other action which it
deems proper that is not inconsistent with any such directive.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium, if any, and interest
on the Note, on or after the respective due
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dates expressed in the Note (including in connection with an offer to purchase),
or to bring suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the consent of such
Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Issuers for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Issuers
(or any other obligor upon the Notes), their creditors or their property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 out of the
estate in any such proceeding, shall be denied for any reason, payment of the
same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the
Trustee and the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium, if any and interest,
respectively; and
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Third: to the Issuers or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own gross
negligent action, its own gross negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved
that the Trustee was grossly negligent in ascertaining the pertinent
facts; and
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(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Issuers. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or documents.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from either of the Issuers shall be sufficient if
signed by an Officer of such Issuer.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
(g) The Trustee shall not be charged with knowledge of any Default or
Event of Default unless either (i) a Responsible Officer of the Trustee shall
have actual knowledge of such Default or Event of Default or (ii) written notice
of such Default or Event of Default shall have been given to the Trustee by the
Issuers or any Holder.
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Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Issuers, the Guarantor or
any Affiliate of either of the Issuers or the Guarantor with the same rights it
would have if it were not Trustee. However, in the event that the Trustee
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue as trustee or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Issuers' use of the proceeds from the Notes or any money
paid to the Issuers or upon the Issuers' direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after the Trustee acquires knowledge
thereof. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, or interest on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA ss. 313(a) (but if no event described in TIA ss.
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA ss.
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA ss. 313(d). The Issuers shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Issuers shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuers shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
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The Issuers and the Guarantor shall, jointly and severally, indemnify the
Trustee against any and all losses, liabilities or expenses incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture, including the costs and expenses of enforcing this
Indenture against the Issuers and the Guarantor (including this Section 7.07)
and defending itself against any claim (whether asserted by the Issuers or the
Guarantor or any Holder or any other person) or liability in connection with the
exercise or performance of any of its powers or duties hereunder, except to the
extent any such loss, liability or expense may be attributable to its gross
negligence or willful misconduct. The Trustee shall notify the Issuers promptly
of any claim for which it may seek indemnity. Failure by the Trustee to so
notify the Issuers shall not relieve the Issuers or the Guarantor of their
obligations hereunder. The Issuers and the Guarantor shall defend the claim and
the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Issuers shall pay the reasonable fees and expenses of such
counsel. The Issuers and the Guarantor need not pay for any settlement made
without their consent, which consent shall not be unreasonably withheld.
The obligations of the Issuers and the Guarantor under this Section 7.07
shall survive resignation or removal of the Trustee and the satisfaction and
discharge of this Indenture.
To secure the Issuers' payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the resignation or removal of the
Trustee and the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the
extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Issuers. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Issuers in writing. The Issuers may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes
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office, the Holders of a majority in principal amount of the then outstanding
Notes may appoint a successor Trustee to replace the successor Trustee appointed
by the Issuers.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who has been a Holder
for at least six months, fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Issuers. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders. The retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee; provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07.
Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the
Issuers' and the Guarantor's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b).
Section 7.11. Preferential Collection of Claims Against the Issuers.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
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ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Issuers may, at the option of their respective Boards of Directors
evidenced by a resolution set forth in an Officers' Certificate of each of the
Issuers, at any time, elect to have either Section 8.02 or 8.03 be applied to
all outstanding Notes upon compliance with the conditions set forth below in
this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Issuers' exercise under Section 8.01 of the option applicable to
this Section 8.02, the Issuers and the Guarantor shall, subject to the
satisfaction of the conditions set forth in Section 8.04, be deemed to have been
discharged from their obligations with respect to all outstanding Notes and
Guarantees thereof on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that
the Issuers shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 and the other Sections of
this Indenture referred to in (a) and (b) below, and to have satisfied all their
other obligations under such Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Issuers, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder:
(a) the rights of Holders of outstanding Notes to receive payments
in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due from the trust referred to below;
(b) the Issuers' obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost
or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(c) the rights, powers, trusts, duties and immunities of the
Trustee, and the Issuers' and the Guarantor's obligations in connection
therewith; and
(d) the Legal Defeasance provisions of this Indenture;
Subject to compliance with this Article 8, the Issuers may exercise their
option under this Section 8.02 notwithstanding the prior exercise of their
option under Section 8.03.
Section 8.03. Covenant Defeasance.
Upon the Issuers' exercise under Section 8.01 of the option applicable to
this Section 8.03, the Issuers and the Guarantor shall, subject to the
satisfaction of the conditions set forth in Section 8.04, be released from their
obligations under the covenants contained in Article 5 and Sections 4.03, 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17 and 4.19 with respect to
the outstanding Notes and Guarantees thereof on and after the date the
conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes and Guarantees thereof shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed
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"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Issuers and the Guarantor may omit to comply with and shall have no
liability in respect of any term, condition or limitation set forth in any such
covenant, whether directly or indirectly, by reason of any reference elsewhere
herein to any such covenant or by reason of any reference in any such covenant
to any other provision herein or in any other document and such omission to
comply shall not constitute a Default or an Event of Default under Section 6.01,
but, except as specified above, the remainder of this Indenture and such Notes
and the Guarantees thereof shall be unaffected thereby. In addition, upon the
Issuers' exercise under Section 8.01 of the option applicable to this Section
8.03, subject to the satisfaction of the conditions set forth in Section 8.04,
Sections 6.01(c) through 6.01(f) shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest on the outstanding Notes on the stated maturity or on
the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to
the Trustee confirming that (a) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (b) since
the date of this Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had
not occurred;
(3) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to
the Trustee confirming that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing either: (a) on the date of such deposit (other than a Default
or Event of Default resulting from the borrowing of funds to be applied to
such deposit); or (b) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit;
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(5) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture) to which the Company
or any of the Restricted Subsidiaries is a party or by which the Company
or any of the Restricted Subsidiaries is bound;
(6) the Company must have delivered to the applicable Trustee an
opinion of counsel to the effect that after the 91st day assuming no
intervening bankruptcy, that no Holder is an insider of either of the
Issuers following the deposit and that such deposit would not be deemed by
a court of competent jurisdiction a transfer for the benefit of the
Guarantor or either co-Issuer in its capacity as such, the trust funds
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
Notwithstanding the foregoing, the opinion of counsel required by clause
(2) above with respect to a Legal Defeasance need not be delivered if all Notes
not theretofore delivered to the Trustee for cancellation (i) have become due
and payable or (ii) will become due and payable on the maturity date within one
year, by their terms or under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name, and at the expense,
of the Issuers.
Section 8.05. Deposited Money and Government Securities to Be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06, all money and non-callable Government Securities
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant
to Section 8.04 in respect of the outstanding Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Issuers acting as Paying Agent) as the Trustee may determine, to
the Holders of such Notes of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Issuers and the Guarantor shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.04 or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Issuers from time to time upon the request of the
Issuers any money or non-callable Government Securities held by it as provided
in Section 8.04 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a)), are in excess of the amount thereof that
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would then be required to be deposited to effect an equivalent Legal Defeasance
or Covenant Defeasance.
Section 8.06. Repayment to Issuers.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Issuers, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable shall be paid to the
Issuers on their request or (if then held by the Issuers) shall be discharged
from such trust; and the Holder of such Note shall thereafter look only to the
Issuers for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Issuers as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Issuers cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining shall be repaid to the Issuers.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Issuers' and the Guarantor's obligations under this
Indenture, the Notes and the Guarantee, as the case may be, shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03
until such time as the Trustee or Paying Agent is permitted to apply all such
money in accordance with Section 8.02 or 8.03, as the case may be; provided,
however, that, if the Issuers make any payment of principal of, premium, if any,
or interest on any Note following the reinstatement of their obligations, the
Issuers or the Guarantor, as the case may be, shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Issuers, the Guarantor
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(c) to provide for the assumption of an Issuer's or the Guarantor's
obligations, as the case may be, to Holders of Notes in the case of a
merger or consolidation or sale of all or substantially all of the assets
of either Issuer or the Guarantor, as the case may be, pursuant to Article
5;
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(d) to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the
legal rights under this Indenture of any such Holder; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA or otherwise as
necessary to comply with applicable law.
Upon the request of the Issuers accompanied by a resolution of their
respective Boards of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02, the Trustee shall join with the Issuers and the
Guarantor in the execution of any amended or supplemental Indenture authorized
or permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee shall
not be obligated to enter into such amended or supplemental Indenture that
affects its own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, this Indenture (including
Sections 4.11 and 4.16) or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in connection
with a purchase of, or a tender offer or exchange offer for, Notes) and, subject
to Sections 6.04 and 6.07, any existing Default or compliance with any provision
of this Indenture or the Notes may be waived with the consent of the Holders of
a majority in principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or a tender
offer or exchange offer for, Notes). Section 2.08 shall determine which Notes
are considered to be "outstanding" for purposes of this Section 9.02.
Upon the request of the Issuers accompanied by a resolution of their
respective Boards of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02, the
Trustee shall join with the Issuers and the Guarantor in the execution of such
amended or supplemental Indenture unless such amended or supplemental Indenture
directly affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Issuers with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment, supplement or waiver under this Section 9.02 may not (with respect to
any Notes held by a non-consenting Holder):
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(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter the payment provisions with respect to the redemption of the
Notes (other than provisions relating to Sections 4.11 and 4.16);
(c) reduce the rate of or extend the time for payment of interest on
any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than
a payment required by one of the covenants described in Sections 4.11 and
4.16);
(h) amend any provision or release the Guarantee of the Guarantor
except pursuant to the Marcus Combination; or
(i) make any change in this Section 9.02.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Issuers in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
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Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Issuers
and the Guarantor may not sign an amendment or supplemental Indenture until
their respective Boards of Directors approve it. In executing any amended or
supplemental indenture, the Trustee shall be entitled to receive and (subject to
Section 7.01) shall be fully protected in relying upon, in addition to the
documents required by Section 12.04, an Officer's Certificate and an Opinion of
Counsel, in each case from each of the Issuers, stating that the execution of
such amended or supplemental indenture is authorized or permitted by this
Indenture.
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Unconditional Guarantee.
Subject to the provisions of this Article Ten, the Guarantor hereby
unconditionally and irrevocably guarantees, on a senior basis to each Holder of
a Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Notes or the obligations of the Issuers to the Holders or the
Trustee hereunder or thereunder, that: (a) the principal of, premium, if any,
and interest on the Notes (and any Special Interest payable thereon) shall be
duly and punctually paid in full when due, whether at maturity, upon redemption
at the option of Holders pursuant to the provisions of the Notes relating
thereto, by acceleration or otherwise, and interest on the overdue principal and
(to the extent permitted by law) interest, if any, on the Notes and all other
obligations of the Issuers to the Holders or the Trustee hereunder or thereunder
(including amounts due the Trustee under Section 7.07) and all other obligations
shall be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, the same shall be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed, or failing performance of any
other obligation of the Issuers to the Holders under this Indenture or under the
Notes, for whatever reason, the Guarantor shall be obligated to pay, or to
perform or cause the performance of, the same immediately. An Event of Default
under this Indenture or the Notes shall constitute an event of default under
this Guarantee, and shall entitle the Holders of Notes to accelerate the
obligations of the Guarantor hereunder in the same manner and to the same extent
as the obligations of the Issuers.
The Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Issuers, any action
to enforce the same, whether or not this Guarantee is affixed to any particular
Note, or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of the Guarantor. The Guarantor hereby waives the
benefit of diligence, presentment, demand of payment, filing of claims with a
court in the event of insolvency or bankruptcy of either Issuer, any right to
require a proceeding first against either Issuer, protest, notice and all
demands whatsoever and covenants that its Guarantee shall not be discharged
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except by complete performance of the obligations contained in the Notes, this
Indenture and this Guarantee or except as otherwise permitted by this Indenture.
This Guarantee is a guarantee of payment and not of collection. If any Holder or
the Trustee is required by any court or otherwise to return to either Issuer or
to the Guarantor, or any custodian, trustee, liquidator or other similar
official acting in relation to either Issuer or the Guarantor, any amount paid
by either Issuer or the Guarantor to the Trustee or such Holder, this Guarantee,
to the extent theretofore discharged, shall be reinstated in full force and
effect. The Guarantor further agrees that, as between it, on the one hand, and
the Holders of Notes and the Trustee, on the other hand, (a) subject to this
Article Ten, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (b) in the
event of any acceleration of such obligations as provided in Article Six, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for the purpose of this Guarantee.
No stockholder, member, officer, director, employee or incorporator, past,
present or future, of the Guarantor , as such, shall have any personal liability
under this Guarantee by reason of his, her or its status as such stockholder,
officer, director, employee or incorporator.
Section 10.02. Limitations on this Guarantee.
The obligations of the Guarantor under its Guarantee are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of the Guarantor will result in the obligations of the Guarantor
under the Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under any laws of the United States, any state of the United States or
the District of Columbia.
Section 10.03. Execution and Delivery of this Guarantee.
To further evidence the Guarantee set forth in Section 10.01, the
Guarantor hereby agrees that a notation of such Guarantee, substantially in the
form of Exhibit F, shall be endorsed on each Note authenticated and delivered by
the Trustee. Such Guarantee shall be executed on behalf of the Guarantor by
either manual or facsimile signature of two Officers of the Guarantor, each of
whom, in each case, shall have been duly authorized to so execute by all
requisite corporate action. The validity and enforceability of the Guarantee set
forth in Section 10.01 shall not be affected by the fact that it is not affixed
to any particular Note. The Guarantor hereby agrees that its Guarantee set forth
in Section 10.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Guarantee.
If an Officer of the Guarantor whose signature is on this Indenture or a
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which such Guarantee is endorsed or at any time thereafter, the
Guarantor's Guarantee of such Note shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of any Guarantee set forth in this
Indenture on behalf of the Guarantor.
Section 10.04. Release of Guarantor.
(a) Upon the consummation of the Marcus Combination, the Guarantor's
Guarantee shall be released, and the Guarantor shall be deemed released from all
obligations under this Article Ten and this Indenture without any further action
required on the part of the Guarantor, the Trustee or any Holder. If the Marcus
Combination is not consummated, the Guarantor will not be so released and the
Guarantor or
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any entity surviving the Guarantor, as applicable, shall remain or be liable
under its Guarantee as provided in this Article Ten.
(b) The Trustee shall deliver an appropriate instrument evidencing the
release of the Guarantor upon receipt of a request by the Company or the
Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel
certifying as to the compliance with this Section 10.04; provided the legal
counsel delivering such Opinion of Counsel may rely as to matters of fact on one
or more Officers Certificates of the Company or the Guarantor.
The Trustee shall execute any documents reasonably requested by the
Company or the Guarantor in order to evidence the release of the Guarantor from
its obligations under its Guarantee endorsed on the Notes, under this Article
Ten and under this Indenture.
Section 10.05. Waiver of Subrogation.
Until this Indenture is discharged and all of the Notes are discharged and
paid in full, the Guarantor hereby irrevocably waives and agrees not to exercise
any claim or other rights which it may now or hereafter acquire against either
Issuer that arise from the existence, payment, performance or enforcement of the
Issuers' obligations under the Notes or this Indenture and the Guarantor's
obligations under this Guarantee and this Indenture, in any such instance
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, and any right to participate in any
claim or remedy of the Holders against either Issuer, whether or not such claim,
remedy or right arises in equity, or under contract, statute or common law,
including, without limitation, the right to take or receive from either Issuer,
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 in violation of the preceding sentence and
any amounts owing to the Trustee or the Holders of Notes under the Notes, this
Indenture, or any other document or instrument delivered under or in connection
with such agreements or instruments, shall not have been paid in full, such
amount shall have been deemed to have been paid to the Guarantor for the benefit
of, and held in trust for the benefit of, the Trustee or the Holders and shall
forthwith be paid to the Trustee for the benefit of itself or such Holders to be
credited and applied to the obligations in favor of the Trustee or the Holders,
as the case may be, whether matured or unmatured, in accordance with the terms
of this Indenture. The Guarantor acknowledges that it will receive direct and
indirect benefits from the financing arrangements contemplated by this Indenture
and that the waiver set forth in this Section 10.05 is knowingly made in
contemplation of such benefits.
Section 10.06. Immediate Payment.
The Guarantor agrees to make immediate payment to the Trustee on behalf of
the Holders of all obligations under the Notes and this Indenture owing or
payable to the respective Holders upon receipt of a demand for payment therefor
by the Trustee to such Guarantor in writing.
Section 10.07. Obligations Continuing.
The obligations of the Guarantor hereunder shall be continuing and shall
remain in full force and effect until all the obligations have been paid and
satisfied in full. The Guarantor agrees with the Trustee that it will from time
to time deliver to the Trustee suitable acknowledgments of this continued
liability hereunder.
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Section 10.08. Obligations Reinstated.
The obligations of the Guarantor hereunder shall continue to be effective
or shall be reinstated, as the case may be, if at any time any payment which
would otherwise have reduced the obligations of the Guarantor hereunder (whether
such payment shall have been made by or on behalf of either Issuer or by or on
behalf of the Guarantor) is rescinded or reclaimed from any of the Holders upon
the insolvency, bankruptcy, liquidation or reorganization of either Issuer or
the Guarantor or otherwise, all as though such payment had not been made. If
demand for, or acceleration of the time for, payment by either Issuer is stayed
upon the insolvency, bankruptcy, liquidation or reorganization of either Issuer,
all such Indebtedness otherwise subject to demand for payment or acceleration
shall nonetheless be payable by the Guarantor as provided herein.
Section 10.09. Obligations Not Affected.
The obligations of the Guarantor hereunder shall not be affected, impaired
or diminished in any way by any act, omission, matter or thing whatsoever,
occurring before, upon or after any demand for payment hereunder (and whether or
not known or consented to by the Guarantor or any of the Holders) which, but for
this provision, might constitute a whole or partial defense to a claim against
the Guarantor hereunder or might operate to release or otherwise exonerate the
Guarantor from any of its obligations hereunder or otherwise affect such
obligations, whether occasioned by default of any of the Holders or otherwise.
Section 10.10. Waiver.
Without in any way limiting the provisions of Section 10.01 hereof, the
Guarantor hereby waives notice or proof of reliance by the Holders upon the
obligations of the Guarantor hereunder, and diligence, presentment, demand for
payment on the Issuers, protest or notice of dishonor of any of the obligations
under the Note and this Indenture, or other notice or formalities to the Issuers
of any kind whatsoever.
Section 10.11. No Obligation To Take Action Against Either Issuer.
Neither the Trustee nor any other Person shall have any obligation to
enforce or exhaust any rights or remedies or to take any other steps under any
security for the obligations under the Notes and this Indenture or against
either Issuer or any other Person or any property of either Issuer or any other
Person before the Trustee is entitled to demand payment and performance by the
Guarantor of its liabilities and obligations under its Guarantees or under this
Indenture.
Section 10.12. Dealing With The Company and Others.
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of the Guarantor
hereunder and without the consent of or notice to the Guarantor, may
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to either Issuer or
any other Person;
(b) take or abstain from taking security or collateral from the
Issuers or from perfecting security or collateral of the Issuers;
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(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security given
by the Issuers or any third party with respect to the obligations or
matters contemplated by this Indenture or the Notes;
(d) accept compromises or arrangements from either Issuer;
(e) apply all monies at any time received from either Issuer or from
any security upon such part of the obligations under the Notes or this
Indenture as the Holders may see fit or change any such application in
whole or in part from time to time as the Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to deal
with, either Issuer and all other Persons and any security as the Holders
or the Trustee may see fit.
Section 10.13. Default and Enforcement.
If the Guarantor fails to pay in accordance with Section 10.06, the
Trustee may proceed in its name as trustee hereunder in the enforcement of the
Guarantee of the Guarantor and the Guarantor's obligations thereunder and
hereunder by any remedy provided by law, whether by legal proceedings or
otherwise, and to recover from the Guarantor the obligations.
Section 10.14. Amendment, Etc.
No amendment, modification or waiver of any provision of this Indenture
relating to the Guarantor or consent to any departure by the Guarantor or any
other Person from any such provision will in any event be effective unless it is
signed by the Guarantor, the Issuers and the Trustee.
Section 10.15. Acknowledgement.
The Guarantor hereby acknowledges communication of the terms of this
Indenture and the Notes and consents to and approves of the same.
Section 10.16. Costs and Expenses.
The Guarantor shall pay on demand by the Trustee any and all costs, fees
and expenses (including, without limitation, legal fees on a solicitor and
client basis) incurred by the Trustee, its agents, advisors and counsel or any
of the Holders in enforcing any of their rights under the Guarantee.
Section 10.17. No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part of the
Trustee or the Holders, any right, remedy, power or privilege hereunder or under
this Indenture or the Notes, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder or
under this Indenture or the Notes preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges in the Guarantee and under this Indenture, the
Notes and any other document or instrument between the Guarantor and/or the
Issuers and the Trustee are cumulative and not exclusive of any rights,
remedies, powers and privilege provided by law.
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Section 10.18. Effect of Offset or Counterclaim.
The obligations of the Guarantor hereunder shall be enforceable against
the Guarantor without regard to and without giving effect to any right of offset
or counterclaim available to or which may be asserted by the Company or the
Guarantor.
Section 10.19. Guarantee in Addition to Other Obligations.
The obligations of the Guarantor under its Guarantee and this Indenture
are in addition to and not in substitution for any other obligations to the
Trustee or to any of the Holders in relation to this Indenture or the Notes
(including the Purchase Agreement and the Registration Rights Agreement).
Section 10.20. Severability.
Any provision of this Article Ten which is prohibited or unenforceable in
any jurisdiction shall not invalidate the remaining provisions and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction unless its removal
would substantially defeat the basic intent, spirit and purpose of this
Indenture and this Article Ten.
Section 10.21. Successors and Assigns.
Each Guarantee shall be binding upon and inure to the benefit of the
Guarantor, the Issuers, the Trustee and the Holders and their respective
successors and permitted assigns, except that the Guarantor may not assign any
of its obligations hereunder or thereunder.
ARTICLE 11
SECURITY
Section 11.01. Security.
In order to secure the due and punctual payment of the principal of,
premium, if any, and interest, and Special Interest, if any, on the Notes when
and as the same shall be due and payable, whether on an interest payment date,
at maturity, by acceleration, call for redemption or otherwise, and interest on
the overdue principal and interest, if any, of the Notes and performance of all
other obligations of the Issuers, to the Holders or the Trustee under this
Indenture and the Notes, according to the terms hereof or thereof, the Company
will make an assignment of its right, title and interest in and to the
Collateral to the Trustee pursuant to the Pledge Documents and to the extent
therein provided, no later than the date of the first issuance of the Notes
hereunder. At the time the Pledge Documents are executed, the Company will have
full right, power and lawful authority to grant, bargain, sell, release, convey,
hypothecate, assign, mortgage, transfer and confirm, absolutely, the property
constituting the Collateral in the manner and form done, or intended to be done,
in the Pledge Documents, free and clear of all Liens whatsoever, except to the
extent otherwise provided therein, and (a) will for so long as any Notes are
outstanding, warrant and defend the title to the same against the claims of all
Persons whatsoever, (b) will execute, acknowledge and deliver to the Trustee
such further assignments, transfers, assurances or other instruments as the
Trustee may require or request and (c) will do or cause to be done all such acts
and things as may be necessary or proper, or as may be required by the Trustee,
to assure and confirm to the Trustee the security interest in the Collateral
contemplated hereby and by the Pledge Documents, or any part thereof, as from
time to time constituted, so as to render the same available for the security
and benefit of this Indenture and of the Notes secured hereby, according to the
intent and
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purposes herein expressed. The Pledge Documents will create a direct and valid
Lien on the property constituting the Collateral as set forth in the Pledge
Documents.
Section 11.02. Recording and Opinions.
The Company will cause, at its own expense, the Pledge Documents, this
Indenture and all amendments or supplements thereto and UCC-1 financing
statements and other applicable documents relating thereto to be registered,
recorded and filed or re-recorded, refiled and renewed in such manner and in
such place or places if any, as may be required by law in order fully to
preserve and protect the Liens created by the Pledge Documents on all parts of
the Collateral and to effectuate and preserve the security of the Holders and
all rights of the Trustee.
The Company shall furnish to the Trustee:
(a) promptly after the execution and delivery of the Pledge
Documents, an Opinion of Counsel either (a) stating that, in the opinion
of such counsel, this Indenture and the assignment of the Collateral
intended to be made by the Pledge Documents and all other instruments of
further assurance or amendment have been properly recorded, registered and
filed to the extent necessary to make effective the Lien intended to be
created by the Pledge Documents, and reciting the details of such action
or referring to prior opinions of counsel in which such details are given,
and stating that as to the Pledge Documents such recordings, registering
and filings are sufficient to give notice thereof and that no
re-recordings, re-registerings or refilings are necessary to maintain such
notice, and further stating that all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the rights of the Holders and the Trustee hereunder
and under the Pledge Documents, or (b) stating that, in the opinion of
such counsel, no such action is necessary to make such Lien and assignment
effective; and
(b) within 30 days after April 1 in each year beginning with April
1, 2000, an Opinion of Counsel, dated as of such date, either (a) stating
that, in the opinion of such counsel, such action has been taken with
respect to the recording, registering, filing, re-recording,
re-registering and refiling of all supplemental indentures, financing
statements, continuation statements or other instruments of further
assurance as is necessary to maintain the Lien of the Pledge Documents and
reciting the details of such action or referring to prior opinions of
counsel in which such details are given, and stating that all financing
statements and continuation statements have been executed and filed that
are necessary fully to preserve and protect the rights of the Holders and
the Trustee hereunder and under the Pledge Documents, or (b) stating that,
in the opinion of such counsel, no such action is necessary to maintain
such lien and assignment.
Section 11.03. Release of Collateral.
Upon the consummation of the Marcus Combination, the security interest in
the Collateral in favor of the Trustee for the benefit of the Holders will be
immediately released.
To the extent applicable, the Company shall cause TIA ss. 314(d) relating
the release of property from the Lien of the Pledge Documents to be complied
with. Any certificate or opinion required by TIA ss. 314(d) may be made by an
officer of the Company, except in cases in which TIA ss. 314(d) requires that
such certificate or opinion be made by an independent Person.
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Section 11.04. Authorization of Actions To Be Taken by the Trustee.
Subject to the provisions of the Pledge Documents, the Trustee shall have
power to institute and to maintain such suits and proceedings as it may deem
expedient to prevent any impairment of the Collateral by any acts which may be
unlawful or in violation of the Pledge Documents, or this Indenture, and such
suits and proceedings as the Trustee may deem expedient to preserve or protect
its interests and the interests of the Holders in the Collateral (including
power to institute and maintain suits or proceedings to restrain the enforcement
of or compliance with any legislative or governmental enactment, rule, or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the security
hereunder or be prejudicial to the interest of the Trustee).
Section 11.05. Acknowledgment that Collateral Secures the Other Notes.
The Collateral is secured for the equal and ratable benefit of the holders
of the Notes and the holders of the Other Notes.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA ss. 318(c), the imposed duties shall control.
Section 12.02. Notices.
Any notice or communication by the Issuers, the Guarantor or the Trustee
to the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Issuers,
or the Guarantor: c/o Charter Communications, Inc.
12444 Powerscourt Drive, Suite 100
St. Louis, Missouri 63131
Telecopier No.: (314) 965-8793
Attention: Secretary
With a copy to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
31st Floor
New York, New York 10022
Telecopier No.: (212) 319-4090
Attention: Thomas R. Pollock, Esq.
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If to the Trustee: Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Telecopier No.: (312) 461-3525
Attention: Corporate Trust Department
The Issuers, the Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Issuers mail a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Issuers, the
Guarantor, the Trustee, the Registrar and anyone else shall have the protection
of TIA ss. 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuers or the Guarantor to the
Trustee to take any action under this Indenture, the Issuers or the Guarantor,
as the case may be, shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
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Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss.
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07. No Personal Liability of Directors, Officers, Employees, Members
and Stockholders.
No director, officer, employee, incorporator, member or stockholder of the
Issuers or the Guarantor, as such, shall have any liability for any obligations
of the Issuers or the Guarantor under the Notes, the Guarantee, this Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes.
Section 12.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEE WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE,
THE NOTES OR ANY GUARANTEE.
Section 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Issuers, the Guarantor or their Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
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Section 12.10. Successors.
All agreements of the Issuers and the Guarantor in this Indenture, the
Notes and the Guarantee, as the case may be, shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
Section 12.11. Severability.
In case any provision in this Indenture, the Notes or the Guarantee, as
the case may be, shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 12.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 12.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions.
ARTICLE 13
SATISFACTION AND DISCHARGE
Section 13.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Notes herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Issuers, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Notes theretofore authenticated and delivered (other
than (i) Notes which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.07 and (ii)
Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Issuers and thereafter
repaid to the Issuers or discharged from such trust,) have been
delivered to the Trustee for cancellation; or
(B) all such Notes not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
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(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Issuers,
and the Issuers, in the case of (i), (ii) or (iii) above, have
deposited or caused to be deposited with the Trustee as trust funds
in trust for the purpose an amount sufficient to pay and discharge
the entire indebtedness on such Notes not theretofore delivered to
the Trustee for cancellation, for principal (and premium, if any)
and interest to the date of such deposit (in the case of Notes which
have become due and payable) or to the maturity or redemption
thereof, as the case may be;
(2) the Issuers have paid or caused to be paid all other sums payable
hereunder by the Issuers and the Guarantors; and
(3) each of the Issuers have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article 13, the obligations of the Issuers and the Guarantor to the Trustee
under Section 7.07, and, if money shall have been deposited with the Trustee
pursuant to subclause (B) of clause (1) of this Section, the obligations of the
Trustee under Section 13.02 shall survive.
Section 13.02. Application of Trust Money.
All money deposited with the Trustee pursuant to Section 13.01 shall be
held in trust and applied by it, in accordance with the provisions of the Notes
and this Indenture, to the payment, either directly or through any Paying Agent
as the Trustee may determine, to the Persons entitled thereto, of the principal
(and premium, if any) and interest for whose payment such money has been
deposited with the Trustee.
[Signatures on following page]
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<PAGE> 91
SIGNATURES
Dated as of March 17, 1999
CHARTER COMMUNICATIONS HOLDINGS, LLC, as
an Issuer
By: /s/ Eloise Engman
_____________________________________
Name: Eloise Engman
Title: Vice President
CHARTER COMMUNICATIONS HOLDINGS CAPITAL
CORPORATION, as an Issuer
By: /s/ Eloise Engman
_____________________________________
Name: Eloise Engman
Title: Vice President
MARCUS CABLE HOLDINGS, LLC,
as Guarantor
BY: MARCUS CABLE PROPERTIES, L.L.C.,
as Manager
BY: MARCUS CABLE PROPERTIES, INC.,
as Manager
By: /s/ Marcy Lifton
_____________________________________
Name: Marcy Lifton
Title: Senior Vice President and
Assistant Secretary
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: /s/ Kevin O. Healey
_____________________________________
Name: Kevin O. Healey
Title: Senior Vice President
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<PAGE> 92
EXHIBIT A
[Face of Note]
CUSIP NO. [ ]
8.25% Senior Notes due 2007
No. $
CHARTER COMMUNICATIONS HOLDINGS, LLC
and
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
promise to pay to ______________________________________________________________
or registered assigns,
the principal amount of ________________________________________________________
Dollars ($______________________________) on April 1, 2007.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
Subject to Restrictions set forth in this Note.
Dated: March 17, 1999
CHARTER COMMUNICATIONS HOLDINGS, LLC
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
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CHARTER COMMUNICATIONS HOLDINGS CAPITAL
CORPORATION
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: __________________________________
Authorized Signatory
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[Back of Note]
8.25% Senior Notes due 2007
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS."(1)
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES."(2)
- ----------
(1) This paragraph should be included only if the Notes is issued in global
form.
(2) This paragraph should be removed upon the exchange of Notes for Exchange
in the Exchange Offer or upon the registration of the Notes pursuant to
the terms of the Registration Rights Agreements.
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Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Charter Communications Holdings, LLC, a Delaware limited
liability company (the "Company"), and Charter Communications Holdings Capital
Corporation, a Delaware corporation ("Charter Capital" and, together with the
Company, the "Issuers"), promise to pay interest on the principal amount of this
Note at the rate of 8.25% per annum from March 17, 1999 until maturity. The
interest rate on the Notes is subject to increase pursuant to the provisions of
the Registration Rights Agreement. The Issuers will pay interest semi-annually
in arrears on April 1 and October 1 of each year (each an "Interest Payment
Date"), or if any such day is not a Business Day, on the next succeeding
Business Day. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face and the next succeeding Interest Payment Date, interest shall accrue
from such next succeeding Interest Payment Date; provided, further, that the
first Interest Payment Date shall be October 1, 1999. The Issuers shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; they
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Issuers shall pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the March 15 or September 15 next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. The Notes will be payable as to
principal, premium, if any, and interest at the office or agency of the Issuers
maintained for such purpose within or without the City and State of New York,
or, at the option of the Issuers, payment of interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest and premium on all Global
Notes and all other Notes the Holders of which shall have provided wire transfer
instructions to the Issuers or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Harris Trust and Savings Bank,
the Trustee under the Indenture, will act as Paying Agent and Registrar. The
Issuers may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Issuers issued the Notes under an Indenture dated as of
March 17, 1999 ("Indenture") between the Issuers, Marcus Cable Holdings, LLC
(the "Guarantor") and the Trustee. The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. To the extent any provision of this Note
conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are obligations of the
Issuers limited to $600 million in aggregate principal amount, of which all $600
million in aggregate principal amount of Notes were issued on the Issue Date.
The Notes are guaranteed on a senior basis by the Guarantor.
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5. OPTIONAL REDEMPTION.
The Notes will not be redeemable at the Issuers' option prior to maturity.
6. MANDATORY REDEMPTION.
Except as otherwise provided in Paragraph 7 below, the Issuers shall not
be required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Issuers shall make an offer (a
"Change of Control Offer") to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of each Holder's Notes at a purchase price equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of purchase (the "Change of Control Payment").
Within 10 days following any Change of Control, the Issuers shall mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the Change of Control
Payment Date specified in such notice, pursuant to the procedures required by
the Indenture and described in such notice.
(b) If the Company or a Restricted Subsidiary consummates any Asset Sale,
when the aggregate amount of Excess Proceeds exceeds $25.0 million, the Issuers
shall commence an offer (an "Asset Sale Offer") pursuant to Section 4.11 of the
Indenture to all Holders of Notes and all holders of other Indebtedness that is
pari passu with the Notes containing provisions requiring offers to purchase or
redeem with the proceeds of sales of assets to purchase the maximum principal
amount of Notes and such other pari passu Indebtedness that may be purchased out
of the Excess Proceeds (which amount includes the entire amount of the Net
Proceeds). The offer price in any Asset Sale Offer will be payable in cash and
equal to 100% of principal amount plus accrued and unpaid interest, if any, to
the date of purchase. If any Excess Proceeds remain after consummation of an
Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by the Indenture. If the aggregate principal amount of
Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other pari passu Indebtedness to be purchased on a pro rata basis. Upon
completion of each Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero. Holders of Notes that are the subject of an offer to purchase
will receive an Asset Sale Offer from the Company prior to any related purchase
date and may elect to have such Notes purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first
class mail at least 30 days but not more than 60 days before the redemption date
to each Holder whose Notes are to be redeemed at its registered address. Notices
of redemption may not be conditional. No Notes of $1,000 or less may be redeemed
in part. Notes in denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000, unless all of the Notes held by a Holder are
to be redeemed. On and after the redemption date interest ceases to accrue on
Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuers may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuers need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Issuers
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need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes, other than with respect to the payment of
Additional Amounts.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, Notes). Without the
consent of any Holder of a Note, the Issuers and the Trustee may amend or
supplement the Indenture or the Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of an Issuers' or the
Guarantor's obligations, as the case may be, to Holders of Notes in the case of
a merger or consolidation or sale of all or substantially all of the assets of
either Issuer or the Guarantor, as the case may be, to make any change that
would provide any additional rights or benefits to the Holders of Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder, or to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the TIA or otherwise as
necessary to comply with applicable law.
12. DEFAULTS AND REMEDIES. Each of the following is an Event of Default:
(i) default for 30 days in the payment when due of interest on the Notes, (ii)
default in payment when due of the principal of or premium, if any, on the
Notes, (iii) failure by the Company or any of its Restricted Subsidiaries, or
the Guarantor or any of its Restricted Subsidiaries, to comply with Sections
4.16 and 5.01 of the Indenture, (iv) failure by the Company or any of its
Restricted Subsidiaries, or the Guarantor or any of its Restricted Subsidiaries,
for 30 days after written notice thereof has been given to the Company by the
Trustee or to the Company and the Trustee by the Holders of at least 25% of the
aggregate principal amount of the Notes outstanding to comply with any of their
other covenants or agreements in the Indenture, (v) default under any mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any Indebtedness for money borrowed by the Company or any
of its Restricted Subsidiaries, or by the Guarantor or any of its Restricted
Subsidiaries, (or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries, or by the Guarantor or any of its Restricted
Subsidiaries), whether such Indebtedness or guarantee now exists or is created
after the date of the Indenture, if that default: (a) is caused by a failure to
pay at final stated maturity the principal amount of such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the date of
such default (a "Payment Default"); or (b) results in the acceleration of such
Indebtedness prior to its express maturity, and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $100.0 million or more, (vi)
failure by the Company or any of its Restricted Subsidiaries, or by the
Guarantor or any of its Restricted Subsidiaries, to pay final judgments which
are non-appealable aggregating in excess of $100.0 million (net of applicable
insurance which has not been denied in writing by the insurer), which judgments
are not paid, discharged or stayed for a period of 60 days, (vii) certain events
of bankruptcy or insolvency with respect to the Company, the Guarantor or any of
their Significant Subsidiaries, (viii) except as permitted by the Indenture, the
Guarantee of the Guarantor being held in any judicial proceeding to be
unenforceable or invalid or ceasing for any reason to be in full force and
effect or is caused by the Guarantor's, or any Person's (such Person acting on
behalf of the Guarantor), denial or disaffirmation of its obligations under the
Guarantee or (ix) except as
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permitted by the Indenture, any of the Pledge Documents cease to be in full
force and effect (other than in accordance with their respective terms or the
terms of the Indenture), or any of the Pledge Documents cease to give the
Trustee or the Company, as the case may be, the Liens purported to be created
thereby, or any Pledge Document is declared null and void. In the case of an
Event of Default arising from certain events of bankruptcy or insolvency with
respect to the Company, all outstanding Notes will become due and payable
without further action or notice. If any other Event of Default occurs and is
continuing, the Trustee by notice to the Issuers or the Holders of at least 25%
in principal amount of the then outstanding Notes by notice to the Issuers and
the Trustee may declare all the Notes to be due and payable. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. Subject
to certain limitations, Holders of a majority in principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest. The Holders of a majority in aggregate principal amount of
the Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the principal of, the Notes. The Company is
required to deliver to the Trustee annually a statement regarding compliance
with the Indenture. Upon becoming aware of any Default or Event of Default, the
Company is required to deliver to the Trustee a statement specifying such
Default or Event of Default.
13. TRUSTEE DEALINGS WITH ISSUERS. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Issuers, the Guarantor or their Affiliates, and may otherwise deal with
the Issuers, the Guarantor or their Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator, member or stockholder of either of the Issuers or the Guarantor,
as such, shall not have any liability for any obligations of the Issuers under
the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. GUARANTEES. Until the consummation of the Marcus Combination, this
Note will be entitled to the benefits of certain Guarantees, if any, made for
the benefit of the Holders. Reference is hereby made to the Indenture for a
statement of the respective rights, limitations of rights, duties and
obligations thereunder of the Guarantor, the Trustee and the Holders.
16. GOVERNING LAW. This Note and the Indenture shall be governed by and
construed in accordance with the laws of the State of New York, as applied to
contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto and the holders agree
to submit to the jurisdiction of the courts of the State of New York in any
action or proceeding arising out of or relating to this Note.
17. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
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19. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED
DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the Exchange and Registration
Rights Agreement dated as of March 17, 1999, among the Issuers, the Guarantor
and the initial purchasers named therein (the "Registration Rights Agreement").
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Charter Communications Holdings, LLC
Charter Communications Holdings Capital Corporation
c/o Charter Communications, Inc.
12444 Powerscourt Drive
Suite 100
St. Louis, Missouri 63131
Attention: Secretary
Telecopier No.: (314) 965-0555
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ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:___________________________________
(Insert assignee's legal name)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Issuers. The agent may substitute
another to act for him.
Date:______________________________
Your Signature:_____________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*:_____________________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers pursuant
to Section 4.11 or 4.16 of the Indenture, check the appropriate box below:
|_| Section 4.11 |_| Section 4.16
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.11 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$_______________
Date: ____________________
Your Signature: ____________________________________________
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.: ____________________________________
Signature Guarantee*: _____________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-10
<PAGE> 102
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Signature of
decrease in increase in Amount of authorized
Principal Principal this Global Note officer of
Amount of Amount of following such Trustee or
Date of this Global this Global decrease Note
Exchange Note Note (or increase) Custodian
-------- ---- ---- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
A-11
<PAGE> 103
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Charter Communications Holdings, LLC
Charter Communications Holdings Capital Corporation
c/o Charter Communications, Inc.
12444 Powerscourt Drive, Suite 100
St. Louis, Missouri 63131
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attn: Corporate Trust Department
Re: 8.25% Senior Notes due 2007
Reference is hereby made to the Indenture, dated as of March 17, 1999 (the
"Indenture"), among Charter Communications Holdings, LLC (the "Company") and
Charter Communications Holdings Capital Corporation ("Charter Capital" and,
together with the Company, the "Issuers"), Marcus Cable Holdings, LLC, as
guarantor, and Harris Trust and Savings Bank, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
___________________ (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. |_| Check if Transferee will take delivery of a beneficial interest in
the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. |_| Check if Transferee will take delivery of a beneficial interest in
the Regulation S Global Note or a Definitive Note pursuant to Regulation S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been
B-1
<PAGE> 104
made in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the Securities Act and (iii) the transaction is not part of a
plan or scheme to evade the registration requirements of the Securities Act.
Upon consummation of the proposed transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on Transfer enumerated in the Private Placement
Legend printed on the Regulation S Global Note and/or the Definitive Note and in
the Indenture and the Securities Act.
3. |_| Check and complete if Transferee will take delivery of a beneficial
interest in a Definitive Note pursuant to any provision of the Securities Act
other than Rule 144A or Regulation S. The Transfer is being effected in
compliance with the transfer restrictions applicable to beneficial interests in
Restricted Global Notes and Restricted Definitive Notes and pursuant to and in
accordance with the Securities Act and any applicable blue sky securities laws
of any state of the United States, and accordingly the Transferor hereby further
certifies that (check one):
(a) |_| such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) |_| such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) |_| such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) |_| such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule
904, and the Transferor hereby further certifies that it has not engaged
in any general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption claimed,
which certification is supported by (1) a certificate executed by the
Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Note and/or the Definitive Notes and in
the Indenture and the Securities Act.
4. |_| Check if Transferee will take delivery of a beneficial interest in
an Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) |_| Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement
B-2
<PAGE> 105
Legend are not required in order to maintain compliance with the Securities Act.
Upon consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will no longer
be subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes, on Restricted Definitive Notes
and in the Indenture.
(b) |_| Check if Transfer is Pursuant to Regulation S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(c) |_| Check if Transfer is Pursuant to Other Exemption. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers.
____________________________________________
[Insert Name of Transferor]
By: ________________________________________
Name:
Title:
Dated: ________________________
B-3
<PAGE> 106
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP __________), or
(ii) |_| Regulation S Global Note (CUSIP _________), or
(b) |_| a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP __________), or
(ii) |_| Regulation S Global Note (CUSIP _________), or
(iii) |_| Unrestricted Global Note (CUSIP _________); or
(b) |_| a Restricted Definitive Note; or
(c) |_| an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE> 107
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Charter Communications Holdings, LLC
Charter Communications Holdings Capital Corporation
c/o Charter Communications, Inc.
12444 Powerscourt Drive, Suite 100
St. Louis, Missouri 63131
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attn: Corporate Trust Department
Re: 8.25 % Senior Notes due 2007
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of March 17, 1999 (the
"Indenture"), among Charter Communications Holdings, LLC (the "Company") and
Charter Communications Holdings Capital Corporation ("Charter Capital" and,
together with the Company, the "Issuers"), Marcus Cable Holdings, LLC, as
guarantor, and Harris Trust and Savings Bank, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
__________________________ (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) |_| Check if Exchange is from beneficial interest in a Restricted
Global Note to beneficial interest in an Unrestricted Global Note. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) |_| Check if Exchange is from beneficial interest in a Restricted
Global Note to Unrestricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the
C-1
<PAGE> 108
Securities Act and (iv) the Definitive Note is being acquired in compliance with
any applicable blue sky securities laws of any state of the United States.
(c) |_| Check if Exchange is from Restricted Definitive Note to beneficial
interest in an Unrestricted Global Note. In connection with the Owner's Exchange
of a Restricted Definitive Note for a beneficial interest in an Unrestricted
Global Note, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) |_| Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes
(a) |_| Check if Exchange is from beneficial interest in a Restricted
Global Note to Restricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) Check if Exchange is from Restricted Definitive Note to beneficial
interest in a Restricted Global Note. In connection with the Exchange of the
Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
|_| 144A Global Note or |_| Regulation S Global Note with an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer and (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, and in compliance with any applicable blue sky securities laws of any state
of the United States. Upon consummation of the proposed Exchange in accordance
with the terms of the Indenture, the beneficial interest issued will be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the relevant Restricted Global Note and in the Indenture and the
Securities Act.
C-2
<PAGE> 109
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers.
____________________________________________
[Insert Name of Transferor]
By: ________________________________________
Name:
Title:
Dated: ________________________
C-3
<PAGE> 110
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Charter Communications Holdings, LLC
Charter Communications Holdings Capital Corporation
c/o Charter Communications, Inc.
12444 Powerscourt Drive, Suite 100
St. Louis, Missouri 63131
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attn: Corporate Trust Department
Re: 8.25% Senior Notes due 2007
Reference is hereby made to the Indenture, dated as of March 17, 1999 (the
"Indenture"), among Charter Communications Holdings, LLC (the "Company") and
Charter Communications Holdings Capital Corporation ("Charter Capital" and,
together with the Company, the "Issuers"), Marcus Cable Holdings, LLC, as
guarantor, and Harris Trust and Savings Bank, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) |_| a beneficial interest in a Global Note, or
(b) |_| a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any interest
therein is subject to certain restrictions and conditions set forth in the
Indenture and the undersigned agrees to be bound by, and not to resell, pledge
or otherwise transfer the Notes or any interest therein except in compliance
with, such restrictions and conditions and the United States Securities Act of
1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144(k) under the Securities Act or (F) pursuant to an
effective registration statement under the Securities Act, and we further agree
to provide to any person purchasing the Definitive Note or beneficial interest
in a Global Note from us in a
D-1
<PAGE> 111
transaction meeting the requirements of clauses (A) through (E) of this
paragraph a notice advising such purchaser that resales thereof are restricted
as stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the Issuers such
certifications, legal opinions and other information as you and the Issuers may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased by
us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy to any interested party
in any administrative or legal proceedings or official inquiry with respect to
the matters covered hereby.
____________________________________________
[Insert Name of Accredited Investor]
By: ________________________________________
Name:
Title:
Dated: ________________________
D-2
<PAGE> 112
EXHIBIT E
FORM OF GUARANTEE
For value received, the undersigned hereby unconditionally guarantees, as
principal obligor and not only as a surety, to the Holder of this Note the cash
payments in United States dollars of principal of, premium, if any, and interest
on this Note (and including Special Interest payable thereon) in the amounts and
at the times when due and interest on the overdue principal, premium, if any,
and interest, if any, of this Note, if lawful, and the payment or performance of
all other obligations of the Issuers under the Indenture (as defined below) or
the Notes, to the Holder of this Note and the Trustee, all in accordance with
and subject to the terms and limitations of this Note, Article Ten of the
Indenture and this Guarantee. This Guarantee will become effective in accordance
with Article Ten of the Indenture and its terms shall be evidenced therein. The
validity and enforceability of any Guarantee shall not be affected by the fact
that it is not affixed to any particular Note. Capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Indenture dated
as of March 17, 1999, among Charter Communications Holdings, LLC, a Delaware
limited liability company, Charter Communications Holdings Capital Corporation,
a company incorporated under the laws of Delaware, Marcus Cable Holdings, LLC, a
Delaware limited liability company, as guarantor, and Harris Trust and Savings
Bank, as trustee, as amended or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article Ten of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS
OF LAW. Each Guarantor hereby agrees to submit to the jurisdiction of the courts
of the State of New York in any action or proceeding arising out of or relating
to this Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
E-1
<PAGE> 113
IN WITNESS WHEREOF, the Guarantor has caused its Guarantee to be duly
executed.
Date:______________
MARCUS CABLE HOLDINGS, LLC,
as Guarantor
By: MARCUS CABLE PROPERTIES, L.L.C.,
as Manager
By: MARCUS CABLE PROPERTIES, INC.,
as Manager
By: _____________________________________
Name:
Title:
E-2
<PAGE> 114
EXHIBIT F
FORM OF MIRROR NOTE
9.92% Senior Note due 2007
$1,548,630,855
MARCUS CABLE HOLDINGS, LLC
(the "Borrower")
promises to pay to CHARTER COMMUNICATIONS HOLDINGS, LLC (the "Lender") on April
1, 2007 (the "Maturity Date") the principal amount outstanding on the Maturity
Date.
Interest Payment Dates: April 1 and October 1
Date: March 17, 1999
MARCUS CABLE HOLDINGS, LLC
By: MARCUS CABLE PROPERTIES, L.L.C.,
as Manager
By: MARCUS CABLE PROPERTIES, INC.,
as Manager
By: ___________________________________
Name:
Title:
CHARTER COMMUNICATIONS HOLDINGS, LLC
By: ______________________________
Name:
Title:
F-1
<PAGE> 115
1. INTEREST. Marcus Cable Holdings, LLC, a Delaware limited liability
Company (the "Borrower"), promises to pay to Charter Communications Holdings,
LLC, a Delaware limited liability company (the "Lender"), interest on the
principal amount of this Note from time to time outstanding at the rate of 9.92%
per annum from the date hereof until maturity. The Borrower will pay interest
semi-annually in arrears on April 1 and October 1 of each year (each an
"Interest Payment Date"), or if any such day is not a Business Day, on the next
succeeding Business Day. Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided, further, that the first Interest Payment Date shall
be October 1, 1999. The principal amount on which the Borrower will pay interest
on each Interest Payment Day will be the principal amount of this Note
outstanding from time to time during the 6-month period prior to such Interest
Payment Date. The Borrower shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue principal and premium, if
any, from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; it shall pay interest (including post-petition interest in
any proceeding under Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Borrower will pay interest on this Note to
Lender. This Note will be payable as to principal, premium, if any, and interest
by check mailed to Lender at 12444 Powerscourt Drive, Suite 100, St. Louis,
Missouri 63131 or such other address as Lender shall have notified the Borrower
in writing, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest on this Note if
Lender shall have provided wire transfer instructions to the Borrower. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. DEFINED TERMS. Capitalized terms used herein shall have the meanings
assigned to them in the Indenture dated as of March 17, 1999 (the "Indenture")
between the Lender, Charter Communications Holdings Capital Corporation, a
company incorporated under the laws of Delaware, the Borrower, and Harris Trust
and Savings Bank, as trustee, relating to the 8.625% Senior Notes due 2009.
4. PREPAYMENT OF NOTE. This Note may be prepaid in whole or in part at any
time without penalty or premium.
5. REPAYMENT AT OPTION OF HOLDER. Upon the occurrence of (i) a Change of
Control or (ii) an Asset Sale, in each case under the Indenture, Lender may
require Borrower to prepay this Note in whole or in part.
6. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest on this Note, (ii) default in payment
when due of principal on this Note, and (iii) any event which constitutes an
Event of Default under the Indenture. If any Event of Default occurs and is
continuing, Lender may declare this Note to be due and payable. Notwithstanding
the foregoing, upon the occurrence of an Event of Default pursuant to Section
6.01(g) or (h) of the Indenture, this Note will become due and payable without
further action or notice. Lender may waive any existing Default or Event of
Default and its consequences except a continuing Default or Event of Default in
the payment of interest on, or the principal of, this Note. The Borrower is
required upon becoming aware of any Default or Event of Default to deliver to
Lender a statement specifying such Default or Event of Default.
7. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator, member or stockholder, of the Borrower, as such, shall not have
any liability for any obligations of the
F-2
<PAGE> 116
Borrower under this Note or for any claim based on, in respect of, or by reason
of, such obligation or its creation. Lender by accepting this Note waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of this Note.
8. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of New York, as applied to contracts made
and performed within the State of New York, without regard to principles of
conflict of laws. Each of the parties hereto and the holders agree to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Note.
F-3
<PAGE> 1
Exhibit 4.1(c)
CHARTER COMMUNICATIONS HOLDINGS, LLC
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
MARCUS CABLE HOLDINGS, LLC
$600,000,000 8.25% Senior Notes due 2007
----------
Exchange and Registration Rights Agreement
March 17, 1999
Goldman, Sachs & Co.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Bear, Stearns & Co. Inc.
NationsBanc Montgomery Securities LLC
Salomon Smith Barney Inc.
Credit Lyonnais Securities (USA), Inc.
First Union Capital Markets Corp.
Prudential Securities Incorporated
TD Securities (USA) Inc.
CIBC Oppenheimer Corp.
Nesbitt Burns Securities Inc.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Charter Communications Holdings, LLC, a Delaware limited liability
company (the "Company"), and Charter Communications Holdings Capital
Corporation, a Delaware corporation ("Charter Capital" and, together with the
Company, the "Issuers"), propose, subject to the terms and conditions stated
herein, to issue and sell to the Purchasers (as defined herein) upon the terms
set forth in the Purchase Agreement (as defined herein) their $600,000,000
aggregate principal amount of 8.25% Senior Notes due 2007 (the "Notes"), which
are guaranteed (the "Guarantee") by Marcus Cable Holdings, LLC (the
"Guarantor"). As an inducement to the Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the
Purchasers thereunder, the Issuers and the Guarantor agree with the Purchasers
for the benefit of holders (as defined herein) from time to time of the
Registrable Securities (as defined herein) as follows:
<PAGE> 2
1. Certain Definitions. For purposes of this Exchange and
Registration Rights Agreement, the following terms shall have the following
respective meanings:
"Base Interest" shall mean the interest that would otherwise accrue
on the Notes under the terms thereof and the Indenture, without giving
effect to the provisions of this Exchange and Registration Rights
Agreement.
The term "broker-dealer" shall mean any broker or dealer registered
with the Commission under the Exchange Act.
"Closing Date" shall mean the date on which the Notes are initially
issued.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for
the particular purpose.
"Effective Time," in the case of (i) an Exchange Offer Registration,
shall mean the time and date as of which the Commission declares the
Exchange Offer Registration Statement effective or as of which the
Exchange Offer Registration Statement otherwise becomes effective and (ii)
a Shelf Registration, shall mean the time and date as of which the
Commission declares the Shelf Registration Statement effective or as of
which the Shelf Registration Statement otherwise becomes effective.
"Electing Holder" shall mean any holder of Registrable Securities
that has returned a completed and signed Notice and Questionnaire to the
Issuers in accordance with Section 3(d)(ii) or 3(d)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
"Exchange Notes" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Offer" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Offer Registration" shall have the meaning assigned
thereto in Section 3(c) hereof.
"Exchange Offer Registration Statement" shall have the meaning
assigned thereto in Section 2(a) hereof.
"Guarantee" shall mean the guarantee of the Notes to be issued by
the Guarantor.
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<PAGE> 3
The term "holder" shall mean each of the Purchasers and other
persons who acquire Registrable Securities from time to time (including
any successors or assigns), in each case for so long as such person is a
registered holder of any Registrable Securities.
"Indenture" shall mean the Indenture governing the Notes, dated as
of March 17, 1999 between the Issuers and Harris Trust and Savings Bank,
as Trustee, as the same shall be amended from time to time.
"Notes" shall mean, collectively, the 8.25% Senior Notes due 2007 of
the Issuers, guaranteed by the Guarantor, to be issued and sold to the
Purchasers, and Notes issued in exchange therefor or in lieu thereof,
pursuant to the Indenture.
"Notice and Questionnaire" means a Notice of Registration Statement
and Selling Securityholder Questionnaire substantially in the form of
Exhibit A hereto.
The term "person" shall mean a corporation, association,
partnership, organization, business, individual, government or political
subdivision thereof or governmental agency.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of
March 12, 1999, between the Purchasers, the Guarantor and the Issuers
relating to the Notes.
"Purchasers" shall mean the Purchasers named in Schedule I to the
Purchase Agreement.
"Registrable Securities" shall mean the Notes; provided, however,
that a Note shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a) hereof, such Note has been
exchanged for an Exchange Note in an Exchange Offer as contemplated in
Section 2(a) hereof (provided that any Exchange Note that, pursuant to the
last two sentences of Section 2(a), is included in a prospectus for use in
connection with resales by broker-dealers shall be deemed to be a
Registrable Security with respect to Sections 5, 6 and 9 hereof until
resale of such Registrable Security has been effected within the 180-day
period referred to in Section 2(a))(y); (ii) in the circumstances
contemplated by Section 2(b) hereof, a Shelf Registration Statement
registering such Note under the Securities Act has been declared or
becomes effective and such Note has been sold or otherwise transferred by
the holder thereof pursuant to and in a manner contemplated by such
effective Shelf Registration Statement; (iii) such Note is sold pursuant
to Rule 144 under circumstances in which any legend borne by such Note
relating to restrictions on transferability thereof, under the Securities
Act or otherwise, is removed by the Issuers or pursuant to the Indenture;
(iv) such Security is eligible to be sold pursuant to paragraph (k) of
Rule 144; or (v) such Security shall cease to be outstanding.
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<PAGE> 4
"Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
"Resale Period" shall have the meaning assigned thereto in Section
2(a) hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of
the Issuers within the meaning of Rule 405, (ii) a holder who acquires
Exchange Notes outside the ordinary course of such holder's business,
(iii) a holder who has arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of distributing Exchange
Notes and (iv) a holder that is a broker-dealer, but only with respect to
Exchange Notes received by such broker-dealer pursuant to an Exchange
Offer in exchange for Registrable Securities acquired by the broker-dealer
directly from the Issuers.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Securities Act (or any successor provision), as
the same shall be amended from time to time.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"Shelf Registration" shall have the meaning assigned thereto in
Section 2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned
thereto in Section 2(b) hereof.
"Special Interest" shall have the meaning assigned thereto in
Section 2(c) hereof.
"subsidiaries" shall mean subsidiaries which would be "significant
subsidiaries" as defined in Rule 1-02(w) of Regulation S-X under the
Exchange Act.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of this
Exchange and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of
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<PAGE> 5
similar import refer to this Exchange and Registration Rights Agreement as a
whole and not to any particular Section or other subdivision.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Issuers agree to
file under the Securities Act, as soon as practicable, but no later than 90 days
after the Closing Date, a registration statement relating to an offer to
exchange (such registration statement, the "Exchange Offer Registration
Statement", and such offer, the "Exchange Offer") any and all of the Notes
guaranteed by the Guarantor for a like aggregate principal amount of notes
issued by the Issuers and guaranteed by the Guarantor, which notes and guarantee
are substantially identical in all material respects to the Notes and Guarantee
(and are entitled to the benefits of a trust indenture which has terms identical
in all material respects to the Indenture or is the Indenture and which has been
qualified under the Trust Indenture Act), except that they have been registered
pursuant to an effective registration statement under the Securities Act and do
not contain provisions for the additional interest contemplated in Section 2(c)
below (such notes hereinafter called "Exchange Notes"). The Issuers agree to use
their reasonable best efforts to cause the Exchange Offer Registration Statement
to become effective under the Securities Act as soon as practicable, but no
later than 150 days after the Closing Date. The Exchange Offer will be
registered under the Securities Act on the appropriate form and will comply with
all applicable tender offer rules and regulations under the Exchange Act. The
Issuers further agree to use their reasonable best efforts to complete the
Exchange Offer promptly, but no later than 30 business days or longer, if
required by the federal securities laws, after such registration statement has
become effective, hold the Exchange Offer open for at least 30 days and exchange
Exchange Notes for all Registrable Securities that have been properly tendered
and not withdrawn on or prior to the expiration of the Exchange Offer. The
Exchange Offer will be deemed to have been "completed" only if the notes
received by holders other than Restricted Holders, in the Exchange Offer for
Registrable Securities are, upon receipt, transferable by each such holder
without restriction under the Securities Act and the Exchange Act and without
material restrictions under the blue sky or securities laws of a substantial
majority of the States of the United States of America. The Exchange Offer shall
be deemed to have been completed upon the earlier to occur of (i) the Issuers
having exchanged the Exchange Notes for all outstanding Registrable Securities
pursuant to the Exchange Offer and (ii) the Issuers having exchanged, pursuant
to the Exchange Offer, Exchange Notes for all Registrable Securities that have
been properly tendered and not withdrawn before the expiration of the Exchange
Offer, which shall be on a date that is at least 30 business days following the
commencement of the Exchange Offer. The Issuers agree (x) to include in the
Exchange Offer Registration Statement a prospectus for use in any resales by any
holder of Exchange Notes that is a broker-dealer and (y) to keep such Exchange
Offer Registration Statement effective for a period (the "Resale Period")
beginning when Exchange Notes are first issued in the Exchange Offer and ending
upon the earlier of the expiration of the 180th day after the Exchange Offer has
been completed or such time as such broker-dealers no longer own any
5
<PAGE> 6
Registrable Securities. With respect to such Exchange Offer Registration
Statement, such holders shall have the benefit of the rights of indemnification
and contribution set forth in Sections 6(a), (c), (d) and (e) hereof.
(b) If (i) on or prior to the time the Exchange Offer is completed
existing law or Commission policy or interpretations are changed such that the
Exchange Notes received by holders, other than Restricted Holders in the
Exchange Offer in exchange for Registrable Securities are not or would not be,
upon receipt, transferable by each such holder without restriction under the
Securities Act, (ii) the Exchange Offer has not been completed within 180 days
following the Closing Date or (iii) the Exchange Offer is not available to any
holder of the Notes, the Issuers shall, in lieu of (or, in the case of clause
(iii), in addition to) conducting the Exchange Offer contemplated by Section
2(a), file under the Securities Act on or prior to 30 business days after the
time such obligation to file arises, a "shelf" registration statement providing
for the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities, pursuant to Rule 415 or any
similar rule that may be adopted by the Commission (such filing, the "Shelf
Registration" and such registration statement, the "Shelf Registration
Statement"). The Issuers agree to use their reasonable best efforts (x) to cause
the Shelf Registration Statement to become or be declared effective by the
Commission no later than 90 days after such obligation to file arises and to
keep such Shelf Registration Statement continuously effective for a period
ending on the earlier of (i) the second anniversary of the Effective Time or
(ii) such time as there are no longer any Registrable Securities outstanding;
provided, however, that no holder shall be entitled to be named as a selling
securityholder in the Shelf Registration Statement or to use the prospectus
forming a part thereof for resales of Registrable Securities unless such holder
is an Electing Holder, and (y) after the Effective Time of the Shelf
Registration Statement, promptly upon the request of any holder of Registrable
Securities that is not then an Electing Holder, to take any action reasonably
necessary to enable such holder to use the prospectus forming a part thereof for
resales of Registrable Securities, including, without limitation, any action
necessary to identify such holder as a selling securityholder in the Shelf
Registration Statement, provided, however, that nothing in this clause (y) shall
relieve any such holder of the obligation to return a completed and signed
Notice and Questionnaire to the Issuers in accordance with Section 3(d)(iii)
hereof. The Issuers further agree to supplement or make amendments to the Shelf
Registration Statement, as and when required by the rules, regulations or
instructions applicable to the registration form used by the Issuers for such
Shelf Registration Statement or by the Securities Act or rules and regulations
thereunder for shelf registration, and the Issuers agree to furnish to each
Electing Holder copies of any such supplement or amendment prior to its being
used or promptly following its filing with the Commission.
(c) In the event that (i) the Issuers have not filed the Exchange
Offer Registration Statement or Shelf Registration Statement on or before the
date on which such registration statement is required to be filed pursuant to
Section 2(a) or 2(b), respectively, or (ii) such Exchange Offer Registration
Statement or Shelf Registration Statement to become effec-
6
<PAGE> 7
tive or been declared effective by the Commission on or before the date on which
such registration statement is required to become or be declared effective
pursuant to Section 2(a) or 2(b), respectively, or (iii) the Exchange Offer has
not been completed within 30 business days after the initial effective date of
the Exchange Offer Registration Statement relating to the Exchange Offer (if the
Exchange Offer is then required to be made) or (iv) any Exchange Offer
Registration Statement or Shelf Registration Statement required by Section 2(a)
or 2(b) hereof is filed and declared effective but shall thereafter either be
withdrawn by the Issuers or shall become subject to an effective stop order
issued pursuant to Section 8(d) of the Securities Act suspending the
effectiveness of such registration statement (except as specifically permitted
herein) without being succeeded immediately by an additional registration
statement filed and declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"), then, as liquidated damages for such Registration Default, subject to
the provisions of Section 9(b), special interest ("Special Interest"), in
addition to the Base Interest, shall accrue on the aggregate principal amount of
the outstanding Notes at a per annum rate of 0.25% for the first 90 days of the
Registration Default Period, at a per annum rate of 0.50% for the second 90 days
of the Registration Default Period, at a per annum rate of 0.75% for the third
90 days of the Registration Default Period and at a per annum rate of 1.0%
thereafter for the remaining portion of the Registration Default Period. All
accrued Special Interest shall be paid in cash by the Issuers on each Interest
Payment Date (as defined in the Indenture).
(d) The Issuers shall use their reasonable best efforts to take all
actions necessary or advisable to be taken by them to ensure that the
transactions contemplated herein are effected as so contemplated in Section 2(a)
or 2(b) hereof.
(e) Any reference herein to a registration statement as of any time
shall be deemed to include any document incorporated, or deemed to be
incorporated, therein by reference as of such time and any reference herein to
any post-effective amendment to a registration statement as of any time shall be
deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time.
3. Registration Procedures.
If the Issuers file a registration statement pursuant to Section
2(a) or Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the
Shelf Registration, as the case may be, the Issuers shall cause the Indenture to
be qualified under the Trust Indenture Act of 1939.
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<PAGE> 8
(b) In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Issuers shall appoint a
new trustee thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Issuers' obligations with respect to the
registration of Exchange Notes as contemplated by Section 2(a) (the "Exchange
Offer Registration"), if applicable, the Issuers shall, as soon as practicable
(or as otherwise specified):
(i) prepare and file with the Commission, as soon as
practicable but no later than 90 days after the Closing Date, an
Exchange Offer Registration Statement on any form which may be
utilized by the Issuers and which shall permit the Exchange Offer
and resales of Exchange Notes by broker-dealers during the Resale
Period to be effected as contemplated by Section 2(a), and use their
reasonable best efforts to cause such Exchange Offer Registration
Statement to become effective as soon as practicable thereafter, but
no later than 150 days after the Closing Date;
(ii) as soon as practicable prepare and file with the
Commission such amendments and supplements to such Exchange Offer
Registration Statement and the prospectus included therein as may be
necessary to effect and maintain the effectiveness of such Exchange
Offer Registration Statement for the periods and purposes
contemplated in Section 2(a) hereof and as may be required by the
applicable rules and regulations of the Commission and the
instructions applicable to the form of such Exchange Offer
Registration Statement, and promptly provide each broker-dealer
holding Exchange Notes with such number of copies of the prospectus
included therein (as then amended or supplemented), in conformity in
all material respects with the requirements of the Securities Act
and the Trust Indenture Act and the rules and regulations of the
Commission thereunder, as such broker-dealer reasonably may request
prior to the expiration of the Resale Period, for use in connection
with resales of Exchange Notes;
(iii) promptly notify each broker-dealer that has requested or
received copies of the prospectus included in such registration
statement, and confirm such advice in writing, (A) when such
Exchange Offer Registration Statement or the prospectus included
therein or any prospectus amendment or supplement or post-effective
amendment has been filed, and, with respect to such Exchange Offer
Registration Statement or any post-effective amendment, when the
same has become effective, (B) of any comments by the Commission and
by the blue sky or securities commissioner or regulator of any state
with respect thereto, or any request by the Commission for
amendments or supplements to such Exchange Offer Registration
Statement or prospectus or for additional informa-
8
<PAGE> 9
tion, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of such Exchange Offer Registration
Statement or the initiation or, to the knowledge of the Issuers,
threatening of any proceedings for that purpose, (D) if at any time
the representations and warranties of the Issuers contemplated by
Section 5 hereof cease to be true and correct in all material
respects, (E) of the receipt by the Issuers of any notification with
respect to the suspension of the qualification of the Exchange Notes
for sale in any jurisdiction or the initiation or, to the knowledge
of the Issuers, threatening of any proceeding for such purpose, or
(F) at any time during the Resale Period when a prospectus is
required to be delivered under the Securities Act, that such
Exchange Offer Registration Statement, prospectus, prospectus
amendment or supplement or post-effective amendment does not conform
in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture, Act and the rules and
regulations of the Commission thereunder, or contains an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(iv) in the event that the Issuers would be required, pursuant
to Section 3(e)(iii)(F) above, to notify any broker-dealers holding
Exchange Notes, the Issuers shall prepare and furnish to each such
holder a reasonable number of copies of a prospectus supplemented or
amended so that, as thereafter delivered to purchasers of such
Exchange Notes during the Resale Period, such prospectus conforms in
all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and shall not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(v) use their reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of such Exchange Offer
Registration Statement or any post-effective amendment thereto as
soon as practicable;
(vi) use their reasonable best efforts to (A) register or
qualify the Exchange Notes under the securities laws or blue sky
laws of such jurisdictions as are contemplated by Section 2(a) no
later than the commencement of the Exchange Offer, (B) keep such
registrations or qualifications in effect and comply with such laws
so as to permit the continuance of offers, sales and dealings
therein in such jurisdictions until the expiration of the Resale
Period and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each broker-dealer holding Exchange
Notes to consummate the disposi-
9
<PAGE> 10
tion thereof in such jurisdictions; provided, however, that none of
the Issuers shall be required for any such purpose to (1) qualify as
a foreign corporation or limited liability company, as the case may
be, in any jurisdiction wherein it would not otherwise be required
to qualify but for the requirements of this Section 3(c)(vi), (2)
consent to general service of process in any such jurisdiction or
(3) make any changes to its certificate of incorporation or by-laws
(or other organizational document) or any agreement between it and
holders of its ownership interests;
(vii) use their reasonable best efforts to obtain the consent
or approval of each governmental agency or authority, whether
federal, state or local, which may be required to effect the
Exchange Offer Registration, the Exchange Offer and the offering and
sale of Exchange Notes by broker-dealers during the Resale Period;
(viii) provide a CUSIP number for all Exchange Notes, not
later than the applicable Effective Time;
(ix) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as
soon as practicable but no later than eighteen months after the
effective date of such Exchange Offer Registration Statement, an
earning statement of the Company and its subsidiaries complying with
Section 11(a) of the Securities Act (including, at the option of the
Company, Rule 158 thereunder).
(d) In connection with the Issuers' obligations with respect to the
Shelf Registration, if applicable, the Issuers shall, as soon as practicable (or
as otherwise specified):
(i) prepare and file with the Commission within the time
periods specified in Section 2(b), a Shelf Registration Statement on
any form which may be utilized by the Issuers and which shall
register all of the Registrable Securities for resale by the holders
thereof in accordance with such method or methods of disposition as
may be specified by such of the holders as, from time to time, may
be Electing Holders and use their reasonable best efforts to cause
such Shelf Registration Statement to become effective within the
time periods specified in Section 2(b);
(ii) not less than 30 calendar days prior to the Effective
Time of the Shelf Registration Statement, mail the Notice and
Questionnaire to the holders of Registrable Securities; no holder
shall be entitled to be named as a selling securityholder in the
Shelf Registration Statement as of the Effective Time, and no holder
shall be entitled to use the prospectus forming a part thereof for
resales of Registrable Securities at any time, unless such holder
has returned a
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<PAGE> 11
completed and signed Notice and Questionnaire to the Issuers by the
deadline for response set forth therein; provided, however, holders
of Registrable Securities shall have at least 28 calendar days from
the date on which the Notice and Questionnaire is first mailed to
such holders to return a completed and signed Notice and
Questionnaire to the Issuers;
(iii) after the Effective Time of the Shelf Registration
Statement, upon the request of any holder of Registrable Securities
that is not then an Electing Holder, promptly send a Notice and
Questionnaire to such holder; provided that the Issuers shall not be
required to take any action to name such holder as a selling
securityholder in the Shelf Registration Statement or to enable such
holder to use the prospectus forming a part thereof for resales of
Registrable Securities until such holder has returned a completed
and signed Notice and Questionnaire to the Issuers;
(iv) as soon as practicable prepare and file with the
Commission such amendments and supplements to such Shelf
Registration Statement and the prospectus included therein as may be
necessary to effect and maintain the effectiveness of such Shelf
Registration Statement for the period specified in Section 2(b)
hereof and as may be required by the applicable rules and
regulations of the Commission and the instructions applicable to the
form of such Shelf Registration Statement, and furnish to the
Electing Holders copies of any such supplement or amendment
simultaneously with or prior to its being used or filed with the
Commission;
(v) comply with the provisions of the Securities Act with
respect to the disposition of all of the Registrable Securities
covered by such Shelf Registration Statement in accordance with the
intended methods of disposition by the Electing Holders provided for
in such Shelf Registration Statement;
(vi) provide (A) the Electing Holders, (B) the underwriters
(which term, for purposes of this Exchange and Registration Rights
Agreement, shall include a person deemed to be an underwriter within
the meaning of Section 2(a)(11) of the Securities Act), if any,
thereof, (C) any sales or placement agent therefor, (D) counsel for
any such underwriter or agent and (E) not more than one counsel for
all the Electing Holders the opportunity to participate in the
preparation of such Shelf Registration Statement, each prospectus
included therein or filed with the Commission and each amendment or
supplement thereto;
(vii) for a reasonable period prior to the filing of such
Shelf Registration Statement, and throughout the period specified in
Section 2(b), make available at reasonable times at the Issuers'
principal place of business or such other reasonable place for
inspection by the persons referred to in Section 3(d)(vi) who
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<PAGE> 12
shall certify to the Issuers that they have a current intention to
sell the Registrable Securities pursuant to the Shelf Registration
such financial and other relevant information and books and records
of the Issuers, and cause the officers, employees, counsel and
independent certified public accountants of the Issuers to respond
to such inquiries, as shall be reasonably necessary, in the judgment
of the respective counsel referred to in such Section, to conduct a
reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that each such party shall be
required to maintain in confidence and not to disclose to any other
person any information or records reasonably designated by the
Issuers as being confidential, until such time as (A) such
information becomes a matter of public record (whether by virtue of
its inclusion in such registration statement or otherwise, except as
a result of a breach of this or any other obligation of
confidentiality to the Issuers), or (B) such person shall be
required so to disclose such information pursuant to a subpoena or
order of any court or other governmental agency or body having
jurisdiction over the matter (subject to the requirements of such
order, and only after such person shall have given the Issuers
prompt prior written notice of such requirement), or (C) such
information is required to be set forth in such Shelf Registration
Statement or the prospectus included therein or in an amendment to
such Shelf Registration Statement or an amendment or supplement to
such prospectus in order that such Shelf Registration Statement,
prospectus, amendment or supplement, as the case may be, complies
with applicable requirements of the federal securities laws and the
rules and regulations of the Commission and does not contain an
untrue statement of a material fact or omit to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing;
(viii) promptly notify each of the Electing Holders, any sales
or placement agent therefor and any underwriter thereof (which
notification may be made through any managing underwriter that is a
representative of such underwriter for such purpose) and confirm
such advice in writing, (A) when such Shelf Registration Statement
or the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and, with
respect to such Shelf Registration Statement or any post-effective
amendment, when the same has become effective, (B) of any comments
by the Commission and by the blue sky or securities commissioner or
regulator of any state with respect thereto, or any request by the
Commission for amendments or supplements to such Shelf Registration
Statement or prospectus or for additional information, (C) of the
issuance by the Commission of any stop order suspending the
effectiveness of such Shelf Registration Statement or the initiation
or, to the knowledge of the Issuers, threatening of any proceedings
for that
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<PAGE> 13
purpose, (D) if at any time the representations and warranties of
the Issuers contemplated by Section 3(d)(xvii) or Section 5 hereof
cease to be true and correct in all material respects, (E) of the
receipt by the Issuers of any notification with respect to the
suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or, to the knowledge of
the Issuers, threatening of any proceeding for such purpose, or (F)
if at any time when a prospectus is required to be delivered under
the Securities Act, that such Shelf Registration Statement,
prospectus, prospectus amendment or supplement or post-effective
amendment does not conform in all material respects to the
applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission
thereunder, or contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances then existing;
(ix) use their reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of such
registration statement or any post-effective amendment thereto as
soon as practicable;
(x) if requested by any managing underwriter or underwriters,
any placement or sales agent or any Electing Holder, promptly
incorporate in a prospectus supplement or post-effective amendment
such information as is required by the applicable rules and
regulations of the Commission, and as such managing underwriter or
underwriters, such agent or such Electing Holder specifies should be
included therein relating to the terms of the sale of such
Registrable Securities, including information (i) with respect to
the principal amount of Registrable Securities being sold by such
Electing Holder or agent or to any underwriters, the name and
description of such Electing Holder, agent or underwriter, the
offering price of such Registrable Securities, and any discount,
commission or other compensation payable in respect thereof and the
purchase price being paid therefor by such underwriters and (ii)
with respect to any other material terms of the offering of the
Registrable Securities to be sold by such Electing Holder or agent
or to such underwriters; and make all required filings of such
prospectus supplement or post-effective amendment upon notification
of the matters to be incorporated in such prospectus supplement or
post-effective amendment;
(xi) furnish to each Electing Holder, each placement or sales
agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(d)(vi) hereof an
executed copy (or, in the case of an Electing Holder, a conformed
copy) of such Shelf Registration Statement, each such amendment and
supplement thereto (in each case including all exhibits
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<PAGE> 14
thereto (in the case of an Electing Holder of Registrable
Securities, upon request) and documents incorporated by reference
therein) and such number of copies of such Shelf Registration
Statement (excluding exhibits thereto and documents incorporated by
reference therein unless specifically so requested by such Electing
Holder, agent or underwriter, as the case may be) and of the
prospectus included in such Shelf Registration Statement (including
each preliminary prospectus and any summary prospectus), in
conformity in all material respects with the applicable requirements
of the Securities Act and the Trust Indenture Act, and the rules and
regulations of the Commission thereunder, and such other documents,
as such Electing Holder, agent, if any, and underwriter, if any, may
reasonably request in order to facilitate the offering and
disposition of the Registrable Securities owned by such Electing
Holder, offered or sold by such agent or underwritten by such
underwriter and to permit such Electing Holder, agent and
underwriter to satisfy the prospectus delivery requirements of the
Securities Act; and the Issuers hereby consent to the use of such
prospectus (including such preliminary and summary prospectus) and
any amendment or supplement thereto by each such Electing Holder and
by any such agent and underwriter, in each case in the form most
recently provided to such person by the Issuers, in connection with
the offering and sale of the Registrable Securities covered by the
prospectus (including such preliminary and summary prospectus) or
any supplement or amendment thereto;
(xii) use their reasonable best efforts to (A) register or
qualify the Registrable Securities to be included in such Shelf
Registration Statement under such securities laws or blue sky laws
of such jurisdictions as any Electing Holder and each placement or
sales agent, if any, therefor and underwriter, if any, thereof shall
reasonably request, (B) keep such registrations or qualifications in
effect and comply with such laws so as to permit the continuance of
offers, sales and dealings therein in such jurisdictions during the
period the Shelf Registration is required to remain effective under
Section 2(b) above and for so long as may be necessary to enable any
such Electing Holder, agent or underwriter to complete its
distribution of Notes pursuant to such Shelf Registration Statement
and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each such Electing Holder, agent,
if any, and underwriter, if any, to consummate the disposition in
such jurisdictions of such Registrable Securities; provided,
however, that none of the Issuers shall be required for any such
purpose to (1) qualify as a foreign corporation or limited liability
company, as the case may be, in any jurisdiction wherein it would
not otherwise be required to qualify but for the requirements of
this Section 3(d)(xii), (2) consent to general service of process in
any such jurisdiction or (3) make any changes to its certificate of
incorporation or by-laws (or other or-
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<PAGE> 15
ganizational document) or any agreement between it and holders of
its ownership interests;
(xiii) use their reasonable best efforts to obtain the consent
or approval of each governmental agency or authority, whether
federal, state or local, which may be required to effect the Shelf
Registration or the offering or sale in connection therewith or to
enable the selling holder or holders to offer, or to consummate the
disposition of, their Registrable Securities;
(xiv) unless any Registrable Securities shall be in book-entry
only form, cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be
sold, which certificates, if so required by any securities exchange
upon which any Registrable Securities are listed, shall be penned,
lithographed or engraved, or produced by any combination of such
methods, on steel engraved borders, and which certificates shall not
bear any restrictive legends; and, in the case of an underwritten
offering, enable such Registrable Securities to be in such
denominations and registered in such names as the managing
underwriters may request at least two business days prior to any
sale of the Registrable Securities;
(xv) provide a CUSIP number for all Registrable Securities,
not later than the applicable Effective Time;
(xvi) enter into one or more underwriting agreements,
engagement letters, agency agreements, "best efforts" underwriting
agreements or similar agreements, as appropriate, including
customary provisions relating to indemnification and contribution,
and take such other actions in connection therewith as any Electing
Holders of at least 20% in aggregate principal amount of the
Registrable Securities at the time outstanding shall request in
order to expedite or facilitate the disposition of such Registrable
Securities;
(xvii) whether or not an agreement of the type referred to in
Section 3(d)(xvi) hereof is entered into, and whether or not any
portion of the offering contemplated by the Shelf Registration is an
underwritten offering or is made through a placement or sales agent
or any other entity, (A) make such representations and warranties to
the Electing Holders and the placement or sales agent, if any,
therefor and the underwriters, if any, thereof in form, substance
and scope as are customarily made in connection with an offering of
debt securities pursuant to any appropriate agreement or to a
registration statement filed on the form applicable to the Shelf
Registration; (B) obtain an opinion of counsel to the Issuers in
customary form, subject to customary limitations, assumptions and
exclusions, and covering such matters, of the type customarily
cov-
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<PAGE> 16
ered by such an opinion, as the managing underwriters, if any, or as
any Electing Holders of at least 20% in aggregate principal amount
of the Registrable Securities at the time outstanding may reasonably
request, addressed to such Electing Holder or Electing Holders and
the placement or sales agent, if any, therefor and the underwriters,
if any, thereof and dated the date of the Effective Time of such
Shelf Registration Statement (and if such Shelf Registration
Statement contemplates an underwritten offering of a part or all of
the Registrable Securities, dated the date of the closing under the
underwriting agreement relating thereto) (it being agreed that the
matters to be covered by such opinion shall include the matters set
forth in paragraph (b) of Section 7 of the Purchase Agreement to the
extent applicable to an offering of this type); (C) obtain a "cold
comfort" letter or letters from the independent certified public
accountants of the Issuers addressed to the selling Electing
Holders, the placement or sales agent, if any, therefor or the
underwriters, if any, thereof, dated (i) the effective date of such
Shelf Registration Statement and (ii) the effective date of any
prospectus supplement to the prospectus included in such Shelf
Registration Statement or post-effective amendment to such Shelf
Registration Statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the
latest such statements included in such prospectus (and, if such
Shelf Registration Statement contemplates an underwritten offering
pursuant to any prospectus supplement to the prospectus included in
such Shelf Registration Statement or post-effective amendment to
such Shelf Registration Statement which includes unaudited or
audited financial statements as of a date or for a period subsequent
to that of the latest such statements included in such prospectus,
dated the date of the closing under the underwriting agreement
relating thereto), such letter or letters to be in customary form
and covering such matters of the type customarily covered by letters
of such type; (D) deliver such documents and certificates, including
officers' certificates, as may be reasonably requested by any
Electing Holders of at least 20% in aggregate principal amount of
the Registrable Securities at the time outstanding or the placement
or sales agent, if any, therefor and the managing underwriters, if
any, thereof to evidence the accuracy of the representations and
warranties made pursuant to clause (A) above or those contained in
Section 5(a) hereof and the compliance with or satisfaction of any
agreements or conditions contained in the underwriting agreement or
other similar agreement entered into by the Issuers pursuant to
Section 3(d)(xvi); and (E) undertake such obligations relating to
expense reimbursement, indemnification and contribution as are
provided in Section 6 hereof;
(xviii) notify in writing each holder of Registrable
Securities of any proposal by the Issuers to amend or waive any
provision of this Exchange and Registration Rights Agreement
pursuant to Section 9(h) hereof and of any
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<PAGE> 17
amendment or waiver effected pursuant thereto, each of which notices
shall contain the substance of the amendment or waiver proposed or
effected, as the case may be;
(xix) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or
participate as a member of an underwriting syndicate or selling
group or "assist in the distribution" (within the meaning of the
Conduct Rules (the "Conduct Rules") of the National Association of
Securities Dealers, Inc. ("NASD") or any successor thereto, as
amended from time to time) thereof, whether as a holder of such
Registrable Securities or as an underwriter, a placement or sales
agent or a broker or dealer in respect thereof, or otherwise, assist
such broker-dealer in complying with the requirements of such
Conduct Rules, including by (A) if such Conduct Rules shall so
require, engaging a "qualified independent underwriter" (as defined
in such Conduct Rules) to participate in the preparation of the
Shelf Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by such
Shelf Registration Statement is an underwritten offering or is made
through a placement or sales agent, to recommend the yield of such
Registrable Securities, (B) indemnifying any such qualified
independent underwriter to the extent of the indemnification of
underwriters provided in Section 6 hereof (or to such other
customary extent as may be requested by such underwriter), and (C)
providing such information to such broker-dealer as may be required
in order for such broker-dealer to comply with the requirements of
the Conduct Rules; and
(xx) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as
soon as practicable but in any event not later than eighteen months
after the effective date of such Shelf Registration Statement, an
earning statement of the Company and its subsidiaries complying with
Section 11(a) of the Securities Act (including, at the option of the
Company, Rule 158 thereunder).
(e) In the event that the Issuers would be required, pursuant to
Section 3(d)(viii)(F) above, to notify the Electing Holders, the placement or
sales agent, if any, therefor and the managing underwriters, if any, thereof,
the Issuers shall prepare and furnish to each of the Electing Holders, to each
placement or sales agent, if any, and to each such underwriter, if any, a
reasonable number of copies of a prospectus supplemented or amended so that, as
thereafter delivered to purchasers of Registrable Securities, such prospectus
conforms in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act, and the rules and regulations of the
Commission thereunder, and shall not contain an untrue statement of a material
fact or omit to state a material fact required to be stated
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<PAGE> 18
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing. Each Electing Holder agrees that upon receipt
of any notice from the Issuers pursuant to Section 3(d)(viii)(F) hereof, such
Electing Holder shall forthwith discontinue the disposition of Registrable
Securities pursuant to the Shelf Registration Statement applicable to such
Registrable Securities until such Electing Holder shall have received copies of
such amended or supplemented prospectus, and if so directed by the Issuers, such
Electing Holder shall deliver to the Issuers (at the Issuers' expense) all
copies, other than permanent file copies, then in such Electing Holder's
possession of the prospectus covering such Registrable Securities at the time of
receipt of such notice.
(f) In the event of a Shelf Registration, in addition to the
information required to be provided by each Electing Holder in its Notice and
Questionnaire, the Issuers may require such Electing Holder to furnish to the
Issuers such additional information regarding such Electing Holder and such
Electing Holder's intended method of distribution of Registrable Securities as
may be required in order to comply with the Securities Act. Each such Electing
Holder agrees to notify the Issuers as promptly as practicable of any inaccuracy
or change in information previously furnished by such Electing Holder to the
Issuers or of the occurrence of any event in either case as a result of which
any prospectus relating to such Shelf Registration contains or would contain an
untrue statement of a material fact regarding such Electing Holder or such
Electing Holder's intended method of disposition of such Registrable Securities
or omits to state any material fact regarding such Electing Holder or such
Electing Holder's intended method of disposition of such Registrable Securities
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and promptly to furnish
to the Issuers any additional information required to correct and update any
previously furnished information or required so that such prospectus shall not
contain, with respect to such Electing Holder or the disposition of such
Registrable Securities, an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
4. Registration Expenses.
The Issuers agree, subject to the last sentence of this Section, to
bear and to pay or cause to be paid promptly all expenses incident to the
Issuers' performance of or compliance with this Exchange and Registration Rights
Agreement, including (a) all Commission and any NASD registration, filing and
review fees and expenses including fees and disbursements of counsel for the
placement or sales agent or underwriters in connection with such registration,
filing and review, (b) all fees and expenses in connection with the
qualification of the Notes for offering and sale under the securities laws and
blue sky laws referred to in Section 3(d)(xii) hereof and determination of their
eligibility for investment under the laws of such jurisdictions as any managing
underwriters or the Electing Holders may designate, including any fees and
disbursements of counsel for the Electing Holders or underwriters in
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<PAGE> 19
connection with such qualification and determination, (c) all expenses relating
to the preparation, printing, production, distribution and reproduction of each
registration statement required to be filed hereunder, each prospectus included
therein or prepared for distribution pursuant hereto, each amendment or
supplement to the foregoing, the expenses of preparing the Notes for delivery
and the expenses of printing or producing any underwriting agreements,
agreements among underwriters, selling agreements and blue sky or legal
investment memoranda and all other documents in connection with the offering,
sale or delivery of Notes to be disposed of (including certificates representing
the Notes), (d) messenger, telephone and delivery expenses relating to the
offering, sale or delivery of Notes and the preparation of documents referred in
clause (c) above, (e) fees and expenses of the Trustee under the Indenture, any
agent of the Trustee and any reasonable fees and expenses for counsel for the
Trustee and of any collateral agent or custodian, (f) internal expenses
(including all salaries and expenses of the Issuers' officers and employees
performing legal or accounting duties), (g) fees, disbursements and expenses of
counsel and independent certified public accountants of the Issuers (including
the expenses of any opinions or "cold comfort" letters required by or incident
to such performance and compliance), (h) fees, disbursements and expenses of any
"qualified independent underwriter" engaged pursuant to Section 3(d)(xix)
hereof, (i) reasonable fees, disbursements and expenses of one counsel for the
Electing Holders retained in connection with a Shelf Registration, as selected
by the Electing Holders of at least a majority in aggregate principal amount of
the Registrable Securities held by Electing Holders (which counsel shall be
reasonably satisfactory to the Issuers), (j) any fees charged by securities
rating services for rating the Notes, and (k) reasonable fees, expenses and
disbursements of any other persons, including special experts, retained by the
Issuers in connection with such registration (collectively, the "Registration
Expenses"). To the extent that any Registration Expenses are incurred, assumed
or paid by any holder of Registrable Securities or any placement or sales agent
therefor or underwriter thereof, the Issuers shall reimburse such person for the
full amount of the Registration Expenses so incurred, assumed or paid promptly
after receipt of a request therefor. Notwithstanding the foregoing, the holders
of the Registrable Securities being registered shall pay all agency fees and
commissions and underwriting discounts and commissions attributable to the sale
of such Registrable Securities and the fees and disbursements of any counsel or
other advisors or experts retained by such holders (severally or jointly), other
than the counsel and experts specifically referred to above.
5. Representations, Warranties and Covenants.
Except with respect to clauses (a) and (b) below, the Issuers
represent and warrant to, and agree with, each Purchaser and each of the holders
from time to time of Registrable Securities the information set forth in this
Section 5.
With respect to clauses (a) and (b) below, the Issuers covenant
that:
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(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(d) or Section 3(c) hereof and any
further amendments or supplements to any such registration statement or
prospectus, when it becomes effective or is filed with the Commission, as the
case may be, and, in the case of an underwritten offering of Registrable
Securities, at the time of the closing under the underwriting agreement relating
thereto, will conform in all material respects to the requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and at all times subsequent to
the Effective Time when a prospectus would be required to be delivered under the
Securities Act, other than from (i) such time as a notice has been given to
holders of Registrable Securities pursuant to Section 3(d)(viii)(F) or Section
3(c)(iii)(F) hereof until (ii) such time as the Issuers furnishes an amended or
supplemented prospectus pursuant to Section 3(e) or Section 3(c)(iv) hereof,
each such registration statement, and each prospectus (including any summary
prospectus) contained therein or furnished pursuant to Section 3(d) or Section
3(c) hereof, as then amended or supplemented, will conform in all material
respects to the requirements of the Securities Act and the Trust Indenture Act
and the rules and regulations of the Commission thereunder and will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing; provided, however, that this
covenant shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Issuers by a
holder of Registrable Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus
referred to in Section 5(a) hereof, when they become or became effective or are
or were filed with the Commission, as the case may be, will conform or conformed
in all material respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and none of such documents will contain or
contained an untrue statement of a material fact or will omit or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this covenant shall
not apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Issuers by a holder of Registrable
Securities expressly for use therein.
(c) The compliance by the Issuers with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a material
breach of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement, lease, license, franchise
agreement, permit or other material agreement or instrument to which either of
the Issuers or any of their subsidiaries is a party or by which either of the
Issuers or any of their subsidiaries is bound or to which any of the property or
assets of the Issuers or
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<PAGE> 21
any of their subsidiaries is subject, nor will such action result in any
violation of the provisions of the certificate of incorporation, charter, or the
by-laws (or other organizational document) of the Issuers or any statute or any
order, rule or regulation of any court or governmental agency or body, including
without limitation, the Federal Communications Act of 1934, as amended, the
Cable Communications Policy Act of 1984, the Cable Television Consumer
Protection and Competition Act of 1992 and the Telecommunications Reform Act of
1996 (collectively, the "Cable Acts") or any order, rule or regulation of the
Federal Communications Commission (the "FCC") having jurisdiction over the
Issuers or any of their subsidiaries or any of their properties, except for any
such violation which would not materially impair the Issuers' ability to comply
herewith; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required, including, without limitation, under the Cable Acts or any order, rule
or regulation of the FCC, for the consummation by the Issuers of the
transactions contemplated by this Exchange and Registration Rights Agreement,
except the registration under the Securities Act of the Notes, qualification of
the Indenture under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under State
Notes or blue sky laws in connection with the offering and distribution of the
Notes.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Issuers.
6. Indemnification.
(a) Indemnification by the Issuers and the Guarantor. The Issuers
and the Guarantor (i) will indemnify and hold harmless each of the holders of
Registrable Securities included in an Exchange Offer Registration Statement,
each of the Electing Holders of Registrable Securities included in a Shelf
Registration Statement and each person who participates as a placement or sales
agent or as an underwriter in any offering or sale of such Registrable
Securities against any losses, claims, damages or liabilities, joint or several,
to which such holder, agent or underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Exchange Offer Registration Statement or Shelf Registration Statement, as the
case may be, under which such Registrable Securities were registered under the
Securities Act, or any preliminary, final or summary prospectus contained
therein or furnished by the Issuers to any such holder, Electing Holder, agent
or underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (ii) will reimburse such holder, such Electing Holder, such
agent and such underwriter for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such action or claim
as such expenses are incurred; provided, however, that none of the Issuers shall
be liable to any such persons in any such case to the extent that any
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<PAGE> 22
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, or preliminary, final or summary prospectus, or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Issuers by such persons expressly for use therein.
(b) Indemnification by the Holders and any Agents and Underwriters.
The Issuers may require, as a condition to including any Registrable Securities
in any registration statement filed pursuant to Section 2(b) hereof and to
entering into any underwriting agreement or similar agreement with respect
thereto, that the Issuers shall have received an undertaking reasonably
satisfactory to them from the Electing Holder of such Registrable Securities
included in a Shelf Registration Statement and from each underwriter or agent
named in any such underwriting agreement or similar agreement, severally and not
jointly, to (i) indemnify and hold harmless the Issuers, the Guarantor and all
other holders of Registrable Securities, against any losses, claims, damages or
liabilities to which the Issuers, the Guarantor or such other holders of
Registrable Securities may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such registration statement, or
any preliminary, final or summary prospectus contained therein or furnished by
the Issuers to any such Electing Holder, agent or underwriter, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Issuers or the Guarantor by
such Electing Holder or underwriter expressly for use therein, and (ii)
reimburse the Issuers and the Guarantor for any legal or other expenses
reasonably incurred by the Issuers and the Guarantor in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that no such Electing Holder shall be required to
undertake liability to any person under this Section 6(b) for any amounts in
excess of the dollar amount of the proceeds to be received by such Electing
Holder from the sale of such Electing Holder's Registrable Securities pursuant
to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party otherwise than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemni-
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<PAGE> 23
fying party shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, such indemnifying party shall not be liable to such indemnified
party for any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 6(d) were determined by
pro rata allocation (even if the holders or any agents or underwriters or all of
them were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 6(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no holder shall be required to contribute any
amount in excess of the amount by which the dollar amount of the proceeds
received by such holder from the sale of any Registrable Securities (after
deducting any fees, discounts and commissions applicable thereto) exceeds
23
<PAGE> 24
the amount of any damages which such holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission, and no underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' and any underwriters' obligations in this
Section 6(d) to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may be,
by them and not joint.
(e) The obligations of the Issuers and the Guarantor under this
Section 6 shall be in addition to any liability which the Issuers and the
Guarantor may otherwise have and shall extend, upon the same terms and
conditions, to each officer, director and partner of each holder, agent and
underwriter and each person, if any, who controls any holder, agent or
underwriter within the meaning of the Securities Act; and the obligations of the
holders and any agents or underwriters contemplated by this Section 6 shall be
in addition to any liability which the respective holder, agent or underwriter
may otherwise have and shall extend, upon the same terms and conditions, to each
officer (including any officer who signed any registration statement), director,
employee, representative or agent of the Issuers and the Guarantor and to each
person, if any, who controls the Issuers or the Guarantor within the meaning of
the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities
covered by the Shelf Registration are to be sold pursuant to an underwritten
offering, the managing underwriter or underwriters thereof shall be designated
by Electing Holders holding at least a majority in aggregate principal amount of
the Registrable Securities to be included in such offering, provided that such
designated managing underwriter or underwriters is or are reasonably acceptable
to the Issuers.
(b) Participation by Holders. Each holder of Registrable Securities
hereby agrees with each other such holder that no such holder may participate in
any underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
24
<PAGE> 25
8. Rule 144.
Each of the Issuers covenants to the holders of Registrable
Securities that to the extent it shall be required to do so under the Exchange
Act, it shall timely file the reports required to be filed by it under the
Exchange Act or the Securities Act (including the reports under Section 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted
by the Commission under the Securities Act) and the rules and regulations
adopted by the Commission thereunder, and shall take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitations of the
exemption provided by Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar or successor rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities in connection with that holder's sale pursuant to Rule
144, the Issuers shall deliver to such holder a written statement as to whether
it has complied with such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Issuers represent, warrant,
covenant and agree that they have not granted, and shall not grant, registration
rights with respect to Registrable Securities or any other Notes which would be
inconsistent with the terms contained in this Exchange and Registration Rights
Agreement.
(b) Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if the Issuers fail to perform any of their
obligations hereunder and that the Purchasers and the holders from time to time
of the Registrable Securities may be irreparably harmed by any such failure, and
accordingly agree that the Purchasers and such holders, in addition to any other
remedy to which they may be entitled at law or in equity, shall be entitled to
compel specific performance of the obligations of the Issuers under this
Exchange and Registration Rights Agreement in accordance with the terms and
conditions of this Exchange and Registration Rights Agreement, in any court of
the United States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and
other communications hereunder shall be in writing and shall be deemed to have
been duly given (i) when delivered by hand, if delivered personally or by
courier, (ii) when sent by facsimile (with written confirmation of receipt),
provided that a copy is mailed by registered or certified mail, return receipt
requested or (iii) three days after being deposited in the mail (registered or
certified mail, postage prepaid, return receipt requested) as follows: If to the
Issuers, c/o Charter Communications, Inc., 12444 Powerscourt Drive, Suite 100,
St. Louis, Missouri, 63131, Attention: Secretary, and if to a holder, to the
address of such holder set forth in the security register or other records of
the Issuers, or to such other address as the Issuers or any
25
<PAGE> 26
such holder may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this
Exchange and Registration Rights Agreement shall be binding upon, shall inure to
the benefit of and shall be enforceable by the parties hereto and the holders
from time to time of the Registrable Securities and the respective successors
and assigns of the parties hereto and such holders. In the event that any
transferee of any holder of Registrable Securities shall acquire Registrable
Securities, in any manner, whether by gift, bequest, purchase, operation of law
or otherwise, such transferee shall, without any further writing or action of
any kind, be deemed a beneficiary hereof for all purposes and such Registrable
Securities shall be held subject to all of the terms of this Exchange and
Registration Rights Agreement, and by taking and holding such Registrable
Securities such transferee shall be entitled to receive the benefits of, and be
conclusively deemed to have agreed to be bound by all of the applicable terms
and provisions of this Exchange and Registration Rights Agreement. If the
Issuers shall so request, any such successor, assign or transferee shall agree
in writing to acquire and hold the Registrable Securities subject to all of the
applicable terms hereof.
(e) Survival. The respective indemnities, agreements,
representations, warranties and each other provision set forth in this Exchange
and Registration Rights Agreement or made pursuant hereto shall remain in full
force and effect regardless of any investigation (or statement as to the results
thereof) made by or on behalf of any holder of Registrable Securities, any
director, officer or partner of such holder, any agent or underwriter or any
director, officer or partner thereof, or any controlling person of any of the
foregoing, and shall survive delivery of and payment for the Registrable
Securities pursuant to the Purchase Agreement and the transfer and registration
of Registrable Securities by such holder and the consummation of an Exchange
Offer.
(f) Governing Law. This Exchange and Registration Rights Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without giving effect to any provisions relating to conflicts of law.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted for
convenience only, do not constitute a part of this Exchange and Registration
Rights Agreement and shall not affect in any way the meaning or interpretation
of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration
Rights Agreement and the other writings referred to herein (including the
Indenture and the form of Notes) or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with respect to its
subject matter. This Exchange and Registration Rights Agreement supersedes all
prior agreements and understandings between the parties
26
<PAGE> 27
with respect to its subject matter. This Exchange and Registration Rights
Agreement may be amended and the observance of any term of this Exchange and
Registration Rights Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a written instrument
duly executed by the Issuers and the holders of at least a majority in aggregate
principal amount of the Registrable Securities at the time outstanding. Each
holder of any Registrable Securities at the time or thereafter outstanding shall
be bound by any amendment or waiver effected pursuant to this Section 9(h),
whether or not any notice, writing or marking indicating such amendment or
waiver appears on such Registrable Securities or is delivered to such holder.
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and a complete list of the names and addresses of all the holders of Registrable
Securities shall be made available for inspection and copying, upon reasonable
prior notice, on any business day during normal business hours by any holder of
Registrable Securities for proper purposes only (which shall include any purpose
related to the rights of the holders of Registrable Securities under the Notes,
the Indenture and this Agreement) at the offices of the Issuers at the address
thereof set forth in Section 9(c) above and at the office of the Trustee under
the Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
27
<PAGE> 28
If the foregoing is in accordance with your understanding, please
sign and return to us counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Purchasers, this letter and such acceptance hereof
shall constitute a binding agreement between each of the Purchasers and the
Issuers. It is understood that your acceptance of this letter on behalf of each
of the Purchasers is pursuant to the authority set forth in a form of Agreement
among Purchasers, the form of which shall be submitted to the Issuers for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
CHARTER COMMUNICATIONS
HOLDINGS, LLC
By: /s/ Eloise Engman
--------------------------------
Name: Eloise Engman
Title: Vice President
CHARTER COMMUNICATIONS HOLDINGS
CAPITAL CORPORATION
By: /s/ Eloise Engman
--------------------------------
Name: Eloise Engman
Title: Vice President
MARCUS CABLE HOLDINGS, LLC
By: MARCUS CABLE PROPERTIES, L.L.C.,
as Manager
By: MARCUS CABLE PROPERTIES,
INC., as Manager
By: /s/ Marcy Lifton
--------------------------------
Name: Marcy Lifton
Title: Senior Vice President and
Assistant Secretary
28
<PAGE> 29
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
SALOMON SMITH BARNEY INC.
