<PAGE>
As filed with the Securities and Exchange Commission on November 12, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
Form S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------
Mediacom Communications Corporation
(Exact name of registrant as specified in its charter)
Delaware 4841 Applied For
(Primary Standard (I.R.S. Employer
(State or other Industrial Identification Number)
jurisdiction of Classification Code
incorporation or Number)
organization)
100 Crystal Run Road
Middletown, New York 10941
(914) 695-2600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-----------
Rocco B. Commisso
Chairman and Chief Executive Officer
Mediacom Communications Corporation
100 Crystal Run Road
Middletown, New York 10941
(914) 695-2600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------
Copies to:
Robert L. Winikoff, Esq. James J. Clark, Esq.
Elliot E. Brecher, Esq. Christopher Cox, Esq.
Cooperman Levitt Winikoff Lester & Cahill Gordon & Reindel
Newman, P.C. 80 Pine Street
800 Third Avenue New York, New York 10005
New York, New York 10022 (212) 701-3000
(212) 688-7000 Fax: (212) 269-5420
Fax: (212) 755-2839
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
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(c)
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. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Maximum Amount of
Title of Each Class of Aggregate Offering Registration
Securities to be Registered Price(1) Fee
- -----------------------------------------------------------------------------
<S> <C> <C>
Class A common stock, $.01 par value per
share................................... $345,000,000 $95,910
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
</TABLE>
(1) Estimated pursuant to Rule 457(o) under the Securities Act of 1933 solely
for the purpose of calculating the registration fee.
-----------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act or until the registration statement shall become effective
on such date as the Commission, acting pursuant to said Section 8(a), may
determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED NOVEMBER 12, 1999
Shares
Mediacom Communications Corporation
Class A Common Stock
---------
Prior to this offering, there has been no public market for our Class A
common stock. The initial public offering price of the Class A common stock is
expected to be between $ and $ per share. We will make application to
list our Class A common stock on The Nasdaq Stock Market's National Market
under the symbol "MCCC."
The underwriters have an option to purchase a maximum of additional
shares to cover over-allotments of shares.
Following this offering, we will have two classes of common stock, Class A
common stock and Class B common stock. Holders of each class generally have
identical rights, except for differences in voting. Holders of our Class A
common stock have one vote per share, while holders of our Class B common stock
have ten votes per share. After this offering, the holders of our Class B
common stock will have % of the combined voting power of our common stock.
Investing in the Class A common stock involves risks. See "Risk Factors" on
page 10.
<TABLE>
<CAPTION>
Underwriting
Price Discounts Proceeds
to and to
Public Commissions Mediacom
------ ------------ --------
<S> <C> <C> <C>
Per Share.................................. $ $ $
Total...................................... $ $ $
</TABLE>
Delivery of the shares of Class A common stock will be made on or about
.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Credit Suisse First Boston Salomon Smith Barney Donaldson, Lufkin & Jenrette
Goldman, Sachs & Co. Merrill Lynch & Co.
Chase Securities Inc. CIBC World Markets First Union Securities, Inc.
The date of this prospectus is .
<PAGE>
[Map of the United States marked to indicate location of our cable systems,
including pending acquisitions.]
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary ................. 1
Risk Factors ....................... 10
Forward-Looking Statements ......... 17
Use of Proceeds..................... 18
Dividend Policy..................... 18
Capitalization ..................... 19
Dilution ........................... 20
Completed and Pending Transactions.. 21
Unaudited Pro Forma Consolidated
Financial and Operating Data....... 22
Selected Historical Consolidated
Financial and Operating Data....... 35
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 39
Industry............................ 48
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Business........................... 50
Legislation and Regulation......... 66
Management......................... 75
Certain Relationships and Related
Transactions...................... 80
Principal Stockholders............. 83
Description of Certain
Indebtedness...................... 85
Description of Capital Stock....... 89
Shares Eligible for Future Sale.... 92
Underwriters....................... 94
Legal Matters...................... 97
Experts............................ 97
Available Information.............. 97
Glossary........................... G-1
Index to Financial Statements...... F-1
</TABLE>
------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
Dealer Prospectus Delivery Obligation
Until (25 days after the commencement of this offering), all dealers
that effect transactions in these securities, whether or not participating in
this offering, may be required to deliver a prospectus. This is in addition to
the dealer's obligation to deliver a prospectus when acting as an underwriter
and with respect to unsold allotments or subscriptions.
i
<PAGE>
PROSPECTUS SUMMARY
This summary highlights some of the information in this prospectus. It may
not contain all the information that is important to you. For a more complete
understanding of this offering, you should read the entire prospectus
carefully, including the risk factors and the financial statements. Unless we
tell you otherwise, the information in this prospectus assumes that the
underwriters will not exercise their over-allotment option and that the Class A
common stock being offered will be sold at $ per share, which is the mid-
point of the range set forth on the cover page of this prospectus, and also
gives effect to the exchange of membership interests of Mediacom LLC for shares
of our common stock, which will occur upon completion of this offering. Unless
the context requires otherwise, "we," "us," "our" and similar terms refer to
Mediacom Communications Corporation and Mediacom LLC and its consolidated
subsidiaries.
Overview
We are the eighth largest cable operator in the United States, based on
customers served by wholly-owned systems after giving effect to our pending
acquisitions and recently announced industry transactions. Our cable systems
pass approximately 1.1 million homes and serve approximately 740,000 basic
subscribers, including our pending acquisitions. Mediacom LLC was founded in
July 1995 by Rocco B. Commisso, our Chairman and Chief Executive Officer, to
acquire and develop cable television systems serving principally non-
metropolitan markets of the United States.
Since commencement of our operations in March 1996, we have experienced
significant growth in basic subscribers, revenues and cash flows. We have
deployed a disciplined strategy of acquiring underperforming cable systems
primarily in markets with favorable demographic profiles. Through June 1999, we
spent approximately $432.4 million to complete nine acquisitions of cable
systems that served 355,800 basic subscribers. In October and November 1999,
for approximately $759.6 million, we acquired the cable systems of Triax
Midwest Associates, L.P. and Zylstra Communications Corporation that served
355,500 basic subscribers as of June 30, 1999. On a pro forma basis, our 1998
revenues were $272.3 million and operating income (loss) before depreciation
and amortization was $124.5 million. On the same basis, for the six months
ended June 30, 1999, our revenues were $143.9 million and operating income
(loss) before depreciation and amortization was $68.4 million.
We also have generated strong internal growth and improved the operating and
financial performance of our systems. These results have been achieved
primarily through the introduction of an expanded array of core cable
television products and services made possible by the rapid upgrade of our
cable network and through the successful integration of our acquired systems.
Assuming all our systems, excluding the Triax and Zylstra systems, were
acquired on January 1, 1997, in 1998 our revenues grew by 13.0%, operating
income (loss) before depreciation and amortization increased by 31.9%, and our
internal subscriber growth was 2.5% compared to the prior year. Based on the
same assumptions, for the six months ended June 30, 1999, our revenues
increased by 11.5%, operating income (loss) before depreciation and
amortization increased by 23.3%, and our internal subscriber growth was 2.0%
compared to the corresponding period in 1998.
We believe that the impact of digital technologies on video and
telecommunications delivery systems, together with the emergence of the
Internet as an interactive medium for communications, information,
entertainment and electronic commerce, has positioned cable's high-speed,
interactive, broadband network as the primary platform for the delivery of
video, voice and data services to homes and businesses. We believe that there
is considerable demand in the communities we serve for these new and enhanced
products and services.
1
<PAGE>
To capitalize on these opportunities, we are rapidly upgrading our cable
network to provide our customers with an expanded array of new cable television
products and services, such as digital cable television, two-way, high-speed
Internet access, interactive video and telephony. Currently, approximately 73%
of our customers are served by systems which have been upgraded to 550MHz to
750MHz bandwidth capacity, excluding customers served by the Triax and Zylstra
systems.
Upon completion of our upgrade program in December 2002, we anticipate that
91% of our customers, including the Triax and Zylstra customers, will be served
by upgraded systems and, as a result of consolidating our headend facilities,
84% of our customers will be served by 30 headend facilities. As part of our
upgrade program, we plan to deploy over 10,000 route miles of fiber optic cable
to create large regional fiber optic networks with the potential to provide
advanced telecommunications services.
In June 1999, we began offering digital cable services to our customers. By
December 1999, we expect to offer digital cable services in systems passing
more than 243,000 homes. In addition, through our strategic relationship with
SoftNet Systems, Inc.'s ISP Channel, we expect to deploy two-way, high-speed
Internet service in systems passing more than 155,000 homes by December 1999.
Rocco B. Commisso is a highly regarded cable television veteran with over 21
years of industry experience. Prior to founding Mediacom LLC, Mr. Commisso was
Executive Vice President, Chief Financial Officer and Director of Cablevision
Industries Corporation, the eighth largest cable television company in the
United States before its sale to Time Warner Inc. for approximately $2.8
billion. Mr. Commisso, through his ownership of our Class B common stock, has
the power to elect all of our directors and control stockholder decisions
immediately following this offering. In addition to Mr. Commisso, our senior
management team has an average of 18 years of industry experience in acquiring,
financing and operating cable systems.
Business Strategy
Our objective is to become the leading cable operator focused on providing
entertainment, information and telecommunications services in non-metropolitan
markets of the United States. The key elements of our strategy are to:
. Improve the operating and financial performance of our acquired cable
systems;
. Develop efficient operating clusters;
. Rapidly upgrade our cable network;
. Introduce new and enhanced products and services;
. Maximize customer satisfaction to build customer loyalty;
. Acquire underperforming cable systems principally in non-metropolitan
markets; and
. Implement a flexible financing structure.
Recent Developments
In October and November 1999, we acquired the Zylstra and Triax cable
systems serving approximately 355,500 basic subscribers in nine states,
principally Illinois, Indiana and Minnesota.
In November 1999, we finalized an agreement with SoftNet for the provision
of high-speed Internet access and content services in our cable systems.
Through this agreement and the upgrade plan for our cable network, by December
2002, we expect to offer two-way, high-speed Internet services to at least
900,000 homes that are passed by our cable network. In connection with this
agreement, SoftNet has agreed to issue to us 3.5 million shares, representing
approximately 16.2% of its outstanding common stock.
2
<PAGE>
In the second half of 1999, we signed five letters of intent to acquire
cable systems serving approximately 28,000 basic subscribers for an aggregate
purchase price of $47.7 million. These cable systems are in close proximity to
our systems, thereby complementing our operating clusters. We expect to
complete the acquisitions of these systems in the first half of 2000, subject
to the completion of definitive documentation.
Organizational Structure
We are a newly formed Delaware corporation. Immediately prior to the
completion of this offering, we will issue shares of our common stock in
exchange for all of the outstanding membership interests of Mediacom LLC, which
currently serves as the holding company for our operating subsidiaries. As a
result, we will become the parent company of Mediacom LLC which will continue
to serve as the holding company for our subsidiaries.
Principal Executive Offices
Our principal executive offices are located at 100 Crystal Run Road,
Middletown, New York 10941. Our telephone number is (914) 695-2600, and our
website is located at www.mediacomllc.com. The information on our website is
not part of this prospectus.
3
<PAGE>
The Offering
<TABLE>
<C> <S> <C>
Class A common stock offered.......... shares
Common stock to be outstanding after
this offering........................ shares of Class A common stock
shares of Class B common stock
---
shares
===
Voting rights......................... Holders of each class of our common
stock generally have identical rights,
except for differences in voting.
Holders of our Class A common stock
have one vote per share, while holders
of our Class B common stock have ten
votes per share. After this offering,
the holders of our Class B common
stock will have % of the combined
voting power of our common stock.
Use of proceeds....................... We intend to use the net proceeds of
this offering to repay approximately
$280.5 million of outstanding
indebtedness under our subsidiary
credit facilities.
Proposed Nasdaq National Market
symbol............................... MCCC
</TABLE>
The outstanding common stock excludes shares of Class A common
stock and shares of Class B common stock issuable upon the exercise of
stock options to be outstanding upon completion of this offering, of which
will be then exercisable.
4
<PAGE>
Summary Unaudited Pro Forma Consolidated Financial and Operating Data
The following summary unaudited pro forma consolidated financial and
operating data has been derived from and should be read in conjunction with
"Unaudited Pro Forma Consolidated Financial and Operating Data," "Selected
Historical Consolidated Financial and Operating Data" and the historical
financial statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
Six Months
Year Ended Ended
December 31, June 30,
1998 1999
----------------- ----------------
(dollars in thousands, except per
share and per subscriber data)
<S> <C> <C>
Statement of Operations Data:
Revenues................................. $ 272,258 $ 143,923
Costs and expenses:
Service costs........................... 89,966 48,157
Selling, general and administrative
expenses............................... 52,317 24,489
Corporate expense....................... 5,445 2,878
Depreciation and amortization........... 174,503 94,241
---------------- ----------------
Operating loss........................... (49,973) (25,842)
Interest expense, net.................... 63,673 30,543
Other expenses........................... 4,058 734
---------------- ----------------
Loss before income taxes................. (117,704) (57,119)
Provision (benefit) for income taxes..... -- --
---------------- ----------------
Net loss from continuing operations...... $ (117,704) $ (57,119)
================ ================
Pro forma basic and diluted net loss per
share...................................
Pro forma weighted average common shares
outstanding.............................
Other Data:
System cash flow(1)...................... $ 129,975 $ 71,277
System cash flow margin(2)............... 47.7% 49.5%
Annualized system cash flow(3)........... $ 142,554
EBITDA(4)................................ $ 124,530 68,399
EBITDA margin(5)......................... 45.7% 47.5%
Annualized EBITDA(6)..................... $ 136,798
Net cash flows from operating
activities.............................. $ 85,336 38,502
Net cash flows used in investing
activities.............................. (89,877) (59,518)
Net cash flows from financing
activities.............................. 8,631 22,871
Operating Data (end of period, except
average):
Homes passed(7).......................... 1,051,000 1,065,500
Basic subscribers(8)..................... 707,500 711,300
Basic penetration(9)..................... 67.3% 66.8%
Premium service units(10)................ 592,850 554,000
Premium penetration(11).................. 83.8% 77.9%
Average monthly revenues per basic
subscriber(12).......................... $33.72
Annualized system cash flow per basic
subscriber(13).......................... $200
Annualized EBITDA per basic
subscriber(14).......................... $192
Balance Sheet Data (end of period):
Total assets............................. $ 1,226,048
Total debt............................... 841,379
Total stockholders' equity............... 339,444
</TABLE>
(footnotes on following page)
5
<PAGE>
Notes to Summary Unaudited Pro Forma Consolidated Financial and Operating Data
(1) Represents EBITDA (as defined in note 4 below) before corporate expense.
System cash flow (a) is not intended to be a performance measure that
should be regarded as an alternative either to operating income or net
income as an indicator of operating performance or to the statement of
cash flows as a measure of liquidity, (b) is not intended to represent
funds available for debt service, dividends, reinvestment or other
discretionary uses and (c) should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles. System cash flow is included in
this prospectus because our management believes that system cash flow is a
meaningful measure of performance commonly used in the cable television
industry and by the investment community to analyze and compare cable
television companies. Our definition of system cash flow may not be
identical to similarly titled measures reported by other companies.
(2) Represents system cash flow as a percentage of revenues. This measurement
is used by us, and is commonly used in the cable television industry, to
analyze and compare cable television companies on the basis of operating
performance, for the reasons discussed in note 1 above.
(3) Represents system cash flow for the six months ended June 30, 1999,
multiplied by two. Our management believes this calculation provides a
meaningful measure of performance, on an annualized basis, for the reasons
discussed in note 1 above.
(4) Represents operating income (loss) before depreciation and amortization.
EBITDA (a) is not intended to be a performance measure that should be
regarded as an alternative either to operating income or net income as an
indicator of operating performance or to the statement of cash flows as a
measure of liquidity, (b) is not intended to represent funds available for
debt service, dividends, reinvestment or other discretionary uses and (c)
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles. EBITDA is included in this prospectus because our management
believes that EBITDA is a meaningful measure of performance commonly used
in the cable television industry and by the investment community to
analyze and compare cable television companies. Our definition of EBITDA
may not be identical to similarly titled measures reported by other
companies.
(5) Represents EBITDA as a percentage of revenues. This measurement is used by
us, and is commonly used in the cable television industry, to analyze and
compare cable television companies on the basis of operating performance,
for the reasons discussed in note 4 above.
(6) Represents EBITDA for the six months ended June 30, 1999, multiplied by
two. Our management believes this calculation provides a meaningful
measure of performance, on an annualized basis, for the reasons discussed
in note 4 above.
(7) Represents the number of single residence homes, apartments and
condominium units passed by the cable distribution network in a cable
system's service area.
(8) Represents subscribers of a cable system who receive a package of over-
the-air broadcast stations, local access channels and/or certain
satellite-delivered cable television services, and who are usually charged
a flat monthly rate for a number of channels.
(9) Represents basic subscribers as a percentage of total number of homes
passed.
(10) Represents the number of subscriptions to premium services. A subscriber
may purchase more than one premium service, each of which is counted as a
separate premium service unit. For the six months ended June 30, 1999,
premium service units decreased primarily due to the Disney Channel being
moved from a premium service to the basic programming packages in several
of our cable systems.