CREDIT LYONNAIS SECURITIES (USA), INC.
FIRST UNION CAPITAL MARKETS CORP.
PRUDENTIAL SECURITIES INCORPORATED
TD SECURITIES (USA) INC.
CIBC OPPENHEIMER CORP.
NESBITT BURNS SECURITIES INC.
By: GOLDMAN, SACHS & CO.
By: /s/ Goldman, Sachs & Co
--------------------------------
Name:
Title:
29
<PAGE> 30
Exhibit A
CHARTER COMMUNICATIONS HOLDINGS, LLC
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
MARCUS CABLE HOLDINGS, LLC
INSTRUCTION TO DTC PARTICIPANTS
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE](a)
The Depository Trust Issuers ("DTC") has identified you as a DTC Participant
through which beneficial interests in the Charter Communications Holdings, LLC
(the "Company") and Charter Communications Holdings Capital Corporation
("Charter Capital" and, together with the Company, the "Issuers") 8.25% Senior
Notes due 2007 (the "Notes"), guaranteed by Marcus Cable Holdings, LLC are held.
The Issuers are in the process of registering the Notes under the Securities Act
of 1933, as amended, for resale by the beneficial owners thereof. In order to
have their Notes included in the registration statement, beneficial owners must
complete and return the enclosed Notice of Registration Statement and Selling
Securityholder Questionnaire.
It is important that beneficial owners of the Notes receive a copy of the
enclosed materials as soon as possible as their rights to have the Notes
included in the registration statement depend upon their returning the Notice
and Questionnaire by [Deadline For Response]. Please forward a copy of the
enclosed documents to each beneficial owner that holds interests in the Notes
through you. If you require more copies of the enclosed materials or have any
questions pertaining to this matter, please contact the Issuers c/o Charter
Communications, Inc., 12444 Powerscourt Drive, Suite 100, St. Louis, Missouri,
63131, Attention: Secretary.
- ----------
(a) Not less than 28 calendar days from date of mailing.
A-1
<PAGE> 31
CHARTER COMMUNICATIONS HOLDINGS, LLC
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
MARCUS CABLE HOLDINGS, LLC
Notice of Registration Statement
and
Selling Securityholder Questionnaire
(Date)
Reference is hereby made to the Exchange and Registration Rights Agreement (the
"Exchange and Registration Rights Agreement") between Charter Communications
Holdings, LLC and Charter Communications Holdings Capital Corporation (together,
the "Issuers"), Marcus Cable Holdings, LLC (the "Guarantor") and the Purchasers
named therein. Pursuant to the Exchange and Registration Rights Agreement, the
Issuers have filed with the United States Securities and Exchange Commission
(the "Commission") a registration statement on Form [__] (the "Shelf
Registration Statement") for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the "Securities Act"), of the Issuers' 8.25%
Senior Notes due 2007 (the "Notes"), guaranteed by the Guarantor. A copy of the
Exchange and Registration Rights Agreement is attached hereto. All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Exchange and Registration Rights Agreement.
Each beneficial owner of Registrable Securities is entitled to have the
Registrable Securities beneficially owned by it included in the Shelf
Registration Statement. In order to have Registrable Securities included in the
Shelf Registration Statement, this Notice of Registration Statement and Selling
Securityholder Questionnaire ("Notice and Questionnaire") must be completed,
executed and delivered to the Issuers' counsel at the address set forth herein
for receipt ON OR BEFORE [Deadline for Response]. Beneficial owners of
Registrable Securities who do not complete, execute and return this Notice and
Questionnaire by such date (i) will not be named as selling securityholders in
the Shelf Registration Statement and (ii) may not use the Prospectus forming a
part thereof for resales of Registrable Securities.
Certain legal consequences arise from being named as a selling securityholder in
the Shelf Registration Statement and related prospectus. Accordingly, holders
and beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Shelf Registration Statement and
related prospectus.
A-2
<PAGE> 32
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable Securities
hereby elects to include in the Shelf Registration Statement the Registrable
Securities beneficially owned by it and listed below in Item (3). The
undersigned, by signing and returning this Notice and Questionnaire, agrees to
be bound with respect to such Registrable Securities by the terms and conditions
of this Notice and Questionnaire and the Exchange and Registration Rights
Agreement, including, without limitation, Section 6 of the Exchange and
Registration Rights Agreement, as if the undersigned Selling Securityholder were
an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the Issuers
and the Trustee the Notice of Transfer set forth in Exhibit B to the Exchange
and Registration Rights Agreement.
The Selling Securityholder hereby provides the following information to the
Issuers and represents and warrants that such information is accurate and
complete:
A-3
<PAGE> 33
QUESTIONNAIRE
(1)(a) Full Legal Name of Selling Securityholder:
(b) Full Legal Name of Registered Holder (if not the same as in (a)
above) of Registrable Securities Listed in Item (3) below:
(c) Full Legal Name of DTC Participant (if applicable and if not the
same as (b) above) Through Which Registrable Securities Listed in
Item (3) below are Held:
(2) Address for Notices to Selling Securityholder:
_____________________________________
_____________________________________
_____________________________________
Telephone: _____________________________________
Fax: _____________________________________
Contact Person: _____________________________________
(3) Beneficial Ownership of Notes:
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Notes.
(a) Principal amount of Registrable Securities beneficially owned:
_________ CUSIP No(s). of such Registrable Securities:
______________________________________________________________
(b) Principal amount of Notes other than Registrable Securities
beneficially owned: __________________________________________
CUSIP No(s). of such other Notes:
______________________________________________________________
(c) Principal amount of Registrable Securities which the undersigned
wishes to be included in the Shelf Registration Statement: CUSIP
No(s). of such Registrable Securities to be included in the Shelf
Registration Statement:
A-4
<PAGE> 34
(4) Beneficial Ownership of Other Securities of the Issuers and the Guarantor:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other
securities of the Issuers or the Guarantor other than the Notes as
Guaranteed listed above in Item (3).
State any exceptions here:
(5) Relationships with the Issuers and the Guarantor:
Except as set forth below, neither the Selling Securityholder nor any of
its affiliates, officers, directors or principal equity holders (5% or
more) has held any position or office or has had any other material
relationship with the Issuers or the Guarantor (or their respective
predecessors or affiliates) during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder intends
to distribute the Registrable Securities listed above in Item (3) only as
follows (if at all): Such Registrable Securities may be sold from time to
time directly by the undersigned Selling Securityholder or, alternatively,
through underwriters, broker-dealers or agents. Such Registrable
Securities may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined
at the time of sale, or at negotiated prices. Such sales may be effected
in transactions (which may involve crosses or block transactions) (i) on
any national securities exchange or quotation service on which the
Registered Notes may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such
exchanges or services or in the over-the-counter market, or (iv) through
the writing of options. In connection with sales of the Registrable
Securities or otherwise, the Selling Securityholder may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales
of the Registrable Securities in the course of hedging the positions they
assume. The Selling Securityholder may also sell Registrable Securities
short and deliver Registrable Securities to close out such short
positions, or loan or pledge Registrable Securities to broker-dealers that
in turn may sell such Notes.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it understands
its obligation to comply, and agrees that it will comply, with the provisions of
the Exchange Act and the rules and regulations thereunder, particularly
Regulation M.
A-5
<PAGE> 35
In the event that the Selling Securityholder transfers all or any portion of the
Registrable Securities listed in Item (3) above after the date on which such
information is provided to the Issuers, the Selling Securityholder agrees to
notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Exchange and
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure of the
information contained herein in its answers to Items (1) through (6) above and
the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling Securityholder understands that such information
will be relied upon by the Issuers in connection with the preparation of the
Shelf Registration Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under Section 3(d) of
the Exchange and Registration Rights Agreement to provide such information as
may be required by law for inclusion in the Shelf Registration Statement, the
Selling Securityholder agrees to promptly notify the Issuers of any inaccuracies
or changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Exchange and Registration
Rights Agreement shall be made in writing, by hand-delivery, first-class mail,
or air courier guaranteeing overnight delivery as follows:
(i) To the Issuers:
_________________________
_________________________
_________________________
_________________________
_________________________
(ii) With a copy to:
_________________________
_________________________
_________________________
_________________________
_________________________
A-6
<PAGE> 36
Once this Notice and Questionnaire is executed by the Selling Securityholder and
received by the Issuers' counsel, the terms of this Notice and Questionnaire,
and the representations and warranties contained herein, shall be binding on,
shall inure to the benefit of and shall be enforceable by the respective
successors, heirs, personal representatives, and assigns of the Issuers and the
Selling Securityholder (with respect to the Registrable Securities beneficially
owned by such Selling Securityholder and listed in Item (3) above. This
Agreement shall be governed in all respects by the laws of the State of New York
without giving effect to any provisions relating to conflicts of laws.
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.
Dated: ___________________________
______________________________________________________________
Selling Securityholder
(Print/type full legal name of beneficial owner of Registrable
Securities)
By: __________________________________________________________
Name:
Title:
A-7
<PAGE> 37
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE ISSUERS' COUNSEL AT:
_________________________
_________________________
_________________________
_________________________
_________________________
A-8
<PAGE> 38
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
[Name of Trustee]
Charter Communications Holdings, LLC
Charter Communications Holdings Capital
Corporation
Marcus Cable Holdings, LLC
c/o [Name of Trustee]
[Address of Trustee]
Attention: Trust Officer
Re: Charter Communications Holdings, LLC
and Charter Communications Holdings Capital Corporation
(together, the "Issuers") 8.25% Senior Notes due 2007
guaranteed by Marcus Cable Holdings, LLC
Dear Sirs:
Please be advised that ______________ has transferred $__________ aggregate
principal amount of the above-referenced Notes pursuant to an effective
Registration Statement on Form [___] (File No. 333-____) filed by the Issuers.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Notes is named as a "Selling Holder" in the prospectus
dated [date] or in supplements thereto, and that the aggregate principal amount
of the Notes transferred are the Notes listed in such prospectus opposite such
owner's name.
Dated:
Very truly yours,
__________________________________
(Name)
By: ______________________________
(Authorized Signature)
B-1
<PAGE> 1
Exhibit 4.2(a)
CHARTER COMMUNICATIONS HOLDINGS, LLC
AND
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
as Issuers
AND
MARCUS CABLE HOLDINGS, LLC
as Guarantor
$1,500,000,000
8.625% SENIOR NOTES DUE 2009
------------------
INDENTURE
Dated as of March 17, 1999
HARRIS TRUST AND SAVINGS BANK,
Trustee
------------------
<PAGE> 2
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310(a)(1)....................................... 7.10
(a)(2)....................................... 7.10
(a)(3)....................................... N.A.
(a)(4)....................................... N.A.
(a)(5)....................................... 7.10
(b).......................................... 7.10
(c).......................................... N.A.
311(a).......................................... 7.11
(b).......................................... 7.11
(c).......................................... N.A.
312(a).......................................... 2.05
(b).......................................... 12.03
(c).......................................... 12.03
313(a).......................................... 7.06
(b)(1)....................................... 12.03
(b)(2)....................................... 7.07;12.03
(c).......................................... 7.06;12.02
(d).......................................... 7.06
314(a).......................................... 4.03;12.02
(b).......................................... 12.02
(c)(1)....................................... 12.04
(c)(2)....................................... 12.04
(c)(3)....................................... N.A.
(d).......................................... N.A.
(e).......................................... 12.05
(f).......................................... N.A.
315(a).......................................... 7.01
(b).......................................... 7.05;12.02
(c).......................................... 7.01
(d).......................................... 7.01
(e).......................................... 6.11
316(a) (last sentence).......................... 2.09
(a)(1)(A).................................... 6.05
(a)(1)(B).................................... 6.04
(a)(2)....................................... N.A.
(b).......................................... 6.07
(c).......................................... 2.12
317(a)(1)....................................... 6.08
(a)(2)....................................... 6.09
(b).......................................... 2.04
318..........................................(a) 12.01
(b).......................................... N.A.
(c).......................................... 12.01
N.A. means not applicable.
* This Cross-Reference Table is not part of the Indenture.
------------------
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions ................................................ 1
Section 1.02. Other Definitions .......................................... 20
Section 1.03. Incorporation by Reference of Trust Indenture Act .......... 21
Section 1.04. Rules of Construction ...................................... 21
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating ............................................ 22
Section 2.02. Execution and Authentication ............................... 23
Section 2.03. Registrar and Paying Agent ................................. 23
Section 2.04. Paying Agent to Hold Money in Trust ........................ 23
Section 2.05. Holder Lists ............................................... 24
Section 2.06. Transfer and Exchange ...................................... 24
Section 2.07. Replacement Notes .......................................... 35
Section 2.08. Outstanding Notes .......................................... 35
Section 2.09. Treasury Notes ............................................. 36
Section 2.10. Temporary Notes ............................................ 36
Section 2.11. Cancellation ............................................... 36
Section 2.12. Defaulted Interest ......................................... 36
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee ......................................... 37
Section 3.02. Selection of Notes to Be Redeemed .......................... 37
Section 3.03. Notice of Redemption ....................................... 37
Section 3.04. Effect of Notice of Redemption ............................. 38
Section 3.05. Deposit of Redemption Price ................................ 38
Section 3.06. Notes Redeemed in Part ..................................... 38
Section 3.07. Optional Redemption ........................................ 38
Section 3.08. Mandatory Redemption ....................................... 39
Section 3.09. Offer to Purchase by Application of Excess Proceeds ........ 39
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes ........................................... 41
Section 4.02. Maintenance of Office or Agency ............................ 41
Section 4.03. Reports .................................................... 42
Section 4.04. Compliance Certificate ..................................... 42
Section 4.05. Taxes ...................................................... 43
Section 4.06. Stay, Extension and Usury Laws ............................. 43
Section 4.07. Restricted Payments ........................................ 43
Section 4.08. Investments ................................................ 46
Section 4.09. Dividend and Other Payment Restrictions Affecting
Subsidiaries ............................................... 47
i
<PAGE> 4
Page
Section 4.10. Incurrence of Indebtedness and Issuance of Preferred
Stock ...................................................... 48
Section 4.11. Limitation on Asset Sales .................................. 51
Section 4.12. Sale and Leaseback Transactions ............................ 52
Section 4.13. Transactions with Affiliates ............................... 52
Section 4.14. Liens ...................................................... 54
Section 4.15. Corporate Existence ........................................ 54
Section 4.16. Repurchase at the Option of Holders upon a Change of
Control .................................................... 54
Section 4.17. Limitations on Issuances of Guarantees of Indebtedness ..... 55
Section 4.18. Payments for Consent ....................................... 56
Section 4.19. Application of Fall-Away Covenants ......................... 56
Section 4.20. Impairment of Security Interest ............................ 56
Section 4.21. Security Interest .......................................... 57
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets ................... 57
Section 5.02. Successor Corporation Substituted .......................... 58
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default .......................................... 58
Section 6.02. Acceleration ............................................... 60
Section 6.03. Other Remedies ............................................. 60
Section 6.04. Waiver of Existing Defaults ................................ 60
Section 6.05. Control by Majority ........................................ 60
Section 6.06. Limitation on Suits ........................................ 61
Section 6.07. Rights of Holders of Notes to Receive Payment .............. 61
Section 6.08. Collection Suit by Trustee ................................. 61
Section 6.09. Trustee May File Proofs of Claim ........................... 61
Section 6.10. Priorities ................................................. 62
Section 6.11. Undertaking for Costs ...................................... 62
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee .......................................... 63
Section 7.02. Rights of Trustee .......................................... 64
Section 7.03. Individual Rights of Trustee ............................... 64
Section 7.04. Trustee's Disclaimer ....................................... 64
Section 7.05. Notice of Defaults ......................................... 65
Section 7.06. Reports by Trustee to Holders of the Notes ................. 65
Section 7.07. Compensation and Indemnity ................................. 65
Section 7.08. Replacement of Trustee ..................................... 66
Section 7.09. Successor Trustee by Merger, etc ........................... 67
Section 7.10. Eligibility; Disqualification .............................. 67
Section 7.11. Preferential Collection of Claims Against the Issuers ...... 67
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance ... 67
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Page
Section 8.02. Legal Defeasance and Discharge ............................. 67
Section 8.03. Covenant Defeasance ........................................ 68
Section 8.04. Conditions to Legal or Covenant Defeasance ................. 68
Section 8.05. Deposited Money and Government Securities to Be Held in
Trust; Other Miscellaneous Provisions ...................... 70
Section 8.06. Repayment to Issuers ....................................... 70
Section 8.07. Reinstatement .............................................. 70
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes ........................ 71
Section 9.02. With Consent of Holders of Notes ........................... 71
Section 9.03. Compliance with Trust Indenture Act ........................ 73
Section 9.04. Revocation and Effect of Consents .......................... 73
Section 9.05. Notation on or Exchange of Notes ........................... 73
Section 9.06. Trustee to Sign Amendments, etc ............................ 73
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Unconditional Guarantee .................................... 73
Section 10.02. Limitations on this Guarantee .............................. 74
Section 10.03. Execution and Delivery of this Guarantee ................... 75
Section 10.04. Release of Guarantor ....................................... 75
Section 10.05. Waiver of Subrogation ...................................... 75
Section 10.06. Immediate Payment .......................................... 76
Section 10.07. Obligations Continuing ..................................... 76
Section 10.08. Obligations Reinstated ..................................... 76
Section 10.09. Obligations Not Affected ................................... 76
Section 10.10. Waiver ..................................................... 76
Section 10.11. No Obligation To Take Action Against Either Issuer ......... 77
Section 10.12. Dealing With The Company and Others ........................ 77
Section 10.13. Default and Enforcement .................................... 77
Section 10.14. Amendment, Etc ............................................. 77
Section 10.15. Acknowledgement ............................................ 78
Section 10.16. Costs and Expenses ......................................... 78
Section 10.17. No Waiver; Cumulative Remedies ............................. 78
Section 10.18. Effect of Offset or Counterclaim ........................... 78
Section 10.19. Guarantee in Addition to Other Obligations ................. 78
Section 10.20. Severability ............................................... 78
Section 10.21. Successors and Assigns ..................................... 78
ARTICLE 11
SECURITY
Section 11.01. Security ................................................... 79
Section 11.02. Recording and Opinions ..................................... 79
Section 11.03. Release of Collateral ...................................... 80
Section 11.04. Authorization of Actions To Be Taken by the Trustee ........ 80
Section 11.05. Acknowledgment that Collateral Secures the Other Notes ..... 80
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Page
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls ............................... 80
Section 12.02. Notices .................................................... 81
Section 12.03. Communication by Holders of Notes with Other Holders of
Notes ...................................................... 82
Section 12.04. Certificate and Opinion as to Conditions Precedent ......... 82
Section 12.05. Statements Required in Certificate or Opinion .............. 82
Section 12.06. Rules by Trustee and Agents ................................ 82
Section 12.07. No Personal Liability of Directors, Officers, Employees,
Members and Stockholders ................................... 82
Section 12.08. Governing Law .............................................. 83
Section 12.09. No Adverse Interpretation of Other Agreements .............. 83
Section 12.10. Successors ................................................. 83
Section 12.11. Severability ............................................... 83
Section 12.12. Counterpart Originals ...................................... 83
Section 12.13. Table of Contents, Headings, etc ........................... 83
ARTICLE 13
SATISFACTION AND DISCHARGE
Section 13.01. Satisfaction and Discharge of Indenture .................... 83
Section 13.02. Application of Trust Money ................................. 84
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED
INVESTOR
Exhibit E FORM OF GUARANTEE
Exhibit F FORM OF MIRROR NOTE
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INDENTURE dated as of March 17, 1999 among Charter Communications
Holdings, LLC, a Delaware limited liability company (the "Company"), Charter
Communications Holdings Capital Corporation, a company incorporated under the
laws of Delaware ("Charter Capital" and together with the Company, the
"Issuers"), Marcus Cable Holdings, LLC, a Delaware limited liability company, as
guarantor (the "Guarantor"), and Harris Trust and Savings Bank, as trustee (the
"Trustee").
The Issuers, the Guarantor and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 8.625% Senior Notes due 2009 (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note substantially in the form of
Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend
and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in an initial denomination equal
to the outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or becomes a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with,
or in contemplation of, such other Person merging with or into, or
becoming a Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling, "controlled by" and "under common control
with " shall have correlative meanings.
"Agent" means any Registrar or Paying Agent.
"Applicable Procedures" means, with respect to any transfer or exchange of
or for beneficial interests in any Global Note, the rules and procedures of the
Depositary, Euroclear and Cedel that apply to such transfer or exchange.
"Asset Acquisition" means (a) an Investment by the Company or any of the
Company's Restricted Subsidiaries, or the Guarantor or any of the Guarantor's
Restricted Subsidiaries, as the case may be, in any other Person pursuant to
which such Person shall become a Restricted Subsidiary of the Company or any of
the Company's Restricted Subsidiaries, or the Guarantor or any of the
Guarantor's
<PAGE> 8
Restricted Subsidiaries, as the case may be, or shall be merged with or into the
Company or any of the Company's Restricted Subsidiaries, or the Guarantor or any
of the Guarantor's Restricted Subsidiaries, as the case may be, or (b) the
acquisition by the Company or any of the Company's Restricted Subsidiaries, or
the Guarantor or any of the Guarantor's Subsidiaries, as the case may be, of the
assets of any Person which constitute all or substantially all of the assets of
such Person, any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets
or rights, other than sales of inventory in the ordinary course of
business consistent with past practices; provided that the sale,
conveyance or other disposition of all or substantially all of the assets
of the Company and its Restricted Subsidiaries, taken as a whole, and of
the Guarantor and its Restricted Subsidiaries, taken as a whole, shall be
governed by Section 4.16 and/or Section 5.01 and not by the provisions of
Section 4.11; and
(2) the issuance of Equity Interests by any of the Company's or the
Guarantor's Restricted Subsidiaries or the sale of Equity Interests in any
of the Company's or the Guarantor's Restricted Subsidiaries.
Notwithstanding the preceding, the following items shall not be deemed to
be Asset Sales:
(1) any single transaction or series of related transactions that:
(a) involves assets having a fair market value of less than $100 million;
or (b) results in net proceeds to the Company, the Guarantor and their
Restricted Subsidiaries of less than $100 million;
(2) a transfer of assets (i) between or among the Company and its
Restricted Subsidiaries, (ii) between or among the Guarantor and its
Restricted Subsidiaries and (iii) from the Guarantor or any of its
Restricted Subsidiaries to any of the Company or its Restricted
Subsidiaries;
(3) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary of the Company to the Company or to another Wholly Owned
Restricted Subsidiary of the Company, or an issuance of Equity Interests
by a Wholly Owned Restricted Subsidiary of the Guarantor to another Wholly
Owned Restricted Subsidiary of the Guarantor;
(4) a Restricted Payment that is permitted by Section 4.07 and a
Restricted Investment that is permitted by Section 4.08; and
(5) the incurrence of Permitted Liens and the disposition of assets
related to such Permitted Liens by the secured party pursuant to a
foreclosure.
"Attributable Debt" in respect of a sale and leaseback transaction means,
at the time of determination, the present value of the obligation of the lessee
for net rental payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which such lease has
been extended or may, at the option of the lessee, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
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"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or state
law of any jurisdiction relating to bankruptcy, insolvency, winding up,
liquidation, reorganization or relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3 and
Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire, whether such
right is currently exercisable or is exercisable only upon the occurrence of a
subsequent condition.
"Board of Directors" means the Board of Directors of the Company, Charter
Capital or the Guarantor, as the case may be, or any authorized committee of the
Board of Directors of the Company, Charter Capital or the Guarantor, as the case
may be.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company, Charter Capital or the Guarantor, as
the case may be, to have been duly adopted by the Board of Directors of the
Company, Charter Capital or the Guarantor, as the case may be, and to be in full
force and effect on the date of such certification and delivered to the Trustee.
"Business Day" means any day other than a Legal Holiday.
"Cable Related Business" means the business of owning cable television
systems and businesses ancillary, complementary and related thereto.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest (other than any debt obligation) or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Capital Stock Sale Proceeds " means the aggregate net cash proceeds
(including the fair market value of the non-cash proceeds, as determined by an
independent appraisal firm) received by the Company or the Guarantor since the
date of this Indenture (x) as a contribution to the common equity capital or
from the issue or sale of Equity Interests of the Company or the Guarantor
(other than Disqualified Stock) or (y) from the issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt securities
of the Company or the Guarantor that have been converted into or exchanged for
such Equity Interests (other than Equity Interests (or Disqualified Stock or
debt securities) sold to a Subsidiary of the Company or the Guarantor).
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<PAGE> 10
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged
in support thereof) having maturities of not more than twelve months from
the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of twelve months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any domestic commercial bank having combined
capital and surplus in excess of $500 million and a Thompson Bank Watch
Rating at the time of acquisition of "B" or better;
(4) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper having a rating of at least "P-1" from Moody's
or at least "A-1" from S&P and in each case maturing within twelve months
after the date of acquisition;
(6) corporate debt obligations maturing within twelve months after
the date of acquisition thereof, rated at the time of acquisition at least
"Aaa" or "P-1" by Moody's or "AAA" or "A-1" by S&P;
(7) auction-rate preferred stocks of any corporation maturing not
later than 45 days after the date of acquisition thereof, rated at the
time of acquisition at least "Aaa" by Moody's or "AAA" by S&P;
(8) securities issued by any state, commonwealth or territory of the
United States, or by any political subdivision or taxing authority
thereof, maturing not later than six months after the date of acquisition
thereof, rated at the time of acquisition at least "A" by Moody's or S&P;
and
(9) money market or, mutual funds, at least 90% of the assets of
which constitute Cash Equivalents of the kinds described in clauses (1)
through (8) of this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Subsidiaries, taken as a whole, or the Guarantor and its Subsidiaries,
taken as a whole, to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than the Principal or a Related Party
of the Principal;
(2) the adoption of a plan relating to the liquidation or
dissolution of the Company or the Guarantor;
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<PAGE> 11
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principal and Related Parties
and any entity formed for the purpose of owning Capital Stock of the
Company, becomes the Beneficial Owner, directly or indirectly, of more
than 35% of the Voting Stock of the Company or the Guarantor, measured by
voting power rather than number of shares, unless the Principal or a
Related Party Beneficially Owns, directly or indirectly, a greater
percentage of Voting Stock of the Company or the Guarantor, as the case
may be, measured by voting power rather than the number of shares, than
such person;
(4) after the Company's initial public offering, the first day on
which a majority of the members of the Board of Directors of the Company
are not Continuing Directors; or
(5) the Company or the Guarantor consolidates with, or merges with
or into, any Person, or any Person consolidates with, or merges with or
into, the Company or the Guarantor, in any such event pursuant to a
transaction in which any of the outstanding Voting Stock of the Company or
the Guarantor is converted into or exchanged for cash, securities or other
property, other than any such transaction where the Voting Stock of the
Company or the Guarantor outstanding immediately prior to such transaction
is converted into or exchanged for Voting Stock (other than Disqualified
Stock) of the surviving or transferee Person constituting a majority of
the outstanding shares of such Voting Stock of such surviving or
transferee Person immediately after giving effect to such issuance.
"Charter Capital" has the meaning assigned to it in the preamble to this
Indenture.
"Collateral" means the Mirror Note and other collateral which secures the
obligations under the Notes pursuant to the Pledge Documents and the collateral
which secures the obligations under the Mirror Note.
"Commission" or "SEC" means the Securities and Exchange Commission.
"Company" has the meaning assigned to it in the preamble to this
Indenture.
"Company Preferred Stock" means the 10% cumulative convertible redeemable
preferred stock of the Company with an aggregate liquidation value of $25
million.
"Consolidated EBITDA" means with respect to any Person, for any period,
the net income of such Person and its Restricted Subsidiaries for such period
plus, to the extent such amount was deducted in calculating such net income:
(1) Consolidated Interest Expense;
(2) income taxes;
(3) depreciation expense;
(4) amortization expense;
(5) all other non-cash items, extraordinary items, nonrecurring and
unusual items and the cumulative effects of changes in accounting
principles reducing such net income, less all non-cash items,
extraordinary items, nonrecurring and unusual items and cumulative effects
of
5
<PAGE> 12
changes in accounting principles increasing such net income, all as
determined on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP;
(6) amounts actually paid during such period pursuant to a deferred
compensation plan; and
(7) for purposes of Section 4.10 only, Management Fees;
provided that Consolidated EBITDA shall not include:
(x) the net income (or net loss) of any Person that is not a
Restricted Subsidiary ("Other Person"), except (I) with respect to net
income, to the extent of the amount of dividends or other distributions
actually paid to such Person or any of its Restricted Subsidiaries by such
Other Person during such period and (II) with respect to net losses, to
the extent of the amount of investments made by such Person or any
Restricted Subsidiary of such Person in such Other Person during such
period;
(y) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (3) of Section 4.07 (and in
such case, except to the extent includable pursuant to clause (x) above),
the net income (or net loss) of any Other Person accrued prior to the date
it becomes a Restricted Subsidiary or is merged into or consolidated with
such Person or any Restricted Subsidiaries or all or substantially all of
the property and assets of such Other Person are acquired by such Person
or any of its Restricted Subsidiaries; and
(z) the net income of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary (other than any agreement or
instrument evidencing Indebtedness or Preferred Stock outstanding on the
date of this Indenture or incurred or issued thereafter in compliance with
Section 4.10; provided that the terms of any such agreement restricting
the declaration and payment of dividends or similar distributions apply
only in the event of a default with respect to a financial covenant or a
covenant relating to payment (beyond any applicable period of grace)
contained in such agreement or instrument and provided such terms are
determined by such Person to be customary in comparable financings and
such restrictions are determined by the Company not to materially affect
the Company's ability to make principal or interest payments on the Notes
when due).
"Consolidated Indebtedness" means, with respect to any Person as of any
date of determination, the sum, without duplication, of:
(1) the total amount of outstanding Indebtedness of such Person and
its Restricted Subsidiaries, plus
(2) the total amount of Indebtedness of any other Person that has
been Guaranteed by the referent Person or one or more of its Restricted
Subsidiaries (excluding Indebtedness of the Company or any of its
Subsidiaries guaranteed by the Guarantor and any of its Subsidiaries which
Indebtedness has been previously counted for the purposes of this
definition), plus
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(3) the aggregate liquidation value of all Disqualified Stock of
such Person and all preferred stock of Restricted Subsidiaries of such
Person, in each case, determined on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" means, with respect to any Person for any
period, without duplication, the sum of
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization or original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations);
and
(2) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and
(3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries
(whether or not such Guarantee or Lien is called upon);
excluding, however, any amount of such interest of any Restricted Subsidiary if
the net income of such Restricted Subsidiary is excluded in the calculation of
Consolidated EBITDA pursuant to clause (z) of the definition thereof (but only
in the same proportion as the net income of such Restricted Subsidiary is
excluded from the calculation of Consolidated EBITDA pursuant to clause (z) of
the definition thereof), in each case, on a consolidated basis and in accordance
with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the date of this
Indenture; or
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election or whose
election or appointment was previously so approved.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 12.02 or such other address as to which the Trustee
may give notice to the Issuers.
"Credit Facilities" means, with respect to the Company, the Guarantor
and/or their respective Restricted Subsidiaries, one or more debt facilities or
commercial paper facilities, in each case with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
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<PAGE> 14
"Definitive Note" means a certificated Note registered in the name of the
Holder thereof and issued in accordance with Section 2.06, substantially in the
form of Exhibit A hereto, except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Global Notes, the Person specified
in Section 2.03 as the Depositary with respect to the Notes, and any and all
successors thereto appointed as depositary hereunder and having become such
pursuant to the applicable provision of this Indenture.
"Disposition" means, with respect to any Person, any merger, consolidation
or other business combination involving such Person (whether or not such Person
is the Surviving Person) or the sale, assignment, or transfer, lease conveyance
or other disposition of all or substantially all of such Person's assets or
Capital Stock.
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company or the Guarantor, as the
case may be, to repurchase such Capital Stock upon the occurrence of a change of
control or an asset sale shall not constitute Disqualified Stock if the terms of
such Capital Stock provide that the Company or the Guarantor, as the case may
be, may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with Section 4.07.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any private or underwritten public offering of
Qualified Capital Stock of the Company of which the gross proceeds to the
Company are at least $25 million.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Notes" means the Notes issued in the Exchange Offer pursuant to
Section 2.06(f).
"Exchange Offer" has the meaning set forth in the Registration Rights
Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in the
Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries and the Guarantor and its Restricted Subsidiaries in
existence on the Issue Date, until such amounts are repaid.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public
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<PAGE> 15
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession, which are in
effect on the Issue Date.
"Global Note Legend" means the legend set forth in Section 2.06(g)(ii),
which is required to be placed on all Global Notes issued under this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" or "guarantee" means a guarantee other than by endorsement of
negotiable instruments for collection in the ordinary course of business, direct
or indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness, measured as the lesser of the
aggregate outstanding amount of the Indebtedness so guaranteed and the face
amount of the Guarantee.
"Guarantor" has the meaning assigned to it in the preamble to this
Indenture.
"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements;
(2) interest rate option agreements, foreign currency exchange
agreements, foreign currency swap agreements; and
(3) other agreements or arrangements designed to protect such Person
against fluctuations in interest and currency exchange rates.
"Holder" means a holder of the Notes.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
(5) in respect of the balance deferred and unpaid of the purchase
price of any property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing the notional amount of any Hedging Obligations,
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if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness
issued with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from time to
time.
"Indirect Participant" means a Person who holds a beneficial interest in a
Global Note through a Participant.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is not also a QIB.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Investment Grade Rating" means a rating equal to or higher than Baa3 (or
the equivalent) by Moody's and BBB- (or the equivalent) by S&P.
"Issue Date" means March 17, 1999.
"Issuers" has the meaning assigned to it in the preamble to this
Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be prepared by
the Issuers and sent to all Holders of the Notes for use by such Holders in
connection with the Exchange Offer.
"Leverage Ratio" means, as of any date, the ratio of:
(1) the combined Consolidated Indebtedness of the Company and the
Guarantor on such date to
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(2) the aggregate amount of combined Consolidated EBITDA for the
Company and the Guarantor for the most recently ended fiscal quarter for
which internal financial statements are available multiplied by four (the
"Reference Period").
In addition to the foregoing, for purposes of this definition,
"Consolidated EBITDA" shall be calculated on a pro forma basis after giving
effect to
(1) the issuance of the Notes;
(2) the incurrence of the Indebtedness or the issuance of the
Disqualified Stock or other Preferred Stock of a Restricted Subsidiary
(and the application of the proceeds therefrom) giving rise to the need to
make such calculation and any incurrence or issuance (and the application
of the proceeds therefrom) or repayment of other Indebtedness or
Disqualified Stock or other Preferred Stock of a Restricted Subsidiary,
other than the incurrence or repayment of Indebtedness for ordinary
working capital purposes, at any time subsequent to the beginning of the
Reference Period and on or prior to the date of determination, as if such
incurrence (and the application of the proceeds thereof), or the
repayment, as the case may be, occurred on the first day of the Reference
Period; and
(3) any Dispositions or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted
Subsidiaries (including any person that becomes a Restricted Subsidiary as
a result of such Asset Acquisition) incurring, assuming or otherwise
becoming liable for or issuing Indebtedness, Disqualified Stock or
Preferred Stock) made on or subsequent to the first day of the Reference
Period and on or prior to the date of determination, as if such
Disposition or Asset Acquisition (including the incurrence, assumption or
liability for any such Indebtedness, Disqualified Stock or Preferred Stock
and also including any Consolidated EBITDA associated with such Asset
Acquisition, including any cost savings adjustments in compliance with
Regulation S-X promulgated by the Commission) had occurred on the first
day of the Reference Period.
For purposes of this definition and calculating the combined Consolidated
Indebtedness for the Company and the Guarantor, in no case will the combined
Consolidated Indebtedness for the Company include (x) Consolidated Indebtedness
of the Company which has already been counted as part of the Consolidated
Indebtedness of the Guarantor and (y) Consolidated Indebtedness of the Guarantor
which has already been counted as the Consolidated Indebtedness of the Company.
Further, for purposes of this definition and calculating combined Consolidated
EBITDA for the Company and the Guarantor, in no case will combined Consolidated
EBITDA for the Company and the Guarantor include (x) Consolidated EBITDA of the
Company which has already been counted as part of the Consolidated EBITDA of the
Guarantor and (y) Consolidated EBITDA of the Guarantor which has already been
counted as the Consolidated EBITDA of the Company.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
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<PAGE> 18
"Management Fees" means the fee payable to Charter Communications, Inc.
pursuant to the management agreement between Charter Communications, Inc. and
Charter Communication Operating LLC, as such agreement exists on the Issue Date,
including any amendment or replacement thereof, provided that any such amendment
or replacement is not more disadvantageous to the Holders of the Notes in any
material respect from such management agreement existing on the Issue Date.
"Marcus Combination" means the consolidation or merger of the Guarantor
with and into the Company or any of its Restricted Subsidiaries.
"Mirror Note" means the senior note of the Guarantor due April 1, 2007
issued to the Company in the principal amount of $1,548,630,855 in the form
attached to this Indenture as Exhibit F, and which will be secured by the pledge
by the Guarantor of all of the Capital Stock of Marcus Cable Company LLC, a
wholly owned Subsidiary of the Guarantor.
"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries or by the Guarantor or any of its
Restricted Subsidiaries, as the case may be, in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof or taxes paid or payable as a
result thereof (including amounts distributable in respect of owners', partners'
or members' tax liabilities resulting from such sale), in each case after taking
into account any available tax credits or deductions and any tax sharing
arrangements and amounts required to be applied to the repayment of
Indebtedness.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted
Subsidiaries, nor the Guarantor or any of its Restricted Subsidiaries, as
the case may be, (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or both
any holder of any other Indebtedness (other than the Notes) of the Company
or any of its Restricted Subsidiaries, or the Guarantor or any of its
Restricted Subsidiaries, as the case may be, to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries or the Guarantor or any of its Restricted
Subsidiaries, as the case may be.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this Indenture.
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<PAGE> 19
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the Board,
the Chief Executive Officer, the President, the Chief Operating Officer, the
Chief Financial Officer, the Treasurer, any Assistant Treasurer, the Controller,
the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company, Charter Capital or the Guarantor, as the case may be, by two Officers
of the Company, Charter Capital or the Guarantor, as the case may be, one of
whom must be the principal executive officer, the chief financial officer or the
treasurer of the Company, Charter Capital or the Guarantor, as the case may be,
that meets the requirements of Section 12.05.
"Opinion of Counsel" means an opinion from legal counsel who is reasonably
acceptable to the Trustee, that meets the requirements of Section 12.05. The
counsel may be an employee of or counsel to the Issuers, the Guarantor, any
Subsidiary of the Issuers or the Guarantor or the Trustee.
"Other Notes" means the 8.25% Senior Notes due 2007 of the Issuers in an
aggregate principal amount not to exceed the principal amount issued on the
Issue Date, and the 9.920% Senior Discount Notes due 2011 of the Issuers in an
aggregate principal amount at maturity not to exceed the principal amount at
maturity issued on the Issue Date.
"Participant" means, with respect to the Depositary, Euroclear or Cedel, a
Person who has an account with the Depositary, Euroclear or Cedel, respectively
(and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Investments" means:
(1) any Investment by the Company in a Restricted Subsidiary of the
Company, or any Investment by the Guarantor in a Restricted Subsidiary of
the Guarantor, the Company or a Restricted Subsidiary of the Company, or
any Investment by a Restricted Subsidiary of the Company or the Guarantor
in the Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the
Company; or
(b) such Person is merged or consolidated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the
Company;
(4) any Investment by the Guarantor or any Restricted Subsidiary of
the Guarantor in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the
Guarantor; or
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<PAGE> 20
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or
is liquidated into, the Guarantor or a Restricted Subsidiary of the
Guarantor;
(5) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.11;
(6) Investment made out of the net cash proceeds of the issue and
sale (other than to a Subsidiary of the Company or the Guarantor) of
Equity Interests (other than Disqualified Stock) of the Company or the
Guarantor to the extent that such net cash proceeds have not been applied
to make a Restricted Payment or to effect other transactions pursuant to
Section 4.07 or to the extent such net cash proceeds have not been used to
incur Indebtedness pursuant to clause (10) of Section 4.10;
(7) Investments in Productive Assets having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with
all other Investments made pursuant to this clause (7) since the Issue
Date, not to exceed $150 million; provided that either the Company or any
of its Restricted Subsidiaries or the Guarantor or any of its Restricted
Subsidiaries, after giving effect to such Investments, will own at least
20% of the Voting Stock of such Person;
(8) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with
all other Investments made pursuant to this clause (8) since the date of
this Indenture, not to exceed $50 million;
(9) Investments in customers and suppliers in the ordinary course of
business which either (A) generate accounts receivable or (B) are accepted
in settlement of bona fide disputes; and
(10) the Company's investment in the Guarantor, as outstanding on
the Issue Date.
"Permitted Liens" means:
(1) Liens on the assets of the Company or the Guarantor securing
Indebtedness and other Obligations under clause (1) of Section 4.10;
(2) Liens in favor of the Company and the Guarantor and Liens on the
assets of any Restricted Subsidiary of the Company or the Guarantor in
favor of any other Restricted Subsidiary of the Company or the Guarantor;
(3) Liens on property of a Person existing at the time such Person
is merged with or into or consolidated with the Company or the Guarantor;
provided that such Liens were in existence prior to the contemplation of
such merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with the Company or the
Guarantor;
(4) Liens on property existing at the time of acquisition thereof by
the Company or the Guarantor; provided that such Liens were in existence
prior to the contemplation of such acquisition;
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<PAGE> 21
(5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) purchase money mortgages or other purchase money liens
(including without limitation any Capital Lease Obligations) incurred by
the Company or the Guarantor upon any fixed or capital assets acquired
after the Issue Date or purchase money mortgages (including without
limitation Capital Lease Obligations) on any such assets, whether or not
assumed, existing at the time of acquisition of such assets, whether or
not assumed, so long as (i) such mortgage or lien does not extend to or
cover any of the assets of the Company or the Guarantor, except the asset
so developed, constructed, or acquired, and directly related assets such
as enhancements and modifications thereto, substitutions, replacements,
proceeds (including insurance proceeds), products, rents and profits
thereof, and (ii) such mortgage or lien secures the obligation to pay the
purchase price of such asset, interest thereon and other charges, costs
and expenses (including, without limitation, the cost of design,
development, construction, acquisition, transportation, installation,
improvement, and migration) and incurred in connection therewith (or the
obligation under such Capital Lease Obligation) only;
(7) Liens existing on the date of this Indenture (other than in
connection with the Credit Facilities);
(8) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(9) statutory and common law Liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted
and for which a reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made;
(10) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security;
(11) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligation, bankers'
acceptance, surety and appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of a similar nature incurred
in the ordinary course of business (exclusive of obligations for the
payment of borrowed money);
(12) easements, rights-of-way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of the
Company or the Guarantor or any of their Restricted Subsidiaries;
(13) Liens of franchisors or other regulatory bodies arising in the
ordinary course of business;
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<PAGE> 22
(14) Liens arising from filing Uniform Commercial Code financing
statements regarding leases or other Uniform Commercial Code financing
statements for precautionary purposes relating to arrangements not
constituting Indebtedness;
(15) Liens arising from the rendering of a final judgment or order
against the Company, the Guarantor or any of their Restricted Subsidiaries
that does not give rise to an Event of Default;
(16) Liens securing reimbursement obligations with respect to
letters of credit that encumber documents and other property relating to
such letters of credit and the products and proceeds thereof;
(17) Liens encumbering customary initial deposits and margin
deposits, and other Liens that are within the general parameters customary
in the industry and incurred in the ordinary course of business, in each
case, securing Indebtedness under Hedging Obligations and forward
contracts, options, future contracts, future options or similar agreements
or arrangements designed solely to protect the Company, the Guarantor or
any of their respective Restricted Subsidiaries from fluctuations in
interest rates, currencies or the price of commodities;
(18) Liens consisting of any interest or title of licensor in the
property subject to a license;
(19) Liens on the Capital Stock of Unrestricted Subsidiaries;
(20) Liens arising from sales or other transfers of accounts
receivable which are past due or otherwise doubtful of collection in the
ordinary course of business;
(21) Liens incurred in the ordinary course of business of the
Company or the Guarantor, with respect to obligations which in the
aggregate do not exceed $50 million at any one time outstanding;
(22) Liens in favor of the Trustee arising under the provisions in
this Indenture and in the indentures relating to the Other Notes, in each
case under Section 7.07; and
(23) Liens in favor of the Trustee for its benefit and the benefit
of the Holders and the holders of the Other Notes, as their respective
interests appear.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries, or the Guarantor or any of its Restricted
Subsidiaries, as the case may be, issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund, other
Indebtedness of the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, respectively (other than
intercompany Indebtedness); provided that unless permitted otherwise by this
Indenture, no Indebtedness of the Company or any of its Restricted Subsidiaries,
or the Guarantor or any of its Restricted Subsidiaries, may be issued in
exchange for, or the net proceeds of which are used to extend, refinance, renew,
replace, defease or refund Indebtedness of the Guarantor or any of its
Restricted Subsidiaries, or the Company or any of its Restricted Subsidiaries,
respectively; provided, further, that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if
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<PAGE> 23
applicable), plus accrued interest and premium, if any, on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Notes or the Guarantee, such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Notes or the Guarantee, as the
case may be, on terms at least as favorable to the Holders of Notes as
those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or by any of
its Restricted Subsidiaries or the Guarantor or by any of its Restricted
Subsidiaries who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
"Pledge Documents" means, collectively, this Indenture and all pledge
agreements or other instruments evidencing or creating any security interests in
favor of the Trustee in all or any portion of the Collateral, in each case as
amended, supplemented or modified from time to time in accordance with their
terms and the terms of this Indenture.
"Principal" means Paul G. Allen.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i)(A) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Productive Assets" means assets (including assets of a referent Person
owned directly or indirectly through ownership of Capital Stock) of a kind used
or useful in the Cable Related Business.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Qualified Capital Stock" means any Capital Stock that is not Disqualified
Stock.
"Rating Agencies" means Moody's and S&P.
"Registration Rights Agreement" means the Exchange and Registration Rights
Agreement dated as of the Issue Date among the Issuers, the Guarantor and the
initial purchasers named therein with respect to the Notes issued on the Issue
Date.
"Regulation S" means Regulation S promulgated under the Securities Act.
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<PAGE> 24
"Regulation S Global Note" means a global Note bearing the Private
Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee, issued in an initial
denomination equal to the outstanding principal amount of the Notes initially
sold in reliance on Rule 903 of Regulation S.
"Related Party" means:
(1) the spouse or an immediate family member, estate or heir of the
Principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of the
Principal and/or such other Persons referred to in the immediately
preceding clause (1).
"Responsible Officer," when used with respect to the Trustee, means any
officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) with direct responsibility for the
administration of this Indenture and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the Private
Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private Placement
Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"S&P" means Standard & Poor's Ratings Service, a division of the
McGraw-Hill Companies, Inc. or any successor to the rating agency business
thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration Statement as
defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary of the Company
which is a "Significant Subsidiary" as defined in Rule 1-02(w) of Regulation S-X
under the Exchange Act.
"Special Interest" has the meaning set forth in the Registration Rights
Agreement.
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"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the documentation governing
such Indebtedness on the Issue Date, or, if none, the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which
at least 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned
or controlled, directly or indirectly, by such Person or one or more of
the other Subsidiaries of that Person (or a combination thereof) and, in
the case of any such entity of which 50% of the total voting power of
shares of Capital Stock is so owned or controlled by such Person or one or
more of the other Subsidiaries of such Person, such Person and its
Subsidiaries also has the right to control the management of such entity
pursuant to contract or otherwise; and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Tax" shall mean any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other liabilities
related thereto).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA; provided, however, that in the event the Trust Indenture Act of
1939 is amended after such date, then "TIA" means, to the extent required by
such amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means Harris Trust and Savings Bank until a successor replaces
Harris Trust and Savings Bank in accordance with the applicable provisions of
this Indenture and thereafter means the successor serving hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes that do
not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent global Note substantially in
the form of Exhibit A attached hereto that bears the Global Note Legend and that
has the "Schedule of Exchanges of Interests in the Global Note" attached
thereto, and that is deposited with or on behalf of and registered in the name
of the Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company or the
Guarantor that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a Board Resolution, but only to the extent that such
Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
or the Guarantor or any Restricted Subsidiary of the Guarantor unless the
terms of any such agreement, contract, arrangement or
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<PAGE> 26
understanding are no less favorable to the Company or any Restricted
Subsidiary or the Guarantor or any Restricted Subsidiary of the Guarantor
than those that might be obtained at the time from Persons who are not
Affiliates of the Company or the Guarantor unless such terms constitute
Investments permitted by the covenant described above under Section 4.08;
(3) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries, nor the Guarantor nor any of its Restricted
Subsidiaries, has any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified
levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries or the Guarantor or any of its Restricted
Subsidiaries; and
(5) has at least one director on its board of directors that is not
a director or executive officer of the Company or any of its Restricted
Subsidiaries, or of the Guarantor or any of its Restricted Subsidiaries,
or has at least one executive officer that is not a director or executive
officer of the Company or any of its Restricted Subsidiaries, or of the
Guarantor or any of its Restricted Subsidiaries.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under the
Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the board of
directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount
of each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person and/or by one or more Wholly Owned Restricted
Subsidiaries of such Person.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined
in
Term Section
---- -------
<S> <C>
"Affiliate Transaction".................................. 4.13
"Asset Sale Offer"....................................... 3.09
"Authentication Order"................................... 2.02
"Change of Control Offer"................................ 4.16
"Change of Control Payment".............................. 4.16
</TABLE>
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<PAGE> 27
<TABLE>
<CAPTION>
Defined
in
Term Section
---- -------
<S> <C>
"Change of Control Payment Date"......................... 4.16
"Covenant Defeasance".................................... 8.01
"DTC".................................................... 2.03
"Event of Default"....................................... 6.01
"Excess Proceeds"........................................ 4.12
"incur".................................................. 4.09
"Legal Defeasance"....................................... 8.01
"Offer Period"........................................... 3.09
"Paying Agent"........................................... 2.03
"Payment Default"........................................ 6.01
"Permitted Debt"......................................... 4.10
"Preferred Stock Financing".............................. 4.10
"Purchase Date".......................................... 3.09
"Registrar".............................................. 2.03
"Restricted Payments".................................... 4.07
"Subordinated Debt Financing"............................ 4.10
"Subordinated Notes"..................................... 4.10
"Subsidiary Guarantee"................................... 4.17
"Suspended Covenants".................................... 4.19
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee; and
"obligor" on the Notes means the Issuers and any successor obligor upon
the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
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<PAGE> 28
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural include
the singular;
(e) provisions apply to successive events and transactions;
(f) references to sections of or rules under the Securities Act shall be
deemed to include substitute, replacement of successor sections or rules adopted
by the SEC from time to time;
(g) references to any statute, law, rule or regulation shall be deemed to
refer to the same as from time to time amended and in effect and to any
successor statute, law, rule or regulation; and
(h) references to any contract, agreement or instrument shall mean the
same as amended, modified, supplemented or amended and restated from time to
time, in each case, in accordance with any applicable restrictions contained in
this Indenture.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A hereto. The Notes may have
notations, legends or endorsements required by law, stock exchange rule or
usage. Each Note shall be dated the date of its authentication. The Notes shall
be in denominations of $1,000 and integral multiples thereof.
The terms and provisions contained in the Notes shall constitute, and are
hereby expressly made, a part of this Indenture and the Issuers and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby. However, to the extent any provision of
any Note conflicts with the express provisions of this Indenture, the provisions
of this Indenture shall govern and be controlling.
(b) Global Notes. Notes issued in global form shall be substantially in
the form of Exhibit A attached hereto (including the Global Note Legend thereon
and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the
custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06.
(c) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Global Notes that are held by
Participants through Euroclear or Cedel Bank.
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<PAGE> 29
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for each Issuer by manual or facsimile
signature. The Guarantor shall execute the Guarantee in the manner set forth in
Article 10.
If an Officer whose signature is on a Note no longer holds that office at
the time a Note is authenticated, the Note shall nevertheless be valid.
A Note shall not be valid until authenticated by the manual signature of
the Trustee. The signature shall be conclusive evidence that the Note has been
authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuers signed by an
Officer of each of the Issuers (an "Authentication Order"), authenticate Notes
for original issue in the aggregate principal amount of $1,500,000,000. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07. On the Issue Date, the Issuers will
issue $1,500,000,000 aggregate principal amount of Notes.
The Trustee may appoint an authenticating agent acceptable to the Issuers
to authenticate Notes. An authenticating agent may authenticate Notes whenever
the Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with Holders or an Affiliate of the Issuers.
Section 2.03. Registrar and Paying Agent.
The Issuers shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Issuers may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Issuers may change any
Paying Agent or Registrar without notice to any Holder. The Issuers shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Issuers fail to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Issuers or any of
their Subsidiaries may act as Paying Agent or Registrar.
The Issuers initially appoint The Depository Trust Company ("DTC") to act
as Depositary with respect to the Global Notes.
The Issuers initially appoint the Trustee to act as the Registrar and
Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Issuers shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium, if any, or interest on the Notes, and shall notify the
Trustee of any default by the Issuers in making any such payment. While any such
default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee. The Issuers at any time may require a Paying Agent to pay
all money held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent (if other than the Issuers or a Subsidiary) shall have no further
liability for the money. If the Issuers or a Subsidiary acts as Paying Agent, it
shall segregate and hold in a separate trust fund for
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<PAGE> 30
the benefit of the Holders all money held by it as Paying Agent. Upon any
bankruptcy or reorganization proceedings relating to the Issuers, the Trustee
shall serve as Paying Agent for the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Issuers shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Issuers shall otherwise comply with TIA ss. 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes shall be exchanged
by the Company for Definitive Notes if:
(i) the Issuers deliver to the Trustee notice from the
Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered
under the Exchange Act and, in either case, a successor Depositary
is not appointed by the Issuers within 120 days after the date of
such notice from the Depositary; or
(ii) the Issuers in their sole discretion determine that the
Global Notes (in whole but not in part) should be exchanged for
Definitive Notes and deliver a written notice to such effect to the
Trustee; or
(iii) there shall have occurred and be continuing a Default or
Event of Default with respect to the Notes.
Upon the occurrence of any of the preceding events in (i), (ii) or (iii)
above, Definitive Notes shall be issued in such names as the Depositary shall
instruct the Trustee. Global Notes also may be exchanged or replaced, in whole
or in part, as provided in Sections 2.07 and 2.10. Every Note authenticated and
delivered in exchange for, or in lieu of, a Global Note or any portion thereof,
pursuant to this Section 2.06 or Section 2.07 or 2.10, shall be authenticated
and delivered in the form of, and shall be, a Global Note. A Global Note may not
be exchanged for another Note other than as provided in this Section 2.06(a);
however, beneficial interests in a Global Note may be transferred and exchanged
as provided in Section 2.06(b), (c) or (f).
(b) Transfer and Exchange of Beneficial Interests in the Global Notes. The
transfer and exchange of beneficial interests in the Global Notes shall be
effected through the Depositary, in accordance with the provisions of this
Indenture and the Applicable Procedures. Beneficial interests in the Restricted
Global Notes shall be subject to restrictions on transfer comparable to those
set forth herein to the extent required by the Securities Act. Transfers of
beneficial interests in the Global Notes also shall require compliance with
either subparagraph (i) or (ii) below, as applicable, as well as one or more of
the other following subparagraphs, as applicable:
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<PAGE> 31
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in the same Restricted Global Note in accordance
with the transfer restrictions set forth in the Private Placement
Legend. Beneficial interests in any Unrestricted Global Note may be
transferred to Persons who take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note. No written
orders or instructions shall be required to be delivered to the
Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests
in Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i)
above, the transferor of such beneficial interest must deliver to
the Registrar either:
(A)(1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to credit or cause to be credited a
beneficial interest in another Global Note in an amount equal to the
beneficial interest to be transferred or exchanged; and
(A)(2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account to be
credited with such increase; or
(B)(1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the Applicable
Procedures directing the Depositary to cause to be issued a Definitive
Note in an amount equal to the beneficial interest to be transferred or
exchanged; and
(B)(2) instructions given by the Depositary to the Registrar
containing information regarding the Person in whose name such Definitive
Note shall be registered to effect the transfer or exchange referred to in
(1) above.
Upon consummation of an Exchange Offer by the Issuers in
accordance with Section 2.06(f), the requirements of this Section
2.06(b)(ii) shall be deemed to have been satisfied upon receipt by
the Registrar of the instructions contained in the Letter of
Transmittal delivered by the holder of such beneficial interests in
the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in
Global Notes contained in this Indenture and the Notes or otherwise
applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to Section
2.06(h).
(iii) Transfer of Beneficial Interests to Another Restricted
Global Note. A beneficial interest in any Restricted Global Note may
be transferred to a Person who takes delivery thereof in the form of
a beneficial interest in another Restricted Global Note if the
transfer complies with the requirements of Section 2.06(b)(ii) above
and the Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof; and
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<PAGE> 32
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a
Restricted Global Note for Beneficial Interests in the Unrestricted
Global Note. A beneficial interest in any Restricted Global Note may
be exchanged by any holder thereof for a beneficial interest in an
Unrestricted Global Note or transferred to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note if the exchange or transfer complies with
the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and
the holder of the beneficial interest to be transferred, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a broker-dealer, (2) a
Person participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a broker-dealer pursuant to
the Exchange Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a certificate
from such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet
been issued, the Issuers shall issue (and, in the case of the
Guarantee, the Guarantor shall issue) and, upon receipt of an
Authentication Order in accordance with Section 2.02, the Trustee
shall authenticate one or more Unrestricted Global Notes (with
corresponding Guarantees) in an aggregate
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<PAGE> 33
principal amount equal to the aggregate principal amount of
beneficial interests transferred pursuant to subparagraph (B) or (D)
above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof
in the form of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. If any holder of a beneficial interest
in a Restricted Global Note proposes to exchange such beneficial
interest for a Restricted Definitive Note or to transfer such
beneficial interest to a Person who takes delivery thereof in the
form of a Restricted Definitive Note, then, upon receipt by the
Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate to
the effect set forth in Exhibit B hereto, including the certifications in
item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule 903 or
Rule 904 under the Securities Act, a certificate to the effect set forth
in Exhibit B hereto, including the certifications in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the Securities Act
in accordance with Rule 144 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications in item
(3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable;
(F) if such beneficial interest is being transferred to the
Issuers or any of their Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(G) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h), and the Issuers shall execute (and, in the case of the
Guarantee, the Guarantor shall execute) and the Trustee shall
authenticate and deliver to the Person designated in the
instructions a Definitive Note (with its
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<PAGE> 34
corresponding Guarantee) in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c) shall be
registered in such name or names and in such authorized denomination
or denominations as the holder of such beneficial interest shall
instruct the Registrar through instructions from the Depositary and
the Participant or Indirect Participant. The Trustee shall deliver
such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a
beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c)(i) shall bear the Private Placement Legend and shall
be subject to all restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in
a Restricted Global Note may exchange such beneficial interest for
an Unrestricted Definitive Note or may transfer such beneficial
interest to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and
the holder of such beneficial interest, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable Letter
of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a Person
who is an affiliate (as defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a broker-dealer pursuant to
the Exchange Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement
Legend, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
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<PAGE> 35
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial
interest in an Unrestricted Global Note proposes to exchange such
beneficial interest for a Definitive Note or to transfer such
beneficial interest to a Person who takes delivery thereof in the
form of a Definitive Note, then, upon satisfaction of the conditions
set forth in Section 2.06(b)(ii), the Trustee shall cause the
aggregate principal amount of the applicable Global Note to be
reduced accordingly pursuant to Section 2.06(h), and the Issuers
shall execute (and, in the case of the Guarantee, the Guarantor
shall execute) and the Trustee shall authenticate and deliver to the
Person designated in the instructions a Definitive Note (with its
corresponding Guarantee) in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest
pursuant to this Section 2.06(c)(iii) shall be registered in such
name or names and in such authorized denomination or denominations
as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the
Participant or Indirect Participant. The Trustee shall deliver such
Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall not bear the
Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial Interests in
Global Notes.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive
Note proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive
Notes to a Person who takes delivery thereof in the form of a
beneficial interest in a Restricted Global Note, then, upon receipt
by the Registrar of the following documentation:
(A) if the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the certifications
in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with Rule 903
or Rule 904 under the Securities Act, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (2)
thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to
an Institutional Accredited Investor in reliance on an exemption from the
registration requirements of the Securities Act other than those listed in
subparagraphs (B) through (D) above, a certificate to the effect set forth
in Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable;
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<PAGE> 36
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case
of clause (A) above, the appropriate Restricted Global Note, in the
case of clause (B) above, the 144A Global Note, in the case of
clause (C) above, the Regulation S Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Restricted Definitive Note to a Person
who takes delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and
the Holder, in the case of an exchange, or the transferee, in the case of
a transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a broker-dealer pursuant to
the Exchange Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in
the form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to
the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained
herein and in the Private Placement Legend are no longer required in
order to maintain compliance with the Securities Act.
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Upon satisfaction of the conditions of any of the
subparagraphs in this Section 2.06(d)(ii), the Trustee shall cancel
the Definitive Notes and increase or cause to be increased the
aggregate principal amount of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive
Note may exchange such Note for a beneficial interest in an
Unrestricted Global Note or transfer such Definitive Notes to a
Person who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Note at any time. Upon receipt of
a request for such an exchange or transfer, the Trustee shall cancel
the applicable Unrestricted Definitive Note and increase or cause to
be increased the aggregate principal amount of one of the
Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B),
(ii)(D) or (iii) above at a time when an Unrestricted Global Note
has not yet been issued, the Issuers shall issue (and, in the case
of the Guarantee, the Guarantor shall issue) and, upon receipt of an
Authentication Order in accordance with Section 2.02, the Trustee
shall authenticate one or more Unrestricted Global Notes (with
corresponding Guarantees) in an aggregate principal amount equal to
the principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive
Notes. Any Restricted Definitive Note may be transferred to and
registered in the name of Persons who take delivery thereof in the
form of a Restricted Definitive Note if the Registrar receives the
following:
(A) if the transfer will be made pursuant to Rule 144A under
the Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of Exhibit
B hereto, including the certifications in item (2) thereof; and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act, then
the transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel required
by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive
Notes. Any Restricted Definitive Note may be exchanged by the Holder
thereof for an Unrestricted
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<PAGE> 38
Definitive Note or transferred to a Person or Persons who take
delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement and
the Holder, in the case of an exchange, or the transferee, in the case of
a transfer, certifies in the applicable Letter of Transmittal that it is
not (1) a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined in Rule
144) of the Issuers;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a broker-dealer pursuant
to the Exchange Registration Statement in accordance with the Registration
Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive Note,
a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably
acceptable to the Issuers to the effect that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such
Notes to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Note. Upon receipt of a request to register
such a transfer, the Registrar shall register the Unrestricted
Definitive Notes pursuant to the instructions from the Holder
thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Issuers shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Issuers,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Issuers shall execute and the Trustee shall
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<PAGE> 39
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Definitive Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange therefor
or substitution thereof) shall bear the legend in substantially the
following form:
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section 2.06
(and all Notes issued in exchange therefor or substitution thereof) shall
not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend
in substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON
AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS
GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE
TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND
(III) THIS GLOBAL
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NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE ISSUERS."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11. At any
time prior to such cancellation, if any beneficial interest in a Global Note is
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note or for Definitive Notes,
the principal amount of Notes represented by such Global Note shall be reduced
accordingly and an endorsement shall be made on such Global Note by the Trustee
or by the Depositary at the direction of the Trustee to reflect such reduction;
and if the beneficial interest is being exchanged for or transferred to a Person
who will take delivery thereof in the form of a beneficial interest in another
Global Note, such other Global Note shall be increased accordingly and an
endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the
Issuers shall execute (and in the case of the Guarantee, the
Guarantor shall execute) and the Trustee shall authenticate Global
Notes and Definitive Notes (each with corresponding Guarantees) upon
the Issuers' order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a
beneficial interest in a Global Note or to a Holder of a Definitive
Note for any registration of transfer or exchange, but the Issuers
may require payment of a sum sufficient to cover any transfer tax or
similar governmental charge payable in connection therewith (other
than any such transfer taxes or similar governmental charge payable
upon exchange or transfer pursuant to Sections 2.10, 3.06, 3.09,
4.11, 4.16 and 9.05).
(iii) The Registrar shall not be required to register the
transfer of or exchange any Note selected for redemption in whole or
in part, except the unredeemed portion of any Note being redeemed in
part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Issuers (and the
Guarantor, in the case of the Guarantee), evidencing the same debt,
and entitled to the same benefits under this Indenture, as the
Global Notes or Definitive Notes (each with a corresponding
Guarantee) surrendered upon such registration of transfer or
exchange.
(v) The Issuers shall not be required (A) to issue, to
register the transfer of or to exchange any Notes during a period
beginning at the opening of business 15 days before the day of any
selection of Notes for redemption under Section 3.02 and ending at
the close of business on the day of selection, (B) to register the
transfer of or to exchange any Note so selected for redemption in
whole or in part, except the unredeemed portion of any Note being
redeemed in part or (C) to register the transfer of or to exchange a
Note between a record date and the next succeeding Interest Payment
Date.
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<PAGE> 41
(vi) Prior to due presentment for the registration of a
transfer of any Note, the Trustee, any Agent and the Issuers may
deem and treat the Person in whose name any Note is registered as
the absolute owner of such Note for the purpose of receiving payment
of principal of and interest on such Notes and for all other
purposes, and none of the Trustee, any Agent or the Issuers shall be
affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and
Definitive Notes in accordance with the provisions of Section 2.02.
(viii) All certifications, certificates and Opinions of
Counsel required to be submitted to the Registrar pursuant to this
Section 2.06 to effect a registration of transfer or exchange may be
submitted by facsimile.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Issuers and the
Trustee receives evidence to its satisfaction of the destruction, loss or theft
of any Note, the Issuers shall issue (and, in the case of the Guarantee, the
Guarantor shall issue) and the Trustee, upon receipt of an Authentication Order,
shall authenticate a replacement Note (with a corresponding Guarantee) if the
Trustee's requirements are met. If required by the Trustee or the Issuers, an
indemnity bond must be supplied by the Holder that is sufficient in the judgment
of the Trustee and the Issuers to protect the Issuers, the Trustee, any Agent
and any authenticating agent from any loss that any of them may suffer if a Note
is replaced. The Issuers may charge for their expenses in replacing a Note.
Every replacement Note (with corresponding Guarantee) is an additional
obligation of the Issuers and the Guarantor and shall be entitled to all of the
benefits of this Indenture equally and proportionately with all other Notes
(with corresponding Guarantees) duly issued hereunder.
Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by the
Trustee except for those canceled by it, those delivered to it for cancellation,
those reductions in the interest in a Global Note effected by the Trustee in
accordance with the provisions, and those described in this Section as not
outstanding. Except as set forth in Section 2.09, a Note does not cease to be
outstanding because either of the Issuers, the Guarantor or an Affiliate of the
Issuers or the Guarantor holds the Note; however, Notes held by an Issuer, the
Guarantor or a Subsidiary of an Issuer or the Guarantor shall not be deemed to
be outstanding for purposes of Section 3.07(b).
If a Note is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section 4.01,
it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than an Issuer, a Subsidiary or an Affiliate of
any thereof) holds, on a redemption date or maturity date, money sufficient to
pay Notes payable on that date, then on and after that date such Notes shall be
deemed to be no longer outstanding and shall cease to accrue interest.
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Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount of
Notes have concurred in any direction, waiver or consent, Notes owned by an
Issuer, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with an Issuer, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that a Responsible Officer of the Trustee knows are so owned shall be
so disregarded.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the Issuers
may prepare (and, in the case of the Guarantee, the Guarantor may prepare) and
the Trustee, upon receipt of an Authentication Order, shall authenticate
temporary Notes (with corresponding Guarantees). Temporary Notes shall be
substantially in the form of certificated Notes but may have variations that the
Issuers considers appropriate for temporary Notes and as shall be reasonably
acceptable to the Trustee. Without unreasonable delay, the Issuers shall prepare
(and, in the case of the Guarantee, the Guarantor shall prepare) and the Trustee
shall authenticate definitive Notes (with corresponding Guarantees) in exchange
for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits of
this Indenture.
Section 2.11. Cancellation.
The Issuers at any time may deliver Notes to the Trustee for cancellation.
The Registrar and Paying Agent shall forward to the Trustee any Notes
surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for registration of
transfer, exchange, payment, replacement or cancellation and shall destroy
canceled Notes. Certification of the destruction of all canceled Notes shall be
delivered to the Issuers. The Issuers may not issue new Notes to replace Notes
that they have paid or that have been delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Issuers default in a payment of interest on the Notes, they shall
pay the defaulted interest in any lawful manner plus, to the extent lawful,
interest payable on the defaulted interest, to the Persons who are Holders on a
subsequent special record date, in each case at the rate provided in the Notes
and in Section 4.01. The Issuers shall notify the Trustee in writing of the
amount of defaulted interest proposed to be paid on each Note and the date of
the proposed payment. The Issuers shall fix or cause to be fixed each such
special record date and payment date; provided that no such special record date
shall be less than 10 days prior to the related payment date for such defaulted
interest. At least 15 days before the special record date, the Issuers (or, upon
the written request of the Issuers, the Trustee in the name and at the expense
of the Issuers) shall mail or cause to be mailed to Holders a notice that states
the special record date, the related payment date and the amount of such
interest to be paid.
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ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Issuers elect to redeem Notes pursuant to the optional redemption
provisions of Section 3.07, it shall furnish to the Trustee, at least 30 days
but not more than 60 days before a redemption date, an Officers' Certificate
setting forth (i) the clause of this Indenture pursuant to which the redemption
shall occur, (ii) the redemption date, (iii) the principal amount of Notes to be
redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an offer
to purchase at any time, the Trustee shall select the Notes to be redeemed or
purchased among the Holders of the Notes in compliance with the requirements of
the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Issuers in writing of the Notes
selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09, at least 30 days but not more
than 60 days before a redemption date, the Issuers shall mail or cause to be
mailed, by first class mail, a notice of redemption to each Holder whose Notes
are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
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(f) that, unless the Issuers default in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes.
At the Issuers' request, the Trustee shall give the notice of redemption
in the Issuers' name and at their expense; provided, however, that each of the
Issuers shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee give such
notice and setting forth the information to be stated in such notice as provided
in the preceding paragraph.
Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03, Notes
called for redemption become irrevocably due and payable on the redemption date
at the redemption price. A notice of redemption may not be conditional.
Section 3.05. Deposit of Redemption Price.
At or prior to 10:00 a.m., New York City time, on the redemption date, the
Issuers shall deposit with the Trustee or with the Paying Agent money sufficient
to pay the redemption price of and accrued interest on all Notes to be redeemed
on that date. The Trustee or the Paying Agent shall promptly return to the
Issuers any money deposited with the Trustee or the Paying Agent by the Issuers
in excess of the amounts necessary to pay the redemption price of, and accrued
interest on, all Notes to be redeemed.
If the Issuers comply with the provisions of the preceding paragraph, on
and after the redemption date, interest shall cease to accrue on the Notes or
the portions of Notes called for redemption. If a Note is redeemed on or after
an interest record date but on or prior to the related interest payment date,
then any accrued and unpaid interest shall be paid to the Person in whose name
such Note was registered at the close of business on such record date. If any
Note called for redemption shall not be so paid upon surrender for redemption
because of the failure of the Issuers to comply with the preceding paragraph,
interest shall be paid on the unpaid principal, from the redemption date until
such principal is paid, and to the extent lawful on any interest not paid on
such unpaid principal, in each case at the rate provided in the Notes and in
Section 4.01.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Issuers shall issue
and, upon the Issuers' written request, the Trustee shall authenticate for the
Holder at the expense of the Issuers a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the Issuers
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to April 1, 2004. Thereafter, the Issuers shall have the option to redeem
the Notes, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus
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accrued and unpaid interest thereon, if any, to the applicable redemption date,
if redeemed during the twelve-month period beginning on April 1 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004.................. 104.313%
2005.................. 102.875%
2006.................. 101.438%
2007 and thereafter... 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at
any time prior to April 1, 2002, the Issuers may, on any one or more occasions,
redeem up to 35% of the aggregate principal amount of the Notes originally
issued under this Indenture on a pro rata basis (or nearly as pro rata as
practicable) at a redemption price of 108.625% of the principal amount thereof,
plus accrued and unpaid interest to the redemption date, with the net cash
proceeds of one or more Equity Offerings; provided that
(1) at least 65% of the aggregate principal amount of Notes
originally issued under this Indenture remains outstanding immediately
after the occurrence of such redemption (excluding Notes held by the
Company and its Subsidiaries and the Guarantor and its Subsidiaries); and
(2) the redemption must occur within 60 days of the date of the
closing of such Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06.
Section 3.08. Mandatory Redemption.
Except as otherwise provided in Section 4.11 or Section 4.16 below, the
Issuers shall not be required to make mandatory redemption payments with respect
to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that the Issuers shall be required to commence an offer to
all Holders to purchase Notes pursuant to Section 4.11 (an "Asset Sale Offer"),
they shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business Days
following its commencement and no longer, except to the extent that a longer
period is required by applicable law (the "Offer Period"). No later than five
Business Days after the termination of the Offer Period (the "Purchase Date"),
the Issuers shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.11 (the "Offer Amount") or, if less than the
Offer Amount has been tendered, all Notes tendered in response to the Asset Sale
Offer. Payment for any Notes so purchased shall be made in the same manner as
interest payments are made.
If the Purchase Date is on or after an interest record date and on or
before the related interest payment date, any accrued and unpaid interest shall
be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no Special Interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
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Upon the commencement of an Asset Sale Offer the Issuers shall send, by
first class mail, a notice to the Trustee and each of the Holders, with a copy
to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.11 and the length of time the Asset Sale Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrue interest;
(d) that, unless the Issuers default in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrue
interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer or may elect to have Notes purchased in integral multiples of $1,000
only;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Issuers, a depositary, if appointed by
the Issuers, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Issuers, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Issuers shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Issuers so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Issuers shall, to the extent lawful,
accept for payment, on a pro rata basis to the extent necessary, the Offer
Amount of Notes or portions thereof tendered pursuant to the Asset Sale Offer or
if less than the Offer Amount has been tendered, all Notes tendered, and shall
deliver to the Trustee an Officers' Certificate stating that such Notes or
portions thereof were accepted for payment by the Issuers in accordance with the
terms of this Section 3.09. The Issuers, the Depositary or the Paying Agent, as
the case may be, shall promptly (but in any case not later than five days after
the Purchase Date) mail or deliver to each tendering Holder an amount equal to
the purchase price of the Notes tendered by such Holder and accepted by the
Issuers for purchase, and the Issuers shall promptly issue a new Note, and the
Trustee, upon written request from the Issuers shall authenticate and mail or
deliver such new Note to such Holder, in a principal amount equal to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Issuers to the
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Holder thereof. The Issuers shall publicly announce the results of the Asset
Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any purchase
pursuant to this Section 3.09 shall be made pursuant to the provisions of
Sections 3.01 through 3.06.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Issuers shall pay or cause to be paid the principal of, premium, if
any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Issuers or a Subsidiary thereof,
holds as of 10:00 a.m. New York City time on the due date money deposited by the
Issuers in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Issuers shall pay all
Special Interest, if any, in the same manner on the dates and in the amounts set
forth in the Registration Rights Agreement.
The Issuers shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal at the rate equal to
1% per annum in excess of the then applicable interest rate on the Notes to the
extent lawful; they shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
Section 4.02. Maintenance of Office or Agency.
The Issuers shall maintain in the Borough of Manhattan, the City of New
York, an office or agency (which may be an office of the Trustee or an affiliate
of the Trustee, Registrar or co-registrar) where Notes may be surrendered for
registration of transfer or for exchange and where notices and demands to or
upon the Issuers in respect of the Notes and this Indenture may be served. The
Issuers shall give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time the Issuers
shall fail to maintain any such required office or agency or shall fail to
furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee.
The Issuers may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Issuers
of their obligation to maintain an office or agency in the Borough of Manhattan,
the City of New York for such purposes. The Issuers shall give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
The Issuers hereby designate the Harris Trust Company of New York, an
affiliate of the Trustee as one such office or agency of the Issuers in
accordance with Section 2.03.
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Section 4.03. Reports.
Whether or not required by the Commission, so long as any Notes are
outstanding, the Issuers and the Guarantor shall furnish to the Holders of
Notes, within the time periods specified in the Commission's rules and
regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Issuers and the Guarantor were required to file such Forms,
including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information
only, a report on the annual financial statements by the Issuers'
certified independent accountants and the Guarantor's certified
independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Issuers or the Guarantor were required to
file such reports.
If the Issuers or the Guarantor has designated any of its Subsidiaries as
Unrestricted Subsidiaries, then the quarterly and annual financial information
required by the preceding paragraph shall include a reasonably detailed
presentation, either on the face of the financial statements or in the footnotes
thereto, and in Management's Discussion and Analysis of Financial Condition and
Results of Operations, of the financial condition and results of operations of
the Issuers or the Guarantor, as the case may be, and their respective
Restricted Subsidiaries separate from the financial condition and results of
operations of the Unrestricted Subsidiaries of the Issuers or the Guarantor, as
the case may be.
In addition, whether or not required by the Commission, the Issuers and
the Guarantor shall file a copy of all of the information and reports referred
to in clauses (1) and (2) above with the Commission for public availability
within the time periods specified in the Commission's rules and regulations
(unless the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request.
Section 4.04. Compliance Certificate.
(a) Each of the Company and the Guarantor shall deliver to the Trustee,
within 90 days after the end of each fiscal year, an Officers' Certificate
stating that a review of the activities of the Company and its Subsidiaries and
the Guarantor and its Subsidiaries, respectively, during the preceding fiscal
year have been made under the supervision of the signing Officers with a view to
determining whether the Company or the Guarantor, as the case may be, has kept,
observed, performed and fulfilled its obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge the Company or the Guarantor, as the case may be,
has kept, observed, performed and fulfilled each and every covenant contained in
this Indenture and is not in default in the performance or observance of any of
the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company or the
Guarantor, as the case may be, is taking or proposes to take with respect
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of
or interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company or the Guarantor, as the
case may be, is taking or proposes to take with respect thereto.
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(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants or the
Guarantor's independent public accountants, as the case may be, (each of whom
shall be a firm of established national reputation) that in making the
examination necessary for certification of such financial statements, nothing
has come to their attention that would lead them to believe that the Company or
the Guarantor, as the case may be, has violated any provisions of Article 4 or
Article 5 or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation. In the event that, after the Company or the
Guarantor, as the case may be, has used its reasonable best efforts to obtain
the written statement of the Company's independent public accountants or the
Guarantor's independent public accountants, as the case may be, required by the
provisions of this paragraph, such statement cannot be obtained, the Company or
the Guarantor, as the case may be, shall deliver, in satisfaction of its
obligations under this Section 4.04, an Officers' Certificate (A) certifying
that it has used its reasonable best efforts to obtain such required statement
but was unable to do so and (B) attaching the written statement of the Company's
accountants or the Guarantor's accountants, as the case may be, that the Company
or the Guarantor, as the case may be, received in lieu thereof.
(c) Each of the Company and the Guarantor shall, so long as any of the
Notes are outstanding, deliver to the Trustee, forthwith upon any Officer
becoming aware of any Default or Event of Default, an Officers' Certificate
specifying such Default or Event of Default and what action the Company or the
Guarantor, as the case may be, is taking or proposes to take with respect
thereto.
Section 4.05. Taxes.
Each of the Company and the Guarantor shall pay, and shall cause each of
their Subsidiaries to pay, prior to delinquency, all material taxes,
assessments, and governmental levies except such as are contested in good faith
and by appropriate proceedings or where the failure to effect such payment is
not adverse in any material respect to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
Each of the Issuers and the Guarantor covenants (to the extent that it may
lawfully do so) that it shall not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, that may
affect the covenants or the performance of this Indenture; and each of the
Issuers and the Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other payment or
distribution on account of the Company's, the Guarantor's or any of their
Restricted Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger or
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consolidation involving the Company, the Guarantor or any of their
Restricted Subsidiaries) or to the direct or indirect holders of the
Company's, the Guarantor's or any of their Restricted Subsidiaries' Equity
Interests in their capacity as such (other than dividends or distributions
payable in Equity Interests (other than Disqualified Stock) of the Company
or the Guarantor or, in the case of the Company and its Restricted
Subsidiaries, to the Company or a Restricted Subsidiary of the Company or
in the case of the Guarantor and its Restricted Subsidiaries, to the
Company, the Guarantor or a Restricted Subsidiary of the Company or the
Guarantor);
(b) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company
or the Guarantor or any direct or indirect parent of the Company or the
Guarantor or any Restricted Subsidiary of the Company or the Guarantor
(other than, in the case of the Company and its Restricted Subsidiaries,
any such Equity Interests owned by the Company or any Restricted
Subsidiary of the Company or, in the case of the Guarantor and its
Restricted Subsidiaries, any such Equity Interests owned by the Company,
the Guarantor or any Restricted Subsidiary of the Company or the
Guarantor); or
(c) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or the Guarantees (other than the Notes or the
Guarantees), except a payment of interest or principal at the Stated
Maturity thereof (all such payments and other actions set forth in clauses
(a) through (c) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such
Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Leverage Ratio test set forth in the first paragraph of Section 4.10;
and
(3) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company, the Guarantor and each
of their Restricted Subsidiaries after the date of this Indenture
(excluding Restricted Payments permitted by clauses (2), (3), (4), (5),
(6), (7) and (8) of the next succeeding paragraph), shall not exceed, at
the date of determination, the sum of:
(a) an amount equal to 100% of the combined Consolidated
EBITDA of the Company and the Guarantor since the date of this
Indenture to the end of the Company's and the Guarantor's most
recently ended full fiscal quarter for which internal financial
statements are available, taken as a single accounting period, less
the product of 1.2 times the combined Consolidated Interest Expense
of the Company and the Guarantor since the date of this Indenture to
the end of the Company's and the Guarantor's most recently ended
full fiscal quarter for which internal financial statements are
available, taken as a single accounting period, plus
(b) an amount equal to 100% of Capital Stock Sale Proceeds
less any such Capital Stock Sale Proceeds used in connection with
(i) an Investment made pursuant to
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clause (6) of the definition of "Permitted Investments" or (ii) the
incurrence of Indebtedness pursuant to clause (10) of Section 4.10,
plus
(c) $100.0 million.
So long as no Default has occurred and is continuing or would be caused
thereby, the preceding provisions shall not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of this Indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or the
Guarantor in exchange for, or out of the net proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company or the
Guarantor) of, Equity Interests of the Company or the Guarantor (other
than Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause
(3) (b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company, the Guarantor or any of their
Restricted Subsidiaries with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
(4) regardless of whether a Default then exists, the payment of any
dividend or distribution to the extent necessary to permit direct or
indirect beneficial owners of shares of Capital Stock of the Company or
the Guarantor to pay federal, state or local income tax liabilities that
would arise solely from income of the Company or the Guarantor or any of
their Restricted Subsidiaries, as the case may be, for the relevant
taxable period and attributable to them solely as a result of the Company
or the Guarantor (and any intermediate entity through which the Holder
owns such shares) or any of its Restricted Subsidiaries being a limited
liability company, partnership or similar entity for federal income tax
purposes;
(5) regardless of whether a Default then exists, the payment of any
dividend by a Restricted Subsidiary of the Company or the Guarantor to the
holders of its common Equity Interests on a pro rata basis;
(6) the payment of any dividend on the Company Preferred Stock or
the redemption, repurchase, retirement or other acquisition of the Company
Preferred Stock in an amount not in excess of its aggregate liquidation
value;
(7) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or the Guarantor held by
any member of the Company's or the Guarantor's management pursuant to any
management equity subscription agreement or stock option agreement in
effect as of the date of this Indenture; provided that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $10 million in any fiscal year; and
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(8) payment of fees in connection with any acquisition, merger or
similar transaction in an amount that does not exceed an amount equal to
1.25% of the transaction value of such acquisition, merger or similar
transaction.
The amount of all Restricted Payments (other than cash) shall be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by the Company, the Guarantor or any of
their Restricted Subsidiaries pursuant to the Restricted Payment. The fair
market value of any assets or securities that are required to be valued by this
covenant shall be determined by the Board of Directors of the Company or the
Guarantor, as the case may be, whose resolution with respect thereto shall be
delivered to the Trustee. Such Board of Director's determination must be based
upon an opinion or appraisal issued by an accounting, appraisal or investment
banking firm of national standing if the fair market value exceeds $100 million.
Not later than the date of making any Restricted Payment, the Company or the
Guarantor, as the case may be shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal required by
this Indenture.
Section 4.08. Investments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(1) make any Restricted Investment; or
(2) allow any Restricted Subsidiary of the Company or the Guarantor
to become an Unrestricted Subsidiary,
unless, in each case:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) the Company would, at the time of, and after giving effect to,
such Restricted Investment or such designation of a Restricted Subsidiary
as an Unrestricted Subsidiary, have been permitted to incur at least $1.00
of additional Indebtedness pursuant to the Leverage Ratio test set forth
in the first paragraph of Section 4.10.
Any designation of a Subsidiary of the Company or the Guarantor as an
Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the preceding conditions and was permitted by this Section 4.08.
If, at any time, any Unrestricted Subsidiary would fail to meet the requirements
as an Unrestricted Subsidiary described in the definition of "Unrestricted
Subsidiary," it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of this Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company or the Guarantor
as of such date and, if such Indebtedness is not permitted to be incurred as of
such date under Section 4.10, the Company or the Guarantor, as the case may be,
shall be in default. The Board of Directors of the Company and the Guarantor may
at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company or the Guarantor,
respectively, of any outstanding Indebtedness of such Unrestricted Subsidiary
and such designation shall
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only be permitted if (1) such Indebtedness is permitted under the covenant
described under Section 4.10 calculated on a pro forma basis as if such
designation had occurred at the beginning of the Reference Period; and (2) no
Default or Event of Default would be in existence following such designation.
Section 4.09. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company and the Guarantor shall not, directly or indirectly, create or
permit to exist or become effective any encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company or the Guarantor, as the
case may be, to:
(1) pay dividends or make any other distributions on its Capital
Stock to the Company or any of its Restricted Subsidiaries or to the
Guarantor or any of its Restricted Subsidiaries, or with respect to any
other interest or participation in, or measured by, its profits, or pay
any indebtedness owed to the Company or any of its Restricted Subsidiaries
or to the Guarantor or any of its Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries or to the Guarantor or any of its Restricted Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any
of its Restricted Subsidiaries or to the Guarantor or any of its
Restricted Subsidiaries.
However, the preceding restrictions shall not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of this Indenture
(including, without limitation, the Credit Facilities) and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof; provided that such amendments,
modifications, restatements, renewals, increases, supplements,
refinancings, replacements or refinancings are no more restrictive, taken
as a whole, with respect to such dividend and other payment restrictions
than those contained in such Existing Indebtedness, as in effect on the
date of this Indenture;
(2) this Indenture, the Notes and the Other Notes;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries or to
the Guarantor or any of its Restricted Subsidiaries as in effect at the
time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired; provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred;
(5) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the preceding paragraph;
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(7) any agreement for the sale or other disposition of a Restricted
Subsidiary of either the Company or the Guarantor that restricts
distributions by such Restricted Subsidiary pending its sale or other
disposition;
(8) Permitted Refinancing Indebtedness; provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under Section
4.14 that limit the right of the Company or any of its Restricted
Subsidiaries or the Guarantor or any of its Restricted Subsidiaries to
dispose of the assets subject to such Lien;
(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business;
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(12) restrictions contained in the terms of Indebtedness permitted
to be incurred under Section 4.10; provided that such restrictions are no
more restrictive than the terms contained in the Credit Facilities as in
effect on the Issue Date; and
(13) restrictions that are not materially more restrictive than
customary provisions in comparable financings and the management of the
Company determines that such restrictions will not materially impair the
Company's ability to make payments as required under the Notes.
Section 4.10. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt), and the Company and the Guarantor shall
not issue any Disqualified Stock and shall not permit any of their Restricted
Subsidiaries to issue any shares of preferred stock unless the Leverage Ratio
would have been not greater than 8.75 to 1.0 determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of the most recently ended fiscal
quarter.
So long as no Default shall have occurred and be continuing or would be
caused thereby, the first paragraph of this covenant shall not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by the Company and its Restricted Subsidiaries
and the Guarantor and its Restricted Subsidiaries of Indebtedness under
the Credit Facilities; provided that the aggregate principal amount of all
Indebtedness of the Company and its Restricted Subsidiaries and the
Guarantor and its Restricted Subsidiaries outstanding under all Credit
Facilities after giving effect to such incurrence does not exceed an
amount equal to $3.5 billion less the aggregate amount of all Net Proceeds
of Asset Sales applied by the Company or any of its
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Subsidiaries or the Guarantor or any of its Subsidiaries, as the case may
be, in the case of an Asset Sale since the date of this Indenture to repay
Indebtedness under a Credit Facility pursuant to Section 4.11;
(2) the incurrence by the Company and its Restricted Subsidiaries
and the Guarantor and its Restricted Subsidiaries of Existing Indebtedness
(other than the Credit Facilities);
(3) the incurrence on the Issue Date by the Company and its
Restricted Subsidiaries and the Guarantor and its Restricted Subsidiaries
of Indebtedness represented by the Notes, the Other Notes and the related
Guarantees;
(4) the incurrence by the Company or any of its Restricted
Subsidiaries or the Guarantor or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case, incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement (including, without limitation, the cost of design,
development, construction, acquisition, transportation, installation,
improvement, and migration) of Productive Assets of the Company or any of
its Restricted Subsidiaries or the Guarantor or any of its Restricted
Subsidiaries, in an aggregate principal amount not to exceed $75 million
at any time outstanding;
(5) the incurrence by the Company or any of its Restricted
Subsidiaries or the Guarantor or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace, in whole or in part,
Indebtedness (other than intercompany Indebtedness) that was permitted by
this Indenture to be incurred under the first paragraph of this covenant
or clauses (2) or (3) of this paragraph;
(6) the incurrence by the Company or any of its Restricted
Subsidiaries or the Guarantor or any of its Restricted Subsidiaries, as
the case may be, of intercompany Indebtedness between or among the Company
and any of its Wholly Owned Restricted Subsidiaries, or the Guarantor or
any of its Restricted Subsidiaries, respectively; provided that except for
the Mirror Note, this clause does not permit Indebtedness between the
Company or any of its Restricted Subsidiaries, as creditor or debtor, as
the case may be, and the Guarantor or any of its Restricted Subsidiaries,
as debtor or creditor, as the case may be, unless otherwise permitted by
the Indentures; provided, further, that:
(a) if the Company or the Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated to
the prior payment in full in cash of all Obligations with respect to
the Notes in the case of the Company, or the Guarantee of such
Guarantor, in the case of the Guarantor; and
(b) (i) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a
Person other than the Company or a Wholly Owned Restricted
Subsidiary thereof or the Guarantor or a Wholly Owned Restricted
Subsidiary thereof and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Wholly
Owned Restricted Subsidiary thereof or the Guarantor or a Wholly
Owned Restricted Subsidiary thereof, shall be deemed, in each case,
to constitute an incurrence of such Indebtedness by the Company or
any of its Restricted Subsidiaries or the Guarantor or any of its
Restricted Subsidiaries, respectively, as the case may be, that was
not permitted by this clause (6);
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(7) the incurrence by the Company or any of its Restricted
Subsidiaries, or the Guarantor or any of its Restricted Subsidiaries, of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of the Indentures to be outstanding;
(8) the guarantee by the Company or the Guarantor of Indebtedness of
the Company or a Restricted Subsidiary of the Company, or Indebtedness of
the Guarantor or a Restricted Subsidiary of the Guarantor, that was
permitted to be incurred by another provision of this Section 4.10;
(9) the incurrence by the Company or any of its Restricted
Subsidiaries, or the Guarantor or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount at any time
outstanding, not to exceed $300 million;
(10) the incurrence by the Company or any of its Restricted
Subsidiaries, or the Guarantor or any of its Restricted Subsidiaries, of
additional Indebtedness in an aggregate principal amount at any time
outstanding, not to exceed 200% of the net cash proceeds received by the
Company from the sale of its Equity Interests (other than Disqualified
Stock) after the date of this Indenture to the extent such net cash
proceeds have not been applied to make Restricted Payments or to effect
other transactions pursuant to Section 4.07 or to make Permitted
Investments pursuant to clause (6) of the definition thereof;
(11) the accretion or amortization of original issue discount and
the write up of Indebtedness in accordance with purchase accounting; and
(12) Indebtedness under the Mirror Note.
For purposes of determining compliance with this Section 4.10, in the
event that an item of proposed Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (1) through (12) above,
or is entitled to be incurred pursuant to the first paragraph of this covenant,
the Company or the Guarantor, as the case may be, shall be permitted to classify
and from time to time to reclassify such item of Indebtedness on the date of its
incurrence in any manner that complies with this covenant. For avoidance of
doubt, Indebtedness incurred pursuant to a single agreement, instrument,
program, facility or line of credit may be classified as Indebtedness arising in
part under one of the clauses listed above, and in part under any one or more of
the clauses listed above, to the extent that such Indebtedness satisfies the
criteria for such clauses.
Notwithstanding the foregoing, in no event shall any Restricted Subsidiary
of the Company or the Guarantor consummate a Subordinated Debt Financing or a
Preferred Stock Financing. A "Subordinated Debt Financing" or a "Preferred Stock
Financing", as the case may be, with respect to any Restricted Subsidiary of the
Company or the Guarantor shall mean a public offering or private placement
(whether pursuant to Rule 144A under the Securities Act or otherwise) of
Subordinated Notes or preferred stock (whether or not such preferred stock
constitutes Disqualified Stock), as the case may be, of such Restricted
Subsidiary to one or more purchasers (other than to one or more Affiliates of
the Company or the Guarantor). "Subordinated Notes" with respect to any
Restricted Subsidiary of the Company or the Guarantor shall mean Indebtedness of
such Restricted Subsidiary that is contractually subordinated in right of
payment to any other Indebtedness of such Restricted Subsidiary (including,
without limitation, Indebtedness under the Credit Facilities). The foregoing
limitation shall not apply to (i) any Indebtedness or preferred stock of any
Person existing at the time such Person is merged with or into or became a
Subsidiary of the Company or the Guarantor; provided that such Indebtedness or
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preferred stock was not incurred or issued in connection with, or in
contemplation of, such Person merging with or into, or becoming a Subsidiary of,
the Company or the Guarantor and (ii) any Indebtedness or preferred stock of a
Restricted Subsidiary issued in connection with, and as part of the
consideration for, an acquisition, whether by stock purchase, asset sale, merger
or otherwise, in each case involving such Restricted Subsidiary, which
Indebtedness or preferred stock is issued to the seller or sellers of such stock
or assets; provided that such Restricted Subsidiary is not obligated to register
such Indebtedness or preferred stock under the Securities Act or obligated to
provide information pursuant to Rule 144A under the Securities Act.
Section 4.11. Limitation on Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) the Company, the Guarantor or a Restricted Subsidiary of the
Company or the Guarantor, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets or Equity Interests issued or sold or otherwise disposed of;
(2) such fair market value is determined by the Company's or the
Guarantor's Board of Directors, as the case may be, and evidenced by a
resolution of such Board of Directors set forth in an Officers'
Certificate delivered to the Trustee; and
(3) at least 75% of the consideration therefor received by the
Company, the Guarantor or such Restricted Subsidiary is in the form of
cash, Cash Equivalents or readily marketable securities.
For purposes of this Section 4.11, each of the following shall be deemed
to be cash:
(a) any liabilities (as shown on the Company's, the Guarantor's or
such Restricted Subsidiary's most recent balance sheet) of the Company,
the Guarantor or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the
Notes or the Guarantees) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the
Company, the Guarantor or such Restricted Subsidiary from further
liability;
(b) any securities, notes or other obligations received by the
Company, the Guarantor or any such Restricted Subsidiary from such
transferee that are converted by the Company, the Guarantor or such
Restricted Subsidiary into cash, Cash Equivalents or readily marketable
securities within 60 days after receipt thereof (to the extent of the
cash, Cash Equivalents or readily marketable securities received in that
conversion); and
(c) Productive Assets.
Within 365 days after the receipt of any Net Proceeds from an Asset Sale,
the Company, the Guarantor or a Restricted Subsidiary of the Company or the
Guarantor, as the case may be, may apply such Net Proceeds at its option:
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(1) to repay debt under the Credit Facilities or any other
Indebtedness of the Restricted Subsidiaries of the Company (other than
Indebtedness represented by a guarantee of a Restricted Subsidiary of the
Company or the Guarantor); or
(2) to invest in Productive Assets; provided that any Net Proceeds
which the Company, the Guarantor, or a Restricted Subsidiary of the
Company or the Guarantor, as the case may be, has committed to invest in
Productive Assets within 365 days of the applicable Asset Sale may be
invested in Productive Assets within two years of such Asset Sale.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph shall constitute "Excess Proceeds." When the
aggregate amount of Excess Proceeds exceeds $25.0 million, the Issuers shall
make an Asset Sale Offer to all Holders of Notes and all holders of other
Indebtedness that is pari passu with the Notes containing provisions requiring
offers to purchase or redeem with the proceeds of sales of assets to purchase
the maximum principal amount of Notes and such other pari passu Indebtedness
that may be purchased out of the Excess Proceeds (which amount includes the
entire amount of the Net Proceeds). The offer price in any Asset Sale Offer
shall be payable in cash and equal to 100% of principal amount plus accrued and
unpaid interest, if any, to the date of purchase. If any Excess Proceeds remain
after consummation of an Asset Sale Offer, the Company may use such Excess
Proceeds for any purpose not otherwise prohibited by this Indenture. If the
aggregate principal amount of Notes and such other pari passu Indebtedness
tendered into such Asset Sale Offer exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other pari passu Indebtedness to be
purchased on a pro rata basis. Upon completion of each Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
In the event that the Issuers shall be required to commence an offer to
Holders to purchase Notes pursuant to this Section 4.11, they shall follow the
procedures specified in Section 3.09.
Section 4.12. Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company or the Guarantor may enter into a sale and leaseback
transaction if:
(1) the Company or the Guarantor, as applicable, could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt relating
to such sale and leaseback transaction under the Leverage Ratio test in
the first paragraph of Section 4.10 and (b) incurred a Lien to secure such
Indebtedness pursuant to Section 4.14; and
(2) the transfer of assets in that sale and leaseback transaction is
permitted by, and the Company or the Guarantor, as the case may be,
applies the proceeds of such transaction in compliance with, the covenant
described above under Section 4.11.
The foregoing restrictions do not apply to a sale and leaseback
transaction if the lease is for a period, including renewal rights, of not in
excess of three years.
Section 4.13. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to, or
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sell, lease, transfer or otherwise dispose of any of its properties or assets
to, or purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each, an "Affiliate Transaction"),
unless:
(1) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary or to the
Guarantor or the relevant Restricted Subsidiary, than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary or the Guarantor or such Restricted Subsidiary, as
the case may be, with an unrelated Person; and
(2) the Company, or the Guarantor, as the case may be, delivers to
the Trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $15.0 million, a resolution of the Board of Directors of
the Company or a resolution of the Board of Directors of the
Guarantor, as the case may be, set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with this
covenant and that such Affiliate Transaction has been approved by a
majority of the members of such Board of Directors; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $50.0 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of
national standing.
The following items shall not be deemed to be Affiliate Transactions and,
therefore, shall not be subject to the provisions of the prior paragraph:
(1) existing employment agreement entered into by the Company, the
Guarantor or any of their Subsidiaries and any employment agreement
entered into by the Company or any of its Restricted Subsidiaries or, any
employment agreement entered into by the Guarantor or any of its
Restricted Subsidiaries in the ordinary course of business and consistent
with the past practice of the Company or such Restricted Subsidiary or the
Guarantor or such Restricted Subsidiary, as the case may be;
(2) transactions between or among the Company and/or its Restricted
Subsidiaries and the transactions between or among the Guarantor and/or
its Restricted Subsidiaries;
(3) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company or the Guarantor, as the case may be,
and customary indemnification and insurance arrangements in favor of
directors, regardless of affiliation with the Company, the Guarantor or
any of their Restricted Subsidiaries;
(4) payment of management fees pursuant to management agreements
either (A) existing on the Issue Date or (B) entered into after the Issue
Date, to the extent that such management agreements provide for percentage
fees no higher than the percentage fees existing under the management
agreements existing on the Issue Date;
(5) Restricted Payments that are permitted by Section 4.07; and
(6) Permitted Investments.
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Section 4.14. Liens.
The Company and the Guarantor shall not, directly or indirectly, create,
incur, assume or suffer to exist any Lien of any kind securing Indebtedness,
Attributable Debt or trade payables on any asset now owned or hereafter
acquired, except Permitted Liens.
Section 4.15. Corporate Existence.
Subject to Article 5, each of the Company and the Guarantor shall do or
cause to be done all things necessary to preserve and keep in full force and
effect (i) its corporate existence, and the corporate, partnership or other
existence of each of its Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of the
Company, the Guarantor or any such Subsidiary and (ii) the rights (charter and
statutory), licenses and franchises of the Company, the Guarantor and their
Subsidiaries; provided, however, that neither the Company nor the Guarantor
shall be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of their Subsidiaries (other
than Charter Capital), if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries and the Guarantor and its Subsidiaries, taken
as a whole, and that the loss thereof is not adverse in any material respect to
the Holders of the Notes.
Section 4.16. Repurchase at the Option of Holders upon a Change of Control.
If a Change of Control occurs, each Holder of Notes shall have the right
to require the Issuers to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of that Holder's Notes pursuant to a Change of
Control Offer. In the Change of Control Offer, the Issuers shall offer (a
"Change of Control Offer") a payment (the "Change of Control Payment") in cash
equal to 101% of the aggregate principal amount of Notes repurchased plus
accrued and unpaid interest thereon, if any, to the date of purchase.
Within ten days following any Change of Control, the Issuers shall mail a
notice to each Holder (with a copy to the Trustee) describing the transaction or
transactions that constitute the Change of Control and stating:
(a) the purchase price and the purchase date, which shall not exceed
30 Business Days from the date such notice is mailed (the "Change of
Control Payment Date");
(b) that any Note not tendered shall continue to accrue interest;
(c) that, unless the Issuers default in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Payment Date;
(d) that Holders electing to have any Notes purchased pursuant to a
Change of Control Offer shall be required to surrender the Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date;
(e) that Holders shall be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change
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of Control Payment Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of Notes
delivered for purchase, and a statement that such Holder is withdrawing
his election to have the Notes purchased; and
(f) that Holders whose Notes are being purchased only in part shall
be issued new Notes equal in principal amount to the unpurchased portion
of the Notes surrendered, which unpurchased portion must be equal to
$1,000 in principal amount or an integral multiple thereof.
The Issuers shall comply with the requirements of Rule 14e-1 under the
Exchange Act (or any successor rules) and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Issuers shall, to the extent
lawful:
(a) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(b) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered;
and
(c) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount of Notes or portions thereof being purchased by the
Issuers.
The Paying Agent shall promptly pay to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee shall promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; provided that each such new Note shall be in a principal
amount of $1,000 or an integral multiple thereof. The Company shall publicly
announce the results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
The provisions described above that require the Issuers to make a Change
of Control Offer following a Change of Control shall be applicable regardless of
whether or not any other provisions in this Indenture are applicable. Except as
described above with respect to a Change of Control, this Indenture does not
contain provisions that permit the Holders of the Notes to require that the
Issuers repurchase or redeem the Notes in the event of a takeover,
recapitalization or similar transaction.
Notwithstanding any other provision of this Section 4.16, the Issuers
shall not be required to make a Change of Control Offer upon a Change of Control
if a third party makes the Change of Control Offer in the manner, at the times
and otherwise in compliance with the requirements set forth in this Indenture
applicable to a Change of Control Offer made by the Issuers and purchases all
Notes validly tendered and not withdrawn under such Change of Control Offer.
Section 4.17. Limitations on Issuances of Guarantees of Indebtedness.
The Company shall not permit any of its Restricted Subsidiaries, directly
or indirectly, and the Guarantor shall not permit any of its Restricted
Subsidiaries, directly or indirectly, to Guarantee or pledge any assets to
secure the payment of any other Indebtedness of the Company or the Guarantor, as
the case may be, except in respect of the Credit Facilities (the "Guaranteed
Indebtedness") unless (i) such Restricted Subsidiary of the Company or the
Guarantor, as the case may be, simultaneously executes and delivers a
supplemental indenture providing for the Guarantee (a "Subsidiary Guarantee") of
the payment
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of the Notes by such Restricted Subsidiary and (ii) until one year after all the
Notes have been paid in full in cash, such Restricted Subsidiary waives and will
not in any manner whatsoever claim or take the benefit or advantage of, any
rights of reimbursement, indemnity or subrogation or any other rights against
the Company, the Guarantor or any other Restricted Subsidiary of the Company or
the Guarantor as a result of any payment by such Restricted Subsidiary under its
Subsidiary Guarantee; provided that this paragraph shall not be applicable to
any Guarantee or any Restricted Subsidiary that existed at the time such Person
became a Restricted Subsidiary and was not Incurred in connection with, or in
contemplation of, such Person becoming a Restricted Subsidiary. If the
Guaranteed Indebtedness is subordinated to the Notes, then the Guarantee of such
Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee at
least to the extent that the Guaranteed Indebtedness is subordinated to the
Notes.
Section 4.18. Payments for Consent.
The Company shall not, and shall not permit any of its Subsidiaries to,
and the Guarantor shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of this Indenture or the Notes
unless such consideration is offered to be paid and is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
Section 4.19. Application of Fall-Away Covenants.
During any period of time that (a) the Notes have Investment Grade Ratings
from both Rating Agencies and (b) no Default or Event of Default has occurred
and is continuing, the Company and its Restricted Subsidiaries and the Guarantor
and its Restricted Subsidiaries shall not be subject to the provisions of
Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13 and clause (4) of the first
paragraph of Section 5.01 (collectively, the "Suspended Covenants"). In the
event that the Company and its Restricted Subsidiaries are not subject to the
Suspended Covenants for any period of time as a result of the preceding sentence
and, subsequently, one or both of the Rating Agencies withdraws its ratings or
downgrades the ratings assigned to the Notes below the required Investment Grade
Ratings or a Default or Event of Default occurs and is continuing, then the
Company and its Restricted Subsidiaries and the Guarantor and its Restricted
Subsidiaries shall thereafter again be subject to the Suspended Covenants and
compliance with the Suspended Covenants with respect to the Restricted Payments
made after the time of such withdrawal, downgrade, Default or Event of Default
will be calculated in accordance with the terms of Section 4.07 as though such
covenant had been in effect during the entire period of time from the Issue
Date.
Section 4.20. Impairment of Security Interest.
Neither the Company, the Guarantor nor any of their Subsidiaries shall
take or omit to take any action which action or omission would have the result
of adversely affecting or impairing the security interest in favor of the
Trustee, on behalf of itself and the Holders, with respect to the Collateral,
and neither the Company, the Guarantor nor any of their Subsidiaries shall grant
to any Person, or suffer any Person (other than the Trustee with respect to the
Collateral securing the obligations under the Notes and the Company with respect
to the Collateral securing the obligations under the Mirror Note) to have any
interest whatsoever in the Collateral other than Liens permitted by the Pledge
Documents. Neither the Company nor any of its Subsidiaries shall enter into any
agreement or instrument that by its terms requires the proceeds received from
any sale of Collateral to be applied to repay, redeem, defease or
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otherwise acquire or retire any Indebtedness of any Person, other than pursuant
to this Indenture, the Notes and the Pledge Documents.
Section 4.21. Security Interest.
The Company and the Guarantor shall, and shall cause each of their
Restricted Subsidiaries to, undertake to deliver or cause to be delivered to the
Trustee from time to time such other documentation, consents, authorizations,
approvals and orders in form and substance reasonably satisfactory to the
Trustee as the Trustee shall deem necessary or advisable to perfect or maintain
the security interest in the Collateral for the benefit of the Trustee on behalf
of the Holders until any such Collateral is released in accordance with the
terms of this Indenture.
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
Neither of the Issuers nor the Guarantor may, directly or indirectly: (1)
consolidate or merge with or into another Person (whether or not such Issuer, or
the Guarantor, as the case may be, is the surviving corporation); or (2) sell,
assign, transfer, convey or otherwise dispose of all or substantially all of its
properties or assets, in one or more related transactions, to another Person;
unless:
(1) either: (a) such Issuer, or the Guarantor, as the case may be,
is the surviving corporation; or (b) the Person formed by or surviving any
such consolidation or merger (if other than such Issuer, or the Guarantor,
as the case may be) or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made is a Person organized
or existing under the laws of the United States, any state thereof or the
District of Columbia (provided that if the Person formed by or surviving
any such consolidation or merger with either Issuer is a limited liability
company or other Person other than a corporation, a corporate co-issuer
shall also be an obligor with respect to the Notes);
(2) the Person formed by or surviving any such consolidation or
merger (if other than the Company, or the Guarantor, as the case may be)
or the Person to which such sale, assignment, transfer, conveyance or
other disposition shall have been made assumes all the obligations of the
Company, or the Guarantor, as the case may be, under the Notes in the case
of the Company, or under the Guarantee, in the case of the Guarantor, and
this Indenture pursuant to agreements reasonably satisfactory to the
Trustee;
(3) immediately after such transaction no Default or Event of
Default exists; and
(4) the Company, or the Guarantor, as the case may be, or the Person
formed by or surviving any such consolidation or merger (if other than the
Company, or the Guarantor, as the case may be) will, on the date of such
transaction after giving pro forma effect thereto and any related
financing transactions as if the same had occurred at the beginning of the
applicable four-quarter period, either (A) be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Leverage Ratio test set
forth in the first paragraph of Section 4.10 or (B) have a Leverage Ratio
immediately after giving effect to such consolidation or merger no greater
than the Leverage Ratio immediately prior to such consolidation or merger.
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In addition, the Company may not, directly or indirectly, and the
Guarantor may not, directly or indirectly, lease all or substantially all of its
properties or assets, in one or more related transactions, to any other Person.
This Section 5.01 shall not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among the Company and any of its
Wholly-Owned Subsidiaries, or the Guarantor and any of its Wholly-Owned
Subsidiaries, as the case may be.
Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of either Issuer or the Guarantor, as the case may be, in accordance with
Section 5.01, the successor Person formed by such consolidation or into which
either Issuer or the Guarantor, as the case may be, is merged or to which such
transfer is made shall succeed to and (except in the case of a lease) be
substituted for, and may exercise every right and power of, such Issuer or the
Guarantor, as the case may be, under this Indenture with the same effect as if
such successor Person had been named therein as such Issuer or the Guarantor, as
the case may be, and (except in the case of a lease) such Issuer or the
Guarantor, as the case may be, shall be released from the obligations under the
Notes (or the Guarantee, in the case of the Guarantor) and this Indenture,
except with respect to any obligations that arise from, or are related to, such
transaction.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Issuers default in the payment when due of interest on the
Notes and such default continues for a period of 30 days;
(b) the Issuers default in payment when due of the principal of or
premium, if any, on the Notes;
(c) the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, fails to comply with any
of the provisions of Sections 4.16 or 5.01;
(d) the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, fails to comply with any
of their other covenants or agreements in this Indenture for 30 days after
written notice thereof has been given to the Company by the Trustee or to
the Company and the Trustee by Holders of at least 25% of the aggregate
principal amount of the Notes outstanding;
(e) the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, defaults under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money
borrowed (or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries or by the Guarantor or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists or is
created after the date of this Indenture, if that default:
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(1) is caused by a failure to pay at final stated maturity the
principal amount on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such
default (a "Payment Default"); or
(2) results in the acceleration of such Indebtedness prior to
its express maturity,
and, in each case, the principal amount of any such Indebtedness,
together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $100.0 million or more;
(f) the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, fails to pay final
judgments which are non-appealable aggregating in excess of $100.0 million
(net of applicable insurance which has not been denied in writing by the
insurer), which judgments are not paid, discharged or stayed for a period
of 60 days;
(g) the Company, the Guarantor or any of their Significant
Subsidiaries pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a custodian of it or for
all or substantially all of its property, or
(iv) makes a general assignment for the benefit of its
creditors; or
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company, the Guarantor or any of
their Significant Subsidiaries in an involuntary case;
(ii) appoints a custodian of the Company, the Guarantor or any
of their Significant Subsidiaries or for all or substantially all of
the property of the Company, the Guarantor or any of their
Significant Subsidiaries; or
(iii) orders the liquidation of the Company, the Guarantor or
any of their Significant Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive
days;
(i) except as permitted by this Indenture, the Guarantee of the
Guarantor shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to be in full force and effect or
the Guarantor, or any Person acting on behalf of the Guarantor, shall deny
or disaffirm its obligations under the Guarantee; or
(j) except as permitted by this Indenture, any of the Pledge
Documents cease to be in full force and effect (other than in accordance
with their respective terms or the terms of the
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Indenture), or any of the Pledge Documents cease to give the Trustee or
the Company, as the case may be, the Liens purported to be created
thereby, or any Pledge Document is declared null and void, or the Company
or the Guarantor shall repudiate or deny in writing that it has any
liability or obligation under any Pledge Document.
Section 6.02. Acceleration.
In the case of an Event of Default arising from clause (g) or (h) of
Section 6.01, with respect to the Company or the Guarantor, all outstanding
Notes shall become due and payable immediately without further action or notice.
If any other Event of Default occurs and is continuing, the Trustee by notice to
the Issuers or the Holders of at least 25% in principal amount of the then
outstanding Notes by notice to the Issuers and the Trustee may declare all the
Notes to be due and payable immediately. The Holders of a majority in aggregate
principal amount of the Notes then outstanding by written notice to the Trustee
may on behalf of all of the Holders rescind an acceleration and its consequences
if the rescission would not conflict with any judgment or decree and if all
existing Events of Default (except nonpayment of principal, interest or premium
that has become due solely because of the acceleration) have been cured or
waived.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal, premium, if any, and
interest on the Notes or to enforce the performance of any provision of the
Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or omission
by the Trustee or any Holder of a Note in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 6.04. Waiver of Existing Defaults.
Holders of not less than a majority in aggregate principal amount of the
then outstanding Notes by notice to the Trustee may on behalf of the Holders of
all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium, if any, or interest on, the Notes
(including in connection with an offer to purchase) (provided, however, that the
Holders of a majority in aggregate principal amount of the then outstanding
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration). Upon any such waiver,
such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in principal amount of the then outstanding Notes
may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any direction that
conflicts with law or this Indenture that the Trustee determines may be unduly
prejudicial to the
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rights of other Holders of Notes or that may involve the Trustee in personal
liability. The Trustee may take any other action which it deems proper that is
not inconsistent with any such directive.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this Indenture or
the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a direction
inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of
another Holder of a Note or to obtain a preference or priority over another
Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any
Holder of a Note to receive payment of principal, premium, if any, and interest
on the Note, on or after the respective due dates expressed in the Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs and is
continuing, the Trustee is authorized to recover judgment in its own name and as
trustee of an express trust against the Issuers for the whole amount of
principal of, premium, if any, and interest remaining unpaid on the Notes and
interest on overdue principal and, to the extent lawful, interest and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Issuers
(or any other obligor upon the Notes), their creditors or their property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the
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Trustee, and in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07. To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be secured
by a Lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties that the Holders may be entitled to
receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder, or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall pay
out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the
Trustee and the costs and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium, if any and interest,
respectively; and
Third: to the Issuers or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment to
Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07, or a suit by Holders of more than 10% in
principal amount of the then outstanding Notes.
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ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in its exercise, as a prudent person would
exercise or use under the circumstances in the conduct of such person's own
affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by
the express provisions of this Indenture and the Trustee need
perform only those duties that are specifically set forth in this
Indenture and no others, and no implied covenants or obligations
shall be read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform
to the requirements of this Indenture.
(c) The Trustee may not be relieved from liabilities for its own gross
negligent action, its own gross negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b)
of this Section;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved
that the Trustee was grossly negligent in ascertaining the pertinent
facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.05.
(d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to paragraphs (a),
(b), and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee shall be under no
obligation to exercise any of its rights and powers under this Indenture at the
request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Issuers. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
(g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture or
other paper or documents.
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Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by it to
be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall not be
responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee shall not be liable for any action it takes or omits to
take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from either of the Issuers shall be sufficient if
signed by an Officer of such Issuer.
(f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might be
incurred by it in compliance with such request or direction.
(g) The Trustee shall not be charged with knowledge of any Default or
Event of Default unless either (i) a Responsible Officer of the Trustee shall
have actual knowledge of such Default or Event of Default or (ii) written notice
of such Default or Event of Default shall have been given to the Trustee by the
Issuers or any Holder.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the owner
or pledgee of Notes and may otherwise deal with the Issuers, the Guarantor or
any Affiliate of either of the Issuers or the Guarantor with the same rights it
would have if it were not Trustee. However, in the event that the Trustee
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue as trustee or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation as to
the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Issuers' use of the proceeds from the Notes or any money
paid to the Issuers or upon the Issuers' direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
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Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it is
known to the Trustee, the Trustee shall mail to Holders of Notes a notice of the
Default or Event of Default within 90 days after the Trustee acquires knowledge
thereof. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, or interest on any Note, the Trustee may withhold
the notice if and so long as a committee of its Responsible Officers in good
faith determines that withholding the notice is in the interests of the Holders
of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following the
date of this Indenture, and for so long as Notes remain outstanding, the Trustee
shall mail to the Holders of the Notes a brief report dated as of such reporting
date that complies with TIA ss. 313(a) (but if no event described in TIA ss.
313(a) has occurred within the twelve months preceding the reporting date, no
report need be transmitted). The Trustee also shall comply with TIA ss.
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of Notes
shall be mailed to the Company and filed with the SEC and each stock exchange on
which the Notes are listed in accordance with TIA ss. 313(d). The Issuers shall
promptly notify the Trustee when the Notes are listed on any stock exchange.
Section 7.07. Compensation and Indemnity.
The Issuers shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuers shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Issuers and the Guarantor shall, jointly and severally, indemnify the
Trustee against any and all losses, liabilities or expenses incurred by it
arising out of or in connection with the acceptance or administration of its
duties under this Indenture, including the costs and expenses of enforcing this
Indenture against the Issuers and the Guarantor (including this Section 7.07)
and defending itself against any claim (whether asserted by the Issuers or the
Guarantor or any Holder or any other person) or liability in connection with the
exercise or performance of any of its powers or duties hereunder, except to the
extent any such loss, liability or expense may be attributable to its gross
negligence or willful misconduct. The Trustee shall notify the Issuers promptly
of any claim for which it may seek indemnity. Failure by the Trustee to so
notify the Issuers shall not relieve the Issuers or the Guarantor of their
obligations hereunder. The Issuers and the Guarantor shall defend the claim and
the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Issuers shall pay the reasonable fees and expenses of such
counsel. The Issuers and the Guarantor need not pay for any settlement made
without their consent, which consent shall not be unreasonably withheld.
The obligations of the Issuers and the Guarantor under this Section 7.07
shall survive resignation or removal of the Trustee and the satisfaction and
discharge of this Indenture.
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To secure the Issuers' payment obligations in this Section, the Trustee
shall have a Lien prior to the Notes on all money or property held or collected
by the Trustee, except that held in trust to pay principal and interest on
particular Notes. Such Lien shall survive the resignation or removal of the
Trustee and the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(g) or (h) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to the
extent applicable.
Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from the
trust hereby created by so notifying the Issuers. The Holders of a majority in
principal amount of the then outstanding Notes may remove the Trustee by so
notifying the Trustee and the Issuers in writing. The Issuers may remove the
Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Issuers.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers, or
the Holders of at least 10% in principal amount of the then outstanding Notes
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee, after written request by any Holder who has been a Holder
for at least six months, fails to comply with Section 7.10, such Holder may
petition any court of competent jurisdiction for the removal of the Trustee and
the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Issuers. Thereupon, the resignation or
removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. The successor Trustee shall mail a notice of its succession to
Holders. The retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee; provided all sums owing to the Trustee
hereunder have been paid and subject to the Lien provided for in Section 7.07.
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Notwithstanding replacement of the Trustee pursuant to this Section 7.08, the
Issuers' and the Guarantor's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers all or
substantially all of its corporate trust business to, another corporation, the
successor corporation without any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a corporation
organized and doing business under the laws of the United States of America or
of any state thereof that is authorized under such laws to exercise corporate
trustee power, that is subject to supervision or examination by federal or state
authorities and that has a combined capital and surplus of at least $100 million
as set forth in its most recent published annual report of condition.
This Indenture shall always have a Trustee who satisfies the requirements
of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA ss. 310(b).
Section 7.11. Preferential Collection of Claims Against the Issuers.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Issuers may, at the option of their respective Boards of Directors
evidenced by a resolution set forth in an Officers' Certificate of each of the
Issuers, at any time, elect to have either Section 8.02 or 8.03 be applied to
all outstanding Notes upon compliance with the conditions set forth below in
this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Issuers' exercise under Section 8.01 of the option applicable to
this Section 8.02, the Issuers and the Guarantor shall, subject to the
satisfaction of the conditions set forth in Section 8.04, be deemed to have been
discharged from their obligations with respect to all outstanding Notes and
Guarantees thereof on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that
the Issuers shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 and the other Sections of
this Indenture referred to in (a) and (b) below, and to have satisfied all their
other obligations under such Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Issuers, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder:
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(a) the rights of Holders of outstanding Notes to receive payments
in respect of the principal of, premium, if any, and interest on such
Notes when such payments are due from the trust referred to below;
(b) the Issuers' obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost
or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(c) the rights, powers, trusts, duties and immunities of the
Trustee, and the Issuers' and the Guarantor's obligations in connection
therewith; and
(d) the Legal Defeasance provisions of this Indenture.
Subject to compliance with this Article 8, the Issuers may exercise their
option under this Section 8.02 notwithstanding the prior exercise of their
option under Section 8.03.
Section 8.03. Covenant Defeasance.
Upon the Issuers' exercise under Section 8.01 of the option applicable to
this Section 8.03, the Issuers and the Guarantor shall, subject to the
satisfaction of the conditions set forth in Section 8.04, be released from their
obligations under the covenants contained in Article 5 and Sections 4.03, 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17 and 4.19 with respect to
the outstanding Notes and Guarantees thereof on and after the date the
conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes and Guarantees thereof shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Issuers and
the Guarantor may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01, but, except as
specified above, the remainder of this Indenture and such Notes and the
Guarantees thereof shall be unaffected thereby. In addition, upon the Issuers'
exercise under Section 8.01 of the option applicable to this Section 8.03,
subject to the satisfaction of the conditions set forth in Section 8.04,
Sections 6.01(c) through 6.01(f) shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either Section
8.02 or 8.03 to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest on the outstanding Notes on the stated maturity or on
the applicable redemption date, as
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the case may be, and the Company must specify whether the Notes are being
defeased to maturity or to a particular redemption date;
(2) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to
the Trustee confirming that (a) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (b) since
the date of this Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had
not occurred;
(3) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to
the Trustee confirming that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing either: (a) on the date of such deposit (other than a Default
or Event of Default resulting from the borrowing of funds to be applied to
such deposit); or (b) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture) to which the Company
or any of the Restricted Subsidiaries is a party or by which the Company
or any of the Restricted Subsidiaries is bound;
(6) the Company must have delivered to the applicable Trustee an
opinion of counsel to the effect that after the 91st day assuming no
intervening bankruptcy, that no Holder is an insider of either of the
Issuers following the deposit and that such deposit would not be deemed by
a court of competent jurisdiction a transfer for the benefit of the
Guarantor or either co-Issuer in its capacity as such, the trust funds
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors
of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
Notwithstanding the foregoing, the opinion of counsel required by clause
(2) above with respect to a Legal Defeasance need not be delivered if all Notes
not theretofore delivered to the Trustee for cancellation (i) have become due
and payable or (ii) will become due and payable on the maturity date
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within one year, by their terms or under arrangements satisfactory to the
Trustee for the giving of notice of redemption by the Trustee in the name, and
at the expense, of the Issuers.
Section 8.05. Deposited Money and Government Securities to Be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06, all money and non-callable Government Securities
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this Section 8.05, the "Trustee") pursuant
to Section 8.04 in respect of the outstanding Notes shall be held in trust and
applied by the Trustee, in accordance with the provisions of such Notes and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Issuers acting as Paying Agent) as the Trustee may determine, to
the Holders of such Notes of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Issuers and the Guarantor shall pay and indemnify the Trustee against
any tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.04 or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the Trustee
shall deliver or pay to the Issuers from time to time upon the request of the
Issuers any money or non-callable Government Securities held by it as provided
in Section 8.04 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a)), are in excess of the amount thereof that would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Issuers.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Issuers, in trust for the payment of the principal of, premium, if any, or
interest on any Note and remaining unclaimed for two years after such principal,
and premium, if any, or interest has become due and payable shall be paid to the
Issuers on their request or (if then held by the Issuers) shall be discharged
from such trust; and the Holder of such Note shall thereafter look only to the
Issuers for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Issuers as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Issuers cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining shall be repaid to the Issuers.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Issuers' and the Guarantor's obligations under this
Indenture, the Notes and the Guarantee, as the case may be, shall be revived and
reinstated as though no deposit had occurred
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pursuant to Section 8.02 or 8.03 until such time as the Trustee or Paying Agent
is permitted to apply all such money in accordance with Section 8.02 or 8.03, as
the case may be; provided, however, that, if the Issuers make any payment of
principal of, premium, if any, or interest on any Note following the
reinstatement of their obligations, the Issuers or the Guarantor, as the case
may be, shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money held by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Issuers, the Guarantor
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(c) to provide for the assumption of an Issuer's or the Guarantor's,
obligations, as the case may be, to Holders of Notes in the case of a
merger or consolidation or sale of all or substantially all of the assets
of either Issuer or the Guarantor, as the case may be, pursuant to Article
5;
(d) to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the
legal rights under this Indenture of any such Holder; or
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA or otherwise as
necessary to comply with applicable law.
Upon the request of the Issuers accompanied by a resolution of their
respective Boards of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02, the Trustee shall join with the Issuers and the
Guarantor in the execution of any amended or supplemental Indenture authorized
or permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee shall
not be obligated to enter into such amended or supplemental Indenture that
affects its own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, this Indenture (including
Sections 4.11 and 4.16) or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in connection
with a purchase of, or a tender offer or exchange offer for, Notes) and, subject
to Sections 6.04 and 6.07, any existing Default or compliance with any provision
of this Indenture or the Notes may be waived with the consent of the Holders of
a majority in principal amount of the Notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or a
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tender offer or exchange offer for, Notes). Section 2.08 shall determine which
Notes are considered to be "outstanding" for purposes of this Section 9.02.
Upon the request of the Issuers accompanied by a resolution of their
respective Boards of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02, the
Trustee shall join with the Issuers and the Guarantor in the execution of such
amended or supplemental Indenture unless such amended or supplemental Indenture
directly affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes under
this Section 9.02 to approve the particular form of any proposed amendment or
waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07, the Holders of a
majority in aggregate principal amount of the Notes then outstanding may waive
compliance in a particular instance by the Issuers with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected, an
amendment, supplement or waiver under this Section 9.02 may not (with respect to
any Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note
or alter the payment provisions with respect to the redemption of the
Notes (other than provisions relating to Sections 4.11 and 4.16);
(c) reduce the rate of or extend the time for payment of interest on
any Note;
(d) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on the Notes (except a rescission of
acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount of the Notes and a waiver of the payment
default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or premium, if any, or interest on the Notes;
(g) waive a redemption payment with respect to any Note (other than
a payment required by one of the covenants described in Sections 4.11 and
4.16);
(h) amend any provision or release the Guarantee of the Guarantor
except pursuant to the Marcus Combination; or
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(i) make any change in this Section 9.02.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall be set
forth in a amended or supplemental Indenture that complies with the TIA as then
in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder of a Note is a continuing consent by the Holder of a Note and
every subsequent Holder of a Note or portion of a Note that evidences the same
debt as the consenting Holder's Note, even if notation of the consent is not
made on any Note. However, any such Holder of a Note or subsequent Holder of a
Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Issuers in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall not
affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture authorized
pursuant to this Article 9 if the amendment or supplement does not adversely
affect the rights, duties, liabilities or immunities of the Trustee. The Issuers
and the Guarantor may not sign an amendment or supplemental Indenture until
their respective Boards of Directors approve it. In executing any amended or
supplemental indenture, the Trustee shall be entitled to receive and (subject to
Section 7.01) shall be fully protected in relying upon, in addition to the
documents required by Section 12.04, an Officer's Certificate and an Opinion of
Counsel, in each case from each of the Issuers, stating that the execution of
such amended or supplemental indenture is authorized or permitted by this
Indenture.
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Unconditional Guarantee.
Subject to the provisions of this Article Ten, the Guarantor hereby
unconditionally and irrevocably guarantees, on a senior basis to each Holder of
a Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Notes or the obligations of the Issuers to the Holders or the
Trustee hereunder or thereunder, that: (a) the principal of, premium, if any,
and interest on the Notes (and any Special Interest payable thereon) shall be
duly and punctually paid in full when due, whether at maturity, upon
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redemption at the option of Holders pursuant to the provisions of the Notes
relating thereto, by acceleration or otherwise, and interest on the overdue
principal and (to the extent permitted by law) interest, if any, on the Notes
and all other obligations of the Issuers to the Holders or the Trustee hereunder
or thereunder (including amounts due the Trustee under Section 7.07) and all
other obligations shall be promptly paid in full or performed, all in accordance
with the terms hereof and thereof; and (b) in case of any extension of time of
payment or renewal of any Notes or any of such other obligations, the same shall
be promptly paid in full when due or performed in accordance with the terms of
the extension or renewal, whether at maturity, by acceleration or otherwise.
Failing payment when due of any amount so guaranteed, or failing performance of
any other obligation of the Issuers to the Holders under this Indenture or under
the Notes, for whatever reason, the Guarantor shall be obligated to pay, or to
perform or cause the performance of, the same immediately. An Event of Default
under this Indenture or the Notes shall constitute an event of default under
this Guarantee, and shall entitle the Holders of Notes to accelerate the
obligations of the Guarantor hereunder in the same manner and to the same extent
as the obligations of the Issuers.
The Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Issuers, any action
to enforce the same, whether or not this Guarantee is affixed to any particular
Note, or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of the Guarantor. The Guarantor hereby waives the
benefit of diligence, presentment, demand of payment, filing of claims with a
court in the event of insolvency or bankruptcy of either Issuer, any right to
require a proceeding first against either Issuer, protest, notice and all
demands whatsoever and covenants that its Guarantee shall not be discharged
except by complete performance of the obligations contained in the Notes, this
Indenture and this Guarantee or except as otherwise permitted by this Indenture.
This Guarantee is a guarantee of payment and not of collection. If any Holder or
the Trustee is required by any court or otherwise to return to either Issuer or
to the Guarantor, or any custodian, trustee, liquidator or other similar
official acting in relation to either Issuer or the Guarantor, any amount paid
by either Issuer or the Guarantor to the Trustee or such Holder, this Guarantee,
to the extent theretofore discharged, shall be reinstated in full force and
effect. The Guarantor further agrees that, as between it, on the one hand, and
the Holders of Notes and the Trustee, on the other hand, (a) subject to this
Article Ten, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (b) in the
event of any acceleration of such obligations as provided in Article Six, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for the purpose of this Guarantee.
No stockholder, member, officer, director, employee or incorporator, past,
present or future, of the Guarantor , as such, shall have any personal liability
under this Guarantee by reason of his, her or its status as such stockholder,
officer, director, employee or incorporator.
Section 10.02. Limitations on this Guarantee.
The obligations of the Guarantor under its Guarantee are limited to the
maximum amount which, after giving effect to all other contingent and fixed
liabilities of the Guarantor will result in the obligations of the Guarantor
under the Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under any laws of the United States, any state of the United States or
the District of Columbia.
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Section 10.03. Execution and Delivery of this Guarantee.
To further evidence the Guarantee set forth in Section 10.01, the
Guarantor hereby agrees that a notation of such Guarantee, substantially in the
form of Exhibit F, shall be endorsed on each Note authenticated and delivered by
the Trustee. Such Guarantee shall be executed on behalf of the Guarantor by
either manual or facsimile signature of two Officers of the Guarantor, each of
whom, in each case, shall have been duly authorized to so execute by all
requisite corporate action. The validity and enforceability of the Guarantee set
forth in Section 10.01 shall not be affected by the fact that it is not affixed
to any particular Note. The Guarantor hereby agrees that its Guarantee set forth
in Section 10.01 shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Guarantee.
If an Officer of the Guarantor whose signature is on this Indenture or a
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which such Guarantee is endorsed or at any time thereafter, the
Guarantor's Guarantee of such Note shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication thereof
hereunder, shall constitute due delivery of any Guarantee set forth in this
Indenture on behalf of the Guarantor.
Section 10.04. Release of Guarantor.
(a) Upon the consummation of the Marcus Combination, the Guarantor's
Guarantee shall be released, and the Guarantor shall be deemed released from all
obligations under this Article Ten and this Indenture without any further action
required on the part of the Guarantor, the Trustee or any Holder. If the Marcus
Combination is not consummated, the Guarantor will not be so released and the
Guarantor or any entity surviving the Guarantor, as applicable, shall remain or
be liable under its Guarantee as provided in this Article Ten.
(b) The Trustee shall deliver an appropriate instrument evidencing the
release of the Guarantor upon receipt of a request by the Company or the
Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel
certifying as to the compliance with this Section 10.04; provided the legal
counsel delivering such Opinion of Counsel may rely as to matters of fact on one
or more Officers Certificates of the Company or the Guarantor.
The Trustee shall execute any documents reasonably requested by the
Company or the Guarantor in order to evidence the release of the Guarantor from
its obligations under its Guarantee endorsed on the Notes, under this Article
Ten and under this Indenture.
Section 10.05. Waiver of Subrogation.
Until this Indenture is discharged and all of the Notes are discharged and
paid in full, the Guarantor hereby irrevocably waives and agrees not to exercise
any claim or other rights which it may now or hereafter acquire against either
Issuer that arise from the existence, payment, performance or enforcement of the
Issuers' obligations under the Notes or this Indenture and the Guarantor's
obligations under this Guarantee and this Indenture, in any such instance
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, and any right to participate in any
claim or remedy of the Holders against either Issuer, whether or not such claim,
remedy or right arises in equity, or under contract, statute or common law,
including, without limitation, the right to take or receive from either Issuer,
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
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Guarantor in violation of the preceding sentence and any amounts owing to the
Trustee or the Holders of Notes under the Notes, this Indenture, or any other
document or instrument delivered under or in connection with such agreements or
instruments, shall not have been paid in full, such amount shall have been
deemed to have been paid to the Guarantor for the benefit of, and held in trust
for the benefit of, the Trustee or the Holders and shall forthwith be paid to
the Trustee for the benefit of itself or such Holders to be credited and applied
to the obligations in favor of the Trustee or the Holders, as the case may be,
whether matured or unmatured, in accordance with the terms of this Indenture.
The Guarantor acknowledges that it will receive direct and indirect benefits
from the financing arrangements contemplated by this Indenture and that the
waiver set forth in this Section 10.05 is knowingly made in contemplation of
such benefits.
Section 10.06. Immediate Payment.
The Guarantor agrees to make immediate payment to the Trustee on behalf of
the Holders of all obligations under the Notes and this Indenture owing or
payable to the respective Holders upon receipt of a demand for payment therefor
by the Trustee to such Guarantor in writing.
Section 10.07. Obligations Continuing.
The obligations of the Guarantor hereunder shall be continuing and shall
remain in full force and effect until all the obligations have been paid and
satisfied in full. The Guarantor agrees with the Trustee that it will from time
to time deliver to the Trustee suitable acknowledgments of this continued
liability hereunder.
Section 10.08. Obligations Reinstated.
The obligations of the Guarantor hereunder shall continue to be effective
or shall be reinstated, as the case may be, if at any time any payment which
would otherwise have reduced the obligations of the Guarantor hereunder (whether
such payment shall have been made by or on behalf of either Issuer or by or on
behalf of the Guarantor) is rescinded or reclaimed from any of the Holders upon
the insolvency, bankruptcy, liquidation or reorganization of either Issuer or
the Guarantor or otherwise, all as though such payment had not been made. If
demand for, or acceleration of the time for, payment by either Issuer is stayed
upon the insolvency, bankruptcy, liquidation or reorganization of either Issuer,
all such Indebtedness otherwise subject to demand for payment or acceleration
shall nonetheless be payable by the Guarantor as provided herein.
Section 10.09. Obligations Not Affected.
The obligations of the Guarantor hereunder shall not be affected, impaired
or diminished in any way by any act, omission, matter or thing whatsoever,
occurring before, upon or after any demand for payment hereunder (and whether or
not known or consented to by the Guarantor or any of the Holders) which, but for
this provision, might constitute a whole or partial defense to a claim against
the Guarantor hereunder or might operate to release or otherwise exonerate the
Guarantor from any of its obligations hereunder or otherwise affect such
obligations, whether occasioned by default of any of the Holders or otherwise.
Section 10.10. Waiver.
Without in any way limiting the provisions of Section 10.01 hereof, the
Guarantor hereby waives notice or proof of reliance by the Holders upon the
obligations of the Guarantor hereunder, and diligence,
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presentment, demand for payment on the Issuers, protest or notice of dishonor of
any of the obligations under the Note and this Indenture, or other notice or
formalities to the Issuers of any kind whatsoever.
Section 10.11. No Obligation To Take Action Against Either Issuer.
Neither the Trustee nor any other Person shall have any obligation to
enforce or exhaust any rights or remedies or to take any other steps under any
security for the obligations under the Notes and this Indenture or against
either Issuer or any other Person or any property of either Issuer or any other
Person before the Trustee is entitled to demand payment and performance by the
Guarantor of its liabilities and obligations under its Guarantees or under this
Indenture.
Section 10.12. Dealing With The Company and Others.
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of the Guarantor
hereunder and without the consent of or notice to the Guarantor, may
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to either Issuer or
any other Person;
(b) take or abstain from taking security or collateral from the
Issuers or from perfecting security or collateral of the Issuers;
(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security given
by the Issuers or any third party with respect to the obligations or
matters contemplated by this Indenture or the Notes;
(d) accept compromises or arrangements from either Issuer;
(e) apply all monies at any time received from either Issuer or from
any security upon such part of the obligations under the Notes or this
Indenture as the Holders may see fit or change any such application in
whole or in part from time to time as the Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to deal
with, either Issuer and all other Persons and any security as the Holders
or the Trustee may see fit.
Section 10.13. Default and Enforcement.
If the Guarantor fails to pay in accordance with Section 10.06, the
Trustee may proceed in its name as trustee hereunder in the enforcement of the
Guarantee of the Guarantor and the Guarantor's obligations thereunder and
hereunder by any remedy provided by law, whether by legal proceedings or
otherwise, and to recover from the Guarantor the obligations.
Section 10.14. Amendment, Etc.
No amendment, modification or waiver of any provision of this Indenture
relating to the Guarantor or consent to any departure by the Guarantor or any
other Person from any such provision will in any event be effective unless it is
signed by the Guarantor, the Issuers and the Trustee.
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Section 10.15. Acknowledgement.
The Guarantor hereby acknowledges communication of the terms of this
Indenture and the Notes and consents to and approves of the same.
Section 10.16. Costs and Expenses.
The Guarantor shall pay on demand by the Trustee any and all costs, fees
and expenses (including, without limitation, legal fees on a solicitor and
client basis) incurred by the Trustee, the agents, advisors and counsel or any
of the Holders in enforcing any of their rights under its Guarantee.
Section 10.17. No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part of the
Trustee or the Holders, any right, remedy, power or privilege hereunder or under
this Indenture or the Notes, shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder or
under this Indenture or the Notes preclude any other or further exercise thereof
or the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges in the Guarantee and under this Indenture, the
Notes and any other document or instrument between the Guarantor and/or the
Issuers and the Trustee are cumulative and not exclusive of any rights,
remedies, powers and privilege provided by law.
Section 10.18. Effect of Offset or Counterclaim.
The obligations of the Guarantor hereunder shall be enforceable against
the Guarantor without regard to and without giving effect to any right of offset
or counterclaim available to or which may be asserted by the Company or the
Guarantor.
Section 10.19. Guarantee in Addition to Other Obligations.
The obligations of the Guarantor under its Guarantee and this Indenture
are in addition to and not in substitution for any other obligations to the
Trustee or to any of the Holders in relation to this Indenture or the Notes
(including the Purchase Agreement and the Registration Rights Agreement).
Section 10.20. Severability.
Any provision of this Article Ten which is prohibited or unenforceable in
any jurisdiction shall not invalidate the remaining provisions and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction unless its removal
would substantially defeat the basic intent, spirit and purpose of this
Indenture and this Article Ten.
Section 10.21. Successors and Assigns.
Each Guarantee shall be binding upon and inure to the benefit of the
Guarantor, the Issuers, the Trustee and the Holders and their respective
successors and permitted assigns, except that the Guarantor may not assign any
of its obligations hereunder or thereunder.
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ARTICLE 11
SECURITY
Section 11.01. Security.
In order to secure the due and punctual payment of the principal of,
premium, if any, and interest, and Special Interest, if any, on the Notes when
and as the same shall be due and payable, whether on an interest payment date,
at maturity, by acceleration, call for redemption or otherwise, and interest on
the overdue principal and interest, if any, of the Notes and performance of all
other obligations of the Issuers, to the Holders or the Trustee under this
Indenture and the Notes, according to the terms hereof or thereof, the Company
will make an assignment of its right, title and interest in and to the
Collateral to the Trustee pursuant to the Pledge Documents and to the extent
therein provided, no later than the date of the first issuance of the Notes
hereunder. At the time the Pledge Documents are executed, the Company will have
full right, power and lawful authority to grant, bargain, sell, release, convey,
hypothecate, assign, mortgage, transfer and confirm, absolutely, the property
constituting the Collateral in the manner and form done, or intended to be done,
in the Pledge Documents, free and clear of all Liens whatsoever, except to the
extent otherwise provided therein, and (a) will for so long as any Notes are
outstanding, warrant and defend the title to the same against the claims of all
Persons whatsoever, (b) will execute, acknowledge and deliver to the Trustee
such further assignments, transfers, assurances or other instruments as the
Trustee may require or request and (c) will do or cause to be done all such acts
and things as may be necessary or proper, or as may be required by the Trustee,
to assure and confirm to the Trustee the security interest in the Collateral
contemplated hereby and by the Pledge Documents, or any part thereof, as from
time to time constituted, so as to render the same available for the security
and benefit of this Indenture and of the Notes secured hereby, according to the
intent and purposes herein expressed. The Pledge Documents will create a direct
and valid Lien on the property constituting the Collateral as set forth in the
Pledge Documents.
Section 11.02. Recording and Opinions.
The Company will cause, at its own expense, the Pledge Documents, this
Indenture and all amendments or supplements thereto and UCC-1 financing
statements and other applicable documents relating thereto to be registered,
recorded and filed or re-recorded, refiled and renewed in such manner and in
such place or places if any, as may be required by law in order fully to
preserve and protect the Liens created by the Pledge Documents on all parts of
the Collateral and to effectuate and preserve the security of the Holders and
all rights of the Trustee.
The Company shall furnish to the Trustee:
(a) promptly after the execution and delivery of the Pledge
Documents, an Opinion of Counsel either (a) stating that, in the opinion
of such counsel, this Indenture and the assignment of the Collateral
intended to be made by the Pledge Documents and all other instruments of
further assurance or amendment have been properly recorded, registered and
filed to the extent necessary to make effective the Lien intended to be
created by the Pledge Documents, and reciting the details of such action
or referring to prior opinions of counsel in which such details are given,
and stating that as to the Pledge Documents such recordings, registering
and filings are sufficient to give notice thereof and that no
re-recordings, re-registerings or refilings are necessary to maintain such
notice, and further stating that all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the rights of the Holders and the Trustee hereunder
and under the Pledge Documents, or
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(b) stating that, in the opinion of such counsel, no such action is
necessary to make such Lien and assignment effective; and
(b) within 30 days after April 1 in each year beginning with April
1, 2000, an Opinion of Counsel, dated as of such date, either (a) stating
that, in the opinion of such counsel, such action has been taken with
respect to the recording, registering, filing, re-recording,
re-registering and refiling of all supplemental indentures, financing
statements, continuation statements or other instruments of further
assurance as is necessary to maintain the Lien of the Pledge Documents and
reciting the details of such action or referring to prior opinions of
counsel in which such details are given, and stating that all financing
statements and continuation statements have been executed and filed that
are necessary fully to preserve and protect the rights of the Holders and
the Trustee hereunder and under the Pledge Documents, or (b) stating that,
in the opinion of such counsel, no such action is necessary to maintain
such lien and assignment.
Section 11.03. Release of Collateral.
Upon the consummation of the Marcus Combination, the security interest in
the Collateral in favor of the Trustee for the benefit of the Holders will be
immediately released.
To the extent applicable, the Company shall cause TIA ss. 314(d) relating
the release of property from the Lien of the Pledge Documents to be complied
with. Any certificate or opinion required by TIA ss. 314(d) may be made by an
officer of the Company, except in cases in which TIA ss. 314(d) requires that
such certificate or opinion be made by an independent Person.
Section 11.04. Authorization of Actions To Be Taken by the Trustee.
Subject to the provisions of the Pledge Documents, the Trustee shall have
power to institute and to maintain such suits and proceedings as it may deem
expedient to prevent any impairment of the Collateral by any acts which may be
unlawful or in violation of the Pledge Documents, or this Indenture, and such
suits and proceedings as the Trustee may deem expedient to preserve or protect
its interests and the interests of the Holders in the Collateral (including
power to institute and maintain suits or proceedings to restrain the enforcement
of or compliance with any legislative or governmental enactment, rule, or order
that may be unconstitutional or otherwise invalid if the enforcement of, or
compliance with, such enactment, rule or order would impair the security
hereunder or be prejudicial to the interest of the Trustee).
Section 11.05. Acknowledgment that Collateral Secures the Other Notes.
The Collateral is secured for the equal and ratable benefit of the holders
of the Notes and the holders of the Other Notes.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by TIA ss. 318(c), the imposed duties shall control.
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Section 12.02. Notices.
Any notice or communication by the Issuers, the Guarantor or the Trustee
to the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Issuers
or the Guarantor: c/o Charter Communications, Inc.
12444 Powerscourt Drive, Suite 100
St. Louis, Missouri 63131
Telecopier No.: (314) 965-8793
Attention: Secretary
With a copy to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
31st Floor
New York, New York 10022
Telecopier No.: (212) 319-4090
Attention: Thomas R. Pollock, Esq.
If to the Trustee: Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Telecopier No.: (312) 461-3525
Attention: Corporate Trust Department
The Issuers, the Guarantor or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; five Business Days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; when receipt acknowledged,
if telecopied; and the next Business Day after timely delivery to the courier,
if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it.
If the Issuers mail a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.
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Section 12.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders with
respect to their rights under this Indenture or the Notes. The Issuers, the
Guarantor, the Trustee, the Registrar and anyone else shall have the protection
of TIA ss. 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuers or the Guarantor to the
Trustee to take any action under this Indenture, the Issuers or the Guarantor,
as the case may be, shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA ss.
314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07. No Personal Liability of Directors, Officers, Employees, Members
and Stockholders.
No director, officer, employee, incorporator, member or stockholder of the
Issuers or the Guarantor, as such, shall have any liability for any obligations
of the Issuers or the Guarantor under the Notes, the Guarantee, this Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of Notes by accepting a Note waives and releases all
such liability. The waiver and release are part of the consideration for
issuance of the Notes.
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Section 12.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEE WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE,
THE NOTES OR ANY GUARANTEE.
Section 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture, loan or
debt agreement of the Issuers, the Guarantor or their Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
Section 12.10. Successors.
All agreements of the Issuers and the Guarantor in this Indenture, the
Notes and the Guarantee, as the case may be, shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
Section 12.11. Severability.
In case any provision in this Indenture, the Notes or the Guarantee, as
the case may be, shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 12.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.
Section 12.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part of this Indenture and shall in no way
modify or restrict any of the terms or provisions.
ARTICLE 13
SATISFACTION AND DISCHARGE
Section 13.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Notes herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Issuers, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
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(A) all Notes theretofore authenticated and delivered (other
than (i) Notes which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.07 and (ii)
Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Issuers and thereafter
repaid to the Issuers or discharged from such trust,) have been
delivered to the Trustee for cancellation; or
(B) all such Notes not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Issuers,
and the Issuers, in the case of (i), (ii) or (iii) above, have
deposited or caused to be deposited with the Trustee as trust funds
in trust for the purpose an amount sufficient to pay and discharge
the entire indebtedness on such Notes not theretofore delivered to
the Trustee for cancellation, for principal (and premium, if any)
and interest to the date of such deposit (in the case of Notes which
have become due and payable) or to the maturity or redemption
thereof, as the case may be;
(2) the Issuers have paid or caused to be paid all other sums payable
hereunder by the Issuers and the Guarantors; and
(3) each of the Issuers have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article 13, the obligations of the Issuers and the Guarantor to the Trustee
under Section 7.07, and, if money shall have been deposited with the Trustee
pursuant to subclause (B) of clause (1) of this Section, the obligations of the
Trustee under Section 13.02 shall survive.
Section 13.02. Application of Trust Money.
All money deposited with the Trustee pursuant to Section 13.01 shall be
held in trust and applied by it, in accordance with the provisions of the Notes
and this Indenture, to the payment, either directly or through any Paying Agent
as the Trustee may determine, to the Persons entitled thereto, of the principal
(and premium, if any) and interest for whose payment such money has been
deposited with the Trustee.
[Signatures on following page]
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<PAGE> 91
SIGNATURES
Dated as of March 17, 1999
CHARTER COMMUNICATIONS HOLDINGS, LLC, as
an Issuer
By: /s/ Eloise Engman
--------------------------------------
Name: Eloise Engman
Title: Vice President
CHARTER COMMUNICATIONS HOLDINGS
CAPITAL CORPORATION, as an Issuer
By: /s/ Eloise Engman
--------------------------------------
Name: Eloise Engman
Title: Vice President
MARCUS CABLE HOLDINGS, LLC,
as Guarantor
BY: MARCUS CABLE PROPERTIES, L.L.C.,
as Manager
BY: MARCUS CABLE PROPERTIES, INC.,
as Manager
By: /s/ Marcy Lifton
--------------------------------------
Name: Marcy Lifton
Title: Senior Vice President and
Assistant Secretary
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: /s/ Kevin O. Healey
--------------------------------------
Name: Kevin O. Healey
Title: Senior Vice President
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<PAGE> 92
EXHIBIT A
[Face of Note]
CUSIP NO. [ ]
8.625% Senior Notes due 2009
No. $
CHARTER COMMUNICATIONS HOLDINGS, LLC
and
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
promise to pay to ____________________________________________________________
or registered assigns,
the principal amount of ______________________________________________________
Dollars ($_____________________) on April 1, 2009.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
Subject to Restrictions set forth in this Note.
Dated: March 17, 1999
CHARTER COMMUNICATIONS HOLDINGS, LLC
By: ________________________________
Name:
Title:
By: ________________________________
Name:
Title:
A-1
<PAGE> 93
CHARTER COMMUNICATIONS HOLDINGS CAPITAL
CORPORATION
By: ________________________________
Name:
Title:
By: ________________________________
Name:
Title:
This is one of the Notes referred to
in the within-mentioned Indenture:
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: __________________________________
Authorized Signatory
A-2
<PAGE> 94
[Back of Note]
8.625% Senior Notes due 2009
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE BENEFICIAL
OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES
EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED
PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE,
(III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO
A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE ISSUERS."(1)
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES."(2)
- ----------
(1) This paragraph should be included only if the Note is issued in global
form.
(2) This paragraph should be removed upon the exchange of Notes for Exchange
Notes in the Exchange Offer or upon the registration of the Notes pursuant
to the terms of the Registration Rights Agreement.
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<PAGE> 95
Capitalized terms used herein shall have the meanings assigned to them in
the Indenture referred to below unless otherwise indicated.
1. INTEREST. Charter Communications Holdings, LLC, a Delaware limited
liability company (the "Company"), and Charter Communications Holdings Capital
Corporation, a Delaware corporation ("Charter Capital" and, together with the
Company, the "Issuers"), promise to pay interest on the principal amount of this
Note at the rate of 8.625% per annum from March 17, 1999 until maturity. The
interest rate on the Notes is subject to increase pursuant to the provisions of
the Registration Rights Agreement. The Issuers will pay interest semi-annually
in arrears on April 1 and October 1 of each year (each an "Interest Payment
Date"), or if any such day is not a Business Day, on the next succeeding
Business Day. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the date of
issuance; provided that if there is no existing Default in the payment of
interest, and if this Note is authenticated between a record date referred to on
the face and the next succeeding Interest Payment Date, interest shall accrue
from such next succeeding Interest Payment Date; provided, further, that the
first Interest Payment Date shall be October 1, 1999. The Issuers shall pay
interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue principal and premium, if any, from time to time on
demand at a rate that is 1% per annum in excess of the rate then in effect; they
shall pay interest (including post-petition interest in any proceeding under any
Bankruptcy Law) on overdue installments of interest (without regard to any
applicable grace periods) from time to time on demand at the same rate to the
extent lawful. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
2. METHOD OF PAYMENT. The Issuers shall pay interest on the Notes (except
defaulted interest) to the Persons who are registered Holders of Notes at the
close of business on the March 15 or September 15 next preceding the Interest
Payment Date, even if such Notes are canceled after such record date and on or
before such Interest Payment Date, except as provided in Section 2.12 of the
Indenture with respect to defaulted interest. The Notes will be payable as to
principal, premium, if any, and interest at the office or agency of the Issuers
maintained for such purpose within or without the City and State of New York,
or, at the option of the Issuers, payment of interest may be made by check
mailed to the Holders at their addresses set forth in the register of Holders,
and provided that payment by wire transfer of immediately available funds will
be required with respect to principal of and interest and premium on all Global
Notes and all other Notes the Holders of which shall have provided wire transfer
instructions to the Issuers or the Paying Agent. Such payment shall be in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Harris Trust and Savings Bank,
the Trustee under the Indenture, will act as Paying Agent and Registrar. The
Issuers may change any Paying Agent or Registrar without notice to any Holder.
The Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Issuers issued the Notes under an Indenture dated as of
March 17, 1999 ("Indenture") between the Issuers, Marcus Cable Holdings, LLC
(the "Guarantor") and the Trustee. The terms of the Notes include those stated
in the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The Notes
are subject to all such terms, and Holders are referred to the Indenture and
such Act for a statement of such terms. To the extent any provision of this Note
conflicts with the express provisions of the Indenture, the provisions of the
Indenture shall govern and be controlling. The Notes are obligations of the
Issuers limited to $1.5 billion in aggregate principal amount, of which all $1.5
billion in aggregate principal amount of Notes were issued on the Issue Date.
The Notes are guaranteed on a senior basis by the Guarantor.
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5. OPTIONAL REDEMPTION.
(a) Except as set forth in clauses (b) of this Paragraph 5, the Issuers
shall not have the option to redeem the Notes prior to April 1, 2004.
Thereafter, the Issuers shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount) set forth below plus
accrued and unpaid interest thereon, if any, to the applicable redemption date,
if redeemed during the twelve-month period beginning on April 1 of the years
indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004.................. 104.313%
2005.................. 102.875%
2006.................. 101.438%
2007 and thereafter... 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Paragraph 5, at
any time prior to April 1, 2002, the Issuers may on any one or more occasions
redeem up to 35% of the aggregate principal amount of the Notes originally
issued under the Indenture on a pro rata basis (or as nearly pro rata as
practicable), at a redemption price of 108.625% of the principal amount thereof,
plus accrued and unpaid interest to the redemption date, with the net cash
proceeds of one or more Equity Offerings; provided that
(1) at least 65% of the aggregate principal amount of Notes
originally issued under the Indenture remains outstanding immediately
after the occurrence of such redemption (excluding Notes held by the
Company and its Subsidiaries); and
(2) the redemption must occur within 60 days of the date of the
closing of such Equity Offering.
6. MANDATORY REDEMPTION.
Except as otherwise provided in Paragraph 7 below, the Issuers shall not
be required to make mandatory redemption payments with respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Issuers shall make an offer (a
"Change of Control Offer") to repurchase all or any part (equal to $1,000 or an
integral multiple thereof) of each Holder's Notes at a purchase price equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest
thereon, if any, to the date of purchase (the "Change of Control Payment").
Within 10 days following any Change of Control, the Issuers shall mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the Change of Control
Payment Date specified in such notice, pursuant to the procedures required by
the Indenture and described in such notice.
(b) If the Company or a Restricted Subsidiary consummates any Asset Sale,
when the aggregate amount of Excess Proceeds exceeds $25.0 million, the Issuers
shall commence an offer (an "Asset Sale Offer") pursuant to Section 4.11 of the
Indenture to all Holders of Notes and all holders of other Indebtedness that is
pari passu with the Notes containing provisions requiring offers to purchase or
redeem with the proceeds of sales of assets to purchase the maximum principal
amount of Notes and such other pari passu Indebtedness that may be purchased out
of the Excess Proceeds (which amount
A-5
<PAGE> 97
includes the entire amount of the Net Proceeds). The offer price in any Asset
Sale Offer will be payable in cash and equal to 100% of principal amount plus
accrued and unpaid interest, if any, to the date of purchase. If any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
such Excess Proceeds for any purpose not otherwise prohibited by the Indenture.
If the aggregate principal amount of Notes and such other pari passu
Indebtedness tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Notes and such other pari passu
Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero. Holders of
Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed by first
class mail at least 30 days but not more than 60 days before the redemption date
to each Holder whose Notes are to be redeemed at its registered address. Notices
of redemption may not be conditional. No Notes of $1,000 or less may be redeemed
in part. Notes in denominations larger than $1,000 may be redeemed in part but
only in whole multiples of $1,000, unless all of the Notes held by a Holder are
to be redeemed. On and after the redemption date interest ceases to accrue on
Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered form
without coupons in denominations of $1,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in
the Indenture. The Registrar and the Trustee may require a Holder, among other
things, to furnish appropriate endorsements and transfer documents and the
Issuers may require a Holder to pay any taxes and fees required by law or
permitted by the Indenture. The Issuers need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Issuers
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be treated
as its owner for all purposes, other than with respect to the payment of
Additional Amounts.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions, the
Indenture or the Notes may be amended or supplemented with the consent of the
Holders of at least a majority in principal amount of the Notes then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the Notes then
outstanding (including, without limitation, consents obtained in connection with
a purchase of, or tender offer or exchange offer for, Notes). Without the
consent of any Holder of a Note, the Issuers and the Trustee may amend or
supplement the Indenture or the Notes to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of an Issuers' or the
Guarantor's, as the case may be, obligations to Holders of Notes in the case of
a merger or consolidation or sale of all or substantially all of the assets of
either Issuer or the Guarantor, as the case may be, to make any change that
would provide any additional rights or benefits to the Holders of Notes or that
does not adversely affect the legal rights under the Indenture of any such
Holder, or to comply with the requirements of the SEC in order to effect or
maintain the qualification of the Indenture under the TIA or otherwise as
necessary to comply with applicable law.
12. DEFAULTS AND REMEDIES. Each of the following is an Event of Default:
(i) default for 30 days in the payment when due of interest on the Notes, (ii)
default in payment when due of the principal of or premium, if any, on the
Notes, (iii) failure by the Company or any of its Restricted
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Subsidiaries, or the Guarantor or any of its Restricted Subsidiaries, to comply
with Sections 4.16 and 5.01 of the Indenture, (iv) failure by the Company or any
of its Restricted Subsidiaries, or the Guarantor or any of its Restricted
Subsidiaries, for 30 days after written notice thereof has been given to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% of the aggregate principal amount of the Notes outstanding to comply
with any of their other covenants or agreements in the Indenture, (v) default
under any mortgage, indenture or instrument under which there may be issued or
by which there may be secured or evidenced any Indebtedness for money borrowed
by the Company or any of its Restricted Subsidiaries, or by the Guarantor or any
of its Restricted Subsidiaries, (or the payment of which is guaranteed by the
Company or any of its Restricted Subsidiaries, or by the Guarantor or any of its
Restricted Subsidiaries), whether such Indebtedness or guarantee now exists or
is created after the date of the Indenture, if that default: (a) is caused by a
failure to pay at final stated maturity the principal amount of such
Indebtedness prior to the expiration of the grace period provided in such
Indebtedness on the date of such default (a "Payment Default"); or (b) results
in the acceleration of such Indebtedness prior to its express maturity, and, in
each case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$100.0 million or more, (vi) failure by the Company or any of its Restricted
Subsidiaries, or by the Guarantor or any of its Restricted Subsidiaries, to pay
final judgments which are non-appealable aggregating in excess of $100.0 million
(net of applicable insurance which has not been denied in writing by the
insurer), which judgments are not paid, discharged or stayed for a period of 60
days, (vii) certain events of bankruptcy or insolvency with respect to the
Company or the Guarantor or any of their Significant Subsidiaries, (viii) except
as permitted by the Indenture, the Guarantee of the Guarantor being held in any
judicial proceeding to be unenforceable or invalid or ceasing for any reason to
be in full force and effect or is caused by the Guarantor's, or any Person's
(such Person acting on behalf of the Guarantor), denial or disaffirmation of its
obligations under the Guarantee or (ix) except as permitted by the Indenture,
any of the Pledge Documents cease to be in full force and effect (other than in
accordance with their respective terms or the terms of the Indenture), or any of
the Pledge Documents cease to give the Trustee or the Company, as the case may
be, the Liens purported to be created thereby, or any Pledge Document is
declared null and void. In the case of an Event of Default arising from certain
events of bankruptcy or insolvency with respect to the Company, all outstanding
Notes will become due and payable without further action or notice. If any other
Event of Default occurs and is continuing, the Trustee by notice to the Issuers
or the Holders of at least 25% in principal amount of the then outstanding Notes
by notice to the Issuers and the Trustee may declare all the Notes to be due and
payable. Holders may not enforce the Indenture or the Notes except as provided
in the Indenture. Subject to certain limitations, Holders of a majority in
principal amount of the then outstanding Notes may direct the Trustee in its
exercise of any trust or power. The Trustee may withhold from Holders of the
Notes notice of any continuing Default or Event of Default (except a Default or
Event of Default relating to the payment of principal or interest) if it
determines that withholding notice is in their interest. The Holders of a
majority in aggregate principal amount of the Notes then outstanding by notice
to the Trustee may on behalf of the Holders of all of the Notes waive any
existing Default or Event of Default and its consequences under the Indenture
except a continuing Default or Event of Default in the payment of interest on,
or the principal of, the Notes. The Company is required to deliver to the
Trustee annually a statement regarding compliance with the Indenture. Upon
becoming aware of any Default or Event of Default, the Company is required to
deliver to the Trustee a statement specifying such Default or Event of Default.
13. TRUSTEE DEALINGS WITH ISSUERS. The Trustee, in its individual or any
other capacity, may make loans to, accept deposits from, and perform services
for the Issuers, the Guarantor or their Affiliates, and may otherwise deal with
the Issuers, the Guarantor or their Affiliates, as if it were not the Trustee.
A-7
<PAGE> 99
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator, member or stockholder of either of the Issuers or the Guarantor,
as such, shall not have any liability for any obligations of the Issuers under
the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. GUARANTEES. Until the consummation of the Marcus Combination, this
Note will be entitled to the benefits of certain Guarantees, if any, made for
the benefit of the Holders. Reference is hereby made to the Indenture for a
statement of the respective rights, limitations of rights, duties and
obligations thereunder of the Guarantor, the Trustee and the Holders.
16. GOVERNING LAW. This Note and the Indenture shall be governed by and
construed in accordance with the laws of the State of New York, as applied to
contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto and the holders agree
to submit to the jurisdiction of the courts of the State of New York in any
action or proceeding arising out of or relating to this Note.
17. AUTHENTICATION. This Note shall not be valid until authenticated by
the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name of a
Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND RESTRICTED
DEFINITIVE NOTES. In addition to the rights provided to Holders of Notes under
the Indenture, Holders of Restricted Global Notes and Restricted Definitive
Notes shall have all the rights set forth in the Exchange and Registration
Rights Agreement dated as of March 17, 1999, among the Issuers, the Guarantor
and the initial purchasers named therein (the "Registration Rights Agreement").
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and without
charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Charter Communications Holdings, LLC
Charter Communications Holdings Capital Corporation
c/o Charter Communications, Inc.
12444 Powerscourt Drive
Suite 100
St. Louis, Missouri 63131
Attention: Secretary
Telecopier No.: (314) 965-0555
A-8
<PAGE> 100
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to: __________________________________
(Insert assignee's legal name)
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Issuers. The agent may substitute
another to act for him.
Date: __________________
Your Signature: ____________________________________________
(Sign exactly as your name appears on the face of this Note)
Signature Guarantee*: ____________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
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<PAGE> 101
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers pursuant
to Section 4.11 or 4.16 of the Indenture, check the appropriate box below:
|_| Section 4.11 |_| Section 4.16
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.11 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$_____________
Date: __________________
Your Signature: ____________________________________________
(Sign exactly as your name appears on the face of this Note)
Tax Identification No.: ____________________________________
Signature Guarantee*: _____________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
A-10
<PAGE> 102
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an interest in
another Global Note or for a Definitive Note, or exchanges of a part of another
Global Note or Definitive Note for an interest in this Global Note, have been
made:
<TABLE>
<CAPTION>
Amount of Amount of Principal Signature of
decrease in increase in Amount of authorized
Principal Principal this Global Note officer of
Amount of Amount of following such Trustee or
Date of this Global this Global decrease Note
Exchange Note Note (or increase) Custodian
-------- ---- ---- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
A-11
<PAGE> 103
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Charter Communications Holdings, LLC
Charter Communications Holdings Capital Corporation
c/o Charter Communications, Inc.
12444 Powerscourt Drive, Suite 100
St. Louis, Missouri 63131
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attn: Corporate Trust Department
Re: 8.625% Senior Notes due 2009
Reference is hereby made to the Indenture, dated as of March 17, 1999 (the
"Indenture"), among Charter Communications Holdings, LLC (the "Company") and
Charter Communications Holdings Capital Corporation ("Charter Capital" and,
together with the Company, the "Issuers"), Marcus Cable Holdings, LLC, as
guarantor, and Harris Trust and Savings Bank, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
___________________ (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to ___________________________ (the "Transferee"), as further specified in Annex
A hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. |_| Check if Transferee will take delivery of a beneficial interest in
the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. |_| Check if Transferee will take delivery of a beneficial interest in
the Regulation S Global Note or a Definitive Note pursuant to Regulation S. The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and, accordingly, the Transferor hereby further
certifies that (i) the Transfer is not being made to a person in the United
States and (x) at the time the buy order was originated, the Transferee was
outside the United States or such Transferor and any Person acting on its behalf
reasonably believed and believes that the Transferee was outside the United
States or (y) the transaction was executed in, on or through the facilities of a
designated offshore securities market and neither such Transferor nor any Person
acting on its behalf knows that the transaction was prearranged with a buyer in
the United States, (ii) no directed selling efforts have been
B-1
<PAGE> 104
made in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the Securities Act and (iii) the transaction is not part of a
plan or scheme to evade the registration requirements of the Securities Act.
Upon consummation of the proposed transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will be
subject to the restrictions on Transfer enumerated in the Private Placement
Legend printed on the Regulation S Global Note and/or the Definitive Note and in
the Indenture and the Securities Act.
3. |_| Check and complete if Transferee will take delivery of a beneficial
interest in a Definitive Note pursuant to any provision of the Securities Act
other than Rule 144A or Regulation S. The Transfer is being effected in
compliance with the transfer restrictions applicable to beneficial interests in
Restricted Global Notes and Restricted Definitive Notes and pursuant to and in
accordance with the Securities Act and any applicable blue sky securities laws
of any state of the United States, and accordingly the Transferor hereby further
certifies that (check one):
(a) |_| such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) |_| such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) |_| such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in
compliance with the prospectus delivery requirements of the Securities
Act;
or
(d) |_| such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule
904, and the Transferor hereby further certifies that it has not engaged
in any general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption claimed,
which certification is supported by (1) a certificate executed by the
Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Note and/or the Definitive Notes and in
the Indenture and the Securities Act.
4. |_| Check if Transferee will take delivery of a beneficial interest in
an Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) |_| Check if Transfer is pursuant to Rule 144. (i) The Transfer is
being effected pursuant to and in accordance with Rule 144 under the Securities
Act and in compliance with the transfer restrictions contained in the Indenture
and any applicable blue sky securities laws of any state of the United States
and (ii) the restrictions on transfer contained in the Indenture and the Private
Placement
B-2
<PAGE> 105
Legend are not required in order to maintain compliance with the Securities Act.
Upon consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will no longer
be subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes, on Restricted Definitive Notes
and in the Indenture.
(b) |_| Check if Transfer is Pursuant to Regulation S. (i) The Transfer is
being effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(c) |_| Check if Transfer is Pursuant to Other Exemption. (i) The Transfer
is being effected pursuant to and in compliance with an exemption from the
registration requirements of the Securities Act other than Rule 144, Rule 903 or
Rule 904 and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any State of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will not be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Global Notes or
Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers.
___________________________________________
[Insert Name of Transferor]
By: _______________________________________
Name:
Title:
Dated: _______________
B-3
<PAGE> 106
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP ___), or
(ii) |_| Regulation S Global Note (CUSIP ___), or
(b) |_| a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP ___), or
(ii) |_| Regulation S Global Note (CUSIP ___), or
(iii) |_| Unrestricted Global Note (CUSIP ___); or
(b) |_| a Restricted Definitive Note; or
(c) |_| an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-4
<PAGE> 107
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Charter Communications Holdings, LLC
Charter Communications Holdings Capital Corporation
c/o Charter Communications, Inc.
12444 Powerscourt Drive, Suite 100
St. Louis, Missouri 63131
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attn: Corporate Trust Department
Re: 8.625% Senior Notes due 2009
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of March 17, 1999 (the
"Indenture"), among Charter Communications Holdings, LLC (the "Company") and
Charter Communications Holdings Capital Corporation ("Charter Capital" and,
together with the Company, the "Issuers"), Marcus Cable Holdings, LLC, as
guarantor, and Harris Trust and Savings Bank, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
__________________________ (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) |_| Check if Exchange is from beneficial interest in a Restricted
Global Note to beneficial interest in an Unrestricted Global Note. In connection
with the Exchange of the Owner's beneficial interest in a Restricted Global Note
for a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) |_| Check if Exchange is from beneficial interest in a Restricted
Global Note to Unrestricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for an Unrestricted
Definitive Note, the Owner hereby certifies (i) the Definitive Note is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, (iii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act and (iv) the Definitive Note is being acquired in compliance
with any applicable blue sky securities laws of any state of the United States.
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<PAGE> 108
(c) |_| Check if Exchange is from Restricted Definitive Note to beneficial
interest in an Unrestricted Global Note. In connection with the Owner's Exchange
of a Restricted Definitive Note for a beneficial interest in an Unrestricted
Global Note, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) |_| Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests in
Restricted Global Notes for Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes
(a) |_| Check if Exchange is from beneficial interest in a Restricted
Global Note to Restricted Definitive Note. In connection with the Exchange of
the Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) Check if Exchange is from Restricted Definitive Note to beneficial
interest in a Restricted Global Note. In connection with the Exchange of the
Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
|_| 144A Global Note or |_| Regulation S Global Note with an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer and (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, and in compliance with any applicable blue sky securities laws of any state
of the United States. Upon consummation of the proposed Exchange in accordance
with the terms of the Indenture, the beneficial interest issued will be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the relevant Restricted Global Note and in the Indenture and the
Securities Act.
C-2
<PAGE> 109
This certificate and the statements contained herein are made for your
benefit and the benefit of the Issuers.
___________________________________________
[Insert Name of Transferor]
By: _______________________________________
Name:
Title:
Dated: _______________
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<PAGE> 110
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Charter Communications Holdings, LLC
Charter Communications Holdings Capital Corporation
c/o Charter Communications, Inc.
12444 Powerscourt Drive, Suite 100
St. Louis, Missouri 63131
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attn: Corporate Trust Department
Re: 8.625% Senior Notes due 2009
Reference is hereby made to the Indenture, dated as of March 17, 1999 (the
"Indenture"), among Charter Communications Holdings, LLC (the "Company") and
Charter Communications Holdings Capital Corporation ("Charter Capital" and,
together with the Company, the "Issuers"), Marcus Cable Holdings, LLC, as
guarantor, and Harris Trust and Savings Bank, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) |_| a beneficial interest in a Global Note, or
(b) |_| a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any interest
therein is subject to certain restrictions and conditions set forth in the
Indenture and the undersigned agrees to be bound by, and not to resell, pledge
or otherwise transfer the Notes or any interest therein except in compliance
with, such restrictions and conditions and the United States Securities Act of
1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in accordance
with Rule 904 of Regulation S under the Securities Act, (E) pursuant to the
provisions of Rule 144(k) under the Securities Act or (F) pursuant to an
effective registration statement under the Securities Act,
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<PAGE> 111
EXHIBIT D
and we further agree to provide to any person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or beneficial
interest therein, we will be required to furnish to you and the Issuers such
certifications, legal opinions and other information as you and the Issuers may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will bear a
legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein purchased by
us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy to any interested party
in any administrative or legal proceedings or official inquiry with respect to
the matters covered hereby.
___________________________________________
[Insert Name of Transferor]
By: _______________________________________
Name:
Title:
Dated: _______________
D-2
<PAGE> 112
EXHIBIT E
FORM OF GUARANTEE
For value received, the undersigned hereby unconditionally guarantees, as
principal obligor and not only as a surety, to the Holder of this Note the cash
payments in United States dollars of principal of, premium, if any, and interest
on this Note (and including Special Interest payable thereon) in the amounts and
at the times when due and interest on the overdue principal, premium, if any,
and interest, if any, of this Note, if lawful, and the payment or performance of
all other obligations of the Issuers under the Indenture (as defined below) or
the Notes, to the Holder of this Note and the Trustee, all in accordance with
and subject to the terms and limitations of this Note, Article Ten of the
Indenture and this Guarantee. This Guarantee will become effective in accordance
with Article Ten of the Indenture and its terms shall be evidenced therein. The
validity and enforceability of any Guarantee shall not be affected by the fact
that it is not affixed to any particular Note. Capitalized terms used but not
defined herein shall have the meanings ascribed to them in the Indenture dated
as of March 17, 1999, among Charter Communications Holdings, LLC, a Delaware
limited liability company, Charter Communications Holdings Capital Corporation,
a company incorporated under the laws of Delaware, Marcus Cable Holdings, LLC, a
Delaware limited liability company, as guarantor, and Harris Trust and Savings
Bank, as trustee, as amended or supplemented (the "Indenture").
The obligations of the undersigned to the Holders of Notes and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article Ten of the Indenture and reference is hereby made to the Indenture for
the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS
OF LAW. Each Guarantor hereby agrees to submit to the jurisdiction of the courts
of the State of New York in any action or proceeding arising out of or relating
to this Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
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<PAGE> 113
IN WITNESS WHEREOF, the Guarantor has caused its Guarantee to be duly
executed.
Date:______________
MARCUS CABLE HOLDINGS, LLC,
as Guarantor
By: MARCUS CABLE PROPERTIES, L.L.C.,
as Manager
By: MARCUS CABLE PROPERTIES, INC.,
as Manager
By: ___________________________________
Name:
Title:
E-2
<PAGE> 114
EXHIBIT F
FORM OF MIRROR NOTE
9.92% Senior Note due 2007
$1,548,630,855
MARCUS CABLE HOLDINGS, LLC
(the "Borrower")
promises to pay to CHARTER COMMUNICATIONS HOLDINGS, LLC (the "Lender") on April
1, 2007 (the "Maturity Date") the principal amount outstanding on the Maturity
Date.
Interest Payment Dates: April 1 and October 1
Date: March 17, 1999
MARCUS CABLE HOLDINGS, LLC
By: MARCUS CABLE PROPERTIES,
L.L.C., as Manager
By: MARCUS CABLE PROPERTIES,
INC., as Manager
By: _______________________________
Name:
Title:
CHARTER COMMUNICATIONS HOLDINGS, LLC
By: _____________________________
Name:
Title:
F-1
<PAGE> 115
1. INTEREST. Marcus Cable Holdings, LLC, a Delaware limited liability
Company (the "Borrower"), promises to pay to Charter Communications Holdings,
LLC, a Delaware limited liability company (the "Lender"), interest on the
principal amount of this Note from time to time outstanding at the rate of 9.92%
per annum from the date hereof until maturity. The Borrower will pay interest
semi-annually in arrears on April 1 and October 1 of each year (each an
"Interest Payment Date"), or if any such day is not a Business Day, on the next
succeeding Business Day. Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided, further, that the first Interest Payment Date shall
be October 1, 1999. The principal amount on which the Borrower will pay interest
on each Interest Payment Day will be the principal amount of this Note
outstanding from time to time during the 6-month period prior to such Interest
Payment Date. The Borrower shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue principal and premium, if
any, from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; it shall pay interest (including post-petition interest in
any proceeding under Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Borrower will pay interest on this Note to
Lender. This Note will be payable as to principal, premium, if any, and interest
by check mailed to Lender at 12444 Powerscourt Drive, Suite 100, St. Louis,
Missouri 63131 or such other address as Lender shall have notified the Borrower
in writing, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest on this Note if
Lender shall have provided wire transfer instructions to the Borrower. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. DEFINED TERMS. Capitalized terms used herein shall have the meanings
assigned to them in the Indenture dated as of March 17, 1999 (the "Indenture")
between the Lender, Charter Communications Holdings Capital Corporation, a
company incorporated under the laws of Delaware, the Borrower, and Harris Trust
and Savings Bank, as trustee, relating to the 8.625% Senior Notes due 2009.
4. PREPAYMENT OF NOTE. This Note may be prepaid in whole or in part at any
time without penalty or premium.
5. REPAYMENT AT OPTION OF HOLDER. Upon the occurrence of (i) a Change of
Control or (ii) an Asset Sale, in each case under the Indenture, Lender may
require Borrower to prepay this Note in whole or in part.
6. DEFAULTS AND REMEDIES. Events of Default include: (i) default for 30
days in the payment when due of interest on this Note, (ii) default in payment
when due of principal on this Note, and (iii) any event which constitutes an
Event of Default under the Indenture. If any Event of Default occurs and is
continuing, Lender may declare this Note to be due and payable.
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Notwithstanding the foregoing, upon the occurrence of an Event of Default
pursuant to Section 6.01(g) or (h) of the Indenture, this Note will become due
and payable without further action or notice. Lender may waive any existing
Default or Event of Default and its consequences except a continuing Default or
Event of Default in the payment of interest on, or the principal of, this Note.
The Borrower is required upon becoming aware of any Default or Event of Default
to deliver to Lender a statement specifying such Default or Event of Default.
7. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator, member or stockholder, of the Borrower, as such, shall not have
any liability for any obligations of the Borrower under this Note or for any
claim based on, in respect of, or by reason of, such obligation or its creation.
Lender by accepting this Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of this Note.
8. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of New York, as applied to contracts made
and performed within the State of New York, without regard to principles of
conflict of laws. Each of the parties hereto and the holders agree to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Note.
F-3
<PAGE> 1
Exhibit 4.2(c)
CHARTER COMMUNICATIONS HOLDINGS, LLC
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
MARCUS CABLE HOLDINGS, LLC
$1,500,000,000 8.625% Senior Notes due 2009
----------
Exchange and Registration Rights Agreement
March 17, 1999
Goldman, Sachs & Co.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Bear, Stearns & Co. Inc.
NationsBanc Montgomery Securities LLC
Salomon Smith Barney Inc.
Credit Lyonnais Securities (USA), Inc.
First Union Capital Markets Corp.
Prudential Securities Incorporated
TD Securities (USA) Inc.
CIBC Oppenheimer Corp.
Nesbitt Burns Securities Inc.
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Charter Communications Holdings, LLC, a Delaware limited liability
company (the "Company"), and Charter Communications Holdings Capital
Corporation, a Delaware corporation ("Charter Capital" and, together with the
Company, the "Issuers"), propose, subject to the terms and conditions stated
herein, to issue and sell to the Purchasers (as defined herein) upon the terms
set forth in the Purchase Agreement (as defined herein) their $1,500,000,000
aggregate principal amount of 8.625% Senior Notes due 2009 (the "Notes"), which
are guaranteed (the "Guarantee") by Marcus Cable Holdings, LLC (the
"Guarantor"). As an inducement to the Purchasers to enter into the Purchase
Agreement and in satisfaction of a condition to the obligations of the
Purchasers thereunder, the Issuers and the Guarantor agree with the Purchasers
for the benefit of holders (as defined herein) from time to time of the
Registrable Securities (as defined herein) as follows:
<PAGE> 2
1. Certain Definitions. For purposes of this Exchange and
Registration Rights Agreement, the following terms shall have the following
respective meanings:
"Base Interest" shall mean the interest that would otherwise accrue
on the Notes under the terms thereof and the Indenture, without giving
effect to the provisions of this Exchange and Registration Rights
Agreement.
The term "broker-dealer" shall mean any broker or dealer registered
with the Commission under the Exchange Act.
"Closing Date" shall mean the date on which the Notes are initially
issued.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for
the particular purpose.
"Effective Time," in the case of (i) an Exchange Offer Registration,
shall mean the time and date as of which the Commission declares the
Exchange Offer Registration Statement effective or as of which the
Exchange Offer Registration Statement otherwise becomes effective and (ii)
a Shelf Registration, shall mean the time and date as of which the
Commission declares the Shelf Registration Statement effective or as of
which the Shelf Registration Statement otherwise becomes effective.
"Electing Holder" shall mean any holder of Registrable Securities
that has returned a completed and signed Notice and Questionnaire to the
Issuers in accordance with Section 3(d)(ii) or 3(d)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
"Exchange Notes" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Offer" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Offer Registration" shall have the meaning assigned
thereto in Section 3(c) hereof.
"Exchange Offer Registration Statement" shall have the meaning
assigned thereto in Section 2(a) hereof.
"Guarantee" shall mean the guarantee of the Notes to be issued by
the Guarantor.
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<PAGE> 3
The term "holder" shall mean each of the Purchasers and other
persons who acquire Registrable Securities from time to time (including
any successors or assigns), in each case for so long as such person is a
registered holder of any Registrable Securities.
"Indenture" shall mean the Indenture governing the Notes, dated as
of March 17, 1999 between the Issuers and Harris Trust and Savings Bank,
as Trustee, as the same shall be amended from time to time.
"Notes" shall mean, collectively, the 8.625% Senior Notes due 2009
of the Issuers, guaranteed by the Guarantor, to be issued and sold to the
Purchasers, and Notes issued in exchange therefor or in lieu thereof,
pursuant to the Indenture.
"Notice and Questionnaire" means a Notice of Registration Statement
and Selling Securityholder Questionnaire substantially in the form of
Exhibit A hereto.
The term "person" shall mean a corporation, association,
partnership, organization, business, individual, government or political
subdivision thereof or governmental agency.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of
March 12, 1999, between the Purchasers, the Guarantor and the Issuers
relating to the Notes.
"Purchasers" shall mean the Purchasers named in Schedule I to the
Purchase Agreement.
"Registrable Securities" shall mean the Notes; provided, however,
that a Note shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a) hereof, such Note has been
exchanged for an Exchange Note in an Exchange Offer as contemplated in
Section 2(a) hereof (provided that any Exchange Note that, pursuant to the
last two sentences of Section 2(a), is included in a prospectus for use in
connection with resales by broker-dealers shall be deemed to be a
Registrable Security with respect to Sections 5, 6 and 9 hereof until
resale of such Registrable Security has been effected within the 180-day
period referred to in Section 2(a))(y); (ii) in the circumstances
contemplated by Section 2(b) hereof, a Shelf Registration Statement
registering such Note under the Securities Act has been declared or
becomes effective and such Note has been sold or otherwise transferred by
the holder thereof pursuant to and in a manner contemplated by such
effective Shelf Registration Statement; (iii) such Note is sold pursuant
to Rule 144 under circumstances in which any legend borne by such Note
relating to restrictions on transferability thereof, under the Securities
Act or otherwise, is removed by the Issuers or pursuant to the Indenture;
(iv) such Security is eligible to be sold pursuant to paragraph (k) of
Rule 144; or (v) such Security shall cease to be outstanding.
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<PAGE> 4
"Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
"Resale Period" shall have the meaning assigned thereto in Section
2(a) hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of
the Issuers within the meaning of Rule 405, (ii) a holder who acquires
Exchange Notes outside the ordinary course of such holder's business,
(iii) a holder who has arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of distributing Exchange
Notes and (iv) a holder that is a broker-dealer, but only with respect to
Exchange Notes received by such broker-dealer pursuant to an Exchange
Offer in exchange for Registrable Securities acquired by the broker-dealer
directly from the Issuers.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Securities Act (or any successor provision), as
the same shall be amended from time to time.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"Shelf Registration" shall have the meaning assigned thereto in
Section 2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned
thereto in Section 2(b) hereof.
"Special Interest" shall have the meaning assigned thereto in
Section 2(c) hereof.
"subsidiaries" shall mean subsidiaries which would be "significant
subsidiaries" as defined in Rule 1-02(w) of Regulation S-X under the
Exchange Act.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of this
Exchange and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of
4
<PAGE> 5
similar import refer to this Exchange and Registration Rights Agreement as a
whole and not to any particular Section or other subdivision.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Issuers agree to
file under the Securities Act, as soon as practicable, but no later than 90 days
after the Closing Date, a registration statement relating to an offer to
exchange (such registration statement, the "Exchange Offer Registration
Statement", and such offer, the "Exchange Offer") any and all of the Notes
guaranteed by the Guarantor for a like aggregate principal amount of notes
issued by the Issuers and guaranteed by the Guarantor, which notes and guarantee
are substantially identical in all material respects to the Notes and Guarantee
(and are entitled to the benefits of a trust indenture which has terms identical
in all material respects to the Indenture or is the Indenture and which has been
qualified under the Trust Indenture Act), except that they have been registered
pursuant to an effective registration statement under the Securities Act and do
not contain provisions for the additional interest contemplated in Section 2(c)
below (such notes hereinafter called "Exchange Notes"). The Issuers agree to use
their reasonable best efforts to cause the Exchange Offer Registration Statement
to become effective under the Securities Act as soon as practicable, but no
later than 150 days after the Closing Date. The Exchange Offer will be
registered under the Securities Act on the appropriate form and will comply with
all applicable tender offer rules and regulations under the Exchange Act. The
Issuers further agree to use their reasonable best efforts to complete the
Exchange Offer promptly, but no later than 30 business days or longer, if
required by the federal securities laws, after such registration statement has
become effective, hold the Exchange Offer open for at least 30 days and exchange
Exchange Notes for all Registrable Securities that have been properly tendered
and not withdrawn on or prior to the expiration of the Exchange Offer. The
Exchange Offer will be deemed to have been "completed" only if the notes
received by holders other than Restricted Holders in the Exchange Offer for
Registrable Securities are, upon receipt, transferable by each such holder
without restriction under the Securities Act and the Exchange Act and without
material restrictions under the blue sky or securities laws of a substantial
majority of the States of the United States of America. The Exchange Offer shall
be deemed to have been completed upon the earlier to occur of (i) the Issuers
having exchanged the Exchange Notes for all outstanding Registrable Securities
pursuant to the Exchange Offer and (ii) the Issuers having exchanged, pursuant
to the Exchange Offer, Exchange Notes for all Registrable Securities that have
been properly tendered and not withdrawn before the expiration of the Exchange
Offer, which shall be on a date that is at least 30 business days following the
commencement of the Exchange Offer. The Issuers agree (x) to include in the
Exchange Offer Registration Statement a prospectus for use in any resales by any
holder of Exchange Notes that is a broker-dealer and (y) to keep such Exchange
Offer Registration Statement effective for a period (the "Resale Period")
beginning when Exchange Notes are first issued in the Exchange Offer and ending
upon the earlier of the expiration of the 180th day after the Exchange Offer has
been completed or such time as such broker-dealers no longer own any
5
<PAGE> 6
Registrable Securities. With respect to such Exchange Offer Registration
Statement, such holders shall have the benefit of the rights of indemnification
and contribution set forth in Sections 6(a), (c), (d) and (e) hereof.
(b) If (i) on or prior to the time the Exchange Offer is completed
existing law or Commission policy or interpretations are changed such that the
Exchange Notes received by holders, other than Restricted Holders in the
Exchange Offer in exchange for Registrable Securities are not or would not be,
upon receipt, transferable by each such holder without restriction under the
Securities Act, (ii) the Exchange Offer has not been completed within 180 days
following the Closing Date or (iii) the Exchange Offer is not available to any
holder of the Notes, the Issuers shall, in lieu of (or, in the case of clause
(iii), in addition to) conducting the Exchange Offer contemplated by Section
2(a), file under the Securities Act on or prior to 30 business days after the
time such obligation to file arises, a "shelf" registration statement providing
for the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities, pursuant to Rule 415 or any
similar rule that may be adopted by the Commission (such filing, the "Shelf
Registration" and such registration statement, the "Shelf Registration
Statement"). The Issuers agree to use their reasonable best efforts (x) to cause
the Shelf Registration Statement to become or be declared effective by the
Commission no later than 90 days after such obligation to file arises and to
keep such Shelf Registration Statement continuously effective for a period
ending on the earlier of (i) the second anniversary of the Effective Time or
(ii) such time as there are no longer any Registrable Securities outstanding,
provided, however, that no holder shall be entitled to be named as a selling
securityholder in the Shelf Registration Statement or to use the prospectus
forming a part thereof for resales of Registrable Securities unless such holder
is an Electing Holder, and (y) after the Effective Time of the Shelf
Registration Statement, promptly upon the request of any holder of Registrable
Securities that is not then an Electing Holder, to take any action reasonably
necessary to enable such holder to use the prospectus forming a part thereof for
resales of Registrable Securities, including, without limitation, any action
necessary to identify such holder as a selling securityholder in the Shelf
Registration Statement, provided, however, that nothing in this clause (y) shall
relieve any such holder of the obligation to return a completed and signed
Notice and Questionnaire to the Issuers in accordance with Section 3(d)(iii)
hereof. The Issuers further agree to supplement or make amendments to the Shelf
Registration Statement, as and when required by the rules, regulations or
instructions applicable to the registration form used by the Issuers for such
Shelf Registration Statement or by the Securities Act or rules and regulations
thereunder for shelf registration, and the Issuers agree to furnish to each
Electing Holder copies of any such supplement or amendment prior to its being
used or promptly following its filing with the Commission.
(c) In the event that (i) the Issuers have not filed the Exchange
Offer Registration Statement or Shelf Registration Statement on or before the
date on which such registration statement is required to be filed pursuant to
Section 2(a) or 2(b), respectively, or (ii) such Exchange Offer Registration
Statement or Shelf Registration Statement to become effective or been declared
effec-
6
<PAGE> 7
tive by the Commission on or before the date on which such registration
statement is required to become or be declared effective pursuant to Section
2(a) or 2(b), respectively, or (iii) the Exchange Offer has not been completed
within 30 business days after the initial effective date of the Exchange Offer
Registration Statement relating to the Exchange Offer (if the Exchange Offer is
then required to be made) or (iv) any Exchange Offer Registration Statement or
Shelf Registration Statement required by Section 2(a) or 2(b) hereof is filed
and declared effective but shall thereafter either be withdrawn by the Issuers
or shall become subject to an effective stop order issued pursuant to Section
8(d) of the Securities Act suspending the effectiveness of such registration
statement (except as specifically permitted herein) without being succeeded
immediately by an additional registration statement filed and declared effective
(each such event referred to in clauses (i) through (iv), a "Registration
Default" and each period during which a Registration Default has occurred and is
continuing, a "Registration Default Period"), then, as liquidated damages for
such Registration Default, subject to the provisions of Section 9(b), special
interest ("Special Interest"), in addition to the Base Interest, shall accrue on
the aggregate principal amount of the outstanding Notes at a per annum rate of
0.25% for the first 90 days of the Registration Default Period, at a per annum
rate of 0.50% for the second 90 days of the Registration Default Period, at a
per annum rate of 0.75% for the third 90 days of the Registration Default Period
and at a per annum rate of 1.0% thereafter for the remaining portion of the
Registration Default Period. All accrued Special Interest shall be paid in cash
by the Issuers on each Interest Payment Date (as defined in the Indenture).
(d) The Issuers shall use their reasonable best efforts to take all
actions necessary or advisable to be taken by them to ensure that the
transactions contemplated herein are effected as so contemplated in Section 2(a)
or 2(b) hereof.
(e) Any reference herein to a registration statement as of any time
shall be deemed to include any document incorporated, or deemed to be
incorporated, therein by reference as of such time and any reference herein to
any post-effective amendment to a registration statement as of any time shall be
deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time.
3. Registration Procedures.
If the Issuers file a registration statement pursuant to Section
2(a) or Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the
Shelf Registration, as the case may be, the Issuers shall cause the Indenture to
be qualified under the Trust Indenture Act of 1939.
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<PAGE> 8
(b) In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Issuers shall appoint a
new trustee thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Issuers' obligations with respect to the
registration of Exchange Notes as contemplated by Section 2(a) (the "Exchange
Offer Registration"), if applicable, the Issuers shall, as soon as practicable
(or as otherwise specified):
(i) prepare and file with the Commission, as soon as
practicable but no later than 90 days after the Closing Date, an
Exchange Offer Registration Statement on any form which may be
utilized by the Issuers and which shall permit the Exchange Offer
and resales of Exchange Notes by broker-dealers during the Resale
Period to be effected as contemplated by Section 2(a), and use their
reasonable best efforts to cause such Exchange Offer Registration
Statement to become effective as soon as practicable thereafter, but
no later than 150 days after the Closing Date;
(ii) as soon as practicable prepare and file with the
Commission such amendments and supplements to such Exchange Offer
Registration Statement and the prospectus included therein as may be
necessary to effect and maintain the effectiveness of such Exchange
Offer Registration Statement for the periods and purposes
contemplated in Section 2(a) hereof and as may be required by the
applicable rules and regulations of the Commission and the
instructions applicable to the form of such Exchange Offer
Registration Statement, and promptly provide each broker-dealer
holding Exchange Notes with such number of copies of the prospectus
included therein (as then amended or supplemented), in conformity in
all material respects with the requirements of the Securities Act
and the Trust Indenture Act and the rules and regulations of the
Commission thereunder, as such broker-dealer reasonably may request
prior to the expiration of the Resale Period, for use in connection
with resales of Exchange Notes;
(iii) promptly notify each broker-dealer that has requested or
received copies of the prospectus included in such registration
statement, and confirm such advice in writing, (A) when such
Exchange Offer Registration Statement or the prospectus included
therein or any prospectus amendment or supplement or post-effective
amendment has been filed, and, with respect to such Exchange Offer
Registration Statement or any post-effective amendment, when the
same has become effective, (B) of any comments by the Commission and
by the blue sky or securities commissioner or regulator of any state
with respect thereto or any request by the Commission for amendments
or supplements to such Exchange Offer Registration Statement or
prospectus or for additional informa-
8
<PAGE> 9
tion, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of such Exchange Offer Registration
Statement or the initiation or, to the knowledge of the Issuers,
threatening of any proceedings for that purpose, (D) if at any time
the representations and warranties of the Issuers contemplated by
Section 5 hereof cease to be true and correct in all material
respects, (E) of the receipt by the Issuers of any notification with
respect to the suspension of the qualification of the Exchange Notes
for sale in any jurisdiction or the initiation or, to the knowledge
of the Issuers, threatening of any proceeding for such purpose, or
(F) at any time during the Resale Period when a prospectus is
required to be delivered under the Securities Act, that such
Exchange Offer Registration Statement, prospectus, prospectus
amendment or supplement or post-effective amendment does not conform
in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act, and the rules and
regulations of the Commission thereunder or contains an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(iv) in the event that the Issuers would be required, pursuant
to Section 3(e)(iii)(F) above, to notify any broker-dealers holding
Exchange Notes, the Issuers shall prepare and furnish to each such
holder a reasonable number of copies of a prospectus supplemented or
amended so that, as thereafter delivered to purchasers of such
Exchange Notes during the Resale Period, such prospectus conforms in
all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and shall not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(v) use their reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of such Exchange Offer
Registration Statement or any post-effective amendment thereto as
soon as practicable;
(vi) use their reasonable best efforts to (A) register or
qualify the Exchange Notes under the securities laws or blue sky
laws of such jurisdictions as are contemplated by Section 2(a) no
later than the commencement of the Exchange Offer, (B) keep such
registrations or qualifications in effect and comply with such laws
so as to permit the continuance of offers, sales and dealings
therein in such jurisdictions until the expiration of the Resale
Period and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each broker-dealer holding Exchange
Notes to consummate the disposi-
9
<PAGE> 10
tion thereof in such jurisdictions; provided, however, that none of
the Issuers shall be required for any such purpose to (1) qualify as
a foreign corporation or limited liability company, as the case may
be, in any jurisdiction wherein it would not otherwise be required
to qualify but for the requirements of this Section 3(c)(vi), (2)
consent to general service of process in any such jurisdiction or
(3) make any changes to its certificate of incorporation or by-laws
(or other organizational document) or any agreement between it and
holders of its ownership interests;
(vii) use their reasonable best efforts to obtain the consent
or approval of each governmental agency or authority, whether
federal, state or local, which may be required to effect the
Exchange Offer Registration, the Exchange Offer and the offering and
sale of Exchange Notes by broker-dealers during the Resale Period;
(viii) provide a CUSIP number for all Exchange Notes, not
later than the applicable Effective Time;
(ix) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as
soon as practicable but no later than eighteen months after the
effective date of such Exchange Offer Registration Statement, an
earning statement of the Company and its subsidiaries complying with
Section 11(a) of the Securities Act (including, at the option of the
Company, Rule 158 thereunder).
(d) In connection with the Issuers' obligations with respect to the
Shelf Registration, if applicable, the Issuers shall, as soon as practicable (or
as otherwise specified):
(i) prepare and file with the Commission within the time
periods specified in Section 2(b), a Shelf Registration Statement on
any form which may be utilized by the Issuers and which shall
register all of the Registrable Securities for resale by the holders
thereof in accordance with such method or methods of disposition as
may be specified by such of the holders as, from time to time, may
be Electing Holders and use their reasonable best efforts to cause
such Shelf Registration Statement to become effective within the
time periods specified in Section 2(b);
(ii) not less than 30 calendar days prior to the Effective
Time of the Shelf Registration Statement, mail the Notice and
Questionnaire to the holders of Registrable Securities; no holder
shall be entitled to be named as a selling securityholder in the
Shelf Registration Statement as of the Effective Time, and no holder
shall be entitled to use the prospectus forming a part thereof for
resales of Registrable Securities at any time, unless such holder
has returned a
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<PAGE> 11
completed and signed Notice and Questionnaire to the Issuers by the
deadline for response set forth therein; provided, however, holders
of Registrable Securities shall have at least 28 calendar days from
the date on which the Notice and Questionnaire is first mailed to
such holders to return a completed and signed Notice and
Questionnaire to the Issuers;
(iii) after the Effective Time of the Shelf Registration
Statement, upon the request of any holder of Registrable Securities
that is not then an Electing Holder, promptly send a Notice and
Questionnaire to such holder; provided that the Issuers shall not be
required to take any action to name such holder as a selling
securityholder in the Shelf Registration Statement or to enable such
holder to use the prospectus forming a part thereof for resales of
Registrable Securities until such holder has returned a completed
and signed Notice and Questionnaire to the Issuers;
(iv) as soon as practicable prepare and file with the
Commission such amendments and supplements to such Shelf
Registration Statement and the prospectus included therein as may be
necessary to effect and maintain the effectiveness of such Shelf
Registration Statement for the period specified in Section 2(b)
hereof and as may be required by the applicable rules and
regulations of the Commission and the instructions applicable to the
form of such Shelf Registration Statement, and furnish to the
Electing Holders copies of any such supplement or amendment
simultaneously with or prior to its being used or filed with the
Commission;
(v) comply with the provisions of the Securities Act with
respect to the disposition of all of the Registrable Securities
covered by such Shelf Registration Statement in accordance with the
intended methods of disposition by the Electing Holders provided for
in such Shelf Registration Statement;
(vi) provide (A) the Electing Holders, (B) the underwriters
(which term, for purposes of this Exchange and Registration Rights
Agreement, shall include a person deemed to be an underwriter within
the meaning of Section 2(a)(11) of the Securities Act), if any,
thereof, (C) any sales or placement agent therefor, (D) counsel for
any such underwriter or agent and (E) not more than one counsel for
all the Electing Holders the opportunity to participate in the
preparation of such Shelf Registration Statement, each prospectus
included therein or filed with the Commission and each amendment or
supplement thereto;
(vii) for a reasonable period prior to the filing of such
Shelf Registration Statement, and throughout the period specified in
Section 2(b), make available at reasonable times at the Issuers'
principal place of business or such other reasonable place for
inspection by the persons referred to in Section 3(d)(vi) who
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shall certify to the Issuers that they have a current intention to
sell the Registrable Securities pursuant to the Shelf Registration
such financial and other relevant information and books and records
of the Issuers, and cause the officers, employees, counsel and
independent certified public accountants of the Issuers to respond
to such inquiries, as shall be reasonably necessary, in the judgment
of the respective counsel referred to in such Section, to conduct a
reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that each such party shall be
required to maintain in confidence and not to disclose to any other
person any information or records reasonably designated by the
Issuers as being confidential, until such time as (A) such
information becomes a matter of public record (whether by virtue of
its inclusion in such registration statement or otherwise, except as
a result of a breach of this or any other obligation of
confidentiality to the Issuers), or (B) such person shall be
required so to disclose such information pursuant to a subpoena or
order of any court or other governmental agency or body having
jurisdiction over the matter (subject to the requirements of such
order, and only after such person shall have given the Issuers
prompt prior written notice of such requirement), or (C) such
information is required to be set forth in such Shelf Registration
Statement or the prospectus included therein or in an amendment to
such Shelf Registration Statement or an amendment or supplement to
such prospectus in order that such Shelf Registration Statement,
prospectus, amendment or supplement, as the case may be, complies
with applicable requirements of the federal securities laws and the
rules and regulations of the Commission and does not contain an
untrue statement of a material fact or omit to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing;
(viii) promptly notify each of the Electing Holders, any sales
or placement agent therefor and any underwriter thereof (which
notification may be made through any managing underwriter that is a
representative of such underwriter for such purpose) and confirm
such advice in writing, (A) when such Shelf Registration Statement
or the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and, with
respect to such Shelf Registration Statement or any post-effective
amendment, when the same has become effective, (B) of any comments
by the Commission and by the blue sky or securities commissioner or
regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such Shelf Registration
Statement or prospectus or for additional information, (C) of the
issuance by the Commission of any stop order suspending the
effectiveness of such Shelf Registration Statement or the initiation
or, to the knowledge of the Issuers, threatening of any proceedings
for that
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purpose, (D) if at any time the representations and warranties of
the Issuers contemplated by Section 3(d)(xvii) or Section 5 hereof
cease to be true and correct in all material respects, (E) of the
receipt by the Issuers of any notification with respect to the
suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or, to the knowledge of
the Issuers, threatening of any proceeding for such purpose, or (F)
if at any time when a prospectus is required to be delivered under
the Securities Act, that such Shelf Registration Statement,
prospectus, prospectus amendment or supplement or post-effective
amendment does not conform in all material respects to the
applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission
thereunder or contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances then existing;
(ix) use their reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of such
registration statement or any post-effective amendment thereto as
soon as practicable;
(x) if requested by any managing underwriter or underwriters,
any placement or sales agent or any Electing Holder, promptly
incorporate in a prospectus supplement or post-effective amendment
such information as is required by the applicable rules and
regulations of the Commission and as such managing underwriter or
underwriters, such agent or such Electing Holder specifies should be
included therein relating to the terms of the sale of such
Registrable Securities, including information (i) with respect to
the principal amount of Registrable Securities being sold by such
Electing Holder or agent or to any underwriters, the name and
description of such Electing Holder, agent or underwriter, the
offering price of such Registrable Securities and any discount,
commission or other compensation payable in respect thereof and the
purchase price being paid therefor by such underwriters and (ii)
with respect to any other material terms of the offering of the
Registrable Securities to be sold by such Electing Holder or agent
or to such underwriters; and make all required filings of such
prospectus supplement or post-effective amendment upon notification
of the matters to be incorporated in such prospectus supplement or
post-effective amendment;
(xi) furnish to each Electing Holder, each placement or sales
agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(d)(vi) hereof an
executed copy (or, in the case of an Electing Holder, a conformed
copy) of such Shelf Registration Statement, each such amendment and
supplement thereto (in each case including all exhibits
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<PAGE> 14
thereto (in the case of an Electing Holder of Registrable
Securities, upon request) and documents incorporated by reference
therein) and such number of copies of such Shelf Registration
Statement (excluding exhibits thereto and documents incorporated by
reference therein unless specifically so requested by such Electing
Holder, agent or underwriter, as the case may be) and of the
prospectus included in such Shelf Registration Statement (including
each preliminary prospectus and any summary prospectus), in
conformity in all material respects with the applicable requirements
of the Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder, and such other documents,
as such Electing Holder, agent, if any, and underwriter, if any, may
reasonably request in order to facilitate the offering and
disposition of the Registrable Securities owned by such Electing
Holder, offered or sold by such agent or underwritten by such
underwriter and to permit such Electing Holder, agent and
underwriter to satisfy the prospectus delivery requirements of the
Securities Act; and the Issuers hereby consent to the use of such
prospectus (including such preliminary and summary prospectus) and
any amendment or supplement thereto by each such Electing Holder and
by any such agent and underwriter, in each case in the form most
recently provided to such person by the Issuers in connection with
the offering and sale of the Registrable Securities covered by the
prospectus (including such preliminary and summary prospectus) or
any supplement or amendment thereto;
(xii) use their reasonable best efforts to (A) register or
qualify the Registrable Securities to be included in such Shelf
Registration Statement under such securities laws or blue sky laws
of such jurisdictions as any Electing Holder and each placement or
sales agent, if any, therefor and underwriter, if any, thereof shall
reasonably request, (B) keep such registrations or qualifications in
effect and comply with such laws so as to permit the continuance of
offers, sales and dealings therein in such jurisdictions during the
period the Shelf Registration is required to remain effective under
Section 2(b) above and for so long as may be necessary to enable any
such Electing Holder, agent or underwriter to complete its
distribution of Notes pursuant to such Shelf Registration Statement
and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each such Electing Holder, agent,
if any, and underwriter, if any, to consummate the disposition in
such jurisdictions of such Registrable Securities; provided,
however, that none of the Issuers shall be required for any such
purpose to (1) qualify as a foreign corporation or limited liability
company, as the case may be, in any jurisdiction wherein it would
not otherwise be required to qualify but for the requirements of
this Section 3(d)(xii), (2) consent to general service of process in
any such jurisdiction or (3) make any changes to its certificate of
incorporation or by-laws (or other or-
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<PAGE> 15
ganizational document) or any agreement between it and holders of
its ownership interests;
(xiii) use their reasonable best efforts to obtain the consent
or approval of each governmental agency or authority, whether
federal, state or local, which may be required to effect the Shelf
Registration or the offering or sale in connection therewith or to
enable the selling holder or holders to offer, or to consummate the
disposition of, their Registrable Securities;
(xiv) unless any Registrable Securities shall be in book-entry
only form, cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be
sold, which certificates, if so required by any securities exchange
upon which any Registrable Securities are listed, shall be penned,
lithographed or engraved, or produced by any combination of such
methods, on steel engraved borders, and which certificates shall not
bear any restrictive legends; and, in the case of an underwritten
offering, enable such Registrable Securities to be in such
denominations and registered in such names as the managing
underwriters may request at least two business days prior to any
sale of the Registrable Securities;
(xv) provide a CUSIP number for all Registrable Securities,
not later than the applicable Effective Time;
(xvi) enter into one or more underwriting agreements,
engagement letters, agency agreements, "best efforts" underwriting
agreements or similar agreements, as appropriate, including
customary provisions relating to indemnification and contribution,
and take such other actions in connection therewith as any Electing
Holders of at least 20% in aggregate principal amount of the
Registrable Securities at the time outstanding shall request in
order to expedite or facilitate the disposition of such Registrable
Securities;
(xvii) whether or not an agreement of the type referred to in
Section 3(d)(xvi) hereof is entered into and whether or not any
portion of the offering contemplated by the Shelf Registration is an
underwritten offering or is made through a placement or sales agent
or any other entity, (A) make such representations and warranties to
the Electing Holders and the placement or sales agent, if any,
therefor and the underwriters, if any, thereof in form, substance
and scope as are customarily made in connection with an offering of
debt securities pursuant to any appropriate agreement or to a
registration statement filed on the form applicable to the Shelf
Registration; (B) obtain an opinion of counsel to the Issuers in
customary form, subject to customary limitations, assumptions and
exclusions, and covering such matters, of the type customarily
cov-
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<PAGE> 16
ered by such an opinion, as the managing underwriters, if any, or as
any Electing Holders of at least 20% in aggregate principal amount
of the Registrable Securities at the time outstanding may reasonably
request, addressed to such Electing Holder or Electing Holders and
the placement or sales agent, if any, therefor and the underwriters,
if any, thereof and dated the date of the Effective Time of such
Shelf Registration Statement (and if such Shelf Registration
Statement contemplates an underwritten offering of a part or all of
the Registrable Securities, dated the date of the closing under the
underwriting agreement relating thereto) (it being agreed that the
matters to be covered by such opinion shall include the matters set
forth in paragraph (b) of Section 7 of the Purchase Agreement to the
extent applicable to an offering of this type); (C) obtain a "cold
comfort" letter or letters from the independent certified public
accountants of the Issuers addressed to the selling Electing
Holders, the placement or sales agent, if any, therefor or the
underwriters, if any, thereof, dated (i) the effective date of such
Shelf Registration Statement and (ii) the effective date of any
prospectus supplement to the prospectus included in such Shelf
Registration Statement or post-effective amendment to such Shelf
Registration Statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the
latest such statements included in such prospectus (and, if such
Shelf Registration Statement contemplates an underwritten offering
pursuant to any prospectus supplement to the prospectus included in
such Shelf Registration Statement or post-effective amendment to
such Shelf Registration Statement which includes unaudited or
audited financial statements as of a date or for a period subsequent
to that of the latest such statements included in such prospectus,
dated the date of the closing under the underwriting agreement
relating thereto), such letter or letters to be in customary form
and covering such matters of the type customarily covered by letters
of such type; (D) deliver such documents and certificates, including
officers' certificates, as may be reasonably requested by any
Electing Holders of at least 20% in aggregate principal amount of
the Registrable Securities at the time outstanding or the placement
or sales agent, if any, therefor and the managing underwriters, if
any, thereof to evidence the accuracy of the representations and
warranties made pursuant to clause (A) above or those contained in
Section 5(a) hereof and the compliance with or satisfaction of any
agreements or conditions contained in the underwriting agreement or
other similar agreement entered into by the Issuers pursuant to
Section 3(d)(xvi); and (E) undertake such obligations relating to
expense reimbursement, indemnification and contribution as are
provided in Section 6 hereof;
(xviii) notify in writing each holder of Registrable
Securities of any proposal by the Issuers to amend or waive any
provision of this Exchange and Registration Rights Agreement
pursuant to Section 9(h) hereof and of any
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<PAGE> 17
amendment or waiver effected pursuant thereto, each of which notices
shall contain the substance of the amendment or waiver proposed or
effected, as the case may be;
(xix) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or
participate as a member of an underwriting syndicate or selling
group or "assist in the distribution" (within the meaning of the
Conduct Rules (the "Conduct Rules") of the National Association of
Securities Dealers, Inc. ("NASD") or any successor thereto, as
amended from time to time) thereof, whether as a holder of such
Registrable Securities or as an underwriter, a placement or sales
agent or a broker or dealer in respect thereof, or otherwise, assist
such broker-dealer in complying with the requirements of such
Conduct Rules, including by (A) if such Conduct Rules shall so
require, engaging a "qualified independent underwriter" (as defined
in such Conduct Rules) to participate in the preparation of the
Shelf Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by such
Shelf Registration Statement is an underwritten offering or is made
through a placement or sales agent, to recommend the yield of such
Registrable Securities, (B) indemnifying any such qualified
independent underwriter to the extent of the indemnification of
underwriters provided in Section 6 hereof (or to such other
customary extent as may be requested by such underwriter), and (C)
providing such information to such broker-dealer as may be required
in order for such broker-dealer to comply with the requirements of
the Conduct Rules; and
(xx) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as
soon as practicable but in any event not later than eighteen months
after the effective date of such Shelf Registration Statement, an
earning statement of the Company and its subsidiaries complying with
Section 11(a) of the Securities Act (including, at the option of the
Company, Rule 158 thereunder).