(11) Represents premium service units as a percentage of total number of basic
subscribers.
(12) Represents average monthly revenues for the period divided by average
monthly basic subscribers for such period. This measurement is commonly
used in the cable television industry to analyze and compare cable
television companies on the basis of operating performance.
(13) Represents annualized system cash flow for the period divided by average
monthly basic subscribers for such period. This measurement is commonly
used in the cable television industry to analyze and compare cable
television companies on the basis of operating performance.
(14) Represents annualized EBITDA for the period divided by average monthly
basic subscribers for such period. This measurement is commonly used in
the cable television industry to analyze and compare cable television
companies on the basis of operating performance.
6
<PAGE>
Summary Historical Consolidated Financial and Operating Data
The following summary historical consolidated financial and operating data
of Mediacom LLC should be read in conjunction with "Selected Historical
Consolidated Financial and Operating Data," "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" and the historical
consolidated financial statements of Mediacom LLC included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
March 12 Six Months Ended
Through Year Ended Year Ended June 30,
December 31, December 31, December 31, -------------------
1996 1997 1998 1998 1999
------------ ------------ ------------ --------- --------
(dollars in thousands, except per share and per
subscriber data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues............... $ 5,411 $ 17,634 $ 129,297 $ 60,068 $ 74,178
Costs and expenses:
Service costs......... 1,511 5,547 43,849 21,463 24,175
Selling, general and
administrative
expenses............. 931 2,696 25,596 11,541 14,502
Management fee
expense(1)........... 270 882 5,797 2,782 3,588
Depreciation and
amortization......... 2,157 7,636 65,793 27,422 41,431
-------- -------- --------- --------- --------
Operating income
(loss)................ 542 873 (11,738) (3,140) (9,518)
Interest expense,
net(2)................ 1,528 4,829 23,994 11,738 13,392
Other expenses......... 967 640 4,058 3,568 734
-------- -------- --------- --------- --------
Net loss............... $ (1,953) $ (4,596) $ (39,790) $ (18,446) $(23,644)
-------- -------- --------- --------- --------
Pro forma provision
(benefit) for income
taxes(3).............. -- --
--------- --------
Pro forma net loss(4).. $ (39,790) $(23,644)
========= ========
Pro forma basic and
diluted net loss per
share.................
Pro forma weighted
average common shares
outstanding(5)........
Other Data:
System cash flow(6).... $ 2,969 $ 9,391 $ 59,852 $ 27,064 $ 35,501
System cash flow
margin(7)............. 54.9% 53.3% 46.3% 45.1% 47.9%
Annualized system cash
flow(8)............... $ 71,002
EBITDA(9).............. $ 2,699 $ 8,509 $ 54,055 $ 24,282 31,913
EBITDA margin(10)...... 49.9% 48.3% 41.8% 40.4% 43.0%
Annualized EBITDA(11).. $ 63,826
Net cash flows from
operating activities.. $ 237 $ 7,007 $ 53,556 $ 31,803 17,306
Net cash flows used in
investing activities.. (45,257) (60,008) (397,085) (354,079) (36,205)
Net cash flows from
financing activities.. 45,416 53,632 344,714 322,657 18,242
Operating Data (end of
period, except
average):
Homes passed(12)....... 38,749 87,750 520,000 508,000 523,000
Basic subscribers(13).. 27,153 64,350 354,000 345,000 355,800
Basic penetration(14).. 70.1% 73.3% 68.1% 67.9% 68.0%
Premium service
units(15)............. 11,691 39,288 407,100 398,500 385,400
Premium
penetration(16)....... 43.1% 61.1% 115.0% 115.5% 108.3%
Average monthly
revenues per basic
subscriber(17)........ $31.72 $34.74
Annualized system cash
flow per basic
subscriber(18)........ $172 $200
Annualized EBITDA per
basic subscriber(19).. $154 $179
Balance Sheet Data (end
of period):
Total assets........... $ 46,560 $102,791 $ 451,152 $ 449,225 $448,410
Total debt............. 40,529 72,768 337,905 315,129 359,629
Total members' equity.. 4,537 24,441 78,651 99,995 55,007
</TABLE>
(footnotes on following page)
7
<PAGE>
Notes to Summary Historical Consolidated Financial and Operating Data
(1) Represents fees paid to Mediacom Management Corporation for management
services rendered to our operating subsidiaries. Mediacom Management
utilizes these fees to compensate its employees as well as to fund its
corporate overhead. The Mediacom Management management agreements were
amended effective November 19, 1999 in connection with an amendment to
Mediacom LLC's operating agreement. The amended agreements provide for
management fees equal to 2% of annual gross revenues. Each of the
management agreements will be terminated upon the completion of this
offering. At that time, Mediacom Management's employees will become our
employees and its corporate overhead will become our corporate overhead.
These expenses will be reflected as our corporate expense, which we
estimate will amount to approximately 2% of our annual gross revenues.
(2) Net of interest income. Interest income for the periods presented was not
material.
(3) Represents an income tax provision (benefit) assuming the exchange of
membership interests in Mediacom LLC for shares of our common stock. We
have operating losses for the periods presented and have not reflected any
tax benefit for such losses.
(4) Represents pro forma net loss. Amount does not include a one-time $12.5
million non-recurring non-cash charge associated with the amendments to
the Mediacom Management management agreements, for which additional
membership interests will be issued to an existing member of Mediacom LLC.
(5) Represents the shares issued to effect the exchange of membership
interests of Mediacom LLC for shares of our common stock as if these
shares were outstanding for the periods presented.
(6) Represents EBITDA (as defined in note 9 below) before management fee
expense. System cash flow (a) is not intended to be a performance measure
that should be regarded as an alternative either to operating income or
net income as an indicator of operating performance or to the statement of
cash flows as a measure of liquidity, (b) is not intended to represent
funds available for debt service, dividends, reinvestment or other
discretionary uses and (c) should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles. System cash flow is included in
this prospectus because our management believes that system cash flow is a
meaningful measure of performance commonly used in the cable television
industry and by the investment community to analyze and compare cable
television companies. Our definition of system cash flow may not be
identical to similarly titled measures reported by other companies.
(7) Represents system cash flow as a percentage of revenues. This measurement
is used by us, and is commonly used in the cable television industry, to
analyze and compare cable television companies on the basis of operating
performance, for the reasons discussed in note 6 above.
(8) Represents system cash flow for the six months ended June 30, 1999,
multiplied by two. Our management believes this calculation provides a
meaningful measure of performance, on an annualized basis, for the reasons
discussed in note 6 above.
(9) Represents operating income (loss) before depreciation and amortization.
EBITDA (a) is not intended to be a performance measure that should be
regarded as an alternative either to operating income or net income as an
indicator of operating performance or to the statement of cash flows as a
measure of liquidity, (b) is not intended to represent funds available for
debt service, dividends, reinvestment or other discretionary uses and (c)
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles. EBITDA is included in this prospectus because our management
believes that EBITDA is a meaningful measure of performance commonly used
in the cable television industry and by the investment community to
analyze and compare cable television companies. Our definition of EBITDA
may not be identical to similarly titled measures reported by other
companies.
(10) Represents EBITDA as a percentage of revenues. This measurement is used
by us, and is commonly used in the cable television industry, to analyze
and compare cable television companies on the basis of operating
performance, for the reasons discussed in note 9 above.
(11) Represents EBITDA for the six months ended June 30, 1999, multiplied by
two. Our management believes this calculation provides a meaningful
measure of performance, on an annualized basis, for the reasons discussed
in note 9 above.
(12) Represents the number of single residence homes, apartments and
condominium units passed by the cable distribution network in a cable
system's service area.
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(13) Represents subscribers of a cable television system who receive a package
of over-the-air broadcast stations, local access channels and/or certain
satellite-delivered cable television services and who are usually charged
a flat monthly rate for a number of channels.
(14) Represents basic subscribers as a percentage of total number of homes
passed.
(15) Represents the number of subscriptions to premium services. A subscriber
may purchase more than one premium service, each of which is counted as a
separate premium service unit. For the six months ended June 30, 1999,
premium service units decreased primarily due to the Disney Channel being
moved from a premium service to the basic programming packages in several
of our cable systems.
(16) Represents premium service units as a percentage of total number of basic
subscribers. This ratio may be greater than 100% if the average basic
subscriber subscribes to more than one premium service unit.
(17) Represents average monthly revenues for the period divided by average
monthly basic subscribers for such period. This measurement is commonly
used in the cable television industry to analyze and compare cable
television companies on the basis of operating performance.
(18) Represents annualized system cash flow for the period divided by average
monthly basic subscribers for such period. This measurement is commonly
used in the cable television industry to analyze and compare cable
television companies on the basis of operating performance.
(19) Represents annualized EBITDA for the period divided by average monthly
basic subscribers for such period. This measurement is commonly used in
the cable television industry to analyze and compare cable television
companies on the basis of operating performance.
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RISK FACTORS
An investment in our Class A common stock involves the following risks. You
should consider carefully these risk factors, as well as the other information
in this prospectus, before you decide to purchase shares of our Class A common
stock.
Our Business
We have a history of net losses and may not be profitable in the future.
We have had a history of net losses and expect to continue to report net
losses for the foreseeable future, which could cause our stock price to decline
and adversely affect our ability to finance our business in the future. We
reported net losses of $4.6 million, $39.8 million and $23.6 million for the
years ended December 31, 1997 and 1998 and the six months ended June 30, 1999.
On a pro forma basis, we had net losses of $117.7 million and $57.1 million for
the year ended December 31, 1998 and the six months ended June 30, 1999. 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 expanding and upgrading our cable systems and
interest costs on borrowed money. We expect that we will continue to incur
these expenses at increased levels as a result of our network upgrade program
and our recent and pending acquisitions, which expenses will result in
continued net losses. For additional information, you should read the
discussion under "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources."
We have grown rapidly and have a limited history of operating our current
cable systems, which may make it difficult for you to evaluate our
performance.
We commenced operations in 1996 and have grown rapidly since then
principally through acquisitions. We acquired a substantial portion of our
operations in early 1998. In addition, our recent acquisitions of the Triax and
Zylstra systems nearly doubled the number of subscribers served by our systems.
As a result, you have limited information upon which to evaluate our
performance in managing our current systems, and our historical financial
information may not be indicative of the future results we can achieve with our
systems.
If we are unable to successfully integrate our newly acquired cable systems,
our business could be adversely affected.
Since January 1, 1998, we have completed five acquisitions that comprise
approximately 91% of our current basic subscribers. In addition, we expect to
continue to acquire cable systems as an element of our business strategy. The
effective integration and management of acquired cable systems involves a
number of risks, including:
. our acquired systems may result in unexpected operating difficulties,
liabilities or contingencies, which could be significant;
. the integration of acquired systems may place significant demands on our
management, diverting their attention from, and making it more difficult
for them to manage, our other systems;
. the integration of acquired systems may require significant financial
resources that could otherwise be used for the ongoing development of
our other systems, including our network upgrade program;
. we may be unable to recruit additional qualified personnel which may be
required to integrate and manage acquired systems; and
. our existing operational, financial and management systems may be
incompatible with or inadequate to effectively integrate and manage
acquired systems and any steps taken to implement changes in our systems
may not be sufficient.
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Our business, financial condition and results of operations could be
materially adversely affected if we fail to successfully integrate and manage
acquired cable systems in a timely manner.
The loss of key personnel could have a material adverse effect on our
business.
Our success is substantially dependent upon the retention and continued
performance of our key personnel, including Rocco B. Commisso, our Chairman
and Chief Executive Officer. We have not entered into employment agreements
with Mr. Commisso or any of our other executive officers. If any of these
personnel become unable or unwilling to participate in our business and
operations, our financial condition and results of operations could be
materially adversely affected. In addition, our subsidiary credit facilities
provide that a default will result if Mr. Commisso ceases to be our Chairman
and Chief Executive Officer. We do not currently maintain key man life
insurance on Mr. Commisso. You should read the discussion under "Management"
for information concerning the experience of Mr. Commisso and our other
executive officers.
Our success will also depend upon our ability to attract and retain
personnel for customer relations and field operations. We continually need to
hire, integrate and retain personnel for positions that require a high level
of technical expertise and the ability to communicate technical concepts to
our customers. There is no guarantee that we will be able to recruit or retain
these skilled workers. A failure to do so could impair our ability to operate
efficiently and maintain our reputation for high quality service. This could
also impair our ability to retain current customers and attract new customers,
which would adversely affect our growth, financial condition and results of
operations.
We have substantial existing debt and may incur substantial additional debt,
which could adversely affect our ability to obtain financing in the future
and require our operating subsidiaries to apply a substantial portion of
their cash flow to debt service.
As of June 30, 1999, we had outstanding total indebtedness of $359.6
million. Our net interest expense was $13.4 million for the six months ended
June 30, 1999. On a pro forma basis, our total indebtedness as of June 30,
1999 was $841.3 million and our net interest expense for the six months ended
June 30, 1999 was $30.5 million. This high level of debt and our debt service
obligations could have material adverse consequences, including:
. we may have limited ability to obtain additional financing for working
capital, capital expenditures, acquisitions and general corporate
purposes in the future;
. our operating subsidiaries will be required to dedicate a substantial
portion of their cash flow from operations to the payment of the
principal of and interest on their debt, thereby reducing funds we have
available for working capital, capital expenditures, acquisitions and
general corporate purposes;
. we may be more vulnerable to adverse economic and industry conditions;
. we may be limited in our ability to withstand competitive pressures;
. we may have limited flexibility in planning for, or reacting to, changes
in our business and industry; and
. we may be at a disadvantage when compared to those of our competitors
that have less debt.
We anticipate incurring additional debt in the future to finance
acquisitions and to fund the expansion, maintenance and upgrade of our
systems. If new debt is added to our current debt levels, the related risks
that we now face could intensify. For additional information, you should read
the discussion under "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"Description of Certain Indebtedness."
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The terms of our indebtedness require us to comply with various financial and
operational restrictions, and may adversely affect our ability to obtain
financing in the future and react to changes in our business.
The indentures governing our senior notes and the agreements governing our
subsidiary credit facilities contain numerous restrictive covenants. These
covenants place restrictions on, among other things, our ability and the
ability of our operating subsidiaries to:
. incur additional indebtedness;
. create liens and other encumbrances;
. pay dividends and make other payments, investment, loans and guarantees;
. enter into transactions with related parties;
. sell or otherwise dispose of assets and merge or consolidate with
another entity;
. repurchase or redeem capital stock or debt;
. pledge assets; and
. issue capital stock.
Our subsidiary credit facilities also contain a number of financial
covenants that require our operating subsidiaries to meet specified financial
ratios and tests. For additional information, you should read the discussion
under "Description of Certain Indebtedness." Events beyond the control of our
subsidiaries may affect their ability to meet these ratios and tests. The
breach of any of these covenants will result in a default under the applicable
debt agreement or instrument, which could result in acceleration of the debt.
Any default under our subsidiary credit facilities or our indentures may
materially adversely affect our growth, financial condition and results of
operations.
We may need additional capital to continue the development of our business.
Our business requires substantial capital for the upgrade, expansion and
maintenance of our cable systems. As a result of the Triax and Zylstra
acquisitions, we have updated our capital improvement program and expect to
spend approximately $400 million over the three-year period ending December
2002, of which approximately $240 million will be invested to upgrade our cable
systems and approximately $160 million will be used for plant expansion,
digital headends and set-top boxes, cable modems and maintenance.
We cannot assure you that these amounts will be sufficient to accomplish our
capital improvement program. In addition, we cannot assure you that we will be
able to obtain the funds necessary to finance our capital improvement program
through internally generated funds, additional borrowings or other sources. If
we are unable to obtain these funds, our growth, financial condition and
results of operation could be materially adversely affected.
If we are unsuccessful in implementing our growth strategy, our financial
condition and results of operations could be adversely affected.
We expect that a substantial portion of our future growth will be achieved
through revenues from new products and services and the acquisition of
additional cable systems. We may not be able to offer these new products and
services successfully to our customers and these new products and services may
not generate adequate revenues. In addition, we cannot predict the success of
our acquisition strategy. In the past year, the cable television industry has
undergone dramatic consolidation, which has reduced the number of future
acquisition prospects. This consolidation may increase the purchase price of
future acquisitions, and we may not be successful in identifying attractive
acquisition targets or obtaining the financing necessary to complete
acquisitions in the future.
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We may be unable to negotiate construction agreements on favorable terms and
our construction costs may increase significantly, which could adversely
affect our growth, financial condition and results of operations.
The expansion and upgrade of our cable systems will require us to hire and
enter into construction agreements with contractors. We may have difficulty
hiring experienced contractors, and the contractors we hire may encounter cost
overruns or delays in construction. Although we have recently been able to
negotiate construction agreements at rates which we believe are competitive
relative to the cable industry as a whole, our construction costs may increase
significantly over the next few years as existing agreements expire and as
demand for cable construction services continues to grow. We cannot assure you
that we will be able to construct new cable systems or expand or upgrade
existing or acquired systems in a timely manner or at a reasonable cost, which
may adversely affect our growth, financial condition and results of
operations.