(e) In the event that the Issuers would be required, pursuant to
Section 3(d)(viii)(F) above, to notify the Electing Holders, the placement or
sales agent, if any, therefor and the managing underwriters, if any, thereof,
the Issuers shall prepare and furnish to each of the Electing Holders, to each
placement or sales agent, if any, and to each such underwriter, if any, a
reasonable number of copies of a prospectus supplemented or amended so that, as
thereafter delivered to purchasers of Registrable Securities, such prospectus
conforms in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act, and the rules and regulations of the
Commission thereunder and shall not contain an untrue statement of a material
fact or omit to state a material fact required to be stated
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<PAGE> 18
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing. Each Electing Holder agrees that upon receipt
of any notice from the Issuers pursuant to Section 3(d)(viii)(F) hereof, such
Electing Holder shall forthwith discontinue the disposition of Registrable
Securities pursuant to the Shelf Registration Statement applicable to such
Registrable Securities until such Electing Holder shall have received copies of
such amended or supplemented prospectus, and if so directed by the Issuers, such
Electing Holder shall deliver to the Issuers (at the Issuers' expense) all
copies, other than permanent file copies, then in such Electing Holder's
possession of the prospectus covering such Registrable Securities at the time of
receipt of such notice.
(f) In the event of a Shelf Registration, in addition to the
information required to be provided by each Electing Holder in its Notice and
Questionnaire, the Issuers may require such Electing Holder to furnish to the
Issuers such additional information regarding such Electing Holder and such
Electing Holder's intended method of distribution of Registrable Securities as
may be required in order to comply with the Securities Act. Each such Electing
Holder agrees to notify the Issuers as promptly as practicable of any inaccuracy
or change in information previously furnished by such Electing Holder to the
Issuers or of the occurrence of any event in either case as a result of which
any prospectus relating to such Shelf Registration contains or would contain an
untrue statement of a material fact regarding such Electing Holder or such
Electing Holder's intended method of disposition of such Registrable Securities
or omits to state any material fact regarding such Electing Holder or such
Electing Holder's intended method of disposition of such Registrable Securities
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and promptly to furnish
to the Issuers any additional information required to correct and update any
previously furnished information or required so that such prospectus shall not
contain, with respect to such Electing Holder or the disposition of such
Registrable Securities, an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
4. Registration Expenses.
The Issuers agree, subject to the last sentence of this Section, to
bear and to pay or cause to be paid promptly all expenses incident to the
Issuers' performance of or compliance with this Exchange and Registration Rights
Agreement, including (a) all Commission and any NASD registration, filing and
review fees and expenses including fees and disbursements of counsel for the
placement or sales agent or underwriters in
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<PAGE> 19
connection with such registration, filing and review, (b) all fees and expenses
in connection with the qualification of the Notes for offering and sale under
the securities laws and blue sky laws referred to in Section 3(d)(xii) hereof
and determination of their eligibility for investment under the laws of such
jurisdictions as any managing underwriters or the Electing Holders may
designate, including any fees and disbursements of counsel for the Electing
Holders or underwriters in connection with such qualification and determination,
(c) all expenses relating to the preparation, printing, production, distribution
and reproduction of each registration statement required to be filed hereunder,
each prospectus included therein or prepared for distribution pursuant hereto,
each amendment or supplement to the foregoing, the expenses of preparing the
Notes for delivery and the expenses of printing or producing any underwriting
agreements, agreements among underwriters, selling agreements and blue sky or
legal investment memoranda and all other documents in connection with the
offering, sale or delivery of Notes to be disposed of (including certificates
representing the Notes), (d) messenger, telephone and delivery expenses relating
to the offering, sale or delivery of Notes and the preparation of documents
referred in clause (c) above, (e) fees and expenses of the Trustee under the
Indenture, any agent of the Trustee and any reasonable fees and expenses for
counsel for the Trustee and of any collateral agent or custodian, (f) internal
expenses (including all salaries and expenses of the Issuers' officers and
employees performing legal or accounting duties), (g) fees, disbursements and
expenses of counsel and independent certified public accountants of the Issuers
(including the expenses of any opinions or "cold comfort" letters required by or
incident to such performance and compliance), (h) fees, disbursements and
expenses of any "qualified independent underwriter" engaged pursuant to Section
3(d)(xix) hereof, (i) reasonable fees, disbursements and expenses of one counsel
for the Electing Holders retained in connection with a Shelf Registration, as
selected by the Electing Holders of at least a majority in aggregate principal
amount of the Registrable Securities held by Electing Holders (which counsel
shall be reasonably satisfactory to the Issuers), (j) any fees charged by
securities rating services for rating the Notes, and (k) reasonable fees,
expenses and disbursements of any other persons, including special experts,
retained by the Issuers in connection with such registration (collectively, the
"Registration Expenses"). To the extent that any Registration Expenses are
incurred, assumed or paid by any holder of Registrable Securities or any
placement or sales agent therefor or underwriter thereof, the Issuers shall
reimburse such person for the full amount of the Registration Expenses so
incurred, assumed or paid promptly after receipt of a request therefor.
Notwithstanding the foregoing, the holders of the Registrable Securities being
registered shall pay all agency fees and commissions and underwriting discounts
and commissions attributable to the sale of such Registrable Securities and the
fees and disbursements of any counsel or other advisors or experts retained by
such holders (severally or jointly), other than the counsel and experts
specifically referred to above.
5. Representations, Warranties and Covenants.
Except with respect to clauses (a) and (b) below, the Issuers
represent and warrant to, and agree with, each Purchaser and each of the holders
from time to time of Registrable Securities the information set forth in this
Section 5.
With respect to clauses (a) and (b) below, the Issuers covenant
that:
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(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(d) or Section 3(c) hereof and any
further amendments or supplements to any such registration statement or
prospectus, when it becomes effective or is filed with the Commission, as the
case may be, and, in the case of an underwritten offering of Registrable
Securities, at the time of the closing under the underwriting agreement relating
thereto, will conform in all material respects to the requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and at all times subsequent to
the Effective Time when a prospectus would be required to be delivered under the
Securities Act, other than from (i) such time as a notice has been given to
holders of Registrable Securities pursuant to Section 3(d)(viii)(F) or Section
3(c)(iii)(F) hereof until (ii) such time as the Issuers furnishes an amended or
supplemented prospectus pursuant to Section 3(e) or Section 3(c)(iv) hereof,
each such registration statement, and each prospectus (including any summary
prospectus) contained therein or furnished pursuant to Section 3(d) or Section
3(c) hereof, as then amended or supplemented, will conform in all material
respects to the requirements of the Securities Act and the Trust Indenture Act
and the rules and regulations of the Commission thereunder and will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing; provided, however, that this
covenant shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Issuers by a
holder of Registrable Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus
referred to in Section 5(a) hereof, when they become or became effective or are
or were filed with the Commission, as the case may be, will conform or conformed
in all material respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and none of such documents will contain or
contained an untrue statement of a material fact or will omit or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this covenant shall
not apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Issuers by a holder of Registrable
Securities expressly for use therein.
(c) The compliance by the Issuers with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a material
breach of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement, lease, license, franchise
agreement, permit or other material agreement or instrument to which either of
the Issuers or any of their subsidiaries is a party or by which either of the
Issuers or any of their subsidiaries is bound or to which any of the property or
assets of the Issuers or
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any of their subsidiaries is subject, nor will such action result in any
violation of the provisions of the certificate of incorporation, charter, or the
by-laws (or other organizational document) of the Issuers or any statute or any
order, rule or regulation of any court or governmental agency or body, including
without limitation, the Federal Communications Act of 1934, as amended, the
Cable Communications Policy Act of 1984, the Cable Television Consumer
Protection and Competition Act of 1992 and the Telecommunications Reform Act of
1996 (collectively, the "Cable Acts") or any order, rule or regulation of the
Federal Communications Commission (the "FCC") having jurisdiction over the
Issuers or any of their subsidiaries or any of their properties, except for any
such violation which would not materially impair the Issuers' ability to comply
herewith; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required, including, without limitation, under the Cable Acts or any order, rule
or regulation of the FCC, for the consummation by the Issuers of the
transactions contemplated by this Exchange and Registration Rights Agreement,
except the registration under the Securities Act of the Notes, qualification of
the Indenture under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under State
Notes or blue sky laws in connection with the offering and distribution of the
Notes.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Issuers.
6. Indemnification.
(a) Indemnification by the Issuers and the Guarantor. The Issuers
and the Guarantor (i) will indemnify and hold harmless each of the holders of
Registrable Securities included in an Exchange Offer Registration Statement,
each of the Electing Holders of Registrable Securities included in a Shelf
Registration Statement and each person who participates as a placement or sales
agent or as an underwriter in any offering or sale of such Registrable
Securities against any losses, claims, damages or liabilities, joint or several,
to which such holder, agent or underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Exchange Offer Registration Statement or Shelf Registration Statement, as the
case may be, under which such Registrable Securities were registered under the
Securities Act, or any preliminary, final or summary prospectus contained
therein or furnished by the Issuers to any such holder, Electing Holder, agent
or underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (ii) will reimburse such holder, such Electing Holder, such
agent and such underwriter for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such action or claim
as such expenses are incurred; provided, however, that none of the Issuers shall
be liable to any such persons in any such case to the extent that any
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such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, or preliminary, final or summary prospectus, or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Issuers by such persons expressly for use therein.
(b) Indemnification by the Holders and any Agents and Underwriters.
The Issuers may require, as a condition to including any Registrable Securities
in any registration statement filed pursuant to Section 2(b) hereof and to
entering into any underwriting agreement or similar agreement with respect
thereto, that the Issuers shall have received an undertaking reasonably
satisfactory to them from the Electing Holder of such Registrable Securities
included in a Shelf Registration Statement and from each underwriter or agent
named in any such underwriting agreement or similar agreement, severally and not
jointly, to (i) indemnify and hold harmless the Issuers, the Guarantor and all
other holders of Registrable Securities, against any losses, claims, damages or
liabilities to which the Issuers, the Guarantor or such other holders of
Registrable Securities may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such registration statement, or
any preliminary, final or summary prospectus contained therein or furnished by
the Issuers to any such Electing Holder, agent or underwriter, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Issuers or the Guarantor by
such Electing Holder or underwriter expressly for use therein, and (ii)
reimburse the Issuers and the Guarantor for any legal or other expenses
reasonably incurred by the Issuers and the Guarantor in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that no such Electing Holder shall be required to
undertake liability to any person under this Section 6(b) for any amounts in
excess of the dollar amount of the proceeds to be received by such Electing
Holder from the sale of such Electing Holder's Registrable Securities pursuant
to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party otherwise than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemni-
22
<PAGE> 23
fying party shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, such indemnifying party shall not be liable to such indemnified
party for any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 6(d) were determined by
pro rata allocation (even if the holders or any agents or underwriters or all of
them were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 6(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no holder shall be required to contribute any
amount in excess of the amount by which the dollar amount of the proceeds
received by such holder from the sale of any Registrable Securities (after
deducting any fees, discounts and commissions applicable thereto) exceeds
23
<PAGE> 24
the amount of any damages which such holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission, and no underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' and any underwriters' obligations in this
Section 6(d) to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may be,
by them and not joint.
(e) The obligations of the Issuers and the Guarantor under this
Section 6 shall be in addition to any liability which the Issuers and the
Guarantor may otherwise have and shall extend, upon the same terms and
conditions, to each officer, director and partner of each holder, agent and
underwriter and each person, if any, who controls any holder, agent or
underwriter within the meaning of the Securities Act; and the obligations of the
holders and any agents or underwriters contemplated by this Section 6 shall be
in addition to any liability which the respective holder, agent or underwriter
may otherwise have and shall extend, upon the same terms and conditions, to each
officer (including any officer who signed any registration statement), director,
employee, representative or agent of the Issuers and the Guarantor and to each
person, if any, who controls the Issuers or the Guarantor within the meaning of
the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities
covered by the Shelf Registration are to be sold pursuant to an underwritten
offering, the managing underwriter or underwriters thereof shall be designated
by Electing Holders holding at least a majority in aggregate principal amount of
the Registrable Securities to be included in such offering, provided that such
designated managing underwriter or underwriters is or are reasonably acceptable
to the Issuers.
(b) Participation by Holders. Each holder of Registrable Securities
hereby agrees with each other such holder that no such holder may participate in
any underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
24
<PAGE> 25
8. Rule 144.
Each of the Issuers covenants to the holders of Registrable
Securities that to the extent it shall be required to do so under the Exchange
Act, it shall timely file the reports required to be filed by it under the
Exchange Act or the Securities Act (including the reports under Section 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted
by the Commission under the Securities Act) and the rules and regulations
adopted by the Commission thereunder, and shall take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitations of the
exemption provided by Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar or successor rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities in connection with that holder's sale pursuant to Rule
144, the Issuers shall deliver to such holder a written statement as to whether
it has complied with such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Issuers represent, warrant,
covenant and agree that they have not granted, and shall not grant, registration
rights with respect to Registrable Securities or any other Notes which would be
inconsistent with the terms contained in this Exchange and Registration Rights
Agreement.
(b) Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if the Issuers fail to perform any of their
obligations hereunder and that the Purchasers and the holders from time to time
of the Registrable Securities may be irreparably harmed by any such failure, and
accordingly agree that the Purchasers and such holders, in addition to any other
remedy to which they may be entitled at law or in equity, shall be entitled to
compel specific performance of the obligations of the Issuers under this
Exchange and Registration Rights Agreement in accordance with the terms and
conditions of this Exchange and Registration Rights Agreement, in any court of
the United States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and
other communications hereunder shall be in writing and shall be deemed to have
been duly given (i) when delivered by hand, if delivered personally or by
courier, (ii) when sent by facsimile (with written confirmation of receipt),
provided that a copy is mailed by registered or certified mail, return receipt
requested or (iii) three days after being deposited in the mail (registered or
certified mail, postage prepaid, return receipt requested) as follows: If to the
Issuers, c/o Charter Communications, Inc., 12444 Powerscourt Drive, Suite 100,
St. Louis, Missouri, 63131, Attention: Secretary, and if to a holder, to the
address of such holder set forth in the security register or other records of
the Issuers, or to such other address as the Issuers or any
25
<PAGE> 26
such holder may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this
Exchange and Registration Rights Agreement shall be binding upon, shall inure to
the benefit of and shall be enforceable by the parties hereto and the holders
from time to time of the Registrable Securities and the respective successors
and assigns of the parties hereto and such holders. In the event that any
transferee of any holder of Registrable Securities shall acquire Registrable
Securities, in any manner, whether by gift, bequest, purchase, operation of law
or otherwise, such transferee shall, without any further writing or action of
any kind, be deemed a beneficiary hereof for all purposes and such Registrable
Securities shall be held subject to all of the terms of this Exchange and
Registration Rights Agreement, and by taking and holding such Registrable
Securities such transferee shall be entitled to receive the benefits of, and be
conclusively deemed to have agreed to be bound by all of the applicable terms
and provisions of this Exchange and Registration Rights Agreement. If the
Issuers shall so request, any such successor, assign or transferee shall agree
in writing to acquire and hold the Registrable Securities subject to all of the
applicable terms hereof.
(e) Survival. The respective indemnities, agreements,
representations, warranties and each other provision set forth in this Exchange
and Registration Rights Agreement or made pursuant hereto shall remain in full
force and effect regardless of any investigation (or statement as to the results
thereof) made by or on behalf of any holder of Registrable Securities, any
director, officer or partner of such holder, any agent or underwriter or any
director, officer or partner thereof, or any controlling person of any of the
foregoing, and shall survive delivery of and payment for the Registrable
Securities pursuant to the Purchase Agreement and the transfer and registration
of Registrable Securities by such holder and the consummation of an Exchange
Offer.
(f) Governing Law. This Exchange and Registration Rights Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without giving effect to any provisions relating to conflicts of law.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted for
convenience only, do not constitute a part of this Exchange and Registration
Rights Agreement and shall not affect in any way the meaning or interpretation
of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration
Rights Agreement and the other writings referred to herein (including the
Indenture and the form of Notes) or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with respect to its
subject matter. This Exchange and Registration Rights Agreement supersedes all
prior agreements and understandings between the parties
26
<PAGE> 27
with respect to its subject matter. This Exchange and Registration Rights
Agreement may be amended and the observance of any term of this Exchange and
Registration Rights Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a written instrument
duly executed by the Issuers and the holders of at least a majority in aggregate
principal amount of the Registrable Securities at the time outstanding. Each
holder of any Registrable Securities at the time or thereafter outstanding shall
be bound by any amendment or waiver effected pursuant to this Section 9(h),
whether or not any notice, writing or marking indicating such amendment or
waiver appears on such Registrable Securities or is delivered to such holder.
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and a complete list of the names and addresses of all the holders of Registrable
Securities shall be made available for inspection and copying, upon reasonable
prior notice, on any business day during normal business hours by any holder of
Registrable Securities for proper purposes only (which shall include any purpose
related to the rights of the holders of Registrable Securities under the Notes,
the Indenture and this Agreement) at the offices of the Issuers at the address
thereof set forth in Section 9(c) above and at the office of the Trustee under
the Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
27
<PAGE> 28
If the foregoing is in accordance with your understanding, please
sign and return to us counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Purchasers, this letter and such acceptance hereof
shall constitute a binding agreement between each of the Purchasers and the
Issuers. It is understood that your acceptance of this letter on behalf of each
of the Purchasers is pursuant to the authority set forth in a form of Agreement
among Purchasers, the form of which shall be submitted to the Issuers for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
CHARTER COMMUNICATIONS
HOLDINGS, LLC
By: /s/ Eloise Engman
--------------------------------
Name: Eloise Engman
Title: Vice President
CHARTER COMMUNICATIONS HOLDINGS
CAPITAL CORPORATION
By: /s/ Eloise Engman
--------------------------------
Name: Eloise Engman
Title: Vice President
MARCUS CABLE HOLDINGS, LLC
By: MARCUS CABLE PROPERTIES, L.L.C.,
as Manager
By: MARCUS CABLE PROPERTIES,
INC., as Manager
By: /s/ Marcy Lifton
--------------------------------
Name: Marcy Lifton
Title: Senior Vice President and
Assistant Secretary
28
<PAGE> 29
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
SALOMON SMITH BARNEY INC.
CREDIT LYONNAIS SECURITIES (USA), INC.
FIRST UNION CAPITAL MARKETS CORP.
PRUDENTIAL SECURITIES INCORPORATED
TD SECURITIES (USA) INC.
CIBC OPPENHEIMER CORP.
NESBITT BURNS SECURITIES INC.
By: GOLDMAN, SACHS & CO.
By: /s/ Goldman, Sachs & Co.
--------------------------------
Name:
Title:
29
<PAGE> 30
Exhibit A
CHARTER COMMUNICATIONS HOLDINGS LLC
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
MARCUS CABLE HOLDINGS, LLC
INSTRUCTION TO DTC PARTICIPANTS
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE](a)
The Depository Trust Issuers ("DTC") has identified you as a DTC Participant
through which beneficial interests in the Charter Communications Holdings LLC
(the "Company") and Charter Communications Holdings Capital Corporation
("Charter Capital" and, together with the Company, the "Issuers") 8.625% Senior
Notes due 2009 (the "Notes"), guaranteed by Marcus Cable Holdings, LLC are held.
The Issuers are in the process of registering the Notes under the Securities Act
of 1933, as amended, for resale by the beneficial owners thereof. In order to
have their Notes included in the registration statement, beneficial owners must
complete and return the enclosed Notice of Registration Statement and Selling
Securityholder Questionnaire.
It is important that beneficial owners of the Notes receive a copy of the
enclosed materials as soon as possible as their rights to have the Notes
included in the registration statement depend upon their returning the Notice
and Questionnaire by [Deadline For Response]. Please forward a copy of the
enclosed documents to each beneficial owner that holds interests in the Notes
through you. If you require more copies of the enclosed materials or have any
questions pertaining to this matter, please contact the Issuers c/o Charter
Communications, Inc., 12444 Powerscourt Drive, Suite 100, St. Louis, Missouri,
63131, Attention: Secretary.
- ----------
(a) Not less than 28 calendar days from date of mailing.
A-1
<PAGE> 31
CHARTER COMMUNICATIONS HOLDINGS LLC
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
MARCUS CABLE HOLDINGS, LLC
Notice of Registration Statement
and
Selling Securityholder Questionnaire
(Date)
Reference is hereby made to the Exchange and Registration Rights Agreement (the
"Exchange and Registration Rights Agreement") between Charter Communications
Holdings LLC and Charter Communications Holdings Capital Corporation (together,
the "Issuers"), Marcus Cable Holdings, LLC (the "Guarantor") and the Purchasers
named therein. Pursuant to the Exchange and Registration Rights Agreement, the
Issuers have filed with the United States Securities and Exchange Commission
(the "Commission") a registration statement on Form [__] (the "Shelf
Registration Statement") for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the "Securities Act"), of the Issuers'
8.625% Senior Notes due 2009 (the "Notes"), guaranteed by the Guarantor. A copy
of the Exchange and Registration Rights Agreement is attached hereto. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Exchange and Registration Rights Agreement.
Each beneficial owner of Registrable Securities is entitled to have the
Registrable Securities beneficially owned by it included in the Shelf
Registration Statement. In order to have Registrable Securities included in the
Shelf Registration Statement, this Notice of Registration Statement and Selling
Securityholder Questionnaire ("Notice and Questionnaire") must be completed,
executed and delivered to the Issuers' counsel at the address set forth herein
for receipt ON OR BEFORE [Deadline for Response]. Beneficial owners of
Registrable Securities who do not complete, execute and return this Notice and
Questionnaire by such date (i) will not be named as selling securityholders in
the Shelf Registration Statement and (ii) may not use the Prospectus forming a
part thereof for resales of Registrable Securities.
Certain legal consequences arise from being named as a selling securityholder in
the Shelf Registration Statement and related prospectus. Accordingly, holders
and beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the consequences of being named or not being
named as a selling securityholder in the Shelf Registration Statement and
related prospectus.
A-2
<PAGE> 32
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable Securities
hereby elects to include in the Shelf Registration Statement the Registrable
Securities beneficially owned by it and listed below in Item (3). The
undersigned, by signing and returning this Notice and Questionnaire, agrees to
be bound with respect to such Registrable Securities by the terms and conditions
of this Notice and Questionnaire and the Exchange and Registration Rights
Agreement, including, without limitation, Section 6 of the Exchange and
Registration Rights Agreement, as if the undersigned Selling Securityholder were
an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the Issuers
and the Trustee the Notice of Transfer set forth in Exhibit B to the Exchange
and Registration Rights Agreement.
The Selling Securityholder hereby provides the following information to the
Issuers and represents and warrants that such information is accurate and
complete:
A-3
<PAGE> 33
QUESTIONNAIRE
(1)(a) Full Legal Name of Selling Securityholder:
(b) Full Legal Name of Registered Holder (if not the same as in (a)
above) of Registrable Securities Listed in Item (3) below:
(c) Full Legal Name of DTC Participant (if applicable and if not the
same as (b) above) Through Which Registrable Securities Listed in
Item (3) below are Held:
(2) Address for Notices to Selling Securityholder:
_____________________________________
_____________________________________
_____________________________________
Telephone: _____________________________________
Fax: _____________________________________
Contact Person: _____________________________________
(3) Beneficial Ownership of Notes:
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Notes.
(a) Principal amount of Registrable Securities beneficially owned:
_________ CUSIP No(s). of such Registrable Securities:
______________________________________________________________
(b) Principal amount of Notes other than Registrable Securities
beneficially owned: __________________________________________
CUSIP No(s). of such other Notes:
______________________________________________________________
(c) Principal amount of Registrable Securities which the undersigned
wishes to be included in the Shelf Registration Statement: ______
CUSIP No(s). of such Registrable Securities to be included in the
Shelf Registration Statement:
A-4
<PAGE> 34
(4) Beneficial Ownership of Other Securities of the Issuers and the Guarantor:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other
securities of the Issuers or the Guarantor other than the Notes as
Guaranteed listed above in Item (3).
State any exceptions here:
(5) Relationships with the Issuers and the Guarantor:
Except as set forth below, neither the Selling Securityholder nor any of
its affiliates, officers, directors or principal equity holders (5% or
more) has held any position or office or has had any other material
relationship with the Issuers or the Guarantor (or their respective
predecessors or affiliates) during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder intends
to distribute the Registrable Securities listed above in Item (3) only as
follows (if at all): Such Registrable Securities may be sold from time to
time directly by the undersigned Selling Securityholder or, alternatively,
through underwriters, broker-dealers or agents. Such Registrable
Securities may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined
at the time of sale, or at negotiated prices. Such sales may be effected
in transactions (which may involve crosses or block transactions) (i) on
any national securities exchange or quotation service on which the
Registered Notes may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such
exchanges or services or in the over-the-counter market, or (iv) through
the writing of options. In connection with sales of the Registrable
Securities or otherwise, the Selling Securityholder may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales
of the Registrable Securities in the course of hedging the positions they
assume. The Selling Securityholder may also sell Registrable Securities
short and deliver Registrable Securities to close out such short
positions, or loan or pledge Registrable Securities to broker-dealers that
in turn may sell such Notes.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it understands
its obligation to comply, and agrees that it will comply, with the provisions of
the Exchange Act and the rules and regulations thereunder, particularly
Regulation M.
A-5
<PAGE> 35
In the event that the Selling Securityholder transfers all or any portion of the
Registrable Securities listed in Item (3) above after the date on which such
information is provided to the Issuers, the Selling Securityholder agrees to
notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Exchange and
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure of the
information contained herein in its answers to Items (1) through (6) above and
the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling Securityholder understands that such information
will be relied upon by the Issuers in connection with the preparation of the
Shelf Registration Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under Section 3(d) of
the Exchange and Registration Rights Agreement to provide such information as
may be required by law for inclusion in the Shelf Registration Statement, the
Selling Securityholder agrees to promptly notify the Issuers of any inaccuracies
or changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Exchange and Registration
Rights Agreement shall be made in writing, by hand-delivery, first-class mail,
or air courier guaranteeing overnight delivery as follows:
(i) To the Issuers:
_________________________
_________________________
_________________________
_________________________
_________________________
(ii) With a copy to:
_________________________
_________________________
_________________________
_________________________
_________________________
A-6
<PAGE> 36
Once this Notice and Questionnaire is executed by the Selling Securityholder and
received by the Issuers' counsel, the terms of this Notice and Questionnaire,
and the representations and warranties contained herein, shall be binding on,
shall inure to the benefit of and shall be enforceable by the respective
successors, heirs, personal representatives, and assigns of the Issuers and the
Selling Securityholder (with respect to the Registrable Securities beneficially
owned by such Selling Securityholder and listed in Item (3) above. This
Agreement shall be governed in all respects by the laws of the State of New York
without giving effect to any provisions relating to conflicts of laws.
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.
Dated: ___________________________
______________________________________________________________
Selling Securityholder
(Print/type full legal name of beneficial owner of Registrable
Securities)
By: __________________________________________________________
Name:
Title:
A-7
<PAGE> 37
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE ISSUERS' COUNSEL AT:
_________________________
_________________________
_________________________
_________________________
_________________________
A-8
<PAGE> 38
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
[Name of Trustee]
Charter Communications Holdings LLC
Charter Communications Holdings Capital
Corporation
Marcus Cable Holdings, LLC
c/o [Name of Trustee]
[Address of Trustee]
Attention: Trust Officer
Re: Charter Communications Holdings LLC
and Charter Communications Holdings Capital Corporation
(together, the "Issuers") 8.625% Senior Notes due 2009
guaranteed by Marcus Cable Holdings, LLC
Dear Sirs:
Please be advised that ______________ has transferred $__________ aggregate
principal amount of the above-referenced Notes pursuant to an effective
Registration Statement on Form [___] (File No. 333-____) filed by the Issuers.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Notes is named as a "Selling Holder" in the prospectus
dated [date] or in supplements thereto, and that the aggregate principal amount
of the Notes transferred are the Notes listed in such prospectus opposite such
owner's name.
Dated:
Very truly yours,
__________________________________
(Name)
By: ______________________________
(Authorized Signature)
B-1
<PAGE> 1
Exhibit 4.3(a)
CHARTER COMMUNICATIONS HOLDINGS, LLC
AND
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
as Issuers
AND
MARCUS CABLE HOLDINGS, LLC
as Guarantor
$1,475,000,000 (principal amount at maturity)
9.92% SENIOR DISCOUNT NOTES DUE 2011
-------------------------
INDENTURE
Dated as of March 17, 1999
HARRIS TRUST AND SAVINGS BANK,
Trustee
-------------------------
<PAGE> 2
CROSS-REFERENCE TABLE*
Trust Indenture
Act Section Indenture Section
310 (a)(1) ................................................ 7.10
(a)(2) ................................................ 7.10
(a)(3) ................................................ N.A.
(a)(4) ................................................ N.A.
(a)(5) ................................................ 7.10
(b) ................................................... 7.10
(c) ................................................... N.A.
311 (a) ................................................... 7.11
(b) ................................................... 7.11
(c) ................................................... N.A.
312 (a) ................................................... 2.05
(b) ................................................... 12.03
(c) ................................................... 12.03
313 (a) ................................................... 7.06
(b)(1) ................................................ 12.03
(b)(2) ................................................ 7.07, 12.03
(c) ................................................... 7.06; 12.02
(d) ................................................... 7.06
314 (a) ................................................... 4.03; 12.02
(b) ................................................... 12.02
(c)(1) ................................................ 12.04
(c)(2) ................................................ 12.04
(c)(3) ................................................ N.A.
(d) ................................................... N.A.
(e) ................................................... 12.05
(f) ................................................... N.A.
315 (a) ................................................... 7.01
(b) ................................................... 7.05; 12.02
(c) ................................................... 7.01
(d) ................................................... 7.01
(e) ................................................... 6.11
316 (a) (last sentence) ................................... 2.09
(a)(1)(A) ............................................. 6.05
(a)(1)(B) ............................................. 6.04
(a)(2) ................................................ N.A.
(b) ................................................... 6.07
(c) ................................................... 2.12
317 (a)(1) ................................................ 6.08
(a)(2) ................................................ 6.09
(b) ................................................... 2.04
318 (a) ................................................... 12.01
(b) ................................................... N.A.
(c) ................................................... 12.01
- ----------
N.A. means Not Applicable
This Cross-Reference Table is not part of the Indenture
----------------------------
<PAGE> 3
TABLE OF CONTENTS
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ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions............................................... 1
Section 1.02. Other Definitions......................................... 24
Section 1.03. Incorporation by Reference of Trust Indenture Act......... 25
Section 1.04. Rules of Construction..................................... 25
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating........................................... 26
Section 2.02. Execution and Authentication.............................. 26
Section 2.03. Registrar and Paying Agent................................ 27
Section 2.04. Paying Agent to Hold Money in Trust....................... 27
Section 2.05. Holder Lists.............................................. 28
Section 2.06. Transfer and Exchange..................................... 28
Section 2.07. Replacement Notes......................................... 40
Section 2.08. Outstanding Notes......................................... 40
Section 2.09. Treasury Notes............................................ 41
Section 2.10. Temporary Notes........................................... 41
Section 2.11. Cancellation.............................................. 41
Section 2.12. Defaulted Interest........................................ 42
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee........................................ 42
Section 3.02. Selection of Notes to Be Redeemed......................... 42
Section 3.03. Notice of Redemption...................................... 43
Section 3.04. Effect of Notice of Redemption............................ 43
Section 3.05. Deposit of Redemption Price............................... 44
Section 3.06. Notes Redeemed in Part.................................... 44
Section 3.07. Optional Redemption....................................... 44
Section 3.08. Mandatory Redemption...................................... 45
Section 3.09. Offer to Purchase by Application of Excess Proceeds....... 45
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.......................................... 47
Section 4.02. Maintenance of Office or Agency........................... 47
Section 4.03. Reports................................................... 48
Section 4.04. Compliance Certificate.................................... 48
Section 4.05. Taxes..................................................... 49
Section 4.06. Stay, Extension and Usury Laws............................ 50
Section 4.07. Restricted Payments....................................... 50
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Section 4.08. Investments............................................... 53
Section 4.09. Dividend and Other Payment Restrictions Affecting
Subsidiaries........................................... 53
Section 4.10. Incurrence of Indebtedness and Issuance of Preferred
Stock.................................................. 55
Section 4.11. Limitation on Asset Sales................................. 58
Section 4.12. Sale and Leaseback Transactions........................... 60
Section 4.13. Transactions with Affiliates.............................. 60
Section 4.14. Liens..................................................... 61
Section 4.15. Corporate Existence....................................... 61
Section 4.16. Repurchase at the Option of Holders upon a Change of
Control................................................ 62
Section 4.17. Limitations on Issuances of Guarantees of
Indebtedness........................................... 63
Section 4.18. Payments for Consent...................................... 64
Section 4.19. Application of Fall-Away Covenants........................ 64
Section 4.20. Impairment of Security Interest........................... 64
Section 4.21. Security Interest......................................... 65
ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.................. 65
Section 5.02. Successor Corporation Substituted......................... 66
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default......................................... 66
Section 6.02. Acceleration.............................................. 68
Section 6.03. Other Remedies............................................ 69
Section 6.04. Waiver of Existing Defaults............................... 69
Section 6.05. Control by Majority....................................... 69
Section 6.06. Limitation on Suits....................................... 69
Section 6.07. Rights of Holders of Notes to Receive Payment............. 70
Section 6.08. Collection Suit by Trustee................................ 70
Section 6.09. Trustee May File Proofs of Claim.......................... 70
Section 6.10. Priorities................................................ 71
Section 6.11. Undertaking for Costs..................................... 71
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee......................................... 72
Section 7.02. Rights of Trustee......................................... 73
Section 7.03. Individual Rights of Trustee.............................. 73
Section 7.04. Trustee's Disclaimer...................................... 74
Section 7.05. Notice of Defaults........................................ 74
Section 7.06. Reports by Trustee to Holders of the Notes................ 74
Section 7.07. Compensation and Indemnity................................ 74
Section 7.08. Replacement of Trustee.................................... 75
Section 7.09. Successor Trustee by Merger, etc.......................... 76
Section 7.10. Eligibility; Disqualification............................. 76
Section 7.11. Preferential Collection of Claims Against the Issuers..... 77
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ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant
Defeasance............................................. 77
Section 8.02. Legal Defeasance and Discharge............................ 77
Section 8.03. Covenant Defeasance....................................... 78
Section 8.04. Conditions to Legal or Covenant Defeasance................ 78
Section 8.05. Deposited Money and Government Securities to Be Held
in Trust; Other Miscellaneous Provisions............... 80
Section 8.06. Repayment to Issuers...................................... 80
Section 8.07. Reinstatement............................................. 80
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes....................... 81
Section 9.02. With Consent of Holders of Notes.......................... 82
Section 9.03. Compliance with Trust Indenture Act....................... 83
Section 9.04. Revocation and Effect of Consents......................... 83
Section 9.05. Notation on or Exchange of Notes.......................... 83
Section 9.06. Trustee to Sign Amendments, etc........................... 84
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Unconditional Guarantee................................... 84
Section 10.02. Limitations on this Guarantee............................. 85
Section 10.03. Execution and Delivery of this Guarantee.................. 85
Section 10.04. Release of Guarantor...................................... 86
Section 10.05. Waiver of Subrogation..................................... 86
Section 10.06. Immediate Payment......................................... 87
Section 10.07. Obligations Continuing.................................... 87
Section 10.08. Obligations Reinstated.................................... 87
Section 10.09. Obligations Not Affected.................................. 87
Section 10.10. Waiver.................................................... 87
Section 10.11. No Obligation To Take Action Against Either Issuer........ 88
Section 10.12. Dealing With The Company and Others....................... 88
Section 10.13. Default and Enforcement................................... 88
Section 10.14. Amendment, Etc............................................ 89
Section 10.15. Acknowledgement........................................... 89
Section 10.16. Costs and Expenses........................................ 89
Section 10.17. No Waiver; Cumulative Remedies............................ 89
Section 10.18. Effect of Offset or Counterclaim.......................... 89
Section 10.19. Guarantee in Addition to Other Obligations................ 89
Section 10.20. Severability.............................................. 89
Section 10.21. Successors and Assigns.................................... 90
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ARTICLE 11
SECURITY
Section 11.01. Security.................................................. 90
Section 11.02. Recording and Opinions.................................... 90
Section 11.03. Release of Collateral..................................... 91
Section 11.04. Authorization of Actions To Be Taken by the Trustee....... 91
Section 11.05. Acknowledgment that Collateral Secures the Other Notes.... 92
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.............................. 92
Section 12.02. Notices................................................... 92
Section 12.03. Communication by Holders of Notes with Other Holders
of Notes............................................... 93
Section 12.04. Certificate and Opinion as to Conditions Precedent........ 93
Section 12.05. Statements Required in Certificate or Opinion............. 94
Section 12.06. Rules by Trustee and Agents............................... 94
Section 12.07. No Personal Liability of Directors, Officers,
Employees, Members and Stockholders.................... 94
Section 12.08. Governing Law............................................. 94
Section 12.09. No Adverse Interpretation of Other Agreements............. 95
Section 12.10. Successors................................................ 95
Section 12.11. Severability.............................................. 95
Section 12.12. Counterpart Originals..................................... 95
Section 12.13. Table of Contents, Headings, etc.......................... 95
ARTICLE 13
SATISFACTION AND DISCHARGE
Section 13.01. Satisfaction and Discharge of Indenture................... 95
Section 13.02. Application of Trust Money................................ 96
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E FORM OF GUARANTEE
Exhibit F FORM OF MIRROR NOTE
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<PAGE> 7
INDENTURE dated as of March 17, 1999 among Charter Communications
Holdings, LLC, a Delaware limited liability company (the "Company"), Charter
Communications Holdings Capital Corporation, a company incorporated under the
laws of Delaware ("Charter Capital" and together with the Company, the
"Issuers"), Marcus Cable Holdings, LLC, a Delaware limited liability company, as
guarantor (the "Guarantor"), and Harris Trust and Savings Bank, as trustee (the
"Trustee").
The Issuers, the Guarantor and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 9.92% Senior Discount Notes due 2011 (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION
BY REFERENCE
Section 1.01. Definitions.
"144A Global Note" means a global note substantially in the form of
Exhibit A hereto bearing the Global Note Legend and the Private Placement Legend
and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in an initial denomination equal
to the outstanding principal amount at maturity of the Notes sold in reliance on
Rule 144A.
"Accreted Value" is defined to mean, for any specific date, the
amount calculated pursuant to (i), (ii), (iii) or (iv) for each $ 1,000 of
principal amount at maturity of the Notes:
(i) if the specified date occurs on one or more of the following
dates (each a "Semi-Annual Accrual Date"), the Accreted Value will equal
the amount set forth below for such Semi-Annual Accrual Date:
<TABLE>
<CAPTION>
Semi Annual
Accrual Date Accreted Value
------------ --------------
<S> <C>
Issue Date $ 613.94
October 1, 1999 646.88
April 1, 2000 678.96
October 1, 2000 712.64
April 1, 2001 747.99
October 1, 2001 785.09
April 1, 2002 824.03
October 1, 2002 864.90
April 1, 2003 907.80
October 1, 2003 952.82
April 1, 2004 $1,000.00
</TABLE>
<PAGE> 8
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(ii) if the specified date occurs before the first Semi-Annual
Accrual Date, the Accreted Value will equal the sum of (a) $613.94 and (b)
an amount equal to the product of (1) the Accreted Value for the first
Semi-Annual Accrual Date less $613.94 multiplied by (2) a fraction, the
numerator of which is the number of days from the Issue Date of the Notes
to the specified date, using a 360-day year of twelve 30-day months, and
the denominator of which is the number of days elapsed from the issue date
of the Notes to the first Semi-Annual Accrual Date, using a 360-day year
of twelve 30-day months;
(iii) if the specified date occurs between two Semi-Annual Accrual
Dates, the Accreted Value will equal the sum of (a) the Accreted Value for
the Semi-Annual Accrual Date immediately preceding such specified date and
(b) an amount equal to the product of (1) the Accreted Value for the
immediately following Semi-Annual Accrual Date less the Accreted Value for
the immediately preceding Semi-Annual Accrual Date multiplied by (2) a
fraction, the numerator of which is the number of days from the
immediately preceding Semi-Annual Accrual Date to the specified date,
using a 360-day year of twelve 30-day months, and the denominator of which
is 180; or
(iv) if the specified date occurs after the last Semi-Annual Accrual
Date, the Accreted Value will equal $1,000.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or becomes a Subsidiary of such specified
Person, whether or not such Indebtedness is incurred in connection with,
or in contemplation of, such other Person merging with or into, or
becoming a Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling, "controlled by" and "under common control
with " shall have correlative meanings.
"Agent" means any Registrar or Paying Agent.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Acquisition" means (a) an Investment by the Company or any of
the Company's Restricted Subsidiaries, or the Guarantor or any of the
Guarantor's Restricted Subsidiaries, as
<PAGE> 9
-3-
the case may be, in any other Person pursuant to which such Person shall become
a Restricted Subsidiary of the Company or any of the Company's Restricted
Subsidiaries, or the Guarantor or any of the Guarantor's Restricted
Subsidiaries, as the case may be, or shall be merged with or into the Company or
any of the Company's Restricted Subsidiaries, or the Guarantor or any of the
Guarantor's Restricted Subsidiaries, as the case may be, or (b) the acquisition
by the Company or any of the Company's Restricted Subsidiaries, or the Guarantor
or any of the Guarantor's Subsidiaries, as the case may be, of the assets of any
Person which constitute all or substantially all of the assets of such Person,
any division or line of business of such Person or any other properties or
assets of such Person other than in the ordinary course of business.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets
or rights, other than sales of inventory in the ordinary course of
business consistent with past practices; provided that the sale,
conveyance or other disposition of all or substantially all of the assets
of the Company and its Restricted Subsidiaries, taken as a whole and of
the Guarantor and its Restricted Subsidiaries, taken as a whole, shall be
governed by Section 4.16 and/or Section 5.01 and not by the provisions of
Section 4.11; and
(2) the issuance of Equity Interests by any of the Company's or the
Guarantor's Restricted Subsidiaries or the sale of Equity Interests in any
of the Company's or the Guarantor's Restricted Subsidiaries.
Notwithstanding the preceding, the following items shall not be
deemed to be Asset Sales:
(1) any single transaction or series of related transactions that:
(a) involves assets having a fair market value of less than $100 million;
or (b) results in net proceeds to the Company, the Guarantor and their
Restricted Subsidiaries of less than $100 million;
(2) a transfer of assets (i) between or among the Company and its
Restricted Subsidiaries, (ii) between or among the Guarantor and its
Restricted Subsidiaries and (iii) from the Guarantor or any of its
Restricted Subsidiaries to any of the Company or its Restricted
Subsidiaries;
(3) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary of the Company to the Company or to another Wholly Owned
Restricted Subsidiary of the Company, or an issuance of Equity Interests
by a Wholly Owned Restricted Subsidiary of the Guarantor to another Wholly
Owned Restricted Subsidiary of the Guarantor;
(4) a Restricted Payment that is permitted by Section 4.07 and a
Restricted Investment that is permitted by Section 4.08; and
(5) the incurrence of Permitted Liens and the disposition of assets
related to such Permitted Liens by the secured party pursuant to a
foreclosure.
<PAGE> 10
-4-
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value of the obligation of the
lessee for net rental payments during the remaining term of the lease included
in such sale and leaseback transaction including any period for which such lease
has been extended or may, at the option of the lessee, be extended. Such present
value shall be calculated using a discount rate equal to the rate of interest
implicit in such transaction, determined in accordance with GAAP.
"Bankruptcy Law" means Title 11, U.S. Code or any similar Federal or
state law of any jurisdiction relating to bankruptcy, insolvency, winding up,
liquidation, reorganization or relief of debtors.
"Beneficial Owner" has the meaning assigned to such term in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person" (as such term is used in Section
13(d)(3) of the Exchange Act), such "person" shall be deemed to have beneficial
ownership of all securities that such "person" has the right to acquire, whether
such right is currently exercisable or is exercisable only upon the occurrence
of a subsequent condition.
"Board of Directors" means the Board of Directors of the Company,
Charter Capital or the Guarantor, as the case may be, or any authorized
committee of the Board of Directors of the Company, Charter Capital or the
Guarantor, as the case may be.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company, Charter Capital or the
Guarantor, as the case may be, to have been duly adopted by the Board of
Directors of the Company, Charter Capital or the Guarantor, as the case may be,
and to be in full force and effect on the date of such certification and
delivered to the Trustee.
"Business Day" means any day other than a Legal Holiday.
"Cable Related Business" means the business of owning cable
television systems and businesses ancillary, complementary and related thereto.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
<PAGE> 11
-5-
(4) any other interest (other than any debt obligation) or
participation that confers on a Person the right to receive a share of the
profits and losses of, or distributions of assets of, the issuing Person.
"Capital Stock Sale Proceeds " means the aggregate net cash proceeds
(including the fair market value of the non-cash proceeds, as determined by an
independent appraisal firm) received by the Company or the Guarantor since the
date of this Indenture (x) as a contribution to the common equity capital or
from the issue or sale of Equity Interests of the Company or the Guarantor
(other than Disqualified Stock) or (y) from the issue or sale of convertible or
exchangeable Disqualified Stock or convertible or exchangeable debt securities
of the Company or the Guarantor that have been converted into or exchanged for
such Equity Interests (other than Equity Interests (or Disqualified Stock or
debt securities) sold to a Subsidiary of the Company or the Guarantor).
"Cash Equivalents" means:
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof
(provided that the full faith and credit of the United States is pledged
in support thereof) having maturities of not more than twelve months from
the date of acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of twelve months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case, with any domestic commercial bank having combined
capital and surplus in excess of $500 million and a Thompson Bank Watch
Rating at the time of acquisition of "B" or better;
(4) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in clause (3) above;
(5) commercial paper having a rating of at least "P-1" from Moody's
or at least "A-1" from S&P and in each case maturing within twelve months
after the date of acquisition;
(6) corporate debt obligations maturing within twelve months after
the date of acquisition thereof, rated at the time of acquisition at least
"Aaa" or "P-1" by Moody's or "AAA" or "A-1" by S&P;
(7) auction-rate preferred stocks of any corporation maturing not
later than 45 days after the date of acquisition thereof, rated at the
time of acquisition at least "Aaa" by Moody's or "AAA" by S&P;
(8) securities issued by any state, commonwealth or territory of the
United States, or by any political subdivision or taxing authority
thereof, maturing not later than six months after the date of acquisition
thereof, rated at the time of acquisition at least "A" by Moody's or S&P;
and
<PAGE> 12
-6-
(9) money market or, mutual funds, at least 90% of the assets of
which constitute Cash Equivalents of the kinds described in clauses (1)
through (8) of this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Subsidiaries, taken as a whole, or the Guarantor and its Subsidiaries,
taken as a whole, to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than the Principal or a Related Party
of the Principal;
(2) the adoption of a plan relating to the liquidation or
dissolution of the Company or the Guarantor;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Principal and Related Parties
and any entity formed for the purpose of owning Capital Stock of the
Company, becomes the Beneficial Owner, directly or indirectly, of more
than 35% of the Voting Stock of the Company or the Guarantor, measured by
voting power rather than number of shares, unless the Principal or a
Related Party Beneficially Owns, directly or indirectly, a greater
percentage of Voting Stock of the Company or the Guarantor, as the case
may be, measured by voting power rather than the number of shares, than
such person;
(4) after the Company's initial public offering, the first day on
which a majority of the members of the Board of Directors of the Company
are not Continuing Directors; or
(5) the Company or the Guarantor consolidates with, or merges with
or into, any Person, or any Person consolidates with, or merges with or
into, the Company or the Guarantor, in any such event pursuant to a
transaction in which any of the outstanding Voting Stock of the Company or
the Guarantor is converted into or exchanged for cash, securities or other
property, other than any such transaction where the Voting Stock of the
Company or the Guarantor outstanding immediately prior to such transaction
is converted into or exchanged for Voting Stock (other than Disqualified
Stock) of the surviving or transferee Person constituting a majority of
the outstanding shares of such Voting Stock of such surviving or
transferee Person immediately after giving effect to such issuance.
"Charter Capital" has the meaning assigned to it in the preamble to
this Indenture.
"Collateral" means the Mirror Note and other collateral which
secures the obligations under the Notes pursuant to the Pledge Documents and the
collateral which secures the obligations under the Mirror Note.
"Commission" or "SEC" means the Securities and Exchange Commission.
"Company" has the meaning assigned to it in the preamble to this
Indenture.
<PAGE> 13
-7-
"Company Preferred Stock" means the 10% cumulative convertible
redeemable preferred stock of the Company with an aggregate liquidation value of
$25 million.
"Consolidated EBITDA" means with respect to any Person, for any
period, the net income of such Person and its Restricted Subsidiaries for such
period plus, to the extent such amount was deducted in calculating such net
income:
(1) Consolidated Interest Expense;
(2) income taxes;
(3) depreciation expense;
(4) amortization expense;
(5) all other non-cash items, extraordinary items, nonrecurring and
unusual items and the cumulative effects of changes in accounting
principles reducing such net income, less all non-cash items,
extraordinary items, nonrecurring and unusual items and cumulative effects
of changes in accounting principles increasing such net income, all as
determined on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP;
(6) amounts actually paid during such period pursuant to a deferred
compensation plan; and
(7) for purposes of Section 4.10 only, Management Fees;
provided that Consolidated EBITDA shall not include:
(x) the net income (or net loss) of any Person that is not a
Restricted Subsidiary ("Other Person"), except (I) with respect to net
income, to the extent of the amount of dividends or other distributions
actually paid to such Person or any of its Restricted Subsidiaries by such
Other Person during such period and (II) with respect to net losses, to
the extent of the amount of investments made by such Person or any
Restricted Subsidiary of such Person in such Other Person during such
period;
(y) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (3) of Section 4.07 (and in
such case, except to the extent includable pursuant to clause (x) above),
the net income (or net loss) of any Other Person accrued prior to the date
it becomes a Restricted Subsidiary or is merged into or consolidated with
such Person or any Restricted Subsidiaries or all or substantially all of
the property and assets of such Other Person are acquired by such Person
or any of its Restricted Subsidiaries; and
(z) the net income of any Restricted Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation
applicable
<PAGE> 14
-8-
to such Restricted Subsidiary (other than any agreement or instrument
evidencing Indebtedness or Preferred Stock outstanding on the date of this
Indenture or incurred or issued thereafter in compliance with Section
4.10; provided that the terms of any such agreement restricting the
declaration and payment of dividends or similar distributions apply only
in the event of a default with respect to a financial covenant or a
covenant relating to payment (beyond any applicable period of grace)
contained in such agreement or instrument and provided such terms are
determined by such Person to be customary in comparable financings and
such restrictions are determined by the Company not to materially affect
the Company's ability to make principal or interest payments on the Notes
when due).
"Consolidated Indebtedness" means, with respect to any Person as of
any date of determination, the sum, without duplication, of:
(1) the total amount of outstanding Indebtedness of such Person and
its Restricted Subsidiaries, plus
(2) the total amount of Indebtedness of any other Person that has
been Guaranteed by the referent Person or one or more of its Restricted
Subsidiaries (excluding Indebtedness of the Company or any of its
Subsidiaries guaranteed by the Guarantor and any of its Subsidiaries which
Indebtedness has been previously counted for the purposes of this
definition), plus
(3) the aggregate liquidation value of all Disqualified Stock of
such Person and all preferred stock of Restricted Subsidiaries of such
Person, in each case, determined on a consolidated basis in accordance
with GAAP.
"Consolidated Interest Expense" means, with respect to any Person
for any period, without duplication, the sum of
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization or original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations);
and
(2) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, and
(3) any interest expense on Indebtedness of another Person that is
guaranteed by such Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of such Person or one of its Restricted Subsidiaries
(whether or not such Guarantee or Lien is called upon);
excluding, however, any amount of such interest of any Restricted Subsidiary if
the net income of such Restricted Subsidiary is excluded in the calculation of
Consolidated EBITDA pursuant to clause (z) of the definition thereof (but only
in the same proportion as the net income of such Restricted Subsidiary is
<PAGE> 15
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excluded from the calculation of Consolidated EBITDA pursuant to clause (z) of
the definition thereof), in each case, on a consolidated basis and in accordance
with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who:
(1) was a member of such Board of Directors on the date of this
Indenture; or
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who were
members of such Board at the time of such nomination or election or whose
election or appointment was previously so approved.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 12.02 or such other address as to which the
Trustee may give notice to the Issuers.
"Credit Facilities" means, with respect to the Company, the
Guarantor and/or their respective Restricted Subsidiaries, one or more debt
facilities or commercial paper facilities, in each case with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Default" means any event that is, or with the passage of time or
the giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name
of the Holder thereof and issued in accordance with Section 2.06, substantially
in the form of Exhibit A hereto, except that such Note shall not bear the Global
Note Legend and shall not have the "Schedule of Exchanges of Interests in the
Global Note" attached thereto.
"Depositary" means, with respect to the Global Notes, the Person
specified in Section 2.03 as the Depositary with respect to the Notes, and any
and all successors thereto appointed as depositary hereunder and having become
such pursuant to the applicable provision of this Indenture.
"Disposition" means, with respect to any Person, any merger,
consolidation or other business combination involving such Person (whether or
not such Person is the Surviving Person) or the sale, assignment, or transfer,
lease conveyance or other disposition of all or substantially all of such
Person's assets or Capital Stock.
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company or the Guarantor, as the
case
<PAGE> 16
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may be, to repurchase such Capital Stock upon the occurrence of a change of
control or an asset sale shall not constitute Disqualified Stock if the terms of
such Capital Stock provide that the Company or the Guarantor, as the case may
be, may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with Section 4.07.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means any private or underwritten public offering
of Qualified Capital Stock of the Company of which the gross proceeds to the
Company are at least $25 million.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f).
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries and the Guarantor and its Restricted Subsidiaries in
existence on the Issue Date, until such amounts are repaid.
"Full Accretion Date" means, April 1, 2004, the first date on which
the Accreted Value of the Notes has accreted to an amount equal to the principal
amount at maturity of the Notes.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the Issue Date.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
<PAGE> 17
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"Guarantee" or "guarantee" means a guarantee other than by
endorsement of negotiable instruments for collection in the ordinary course of
business, direct or indirect, in any manner including, without limitation, by
way of a pledge of assets or through letters of credit or reimbursement
agreements in respect thereof, of all or any part of any Indebtedness, measured
as the lesser of the aggregate outstanding amount of the Indebtedness so
guaranteed and the face amount of the Guarantee.
"Guarantor" has the meaning assigned to it in the preamble to this
Indenture.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements;
(2) interest rate option agreements, foreign currency exchange
agreements, foreign currency swap agreements; and
(3) other agreements or arrangements designed to protect such Person
against fluctuations in interest and currency exchange rates.
"Holder" means a holder of the Notes.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) in respect of banker's acceptances;
(4) representing Capital Lease Obligations;
(5) in respect of the balance deferred and unpaid of the purchase
price of any property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing the notional amount of any Hedging Obligations,
if and to the extent any of the preceding items (other than letters of credit
and Hedging Obligations) would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition, the term
"Indebtedness" includes all Indebtedness of others secured by a Lien on any
asset of the specified Person (whether or not such Indebtedness is assumed by
the specified Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person.
<PAGE> 18
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The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness
issued with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act that is not also a QIB.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
"Investment Grade Rating" means a rating equal to or higher than
Baa3 (or the equivalent) by Moody's and BBB- (or the equivalent) by S&P.
"Issue Date" means March 17, 1999.
"Issuers" has the meaning assigned to it in the preamble to this
Indenture.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue on
such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Issuers and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Leverage Ratio " means, as of any date, the ratio of:
(1) the combined Consolidated Indebtedness of the Company and the
Guarantor on such date to
<PAGE> 19
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(2) the aggregate amount of combined Consolidated EBITDA for the
Company and the Guarantor for the most recently ended fiscal quarter for
which internal financial statements are available multiplied by four (the
"Reference Period").
In addition to the foregoing, for purposes of this definition,
"Consolidated EBITDA" shall be calculated on a pro forma basis after giving
effect to
(1) the issuance of the Notes;
(2) the incurrence of the Indebtedness or the issuance of the
Disqualified Stock or other Preferred Stock of a Restricted Subsidiary
(and the application of the proceeds therefrom) giving rise to the need to
make such calculation and any incurrence or issuance (and the application
of the proceeds therefrom) or repayment of other Indebtedness or
Disqualified Stock or other Preferred Stock of a Restricted Subsidiary,
other than the incurrence or repayment of Indebtedness for ordinary
working capital purposes, at any time subsequent to the beginning of the
Reference Period and on or prior to the date of determination, as if such
incurrence (and the application of the proceeds thereof), or the
repayment, as the case may be, occurred on the first day of the Reference
Period; and
(3) any Dispositions or Asset Acquisitions (including, without
limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of such Person or one of its Restricted
Subsidiaries (including any person that becomes a Restricted Subsidiary as
a result of such Asset Acquisition) incurring, assuming or otherwise
becoming liable for or issuing Indebtedness, Disqualified Stock or
Preferred Stock) made on or subsequent to the first day of the Reference
Period and on or prior to the date of determination, as if such
Disposition or Asset Acquisition (including the incurrence, assumption or
liability for any such Indebtedness, Disqualified Stock or Preferred Stock
and also including any Consolidated EBITDA associated with such Asset
Acquisition, including any cost savings adjustments in compliance with
Regulation S-X promulgated by the Commission) had occurred on the first
day of the Reference Period.
For purposes of this definition and calculating the combined
Consolidated Indebtedness for the Company and the Guarantor, in no case will the
combined Consolidated Indebtedness for the Company include (x) Consolidated
Indebtedness of the Company which has already been counted as part of the
Consolidated Indebtedness of the Guarantor and (y) Consolidated Indebtedness of
the Guarantor which has already been counted as the Consolidated Indebtedness of
the Company. Further, for purposes of this definition and calculating combined
Consolidated EBITDA for the Company and the Guarantor, in no case will combined
Consolidated EBITDA for the Company and the Guarantor include (x) Consolidated
EBITDA of the Company which has already been counted as part of the Consolidated
EBITDA of the Guarantor and (y) Consolidated EBITDA of the Guarantor which has
already been counted as the Consolidated EBITDA of the Company.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and
<PAGE> 20
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any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction.
"Management Fees" means the fee payable to Charter Communications,
Inc. pursuant to the management agreement between Charter Communications, Inc.
and Charter Communication Operating LLC, as such agreement exists on the Issue
Date, including any amendment or replacement thereof, provided that any such
amendment or replacement is not more disadvantageous to the Holders of the Notes
in any material respect from such management agreement existing on the Issue
Date.
"Marcus Combination" means the consolidation or merger of the
Guarantor with and into the Company or any of its Restricted Subsidiaries.
"Mirror Note" means the senior note of the Guarantor due April 1,
2007 issued to the Company in the principal amount of $1,548,630,855 in the form
attached to this Indenture as Exhibit F, and which will be secured by the pledge
by the Guarantor of all of the Capital Stock of Marcus Cable Company LLC, a
wholly owned Subsidiary of the Guarantor.
"Moody's" means Moody's Investors Service, Inc. or any successor to
the rating agency business thereof.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries or by the Guarantor or any of its
Restricted Subsidiaries, as the case may be, in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof or taxes paid or payable as a
result thereof (including amounts distributable in respect of owners', partners'
or members' tax liabilities resulting from such sale), in each case after taking
into account any available tax credits or deductions and any tax sharing
arrangements and amounts required to be applied to the repayment of
Indebtedness.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither the Company nor any of its Restricted
Subsidiaries, nor the Guarantor or any of its Restricted Subsidiaries, as
the case may be, (a) provides credit support of any kind (including any
undertaking, agreement or instrument that would constitute Indebtedness),
(b) is directly or indirectly liable as a guarantor or otherwise, or (c)
constitutes the lender;
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time or both
any holder of any other Indebtedness (other than the Notes) of the Company
or any of its Restricted Subsidiaries, or the Guarantor or any of its
Restricted Subsidiaries, as the case may be, to declare a default on such
other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity; and
<PAGE> 21
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(3) as to which the lenders have been notified in writing that they
will not have any recourse to the stock or assets of the Company or any of
its Restricted Subsidiaries or the Guarantor or any of its Restricted
Subsidiaries, as the case may be.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company, Charter Capital or the Guarantor, as the case may be, by two Officers
of the Company, Charter Capital or the Guarantor, as the case may be, one of
whom must be the principal executive officer, the chief financial officer or the
treasurer of the Company, Charter Capital or the Guarantor, as the case may be,
that meets the requirements of Section 12.05.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Trustee, that meets the requirements of Section
12.05. The counsel may be an employee of or counsel to the Issuers, the
Guarantor, any Subsidiary of the Issuers or the Guarantor or the Trustee.
"Other Notes" means the 8.25% Senior Notes due 2007 of the Issuers
in an aggregate principal amount not to exceed the principal amount issued on
the Issue Date, and the 8.625% Senior Notes due 2009 of the Issuers in an
aggregate principal amount not to exceed the principal amount issued on the
Issue Date.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to DTC, shall include Euroclear and Cedel).
"Permitted Investments" means:
(1) any Investment by the Company in a Restricted Subsidiary of the
Company, or any Investment by the Guarantor in a Restricted Subsidiary of
the Guarantor, the Company or a Restricted Subsidiary of the Company, or
any Investment by a Restricted Subsidiary of the Company or the Guarantor
in the Company;
(2) any Investment in Cash Equivalents;
(3) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment:
<PAGE> 22
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(a) such Person becomes a Restricted Subsidiary of the
Company; or
(b) such Person is merged or consolidated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Restricted Subsidiary of the
Company;
(4) any Investment by the Guarantor or any Restricted Subsidiary of
the Guarantor in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of the
Guarantor; or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or
is liquidated into, the Guarantor or a Restricted Subsidiary of the
Guarantor;
(5) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.11;
(6) Investment made out of the net cash proceeds of the issue and
sale (other than to a Subsidiary of the Company or the Guarantor) of
Equity Interests (other than Disqualified Stock) of the Company or the
Guarantor to the extent that such net cash proceeds have not been applied
to make a Restricted Payment or to effect other transactions pursuant to
Section 4.07 or to the extent such net cash proceeds have not been used to
incur Indebtedness pursuant to clause (10) of Section 4.10;
(7) Investments in Productive Assets having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with
all other Investments made pursuant to this clause (7) since the Issue
Date, not to exceed $150 million; provided that either the Company or any
of its Restricted Subsidiaries or the Guarantor or any of its Restricted
Subsidiaries, after giving effect to such Investments, will own at least
20% of the Voting Stock of such Person;
(8) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with
all other Investments made pursuant to this clause (8) since the date of
this Indenture, not to exceed $50 million;
(9) Investments in customers and suppliers in the ordinary course of
business which either (A) generate accounts receivable or (B) are accepted
in settlement of bona fide disputes; and
(10) the Company's investment in the Guarantor, as outstanding on
the Issue Date.
<PAGE> 23
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"Permitted Liens" means:
(1) Liens on the assets of the Company or the Guarantor securing
Indebtedness and other Obligations under clause (1) of Section 4.10;
(2) Liens in favor of the Company and the Guarantor and Liens on the
assets of any Restricted Subsidiary of the Company or the Guarantor in
favor of any other Restricted Subsidiary of the Company or the Guarantor;
(3) Liens on property of a Person existing at the time such Person
is merged with or into or consolidated with the Company or the Guarantor;
provided that such Liens were in existence prior to the contemplation of
such merger or consolidation and do not extend to any assets other than
those of the Person merged into or consolidated with the Company or the
Guarantor;
(4) Liens on property existing at the time of acquisition thereof by
the Company or the Guarantor; provided that such Liens were in existence
prior to the contemplation of such acquisition;
(5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(6) purchase money mortgages or other purchase money liens
(including without limitation any Capital Lease Obligations) incurred by
the Company or the Guarantor upon any fixed or capital assets acquired
after the Issue Date or purchase money mortgages (including without
limitation Capital Lease Obligations) on any such assets, whether or not
assumed, existing at the time of acquisition of such assets, whether or
not assumed, so long as (i) such mortgage or lien does not extend to or
cover any of the assets of the Company or the Guarantor, except the asset
so developed, constructed, or acquired, and directly related assets such
as enhancements and modifications thereto, substitutions, replacements,
proceeds (including insurance proceeds), products, rents and profits
thereof, and (ii) such mortgage or lien secures the obligation to pay the
purchase price of such asset, interest thereon and other charges, costs
and expenses (including, without limitation, the cost of design,
development, construction, acquisition, transportation, installation,
improvement, and migration) and incurred in connection therewith (or the
obligation under such Capital Lease Obligation) only;
(7) Liens existing on the date of this Indenture (other than in
connection with the Credit Facilities);
(8) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(9) statutory and common law Liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen or other
similar Liens arising in the ordinary
<PAGE> 24
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course of business and with respect to amounts not yet delinquent or being
contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with
GAAP shall have been made;
(10) Liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation, unemployment insurance
and other types of social security;
(11) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory or regulatory obligation, bankers'
acceptance, surety and appeal bonds, government contracts, performance and
return-of-money bonds and other obligations of a similar nature incurred
in the ordinary course of business (exclusive of obligations for the
payment of borrowed money);
(12) easements, rights-of-way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that
do not materially interfere with the ordinary course of business of the
Company or the Guarantor or any of their Restricted Subsidiaries;
(13) Liens of franchisors or other regulatory bodies arising in the
ordinary course of business;
(14) Liens arising from filing Uniform Commercial Code financing
statements regarding leases or other Uniform Commercial Code financing
statements for precautionary purposes relating to arrangements not
constituting Indebtedness;
(15) Liens arising from the rendering of a final judgment or order
against the Company, the Guarantor or any of their Restricted Subsidiaries
that does not give rise to an Event of Default; (16) Liens securing
reimbursement obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit and the
products and proceeds thereof;
(17) Liens encumbering customary initial deposits and margin
deposits, and other Liens that are within the general parameters customary
in the industry and incurred in the ordinary course of business, in each
case, securing Indebtedness under Hedging Obligations and forward
contracts, options, future contracts, future options or similar agreements
or arrangements designed solely to protect the Company, the Guarantor or
any of their respective Restricted Subsidiaries from fluctuations in
interest rates, currencies or the price of commodities;
(18) Liens consisting of any interest or title of licensor in the
property subject to a license;
(19) Liens on the Capital Stock of Unrestricted Subsidiaries;
<PAGE> 25
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(20) Liens arising from sales or other transfers of accounts
receivable which are past due or otherwise doubtful of collection in the
ordinary course of business;
(21) Liens incurred in the ordinary course of business of the
Company or the Guarantor, with respect to obligations which in the
aggregate do not exceed $50 million at any one time outstanding;
(22) Liens in favor of the Trustee arising under the provisions in
this Indenture and in the indentures relating to the Other Notes, in each
case under Section 7.07; and
(23) Liens in favor of the Trustee for its benefit and the benefit
of the Holders and the holders of the Other Notes, as their respective
interests appear.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries, or the Guarantor or any of its
Restricted Subsidiaries, as the case may be, issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund, other Indebtedness of the Company or any of its Restricted Subsidiaries,
or the Guarantor or any of its Restricted Subsidiaries, respectively (other than
intercompany Indebtedness); provided that unless permitted otherwise by this
Indenture, no Indebtedness of the Company or any of its Restricted Subsidiaries,
or the Guarantor or any of its Restricted Subsidiaries, may be issued in
exchange for, or the net proceeds of which are used to extend, refinance, renew,
replace, defease or refund Indebtedness of the Guarantor or any of its
Restricted Subsidiaries, or the Company or any of its Restricted Subsidiaries,
respectively; provided, further, that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest and premium, if
any, on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity
date later than the final maturity date of, and has a Weighted Average
Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Notes or the Guarantee, such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and is
subordinated in right of payment to, the Notes or the Guarantee, as the
case may be, on terms at least as favorable to the Holders of Notes as
those contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by the Company or by any of
its Restricted Subsidiaries or the Guarantor or by any of its Restricted
Subsidiaries who is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
<PAGE> 26
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"Person" means any individual, corporation, partnership, joint
venture, association, limited liability company, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
"Pledge Documents" means, collectively, this Indenture and all
pledge agreements or other instruments evidencing or creating any security
interests in favor of the Trustee in all or any portion of the Collateral, in
each case as amended, supplemented or modified from time to time in accordance
with their terms and the terms of this Indenture.
"Principal" means Paul G. Allen.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i)(A) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Productive Assets" means assets (including assets of a referent
Person owned directly or indirectly through ownership of Capital Stock) of a
kind used or useful in the Cable Related Business.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Qualified Capital Stock" means any Capital Stock that is not
Disqualified Stock.
"Rating Agencies" means Moody's and S&P.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement dated as of the Issue Date among the Issuers, the Guarantor and
the initial purchasers named therein with respect to the Notes issued on the
Issue Date.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a global Note bearing the Private
Placement Legend and deposited with or on behalf of the Depositary and
registered in the name of the Depositary or its nominee, issued in an initial
denomination equal to the outstanding principal amount at maturity of the Notes
initially sold in reliance on Rule 903 of Regulation S.
"Related Party" means:
(1) the spouse or an immediate family member, estate or heir of the
Principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, stockholders, partners, owners or Persons beneficially
holding an 80% or more controlling interest of which consist of the
Principal and/or such other Persons referred to in the immediately
preceding clause (1).
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) with
<PAGE> 27
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direct responsibility for the administration of this Indenture and also means,
with respect to a particular corporate trust matter, any other officer to whom
such matter is referred because of his knowledge of and familiarity with the
particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated the Securities Act.
"S&P" means Standard & Poor's Ratings Service, a division of the
McGraw-Hill Companies, Inc. or any successor to the rating agency business
thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary of the
Company which is a "Significant Subsidiary" as defined in Rule 1-02(w) of
Regulation S-X under the Exchange Act.
"Special Interest" has the meaning set forth in the Registration
Rights Agreement.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the documentation governing
such Indebtedness on the Issue Date, or, if none, the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person:
(1) any corporation, association or other business entity of which
at least 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time
<PAGE> 28
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owned or controlled, directly or indirectly, by such Person or one or more
of the other Subsidiaries of that Person (or a combination thereof) and,
in the case of any such entity of which 50% of the total voting power of
shares of Capital Stock is so owned or controlled by such Person or one or
more of the other Subsidiaries of such Person, such Person and its
Subsidiaries also has the right to control the management of such entity
pursuant to contract or otherwise; and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or
(b) the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Tax" shall mean any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other liabilities
related thereto).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA; provided, however, that in the event the Trust Indenture Act of
1939 is amended after such date, then "TIA" means, to the extent required by
such amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means Harris Trust and Savings Bank until a successor
replaces Harris Trust and Savings Bank in accordance with the applicable
provisions of this Indenture and thereafter means the successor serving
hereunder.
"Unrestricted Definitive Note" means one or more Definitive Notes
that do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Global Note" means a permanent global Note
substantially in the form of Exhibit A attached hereto that bears the Global
Note Legend and that has the "Schedule of Exchanges of Interests in the Global
Note" attached thereto, and that is deposited with or on behalf of and
registered in the name of the Depositary, representing a series of Notes that do
not bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company or the
Guarantor that is designated by the Board of Directors as an Unrestricted
Subsidiary pursuant to a Board Resolution, but only to the extent that such
Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with the Company or any Restricted Subsidiary of the Company
or the Guarantor or any Restricted Subsidiary of the Guarantor unless the
terms of any such agreement, contract, arrangement or understanding are no
less favorable to the Company or any Restricted Subsidiary or the
Guarantor or any Restricted Subsidiary of the Guarantor than those that
might be obtained at the time from Persons who are not Affiliates of the
Company or the Guarantor unless such terms constitute Investments
permitted by the covenant described above under Section 4.08;
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(3) is a Person with respect to which neither the Company nor any of
its Restricted Subsidiaries, nor the Guarantor nor any of its Restricted
Subsidiaries, has any direct or indirect obligation (a) to subscribe for
additional Equity Interests or (b) to maintain or preserve such Person's
financial condition or to cause such Person to achieve any specified
levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of the Company or any of its
Restricted Subsidiaries or the Guarantor or any of its Restricted
Subsidiaries; and
(5) has at least one director on its board of directors that is not
a director or executive officer of the Company or any of its Restricted
Subsidiaries, or of the Guarantor or any of its Restricted Subsidiaries,
or has at least one executive officer that is not a director or executive
officer of the Company or any of its Restricted Subsidiaries, or of the
Guarantor or any of its Restricted Subsidiaries.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under
the Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock
of such Person that is at the time entitled to vote in the election of the board
of directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount
of each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the making of such
payment; by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person and/or by one or more Wholly Owned
Restricted Subsidiaries of such Person.
Section 1.02. Other Definitions.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Affiliate Transaction" 4.13
"Asset Sale Offer" 3.09
"Authentication Order" 2.02
"Change of Control Offer" 4.16
</TABLE>
<PAGE> 30
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<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Change of Control Payment" 4.16
"Change of Control Payment Date" 4.16
"Covenant Defeasance" 8.01
"DTC" 2.03
"Event of Default" 6.01
"Excess Proceeds" 4.12
"incur" 4.09
"Legal Defeasance" 8.01
"Offer Period" 3.09
"Paying Agent" 2.03
"Payment Default" 6.01
"Permitted Debt" 4.10
"Preferred Stock Financing" 4.10
"Purchase Date" 3.09
"Registrar" 2.03
"Restricted Payments" 4.07
"Subordinated Debt Financing" 4.10
"Subordinated Notes" 4.10
"Subsidiary Guarantee" 4.17
"Suspended Covenants" 4.19
</TABLE>
Section 1.03. Incorporation by Reference of Trust Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the Notes means the Issuers and any successor obligor
upon the Notes.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
<PAGE> 31
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Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and in the plural
include the singular;
(e) provisions apply to successive events and transactions;
(f) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of successor sections
or rules adopted by the SEC from time to time;
(g) references to any statute, law, rule or regulation shall be
deemed to refer to the same as from time to time amended and in effect and
to any successor statute, law, rule or regulation; and
(h) references to any contract, agreement or instrument shall mean
the same as amended, modified, supplemented or amended and restated from
time to time, in each case, in accordance with any applicable restrictions
contained in this Indenture.
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.
(a) General. The Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto. The Notes
may have notations, legends or endorsements required by law, stock exchange rule
or usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 principal amount at maturity and integral
multiples thereof.
The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Indenture and the Issuers and the
Trustee, by their execution and delivery of this Indenture, expressly agree to
such terms and provisions and to be bound thereby. However, to the extent any
provision of any Note conflicts with the express provisions of this Indenture,
the provisions of this Indenture shall govern and be controlling.
<PAGE> 32
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(b) Global Notes. Notes issued in global form shall be substantially
in the form of Exhibit A attached hereto (including the Global Note Legend
thereon and the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Notes issued in definitive form shall be substantially in the form of
Exhibit A attached hereto (but without the Global Note Legend thereon and
without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount at maturity of outstanding Notes from time to time
endorsed thereon and that the aggregate principal amount at maturity of
outstanding Notes represented thereby may from time to time be reduced or
increased, as appropriate, to reflect exchanges and redemptions. Any endorsement
of a Global Note to reflect the amount of any increase or decrease in the
aggregate principal amount at maturity of outstanding Notes represented thereby
shall be made by the Trustee or the custodian, at the direction of the Trustee,
in accordance with instructions given by the Holder thereof as required by
Section 2.06.
(c) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Global Notes that are held by
Participants through Euroclear or Cedel Bank.
Section 2.02. Execution and Authentication.
Two Officers shall sign the Notes for each Issuer by manual or
facsimile signature. The Guarantor shall execute the Guarantee in the manner set
forth in Article 10.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuers signed by an
Officer of each of the Issuers (an "Authentication Order"), authenticate Notes
for original issue in the aggregate principal amount at maturity of
$1,475,000,000. The aggregate principal amount at maturity of Notes outstanding
at any time may not exceed such amount except as provided in Section 2.07. On
the Issue Date, the Issuers will issue $1,475,000,000 aggregate principal amount
at maturity of Notes.
The Trustee may appoint an authenticating agent acceptable to the
Issuers to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Issuers.
Section 2.03. Registrar and Paying Agent.
The Issuers shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be pre-
<PAGE> 33
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sented for payment ("Paying Agent"). The Registrar shall keep a register of the
Notes and of their transfer and exchange. The Issuers may appoint one or more
co-registrars and one or more additional paying agents. The term "Registrar"
includes any co-registrar and the term "Paying Agent" includes any additional
paying agent. The Issuers may change any Paying Agent or Registrar without
notice to any Holder. The Issuers shall notify the Trustee in writing of the
name and address of any Agent not a party to this Indenture. If the Issuers fail
to appoint or maintain another entity as Registrar or Paying Agent, the Trustee
shall act as such. The Issuers or any of their Subsidiaries may act as Paying
Agent or Registrar.
The Issuers initially appoint The Depository Trust Company ("DTC")
to act as Depositary with respect to the Global Notes.
The Issuers initially appoint the Trustee to act as the Registrar
and Paying Agent and to act as Custodian with respect to the Global Notes.
Section 2.04. Paying Agent to Hold Money in Trust.
The Issuers shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
Accreted Value, premium, if any, or interest on the Notes, and shall notify the
Trustee of any default by the Issuers in making any such payment. While any such
default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee. The Issuers at any time may require a Paying Agent to pay
all money held by it to the Trustee. Upon payment over to the Trustee, the
Paying Agent (if other than the Issuers or a Subsidiary) shall have no further
liability for the money. If the Issuers or a Subsidiary acts as Paying Agent, it
shall segregate and hold in a separate trust fund for the benefit of the Holders
all money held by it as Paying Agent. Upon any bankruptcy or reorganization
proceedings relating to the Issuers, the Trustee shall serve as Paying Agent for
the Notes.
Section 2.05. Holder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Issuers shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Issuers shall otherwise comply with TIA ss. 312(a).
Section 2.06. Transfer and Exchange.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary. All Global Notes shall be exchanged
by the Company for Definitive Notes if:
<PAGE> 34
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(i) the Issuers deliver to the Trustee notice from the Depositary
that it is unwilling or unable to continue to act as Depositary or that it
is no longer a clearing agency registered under the Exchange Act and, in
either case, a successor Depositary is not appointed by the Issuers within
120 days after the date of such notice from the Depositary; or
(ii) the Issuers in their sole discretion determine that the Global
Notes (in whole but not in part) should be exchanged for Definitive Notes
and deliver a written notice to such effect to the Trustee; or
(iii) there shall have occurred and be continuing a Default or Event
of Default with respect to the Notes.
Upon the occurrence of any of the preceding events in (i), (ii) or
(iii) above, Definitive Notes shall be issued in such names as the Depositary
shall instruct the Trustee. Global Notes also may be exchanged or replaced, in
whole or in part, as provided in Sections 2.07 and 2.10. Every Note
authenticated and delivered in exchange for, or in lieu of, a Global Note or any
portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10, shall be
authenticated and delivered in the form of, and shall be, a Global Note. A
Global Note may not be exchanged for another Note other than as provided in this
Section 2.06(a); however, beneficial interests in a Global Note may be
transferred and exchanged as provided in Section 2.06(b), (c) or (f).
(b) Transfer and Exchange of Beneficial Interests in the Global
Notes. The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend. Beneficial
interests in any Unrestricted Global Note may be transferred to Persons
who take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note. No written orders or instructions shall be
required to be delivered to the Registrar to effect the transfers
described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either:
(A)(1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary
<PAGE> 35
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to credit or cause to be credited a beneficial interest in another
Global Note in an amount equal to the beneficial interest to be
transferred or exchanged; and
(A)(2) instructions given in accordance with the Applicable
Procedures containing information regarding the Participant account
to be credited with such increase; or
(B)(1) a written order from a Participant or an Indirect
Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to cause to be issued
a Definitive Note in an amount equal to the beneficial interest to
be transferred or exchanged; and
(B)(2) instructions given by the Depositary to the Registrar
containing information regarding the Person in whose name such
Definitive Note shall be registered to effect the transfer or
exchange referred to in (1) above.
Upon consummation of an Exchange Offer by the Issuers in accordance
with Section 2.06(f), the requirements of this Section 2.06(b)(ii) shall
be deemed to have been satisfied upon receipt by the Registrar of the
instructions contained in the Letter of Transmittal delivered by the
holder of such beneficial interests in the Restricted Global Notes. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in this Indenture and the
Notes or otherwise applicable under the Securities Act, the Trustee shall
adjust the principal amount at maturity of the relevant Global Note(s)
pursuant to Section 2.06(h).
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof; and
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
<PAGE> 36
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(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1)
a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined
in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a broker-dealer pursuant to
the Exchange Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a beneficial interest in an Unrestricted Global
Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof;
or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the
form of a beneficial interest in an Unrestricted Global Note,
a certificate from such holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so
requests or if the Applicable Procedures so require, an Opinion of Counsel in
form reasonably acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Issuers shall issue (and, in the case of the Guarantee, the Guarantor shall
issue) and, upon receipt of an Authentication Order in accordance with Section
2.02, the Trustee shall authenticate one or more Unrestricted Global Notes (with
corresponding Guarantees) in an aggregate principal amount at maturity equal to
the aggregate principal amount at maturity of beneficial interests transferred
pursuant to subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such
<PAGE> 37
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beneficial interest for a Restricted Definitive Note or to transfer such
beneficial interest to a Person who takes delivery thereof in the form of
a Restricted Definitive Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (2) thereof;
(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being transferred to the
Issuers or any of their Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount at maturity of the
applicable Global Note to be reduced accordingly pursuant to Section
2.06(h), and the Issuers shall execute (and, in the case of the Guarantee,
the Guarantor shall execute) and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note
(with its corresponding Guarantee) in the appropriate principal amount.
Any Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such
<PAGE> 38
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Definitive Notes to the Persons in whose names such Notes are so
registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Beneficial Interests in Restricted Global Notes to Unrestricted
Definitive Notes. A holder of a beneficial interest in a Restricted Global
Note may exchange such beneficial interest for an Unrestricted Definitive
Note or may transfer such beneficial interest to a Person who takes
delivery thereof in the form of an Unrestricted Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer, certifies in
the applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of the
Exchange Notes or (3) a Person who is an affiliate (as defined in
Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a broker-dealer pursuant to
the Exchange Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial
interest for a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form
of Exhibit C hereto, including the certifications in item
(1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial
interest to a Person who shall take delivery thereof in the
form of a Definitive Note that does not bear the Private
Placement Legend, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act and that the restrictions on transfer contained herein and in the
Private Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in
an Unrestricted Global Note proposes to exchange such beneficial interest
for a Definitive Note or to transfer such beneficial interest to a Person
who takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of
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the conditions set forth in Section 2.06(b)(ii), the Trustee shall cause
the aggregate principal amount at maturity of the applicable Global Note
to be reduced accordingly pursuant to Section 2.06(h), and the Issuers
shall execute (and, in the case of the Guarantee, the Guarantor shall
execute) and the Trustee shall authenticate and deliver to the Person
designated in the instructions a Definitive Note (with its corresponding
Guarantee) in the appropriate principal amount. Any Definitive Note issued
in exchange for a beneficial interest pursuant to this Section
2.06(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
interest pursuant to this Section 2.06(c)(iii) shall not bear the Private
Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests in Global Notes.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Notes to a Person
who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to
an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable;
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(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause
to be increased the aggregate principal amount at maturity of, in the case
of clause (A) above, the appropriate Restricted Global Note, in the case
of clause (B) above, the 144A Global Note, in the case of clause (C)
above, the Regulation S Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Restricted Definitive Note to a Person who takes
delivery thereof in the form of a beneficial interest in an Unrestricted
Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Issuers;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a broker-dealer pursuant to
the Exchange Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in
the form of Exhibit C hereto, including the certifications in
item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery
thereof in the form of a beneficial interest in the
Unrestricted Global Note, a certificate from such Holder in
the form of Exhibit B hereto, including the certifications in
item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel in form reasonably acceptable to the Registrar to the
effect that such exchange or transfer is in compliance with the Securities
Act
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and that the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain compliance
with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in
this Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes
and increase or cause to be increased the aggregate principal amount at
maturity of the Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note at any time. Upon receipt of a request for such an exchange or
transfer, the Trustee shall cancel the applicable Unrestricted Definitive
Note and increase or cause to be increased the aggregate principal amount
at maturity of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D)
or (iii) above at a time when an Unrestricted Global Note has not yet been
issued, the Issuers shall issue (and, in the case of the Guarantee, the
Guarantor shall issue) and, upon receipt of an Authentication Order in
accordance with Section 2.02, the Trustee shall authenticate one or more
Unrestricted Global Notes (with corresponding Guarantees) in an aggregate
principal amount at maturity equal to the principal amount at maturity of
Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes.
Upon request by a Holder of Definitive Notes and such Holder's compliance with
the provisions of this Section 2.06(e), the Registrar shall register the
transfer or exchange of Definitive Notes. Prior to such registration of transfer
or exchange, the requesting Holder shall present or surrender to the Registrar
the Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by its attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the
name of Persons who take delivery thereof in the form of a Restricted
Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under
the Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications in
item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a cer-
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tificate in the form of Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes.
Any Restricted Definitive Note may be exchanged by the Holder thereof for
an Unrestricted Definitive Note or transferred to a Person or Persons who
take delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Issuers;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a broker-dealer pursuant
to the Exchange Registration Statement in accordance with the
Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(d) thereof;
or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take
delivery thereof in the form of an Unrestricted Definitive
Note, a certificate from such Holder in the form of Exhibit B
hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel in form reasonably acceptable
to the Issuers to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer,
the Registrar shall register the Unrestricted Definitive Notes pursuant to
the instructions from the Holder thereof.
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(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement the Issuers shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount at maturity equal to the principal amount at maturity
of the beneficial interests in the Restricted Global Notes tendered for
acceptance by Persons that certify in the applicable Letters of Transmittal that
(x) they are not broker-dealers, (y) they are not participating in a
distribution of the Exchange Notes and (z) they are not affiliates (as defined
in Rule 144) of the Issuers, and accepted for exchange in the Exchange Offer and
(ii) Definitive Notes in an aggregate principal amount at maturity equal to the
principal amount at maturity of the Restricted Definitive Notes accepted for
exchange in the Exchange Offer. Concurrently with the issuance of such Notes,
the Trustee shall cause the aggregate principal amount at maturity of the
applicable Restricted Global Notes to be reduced accordingly, and the Issuers
shall execute and the Trustee shall authenticate and deliver to the Persons
designated by the Holders of Definitive Notes so accepted Definitive Notes in
the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all
Global Notes and Definitive Notes issued under this Indenture unless
specifically stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A)(1) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER
WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE
TRANSACTION COMPLYING WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE
SECURITIES ACT, (3) TO AN INSTITUTIONAL ACCREDITED INVESTOR IN A
TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, (4) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (5) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (B) IN
ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES OF THE UNITED
STATES."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii)
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or (f) to this Section 2.06 (and all Notes issued in exchange
therefor or substitution thereof) shall not bear the Private
Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE INDENTURE
GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON
AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS
GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE
TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND
(III) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH
THE PRIOR WRITTEN CONSENT OF THE ISSUERS."
(h) Cancellation and/or Adjustment of Global Notes. At such time as
all beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11. At any
time prior to such cancellation, if any beneficial interest in a Global Note is
exchanged for or transferred to a Person who will take delivery thereof in the
form of a beneficial interest in another Global Note or for Definitive Notes,
the principal amount at maturity of Notes represented by such Global Note shall
be reduced accordingly and an endorsement shall be made on such Global Note by
the Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Issuers
shall execute (and in the case of the Guarantee, the Guarantor shall
execute) and the Trustee shall authenticate Global Notes and Definitive
Notes (each with corresponding Guarantees) upon the Issuers' order or at
the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Issuers may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.11, 4.16 and 9.05).
<PAGE> 45
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(iii) The Registrar shall not be required to register the transfer
of or exchange any Note selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Issuers (and the Guarantor, in the
case of the Guarantee), evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Global Notes or Definitive Notes
(each with a corresponding Guarantee) surrendered upon such registration
of transfer or exchange.
(v) The Issuers shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 and ending at the close of business on the
day of selection, (B) to register the transfer of or to exchange any Note
so selected for redemption in whole or in part, except the unredeemed
portion of any Note being redeemed in part or (C) to register the transfer
of or to exchange a Note between a record date and the next succeeding
Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Issuers may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Issuers shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
Section 2.07. Replacement Notes.
If any mutilated Note is surrendered to the Trustee or the Issuers
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note, the Issuers shall issue (and, in the case of the
Guarantee, the Guarantor shall issue) and the Trustee, upon receipt of an
Authentication Order, shall authenticate a replacement Note (with a
corresponding Guarantee) if the Trustee's requirements are met. If required by
the Trustee or the Issuers, an indemnity bond must be supplied by the Holder
that is sufficient in the judgment of the Trustee and the Issuers to protect the
Issuers, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Issuers may charge for their
expenses in replacing a Note.
Every replacement Note (with corresponding Guarantee) is an
additional obligation of the Issuers and the Guarantor and shall be entitled to
all of the benefits of this Indenture equally and proportionately with all other
Notes (with corresponding Guarantees) duly issued hereunder.
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Section 2.08. Outstanding Notes.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions, and those described in this Section
as not outstanding. Except as set forth in Section 2.09, a Note does not cease
to be outstanding because either of the Issuers, the Guarantor or an Affiliate
of the Issuers or the Guarantor holds the Note; however, Notes held by an
Issuer, the Guarantor or a Subsidiary of an Issuer or the Guarantor shall not be
deemed to be outstanding for purposes of Section 3.07(b).
If a Note is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Note is held by a bona fide purchaser.
If the Accreted Value of any Note is considered paid under Section
4.01, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than an Issuer, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
Section 2.09. Treasury Notes.
In determining whether the Holders of the required principal amount
at maturity of Notes have concurred in any direction, waiver or consent, Notes
owned by an Issuer, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with an Issuer, shall
be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that a Responsible Officer of the
Trustee knows are so owned shall be so disregarded.
Section 2.10. Temporary Notes.
Until certificates representing Notes are ready for delivery, the
Issuers may prepare (and, in the case of the Guarantee, the Guarantor may
prepare) and the Trustee, upon receipt of an Authentication Order, shall
authenticate temporary Notes (with corresponding Guarantees). Temporary Notes
shall be substantially in the form of certificated Notes but may have variations
that the Issuers considers appropriate for temporary Notes and as shall be
reasonably acceptable to the Trustee. Without unreasonable delay, the Issuers
shall prepare (and, in the case of the Guarantee, the Guarantor shall prepare)
and the Trustee shall authenticate definitive Notes (with corresponding
Guarantees) in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits
of this Indenture.
Section 2.11. Cancellation.
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of
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transfer, exchange or payment. The Trustee and no one else shall cancel all
Notes surrendered for registration of transfer, exchange, payment, replacement
or cancellation and shall destroy canceled Notes. Certification of the
destruction of all canceled Notes shall be delivered to the Issuers. The Issuers
may not issue new Notes to replace Notes that they have paid or that have been
delivered to the Trustee for cancellation.
Section 2.12. Defaulted Interest.
If the Issuers default in a payment of interest on the Notes, they
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01. The Issuers shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Issuers shall fix or cause to be fixed
each such special record date and payment date; provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Issuers (or, upon the written request of the Issuers, the Trustee in the name
and at the expense of the Issuers) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
ARTICLE 3
REDEMPTION AND PREPAYMENT
Section 3.01. Notices to Trustee.
If the Issuers elect to redeem Notes pursuant to the optional
redemption provisions of Section 3.07, it shall furnish to the Trustee, at least
30 days but not more than 60 days before a redemption date, an Officers'
Certificate setting forth (i) the clause of this Indenture pursuant to which the
redemption shall occur, (ii) the redemption date, (iii) the Accreted Value of
Notes to be redeemed and (iv) the redemption price.
Section 3.02. Selection of Notes to Be Redeemed.
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor more
than 60 days prior to the redemption date by the Trustee from the outstanding
Notes not previously called for redemption.
The Trustee shall promptly notify the Issuers in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the Accreted Value thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 principal amount at
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maturity or whole multiples of $1,000 principal amount at maturity; except that
if all of the Notes of a Holder are to be redeemed, the entire outstanding
amount of Notes held by such Holder, even if not a multiple of $1,000 principal
amount at maturity, shall be redeemed. Except as provided in the preceding
sentence, provisions of this Indenture that apply to Notes called for redemption
also apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
Subject to the provisions of Section 3.09, at least 30 days but not
more than 60 days before a redemption date, the Issuers shall mail or cause to
be mailed, by first class mail, a notice of redemption to each Holder whose
Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
Accreted Value or the principal amount at maturity of such Note to be
redeemed and that, after the redemption date upon surrender of such Note,
a new Note or Notes in principal amount at maturity equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Issuers default in making such redemption
payment, interest on Notes called for redemption ceases to accrue, or the
Accreted Value on the Notes ceases to increase, as the case may be, on and
after the redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Issuers' request, the Trustee shall give the notice of
redemption in the Issuers' name and at their expense; provided, however, that
each of the Issuers shall have delivered to the Trustee, at least 45 days prior
to the redemption date, an Officers' Certificate requesting that the Trustee
give such notice and setting forth the information to be stated in such notice
as provided in the preceding paragraph.
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Section 3.04. Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with Section 3.03,
Notes called for redemption become irrevocably due and payable on the redemption
date at the redemption price. A notice of redemption may not be conditional.
Section 3.05. Deposit of Redemption Price.
At or prior to 10:00 a.m., New York City time, on the redemption
date, the Issuers shall deposit with the Trustee or with the Paying Agent money
sufficient to pay the redemption price of and accrued interest on all Notes to
be redeemed on that date. The Trustee or the Paying Agent shall promptly return
to the Issuers any money deposited with the Trustee or the Paying Agent by the
Issuers in excess of the amounts necessary to pay the redemption price of, and
accrued interest on, all Notes to be redeemed.
If the Issuers comply with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Issuers to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Issuers shall
issue and, upon the Issuers' written request, the Trustee shall authenticate for
the Holder at the expense of the Issuers a new Note equal in principal amount at
maturity to the unredeemed portion of the Note surrendered.
Section 3.07. Optional Redemption.
(a) Except as set forth in clause (b) of this Section 3.07, the
Issuers shall not have the option to redeem the Notes pursuant to this Section
3.07 prior to April 1, 2004. Thereafter, the Issuers shall have the option to
redeem the Notes, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount at maturity) set forth below plus accrued and unpaid interest thereon, if
any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on April 1 of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004 104.960%
2005 103.307%
2006 101.653%
2007 and thereafter 100.000%
</TABLE>
<PAGE> 50
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(b) Notwithstanding the provisions of clause (a) of this Section
3.07, at any time prior to April 1, 2002, the Issuers may, on any one or more
occasions, redeem up to 35% of the aggregate principal amount at maturity of the
Notes originally issued under this Indenture on a pro rata basis (or nearly as
pro rata as practicable) at a redemption price of 109.92% of the Accreted Value
thereof, plus, after the Full Accretion Date, accrued and unpaid interest to the
redemption date, with the net cash proceeds of one or more Equity Offerings;
provided that
(1) at least 65% of the aggregate principal amount at maturity of
Notes originally issued under this Indenture remains outstanding
immediately after the occurrence of such redemption (excluding Notes held
by the Company and its Subsidiaries and the Guarantor and its
Subsidiaries); and
(2) the redemption must occur within 60 days of the date of the
closing of such Equity Offering.
(c) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06.
Section 3.08. Mandatory Redemption.
Except as otherwise provided in Section 4.11 or Section 4.16 below,
the Issuers shall not be required to make mandatory redemption payments with
respect to the Notes.
Section 3.09. Offer to Purchase by Application of Excess Proceeds.
In the event that the Issuers shall be required to commence an offer
to all Holders to purchase Notes pursuant to Section 4.11 (an "Asset Sale
Offer"), they shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Issuers shall purchase the principal amount at maturity of Notes
required to be purchased pursuant to Section 4.11 (the "Offer Amount") or, if
less than the Offer Amount has been tendered, all Notes tendered in response to
the Asset Sale Offer. Payment for any Notes so purchased shall be made in the
same manner as interest payments are made.
If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Note is registered at the close of
business on such record date, and no Special Interest shall be payable to
Holders who tender Notes pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer the Issuers shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
<PAGE> 51
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(a) that the Asset Sale Offer is being made pursuant to this Section
3.09 and Section 4.11 and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrue interest;
(d) that, unless the Issuers default in making such payment, any
Note accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Asset Sale Offer or may elect to have Notes purchased in integral
multiples of $1,000 principal amount at maturity only;
(f) that Holders electing to have a Note purchased pursuant to any
Asset Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Note
completed, or transfer by book-entry transfer, to the Issuers, a
depositary, if appointed by the Issuers, or a Paying Agent at the address
specified in the notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Issuers, the depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount at maturity of the Note the Holder delivered for purchase
and a statement that such Holder is withdrawing his election to have such
Note purchased;
(h) that, if the aggregate Accreted Value of Notes surrendered by
Holders exceeds the Offer Amount, the Issuers shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Issuers so that only Notes in denominations of $1,000
principal amount at maturity, or integral multiples thereof, shall be
purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount at maturity to the unpurchased
portion of the Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Issuers shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Notes or portions thereof tendered pursuant to the Asset Sale
Offer or if less than the Offer Amount has been tendered, all Notes tendered,
and shall deliver to the Trustee an Officers' Certificate stating that such
Notes or portions thereof were accepted for payment by the Issuers in accordance
with the terms of this Section 3.09. The Issuers, the Depositary or the Paying
Agent, as the case may be, shall promptly (but in any case not later than five
days after the Purchase Date) mail or deliver to each tendering Holder an amount
equal to the purchase price of the Notes tendered by such Holder and accepted by
the Issuers for purchase, and the Issuers shall promptly issue a new Note, and
the Trustee, upon written request
<PAGE> 52
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from the Issuers shall authenticate and mail or deliver such new Note to such
Holder, in a principal amount at maturity equal to any unpurchased portion of
the Note surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Issuers to the Holder thereof. The Issuers shall publicly
announce the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
The Issuers shall pay or cause to be paid the Accreted Value of,
premium, if any, and interest on the Notes on the dates and in the manner
provided in the Notes. Accreted Value, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Issuers
or a Subsidiary thereof, holds as of 10:00 a.m. New York City time on the due
date money deposited by the Issuers in immediately available funds and
designated for and sufficient to pay all Accreted Value, premium, if any, and
interest then due. The Issuers shall pay all Special Interest, if any, in the
same manner on the dates and in the amounts set forth in the Registration Rights
Agreement.
The Issuers shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; they shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace period) at the same rate to the extent
lawful.
Section 4.02. Maintenance of Office or Agency.
The Issuers shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Issuers in respect of the Notes and this Indenture may be
served. The Issuers shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Issuers shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
The Issuers may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Issuers of their obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Issuers shall give prompt
written notice to
<PAGE> 53
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the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency.
The Issuers hereby designate the Harris Trust Company of New York,
an affiliate of the Trustee, as one such office or agency of the Issuers in
accordance with Section 2.03.
Section 4.03. Reports.
Whether or not required by the Commission, so long as any Notes are
outstanding, the Issuers and the Guarantor shall furnish to the Holders of
Notes, within the time periods specified in the Commission's rules and
regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if the Issuers and the Guarantor were required to file such Forms,
including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and, with respect to the annual information
only, a report on the annual financial statements by the Issuers'
certified independent accountants and the Guarantor's certified
independent accountants; and
(2) all current reports that would be required to be filed with the
Commission on Form 8-K if the Issuers or the Guarantor were required to
file such reports.
If the Issuers or the Guarantor has designated any of its
Subsidiaries as Unrestricted Subsidiaries, then the quarterly and annual
financial information required by the preceding paragraph shall include a
reasonably detailed presentation, either on the face of the financial statements
or in the footnotes thereto, and in Management's Discussion and Analysis of
Financial Condition and Results of Operations, of the financial condition and
results of operations of the Issuers or the Guarantor, as the case may be, and
their respective Restricted Subsidiaries separate from the financial condition
and results of operations of the Unrestricted Subsidiaries of the Issuers or the
Guarantor, as the case may be.
In addition, whether or not required by the Commission, the Issuers
and the Guarantor shall file a copy of all of the information and reports
referred to in clauses (1) and (2) above with the Commission for public
availability within the time periods specified in the Commission's rules and
regulations (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
Section 4.04. Compliance Certificate.
(a) Each of the Company and the Guarantor shall deliver to the
Trustee, within 90 days after the end of each fiscal year, an Officers'
Certificate stating that a review of the activities of the Company and its
Subsidiaries and the Guarantor and its Subsidiaries, respectively, during the
preceding fiscal year have been made under the supervision of the signing
Officers with a view to determining whether the Company or the Guarantor, as the
case may be, has kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company or the
Guarantor, as the case may be, has kept, observed, performed and fulfilled each
and every covenant contained in this Inden-
<PAGE> 54
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ture and is not in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company or the
Guarantor, as the case may be, is taking or proposes to take with respect
thereto) and that to the best of his or her knowledge no event has occurred and
remains in existence by reason of which payments on account of the principal of
or interest, if any, on the Notes is prohibited or if such event has occurred, a
description of the event and what action the Company or the Guarantor, as the
case may be, is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03 above shall be accompanied by a
written statement of the Company's independent public accountants or the
Guarantor's independent public accountants, as the case may be, (each of whom
shall be a firm of established national reputation) that in making the
examination necessary for certification of such financial statements, nothing
has come to their attention that would lead them to believe that the Company or
the Guarantor, as the case may be, has violated any provisions of Article 4 or
Article 5 or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly to any Person for any failure to obtain
knowledge of any such violation. In the event that, after the Company or the
Guarantor, as the case may be, has used its reasonable best efforts to obtain
the written statement of the Company's independent public accountants or the
Guarantor's independent public accountants, as the case may be, required by the
provisions of this paragraph, such statement cannot be obtained, the Company or
the Guarantor, as the case may be, shall deliver, in satisfaction of its
obligations under this Section 4.04, an Officers' Certificate (A) certifying
that it has used its reasonable best efforts to obtain such required statement
but was unable to do so and (B) attaching the written statement of the Company's
accountants or the Guarantor's accountants, as the case may be, that the Company
or the Guarantor, as the case may be, received in lieu thereof.
(c) Each of the Company and the Guarantor shall, so long as any of
the Notes are outstanding, deliver to the Trustee, forthwith upon any Officer
becoming aware of any Default or Event of Default, an Officers' Certificate
specifying such Default or Event of Default and what action the Company or the
Guarantor, as the case may be, is taking or proposes to take with respect
thereto.
Section 4.05. Taxes.
Each of the Company and the Guarantor shall pay, and shall cause
each of its Subsidiaries to pay, prior to delinquency, all material taxes,
assessments, and governmental levies except such as are contested in good faith
and by appropriate proceedings or where the failure to effect such payment is
not adverse in any material respect to the Holders of the Notes.
Section 4.06. Stay, Extension and Usury Laws.
Each of the Issuers and the Guarantor covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and each of
the Is-
<PAGE> 55
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suers and the Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law, and covenants that it
shall not, by resort to any such law, hinder, delay or impede the execution of
any power herein granted to the Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
Section 4.07. Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(a) declare or pay any dividend or make any other payment or
distribution on account of the Company's, the Guarantor's or any of their
Restricted Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation involving the
Company, the Guarantor or any of their Restricted Subsidiaries) or to the
direct or indirect holders of the Company's, the Guarantor's or any of
their Restricted Subsidiaries' Equity Interests in their capacity as such
(other than dividends or distributions payable in Equity Interests (other
than Disqualified Stock) of the Company or the Guarantor or, in the case
of the Company and its Restricted Subsidiaries, to the Company or a
Restricted Subsidiary of the Company or in the case of the Guarantor and
its Restricted Subsidiaries, to the Company, the Guarantor or a Restricted
Subsidiary of the Company or the Guarantor);
(b) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving the Company) any Equity Interests of the Company
or the Guarantor or any direct or indirect parent of the Company or the
Guarantor or any Restricted Subsidiary of the Company or the Guarantor
(other than, in the case of the Company and its Restricted Subsidiaries,
any such Equity Interests owned by the Company or any Restricted
Subsidiary of the Company or, in the case of the Guarantor and its
Restricted Subsidiaries, any such Equity Interests owned by the Company,
the Guarantor or any Restricted Subsidiary of the Company or the
Guarantor); or
(c) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes or the Guarantees (other than the Notes or the
Guarantees), except a payment of interest or principal at the Stated
Maturity thereof
(all such payments and other actions set forth in clauses (a) through (c) above
being collectively referred to as "Restricted Payments"), unless, at the time of
and after giving effect to such Restricted Payment:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Leverage Ratio test set forth in the first paragraph of Section 4.10;
and
<PAGE> 56
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(3) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company, the Guarantor and each
of their Restricted Subsidiaries after the date of this Indenture
(excluding Restricted Payments permitted by clauses (2), (3), (4), (5),
(6), (7) and (8) of the next succeeding paragraph), shall not exceed, at
the date of determination, the sum of:
(a) an amount equal to 100% of the combined Consolidated
EBITDA of the Company and the Guarantor since the date of this
Indenture to the end of the Company's and the Guarantor's most
recently ended full fiscal quarter for which internal financial
statements are available, taken as a single accounting period, less
the product of 1.2 times the combined Consolidated Interest Expense
of the Company and the Guarantor since the date of this Indenture to
the end of the Company's and the Guarantor's most recently ended
full fiscal quarter for which internal financial statements are
available, taken as a single accounting period, plus
(b) an amount equal to 100% of Capital Stock Sale Proceeds
less any such Capital Stock Sale Proceeds used in connection with
(i) an Investment made pursuant to clause (6) of the definition of
"Permitted Investments" or (ii) the incurrence of Indebtedness
pursuant to clause (10) of Section 4.10, plus
(c) $100.0 million.
So long as no Default has occurred and is continuing or would be
caused thereby, the preceding provisions shall not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would
have complied with the provisions of this Indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of the Company or the
Guarantor in exchange for, or out of the net proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company or the
Guarantor ) of, Equity Interests of the Company or the Guarantor (other
than Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause
(3) (b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of the Company, the Guarantor or any of their
Restricted Subsidiaries with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
(4) regardless of whether a Default then exists, the payment of any
dividend or distribution to the extent necessary to permit direct or
indirect beneficial owners of shares of Capital Stock of the Company or
the Guarantor to pay federal, state or local income tax liabilities that
would arise solely from income of the Company or the Guarantor or any of
their Restricted Subsidiaries, as the case may be, for the relevant
taxable period and attributable to
<PAGE> 57
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them solely as a result of the Company or the Guarantor (and any
intermediate entity through which the Holder owns such shares) or any of
its Restricted Subsidiaries being a limited liability company, partnership
or similar entity for federal income tax purposes;
(5) regardless of whether a Default then exists, the payment of any
dividend by a Restricted Subsidiary of the Company or the Guarantor to the
holders of its common Equity Interests on a pro rata basis;
(6) the payment of any dividend on the Company Preferred Stock or
the redemption, repurchase, retirement or other acquisition of the Company
Preferred Stock in an amount not in excess of its aggregate liquidation
value;
(7) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or the Guarantor held by
any member of the Company's or the Guarantor's management pursuant to any
management equity subscription agreement or stock option agreement in
effect as of the date of this Indenture; provided that the aggregate price
paid for all such repurchased, redeemed, acquired or retired Equity
Interests shall not exceed $10 million in any fiscal year; and
(8) payment of fees in connection with any acquisition, merger or
similar transaction in an amount that does not exceed an amount equal to
1.25% of the transaction value of such acquisition, merger or similar
transaction.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company, the Guarantor or
any of their Restricted Subsidiaries pursuant to the Restricted Payment. The
fair market value of any assets or securities that are required to be valued by
this covenant shall be determined by the Board of Directors of the Company or
the Guarantor, as the case may be, whose resolution with respect thereto shall
be delivered to the Trustee. Such Board of Director's determination must be
based upon an opinion or appraisal issued by an accounting, appraisal or
investment banking firm of national standing if the fair market value exceeds
$100 million. Not later than the date of making any Restricted Payment, the
Company or the Guarantor, as the case may be, shall deliver to the Trustee an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by this Section
4.07 were computed, together with a copy of any fairness opinion or appraisal
required by this Indenture.
Section 4.08. Investments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly:
(1) make any Restricted Investment; or
(2) allow any Restricted Subsidiary of the Company or the Guarantor
to become an Unrestricted Subsidiary,
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unless, in each case:
(1) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(2) the Company would, at the time of, and after giving effect to,
such Restricted Investment or such designation of a Restricted Subsidiary
as an Unrestricted Subsidiary, have been permitted to incur at least $1.00
of additional Indebtedness pursuant to the Leverage Ratio test set forth
in the first paragraph of Section 4.10.
Any designation of a Subsidiary of the Company or the Guarantor as
an Unrestricted Subsidiary shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the preceding conditions and was permitted by this Section 4.08.
If, at any time, any Unrestricted Subsidiary would fail to meet the requirements
as an Unrestricted Subsidiary described in the definition of "Unrestricted
Subsidiary," it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of this Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company or the Guarantor
as of such date and, if such Indebtedness is not permitted to be incurred as of
such date under Section 4.10, the Company or the Guarantor, as the case may be,
shall be in default. The Board of Directors of the Company and the Guarantor may
at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of the Company or the Guarantor,
respectively, of any outstanding Indebtedness of such Unrestricted Subsidiary
and such designation shall only be permitted if (1) such Indebtedness is
permitted under the covenant described under Section 4.10 calculated on a pro
forma basis as if such designation had occurred at the beginning of the
Reference Period; and (2) no Default or Event of Default would be in existence
following such designation.
Section 4.09. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company and the Guarantor shall not, directly or indirectly,
create or permit to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary of the Company or the Guarantor, as the
case may be, to:
(1) pay dividends or make any other distributions on its Capital
Stock to the Company or any of its Restricted Subsidiaries or to the
Guarantor or any of its Restricted Subsidiaries, or with respect to any
other interest or participation in, or measured by, its profits, or pay
any indebtedness owed to the Company or any of its Restricted Subsidiaries
or to the Guarantor or any of its Restricted Subsidiaries;
(2) make loans or advances to the Company or any of its Restricted
Subsidiaries or to the Guarantor or any of its Restricted Subsidiaries; or
(3) transfer any of its properties or assets to the Company or any
of its Restricted Subsidiaries or to the Guarantor or any of its
Restricted Subsidiaries.
<PAGE> 59
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However, the preceding restrictions shall not apply to encumbrances
or restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date of this Indenture
(including, without limitation, the Credit Facilities) and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof; provided that such amendments,
modifications, restatements, renewals, increases, supplements,
refinancings, replacements or refinancings are no more restrictive, taken
as a whole, with respect to such dividend and other payment restrictions
than those contained in such Existing Indebtedness, as in effect on the
date of this Indenture;
(2) this Indenture, the Notes and the Other Notes;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a
Person acquired by the Company or any of its Restricted Subsidiaries or to
the Guarantor or any of its Restricted Subsidiaries as in effect at the
time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the property
or assets of the Person, so acquired; provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred;
(5) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so acquired of
the nature described in clause (3) of the preceding paragraph;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary of either the Company or the Guarantor that restricts
distributions by such Restricted Subsidiary pending its sale or other
disposition;
(8) Permitted Refinancing Indebtedness; provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive, taken as a whole, than
those contained in the agreements governing the Indebtedness being
refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under Section
4.14 that limit the right of the Company or any of its Restricted
Subsidiaries or the Guarantor or any of its Restricted Subsidiaries to
dispose of the assets subject to such Lien;
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(10) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business;
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business;
(12) restrictions contained in the terms of Indebtedness permitted
to be incurred under Section 4.10; provided that such restrictions are no
more restrictive than the terms contained in the Credit Facilities as in
effect on the Issue Date; and
(13) restrictions that are not materially more restrictive than
customary provisions in comparable financings and the management of the
Company determines that such restrictions will not materially impair the
Company's ability to make payments as required under the Notes.
Section 4.10. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt), and the Company and the Guarantor shall
not issue any Disqualified Stock and shall not permit any of their Restricted
Subsidiaries to issue any shares of preferred stock unless the Leverage Ratio
would have been not greater than 8.75 to 1.0 determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of the most recently ended fiscal
quarter.
So long as no Default shall have occurred and be continuing or would
be caused thereby, the first paragraph of this covenant shall not prohibit the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(1) the incurrence by the Company and its Restricted Subsidiaries
and the Guarantor and its Restricted Subsidiaries of Indebtedness under
the Credit Facilities; provided that the aggregate principal amount of all
Indebtedness of the Company and its Restricted Subsidiaries and the
Guarantor and its Restricted Subsidiaries outstanding under all Credit
Facilities after giving effect to such incurrence does not exceed an
amount equal to $3.5 billion less the aggregate amount of all Net Proceeds
of Asset Sales applied by the Company or any of its Subsidiaries or the
Guarantor or any of its Subsidiaries, as the case may be, in the case of
an Asset Sale since the date of this Indenture to repay Indebtedness under
a Credit Facility pursuant to Section 4.11;
(2) the incurrence by the Company and its Restricted Subsidiaries
and the Guarantor and its Restricted Subsidiaries of Existing Indebtedness
(other than the Credit Facilities);
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(3) the incurrence on the Issue Date by the Company and its
Restricted Subsidiaries and the Guarantor and its Restricted Subsidiaries
of Indebtedness represented by the Notes, the Other Notes and the related
Guarantees;
(4) the incurrence by the Company or any of its Restricted
Subsidiaries or the Guarantor or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings
or purchase money obligations, in each case, incurred for the purpose of
financing all or any part of the purchase price or cost of construction or
improvement (including, without limitation, the cost of design,
development, construction, acquisition, transportation, installation,
improvement, and migration) of Productive Assets of the Company or any of
its Restricted Subsidiaries or the Guarantor or any of its Restricted
Subsidiaries, in an aggregate principal amount not to exceed $75 million
at any time outstanding;
(5) the incurrence by the Company or any of its Restricted
Subsidiaries or the Guarantor or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace, in whole or in part,
Indebtedness (other than intercompany Indebtedness) that was permitted by
this Indenture to be incurred under the first paragraph of this covenant
or clauses (2) or (3) of this paragraph;
(6) the incurrence by the Company or any of its Restricted
Subsidiaries or the Guarantor or any of its Restricted Subsidiaries, as
the case may be, of intercompany Indebtedness between or among the Company
and any of its Wholly Owned Restricted Subsidiaries, or the Guarantor or
any of its Restricted Subsidiaries, respectively; provided that except for
the Mirror Note, this clause does not permit Indebtedness between the
Company or any of its Restricted Subsidiaries, as creditor or debtor, as
the case may be, and the Guarantor or any of its Restricted Subsidiaries,
as debtor or creditor, as the case may be, unless otherwise permitted by
the Indentures; provided, further, that:
(a) if the Company or the Guarantor is the obligor on such
Indebtedness, such Indebtedness must be expressly subordinated to
the prior payment in full in cash of all Obligations with respect to
the Notes in the case of the Company, or the Guarantee of such
Guarantor, in the case of the Guarantor; and
(b)(i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other
than the Company or a Wholly Owned Restricted Subsidiary thereof or
the Guarantor or a Wholly Owned Restricted Subsidiary thereof and
(ii) any sale or other transfer of any such Indebtedness to a Person
that is not either the Company or a Wholly Owned Restricted
Subsidiary thereof, or the Guarantor or a Wholly Owned Restricted
Subsidiary thereof, shall be deemed, in each case, to constitute an
incurrence of such Indebtedness by the Company or any of its
Restricted Subsidiaries or the Guarantor or any of its Restricted
Subsidiaries, respectively, as the case may be, that was not
permitted by this clause (6);
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(7) the incurrence by the Company or any of its Restricted
Subsidiaries, or the Guarantor or any of its Restricted Subsidiaries, of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of the Indentures to be outstanding;
(8) the guarantee by the Company or the Guarantor of Indebtedness of
the Company or a Restricted Subsidiary of the Company, or Indebtedness of
the Guarantor or a Restricted Subsidiary of the Guarantor that was
permitted to be incurred by another provision of this Section 4.10;
(9) the incurrence by the Company or any of its Restricted
Subsidiaries, or the Guarantor or any of its Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount at any time
outstanding, not to exceed $300 million;
(10) the incurrence by the Company or any of its Restricted
Subsidiaries, or the Guarantor or any of its Restricted Subsidiaries, of
additional Indebtedness in an aggregate principal amount at any time
outstanding, not to exceed 200% of the net cash proceeds received by the
Company from the sale of its Equity Interests (other than Disqualified
Stock) after the date of this Indenture to the extent such net cash
proceeds have not been applied to make Restricted Payments or to effect
other transactions pursuant to Section 4.07 or to make Permitted
Investments pursuant to clause (6) of the definition thereof;
(11) the accretion or amortization of original issue discount and
the write up of Indebtedness in accordance with purchase accounting; and
(12) Indebtedness under the Mirror Note.
For purposes of determining compliance with this Section 4.10, in
the event that an item of proposed Indebtedness meets the criteria of more than
one of the categories of Permitted Debt described in clauses (1) through (12)
above, or is entitled to be incurred pursuant to the first paragraph of this
covenant, the Company or the Guarantor, as the case may be, shall be permitted
to classify and from time to time to reclassify such item of Indebtedness on the
date of its incurrence in any manner that complies with this covenant. For
avoidance of doubt, Indebtedness incurred pursuant to a single agreement,
instrument, program, facility or line of credit may be classified as
Indebtedness arising in part under one of the clauses listed above, and in part
under any one or more of the clauses listed above, to the extent that such
Indebtedness satisfies the criteria for such clauses.
Notwithstanding the foregoing, in no event shall any Restricted
Subsidiary of the Company or the Guarantor consummate a Subordinated Debt
Financing or a Preferred Stock Financing. A "Subordinated Debt Financing" or a
"Preferred Stock Financing", as the case may be, with respect to any Restricted
Subsidiary of the Company or the Guarantor shall mean a public offering or
private placement (whether pursuant to Rule 144A under the Securities Act or
otherwise) of Subordinated Notes or preferred stock (whether or not such
preferred stock constitutes Disqualified Stock), as the case may be, of such
Restricted Subsidiary to one or more purchasers (other than to one or more
Affiliates of the Company or the Guarantor). "Subordinated Notes" with respect
to any Restricted Subsidiary of the Company or the Guarantor shall mean
Indebtedness of such Restricted Subsidiary
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that is contractually subordinated in right of payment to any other Indebtedness
of such Restricted Subsidiary (including, without limitation, Indebtedness under
the Credit Facilities). The foregoing limitation shall not apply to (i) any
Indebtedness or preferred stock of any Person existing at the time such Person
is merged with or into or became a Subsidiary of the Company or the Guarantor;
provided that such Indebtedness or preferred stock was not incurred or issued in
connection with, or in contemplation of, such Person merging with or into, or
becoming a Subsidiary of, the Company or the Guarantor and (ii) any Indebtedness
or preferred stock of a Restricted Subsidiary issued in connection with, and as
part of the consideration for, an acquisition, whether by stock purchase, asset
sale, merger or otherwise, in each case involving such Restricted Subsidiary,
which Indebtedness or preferred stock is issued to the seller or sellers of such
stock or assets; provided that such Restricted Subsidiary is not obligated to
register such Indebtedness or preferred stock under the Securities Act or
obligated to provide information pursuant to Rule 144A under the Securities Act.
Section 4.11. Limitation on Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless:
(1) the Company, the Guarantor or a Restricted Subsidiary of the
Company or the Guarantor, as the case may be, receives consideration at
the time of such Asset Sale at least equal to the fair market value of the
assets or Equity Interests issued or sold or otherwise disposed of;
(2) such fair market value is determined by the Company's or the
Guarantor's Board of Directors, as the case may be, and evidenced by a
resolution of such Board of Directors set forth in an Officers'
Certificate delivered to the Trustee; and
(3) at least 75% of the consideration therefor received by the
Company, the Guarantor or such Restricted Subsidiary is in the form of
cash, Cash Equivalents or readily marketable securities.
For purposes of this Section 4.11, each of the following shall be
deemed to be cash:
(a) any liabilities (as shown on the Company's, the Guarantor's or
such Restricted Subsidiary's most recent balance sheet) of the Company,
the Guarantor or any Restricted Subsidiary (other than contingent
liabilities and liabilities that are by their terms subordinated to the
Notes or the Guarantees) that are assumed by the transferee of any such
assets pursuant to a customary novation agreement that releases the
Company, the Guarantor or such Restricted Subsidiary from further
liability;
(b) any securities, notes or other obligations received by the
Company, the Guarantor or any such Restricted Subsidiary from such
transferee that are converted by the Company, the Guarantor or such
Restricted Subsidiary into cash, Cash Equivalents or readily marketable
securities within 60 days after receipt thereof (to the extent of the
cash, Cash Equivalents or readily marketable securities received in that
conversion); and
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(c) Productive Assets.
Within 365 days after the receipt of any Net Proceeds from an Asset
Sale, the Company, the Guarantor or a Restricted Subsidiary of the Company or
the Guarantor, as the case may be, may apply such Net Proceeds at its option:
(1) to repay debt under the Credit Facilities or any other
Indebtedness of the Restricted Subsidiaries of the Company (other than
Indebtedness represented by a guarantee of a Restricted Subsidiary of the
Company or the Guarantor); or
(2) to invest in Productive Assets; provided that any Net Proceeds
which the Company, the Guarantor, or a Restricted Subsidiary of the
Company or the Guarantor, as the case may be, has committed to invest in
Productive Assets within 365 days of the applicable Asset Sale may be
invested in Productive Assets within two years of such Asset Sale.
Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the preceding paragraph shall constitute "Excess Proceeds." When
the aggregate amount of Excess Proceeds exceeds $25.0 million, the Issuers shall
make an Asset Sale Offer to all Holders of Notes and all holders of other
Indebtedness that is pari passu with the Notes containing provisions requiring
offers to purchase or redeem with the proceeds of sales of assets to purchase
the maximum principal amount at maturity of Notes and such other pari passu
Indebtedness that may be purchased out of the Excess Proceeds (which amount
includes the entire amount of the Net Proceeds). The offer price in any Asset
Sale Offer shall be payable in cash and equal to 100% of the Accreted Value
thereof plus, after the Full Accretion Date, accrued and unpaid interest, if
any, to the date of purchase. If any Excess Proceeds remain after consummation
of an Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by this Indenture. If the aggregate Accreted Value of
Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer
exceeds the amount of Excess Proceeds, the Trustee shall select the Notes and
such other pari passu Indebtedness to be purchased on a pro rata basis. Upon
completion of each Asset Sale Offer, the amount of Excess Proceeds shall be
reset at zero.
In the event that the Issuers shall be required to commence an offer
to Holders to purchase Notes pursuant to this Section 4.11, they shall follow
the procedures specified in Section 3.09.
Section 4.12. Sale and Leaseback Transactions.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company or the Guarantor may enter into a sale and leaseback
transaction if:
(1) the Company or the Guarantor, as applicable, could have (a)
incurred Indebtedness in an amount equal to the Attributable Debt relating
to such sale and leaseback transaction under the Leverage Ratio test in
the first paragraph of Section 4.10 and (b) incurred a Lien to secure such
Indebtedness pursuant to Section 4.14; and
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(2) the transfer of assets in that sale and leaseback transaction is
permitted by, and the Company or the Guarantor, as the case may be,
applies the proceeds of such transaction in compliance with, the covenant
described above under Section 4.11.
The foregoing restrictions do not apply to a sale and leaseback
transaction if the lease is for a period, including renewal rights, of not in
excess of three years.
Section 4.13. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, and the Guarantor shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less
favorable to the Company or the relevant Restricted Subsidiary or to the
Guarantor or the relevant Restricted Subsidiary, than those that would
have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary or the Guarantor or such Restricted Subsidiary, as
the case may be, with an unrelated Person; and
(2) the Company, or the Guarantor, as the case may be, delivers to
the Trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $15.0 million, a resolution of the Board of Directors of
the Company or a resolution of the Board of Directors of the
Guarantor, as the case may be, set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with this
covenant and that such Affiliate Transaction has been approved by a
majority of the members of such Board of Directors; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in
excess of $50.0 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of
national standing.
The following items shall not be deemed to be Affiliate Transactions
and, therefore, shall not be subject to the provisions of the prior paragraph:
(1) existing employment agreement entered into by the Company, the
Guarantor or any of their Subsidiaries and any employment agreement
entered into by the Company or any of its Restricted Subsidiaries, or any
employment agreement entered into by the Guarantor or any of its
Restricted Subsidiaries in the ordinary course of business and consistent
with the past practice of the Company or such Restricted Subsidiary or the
Guarantor or such Restricted Subsidiary, as the case may be;
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(2) transactions between or among the Company and/or its Restricted
Subsidiaries and the transactions between or among the Guarantor and/or
its Restricted Subsidiaries;
(3) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company or the Guarantor, as the case may be,
and customary indemnification and insurance arrangements in favor of
directors, regardless of affiliation with the Company, the Guarantor or
any of their Restricted Subsidiaries;
(4) payment of management fees pursuant to management agreements
either (A) existing on the Issue Date or (B) entered into after the Issue
Date, to the extent that such management agreements provide for percentage
fees no higher than the percentage fees existing under the management
agreements existing on the Issue Date;
(5) Restricted Payments that are permitted by Section 4.07; and
(6) Permitted Investments.
Section 4.14. Liens.
The Company and the Guarantor shall not, directly or indirectly,
create, incur, assume or suffer to exist any Lien of any kind securing
Indebtedness, Attributable Debt or trade payables on any asset now owned or
hereafter acquired, except Permitted Liens.
Section 4.15. Corporate Existence.
Subject to Article 5, each of the Company and the Guarantor shall do
or cause to be done all things necessary to preserve and keep in full force and
effect (i) its corporate existence, and the corporate, partnership or other
existence of each of its Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of the
Company, the Guarantor or any such Subsidiary and (ii) the rights (charter and
statutory), licenses and franchises of the Company, the Guarantor and their
Subsidiaries; provided, however, that neither the Company nor the Guarantor
shall be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of their Subsidiaries (other
than Charter Capital), if the Board of Directors shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Subsidiaries and the Guarantor and its Subsidiaries, taken
as a whole, and that the loss thereof is not adverse in any material respect to
the Holders of the Notes.
Section 4.16. Repurchase at the Option of Holders upon a Change of Control.
If a Change of Control occurs, each Holder of Notes shall have the
right to require the Issuers to repurchase all or any part (equal to $1,000
principal amount at maturity or an integral multiple thereof) of that Holder's
Notes pursuant to a Change of Control Offer. In the Change of Control Offer, the
Issuers shall offer (a "Change of Control Offer") a payment (the "Change of
Control Payment") in cash equal to 101% of the Accreted Value plus, for any
Change of Control Offer occurring after the Full Accretion Date, accrued and
unpaid interest thereon, if any, to the date of purchase.
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Within ten days following any Change of Control, the Issuers shall
mail a notice to each Holder (with a copy to the Trustee) describing the
transaction or transactions that constitute the Change of Control and stating:
(a) the purchase price and the purchase date, which shall not exceed
30 Business Days from the date such notice is mailed (the "Change of
Control Payment Date");
(b) that any Note not tendered shall continue to accrete in value or
accrue interest;
(c) that, unless the Issuers default in the payment of the Change of
Control Payment, all Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrete in value or accrue interest after the
Change of Control Payment Date;
(d) that Holders electing to have any Notes purchased pursuant to a
Change of Control Offer shall be required to surrender the Notes, with the
form entitled "Option of Holder to Elect Purchase" on the reverse of the
Notes completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day preceding
the Change of Control Payment Date;
(e) that Holders shall be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
Holder, the principal amount at maturity of Notes delivered for purchase,
and a statement that such Holder is withdrawing his election to have the
Notes purchased; and
(f) that Holders whose Notes are being purchased only in part shall
be issued new Notes equal in principal amount at maturity to the
unpurchased portion of the Notes surrendered, which unpurchased portion
must be equal to $1,000 in principal amount at maturity or an integral
multiple thereof.
The Issuers shall comply with the requirements of Rule 14e-1 under
the Exchange Act (or any successor rules) and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of the Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Issuers shall, to the
extent lawful:
(a) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(b) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all Notes or portions thereof so tendered;
and
(c) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the aggregate
principal amount at maturity of Notes or portions thereof being purchased
by the Issuers.
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The Paying Agent shall promptly pay to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount at maturity to any unpurchased
portion of the Notes surrendered, if any; provided that each such new Note shall
be in a principal amount at maturity of $1,000 or an integral multiple thereof.
The Company shall publicly announce the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Payment Date.
The provisions described above that require the Issuers to make a
Change of Control Offer following a Change of Control shall be applicable
regardless of whether or not any other provisions in this Indenture are
applicable. Except as described above with respect to a Change of Control, this
Indenture does not contain provisions that permit the Holders of the Notes to
require that the Issuers repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
Notwithstanding any other provision of this Section 4.16, the
Issuers shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Indenture applicable to a Change of Control Offer made by the Issuers and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
Section 4.17. Limitations on Issuances of Guarantees of Indebtedness.
The Company shall not permit any of its Restricted Subsidiaries,
directly or indirectly, and the Guarantor shall not permit any of its Restricted
Subsidiaries, directly or indirectly, to Guarantee or pledge any assets to
secure the payment of any other Indebtedness of the Company or the Guarantor, as
the case may be, except in respect of the Credit Facilities (the "Guaranteed
Indebtedness") unless (i) such Restricted Subsidiary of the Company or the
Guarantor, as the case may be, simultaneously executes and delivers a
supplemental indenture providing for the Guarantee (a "Subsidiary Guarantee") of
the payment of the Notes by such Restricted Subsidiary and (ii) until one year
after all the Notes have been paid in full in cash, such Restricted Subsidiary
waives and will not in any manner whatsoever claim or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any other
rights against the Company, the Guarantor or any other Restricted Subsidiary of
the Company or the Guarantor as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any Guarantee or any Restricted Subsidiary that existed at
the time such Person became a Restricted Subsidiary and was not Incurred in
connection with, or in contemplation of, such Person becoming a Restricted
Subsidiary. If the Guaranteed Indebtedness is subordinated to the Notes, then
the Guarantee of such Guaranteed Indebtedness shall be subordinated to the
Subsidiary Guarantee at least to the extent that the Guaranteed Indebtedness is
subordinated to the Notes.
Section 4.18. Payments for Consent.
The Company shall not, and shall not permit any of its Subsidiaries
to, and the Guarantor shall not, and shall not permit any of its Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration to or for
the benefit of any Holder of Notes for or as an inducement to any
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consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Notes unless such consideration is offered to be paid and is paid to all
Holders of the Notes that consent, waive or agree to amend in the time frame set
forth in the solicitation documents relating to such consent, waiver or
agreement.
Section 4.19. Application of Fall-Away Covenants.
During any period of time that (a) the Notes have Investment Grade
Ratings from both Rating Agencies and (b) no Default or Event of Default has
occurred and is continuing, the Company and its Restricted Subsidiaries and the
Guarantor and its Restricted Subsidiaries shall not be subject to the provisions
of Sections 4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13 and clause (4) of the first
paragraph of Section 5.01 (collectively, the "Suspended Covenants"). In the
event that the Company and its Restricted Subsidiaries are not subject to the
Suspended Covenants for any period of time as a result of the preceding sentence
and, subsequently, one or both of the Rating Agencies withdraws its ratings or
downgrades the ratings assigned to the Notes below the required Investment Grade
Ratings or a Default or Event of Default occurs and is continuing, then the
Company and its Restricted Subsidiaries and the Guarantor and its Restricted
Subsidiaries shall thereafter again be subject to the Suspended Covenants and
compliance with the Suspended Covenants with respect to the Restricted Payments
made after the time of such withdrawal, downgrade, Default or Event of Default
will be calculated in accordance with the terms of Section 4.07 as though such
covenant had been in effect during the entire period of time from the Issue
Date.
Section 4.20. Impairment of Security Interest.
Neither the Company, the Guarantor nor any of their Subsidiaries
shall take or omit to take any action which action or omission would have the
result of adversely affecting or impairing the security interest in favor of the
Trustee, on behalf of itself and the Holders, with respect to the Collateral,
and neither the Company, the Guarantor nor any of their Subsidiaries shall grant
to any Person, or suffer any Person (other than the Trustee with respect to the
Collateral securing the obligations under the Notes and the Company with respect
to the Collateral securing the obligations under the Mirror Note) to have any
interest whatsoever in the Collateral other than Liens permitted by the Pledge
Documents. Neither the Company nor any of its Subsidiaries shall enter into any
agreement or instrument that by its terms requires the proceeds received from
any sale of Collateral to be applied to repay, redeem, defease or otherwise
acquire or retire any Indebtedness of any Person, other than pursuant to this
Indenture, the Notes and the Pledge Documents.
Section 4.21. Security Interest.
The Company and the Guarantor shall, and shall cause each of their
Restricted Subsidiaries to, undertake to deliver or cause to be delivered to the
Trustee from time to time such other documentation, consents, authorizations,
approvals and orders in form and substance reasonably satisfactory to the
Trustee as the Trustee shall deem necessary or advisable to perfect or maintain
the security interest in the Collateral for the benefit of the Trustee on behalf
of the Holders until any such Collateral is released in accordance with the
terms of this Indenture.
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ARTICLE 5
SUCCESSORS
Section 5.01. Merger, Consolidation, or Sale of Assets.
Neither of the Issuers nor the Guarantor may, directly or
indirectly: (1) consolidate or merge with or into another Person (whether or not
such Issuer, or the Guarantor, as the case may be, is the surviving
corporation); or (2) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of its properties or assets, in one or more related
transactions, to another Person; unless:
(1) either: (a) such Issuer, or the Guarantor, as the case may be,
is the surviving corporation; or (b) the Person formed by or surviving any
such consolidation or merger (if other than such Issuer, or the Guarantor,
as the case may be) or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made is a Person organized
or existing under the laws of the United States, any state thereof or the
District of Columbia (provided that if the Person formed by or surviving
any such consolidation or merger with either Issuer is a limited liability
company or other Person other than a corporation, a corporate co-issuer
shall also be an obligor with respect to the Notes);
(2) the Person formed by or surviving any such consolidation or
merger (if other than the Company, or the Guarantor, as the case may be)
or the Person to which such sale, assignment, transfer, conveyance or
other disposition shall have been made assumes all the obligations of the
Company, or the Guarantor, as the case may be, under the Notes in the case
of the Company, or under the Guarantee, in the case of the Guarantor, and
this Indenture pursuant to agreements reasonably satisfactory to the
Trustee;
(3) immediately after such transaction no Default or Event of
Default exists; and
(4) the Company, or the Guarantor, as the case may be, or the Person
formed by or surviving any such consolidation or merger (if other than the
Company, or the Guarantor, as the case may be) will, on the date of such
transaction after giving pro forma effect thereto and any related
financing transactions as if the same had occurred at the beginning of the
applicable four-quarter period, either (A) be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Leverage Ratio test set
forth in the first paragraph of Section 4.10 or (B) have a Leverage Ratio
immediately after giving effect to such consolidation or merger no greater
than the Leverage Ratio immediately prior to such consolidation or merger.
In addition, the Company may not, directly or indirectly, and the
Guarantor may not, directly or indirectly, lease all or substantially all of its
properties or assets, in one or more related transactions, to any other Person.
This Section 5.01 shall not apply to a sale, assignment, transfer, conveyance or
other disposition of assets between or among the Company and any of its
Wholly-Owned Subsidiaries, or the Guarantor and any of its Wholly-Owned
Subsidiaries, as the case may be.
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Section 5.02. Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of either Issuer or the Guarantor, as the case may be, in accordance with
Section 5.01, the successor Person formed by such consolidation or into which
either Issuer or the Guarantor, as the case may be, is merged or to which such
transfer is made shall succeed to and (except in the case of a lease) be
substituted for, and may exercise every right and power of, such Issuer or the
Guarantor, as the case may be, under this Indenture with the same effect as if
such successor Person had been named therein as such Issuer or the Guarantor, as
the case may be, and (except in the case of a lease) such Issuer or the
Guarantor, as the case may be, shall be released from the obligations under the
Notes (or the Guarantee, in the case of the Guarantor) and this Indenture,
except with respect to any obligations that arise from, or are related to, such
transaction.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(a) the Issuers default in the payment when due of interest on the
Notes and such default continues for a period of 30 days;
(b) the Issuers default in payment when due of the Accreted Value
of, or premium, if any, on the Notes;
(c) the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, fails to comply with any
of the provisions of Sections 4.16 or 5.01;
(d) the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, fails to comply with any
of their other covenants or agreements in this Indenture for 30 days after
written notice thereof has been given to the Company by the Trustee or to
the Company and the Trustee by Holders of at least 25% of the aggregate
principal amount at maturity of the Notes outstanding;
(e) the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, defaults under any
mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness for money
borrowed (or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries or by the Guarantor or any of its Restricted
Subsidiaries) whether such Indebtedness or guarantee now exists or is
created after the date of this Indenture, if that default:
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(1) is caused by a failure to pay at final stated maturity the
principal amount on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such
default (a "Payment Default"); or
(2) results in the acceleration of such Indebtedness prior to
its express maturity,
and, in each case, the principal amount of any such Indebtedness, together
with the principal amount of any other such Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $100.0 million or more;
(f) the Company or any of its Restricted Subsidiaries, or the
Guarantor or any of its Restricted Subsidiaries, fails to pay final
judgments which are non-appealable aggregating in excess of $100.0 million
(net of applicable insurance which has not been denied in writing by the
insurer), which judgments are not paid, discharged or stayed for a period
of 60 days;
(g) the Company, the Guarantor or any of their Significant
Subsidiaries pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it
in an involuntary case,
(iii) consents to the appointment of a custodian of it or for
all or substantially all of its property, or
(iv) makes a general assignment for the benefit of its
creditors; or
(h) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(i) is for relief against the Company, the Guarantor or any of
their Significant Subsidiaries in an involuntary case;
(ii) appoints a custodian of the Company, the Guarantor or any
of their Significant Subsidiaries or for all or substantially all of
the property of the Company, the Guarantor or any of their
Significant Subsidiaries; or
(iii) orders the liquidation of the Company, the Guarantor or
any of their Significant Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive
days;
(i) except as permitted by this Indenture, the Guarantee of the
Guarantor shall be held in any judicial proceeding to be unenforceable or
invalid or shall cease for any reason to
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be in full force and effect or the Guarantor, or any Person acting on
behalf of the Guarantor, shall deny or disaffirm its obligations under the
Guarantee; or
(j) except as permitted by this Indenture, any of the Pledge
Documents cease to be in full force and effect (other than in accordance
with their respective terms or the terms of the Indenture), or any of the
Pledge Documents cease to give the Trustee or the Company, as the case may
be, the Liens purported to be created thereby, or any Pledge Document is
declared null and void, or the Company or the Guarantor shall repudiate or
deny in writing that it has any liability or obligation under any Pledge
Document.
Section 6.02. Acceleration.
In the case of an Event of Default arising from clause (g) or (h) of
Section 6.01, with respect to the Company or the Guarantor, all outstanding
Notes shall become due and payable immediately without further action or notice.
If any other Event of Default occurs and is continuing, the Trustee by notice to
the Issuers or the Holders of at least 25% in aggregate principal amount at
maturity of the then outstanding Notes by notice to the Issuers and the Trustee
may declare all the Notes to be due and payable immediately in an amount equal
to (x) the Accreted Value of the Notes outstanding on the date of acceleration,
if such declaration is made prior to the Full Accretion Date or (y) the entire
principal amount at maturity of all the Notes outstanding on the date of
acceleration plus accrued interest, if any, to the date of acceleration, if such
declaration is made after the Full Accretion Date. The Holders of a majority in
aggregate principal amount at maturity of the Notes then outstanding by written
notice to the Trustee may on behalf of all of the Holders rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default (except nonpayment of
Accreted Value, interest or premium that has become due solely because of the
acceleration) have been cured or waived.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of Accreted Value, premium,
if any, and interest on the Notes or to enforce the performance of any provision
of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
Section 6.04. Waiver of Existing Defaults.
Holders of not less than a majority in aggregate principal amount at
maturity of the then outstanding Notes by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the Accreted Value of, premium, if any, or interest on, the
Notes (including in connection with an offer to purchase) (provided, however,
that the Holders of
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a majority in aggregate principal amount at maturity of the then outstanding
Notes may rescind an acceleration and its consequences, including any related
payment default that resulted from such acceleration). Upon any such waiver,
such Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured for every purpose of this Indenture; but no
such waiver shall extend to any subsequent or other Default or impair any right
consequent thereon.
Section 6.05. Control by Majority.
Holders of a majority in aggregate principal amount at maturity of
the then outstanding Notes may direct the time, method and place of conducting
any proceeding for exercising any remedy available to the Trustee or exercising
any trust or power conferred on it. However, the Trustee may refuse to follow
any direction that conflicts with law or this Indenture that the Trustee
determines may be unduly prejudicial to the rights of other Holders of Notes or
that may involve the Trustee in personal liability. The Trustee may take any
other action which it deems proper that is not inconsistent with any such
directive.
Section 6.06. Limitation on Suits.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in aggregate principal amount at
maturity of the then outstanding Notes make a written request to the
Trustee to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in aggregate
principal amount at maturity of the then outstanding Notes do not give the
Trustee a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
Section 6.07. Rights of Holders of Notes to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of Accreted Value, premium, if any, and
interest on the Note, on or after the respective due dates expressed in the Note
(including in connection with an offer to purchase), or to bring suit for the
enforcement of any such payment on or after such respective dates, shall not be
impaired or affected without the consent of such Holder.
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Section 6.08. Collection Suit by Trustee.
If an Event of Default specified in Section 6.01(a) or (b) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Issuers for the whole amount of
Accreted Value of, premium, if any, and interest remaining unpaid on the Notes
and interest on overdue Accreted Value and, to the extent lawful, interest and
such further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Holders of the Notes allowed in any judicial proceedings relative to the Issuers
(or any other obligor upon the Notes), their creditors or their property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 out of the
estate in any such proceeding, shall be denied for any reason, payment of the
same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for Accreted Value, premium, if any, and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Notes for Accreted Value, premium, if any and interest,
respectively; and
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Third: to the Issuers or to such party as a court of competent
jurisdiction shall direct.
The Trustee may fix a record date and payment date for any payment
to Holders of Notes pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section does not apply to a suit by the Trustee, a suit by a Holder of a
Note pursuant to Section 6.07, or a suit by Holders of more than 10% in
aggregate principal amount at maturity of the then outstanding Notes.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
such person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own
gross negligent action, its own gross negligent failure to act, or its own
willful misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
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(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was grossly negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section 7.01.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
(g) The Trustee shall not be bound to make any investigation into
the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture or other paper or documents.
Section 7.02. Rights of Trustee.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel and the written advice of such counsel or any Opinion of Counsel shall
be full and complete authorization and protection from liability in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from either of the Issuers shall be
sufficient if signed by an Officer of such Issuer.
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(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
(g) The Trustee shall not be charged with knowledge of any Default
or Event of Default unless either (i) a Responsible Officer of the Trustee shall
have actual knowledge of such Default or Event of Default or (ii) written notice
of such Default or Event of Default shall have been given to the Trustee by the
Issuers or any Holder.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Issuers, the Guarantor
or any Affiliate of either of the Issuers or the Guarantor with the same rights
it would have if it were not Trustee. However, in the event that the Trustee
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue as trustee or resign. Any
Agent may do the same with like rights and duties. The Trustee is also subject
to Sections 7.10 and 7.11.
Section 7.04. Trustee's Disclaimer.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Issuers' use of the proceeds from the Notes or any money
paid to the Issuers or upon the Issuers' direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of
the Default or Event of Default within 90 days after the Trustee acquires
knowledge thereof. Except in the case of a Default or Event of Default in
payment of Accreted Value of, premium, if any, or interest on any Note, the
Trustee may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the
interests of the Holders of the Notes.
Section 7.06. Reports by Trustee to Holders of the Notes.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA ss. 313(a) (but if no event described in
TIA ss. 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA ss.
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
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A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA ss. 313(d). The
Issuers shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
Section 7.07. Compensation and Indemnity.
The Issuers shall pay to the Trustee from time to time reasonable
compensation for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Issuers shall reimburse the Trustee promptly
upon request for all reasonable disbursements, advances and expenses incurred or
made by it in addition to the compensation for its services. Such expenses shall
include the reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel.
The Issuers and the Guarantor shall, jointly and severally,
indemnify the Trustee against any and all losses, liabilities or expenses
incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, including the costs and
expenses of enforcing this Indenture against the Issuers and the Guarantor
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Issuers or the Guarantor or any Holder or any other person) or
liability in connection with the exercise or performance of any of its powers or
duties hereunder, except to the extent any such loss, liability or expense may
be attributable to its gross negligence or willful misconduct. The Trustee shall
notify the Issuers promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Issuers shall not relieve the Issuers or
the Guarantor of their obligations hereunder. The Issuers and the Guarantor
shall defend the claim and the Trustee shall cooperate in the defense. The
Trustee may have separate counsel and the Issuers shall pay the reasonable fees
and expenses of such counsel. The Issuers need not pay for any settlement made
without their consent, which consent shall not be unreasonably withheld.
The obligations of the Issuers and the Guarantor under this Section
7.07 shall survive resignation or removal of the Trustee and the satisfaction
and discharge of this Indenture.
To secure the Issuers' payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the resignation or removal
of the Trustee and the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(g) or (h) occurs, the expenses and the
compensation for the services (including the fees and expenses of its agents and
counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
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Section 7.08. Replacement of Trustee.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Issuers. The Holders of a majority
in aggregate principal amount at maturity of the then outstanding Notes may
remove the Trustee by so notifying the Trustee and the Issuers in writing. The
Issuers may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy
Law;
(c) a custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in aggregate principal amount at maturity of the then outstanding
Notes may appoint a successor Trustee to replace the successor Trustee appointed
by the Issuers.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers, or
the Holders of at least 10% in aggregate principal amount at maturity of the
then outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder who has been a
Holder for at least six months, fails to comply with Section 7.10, such Holder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee; provided all sums owing to the
Trustee hereunder have been paid and subject to the Lien provided for in Section
7.07. Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Issuers' and the Guarantor's obligations under Section 7.07 shall continue
for the benefit of the retiring Trustee.
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Section 7.09. Successor Trustee by Merger, etc.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
Section 7.10. Eligibility; Disqualification.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
Section 7.11. Preferential Collection of Claims Against the Issuers.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance.
The Issuers may, at the option of their respective Boards of
Directors evidenced by a resolution set forth in an Officers' Certificate of
each of the Issuers, at any time, elect to have either Section 8.02 or 8.03 be
applied to all outstanding Notes upon compliance with the conditions set forth
below in this Article 8.
Section 8.02. Legal Defeasance and Discharge.
Upon the Issuers' exercise under Section 8.01 of the option
applicable to this Section 8.02, the Issuers and the Guarantor shall, subject to
the satisfaction of the conditions set forth in Section 8.04, be deemed to have
been discharged from their obligations with respect to all outstanding Notes and
Guarantees thereof on the date the conditions set forth below are satisfied
(hereinafter, "Legal Defeasance"). For this purpose, Legal Defeasance means that
the Issuers shall be deemed to have paid and discharged the entire Indebtedness
represented by the outstanding Notes, which shall thereafter be deemed to be
"outstanding" only for the purposes of Section 8.05 and the other Sections of
this Indenture referred to in (a) and (b) below, and to have satisfied all their
other obligations under such Notes and this Indenture (and the Trustee, on
demand of and at the expense of the Issuers, shall
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execute proper instruments acknowledging the same), except for the following
provisions which shall survive until otherwise terminated or discharged
hereunder:
(a) the rights of Holders of outstanding Notes to receive payments
in respect of the Accreted Value of, premium, if any, and interest on such
Notes when such payments are due from the trust referred to below;
(b) the Issuers' obligations with respect to the Notes concerning
issuing temporary Notes, registration of Notes, mutilated, destroyed, lost
or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(c) the rights, powers, trusts, duties and immunities of the
Trustee, and the Issuers' and the Guarantor's obligations in connection
therewith; and
(d) the Legal Defeasance provisions of this Indenture.
Subject to compliance with this Article 8, the Issuers may exercise
their option under this Section 8.02 notwithstanding the prior exercise of their
option under Section 8.03.
Section 8.03. Covenant Defeasance.
Upon the Issuers' exercise under Section 8.01 of the option
applicable to this Section 8.03, the Issuers and the Guarantor shall, subject to
the satisfaction of the conditions set forth in Section 8.04, be released from
their obligations under the covenants contained in Article 5 and Sections 4.03,
4.07, 4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14, 4.16, 4.17 and 4.19 with respect
to the outstanding Notes and Guarantees thereof on and after the date the
conditions set forth in Section 8.04 are satisfied (hereinafter, "Covenant
Defeasance"), and the Notes and Guarantees thereof shall thereafter be deemed
not "outstanding" for the purposes of any direction, waiver, consent or
declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder (it being understood that such Notes shall not
be deemed outstanding for accounting purposes). For this purpose, Covenant
Defeasance means that, with respect to the outstanding Notes, the Issuers and
the Guarantor may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01, but, except as
specified above, the remainder of this Indenture and such Notes and the
Guarantees thereof shall be unaffected thereby. In addition, upon the Issuers'
exercise under Section 8.01 of the option applicable to this Section 8.03,
subject to the satisfaction of the conditions set forth in Section 8.04,
Sections 6.01(c) through 6.01(f) shall not constitute Events of Default.
Section 8.04. Conditions to Legal or Covenant Defeasance.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
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(1) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay the principal of, premium,
if any, and interest on the outstanding Notes on the stated maturity or on
the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of Legal Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to
the Trustee confirming that (a) the Company has received from, or there
has been published by, the Internal Revenue Service a ruling or (b) since
the date of this Indenture, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based
thereon such opinion of counsel shall confirm that, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal
income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Legal Defeasance had
not occurred;
(3) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an Opinion of Counsel reasonably acceptable to
the Trustee confirming that the Holders of the outstanding Notes will not
recognize income, gain or loss for federal income tax purposes as a result
of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing either: (a) on the date of such deposit (other than a Default
or Event of Default resulting from the borrowing of funds to be applied to
such deposit); or (b) or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the
91st day after the date of deposit;
(5) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material
agreement or instrument (other than this Indenture) to which the Company
or any of the Restricted Subsidiaries is a party or by which the Company
or any of the Restricted Subsidiaries is bound;
(6) the Company must have delivered to the applicable Trustee an
opinion of counsel to the effect that after the 91st day assuming no
intervening bankruptcy, that no Holder is an insider of either of the
Issuers following the deposit and that such deposit would not be deemed by
a court of competent jurisdiction a transfer for the benefit of the
Guarantor or either co-Issuer in its capacity as such, the trust funds
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(7) the Company must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by the Company with the intent of
preferring the Holders of Notes
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over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and
(8) the Company must deliver to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent
relating to the Legal Defeasance or the Covenant Defeasance have been
complied with.
Notwithstanding the foregoing, the opinion of counsel required by
clause (2) above with respect to a Legal Defeasance need not be delivered if all
Notes not theretofore delivered to the Trustee for cancellation (i) have become
due and payable or (ii) will become due and payable on the maturity date within
one year, by their terms or under arrangements satisfactory to the Trustee for
the giving of notice of redemption by the Trustee in the name, and at the
expense, of the Issuers.
Section 8.05. Deposited Money and Government Securities to Be Held in Trust;
Other Miscellaneous Provisions.
Subject to Section 8.06, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.05, the
"Trustee") pursuant to Section 8.04 in respect of the outstanding Notes shall be
held in trust and applied by the Trustee, in accordance with the provisions of
such Notes and this Indenture, to the payment, either directly or through any
Paying Agent (including the Issuers acting as Paying Agent) as the Trustee may
determine, to the Holders of such Notes of all sums due and to become due
thereon in respect of principal, premium, if any, and interest, but such money
need not be segregated from other funds except to the extent required by law.
The Issuers and the Guarantor shall pay and indemnify the Trustee
against any tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.04 or the
principal and interest received in respect thereof other than any such tax, fee
or other charge which by law is for the account of the Holders of the
outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon the request
of the Issuers any money or non-callable Government Securities held by it as
provided in Section 8.04 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee (which may be the opinion delivered under Section
8.04(a)), are in excess of the amount thereof that would then be required to be
deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.
Section 8.06. Repayment to Issuers.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Issuers, in trust for the payment of the Accreted Value of, premium,
if any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Issuers on their request or (if then held by the Issuers) shall be
discharged from such trust; and the Holder of such Note shall thereafter look
only to the Issuers for
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payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Issuers as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Issuers cause to be published once, in the New York Times and The
Wall Street Journal (national edition), notice that such money remains unclaimed
and that, after a date specified therein, which shall not be less than 30 days
from the date of such notification or publication, any unclaimed balance of such
money then remaining shall be repaid to the Issuers.
Section 8.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03, as the case may be, by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Issuers' and the Guarantor's obligations under this
Indenture, the Notes and the Guarantee, as the case may be, shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.02 or 8.03
until such time as the Trustee or Paying Agent is permitted to apply all such
money in accordance with Section 8.02 or 8.03, as the case may be; provided,
however, that, if the Issuers make any payment of Accreted Value of, premium, if
any, or interest on any Note following the reinstatement of their obligations,
the Issuers or the Guarantor, as the case may be, shall be subrogated to the
rights of the Holders of such Notes to receive such payment from the money held
by the Trustee or Paying Agent.
ARTICLE 9
AMENDMENT, SUPPLEMENT AND WAIVER
Section 9.01. Without Consent of Holders of Notes.
Notwithstanding Section 9.02 of this Indenture, the Issuers, the
Guarantor and the Trustee may amend or supplement this Indenture or the Notes
without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes;
(c) to provide for the assumption of an Issuer's or the Guarantor's
obligations, as the case may be, to Holders of Notes in the case of a
merger or consolidation or sale of all or substantially all of the assets
of either Issuer or the Guarantor, as the case may be, pursuant to Article
5;
(d) to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely affect the
legal rights under this Indenture of any such Holder; or
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(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA or otherwise as
necessary to comply with applicable law.
Upon the request of the Issuers accompanied by a resolution of their
respective Boards of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02, the Trustee shall join with the Issuers and the
Guarantor in the execution of any amended or supplemental Indenture authorized
or permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Trustee shall
not be obligated to enter into such amended or supplemental Indenture that
affects its own rights, duties or immunities under this Indenture or otherwise.
Section 9.02. With Consent of Holders of Notes.
Except as provided below in this Section 9.02, this Indenture
(including Sections 4.11 and 4.16) or the Notes may be amended or supplemented
with the consent of the Holders of at least a majority in aggregate principal
amount at maturity of the Notes then outstanding (including, without limitation,
consents obtained in connection with a purchase of, or a tender offer or
exchange offer for, Notes) and, subject to Sections 6.04 and 6.07, any existing
Default or compliance with any provision of this Indenture or the Notes may be
waived with the consent of the Holders of a majority in aggregate principal
amount at maturity of the Notes then outstanding (including, without limitation,
consents obtained in connection with a purchase of, or a tender offer or
exchange offer for, Notes). Section 2.08 shall determine which Notes are
considered to be "outstanding" for purposes of this Section 9.02.
Upon the request of the Issuers accompanied by a resolution of their
respective Boards of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as aforesaid,
and upon receipt by the Trustee of the documents described in Section 7.02, the
Trustee shall join with the Issuers and the Guarantor in the execution of such
amended or supplemental Indenture unless such amended or supplemental Indenture
directly affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07, the Holders of a
majority in aggregate principal amount at maturity of the Notes then outstanding
may waive compliance in a particular instance by the Issuers with any provision
of this Indenture or the Notes. However, without the consent of each
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Holder affected, an amendment, supplement or waiver under this Section 9.02 may
not (with respect to any Notes held by a non-consenting Holder):
(a) reduce the principal amount at maturity of Notes whose Holders
must consent to an amendment, supplement or waiver;
(b) reduce the Accreted Value of or change the fixed maturity of any
Note or alter the payment provisions with respect to the redemption of the
Notes (other than provisions relating to Sections 4.11 and 4.16);
(c) reduce the rate of or extend the time for payment of interest on
any Note;
(d) waive a Default or Event of Default in the payment of Accreted
Value of or premium, if any, or interest on the Notes (except a rescission
of acceleration of the Notes by the Holders of at least a majority in
aggregate principal amount at maturity of the Notes and a waiver of the
payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive
payments of Accreted Value of, or premium, if any, or interest on the
Notes;
(g) waive a redemption payment with respect to any Note (other than
a payment required by one of the covenants described in Sections 4.11 and
4.16);
(h) amend any provision or release the Guarantee of the Guarantor
except pursuant to the Marcus Combination; or
(i) make any change in this Section 9.02.
Section 9.03. Compliance with Trust Indenture Act.
Every amendment or supplement to this Indenture or the Notes shall
be set forth in a amended or supplemental Indenture that complies with the TIA
as then in effect.
Section 9.04. Revocation and Effect of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
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Section 9.05. Notation on or Exchange of Notes.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Issuers in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
Section 9.06. Trustee to Sign Amendments, etc.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Issuers and the Guarantor may not sign an amendment or supplemental
Indenture until their respective Boards of Directors approve it. In executing
any amended or supplemental indenture, the Trustee shall be entitled to receive
and (subject to Section 7.01) shall be fully protected in relying upon, in
addition to the documents required by Section 12.04, an Officer's Certificate
and an Opinion of Counsel, in each case from each of the Issuers, stating that
the execution of such amended or supplemental indenture is authorized or
permitted by this Indenture.
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Unconditional Guarantee.
Subject to the provisions of this Article Ten, the Guarantor hereby
unconditionally and irrevocably guarantees, on a senior basis to each Holder of
a Note authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Notes or the obligations of the Issuers to the Holders or the
Trustee hereunder or thereunder, that: (a) the principal of, premium, if any,
and interest on the Notes (and any Special Interest payable thereon) shall be
duly and punctually paid in full when due, whether at maturity, upon redemption
at the option of Holders pursuant to the provisions of the Notes relating
thereto, by acceleration or otherwise, and interest on the overdue principal and
(to the extent permitted by law) interest, if any, on the Notes and all other
obligations of the Issuers to the Holders or the Trustee hereunder or thereunder
(including amounts due the Trustee under Section 7.07) and all other obligations
shall be promptly paid in full or performed, all in accordance with the terms
hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other obligations, the same shall be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at maturity, by acceleration or otherwise. Failing
payment when due of any amount so guaranteed, or failing performance of any
other obligation of the Issuers to the Holders under this Indenture or under the
Notes, for whatever reason, the Guarantor shall be obligated to pay, or to
perform or cause the performance of, the same immediately. An Event of Default
under this Indenture or the Notes shall constitute an event of default under
this Guarantee,
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and shall entitle the Holders of Notes to accelerate the obligations of the
Guarantor hereunder in the same manner and to the same extent as the obligations
of the Issuers.
The Guarantor hereby agrees that its obligations hereunder shall be
unconditional, irrespective of the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Issuers, any action
to enforce the same, whether or not this Guarantee is affixed to any particular
Note, or any other circumstance which might otherwise constitute a legal or
equitable discharge or defense of the Guarantor. The Guarantor hereby waives the
benefit of diligence, presentment, demand of payment, filing of claims with a
court in the event of insolvency or bankruptcy of either Issuer, any right to
require a proceeding first against either Issuer, protest, notice and all
demands whatsoever and covenants that its Guarantee shall not be discharged
except by complete performance of the obligations contained in the Notes, this
Indenture and this Guarantee or except as otherwise permitted by this Indenture.
This Guarantee is a guarantee of payment and not of collection. If any Holder or
the Trustee is required by any court or otherwise to return to either Issuer or
to the Guarantor, or any custodian, trustee, liquidator or other similar
official acting in relation to either Issuer or the Guarantor, any amount paid
by either Issuer or the Guarantor to the Trustee or such Holder, this Guarantee,
to the extent theretofore discharged, shall be reinstated in full force and
effect. The Guarantor further agrees that, as between it, on the one hand, and
the Holders of Notes and the Trustee, on the other hand, (a) subject to this
Article Ten, the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Six for the purposes of this Guarantee,
notwithstanding any stay, injunction or other prohibition preventing such
acceleration in respect of the obligations guaranteed hereby, and (b) in the
event of any acceleration of such obligations as provided in Article Six, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantor for the purpose of this Guarantee.
No stockholder, member, officer, director, employee or incorporator,
past, present or future, of the Guarantor , as such, shall have any personal
liability under this Guarantee by reason of his, her or its status as such
stockholder, officer, director, employee or incorporator.
Section 10.02. Limitations on this Guarantee.
The obligations of the Guarantor under its Guarantee are limited to
the maximum amount which, after giving effect to all other contingent and fixed
liabilities of the Guarantor will result in the obligations of the Guarantor
under the Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under any laws of the United States, any state of the United States or
the District of Columbia.
Section 10.03. Execution and Delivery of this Guarantee.
To further evidence the Guarantee set forth in Section 10.01, the
Guarantor hereby agrees that a notation of such Guarantee, substantially in the
form of Exhibit F, shall be endorsed on each Note authenticated and delivered by
the Trustee. Such Guarantee shall be executed on behalf of the Guarantor by
either manual or facsimile signature of two Officers of the Guarantor, each of
whom, in each case, shall have been duly authorized to so execute by all
requisite corporate action.
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The validity and enforceability of the Guarantee set forth in Section 10.01
shall not be affected by the fact that it is not affixed to any particular Note.
The Guarantor hereby agrees that its Guarantee set forth in Section 10.01 shall
remain in full force and effect notwithstanding any failure to endorse on each
Note a notation of such Guarantee.
If an Officer of the Guarantor whose signature is on this Indenture
or a Guarantee no longer holds that office at the time the Trustee authenticates
the Note on which such Guarantee is endorsed or at any time thereafter, the
Guarantor's Guarantee of such Note shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of the Guarantor.
Section 10.04. Release of Guarantor.
(a) Upon the consummation of the Marcus Combination, the Guarantor's
Guarantee shall be released, and the Guarantor shall be deemed released from all
obligations under this Article Ten and this Indenture without any further action
required on the part of the Guarantor, the Trustee or any Holder. If the Marcus
Combination is not consummated, the Guarantor will not be so released and the
Guarantor or any entity surviving the Guarantor, as applicable, shall remain or
be liable under its Guarantee as provided in this Article Ten.
(b) The Trustee shall deliver an appropriate instrument evidencing
the release of the Guarantor upon receipt of a request by the Company or the
Guarantor accompanied by an Officers' Certificate and an Opinion of Counsel
certifying as to the compliance with this Section 10.04; provided the legal
counsel delivering such Opinion of Counsel may rely as to matters of fact on one
or more Officers Certificates of the Company or the Guarantor.
The Trustee shall execute any documents reasonably requested by the
Company or the Guarantor in order to evidence the release of the Guarantor from
its obligations under its Guarantee endorsed on the Notes, under this Article
Ten and under this Indenture.
Section 10.05. Waiver of Subrogation.
Until this Indenture is discharged and all of the Notes are
discharged and paid in full, the Guarantor hereby irrevocably waives and agrees
not to exercise any claim or other rights which it may now or hereafter acquire
against either Issuer that arise from the existence, payment, performance or
enforcement of the Issuers' obligations under the Notes or this Indenture and
the Guarantor's obligations under this Guarantee and this Indenture, in any such
instance including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification, and any right to participate in any
claim or remedy of the Holders against either Issuer, whether or not such claim,
remedy or right arises in equity, or under contract, statute or common law,
including, without limitation, the right to take or receive from either Issuer,
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 in violation of the preceding sentence and
any amounts owing to the Trustee or the Holders of Notes under the Notes, this
Indenture, or any other document or instrument delivered under or in connection
with such agreements or instruments, shall
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not have been paid in full, such amount shall have been deemed to have been paid
to the Guarantor for the benefit of, and held in trust for the benefit of, the
Trustee or the Holders and shall forthwith be paid to the Trustee for the
benefit of itself or such Holders to be credited and applied to the obligations
in favor of the Trustee or the Holders, as the case may be, whether matured or
unmatured, in accordance with the terms of this Indenture. The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by this Indenture and that the waiver set
forth in this Section 10.05 is knowingly made in contemplation of such benefits.
Section 10.06. Immediate Payment.
The Guarantor agrees to make immediate payment to the Trustee on
behalf of the Holders of all obligations under the Notes and this Indenture
owing or payable to the respective Holders upon receipt of a demand for payment
therefor by the Trustee to such Guarantor in writing.
Section 10.07. Obligations Continuing.
The obligations of the Guarantor hereunder shall be continuing and
shall remain in full force and effect until all the obligations have been paid
and satisfied in full. The Guarantor agrees with the Trustee that it will from
time to time deliver to the Trustee suitable acknowledgments of this continued
liability hereunder.
Section 10.08. Obligations Reinstated.
The obligations of the Guarantor hereunder shall continue to be
effective or shall be reinstated, as the case may be, if at any time any payment
which would otherwise have reduced the obligations of the Guarantor hereunder
(whether such payment shall have been made by or on behalf of either Issuer or
by or on behalf of the Guarantor) is rescinded or reclaimed from any of the
Holders upon the insolvency, bankruptcy, liquidation or reorganization of either
Issuer or the Guarantor or otherwise, all as though such payment had not been
made. If demand for, or acceleration of the time for, payment by either Issuer
is stayed upon the insolvency, bankruptcy, liquidation or reorganization of
either Issuer, all such Indebtedness otherwise subject to demand for payment or
acceleration shall nonetheless be payable by the Guarantor as provided herein.
Section 10.09. Obligations Not Affected.
The obligations of the Guarantor hereunder shall not be affected,
impaired or diminished in any way by any act, omission, matter or thing
whatsoever, occurring before, upon or after any demand for payment hereunder
(and whether or not known or consented to by the Guarantor or any of the
Holders) which, but for this provision, might constitute a whole or partial
defense to a claim against the Guarantor hereunder or might operate to release
or otherwise exonerate the Guarantor from any of its obligations hereunder or
otherwise affect such obligations, whether occasioned by default of any of the
Holders or otherwise.
Section 10.10. Waiver.
Without in any way limiting the provisions of Section 10.01 hereof,
the Guarantor hereby waives notice or proof of reliance by the Holders upon the
obligations of the Guarantor
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hereunder, and diligence, presentment, demand for payment on the Issuers,
protest or notice of dishonor of any of the obligations under the Note and this
Indenture, or other notice or formalities to the Issuers of any kind whatsoever.
Section 10.11. No Obligation To Take Action Against Either Issuer.
Neither the Trustee nor any other Person shall have any obligation
to enforce or exhaust any rights or remedies or to take any other steps under
any security for the obligations under the Notes and this Indenture or against
either Issuer or any other Person or any property of either Issuer or any other
Person before the Trustee is entitled to demand payment and performance by the
Guarantor of its liabilities and obligations under its Guarantees or under this
Indenture.
Section 10.12. Dealing With The Company and Others.
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the obligations and liabilities of the Guarantor
hereunder and without the consent of or notice to the Guarantor, may
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases, discharges and other indulgences to either Issuer or
any other Person;
(b) take or abstain from taking security or collateral from the
Issuers or from perfecting security or collateral of the Issuers;
(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without
consideration) any and all collateral, mortgages or other security given
by the Issuers or any third party with respect to the obligations or
matters contemplated by this Indenture or the Notes;
(d) accept compromises or arrangements from either Issuer;
(e) apply all monies at any time received from either Issuer or from
any security upon such part of the obligations under the Notes or this
Indenture as the Holders may see fit or change any such application in
whole or in part from time to time as the Holders may see fit; and
(f) otherwise deal with, or waive or modify their right to deal
with, either Issuer and all other Persons and any security as the Holders
or the Trustee may see fit.
Section 10.13. Default and Enforcement.
If the Guarantor fails to pay in accordance with Section 10.06, the
Trustee may proceed in its name as trustee hereunder in the enforcement of the
Guarantee of the Guarantor and the Guarantor's obligations thereunder and
hereunder by any remedy provided by law, whether by legal proceedings or
otherwise, and to recover from the Guarantor the obligations.
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Section 10.14. Amendment, Etc.
No amendment, modification or waiver of any provision of this
Indenture relating to the Guarantor or consent to any departure by the Guarantor
or any other Person from any such provision will in any event be effective
unless it is signed by the Guarantor, the Issuers and the Trustee.
Section 10.15. Acknowledgement.
The Guarantor hereby acknowledges communication of the terms of this
Indenture and the Notes and consents to and approves of the same.
Section 10.16. Costs and Expenses.
The Guarantor shall pay on demand by the Trustee any and all costs,
fees and expenses (including, without limitation, legal fees on a solicitor and
client basis) incurred by the Trustee, its agents, advisors and counsel or any
of the Holders in enforcing any of their rights under its Guarantee.
Section 10.17. No Waiver; Cumulative Remedies.
No failure to exercise and no delay in exercising, on the part of
the Trustee or the Holders, any right, remedy, power or privilege hereunder or
under this Indenture or the Notes, shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, remedy, power or privilege
hereunder or under this Indenture or the Notes preclude any other or further
exercise thereof or the exercise of any other right, remedy, power or privilege.
The rights, remedies, powers and privileges in the Guarantee and under this
Indenture, the Notes and any other document or instrument between the Guarantor
and/or the Issuers and the Trustee are cumulative and not exclusive of any
rights, remedies, powers and privilege provided by law.
Section 10.18. Effect of Offset or Counterclaim.
The obligations of the Guarantor hereunder shall be enforceable
against the Guarantor without regard to and without giving effect to any right
of offset or counterclaim available to or which may be asserted by the Company
or the Guarantor.
Section 10.19. Guarantee in Addition to Other Obligations.
The obligations of the Guarantor under its Guarantee and this
Indenture are in addition to and not in substitution for any other obligations
to the Trustee or to any of the Holders in relation to this Indenture or the
Notes (including the Purchase Agreement and the Registration Rights Agreement).
Section 10.20. Severability.
Any provision of this Article Ten which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction
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unless its removal would substantially defeat the basic intent, spirit and
purpose of this Indenture and this Article Ten.
Section 10.21. Successors and Assigns.
Each Guarantee shall be binding upon and inure to the benefit of the
Guarantor, the Issuers, the Trustee and the Holders and their respective
successors and permitted assigns, except that the Guarantor may not assign any
of its obligations hereunder or thereunder.
ARTICLE 11
SECURITY
Section 11.01. Security.
In order to secure the due and punctual payment of the principal of,
premium, if any, and interest, and Special Interest, if any, on the Notes when
and as the same shall be due and payable, whether on an interest payment date,
at maturity, by acceleration, call for redemption or otherwise, and interest on
the overdue principal and interest, if any, of the Notes and performance of all
other obligations of the Issuers, to the Holders or the Trustee under this
Indenture and the Notes, according to the terms hereof or thereof, the Company
will make an assignment of its right, title and interest in and to the
Collateral to the Trustee pursuant to the Pledge Documents and to the extent
therein provided, no later than the date of the first issuance of the Notes
hereunder. At the time the Pledge Documents are executed, the Company will have
full right, power and lawful authority to grant, bargain, sell, release, convey,
hypothecate, assign, mortgage, transfer and confirm, absolutely, the property
constituting the Collateral in the manner and form done, or intended to be done,
in the Pledge Documents, free and clear of all Liens whatsoever, except to the
extent otherwise provided therein, and (a) will for so long as any Notes are
outstanding, warrant and defend the title to the same against the claims of all
Persons whatsoever, (b) will execute, acknowledge and deliver to the Trustee
such further assignments, transfers, assurances or other instruments as the
Trustee may require or request and (c) will do or cause to be done all such acts
and things as may be necessary or proper, or as may be required by the Trustee,
to assure and confirm to the Trustee the security interest in the Collateral
contemplated hereby and by the Pledge Documents, or any part thereof, as from
time to time constituted, so as to render the same available for the security
and benefit of this Indenture and of the Notes secured hereby, according to the
intent and purposes herein expressed. The Pledge Documents will create a direct
and valid Lien on the property constituting the Collateral as set forth in the
Pledge Documents.
Section 11.02. Recording and Opinions.
The Company will cause, at its own expense, the Pledge Documents,
this Indenture and all amendments or supplements thereto and UCC-1 financing
statements and other applicable documents relating thereto to be registered,
recorded and filed or re-recorded, refiled and renewed in such manner and in
such place or places if any, as may be required by law in order fully to
preserve and protect the Liens created by the Pledge Documents on all parts of
the Collateral and to effectuate and preserve the security of the Holders and
all rights of the Trustee.
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The Company shall furnish to the Trustee:
(a) promptly after the execution and delivery of the Pledge
Documents, an Opinion of Counsel either (a) stating that, in the opinion
of such counsel, this Indenture and the assignment of the Collateral
intended to be made by the Pledge Documents and all other instruments of
further assurance or amendment have been properly recorded, registered and
filed to the extent necessary to make effective the Lien intended to be
created by the Pledge Documents, and reciting the details of such action
or referring to prior opinions of counsel in which such details are given,
and stating that as to the Pledge Documents such recordings, registering
and filings are sufficient to give notice thereof and that no
re-recordings, re-registerings or refilings are necessary to maintain such
notice, and further stating that all financing statements and continuation
statements have been executed and filed that are necessary fully to
preserve and protect the rights of the Holders and the Trustee hereunder
and under the Pledge Documents, or (b) stating that, in the opinion of
such counsel, no such action is necessary to make such Lien and assignment
effective; and
(b) within 30 days after April 1 in each year beginning with April
1, 2000, an Opinion of Counsel, dated as of such date, either (a) stating
that, in the opinion of such counsel, such action has been taken with
respect to the recording, registering, filing, re-recording,
re-registering and refiling of all supplemental indentures, financing
statements, continuation statements or other instruments of further
assurance as is necessary to maintain the Lien of the Pledge Documents and
reciting the details of such action or referring to prior opinions of
counsel in which such details are given, and stating that all financing
statements and continuation statements have been executed and filed that
are necessary fully to preserve and protect the rights of the Holders and
the Trustee hereunder and under the Pledge Documents, or (b) stating that,
in the opinion of such counsel, no such action is necessary to maintain
such lien and assignment.
Section 11.03. Release of Collateral.
Upon the consummation of the Marcus Combination, the security
interest in the Collateral in favor of the Trustee for the benefit of the
Holders will be immediately released.
To the extent applicable, the Company shall cause TIA ss. 314(d)
relating the release of property from the Lien of the Pledge Documents to be
complied with. Any certificate or opinion required by TIA ss. 314(d) may be made
by an officer of the Company, except in cases in which TIA ss. 314(d) requires
that such certificate or opinion be made by an independent Person.
Section 11.04. Authorization of Actions To Be Taken by the Trustee.
Subject to the provisions of the Pledge Documents, the Trustee shall
have power to institute and to maintain such suits and proceedings as it may
deem expedient to prevent any impairment of the Collateral by any acts which may
be unlawful or in violation of the Pledge Documents, or this Indenture, and such
suits and proceedings as the Trustee may deem expedient to preserve or protect
its interests and the interests of the Holders in the Collateral (including
power to institute and maintain suits or proceedings to restrain the enforcement
of or compliance with any legislative or
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governmental enactment, rule, or order that may be unconstitutional or otherwise
invalid if the enforcement of, or compliance with, such enactment, rule or order
would impair the security hereunder or be prejudicial to the interest of the
Trustee).
Section 11.05. Acknowledgment that Collateral Secures the Other Notes.
The Collateral is secured for the equal and ratable benefit of the
holders of the Notes and the holders of the Other Notes.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA ss. 318(c), the imposed duties shall control.
Section 12.02. Notices.
Any notice or communication by the Issuers, the Guarantor or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the others' address:
If to the c/o Charter Communications, Inc.
Issuers or the 12444 Powerscourt Drive, Suite 100
Guarantor: St. Louis, Missouri 63131
Telecopier No.: (314) 965-8793
Attention: Secretary
With a copy to: Paul, Hastings, Janofsky & Walker LLP
399 Park Avenue
31st Floor
New York, New York 10022
Telecopier No.: (212) 319-4090
Attention: Thomas R. Pollock, Esq.
If to the Harris Trust and Savings Bank
Trustee: 311 West Monroe, 12th Floor
Chicago, Illinois 60606
Telecopier No.: (312) 461-3525
Attention: Corporate Trust Department
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The Issuers, the Guarantor or the Trustee, by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA ss. 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Issuers mail a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
Section 12.03. Communication by Holders of Notes with Other Holders of Notes.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Issuers, the Guarantor, the Trustee, the Registrar and anyone else shall have
the protection of TIA ss. 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Issuers or the Guarantor to
the Trustee to take any action under this Indenture, the Issuers or the
Guarantor, as the case may be, shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 12.05) stating that, in the opinion of such counsel, all such
conditions precedent and covenants have been satisfied.
<PAGE> 98
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Section 12.05. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
Section 12.06. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
Section 12.07. No Personal Liability of Directors, Officers, Employees, Members
and Stockholders.
No director, officer, employee, incorporator, member or stockholder
of the Issuers or the Guarantor, as such, shall have any liability for any
obligations of the Issuers or the Guarantor under the Notes, the Guarantee, this
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes.
Section 12.08. Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS INDENTURE, THE NOTES AND THE GUARANTEE WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. EACH OF THE PARTIES
HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW
YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE,
THE NOTES OR ANY GUARANTEE.
<PAGE> 99
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Section 12.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret any other indenture,
loan or debt agreement of the Issuers, the Guarantor or their Subsidiaries or of
any other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
Section 12.10. Successors.
All agreements of the Issuers and the Guarantor in this Indenture,
the Notes and the Guarantee, as the case may be, shall bind their respective
successors. All agreements of the Trustee in this Indenture shall bind its
successors.
Section 12.11. Severability.
In case any provision in this Indenture, the Notes or the Guarantee,
as the case may be, shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
Section 12.12. Counterpart Originals.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
Section 12.13. Table of Contents, Headings, etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions.
ARTICLE 13
SATISFACTION AND DISCHARGE
Section 13.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as to any
surviving rights of registration of transfer or exchange of Notes herein
expressly provided for), and the Trustee, on demand of and at the expense of the
Issuers, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
(A) all Notes theretofore authenticated and delivered (other
than (i) Notes which have been destroyed, lost or stolen and which
have been replaced or paid as provided in Section 2.07 and (ii)
Notes for whose payment money has theretofore been deposited in
trust or segregated and held in trust by the Issuers and thereafter
re-
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paid to the Issuers or discharged from such trust,) have been
delivered to the Trustee for cancellation; or
(B) all such Notes not theretofore delivered to the Trustee
for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated Maturity
within one year, or
(iii) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Issuers,
and the Issuers, in the case of (i), (ii) or (iii) above, have
deposited or caused to be deposited with the Trustee as trust funds
in trust for the purpose an amount sufficient to pay and discharge
the entire indebtedness on such Notes not theretofore delivered to
the Trustee for cancellation, for principal (and premium, if any)
and interest to the date of such deposit (in the case of Notes which
have become due and payable) or to the maturity or redemption
thereof, as the case may be;
(2) the Issuers have paid or caused to be paid all other sums
payable hereunder by the Issuers and the Guarantors; and
(3) each of the Issuers have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant
to this Article 13, the obligations of the Issuers and the Guarantor to the
Trustee under Section 7.07, and, if money shall have been deposited with the
Trustee pursuant to subclause (B) of clause (1) of this Section, the obligations
of the Trustee under Section 13.02 shall survive.
Section 13.02. Application of Trust Money.
All money deposited with the Trustee pursuant to Section 13.01 shall
be held in trust and applied by it, in accordance with the provisions of the
Notes and this Indenture, to the payment, either directly or through any Paying
Agent as the Trustee may determine, to the Persons entitled thereto, of the
principal (and premium, if any) and interest for whose payment such money has
been deposited with the Trustee.
[Signatures on following page]
<PAGE> 101
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SIGNATURES
Dated as of March 17, 1999
CHARTER COMMUNICATIONS HOLDINGS, LLC,
as an Issuer
By: /s/ Eloise Engman
_____________________________________
Name: Eloise Engman
Title: Vice President
CHARTER COMMUNICATIONS HOLDINGS
CAPITAL CORPORATION, as an Issuer
By: /s/ Eloise Engman
_____________________________________
Name: Eloise Engman
Title: Vice President
MARCUS CABLE HOLDINGS, LLC,
as Guarantor
BY: MARCUS CABLE PROPERTIES, L.L.C.,
as Manager
BY: MARCUS CABLE PROPERTIES, INC.,
as Manager
By: /s/ Marcy Lifton
_____________________________________
Name: Marcy Lifton
Title: Senior Vice President and
Assistant Secretary
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: /s/ Kevin O. Healey
_____________________________________
Name: Kevin O. Healey
Title: Senior Vice President
<PAGE> 102
EXHIBIT A
[Face of Note]
CUSIP NO. [ ]
9.92% Senior Discount Notes due 2011
No. $
CHARTER COMMUNICATIONS HOLDINGS, LLC
and
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
promise to pay to__________________________________________________________.
or registered assigns,
the principal amount at maturity of ______________________
Dollars ($ ) on April 1, 2011.
Interest Payment Dates: April 1 and October 1
Record Dates: March 15 and September 15
Subject to Restrictions set forth in this Note.
Dated: March 17, 1999
A-1
<PAGE> 103
CHARTER COMMUNICATIONS HOLDINGS, LLC
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
CHARTER COMMUNICATIONS HOLDINGS
CAPITAL CORPORATION
By:_____________________________________
Name:
Title:
By:_____________________________________
Name:
Title:
This is one of the Notes referred to in the within-mentioned Indenture:
HARRIS TRUST AND SAVINGS BANK,
as Trustee
By: __________________________________
Authorized Signatory
A-2
<PAGE> 104
[Back of Note]
9.92% Senior Discount Notes due 2011
FOR THE PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED, THIS SECURITY IS BEING ISSUED WITH ORIGINAL
ISSUE DISCOUNT; FOR EACH $1,000 PRINCIPAL AMOUNT OF THIS SECURITY, THE ISSUE
PRICE IS $613.94, THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $386.06, THE ISSUE
DATE IS MARCH 17, 1999 AND THE YIELD TO MATURITY IS 9.92% PER ANNUM.
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF THE
BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY
BE REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY
BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE
INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR
CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE
MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE ISSUERS."(1)
"THE NOTES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (A) (1) TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE
MEANING OF RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT, (3) TO AN
INSTITUTIONAL ACCREDITED INVESTOR IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (4) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE) OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE
STATES OF THE UNITED STATES."(2)
- ----------
(1) This paragraph should be included only if the Note is issued in global
form.
(2) This paragraph should be removed upon the exchange of Notes for Exchange
Notes in the Exchange Offer or upon the registration of the Notes pursuant
to the terms of the Registration Rights Agreement.
A-3
<PAGE> 105
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Charter Communications Holdings, LLC, a Delaware
limited liability company (the "Company"), and Charter Communications Holdings
Capital Corporation, a Delaware corporation ("Charter Capital" and, together
with the Company, the "Issuers"), promise to pay interest on the principal
amount at maturity of this Note at the rate of 9.92% per annum. The interest
rate on the Notes is subject to increase pursuant to the provisions of the
Registration Rights Agreement. The Issuers will pay interest semi-annually in
arrears on April 1 and October 1 of each year (each an "Interest Payment Date"),
or if any such day is not a Business Day, on the next succeeding Business Day,
commencing on October 1, 2004. The principal amount at maturity of this Note
will not bear or accrue cash interest until April 1, 2004. Cash interest on the
Notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from April 1, 2004; provided that if there is no
existing Default in the payment of interest, and if this Note is authenticated
between a record date referred to on the face and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date. The Issuers shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue Accreted Value and premium, if
any, from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; they shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Issuers shall pay interest on the Notes
(except defaulted interest) to the Persons who are registered Holders of Notes
at the close of business on the March 15 or September 15 next preceding the
Interest Payment Date, even if such Notes are canceled after such record date
and on or before such Interest Payment Date, except as provided in Section 2.12
of the Indenture with respect to defaulted interest. The Notes will be payable
as to Accreted Value, premium, if any, and interest at the office or agency of
the Issuers maintained for such purpose within or without the City and State of
New York, or, at the option of the Issuers, payment of interest may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to Accreted Value of and interest and
premium on all Global Notes and all other Notes the Holders of which shall have
provided wire transfer instructions to the Issuers or the Paying Agent. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, Harris Trust and Savings
Bank, the Trustee under the Indenture, will act as Paying Agent and Registrar.
The Issuers may change any Paying Agent or Registrar without notice to any
Holder. The Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Issuers issued the Notes under an Indenture dated
as of March 17, 1999 ("Indenture") between the Issuers, Marcus Cable Holdings,
LLC (the "Guarantor") and the Trustee. The terms of the Notes include those
stated in the Indenture and those made part of
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the Indenture by reference to the Trust Indenture Act of 1939, as amended (15
U.S. Code ss.ss. 77aaa-77bbbb). The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Act for a statement of such
terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Issuers limited to $1.475 billion
in aggregate principal amount at maturity, of which all $1.475 billion in
aggregate principal amount at maturity of Notes were issued on the Issue Date.
The Notes are guaranteed on a senior basis by the Guarantor.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Paragraph 5, the
Issuers shall not have the option to redeem the Notes prior to April 1, 2004.
Thereafter, the Issuers shall have the option to redeem the Notes, in whole or
in part, upon not less than 30 nor more than 60 days' notice, at the redemption
prices (expressed as percentages of principal amount at maturity) set forth
below plus accrued and unpaid interest thereon, if any, to the applicable
redemption date, if redeemed during the twelve-month period beginning on April 1
of the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2004....................... 104.960%
2005....................... 103.307%
2006....................... 101.653%
2007 and thereafter........ 100.000%
</TABLE>
(b) Notwithstanding the provisions of clause (a) of this Paragraph
5, at any time prior to April 1, 2002, the Issuers may on any one or more
occasions redeem up to 35% of the aggregate principal amount at maturity of the
Notes originally issued under the Indenture on a pro rata basis (or as nearly
pro rata as practicable), at a redemption price of 109.920% of the Accreted
Value thereof, plus, after the Full Accretion Date, accrued and unpaid interest
to the redemption date, with the net cash proceeds of one or more Equity
Offerings; provided that
(1) at least 65% of the aggregate principal amount at maturity
of Notes originally issued under the Indenture remains outstanding
immediately after the occurrence of such redemption (excluding Notes held
by the Company and its Subsidiaries); and
(2) the redemption must occur within 60 days of the date of
the closing of such Equity Offering.
6. MANDATORY REDEMPTION.
Except as otherwise provided in Paragraph 7 below, the Issuers shall
not be required to make mandatory redemption payments with respect to the Notes.
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7. REPURCHASE AT OPTION OF HOLDER
(a) If there is a Change of Control, the Issuers shall make an offer
(a "Change of Control Offer") to repurchase all or any part (equal to $1,000
principal amount at maturity or an integral multiple thereof) of each Holder's
Notes at a purchase price equal to 101% of the Accreted Value thereof plus, for
any Change of Control Offer occurring after the Full Accretion Date, accrued and
unpaid interest thereon, if any, to the date of purchase (the "Change of Control
Payment"). Within 10 days following any Change of Control, the Issuers shall
mail a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Notes on the Change
of Control Payment Date specified in such notice, pursuant to the procedures
required by the Indenture and described in such notice.
(b) If the Company or a Restricted Subsidiary consummates any Asset
Sale, when the aggregate amount of Excess Proceeds exceeds $25.0 million, the
Issuers shall commence an offer (an "Asset Sale Offer") pursuant to Section 4.11
of the Indenture to all Holders of Notes and all holders of other Indebtedness
that is pari passu with the Notes containing provisions requiring offers to
purchase or redeem with the proceeds of sales of assets to purchase the maximum
principal amount of Notes and such other pari passu Indebtedness that may be
purchased out of the Excess Proceeds (which amount includes the entire amount of
the Net Proceeds). The offer price in any Asset Sale Offer will be payable in
cash and equal to 100% of the Accreted Value thereof plus, after the Full
Accretion Date, accrued and unpaid interest, if any, to the date of purchase. If
any Excess Proceeds remain after consummation of an Asset Sale Offer, the
Company may use such Excess Proceeds for any purpose not otherwise prohibited by
the Indenture. If the aggregate principal amount of Notes and such other pari
passu Indebtedness tendered into such Asset Sale Offer exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes and such other pari passu
Indebtedness to be purchased on a pro rata basis. Upon completion of each Asset
Sale Offer, the amount of Excess Proceeds shall be reset at zero. Holders of
Notes that are the subject of an offer to purchase will receive an Asset Sale
Offer from the Company prior to any related purchase date and may elect to have
such Notes purchased by completing the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Notes.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed by
first class mail at least 30 days but not more than 60 days before the
redemption date to each Holder whose Notes are to be redeemed at its registered
address. Notices of redemption may not be conditional. No Notes of $1,000
principal amount at maturity or less may be redeemed in part. Notes in
denominations larger than $1,000 principal amount at maturity may be redeemed in
part but only in whole multiples of $1,000 principal amount at maturity, unless
all of the Notes held by a Holder are to be redeemed. On and after the
redemption date Accreted Value ceases to accrete and interest ceases to accrue,
as the case may be, on Notes or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 principal amount at maturity and
integral multiples of $1,000 principal amount at maturity. The transfer of Notes
may be registered and Notes may be exchanged as provided in the Indenture. The
Registrar and the Trustee may require
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a Holder, among other things, to furnish appropriate endorsements and transfer
documents and the Issuers may require a Holder to pay any taxes and fees
required by law or permitted by the Indenture. The Issuers need not exchange or
register the transfer of any Note or portion of a Note selected for redemption,
except for the unredeemed portion of any Note being redeemed in part. Also, the
Issuers need not exchange or register the transfer of any Notes for a period of
15 days before a selection of Notes to be redeemed or during the period between
a record date and the corresponding Interest Payment Date.
10. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes, other than with respect to the payment of
Additional Amounts.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture or the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in aggregate principal amount at maturity of
the Notes then outstanding (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes),
and any existing default or compliance with any provision of the Indenture or
the Notes may be waived with the consent of the Holders of a majority in
aggregate principal amount at maturity of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes). Without the consent of any Holder of
a Note, the Issuers and the Trustee may amend or supplement the Indenture or the
Notes to cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption of an Issuers' or the Guarantor's, as the case may
be, obligations to Holders of Notes in the case of a merger or consolidation or
sale of all or substantially all of the assets of either Issuer or the
Guarantor, as the case may be, to make any change that would provide any
additional rights or benefits to the Holders of Notes or that does not adversely
affect the legal rights under the Indenture of any such Holder, or to comply
with the requirements of the SEC in order to effect or maintain the
qualification of the Indenture under the TIA or otherwise as necessary to comply
with applicable law.
12. DEFAULTS AND REMEDIES. Each of the following is an Event of
Default: (i) default for 30 days in the payment when due of interest on the
Notes, (ii) default in payment when due of the Accreted Value of, or premium, if
any, on the Notes, (iii) failure by the Company or any of its Restricted
Subsidiaries, or the Guarantor or any of its Restricted Subsidiaries, to comply
with Sections 4.16 and 5.01 of the Indenture, (iv) failure by the Company or any
of its Restricted Subsidiaries, or the Guarantor or any of its Restricted
Subsidiaries, for 30 days after written notice thereof has been given to the
Company by the Trustee or to the Company and the Trustee by the Holders of at
least 25% of the aggregate principal amount at maturity of the Notes outstanding
to comply with any of their other covenants or agreements in the Indenture, (v)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Restricted Subsidiaries, or by the
Guarantor or any of its Restricted Subsidiaries, (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries, or by the
Guarantor or any of its Restricted Subsidiaries), whether such Indebtedness or
guarantee now exists or is created after the date of the Indenture, if that
default: (a) is caused by a failure to pay at final stated maturity the
principal amount of such Indebtedness prior to the expiration of the grace
period provided in such Indebtedness on the date of such default (a "Payment
Default"); or (b) results in the acceleration of such Indebtedness prior to its
express maturity, and, in each case, the principal amount of any such
Indebtedness, together with the principal
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amount of any other such Indebtedness under which there has been a Payment
Default or the maturity of which has been so accelerated, aggregates $100.0
million or more, (vi) failure by the Company or any of its Restricted
Subsidiaries, or by the Guarantor or any of its Restricted Subsidiaries to pay
final judgments which are non-appealable aggregating in excess of $100.0 million
(net of applicable insurance which has not been denied in writing by the
insurer), which judgments are not paid, discharged or stayed for a period of 60
days, (vii) certain events of bankruptcy or insolvency with respect to the
Company or the Guarantor or any of their Significant Subsidiaries, (viii) except
as permitted by the Indenture the Guarantee of the Guarantor being held in any
judicial proceeding to be unenforceable or invalid or ceasing for any reason to
be in full force and effect or is caused by the Guarantor's, or any Person's
(such Person acting on behalf of the Guarantor), denial or disaffirmation of its
obligations under the Guarantee or (ix) except as permitted by the Indenture any
of the Pledge Documents cease to be in full force and effect (other than in
accordance with their respective terms or the terms of the Indenture), or any of
the Pledge Documents cease to give the Trustee or the Company, as the case may
be, the Liens purported to be created thereby, or any Pledge Document is
declared null and void. In the case of an Event of Default arising from certain
events of bankruptcy or insolvency with respect to the Company, all outstanding
Notes will become due and payable without further action or notice. If any other
Event of Default occurs and is continuing, the Trustee by notice to the Issuers
or the Holders of at least 25% in aggregate principal amount at maturity of the
then outstanding Notes by notice to the Issuers and the Trustee may declare all
the Notes to be due and payable in an amount equal to (x) the Accreted Value of
the Notes outstanding on the date of acceleration, if such declaration is made
prior to the Full Accretion Date or (y) the entire principal amount at maturity
of all the Notes outstanding on the date of acceleration, plus accrued interest,
if any, to the date of acceleration, if such declaration is made after the Full
Accretion Date. Holders may not enforce the Indenture or the Notes except as
provided in the Indenture. Subject to certain limitations, Holders of a majority
in aggregate principal amount at maturity of the then outstanding Notes may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of the Notes notice of any continuing Default or Event of
Default (except a Default or Event of Default relating to the payment of
principal or interest) if it determines that withholding notice is in their
interest. The Holders of a majority in aggregate principal amount at maturity of
the Notes then outstanding by notice to the Trustee may on behalf of the Holders
of all of the Notes waive any existing Default or Event of Default and its
consequences under the Indenture except a continuing Default or Event of Default
in the payment of interest on, or the Accreted Value of, the Notes. The Company
is required to deliver to the Trustee annually a statement regarding compliance
with the Indenture. Upon becoming aware of any Default or Event of Default, the
Company is required to deliver to the Trustee a statement specifying such
Default or Event of Default.
13. TRUSTEE DEALINGS WITH ISSUERS. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Issuers, the Guarantor or their Affiliates, and may otherwise
deal with the Issuers, the Guarantor or their Affiliates, as if it were not the
Trustee.
14. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator, member or stockholder of either of the Issuers or the Guarantor,
as such, shall not have any liability for any obligations of the Issuers under
the Notes or the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder by accepting a Note
waives
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<PAGE> 110
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.
15. GUARANTEES. Until the consummation of the Marcus Combination,
this Note will be entitled to the benefits of certain Guarantees, if any, made
for the benefit of the Holders. Reference is hereby made to the Indenture for a
statement of the respective rights, limitations of rights, duties and
obligations thereunder of the Guarantor, the Trustee and the Holders.
16. GOVERNING LAW. This Note and the Indenture shall be governed by
and construed in accordance with the laws of the State of New York, as applied
to contracts made and performed within the State of New York, without regard to
principles of conflict of laws. Each of the parties hereto and the holders agree
to submit to the jurisdiction of the courts of the State of New York in any
action or proceeding arising out of or relating to this Note.
17. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
18. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
19. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Exchange and
Registration Rights Agreement dated as of March 17, 1999, among the Issuers, the
Guarantor and the initial purchasers named therein (the "Registration Rights
Agreement").
20. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Issuers have caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Charter Communications Holdings, LLC
Charter Communications Holdings Capital Corporation
c/o Charter Communications, Inc.
12444 Powerscourt Drive
Suite 100
St. Louis, Missouri 63131
Attention: Secretary
Telecopier No.: (314) 965-0555
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<PAGE> 111
ASSIGNMENT FORM
To assign this Note, fill in the form below:
(I) or (we) assign and transfer this Note to:___________________________________
(Insert assignee's legal name)
____________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Issuers. The agent may substitute
another to act for him.
Date: _________________________
Your Signature: _____________________
(Sign exactly as your name appears on
the face of this Note)
Signature Guarantee*: _______________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
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<PAGE> 112
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Issuers
pursuant to Section 4.11 or 4.16 of the Indenture, check the appropriate box
below:
|_| Section 4.11 |_| Section 4.16
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.11 or Section 4.16 of the Indenture, state the
amount you elect to have purchased:
$____________________
Date: ____________________________
Your Signature:__________________________
(Sign exactly as your name appears on
the face of this Note)
Tax Identification No.:__________________
Signature Guarantee*:________________________
* Participant in a recognized Signature Guarantee Medallion Program (or other
signature guarantor acceptable to the Trustee).
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<PAGE> 113
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE*
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
<TABLE>
<CAPTION>
Principal
Amount of Amount
decrease at Maturity of Signature of
in Principal Amount of this Global authorized
Amount increase in Note officer of
at Maturity Principal Amount following such Trustee or
Date of of this Global at Maturity of decrease Note
Exchange Note this Global Note (or increase) Custodian
- -------- ---- ---------------- ------------- ---------
<S> <C> <C> <C> <C>
</TABLE>
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<PAGE> 114
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Charter Communications Holdings, LLC
Charter Communications Holdings Capital Corporation
c/o Charter Communications, Inc.
12444 Powerscourt Drive, Suite 100
St. Louis, Missouri 63131
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attn: Corporate Trust Department
Re: 9.92% Senior Discount Notes due 2011
Reference is hereby made to the Indenture, dated as of March 17,
1999 (the "Indenture"), among Charter Communications Holdings, LLC (the
"Company") and Charter Communications Holdings Capital Corporation ("Charter
Capital" and, together with the Company, the "Issuers"), Marcus Cable Holdings,
LLC, as guarantor, and Harris Trust and Savings Bank, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
___________________ (the "Transferor") owns and proposes to transfer
the Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount at maturity of $___________ in such Note[s] or interests (the
"Transfer"), to ___________________________ (the "Transferee"), as further
specified in Annex A hereto. In connection with the Transfer, the Transferor
hereby certifies that:
[CHECK ALL THAT APPLY]
1. |_| Check if Transferee will take delivery of a beneficial
interest in the 144A Global Note or a Definitive Note Pursuant to Rule 144A. The
Transfer is being effected pursuant to and in accordance with Rule 144A under
the United States Securities Act of 1933, as amended (the "Securities Act"),
and, accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
2. |_| Check if Transferee will take delivery of a beneficial
interest in the Regulation S Global Note or a Definitive Note pursuant to
Regulation S. The Transfer is being
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<PAGE> 115
effected pursuant to and in accordance with Rule 903 or Rule 904 under the
Securities Act and, accordingly, the Transferor hereby further certifies that
(i) the Transfer is not being made to a person in the United States and (x) at
the time the buy order was originated, the Transferee was outside the United
States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or (y)
the transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the United
States, (ii) no directed selling efforts have been made in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the Securities
Act and (iii) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will be subject to the restrictions on
Transfer enumerated in the Private Placement Legend printed on the Regulation S
Global Note and/or the Definitive Note and in the Indenture and the Securities
Act.
3. |_| Check and complete if Transferee will take delivery of a
beneficial interest in a Definitive Note pursuant to any provision of the
Securities Act other than Rule 144A or Regulation S. The Transfer is being
effected in compliance with the transfer restrictions applicable to beneficial
interests in Restricted Global Notes and Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act and any applicable blue
sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) |_| such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) |_| such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) |_| such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(c) |_| such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule
904, and the Transferor hereby further certifies that it has not engaged
in any general solicitation within the meaning of Regulation D under the
Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Note or
Restricted Definitive Notes and the requirements of the exemption claimed,
which certification is supported by (1) a certificate executed by the
Transferee in the form of Exhibit D to the Indenture and (2) an Opinion of
Counsel provided by the Transferor or the Transferee (a copy of which the
Transferor has attached to this certification), to the effect that such
Transfer is in compliance with the Securities Act. Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
trans-
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<PAGE> 116
ferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Note and/or the Definitive Notes and in
the Indenture and the Securities Act.
4.|_| Check if Transferee will take delivery of a beneficial
interest in an Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) |_| Check if Transfer is pursuant to Rule 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained
in the Indenture and any applicable blue sky securities laws of any state
of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order
to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will no longer be
subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes, on Restricted
Definitive Notes and in the Indenture.
(b) |_| Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or
Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky
securities laws of any state of the United States and (ii) the
restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted
Global Notes, on Restricted Definitive Notes and in the Indenture.
(c) |_| Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption
from the registration requirements of the Securities Act other than Rule
144, Rule 903 or Rule 904 and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of
any State of the United States and (ii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note will not
be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Global Notes or Restricted
Definitive Notes and in the Indenture.
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<PAGE> 117
This certificate and the statements contained herein are made for
your benefit and the benefit of the Issuers.
__________________________________________
[Insert Name of Transferor]
By:_______________________________________
Name:
Title:
Dated: __________________________
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<PAGE> 118
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP__________), or
(ii) |_| Regulation S Global Note (CUSIP__________), or
(b) |_| a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) |_| a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP__________), or
(ii) |_| Regulation S Global Note (CUSIP__________), or
(iii) |_| Unrestricted Global Note (CUSIP__________); or
(b) |_| a Restricted Definitive Note; or
(c) |_| an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
B-5
<PAGE> 119
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Charter Communications Holdings, LLC
Charter Communications Holdings Capital Corporation
c/o Charter Communications, Inc.
12444 Powerscourt Drive, Suite 100
St. Louis, Missouri 63131
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attn: Corporate Trust Department
Re: 9.92% Senior Discount Notes due 2011
(CUSIP ____________)
Reference is hereby made to the Indenture, dated as of March 17,
1999 (the "Indenture"), among Charter Communications Holdings, LLC (the
"Company") and Charter Communications Holdings Capital Corporation ("Charter
Capital" and, together with the Company, the "Issuers"), Marcus Cable Holdings,
LLC, as guarantor, and Harris Trust and Savings Bank, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
__________________________ (the "Owner") owns and proposes to
exchange the Note[s] or interest in such Note[s] specified herein, in the
principal amount at maturity of $____________ in such Note[s] or interests (the
"Exchange"). In connection with the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests
in a Restricted Global Note for Unrestricted Definitive Notes or Beneficial
Interests in an Unrestricted Global Note
(a) |_| Check if Exchange is from beneficial interest in a
Restricted Global Note to beneficial interest in an Unrestricted Global Note. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Note for a beneficial interest in an Unrestricted Global Note in an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer, (ii) such Exchange
has been effected in compliance with the transfer restrictions applicable to the
Global Notes and pursuant to and in accordance with the United States Securities
Act of 1933, as amended (the "Securities Act"), (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
beneficial interest in an Unrestricted Global Note is being acquired in
compliance with any applicable blue sky securities laws of any state of the
United States.