Our programming costs are substantial and may increase, which could result in
a decrease in profitability if we are unable to pass increases on to our
customers.
In recent years, the cable television industry has experienced a rapid
escalation in the cost of programming, particularly sports programming. The
escalation in programming costs 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 cable systems and add programming to our basic and
expanded basic programming tiers, 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 could adversely affect our financial
condition and results of operations.
Our Chief Executive Officer has the ability to control all major corporate
decisions, which could inhibit or prevent a change of control or change in
management.
Our Class B common stock has ten votes per share, while our Class A common
stock, which is the stock we are offering in this prospectus, has one vote per
share. Following this offering, Rocco B. Commisso, our Chairman and Chief
Executive Officer, will beneficially own substantially all of our outstanding
Class B common stock, representing approximately % of the combined voting
power of our common stock. As a result, Mr. Commisso will generally have the
ability to control the outcome of all matters requiring stockholder approval,
including the election of our entire board of directors, the approval of any
merger or consolidation involving us and the sale of all or substantially all
or our assets. Because of this structure, Mr. Commisso may continue to be able
to control all matters submitted to our stockholders even if he owns a
minority economic interest in our company. Our subsidiary credit facilities
provide that a default will result if Mr. Commisso ceases to own at least
50.1% of the combined voting power of our common stock on a fully-diluted
basis. In addition, Mr. Commisso's control over our management and affairs
could create conflicts of interest if he is faced with decisions that could
have implications for him, for us and for the other holders of our Class A
common stock.
As a result of this concentrated control, Mr. Commisso will have the
ability to delay or prevent a merger, takeover or other change of control or
changes in our management that our other stockholders may consider favorable
or beneficial. If a change of control or change in management is delayed or
prevented, the market price of our Class A common stock could be adversely
affected or holders may not receive a change of control premium over the then-
current market price of our Class A common stock.
If our computer systems or those of third parties with whom we do business
are not Year 2000 compliant, our operations could be significantly disrupted.
We are evaluating the impact of the Year 2000 problem on our business
operations, as well as our products and services. Areas that could be
adversely impacted by the Year 2000 problem include the following:
. information process and financial reporting systems;
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. customer billing systems;
. customer service systems;
. cable headend equipment and advertising insertion equipment; and
. services from third-party vendors.
System failure or miscalculation could result in an inability to process
transactions, send invoices, accept customer orders or provide customers with
products and services. We presently do not have a formal contingency plan in
place if we or any third parties with which we have material relationships
sustain business interruptions caused by Year 2000 problems.
For a description of our Year 2000 compliance efforts you should read the
discussion under "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Year 2000 Compliance."
Our Industry
We operate in a highly competitive industry, which may adversely affect our
business and operations.
Our industry is highly competitive. The nature and level of the competition
we face affects, among other things, how much we must spend to upgrade our
cable systems, how much we must spend on marketing and promotions and the
prices we can charge our customers. We cannot assure you that we will have the
resources necessary to compete effectively. Many of our present and potential
competitors may have fewer regulatory burdens, substantially greater resources,
greater brand name recognition and long-standing relationships with regulatory
authorities. In addition, some of our competitors may use technology that
customers may find superior to ours.
Direct broadcast satellite, known as DBS, has emerged as a significant
competitor to cable operators. DBS has grown rapidly over the last several
years, far exceeding the growth rate of the cable television industry.
Legislation permiting DBS operators to transmit local broadcast signals was
passed by the U.S. House of Representatives on November 9, 1999 and is
currently awaiting passage by the U.S. Senate. If DBS operators are able to
deliver local broadcast signals, cable system operators will lose a significant
competitive advantage over DBS operators. The continued growth of DBS operators
and other competitors may adversely affect our growth, financial condition and
results of operations.
Recent changes in federal law and recent administrative and judicial
decisions have also removed restrictions that have limited entry into the cable
television industry by potential competitors such as telephone companies and
registered utility holding companies. These developments will enable local
telephone and utility companies to provide a wide variety of video services in
their service areas which will be directly competitive with the services
provided by cable television systems in the same area. We also cannot predict
the extent to which competition will materialize in our franchise areas from
other cable television operators, other video programming distribution systems
and other broadband telecommunications services to the home. In addition, as we
expand and introduce new and enhanced products and services, including Internet
and telecommunications services, we will become subject to competition from
Internet service providers and telecommunications providers. We expect other
advances in communications technology, as well as changes in the marketplace
and the regulatory and legislative environment to occur in the future. Other
new technologies and services may develop and may compete with services that
our cable television systems offer. The success of these ongoing and future
developments could have a negative impact on our business and operations. We
cannot predict the extent to which this competition or other new competitors
may affect our business and operations in the future. You should read the
discussion under "Business--Competition" for additional information.
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Our business has been and continues to be subject to extensive governmental
legislation and regulation, and changes in this legislation and regulation
could increase our costs of compliance and reduce the profitability of our
business.
The cable television industry is subject to extensive governmental
legislation and regulation at the federal and local levels and, in some
instances, at the state level, and many aspects of this legislation and
regulation are currently the subject of judicial proceedings and administrative
or legislative proposals. The Federal Communications Commission has principal
regulatory responsibility. In addition, operating in a regulated industry
generally increases the cost of doing business. We may also become subject to
additional regulatory burdens and related increased costs. As we begin to offer
telecommunication 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 these licenses or authorizations in a timely manner, or at all,
or conditions could be imposed upon these licenses and authorizations that may
not be favorable to us. Future changes in legislation or regulations could have
an adverse impact on us and our business operations. You should read the
discussion under "Legislation and Regulation" for additional information.
Our franchises are non-exclusive and local franchising authorities may grant
competing franchises in our markets.
Our cable systems are operated under non-exclusive franchises granted by
local franchising authorities. As a result, competing operators of cable
systems and other potential competitors, such as municipal utility providers,
may be granted franchises and may build cable systems in markets where we hold
franchises. The existence of multiple cable systems in the same geographic area
is generally referred to as an overbuild. We currently face overbuilds in a
limited number of our markets. Although we do not believe that these overbuilds
are material to our financial condition and results of operations, we cannot
assure you that we will not face new or increased competition in our markets in
the future. Any such competition could materially and adversely affect our
financial condition and results of operations. You should read the discussion
under "Business--Competition" for additional information.
We may be required to provide access to our networks to other Internet service
providers, which could significantly increase our competition and adversely
affect the upgrade of our systems and our ability to provide new products and
services.
Proposals are currently before the U.S. Congress and the Federal
Communications Commission to require cable operators to provide access over
their cable systems to other Internet service providers. To date, the Federal
Communications Commission has declined to impose these requirements. This same
"open access" issue is being considered by some local franchising authorities
as well. Recently, a federal district court in Portland, Oregon, upheld the
authority of the local franchising authority to impose an open access
requirement in connection with a cable television franchise transfer and that
decision has been appealed to the U.S. Court of Appeals for the Ninth Circuit.
Open access requirements have also been adopted in Broward County, Florida and
Fairfax, Virginia and are also being considered by a number of other
franchising authorities. Various cable companies have initiated litigation
challenging municipal "open access" requirements. Franchise renewals and
transfers could become more difficult depending upon the outcome of this issue.
In addition, several telephone companies are introducing digital subscriber
line technology, known as DSL, which will allow Internet access to subscribers
at data transmission speeds equal to or greater than that of modems over
conventional telephone lines. If we are required to provide open access, it
could prohibit us from entering into or limit our existing agreements with
Internet service providers, adversely impact our anticipated revenues from
high-speed cable modem services and could complicate marketing and technical
issues associated with the introduction of these services.
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Our franchises are subject to non-renewal or termination, which could cause us
to lose our right to operate some of our systems.
Cable television companies operate under non-exclusive franchises granted by
local authorities that are subject to renewal and renegotiation from time to
time. Our cable systems are dependent upon the retention and renewal of their
respective local franchises. A franchise is generally granted for a fixed term
ranging from five to fifteen years, but in many cases is terminable if the
franchisee fails to comply with material provisions contained in the franchise
agreement governing system operations. Franchises typically impose conditions
relating to the operation of cable systems, including requirements relating to
the payment of fees, system bandwidth capacity, customer service, franchise
renewal and termination. No assurance can be given that our cable systems will
be able to retain or renew their franchises or that any renewals will be on
terms favorable to us. The non-renewal or termination of franchises with
respect to a significant portion of any of our cable systems would have a
material adverse effect on our ability to provide service to current or future
customers and on our financial condition and results of operations. You should
read the discussion under "Business--Franchises" and "Legislation and
Regulation--State and Local Regulation" for additional information concerning
our franchises.
This Offering
Existing stockholders may sell their common stock after this offering, which
could adversely affect the market price of the Class A common stock.
Sales of a substantial number of shares of our common stock, or the
perception that sales could occur, could adversely affect the market price for
shares of our Class A common stock by causing the amount of our common stock
available for sale to exceed the demand for our common stock. These sales could
also make it more difficult for us to sell equity securities in the future at a
time and price we deem appropriate.
After this offering, we will have outstanding shares of Class A common
stock and shares of Class B common stock. Of these shares, the shares
of Class A common stock sold in this offering will be freely transferable
without restriction of further registration under the U.S. federal securities
laws unless purchased by one of our "affiliates," as defined in Rule 144 of the
Securities Act of 1933. The remaining shares of Class A common stock and
all shares of Class B common stock, representing approximately % of our
outstanding common stock upon completion of this offering, will be "restricted
securities" under the Securities Act of 1933. These securities will be subject
to restrictions on the timing, manner and volume of sales of the restricted
shares. However, each of Rocco B. Commisso, our Chairman and Chief Executive
Officer, BMO Financial Inc., CB Capital Investors, L.P., Chase Manhattan
Capital, L.P., Morris Communications Corporation, Private Market Fund, L.P. and
U.S. Investor, Inc., will have rights to require us to register their shares
beginning 180 days after the completion of this offering. For additional
information regarding these registration rights, you should read the discussion
under "Shares Eligible for Future Sale--Registration Rights."
Our officers, directors and existing stockholders have agreed not to offer,
sell, contract to sell, pledge or otherwise dispose of, directly or indirectly,
their shares of common stock for a period of 180 days following this offering
without the prior written consent of Credit Suisse First Boston Corporation.
Because of this restriction, on the date of this prospectus, no shares other
than those offered in this offering will be eligible for sale. For additional
information, you should read the discussion under "Shares Eligible for Future
Sale" and "Underwriters."
There has been no prior market for our Class A common stock, and the market
price of the shares will fluctuate.
We cannot assure you that an active public market for our Class A common
stock will develop or continue after this offering. Prices for our Class A
common stock will be determined in the marketplace and may be influenced by
many factors, including variations in our financial results, changes in
earnings estimates by
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industry research analysts, investors' perceptions of us and general economic,
industry and market conditions. The initial public offering price per share of
our Class A common stock has been determined by negotiations among us and the
representatives of the underwriters and may have no relation to the price at
which the Class A common stock trades after the completion of this offering.
Investors may not be able to sell their Class A common stock at or above the
initial public offering price. The market price of our Class A common stock is
likely to be highly volatile and could be subject to wide fluctuations in
response to, among other things, the following factors:
. the development of improved or competitive technologies;
. the development and continuation of an active public market for our
Class A common stock;
. our operating performance and the performance of similar companies;
. news announcements or other developments relating to us, our competitors
or our industry;
. changes in earnings estimates or recommendations by research analysts;
. changes in general economic conditions; and
. the significant price and volume volatility in the stock markets that
has occurred in recent years and may continue to occur and that is often
unrelated to the operating performance of specific companies.
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus contains forward-looking
statements. You can identify these statements by forward-looking words such as
"may," "will," "expect," "plan," "intend," "anticipate," "believe," "estimate,"
and "continue" or similar words. You should read statements that contain these
words carefully because they:
. discuss our future expectations;
. contain projections of our future results of operations or of our
financial condition; or
. state other forward-looking information.
We believe it is important to communicate our expectations to our investors.
However, forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
or achievements to be materially different from any results, performance or
achievements expressed or implied by any forward-looking statements. These
factors include, among other things, those listed under "Risk Factors" and
elsewhere in this prospectus. Although we believe that the expectations
reflected in our forward-looking statements are reasonable, we cannot assure
you of future results, performance or achievements. We are under no duty to
update these statements to reflect events or circumstances after the date of
this prospectus or to reflect the occurrence of unanticipated events.
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USE OF PROCEEDS
We estimate that the net proceeds from the sale of our Class A common stock
in this offering, after deducting the estimated underwriting discounts,
commissions and offering expenses payable by us, will be approximately $
million, or approximately $ million if the underwriters' over-allotment
option is exercised in full. We intend to use the net proceeds of this offering
to repay approximately $280.5 million of outstanding indebtedness under our
subsidiary credit facilities.
The reduction of indebtedness under our subsidiary credit facilities will
increase our existing borrowing capacity, which will fund the upgrade of our
systems and future acquisitions, including our pending acquisitions. In
addition, borrowings under our subsidiary credit facilities may be used for
general corporate purposes, including working capital requirements. We
continually evaluate potential acquisitions but have not reached any
agreements, commitments or understandings for any future acquisitions, except
for our pending acquisitions. We cannot assure you that we will be successful
in identifying or completing additional acquisitions.
As of November 10, 1999, $822.0 million was outstanding under our subsidiary
credit facilities, which have final maturities ranging from March 2008 to
December 2008. Weighted interest rates for loans outstanding under our
subsidiary credit facilities was 7.9% as of November 10, 1999. Borrowings under
our subsidiary credit facilities were used to refinance prior indebtedness and
to fund our acquisitions of the Triax and Zylstra systems. You should read the
discussion under "Description of Certain Indebtedness--Credit Facilities" for
additional information about our subsidiary credit facilities.
DIVIDEND POLICY
We have never paid or declared cash dividends on our common stock and
currently intend to retain any future earnings for the development of our
business. Therefore, we do not currently anticipate paying any cash dividends
in the forseeable future. In addition, the credit facilities of our operating
subsidiaries restrict their ability to pay dividends. Our future dividend
policy is within the discretion of our board of directors and will depend upon
various factors, including our results of operations, financial condition,
capital requirements and investment opportunities.
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CAPITALIZATION
The following table sets forth as of June 30, 1999, on a consolidated basis:
. the historical capitalization of Mediacom LLC;
. the pro forma capitalization of Mediacom LLC to reflect:
-- the repayment of an unsecured senior subordinated note in the
original amount of $2.8 million and accrued interest,
-- the $10.5 million equity contribution made by the members of
Mediacom LLC in connection with the acquisition of the Triax systems
in November 1999,
-- borrowings of $762.3 million under our subsidiary credit facilities
to finance the acquisitions of the Triax and Zylstra systems and the
related write-off of unamortized financing fees from our former
subsidiary credit facilities, and
-- a one-time $12.5 million non-recurring non-cash charge associated
with amendments to the Mediacom Management management agreements;
and
. our pro forma as adjusted capitalization to reflect:
-- the exchange of membership interests in Mediacom LLC for shares of
our common stock,
-- a one-time $4.3 million non-recurring non-cash charge to equity to
record a net deferred tax liability as of June 30, 1999 that will be
recognized upon the exchange of membership interests in Mediacom LLC
for shares of our common stock, and
-- the issuance and sale of our Class A common stock in this offering
using an initial public offering price of $ per share, the mid-
point of the range set forth on the cover page of this prospectus,
and the application of the net proceeds from the sale to repay
$280.5 million of outstanding indebtedness under our subsidiary
credit facilities.
The table below should be read in conjunction with the historical
consolidated financial statements of Mediacom LLC included elsewhere in this
prospectus. For additional information, see "Unaudited Pro Forma Consolidated
Financial and Operating Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
and "Description of Certain Indebtedness."
<TABLE>
<CAPTION>
As of June 30, 1999
-----------------------------------
Mediacom
Communications
Mediacom LLC Corporation
-------------------- --------------
Pro Forma
Historical Pro Forma As Adjusted
---------- --------- --------------
(dollars in millions)
<S> <C> <C> <C>
Cash and cash equivalents.................. $ 1.6 $ 2.4 $ 2.4
====== ======== ======
Total debt:
7 7/8% senior notes...................... $200.0 $ 200.0 $200.0
8 1/2% senior notes...................... 125.0 125.0 125.0
Subsidiary credit facilities(1).......... 31.0 796.9 516.4
Unsecured senior subordinated note....... 3.6 -- --
------ -------- ------
Total debt............................. 359.6 1,121.9 841.4
Total members' equity...................... 55.0 63.3
Stockholders' equity:
Class A common stock, par value $0.01,
shares
authorized, and shares issued and
outstanding.............................
Class B common stock, par value $0.01,
shares
authorized, and shares issued and
outstanding.............................
Additional paid-in capital...............
Accumulated deficit......................
------ -------- ------
Total stockholders' equity.............
------ -------- ------
Total capitalization................. $414.6 $1,185.2 $
====== ======== ======
</TABLE>
- ---------------------
(1) After completion of this offering, we will have approximately $584 million
of unused credit commitments under our subsidiary credit facilities.