(b) |_| Check if Exchange is from beneficial interest in a
Restricted Global Note to Unrestricted Definitive Note. In connection with the
Exchange of the Owner's
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beneficial interest in a Restricted Global Note for an Unrestricted Definitive
Note, the Owner hereby certifies (i) the Definitive Note is being acquired for
the Owner's own account without transfer, (ii) such Exchange has been effected
in compliance with the transfer restrictions applicable to the Restricted Global
Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
(c) |_| Check if Exchange is from Restricted Definitive Note to
beneficial interest in an Unrestricted Global Note. In connection with the
Owner's Exchange of a Restricted Definitive Note for a beneficial interest in an
Unrestricted Global Note, the Owner hereby certifies (i) the beneficial interest
is being acquired for the Owner's own account without transfer, (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance with
the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) |_| Check if Exchange is from Restricted Definitive Note to
Unrestricted Definitive Note. In connection with the Owner's Exchange of a
Restricted Definitive Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Unrestricted Definitive Note is being acquired for the Owner's
own account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States.
2. Exchange of Restricted Definitive Notes or Beneficial Interests
in Restricted Global Notes for Restricted Definitive Notes or Beneficial
Interests in Restricted Global Notes
(a) |_| Check if Exchange is from beneficial interest in a
Restricted Global Note to Restricted Definitive Note. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued will continue to be subject to the restrictions on transfer enumerated in
the Private Placement Legend printed on the Restricted Definitive Note and in
the Indenture and the Securities Act.
(b) |_| Check if Exchange is from Restricted Definitive Note to
beneficial interest in a Restricted Global Note. In connection with the Exchange
of the Owner's Restricted Definitive Note for a beneficial interest in the
[CHECK ONE] 144A Global Note or Regulation S Global Note with an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer and (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the
Restricted Global Notes and pursuant to and in accordance with the Securities
Act, and in compliance with any applicable blue sky securities laws of any state
of the United States. Upon consummation of the proposed
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Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
Indenture and the Securities Act.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Issuers.
______________________________________
[Insert Name of Transferor]
By: __________________________________
Name:
Title:
Dated: _______________________
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<PAGE> 122
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Charter Communications Holdings, LLC
Charter Communications Holdings Capital Corporation
c/o Charter Communications, Inc.
12444 Powerscourt Drive, Suite 100
St. Louis, Missouri 63131
Harris Trust and Savings Bank
311 West Monroe, 12th Floor
Chicago, Illinois 60606
Attn: Corporate Trust Department
Re: 9.92% Senior Discount Notes due 2011
Reference is hereby made to the Indenture, dated as of March 17,
1999 (the "Indenture"), among Charter Communications Holdings, LLC (the
"Company") and Charter Communications Holdings Capital Corporation ("Charter
Capital" and, together with the Company, the "Issuers"), Marcus Cable Holdings,
LLC, as guarantor, and Harris Trust and Savings Bank, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount at maturity of:
(a) |_| a beneficial interest in a Global Note, or
(b) |_| a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions set forth in
the Indenture and the undersigned agrees to be bound by, and not to resell,
pledge or otherwise transfer the Notes or any interest therein except in
compliance with, such restrictions and conditions and the United States
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any interest therein
may not be offered or sold except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are acting
as hereinafter stated, that if we should sell the Notes or any interest therein,
we will do so only (A) to the Company or any subsidiary thereof, (B) in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (C) to an institutional "accredited investor" (as
defined below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that
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<PAGE> 123
such transfer is in compliance with the Securities Act, (D) outside the United
States in accordance with Rule 904 of Regulation S under the Securities Act, (E)
pursuant to the provisions of Rule 144(k) under the Securities Act or (F)
pursuant to an effective registration statement under the Securities Act, and we
further agree to provide to any person purchasing the Definitive Note or
beneficial interest in a Global Note from us in a transaction meeting the
requirements of clauses (A) through (E) of this paragraph a notice advising such
purchaser that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you and the
Issuers such certifications, legal opinions and other information as you and the
Issuers may reasonably require to confirm that the proposed sale complies with
the foregoing restrictions. We further understand that the Notes purchased by us
will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Notes, and we and
any accounts for which we are acting are each able to bear the economic risk of
our or its investment.
5. We are acquiring the Notes or beneficial interest therein
purchased by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy to any interested party
in any administrative or legal proceedings or official inquiry with respect to
the matters covered hereby.
_______________________________________
[Insert Name of Accredited Investor]
By: ___________________________________
Name:
Title:
Dated: _____________________
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<PAGE> 124
EXHIBIT E
FORM OF GUARANTEE
For value received, the undersigned hereby unconditionally
guarantees, as principal obligor and not only as a surety, to the Holder of this
Note the cash payments in United States dollars of principal of, premium, if
any, and interest on this Note (and including Special Interest payable thereon)
in the amounts and at the times when due and interest on the overdue principal,
premium, if any, and interest, if any, of this Note, if lawful, and the payment
or performance of all other obligations of the Issuers under the Indenture (as
defined below) or the Notes, to the Holder of this Note and the Trustee, all in
accordance with and subject to the terms and limitations of this Note, Article
Ten of the Indenture and this Guarantee. This Guarantee will become effective in
accordance with Article Ten of the Indenture and its terms shall be evidenced
therein. The validity and enforceability of any Guarantee shall not be affected
by the fact that it is not affixed to any particular Note. Capitalized terms
used but not defined herein shall have the meanings ascribed to them in the
Indenture dated as of March 17, 1999, among Charter Communications Holdings,
LLC, a Delaware limited liability company, Charter Communications Holdings
Capital Corporation, a company incorporated under the laws of Delaware, Marcus
Cable Holdings, LLC, a Delaware limited liability company, as guarantor, and
Harris Trust and Savings Bank, as trustee, as amended or supplemented (the
"Indenture").
The obligations of the undersigned to the Holders of Notes and to
the Trustee pursuant to this Guarantee and the Indenture are expressly set forth
in Article Ten of the Indenture and reference is hereby made to the Indenture
for the precise terms of the Guarantee and all of the other provisions of the
Indenture to which this Guarantee relates.
THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAW. Each Guarantor hereby agrees to submit to the jurisdiction of
the courts of the State of New York in any action or proceeding arising out of
or relating to this Guarantee.
This Guarantee is subject to release upon the terms set forth in the
Indenture.
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<PAGE> 125
IN WITNESS WHEREOF, the Guarantor has caused its Guarantee to be
duly executed.
Date:______________
MARCUS CABLE HOLDINGS, LLC,
as Guarantor
By: MARCUS CABLE PROPERTIES, L.L.C.,
as Manager
By: MARCUS CABLE PROPERTIES, INC.,
as Manager
By: ________________________________________
Name:
Title:
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<PAGE> 126
EXHIBIT F
FORM OF MIRROR NOTE
9.92% Senior Note due 2007
$1,548,630,855
MARCUS CABLE HOLDINGS, LLC
(the "Borrower")
promises to pay to CHARTER COMMUNICATIONS HOLDINGS, LLC (the "Lender") on April
1, 2007 (the "Maturity Date") the principal amount outstanding on the Maturity
Date.
Interest Payment Dates: April 1 and October 1
Date: March 17, 1999
MARCUS CABLE HOLDINGS, LLC
By: MARCUS CABLE PROPERTIES, L.L.C.,
as Manager
By: MARCUS CABLE PROPERTIES, INC.,
as Manager
By: ________________________________________
Name:
Title:
CHARTER COMMUNICATIONS HOLDINGS, LLC
By: ________________________________________
Name:
Title:
F-1
<PAGE> 127
1. INTEREST. Marcus Cable Holdings, LLC, a Delaware limited
liability Company (the "Borrower"), promises to pay to Charter Communications
Holdings, LLC, a Delaware limited liability company (the "Lender"), interest on
the principal amount of this Note from time to time outstanding at the rate of
9.92% per annum from the date hereof until maturity. The Borrower will pay
interest semi-annually in arrears on April 1 and October 1 of each year (each an
"Interest Payment Date"), or if any such day is not a Business Day, on the next
succeeding Business Day. Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of issuance; provided, further, that the first Interest Payment Date shall
be October 1, 1999. The principal amount on which the Borrower will pay interest
on each Interest Payment Day will be the principal amount of this Note
outstanding from time to time during the 6-month period prior to such Interest
Payment Date. The Borrower shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue principal and premium, if
any, from time to time on demand at a rate that is 1% per annum in excess of the
rate then in effect; it shall pay interest (including post-petition interest in
any proceeding under Bankruptcy Law) on overdue installments of interest
(without regard to any applicable grace periods) from time to time on demand at
the same rate to the extent lawful. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Borrower will pay interest on this Note to
Lender. This Note will be payable as to principal, premium, if any, and interest
by check mailed to Lender at 12444 Powerscourt Drive, Suite 100, St. Louis,
Missouri 63131 or such other address as Lender shall have notified the Borrower
in writing, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest on this Note if
Lender shall have provided wire transfer instructions to the Borrower. Such
payment shall be in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
3. DEFINED TERMS. Capitalized terms used herein shall have the
meanings assigned to them in the Indenture dated as of March 17, 1999 (the
"Indenture") between the Lender, Charter Communications Holdings Capital
Corporation, a company incorporated under the laws of Delaware, the Borrower,
and Harris Trust and Savings Bank, as trustee, relating to the 8.625% Senior
Notes due 2009.
4. PREPAYMENT OF NOTE. This Note may be prepaid in whole or in part
at any time without penalty or premium.
5. REPAYMENT AT OPTION OF HOLDER. Upon the occurrence of (i) a
Change of Control or (ii) an Asset Sale, in each case under the Indenture,
Lender may require Borrower to prepay this Note in whole or in part.
6. DEFAULTS AND REMEDIES. Events of Default include: (i) default for
30 days in the payment when due of interest on this Note, (ii) default in
payment when due of principal on this Note, and (iii) any event which
constitutes an Event of Default under the Indenture. If any
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<PAGE> 128
Event of Default occurs and is continuing, Lender may declare this Note to be
due and payable. Notwithstanding the foregoing, upon the occurrence of an Event
of Default pursuant to Section 6.01(g) or (h) of the Indenture, this Note will
become due and payable without further action or notice. Lender may waive any
existing Default or Event of Default and its consequences except a continuing
Default or Event of Default in the payment of interest on, or the principal of,
this Note. The Borrower is required upon becoming aware of any Default or Event
of Default to deliver to Lender a statement specifying such Default or Event of
Default.
7. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator, member or stockholder, of the Borrower, as such, shall not have
any liability for any obligations of the Borrower under this Note or for any
claim based on, in respect of, or by reason of, such obligation or its creation.
Lender by accepting this Note waives and releases all such liability. The waiver
and release are part of the consideration for the issuance of this Note.
8. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of New York, as applied to contracts made
and performed within the State of New York, without regard to principles of
conflict of laws. Each of the parties hereto and the holders agree to submit to
the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Note.
F-3
<PAGE> 1
Exhibit 4.3(c)
CHARTER COMMUNICATIONS HOLDINGS, LLC
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
MARCUS CABLE HOLDINGS, LLC
$1,475,000,000 9.92% Senior Discount Notes due 2011
----------
Exchange and Registration Rights Agreement
March 17, 1999
Goldman, Sachs & Co.
Chase Securities Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Bear, Stearns & Co. Inc.
NationsBanc Montgomery Securities LLC
Salomon Smith Barney Inc.
Credit Lyonnais Securities (USA), Inc.
First Union Capital Markets Corp.
Prudential Securities Incorporated
TD Securities (USA) Inc.
CIBC Oppenheimer Corp.
Nesbitt Burns Securities Inc.
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Ladies and Gentlemen:
Charter Communications Holdings, LLC, a Delaware limited liability
company (the "Company"), and Charter Communications Holdings Capital
Corporation, a Delaware corporation ("Charter Capital" and, together with the
Company, the "Issuers"), propose, subject to the terms and conditions stated
herein, to issue and sell to the Purchasers (as defined herein) upon the terms
set forth in the Purchase Agreement (as defined herein) their $1,475,000,000
aggregate principal amount at maturity of 9.92% Senior Discount Notes due 2011
(the "Notes"), which are guaranteed (the "Guarantee") by Marcus Cable Holdings,
LLC (the "Guarantor"). As an inducement to the Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations of the
Purchasers thereunder, the Issuers and the Guarantor agree with the Purchasers
for the benefit of holders (as defined herein) from time to time of the
Registrable Securities (as defined herein) as follows:
<PAGE> 2
1. Certain Definitions. For purposes of this Exchange and
Registration Rights Agreement, the following terms shall have the following
respective meanings:
"Base Interest" shall mean the interest that would otherwise accrue
on the Notes under the terms thereof and the Indenture, without giving
effect to the provisions of this Exchange and Registration Rights
Agreement.
The term "broker-dealer" shall mean any broker or dealer registered
with the Commission under the Exchange Act.
"Closing Date" shall mean the date on which the Notes are initially
issued.
"Commission" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the
Exchange Act or the Securities Act, whichever is the relevant statute for
the particular purpose.
"Effective Time," in the case of (i) an Exchange Offer Registration,
shall mean the time and date as of which the Commission declares the
Exchange Offer Registration Statement effective or as of which the
Exchange Offer Registration Statement otherwise becomes effective and (ii)
a Shelf Registration, shall mean the time and date as of which the
Commission declares the Shelf Registration Statement effective or as of
which the Shelf Registration Statement otherwise becomes effective.
"Electing Holder" shall mean any holder of Registrable Securities
that has returned a completed and signed Notice and Questionnaire to the
Issuers in accordance with Section 3(d)(ii) or 3(d)(iii) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, or
any successor thereto, as the same shall be amended from time to time.
"Exchange Notes" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Offer" shall have the meaning assigned thereto in Section
2(a) hereof.
"Exchange Offer Registration" shall have the meaning assigned
thereto in Section 3(c) hereof.
"Exchange Offer Registration Statement" shall have the meaning
assigned thereto in Section 2(a) hereof.
"Guarantee" shall mean the guarantee of the Notes to be issued by
the Guarantor.
2
<PAGE> 3
The term "holder" shall mean each of the Purchasers and other
persons who acquire Registrable Securities from time to time (including
any successors or assigns), in each case for so long as such person is a
registered holder of any Registrable Securities.
"Indenture" shall mean the Indenture governing the Notes, dated as
of March 17, 1999 between the Issuers and Harris Trust and Savings Bank,
as Trustee, as the same shall be amended from time to time.
"Notes" shall mean, collectively, the 9.92% Senior Discount Notes
due 2011 of the Issuers, guaranteed by the Guarantor to be issued and sold
to the Purchasers, and Notes issued in exchange therefor or in lieu
thereof, pursuant to the Indenture.
"Notice and Questionnaire" means a Notice of Registration Statement
and Selling Securityholder Questionnaire substantially in the form of
Exhibit A hereto.
The term "person" shall mean a corporation, association,
partnership, organization, business, individual, government or political
subdivision thereof or governmental agency.
"Purchase Agreement" shall mean the Purchase Agreement, dated as of
March 12, 1999, between the Purchasers, the Guarantor and the Issuers
relating to the Notes.
"Purchasers" shall mean the Purchasers named in Schedule I to the
Purchase Agreement.
"Registrable Securities" shall mean the Notes; provided, however,
that a Note shall cease to be a Registrable Security when (i) in the
circumstances contemplated by Section 2(a) hereof, such Note has been
exchanged for an Exchange Note in an Exchange Offer as contemplated in
Section 2(a) hereof (provided that any Exchange Note that, pursuant to the
last two sentences of Section 2(a), is included in a prospectus for use in
connection with resales by broker-dealers shall be deemed to be a
Registrable Security with respect to Sections 5, 6 and 9 hereof until
resale of such Registrable Security has been effected within the 180-day
period referred to in Section 2(a))(y); (ii) in the circumstances
contemplated by Section 2(b) hereof, a Shelf Registration Statement
registering such Note under the Securities Act has been declared or
becomes effective and such Note has been sold or otherwise transferred by
the holder thereof pursuant to and in a manner contemplated by such
effective Shelf Registration Statement; (iii) such Note is sold pursuant
to Rule 144 under circumstances in which any legend borne by such Note
relating to restrictions on transferability thereof, under the Securities
Act or otherwise, is removed by the Issuers or pursuant to the Indenture;
(iv) such Security is eligible to be sold pursuant to paragraph (k) of
Rule 144; or (v) such Security shall cease to be outstanding.
3
<PAGE> 4
"Registration Default" shall have the meaning assigned thereto in
Section 2(c) hereof.
"Registration Expenses" shall have the meaning assigned thereto in
Section 4 hereof.
"Resale Period" shall have the meaning assigned thereto in Section
2(a) hereof.
"Restricted Holder" shall mean (i) a holder that is an affiliate of
the Issuers within the meaning of Rule 405, (ii) a holder who acquires
Exchange Notes outside the ordinary course of such holder's business,
(iii) a holder who has arrangements or understandings with any person to
participate in the Exchange Offer for the purpose of distributing Exchange
Notes and (iv) a holder that is a broker-dealer, but only with respect to
Exchange Notes received by such broker-dealer pursuant to an Exchange
Offer in exchange for Registrable Securities acquired by the broker-dealer
directly from the Issuers.
"Rule 144," "Rule 405" and "Rule 415" shall mean, in each case, such
rule promulgated under the Securities Act (or any successor provision), as
the same shall be amended from time to time.
"Securities Act" shall mean the Securities Act of 1933, or any
successor thereto, as the same shall be amended from time to time.
"Shelf Registration" shall have the meaning assigned thereto in
Section 2(b) hereof.
"Shelf Registration Statement" shall have the meaning assigned
thereto in Section 2(b) hereof.
"Special Interest" shall have the meaning assigned thereto in
Section 2(c) hereof.
"subsidiaries" shall mean subsidiaries which would be "significant
subsidiaries" as defined in Rule 1-02(w) of Regulation S-X under the
Exchange Act.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939, or
any successor thereto, and the rules, regulations and forms promulgated
thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of this
Exchange and Registration Rights Agreement, and the words "herein," "hereof" and
"hereunder" and other words of
4
<PAGE> 5
similar import refer to this Exchange and Registration Rights Agreement as a
whole and not to any particular Section or other subdivision.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Issuers agree to
file under the Securities Act, as soon as practicable, but no later than 90 days
after the Closing Date, a registration statement relating to an offer to
exchange (such registration statement, the "Exchange Offer Registration
Statement", and such offer, the "Exchange Offer") any and all of the Notes
guaranteed by the Guarantor for a like aggregate principal amount of notes
issued by the Issuers and guaranteed by the Guarantor, which notes and guarantee
are substantially identical in all material respects to the Notes and Guarantee
(and are entitled to the benefits of a trust indenture which has terms identical
in all material respects to the Indenture or is the Indenture and which has been
qualified under the Trust Indenture Act), except that they have been registered
pursuant to an effective registration statement under the Securities Act and do
not contain provisions for the additional interest contemplated in Section 2(c)
below (such notes hereinafter called "Exchange Notes"). The Issuers agree to use
their reasonable best efforts to cause the Exchange Offer Registration Statement
to become effective under the Securities Act as soon as practicable, but no
later than 150 days after the Closing Date. The Exchange Offer will be
registered under the Securities Act on the appropriate form and will comply with
all applicable tender offer rules and regulations under the Exchange Act. The
Issuers further agree to use their reasonable best efforts to complete the
Exchange Offer promptly, but no later than 30 business days or longer, if
required by the federal securities laws, after such registration statement has
become effective, hold the Exchange Offer open for at least 30 days and exchange
Exchange Notes for all Registrable Securities that have been properly tendered
and not withdrawn on or prior to the expiration of the Exchange Offer. The
Exchange Offer will be deemed to have been "completed" only if the notes
received by holders other than Restricted Holders in the Exchange Offer for
Registrable Securities are, upon receipt, transferable by each such holder
without restriction under the Securities Act and the Exchange Act and without
material restrictions under the blue sky or securities laws of a substantial
majority of the States of the United States of America. The Exchange Offer shall
be deemed to have been completed upon the earlier to occur of (i) the Issuers
having exchanged the Exchange Notes for all outstanding Registrable Securities
pursuant to the Exchange Offer and (ii) the Issuers having exchanged, pursuant
to the Exchange Offer, Exchange Notes for all Registrable Securities that have
been properly tendered and not withdrawn before the expiration of the Exchange
Offer, which shall be on a date that is at least 30 business days following the
commencement of the Exchange Offer. The Issuers agree (x) to include in the
Exchange Offer Registration Statement a prospectus for use in any resales by any
holder of Exchange Notes that is a broker-dealer and (y) to keep such Exchange
Offer Registration Statement effective for a period (the "Resale Period")
beginning when Exchange Notes are first issued in the Exchange Offer and ending
upon the earlier of the expiration of the 180th day after the Exchange Offer has
been completed or such time as such broker-dealers no longer own any
5
<PAGE> 6
Registrable Securities. With respect to such Exchange Offer Registration
Statement, such holders shall have the benefit of the rights of indemnification
and contribution set forth in Sections 6(a), (c), (d) and (e) hereof.
(b) If (i) on or prior to the time the Exchange Offer is completed
existing law or Commission policy or interpretations are changed such that the
Exchange Notes received by holders, other than Restricted Holders in the
Exchange Offer in exchange for Registrable Securities are not or would not be,
upon receipt, transferable by each such holder without restriction under the
Securities Act, (ii) the Exchange Offer has not been completed within 180 days
following the Closing Date or (iii) the Exchange Offer is not available to any
holder of the Notes, the Issuers shall, in lieu of (or, in the case of clause
(iii), in addition to) conducting the Exchange Offer contemplated by Section
2(a), file under the Securities Act on or prior to 30 business days after the
time such obligation to file arises, a "shelf" registration statement providing
for the registration of, and the sale on a continuous or delayed basis by the
holders of, all of the Registrable Securities, pursuant to Rule 415 or any
similar rule that may be adopted by the Commission (such filing, the "Shelf
Registration" and such registration statement, the "Shelf Registration
Statement"). The Issuers agree to use their reasonable best efforts (x) to cause
the Shelf Registration Statement to become or be declared effective by the
Commission no later than 90 days after such obligation to file arises and to
keep such Shelf Registration Statement continuously effective for a period
ending on the earlier of (i) the second anniversary of the Effective Time or
(ii) such time as there are no longer any Registrable Securities outstanding,
provided, however, that no holder shall be entitled to be named as a selling
securityholder in the Shelf Registration Statement or to use the prospectus
forming a part thereof for resales of Registrable Securities unless such holder
is an Electing Holder, and (y) after the Effective Time of the Shelf
Registration Statement, promptly upon the request of any holder of Registrable
Securities that is not then an Electing Holder, to take any action reasonably
necessary to enable such holder to use the prospectus forming a part thereof for
resales of Registrable Securities, including, without limitation, any action
necessary to identify such holder as a selling securityholder in the Shelf
Registration Statement, provided, however, that nothing in this clause (y) shall
relieve any such holder of the obligation to return a completed and signed
Notice and Questionnaire to the Issuers in accordance with Section 3(d)(iii)
hereof. The Issuers further agree to supplement or make amendments to the Shelf
Registration Statement, as and when required by the rules, regulations or
instructions applicable to the registration form used by the Issuers for such
Shelf Registration Statement or by the Securities Act or rules and regulations
thereunder for shelf registration, and the Issuers agree to furnish to each
Electing Holder copies of any such supplement or amendment prior to its being
used or promptly following its filing with the Commission.
(c) In the event that (i) the Issuers have not filed the Exchange
Offer Registration Statement or Shelf Registration Statement on or before the
date on which such registration statement is required to be filed pursuant to
Section 2(a) or 2(b), respectively, or (ii) such Exchange Offer Registration
Statement or Shelf Registration Statement to become effec-
6
<PAGE> 7
tive or been declared effective by the Commission on or before the date on which
such registration statement is required to become or be declared effective
pursuant to Section 2(a) or 2(b), respectively, or (iii) the Exchange Offer has
not been completed within 30 business days after the initial effective date of
the Exchange Offer Registration Statement relating to the Exchange Offer (if the
Exchange Offer is then required to be made) or (iv) any Exchange Offer
Registration Statement or Shelf Registration Statement required by Section 2(a)
or 2(b) hereof is filed and declared effective but shall thereafter either be
withdrawn by the Issuers or shall become subject to an effective stop order
issued pursuant to Section 8(d) of the Securities Act suspending the
effectiveness of such registration statement (except as specifically permitted
herein) without being succeeded immediately by an additional registration
statement filed and declared effective (each such event referred to in clauses
(i) through (iv), a "Registration Default" and each period during which a
Registration Default has occurred and is continuing, a "Registration Default
Period"), then, as liquidated damages for such Registration Default, subject to
the provisions of Section 9(b), special interest ("Special Interest"), in
addition to the Base Interest, shall accrue on the average Accreted Value (as
defined in the Indenture) of the outstanding Notes at a per annum rate of 0.25%
for the first 90 days of the Registration Default Period, at a per annum rate of
0.50% for the second 90 days of the Registration Default Period, at a per annum
rate of 0.75% for the third 90 days of the Registration Default Period and at a
per annum rate of 1.0% thereafter for the remaining portion of the Registration
Default Period. All accrued Special Interest shall be paid in cash by the
Issuers on each Interest Payment Date (as defined in the Indenture).
(d) The Issuers shall use their reasonable best efforts to take all
actions necessary or advisable to be taken by them to ensure that the
transactions contemplated herein are effected as so contemplated in Section 2(a)
or 2(b) hereof.
(e) Any reference herein to a registration statement as of any time
shall be deemed to include any document incorporated, or deemed to be
incorporated, therein by reference as of such time and any reference herein to
any post-effective amendment to a registration statement as of any time shall be
deemed to include any document incorporated, or deemed to be incorporated,
therein by reference as of such time.
3. Registration Procedures.
If the Issuers file a registration statement pursuant to Section
2(a) or Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the
Shelf Registration, as the case may be, the Issuers shall cause the Indenture to
be qualified under the Trust Indenture Act of 1939.
7
<PAGE> 8
(b) In the event that such qualification would require the
appointment of a new trustee under the Indenture, the Issuers shall appoint a
new trustee thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Issuers' obligations with respect to the
registration of Exchange Notes as contemplated by Section 2(a) (the "Exchange
Offer Registration"), if applicable, the Issuers shall, as soon as practicable
(or as otherwise specified):
(i) prepare and file with the Commission, as soon as
practicable but no later than 90 days after the Closing Date, an
Exchange Offer Registration Statement on any form which may be
utilized by the Issuers and which shall permit the Exchange Offer
and resales of Exchange Notes by broker-dealers during the Resale
Period to be effected as contemplated by Section 2(a), and use their
reasonable best efforts to cause such Exchange Offer Registration
Statement to become effective as soon as practicable thereafter, but
no later than 150 days after the Closing Date;
(ii) as soon as practicable prepare and file with the
Commission such amendments and supplements to such Exchange Offer
Registration Statement and the prospectus included therein as may be
necessary to effect and maintain the effectiveness of such Exchange
Offer Registration Statement for the periods and purposes
contemplated in Section 2(a) hereof and as may be required by the
applicable rules and regulations of the Commission and the
instructions applicable to the form of such Exchange Offer
Registration Statement, and promptly provide each broker-dealer
holding Exchange Notes with such number of copies of the prospectus
included therein (as then amended or supplemented), in conformity in
all material respects with the requirements of the Securities Act
and the Trust Indenture Act and the rules and regulations of the
Commission thereunder, as such broker-dealer reasonably may request
prior to the expiration of the Resale Period, for use in connection
with resales of Exchange Notes;
(iii) promptly notify each broker-dealer that has requested or
received copies of the prospectus included in such registration
statement, and confirm such advice in writing, (A) when such
Exchange Offer Registration Statement or the prospectus included
therein or any prospectus amendment or supplement or post-effective
amendment has been filed, and, with respect to such Exchange Offer
Registration Statement or any post-effective amendment, when the
same has become effective, (B) of any comments by the Commission and
by the blue sky or securities commissioner or regulator of any state
with respect thereto or any request by the Commission for amendments
or supplements to such Exchange Offer Registration Statement or
prospectus or for additional informa-
8
<PAGE> 9
tion, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of such Exchange Offer Registration
Statement or the initiation or, to the knowledge of the Issuers,
threatening of any proceedings for that purpose, (D) if at any time
the representations and warranties of the Issuers contemplated by
Section 5 hereof cease to be true and correct in all material
respects, (E) of the receipt by the Issuers of any notification with
respect to the suspension of the qualification of the Exchange Notes
for sale in any jurisdiction or the initiation or, to the knowledge
of the Issuers, threatening of any proceeding for such purpose, or
(F) at any time during the Resale Period when a prospectus is
required to be delivered under the Securities Act, that such
Exchange Offer Registration Statement, prospectus, prospectus
amendment or supplement or post-effective amendment does not conform
in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act, and the rules and
regulations of the Commission thereunder, or contains an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(iv) in the event that the Issuers would be required, pursuant
to Section 3(e)(iii)(F) above, to notify any broker-dealers holding
Exchange Notes, the Issuers shall prepare and furnish to each such
holder a reasonable number of copies of a prospectus supplemented or
amended so that, as thereafter delivered to purchasers of such
Exchange Notes during the Resale Period, such prospectus conforms in
all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and
regulations of the Commission thereunder and shall not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(v) use their reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of such Exchange Offer
Registration Statement or any post-effective amendment thereto as
soon as practicable;
(vi) use their reasonable best efforts to (A) register or
qualify the Exchange Notes under the securities laws or blue sky
laws of such jurisdictions as are contemplated by Section 2(a) no
later than the commencement of the Exchange Offer, (B) keep such
registrations or qualifications in effect and comply with such laws
so as to permit the continuance of offers, sales and dealings
therein in such jurisdictions until the expiration of the Resale
Period and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each broker-dealer holding Exchange
Notes to consummate the disposi-
9
<PAGE> 10
tion thereof in such jurisdictions; provided, however, that none
of the Issuers shall be required for any such purpose to (1) qualify
as a foreign corporation or limited liability company, as the case
may be, in any jurisdiction wherein it would not otherwise be
required to qualify but for the requirements of this Section
3(c)(vi), (2) consent to general service of process in any such
jurisdiction or (3) make any changes to its certificate of
incorporation or by-laws (or other organizational document) or any
agreement between it and holders of its ownership interests;
(vii) use their reasonable best efforts to obtain the consent
or approval of each governmental agency or authority, whether
federal, state or local, which may be required to effect the
Exchange Offer Registration, the Exchange Offer and the offering and
sale of Exchange Notes by broker-dealers during the Resale Period;
(viii) provide a CUSIP number for all Exchange Notes, not
later than the applicable Effective Time;
(ix) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as
soon as practicable but no later than eighteen months after the
effective date of such Exchange Offer Registration Statement, an
earning statement of the Company and its subsidiaries complying with
Section 11(a) of the Securities Act (including, at the option of the
Company, Rule 158 thereunder).
(d) In connection with the Issuers' obligations with respect to the
Shelf Registration, if applicable, the Issuers shall, as soon as practicable (or
as otherwise specified):
(i) prepare and file with the Commission within the time
periods specified in Section 2(b), a Shelf Registration Statement on
any form which may be utilized by the Issuers and which shall
register all of the Registrable Securities for resale by the holders
thereof in accordance with such method or methods of disposition as
may be specified by such of the holders as, from time to time, may
be Electing Holders and use their reasonable best efforts to cause
such Shelf Registration Statement to become effective within the
time periods specified in Section 2(b);
(ii) not less than 30 calendar days prior to the Effective
Time of the Shelf Registration Statement, mail the Notice and
Questionnaire to the holders of Registrable Securities; no holder
shall be entitled to be named as a selling securityholder in the
Shelf Registration Statement as of the Effective Time, and no holder
shall be entitled to use the prospectus forming a part thereof for
resales of Registrable Securities at any time, unless such holder
has returned a
10
<PAGE> 11
completed and signed Notice and Questionnaire to the Issuers by the
deadline for response set forth therein; provided, however, holders
of Registrable Securities shall have at least 28 calendar days from
the date on which the Notice and Questionnaire is first mailed to
such holders to return a completed and signed Notice and
Questionnaire to the Issuers;
(iii) after the Effective Time of the Shelf Registration
Statement, upon the request of any holder of Registrable Securities
that is not then an Electing Holder, promptly send a Notice and
Questionnaire to such holder; provided that the Issuers shall not be
required to take any action to name such holder as a selling
securityholder in the Shelf Registration Statement or to enable such
holder to use the prospectus forming a part thereof for resales of
Registrable Securities until such holder has returned a completed
and signed Notice and Questionnaire to the Issuers;
(iv) as soon as practicable prepare and file with the
Commission such amendments and supplements to such Shelf
Registration Statement and the prospectus included therein as may be
necessary to effect and maintain the effectiveness of such Shelf
Registration Statement for the period specified in Section 2(b)
hereof and as may be required by the applicable rules and
regulations of the Commission and the instructions applicable to the
form of such Shelf Registration Statement, and furnish to the
Electing Holders copies of any such supplement or amendment
simultaneously with or prior to its being used or filed with the
Commission;
(v) comply with the provisions of the Securities Act with
respect to the disposition of all of the Registrable Securities
covered by such Shelf Registration Statement in accordance with the
intended methods of disposition by the Electing Holders provided for
in such Shelf Registration Statement;
(vi) provide (A) the Electing Holders, (B) the underwriters
(which term, for purposes of this Exchange and Registration Rights
Agreement, shall include a person deemed to be an underwriter within
the meaning of Section 2(a)(11) of the Securities Act), if any,
thereof, (C) any sales or placement agent therefor, (D) counsel for
any such underwriter or agent and (E) not more than one counsel for
all the Electing Holders the opportunity to participate in the
preparation of such Shelf Registration Statement, each prospectus
included therein or filed with the Commission and each amendment or
supplement thereto;
(vii) for a reasonable period prior to the filing of such
Shelf Registration Statement, and throughout the period specified in
Section 2(b), make available at reasonable times at the Issuers'
principal place of business or such other reasonable place for
inspection by the persons referred to in Section 3(d)(vi) who
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<PAGE> 12
shall certify to the Issuers that they have a current intention to
sell the Registrable Securities pursuant to the Shelf Registration
such financial and other relevant information and books and records
of the Issuers, and cause the officers, employees, counsel and
independent certified public accountants of the Issuers to respond
to such inquiries, as shall be reasonably necessary, in the judgment
of the respective counsel referred to in such Section, to conduct a
reasonable investigation within the meaning of Section 11 of the
Securities Act; provided, however, that each such party shall be
required to maintain in confidence and not to disclose to any other
person any information or records reasonably designated by the
Issuers as being confidential, until such time as (A) such
information becomes a matter of public record (whether by virtue of
its inclusion in such registration statement or otherwise, except as
a result of a breach of this or any other obligation of
confidentiality to the Issuers), or (B) such person shall be
required so to disclose such information pursuant to a subpoena or
order of any court or other governmental agency or body having
jurisdiction over the matter (subject to the requirements of such
order, and only after such person shall have given the Issuers
prompt prior written notice of such requirement), or (C) such
information is required to be set forth in such Shelf Registration
Statement or the prospectus included therein or in an amendment to
such Shelf Registration Statement or an amendment or supplement to
such prospectus in order that such Shelf Registration Statement,
prospectus, amendment or supplement, as the case may be, complies
with applicable requirements of the federal securities laws and the
rules and regulations of the Commission and does not contain an
untrue statement of a material fact or omit to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing;
(viii) promptly notify each of the Electing Holders, any sales
or placement agent therefor and any underwriter thereof (which
notification may be made through any managing underwriter that is a
representative of such underwriter for such purpose) and confirm
such advice in writing, (A) when such Shelf Registration Statement
or the prospectus included therein or any prospectus amendment or
supplement or post-effective amendment has been filed, and, with
respect to such Shelf Registration Statement or any post-effective
amendment, when the same has become effective, (B) of any comments
by the Commission and by the blue sky or securities commissioner or
regulator of any state with respect thereto or any request by the
Commission for amendments or supplements to such Shelf Registration
Statement or prospectus or for additional information, (C) of the
issuance by the Commission of any stop order suspending the
effectiveness of such Shelf Registration Statement or the initiation
or, to the knowledge of the Issuers, threatening of any proceedings
for that
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<PAGE> 13
purpose, (D) if at any time the representations and warranties of
the Issuers contemplated by Section 3(d)(xvii) or Section 5 hereof
cease to be true and correct in all material respects, (E) of the
receipt by the Issuers of any notification with respect to the
suspension of the qualification of the Registrable Securities for
sale in any jurisdiction or the initiation or, to the knowledge of
the Issuers, threatening of any proceeding for such purpose, or (F)
if at any time when a prospectus is required to be delivered under
the Securities Act, that such Shelf Registration Statement,
prospectus, prospectus amendment or supplement or post-effective
amendment does not conform in all material respects to the
applicable requirements of the Securities Act and the Trust
Indenture Act and the rules and regulations of the Commission
thereunder or contains an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in light of
the circumstances then existing;
(ix) use their reasonable best efforts to obtain the
withdrawal of any order suspending the effectiveness of such
registration statement or any post-effective amendment thereto as
soon as practicable;
(x) if requested by any managing underwriter or underwriters,
any placement or sales agent or any Electing Holder, promptly
incorporate in a prospectus supplement or post-effective amendment
such information as is required by the applicable rules and
regulations of the Commission and as such managing underwriter or
underwriters, such agent or such Electing Holder specifies should be
included therein relating to the terms of the sale of such
Registrable Securities, including information (i) with respect to
the principal amount of Registrable Securities being sold by such
Electing Holder or agent or to any underwriters, the name and
description of such Electing Holder, agent or underwriter, the
offering price of such Registrable Securities, and any discount,
commission or other compensation payable in respect thereof and the
purchase price being paid therefor by such underwriters and (ii)
with respect to any other material terms of the offering of the
Registrable Securities to be sold by such Electing Holder or agent
or to such underwriters; and make all required filings of such
prospectus supplement or post-effective amendment upon notification
of the matters to be incorporated in such prospectus supplement or
post-effective amendment;
(xi) furnish to each Electing Holder, each placement or sales
agent, if any, therefor, each underwriter, if any, thereof and the
respective counsel referred to in Section 3(d)(vi) hereof an
executed copy (or, in the case of an Electing Holder, a conformed
copy) of such Shelf Registration Statement, each such amendment and
supplement thereto (in each case including all exhibits
13
<PAGE> 14
thereto (in the case of an Electing Holder of Registrable
Securities, upon request) and documents incorporated by reference
therein) and such number of copies of such Shelf Registration
Statement (excluding exhibits thereto and documents incorporated by
reference therein unless specifically so requested by such Electing
Holder, agent or underwriter, as the case may be) and of the
prospectus included in such Shelf Registration Statement (including
each preliminary prospectus and any summary prospectus), in
conformity in all material respects with the applicable requirements
of the Securities Act and the Trust Indenture Act, and the rules and
regulations of the Commission thereunder, and such other documents,
as such Electing Holder, agent, if any, and underwriter, if any, may
reasonably request in order to facilitate the offering and
disposition of the Registrable Securities owned by such Electing
Holder, offered or sold by such agent or underwritten by such
underwriter and to permit such Electing Holder, agent and
underwriter to satisfy the prospectus delivery requirements of the
Securities Act; and the Issuers hereby consent to the use of such
prospectus (including such preliminary and summary prospectus) and
any amendment or supplement thereto by each such Electing Holder and
by any such agent and underwriter, in each case in the form most
recently provided to such person by the Issuers, in connection with
the offering and sale of the Registrable Securities covered by the
prospectus (including such preliminary and summary prospectus) or
any supplement or amendment thereto;
(xii) use their reasonable best efforts to (A) register or
qualify the Registrable Securities to be included in such Shelf
Registration Statement under such securities laws or blue sky laws
of such jurisdictions as any Electing Holder and each placement or
sales agent, if any, therefor and underwriter, if any, thereof shall
reasonably request, (B) keep such registrations or qualifications in
effect and comply with such laws so as to permit the continuance of
offers, sales and dealings therein in such jurisdictions during the
period the Shelf Registration is required to remain effective under
Section 2(b) above and for so long as may be necessary to enable any
such Electing Holder, agent or underwriter to complete its
distribution of Notes pursuant to such Shelf Registration Statement
and (C) take any and all other actions as may be reasonably
necessary or advisable to enable each such Electing Holder, agent,
if any, and underwriter, if any, to consummate the disposition in
such jurisdictions of such Registrable Securities; provided,
however, that none of the Issuers shall be required for any such
purpose to (1) qualify as a foreign corporation or limited liability
company, as the case may be, in any jurisdiction wherein it would
not otherwise be required to qualify but for the requirements of
this Section 3(d)(xii), (2) consent to general service of process in
any such jurisdiction or (3) make any changes to its certificate of
incorporation or by-laws (or other or-
14
<PAGE> 15
ganizational document) or any agreement between it and holders of
its ownership interests;
(xiii) use their reasonable best efforts to obtain the consent
or approval of each governmental agency or authority, whether
federal, state or local, which may be required to effect the Shelf
Registration or the offering or sale in connection therewith or to
enable the selling holder or holders to offer, or to consummate the
disposition of, their Registrable Securities;
(xiv) unless any Registrable Securities shall be in book-entry
only form, cooperate with the Electing Holders and the managing
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be
sold, which certificates, if so required by any securities exchange
upon which any Registrable Securities are listed, shall be penned,
lithographed or engraved, or produced by any combination of such
methods, on steel engraved borders, and which certificates shall not
bear any restrictive legends; and, in the case of an underwritten
offering, enable such Registrable Securities to be in such
denominations and registered in such names as the managing
underwriters may request at least two business days prior to any
sale of the Registrable Securities;
(xv) provide a CUSIP number for all Registrable Securities,
not later than the applicable Effective Time;
(xvi) enter into one or more underwriting agreements,
engagement letters, agency agreements, "best efforts" underwriting
agreements or similar agreements, as appropriate, including
customary provisions relating to indemnification and contribution,
and take such other actions in connection therewith as any Electing
Holders of at least 20% in aggregate principal amount of the
Registrable Securities at the time outstanding shall request in
order to expedite or facilitate the disposition of such Registrable
Securities;
(xvii) whether or not an agreement of the type referred to in
Section 3(d)(xvi) hereof is entered into and whether or not any
portion of the offering contemplated by the Shelf Registration is an
underwritten offering or is made through a placement or sales agent
or any other entity, (A) make such representations and warranties to
the Electing Holders and the placement or sales agent, if any,
therefor and the underwriters, if any, thereof in form, substance
and scope as are customarily made in connection with an offering of
debt securities pursuant to any appropriate agreement or to a
registration statement filed on the form applicable to the Shelf
Registration; (B) obtain an opinion of counsel to the Issuers in
customary form, subject to customary limitations, assumptions and
exclusions, and covering such matters, of the type customarily
cov-
15
<PAGE> 16
ered by such an opinion, as the managing underwriters, if any, or as
any Electing Holders of at least 20% in aggregate principal amount
of the Registrable Securities at the time outstanding may reasonably
request, addressed to such Electing Holder or Electing Holders and
the placement or sales agent, if any, therefor and the underwriters,
if any, thereof and dated the date of the Effective Time of such
Shelf Registration Statement (and if such Shelf Registration
Statement contemplates an underwritten offering of a part or all of
the Registrable Securities, dated the date of the closing under the
underwriting agreement relating thereto) (it being agreed that the
matters to be covered by such opinion shall include the matters set
forth in paragraph (b) of Section 7 of the Purchase Agreement to the
extent applicable to an offering of this type; (C) obtain a "cold
comfort" letter or letters from the independent certified public
accountants of the Issuers addressed to the selling Electing
Holders, the placement or sales agent, if any, therefor or the
underwriters, if any, thereof, dated (i) the effective date of such
Shelf Registration Statement and (ii) the effective date of any
prospectus supplement to the prospectus included in such Shelf
Registration Statement or post-effective amendment to such Shelf
Registration Statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the
latest such statements included in such prospectus (and, if such
Shelf Registration Statement contemplates an underwritten offering
pursuant to any prospectus supplement to the prospectus included in
such Shelf Registration Statement or post-effective amendment to
such Shelf Registration Statement which includes unaudited or
audited financial statements as of a date or for a period subsequent
to that of the latest such statements included in such prospectus,
dated the date of the closing under the underwriting agreement
relating thereto), such letter or letters to be in customary form
and covering such matters of the type customarily covered by letters
of such type; (D) deliver such documents and certificates, including
officers' certificates, as may be reasonably requested by any
Electing Holders of at least 20% in aggregate principal amount of
the Registrable Securities at the time outstanding or the placement
or sales agent, if any, therefor and the managing underwriters, if
any, thereof to evidence the accuracy of the representations and
warranties made pursuant to clause (A) above or those contained in
Section 5(a) hereof and the compliance with or satisfaction of any
agreements or conditions contained in the underwriting agreement or
other similar agreement entered into by the Issuers pursuant to
Section 3(d)(xvi); and (E) undertake such obligations relating to
expense reimbursement, indemnification and contribution as are
provided in Section 6 hereof;
(xviii) notify in writing each holder of Registrable
Securities of any proposal by the Issuers to amend or waive any
provision of this Exchange and Registration Rights Agreement
pursuant to Section 9(h) hereof and of any
16
<PAGE> 17
amendment or waiver effected pursuant thereto, each of which notices
shall contain the substance of the amendment or waiver proposed or
effected, as the case may be;
(xix) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or
participate as a member of an underwriting syndicate or selling
group or "assist in the distribution" (within the meaning of the
Conduct Rules (the "Conduct Rules") of the National Association of
Securities Dealers, Inc. ("NASD") or any successor thereto, as
amended from time to time) thereof, whether as a holder of such
Registrable Securities or as an underwriter, a placement or sales
agent or a broker or dealer in respect thereof, or otherwise, assist
such broker-dealer in complying with the requirements of such
Conduct Rules, including by (A) if such Conduct Rules shall so
require, engaging a "qualified independent underwriter" (as defined
in such Conduct Rules) to participate in the preparation of the
Shelf Registration Statement relating to such Registrable
Securities, to exercise usual standards of due diligence in respect
thereto and, if any portion of the offering contemplated by such
Shelf Registration Statement is an underwritten offering or is made
through a placement or sales agent, to recommend the yield of such
Registrable Securities, (B) indemnifying any such qualified
independent underwriter to the extent of the indemnification of
underwriters provided in Section 6 hereof (or to such other
customary extent as may be requested by such underwriter), and (C)
providing such information to such broker-dealer as may be required
in order for such broker-dealer to comply with the requirements of
the Conduct Rules; and
(xx) comply with all applicable rules and regulations of the
Commission, and make generally available to its securityholders as
soon as practicable but in any event not later than eighteen months
after the effective date of such Shelf Registration Statement, an
earning statement of the Company and its subsidiaries complying with
Section 11(a) of the Securities Act (including, at the option of the
Company, Rule 158 thereunder).
(e) In the event that the Issuers would be required, pursuant to
Section 3(d)(viii)(F) above, to notify the Electing Holders, the placement or
sales agent, if any, therefor and the managing underwriters, if any, thereof,
the Issuers shall prepare and furnish to each of the Electing Holders, to each
placement or sales agent, if any, and to each such underwriter, if any, a
reasonable number of copies of a prospectus supplemented or amended so that, as
thereafter delivered to purchasers of Registrable Securities, such prospectus
conforms in all material respects to the applicable requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder and shall not contain an untrue statement of a material
fact or omit to state a material fact required to be stated
17
<PAGE> 18
therein or necessary to make the statements therein not misleading in light of
the circumstances then existing. Each Electing Holder agrees that upon receipt
of any notice from the Issuers pursuant to Section 3(d)(viii)(F) hereof, such
Electing Holder shall forthwith discontinue the disposition of Registrable
Securities pursuant to the Shelf Registration Statement applicable to such
Registrable Securities until such Electing Holder shall have received copies of
such amended or supplemented prospectus, and if so directed by the Issuers, such
Electing Holder shall deliver to the Issuers (at the Issuers' expense) all
copies, other than permanent file copies, then in such Electing Holder's
possession of the prospectus covering such Registrable Securities at the time of
receipt of such notice.
(f) In the event of a Shelf Registration, in addition to the
information required to be provided by each Electing Holder in its Notice and
Questionnaire, the Issuers may require such Electing Holder to furnish to the
Issuers such additional information regarding such Electing Holder and such
Electing Holder's intended method of distribution of Registrable Securities as
may be required in order to comply with the Securities Act. Each such Electing
Holder agrees to notify the Issuers as promptly as practicable of any inaccuracy
or change in information previously furnished by such Electing Holder to the
Issuers or of the occurrence of any event in either case as a result of which
any prospectus relating to such Shelf Registration contains or would contain an
untrue statement of a material fact regarding such Electing Holder or such
Electing Holder's intended method of disposition of such Registrable Securities
or omits to state any material fact regarding such Electing Holder or such
Electing Holder's intended method of disposition of such Registrable Securities
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing, and promptly to furnish
to the Issuers any additional information required to correct and update any
previously furnished information or required so that such prospectus shall not
contain, with respect to such Electing Holder or the disposition of such
Registrable Securities, an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing.
4. Registration Expenses.
The Issuers agree, subject to the last sentence of this Section, to
bear and to pay or cause to be paid promptly all expenses incident to the
Issuers' performance of or compliance with this Exchange and Registration Rights
Agreement, including (a) all Commission and any NASD registration, filing and
review fees and expenses including fees and disbursements of counsel for the
placement or sales agent or underwriters in connection with such registration,
filing and review, (b) all fees and expenses in connection with the
qualification of the Notes for offering and sale under the securities laws and
blue sky laws referred to in Section 3(d)(xii) hereof and determination of their
eligibility for investment under the laws of such jurisdictions as any managing
underwriters or the Electing Holders may designate, including any fees and
disbursements of counsel for the Electing Holders or underwriters in
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<PAGE> 19
connection with such qualification and determination, (c) all expenses relating
to the preparation, printing, production, distribution and reproduction of each
registration statement required to be filed hereunder, each prospectus included
therein or prepared for distribution pursuant hereto, each amendment or
supplement to the foregoing, the expenses of preparing the Notes for delivery
and the expenses of printing or producing any underwriting agreements,
agreements among underwriters, selling agreements and blue sky or legal
investment memoranda and all other documents in connection with the offering,
sale or delivery of Notes to be disposed of (including certificates representing
the Notes), (d) messenger, telephone and delivery expenses relating to the
offering, sale or delivery of Notes and the preparation of documents referred in
clause (c) above, (e) fees and expenses of the Trustee under the Indenture, any
agent of the Trustee and any reasonable fees and expenses for counsel for the
Trustee and of any collateral agent or custodian, (f) internal expenses
(including all salaries and expenses of the Issuers' officers and employees
performing legal or accounting duties), (g) fees, disbursements and expenses of
counsel and independent certified public accountants of the Issuers (including
the expenses of any opinions or "cold comfort" letters required by or incident
to such performance and compliance), (h) fees, disbursements and expenses of any
"qualified independent underwriter" engaged pursuant to Section 3(d)(xix)
hereof, (i) reasonable fees, disbursements and expenses of one counsel for the
Electing Holders retained in connection with a Shelf Registration, as selected
by the Electing Holders of at least a majority in aggregate principal amount of
the Registrable Securities held by Electing Holders (which counsel shall be
reasonably satisfactory to the Issuers), (j) any fees charged by securities
rating services for rating the Notes, and (k) reasonable fees, expenses and
disbursements of any other persons, including special experts, retained by the
Issuers in connection with such registration (collectively, the "Registration
Expenses"). To the extent that any Registration Expenses are incurred, assumed
or paid by any holder of Registrable Securities or any placement or sales agent
therefor or underwriter thereof, the Issuers shall reimburse such person for the
full amount of the Registration Expenses so incurred, assumed or paid promptly
after receipt of a request therefor. Notwithstanding the foregoing, the holders
of the Registrable Securities being registered shall pay all agency fees and
commissions and underwriting discounts and commissions attributable to the sale
of such Registrable Securities and the fees and disbursements of any counsel or
other advisors or experts retained by such holders (severally or jointly), other
than the counsel and experts specifically referred to above.
5. Representations, Warranties and Covenants.
Except with respect to clauses (a) and (b) below, the Issuers
represent and warrant to, and agree with, each Purchaser and each of the holders
from time to time of Registrable Securities the information set forth in this
Section 5.
With respect to clauses (a) and (b) below, the Issuers covenant
that:
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<PAGE> 20
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(d) or Section 3(c) hereof and any
further amendments or supplements to any such registration statement or
prospectus, when it becomes effective or is filed with the Commission, as the
case may be, and, in the case of an underwritten offering of Registrable
Securities, at the time of the closing under the underwriting agreement relating
thereto, will conform in all material respects to the requirements of the
Securities Act and the Trust Indenture Act and the rules and regulations of the
Commission thereunder and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading; and at all times subsequent to
the Effective Time when a prospectus would be required to be delivered under the
Securities Act, other than from (i) such time as a notice has been given to
holders of Registrable Securities pursuant to Section 3(d)(viii)(F) or Section
3(c)(iii)(F) hereof until (ii) such time as the Issuers furnishes an amended or
supplemented prospectus pursuant to Section 3(e) or Section 3(c)(iv) hereof,
each such registration statement, and each prospectus (including any summary
prospectus) contained therein or furnished pursuant to Section 3(d) or Section
3(c) hereof, as then amended or supplemented, will conform in all material
respects to the requirements of the Securities Act and the Trust Indenture Act
and the rules and regulations of the Commission thereunder and will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances then existing; provided, however, that this
covenant shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Issuers by a
holder of Registrable Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus
referred to in Section 5(a) hereof, when they become or became effective or are
or were filed with the Commission, as the case may be, will conform or conformed
in all material respects to the requirements of the Securities Act or the
Exchange Act, as applicable, and none of such documents will contain or
contained an untrue statement of a material fact or will omit or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this covenant shall
not apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to the Issuers by a holder of Registrable
Securities expressly for use therein.
(c) The compliance by the Issuers with all of the provisions of this
Exchange and Registration Rights Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a material
breach of any of the terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement, lease, license, franchise
agreement, permit or other material agreement or instrument to which either of
the Issuers or any of their subsidiaries is a party or by which either of the
Issuers or any of their subsidiaries is bound or to which any of the property or
assets of the Issuers or
20
<PAGE> 21
any of their subsidiaries is subject, nor will such action result in any
violation of the provisions of the certificate of incorporation, charter, or the
by-laws (or other organizational document) of the Issuers or any statute or any
order, rule or regulation of any court or governmental agency or body, including
without limitation, the Federal Communications Act of 1934, as amended, the
Cable Communications Policy Act of 1984, the Cable Television Consumer
Protection and Competition Act of 1992 and the Telecommunications Reform Act of
1996 (collectively, the "Cable Acts") or any order, rule or regulation of the
Federal Communications Commission (the "FCC") having jurisdiction over the
Issuers or any of their subsidiaries or any of their properties, except for any
such violation which would not materially impair the Issuers' ability to comply
herewith; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required, including, without limitation, under the Cable Acts or any order, rule
or regulation of the FCC, for the consummation by the Issuers of the
transactions contemplated by this Exchange and Registration Rights Agreement,
except the registration under the Securities Act of the Notes, qualification of
the Indenture under the Trust Indenture Act and such consents, approvals,
authorizations, registrations or qualifications as may be required under State
Notes or blue sky laws in connection with the offering and distribution of the
Notes.
(d) This Exchange and Registration Rights Agreement has been duly
authorized, executed and delivered by the Issuers.
6. Indemnification.
(a) Indemnification by the Issuers and the Guarantor. The Issuers
and the Guarantor (i) will indemnify and hold harmless each of the holders of
Registrable Securities included in an Exchange Offer Registration Statement,
each of the Electing Holders of Registrable Securities included in a Shelf
Registration Statement and each person who participates as a placement or sales
agent or as an underwriter in any offering or sale of such Registrable
Securities against any losses, claims, damages or liabilities, joint or several,
to which such holder, agent or underwriter may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Exchange Offer Registration Statement or Shelf Registration Statement, as the
case may be, under which such Registrable Securities were registered under the
Securities Act, or any preliminary, final or summary prospectus contained
therein or furnished by the Issuers to any such holder, Electing Holder, agent
or underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and (ii) will reimburse such holder, such Electing Holder, such
agent and such underwriter for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such action or claim
as such expenses are incurred; provided, however, that none of the Issuers shall
be liable to any such persons in any such case to the extent that any
21
<PAGE> 22
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, or preliminary, final or summary prospectus, or
amendment or supplement thereto, in reliance upon and in conformity with written
information furnished to the Issuers by such persons expressly for use therein.
(b) Indemnification by the Holders and any Agents and Underwriters.
The Issuers may require, as a condition to including any Registrable Securities
in any registration statement filed pursuant to Section 2(b) hereof and to
entering into any underwriting agreement or similar agreement with respect
thereto, that the Issuers shall have received an undertaking reasonably
satisfactory to them from the Electing Holder of such Registrable Securities
included in a Shelf Registration Statement and from each underwriter or agent
named in any such underwriting agreement or similar agreement, severally and not
jointly, to (i) indemnify and hold harmless the Issuers, the Guarantor and all
other holders of Registrable Securities, against any losses, claims, damages or
liabilities to which the Issuers, the Guarantor or such other holders of
Registrable Securities may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in such registration statement, or
any preliminary, final or summary prospectus contained therein or furnished by
the Issuers to any such Electing Holder, agent or underwriter, or any amendment
or supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Issuers or the Guarantor by
such Electing Holder or underwriter expressly for use therein, and (ii)
reimburse the Issuers and the Guarantor for any legal or other expenses
reasonably incurred by the Issuers and the Guarantor in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that no such Electing Holder shall be required to
undertake liability to any person under this Section 6(b) for any amounts in
excess of the dollar amount of the proceeds to be received by such Electing
Holder from the sale of such Electing Holder's Registrable Securities pursuant
to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the commencement of
any action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party pursuant to the indemnification provisions of
or contemplated by this Section 6, notify such indemnifying party in writing of
the commencement of such action; but the omission so to notify the indemnifying
party shall not relieve it from any liability which it may have to any
indemnified party otherwise than under the indemnification provisions of or
contemplated by Section 6(a) or 6(b) hereof. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying party
of the commencement thereof, such indemni-
22
<PAGE> 23
fying party shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, such indemnifying party shall not be liable to such indemnified
party for any legal expenses of other counsel or any other expenses, in each
case subsequently incurred by such indemnified party, in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall, without the written consent of the indemnified party, effect the
settlement or compromise of, or consent to the entry of any judgment with
respect to, any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such action
or claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(d) Contribution. If for any reason the indemnification provisions
contemplated by Section 6(a) or Section 6(b) are unavailable to or insufficient
to hold harmless an indemnified party in respect of any losses, claims, damages
or liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or by such indemnified party, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 6(d) were determined by
pro rata allocation (even if the holders or any agents or underwriters or all of
them were treated as one entity for such purpose) or by any other method of
allocation which does not take account of the equitable considerations referred
to in this Section 6(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, or liabilities (or actions in respect
thereof) referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no holder shall be required to contribute any
amount in excess of the amount by which the dollar amount of the proceeds
received by such holder from the sale of any Registrable Securities (after
deducting any fees, discounts and commissions applicable thereto) exceeds
23
<PAGE> 24
the amount of any damages which such holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission, and no underwriter shall be required to contribute any amount in
excess of the amount by which the total price at which the Registrable
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The holders' and any underwriters' obligations in this
Section 6(d) to contribute shall be several in proportion to the principal
amount of Registrable Securities registered or underwritten, as the case may be,
by them and not joint.
(e) The obligations of the Issuers and the Guarantor under this
Section 6 shall be in addition to any liability which the Issuers and the
Guarantor may otherwise have and shall extend, upon the same terms and
conditions, to each officer, director and partner of each holder, agent and
underwriter and each person, if any, who controls any holder, agent or
underwriter within the meaning of the Securities Act; and the obligations of the
holders and any agents or underwriters contemplated by this Section 6 shall be
in addition to any liability which the respective holder, agent or underwriter
may otherwise have and shall extend, upon the same terms and conditions, to each
officer (including any officer who signed any registration statement), director,
employee, representative or agent of the Issuers and the Guarantor and to each
person, if any, who controls the Issuers or the Guarantor within the meaning of
the Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities
covered by the Shelf Registration are to be sold pursuant to an underwritten
offering, the managing underwriter or underwriters thereof shall be designated
by Electing Holders holding at least a majority in aggregate principal amount of
the Registrable Securities to be included in such offering, provided that such
designated managing underwriter or underwriters is or are reasonably acceptable
to the Issuers.
(b) Participation by Holders. Each holder of Registrable Securities
hereby agrees with each other such holder that no such holder may participate in
any underwritten offering hereunder unless such holder (i) agrees to sell such
holder's Registrable Securities on the basis provided in any underwriting
arrangements approved by the persons entitled hereunder to approve such
arrangements and (ii) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
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<PAGE> 25
8. Rule 144.
Each of the Issuers covenants to the holders of Registrable
Securities that to the extent it shall be required to do so under the Exchange
Act, it shall timely file the reports required to be filed by it under the
Exchange Act or the Securities Act (including the reports under Section 13 and
15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule 144 adopted
by the Commission under the Securities Act) and the rules and regulations
adopted by the Commission thereunder, and shall take such further action as any
holder of Registrable Securities may reasonably request, all to the extent
required from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitations of the
exemption provided by Rule 144 under the Securities Act, as such Rule may be
amended from time to time, or any similar or successor rule or regulation
hereafter adopted by the Commission. Upon the request of any holder of
Registrable Securities in connection with that holder's sale pursuant to Rule
144, the Issuers shall deliver to such holder a written statement as to whether
it has complied with such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Issuers represent, warrant,
covenant and agree that they have not granted, and shall not grant, registration
rights with respect to Registrable Securities or any other Notes which would be
inconsistent with the terms contained in this Exchange and Registration Rights
Agreement.
(b) Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if the Issuers fail to perform any of their
obligations hereunder and that the Purchasers and the holders from time to time
of the Registrable Securities may be irreparably harmed by any such failure, and
accordingly agree that the Purchasers and such holders, in addition to any other
remedy to which they may be entitled at law or in equity, shall be entitled to
compel specific performance of the obligations of the Issuers under this
Exchange and Registration Rights Agreement in accordance with the terms and
conditions of this Exchange and Registration Rights Agreement, in any court of
the United States or any State thereof having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and
other communications hereunder shall be in writing and shall be deemed to have
been duly given (i) when delivered by hand, if delivered personally or by
courier, (ii) when sent by facsimile (with written confirmation of receipt),
provided that a copy is mailed by registered or certified mail, return receipt
requested or (iii) three days after being deposited in the mail (registered or
certified mail, postage prepaid, return receipt requested) as follows: If to the
Issuers, c/o Charter Communications, Inc., 12444 Powerscourt Drive, Suite 100,
St. Louis, Missouri, 63131, Attention: Secretary, and if to a holder, to the
address of such holder set forth in the security register or other records of
the Issuers, or to such other address as the Issuers or any
25
<PAGE> 26
such holder may have furnished to the other in writing in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this
Exchange and Registration Rights Agreement shall be binding upon, shall inure to
the benefit of and shall be enforceable by the parties hereto and the holders
from time to time of the Registrable Securities and the respective successors
and assigns of the parties hereto and such holders. In the event that any
transferee of any holder of Registrable Securities shall acquire Registrable
Securities, in any manner, whether by gift, bequest, purchase, operation of law
or otherwise, such transferee shall, without any further writing or action of
any kind, be deemed a beneficiary hereof for all purposes and such Registrable
Securities shall be held subject to all of the terms of this Exchange and
Registration Rights Agreement, and by taking and holding such Registrable
Securities such transferee shall be entitled to receive the benefits of, and be
conclusively deemed to have agreed to be bound by all of the applicable terms
and provisions of this Exchange and Registration Rights Agreement. If the
Issuers shall so request, any such successor, assign or transferee shall agree
in writing to acquire and hold the Registrable Securities subject to all of the
applicable terms hereof.
(e) Survival. The respective indemnities, agreements,
representations, warranties and each other provision set forth in this Exchange
and Registration Rights Agreement or made pursuant hereto shall remain in full
force and effect regardless of any investigation (or statement as to the results
thereof) made by or on behalf of any holder of Registrable Securities, any
director, officer or partner of such holder, any agent or underwriter or any
director, officer or partner thereof, or any controlling person of any of the
foregoing, and shall survive delivery of and payment for the Registrable
Securities pursuant to the Purchase Agreement and the transfer and registration
of Registrable Securities by such holder and the consummation of an Exchange
Offer.
(f) Governing Law. This Exchange and Registration Rights Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without giving effect to any provisions relating to conflicts of law.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Exchange and Registration Rights Agreement are inserted for
convenience only, do not constitute a part of this Exchange and Registration
Rights Agreement and shall not affect in any way the meaning or interpretation
of this Exchange and Registration Rights Agreement.
(h) Entire Agreement; Amendments. This Exchange and Registration
Rights Agreement and the other writings referred to herein (including the
Indenture and the form of Notes) or delivered pursuant hereto which form a part
hereof contain the entire understanding of the parties with respect to its
subject matter. This Exchange and Registration Rights Agreement supersedes all
prior agreements and understandings between the parties
26
<PAGE> 27
with respect to its subject matter. This Exchange and Registration Rights
Agreement may be amended and the observance of any term of this Exchange and
Registration Rights Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively) only by a written instrument
duly executed by the Issuers and the holders of at least a majority in aggregate
principal amount of the Registrable Securities at the time outstanding. Each
holder of any Registrable Securities at the time or thereafter outstanding shall
be bound by any amendment or waiver effected pursuant to this Section 9(h),
whether or not any notice, writing or marking indicating such amendment or
waiver appears on such Registrable Securities or is delivered to such holder.
(i) Inspection. For so long as this Exchange and Registration Rights
Agreement shall be in effect, this Exchange and Registration Rights Agreement
and a complete list of the names and addresses of all the holders of Registrable
Securities shall be made available for inspection and copying, upon reasonable
prior notice, on any business day during normal business hours by any holder of
Registrable Securities for proper purposes only (which shall include any purpose
related to the rights of the holders of Registrable Securities under the Notes,
the Indenture and this Agreement) at the offices of the Issuers at the address
thereof set forth in Section 9(c) above and at the office of the Trustee under
the Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same instrument.
27
<PAGE> 28
If the foregoing is in accordance with your understanding, please
sign and return to us counterparts hereof, and upon the acceptance hereof by
you, on behalf of each of the Purchasers, this letter and such acceptance hereof
shall constitute a binding agreement between each of the Purchasers and the
Issuers. It is understood that your acceptance of this letter on behalf of each
of the Purchasers is pursuant to the authority set forth in a form of Agreement
among Purchasers, the form of which shall be submitted to the Issuers for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
CHARTER COMMUNICATIONS
HOLDINGS, LLC
By: /s/ Eloise Engman
---------------------------------------
Name: Eloise Engman
Title: Vice President
CHARTER COMMUNICATIONS HOLDINGS
CAPITAL CORPORATION
By: /s/ Eloise Engman
---------------------------------------
Name: Eloise Engman
Title: Vice President
MARCUS CABLE HOLDINGS, LLC
By: MARCUS CABLE PROPERTIES, L.L.C.,
as Manager
By: MARCUS CABLE PROPERTIES,
INC., as Manager
By: /s/ Marcy Lifton
---------------------------------------
Name: Marcy Lifton
Title: Senior Vice President and
Assistant Secretary
28
<PAGE> 29
Accepted as of the date hereof:
GOLDMAN, SACHS & CO.
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
BEAR, STEARNS & CO. INC.
NATIONSBANC MONTGOMERY SECURITIES LLC
SALOMON SMITH BARNEY INC.
CREDIT LYONNAIS SECURITIES (USA), INC.
FIRST UNION CAPITAL MARKETS CORP.
PRUDENTIAL SECURITIES INCORPORATED
TD SECURITIES (USA) INC.
CIBC OPPENHEIMER CORP.
NESBITT BURNS SECURITIES INC.
By: GOLDMAN, SACHS & CO.
By: /s/ Goldman, Sachs & Co.
--------------------------------------
Name:
Title:
29
<PAGE> 30
Exhibit A
CHARTER COMMUNICATIONS HOLDINGS LLC
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
MARCUS CABLE HOLDINGS, LLC
INSTRUCTION TO DTC PARTICIPANTS
(Date of Mailing)
URGENT - IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: [DATE]a
The Depository Trust Issuers ("DTC") has identified you as a DTC Participant
through which beneficial interests in the Charter Communications Holdings LLC
(the "Company") and Charter Communications Holdings Capital Corporation
("Charter Capital" and, together with the Company, the "Issuers") 9.92% Senior
Discount Notes due 2011 (the "Notes"), guaranteed by Marcus Cable Holdings, LLC
are held.
The Issuers are in the process of registering the Notes under the Securities Act
of 1933, as amended, for resale by the beneficial owners thereof. In order to
have their Notes included in the registration statement, beneficial owners must
complete and return the enclosed Notice of Registration Statement and Selling
Securityholder Questionnaire.
It is important that beneficial owners of the Notes receive a copy of the
enclosed materials as soon as possible as their rights to have the Notes
included in the registration statement depend upon their returning the Notice
and Questionnaire by [Deadline For Response]. Please forward a copy of the
enclosed documents to each beneficial owner that holds interests in the Notes
through you. If you require more copies of the enclosed materials or have any
questions pertaining to this matter, please contact the Issuers c/o Charter
Communications, Inc., 12444 Powerscourt Drive, Suite 100, St. Louis, Missouri,
63131, Attention: Secretary.
- --------
a Not less than 28 calendar days from date of mailing.
A-1
<PAGE> 31
CHARTER COMMUNICATIONS HOLDINGS LLC
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
MARCUS CABLE HOLDINGS, LLC
Notice of Registration Statement
and
Selling Securityholder Questionnaire
(Date)
Reference is hereby made to the Exchange and Registration Rights Agreement (the
"Exchange and Registration Rights Agreement") between Charter Communications
Holdings LLC and Charter Communications Holdings Capital Corporation (together,
the "Issuers") Marcus Cable Holdings, LLC (the "Guarantor") and the Purchasers
named therein. Pursuant to the Exchange and Registration Rights Agreement, the
Issuers have filed with the United States Securities and Exchange Commission
(the "Commission") a registration statement on Form [__] (the "Shelf
Registration Statement") for the registration and resale under Rule 415 of the
Securities Act of 1933, as amended (the "Securities Act"), of the Issuers' 9.92%
Senior Discount Notes due 2011 (the "Notes"), guaranteed by the Guarantor. A
copy of the Exchange and Registration Rights Agreement is attached hereto. All
capitalized terms not otherwise defined herein shall have the meanings ascribed
thereto in the Exchange and Registration Rights Agreement.
Each beneficial owner of Registrable Securities is entitled to have the
Registrable Securities beneficially owned by it included in the Shelf
Registration Statement. In order to have Registrable Securities included in the
Shelf Registration Statement, this Notice of Registration Statement and Selling
Securityholder Questionnaire ("Notice and Questionnaire") must be completed,
executed and delivered to the Issuers' counsel at the address set forth herein
for receipt ON OR BEFORE [Deadline for Response]. Beneficial owners of
Registrable Securities who do not complete, execute and return this Notice and
Questionnaire by such date (i) will not be named as selling securityholders in
the Shelf Registration Statement and (ii) may not use the Prospectus forming a
part thereof for resales of Registrable Securities.
Certain legal consequences arise from being named as a selling securityholder in
the Shelf Registration Statement and related prospectus. Accordingly, holders
and beneficial owners of Registrable Securities are advised to consult their own
securities law counsel regarding the
A-2
<PAGE> 32
consequences of being named or not being named as a selling securityholder in
the Shelf Registration Statement and related prospectus.
ELECTION
The undersigned holder (the "Selling Securityholder") of Registrable Securities
hereby elects to include in the Shelf Registration Statement the Registrable
Securities beneficially owned by it and listed below in Item (3). The
undersigned, by signing and returning this Notice and Questionnaire, agrees to
be bound with respect to such Registrable Securities by the terms and conditions
of this Notice and Questionnaire and the Exchange and Registration Rights
Agreement, including, without limitation, Section 6 of the Exchange and
Registration Rights Agreement, as if the undersigned Selling Securityholder were
an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf Registration
Statement, the Selling Securityholder will be required to deliver to the Issuers
and the Trustee the Notice of Transfer set forth in Exhibit B to the Exchange
and Registration Rights Agreement.
The Selling Securityholder hereby provides the following information to the
Issuers and represents and warrants that such information is accurate and
complete:
A-3
<PAGE> 33
QUESTIONNAIRE
(1)(a) Full Legal Name of Selling Securityholder:
(b) Full Legal Name of Registered Holder (if not the same as in (a)
above) of Registrable Securities Listed in Item (3) below:
(c) Full Legal Name of DTC Participant (if applicable and if not the
same as (b) above) Through Which Registrable Securities Listed in
Item (3) below are Held:
(2) Address for Notices to Selling Securityholder:
_______________________________
_______________________________
_______________________________
Telephone: _______________________________
Fax: _______________________________
Contact Person: _______________________________
(3) Beneficial Ownership of Notes:
Except as set forth below in this Item (3), the undersigned does not
beneficially own any Notes.
(a) Principal amount of Registrable Securities beneficially owned: _____
CUSIP No(s). of such Registrable Securities:
____________________________________________________________________
(b) Principal amount of Notes other than Registrable Securities
beneficially owned: ________________________________________________
CUSIP No(s). of such other Notes:
____________________________________________________________________
(c) Principal amount of Registrable Securities which the undersigned
wishes to be included in the Shelf Registration Statement: CUSIP
No(s). of such Registrable Securities to be included in the Shelf
Registration Statement:
A-4
<PAGE> 34
(4) Beneficial Ownership of Other Securities of the Issuers and the Guarantor:
Except as set forth below in this Item (4), the undersigned Selling
Securityholder is not the beneficial or registered owner of any other
securities of the Issuers or the Guarantor other than the Notes as
Guaranteed listed above in Item (3).
State any exceptions here:
(5) Relationships with the Issuers and the Guarantor:
Except as set forth below, neither the Selling Securityholder nor any of
its affiliates, officers, directors or principal equity holders (5% or
more) has held any position or office or has had any other material
relationship with the Issuers or the Guarantor (or their respective
predecessors or affiliates) during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder intends
to distribute the Registrable Securities listed above in Item (3) only as
follows (if at all): Such Registrable Securities may be sold from time to
time directly by the undersigned Selling Securityholder or, alternatively,
through underwriters, broker-dealers or agents. Such Registrable
Securities may be sold in one or more transactions at fixed prices, at
prevailing market prices at the time of sale, at varying prices determined
at the time of sale, or at negotiated prices. Such sales may be effected
in transactions (which may involve crosses or block transactions) (i) on
any national securities exchange or quotation service on which the
Registered Notes may be listed or quoted at the time of sale, (ii) in the
over-the-counter market, (iii) in transactions otherwise than on such
exchanges or services or in the over-the-counter market, or (iv) through
the writing of options. In connection with sales of the Registrable
Securities or otherwise, the Selling Securityholder may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales
of the Registrable Securities in the course of hedging the positions they
assume. The Selling Securityholder may also sell Registrable Securities
short and deliver Registrable Securities to close out such short
positions, or loan or pledge Registrable Securities to broker-dealers that
in turn may sell such Notes.
State any exceptions here:
By signing below, the Selling Securityholder acknowledges that it understands
its obligation to comply, and agrees that it will comply, with the provisions of
the Exchange Act and the rules and regulations thereunder, particularly
Regulation M.
A-5
<PAGE> 35
In the event that the Selling Securityholder transfers all or any portion of the
Registrable Securities listed in Item (3) above after the date on which such
information is provided to the Issuers, the Selling Securityholder agrees to
notify the transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the Exchange and
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the disclosure of the
information contained herein in its answers to Items (1) through (6) above and
the inclusion of such information in the Shelf Registration Statement and
related Prospectus. The Selling Securityholder understands that such information
will be relied upon by the Issuers in connection with the preparation of the
Shelf Registration Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under Section 3(d) of
the Exchange and Registration Rights Agreement to provide such information as
may be required by law for inclusion in the Shelf Registration Statement, the
Selling Securityholder agrees to promptly notify the Issuers of any inaccuracies
or changes in the information provided herein which may occur subsequent to the
date hereof at any time while the Shelf Registration Statement remains in
effect. All notices hereunder and pursuant to the Exchange and Registration
Rights Agreement shall be made in writing, by hand-delivery, first-class mail,
or air courier guaranteeing overnight delivery as follows:
(i) To the Issuers:
_________________________
_________________________
_________________________
_________________________
_________________________
(ii) With a copy to:
_________________________
_________________________
_________________________
_________________________
_________________________
A-6
<PAGE> 36
Once this Notice and Questionnaire is executed by the Selling Securityholder and
received by the Issuers' counsel, the terms of this Notice and Questionnaire,
and the representations and warranties contained herein, shall be binding on,
shall inure to the benefit of and shall be enforceable by the respective
successors, heirs, personal representatives, and assigns of the Issuers and the
Selling Securityholder (with respect to the Registrable Securities beneficially
owned by such Selling Securityholder and listed in Item (3) above. This
Agreement shall be governed in all respects by the laws of the State of New York
without giving effect to any provisions relating to conflicts of laws.
IN WITNESS WHEREOF, the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by its
duly authorized agent.
Dated: _________________________
____________________________________________________________________
Selling Securityholder
(Print/type full legal name of beneficial owner of Registrable
Securities)
By: ________________________________________________________________
Name:
Title:
A-7
<PAGE> 37
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE FOR RECEIPT ON
OR BEFORE [DEADLINE FOR RESPONSE] TO THE ISSUERS' COUNSEL AT:
_________________________
_________________________
_________________________
_________________________
_________________________
A-8
<PAGE> 38
Exhibit B
NOTICE OF TRANSFER PURSUANT TO REGISTRATION STATEMENT
[Name of Trustee]
Charter Communications Holdings LLC
Charter Communications Holdings Capital
Corporation
Marcus Cable Holdings, LLC
c/o [Name of Trustee]
[Address of Trustee]
Attention: Trust Officer
Re: Charter Communications Holdings LLC
and Charter Communications Holdings Capital Corporation
(together, the "Issuers") 9.92% Senior Discount Notes due 2011
guaranteed by Marcus Cable Holdings, LLC
Dear Sirs:
Please be advised that ______________ has transferred $__________ aggregate
principal amount of the above-referenced Notes pursuant to an effective
Registration Statement on Form [___] (File No. 333-_____) filed by the Issuers.
We hereby certify that the prospectus delivery requirements, if any, of the
Securities Act of 1933, as amended, have been satisfied and that the above-named
beneficial owner of the Notes is named as a "Selling Holder" in the prospectus
dated [date] or in supplements thereto, and that the aggregate principal amount
of the Notes transferred are the Notes listed in such prospectus opposite such
owner's name.
Dated:
Very truly yours,
_____________________________________
(Name)
By:__________________________________
(Authorized Signature)
B-1
<PAGE> 1
Exhibit 10.1
EXECUTION COPY
================================================================================
$4,100,000,000
CREDIT AGREEMENT
CHARTER COMMUNICATIONS OPERATING, LLC
and
MARCUS CABLE OPERATING COMPANY, LLC,
as Borrowers
CHARTER COMMUNICATIONS HOLDINGS LLC
and
MARCUS CABLE COMPANY, LLC,
as Guarantors
CHASE SECURITIES INC.,
as Lead Arranger
CHASE SECURITIES INC. and TD SECURITIES (USA) INC.,
as Joint Book Managers
CHASE SECURITIES INC., NATIONSBANC MONTGOMERY SECURITIES LLC and
TD SECURITIES (USA) INC.,
as Arrangers
NATIONSBANK, N.A. and THE CHASE MANHATTAN BANK,
as Administrative Agents
CHASE SECURITIES INC., NATIONSBANC MONTGOMERY SECURITIES LLC and
TD SECURITIES (USA) INC., as Syndication Agents
TORONTO DOMINION (TEXAS), INC., FLEET BANK, N.A. and
CREDIT LYONNAIS NEW YORK BRANCH, as Documentation Agents
Dated as of March 18, 1999
================================================================================
<PAGE> 2
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS........................................................1
1.1 Defined Terms.....................................................1
1.2 Other Definitional Provisions; Pro Forma Calculations............21
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS...................................22
2.1 Commitments; Increases in the Tranche A Term Facility,
the Tranche B Term Facility and the Revolving
Facility; Incremental Term Loans...............................22
2.2 Procedure for Borrowing..........................................24
2.3 Repayment of Loans...............................................24
2.4 Swingline Commitment.............................................26
2.5 Procedure for Swingline Borrowing; Refunding of Swingline
Loans..........................................................26
2.6 Commitment Fees, etc. ...........................................27
2.7 Termination or Reduction of Revolving Commitments................28
2.8 Optional Prepayments.............................................28
2.9 Mandatory Prepayments............................................28
2.10 Conversion and Continuation Options.............................29
2.11 Limitations on Eurodollar Tranches..............................29
2.12 Interest Rates and Payment Dates................................29
2.13 Computation of Interest and Fees................................30
2.14 Inability to Determine Interest Rate............................30
2.15 Pro Rata Treatment and Payments.................................30
2.16 Requirements of Law.............................................32
2.17 Taxes...........................................................33
2.18 Indemnity.......................................................35
2.19 Change of Lending Office........................................35
2.20 Replacement of Lenders..........................................35
SECTION 3. LETTERS OF CREDIT.................................................36
3.1 L/C Commitment...................................................36
3.2 Procedure for Issuance of Letter of Credit.......................36
3.3 Fees and Other Charges...........................................36
3.4 L/C Participations...............................................36
3.5 Reimbursement Obligation of the Borrower.........................37
3.6 Obligations Absolute.............................................37
3.7 Letter of Credit Payments........................................38
3.8 Applications.....................................................38
SECTION 4. REPRESENTATIONS AND WARRANTIES....................................38
4.1 Financial Condition..............................................38
4.2 No Change........................................................39
4.3 Existence; Compliance with Law...................................39
4.4 Power; Authorization; Enforceable Obligations....................39
4.5 No Legal Bar.....................................................39
4.6 Litigation.......................................................40
4.7 No Default.......................................................40
<PAGE> 3
Page
----
4.8 Ownership of Property; Liens.....................................40
4.9 Intellectual Property............................................40
4.10 Taxes...........................................................40
4.11 Federal Regulations.............................................40
4.12 Labor Matters...................................................40
4.13 ERISA...........................................................41
4.14 Investment Company Act; Other Regulations.......................41
4.15 Subsidiaries....................................................41
4.16 Use of Proceeds.................................................41
4.17 Environmental Matters...........................................41
4.18 Certain Cable Television Matters................................42
4.19 Accuracy of Information, etc....................................43
4.20 Security Interests..............................................43
4.21 Solvency........................................................43
4.22 Certain Tax Matters.............................................43
4.23 Year 2000 Matters...............................................43
SECTION 5. CONDITIONS PRECEDENT..............................................44
5.1 Conditions to Initial Extension of Credit........................44
5.2 Conditions to Each Extension of Credit...........................45
SECTION 6. AFFIRMATIVE COVENANTS.............................................46
6.1 Financial Statements.............................................46
6.2 Certificates; Other Information..................................46
6.3 Payment of Obligations...........................................47
6.4 Maintenance of Existence; Compliance. ..........................47
6.5 Maintenance of Property; Insurance...............................48
6.6 Inspection of Property; Books and Records; Discussions...........48
6.7 Notices..........................................................48
6.8 Environmental Laws...............................................49
6.9 Interest Rate Protection.........................................49
6.10 Additional Collateral...........................................49
6.11 Organizational Separateness.....................................49
SECTION 7. NEGATIVE COVENANTS................................................50
7.1 Financial Condition Covenants....................................50
7.2 Indebtedness.....................................................51
7.3 Liens............................................................52
7.4 Fundamental Changes..............................................53
7.5 Disposition of Property..........................................54
7.6 Restricted Payments..............................................55
7.7 Investments......................................................56
7.8 Certain Payments and Modifications Relating to
Indebtedness and Management Fees...............................57
7.9 Transactions with Affiliates.....................................57
7.10 Sales and Leasebacks............................................58
7.11 Changes in Fiscal Periods.......................................58
7.12 Negative Pledge Clauses.........................................58
7.13 Clauses Restricting Subsidiary Distributions....................58
- ii -
<PAGE> 4
Page
----
7.14 Lines of Business; Holding Company Status.......................58
7.15 Certain Intercompany and Tax Matters............................59
SECTION 8. EVENTS OF DEFAULT.................................................59
SECTION 9. THE AGENTS........................................................62
9.1 Appointment......................................................62
9.2 Delegation of Duties.............................................63
9.3 Exculpatory Provisions...........................................63
9.4 Reliance by Funding Agent........................................63
9.5 Notice of Default................................................63
9.6 Non-Reliance on Agents and Other Lenders.........................64
9.7 Indemnification..................................................64
9.8 Agent in Its Individual Capacity.................................64
9.9 Successor Funding Agent..........................................65
9.10 Other Agents....................................................65
SECTION 10. MISCELLANEOUS....................................................65
10.1 Amendments and Waivers..........................................65
10.2 Notices.........................................................66
10.3 No Waiver; Cumulative Remedies..................................67
10.4 Survival of Representations and Warranties......................67
10.5 Payment of Expenses and Taxes...................................67
10.6 Successors and Assigns; Participations and Assignments..........68
10.7 Adjustments; Set-off............................................70
10.8 Counterparts....................................................70
10.9 Severability....................................................71
10.10 Integration....................................................71
10.11 GOVERNING LAW..................................................71
10.12 Submission To Jurisdiction; Waivers............................71
10.13 Acknowledgments................................................71
10.14 Releases of Guarantees and Liens...............................72
10.15 Confidentiality................................................72
10.16 WAIVERS OF JURY TRIAL..........................................72
- iii -
<PAGE> 5
ANNEX:
A Pricing Grid
SCHEDULES:
1.1 Commitments on Stage One Closing Date
4.1 Financial Statements
4.15 Subsidiaries
4.20 UCC Filing Jurisdictions
7.2(d) Existing Bond Indebtedness
7.5(h) InterMedia Exchange
EXHIBITS:
A Form of Guarantee and Collateral Agreement
B Form of Compliance Certificate
C Form of Closing Certificate
D-1 Form of Addendum
D-2 Form of New Lender Supplement
D-3 Form of Increased Facility Activation Notice
E Form of Assignment and Acceptance
F-1 Form of Legal Opinion of Paul, Hastings, Janofsky & Walker LLP
F-2 Form of Legal Opinion of Curtis S. Shaw, Esq.
G Form of Prepayment Option Notice
H Form of Exemption Certificate
I Form of Specified Subordinated Note
- iv -
<PAGE> 6
CREDIT AGREEMENT, dated as of March 18, 1999, among CHARTER
COMMUNICATIONS HOLDINGS LLC, a Delaware limited liability company ("Charter
Holdings"), MARCUS CABLE COMPANY, LLC, a Delaware limited liability company
("Marcus Holdings"), CHARTER COMMUNICATIONS OPERATING, LLC, a Delaware limited
liability company ("Charter"), MARCUS CABLE OPERATING COMPANY, LLC, a Delaware
limited liability company ("Marcus"), the several banks and other financial
institutions or entities from time to time parties to this Agreement (the
"Lenders"), TORONTO DOMINION (TEXAS), INC., FLEET BANK, N.A. and CREDIT LYONNAIS
NEW YORK BRANCH, as documentation agents (in such capacity, the "Documentation
Agents"), CHASE SECURITIES INC., NATIONSBANC MONTGOMERY SECURITIES LLC and TD
SECURITIES (USA) INC., as syndication agents (in such capacity, the "Syndication
Agents"), and NATIONSBANK, N.A. and THE CHASE MANHATTAN BANK, as Administrative
Agents (in such capacity, the "Administrative Agents").
The parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms listed in
this Section 1.1 shall have the respective meanings set forth in this Section
1.1.
"ABR": for any day, a rate per annum (rounded upwards, if necessary,
to the next 1/100th of 1%) equal to the greater of (a) the Prime Rate in effect
on such day and (b) the Federal Funds Effective Rate in effect on such day plus
1/2 of 1%. Any change in the ABR due to a change in the Prime Rate or the
Federal Funds Effective Rate shall be effective as of the opening of business on
the effective day of such change in the Prime Rate or the Federal Funds
Effective Rate, respectively.
"ABR Loans": Loans the rate of interest applicable to which is based
upon the ABR.
"Addendum": an instrument, substantially in the form of Exhibit D-1,
by which a Lender becomes a party to this Agreement as of the Stage One Closing
Date.
"Adjustment Date": as defined in the Pricing Grid.
"Administrative Agents": as defined in the preamble hereto.
"Affiliate": as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person. For purposes of this definition, "control" of a Person means the
power, directly or indirectly, either to (a) vote 10% or more of the securities
having ordinary voting power for the election of directors (or persons
performing similar functions) of such Person or (b) direct or cause the
direction of the management and policies of such Person, whether by contract or
otherwise.
"Agents": the collective reference to the Syndication Agents, the
Documentation Agents, the Administrative Agents and the Funding Agent.
"Aggregate Exposure": with respect to any Lender at any time, an
amount equal to the sum of (a) the aggregate then unpaid principal amount of
such Lender's Term Loans, (b) the amount of such Lender's unutilized Tranche A
Term Commitment then in effect and (c) the amount of such Lender's Revolving
Commitment then in effect or, if the Revolving Commitments have been terminated,
the amount of such Lender's Revolving Extensions of Credit then outstanding.
<PAGE> 7
2
"Aggregate Exposure Percentage": with respect to any Lender at any
time, the ratio (expressed as a percentage) of such Lender's Aggregate Exposure
at such time to the Aggregate Exposure of all Lenders at such time.
"Agreement": this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Annualized Asset Cash Flow Amount": with respect to any Disposition
of assets, an amount equal to the portion of Consolidated Operating Cash Flow
for the most recent Asset Disposition Test Period ending prior to the date of
such Disposition which was contributed by such assets multiplied by four.
"Annualized Operating Cash Flow": for any fiscal quarter, an amount
equal to Consolidated Operating Cash Flow for such period multiplied by four.
"Annualized Pro Forma Operating Cash Flow": an amount, determined on
any Disposition Date or Exchange Date in connection with any proposed
Disposition or Exchange pursuant to Section 7.5(e) or (f), equal to Consolidated
Operating Cash Flow for the most recent Asset Disposition Test Period multiplied
by four, calculated in the manner contemplated by Section 1.2(e) but excluding
the effect of such Disposition or Exchange.
"Applicable Margin": (a) with respect to Tranche A Term Loans,
Tranche B Term Loans, Revolving Loans and Swingline Loans, the per annum rates
determined in accordance with the Pricing Grid and (b) with respect to
Incremental Term Loans, such per annum rates as shall be agreed to by the
Borrower and the applicable Incremental Term Lenders as shown in the applicable
Increased Facility Activation Notice.
"Application": an application, in such form as the relevant Issuing
Lender may specify from time to time, requesting such Issuing Lender to open a
Letter of Credit.
"Approved Fund": with respect to any Lender that is a fund that
invests in commercial loans, any other fund that invests in commercial loans and
is managed or advised by the same investment advisor as such Lender or by an
Affiliate of such investment advisor.
"Asset Disposition Test Period": as of any date of determination,
the most recent fiscal quarter as to which financial statements have been
delivered pursuant to Section 6.1.
"Asset Sale": any Disposition of property or series of related
Dispositions of property (excluding (a) Exchanges pursuant to which no cash
consideration is received by the Borrower or any of its Subsidiaries and (b) any
such Disposition permitted by clause (a), (b), (c) or (d) of Section 7.5) that
yields gross cash proceeds to the Borrower or any of its Subsidiaries in excess
of $1,000,000.
"Assignee": as defined in Section 10.6(c).
"Assignment and Acceptance": an Assignment and Acceptance,
substantially in the form of Exhibit E.
"Assignor": as defined in Section 10.6(c).
"Attributable Debt": in respect of a sale and leaseback transaction
entered into by Holdings, the Borrower or any of its Subsidiaries, at the time
of determination, the present value of the
<PAGE> 8
3
obligation of the lessee for net rental payments during the remaining term of
the lease included in such sale and leaseback transaction including any period
for which such lease has been extended or may, at the sole option of the lessor,
be extended. Such present value shall be calculated using a discount rate equal
to the rate of interest implicit in such transaction, determined in accordance
with GAAP.
"Authorizations": all filings, recordings and registrations with,
and all validations or exemptions, approvals, orders, authorizations, consents,
Licenses, certificates and permits from, the FCC, applicable public utilities
and other Governmental Authorities, including, without limitation, CATV
Franchises, FCC Licenses and Pole Agreements.
"Available Revolving Commitment": as to any Revolving Lender at any
time, an amount equal to the excess, if any, of (a) such Lender's Revolving
Commitment then in effect over (b) such Lender's Revolving Extensions of Credit
then outstanding; provided, that in calculating any Lender's Revolving
Extensions of Credit for the purpose of determining such Lender's Available
Revolving Commitment pursuant to Section 2.6(a), the aggregate principal amount
of Swingline Loans then outstanding shall be deemed to be zero.
"Benefitted Lender": as defined in Section 10.7(a).
"Board": the Board of Governors of the Federal Reserve System of the
United States (or any successor).
"Borrower": prior to the Marcus Combination, Charter and Marcus,
both collectively and individually, and after the Marcus Combination, Charter.
Without limiting the generality of the foregoing, prior to the Marcus
Combination, each of Charter and Marcus shall be jointly and severally liable to
repay all Loans borrowed hereunder and to pay all interest and other obligations
incurred or owing by "the Borrower" pursuant to this Agreement.
"Borrowing Date": any Business Day specified by the Borrower as a
date on which the Borrower requests the relevant Lenders to make Loans
hereunder.
"Budget": as defined in Section 6.2(c).
"Business": as defined in Section 4.17(b).
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City or Dallas, Texas are authorized or
required by law to close, provided, that with respect to notices and
determinations in connection with, and payments of principal and interest on,
Eurodollar Loans, such day is also a day for trading by and between banks in
Dollar deposits in the London, England interbank eurodollar market.
"Capital Lease Obligations": as to any Person, the obligations of
such Person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such Person under GAAP
and, for the purposes of this Agreement, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"Cash Equivalents": (a) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States government or issued by any
agency thereof and backed by the full faith and credit of the United States, in
each case maturing within one year from the date of acquisition; (b)
<PAGE> 9
4
certificates of deposit, time deposits, eurodollar time deposits or overnight
bank deposits having maturities of six months or less from the date of
acquisition issued by any Lender or by any commercial bank organized under the
laws of the United States or any state thereof having combined capital and
surplus of not less than $500,000,000; (c) commercial paper of an issuer rated
at the time of acquisition at least A-1 by Standard & Poor's Ratings Services
("S&P") or P-1 by Moody's Investors Service, Inc. ("Moody's"), or carrying an
equivalent rating by a nationally recognized rating agency, if both of the two
named rating agencies cease publishing ratings of commercial paper issuers
generally, and maturing within six months from the date of acquisition; (d)
repurchase obligations of any Lender or of any commercial bank satisfying the
requirements of clause (b) of this definition, having a term of not more than 30
days, with respect to securities issued or fully guaranteed or insured by the
United States government; (e) securities with maturities of one year or less
from the date of acquisition issued or fully guaranteed by any state,
commonwealth or territory of the United States, by any political subdivision or
taxing authority of any such state, commonwealth or territory or by any foreign
government, the securities of which state, commonwealth, territory, political
subdivision, taxing authority or foreign government (as the case may be) are
rated at the time of acquisition at least A by S&P or A by Moody's; (f)
securities with maturities of six months or less from the date of acquisition
backed by standby letters of credit issued by any Lender or any commercial bank
satisfying the requirements of clause (b) of this definition; or (g) shares of
money market mutual or similar funds which invest exclusively in assets
satisfying the requirements of clauses (a) through (f) of this definition.
"CATV Franchise": collectively, with respect to the Borrower and its
Subsidiaries, (a) any franchise, license, permit, wire agreement or easement
granted by any political jurisdiction or unit or other local, state or federal
franchising authority (other than licenses, permits and easements not material
to the operations of a CATV System) pursuant to which such Person has the right
or license to operate a CATV System and (b) any law, regulation, ordinance,
agreement or other instrument or document 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.
"CATV System": any cable distribution system owned or acquired by
the Borrower or any of its Subsidiaries which receives audio, video, digital,
other broadcast signals or information or telecommunications by cable, optical,
antennae, microwave or satellite transmission and which amplifies and transmits
such signals to customers of the Borrower or any of its Subsidiaries.
"Charter": as defined in the preamble hereto.
"Charter Group": the collective reference to Charter Communications,
Inc., the Borrower and its Subsidiaries, together with any member of the Paul
Allen Group or any Affiliate of any such member that, in each case, directly or
indirectly owns more than 50% of the Equity Interests (determined on the basis
of economic interests) in the Borrower or any of its Subsidiaries.
Notwithstanding the foregoing, no individual and no entity organized for estate
planning purposes shall be deemed to be a member of the Charter Group.
"Charter Holdings": as defined in the preamble hereto.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all property of the Loan Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by the
Guarantee and Collateral Agreement.
"Commitment": as to any Lender, the sum of the Tranche A Term
Commitment, the Tranche B Term Commitment and the Revolving Commitment of such
Lender.
<PAGE> 10
5
"Commitment Fee Rate": the per annum rate determined in accordance
with the Pricing Grid.
"Commonly Controlled Entity": an entity, whether or not
incorporated, that is under common control with the Borrower within the meaning
of Section 4001 of ERISA or is part of a group that includes the Borrower and
that is treated as a single employer under Section 414 of the Code.
"Compliance Certificate": a certificate duly executed by a
Responsible Officer substantially in the form of Exhibit B.
"Confidential Information Memorandum": the collective reference to
(a) the Confidential Information Memorandum dated March 1999 and furnished to
certain of the Lenders in connection with the syndication of certain of the
Facilities prior to the Stage One Closing Date and (b) any other information
memorandum authorized by the Borrower to be distributed to one or more Lenders
or prospective Lenders in connection with any other syndication of any of the
Facilities (including in connection with any increase in the amount thereof).
"Consideration": with respect to any Investment or Disposition, (a)
any cash or other property (valued at fair market value in the case of such
other property) paid or transferred in connection therewith, (b) the principal
amount of any Indebtedness assumed in connection therewith and (c) any letters
of credit, surety arrangements or security deposits posted in connection
therewith.
"Consolidated Debt Service Coverage Ratio": as of the last day of
any period, the ratio of (a) Annualized Operating Cash Flow determined in
respect of the fiscal quarter ending on such day to (b) the sum of (i)
Consolidated Interest Expense for the period of four consecutive fiscal quarters
ending on such day and (ii) scheduled principal payments on Indebtedness of the
Borrower or any of its Subsidiaries for the period of four consecutive fiscal
quarters commencing immediately after such day (or, in the case of the Revolving
Facility, the excess, if any, of the Total Revolving Extensions of Credit
outstanding on such day over the amount of the Total Revolving Commitments
scheduled to be in effect at the end of such period of four consecutive fiscal
quarters).
"Consolidated Interest Coverage Ratio": as of the last day of any
period, the ratio of (a) Consolidated Operating Cash Flow for the period of four
consecutive fiscal quarters ending on such day to (b) Consolidated Interest
Expense for the period of four consecutive fiscal quarters ending on such day.
"Consolidated Interest Expense": for any period, the sum of (a)
total cash interest expense (including that attributable to Capital Lease
Obligations) of the Borrower and its Subsidiaries for such period with respect
to all outstanding Indebtedness of the Borrower and its Subsidiaries (including
all commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing and net costs under Hedge
Agreements in respect of interest rates to the extent such net costs are
allocable to such period in accordance with GAAP) and (b) all Restricted
Payments made by the Borrower during such period in order to enable any of its
Affiliates to pay cash interest expense in respect of Indebtedness of such
Affiliate.
"Consolidated Leverage Ratio": as of the last day of any period, the
ratio of (a) Consolidated Total Debt on such day to (b) Annualized Operating
Cash Flow determined in respect of the fiscal quarter ending on such day.
"Consolidated Net Income": for any period, the consolidated net
income (or loss) of the Borrower and its Subsidiaries, determined on a
consolidated basis in accordance with GAAP; provided
<PAGE> 11
6
that, GAAP to the contrary notwithstanding, there shall be excluded (a) the
income (or deficit) of any Person accrued prior to the date it becomes a
Subsidiary of the Borrower or is merged into or consolidated with the Borrower
or any of its Subsidiaries, (b) the income (or deficit) of any Person (other
than a Subsidiary of the Borrower) in which the Borrower or any of its
Subsidiaries has an ownership interest, except to the extent that any such
income is actually received by the Borrower or such Subsidiary in the form of
dividends or similar distributions, (c) the undistributed earnings of any
Subsidiary of the Borrower (including any Excluded Acquired Subsidiary) to the
extent that the declaration or payment of dividends or similar distributions by
such Subsidiary is not at the time permitted by the terms of any Contractual
Obligation (other than under any Loan Document) or Requirement of Law applicable
to such Subsidiary and (d) whether or not distributed, the income of any
Non-Recourse Subsidiary.
"Consolidated Operating Cash Flow": for any period with respect to
the Borrower and its Subsidiaries, Consolidated Net Income for such period plus,
without duplication and to the extent reflected as a charge in the statement of
Consolidated Net Income for such period, the sum of (i) total income tax
expense, (ii) interest expense, amortization or writeoff of debt discount and
debt issuance costs and commissions, discounts and other fees and charges
associated with Indebtedness, (iii) depreciation and amortization expense, (iv)
management fees expensed during such period, (v) any extraordinary or
non-recurring non-cash expenses or non-cash losses, provided that in the event
that the Borrower or any Subsidiary makes any cash payment in respect of any
such extraordinary or non-recurring non-cash expense, such cash payment shall be
deducted from Consolidated Operating Cash Flow in the period in which such cash
payment is made, (vi) losses on Dispositions of assets outside of the ordinary
course of business, and (vii) other noncash items reducing such Consolidated Net
Income and minus, without duplication and to the extent included in the
statement of Consolidated Net Income for such period, the sum of (i) any
extraordinary or non-recurring non-cash income or non-cash gains, (ii) gains on
Dispositions of assets outside of the ordinary course of business and (iii)
other noncash items increasing such Consolidated Net Income, all as determined
on a consolidated basis in accordance with GAAP.
"Consolidated Total Debt": at any date, the aggregate principal
amount of all Indebtedness (other than, in the case of contingent obligations of
the type described in clause (f) of the definition of "Indebtedness", any such
obligations not constituting L/C Obligations) of the Borrower and its
Subsidiaries at such date, determined on a consolidated basis in accordance with
GAAP.
"Contractual Obligation": as to any Person, any provision of any
debt or equity security issued by such Person or of any agreement, instrument or
other undertaking to which such Person is a party or by which it or any of its
property is bound.
"Default": any of the events specified in Section 8, whether or not
any requirement for the giving of notice, the lapse of time, or both, has been
satisfied.
"Disposition": with respect to any property, any sale, lease (other
than leases in the ordinary course of business, including leases of excess
office space and fiber leases), sale and leaseback, assignment, conveyance,
transfer or other disposition thereof, including pursuant to an exchange for
other property. The terms "Dispose" and "Disposed of" shall have correlative
meanings.
"Disposition Date": as defined in Section 7.5(e).
"Documentation Agents": as defined in the preamble hereto.
"Dollars" and "$": dollars in lawful currency of the United States.
<PAGE> 12
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"Domestic Subsidiary": any Subsidiary of the Borrower organized
under the laws of any jurisdiction within the United States.
"Environmental Laws": any and all foreign, federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees, requirements of any Governmental Authority or other Requirements of Law
(including common law) regulating, relating to or imposing liability or
standards of conduct concerning protection of human health or the environment,
as now or may at any time hereafter be in effect.
"Equity Interests": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all classes of membership interests in a limited liability company, any and
all classes of partnership interests in a partnership and any and all other
equivalent ownership interests in a Person, and any and all warrants, rights or
options to purchase any of the foregoing.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the maximum rates
(expressed as a decimal fraction) of reserve requirements in effect on such day
(including basic, supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum determined
on the basis of the rate for deposits in Dollars for a period equal to such
Interest Period commencing on the first day of such Interest Period appearing on
Page 3750 of the Dow Jones Markets screen as of 11:00 A.M., London time, two
Business Days prior to the beginning of such Interest Period. In the event that
such rate does not appear on Page 3750 of the Dow Jones Markets screen (or
otherwise on such screen), the "Eurodollar Base Rate" shall be determined by
reference to such other comparable publicly available service for displaying
eurodollar rates as may be selected by the Funding Agent or, in the absence of
such availability, by reference to the rate at which the Funding Agent is
offered Dollar deposits at or about 10:00 A.M., Dallas time, two Business Days
prior to the beginning of such Interest Period in the interbank eurodollar
market where its eurodollar and foreign currency and exchange operations are
then being conducted for delivery on the first day of such Interest Period for
the number of days comprised therein.