19
<PAGE>
DILUTION
The difference between the public offering price per share of our Class A
common stock and the pro forma net tangible book value per share of our Class A
and Class B common stock after this offering constitutes the dilution to
investors in this offering. Net tangible book value per share is determined by
subtracting our total liabilities from the total book value of our tangible
assets and dividing the difference by the number of shares of Class A and Class
B common stock deemed to be outstanding on the date total book value is
determined.
As of June 30, 1999, our net tangible book value was a deficit of $ ,
or $ per share of common stock, after giving effect to the transactions
described under "Capitalization," excluding this offering. After giving effect
to the sale of shares of our Class A common stock at an initial
public offering price of $ per share, and the deduction of estimated
underwriting discounts and commissions and other offering expenses, our pro
forma net tangible book value as of June 30, 1999 would have been $ , or
$ per share of common stock. This represents an immediate decrease in our
net negative tangible book value of $ per share to current stockholders
and an immediate dilution of $ per share to new investors purchasing our
Class A common stock. The following table illustrates the foregoing information
as of June 30, 1999 with respect to dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.............. $
Net tangible book value (deficit) per share before this
offering.................................................... $
Increase per share attributable to this offering.............
----
Pro forma net tangible book value (deficit) per share after
this offering...............................................
----
Pro forma dilution per share to new investors................ $
====
</TABLE>
The following table sets forth as of June 30, 1999, with respect to our
existing stockholders and new investors, a comparison of the number of shares
of common stock acquired from us, the percentage ownership of such shares, the
total consideration paid to us, the percentage of total consideration paid and
the average price per share paid by existing stockholders and by investors
purchasing shares of Class A common stock in this offering, giving effect to
the exchange of membership interests of Mediacom LLC for shares of our common
stock:
<TABLE>
<CAPTION>
Shares Total Average
Purchased Consideration Price
-------------- -------------- Per
Number Percent Amount Percent Share
------ ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders................ % $ % $
New investors........................
--- --- ---- ---
Total.............................. % $ %
=== === ==== ===
</TABLE>
To the extent that shares of our common stock are issued in connection with
the stock option arrangements, there will be further dilution to new investors.
20
<PAGE>
COMPLETED AND PENDING ACQUISITIONS
Completed Acquisitions
Since commencement of our operations in March 1996, we have completed 11
acquisitions of cable systems. The following table summarizes information
related to our completed acquisitions of cable systems in chronological order:
<TABLE>
<CAPTION>
Location of Acquisition Purchase Price Basic
Systems Predecessor Owner(1) Date (in millions)(2) Subscribers(3)
- ------------------ ----------------------------------- -------------- ---------------- --------------
<S> <C> <C> <C> <C>
Ridgecrest, CA Benchmark Communications March 1996 $ 18.8 9,200
Kern Valley, CA Booth American Company June 1996 11.0 6,000
Nogales, AZ Saguaro Cable TV Investors, L.P. December 1996 11.4 7,900
Valley Center, CA Valley Center Cable Systems, L.P. December 1996 2.5 1,950
Dagsboro, DE American Cable TV Investors 5, Ltd. June 1997 42.6 31,700
Sun City, CA Cox Communications, Inc. September 1997 11.5 9,950
Clearlake, CA Jones Intercable, Inc. January 1998 21.4 17,900
Various States Cablevision Systems Corporation January 1998 308.2 267,150
Caruthersville, MO Cablevision Systems Corporation October 1998 5.0 4,050
Various States Zylstra Communications Corporation October 1999 19.5 14,000
Various States Triax Midwest Associates, L.P. November 1999 740.1 341,500
-------- -------
$1,192.0 711,300
======== =======
</TABLE>
- ------------
(1) Purchased from the named party, one or more of its related parties or its
controlling or managing operator.
(2) Represents the final purchase price before closing costs and adjustments.
(3) As of June 30, 1999.
Pending Acquisitions
In the second half of 1999, we signed five letters of intent to acquire
cable systems serving approximately 28,000 basic subscribers for an aggregate
purchase price of $47.7 million. These cable systems are in close proximity to
our systems, thereby complementing our operating clusters. We expect to
complete the acquisitions of these systems in the first half of 2000, subject
to the completion of definitive documentation.
21
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA
The following unaudited pro forma consolidated financial and operating data
as of and for the six months ended June 30, 1999 and for the year ended
December 31, 1998 are based on the historical consolidated financial statements
of Mediacom LLC, as adjusted to illustrate the estimated effects of the
following transactions as if each transaction had occurred on January 1, 1998
for the statement of operations data and on June 30, 1999 for the balance sheet
data:
. the issuance and sale of our 8 1/2% senior notes on April 1, 1998 and
the application of $194.5 million of net proceeds from the sale to repay
outstanding indebtedness under our former subsidiary credit facilities;
. the issuance and sale of our 7 7/8% senior notes on February 26, 1999
and the application of $121.9 million of net proceeds from the sale to
repay outstanding indebtedness under our former subsidiary credit
facilities;
. the repayment of an unsecured senior subordinated note in the original
amount of $2.8 million and accrued interest;
. the establishment of our subsidiary credit facilities and the repayment
of all outstanding indebtedness under our former subsidiary credit
facilities;
. the $10.5 million equity contribution made by members of Mediacom LLC in
connection with the acquisition of the Triax systems in November 1999;
. our acquisitions of cable systems described under "Completed and Pending
Transactions" that were completed since January 1, 1998 and the
incurrence of incremental indebtedness arising from the acquisitions;
. a one-time $12.5 million non-recurring, non-cash charge associated with
amendments to the Mediacom Management management agreements, for which
additional membership interests will be issued to an existing member of
Mediacom LLC;
. the exchange of membership interests in Mediacom LLC for shares of our
common stock;
. the effect to management fee expense as a result of amending the
Mediacom Management management agreements;
. a one-time $4.3 million non-recurring, non-cash charge to equity to
record a net deferred tax liability as of June 30, 1999 that will be
recognized upon the exchange of membership interests in Mediacom LLC for
shares of our common stock;
. the reclassification of management fee expense to corporate expense due
to the termination of the Mediacom Management management agreements; and
. the issuance and sale of our Class A common stock in this offering at an
initial public offering price of $ per share, the mid-point of the
range set forth on the cover page of this prospectus, and the
application of the net proceeds from the sale to repay $280.5 million of
outstanding indebtedness under our subsidiary credit facilities.
The unaudited pro forma consolidated financial data give effect to the
acquisitions of our cable systems under the purchase method of accounting. The
purchase price allocation among property, plant and equipment, intangible
assets, other assets and liabilities of the Triax and Zylstra systems is
preliminary and will be completed upon receipt of appraisal reports. We do not
believe that the adjustment resulting from the final allocation of the purchase
price will be material.
The unaudited pro forma consolidated financial and operating data do not
purport to represent what our results of operations or financial condition
would actually have been had the transactions described above occurred on the
dates indicated or to project our results of operations or financial condition
for any future period or date. You should read the historical consolidated
financial statements of Mediacom LLC and U.S. Cable Television Group, L.P. and
the historical financial statements of Triax, appearing elsewhere in this
prospectus.
22
<PAGE>
Unaudited Pro Forma Consolidated Statement of Operations and Operating Data
For the Six Months Ended June 30, 1999
(dollars in thousands, except per share and per subscriber data)
<TABLE>
<CAPTION>
Mediacom LLC Triax Zylstra Offering
(historical) (historical) (historical) Adjustments Subtotal Adjustments Total
------------ ----------- ------------ ----------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues................... $ 74,178 $ 67,257 $2,488 $ -- $ 143,923 $ -- $ 143,923
Costs and expenses:
Service costs.............. 24,175 22,924 1,058 -- 48,157 -- 48,157
Selling, general and
administrative expenses... 14,502 9,592 395 -- 24,489 -- 24,489
Management fee expense..... 3,588 2,218 253 (3,181)(p) 2,878 (2,878)(t) --
Corporate expense.......... -- -- -- -- -- 2,878 (t) 2,878
Depreciation and
amortization.............. 41,431 35,644 274 16,892 (q) 94,241 -- 94,241
-------- --------- ------ --------- --------- ------- ----------
Operating income (loss).... (9,518) (3,121) 508 (13,711) (25,842) -- (25,842)
Interest expense (income),
net....................... 13,392 16,252 (30) 12,539 (r) 42,153 (11,610)(u) 30,543
Other expenses (income).... 734 -- (2) 2 (s) 734 -- 734
-------- --------- ------ --------- --------- ------- ----------
Provision (benefit) for
income taxes.............. -- (v) --
------- ----------
Net (loss) income from
continuing operations..... $(23,644) $ (19,373) $ 540 $ (26,252) $ (68,729) $11,610 $ (57,119)
======== ========= ====== ========= ========= ======= ==========
Pro forma basic and diluted
net loss per share(a).....
Pro forma weighted average
common shares outstanding..
<CAPTION>
Other Data:
<S> <C> <C> <C> <C> <C> <C> <C>
System cash flow(b)................................................................................ $ 71,277
System cash flow margin(c)......................................................................... 49.5%
Annualized system cash flow(d)..................................................................... $ 142,554
EBITDA(e).......................................................................................... 68,399
EBITDA margin(f)................................................................................... 47.5%
Annualized EBITDA(g)............................................................................... $ 136,798
Net cash flows from operating activities........................................................... 38,502
Net cash flows used in investing activities........................................................ (59,518)
Net cash flows from financing activities........................................................... 22,871
Operating Data (end of period, except average):
Homes passed(h).................................................................................... 1,065,500
Basic subscribers(i)............................................................................... 711,300
Basic penetration(j)............................................................................... 66.8%
Premium service units(k)........................................................................... 554,000
Premium penetration(l)............................................................................. 77.9%
Average monthly revenues per basic subscriber(m)................................................... $33.72
Annualized system cash flow per basic subscriber(n)................................................ $200
Annualized EBITDA per basic subscriber(o).......................................................... $192
</TABLE>
See accompanying notes to unaudited pro forma consolidated statement of
operations and operating data.
23
<PAGE>
Notes to Unaudited Pro Forma Consolidated Statement of Operations and Operating
Data
For the Six Months Ended June 30, 1999
(dollars in thousands)
For purposes of determining the pro forma effects of the transactions
described above on the historical consolidated statement of operations of
Mediacom LLC for the six months ended June 30, 1999, the following adjustments
have been made:
(a) Pro forma basic and diluted loss per share is calculated based on
shares of common stock that we expect to be outstanding after this
offering. Upon completion of this offering, options to purchase our
common stock will be issued to certain employees with an exercise
price equal to the public offering price. Accordingly, these stock
options have no effect on the pro forma loss per share amounts.
(b) Represents EBITDA (as defined in note (e) below) before corporate
expense. System cash flow (a) is not intended to be a performance
measure that should be regarded as an alternative either to operating
income or net income as an indicator of operating performance or to
the statement of cash flows as a measure of liquidity, (b) is not
intended to represent funds available for debt service, dividends,
reinvestment or other discretionary uses and (c) should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
System cash flow is included in this prospectus because our management
believes that system cash flow is a meaningful measure of performance
commonly used in the cable television industry and by the investment
community to analyze and compare cable television companies. Our
definition of system cash flow may not be identical to similarly
titled measures reported by other companies.
(c) Represents system cash flow as a percentage of revenues. This
measurement is used by us, and is commonly used in the cable
television industry, to analyze and compare cable television companies
on the basis of operating performance, for the reasons discussed in
note (b) above.
(d) Represents system cash flow for the six months ended June 30, 1999,
multiplied by two. Our management believes this calculation provides a
meaningful measure of performance, on an annualized basis, for the
reasons discussed in note (b) above.
(e) Represents operating income (loss) before depreciation and
amortization. EBITDA (a) is not intended to be a performance measure
that should be regarded as an alternative either to operating income
or net income as an indicator of operating performance or to the
statement of cash flows as a measure of liquidity, (b) is not intended
to represent funds available for debt service, dividends, reinvestment
or other discretionary uses and (c) should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles. EBITDA is
included in this prospectus because our management believes that
EBITDA is a meaningful measure of performance commonly used in the
cable television industry and by the investment community to analyze
and compare cable television companies. Our definition of EBITDA may
not be identical to similarly titled measures reported by other
companies.
(f) Represents EBITDA as a percentage of revenues. This measurement is
used by us, and is commonly used in the cable industry, to analyze and
compare cable television companies on the basis of operating
performance, for the reasons discussed in note (e) above.
(g) Represents EBITDA for the six months ended June 30, 1999, multiplied
by two. Our management believes this calculation provides a meaningful
measure of performance, on an annualized basis, for the reasons
discussed in note (e) above.
(h) Represents the number of single residence homes, apartments and
condominium units passed by the cable distribution network in a cable
system's service area.
24
<PAGE>
(i) Represents subscribers of a cable system who receive a package of
over-the-air broadcast stations, local access channels and/or certain
satellite-delivered cable services, and who are usually charged a flat
monthly rate for a number of channels.
(j) Represents basic subscribers as a percentage of total number of homes
passed.
(k) Represents the number of subscriptions to premium services. A
subscriber may purchase more than one premium service, each of which
is counted as a separate premium service unit. For the six months
ended June 30, 1999, premium service units decreased primarily due to
the Disney Channel being moved from a premium service to the basic
programming packages in several of our cable systems.
(l) Represents premium service units as a percentage of total number of
basic subscribers.
(m) Represents average monthly revenues for the period divided by average
monthly basic subscribers for such period. This measurement is
commonly used in the cable television industry to analyze and compare
cable television companies on the basis of operating performance.
(n) Represents annualized system cash flow for the period divided by
average monthly basic subscribers for such period. This measurement is
commonly used in the cable industry to analyze and compare cable
companies on the basis of operating performance.
(o) Represents annualized EBITDA for the period divided by average monthly
basic subscribers for such period. This measurement is commonly used
in the cable television industry to analyze and compare cable
television companies on the basis of operating performance.
(p) The management agreements with Mediacom Management were amended
effective November 19, 1999 in connection with an amendment to
Mediacom LLC's operating agreement. The amended agreements provide for
management fees equal to 2% of annual gross revenues. No adjustment
has been made to the unaudited pro forma consolidated statement of
operations for a one-time $12,500 non-recurring non-cash charge
associated with the amendments to the Mediacom Management management
agreements, for which additional membership interests will be issued
to an existing member of Mediacom LLC. We have adjusted management fee
expense for the Triax and Zylstra systems so that their historical fee
structure is consistent with the management agreements.
<TABLE>
<S> <C>
Revenues....................................................... $143,923
2% of revenues................................................. 2,878
Historical management fees..................................... (6,059)
--------
Decrease to management fee expense............................. $ (3,181)
========
</TABLE>
(q) Represents increase to historical depreciation and amortization
expense as a result of a preliminary allocation of the Triax and
Zylstra purchase price and other costs:
<TABLE>
<CAPTION>
Estimated Asset Pro Forma
Triax and Zylstra Fair Values Life Expense
----------------- ----------- ----- ---------
<S> <C> <C> <C>
Property, plant and equipment............... $301,168 7 $43,024
Franchise costs............................. 230,672 15 15,378
Subscriber lists............................ 230,672 5 46,134
Deferred financing costs.................... 7,000 8.5 824
Other acquisition costs..................... 3,900 15 260
-------
Annualized pro forma depreciation and
amortization (A)........................... 105,620
Pro forma depreciation and amortization--
Six months ended June 30, 1999 (A
divided by 2).............................. 52,810
Historical--Triax and Zylstra............... (35,918)
-------
Increase to depreciation and amortization... $16,892
=======
</TABLE>
25
<PAGE>
(r) Represents increase to interest expense due to incremental
indebtedness arising from our acquisitions of the Triax and Zylstra
systems and our 7 7/8% senior note offering and decrease to interest
expenses arising from our repayment of the unsecured senior
subordinated note in the original amount of $2,800 and accrued
interest. An 1/8% change in the interest rates will increase or
decrease the interest expense per annum by $934 after adjusting for
interest rate swap agreements. Historical interest expense of Triax
and Zylstra has been eliminated, as we have not assumed their debt
obligations.
<TABLE>
<CAPTION>
Interest Pro Forma
Principal Rate Expense
--------- -------- ---------
<S> <C> <C> <C>
Subsidiary credit facilities................ $796,879 7.21% $ 57,455
8 1/2% senior notes......................... 200,000 8.50 17,000
7 7/8% senior notes......................... 125,000 7.88 9,850
--------
Pro forma interest expense (A).............. 84,305
Pro forma interest expense--Six months ended
June 30, 1999 (A divided by 2)............. 42,153
Historical interest expense................. (29,614)
--------
Increase to interest expense................ $ 12,539
========
(s) Represents elimination of other income of Zylstra.
(t) Represents elimination of management fees paid to Mediacom Management
for management services rendered to our operating subsidiaries.
Mediacom Management utilized these fees to compensate its employees as
well as to fund its corporate overhead. The management agreements with
Mediacom Management were revised effective November 19, 1999 in
connection with an amendment to Mediacom LLC's operating agreement.
The amended agreements provide for management fees equal to 2% of
annual gross revenues. Each of the management agreements will be
terminated upon completion of this offering. At that time, Mediacom
Management's employees will become our employees and its corporate
overhead will become our corporate overhead. These expenses will be
reflected as our corporate expense, which we estimate will amount to
approximately 2% of our annual gross revenues.
(u) Represents decrease to interest expense arising from the repayment of
$280,500 of outstanding indebtedness under our subsidiary credit
facilities with the net proceeds of this offering. An 1/8% change in
the interest rates will increase or decrease the interest expense per
annum by $583 after adjusting for interest rate swap agreements.
<CAPTION>
Interest Pro Forma
Principal Rate Expense
--------- -------- ---------
<S> <C> <C> <C>
Subsidiary credit facilities................ $516,379 6.63% $ 34,236
8 1/2% senior notes......................... 200,000 8.50 17,000
7 7/8% senior notes......................... 125,000 7.88 9,850
--------
Pro forma interest expense after
offering (A)............................... 61,086
Pro forma interest expense after offering--
Six months ended June 30, 1999 (A divided
by 2)...................................... 30,543
Pro forma interest expense prior to
offering................................... (42,153)
--------
Decrease to interest expense................ $(11,610)
========
</TABLE>
(v) No provision has been made in the pro forma statement of operations
for federal, state or local income taxes because Mediacom LLC is a
limited liability company and its members are required to report their
share of income or loss in their respective income tax returns. After
the completion of this offering and the exchange of membership
interests in Mediacom LLC for shares of our common stock, our results
will be included in our corporate tax returns. However, due to our pro
forma consolidated net loss, no income tax benefit has been recorded.
26
<PAGE>
Unaudited Pro Forma Consolidated Statement of Operations and Operating Data
For the Year Ended December 31, 1998
(dollars in thousands, except per share and per subscriber data)
<TABLE>
<CAPTION>
Mediacom LLC Triax Zylstra
(historical) Adjustments Subtotal (historical) (historical) Adjustments
------------ ----------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Statement of
Operations Data:
Revenues........ $129,297 $ 6,888 (k) $136,185 $119,669 $4,970 $ 11,434 (n)
Costs and
expenses:
Service costs... 43,849 2,803 (k) 46,652 37,534 1,883 3,897 (n)
Selling, general
and
administrative
expenses....... 25,596 2,274 (k) 27,870 21,808 747 1,892 (n)
Management fee
expense........ 5,797 7 (k) 5,804 4,048 482 (4,889)(o)
Corporate
expense........ -- -- -- -- -- --
Depreciation and
amortization... 65,793 3,090 (l) 68,883 65,391 279 39,950 (p)
-------- ------- -------- -------- ------ --------
Operating income
(loss)......... (11,738) (1,286) (13,024) (9,112) 1,579 (29,416)
Interest expense
(income), net.. 23,994 2,769 (m) 26,763 29,358 (51) 33,005 (q)
Other expenses.. 4,058 -- 4,058 -- -- --
-------- ------- -------- -------- ------ --------
Provision
(benefit)
for income
taxes..........
Net (loss)
income......... $(39,790) $(4,055) $(43,845) $(38,470) $1,630 $(62,421)
======== ======= ======== ======== ====== ========
Pro forma basic
and diluted net
loss per
share(a).......
Pro forma
weighted
average of
common shares
outstanding....
<CAPTION>
Offering
Subtotal Adjustments Total
---------- ------------- ----------
<S> <C> <C> <C>
Statement of
Operations Data:
Revenues........ $ 272,258 $ -- $ 272,258
Costs and
expenses:
Service costs... 89,966 -- 89,966
Selling, general
and
administrative
expenses....... 52,317 -- 52,317
Management fee
expense........ 5,445 (5,445)(r) --
Corporate
expense........ -- 5,445 (r) 5,445
Depreciation and
amortization... 174,503 -- 174,503
---------- ------------- ----------
Operating income
(loss)......... (49,973) -- (49,973)
Interest expense
(income), net.. 89,075 (25,402)(s) 63,673
Other expenses.. 4,058 -- 4,058
---------- ------------- ----------
Provision
(benefit)
for income
taxes.......... -- (t) --
------------- ----------
Net (loss)
income......... $(143,106) $25,402 $(117,704)
========== ============= ==========
Pro forma basic
and diluted net
loss per
share(a).......
Pro forma
weighted
average of
common shares
outstanding....
</TABLE>
<TABLE>
<S> <C>
Other Data:
System cash flow(b)................................................. $ 129,975
System cash flow margin(c).......................................... 47.7%
EBITDA(d)........................................................... $ 124,530
EBITDA margin(e).................................................... 45.7%
Net cash flows from operating activities............................ $ 85,336
Net cash flows used in investing activities......................... (89,877)
Net cash flows from financing activities............................ 8,631
Operating Data (end of period):
Homes passed(f)..................................................... 1,051,000
Basic subscribers(g)................................................ 707,500
Basic penetration(h)................................................ 67.3%
Premium service units(i)............................................ 592,850
Premium penetration(j).............................................. 83.8%
</TABLE>
See accompanying notes to unaudited pro forma consolidated statement of
operations and operating data.
27
<PAGE>
Notes to Unaudited Pro Forma Consolidated Statement of Operations and Operating
Data
For the Year Ended December 31, 1998
(dollars in thousands)
For purposes of determining the pro forma effects of the transactions
described above on the historical consolidated statement of operations of
Mediacom LLC for the year ended December 31, 1998, the following adjustments
have been made:
(a) Pro forma basic and diluted loss per share is calculated based on
shares of common stock that we expect to be outstanding after this
offering. Upon completion of this offering, options to purchase our
common stock will be issued to certain employees with an exercise
price equal to the public offering price. Accordingly, these stock
options have no effect on the pro forma loss per share amounts.
(b) Represents EBITDA (as defined in note (d) below) before corporate
expense. System cash flow (a) is not intended to be a performance
measure that should be regarded as an alternative either to operating
income or net income as an indicator of operating performance or to
the statement of cash flows as a measure of liquidity, (b) is not
intended to represent funds available for debt service, dividends,
reinvestment or other discretionary uses and (c) should not be
considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles.
System cash flow is included in this prospectus because our management
believes that system cash flow is a meaningful measure of performance
commonly used in the cable television industry and by the investment
community to analyze and compare cable television companies. Our
definition of system cash flow may not be identical to similarly
titled measures reported by other companies.
(c) Represents system cash flow as a percentage of revenues. This
measurement is used by us, and is commonly used in the cable
television industry, to analyze and compare cable television companies
on the basis of operating performance, for the reasons discussed in
note (b) above.
(d) Represents operating income (loss) before depreciation and
amortization. EBITDA (a) is not intended to be a performance measure
that should be regarded as an alternative either to operating income
or net income as an indicator of operating performance or to the
statement of cash flows as a measure of liquidity, (b) is not intended
to represent funds available for debt service, dividends, reinvestment
or other discretionary uses and (c) should not be considered in
isolation or as a substitute for measures of performance prepared in
accordance with generally accepted accounting principles. EBITDA is
included in this prospectus because our management believes that
EBITDA is a meaningful measure of performance commonly used in the
cable television industry and by the investment community to analyze
and compare cable television companies. Our definition of EBITDA may
not be identical to similarly titled measures reported by other
companies.
(e) Represents EBITDA as a percentage of revenues. This measurement is
used by us, and is commonly used in the cable television industry, to
analyze and compare cable television companies on the basis of
operating performance, for the reasons discussed in note (d) above.
(f) Represents the number of single residence homes, apartments and
condominium units passed by the cable distribution network in a cable
system's service area.
(g) Represents subscribers of a cable system who receive a package of
over-the-air broadcast stations, local access channels and/or certain
satellite-delivered cable television services, and who are usually
charged a flat monthly rate for a number of channels.
(h) Represents basic subscribers as a percentage of total number of homes
passed.
(i) Represents the number of subscriptions to premium services. A
subscriber may purchase more than one premium service, each of which
is counted as a separate premium service unit. For the six
28
<PAGE>
months ended June 30, 1999, premium service units decreased primarily
due to the Disney Channel being moved from a premium service to the
basic programming packages in several of our cable systems.
(j) Represents premium service units as a percentage of total number of
basic subscribers.
(k) The table below represents actual revenues, service costs, and
selling, general and administrative expenses and management fee
expense of the Clearlake, Cablevision and Caruthersville systems
recognized prior to the respective dates of acquisition.
<TABLE>
<CAPTION>
Clearlake Cablevision Caruthersville Total
--------- ----------- -------------- ------
<S> <C> <C> <C> <C>
Revenues................... $133 $5,603 $1,152 $6,888
Service costs.............. 152 2,272 379 2,803
Selling, general and
administrative expenses... 139 1,839 296 2,274
Management fee expense..... 7 -- -- 7
</TABLE>
(l) Represents historical depreciation and amortization of the
Cablevision, Clearlake and Caruthersville systems recognized prior to
the respective dates of acquisition and additional depreciation and
amortization related to the step-up in value of the systems based on
the final allocation of their purchase price. See note 3 of the
historical consolidated financial statements of Mediacom LLC for the
year ended December 31, 1998.
(m) Represents increase to interest expense due to incremental
indebtedness arising from our acquisition of the Clearlake,
Cablevision and Caruthersville systems and our 8 1/2% senior note
offering. An 1/8% change in the interest rates will increase or
decrease the interest expense per annum by $106 after adjusting for
interest rate swap agreements.
<TABLE>
<CAPTION>
Interest Pro Forma
Principal Rate Expense
--------- -------- ---------
<S> <C> <C> <C>
Subsidiary credit facilities................. $134,425 7.03% $ 9,450
8 1/2% senior notes.......................... 200,000 8.50 17,000
Unsecured senior subordinated note........... 3,480 9.00 313
-------
Pro forma interest expense................... 26,763
Historical--Mediacom LLC..................... (23,994)
-------
Increase to interest expense................. $ 2,769
=======
</TABLE>
(n) The table below represents historical revenues, service costs, and
selling, general and administrative expenses of the Jones systems and
the Marcus systems, recognized prior to the respective dates of
acquisition by Triax. These systems were acquired by Triax on June 30,
1998 and September 30, 1998, respectively. See note 3 to the
historical financial statements of Triax for the year ended December
31, 1998.
<TABLE>
<CAPTION>
Jones Marcus Total
------ ------ -------
<S> <C> <C> <C>
Revenues........................................... $2,920 $8,514 $11,434
Service costs...................................... 936 2,961 3,897
Selling, general and administrative expenses....... 702 1,190 1,892
</TABLE>
(o) The Mediacom Management management agreements were revised effective
November 19, 1999 in connection with an amendment to Mediacom LLC's
operating agreement to provide for management fees equal to 2% of
annual gross revenues. No adjustment has been made to the unaudited
pro forma consolidated statement of operations for a one-time $12,500
non-recurring, non-cash charge associated with amendments to the
Mediacom Management management agreements, for which additional
membership interests will be issued to an existing member of Mediacom
LLC. We have adjusted management fee expense for the Triax and Zylstra
systems so that their historical fee structure is consistent with the
management agreements.
29
<PAGE>
<TABLE>
<S> <C>
Revenues....................................................... $272,258
2% of revenues................................................. 5,445
Historical management fees..................................... (10,334)
--------
Decrease to management fee expense............................. $ (4,889)
========
</TABLE>
(p) Represents increase to historical depreciation and amortization as a
result of a preliminary allocation of the Triax and Zylstra purchase
price and other costs:
<TABLE>
<CAPTION>
Estimated Asset Pro Forma
Triax and Zylstra Fair Values Life Expense
----------------- ----------- ----- ---------
<S> <C> <C> <C>
Property, plant and equipment................ $301,168 7 $43,024
Franchise costs.............................. 230,672 15 15,378
Subscriber lists............................. 230,672 5 46,134
Deferred financing costs..................... 7,000 8.5 824
Other acquisition costs...................... 3,900 15 260
-------
Pro forma depreciation and amortization...... 105,620
Historical--Triax and Zylstra................ (65,670)
-------
Increase to depreciation and amortization.... $39,950
=======
</TABLE>
(q) Represents increase to interest expense due to incremental
indebtedness arising from our acquisitions of the Triax and Zylstra
systems, our 8 1/2% senior note offering and our 7 7/8% senior note
offering and decrease to interest expenses arising from our repayment
of the unsecured senior subordinated note in the original amount of
$2,800 and accrued interest. An 1/8% change in the interest rates will
increase or decrease the interest expense per annum by $911 after
adjusting for interest rate swap agreements. Historical interest
expense of Triax and Zylstra has been eliminated, as we have not
assumed their debt obligations.
<TABLE>
<CAPTION>
Interest Pro Forma
Principal Rate Expense
--------- -------- ---------
<S> <C> <C> <C>
Subsidiary credit facilities................. $778,780 7.99% $62,225
8 1/2% senior notes.......................... 200,000 8.50 17,000
7 7/8% senior notes.......................... 125,000 7.88 9,850
-------
Pro forma interest expense................... 89,075
Pro forma--Mediacom LLC...................... (26,763)
Historical--Triax and Zylstra................ (29,307)
-------
Increase to interest expense................. $33,005
=======
</TABLE>
(r) Represents elimination of management fees paid to Mediacom Management
for management services rendered to our operating subsidiaries.
Mediacom Management utilized these fees to compensate its employees as
well as fund its corporate overhead. The Mediacom Management
management agreements were revised effective November 19, 1999 in
connection with an amendment to Mediacom LLC's operating agreement.
The amended agreements provide for management fees equal to 2% of
annual gross revenues. Each of the management agreements will be
terminated upon completion of this offering. At that time, Mediacom
Management's employees will become our employees and its corporate
overhead will become our corporate overhead. These expenses will be
reflected as our corporate expense, which we estimate will amount to
approximately 2% of our annual gross revenues.
(s) Represents decrease to interest expense arising from the repayment of
$280,500 of outstanding indebtedness under our subsidiary credit
facilities with the net proceeds of this offering. An 1/8% change in
the interest rates will increase or decrease the interest expense per
annum by $560 after adjusting for interest rate swap agreements.
30
<PAGE>
<TABLE>
<CAPTION>
Pro
Interest Forma
Principal Rate Expense
--------- -------- --------
<S> <C> <C> <C>
Subsidiary credit facilities............... $498,280 7.39% $ 36,823
8 1/2% senior notes........................ 200,000 8.50 17,000
7 7/8% senior notes........................ 125,000 7.88 9,850
--------
Pro forma interest expense after offering.. 63,673
Pro forma interest expense prior to
offering.................................. (89,075)
--------
Decrease to interest expense............... $(25,402)
========
</TABLE>
(t) No provision has been made in the pro forma consolidated statement of
operations for federal, state or local income taxes because Mediacom
LLC is a limited liability company and its members are required to
report their share of income or loss in their respective income tax
returns. After the completion of this offering and the exchange of
membership interests in Mediacom LLC for shares of our common stock,
our results will be included in our corporate tax returns. However,
due to our pro forma consolidated net loss, no income tax benefit has
been recorded.
31
<PAGE>
Unaudited Pro Forma Consolidated Balance Sheet
As of June 30, 1999
(dollars in thousands)
<TABLE>
<CAPTION>
Mediacom LLC Triax Zylstra Offering
(historical) (historical) (historical) Adjustments Subtotal Adjustments Total
------------ ------------ ----------- ----------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Cash and cash
equivalents........... $ 1,555 $ 2,820 $ 97 $ (2,027)(a) $ 2,445 $ -- $ 2,445
Subscriber accounts
receivable, net....... 2,342 1,890 545 836 (a) 5,613 -- 5,613
Prepaid expenses and
other assets.......... 1,690 -- 310 -- 2,000 -- 2,000
Inventory.............. 10,135 -- -- 2,000 (b) 12,135 -- 12,135
Property, plant and
equipment, net........ 277,126 162,168 4,914 134,086 (b) 578,294 -- 578,294
Intangible assets,
net................... 140,956 165,170 58 300,016 (b) 606,200 -- 606,200
Other assets, net...... 14,606 5,835 -- (1,080)(c) 19,361 -- 19,361
-------- -------- ------ -------- ---------- --------- ----------
Total assets.......... $448,410 $337,883 $5,924 $433,831 $1,226,048 $ -- $1,226,048
======== ======== ====== ======== ========== ========= ==========
Liabilities and
Stockholders' Equity
Debt................... $359,629 $409,290 $ 34 $352,926 (d) $1,121,879 $(280,500)(g) $ 841,379
Accounts payable and
accrued expenses...... 31,751 17,466 1,509 (14,873)(a) 35,853 -- 35,853
Subscriber advance
payments and
deposits.............. 1,888 823 -- 2,208 (a) 4,919 -- 4,919
Deferred income tax
liability............. -- -- -- -- -- 4,318 (h) 4,318
Other liabilities...... 135 -- -- -- 135 -- 135
-------- -------- ------ -------- ---------- --------- ----------
Total liabilities..... 393,403 427,579 1,543 340,261 1,162,786 (276,182) 886,604
Members' equity
Capital contributions.. 124,990 -- 1,607 21,393 (e) 147,990 (147,990)(i)
Accumulated deficit.... (69,983) (89,696) 2,774 72,177 (f) (84,728) 84,728 (i)
-------- -------- ------ -------- ---------- ---------
Total member's
equity............... 55,007 (89,696) 4,381 93,570 63,262 (63,262)
Stockholders' equity
Class A common stock... 3,481 (g) 3,481
Class B common stock...