"Eurodollar Loans": Loans for which the applicable rate of interest
is based upon the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward to the nearest 1/100th
of 1%):
Eurodollar Base Rate
----------------------------------------
1.00 - Eurocurrency Reserve Requirements
<PAGE> 13
8
"Eurodollar Tranche": the collective reference to Eurodollar Loans
under a particular Facility the then current Interest Periods with respect to
all of which begin on the same date and end on the same later date (whether or
not such Loans shall originally have been made on the same day).
"Event of Default": any of the events specified in Section 8,
provided that any requirement for the giving of notice, the lapse of time, or
both, has been satisfied.
"Exchange": any exchange of operating assets for other operating
assets in a Permitted Line of Business and, subject to the last sentence of this
definition, of comparable value and use to those assets being exchanged,
including exchanges involving the transfer or acquisition (or both transfer and
acquisition) of Equity Interests of a Person so long as 100% of the Equity
Interests of such Person are transferred or acquired, as the case may be. It is
understood that exchanges of the kind described above as to which a portion of
the consideration paid or received is in the form of cash shall nevertheless
constitute "Exchanges" for the purposes of this Agreement.
"Exchange Date": as defined in Section 7.5(f).
"Excluded Acquired Subsidiary": any Subsidiary described in
paragraph (g) or (h) of Section 7.2 to the extent that the documentation
governing the Indebtedness referred to in said paragraph prohibits such
Subsidiary from becoming a Subsidiary Guarantor, but only so long as such
Indebtedness remains outstanding.
"Facility": each of (a) the Tranche A Term Commitments and the
Tranche A Term Loans made thereunder (the "Tranche A Term Facility"), (b) the
Tranche B Term Commitments and the Tranche B Term Loans made thereunder (the
"Tranche B Term Facility"), (c) the Incremental Term Loans (the "Incremental
Term Facility") and (d) the Revolving Commitments and the extensions of credit
made thereunder (the "Revolving Facility").
"FCC": the Federal Communications Commission and any successor
thereto.
"FCC License": any community antenna relay service, broadcast
auxiliary license, earth station registration, business radio, microwave or
special safety radio service license issued by the FCC pursuant to the
Communications Act of 1934, as amended.
"Federal Funds Effective Rate": for any day, the weighted average of
the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day of such transactions received by the Funding Agent from
three federal funds brokers of recognized standing selected by it.
"Flow-Through Entity": any Person that is not treated as a separate
tax paying entity for United States federal income tax purposes.
"Foreign Subsidiary": any Subsidiary of the Borrower that is not a
Domestic Subsidiary.
"Funding Agent": NationsBank, N.A., together with any of its
successors.
"Funding Office": the office of the Funding Agent specified in
Section 10.2 or such other office as may be specified from time to time by the
Funding Agent as its funding office by written notice to the Borrower and the
Lenders.
<PAGE> 14
9
"GAAP": generally accepted accounting principles in the United
States as in effect from time to time, except that for purposes of Section 7.1,
GAAP shall be determined on the basis of such principles in effect on the date
hereof and consistent with those used in the preparation of the most recent
audited financial statements delivered pursuant to Section 4.1(b). In the event
that any "Accounting Change" (as defined below) shall occur and such change
results in a change in the method of calculation of financial covenants,
standards or terms in this Agreement, then the Borrower and the Administrative
Agents agree to enter into negotiations in order to amend such provisions of
this Agreement so as to equitably reflect such Accounting Changes with the
desired result that the criteria for evaluating the Borrower's financial
condition shall be the same after such Accounting Changes as if such Accounting
Changes had not been made. Until such time as such an amendment shall have been
executed and delivered by the Borrower, the Administrative Agents and the
Required Lenders, all financial covenants, standards and terms in this Agreement
shall continue to be calculated or construed as if such Accounting Changes had
not occurred. "Accounting Changes" refers to changes in accounting principles
required by the promulgation of any rule, regulation, pronouncement or opinion
by the Financial Accounting Standards Board of the American Institute of
Certified Public Accountants or, if applicable, the SEC.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization (including the National Association of Insurance Commissioners).
"Guarantee and Collateral Agreement": the Guarantee and Collateral
Agreement to be executed and delivered by Holdings, the Borrower and each
Subsidiary Guarantor, substantially in the form of Exhibit A, as the same may be
amended, supplemented or otherwise modified from time to time.
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b) another Person
(including any bank under any letter of credit) to induce the creation of which
the guaranteeing person has issued a reimbursement, counterindemnity or similar
obligation, in either case guaranteeing or in effect guaranteeing any
Indebtedness, leases, dividends or other obligations (the "primary obligations")
of any other third Person (the "primary obligor") in any manner, whether
directly or indirectly, including any obligation of the guaranteeing person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (1) for the purchase or payment of any such primary obligation or
(2) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term "Guarantee Obligation" shall not
include endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Guarantee Obligation of any guaranteeing
person shall be deemed to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Guarantors": the collective reference to Holdings and the
Subsidiary Guarantors.
<PAGE> 15
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"Hedge Agreements": all interest rate swaps, caps or collar
agreements or similar arrangements dealing with interest rates or currency
exchange rates or the exchange of nominal interest obligations, either generally
or under specific contingencies.
"Holdings": prior to the Marcus Combination, Charter Holdings and
Marcus Holdings, both collectively and individually, and after the Marcus
Combination, Charter Holdings.
"Holdings Debt": the collective reference to the Senior Notes and
any other Indebtedness of Holdings.
"Increased Facility Activation Date": any Business Day on which any
Lender shall execute and deliver to the Administrative Agents an Increased
Facility Activation Notice pursuant to Section 2.1(c).
"Increased Facility Activation Notice": a notice substantially in
the form of Exhibit D-3.
"Increased Facility Closing Date": any Business Day designated as
such in an Increased Facility Activation Notice.
"Incremental Term Facility": as defined in the definition of
"Facility".
"Incremental Term Lenders": (a) on any Increased Facility Activation
Date relating to Incremental Term Loans, the Lenders signatory to the relevant
Increased Facility Activation Notice and (b) thereafter, each Lender that is a
holder of an Incremental Term Loan.
"Incremental Term Loans": as defined in Section 2.1(a).
"Incremental Term Maturity Date": with respect to the Incremental
Term Loans to be made pursuant to any Increased Facility Activation Notice, the
maturity date specified in such Increased Facility Activation Notice, which date
shall be a date at least six months after the final maturity of the Tranche B
Term Loans.
"Indebtedness": of any Person at any date, without duplication, (a)
all indebtedness of such Person for borrowed money, (b) all obligations of such
Person for the deferred purchase price of property or services (other than
current trade payables incurred in the ordinary course of such Person's
business), (c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments, (d) all indebtedness created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are limited to
repossession or sale of such property), (e) all Capital Lease Obligations of
such Person, (f) all obligations of such Person, contingent or otherwise, as an
account party under acceptances, letters of credit, surety bonds or similar
arrangements, (g) the liquidation value of all redeemable preferred Equity
Interests of such Person, (h) all Guarantee Obligations of such Person in
respect of obligations of the kind referred to in clauses (a) through (g) above,
(i) all obligations of the kind referred to in clauses (a) through (h) above
secured by (or for which the holder of such obligation has an existing right,
contingent or otherwise, to be secured by) any Lien on property (including
accounts and contract rights) owned by such Person, whether or not such Person
has assumed or become liable for the payment of such obligation, and (j) for the
purposes of Section 8(e) only, all obligations of such Person in respect of
Hedge Agreements. The Indebtedness of any Person shall include the Indebtedness
of any other entity (including any partnership in which such Person is a general
partner) to the extent such Person is liable therefor as a result of such
Person's
<PAGE> 16
11
ownership interest in or other relationship with such entity, except to the
extent the terms of such Indebtedness expressly provide that such Person is not
liable therefor.
"Initial Public Offering": an underwritten public offering of Equity
Interests of any member of the Charter Group pursuant to a registration
statement filed with the Securities and Exchange Commission in accordance with
the Securities Act of 1933, as amended, that yields Net Cash Proceeds of at
least $500,000,000.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Intellectual Property": the collective reference to all rights,
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
copyrights, copyright licenses, patents, patent licenses, trademarks, trademark
licenses, technology, know-how and processes, and all rights to sue at law or in
equity for any infringement or other impairment thereof, including the right to
receive all proceeds and damages therefrom.
"Interest Payment Date": (a) as to any ABR Loan, the last day of
each March, June, September and December to occur while such Loan is outstanding
and the final maturity date of such Loan, (b) as to any Eurodollar Loan having
an Interest Period of three months or less, the last day of such Interest
Period, (c) as to any Eurodollar Loan having an Interest Period longer than
three months, each day that is three months, or a whole multiple thereof, after
the first day of such Interest Period and the last day of such Interest Period
and (d) as to any Loan (other than any Revolving Loan that is an ABR Loan and
any Swingline Loan), the date of any repayment or prepayment made in respect
thereof.
"Interest Period": as to any Eurodollar Loan, (a) initially, the
period commencing on the borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two, three, six or, if consented
to by (which consent shall not be unreasonably withheld) each Lender under the
relevant Facility, nine or twelve months thereafter, as selected by the Borrower
in its notice of borrowing or notice of conversion, as the case may be, given
with respect thereto; and (b) thereafter, each period commencing on the last day
of the next preceding Interest Period applicable to such Eurodollar Loan and
ending one, two, three, six or, if consented to by (which consent shall not be
unreasonably withheld) each Lender under the relevant Facility, nine or twelve
months thereafter, as selected by the Borrower by irrevocable notice to the
Funding Agent not less than three Business Days prior to the last day of the
then current Interest Period with respect thereto; provided that, all of the
foregoing provisions relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day that
is not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day unless the result of such extension would be to
carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) the Borrower may not select an Interest Period under a
particular Facility that would extend beyond the Revolving Termination
Date or beyond the date final payment is due on the Tranche A Term Loans,
the Tranche B Term Loans or the relevant Incremental Term Loans, as the
case may be;
<PAGE> 17
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(iii) any Interest Period 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 a calendar month; and
(iv) the Borrower shall select Interest Periods so as not to
require a payment or prepayment of any Eurodollar Loan during an Interest
Period for such Loan.
"Investments": as defined in Section 7.7.
"Issuing Lender": each of the Funding Agent and any other Revolving
Lender that has agreed in its sole discretion to act as an "Issuing Lender"
hereunder and that has been approved in writing by the Funding Agent as an
"Issuing Lender" hereunder, in each case in its capacity as issuer of any Letter
of Credit.
"L/C Commitment": $350,000,000.
"L/C Fee Payment Date": the last day of each March, June, September
and December and the last day of the Revolving Commitment Period.
"L/C Obligations": at any time, an amount equal to the sum of (a)
the aggregate then undrawn and unexpired amount of the then outstanding Letters
of Credit and (b) the aggregate amount of drawings under Letters of Credit that
have not then been reimbursed pursuant to Section 3.5.
"L/C Participants": with respect to any Letter of Credit, the
collective reference to all Revolving Lenders other than the Issuing Lender that
issued such Letter of Credit.
"Lenders": as defined in the preamble hereto.
"Letters of Credit": as defined in Section 3.1(a).
"License": as to any Person, any license, permit, certificate of
need, authorization, certification, accreditation, franchise, approval, or grant
of rights by any Governmental Authority or other Person necessary or appropriate
for such Person to own, maintain, or operate its business or property, including
FCC Licenses.
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), charge or other security
interest or any preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including any conditional sale or
other title retention agreement and any capital lease having substantially the
same economic effect as any of the foregoing).
"Loan": any loan made or held by any Lender pursuant to this
Agreement.
"Loan Documents": this Agreement and the Guarantee and Collateral
Agreement.
"Loan Parties": Holdings, the Borrower and each Subsidiary of the
Borrower that is a party to a Loan Document.
"Majority Facility Lenders": with respect to any Facility, the
holders of more than 50% of the aggregate unpaid principal amount of the Term
Loans or the Total Revolving Extensions of Credit, as the case may be,
outstanding under such Facility (or, in the case of the Revolving Facility,
prior to any
<PAGE> 18
13
termination of the Revolving Commitments, the holders of more than 50% of the
Total Revolving Commitments).
"Management Fee Agreement": the amended and restated Management
Agreement dated as of March 18, 1999 between the Borrower and Charter
Communications, Inc.
"Marcus" : as defined in the preamble hereto.
"Marcus Combination": as defined in Section 7.4(e).
"Marcus Holdings": as defined in the preamble hereto.
"Material Adverse Effect": a material adverse effect on (a) the
business, property, operations or condition (financial or otherwise) of the
Borrower and its Subsidiaries taken as a whole or (b) the validity or
enforceability of any material provision of this Agreement or any of the other
Loan Documents or the rights or remedies of the Administrative Agents or the
Lenders hereunder or thereunder.
"Materials of Environmental Concern": any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated as such
in or under any Environmental Law, including asbestos, polychlorinated biphenyls
and urea-formaldehyde insulation.
"Multiemployer Plan": a Plan that is a multiemployer plan as defined
in Section 4001(a)(3) of ERISA.
"Net Cash Proceeds": (a) in connection with any Asset Sale or any
Recovery Event, the proceeds thereof in the form of cash and Cash Equivalents
(including any such proceeds received by way of deferred payment of principal
pursuant to a note or installment receivable or purchase price adjustment
receivable or otherwise, but only as and when received) of such Asset Sale or
Recovery Event, net of attorneys' fees, accountants' fees, investment banking
fees, amounts required to be applied to the repayment of Indebtedness secured by
a Lien expressly permitted hereunder on any asset that is the subject of such
Asset Sale or Recovery Event (other than any Lien pursuant to the Guarantee and
Collateral Agreement) and other customary fees and expenses actually incurred in
connection therewith and net of taxes paid or reasonably estimated to be payable
as a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements) and (b) in connection with any
issuance or sale of Equity Interests or any incurrence of Indebtedness, the cash
proceeds received from such issuance or incurrence, net of attorneys' fees,
investment banking fees, accountants' fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith.
"New Lender": as defined in Section 2.1(d).
"New Lender Supplement": as defined in Section 2.1(d).
"Non-Excluded Taxes": as defined in Section 2.17(a).
"Non-Recourse Subsidiary": (a) any Subsidiary of the Borrower
created, acquired or activated by the Borrower or any of its Subsidiaries in
connection with any Investment made pursuant to Section 7.7(g) and designated as
such by the Borrower substantially concurrently with such creation, acquisition
or activation and (b) any Subsidiary of such designated Subsidiary, provided,
that (i) at no
<PAGE> 19
14
time shall any creditor of any such Subsidiary have any claim (whether pursuant
to a Guarantee Obligation, by operation of law or otherwise) against the
Borrower or any of its other Subsidiaries (other than another Non-Recourse
Subsidiary) in respect of any Indebtedness or other obligation of any such
Subsidiary (other than in respect of a non-recourse pledge of Equity Interests
in such Subsidiary); (ii) neither the Borrower nor any of its Subsidiaries
(other than another Non-Recourse Subsidiary) shall become a general partner of
any such Subsidiary; (iii) no default with respect to any Indebtedness of any
such Subsidiary (including any right which the holders thereof may have to take
enforcement action against any such Subsidiary) shall permit (upon notice, lapse
of time or both) any holder of any Indebtedness of the Borrower or its other
Subsidiaries (other than another Non-Recourse Subsidiary) to declare a default
on such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its final scheduled maturity; (iv) no such Subsidiary shall own
any Equity Interests of, or own or hold any Lien on any property of, the
Borrower or any other Subsidiary of the Borrower (other than another
Non-Recourse Subsidiary); (v) no Investments may be made in any such Subsidiary
by the Borrower or any of its Subsidiaries (other than another Non-Recourse
Subsidiary) except pursuant to Section 7.7(g); (vi) the Borrower shall not
directly own any Equity Interests in such Subsidiary; and (vii) at the time of
such designation, no Default or Event of Default shall have occurred and be
continuing or would result therefrom. It is understood that Non-Recourse
Subsidiaries shall be disregarded for the purposes of any calculation pursuant
to this Agreement relating to financial matters with respect to the Borrower.
"Non-U.S. Lender": as defined in Section 2.17(d).
"Notes": the collective reference to any promissory note evidencing
Loans.
"Other Taxes": any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement or any other Loan Document.
"Participant": as defined in Section 10.6(b).
"Paul Allen Contributions": any capital contribution made by Paul G.
Allen, directly or indirectly, to the Borrower or any of its Subsidiaries.
"Paul Allen Group": the collective reference to (a) Paul G. Allen,
(b) his estate, spouse, immediate family members and heirs and (c) any trust,
corporation, partnership or other entity, the beneficiaries, stockholders,
partners or other owners of which consist exclusively of Paul G. Allen or such
other Persons referred to in clause (b) above or a combination thereof.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA (or any successor).
"Pending Acquired Entities": American Cable Entertainment, Inc.,
GreaterMedia Cablevision Inc., Renaissance Media Holdings LLC and Renaissance
Media Group LLC.
"Permitted Line of Business": as defined in Section 7.14(a).
"Person": an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever nature.
<PAGE> 20
15
"Plan": at a particular time, any employee benefit plan that is
covered by ERISA and in respect of which the Borrower or a Commonly Controlled
Entity is (or, if such plan were terminated at such time, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of
ERISA.
"Pole Agreement": any pole attachment agreement or underground
conduit use agreement entered into in connection with the operation of any CATV
System.
"Pricing Grid": the pricing grid attached hereto as Annex A.
"Prime Rate": the rate of interest per annum publicly announced from
time to time by the Funding Agent as its prime rate in effect at its principal
office in Dallas, Texas (the Prime Rate not being intended to be the lowest rate
of interest charged by the Funding Agent in connection with extensions of credit
to debtors).
"Pro Forma Financial Statements": as defined in Section 4.1(a).
"Properties": as defined in Section 4.17(a).
"Recovery Event": any settlement of or payment in respect of any
property or casualty insurance claim or any condemnation proceeding relating to
any asset of the Borrower or any of its Subsidiaries.
"Refunded Swingline Loans": as defined in Section 2.5.
"Refunding Date": as defined in Section 2.5.
"Register": as defined in Section 10.6(d).
"Regulation U": Regulation U of the Board as in effect from time to
time.
"Reimbursement Obligation": the obligation of the Borrower to
reimburse the relevant Issuing Lender pursuant to Section 3.5 for amounts drawn
under Letters of Credit.
"Reinvestment Deadline": as defined in the definition of
"Reinvestment Notice".
"Reinvestment Deferred Amount": with respect to any Reinvestment
Event, the aggregate Net Cash Proceeds received by the Borrower or any of its
Subsidiaries in connection therewith that are not applied to prepay the Term
Loans pursuant to Section 2.9(b) as a result of the delivery of a Reinvestment
Notice.
"Reinvestment Event": any Asset Sale or Recovery Event in respect of
which the Borrower has delivered a Reinvestment Notice.
"Reinvestment Notice": a written notice executed by a Responsible
Officer and delivered to the Administrative Agents within twelve months after
any Asset Sale or Recovery Event, stating that (a) no Event of Default has
occurred and is continuing, (b) the Borrower (directly or indirectly through a
Subsidiary) intends and expects to use all or a specified portion of the Net
Cash Proceeds of such Asset Sale or Recovery Event to acquire assets useful in
its business, on or prior to the earlier of (i) the date that is eighteen months
from the date of receipt of such Net Cash Proceeds and (ii) the date on which
such proceeds would be required to be applied, or to be offered to be applied,
to
<PAGE> 21
16
prepay, redeem or defease any Indebtedness of the Borrower or any of its
Affiliates (other than Indebtedness under this Agreement) if not applied as
described above (such earlier date, the "Reinvestment Deadline"), and (c) such
use will not require redemptions or prepayments (or offers to make redemptions
or prepayments) of any other Indebtedness of the Borrower or any of its
Affiliates.
"Reinvestment Prepayment Amount": with respect to any Reinvestment
Event, the Reinvestment Deferred Amount relating thereto less any amount
expended prior to the relevant Reinvestment Prepayment Date to acquire assets
useful in the Borrower's business.
"Reinvestment Prepayment Date": with respect to any Reinvestment
Event, the earlier of (a) the relevant Reinvestment Deadline and (b) the date on
which the Borrower shall have determined not to, or shall have otherwise ceased
to, acquire assets useful in the Borrower's business with all or any portion of
the relevant Reinvestment Deferred Amount.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such plan is in reorganization within the meaning of Section 4241
of ERISA.
"Reportable Event": any of the events set forth in Section 4043(b)
of ERISA, other than those events as to which the thirty day notice period is
waived under subsections .27, .28, .29, .30, .31, .32, .34 or .35 of PBGC Reg.
ss. 4043.
"Required Lenders": at any time, the holders of more than 50% of the
sum of (a) the aggregate unpaid principal amount of the Term Loans then
outstanding, (b) the aggregate unutilized Tranche A Term Commitments then in
effect and (c) the Total Revolving Commitments then in effect or, if the
Revolving Commitments have been terminated, the Total Revolving Extensions of
Credit then outstanding.
"Required Prepayment Lenders": the Majority Facility Lenders in
respect of each Facility (with the Tranche B Term Facility and the Incremental
Term Facility being treated for this purpose as a single Facility).
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"Responsible Officer": the chief executive officer, president or
chief financial officer of the Borrower, but in any event, with respect to
financial matters, any of the chief financial officer or any other financial
officer of the Borrower.
"Restricted Payments": as defined in Section 7.6.
"Revolving Aggregate Committed Amount": the sum of the Total
Revolving Commitments as in effect on the Stage One Closing Date and the amount
of any increases therein effected pursuant to Section 2.1(c).
"Revolving Commitment": as to any Lender, the obligation of such
Lender, if any, to make Revolving Loans and participate in Swingline Loans and
Letters of Credit in an aggregate principal and/or face amount not to exceed the
amount set forth under the heading "Revolving Commitment" opposite such Lender's
name on Schedule 1.1 or in the Assignment and Acceptance or New Lender
Supplement pursuant to which such Lender became a party hereto, as the same may
be changed from
<PAGE> 22
17
time to time pursuant to the terms hereof. The original amount of the Total
Revolving Commitments is $556,000,000.
"Revolving Commitment Period": the period from and including the
Stage One Closing Date to the Revolving Termination Date.
"Revolving Extensions of Credit": as to any Revolving Lender at any
time, an amount equal to the sum of (a) the aggregate principal amount of all
Revolving Loans held by such Lender then outstanding, (b) such Lender's
Revolving Percentage of the L/C Obligations then outstanding and (c) such
Lender's Revolving Percentage of the aggregate principal amount of Swingline
Loans then outstanding.
"Revolving Facility": as defined in the definition of "Facility".
"Revolving Lender": each Lender that has a Revolving Commitment or
that holds Revolving Loans.
"Revolving Loans": as defined in Section 2.1(b).
"Revolving Percentage": as to any Revolving Lender at any time, the
percentage which such Lender's Revolving Commitment then constitutes of the
Total Revolving Commitments (or, at any time after the Revolving Commitments
shall have expired or terminated, the percentage which the aggregate principal
amount of such Lender's Revolving Loans then outstanding constitutes of the
aggregate principal amount of the Revolving Loans then outstanding).
"Revolving Termination Date": September 18, 2007.
"SEC": the Securities and Exchange Commission, any successor thereto
and any analogous Governmental Authority.
"Senior Note Indenture": the collective reference to the Indentures
entered into by Charter Holdings and Charter Communications Holdings Capital
Corporation in connection with the issuance of the Senior Notes, together with
all instruments and other agreements entered into by Charter Holdings or Charter
Communications Holdings Capital Corporation in connection therewith, as the same
may be amended, supplemented or otherwise modified from time to time in
accordance with Section 7.8.
"Senior Notes": the senior notes and senior discount notes of
Charter Holdings and Charter Communications Holdings Capital Corporation issued
on or about the Stage One Closing Date pursuant to the Senior Note Indenture.
"Shell Subsidiary": any Subsidiary of the Borrower that is a "shell"
company having (a) assets (either directly or through any Subsidiary or other
Equity Interests) with an aggregate value not exceeding $10,000 and (b) no
operations.
"Single Employer Plan": any Plan that is covered by Title IV of
ERISA, but that is not a Multiemployer Plan.
"Solvent": when used with respect to any Person, means that, as of
any date of determination, (a) the amount of the "present fair saleable value"
of the assets of such Person will, as of such date, exceed the amount of all
"liabilities of such Person, contingent or otherwise", as of such date, as such
quoted terms are determined in accordance with applicable federal and state laws
governing
<PAGE> 23
18
determinations of the insolvency of debtors, (b) the present fair saleable value
of the assets of such Person will, as of such date, be greater than the amount
that will be required to pay the liability of such Person on its debts as such
debts become absolute and matured, (c) such Person will not have, as of such
date, an unreasonably small amount of capital with which to conduct its
business, and (d) such Person will be able to pay its debts as they mature. For
purposes of this definition, (i) "debt" means liability on a "claim", and (ii)
"claim" means any (x) right to payment, whether or not such a right is reduced
to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an
equitable remedy for breach of performance if such breach gives rise to a right
to payment, whether or not such right to an equitable remedy is reduced to
judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured
or unsecured.
"Specified Change of Control": a "Change of Control" as defined in
the Senior Note Indenture and any defined term having a comparable purpose
contained in the documentation governing any other Holdings Debt or any
Specified Long-Term Indebtedness.
"Specified Holdings Subsidiary": each Subsidiary of Charter Holdings
other than the Borrower and its Subsidiaries.
"Specified Long-Term Indebtedness": any Indebtedness incurred
pursuant to Section 7.2(f).
"Specified Senior Notes": any Senior Notes having a maturity
approximately eight years after the Stage One Closing Date, provided, that no
more than $750,000,000 of Specified Senior Notes shall be issued.
"Specified Subordinated Debt": any Indebtedness of the Borrower
issued directly or indirectly to Paul G. Allen after the Stage Two Closing Date,
the proceeds of which are applied promptly after the incurrence thereof to
finance Investments permitted hereby, so long as such Indebtedness (a) qualifies
as Specified Long-Term Indebtedness and (b) has terms and conditions
substantially identical to those set forth in Exhibit I.
"Stage One Closing Date": the date on which the conditions precedent
set forth in Section 5.1 shall have been satisfied, which date is March 18,
1999.
"Stage Two Closing Date": any Business Day on or prior to the date
that is 120 days after the Stage One Closing Date selected by the Borrower
pursuant to an Increased Facility Activation Notice.
"Subsidiary": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of directors or other managers of such
corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person; provided, that Non-Recourse
Subsidiaries shall be deemed not to constitute "Subsidiaries" for the purposes
of this Agreement (other than the definition of "Non-Recourse Subsidiary").
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Borrower.
"Subsidiary Guarantor": each Subsidiary of the Borrower other than
any Foreign Subsidiary and any Excluded Acquired Subsidiary.
<PAGE> 24
19
"Swingline Commitment": the obligation of the Swingline Lender to
make Swingline Loans pursuant to Section 2.4 in an aggregate principal amount at
any one time outstanding not to exceed $25,000,000.
"Swingline Lender": NationsBank, N.A., in its capacity as the lender
of Swingline Loans.
"Swingline Loans": as defined in Section 2.4.
"Swingline Participation Amount": as defined in Section 2.5.
"Syndication Agents": as defined in the preamble hereto.
"Term Lenders": the collective reference to the Tranche A Term
Lenders, the Tranche B Term Lenders and the Incremental Term Lenders.
"Term Loans": the collective reference to the Tranche A Term Loans,
Tranche B Term Loans and Incremental Term Loans.
"Threshold Management Fee Date": any date on which, both before and
after giving pro forma effect to the payment of any previously deferred
management fees pursuant to Section 7.8(c) (including any Indebtedness incurred
in connection therewith), the Consolidated Interest Coverage Ratio, determined
in respect of the most recent period of four consecutive fiscal quarters for
which the relevant financial information is available, is greater than 2.25 to
1.0.
"Threshold Transaction Date": any date on which, both before and
after giving pro forma effect to a particular transaction (including any
Indebtedness incurred in connection therewith), the Consolidated Interest
Coverage Ratio, determined in respect of the most recent period of four
consecutive fiscal quarters for which the relevant financial information is
available, is greater than 1.75 to 1.0.
"Total Revolving Commitments": at any time, the aggregate amount of
the Revolving Commitments then in effect.
"Total Revolving Extensions of Credit": at any time, the aggregate
amount of the Revolving Extensions of Credit of the Revolving Lenders
outstanding at such time.
"Tranche A Aggregate Funded Amount": the sum of the aggregate
principal amount of Tranche A Term Loans made pursuant to Section 2.1(a) and the
aggregate principal amount of Tranche A Term Loans made pursuant to Section
2.1(c).
"Tranche A Term Commitment": as to any Tranche A Term Lender, the
obligation of such Lender to make a Tranche A Term Loan to the Borrower
hereunder in a principal amount not to exceed the amount set forth under the
heading "Tranche A Term Commitment" opposite such Lender's name on Schedule 1.1
or in the Assignment and Acceptance or New Lender Supplement pursuant to which
such Lender became a party hereto, as the same may be changed from time to time
pursuant to the terms hereof. The original aggregate amount of the Tranche A
Term Commitments is $444,000,000.
"Tranche A Term Facility": as defined in the definition of
"Facility".
<PAGE> 25
20
"Tranche A Term Lender": each Lender that has a Tranche A Term
Commitment or is the holder of a Tranche A Term Loan.
"Tranche A Term Loan": as defined in Section 2.1(a).
"Tranche A Term Percentage": as to any Tranche A Term Lender at any
time, the percentage which the aggregate principal amount of such Lender's
Tranche A Term Loans then outstanding constitutes of the aggregate principal
amount of all Tranche A Term Loans then outstanding.
"Tranche B Aggregate Funded Amount": the sum of the aggregate
principal amount of Tranche B Term Loans made on the Stage One Closing Date and
the aggregate principal amount of Tranche B Term Loans made pursuant to Section
2.1(c).
"Tranche B Term Commitment": as to any Tranche B Term Lender, the
obligation of such Lender to make a Tranche B Term Loan to the Borrower
hereunder in a principal amount not to exceed the amount set forth under the
heading "Tranche B Term Commitment" opposite such Lender's name on Schedule 1.1.
The original aggregate amount of the Tranche B Term Commitments is
$1,750,000,000.
"Tranche B Term Facility": as defined in the definition of
"Facility".
"Tranche B Term Lender": each Lender that has a Tranche B Term
Commitment or that holds a Tranche B Term Loan.
"Tranche B Term Loan": as defined in Section 2.1(a).
"Tranche B Term Percentage": as to any Tranche B Term Lender at any
time, the percentage which the aggregate principal amount of such Lender's
Tranche B Term Loans then outstanding constitutes of the aggregate principal
amount of all Tranche B Term Loans then outstanding.
"Transferee": any Assignee or Participant.
"Type": as to any Loan, its nature as an ABR Loan or a Eurodollar
Loan.
"United States": the United States of America.
"Wholly Owned Subsidiary": as to any Person, any other Person all of
the Equity Interests of which (other than directors' qualifying shares required
by law) is owned by such Person directly or through other Wholly Owned
Subsidiaries or a combination thereof.
"Wholly Owned Subsidiary Guarantor": any Subsidiary Guarantor that
is a Wholly Owned Subsidiary of the Borrower.
1.2 Other Definitional Provisions; Pro Forma Calculations. (a)
Unless otherwise specified therein, all terms defined in this Agreement shall
have the defined meanings when used in the other Loan Documents or any
certificate or other document made or delivered pursuant hereto or thereto.
(b) As used herein and in the other Loan Documents, and any
certificate or other document made or delivered pursuant hereto or thereto, (i)
accounting terms relating to Holdings, the Borrower and its Subsidiaries not
defined in Section 1.1 and accounting terms partly defined in Section 1.1, to
the extent not defined, shall have the respective meanings given to them under
GAAP, (ii) the
<PAGE> 26
21
words "include", "includes" and "including" shall be deemed to be followed by
the phrase "without limitation", (iii) the word "incur" shall be construed to
mean incur, create, issue, assume, become liable in respect of or suffer to
exist (and the words "incurred" and "incurrence" shall have correlative
meanings), and (iv) the words "asset" and "property" shall be construed to have
the same meaning and effect and to refer to any and all tangible and intangible
assets and properties, including cash, Equity Interests, securities, revenues,
accounts, leasehold interests, contract rights and any other "assets" as such
term is defined under GAAP.
(c) 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, and Section,
Schedule and Exhibit references are to this Agreement unless otherwise
specified.
(d) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(e) For the purposes of calculating Annualized Operating Cash Flow,
Annualized Pro Forma Operating Cash Flow, Consolidated Operating Cash Flow and
Consolidated Interest Expense for any period (a "Test Period"), (i) if at any
time from the period (a "Pro Forma Period") commencing on the second day of such
Test Period and ending on the last day of such Test Period (or, in the case of
any pro forma calculation made pursuant hereto in respect of a particular
transaction, ending on the date such transaction is consummated and, unless
otherwise expressly provided herein, after giving effect thereto), the Borrower
or any Subsidiary shall have made any Material Disposition, the Consolidated
Operating Cash Flow for such Test Period shall be reduced by an amount equal to
the Consolidated Operating Cash Flow (if positive) attributable to the property
which is the subject of such Material Disposition for such Test Period or
increased by an amount equal to the Consolidated Operating Cash Flow (if
negative) attributable thereto for such Test Period, and Consolidated Interest
Expense for such Test Period shall be reduced by an amount equal to the
Consolidated Interest Expense for such Test Period attributable to any
Indebtedness of the Borrower or any Subsidiary repaid, repurchased, defeased or
otherwise discharged with respect to the Borrower and its Subsidiaries in
connection with such Material Disposition (or, if the Equity Interests of any
Subsidiary is sold, the Consolidated Interest Expense for such Test Period
directly attributable to the Indebtedness of such Subsidiary to the extent the
Borrower and its continuing Subsidiaries are no longer liable for such
Indebtedness after such Disposition); (ii) if during such Pro Forma Period the
Borrower or any Subsidiary shall have made a Material Acquisition, Consolidated
Operating Cash Flow and Consolidated Interest Expense for such Test Period shall
be calculated after giving pro forma effect thereto (including the incurrence or
assumption of any Indebtedness in connection therewith) as if such Material
Acquisition (and the incurrence or assumption of any such Indebtedness) occurred
on the first day of such Test Period; (iii) if during such Pro Forma Period any
Person that subsequently became a Subsidiary or was merged with or into the
Borrower or any Subsidiary since the beginning of such Pro Forma Period shall
have entered into any disposition or acquisition transaction that would have
required an adjustment pursuant to clause (i) or (ii) above if made by the
Borrower or a Subsidiary during such Pro Forma Period, Consolidated Operating
Cash Flow and Consolidated Interest Expense for such Test Period shall be
calculated after giving pro forma effect thereto as if such transaction occurred
on the first day of such Test Period; and (iv) in the case of determinations in
connection with transactions involving the incurrence of Indebtedness,
Consolidated Interest Expense shall be calculated after giving pro forma effect
thereto (and all other incurrences of Indebtedness during such Pro Forma Period)
as if such Indebtedness was incurred on the first day of such Test Period. For
the purposes of this paragraph, pro forma calculations regarding the amount of
income or earnings relating to any Material Disposition or Material Acquisition
and the amount of Consolidated Interest Expense associated with any discharge or
incurrence of Indebtedness shall in each case be determined in good faith by a
Responsible Officer of the Borrower. If any Indebtedness bears a floating
<PAGE> 27
22
rate of interest and the incurrence or assumption thereof is being given pro
forma effect, the interest expense on such Indebtedness shall be calculated as
if the rate in effect on the last day of the relevant Pro Forma Period had been
the applicable rate for the entire relevant Test Period (taking into account any
interest rate protection agreement applicable to such Indebtedness if such
interest rate protection agreement has a remaining term in excess of 12 months).
As used in this Section 1.2(e), "Material Acquisition" means any acquisition of
property or series of related acquisitions of property that (i) constitutes
assets comprising all or substantially all of an operating unit of a business or
constitutes all or substantially all of the Equity Interests of a Person and
(ii) involves the payment of Consideration by the Borrower and its Subsidiaries
in excess of $1,000,000; and "Material Disposition" means any Disposition of
property or series of related Dispositions of property that yields gross
proceeds to the Borrower or any of its Subsidiaries in excess of $1,000,000.
SECTION 2. AMOUNT AND TERMS OF COMMITMENTS
2.1 Commitments; Increases in the Tranche A Term Facility, the
Tranche B Term Facility and the Revolving Facility; Incremental Term Loans. (a)
Subject to the terms and conditions hereof, (i) each Tranche A Term Lender
severally agrees to make one or more term loans (each, a "Tranche A Term Loan")
to the Borrower in an aggregate amount not to exceed the amount of the Tranche A
Term Commitment of such Lender, (ii) each Tranche B Term Lender severally agrees
to make a term loan (each, a "Tranche B Term Loan") to the Borrower in an amount
not to exceed the amount of the Tranche B Term Commitment of such Lender and
(iii) each Incremental Term Lender severally agrees to make one or more term
loans (each, an "Incremental Term Loan") to the extent provided in Section
2.1(c). The Term Loans may from time to time be Eurodollar Loans or ABR Loans,
as determined by the Borrower and notified to the Funding Agent in accordance
with Sections 2.2 and 2.10. Except as otherwise provided in Section 2.1(c),
Tranche A Term Loans may only be made on three dates selected by the Borrower
during the period from and including the Stage One Closing Date to the earlier
of July 15, 1999 and the date that is 90 days after the Stage Two Closing Date
(such earlier date, the "Tranche A Commitment Termination Date"). Any unutilized
Tranche A Term Commitments shall automatically terminate on the Tranche A
Commitment Termination Date. Except as otherwise provided in Section 2.1(c),
Tranche B Term Loans may only be made on the Stage One Closing Date.
(b) Subject to the terms and conditions hereof, each Revolving
Lender severally agrees to make revolving credit loans ("Revolving Loans") to
the Borrower from time to time during the Revolving Commitment Period in an
aggregate principal amount at any one time outstanding which, when added to such
Lender's Revolving Percentage of the sum of (i) the L/C Obligations then
outstanding and (ii) the aggregate principal amount of the Swingline Loans then
outstanding, does not exceed the amount of such Lender's Revolving Commitment.
During the Revolving Commitment Period the Borrower may use the Revolving
Commitments by borrowing, prepaying the Revolving Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof. The
Revolving Loans may from time to time be Eurodollar Loans or ABR Loans, as
determined by the Borrower and notified to the Funding Agent in accordance with
Sections 2.2 and 2.10.
(c) The Borrower and any one or more Lenders (including New Lenders)
may on the Stage Two Closing Date and from time to time during the period from
the date that is 60 days after the Stage Two Closing Date to the third
anniversary of the Stage One Closing Date, agree that such Lenders shall make,
obtain or increase the amount of their Tranche A Term Commitments, Tranche A
Term Loans, Tranche B Term Loans, Incremental Term Loans or Revolving
Commitments, as applicable, by executing and delivering to the Administrative
Agents an Increased Facility Activation Notice specifying (i) the amount of such
increase and the Facility or Facilities involved, (ii) the applicable Increased
Facility Closing Date and (iii) in the case of Incremental Term Loans, (x) the
applicable Incremental Term Maturity Date, (y) the amortization schedule for
such Incremental Term Loans, which shall comply
<PAGE> 28
23
with Section 2.3, and (z) the Applicable Margin for such Incremental Term Loans.
Notwithstanding the foregoing, without the consent of the Required Lenders, (i)
on the Stage Two Closing Date, the Tranche A Aggregate Funded Amount (together
with the aggregate unutilized Tranche A Term Commitments), Tranche B Aggregate
Funded Amount and Revolving Aggregate Committed Amount (the sum of such amounts,
the "Aggregate Facility Amount") may not be increased to more than
$1,000,000,000, $1,850,000,000 and $1,250,000,000, respectively, except as may
be otherwise agreed to by the Agents, (ii) no Incremental Term Loans may be
obtained on the Stage Two Closing Date, (iii) no incremental Tranche B Term
Loans may be obtained after the Stage Two Closing Date, (iv) the aggregate
amount of borrowings of Incremental Term Loans shall not exceed an amount equal
to (w) $500,000,000 plus (x) the aggregate principal amount of optional
prepayments of Term Loans made pursuant to Section 2.8 or optional reductions of
the Revolving Commitments pursuant to Section 2.7 (provided that the amount
described in this clause (x) shall not exceed $500,000,000) minus (y) the
aggregate amount of incremental Tranche A Term Loans or incremental Revolving
Commitments obtained pursuant to this paragraph (other than on the Stage Two
Closing Date) minus (z) the amount by which the Aggregate Facility Amount on the
Stage Two Closing Date exceeds $4,100,000,000, (v) the aggregate amount of
incremental Tranche A Term Loans and incremental Revolving Commitments obtained
pursuant to this paragraph (other than on the Stage Two Closing Date) shall not
exceed $250,000,000, (vi) each increase effected pursuant to this paragraph
shall be in a minimum amount of at least $100,000,000 and (vii) no more than
five Increased Facility Closing Dates (excluding the Second Stage Closing Date)
may be selected by the Borrower during the term of this Agreement. No Lender
shall have any obligation to participate in any increase described in this
paragraph unless it agrees to do so in its sole discretion.
(d) Any additional bank, financial institution or other entity
which, with the consent of the Borrower and the Administrative Agents (which
consent shall not be unreasonably withheld), elects to become a "Lender" under
this Agreement in connection with any transaction described in Section 2.1(c)
shall execute a New Lender Supplement (each, a "New Lender Supplement"),
substantially in the form of Exhibit D-2, whereupon such bank, financial
institution or other entity (a "New Lender") shall become a Lender for all
purposes and to the same extent as if originally a party hereto and shall be
bound by and entitled to the benefits of this Agreement.
(e) Unless otherwise agreed by the Administrative Agents, on each
Increased Facility Closing Date (other than in respect of Incremental Term
Loans), the Borrower shall borrow Term Loans under the relevant increased
Facility, or shall borrow Revolving Loans under the increased Revolving
Commitments, as the case may be, from each Lender participating in the relevant
increase in an amount determined by reference to the amount of each Type of Loan
(and, in the case of Eurodollar Loans, of each Eurodollar Tranche) which would
then have been outstanding from such Lender if (i) each such Type or Eurodollar
Tranche had been borrowed or effected on such Increased Facility Closing Date
and (ii) the aggregate amount of each such Type or Eurodollar Tranche requested
to be so borrowed or effected had been proportionately increased. The Eurodollar
Base Rate applicable to any Eurodollar Loan borrowed pursuant to the preceding
sentence shall equal the Eurodollar Base Rate then applicable to the Eurodollar
Loans of the other Lenders in the same Eurodollar Tranche (or, until the
expiration of the then-current Interest Period, such other rate as shall be
agreed upon between the Borrower and the relevant Lender).
2.2 Procedure for Borrowing. In order to effect a borrowing
hereunder, the Borrower shall give the Funding Agent irrevocable notice (which
notice must be received by the Funding Agent prior to 12:00 Noon, Dallas time,
(a) three Business Days prior to the requested Borrowing Date, in the case of
Eurodollar Loans, or (b) one Business Day prior to the requested Borrowing Date,
in the case of ABR Loans), specifying (i) the Facility under which such Loan is
to be borrowed, (ii) the amount and Type of Loans to be borrowed, (iii) the
requested Borrowing Date and (iv) in the case of Eurodollar Loans, the
respective amounts of each such Type of Loan and the respective lengths of the
initial Interest
<PAGE> 29
24
Period therefor. Any Loans made on the Stage One Closing Date shall initially be
ABR Loans and, unless otherwise agreed by the Administrative Agents in their
sole discretion, prior to the Stage Two Closing Date, no Loan may be made as,
converted into or continued as a Eurodollar Loan having an Interest Period in
excess of one month. Each borrowing shall be in an aggregate amount equal to (x)
in the case of ABR Loans, $5,000,000 or a whole multiple of $1,000,000 in excess
thereof (or, if the then aggregate Available Revolving Commitments are less than
$5,000,000, such lesser amount) and (y) in the case of Eurodollar Loans,
$10,000,000 or a whole multiple of $1,000,000 in excess thereof; provided, that
the Swingline Lender may request, on behalf of the Borrower, borrowings under
the Revolving Commitments that are ABR Loans in other amounts pursuant to
Section 2.5. Upon receipt of any such notice from the Borrower, the Funding
Agent shall promptly notify each relevant Lender thereof. Each relevant Lender
will make the amount of its pro rata share of each borrowing available to the
Funding Agent for the account of the Borrower at the Funding Office prior to
11:00 A.M., Dallas time, on the Borrowing Date requested by the Borrower in
funds immediately available to the Funding Agent. Such borrowing will then be
made available not later than 2:00 P.M., Dallas time, to the Borrower by the
Funding Agent crediting the account of the Borrower on the books of such office
with the aggregate of the amounts made available to the Funding Agent by the
relevant Lenders and in like funds as received by the Funding Agent.
2.3 Repayment of Loans. (a) The Tranche A Term Loans of each Tranche
A Term Lender shall mature in 22 consecutive quarterly installments, commencing
on June 30, 2002, each of which shall be in an amount equal to such Lender's
Tranche A Term Percentage multiplied by the percentage of the Tranche A
Aggregate Funded Amount set forth below opposite such installment:
<TABLE>
<CAPTION>
Installment Percentage
----------- ----------
<S> <C>
June 30, 2002 2.5%
September 30, 2002 2.5%
December 31, 2002 2.5%
March 31, 2003 2.5%
June 30, 2003 3.75%
September 30, 2003 3.75%
December 31, 2003 3.75%
March 31, 2004 3.75%
June 30, 2004 3.75%
September 30, 2004 3.75%
December 31, 2004 3.75%
March 31, 2005 3.75%
June 30, 2005 5.0%
September 30, 2005 5.0%
December 31, 2005 5.0%
March 31, 2006 5.0%
June 30, 2006 6.25%
September 30, 2006 6.25%
December 31, 2006 6.25%
March 31, 2007 6.25%
June 30, 2007 7.5%
September 18, 2007 7.5%
</TABLE>
(b) The Tranche B Term Loans of each Tranche B Term Lender shall
mature in 24 consecutive quarterly installments (each due on the last day of
each calendar quarter, except for the last such installment), commencing on June
30, 2002, each of which shall be in an amount equal to such Lender's Tranche B
Term Percentage multiplied by (i) in the case of the first 23 such installments,
0.25%
<PAGE> 30
25
of the Tranche B Aggregate Funded Amount and (ii) in the case of the last such
installment (which shall be due on March 18, 2008), 94.25% of the Tranche B
Aggregate Funded Amount.
(c) The Incremental Term Loans of each Incremental Term Lender shall
mature in consecutive installments (which shall be no more frequent than
quarterly) as specified in the Increased Facility Activation Notice pursuant to
which such Incremental Term Loans were made, provided that, prior to the date
that is six months after the final maturity of the Tranche B Term Loans, the
aggregate amount of such installments for any four consecutive fiscal quarters
shall not exceed 1% of the aggregate principal amount of such Incremental Term
Loans on the date such Loans were first made.
(d) The Total Revolving Commitments shall be permanently reduced on
each of the dates set forth below by an aggregate amount equal to the percentage
of the Revolving Aggregate Committed Amount set forth opposite such date:
<TABLE>
<CAPTION>
Date Percentage
---- ----------
<S> <C>
March 31, 2004 10.0%
March 31, 2005 15.0%
March 31, 2006 30.0%
March 31, 2007 30.0%
September 18, 2007 15.0%
</TABLE>
(e) Notwithstanding anything to the contrary in this Section 2.3, if
any Specified Senior Notes are outstanding on the date (the "Six-Month Date")
that is six months prior to the stated maturity of such Specified Senior Notes
then, on such Six-Month Date, all outstanding Term Loans shall automatically
become due and payable and the Revolving Commitments shall automatically be
terminated. Specified Senior Notes that have been defeased in accordance with
the terms thereof shall be deemed to be no longer outstanding for the purposes
of this paragraph.
(f) Any reduction or termination of the Revolving Commitments
pursuant to this Section 2.3 shall be accompanied by prepayment of the Revolving
Loans and/or Swingline Loans to the extent that the Total Revolving Extensions
of Credit exceed the amount of the Total Revolving Commitments after giving
effect thereto, provided that if the aggregate principal amount of Revolving
Loans and Swingline Loans then outstanding is less than the amount of such
excess (because L/C Obligations constitute a portion thereof), the Borrower
shall, to the extent of the balance of such excess, replace outstanding Letters
of Credit and/or deposit an amount in cash in a cash collateral account
established with the Funding Agent for the benefit of the Lenders on terms and
conditions satisfactory to the Funding Agent. The application of any prepayment
pursuant to this paragraph shall be made, first, to ABR Loans and, second, to
Eurodollar Loans. Each prepayment of the Loans under this paragraph (other than
ABR Loans and Swingline Loans) shall be accompanied by accrued interest to the
date of such prepayment on the amount prepaid.
2.4 Swingline Commitment. Subject to the terms and conditions
hereof, the Swingline Lender agrees to make a portion of the credit otherwise
available to the Borrower under the Revolving Commitments from time to time
during the Revolving Commitment Period by making swingline loans ("Swingline
Loans") to the Borrower; provided that (a) the aggregate principal amount of
Swingline Loans outstanding at any time shall not exceed the Swingline
Commitment then in effect (notwithstanding that the Swingline Loans outstanding
at any time, when aggregated with the Swingline Lender's other outstanding
Revolving Loans hereunder, may exceed the Swingline Commitment then in effect)
and (b) the Borrower shall not request, and the Swingline Lender shall not make,
any Swingline Loan if, after giving effect to the making of such Swingline Loan,
the aggregate amount of the Available Revolving Commitments would be less than
zero. During the Revolving Commitment Period, the
<PAGE> 31
26
Borrower may use the Swingline Commitment by borrowing, repaying and
reborrowing, all in accordance with the terms and conditions hereof. Swingline
Loans shall be ABR Loans only.
2.5 Procedure for Swingline Borrowing; Refunding of Swingline Loans.
(a) Whenever the Borrower desires that the Swingline Lender make Swingline Loans
it shall give the Swingline Lender irrevocable telephonic notice confirmed
promptly in writing (which telephonic notice must be received by the Swingline
Lender not later than 12:00 Noon, Dallas time, on the proposed Borrowing Date),
specifying (i) the amount to be borrowed and (ii) the requested Borrowing Date
(which shall be a Business Day during the Revolving Commitment Period). Each
borrowing under the Swingline Commitment shall be in an amount equal to
$1,000,000 or a whole multiple of $500,000 in excess thereof. Not later than
2:00 P.M., Dallas time, on the Borrowing Date specified in a notice in respect
of Swingline Loans, the Swingline Lender shall make available to the Funding
Agent at the Funding Office an amount in immediately available funds equal to
the amount of the Swingline Loan to be made by the Swingline Lender. The Funding
Agent shall make the proceeds of such Swingline Loan available to the Borrower
on such Borrowing Date by depositing such proceeds in the account of the
Borrower with the Funding Agent on such Borrowing Date in immediately available
funds.
(b) The Swingline Lender, at any time and from time to time in its
sole and absolute discretion and in consultation with the Borrower (provided
that the failure to so consult shall not affect the ability of the Swingline
Lender to make the following request) may, on behalf of the Borrower (which
hereby irrevocably directs the Swingline Lender to act on its behalf), on one
Business Day's notice given by the Swingline Lender no later than 1:00 P.M.,
Dallas time, request each Revolving Lender to make, and each Revolving Lender
hereby agrees to make, a Revolving Loan, in an amount equal to such Revolving
Lender's Revolving Percentage of the aggregate amount of the Swingline Loans
(the "Refunded Swingline Loans") outstanding on the date of such notice, to
repay the Swingline Lender. Each Revolving Lender shall make the amount of such
Revolving Loan available to the Funding Agent at the Funding Office in
immediately available funds, not later than 11:00 A.M., Dallas time, one
Business Day after the date of such notice. The proceeds of such Revolving Loans
shall be immediately made available by the Funding Agent to the Swingline Lender
for application by the Swingline Lender to the repayment of the Refunded
Swingline Loans. The Borrower irrevocably authorizes the Swingline Lender to
charge the Borrower's accounts with the Funding Agent (up to the amount
available in each such account) in order to immediately pay the amount of such
Refunded Swingline Loans to the extent amounts received from the Revolving
Lenders are not sufficient to repay in full such Refunded Swingline Loans.
(c) If prior to the time a Revolving Loan would have otherwise been
made pursuant to Section 2.5(b), one of the events described in Section 8(f)
shall have occurred and be continuing with respect to the Borrower or if for any
other reason, as determined by the Swingline Lender in its sole discretion,
Revolving Loans may not be made as contemplated by Section 2.5(b), each
Revolving Lender shall, on the date such Revolving Loan was to have been made
pursuant to the notice referred to in Section 2.5(b) (the "Refunding Date"),
purchase for cash an undivided participating interest in the then outstanding
Swingline Loans by paying to the Swingline Lender an amount (the "Swingline
Participation Amount") equal to (i) such Revolving Lender's Revolving Percentage
times (ii) the sum of the aggregate principal amount of Swingline Loans then
outstanding that were to have been repaid with such Revolving Loans.
(d) Whenever, at any time after the Swingline Lender has received
from any Revolving Lender such Lender's Swingline Participation Amount, the
Swingline Lender receives any payment on account of the Swingline Loans, the
Swingline Lender will distribute to such Lender its Swingline Participation
Amount (appropriately adjusted, in the case of interest payments, to reflect the
period of time during which such Lender's participating interest was outstanding
and funded and, in the case of
<PAGE> 32
27
principal and interest payments, to reflect such Lender's pro rata portion of
such payment if such payment is not sufficient to pay the principal of and
interest on all Swingline Loans then due); provided, however, that in the event
that such payment received by the Swingline Lender is required to be returned,
such Revolving Lender will return to the Swingline Lender any portion thereof
previously distributed to it by the Swingline Lender.
(e) Each Revolving Lender's obligation to make the Loans referred to
in Section 2.5(b) and to purchase participating interests pursuant to Section
2.5(c) shall be absolute and unconditional and shall not be affected by any
circumstance, including (i) any setoff, counterclaim, recoupment, defense or
other right that such Revolving Lender or the Borrower may have against the
Swingline Lender, the Borrower or any other Person for any reason whatsoever;
(ii) the occurrence or continuance of a Default or an Event of Default or the
failure to satisfy any of the other conditions specified in Section 5; (iii) any
adverse change in the condition (financial or otherwise) of the Borrower; (iv)
any breach of this Agreement or any other Loan Document by the Borrower, any
other Loan Party or any other Revolving Lender; or (v) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
2.6 Commitment Fees, etc. (a) The Borrower agrees to pay to the
Funding Agent for the account of each Revolving Lender and each Tranche A Term
Lender a nonrefundable commitment fee for the period from and including the
Stage One Closing Date to the last day of the Revolving Commitment Period or the
date on which the Tranche A Term Commitments have been fully utilized or
terminated, as the case may be, computed at the Commitment Fee Rate on the
average daily amount of the Available Revolving Commitment or the unutilized
Tranche A Term Commitment, as the case may be, of such Lender during the period
for which payment is made, payable quarterly in arrears on the last day of each
March, June, September and December and on the Revolving Termination Date or the
date on which the Tranche A Term Commitments have been fully utilized or
terminated, as the case may be, commencing on the first of such dates to occur
after the date hereof.
(b) The Borrower agrees to pay to the Funding Agent the fees in the
amounts and on the dates previously agreed to in writing by the Borrower and the
Funding Agent.
2.7 Termination or Reduction of Revolving Commitments. The Borrower
shall have the right, upon not less than three Business Days' notice to the
Funding Agent, to terminate the Revolving Commitments or, from time to time, to
reduce the amount of the Revolving Commitments; provided that no such
termination or reduction of Revolving Commitments shall be permitted if, after
giving effect thereto and to any prepayments of the Revolving Loans and
Swingline Loans made on the effective date thereof, the Total Revolving
Extensions of Credit would exceed the Total Revolving Commitments. Any such
reduction shall be in an amount equal to $10,000,000, or a whole multiple of
$1,000,000 in excess thereof, shall reduce permanently the Revolving Commitments
then in effect and shall be applied pro rata to the scheduled reductions
thereof.
2.8 Optional Prepayments. The Borrower may at any time and from time
to time prepay the Loans, in whole or in part, without premium or penalty, upon
irrevocable notice delivered to the Funding Agent at least three Business Days
prior thereto in the case of Eurodollar Loans and at least one Business Day
prior thereto in the case of ABR Loans, which notice shall specify the date and
amount of prepayment and whether the prepayment is of Eurodollar Loans or ABR
Loans; provided, that if a Eurodollar Loan is prepaid on any day other than the
last day of the Interest Period applicable thereto, the Borrower shall also pay
any amounts owing pursuant to Section 2.18. Upon receipt of any such notice the
Funding Agent shall promptly notify each relevant Lender thereof. If any such
notice is given, the amount specified in such notice shall be due and payable on
the date specified therein, together with (except in the case of Revolving Loans
that are ABR Loans and Swingline Loans) accrued interest to
<PAGE> 33
28
such date on the amount prepaid. Partial prepayments of Term Loans and Revolving
Loans shall be in an aggregate principal amount of $5,000,000 or a whole
multiple of $1,000,000 in excess thereof. Partial prepayments of Swingline Loans
shall be in an aggregate principal amount of $1,000,000 or a whole multiple of
$500,000 in excess thereof.
2.9 Mandatory Prepayments. (a) Unless the Required Prepayment
Lenders shall otherwise agree, if any member of the Charter Group shall receive
any Net Cash Proceeds in respect of any issuance of its Equity Interests or
otherwise receive Net Cash Proceeds pursuant to Section 8(k), then, within two
Business Days after such receipt, the Borrower shall apply an amount equal to
50% of such Net Cash Proceeds (whether or not contributed to the Borrower or any
of its Subsidiaries) toward the prepayment of the Term Loans; provided that (i)
the foregoing requirement shall not apply to Paul Allen Contributions and (ii)
in the case of any offering or sale of Equity Interests consummated on or prior
to the date that is eighteen months after the Stage One Closing Date, the
foregoing requirement shall apply only to that portion, if any, of the aggregate
amount of the Net Cash Proceeds of all such offerings and sales consummated
during such period in excess of $500,000,000.
(b) Unless the Required Prepayment Lenders shall otherwise agree, if
on any date the Borrower or any of its Subsidiaries shall receive Net Cash
Proceeds from any Asset Sale or Recovery Event then, (i) unless a Reinvestment
Notice shall be delivered in respect thereof, such Net Cash Proceeds shall be
applied within two Business Days after the deadline by which such Reinvestment
Notice is otherwise required to be delivered in respect of such Asset Sale or
Recovery Event toward the prepayment of the Term Loans (provided that the
foregoing requirement shall not apply to the first $5,000,000 of aggregate Net
Cash Proceeds received after the Stage One Closing Date) and (ii) on each
Reinvestment Prepayment Date, an amount equal to the Reinvestment Prepayment
Amount with respect to the relevant Reinvestment Event shall be applied toward
the prepayment of the Term Loans.
(c) The application of any prepayment pursuant to this Section 2.9
shall be made, first, to ABR Loans and, second, to Eurodollar Loans. Each
prepayment of the Loans under this Section 2.9 shall be accompanied by accrued
interest to the date of such prepayment on the amount prepaid.
2.10 Conversion and Continuation Options. (a) The Borrower may elect
from time to time to convert Eurodollar Loans to ABR Loans by giving the Funding
Agent at least two Business Days' prior irrevocable notice of such election,
provided that any such conversion of Eurodollar Loans may only be made on the
last day of an Interest Period with respect thereto. The Borrower may elect from
time to time to convert ABR Loans to Eurodollar Loans by giving the Funding
Agent at least three Business Days' prior irrevocable notice of such election
(which notice shall specify the length of the initial Interest Period therefor),
provided that no ABR Loan may be converted into a Eurodollar Loan when any Event
of Default has occurred and is continuing. Upon receipt of any such notice the
Funding Agent shall promptly notify each relevant Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the expiration
of the then current Interest Period with respect thereto by the Borrower giving
irrevocable notice to the Funding Agent, in accordance with the applicable
provisions of the term "Interest Period" set forth in Section 1.1, of the length
of the next Interest Period to be applicable to such Loans, provided that (i) no
Eurodollar Loan may be continued as such when any Event of Default has occurred
and is continuing and (ii) if the Borrower shall fail to give any required
notice as described above in this paragraph, the relevant Eurodollar Loans shall
be automatically converted to Eurodollar Loans having a one-month Interest
Period on the last day of the then expiring Interest Period. Upon receipt of any
such notice the Funding Agent shall promptly notify each relevant Lender
thereof.
<PAGE> 34
29
2.11 Limitations on Eurodollar Tranches. Notwithstanding anything to
the contrary in this Agreement, all borrowings, conversions and continuations of
Eurodollar Loans hereunder and all selections of Interest Periods hereunder
shall be in such amounts and be made pursuant to such elections so that, (a)
after giving effect thereto, the aggregate principal amount of the Eurodollar
Loans comprising each Eurodollar Tranche shall be equal to $10,000,000 or a
whole multiple of $1,000,000 in excess thereof and (b) no more than fifteen
Eurodollar Tranches shall be outstanding at any one time.
2.12 Interest Rates and Payment Dates. (a) Each Eurodollar Loan
shall bear interest for each day during each Interest Period with respect
thereto at a rate per annum equal to the Eurodollar Rate determined for such day
plus the Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to
the ABR plus the Applicable Margin.
(c) (i) If all or a portion of the principal amount of any Loan or
Reimbursement Obligation shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), all outstanding Loans and Reimbursement
Obligations (whether or not overdue) shall bear interest at a rate per annum
equal to (x) in the case of the Loans, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section plus 2%
or (y) in the case of Reimbursement Obligations, the rate applicable to ABR
Loans under the Revolving Facility plus 2%, and (ii) if all or a portion of any
interest payable on any Loan or Reimbursement Obligation or any commitment fee
or other amount payable hereunder shall not be paid when due (whether at the
stated maturity, by acceleration or otherwise), such overdue amount shall bear
interest at a rate per annum equal to the rate then applicable to ABR Loans
under the relevant Facility plus 2% (or, in the case of any such other amounts
that do not relate to a particular Facility, the rate then applicable to ABR
Loans under the Revolving Facility plus 2%), in each case, with respect to
clauses (i) and (ii) above, from the date of such non-payment until such amount
is paid in full (as well after as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment
Date, provided that interest accruing pursuant to paragraph (c) of this Section
shall be payable from time to time on demand.
2.13 Computation of Interest and Fees. (a) Interest and fees payable
pursuant hereto shall be calculated on the basis of a 360-day year for the
actual days elapsed, except that, with respect to ABR Loans the rate of interest
on which is calculated on the basis of the Prime Rate, the interest thereon
shall be calculated on the basis of a 365- (or 366-, as the case may be) day
year for the actual days elapsed. The Funding Agent shall as soon as practicable
notify the Borrower and the relevant Lenders of each determination of a
Eurodollar Rate. Any change in the interest rate on a Loan resulting from a
change in the ABR or the Eurocurrency Reserve Requirements shall become
effective as of the opening of business on the day on which such change becomes
effective. The Funding Agent shall as soon as practicable notify the Borrower
and the relevant Lenders of the effective date and the amount of each such
change in interest rate.
(b) Each determination of an interest rate by the Funding Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrower and the Lenders in the absence of manifest error. The Funding Agent
shall, at the request of the Borrower, deliver to the Borrower a statement
showing the quotations used by the Funding Agent in determining any interest
rate pursuant to Section 2.12(a).
2.14 Inability to Determine Interest Rate. If prior to the first day
of any Interest Period:
<PAGE> 35
30
(a) the Funding Agent shall have determined (which determination
shall be conclusive and binding upon the Borrower) that, by reason of
circumstances affecting the relevant market, adequate and reasonable means
do not exist for ascertaining the Eurodollar Rate for such Interest
Period, or
(b) the Funding Agent shall have received notice from the Majority
Facility Lenders in respect of the relevant Facility that the Eurodollar
Rate determined or to be determined for such Interest Period will not
adequately and fairly reflect the cost to such Lenders (as conclusively
certified by such Lenders) of making or maintaining their affected Loans
during such Interest Period,
the Funding Agent shall give telecopy or telephonic notice thereof to the
Borrower and the relevant Lenders as soon as practicable thereafter. If such
notice is given (x) any Eurodollar Loans under the relevant Facility requested
to be made on the first day of such Interest Period shall be made as ABR Loans,
(y) any Loans under the relevant Facility that were to have been converted on
the first day of such Interest Period to Eurodollar Loans shall be continued as
ABR Loans and (z) any outstanding Eurodollar Loans under the relevant Facility
shall be converted, on the last day of the then-current Interest Period, to ABR
Loans. Until such notice has been withdrawn by the Funding Agent, no further
Eurodollar Loans under the relevant Facility shall be made or continued as such,
nor shall the Borrower have the right to convert Loans under the relevant
Facility to Eurodollar Loans.
2.15 Pro Rata Treatment and Payments. (a) Except in the case of the
Incremental Term Facility, each borrowing by the Borrower from the Lenders
hereunder, each payment by the Borrower on account of any commitment fee and any
reduction of the Commitments of the Lenders shall be made pro rata according to
the respective Tranche A Term Commitments, Tranche B Term Commitments or
Revolving Commitments, as the case may be, of the relevant Lenders.
(b) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Term Loans shall be made pro rata
according to the respective outstanding principal amounts of the Term Loans then
held by the Term Lenders (except as otherwise provided in Section 2.15(d)). The
amount of each principal prepayment of the Term Loans shall be applied to reduce
the then remaining installments of the Tranche A Term Loans, Tranche B Term
Loans and Incremental Term Loans, as the case may be, pro rata based upon the
then remaining principal amount thereof. Amounts prepaid on account of the Term
Loans may not be reborrowed.
(c) Each payment (including each prepayment) by the Borrower on
account of principal of and interest on the Revolving Loans shall be made pro
rata according to the respective outstanding principal amounts of the Revolving
Loans then held by the Revolving Lenders.
(d) Notwithstanding anything to the contrary in this Agreement, with
respect to the amount of any mandatory prepayment of the Term Loans pursuant to
Section 2.9 and, if the Borrower so elects in its sole discretion, any optional
prepayment of the Term Loans pursuant to Section 2.8, that in any such case is
allocated to Tranche B Term Loans or Incremental Term Loans (such amounts, the
"Tranche B Prepayment Amount" and the "Incremental Prepayment Amount",
respectively), at any time when Tranche A Term Loans remain outstanding, the
Borrower will (or, in the case of optional prepayments, may), in lieu of
applying such amount to the prepayment of Tranche B Term Loans and Incremental
Term Loans, respectively, on the date specified in Section 2.9 or 2.8, as the
case may be, for such prepayment, give the Funding Agent telephonic notice
(promptly confirmed in writing) requesting that the Funding Agent prepare and
provide to each Tranche B Lender and
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Incremental Term Lender a notice (each, a "Prepayment Option Notice") as
described below. As promptly as practicable after receiving such notice from the
Borrower, the Funding Agent will send to each Tranche B Lender and Incremental
Term Lender a Prepayment Option Notice, which shall be in the form of Exhibit G,
and shall include an offer by the Borrower to prepay on the date (each a
"Prepayment Date") that is 10 Business Days after the date of the Prepayment
Option Notice, the relevant Term Loans of such Lender by an amount equal to the
portion of the Prepayment Amount indicated in such Lender's Prepayment Option
Notice as being applicable to such Lender's Tranche B Term Loans or Incremental
Term Loans, as the case may be. On the Prepayment Date, (i) the Borrower shall
pay to the relevant Tranche B Lenders and Incremental Term Lenders the aggregate
amount necessary to prepay that portion of the outstanding relevant Term Loans
in respect of which such Lenders have accepted prepayment as described above,
(ii) the Borrower shall pay to the Tranche A Lenders an amount equal to 50% (or,
in the case of optional prepayments, such percentage as shall be determined by
the Borrower in its sole discretion) of the portion of the Tranche B Prepayment
Amount and the Incremental Prepayment Amount not accepted by the relevant
Lenders, and such amount shall be applied to the prepayment of the Tranche A
Term Loans, and (iii) the Borrower shall be entitled to retain the remaining
portion of the Tranche B Prepayment Amount and the Incremental Prepayment Amount
not accepted by the relevant Lenders.
(e) All payments (including prepayments) to be made by the Borrower
hereunder, whether on account of principal, interest, fees or otherwise, shall
be made without setoff or counterclaim and shall be made prior to 12:00 Noon,
Dallas time, on the due date thereof to the Funding Agent, for the account of
the Lenders, at the Funding Office, in Dollars and in immediately available
funds. The Funding Agent shall distribute such payments to the Lenders promptly
upon receipt in like funds as received. If any payment hereunder (other than
payments on the Eurodollar Loans) becomes due and payable on a day other than a
Business Day, such payment shall be extended to the next succeeding Business
Day. If any payment on a Eurodollar Loan becomes due and payable on a day other
than a Business Day, the maturity thereof shall be extended to the next
succeeding Business Day unless the result of such extension would be to extend
such payment into another calendar month, in which event such payment shall be
made on the immediately preceding Business Day. In the case of any extension of
any payment of principal pursuant to the preceding two sentences, interest
thereon shall be payable at the then applicable rate during such extension.
(f) Unless the Funding Agent shall have been notified in writing by
any Lender prior to a borrowing that such Lender will not make the amount that
would constitute its share of such borrowing available to the Funding Agent, the
Funding Agent may assume that such Lender is making such amount available to the
Funding Agent, and the Funding Agent may, in reliance upon such assumption, make
available to the Borrower a corresponding amount. If such amount is not made
available to the Funding Agent by the required time on the Borrowing Date
therefor, such Lender shall pay to the Funding Agent, on demand, such amount
with interest thereon at a rate equal to the daily average Federal Funds
Effective Rate for the period until such Lender makes such amount immediately
available to the Funding Agent. A certificate of the Funding Agent submitted to
any Lender with respect to any amounts owing under this paragraph shall be
conclusive in the absence of manifest error. If such Lender's share of such
borrowing is not made available to the Funding Agent by such Lender within three
Business Days of such Borrowing Date, the Funding Agent shall also be entitled
to recover such amount with interest thereon at the rate per annum applicable to
ABR Loans under the relevant Facility, on demand, from the Borrower.
(g) Unless the Funding Agent shall have been notified in writing by
the Borrower prior to the date of any payment being made hereunder that the
Borrower will not make such payment to the Funding Agent, the Funding Agent may
assume that the Borrower is making such payment, and the Funding Agent may, but
shall not be required to, in reliance upon such assumption, make available to
the Lenders their respective pro rata shares of a corresponding amount. If such
payment is not made to the Funding Agent by the Borrower within three Business
Days of such required date, the Funding Agent shall be entitled to recover, on
demand, from each Lender to which any amount which was made available pursuant
to the preceding sentence, such amount with interest thereon at the rate per
annum
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equal to the daily average Federal Funds Effective Rate. Nothing herein shall be
deemed to limit the rights of the Funding Agent or any Lender against the
Borrower.
2.16 Requirements of Law. (a) If the adoption of or any change in
any Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority made
subsequent to the date hereof:
(i) shall subject any Lender to any tax of any kind whatsoever
with respect to this Agreement, any Letter of Credit, any Application or
any Eurodollar Loan made by it, or change the basis of taxation of
payments to such Lender in respect thereof (except for Non-Excluded Taxes
covered by Section 2.17 and changes in the rate of tax on the overall net
income of such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, deposits or other liabilities in or for the account of, advances,
loans or other extensions of credit by, or any other acquisition of funds
by, any office of such Lender that is not otherwise included in the
determination of the Eurodollar Rate hereunder; or
(iii) shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender,
by an amount that such Lender deems to be material, of making, converting into,
continuing or maintaining Eurodollar Loans or issuing or participating in
Letters of Credit, or to reduce any amount receivable hereunder in respect
thereof, then, in any such case, the Borrower shall promptly pay such Lender,
upon its demand, any additional amounts necessary to compensate such Lender for
such increased cost or reduced amount receivable. If any Lender becomes entitled
to claim any additional amounts pursuant to this paragraph, it shall promptly
notify the Borrower (with a copy to the Funding Agent) of the event by reason of
which it has become so entitled.
(b) If any Lender shall have determined that the adoption of or any
change in any Requirement of Law regarding capital adequacy or in the
interpretation or application thereof or compliance by such Lender or any
corporation controlling such Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) from any Governmental
Authority made subsequent to the date hereof shall have the effect of reducing
the rate of return on such Lender's or such corporation's capital as a
consequence of its obligations hereunder or under or in respect of any Letter of
Credit to a level below that which such Lender or such corporation could have
achieved but for such adoption, change or compliance (taking into consideration
such Lender's or such corporation's policies with respect to capital adequacy)
by an amount deemed by such Lender to be material, then from time to time, after
submission by such Lender to the Borrower (with a copy to the Funding Agent) of
a written request therefor, the Borrower shall pay to such Lender such
additional amount or amounts as will compensate such Lender for such reduction;
provided that the Borrower shall not be required to compensate a Lender pursuant
to this paragraph for any amounts incurred more than six months prior to the
date that such Lender notifies the Borrower of such Lender's intention to claim
compensation therefor; and provided further that, if the circumstances giving
rise to such claim have a retroactive effect, then such six-month period shall
be extended to include the period of such retroactive effect.
(c) A certificate as to any additional amounts payable pursuant to
this Section submitted by any Lender to the Borrower (with a copy to the Funding
Agent) shall be conclusive in the absence of
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33
manifest error. The obligations of the Borrower pursuant to this Section shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder.
2.17 Taxes. (a) All payments made by the Borrower under this
Agreement shall be made free and clear of, and without deduction or withholding
for or on account of, any present or future income, stamp or other taxes,
levies, imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any Governmental
Authority, excluding net income taxes and franchise taxes (imposed in lieu of
net income taxes) imposed on the Funding Agent or any Lender as a result of a
present or former connection between the Funding Agent or such Lender and the
jurisdiction of the Governmental Authority imposing such tax or any political
subdivision or taxing authority thereof or therein (other than any such
connection arising solely from the Funding Agent or such Lender having executed,
delivered or performed its obligations or received a payment under, or enforced,
this Agreement or any other Loan Document). If any such non-excluded taxes,
levies, imposts, duties, charges, fees, deductions or withholdings
("Non-Excluded Taxes") or Other Taxes are required to be withheld from any
amounts payable to the Funding Agent or any Lender hereunder, the amounts so
payable to the Funding Agent or such Lender shall be increased to the extent
necessary to yield to the Funding Agent or such Lender (after payment of all
Non-Excluded Taxes and Other Taxes) interest or any such other amounts payable
hereunder at the rates or in the amounts specified in this Agreement, provided,
however, that the Borrower shall not be required to increase any such amounts
payable to any Lender with respect to any Non-Excluded Taxes (i) that are
attributable to such Lender's failure to comply with the requirements of
paragraph (d) or (e) of this Section or (ii) that are United States withholding
taxes imposed on amounts payable to such Lender at the time the Lender becomes a
party to this Agreement, except to the extent that such Lender's assignor (if
any) was entitled, at the time of assignment, to receive additional amounts from
the Borrower with respect to such Non-Excluded Taxes pursuant to this paragraph.
(b) In addition, the Borrower shall pay any Other Taxes to the
relevant Governmental Authority in accordance with applicable law.
(c) Whenever any Non-Excluded Taxes or Other Taxes are payable by
the Borrower, as promptly as possible thereafter the Borrower shall send to the
Funding Agent for its own account or for the account of the relevant Lender, as
the case may be, a certified copy of an original official receipt received by
the Borrower showing payment thereof. If the Borrower fails to pay any
Non-Excluded Taxes or Other Taxes when due to the appropriate taxing authority
or fails to remit to the Funding Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Funding Agent and the
Lenders for any incremental taxes, interest or penalties that may become payable
by the Funding Agent or any Lender as a result of any such failure.
(d) Each Lender (or Transferee) that is not a citizen or resident of
the United States of America, a corporation, partnership or other entity created
or organized in or under the laws of the United States of America (or any
jurisdiction thereof), or any estate or trust that is subject to federal income
taxation regardless of the source of its income (a "Non-U.S. Lender") shall
deliver to the Borrower and the Funding Agent (or, in the case of a Participant,
to the Lender from which the related participation shall have been purchased)
two copies of either U.S. Internal Revenue Service Form 1001 or Form 4224, or,
in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a statement substantially in the form of
Exhibit H and a Form W-8, or any subsequent versions thereof or successors
thereto, properly completed and duly executed by such Non-U.S. Lender claiming
complete exemption from U.S. federal withholding tax on all payments by the
Borrower under this Agreement and the other Loan Documents. Such forms shall be
delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement (or, in the case of any Participant, on or before the date such
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Participant purchases the related participation). In addition, each Non-U.S.
Lender shall deliver such forms promptly upon the obsolescence or invalidity of
any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender
shall promptly notify the Borrower at any time it determines that it is no
longer in a position to provide any previously delivered certificate to the
Borrower (or any other form of certification adopted by the U.S. taxing
authorities for such purpose). Notwithstanding any other provision of this
paragraph, a Non-U.S. Lender shall not be required to deliver any form pursuant
to this paragraph that such Non-U.S. Lender is not legally able to deliver.
(e) A Lender that is entitled to an exemption from non-U.S.
withholding tax under the law of the jurisdiction in which the Borrower is
located, or any treaty to which such jurisdiction is a party, with respect to
payments under this Agreement shall deliver to the Borrower (with a copy to the
Funding Agent), at the time or times prescribed by applicable law or reasonably
requested by the Borrower, such properly completed and executed documentation
prescribed by applicable law as will permit such payments to be made without
withholding, provided that such Lender is legally entitled to complete, execute
and deliver such documentation and in such Lender's judgment such completion,
execution or submission would not materially prejudice the legal position of
such Lender.
(f) The agreements in this Section shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder.
2.18 Indemnity. The Borrower agrees to indemnify each Lender and to
hold each Lender harmless from any loss or expense that such Lender may sustain
or incur as a consequence of (a) default by the Borrower in making a borrowing
of, conversion into or continuation of Eurodollar Loans after the Borrower has
given a notice requesting the same in accordance with the provisions of this
Agreement, (b) default by the Borrower in making any prepayment of or conversion
from Eurodollar Loans after the Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Loans on a day that is not the last day of an Interest
Period with respect thereto. Such indemnification may include an amount equal to
the excess, if any, of (i) the amount of interest that would have accrued on the
amount so prepaid, or not so borrowed, converted or continued, for the period
from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of such Interest Period (or, in the case of a failure
to borrow, convert or continue, the Interest Period that would have commenced on
the date of such failure) in each case at the applicable rate of interest for
such Loans provided for herein (excluding, however, the Applicable Margin
included therein, if any) over (ii) the amount of interest (as reasonably
determined by such Lender) that would have accrued to such Lender on such amount
by placing such amount on deposit for a comparable period with leading banks in
the interbank eurodollar market. A certificate as to any amounts payable
pursuant to this Section submitted to the Borrower by any Lender shall be
conclusive in the absence of manifest error. This covenant shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder.
2.19 Change of Lending Office. Each Lender agrees that, upon the
occurrence of any event giving rise to the operation of Section 2.16 or 2.17(a)
with respect to such Lender, it will, if requested by the Borrower, use
reasonable efforts (subject to overall policy considerations of such Lender) to
designate another lending office for any Loans affected by such event with the
object of avoiding the consequences of such event; provided, that such
designation is made on terms that, in the sole judgment of such Lender, cause
such Lender and its lending office(s) to suffer no economic, legal or regulatory
disadvantage, and provided, further, that nothing in this Section shall affect
or postpone any of the obligations of any Borrower or the rights of any Lender
pursuant to Section 2.16 or 2.17(a).
2.20 Replacement of Lenders. The Borrower shall be permitted to
replace any Lender that (a) requests reimbursement for amounts owing pursuant to
Section 2.16 or 2.17(a) or (b) defaults in
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its obligation to make Loans hereunder, with a replacement financial
institution; provided that (i) such replacement does not conflict with any
Requirement of Law, (ii) no Event of Default shall have occurred and be
continuing at the time of such replacement, (iii) prior to any such replacement,
such Lender shall have taken no action under Section 2.19 which has eliminated
the continued need for payment of amounts owing pursuant to Section 2.16 or
2.17(a), (iv) the replacement financial institution shall purchase, at par, all
Loans and other amounts owing to such replaced Lender on or prior to the date of
replacement, (v) the Borrower shall be liable to such replaced Lender under
Section 2.18 if any Eurodollar Loan owing to such replaced Lender shall be
purchased other than on the last day of the Interest Period relating thereto,
(vi) the replacement financial institution, if not already a Lender, shall be
reasonably satisfactory to the Administrative Agents, (vii) the replaced Lender
shall be obligated to make such replacement in accordance with the provisions of
Section 10.6 (provided that the Borrower shall be obligated to pay the
registration and processing fee referred to therein), (viii) until such time as
such replacement shall be consummated, the Borrower shall pay all additional
amounts (if any) required pursuant to Section 2.16 or 2.17(a), as the case may
be, and (ix) any such replacement shall not be deemed to be a waiver of any
rights that the Borrower, the Agents or any other Lender shall have against the
replaced Lender.
SECTION 3. LETTERS OF CREDIT
3.1 L/C Commitment. (a) Subject to the terms and conditions hereof,
each Issuing Lender, in reliance on the agreements of the other Revolving
Lenders set forth in Section 3.4(a), agrees to issue letters of credit ("Letters
of Credit") for the account of the Borrower on any Business Day during the
Revolving Commitment Period in such form as may be approved from time to time by
such Issuing Lender; provided that no Issuing Lender shall issue any Letter of
Credit if, after giving effect to such issuance, (i) the L/C Obligations would
exceed the L/C Commitment or (ii) the aggregate amount of the Available
Revolving Commitments would be less than zero. Each Letter of Credit shall (i)
be denominated in Dollars, (ii) unless otherwise agreed by the Funding Agent and
the relevant Issuing Lender, have a face amount of at least $500,000 and (iii)
expire no later than the earlier of (x) the first anniversary of its date of
issuance and (y) the date that is five Business Days prior to the Revolving
Termination Date, provided that any Letter of Credit with a one-year term may
provide for the renewal thereof for additional one-year periods (which shall in
no event extend beyond the date referred to in clause (y) above).
(b) No Issuing Lender shall be obligated to issue any Letter of
Credit hereunder if such issuance would conflict with, or cause such Issuing
Lender or any L/C Participant to exceed any limits imposed by, any applicable
Requirement of Law.
3.2 Procedure for Issuance of Letter of Credit. The Borrower may
from time to time request that any Issuing Lender issue a Letter of Credit by
delivering to such Issuing Lender an Application therefor, completed to the
satisfaction of such Issuing Lender, and such other certificates, documents and
other papers and information as such Issuing Lender may request. Upon receipt of
any Application, the relevant Issuing Lender will 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
promptly issue the Letter of Credit requested thereby (but in no event shall
such Issuing Lender be required to issue any Letter of Credit earlier than three
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 agreed to by such Issuing Lender and the Borrower. The relevant
Issuing Lender shall furnish a copy of such Letter of Credit to the Borrower
promptly following the issuance thereof. The relevant Issuing Lender shall
promptly furnish to the Funding Agent, which shall in turn promptly furnish to
the Lenders, notice of the issuance of each Letter of Credit (including the
amount thereof).
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3.3 Fees and Other Charges. (a) The Borrower will pay a fee on all
outstanding Letters of Credit at a per annum rate equal to the Applicable Margin
then in effect with respect to Eurodollar Loans under the Revolving Facility,
shared ratably among the Revolving Lenders and payable quarterly in arrears on
each L/C Fee Payment Date after the issuance date. In addition, the Borrower
shall pay to the relevant Issuing Lender for its own account a fronting fee of
0.25% per annum on the undrawn and unexpired amount of each Letter of Credit
issued by such Issuing Lender, payable quarterly in arrears on each L/C Fee
Payment Date after the Issuance Date.
(b) In addition to the foregoing fees, the Borrower shall pay or
reimburse the relevant Issuing Lender for such normal and customary costs and
expenses as are incurred or charged by such Issuing Lender in issuing,
negotiating, effecting payment under, amending or otherwise administering any
Letter of Credit.
3.4 L/C Participations. (a) Each Issuing Lender irrevocably agrees
to grant and hereby grants to each L/C Participant, and, to induce the Issuing
Lenders to issue Letters of Credit hereunder, each L/C Participant irrevocably
agrees to accept and purchase and hereby accepts and purchases from each 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 Revolving Percentage in each Issuing Lender's obligations and
rights under each Letter of Credit issued by it hereunder and the amount of each
draft paid by such Issuing Lender thereunder. Each L/C Participant
unconditionally and irrevocably agrees with each Issuing Lender that, if a draft
is paid under any Letter of Credit issued by such Issuing Lender for which such
Issuing Lender is not reimbursed in full by the Borrower in accordance with the
terms of this Agreement, such L/C Participant shall pay to such Issuing Lender
upon demand an amount equal to such L/C Participant's Revolving Percentage of
the amount of such draft, or any part thereof, that is not so reimbursed.
(b) If any amount required to be paid by any L/C Participant to any
Issuing Lender pursuant to Section 3.4(a) in respect of any unreimbursed portion
of any payment made by such Issuing Lender under any Letter of Credit is paid to
such Issuing Lender within three Business Days after the date such payment is
due, such L/C Participant shall pay to such Issuing Lender on demand an amount
equal to the product of (i) such amount, times (ii) the daily average Federal
Funds Effective Rate during the period from and including the date such payment
is required to the date on which such payment is immediately available to such
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. If any
such amount required to be paid by any L/C Participant pursuant to Section
3.4(a) is not made available to the relevant Issuing Lender by such L/C
Participant within three Business Days after the date such payment is due, such
Issuing Lender shall be entitled to recover from such L/C Participant, on
demand, such amount with interest thereon calculated from such due date at the
rate per annum applicable to ABR Loans under the Revolving Facility. A
certificate of the relevant Issuing Lender submitted to any L/C Participant with
respect to any amounts owing under this Section shall be conclusive in the
absence of manifest error.
(c) Whenever, at any time after the relevant Issuing Lender has made
payment under any Letter of Credit and has received from any L/C Participant its
pro rata share of such payment in accordance with Section 3.4(a), such Issuing
Lender receives any payment related to such Letter of Credit (whether directly
from the Borrower or otherwise, including proceeds of collateral applied thereto
by such Issuing Lender), or any payment of interest on account thereof, such
Issuing Lender will distribute to such L/C Participant its pro rata share
thereof; provided, however, that in the event that any such payment received by
such Issuing Lender shall be required to be returned by such Issuing Lender,
such L/C Participant shall return to such Issuing Lender the portion thereof
previously distributed by such Issuing Lender to it.
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3.5 Reimbursement Obligation of the Borrower. The Borrower agrees to
reimburse the relevant Issuing Lender on each date on which such Issuing Lender
notifies the Borrower of the date and amount of a draft presented under any
Letter of Credit and paid by such Issuing Lender for the amount of (a) such
draft so paid and (b) any taxes, fees, charges or other costs or expenses
incurred by such Issuing Lender in connection with such payment. Each such
payment shall be made to the relevant Issuing Lender 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 Borrower under this Section from the
date such amounts become payable (whether at stated maturity, by acceleration or
otherwise) until payment in full at the rate set forth in (i) until the second
Business Day following the date of the applicable drawing, Section 2.12(b) and
(ii) thereafter, Section 2.12(c).
3.6 Obligations Absolute. The Borrower's obligations under this
Section 3 shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment that the
Borrower may have or have had against any Issuing Lender, any beneficiary of a
Letter of Credit or any other Person. The Borrower also agrees with each Issuing
Lender that no Issuing Lender shall be responsible for, and the Borrower's
Reimbursement Obligations 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 Borrower 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 the Borrower against any
beneficiary of such Letter of Credit or any such transferee. No Issuing Lender
shall 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 found by a
final and nonappealable decision of a court of competent jurisdiction to have
resulted from the gross negligence or willful misconduct of the relevant Issuing
Lender. The Borrower agrees that any action taken or omitted by any 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 Commercial
Code of the State of New York, shall be binding on the Borrower and shall not
result in any liability of any Issuing Lender to the Borrower.
3.7 Letter of Credit Payments. If any draft shall be presented for
payment under any Letter of Credit, the relevant Issuing Lender shall promptly
notify the Borrower of the date and amount thereof. The responsibility of each
Issuing Lender to the Borrower 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 substantially in conformity with such
Letter of Credit.
3.8 Applications. To the extent that any provision of any
Application related to any Letter of Credit is inconsistent with the provisions
of this Section 3, the provisions of this Section 3 shall apply.
SECTION 4. REPRESENTATIONS AND WARRANTIES
To induce the Agents and the Lenders to enter into this Agreement
and to make the Loans and issue or participate in the Letters of Credit,
Holdings and the Borrower hereby jointly and severally represent and warrant to
the Agents and each Lender that:
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4.1 Financial Condition. (a) The unaudited pro forma combined
balance sheet data and statement of operations of Charter Holdings (the "Pro
Forma Financial Statements") are based on the financial statements of Charter
Holdings, the CCA Group (as defined in Schedule 4.1) and CharterComm Holdings,
L.P. identified on Schedule 4.1, as adjusted to illustrate the estimated effect
of the following transactions as if they had occurred on January 1, 1998 for the
statement of operations and on December 31, 1998 for the balance sheet data:
certain acquisitions made during 1998 by Charter and Marcus, the combination of
Charter Holdings and Marcus Holdings, the acquisitions of the Pending Acquired
Entities and the making of the Loans and the issuance of the Senior Notes and
the use of proceeds thereof. The Pro Forma Financial Statements have been
prepared based on the best information available to Holdings and the Borrower as
of the date of delivery thereof, and present fairly on a pro forma basis the
financial condition of Charter Holdings, Marcus Holdings, the Pending Acquired
Entities and their respective consolidated Subsidiaries for the 1998 fiscal
year, and as at December 31, 1998, as the case may be.
(b) The consolidated financial statements of Marcus Holdings and
CharterComm Holdings, L.P., and the combined financial statements of Charter
Holdings and the CCA Group, all as identified on Schedule 4.1, have been
reported on and accompanied by an unqualified report of the independent public
accountant identified on Schedule 4.1. With respect to the financial statements
identified on Schedule 4.1, the audited balance sheets present fairly the
consolidated or combined (as the case may be) financial condition of such Person
as at the date indicated, and the consolidated or combined (as the case may be)
results of its operations and cash flows for the periods indicated. All such
financial statements, including the related schedules and notes thereto, have
been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as approved by the aforementioned firm of accountants
and disclosed therein). Holdings, the Borrower and its Subsidiaries do not have
any material Guarantee Obligations, contingent liabilities and liabilities for
taxes, or any long-term leases or unusual forward or long-term commitments,
including any interest rate or foreign currency swap or exchange transaction or
other obligation in respect of derivatives, that are not reflected in the most
recent financial statements referred to in this paragraph. During the period
from December 31, 1998 to and including the date hereof there has been no
Disposition by Holdings, the Borrower or any of its Subsidiaries of any material
part of its business or property.
4.2 No Change. Since December 31, 1998 there has been no event,
development or circumstance that has had or could reasonably be expected to have
a Material Adverse Effect.
4.3 Existence; Compliance with Law. Each of Holdings, the Borrower
and its Subsidiaries (a) is duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization, (b) has the
power and authority, and the legal right, to own and operate its property, to
lease the property it operates as lessee and to conduct the business in which it
is currently engaged, (c) is duly qualified as a foreign entity and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such qualification
and (d) is in compliance with all Requirements of Law, in each case with respect
to clauses (c) and (d), except as could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
4.4 Power; Authorization; Enforceable Obligations. Each Loan Party
has the power and authority, and the legal right, to make, deliver and perform
the Loan Documents to which it is a party and, in the case of the Borrower, to
borrow hereunder. Each Loan Party has taken all necessary action to authorize
the execution, delivery and performance of the Loan Documents to which it is a
party and, in the case of the Borrower, to authorize the borrowings on the terms
and conditions of this Agreement. No consent or authorization of, filing with,
notice to or other act by or in respect of, any Governmental Authority or any
other Person is required in connection with the borrowings hereunder or with the
execution, delivery, performance, validity or enforceability of this Agreement
or any of the Loan Documents, except the filings referred to in Section 4.20.
Each Loan Document has been duly executed
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39
and delivered on behalf of each Loan Party party thereto. This Agreement
constitutes, and each other Loan Document upon execution will constitute, a
legal, valid and binding obligation of each Loan Party party thereto,
enforceable against each such Loan Party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
4.5 No Legal Bar. The execution, delivery and performance of this
Agreement and the other Loan Documents, the issuance of Letters of Credit, the
borrowings hereunder and the use of the proceeds thereof will not violate any
Requirement of Law or any material Contractual Obligation of Holdings, the
Borrower or any of its Subsidiaries and will not result in, or require, the
creation or imposition of any Lien on any of their respective properties or
revenues pursuant to any Requirement of Law or any such Contractual Obligation
(other than the Liens created by the Guarantee and Collateral Agreement).
4.6 Litigation. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the knowledge
of Holdings or the Borrower, threatened by or against Holdings, the Borrower or
any of its Subsidiaries or against any of their respective properties or
revenues (a) with respect to any of the Loan Documents or any of the
transactions contemplated hereby or thereby, or (b) that could reasonably be
expected to have a Material Adverse Effect.
4.7 No Default. Neither Holdings, the Borrower nor any of its
Subsidiaries is in default under or with respect to any of its Contractual
Obligations in any respect that could reasonably be expected to have a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
4.8 Ownership of Property; Liens. Each of Holdings, the Borrower and
its Subsidiaries has title in fee simple to, or a valid leasehold interest in,
all its material real property, and good title to, or a valid leasehold interest
in, all its other material property, and none of such property is subject to any
Lien except as permitted by Section 7.3.
4.9 Intellectual Property. Holdings, the Borrower and each of its
Subsidiaries owns, or is licensed to use, all material Intellectual Property
necessary for the conduct of its business as currently conducted. No material
claim has been asserted and is pending by any Person challenging or questioning
the use, validity or effectiveness of any material Intellectual Property owned
or licensed by Holdings, the Borrower or any of its Subsidiaries, nor does
Holdings or the Borrower know of any valid basis for any such claim. The use of
Intellectual Property by Holdings, the Borrower and its Subsidiaries does not
infringe on the rights of any Person in any material respect.
4.10 Taxes. Each of Holdings, the Borrower and each of its
Subsidiaries has filed or caused to be filed all federal, state and other
material tax returns that are required to be filed and has paid all taxes shown
to be due and payable on said returns or on any assessments made against it or
any of its property and all other taxes, fees or other charges imposed on it or
any of its property by any Governmental Authority (other than any the amount or
validity of that are currently being contested in good faith by appropriate
proceedings and with respect to which reserves in conformity with GAAP have been
provided on the books of Holdings, the Borrower or its Subsidiaries, as the case
may be); no tax Lien has been filed, and, to the knowledge of Holdings and the
Borrower, no claim is being asserted, with respect to any such tax, fee or other
charge.
4.11 Federal Regulations. No part of the proceeds of any Loans will
be used for "buying" or "carrying" any "margin stock" within the respective
meanings of each of the quoted terms
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40
under Regulation U as now and from time to time hereafter in effect or for any
purpose that violates the provisions of the Regulations of the Board. If
requested by any Lender or the Funding Agent, the Borrower will furnish to the
Funding Agent and each Lender a statement to the foregoing effect in conformity
with the requirements of FR Form G-3 or FR Form U-1, as applicable, referred to
in Regulation U.
4.12 Labor Matters. Except as, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect: (a) there are no
strikes or other labor disputes against Holdings, the Borrower or any of its
Subsidiaries pending or, to the knowledge of Holdings or the Borrower,
threatened; (b) hours worked by and payment made to employees of Holdings, the
Borrower and its Subsidiaries have not been in violation of the Fair Labor
Standards Act or any other applicable Requirement of Law dealing with such
matters; and (c) all payments due from Holdings, the Borrower or any of its
Subsidiaries on account of employee health and welfare insurance have been paid
or accrued as a liability on the books of Holdings, the Borrower or the relevant
Subsidiary.
4.13 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan, and each Plan
has complied in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has occurred, and no Lien
in favor of the PBGC or a Plan has arisen, during such five-year period. The
present value of all accrued benefits under each Single Employer Plan (based on
those assumptions used to fund such Plans) did not, as of the last annual
valuation date prior to the date on which this representation is made or deemed
made, exceed the value of the assets of such Plan allocable to such accrued
benefits by a material amount. Neither the Borrower nor any Commonly Controlled
Entity has had a complete or partial withdrawal from any Multiemployer Plan that
has resulted or could reasonably be expected to result in a material liability
under ERISA, and neither the Borrower nor, to the Borrower's knowledge, any
Commonly Controlled Entity would become subject to any material liability under
ERISA if the Borrower or any such Commonly Controlled Entity were to withdraw
completely from all Multiemployer Plans as of the valuation date most closely
preceding the date on which this representation is made or deemed made. No such
Multiemployer Plan of Holdings or any of its Subsidiaries nor, to the Borrower's
knowledge, any other Multiemployer Plan, is in Reorganization or Insolvent.
4.14 Investment Company Act; Other Regulations. No Loan Party is an
"investment company", or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended. No Loan
Party is subject to regulation under any Requirement of Law (other than
Regulation X of the Board) that limits its ability to incur Indebtedness.
4.15 Subsidiaries. Except as disclosed to the Funding Agent by the
Borrower in writing from time to time after the Stage One Closing Date, (a)
Schedule 4.15 sets forth the name and jurisdiction of organization of Holdings
and each of its Subsidiaries and, as to each such Subsidiary, the percentage of
each class of Equity Interests owned by any Loan Party and (b) except as set
forth on Schedule 4.15, there are no outstanding subscriptions, options,
warrants, calls, rights or other agreements or commitments of any nature
relating to any Equity Interests of the Borrower or any of its Subsidiaries,
except as created by the Loan Documents.
4.16 Use of Proceeds. The proceeds of the Loans, and the Letters of
Credit, shall be used for general purposes, including to finance permitted
Investments.
4.17 Environmental Matters. Except as, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect:
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41
(a) the facilities and properties owned, leased or operated by
Holdings, the Borrower or any of its Subsidiaries (the "Properties") do
not contain, and have not previously contained, any Materials of
Environmental Concern in amounts or concentrations or under circumstances
that constitute or constituted a violation of, or could give rise to
liability under, any Environmental Law;
(b) neither Holdings, the Borrower nor any of its Subsidiaries has
received or is aware of 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 the
Properties or the business operated by Holdings, the Borrower or any of
its Subsidiaries (the "Business"), nor does Holdings or the Borrower have
knowledge or reason to believe that any such notice will be received or is
being threatened;
(c) Materials of Environmental Concern have not been transported or
disposed of from the Properties in violation of, or in a manner or to a
location that could give rise to liability under, any Environmental Law,
nor have any Materials of Environmental Concern been generated, treated,
stored or disposed of at, on or under any of the Properties in violation
of, or in a manner that could give rise to liability under, any applicable
Environmental Law;
(d) no judicial proceeding or governmental or administrative action
is pending or, to the knowledge of Holdings and the Borrower, threatened,
under any Environmental Law to which Holdings, the Borrower or any
Subsidiary is or will be named as a party with respect to the Properties
or the Business, 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 the Properties or the Business;
(e) there has been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from or
related to the operations of Holdings, the Borrower or any Subsidiary in
connection with the Properties or otherwise in connection with the
Business, in violation of or in amounts or in a manner that could give
rise to liability under Environmental Laws;
(f) the Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance, with all
applicable Environmental Laws, and there is no contamination at, under or
about the Properties or violation of any Environmental Law with respect to
the Properties or the Business; and
(g) neither Holdings, the Borrower nor any of its Subsidiaries has
assumed any liability of any other Person under Environmental Laws.
4.18 Certain Cable Television Matters. Except as, in the aggregate,
could not reasonably be expected to result in a Material Adverse Effect:
(a) (i) Holdings, the Borrower and its Subsidiaries possess all
Authorizations necessary to own, operate and construct the CATV Systems or
otherwise for the operations of their businesses and are not in violation
thereof and (ii) all such Authorizations 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 Authorization;
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(b) neither Holdings, the Borrower nor any of its Subsidiaries is in
violation of any duty or obligation required by the Communications Act of
1934, as amended, or any FCC rule or regulation applicable to the
operation of any portion of any of the CATV Systems;
(c) (i) there is not pending or, to the best knowledge of Holdings
or the Borrower, threatened, any action by the FCC to revoke, cancel,
suspend or refuse to renew any FCC License held by Holdings, the Borrower
or any of its Subsidiaries and (ii) there is not pending or, to the best
knowledge of Holdings or the Borrower, threatened, any action by the FCC
to modify adversely, revoke, cancel, suspend or refuse to renew any other
Authorization; and
(d) there is not issued or outstanding or, to the best knowledge of
Holdings or the Borrower, threatened, any notice of any hearing, violation
or complaint against Holdings, the Borrower or any of its Subsidiaries
with respect to the operation of any portion of the CATV Systems and
neither Holdings nor the Borrower has any knowledge that any Person
intends to contest renewal of any Authorization.
4.19 Accuracy of Information, etc. No statement or information
contained in this Agreement, any other Loan Document, the Confidential
Information Memorandum or any other document, certificate or statement furnished
by or on behalf of any Loan Party to the Agents or the Lenders, or any of them,
for use in connection with the transactions contemplated by this Agreement or
the other Loan Documents, as supplemented from time to time prior to the date
this representation and warranty is made or deemed made, contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained herein or therein not misleading. The projections and
pro forma financial information contained in the materials referenced above are
based upon good faith estimates and assumptions believed by management of the
Borrower to be reasonable at the time made, it being recognized by the Lenders
that such financial information as it relates to future events is not to be
viewed as fact and that actual results during the period or periods covered by
such financial information may differ from the projected results set forth
therein by a material amount. There is no fact known to any Loan Party that
could reasonably be expected to have a Material Adverse Effect that has not been
expressly disclosed herein, in the other Loan Documents, in the Confidential
Information Memorandum or in any other documents, certificates and statements
furnished to the Agents and the Lenders for use in connection with the
transactions contemplated hereby and by the other Loan Documents.
4.20 Security Interests. The Guarantee and Collateral Agreement is
effective to create in favor of the Funding Agent, for the benefit of the
Lenders, a legal, valid and enforceable security interest in the Collateral
described therein and proceeds thereof. In the case of certificated Pledged
Stock described in the Guarantee and Collateral Agreement, when certificates
representing such Pledged Stock are delivered to the Administrative Agents, and
in the case of the other Collateral described in the Guarantee and Collateral
Agreement, when financing statements specified on Schedule 4.20 in appropriate
form are filed in the offices specified on Schedule 4.20, the Guarantee and
Collateral Agreement shall constitute a fully perfected Lien on, and security
interest in, all right, title and interest of the Loan Parties in such
Collateral and the proceeds thereof, as security for the Obligations (as defined
in the Guarantee and Collateral Agreement), in each case prior and superior in
right to any other Person.
4.21 Solvency. Each Loan Party (other than any Shell Subsidiary) is,
and after giving effect to the financing transactions referred to herein will be
and will continue to be, Solvent.
4.22 Certain Tax Matters. As of the Stage One Closing Date, each of
Holdings, the Borrower and each of its Subsidiaries (other than any such
Subsidiary that is organized as a corporation) is a Flow-Through Entity.