Additional paid-in
capital............... 425,009 (g) 425,009
Accumulated deficit.... (89,046)(j) (89,046)
-------- -------- ------ -------- ---------- --------- ----------
Total stockholders'
equity (deficit)..... 339,444 339,444
-------- -------- ------ -------- ---------- --------- ----------
Total liabilities and
stockholders'
equity............... $448,410 $337,883 $5,924 $433,831 $1,226,048 $ -- $1,226,048
======== ======== ====== ======== ========== ========= ==========
</TABLE>
See accompanying notes to unaudited pro forma consolidated balance sheet.
32
<PAGE>
Notes to Unaudited Pro Forma Consolidated Balance Sheet
As of June 30, 1999
(dollars in thousands)
For purposes of determining the pro forma effect of the transactions
described above on the historical consolidated balance sheet of Mediacom LLC as
of June 30, 1999, the following adjustments have been made:
(a) Represents elimination of cash not included in the acquisition of Triax
and Zylstra and adjustments to working capital due to timing
differences between the financial statements as of June 30, 1999 and
the amounts assumed at the closing of the acquisitions.
<TABLE>
<CAPTION>
Working
Preliminary Capital
Closing as of
Working June 30,
Capital 1999 Adjustments
----------- -------- -----------
<S> <C> <C> <C>
Assets acquired:
Cash and cash equivalents........... $ 890 $ 2,917 $ (2,027)
Subscriber accounts receivable,
net................................ 3,271 2,435 836
Prepaid expenses and other assets... 310 310 --
Liabilities assumed:
Accounts payable and accrued
expenses........................... 4,102 18,975 (14,873)
Subscriber advance payments and
deposits........................... 3,031 823 2,208
------- -------- --------
Net working capital................... $(2,662) $(14,136) $ 11,474
======= ======== ========
</TABLE>
(b) Represents an increase to property, plant and equipment and intangible
assets as a result of our acquisitions based on a preliminary
allocation of the purchase price assuming estimated fair values of:
<TABLE>
<CAPTION>
Estimated
Fair Values
----------------------
Property,
Purchase Other Net Plant and
Price Assets Equipment Intangibles
-------- --------- --------- -----------
<S> <C> <C> <C> <C>
Original Triax purchase
price....................... $740,100 $ -- $ 296,040 $ 444,060
Original Zylstra purchase
price....................... 19,500 -- 7,800 11,700
Preliminary subscriber
adjustment.................. 9,026 -- 3,610 5,416
Preliminary purchase price
adjustment.................. (4,114) -- (4,282) 168
Property, plant and equipment
reclassified as inventory... -- 2,000 (2,000) --
Net working capital ......... (2,662) (2,662) -- --
-------- ------ --------- ---------
Subtotal..................... 761,850 (662) 301,168 461,344
Closing costs................ 3,900 -- -- 3,900
-------- ------ --------- ---------
Total acquisition costs...... $765,750 $ (662) 301,168 465,244
======== ======
Historical amounts........... (167,082) (165,228)
--------- ---------
Increase..................... $ 134,086 $ 300,016
========= =========
</TABLE>
(c) Represents adjustment to other assets in connection with:
. incurrence of $7,000 in closing costs in connection with our
subsidiary credit facilities;
. elimination of unamortized deferred financing costs related to our
former credit facilities of $2,245; and
. elimination of unamortized deferred loan costs and other costs of
Triax of $5,835.
33
<PAGE>
(d) Represents the following adjustments to debt related to our
acquisitions of the Triax and Zylstra systems:
<TABLE>
<S> <C>
Proceeds from our subsidiary credit facilities................ $ 796,879
Repayment of our former subsidiary credit facilities.......... (31,000)
Repayment of our unsecured senior subordinated note........... (3,629)
Elimination of Triax and Zylstra debt......................... (409,324)
---------
Increase to debt.............................................. $ 352,926
=========
</TABLE>
(e) Represents adjustment to capital contributions in connection with:
. the elimination of Triax and Zylstra contributed capital accounts of
$1,607;
. additional capital contributions to Mediacom LLC by its members of
$10,500; and
. a one-time $12,500 non-recurring non-cash charge associated with
amendments to the Mediacom Management management agreements, for
which additional membership interests will be issued to an existing
member of Mediacom LLC.
(f) Represents adjustments to accumulated deficit in connection with:
. the elimination of Triax and Zylstra accumulated deficit accounts of
$86,922;
. the write-off of unamortized deferred financing costs related to our
former credit facilities of $2,245; and
. a one-time $12,500 non-recurring non-cash charge associated with
amendments to the Mediacom Management management agreements, for
which additional membership interests will be issued to an existing
member of Mediacom LLC.
(g) Represents the issuance of the Class A and Class B common stock upon
the exchange of membership interests in Mediacom LLC for shares of our
common stock and the issuance and sale of Class A common stock in this
offering and repayment of $280,500 of outstanding indebtedness under
our subsidiary credit facilities with the net proceeds of this
offering.
(h) Represents the recognition of a one-time $4,318 non-recurring non-cash
charge to record a net deferred tax liability as of June 30, 1999 that
will be recognized upon the exchange of membership interests in
Mediacom LLC for shares of our common stock.
(i) Reflects the elimination of members' equity upon the exchange of
membership interests for shares of our common stock.
(j) Reflects the following assumptions:
. reclassification of accumulated deficit to stockholders' equity from
members' equity; and
. recognition of a one-time $4,318 non-recurring non-cash charge to
record a net deferred tax liability as of June 30, 1999 that will be
recognized upon the exchange of membership interests in Mediacom LLC
for shares of our common stock.
34
<PAGE>
SELECTED HISTORICAL CONSOLIDATED
FINANCIAL AND OPERATING DATA
In the table below, we provide you with:
. selected historical financial data for the years ended December 31, 1994
and 1995 and for the period from January 1, 1996 through March 11, 1996,
and balance sheet data as of December 31, 1994 and 1995, and March 11,
1996, derived from the audited financial statements of Benchmark
Acquisition Fund II Limited Partnership;
. selected historical consolidated financial and operating data for the
period from the commencement of our operations on March 12, 1996 to
December 31, 1996 and for the years ended December 31, 1997 and 1998,
and balance sheet data as of December 31, 1996, 1997 and 1998, derived
from the audited consolidated financial statements of Mediacom LLC and
should be read in conjunction with those statements, which are included
in this prospectus; and
. selected historical consolidated financial and operating data for the
six months ended June 30, 1998 and 1999, and balance sheet data as of
June 30, 1998 and 1999, derived from the unaudited consolidated
financial statements of Mediacom LLC and should be read in conjunction
with those statements, which are included in this prospectus.
In our opinion, the unaudited interim financial statements have been
prepared on the same basis as the audited financial statements and include all
adjustments, which consist only of normal recurring adjustments, necessary to
present fairly the financial position and the results of operations for the
interim periods. Financial and operating results for the six months ended June
30, 1999 are not necessarily indicative of the results that may be expected for
the full year.
We were formed as a limited liability company in July 1995 and commenced our
operations on March 12, 1996. Accordingly, since that time, our taxable income
or loss has been included in the federal and certain state income tax returns
of our members. Upon completion of this offering, we will become subject to the
provisions of Subchapter C of the Internal Revenue Code. As a C corporation, we
will be fully subject to the federal, state and local income taxes.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations."
35
<PAGE>
Selected Historical Consolidated Financial and Operating Data
<TABLE>
<CAPTION>
Predecessor(1) Mediacom LLC(2)
----------------------------------- ----------------------------------------------------------
Six Months Ended
June 30,
----------------
Year Year January 1 March 12 Year Year
Ended Ended Through Through Ended Ended
December 31, December 31, March 11, December 31, December 31, December 31,
1994 1995 1996 1996 1997 1998 1998 1999
------------ ------------ --------- ------------ ------------ ------------ --------- --------
(dollars in thousands, except per share and per subscriber data)
Statement of Operations
Data:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.............. $ 5,075 $ 5,171 $1,038 $ 5,411 $ 17,634 $ 129,297 $ 60,068 $ 74,178
Costs and expenses:
Service costs......... 1,322 1,536 297 1,511 5,547 43,849 21,463 24,175
Selling, general and
administrative
expenses.............. 1,016 1,059 222 931 2,696 25,596 11,541 14,502
Management fee
expense(3)............ 252 261 52 270 882 5,797 2,782 3,588
Depreciation and
amortization.......... 4,092 3,945 527 2,157 7,636 65,793 27,422 41,431
------- ------- ------ -------- -------- --------- --------- --------
Operating income
(loss)................ (1,607) (1,630) (60) 542 873 (11,738) (3,140) (9,518)
Interest expense,
net(4)................ 878 935 201 1,528 4,829 23,994 11,738 13,392
Other expenses........ -- -- -- 967 640 4,058 3,568 734
Provision (benefit)
for income taxes(5)...
------- ------- ------ -------- -------- --------- --------- --------
Net loss.............. $(2,485) $(2,565) $ (261) $ (1,953) $ (4,596) $ (39,790) $ (18,446) $(23,664)
======= ======= ====== ======== ======== ========= ========= ========
Pro forma basic and
diluted net loss per
share(6)..............
Pro forma weighted
average common shares
outstanding...........
Other Data:
System cash flow(7)... $ 2,737 $ 2,576 $ 519 $ 2,969 $ 9,391 $ 59,852 $ 27,064 $ 35,501
System cash flow
margin(8)............. 53.9% 49.8% 50.0% 54.9% 53.3% 46.3% 45.1% 47.9%
Annualized system cash
flow(9)............... $ 71,002
EBITDA(10)............ $ 2,485 $ 2,315 $ 467 $ 2,699 $ 8,509 $ 54,055 $ 24,282 31,913
EBITDA margin(11)..... 49.0% 44.8% 45.0% 49.9% 48.3% 41.8% 40.4% 43.0%
Annualized
EBITDA(12)............ 63,826
Net cash flows from
operating activities.. $ 1,395 $ 1,478 $ 226 $ 237 $ 7,007 $ 53,556 $ 31,803 17,306
Net cash flows used in
investing activities.. (552) (261) (86) (45,257) (60,008) (397,085) (354,079) (36,205)
Net cash flows (used
in) from financing
activities............ (919) (1,077) -- 45,416 53,632 344,714 322,657 18,242
Operating Data (end of
period, except
average):
Homes passed(13)...... 38,749 87,750 520,000 508,000 523,000
Basic
subscribers(14)....... 27,153 64,350 354,000 345,000 355,800
Basic
penetration(15)....... 70.1% 73.3% 68.1% 67.9% 68.0%
Premium service
units(16)............. 11,691 39,288 407,100 398,500 385,400
Premium
penetration(17)....... 43.1% 61.1% 115.0% 115.5% 108.3%
Average monthly
revenues per basic
subscriber(18)........ $31.72 $34.74
Annual system cash
flow per basic
subscriber(19)........ $172 $200
Annual EBITDA per
basic subscriber(20).. $154 $179
Balance Sheet Data (end
of period):
Total assets.......... $11,755 $ 8,149 $ 46,560 $102,791 $ 451,152 $ 449,225 $448,410
Total debt............ 13,294 12,217 40,529 72,768 337,905 315,129 359,629
Total members'
equity................ (2,003) (4,568) 4,537 24,441 78,651 99,995 55,007
</TABLE>
(footnotes on following page)
36
<PAGE>
Notes to Selected Historical Consolidated Financial and Operating Data
(1) The selected historical financial data for the years ended December 31,
1994 and 1995 and for the period from January 1, 1996 through March 11,
1996 have been derived from the audited financial statements of the
Benchmark Acquisition Fund II Limited Partnership. The Benchmark
Acquisition Fund II Limited Partnership is our predecessor company.
(2) We commenced operations on March 12, 1996 with the acquisition of the
Ridgecrest system and have since completed eight additional acquisitions.
See the financial statements and related notes included elsewhere in this
prospectus. The historical results of operations of the systems acquired
have been included from their respective dates of acquisition to the end
of the period presented.
(3) Represents fees paid to Mediacom Management for management services
rendered to our operating subsidiaries. Mediacom Management utilizes these
fees to compensate its employees as well as to fund its corporate
overhead. The Mediacom Management management agreements were amended
effective November 19, 1999 in connection with an amendment to Mediacom
LLC's operating agreement. The amended agreements provide for management
fees equal to 2% of annual gross revenues. Each of the management
agreements will be terminated upon the completion of this offering. At
that time, Mediacom Management's employees will become our employees and
its corporate overhead will become our corporate overhead. These expenses
will be reflected as our corporate expense, which we estimate will amount
to approximately 2% of our annual gross revenues.
(4) Net of interest income. Interest income for the periods presented is not
material.
(5) Represents an income tax provision (benefit) assuming the exchange of
membership interests in Mediacom LLC for shares of our common stock. We
have operating losses for the periods presented and have not reflected any
tax benefit for such losses.
(6) Represents the shares issued to effect the exchange of our common stock
for the membership interests in Mediacom LLC as if these shares were
outstanding for the periods presented.
(7) Represents EBITDA (as defined in note 10 below) before management fee
expense. System cash flow (a) is not intended to be a performance measure
that should be regarded as an alternative either to operating income or
net income as an indicator of operating performance or to the statement of
cash flows as a measure of liquidity, (b) is not intended to represent
funds available for debt service, dividends, reinvestment or other
discretionary uses and (c) should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles. System cash flow is included in
this prospectus because our management believes that system cash flow is a
meaningful measure of performance commonly used in the cable television
industry and by the investment community to analyze and compare cable
television companies. Our definition of system cash flow may not be
identical to similarly titled measures reported by other companies.
(8) Represents system cash flow as a percentage of revenues. This measurement
is used by us, and is commonly used in the cable television industry, to
analyze and compare cable television companies on the basis of operating
performance, for the reasons discussed in note 7 above.
(9) Represents system cash flow for the six months ended June 30, 1999,
multiplied by two. Our management believes this calculation provides a
meaningful measure of performance, on an annualized basis, for the reasons
discussed in note 7 above.
(10) Represents operating income (loss) before depreciation and amortization.
EBITDA (a) is not intended to be a performance measure that should be
regarded as an alternative either to operating income or net income as an
indicator of operating performance or to the statement of cash flows as a
measure of liquidity, (b) is not intended to represent funds available for
debt service, dividends, reinvestment or other discretionary uses and (c)
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles. EBITDA is included in this prospectus because our management
believes that EBITDA is a meaningful measure of performance commonly used
in the cable television industry and by the investment community to
analyze and compare cable television companies. Our definition of EBITDA
may not be identical to similarly titled measures reported by other
companies.
37
<PAGE>
(11) Represents EBITDA as a percentage of revenues. This measurement is used by
us, and is commonly used in the cable industry, to analyze and compare
cable companies on the basis of operating performance, for the reasons
discussed in note 10 above.
(12) Represents EBITDA for the six months ended June 30, 1999, multiplied by
two. Our management believes this calculation provides a meaningful
measure of performance, on an annualized basis, for the reasons discussed
in note 10 above.
(13) Represents the number of single residence homes, apartments and
condominium units passed by the cable distribution network in a cable
system's service area.
(14) Represents subscribers of a cable television system who receive a package
of over-the-air broadcast stations, local access channels and/or certain
satellite-delivered cable television services, and who are usually charged
a flat monthly rate for a number of channels.
(15) Represents basic subscribers as a percentage of total number of homes
passed.
(16) Represents the number of subscriptions to premium services. A subscriber
may purchase more than one premium service, each of which is counted as a
separate premium service unit. For the six months ended June 30, 1999,
premium service units decreased primarily due to the Disney Channel being
moved from a premium service to the basic programming packages in several
of our cable systems.
(17) Represents premium service units as a percentage of total number of basic
subscribers. This ratio may be greater than 100% if the average basic
subscriber subscribes to more than one premium service unit.
(18) Represents average monthly revenues for the period divided by average
monthly basic subscribers for such period. This measurement is commonly
used in the cable television industry to analyze and compare cable
companies on the basis of operating performance.
(19) Represents annualized system cash flow for the period divided by average
monthly basic subscribers for such period. This measurement is commonly
used in the cable television industry to analyze and compare cable
companies on the basis of operating performance.
(20) Represents annualized EBITDA for the period divided by average monthly
basic subscribers for such period. This measurement is commonly used in
the cable television industry to analyze and compare cable companies on
the basis of operating performance.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
We materially expanded our business in 1997 and 1998 through acquisitions.
The acquisitions of the Zylstra and Triax systems in October and November 1999
together doubled the number of our basic subscribers. All acquisitions have
been accounted for under the purchase method of accounting and, therefore, our
historical results of operations include the results of operations for each
acquired system, other than the Zylstra and Triax systems, subsequent to its
respective acquisition date. As such, we do not believe the discussion and
analysis of our historical financial condition and results of operations set
forth below are indicative nor should they be relied upon as an indicator of
our future performance.
General
Our revenues are primarily attributable to monthly subscription fees charged
to basic subscribers for our basic and premium cable television programming
services.
. Basic revenues consist of monthly subscription fees for all services
other than premium programming and also include monthly charges for
customer equipment rental and installation fees.
. Premium revenues consist of monthly subscription fees for
programming provided on a per channel basis or as part of premium
service packages.
. Other revenues represent pay-per-view charges, late payment fees,
advertising revenues and commissions related to the sale of goods by
home shopping services.
The following table sets forth for the periods indicated the percentage of
our total revenues attributable to the sources indicated:
<TABLE>
<CAPTION>
Six Months
Period From Year Ended Ended June
March 12, 1996 December 31, 30,
to December 31, -------------- ------------
1996 1997 1998 1998 1999
--------------- ------ ------ ----- -----
<S> <C> <C> <C> <C> <C>
Basic revenues.............. 80.0% 81.0% 80.0% 80.0% 81.0%
Premium revenues............ 8.0 9.0 15.0 15.0 13.0
Other revenues.............. 12.0 10.0 5.0 5.0 6.0
----- ------ ------ ----- -----
Total revenues............ 100.0% 100.0% 100.0% 100.0% 100.0%
===== ====== ====== ===== =====
</TABLE>
For the six months ended June 30, 1999, for each of the past two years and
for the period ended December 31, 1996, we generated significant increases in
revenues as a result of our acquisition activities, increases in monthly
revenues per basic subscriber and internal subscriber growth.
Our operating expenses consist of service costs and selling, general and
administrative expenses directly attributable to our cable systems. Service
costs include fees paid to programming suppliers, expenses related to copyright
fees, wages and salaries of technical personnel and plant operating costs.
Programming fees have historically increased at rates in excess of inflation
due to increases in the number of programming services we have offered and
improvements in the quality of programming. We believe that under the FCC's
existing cable rate regulations, we will be able to increase our rates for
cable television services to more than cover any increases in the costs of
programming. However, competitive factors may limit our ability to increase our
rates. We benefit from our membership in a cooperative of cable television
companies which serve over twelve million basic subscribers, which provides its
members with significant volume discounts from programming suppliers and cable
equipment vendors. Selling, general and administrative expenses directly
attributable to our cable television systems include wages and salaries for
customer service and administrative personnel, franchise fees and expenses
related to billing, marketing, bad debt, advertising sales and office
administration.
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Mediacom Management provides management services to the operating
subsidiaries of Mediacom LLC and receives annual management fees. Until
November 19, 1999, management fees ranged from 4.0% to 5.0% of our annual gross
revenues. The management agreements were revised effective November 19, 1999 in
connection with an amendment to Mediacom LLC's operating agreement to provide
for annual management fees equal to 2.0% of annual gross revenues. Also,
Mediacom Management received an acquisition fee ranging from 0.5% to 1.0% of
the purchase price of acquisitions made by Mediacom LLC and such fees are
included in other expenses. Mediacom Management utilizes these fees to
compensate its employees as well as to fund its corporate overhead. Mediacom
Management has agreed to waive all management fees accrued from July 1, 1999
through November 19, 1999, and to waive the acquisition fees related to the
acquisitions of the Triax and Zylstra systems. Each of the management
agreements will be terminated upon the completion of this offering. At that
time, Mediacom Management's employees will become our employees and its
corporate overhead will become our corporate overhead. These expenses will be
reflected as our corporate expense, which we estimate will amount to
approximately 2% of our annual gross revenues. Also pursuant to the amendment
to Mediacom LLC's operating agreement, no further acquisition fees will be
payable.
The high level of depreciation and amortization associated with our
acquisition activities as well as the interest expense related to our financing
activities have caused us to report net losses in our limited operating
history. We believe that such net losses are common for cable television
companies and anticipate that we will continue to incur net losses for the
foreseeable future.
EBITDA represents operating income (loss) before depreciation and
amortization. EBITDA (a) is not intended to be a performance measure that
should be regarded as an alternative either to operating income or net income
as an indicator of operating performance or to the statement of cash flows as a
measure of liquidity, (b) is not intended to represent funds available for debt
service, dividends, reinvestment or other discretionary uses and (c) should not
be considered in isolation or as a substitute for measures of performance
prepared in accordance with generally accepted accounting principles. EBITDA is
included in this prospectus because our management believes that EBITDA is a
meaningful measure commonly used in the cable television industry and by the
investment community. Our definition of EBITDA may not be identical to
similarly titled measures reported by other companies.
No provision has been made in the pro forma consolidated statement of
operations for federal, state or local income taxes since Mediacom LLC is a
limited liability company, and its members are required to report their share
of income or loss in their respective income tax returns. After the completion
of this offering and the exchange of membership interests in Mediacom LLC for
shares in our company, our results will be included in our corporate tax
returns.
Results of Operations
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
The following historical information for the six months ended June 30, 1999
and 1998 includes the results of operations of the Clearlake system--acquired
on January 9, 1998, the Cablevision systems--acquired on January 23, 1998, and
the Caruthersville system--acquired on October 1, 1998, only for that portion
of the respective period that such cable television systems were owned by us.
Revenues. Revenues increased by 23.5% to approximately $74.2 million for the
six months ended June 30, 1999, as compared to approximately $60.1 million for
the six months ended June 30, 1998 primarily as a result of:
. the inclusion of the results of operations of cable television systems
owned by us on June 30, 1999 and acquired by us during the six months
ended June 30, 1998 for the full six month period in 1999;
. an increase in the average monthly basic service rate of $2.98 per basic
subscriber; and
. internal basic subscriber growth of 2.0%, excluding the acquisition of
the Caruthersville system.
Service costs. Service costs increased by 12.6% to approximately $24.2
million for the six months ended June 30, 1999, as compared to approximately
$21.5 million for the six months ended June 30, 1998.
40
<PAGE>
Acquisitions of the Clearlake, Cablevision and Caruthersville systems accounted
for substantially all of this increase. As a percentage of revenues, service
costs were 32.6% for the six months ended June 30, 1999, as compared to 35.7%
for the six months ended June 30, 1998.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased by 25.7% to approximately $14.5 million for
the six months ended June 30, 1999, as compared to approximately $11.5 million
for the six months ended June 30, 1998. Acquisitions of the Clearlake,
Cablevision and Caruthersville systems accounted for approximately 43.3% of the
total increase. Excluding systems acquired in 1998, these costs increased by
approximately $1.7 million primarily as a result of increased marketing costs
associated with the promotion of new programming services and increased
personnel expenses. As a percentage of revenues, selling, general and
administrative expenses were 19.6% for the six months ended June 30, 1999, as
compared to 19.2% for the six months ended June 30, 1998.
Management fee expense. Management fee expense increased by 29.0% to
approximately $3.6 million for the six months ended June 30, 1999, as compared
to approximately $2.8 million in the 1998 period, due to the higher revenues
generated in the 1999 period.
Depreciation and amortization. Depreciation and amortization increased by
51.1% to approximately $41.4 million for the six months ended June 30, 1999, as
compared to approximately $27.4 million in the 1998 period. This increase was
substantially due to our acquisitions in 1998 and additional capital
expenditures associated with the upgrade of our systems.
Operating loss. Due to the factors described above, we generated an
operating loss of approximately $9.5 million for the six months ended June 30,
1999, as compared to operating loss of $3.1 million for the 1998 period.
Interest expense, net. Interest expense, net, increased by 14.1% to
approximately $13.4 million for the six months ended June 30, 1999, as compared
to approximately $11.7 million for the six months ended June 30, 1998. This
increase was substantially due to higher average debt outstanding during the
1999 period as a result of debt incurred in connection with our acquisitions.
Other expenses. Other expenses decreased by 79.4% to approximately $734,000
for the six months ended June 30, 1999, as compared to approximately $3.6
million for the six months ended June 30, 1998. This decrease was principally
due to acquisition fees incurred in the 1998 period in connection with the
acquisition of the Clearlake system and the Cablevision systems.
Net loss. Due to the factors described above, we generated a net loss of
approximately $23.6 million for the six months ended June 30, 1999, as compared
to a net loss of approximately $18.4 million for the six months ended June 30,
1998.
EBITDA. EBITDA increased by 31.4% to approximately $31.9 million for the six
months ended June 30, 1999, as compared to approximately $24.3 million for the
six months ended June 30, 1998. This increase was substantially due to the
inclusion of the results of operations of the Clearlake, Cablevision and
Caruthersville systems for the full six-month period in 1999, and the other
factors described above. As a percentage of revenues, EBITDA increased to 43.0%
for the six months ended June 30, 1999, as compared to 40.4% for the six months
ended June 30, 1998. On a pro forma basis, assuming the Clearlake, Cablevision
and Caruthersville systems were owned and operated by us as of January 1, 1998,
EBITDA increased by 23.3% for the six months ended June 30, 1999 over the
comparable period in 1998.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
The following historical information for the years ended December 31, 1998
and 1997 includes the results of operations of the Lower Delaware system--
acquired on June 24, 1997, the Sun City system--acquired on September 19, 1997,
the Clearlake system--acquired on January 9, 1998, the Cablevision systems--
acquired on January 23, 1998, and the Caruthersville system--acquired on
October 1, 1998, only for that portion of the respective period that such cable
television systems were owned by us.
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<PAGE>
The Cablevision, Caruthersville, Clearlake, Lower Delaware and Sun City
systems comprise a substantial portion of our basic subscribers. At December
31, 1998, these systems served 328,350 basic subscribers, representing 92.8% of
the 354,000 subscribers served by us as of such date. Accordingly, the
Cablevision, Caruthersville, Clearlake, Lower Delaware and Sun City systems
have had a significant impact on the results of operations for the year ended
December 31, 1998, compared to the prior year. Consequently, we believe that
any comparison of our results of operations between the years ended December
31, 1998 and 1997 are not indicative of our results of operations in the
future.
Revenues. Revenues increased to approximately $129.3 million for the year
ended December 31, 1998, as compared to approximately $17.6 million for the
prior year principally due to:
. the inclusion of the results of operations of the Lower Delaware and Sun
City systems for the full year ended December 31, 1998;
. the inclusion of the results of operations of the Clearlake, Cablevision
and Caruthersville systems from their respective acquisition dates;
. the implementation of average monthly basic service rate increases of
$3.34 per basic subscriber; and
. internal basic subscriber growth of 2.5%.
Service costs. Service costs increased to approximately $43.8 million for
the year ended December 31, 1998, as compared to approximately $5.5 million for
the prior year. Substantially all of this increase was due to the inclusion of
the results of operations of the Cablevision, Caruthersville, Clearlake, Lower
Delaware and Sun City systems. As a percentage of revenues, service costs were
approximately 33.9% in 1998, as compared to approximately 31.5% in 1997.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased to approximately $25.6 million for the year
ended December 31, 1998, as compared to approximately $2.7 million for the
prior year. Substantially all of this increase was due to the inclusion of the
results of operations of the Cablevision, Caruthersville, Clearlake, Lower
Delaware and Sun City systems. As a percentage of revenues, selling, general
and administrative expenses were approximately 19.8% in 1998, as compared to
approximately 15.3% in 1997.
Management fee expense. Management fee expense increased to approximately
$5.8 million for the year ended December 31, 1998, as compared to approximately
$882,000 for the prior year due to the higher revenues generated in 1998.
Depreciation and amortization. Depreciation and amortization increased to
approximately $65.8 million for the year ended December 31, 1998, as compared
to approximately $7.6 million for the prior year. Depreciation increased
primarily by the inclusion of the acquisitions described above.
Operating income (loss). Due to the factors described above, we generated an
operating loss of approximately $11.7 million for the year ended December 31,
1998, as compared to operating income of approximately $873,000 for the prior
year.
Interest expense, net. Interest expense, net, increased to approximately
$24.0 million for the year ended December 31, 1998, as compared to
approximately $4.8 million for the prior year. This increase was substantially
due to the additional debt incurred in connection with the acquisitions
described above.
Other expenses. Other expenses increased to approximately $4.1 million for
the year ended December 31, 1998, as compared to approximately $640,000 for the
prior year. This increase was substantially due to acquisition fees paid to
Mediacom Management in connection with the acquisitions described above.
Net loss. Due to the factors described above, we generated a net loss of
approximately $39.8 million for the year ended December 31, 1998, as compared
to a net loss of approximately $4.6 million for the prior year.
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<PAGE>
EBITDA. EBITDA increased to approximately $54.1 million for the year ended
December 31, 1998, as compared to approximately $8.5 million for the prior
year. This increase was substantially due to the inclusion of the results of
operations of the Cablevision, Caruthersville, Clearlake, Lower Delaware and
Sun City systems. As a percentage of revenues, EBITDA decreased to 41.8% for
the year ended December 31, 1998, as compared to 48.3% for the prior year. This
decrease was principally due to the higher programming costs and selling,
general and administrative expenses of the Cablevision, Caruthersville,
Clearlake, Lower Delaware and Sun City systems in relation to the revenues
generated by such cable television systems.
Year Ended December 31, 1997 Compared to the Period from March 12, 1996 to
December 31, 1996
The following historical information includes the results of operations of
the Ridgecrest system--acquired on March 12, 1996, which is the date of
commencement of our operations, the Kern Valley system--acquired on June 28,
1996, the Valley Center and Nogales systems--acquired on December 27, 1996, the
Lower Delaware system--acquired on June 24, 1997 and the Sun City system--
acquired on September 19, 1997, only for that portion of the respective period
that such systems were owned by us.
Revenues. Revenues increased to approximately $17.6 million for the year
ended December 31, 1997, as compared to approximately $5.4 million for the
period ended December 31, 1996, principally due to the inclusion of:
. the full year of results of operations of the Ridgecrest, Kern Valley,
Nogales and Valley Center systems;
. the results of operations of the Lower Delaware system from the date of
its acquisition on June 24, 1997; and
. the results of operations of the Sun City system from the date of its
acquisition on September 19, 1997.
Service costs. Service costs increased to approximately $5.5 million for the
year ended December 31, 1997, as compared to approximately $1.5 million for the
period ended December 31, 1996. Substantially all of this increase was due to
the inclusion of the results of operations of Lower Delaware and Sun City
systems and the full year of results of the Ridgecrest, Kern Valley, Nogales
and Valley Center systems. As a percentage of revenues, service costs were
approximately 31.5% in 1997, as compared to approximately 27.9% in 1996.
Selling, general and administrative expenses. Selling, general and
administrative expenses increased to approximately $2.7 million for the year
ended December 31, 1997, as compared to approximately $931,000 for the period
ended December 31, 1996. Substantially all of this increase was due to the
inclusion of the results of operations of the aforementioned acquisitions in
1997 and the full year of results of operations of the Ridgecrest, Kern Valley,
Nogales and Valley Center systems. As a percentage of revenues, selling,
general and administrative expenses were approximately 15.3% in 1997, as
compared to approximately 17.2% in 1996.
Management fee expense. Management fee expense increased to approximately
$882,000 for the year ended December 31, 1997, as compared to approximately
$270,000 for the period ended December 31, 1996, due to the higher revenues
generated in 1997.
Depreciation and amortization. Depreciation and amortization increased to
approximately $7.6 million for the year ended December 31, 1997, as compared to
approximately $2.2 million for the period ended December 31, 1996. This
increase was substantially due to the inclusion of the results of operations of
the acquisitions described above.
Operating income. Due to the factors described above, we had operating
income of approximately $873,000 for the year ended December 31, 1997, as
compared to operating income of approximately $542,000 for the period ended
December 31, 1996.
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Interest expense, net. Interest expense, net, increased to approximately
$4.8 million for the year ended December 31, 1997, as compared to approximately
$1.5 million for the period ended December 31, 1996. This increase was
principally due to the increased levels of debt incurred in connection with the
Lower Delaware and Sun City systems.
Other expenses. Other expenses decreased to approximately $640,000 for the
year ended December 31, 1997, as compared to approximately $967,000 for the
period ended December 31, 1996. This decrease was principally due to pre-
acquisition expenses recorded in 1996.
Net loss. Due to the factors described above, we generated a net loss of
approximately $4.6 million for the year ended December 31, 1997, as compared to
a net loss of approximately $2.0 million for the period ended December 31,
1996.
EBITDA. EBITDA increased to approximately $8.5 million for the year ended
December 31, 1997, as compared to approximately $2.7 million for the prior
year. This increase was substantially due to the inclusion of the results of
operations of the Lower Delaware and Sun City systems and the results of
operations for the full year of the Ridgecrest, Kern Valley, Nogales and Valley
Center systems. As a percentage of revenues, EBITDA decreased to 48.3% for the
year ended December 31, 1997, as compared to 49.9% for the period ended
December 31, 1996. This decrease was principally due to the higher programming
costs of the cable television systems acquired during 1997 in relation to the
revenues generated by such cable television systems.
Liquidity and Capital Resources
Our business requires substantial capital for the upgrade, expansion and
maintenance of the cable network. In addition, we have pursued, and will
continue to pursue, a business strategy that includes selective acquisitions.
We have funded our working capital requirements, capital expenditures and
acquisitions through a combination of internally generated funds, long-term
borrowings and equity contributions. We intend to continue to finance such
expenditures through the same sources.