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4.23 Year 2000 Matters. Any reprogramming required to permit the
proper functioning (but only to the extent that such proper functioning would
otherwise be impaired by the occurrence of the year 2000) in and following the
year 2000 of computer systems and other equipment containing embedded
microchips, in either case owned or operated by Holdings, the Borrower or any of
its Subsidiaries or used or relied upon in the conduct of their business
(including any such systems and other equipment supplied by others or with which
the computer systems of Holdings, the Borrower or any of its Subsidiaries
interface) has been completed. The testing of all such systems and other
equipment as so reprogrammed will be completed at such times, and to the extent
necessary, so as to avoid a Material Adverse Effect. The costs to Holdings, the
Borrower and its Subsidiaries that have not been incurred as of the date hereof
for such reprogramming and testing and for the other reasonably foreseeable
consequences to them of any improper functioning of other computer systems and
equipment containing embedded microchips due to the occurrence of the year 2000
could not reasonably be expected to result in a Default or Event of Default or
to have a Material Adverse Effect. The computer systems of Holdings, the
Borrower and its Subsidiaries are and, with ordinary course upgrading and
maintenance, will continue for the term of this Agreement to be, sufficient for
the conduct of their business as currently conducted.
SECTION 5. CONDITIONS PRECEDENT
5.1 Conditions to Initial Extension of Credit. The agreement of each
Lender to make the initial extension of credit requested to be made by it is
subject to the satisfaction, prior to or concurrently with the making of such
extension of credit on the Stage One Closing Date, of the following conditions
precedent (with references to the Lenders in this Section 5.1 referring only to
Lenders as of the Stage One Closing Date):
(a) Credit Agreement; Guarantee and Collateral Agreement. The
Administrative Agents shall have received (i) this Agreement, executed and
delivered by the Agents, Holdings and the Borrower, (ii) an Addendum,
executed and delivered by each Lender listed on Schedule 1.1, (iii) the
Guarantee and Collateral Agreement, executed and delivered by Holdings,
the Borrower and each Subsidiary Guarantor and (iv) an Acknowledgment and
Consent in the form attached to the Guarantee and Collateral Agreement,
executed and delivered by each Issuer (as defined therein), if any, that
is not a Loan Party.
In the event that an Addendum has not been duly executed and
delivered by each Person listed on Schedule 1.1 on the date scheduled to
be the Stage One Closing Date, the condition referred to in clause (i)
above shall nevertheless be deemed satisfied if on such date the Borrower
and the Administrative Agents shall have designated one or more Persons
(the "Designated Lenders") to assume, in the aggregate, all of the
Commitments that would have been held by the Persons listed on Schedule
1.1 (the "Non-Executing Persons") which have not so executed and delivered
an Addendum (subject to each such Designated Lender's consent and its
execution and delivery of an Addendum). Schedule 1.1 shall automatically
be deemed to be amended to reflect the respective Commitments of the
Designated Lenders and the omission of the Non-Executing Persons as
Lenders hereunder.
(b) Financial Statements. The Lenders shall have received the
financial statements referred to in Section 4.1.
(c) Senior Notes. Charter Holdings shall have issued the Senior
Notes. Any Senior Notes that are Specified Senior Notes shall be issued in
compliance with the definition of "Specified Senior Notes".
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(d) Existing Indebtedness. All of the existing notes (other than a
de minimis amount) and credit facilities of Holdings and its Subsidiaries
shall have been redeemed, defeased or paid in full, and any commitments
under such credit facilities shall have been terminated.
(e) Approvals. All material governmental and third party approvals
necessary in connection with the financing contemplated hereby shall have
been obtained and be in full force and effect.
(f) Lien Searches. The Funding Agent shall have received the results
of a recent Lien search in each of the jurisdictions where assets of the
Loan Parties are located, and such search shall reveal no Liens on any of
the assets of Holdings, the Borrower or any of its Subsidiaries except for
Liens permitted by Section 7.3 or Liens which have been discharged, or for
which releases have been tendered, on or prior to the Stage One Closing
Date pursuant to documentation satisfactory to the Funding Agent.
(g) Fees. The Lenders and the Agents shall have received all fees
required to be paid, and all expenses for which invoices have been
presented (including the reasonable fees and expenses of legal counsel),
on or before the Stage One Closing Date. All such amounts will be paid
with proceeds of Loans made on the Stage One Closing Date and will be
reflected in the funding instructions given by the Borrower to the Funding
Agent on or before the Stage One Closing Date.
(h) Closing Certificate; No Material Restrictions; Pro Forma
Compliance. The Funding Agent shall have received, with a counterpart for
each Lender, a certificate of each Loan Party, dated the Stage One Closing
Date, substantially in the form of Exhibit C, with appropriate insertions
and attachments, which (i) in the case of Holdings, shall also certify
that Holdings and its Subsidiaries are not subject to material contractual
or other restrictions that would be violated by the transactions
contemplated hereby and (ii) in the case of the Borrower, shall also
certify, in reasonable detail, pro forma compliance with Section 7.1(a).
(i) Legal Opinions. The Administrative Agents shall have received
the following executed legal opinions:
(i) the legal opinion of Paul, Hastings, Janofsky & Walker
LLP, counsel to Holdings and its Subsidiaries, substantially in the
form of Exhibit F-1; and
(ii) the legal opinion of Curtis S. Shaw, Esq., general
counsel of Holdings and its Subsidiaries, substantially in the form
of Exhibit F-2.
Each such legal opinion shall cover such other matters incident to the
transactions contemplated by this Agreement as the Administrative Agents
may reasonably require.
(j) Filings, Registrations, Recordings, etc. Each document
(including any Uniform Commercial Code financing statement) required by
the Guarantee and Collateral Agreement under law or reasonably requested
by the Funding Agent to be filed, registered or recorded in order to
create in favor of the Funding Agent, for the benefit of the Lenders, a
perfected Lien on the Colleteral described therein, prior end superior in
right to any other Person, shall be in proper fovm for filing,
registration or recordation. The Funding Agent shall have received (i) the
certificates, if any, representing the Equity Interests pledged pursuant
to the Guarantee and Collateral Agreement, together with an undated stock
power for each such certificate executed by
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45
the pledgor thereof, and (ii) each promissory note (if any) pledged to the
Funding Agent pursuant to the Guarantee and Collateral Agreement endorsed
in blank by the pledgor thereof.
5.2 Conditions to Each Extension of Credit. The agreement of each
Lender to make any extension of credit requested to be made by it on any date
(including its initial extension of credit) is subject to the satisfaction of
the following conditions precedent:
(a) Representations and Warranties. Each of the representations and
warranties made by any Loan Party in or pursuant to the Loan Documents
shall be true and correct in all material respects on and as of such date
as if made on and as of such date.
(b) No Default. No Default or Event of Default shall have occurred
and be continuing on such date or after giving effect to the extensions of
credit requested to be made on such date.
(c) Other Documents. In the case of any extension of credit made on
an Increased Facility Closing Date, the Administrative Agents shall have
received such documents and information as they may reasonably request.
Each borrowing by and issuance of a Letter of Credit on behalf of the Borrower
hereunder shall constitute a representation and warranty by the Borrower as of
the date of such extension of credit that the conditions contained in Sections
5.2(a) and (b) have been satisfied.
SECTION 6. AFFIRMATIVE COVENANTS
Holdings and the Borrower hereby agree that, so long as the
Commitments remain in effect, any Letter of Credit remains outstanding or any
Loan or other amount is owing to any Lender or any Agent hereunder, each of
Holdings and the Borrower shall, and shall cause each Subsidiary of the Borrower
to:
6.1 Financial Statements. Furnish to the Funding Agent (with
sufficient copies for each Lender):
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Borrower, a copy of the audited
consolidated balance sheet of the Borrower and its consolidated
Subsidiaries as at the end of such year and the related audited
consolidated statements of income and of cash flows for such year, setting
forth in each case in comparative form the figures for the previous year,
reported on without a "going concern" or like qualification or exception,
or qualification arising out of the scope of the audit, by Arthur Andersen
LLP or other independent certified public accountants of nationally
recognized standing; and
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Borrower, the unaudited consolidated balance sheet of the
Borrower and its consolidated Subsidiaries as at the end of such quarter
and the related unaudited consolidated statements of income and of cash
flows for such quarter and the portion of the fiscal year through the end
of such quarter, setting forth in each case in comparative form the
figures for the previous year, certified by a Responsible Officer as being
fairly stated in all material respects (subject to normal year-end audit
adjustments).
All such financial statements shall be complete and correct in all material
respects and shall be prepared in reasonable detail and in accordance with GAAP
applied consistently throughout the periods reflected
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therein and with prior periods (except as approved by such accountants or
officer, as the case may be, and disclosed therein).
6.2 Certificates; Other Information. Furnish to the Funding Agent
(with sufficient copies for each Lender) (or (i) in the case of clause (e)
below, to the Administrative Agents and (ii) in the case of clause (f) below, to
the relevant Lender):
(a) concurrently with the delivery of the financial statements
referred to in Section 6.1(a), a certificate of the independent certified
public accountants reporting on such financial statements stating that in
making the examination necessary therefor no knowledge was obtained of any
Default or Event of Default under Section 7.1, except as specified in such
certificate;
(b) concurrently with the delivery of any financial statements
pursuant to Section 6.1, (i) a certificate of a Responsible Officer
stating that, to the best of each such Responsible Officer's knowledge,
each Loan Party during such period has observed or performed all of its
covenants and other agreements, and satisfied every condition, contained
in this Agreement and the other Loan Documents to which it is a party to
be observed, performed or satisfied by it, and that such Responsible
Officer has obtained no knowledge of any Default or Event of Default
except as specified in such certificate and (ii) a Compliance Certificate
containing all information and calculations necessary for determining
compliance by Holdings, the Borrower and its Subsidiaries with the
provisions of this Agreement referred to therein as of the last day of the
fiscal quarter or fiscal year of the Borrower, as the case may be;
(c) as soon as available, and in any event no later than 45 days
after the end of each fiscal year of the Borrower, a budget for the
following fiscal year (which shall include projected Consolidated
Operating Cash Flow and budgeted capital expenditures), and, as soon as
available, material revisions, if any, of such budget with respect to such
fiscal year (collectively, the "Budget"), which Budget shall in each case
be accompanied by a certificate of a Responsible Officer stating that such
Budget is based on reasonable estimates, information and assumptions and
that such Responsible Officer has no reason to believe that such Budget is
incorrect or misleading in any material respect;
(d) within five days after the same are sent, copies of all
financial statements and reports (including reports on Form 10-K, 10-Q or
8-K) that Holdings or the Borrower sends to the holders of any class of
its debt securities or public equity securities and, within five days
after the same are filed, copies of all financial statements and reports
that Holdings or the Borrower may make to, or file with, the SEC;
(e) no later than three Business Days prior to consummating any
transaction described in Section 7.2(f), 7.2(g), 7.2(h), 7.5(e), 7.5(f),
7.5(g), 7.6(b), 7.7(f), 7.7(g) or (with respect to payment of deferred
management fees) 7.8(c), a certificate of a Responsible Officer
demonstrating in reasonable detail (i) that both before and after giving
effect to such transaction, no Default or Event of Default shall be in
effect (including, on a pro forma basis, pursuant to Section 7.1) and (ii)
compliance with any other financial tests referred to in the relevant
Section, provided that, in the case of Investments, Dispositions or the
payment of deferred management fees, the requirement to deliver such
certificate shall not apply to any Investment or Disposition pursuant to
which the Consideration paid is less than $5,000,000 or to any such
payment of deferred management fees in an amount less than $5,000,000; and
(f) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
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6.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
material obligations of whatever nature, except where the amount or validity
thereof is currently being contested in good faith by appropriate proceedings
and reserves in conformity with GAAP with respect thereto have been provided on
the books of Holdings, the Borrower or its Subsidiaries, as the case may be.
6.4 Maintenance of Existence; Compliance. (a) (i) Preserve, renew
and keep in full force and effect its existence and (ii) take all reasonable
action to maintain all rights, privileges and franchises necessary or desirable
in the normal conduct of its business, except, in each case, as otherwise
permitted by Section 7.4 and except, in the case of clause (ii) above, to the
extent that failure to do so could not reasonably be expected to have a Material
Adverse Effect; and (b) comply with all Contractual Obligations and Requirements
of Law except to the extent that failure to comply therewith could not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.
6.5 Maintenance of Property; Insurance. (a) Keep all material
property useful and necessary in its business in good working order and
condition, ordinary wear and tear excepted and (b) maintain with financially
sound and reputable insurance companies insurance on all its material property
in at least such amounts and against at least such risks (but including in any
event public liability, product liability and business interruption) as are
usually insured against in the same general area by companies engaged in the
same or a similar business.
6.6 Inspection of Property; Books and Records; Discussions. (a) Keep
proper books of records and account in which full, true and correct entries in
conformity with GAAP and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities and (b) permit
representatives of any Lender, coordinated through the Administrative Agents, to
visit and inspect any of its properties and examine and make abstracts from any
of its books and records at any reasonable time and as often as may reasonably
be desired and to discuss the business, operations, properties and financial and
other condition of Holdings, the Borrower and its Subsidiaries with officers and
employees of Holdings, the Borrower and its Subsidiaries and with its
independent certified public accountants.
6.7 Notices. Promptly give notice to the Funding Agent and each
Lender of:
(a) the occurrence of any Default or Event of Default;
(b) any (i) default or event of default under any Contractual
Obligation of Holdings, the Borrower or any of its Subsidiaries or (ii)
litigation, investigation or proceeding that may exist at any time between
Holdings, the Borrower or any of its Subsidiaries and any Governmental
Authority, that, in either case, could reasonably be expected to have a
Material Adverse Effect;
(c) any litigation or proceeding commenced against Holdings, the
Borrower or any of its Subsidiaries which could reasonably be expected to
result in a liability of $25,000,000 or more to the extent not covered by
insurance or which could reasonably be expected to have a Material Adverse
Effect;
(d) the following events, as soon as possible and in any event
within 30 days after the Borrower knows or has reason to know thereof: (i)
the occurrence of any Reportable Event with respect to any Plan, a failure
to make any required contribution to a Plan, the creation of any Lien in
favor of the PBGC or a Plan or any withdrawal from, or the termination,
Reorganization or Insolvency of, any Multiemployer Plan or (ii) the
institution of proceedings or the taking of any other action by the PBGC
or the Borrower or any Commonly Controlled Entity or any
<PAGE> 53
48
Multiemployer Plan with respect to the withdrawal from, or the
termination, Reorganization or Insolvency of, any Plan; and
(e) any other development or event that has had or could reasonably
be expected to have a Material Adverse Effect.
Each notice pursuant to this Section 6.7 shall be accompanied by a statement of
a Responsible Officer setting forth details of the occurrence referred to
therein and stating what action Holdings, the Borrower or the relevant
Subsidiary proposes to take with respect thereto.
6.8 Environmental Laws. (a) Except as, in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect, comply with, and
ensure 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.
(b) Except as, in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect, 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 all Governmental Authorities regarding Environmental Laws.
6.9 Interest Rate Protection. At all times cause at least 50% of the
aggregate outstanding principal amount of Holdings Debt, Specified Long-Term
Indebtedness and Term Loans to be subject to a fixed rate, whether directly or
pursuant to Hedge Agreements having terms and conditions reasonably satisfactory
to the Administrative Agents.
6.10 Additional Collateral. With respect to any new Subsidiary
(other than a Shell Subsidiary so long as it qualifies as such) created or
acquired after the Stage One Closing Date by Marcus Holdings, the Borrower or
any of its Subsidiaries (which shall be deemed to have occurred in the event
that any Non-Recourse Subsidiary ceases to qualify as such), promptly (a)
execute and deliver to the Funding Agent such amendments to the Guarantee and
Collateral Agreement as the Funding Agent deems necessary or advisable to grant
to the Funding Agent, for the benefit of the Lenders, a perfected first priority
security interest in the Equity Interests and intercompany obligations of such
new Subsidiary that are held by Holdings, the Borrower or any of its
Subsidiaries (limited, in the case of Equity Interests of any Foreign
Subsidiary, to 66% of the total outstanding Equity Interests of such Foreign
Subsidiary), (b) deliver to the Funding Agent the certificates, if any,
representing such Equity Interests, and any intercompany notes evidencing such
obligations, together with undated stock powers and endorsements, in blank,
executed and delivered by a duly authorized officer of Marcus Holdings, the
Borrower or such Subsidiary, as the case may be and (c) except in the case of a
Foreign Subsidiary or an Excluded Acquired Subsidiary (until it ceases to
qualify as such), cause such new Subsidiary (i) to become a party to the
Guarantee and Collateral Agreement and (ii) to take such actions necessary or
advisable to grant to the Funding Agent for the benefit of the Lenders a
perfected first priority security interest in the Collateral described in the
Guarantee and Collateral Agreement with respect to such new Subsidiary,
including the filing of Uniform Commercial Code financing statements in such
jurisdictions as may be required by the Guarantee and Collateral Agreement or by
law or as may be requested by the Funding Agent.
6.11 Organizational Separateness. In the case of Holdings, each
Specified Holdings Subsidiary, each Non-Recourse Subsidiary and the Borrower and
its Subsidiaries, (a) satisfy customary formalities with respect to
organizational separateness, including, without limitation, (i) the maintenance
of separate books and records and (ii) the maintenance of separate bank accounts
in its own name; (b) act
<PAGE> 54
49
solely in its own name and through its authorized officers and agents; (c) in
the case of the Borrower or any of its Subsidiaries, not make or agree to make
any payment to a creditor of Holdings, any Specified Holdings Subsidiary or any
Non-Recourse Subsidiary; (d) not commingle any money or other assets of
Holdings, any Specified Holdings Subsidiary or any Non-Recourse Subsidiary with
any money or other assets of the Borrower or any of its Subsidiaries; and (e)
not take any action, or conduct its affairs in a manner, which could reasonably
be expected to result in the separate organizational existence of Holdings, each
Specified Holdings Subsidiary and each Non-Recourse Subsidiary from the Borrower
and its Subsidiaries being ignored under any circumstance. Holdings agrees to
cause each Specified Holdings Subsidiary, and the Borrower agrees to cause each
Non-Recourse Subsidiary, to comply with the applicable provisions of this
Section 6.11.
SECTION 7. NEGATIVE COVENANTS
Holdings and the Borrower hereby agree that, so long as the
Commitments remain in effect, any Letter of Credit remains outstanding or any
Loan or other amount is owing to any Lender or any Agent hereunder, each of
Holdings and the Borrower shall not, and shall not permit any Subsidiary of the
Borrower to, directly or indirectly (provided that only Sections 7.2, 7.3, 7.4,
7.8, 7.10, 7.12 and 7.15 shall apply to Charter Holdings):
7.1 Financial Condition Covenants.
(a) Consolidated Leverage Ratio. Permit the Consolidated Leverage
Ratio determined as of the last day of any fiscal quarter of the Borrower ending
during any period set forth below to exceed the ratio set forth below opposite
such period:
<TABLE>
<CAPTION>
Period Consolidated Leverage Ratio
------ ---------------------------
<S> <C>
04/01/99 - 03/31/01 5.00 to 1.0
04/01/01 - 03/31/02 4.50 to 1.0
04/01/02 - 03/31/03 4.25 to 1.0
04/01/03 and thereafter 4.00 to 1.0
</TABLE>
(b) Consolidated Interest Coverage Ratio. Permit the Consolidated
Interest Coverage Ratio determined as of the last day of any fiscal quarter
ending during any period set forth below to be less than the ratio set forth
below opposite such period:
<TABLE>
<CAPTION>
Period Consolidated Interest Coverage Ratio
------ ------------------------------------
<S> <C>
04/01/99 - 03/31/01 1.50 to 1.0
04/01/01 - 03/31/03 1.75 to 1.0
04/01/03 and thereafter 2.00 to 1.0
</TABLE>
(c) Consolidated Debt Service Coverage Ratio. Permit the
Consolidated Debt Service Coverage Ratio determined as of the last day of any
fiscal quarter commencing after the Stage One Closing Date to be less than 1.25
to 1.0.
For the purposes of paragraphs (b) and (c) above, (i) in calculating the
relevant ratios for the fiscal quarters of the Borrower ending June 30, 1999,
September 30, 1999 and December 31, 1999, Consolidated Interest Expense for the
relevant period shall (x) be deemed to equal Consolidated Interest Expense for
such fiscal quarter (and, in the case of the latter two such determinations,
each previous fiscal quarter commencing on or after April 1, 1999) multiplied by
4, 2 and 4/3, respectively, and (y) in
<PAGE> 55
50
any event, include the first two scheduled cash interest payments in respect of
the Senior Notes, without duplication, and (ii) in determining Consolidated
Interest Expense for any period that commences prior to the Stage One Closing
Date, Consolidated Interest Expense shall be determined as if any incurrence or
refinancing of Indebtedness that occurs on the Stage One Closing Date had
occurred on the first day of such period.
7.2 Indebtedness. Create, issue, incur, assume, become liable in
respect of or suffer to exist any Indebtedness, except:
(a) Indebtedness of any Loan Party pursuant to any Loan Document;
(b) Indebtedness of the Borrower to any Subsidiary and of any Wholly
Owned Subsidiary Guarantor to the Borrower or any other Subsidiary;
(c) Guarantee Obligations incurred in the ordinary course of
business by the Borrower or any of its Subsidiaries of obligations of any
Wholly Owned Subsidiary Guarantor;
(d) Indebtedness described on Schedule 7.2(d);
(e) Indebtedness (including, without limitation, Capital Lease
Obligations) secured by Liens permitted by Section 7.3(f) in an aggregate
principal amount not to exceed $20,000,000 at any one time outstanding;
(f) Indebtedness of the Borrower (but not any Subsidiary of the
Borrower) incurred on any Threshold Transaction Date so long as (i) no
Default or Event of Default shall have occurred and be continuing or would
result therefrom, (ii) such Indebtedness shall have no scheduled
amortization prior to the date that is one year after the final maturity
of the Term Loans outstanding on the date such Indebtedness is incurred
and (iii) the covenants and default provisions applicable to such
Indebtedness shall be no more restrictive than those contained in this
Agreement, provided that the requirement that such Indebtedness be
incurred on a Threshold Transaction Date shall not apply in the case of
any refinancing of Indebtedness previously incurred pursuant to this
Section 7.2(f) so long as the interest rate and cash-pay characteristics
applicable to such refinancing Indebtedness are no more onerous than those
applicable to such refinanced Indebtedness;
(g) Indebtedness of any Person that becomes a Subsidiary pursuant to
an Investment permitted by Section 7.7 (other than as set forth in Section
7.2(h)), so long as (i) no Default or Event of Default shall have occurred
and be continuing or would result therefrom, (ii) such Indebtedness
existed at the time of such Investment and was not created in anticipation
thereof, (iii) the Borrower shall use its best efforts to cause such
Indebtedness to be repaid no later than 90 days after the date of such
Investment, (iv) if such Indebtedness is not repaid within such period
then, until such Indebtedness is repaid, the operating cash flow of the
relevant Subsidiary shall be excluded for the purposes of calculating
Consolidated Operating Cash Flow (whether or not distributed to the
Borrower or any of its other Subsidiaries) and (v) the aggregate
outstanding principal amount of Indebtedness incurred pursuant to this
paragraph shall not exceed $250,000,000;
(h) Indebtedness of Renaissance Media Holdings LLC and its
Subsidiaries in the event that they become Subsidiaries pursuant to an
Investment permitted by Section 7.7, so long as (i) no Default or Event of
Default shall have occurred and be continuing or would result therefrom,
(ii) such Indebtedness existed at the time of such Investment and was not
created in anticipation
<PAGE> 56
51
thereof, (iii) no principal shall be payable in respect of such
Indebtedness until October 2008, (iv) no cash interest shall be payable in
respect of such Indebtedness until October 2003 and (v) the aggregate
outstanding principal amount of Indebtedness incurred pursuant to this
paragraph shall not exceed $115,000,000 plus any amounts that accrete in
respect thereof after the Stage One Closing Date at a per annum rate of
10.0%;
(i) letters of credit for the account of the Borrower or any of its
Subsidiaries obtained other than pursuant to this Agreement, so long as
the aggregate undrawn face amount thereof, together with any unreimbursed
reimbursement obligations in respect thereof, does not exceed $35,000,000
at any one time;
(j) Indebtedness of Charter Holdings (but not any Subsidiary of
Charter Holdings) so long as (i) such Indebtedness shall have no scheduled
amortization prior to the date that is one year after the final maturity
of the Term Loans outstanding on the date such Indebtedness is incurred
(except in the case of Specified Senior Notes) and (ii) except in the case
of the Senior Notes, 100% of the Net Cash Proceeds thereof (other than any
such Net Cash Proceeds that are applied to refinance other Indebtedness of
Holdings to the extent permitted by Section 7.8) shall, within two
Business Days after the receipt thereof, be contributed to the Borrower in
the form of a capital contribution; and
(k) additional Indebtedness of the Borrower or any of its
Subsidiaries in an aggregate principal amount (for the Borrower and all
Subsidiaries) not to exceed $50,000,000 at any one time outstanding.
7.3 Liens. Create, incur, assume or suffer to exist any Lien upon
any of its property, whether now owned or hereafter acquired, except:
(a) Liens for taxes, assessments and other governmental charges not
yet due or that are being contested in good faith by appropriate
proceedings, provided that adequate reserves with respect thereto are
maintained on the books of Holdings, the Borrower or its Subsidiaries, as
the case may be, in conformity with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business
that are not overdue for a period of more than 30 days or that are being
contested in good faith by appropriate proceedings;
(c) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(d) deposits made to secure the performance of bids, tenders, trade
contracts, leases, statutory or regulatory obligations, surety and appeal
bonds, bankers acceptances, government contracts, performance bonds and
other obligations of a like nature incurred in the ordinary course of
business, in each case excluding obligations for borrowed money;
(e) easements, rights-of-way, municipal and zoning ordinances, title
defects, restrictions and other similar encumbrances incurred in the
ordinary course of business that, in the aggregate, are not substantial in
amount and that do not in any case materially detract from the value of
the property subject thereto or materially interfere with the ordinary
conduct of the business of Holdings, the Borrower or any of its
Subsidiaries;
<PAGE> 57
52
(f) Liens securing Indebtedness of Holdings, the Borrower or any of
its Subsidiaries incurred pursuant to Section 7.2(e) to finance the
acquisition of fixed or capital assets, provided that (i) such Liens shall
be created substantially simultaneously with the acquisition of such fixed
or capital assets, (ii) such Liens do not at any time encumber any
property other than the property financed by such Indebtedness and (iii)
the amount of Indebtedness secured thereby is not increased;
(g) Liens created pursuant to the Guarantee and Collateral Agreement
securing obligations of the Loan Parties under (i) the Loan Documents,
(ii) Hedge Agreements provided by any Lender or any Affiliate of any
Lender and (iii) letters of credit issued pursuant to Section 7.2(i) by
any Lender or any Affiliate of any Lender;
(h) any landlord's Lien or other interest or title of a lessor under
any lease or a licensor under a license entered into by Holdings, the
Borrower or any of its Subsidiaries in the ordinary course of its business
and covering only the assets so leased or licensed;
(i) Liens on the Mirror Note (as defined in the Senior Note
Indenture) securing the Senior Notes;
(j) Liens created under Pole Agreements on cables and other property
affixed to transmission poles or contained in underground conduits;
(k) Liens of or restrictions on the transfer of assets imposed by
any franchisors, utilities or other regulatory bodies or any federal,
state or local statute, regulation or ordinance, in each case arising in
the ordinary course of business in connection with franchise agreements or
Pole Agreements;
(l) Liens arising from judgments or decrees not constituting an
Event of Default under Section 8(h); and
(m) Liens not otherwise permitted by this Section so long as neither
(i) the aggregate outstanding principal amount of the obligations secured
thereby nor (ii) the aggregate fair market value (determined as of the
date such Lien is incurred) of the assets subject thereto exceeds (as to
Holdings, the Borrower and all Subsidiaries), when added to the aggregate
outstanding amount of Attributable Debt, $20,000,000 at any one time.
7.4 Fundamental Changes. Enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or Dispose of all or substantially all of its
property or business, except that:
(a) any Subsidiary of the Borrower may be merged or consolidated
with or into any Wholly Owned Subsidiary Guarantor (provided that the
Wholly Owned Subsidiary Guarantor shall be the continuing or surviving
entity);
(b) any Subsidiary of the Borrower that is a holding company with no
operations may be merged or consolidated with or into the Borrower
(provided that the Borrower shall be the continuing or surviving entity);
(c) any Subsidiary of the Borrower may Dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to any Wholly Owned
Subsidiary Guarantor;
<PAGE> 58
53
(d) any Shell Subsidiary may be dissolved; and
(e) so long as no Default or Event of Default has occurred or is
continuing or would result therefrom, (i) Marcus Cable Holdings, LLC and
Marcus Holdings may be merged or consolidated with one another and/or into
Charter Holdings in a substantially simultaneous transaction (provided
that Charter Holdings is the continuing or surviving entity); and (ii)
Marcus may be merged or consolidated with or into Charter (provided that
Charter is the continuing or surviving entity) (the foregoing mergers
and/or consolidations, the "Marcus Combination").
7.5 Disposition of Property. Dispose of any of its property, whether
now owned or hereafter acquired, or, in the case of any Subsidiary, issue or
sell any Equity Interests to any Person, except:
(a) the Disposition of obsolete or worn out property in the ordinary
course of business;
(b) the sale of inventory in the ordinary course of business;
(c) Dispositions expressly permitted by Section 7.4;
(d) the sale or issuance of any Subsidiary's Equity Interests to the
Borrower or any Wholly Owned Subsidiary Guarantor;
(e) the Disposition (directly or indirectly through the Disposition
of 100% of the Equity Interests of a Subsidiary) of operating assets by
the Borrower or any of its Subsidiaries (including any Exchange to the
extent not otherwise permitted by Section 7.5(f), it being understood that
if the entire amount of an Exchange is not permitted by Section 7.5(f) any
portion not so permitted may be allocated to any unused availability in
respect of Dispositions pursuant to this Section 7.5(e), subject to
compliance with the requirements of clauses (i) through (v) below),
provided that (i) on the date of such Disposition (the "Disposition
Date"), no Default or Event of Default shall have occurred and be
continuing or would result therefrom; (ii) the Annualized Asset Cash Flow
Amount attributable to the assets being disposed of, when added to the
Annualized Asset Cash Flow Amount attributable to all other assets
previously disposed of pursuant to this Section 7.5(e) during the one-year
period ending on such Disposition Date (or, if shorter, the period from
the Stage One Closing Date to such Disposition Date), shall not exceed an
amount equal to 15% of Annualized Pro Forma Operating Cash Flow determined
as of such Disposition Date; (iii) the Annualized Asset Cash Flow Amount
attributable to the assets being disposed of, when added to the Annualized
Asset Cash Flow Amount attributable to all other assets previously
disposed of pursuant to this Section 7.5(e) during the five-year period
ending on such Disposition Date (or, if shorter, the period from the Stage
One Closing Date to such Disposition Date), shall not exceed an amount
equal to 25% of Annualized Pro Forma Operating Cash Flow determined as of
such Disposition Date; (iv) except in the case of any Exchange, at least
75% of the proceeds of such Disposition shall be in the form of cash; and
(v) the Net Cash Proceeds of such Disposition shall be applied to prepay
the Term Loans to the extent required by Section 2.9(b);
(f) any Exchange by the Borrower and its Subsidiaries; provided that
(i) on the date of such Exchange (the "Exchange Date"), no Default or
Event of Default shall have occurred and be continuing or would result
therefrom; (ii) the Annualized Asset Cash Flow Amount attributable to the
assets being Exchanged, when added to the Annualized Asset Cash Flow
Amount attributable to all other assets previously Exchanged pursuant to
this Section 7.5(f) during the one-year period ending on such Exchange
Date (or, if shorter, the period from the Stage One
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54
Closing Date to such Exchange Date), shall not exceed an amount equal to
15% of Annualized Pro Forma Operating Cash Flow determined as of such
Exchange Date; (iii) the Annualized Asset Cash Flow Amount attributable to
the assets being Exchanged, when added to the Annualized Asset Cash Flow
Amount attributable to all other assets previously Exchanged pursuant to
this Section 7.5(f) during the five-year period ending on such Exchange
Date (or, if shorter, the period from the Stage One Closing Date to such
Exchange Date), shall not exceed an amount equal to 25% of Annualized Pro
Forma Operating Cash Flow determined as of such Exchange Date; and (iv)
the Net Cash Proceeds of such Exchange, if any, shall be applied to prepay
the Term Loans to the extent required by Section 2.9(b);
(g) Dispositions of property acquired after the Stage Two Closing
Date, (other than (i) property acquired pursuant to the acquisition of
Planned Acquired Entities and (ii) property acquired in connection with
Exchanges of (x) property owned on the Stage Two Closing Date or (y)
property described in clause (i) above), so long as (1) no Default or
Event of Default shall have occurred and be continuing or would result
therefrom, (2) a definitive agreement to consummate such Disposition is
executed no later than twelve months after the date on which relevant
property is acquired and (3) such Disposition is consummated within
eighteen months after the date on which the relevant property is acquired;
(h) any Exchange of cash and certain cable systems of the Borrower
and its Subsidiaries for certain cable systems of InterMedia Partners IV
L.P., as more particularly described on Schedule 7.5(h); and
(i) the Disposition of other property having a fair market value not
to exceed $5,000,000 in the aggregate for any fiscal year of the Borrower.
7.6 Restricted Payments. Declare or pay any dividend (other than
dividends payable solely in common stock of the Person making such dividend) on,
or make any payment on account of, or set apart assets for a sinking or other
analogous fund for, the purchase, redemption, defeasance, retirement or other
acquisition of, any Equity Interests of Holdings, the Borrower or any
Subsidiary, whether now or hereafter outstanding, or make any other distribution
in respect thereof, either directly or indirectly, whether in cash or property
or in obligations of Holdings, the Borrower or any Subsidiary (collectively,
"Restricted Payments"), except that:
(a) any Subsidiary may make Restricted Payments to the Borrower or
any Wholly Owned Subsidiary Guarantor;
(b) the Borrower may make distributions to Holdings for the purpose
of enabling Holdings to make scheduled interest payments in respect of
Holdings Debt, provided that (i) no Default or Event of Default shall have
occurred and be continuing or would result therefrom, (ii) except in the
case of any distribution made for the purpose of paying interest on the
Senior Notes, each such distribution shall be made on a Threshold
Transaction Date and (iii) each such distribution shall be made no earlier
than three Business Days prior to the date the relevant interest payment
is due;
(c) so long as no Default or Event of Default has occurred and is
continuing or would result therefrom, (i) the Borrower may make
distributions to Charter Holdings to be used to repurchase, redeem or
otherwise acquire or retire for value any Equity Interests of Charter
Holdings held by any member of management of Charter Holdings, the
Borrower or any of its Subsidiaries pursuant to any management equity
subscription agreement or stock option agreement in effect as of the Stage
One Closing Date, provided that the aggregate amount of such
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55
distributions shall not exceed $10,000,000 in any fiscal year of the
Borrower and (ii) the Borrower may make distributions to Charter Holdings
to pay amounts not in excess of 1.0% of the aggregate enterprise value of
Investments permitted hereby (excluding the Marcus Combination) to certain
members of the Charter Group; and
(d) the Borrower may make distributions to Charter Holdings to
permit Charter Holdings to pay (i) attorneys' fees, investment banking
fees, accountants' fees, underwriting discounts and commissions and other
customary fees and expenses actually incurred in connection with any
issuance or sale by Charter Holdings of Equity Interests or any incurrence
by Charter Holdings of Indebtedness, (ii) costs and expenses incurred in
connection with the Exchange Offers (as defined in the Senior Note
Indenture) and (iii) other administrative expenses (including legal,
accounting, other professional fees and costs, printing and other such
fees and expenses) incurred in the ordinary course of business, in an
aggregate amount in the case of this clause (iii) not to exceed $2,000,000
in any fiscal year.
7.7 Investments. Make any advance, loan, extension of credit (by way
of guaranty or otherwise) or capital contribution to, or purchase any Equity
Interests, bonds, notes, debentures or other debt securities of, or any assets
constituting a significant part of a business unit of, or make any other
investment in, any Person (all of the foregoing, "Investments"), except:
(a) extensions of trade credit in the ordinary course of business;
(b) investments in Cash Equivalents;
(c) Guarantee Obligations permitted by Section 7.2;
(d) loans and advances to employees of the Borrower or any of its
Subsidiaries in the ordinary course of business (including for travel,
entertainment and relocation expenses) in an aggregate amount not to
exceed $5,000,000 at any one time outstanding;
(e) Investments by the Borrower or any of its Subsidiaries in the
Borrower or any Person that, prior to such investment, is a Wholly Owned
Subsidiary Guarantor;
(f) acquisitions by the Borrower or any Wholly Owned Subsidiary
Guarantor of operating assets (substantially all of which consist of cable
systems), directly through an asset acquisition or indirectly through the
acquisition of 100% of the Equity Interests of a Person substantially all
of whose assets consist of cable systems, provided, that (i) no Default or
Event of Default shall have occurred and be continuing or would result
therefrom and (ii) the aggregate Consideration (excluding Consideration
paid with the proceeds of Paul Allen Contributions) paid in connection
with such acquisitions, other than acquisitions consummated on a Threshold
Transaction Date, shall not exceed $750,000,000 during the term of this
Agreement;
(g) the Borrower or any of its Subsidiaries may contribute cable
systems to any Non-Recourse Subsidiary so long as (i) such Disposition is
permitted pursuant to Section 7.5(e), (ii) no Default or Event of Default
shall have occurred and be continuing or would result therefrom, (iii)
after giving effect thereto, the Consolidated Leverage Ratio shall be
equal to or lower than the Consolidated Leverage Ratio in effect
immediately prior thereto and (iv) the Equity Interests received by the
Borrower or any of its Subsidiaries in connection therewith shall be
pledged as Collateral (either directly or through a holding company parent
of such Non-Recourse Subsidiary so long as such parent is a Wholly Owned
Subsidiary Guarantor); and
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56
(h) in addition to Investments otherwise expressly permitted by this
Section, Investments by the Borrower or any of its Subsidiaries in an
aggregate amount (valued at cost) not to exceed $100,000,000 during the
term of this Agreement.
Notwithstanding anything to the contrary in this Agreement, in no event shall
the sum of (i) the aggregate amount of letters of credit and surety arrangements
(including unreimbursed reimbursement obligations in respect thereof) and
security deposits posted by the Borrower or any of its Subsidiaries in
connection with potential Investments (including pursuant to letters of intent)
and (ii) the aggregate outstanding amount of L/C Obligations, exceed
$350,000,000 at any one time.
7.8 Certain Payments and Modifications Relating to Indebtedness and
Management Fees. (a) Make or offer to make any payment, prepayment, repurchase
or redemption in respect of, or otherwise optionally or voluntarily defease or
segregate funds with respect to (collectively, "prepayment"), any Holdings Debt
or any Specified Long-Term Indebtedness, other than (i) the payment of scheduled
interest payments required to be made in cash, (ii) the prepayment of Specified
Subordinated Debt with the proceeds of other Specified Long-Term Indebtedness or
of Loans, (iii) the prepayment of any such Indebtedness with the proceeds of
other Holdings Debt or other Specified Long-Term Indebtedness, respectively, so
long as such new Indebtedness has terms no less favorable to the interests of
Holdings, the Borrower and the Lenders than those applicable to the Indebtedness
being refinanced and (iv) so long as no Default or Event of Default shall have
occurred and be continuing or would result therefrom, the prepayment of any
Specified Senior Note no earlier than the date that is seven months prior to the
stated maturity thereof.
(b) Amend, modify, waive or otherwise change, or consent or agree to
any amendment, modification, waiver or other change to, any of the terms of the
Holdings Debt or any Specified Long-Term Indebtedness, other than any such
amendment, modification, waiver or other change that (i) (x) would extend the
maturity or reduce the amount of any payment of principal thereof or reduce the
rate or extend any date for payment of interest thereon or (y) is immaterial to
the interests of the Lenders and (ii) does not involve the payment of a consent
fee.
(c) Make, agree to make or expense any payment in respect of
management fees, directly or indirectly, except that the Borrower may pay
management fees pursuant to the Management Fee Agreement so long as (i) no
Default or Event of Default shall have occurred and be continuing or would
result therefrom, (ii) the aggregate amount of such payments expensed during any
fiscal year of the Borrower shall not exceed 3.50% of consolidated revenues of
the Borrower and its consolidated Subsidiaries for the immediately preceding
fiscal year (provided that, in addition, payments of management fees may be made
in respect of amounts that have been accrued, but were not paid, during any
preceding fiscal year of the Borrower ending on or after December 31, 1999, so
long as the aggregate amount of payments made pursuant to this parenthetical
during any fiscal year of the Borrower (other than any such payments made on a
Threshold Management Fee Date), when added to the aggregate amount of
non-deferred management fees otherwise paid pursuant to this clause (ii) during
such fiscal year, shall not exceed 5.0% of consolidated revenues of the Borrower
and its consolidated Subsidiaries for the immediately preceding fiscal year )
and (iii) each such payment shall be made no earlier than three Business Days
prior to the date such payment is due.
(d) Amend, modify, waive or otherwise change, or consent or agree to
any amendment, modification, waiver or other change to, any of the terms of the
Management Fee Agreement, other than any such amendment, modification, waiver or
other change that (i) (x) would extend the due date or reduce the amount of any
payment thereunder or (y) does not adversely affect the interests of the Lenders
and (ii) does not involve the payment of a consent fee.
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7.9 Transactions with Affiliates. Enter into any transaction,
including any purchase, sale, lease or exchange of property, the rendering of
any service or the payment of any management, advisory or similar fees, with any
Affiliate (other than the Borrower or any Wholly Owned Subsidiary Guarantor)
unless such transaction is (a) not prohibited under this Agreement, (b) in the
ordinary course of business of the Borrower or such Subsidiary, as the case may
be, and (c) upon fair and reasonable terms no less favorable to the Borrower or
such Subsidiary, as the case may be, than it would obtain in a comparable arm's
length transaction with a Person that is not an Affiliate. The foregoing
restrictions shall not apply to transactions expressly permitted by Section 7.6
or Section 7.8(c).
7.10 Sales and Leasebacks. Enter into any arrangement with any
Person providing for the leasing by Holdings, the Borrower or any Subsidiary of
real or personal property that has been or is to be sold or transferred by
Holdings, the Borrower or such Subsidiary to such Person or to any other Person
to whom funds have been or are to be advanced by such Person on the security of
such property or rental obligations of Holdings, the Borrower or such Subsidiary
unless, after giving effect thereto, the aggregate outstanding amount of
Attributable Debt, when added to the aggregate amount utilized pursuant to
Section 7.3(m), does not exceed $20,000,000.
7.11 Changes in Fiscal Periods. Permit the fiscal year of the
Borrower to end on a day other than December 31 or change the Borrower's method
of determining fiscal quarters.
7.12 Negative Pledge Clauses. Enter into or suffer to exist or
become effective any agreement that prohibits or limits the ability of Holdings,
the Borrower or any of its Subsidiaries to create, incur, assume or suffer to
exist any Lien upon any of its property or revenues, whether now owned or
hereafter acquired, other than (a) this Agreement and the other Loan Documents,
(b) any agreements governing any purchase money Liens or Capital Lease
Obligations otherwise permitted hereby (in which case, any prohibition or
limitation shall only be effective against the assets financed thereby), (c)
pursuant to Contractual Obligations assumed in connection with Investments (but
not created in contemplation thereof) so long as the maximum aggregate
liabilities of Holdings and its Subsidiaries pursuant thereto do not exceed
$2,000,000 at any time and (d) the Senior Note Indenture and any other document
governing Indebtedness permitted hereby so long as such restrictions are no more
onerous than those contained in the Senior Note Indenture.
7.13 Clauses Restricting Subsidiary Distributions. Enter into or
suffer to exist or become effective any consensual encumbrance or restriction on
the ability of any Subsidiary of the Borrower to (a) make Restricted Payments in
respect of any Equity Interests of such Subsidiary held by, or pay any
Indebtedness owed to, the Borrower or any other Subsidiary of the Borrower, (b)
make loans or advances to, or other Investments in, the Borrower or any other
Subsidiary of the Borrower or (c) transfer any of its assets to the Borrower or
any other Subsidiary of the Borrower, except for such encumbrances or
restrictions existing under or by reason of (i) any restrictions existing under
the Loan Documents, (ii) any restrictions with respect to a Subsidiary imposed
pursuant to an agreement that has been entered into in connection with the
Disposition of all or substantially all of the Equity Interests or assets of
such Subsidiary in a transaction otherwise permitted by this Agreement and (iii)
any restrictions contained in the Senior Note Indenture or any other document
governing Indebtedness permitted hereby so long as such restrictions are no more
onerous than those contained in the Senior Note Indenture.
7.14 Lines of Business; Holding Company Status. (a) Enter into any
business, either directly or through any Subsidiary, except for (i) those
businesses in which the Borrower and its Subsidiaries are significantly engaged
on the date of this Agreement and (ii) businesses which are reasonably similar
or related thereto or reasonable extensions thereof but not, in the case of this
clause (ii), in the aggregate, material to the overall business of the Borrower
and its Subsidiaries (collectively, "Permitted Lines of Business"), provided,
that, in any event, the Borrower and its Subsidiaries will
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continue to be primarily engaged in the businesses in which they are primarily
engaged on the date of this Agreement.
(b) In the case of Marcus Holdings, the Borrower and the two
corporate entities referred to below, (i) conduct, transact or otherwise engage
in, or commit to conduct, transact or otherwise engage in, any business or
operations other than, in the case of Marcus Holdings and the Borrower, those
incidental to its ownership of the Equity Interests of its Subsidiaries or (ii)
own, lease, manage or otherwise operate any properties or assets other than, in
the case of Marcus Holdings and the Borrower, the ownership of Equity Interests
of its Subsidiaries (which, in the case of Marcus Holdings, shall be limited to
Equity Interests of Marcus and of the two corporate entities owned by Marcus
Holdings on the Stage One Closing Date and identified on Schedule 4.15).
7.15 Certain Intercompany and Tax Matters. (a) In the case of
Holdings, make any Investment in the Borrower other than in the form of a
capital contribution.
(b) In the case of the Borrower or any of its Subsidiaries, enter
into any tax sharing arrangement with any of its Affiliates.
(c) In the case of Holdings, the Borrower or any Subsidiary of the
Borrower, (i) take any action that could cause such Person (if such Person is a
Flow-Through Entity) to cease to be a Flow-Through Entity or (ii) fail to
convert any new Subsidiary that is not a Flow-Through Entity into a Flow-Through
Entity as soon as reasonably practicable after the date such Person becomes a
Subsidiary unless, in the reasonable judgment of the Borrower, such conversion
would be impracticable or materially disadvantageous to the interests of the
Borrower or such Subsidiary. This paragraph shall not apply to Shell
Subsidiaries.
SECTION 8. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) the Borrower shall fail to pay any principal of any Loan or
Reimbursement Obligation when due in accordance with the terms hereof; or
the Borrower shall fail to pay any interest on any Loan or Reimbursement
Obligation, or any other amount payable hereunder or under any other Loan
Document, within five days after any such interest or other amount becomes
due in accordance with the terms hereof; or
(b) any representation or warranty made or deemed made by any Loan
Party herein or in any other Loan Document or that is contained in any
certificate, document or financial or other statement furnished by it at
any time under or in connection with this Agreement or any such other Loan
Document shall prove to have been inaccurate in any material respect on or
as of the date made or deemed made; or
(c) any Loan Party shall default in the observance or performance of
any agreement contained in clause (i) or (ii) of Section 6.4(a) (with
respect to Holdings and the Borrower only), Section 6.7(a) or Section 7 of
this Agreement or Sections 6.4 and 6.6(b) of the Guarantee and Collateral
Agreement; or
(d) any Loan Party shall default in the observance or performance of
any other agreement contained in this Agreement or any other Loan Document
(other than as provided in paragraphs (a) through (c) of this Section),
and such default shall continue unremedied for a
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period of 30 days after notice to the Borrower from the Funding Agent or the
Required Lenders; or
(e) Holdings, the Borrower or any of its Subsidiaries shall (i)
default in making any payment of any principal of any Indebtedness
(including any Guarantee Obligation, but excluding the Loans) on the
scheduled or original due date with respect thereto; or (ii) default in
making any payment of any interest on any such Indebtedness beyond the
period of grace, if any, provided in the instrument or agreement under
which such Indebtedness was created; or (iii) default in the observance or
performance of any other agreement or condition relating to any such
Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition
exist, the effect of which default or other event or condition is to
cause, or to permit the holder or beneficiary of such Indebtedness (or a
trustee or agent on behalf of such holder or beneficiary) to cause, with
the giving of notice if required, such Indebtedness to become due prior to
its stated maturity or (in the case of any such Indebtedness constituting
a Guarantee Obligation) to become payable; provided, that a default, event
or condition described in clause (i), (ii) or (iii) of this paragraph (e)
shall not at any time constitute an Event of Default unless, at such time,
one or more defaults, events or conditions of the type described in
clauses (i), (ii) and (iii) of this paragraph (e) shall have occurred and
be continuing with respect to Indebtedness the outstanding principal
amount of which exceeds in the aggregate $50,000,000; or
(f) (i) Holdings, the Borrower or any of its Subsidiaries shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian, conservator or other
similar official for it or for all or any substantial part of its assets,
or Holdings, the Borrower or any of its Subsidiaries shall make a general
assignment for the benefit of its creditors; or (ii) there shall be
commenced against Holdings, the Borrower or any of its Subsidiaries any
case, proceeding or other action of a nature referred to in clause (i)
above that (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of 60 days; or (iii) there shall be commenced
against Holdings, the Borrower or any of its Subsidiaries any case,
proceeding or other action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any substantial
part of its assets that results in the entry of an order for any such
relief that shall not have been vacated, discharged, or stayed or bonded
pending appeal within 60 days from the entry thereof; or (iv) Holdings,
the Borrower or any of its Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence
in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v)
Holdings, the Borrower or any of its Subsidiaries shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due; or
(g) (i) any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Borrower or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders,
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likely to result in the termination of such Plan for purposes of Title IV
of ERISA, (iv) any Single Employer Plan shall terminate for purposes of
Title IV of ERISA, (v) the Borrower or any Commonly Controlled Entity
shall, or in the reasonable opinion of the Required Lenders is likely to,
incur any liability in connection with a withdrawal from, or the
Insolvency or Reorganization of, a Multiemployer Plan or (vi) any other
event or condition shall occur or exist with respect to a Plan; and in
each case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could, in the
sole judgment of the Required Lenders, reasonably be expected to have a
Material Adverse Effect; or
(h) one or more judgments or decrees shall be entered against
Holdings, the Borrower or any of its Subsidiaries involving in the
aggregate a liability (to the extent not paid or fully covered by
insurance as to which the relevant insurance company has acknowledged
coverage) of $25,000,000 or more, and all such judgments or decrees shall
not have been vacated, discharged, stayed or bonded pending appeal within
30 days from the entry thereof; or
(i) the Guarantee and Collateral Agreement shall cease, for any
reason (other than the gross negligence or willful misconduct of the
Funding Agent), to be in full force and effect, or any Loan Party or any
Affiliate of any Loan Party shall so assert, or any Lien created by the
Guarantee and Collateral Agreement shall cease to be enforceable and of
the same effect and priority purported to be created thereby; or
(j) (i) the Paul Allen Group shall cease to have the power, directly
or indirectly, to vote or direct the voting of Equity Interests having at
least 51% (determined on a fully diluted basis) of the ordinary voting
power for the management of Charter; (ii) the Paul Allen Group shall cease
to own of record and beneficially, directly or indirectly, Equity
Interests of Charter representing at least 51% (determined on a fully
diluted basis) of the economic interests therein (provided that such
percentage shall be reduced to 35% after the consummation of an Initial
Public Offering); (iii) prior to the Marcus Combination the Paul Allen
Group shall cease to own of record and beneficially, directly or
indirectly, Equity Interests of Marcus representing at least 51%
(determined on a fully diluted basis) of the economic interests therein
(provided that such percentage shall be reduced to 35% after the
consummation of an Initial Public Offering); (iv) a Specified Change of
Control shall occur; or (v) the Borrower shall cease to be a direct Wholly
Owned Subsidiary of Holdings; or
(k) any member of the Charter Group (other than the Borrower or any
of its Subsidiaries) shall consummate an offering or sale of Equity
Interests of any member of the Charter Group (excluding sales to other
members of the Charter Group) without contributing 100% of the Net Cash
Proceeds thereof to the Borrower within two Business Days after such
member of the Charter Group receives such Net Cash Proceeds; or
(l) the Borrower or any of its Subsidiaries shall have received a
notice of termination or suspension with respect to any of its CATV
Franchises or CATV Systems from the FCC or any Governmental Authority or
other franchising authority or the Borrower or any of its Subsidiaries or
the grantors of any CATV Franchises or CATV Systems shall fail to renew
such CATV Franchises or CATV Systems at the stated expiration thereof if
the percentage represented by such CATV Franchises or CATV Systems and any
other CATV Franchises or CATV Systems which are then so terminated,
suspended or not renewed of Consolidated Operating Cash Flow for the 12-
month period preceding the date of the termination, suspension or failure
to renew, as the case may be, (giving pro forma effect to any acquisitions
or Dispositions that have occurred since the beginning of such 12-month
period as if such acquisitions or Dispositions had occurred at the
beginning of such 12-month period), would exceed 10%, unless (i) an
alternative CATV
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Franchise or CATV System in form and substance reasonably satisfactory to
the Required Lenders shall have been procured and come into effect prior
to or concurrently with the termination or expiration date of such
terminated, suspended or non-renewed CATV Franchise or CATV System or (ii)
the Borrower or such Subsidiary continues to operate and retain the
revenues received from such systems after the stated termination or
expiration and is engaged in negotiations to renew or extend such
franchise rights and obtains such renewal or extension within one year
following the stated termination or expiration, provided that such
negotiations have not been terminated by either party thereto, such
franchise rights or the equivalent thereof have not been awarded on an
exclusive basis to a third Person and no final determination (within the
meaning of Section 635 of the Communications Act of 1934, as amended) has
been made that the Borrower or such Subsidiary is not entitled to the
renewal or extension thereof;
then, and in any such event, (A) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Borrower,
automatically the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) shall immediately
become due and payable, and (B) if such event is any other Event of Default,
either or both of the following actions may be taken: (i) with the consent of
the Required Lenders, the Funding Agent may, or upon the request of the Required
Lenders, the Funding Agent shall, by notice to the Borrower declare the
Revolving Commitments to be terminated forthwith, whereupon the Revolving
Commitments shall immediately terminate; and (ii) with the consent of the
Required Lenders, the Funding Agent may, or upon the request of the Required
Lenders, the Funding Agent shall, by notice to the Borrower, declare the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the other Loan Documents (including all amounts of L/C
Obligations, whether or not the beneficiaries of the then outstanding Letters of
Credit shall have presented the documents required thereunder) to be due and
payable forthwith, whereupon the same shall immediately become due and payable.
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 this
paragraph, the Borrower shall at such time deposit in a cash collateral account
opened by the Funding 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 Funding 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 other obligations of the Borrower hereunder and under the other
Loan Documents. After all such Letters of Credit shall have expired or been
fully drawn upon, all Reimbursement Obligations shall have been satisfied and
all other obligations of the Borrower hereunder and under the other Loan
Documents shall have been paid in full, the balance, if any, in such cash
collateral account shall be returned to the Borrower (or such other Person as
may be lawfully entitled thereto). Except as expressly provided above in this
Section, presentment, demand, protest and all other notices of any kind are
hereby expressly waived by the Borrower.
SECTION 9. THE AGENTS
9.1 Appointment. Each Lender hereby irrevocably designates and
appoints the Funding Agent as the agent of such Lender under this Agreement and
the other Loan Documents, and each such Lender irrevocably authorizes the
Funding Agent, in such capacity, 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 Funding Agent
by the terms of this Agreement and the other Loan Documents, together with such
other powers as are reasonably incidental thereto. Notwithstanding any provision
to the contrary elsewhere in this Agreement, the Funding Agent shall not have
any duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship
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with any Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against the Funding Agent.
9.2 Delegation of Duties. The Funding Agent may execute any of its
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 Funding Agent shall not be responsible
for the negligence or misconduct of any agents or attorneys in-fact selected by
it with reasonable care.
9.3 Exculpatory Provisions. Neither any Agent nor any of their
respective officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement or any
other Loan Document (except to the extent that any of the foregoing are found by
a final and nonappealable decision of a court of competent jurisdiction to have
resulted from its or such Person's own gross negligence or willful misconduct)
or (ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Loan Party or any officer
thereof contained in this Agreement or any other Loan Document or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Agents under or in connection with, this Agreement or any
other Loan Document or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Loan Document or
for any failure of any Loan Party a party thereto to perform its obligations
hereunder or thereunder. The Agents 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 any other Loan
Document, or to inspect the properties, books or records of any Loan Party.
9.4 Reliance by Funding Agent. The Funding Agent shall be entitled
to rely, and shall be fully protected in relying, upon any instrument, writing,
resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be 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
counsel to Holdings or the Borrower), independent accountants and other experts
selected by the Funding Agent. The Funding Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a written notice of
assignment, negotiation or transfer thereof shall have been filed with the
Funding Agent. The Funding Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Required Lenders (or, if
so specified by this Agreement, all Lenders) as it deems appropriate or it shall
first be indemnified to its satisfaction by the Lenders against any and all
liability and expense that may be incurred by it by reason of taking or
continuing to take any such action. The Funding Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
and the other Loan Documents in accordance with a request of the Required
Lenders (or, if so specified by this Agreement, all 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 Loans.
9.5 Notice of Default. The Funding Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Funding Agent has received notice from a Lender, Holdings
or the Borrower 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 Funding Agent receives such a notice, the Funding Agent shall give notice
thereof to the Lenders. The Funding Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed by the Required
Lenders (or, if so specified by this Agreement, all Lenders);
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provided that unless and until the Funding Agent shall have received such
directions, the Funding 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.
9.6 Non-Reliance on Agents and Other Lenders. Each Lender expressly
acknowledges that neither the Agents nor any of their respective officers,
directors, employees, agents, attorneys-in-fact or affiliates have made any
representations or warranties to it and that no act by any Agent hereinafter
taken, including any review of the affairs of a Loan Party or any affiliate of a
Loan Party, shall be deemed to constitute any representation or warranty by any
Agent to any Lender. Each Lender represents to the Agents that it has,
independently and without reliance upon any 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 Loan Parties and their
affiliates and made its own decision to make its Loans hereunder and enter into
this Agreement. Each Lender also represents that it will, independently and
without reliance upon any 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, financial and other condition and creditworthiness of the
Loan Parties and their affiliates. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the Funding Agent
hereunder, the Funding Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
operations, property, condition (financial or otherwise), prospects or
creditworthiness of any Loan Party or any affiliate of a Loan Party that may
come into the possession of the Funding Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or affiliates.
9.7 Indemnification. The Lenders agree to indemnify each Agent in
its capacity as such (to the extent not reimbursed by Holdings or the Borrower
and without limiting the obligation of Holdings or the Borrower to do so),
ratably according to their respective Aggregate Exposure Percentages in effect
on the date on which indemnification is sought under this Section (or, if
indemnification is sought after the date upon which the Commitments shall have
terminated and the Loans shall have been paid in full, ratably in accordance
with such Aggregate Exposure Percentages immediately prior to such date), from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind
whatsoever that may at any time (whether before or after the payment of the
Loans) be imposed on, incurred by or asserted against such Agent in any way
relating to or arising out of, the Commitments, this Agreement, any of 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 such 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 that are found by a final and nonappealable
decision of a court of competent jurisdiction to have resulted from such Agent's
gross negligence or willful misconduct. The agreements in this Section shall
survive the payment of the Loans and all other amounts payable hereunder.
9.8 Agent in Its Individual Capacity. Each Agent and its affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with any Loan Party as though such Agent was not an Agent. With respect
to its Loans made or renewed by it and with respect to any Letter of Credit
issued or participated in by it, each 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 Agent, and the terms "Lender" and
"Lenders" shall include each Agent in its individual capacity.
<PAGE> 69
64
9.9 Successor Funding Agent. The Funding Agent may resign as Funding
Agent upon 30 days' written notice to the Lenders and the Borrower. If the
Funding Agent shall resign as Funding Agent under this Agreement and the other
Loan Documents, then the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders, which successor agent shall (unless an Event of
Default under Section 8(a) or Section 8(f) with respect to the Borrower shall
have occurred and be continuing) be subject to approval by the Borrower (which
approval shall not be unreasonably withheld or delayed), whereupon such
successor agent shall succeed to the rights, powers and duties of the Funding
Agent, and the term "Funding Agent" shall mean such successor agent effective
upon such appointment and approval, and the former Funding Agent's rights,
powers and duties as Funding Agent shall be terminated, without any other or
further act or deed on the part of such former Funding Agent or any of the
parties to this Agreement or any holders of the Loans. If no successor agent has
accepted appointment as Funding Agent by the date that is 30 days following a
retiring Funding Agent's notice of resignation, the retiring Funding Agent's
resignation shall nevertheless thereupon become effective and the other
Administrative Agent or, in the case of any resignation of such other
Administrative Agent in its capacity as Funding Agent (which shall also be
subject to the 30 day notice requirement described above), the Lenders, shall
assume and perform all of the duties of the Funding Agent hereunder until such
time, if any, as the Required Lenders appoint a successor agent as provided for
above. After any retiring Funding Agent's resignation as Funding Agent, the
provisions of this Section 9 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was Funding Agent under this Agreement and
the other Loan Documents.
9.10 Other Agents. Notwithstanding any provision to the contrary
elsewhere in this Agreement (including the circumstance that the Administrative
Agents shall have certain rights regarding notification, consents and other
matters, to the extent expressly provided herein), no Agent other than the
Funding Agent shall have any duties or responsibilities hereunder or under any
other Loan Document, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Loan Document or
otherwise exist against any Agent.
SECTION 10. MISCELLANEOUS
10.1 Amendments and Waivers. Neither this Agreement, any other Loan
Document, nor any terms hereof or thereof may be amended, supplemented or
modified except in accordance with the provisions of this Section 10.1. The
Required Lenders and each Loan Party party to the relevant Loan Document may,
or, with the written consent of the Required Lenders, the Administrative Agents
and each Loan Party party to the relevant Loan Document may, from time to time,
(a) enter into written amendments, supplements or modifications hereto and to
the other Loan Documents for the purpose of adding any provisions to this
Agreement or the other Loan Documents or changing in any manner the rights of
the Lenders or of the Loan Parties hereunder or thereunder or (b) waive, on such
terms and conditions as the Required Lenders or the Administrative Agents, as
the case may be, may specify in such instrument, any of the requirements of this
Agreement or the other Loan Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) forgive the principal amount or extend the
final scheduled date of maturity of any Loan, extend the scheduled date of any
amortization payment in respect of any Term Loan, reduce the stated rate of any
interest or fee payable hereunder or extend the scheduled date of any payment
thereof, or increase the amount or extend the expiration date of any Lender's
Commitment, in each case without the consent of each Lender directly affected
thereby; (ii) eliminate or reduce any voting rights under this Section 10.1 or
reduce any percentage specified in the definition of Required Lenders, consent
to the assignment or transfer by the Borrower of any of its rights and
obligations under this Agreement and the other Loan Documents, release all or
substantially all of the Collateral or release any material Guarantor from its
obligations under the Guarantee and
<PAGE> 70
65
Collateral Agreement (in each case except in connection with Dispositions
consummated or approved in accordance with the other terms of this Agreement),
in each case without the written consent of all Lenders; (iii) reduce the
percentage specified in the definition of Majority Facility Lenders with respect
to any Facility without the written consent of all Lenders under such Facility;
(iv) amend, modify or waive any provision of Section 9 without the written
consent of each affected Agent; (vii) amend, modify or waive any provision of
Section 2.4 or 2.5 without the written consent of the Swingline Lender; or
(viii) amend, modify or waive any provision of Section 3 without the written
consent of each affected Issuing Lender. Any such waiver and any such amendment,
supplement or modification shall apply equally to each of the Lenders and shall
be binding upon the Loan Parties, the Lenders, the Agents and all future holders
of the Loans. In the case of any waiver, the Loan Parties, the Lenders and the
Agents shall be restored to their former position and rights hereunder and under
the other Loan Documents, and any Default or Event of Default waived shall be
deemed to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or impair any right consequent
thereon.
10.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered, or three Business Days after being
deposited in the mail, postage prepaid, or, in the case of telecopy notice, when
received, addressed as follows in the case of Holdings, the Borrower, the
Administrative Agents and the Funding Agent, and as set forth in an
administrative questionnaire delivered to the Funding Agent in the case of the
Lenders, or to such other address as may be hereafter notified by the respective
parties hereto:
Any Loan Party: c/o Charter Communications Holdings LLC
12444 Powerscourt Drive, Suite 400
St. Louis, Missouri 63131
Attention: Kent D. Kalkwarf
Telecopy: (314) 965-8793
Telephone: (314) 543-2309
with a copy to: Paul, Hastings, Janofsky & Walker LLP
600 Peachtree Street, N.E., Suite 2400
Atlanta, Georgia 30308
Attention: Kevin Conboy, Esq.
Telecopy: (404) 815-2444
Telephone: (404) 815-2211
The Administrative Agents: NationsBank, N.A.
901 Main Street
Dallas, Texas 75202
Attention: Jennifer Zydney
Telecopy: (214) 508-9390
Telephone: (214) 508-2752
with a copy to: 901 Main Street
Dallas, TX 75202
Attention: Richard Peck
Telecopy: (214) 508-9390
Telephone: (214) 508-2576
The Chase Manhattan Bank
<PAGE> 71
66
One Chase Manhattan Plaza
New York, New York 10081
Attention: Janet Belden
Telecopy: (212) 552-5658
Telephone: (212) 552-7277
The Funding Agent: NationsBank, N.A.
901 Main Street
Dallas, Texas 75202
Attention: Ruth DelaGarza
Telecopy: (214) 508-2118
Telephone: (214) 508-0989
provided that any notice, request or demand to or upon the Funding Agent, the
Administrative Agents or the Lenders shall not be effective until received.
10.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of any Agent or any Lender, any right, remedy,
power or privilege hereunder or under the other Loan Documents shall operate as
a waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege hereunder preclude any other or further exercise thereof or
the exercise of any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
10.4 Survival of Representations and Warranties. All representations
and warranties made hereunder, in the other Loan Documents and in any document,
certificate or statement delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this Agreement and the making of the
Loans and other extensions of credit hereunder.
10.5 Payment of Expenses and Taxes. The Borrower agrees (a) to pay
or reimburse each Administrative Agent for all its reasonable out-of-pocket
costs and expenses incurred in connection with the development, preparation and
execution of, and any amendment, supplement or modification to, this Agreement
and the other Loan Documents and any other documents prepared in connection
herewith or therewith, and the consummation and administration of the
transactions contemplated hereby and thereby, including the reasonable fees and
disbursements of one firm of counsel to the Administrative Agents and filing and
recording fees and expenses, with statements with respect to the foregoing to be
submitted to the Borrower prior to the Stage One Closing Date (in the case of
amounts to be paid on the Stage One Closing Date) and from time to time
thereafter on a quarterly basis or such other periodic basis as the
Administrative Agents shall deem appropriate, (b) to pay or reimburse each
Lender and each Agent for all its costs and expenses incurred in connection with
the enforcement or preservation of any rights under this Agreement, the other
Loan Documents and any such other documents, including the fees and
disbursements of one firm of counsel selected by the Funding Agent and
reasonably acceptable to the Administrative Agent that is not acting as Funding
Agent (or, in the event that such Administrative Agent determines in good faith
that issues apply to it that are not applicable to the Funding Agent or, with
respect to an issue as to which another counsel is proposed to be engaged, that
its interests are different from those of the Funding Agent, one additional firm
of counsel selected by such Administrative Agent), together with any special or
local counsel, to the Administrative Agents and not more than one other firm of
counsel to the Lenders, (c) to pay, indemnify, and hold each Lender and each
Agent harmless from, any and all recording and filing fees and any and all
liabilities with respect to, or resulting from any delay in paying, stamp,
excise and other taxes, if any, that may be payable or determined to be payable
in connection with the execution and delivery of, or consummation or
administration of any of the
<PAGE> 72
67
transactions contemplated by, or any amendment, supplement or modification of,
or any waiver or consent under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay, indemnify, and hold each
Lender, each Agent, their affiliates and their respective officers, directors,
trustees, employees, agents and controlling persons (each, an "Indemnitee")
harmless from and against any and all other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever with respect to the execution, delivery,
enforcement, performance and administration of this Agreement, the other Loan
Documents and any such other documents, including any of the foregoing relating
to the use of proceeds of the Loans or the violation of, noncompliance with or
liability under, any Environmental Law applicable to the operations of Holdings,
the Borrower any of its Subsidiaries or any of the Properties and the reasonable
fees and expenses of legal counsel in connection with claims, actions or
proceedings by any Indemnitee against any Loan Party under any Loan Document
(all the foregoing in this clause (d), collectively, the "Indemnified
Liabilities"), provided, that the Borrower shall have no obligation hereunder to
any Indemnitee with respect to Indemnified Liabilities to the extent such
Indemnified Liabilities are found by a final and nonappealable decision of a
court of competent jurisdiction to have resulted from the gross negligence or
willful misconduct of such Indemnitee. Without limiting the foregoing, and to
the extent permitted by applicable law, the Borrower agrees not to assert and to
cause its Subsidiaries not to assert, and hereby waives and agrees to cause its
Subsidiaries to so waive, all rights for contribution or any other rights of
recovery with respect to all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses of whatever kind or nature, under or
related to Environmental Laws, that any of them might have by statute or
otherwise against any Indemnitee. All amounts due under this Section 10.5 shall
be payable not later than 15 days after written demand therefor. Statements
payable by the Borrower pursuant to this Section 10.5 shall be submitted to Kent
Kalkwarf (Telephone No. 314-543-2309) (Telecopy No. 314-965-8793), at the
address of the Borrower set forth in Section 10.2, or to such other Person or
address as may be hereafter designated by the Borrower in a written notice to
the Administrative Agents. The agreements in this Section 10.5 shall survive
repayment of the Loans and all other amounts payable hereunder.
10.6 Successors and Assigns; Participations and Assignments. (a)
This Agreement shall be binding upon and inure to the benefit of Holdings, the
Borrower, the Lenders, the Agents, all future holders of the Loans and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Lender.
(b) Any Lender may, without the consent of the Borrower or the
Funding Agent, in accordance with applicable law, at any time sell to one or
more banks, financial institutions or other entities (each, a "Participant")
participating interests in any Loan owing to such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder and under the other Loan
Documents. In the event of any such sale by a Lender of a participating interest
to a Participant, such Lender's obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, such Lender shall remain
solely responsible for the performance thereof, such Lender shall remain the
holder of any such Loan for all purposes under this Agreement and the other Loan
Documents, and the Borrower and the Agents shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and the other Loan Documents. In no event shall
any Participant under any such participation have any right to approve any
amendment or waiver of any provision of any Loan Document, or any consent to any
departure by any Loan Party therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Loans or
any fees payable hereunder, or postpone the date of the final maturity of the
Loans, in each case to the extent subject to such participation. The Borrower
agrees that if amounts outstanding under this Agreement and the Loans are due or
unpaid, or shall have been declared or shall have become due and payable upon
the occurrence of an Event of Default, each Participant shall, to the maximum
extent
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68
permitted by applicable law, be deemed to have the right of setoff in respect of
its participating interest in amounts owing under this Agreement to the same
extent as if the amount of its participating interest were owing directly to it
as a Lender under this Agreement, provided that, in purchasing such
participating interest, such Participant shall be deemed to have agreed to share
with the Lenders the proceeds thereof as provided in Section 10.7(a) as fully as
if it were a Lender hereunder. The Borrower also agrees that each Participant
shall be entitled to the benefits of Sections 2.16, 2.17 and 2.18 with respect
to its participation in the Commitments and the Loans outstanding from time to
time as if it was a Lender; provided that, in the case of Section 2.17, such
Participant shall have complied with the requirements of said Section and
provided, further, that no Participant shall be entitled to receive any greater
amount pursuant to any such Section than the transferor Lender would have been
entitled to receive in respect of the amount of the participation transferred by
such transferor Lender to such Participant had no such transfer occurred.
(c) Any Lender (an "Assignor") may, in accordance with applicable
law, at any time and from time to time assign to any Lender, any affiliate of
any Lender or any Approved Fund or, with the consent of the Borrower and the
Funding Agent (which, in each case, shall not be unreasonably withheld or
delayed), to an additional bank, financial institution or other entity (an
"Assignee") all or any part of its rights and obligations under this Agreement
pursuant to an Assignment and Acceptance, executed by such Assignee, such
Assignor and any other Person whose consent is required pursuant to this
paragraph, and delivered to the Funding Agent for its acceptance and recording
in the Register; provided that, except in the case of an assignment of all of a
Lender's interests under this Agreement, no such assignment to an Assignee
(other than any Lender, any affiliate of any Lender or any Approved Fund) shall
(i) be in an aggregate principal amount of less than $5,000,000 or (ii) cause
the Assignor to have Aggregate Exposure of less than $3,000,000, in each case
unless otherwise agreed by the Borrower and the Funding Agent. For purposes of
clauses (i) and (ii) of the preceding sentence, the amounts described therein
shall be aggregated in respect of each Lender and its related Approved Funds, if
any. Any such assignment need not be ratable as among the Facilities. Upon such
execution, delivery, acceptance and recording, from and after the effective date
determined pursuant to such Assignment and Acceptance, (x) 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 hereunder
with a Commitment and/or Loans as set forth therein, and (y) the Assignor
thereunder shall, to the extent provided in such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all of an Assignor's rights and obligations
under this Agreement, such Assignor shall cease to be a party hereto).
Notwithstanding any provision of this Section 10.6, the consent of the Borrower
shall not be required for any assignment that occurs when an Event of Default
pursuant to Section 8(a) or 8(f) shall have occurred and be continuing. On the
effective date of any Assignment and Acceptance, the Funding Agent shall give
notice of the terms thereof to the Administrative Agent that is not serving as
Funding Agent.
(d) The Funding Agent shall, on behalf of the Borrower, maintain at
its address referred to in Section 10.2 a copy of each Assignment and Acceptance
delivered to it and a register (the "Register") for the recordation of the names
and addresses of the Lenders and the Commitment of, and the principal amount of
the Loans owing to, each Lender from time to time. The entries in the Register
shall be conclusive, in the absence of manifest error, and the Borrower, each
other Loan Party, the Agents and the Lenders shall treat each Person whose name
is recorded in the Register as the owner of the Loans and any Notes evidencing
the Loans recorded therein for all purposes of this Agreement. Any assignment of
any Loan, whether or not evidenced by a Note, shall be effective only upon
appropriate entries with respect thereto being made in the Register (and each
Note shall expressly so provide). Any assignment or transfer of all or part of a
Loan evidenced by a Note shall be registered on the Register only upon surrender
for registration of assignment or transfer of the Note evidencing such Loan,
accompanied by a duly executed Assignment and Acceptance, and thereupon one or
more new Notes
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69
shall be issued to the designated Assignee. The Funding Agent will promptly send
a copy of the Register to the Borrower upon request.
(e) Upon its receipt of an Assignment and Acceptance executed by an
Assignor, an Assignee and any other Person whose consent is required by Section
10.6(c), together with payment to the Funding Agent of a registration and
processing fee of $3,500, the Funding Agent shall (i) promptly accept such
Assignment and Acceptance and (ii) record the information contained therein in
the Register on the effective date determined pursuant thereto.
(f) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this Section 10.6 concerning assignments
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including any pledge or assignment by a
Lender of any Loan to any Federal Reserve Bank in accordance with applicable
law.
10.7 Adjustments; Set-off. (a) Except to the extent that this
Agreement expressly provides for payments to be allocated to a particular Lender
or to the Lenders under a particular Facility, if any Lender (a "Benefitted
Lender") shall receive any payment of all or part of the amounts owing to it
hereunder, or receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the nature
referred to in Section 8(f), or otherwise), in a greater proportion than any
such payment to or collateral received by any other Lender, if any, in respect
of the amounts owing to such other Lender hereunder, such Benefitted Lender
shall purchase for cash from the other Lenders a participating interest in such
portion of the amounts owing to each such other Lender hereunder, or shall
provide such other Lenders with the benefits of any such collateral, as shall be
necessary to cause such Benefitted Lender to share the excess payment or
benefits of such collateral ratably with each of the Lenders; provided, however,
that if all or any portion of such excess payment or benefits is thereafter
recovered from such Benefitted Lender, such purchase shall be rescinded, and the
purchase price and benefits returned, to the extent of such recovery, but
without interest.
(b) In addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, without prior notice to Holdings or
the Borrower, any such notice being expressly waived by Holdings and the
Borrower to the extent permitted by applicable law, upon any amount becoming due
and payable by Holdings or the Borrower hereunder (whether at the stated
maturity, by acceleration or otherwise), to set off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits, indebtedness or
claims, in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such Lender or
any branch or agency thereof to or for the credit or the account of Holdings or
the Borrower, as the case may be. Each Lender agrees promptly to notify the
Borrower and the Funding Agent after any such setoff and application made by
such Lender, provided that the failure to give such notice shall not affect the
validity of such setoff and application.
10.8 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts, and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery of an executed signature page of this Agreement by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof. A set of the copies of this Agreement signed by all the
parties shall be lodged with the Borrower and the Administrative Agents.
10.9 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
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70
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10.10 Integration. This Agreement and the other Loan Documents
represent the agreement of Holdings, the Borrower, the Agents and the Lenders
with respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the any Agent or any Lender
relative to subject matter hereof not expressly set forth or referred to herein
or in the other Loan Documents.
10.11 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
10.12 Submission To Jurisdiction; Waivers. Each of Holdings and the
Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to
which it is a party, or for recognition and enforcement of any judgment in
respect thereof, to the non-exclusive general jurisdiction of the courts
of the State of New York, the courts of the United States for the Southern
District of New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(c) agrees that service of process in any such action or proceeding
may be effected by mailing a copy thereof by registered or certified mail
(or any substantially similar form of mail), postage prepaid, to Holdings
or the Borrower, as the case may be at its address set forth in Section
10.2 or at such other address of which the Funding Agent shall have been
notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred
to in this Section any special, exemplary, punitive or consequential
damages.
10.13 Acknowledgments. Each of Holdings and the Borrower hereby
acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and
delivery of this Agreement and the other Loan Documents;
(b) neither any Agent nor any Lender has any fiduciary relationship
with or duty to Holdings or the Borrower arising out of or in connection
with this Agreement or any of the other Loan Documents, and the
relationship between the Agents and Lenders, on one hand, and
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71
Holdings and the Borrower, on the other hand, in connection herewith or
therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated
hereby among the Agents and the Lenders or among Holdings, the Borrower
and the Agents and the Lenders.
10.14 Releases of Guarantees and Liens. (a) Notwithstanding anything
to the contrary contained herein or in any other Loan Document, the Funding
Agent is hereby irrevocably authorized by each Lender (without requirement of
notice to or consent of any Lender except as expressly required by Section 10.1)
to take any action requested by the Borrower having the effect of releasing any
Collateral or Guarantee Obligations (i) to the extent necessary to permit
consummation of any transaction not prohibited by any Loan Document or that has
been approved in accordance with Section 10.1 or (ii) under the circumstances
described in paragraph (b) below.
(b) At such time as the Loans, the Reimbursement Obligations and the
other obligations under the Loan Documents (other than obligations under or in
respect of Hedge Agreements or letters of credit obtained other than pursuant to
this Agreement) shall have been paid in full, the Commitments have been
terminated and no Letters of Credit shall be outstanding, the Collateral shall
be released from the Liens created by the Guarantee and Collateral Agreement,
and the Guarantee and Collateral Agreement and all obligations (other than those
expressly stated to survive such termination) of the Funding Agent and each Loan
Party under the Guarantee and Collateral Agreement shall terminate, all without
delivery of any instrument or performance of any act by any Person.
10.15 Confidentiality. Each Agent and each Lender agrees to keep
confidential all non-public information provided to it by any Loan Party
pursuant to this Agreement that is designated by such Loan Party as
confidential; provided that nothing herein shall prevent any Agent or any Lender
from disclosing any such information (a) to any Agent, any Lender or any
affiliate of any Lender or any Approved Fund, (b) to any Transferee or
prospective Transferee that agrees to comply with the provisions of this
Section, (c) to its employees, directors, agents, attorneys, accountants and
other professional advisors or those of any of its affiliates who have a need to
know, (d) upon the request or demand of any Governmental Authority, (e) in
response to any order of any court or other Governmental Authority or as may
otherwise be required pursuant to any Requirement of Law, (f) if requested or
required to do so in connection with any litigation or similar proceeding, (g)
that has been publicly disclosed, (h) any nationally recognized rating agency
that requires access to information about a Lender's investment portfolio in
connection with ratings issued with respect to such Lender, or (i) in connection
with the exercise of any remedy hereunder or under any other Loan Document.
10.16 WAIVERS OF JURY TRIAL. HOLDINGS, THE BORROWER, THE AGENTS AND
THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
AND FOR ANY COUNTERCLAIM THEREIN.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their proper and duly authorized officers as
of the day and year first above written.
CHARTER COMMUNICATIONS HOLDINGS LLC
By: /s/ Eloise A. Engman
_______________________________________
Name: Eloise A. Engman
Title: Vice President
CHARTER COMMUNICATIONS OPERATING, LLC
By: /s/ Eloise A. Engman
_______________________________________
Name: Eloise A. Engman
Title: Vice President
MARCUS CABLE COMPANY, L.L.C.
By: Marcus Cable Properties, L.L.C.
Its: Manager
By: Marcus Cable Properties, Inc.
Its: Manager
By: /s/ Marcy Lifton
_______________________________________
Name: Marcy Lifton
Title: Senior Vice President
MARCUS CABLE OPERATING COMPANY, L.L.C.
By: Marcus Cable Company, L.L.C.
Its: Member
By: Marcus Cable Properties, L.L.C.
Its: Manager
By: Marcus Cable Properties, Inc.
Its: Manager
By: /s/ Marcy Lifton
_______________________________________
Name: Marcy Lifton
Title: Senior Vice President
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The Administrative Agents:
NATIONSBANK, N.A.
By: /s/ Jennifer F. Zydney
_______________________________________
Name: Jennifer F. Zydney
Title: Vice President
THE CHASE MANHATTAN BANK
By: /s/ Laurie P. Perper
_______________________________________
Name: Laurie P. Perper
Title: Vice President
The Syndication Agents:
CHASE SECURITIES INC.
By: /s/ Peter Hooker
_______________________________________
Name: Peter Hooker
Title: Vice President
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Barbara P. Jorgensen
_______________________________________
Name: Barbara P. Jorgensen
Title: Principal
TD SECURITIES (USA) INC.
By: /s/ Amy G. Josephson
_______________________________________
Name: Amy G. Josephson
Title: Vice President and Director
<PAGE> 79
74
The Documentation Agents:
TORONTO DOMINION (TEXAS), INC.
By: /s/ Lynn Chasin
_______________________________________
Name: Lynn Chasin
Title: Vice President
FLEET BANK, N.A.
By: /s/ Tanya M. Crossley
_______________________________________
Name: Tanya M. Crossley
Title: Vice President
CREDIT LYONNAIS NEW YORK BRANCH
By: /s/ Mark D. Thorsheim
_______________________________________
Name: Mark D. Thorsheim
Title: Vice President
The Funding Agent:
NATIONSBANK, N.A.
By: /s/ Jennifer F. Zydney
_______________________________________
Name: Jennifer F. Zydney
Title: Vice President
<PAGE> 80
Annex A
PRICING GRID
<TABLE>
<CAPTION>
===================================================================================================
Applicable Margin Applicable Margin
for Eurodollar Loans for ABR Loans
-------------------- ----------------- Commitment
Consolidated Leverage Ratio A/RC B A/RC B Fee Rate
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Greater than 4.50 to 1.0 2.25% 2.75% 1.25% 1.75% 0.375%
- ---------------------------------------------------------------------------------------------------
Greater than 4.00 to 1.0 but 2.00% 2.50% 1.00% 1.50% 0.375%
less than or equal to 4.50 to 1.0
- ---------------------------------------------------------------------------------------------------
Greater than 3.00 to 1.0 but 1.75% 2.50% 0.75% 1.50% 0.375%
less than or equal to 4.00 to 1.0
- ---------------------------------------------------------------------------------------------------
Greater than 2.50 to 1.0 but 1.625% 2.50% 0.625% 1.50% 0.375%
less than or equal to 3.00 to 1.0
- ---------------------------------------------------------------------------------------------------
Less than or equal to 2.50 to 1.0 1.50% 2.25% 0.50% 1.25% 0.250%
===================================================================================================
</TABLE>
As used above, (a) "A/RC" refers to Tranche A Term Loans, Revolving
Loans and Swingline Loans and (b) "B" refers to Tranche B Term Loans.
Until December 31, 2000 (the "Full Grid Date"), rates corresponding
to a Consolidated Leverage Ratio of less than or equal to 3.00 to 1.0 will not
be available. From and after the Full Grid Date, each of the Applicable Margins
referred to in the Pricing Grid (but not the Commitment Fee Rate) will be
reduced by 0.25% per annum if the Consolidated Interest Coverage Ratio
(determined from time to time as provided in the next paragraph) is greater than
or equal to 2.15 to 1.0, provided that, in the case of Tranche B Term Loans, in
no event shall the Applicable Margin be less than 2.25% (in the case of
Eurodollar Loans) and 1.25% (in the case of ABR Loans), respectively.
Changes in the Applicable Margin or in the Commitment Fee Rate
resulting from changes in the Consolidated Leverage Ratio and the Consolidated
Interest Coverage Ratio shall become effective on the date (the "Adjustment
Date") on which financial statements are delivered to the Lenders pursuant to
Section 6.1 (but in any event not later than the 45th day after the end of each
of the first three quarterly periods of each fiscal year or the 90th day after
the end of each fiscal year, as the case may be) and shall remain in effect
until the next change to be effected pursuant to this paragraph. If applicable,
effective on the Full Grid Date, the rates in the Pricing Grid shall be reset
based on the financial statements for the fiscal quarter ending September 30,
2000 delivered pursuant to Section 6.1. Until financial statements are first
delivered pursuant to Section 6.1 after the Stage One Closing Date, the
Consolidated Leverage Ratio for the purposes of the Pricing Grid shall be the
Consolidated Leverage Ratio set forth in the certificate of the Borrower
delivered pursuant to Section 5.1(h). If any financial statements referred to
above are not delivered within the time periods specified above, then, until
such financial statements are delivered, the highest rates referred to in the
Pricing Grid shall be applicable. In addition, the highest rates referred to in
the Pricing Grid shall be applicable at all times while an Event of Default
shall have occurred and be continuing. Each determination of the Consolidated
Leverage Ratio and the Consolidated Interest Coverage Ratio pursuant to the
Pricing Grid shall be made in the manner contemplated by Section 7.1.
<PAGE> 81
Schedule 4.1
CERTAIN FINANCIAL STATEMENTS
CHARTER COMMUNICATIONS HOLDINGS, LLC:
Report of Arthur Andersen LLP
Combined Balance Sheets as of December 31, 1998 and 1997
Combined Statements of Operations for the Period From December 24, 1998
Through December 31, 1998* and January 1, 1998 Through December 23,
1998 and for the Years Ended December 31, 1997 and 1996
Combined Statements of Cash Flows for the Period From December 24, 1998
Through December 31, 1998* and January 1, 1998 through December 23,
1998 and for the Years Ended December 31, 1997 and 1996
Notes to Combined Financial Statements
* For the period from December 24, 1998 through December 31, 1998,
Charter Holdings consolidates the operations of the
successors-in-interest to the CCA Group and to CharterComm Holdings,
L.P.
CCA GROUP (consisting of CCA Holdings Corp., CCT Holdings Corp. and Charter
Communications Long Beach, Inc.):
Report of Arthur Andersen LLP
Combined Balance Sheets as of December 31, 1997
Combined Statements of Operations for the Period From January 1, 1998
Through December 23, 1998 and for the Years Ended December 31, 1997 and
1996
Combined Statements of Operations for the Period From January 1, 1998
Through December 23, 1998 and for the Years Ended December 31, 1997 and
1996
Notes to Combined Financial Statements
CHARTERCOMM HOLDINGS, L.P.:
Report of Arthur Andersen LLP
Consolidated Balance Sheet as of December 31, 1997
Consolidated Statements of Operations for the Period From January 1, 1998
Through December 23, 1998 and for the Years Ended December 31, 1997 and
1996
Consolidated Statements of Cash Flows for the Period From January 1, 1998
Through December 23, 1998 and for the Years Ended December 31, 1997 and
1996
Notes to Consolidated Financial Statements
MARCUS CABLE COMPANY, L.L.C. AND SUBSIDIARIES:
Report of KPMG LLP
Consolidated Balance Sheets as of December 31, 1998, 1997 and 1996
Consolidated Statements of Operations for the Periods From April 23 to
December 31, 1998 and January 1 to April 22, 1998 and for the Years in
the Two-Year Period Ended December 31, 1997
Consolidated Statements of Cash Flows for Periods from April 23, 1998 to
December 31, 1998 and January 1, 1998 Through to April 22, 1998 and for
the Years Ended December 31, 1997 and 1996
<PAGE> 1
Exhibit 12.1
PREDECESSOR OF CHARTER COMMUNICATIONS HOLDINGS, LLC
RATIO OF EARNINGS TO FIXED CHARGES CALCULATION
(In Thousands, Except Ratios)
<TABLE>
<CAPTION>
1/1/95
through
Earnings 1994 9/30/95
- -------- ---- -------
<S> <C> <C>
Income from Continuing Operations
Before Income Taxes $ 749 $ 420
Fixed Charges 17 13
----- -----
Earnings $ 766 $ 433
===== =====
Fixed Charges
- -------------
Interest Expense $ -- $ --
Amortization of Debt Costs -- --
Interest Element of Rentals 17 13
----- -----
Total Fixed Charges $ 17 $ 13
===== =====
Ratio of Earnings to Fixed Charges 45.14 34.00
----- -----
</TABLE>
11
<PAGE> 1
Exhibit 12.2
CHARTER COMMUNICATIONS HOLDINGS, LLC
RATIO OF EARNINGS TO FIXED CHARGES CALCULATION
(In Thousands, Except Ratios)
<TABLE>
<CAPTION>
10/1/95 1/1/98 12/24/98
through through through
Earnings 12/31/95 1996 1997 12/23/98 12/31/98
- -------- -------- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C>
Loss from Continuing Operations
Before Income Taxes $ (531) $ (2,723) $ (4,623) $(17,222) $ (8,724)
Fixed Charges 698 4,442 5,283 17,614 5,088
-------- -------- -------- -------- --------
Earnings $ 167 $ 1,719 $ 660 $ 392 $ (3,636)
======== ======== ======== ======== ========
Fixed Charges
- -------------
Interest Expense $ 691 $ 4,415 $ 5,120 $ 17,277 $ 5,051
Amortization of Debt Costs -- -- 123 267 --
Interest Element of Rentals 7 27 40 70 37
-------- -------- -------- -------- --------
Total Fixed Charges $ 698 $ 4,442 $ 5,283 $ 17,614 $ 5,088
======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges (1) -- -- -- -- --
-------- -------- -------- -------- --------
</TABLE>
(1) Earnings for the period from October 1, 1995 through December 31, 1995 and
the years ended December 31, 1996 and 1997, were insufficient to cover
fixed charges by $531, $2,723, and $4,623, respectively. Earnings for the
periods from January 1, 1998 through December 23, 1998, and the period from
December 24, 1998 through December 31, 1998, were insufficient to cover
fixed charges by $17,222 and $8,724. As a result of such deficiencies, the
ratios are not presented above.
11
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES
Charter Communications Holdings, LLC:
Charter Communications Holdings Capital Corporation
Charter Communications Operating, LLC
Charter Communications Properties LLC
Cencom Cable Entertainment, LLC
Charter Communications Entertainment, LLC
Charter Communications Entertainment II, LLC
American Cable Entertainment Company, LLC
Charter Communications Entertainment I, LLC
Cable Advertising of St. Louis, L.L.C.
Long Beach, LLC
Charter Communications Services, LLC
Charter Cable Operating Company, LLC
Marcus Cable Partners, L.L.C.
Marcus Cable, Inc.
Marcus Cable Associates, L.L.C.
Marcus Cable of Alabama, L.L.C.
Marcus Fiberlink, L.L.C.
Charter Communications, LLC
Peachtree Cable TV, LLC
Peachtree Cable TV, L.P.
CF Finance LaGrange, Inc.
Charter-LaGrange, L.L.C.
Charter RMG, LLC
Renaissance Media Group, LLC
Renaissance Media Capital Corporation
Renaissance Media (Tennessee), LLC
Renaissance Media (Louisiana), LLC
Renaissance Media, LLC
Charter-Helicon, LLC
Charter Communications Holdings Capital Corporation:
None
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
covering the audited financial statements of Charter Communications Holdings,
LLC, CCA Group, CharterComm Holdings, L.P., Long Beach Acquisition Corp., Sonic
Communications Cable Television Systems, and Greater Media Cablevision Systems
(and to all references to our Firm) included in or made a part of this
registration statement.
/s/ ARTHUR ANDERSEN LLP
ST. LOUIS, MISSOURI
JUNE 18, 1999
<PAGE> 1
Exhibit 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Charter Communications, Inc.:
We consent to the use of our report on the consolidated balance sheets of Marcus
Cable Company, L.L.C. and subsidiaries as of December 31, 1998 and 1997 and the
related consolidated statements of operations, members' equity and cash flows
for the period from April 23, 1998 to December 31, 1998 and the consolidated
statements of operations, partners' capital (deficit) and cash flows for the
period from January 1, 1998 to April 22, 1998 and for each of the years in the
two-year period ended December 31, 1997 included herein.
/s/ KPMG LLP
Dallas, Texas
June 18, 1999
<PAGE> 1
Exhibit 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated February 22, 1999 (except for
Note 11, as to which the date is February 24, 1999), with respect to the
consolidated financial statements of Renaissance Media Group LLC included in
Amendment No. 2 to the Registration Statement on Form S-4 (No. 333-77499) and
related Prospectus of Charter Communications Holdings, LLC and Charter
Communications Holdings Capital Corporation for the registration of
$3,575,000,000 Senior Notes and Senior Discount Notes.
/s/ ERNST & YOUNG LLP
New York, New York
June 18, 1999
<PAGE> 1
Exhibit 23.5
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Charter Communications, Inc.:
We consent to the use of our report included herein with respect to the combined
financial statements of Helicon Partners I, L.P. and affiliates as of December
31, 1997 and 1998 and for each of the years in the three-year period ended
December 31, 1998.
/s/ KPMG LLP
New York, New York
June 18, 1999
<PAGE> 1
Exhibit 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Charter Communications Holdings, LLC and
Charter Communications Holdings Capital Corporation of our report dated April
20, 1999 relating to the combined financial statements of InterMedia Cable
Systems, which appears in such Prospectus.
/s/ PRICEWATERHOUSECOOPERS LLP
San Francisco, California
June 18, 1999
<PAGE> 1
Exhibit 23.7
We hereby consent to the use in this Registration Statement on Form S-4 of
Charter Communications Holdings, LLC and Charter Communications Holdings Capital
Corporation of our reports dated March 19, 1999 relating to the financial
statements of Rifkin Acquisition Partners, LLLP, and Rifkin Cable Income
Partners LP for the year ended December, 31, 1998.
/s/ PRICEWATERHOUSECOOPERS LLP
Denver, Colorado
June 18, 1999
<PAGE> 1
Exhibit 23.8
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our reports dated February 19, 1999, with respect
to the consolidated financial statements of R/N South Florida Cable Management
Limited Partnership and Indiana Cable Associates, Ltd. included in Amendment No.
2 to the Registration Statement on Form S-4 and related Prospectus of Charter
Communications Holdings, LLC and Charter Communications Holdings Capital
Corporation for the registration of $3,575,000,000 Senior Notes and Senior
Discount Notes.
/s/ ERNST & YOUNG LLP
Denver, Colorado
June 18, 1999
<PAGE> 1
Exhibit 23.9
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated February 22, 1999, with respect
to the combined financial statements of the Picayune MS, Lafourche LA, St.
Tammany LA, St. Landry LA, Pointe Coupee LA and Jackson TN cable television
systems included in Amendment No. 2 to the Registration Statement on Form S-4
(No. 333-77499) and related Prospectus of Charter Communications Holdings, LLC
and Charter Communications Holdings Capital Corporation for the registration of
$3,575,000,000 Senior Notes and Senior Discount Notes.
/s/ ERNST & YOUNG LLP
New York, New York
June 18, 1999
<PAGE> 1
Exhibit 23.10
CONSENT OF INDEPENDENT AUDITORS
We consent to the use of our report dated March 16, 1998, with respect to
the combined financial statements of the Picayune MS, Lafourche LA, St. Tammany
LA, St. Landry LA, Pointe Coupee LA and Jackson TN cable television systems
included in Amendment No. 2 to the Registration Statement on Form S-4 (No.
333-77499) and related Prospectus of Charter Communications Holdings, LLC and
Charter Communications Holdings Capital Corporation for the registration of
$3,575,000,000 Senior Notes and Senior Discount Notes.
/s/ ERNST & YOUNG LLP
New York, New York
June 18, 1999
<PAGE> 1
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
Statement of Eligibility
Under the Trust Indenture Act of 1939
of a Corporation Designated to Act as Trustee
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2) ______
HARRIS TRUST AND SAVINGS BANK
(Name of Trustee)
Illinois 36-1194448
(State of Incorporation) (I.R.S. Employer Identification No.)
111 West Monroe Street, Chicago, Illinois 60603 (Address of
principal executive offices)
Judith Bartolini, Harris Trust and Savings Bank,
311 West Monroe Street, Chicago, Illinois, 60606
312-461-2527 phone 312-461-3525 facsimile
(Name, address and telephone number for agent for service)
CHARTER COMMUNICATIONS HOLDINGS LLC
CHARTER COMMUNICATIONS HOLDINGS CAPITAL CORPORATION
(Obligors)
Delaware 43-1843179
Delaware 43-1843177
(State of Incorporation) (I.R.S. Employer Identification No.)
12444 Powerscourt Drive Suite 400
St Louis MO 63131
(Address of principal executive offices)
8.25% Senior Notes due 2007
8.625% Senior Notes due 2009
9.92% Senior Discount Notes due 2011
(Title of indenture securities)
<PAGE> 2
1. GENERAL INFORMATION. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Commissioner of Banks and Trust Companies, State of Illinois,
Springfield, Illinois; Chicago Clearing House Association, 164 West
Jackson Boulevard, Chicago, Illinois; Federal Deposit Insurance
Corporation, Washington, D.C.; The Board of Governors of the Federal
Reserve System, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Harris Trust and Savings Bank is authorized to exercise corporate
trust powers.
2. AFFILIATIONS WITH OBLIGOR. If the Obligor is an affiliate of the Trustee,
describe each such affiliation.
The Obligor is not an affiliate of the Trustee.
3. through 15.
NO RESPONSE NECESSARY
16. LIST OF EXHIBITS.
1. A copy of the articles of association of the Trustee as now in
effect which includes the authority of the trustee to commence
business and to exercise corporate trust powers.
A copy of the Certificate of Merger dated April 1, 1972 between
Harris Trust and Savings Bank, HTS Bank and Harris Bankcorp, Inc.
which constitutes the articles of association of the Trustee as now
in effect and includes the authority of the Trustee to commence
business and to exercise corporate trust powers was filed in
connection with the Registration Statement of Louisville Gas and
Electric Company, File No. 2-44295, and is incorporated herein by
reference.
2. A copy of the existing by-laws of the Trustee.
A copy of the existing by-laws of the Trustee was filed in
connection with the Registration Statement of Commercial Federal
Corporation, File No. 333-20711, and is incorporated herein by
reference.
3. The consents of the Trustee required by Section 321(b) of the Act.
(included as Exhibit A on page 2 of this statement)
4. A copy of the latest report of condition of the Trustee published
pursuant to law or the requirements of its supervising or examining
authority.
(included as Exhibit B on page 3 of this statement)
1
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee,
HARRIS TRUST AND SAVINGS BANK, a corporation organized and existing under the
laws of the State of Illinois, has duly caused this statement of eligibility to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Chicago, and State of Illinois, on the 28th day of April, 1999.
HARRIS TRUST AND SAVINGS BANK
By: /s/ Judith Bartolini
-------------------------
J. Bartolini
Vice President
EXHIBIT A
The consents of the trustee required by Section 321(b) of the Act.
Harris Trust and Savings Bank, as the Trustee herein named, hereby consents that
reports of examinations of said trustee by Federal and State authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
HARRIS TRUST AND SAVINGS BANK
By: /s/ Judith Bartolini
-------------------------
J. Bartolini
Vice President
2
<PAGE> 4
EXHIBIT B
Attached is a true and correct copy of the statement of condition of Harris
Trust and Savings Bank as of December 31, 1998, as published in accordance with
a call made by the State Banking Authority and by the Federal Reserve Bank of
the Seventh Reserve District.
[LOGO] HARRIS BANK
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60603
of Chicago, Illinois, And Foreign and Domestic Subsidiaries, at the close of
business on December 31, 1998, a state banking institution organized and
operating under the banking laws of this State and a member of the Federal
Reserve System. Published in accordance with a call made by the Commissioner of
Banks and Trust Companies of the State of Illinois and by the Federal Reserve
Bank of this District.
Bank's Transit Number 71000288
<TABLE>
<CAPTION>
THOUSANDS
ASSETS OF DOLLARS
<S> <C> <C>
Cash and balances due from depository institutions:
Non-interest bearing balances and currency and coin ............ $1,435,233
Interest bearing balances ...................................... $98,929
Securities: .............................................................
a. Held-to-maturity securities $0
b. Available-for-sale securities $5,295,498
Federal funds sold and securities purchased under agreements to resell $151,575
Loans and lease financing receivables:
Loans and leases, net of unearned income ....................... $9,320,939
LESS: Allowance for loan and lease losses ..................... $108,280
----------
Loans and leases, net of unearned income, allowance, and reserve
(item 4.a minus 4.b) ........................................... $9,212,659
Assets held in trading accounts ......................................... $252,881
Premises and fixed assets (including capitalized leases) ................ $271,540
Other real estate owned ................................................. $366
Investments in unconsolidated subsidiaries and associated companies ..... $57
Customer's liability to this bank on acceptances outstanding ............ $30,829
Intangible assets ....................................................... $257,627
Other assets ............................................................ $1,093,599
-----------
TOTAL ASSETS ............................................................ $18,100,793
===========
</TABLE>
3
<PAGE> 5
<TABLE>
<CAPTION>
LIABILITIES
<S> <C> <C>
Deposits:
In domestic offices ............................................................ $10,270,499
Non-interest bearing ................................................. $3,410,568
Interest bearing ..................................................... $6,859,931
In foreign offices, Edge and Agreement subsidiaries, and IBF's ................. $935,609
Non-interest bearing ................................................. $69,215
Interest bearing ..................................................... $866,394
Federal funds purchased and securities sold under agreements to repurchase in
domestic offices of the bank and of its Edge and Agreement subsidiaries, and in IBF's:
Federal funds purchased & securities sold under agreements to repurchase ............. $3,642,049
Trading Liabilities 131,909
Other borrowed money: ................................................................
a. With remaining maturity of one year or less $1,107,125
b. With remaining maturity of more than one year $0
Bank's liability on acceptances executed and outstanding $30,829
Subordinated notes and debentures .................................................... $225,000
Other liabilities .................................................................... $424,376
-----------
TOTAL LIABILITIES $16,767,396
===========
EQUITY CAPITAL
Common stock ......................................................................... $100,000
Surplus .............................................................................. $608,116
a. Undivided profits and capital reserves ........................................... $593,973
b. Net unrealized holding gains (losses) on available-for-sale securities $31,308
-----------
TOTAL EQUITY CAPITAL $1,333,397
===========
Total liabilities, limited-life preferred stock, and equity capital .................. $18,100,793
===========
</TABLE>
I, Pamela Piarowski, Vice President of the above-named bank, do hereby
declare that this Report of Condition has been prepared in conformance with the
instructions issued by the Board of Governors of the Federal Reserve System and
is true to the best of my knowledge and belief.
PAMELA PIAROWSKI
1/27/99
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and, to the best of our
knowledge and belief, has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and the
Commissioner of Banks and Trust Companies of the State of Illinois and is true
and correct.
EDWARD W. LYMAN,
ALAN G. McNALLY,
RICHARD E. TERRY
Directors.
4