During the third quarter of 1998, we modified our previously disclosed five-
year system upgrade program by accelerating its planned completion date to June
30, 2000. Upon completion, we anticipate that 85% of our customers, excluding
the Triax and Zylstra customers, will be served by systems with 550MHz to
750MHz bandwidth capacity.
As a result of our accelerated capital improvement program, total capital
expenditures were $53.7 million for the year ended December 31, 1998 and $35.9
million for the six months ended June 30, 1999. For the year ended December 31,
1998, and for the six months ended June 30, 1999, net cash flows from
operations were $53.6 million and $17.3 million, respectively, which together
with borrowings under our subsidiary credit facilities, funded such capital
expenditures. We anticipate that total capital expenditures will be
approximately $76.0 million during 1999. We intend to use net cash flows from
operations and borrowings under our subsidiary credit facilities to fund these
capital expenditures.
As a result of our recent acquisitions of the Triax and Zylstra systems, we
have updated our capital improvement program and now expect to spend
approximately $400 million over the three-year period ending December 2002, of
which approximately $240 million will be invested to upgrade the cable network
and approximately $160 million will be used for plant expansion, digital
headend and set-up boxes, cable modems and maintenance. We expect to fund these
expenditures through net cash flows from operations and additional borrowings
under our subsidiary credit facilities. By December 2002, including the Triax
and Zylstra systems, we anticipate:
. 91% of our basic subscribers will be served by systems with 550MHz
to 750MHz bandwidth capacity and two-way communications capability;
and
44
<PAGE>
. 369 headend facilities will be eliminated, resulting in 90 headend
facilities serving all of our basic subscribers and 30 headend
facilities serving 84% of our basic subscribers.
From commencement of our operations in March 1996 through December 1998, we
acquired nine cable systems for an aggregate purchase price of $432.4 million,
before closing costs and adjustments. In October and November 1999, we spent
$759.6 million, before closing costs and adjustments, to acquire the Triax and
Zylstra systems.
To finance our acquisitions, working capital requirements and capital
expenditures and to provide liquidity for future capital needs, we had
completed the following financing arrangements as of November 1999:
. $200.0 million offering of our 8 1/2% senior notes due April 2008;
. $125.0 million offering of our 7 7/8% senior notes due February
2011;
. $550.0 million subsidiary credit facility expiring in September
2008;
. $550.0 million subsidiary credit facility expiring in December 2008;
and
. $135.4 million of equity capital contributed by the members of
Mediacom LLC.
As of November 10, 1999, we had entered into interest rate swap agreements,
which expire from 2000 through 2002, to hedge a notional amount of $50.0
million of floating rate debt under the subsidiary credit facilities. As of
such date, the weighted average interest rate on all indebtedness outstanding
under our subsidiary credit facilities was approximately 7.9%, before giving
effect to the aforementioned interest rate swap agreements. As of November 10,
1999, we had $278.0 million of unused credit commitments.
We are regularly presented with opportunities to acquire cable systems that
are evaluated on the basis of our acquisition strategy. Although we presently
do not have any definitive agreements or letters of intent to acquire or sell
any of our cable systems, other than the five letters of intent to acquire the
systems serving approximately 28,000 basic subscribers, from time to time we
negotiate with prospective sellers to acquire additional cable systems. These
potential acquisitions are subject to the negotiation and completion of
definitive documentation, which will include customary representations and
warranties and will be subject to a number of closing conditions. No assurance
can be given that such definitive documents will be entered into or that, if
entered into, the acquisitions will be completed.
Although we have not generated earnings sufficient to cover fixed charges,
we have generated cash and obtained financing sufficient to meet our debt
service, working capital, capital expenditure and acquisition requirements. We
expect that we will continue to be able to generate funds and obtain financing
sufficient to service our obligations and complete our pending acquisitions.
There can be no assurance that we will be able to complete the financing
arrangements described above, or, if we were able to do so, that the terms
would be favorable to us.
Recent Pronouncements
In 1998, Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," was issued. SFAS 133
establishes accounting and reporting standards requiring that every derivative
instrument be recorded in the balance sheet as either an asset or liability
measured at its fair value. We will adopt SFAS 133 in 2001, but have not
quantified the impact or not yet determined the timing or method of the
adoption.
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Inflation and Changing Prices
Our systems' costs and expenses are subject to inflation and price
fluctuations. Since changes in costs can be passed through to subscribers, such
changes are not expected to have a material effect on our results of
operations.
Year 2000 Compliance
We have formed a Year 2000 program management team responsible for
overseeing, coordinating and reporting on the Year 2000 remediation efforts. We
have implemented a company-wide effort to assess and remediate our computer
systems, related software and equipment to ensure such systems, software and
equipment recognize, process and store information in the year 2000 and
thereafter. Our Year 2000 remediation efforts include an assessment of our most
critical systems, such as customer service and billing systems, headend
facilities, business support operations and other equipment and facilities. We
are also verifying the Year 2000 readiness of our significant suppliers and
vendors.
Our Year 2000 program management team has defined a four-phase approach to
determining the Year 2000 readiness of our internal systems, software and
equipment. This approach is intended to provide a detailed method for tracking
the evaluation, repair and testing of systems, software and equipment, as
follows:
1. Assessment--involves the inventory of all systems, software and
equipment and the identification of any Year 2000 issues.
2. Remediation--involves repairing, upgrading and/or replacing any non-
compliant equipment and systems.
3. Testing--involves testing systems, software and equipment for Year
2000 readiness, or in certain cases, relying on test results provided to us
by outside vendors.
4. Implementation--involves placing compliant systems, software and
equipment into production or service.
As of September 30, 1999, our assessment and remediation were substantially
complete, other than the Triax and Zylstra systems, and testing and
implementation were 80% complete, with final completion expected by the fourth
quarter of 1999.
The completion dates set forth above are based on current expectations.
However, due to the uncertainties inherent in Year 2000 remediation, no
assurances can be given as to whether such projects will be completed on such
dates.
We acquired the Zylstra systems in October 1999 and the Triax systems in
November 1999, and we are monitoring the Year 2000 remediation process for such
systems to ensure completion of remediation promptly after acquisition of these
systems. 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 systems. We have included these
acquisitions in our Year 2000 program, and we are not currently aware of any
likely material system failures relating to the Year 2000 affecting those
systems.
Third Party Systems, Software and Equipment
We purchase most of our technology from third parties. Our Year 2000 program
management team has surveyed the significant third-party vendors and suppliers
whose systems, services or products are important to our operations: for
example, suppliers of addressable controllers and set-top boxes, and the
provider of billing services. The Year 2000 readiness of such providers is
critical to the continued provision of cable television service without
interruption. Our Year 2000 project management team has received information
that the most critical systems, services or products supplied to our cable
television systems by third-parties are either Year
46
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2000 ready or are expected to be Year 2000 ready by the fourth quarter. Our
Year 2000 project management team is developing contingency plans for systems
provided by vendors who have not responded to its surveys or systems that may
not be Year 2000 ready in a timely fashion. As of June 30, 1999, approximately
40% of our significant third-party vendors had not responded to the project
management team surveys.
In addition to the survey process described above, our Year 2000 project
management team has identified our most critical supplier/vendor relationships
and has instituted a verification process to determine the vendors' Year 2000
readiness. Such verification includes reviewing vendors' test and other data
and engaging in regular communications with vendors' Year 2000 teams. We are
currently testing to validate the Year 2000 compliance of critical products and
services.
Costs
As of June 30, 1999, we have not incurred material Year 2000 costs. Although
no assurances can be given, we currently expect that the total projected costs
associated with the Year 2000 program for our existing operations will be less
than $350,000.
Contingency Plans
The failure to correct a material Year 2000 problem could result in an
interruption or failure of important business operations. We believe that our
Year 2000 program will significantly reduce risks associated with the
changeover to the Year 2000 and are currently developing contingency plans to
minimize the effect of any potential Year 2000 related disruptions which relate
to systems, software, equipment and services that we have deemed critical in
regard to customer service, business operations, financial impact or safety.
These include:
. the failure of addressable controllers contained in some headend
facilities could disrupt the delivery of premium services to customers
and could necessitate crediting customers for failure to receive such
premium services;
. a failure of the services provided by our billing systems service
provider could result in a loss of customer records which could disrupt
the ability to bill customers for a protracted period; and
. advertising revenue could be adversely affected by the failure of
advertising insertion equipment which could impede or prevent the
insertion of advertising spots in cable television programming.
The financial impact of any or all of the above worst-case scenarios has not
been and cannot be estimated by us due to the numerous uncertainties and
variables associated with such scenarios.
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INDUSTRY
The following section and other parts of this prospectus contain cable
industry terms and technical jargon which readers of this prospectus may find
unfamiliar. We have therefore included a glossary in this prospectus beginning
on page G-1 to assist readers unfamiliar with these terms. Unless otherwise
specified, all cable television industry statistical data in this prospectus
are from Paul Kagan Associates, Inc., a leading cable television industry
publisher.
The U.S. cable television industry is projected to pass 96.6 million homes
and serve 67.3 million basic subscribers, representing a penetration of 69.7%,
as of December 31, 1999. Over the past six years, the industry has experienced
a compound annual growth rate of 2.7% in basic subscribers and 8.4% in total
revenues. It is estimated that the annual revenues of the U.S. cable television
industry will be $36.9 billion in 1999 and will grow to $66.4 billion in 2004.
The following table details the projected revenues and growth rates of core
cable services, digital video, high-speed data and telephony from 1999 to 2004:
<TABLE>
<CAPTION>
1999 2004 CAGR(1)
---------- ---------- -------
(dollars in millions)
<S> <C> <C> <C>
Core cable services(2)...................... $34,384 $45,892 5.9%
Digital video(3)............................ 1,275 8,091 44.7
High-speed data............................. 503 3,805 49.9
Telephony(4)................................ 727 8,602 63.9
---------- ----------
Total revenues ......................... $36,889 $66,390 12.5%
========== ==========
</TABLE>
------------
(1) CAGR means compound annual growth rate.
(2) Includes basic cable, premium services, advanced analog, local
advertising, home shopping, equipment rental and installation.
(3) Includes digital video, pay-per-view, near video-on-demand,
video-on-demand and other interactive services.
(4) Includes business and residential.
The compound annual growth rate in revenues from core cable services is
projected to slow to 5.9% as a result of increased competition in the
multichannel video marketplace and lower subscriber growth rates. We believe,
however, that the cable industry's higher projected total revenues growth
during the next five years will be fueled by a dramatic increase in consumer
awareness of and demand for new broadband services.
. Digital Video. On an industry-wide basis, 5.1 million customers are
projected to subscribe to a digital cable service as of December 31,
1999. By the end of 2000, the number of digital service customers is
projected to increase to 10.6 million, representing a penetration of
15.6% of basic subscribers, and to 33.6 million by 2004, representing a
penetration of 47.3% of basic subscribers.
. Two-Way, High-Speed Data. Cable companies currently deliver Internet
services to over 200 markets throughout the United States, and over 1.6
million households are projected to receive Internet access from their
cable providers by December 31, 1999. The number of homes passed by
cable systems offering high-speed, residential cable Internet services
is projected to increase from 29.0 million homes in 1999 to 39.0 million
homes by 2000 and to 62.9 million homes by 2004. The number of high-
speed Internet service customers is expected to be 3.3 million by the
end of 2000, representing a penetration of 3.4% of homes passed, and is
further expected to increase to 12.7 million homes by the end of 2004,
representing a penetration of 12.5% of homes passed.
. Telephony. The number of cable telephony customers is expected to be
600,000 by the end of 2000, representing a penetration of 9.0% of the
marketed homes, and 9.8 million customers by 2004, representing a
penetration of 25.0%.
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<PAGE>
We believe that the increase in consumer demand for and availability of new
broadband services will be driven largely by the following developments:
Internet
A significant development for the cable television industry has been the
emergence of the Internet as a mass medium for commerce and communications.
International Data Corporation estimates that there were approximately 142
million worldwide users of the Internet at the end of 1998 and that the number
of users will grow to 502 million by the end of 2003. The growth in the number
of users, together with the wealth of content available on the Internet, have
led to sharp increases in the daily traffic volume on the Internet. The ability
of Internet service providers to attract and retain customers is largely based
on their capacity to deliver content quickly and reliably. The combination of
richer content and rapidly increasing volume of usage on the Internet can
lengthen the time required for a user to download information over traditional
telephone networks. This has caused Internet users to seek alternative
providers, such as cable television operators, that have the technical
infrastructure to deliver higher speeds.
Telecommunications Act of 1996
The Telecommunications Act of 1996, the first comprehensive revision of the
federal telecommunications laws since 1934, has led to a sharp acceleration of
the industry's evolution. Among other things, this new law intended to promote
competition in the local telephone markets for the first time. Today, several
of the nation's largest cable operators offer local phone service. We believe
recent developments, including AT&T's purchase of Tele-Communications, Inc.,
AT&T's proposed purchase of MediaOne, Inc. and AT&T's proposed joint ventures
with six other cable operators, will likely accelerate the pace of development
of the voice telephony business for the cable industry.
Competition
Cable television operators face increasing competition from satellite,
wireless and wireline competitors in the delivery of multichannel video
programming. From 1993 to 1999, these alternative providers increased their
market share from 3.1% to nearly 16.0% of total television households. During
this same period, however, cable television's penetration of homes passed
increased from 63.1% to 69.7% due to the cable industry's introduction of an
array of core cable products and services, greater technical reliability of its
network and the enhanced quality of its customer service which has resulted in
improved customer satisfaction. In response to increasing competition and to
meet the growing needs of their customers, cable operators are rapidly
upgrading their broadband networks with new technologies to provide their
customers with new and enhanced products and services.
Technology
Most cable operators' upgrade programs feature the use of high capacity,
hybrid fiber optic coaxial architecture, referred to as HFC architecture, in
their network design. 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 is the most efficient delivery medium for
the connection to the home. As a result, fiber optics and advanced transmission
technology has made it cost-effective for cable operators to consolidate
headends to create large regional networks. This modern network architecture
can provide cable customers with a wide array of enhanced video, voice and
high-speed data communications possibilities. The cable television industry as
a whole invested in excess of $7.7 billion in 1998 to maintain and upgrade
cable networks, creating an enhanced platform for the delivery of digital
television, two-way, high-speed Internet access, interactive services and
telephony.
49
<PAGE>
BUSINESS
Introduction
We are the eighth largest cable operator in the United States, based on
customers served by wholly-owned systems after giving effect to our pending
acquisitions and recently announced industry transactions. Our cable systems
pass approximately 1.1 million homes and serve approximately 740,000 basic
subscribers, including our pending acquisitions. Mediacom LLC was founded in
July 1995 by Rocco B. Commisso, our Chairman and Chief Executive Officer, to
acquire and develop cable television systems serving principally non-
metropolitan markets of the United States.
Since commencement of our operations in March 1996, we have experienced
significant growth in basic subscribers, revenues and cash flows. We have
deployed a disciplined strategy of acquiring underperforming cable systems
primarily in markets with favorable demographic profiles. Through June 1999, we
spent approximately $432.4 million to complete nine acquisitions of cable
systems that served 355,800 basic subscribers. In October and November 1999,
for approximately $759.6 million, we acquired the cable systems of Triax and
Zylstra that served 355,500 basic subscribers as of June 30, 1999. On a pro
forma basis, our 1998 revenues were $272.3 million and EBITDA was $124.5
million. On the same basis, for the six months ended June 30, 1999, our
revenues were $143.9 million and EBITDA was $68.4 million.
We also have generated strong internal growth and improved the operating and
financial performance of our systems. These results have been achieved
primarily through the introduction of an expanded array of core cable
television products and services made possible by the rapid upgrade of our
cable network and through the successful integration of our acquired systems.
Business Strategy
Our objective is to become the leading cable operator focused on providing
entertainment, information and telecommunications services in non-metropolitan
markets of the United States. The key elements of our strategy are to:
Improve the Operating and Financial Performance of Our Acquired Cable Systems
We seek to rapidly integrate our acquired cable systems and improve their
operating and financial performance. Prior to completion of an acquisition, we
formulate plans for customer care and billing improvements, network upgrades,
headend consolidation, new product and service launches, competitive
positioning and human resource requirements. After completing an acquisition,
we implement managerial, operating, purchasing, personnel and engineering
changes designed to effect these plans.
Assuming all our systems, excluding the Triax and Zylstra systems, were
acquired on January 1, 1997, in 1998 our revenues grew by 13.0%, EBITDA
increased by 31.9%, the EBITDA margin improved from 35.1% to 41.0% and our
internal subscriber growth was 2.5% compared to the prior year. Based on the
same assumptions, for the six months ended June 30, 1999, our revenues
increased by 11.5%, EBITDA increased by 23.3%, the EBITDA margin improved from
40.8% to 43.0% and our internal subscriber growth was 2.0% compared to the
corresponding period in 1998.
Develop Efficient Operating Clusters
Our systems are managed through six operating clusters, including Triax and
Zylstra systems, by management teams that oversee local system activities and
operate autonomously within financial and operating guidelines established by
our corporate office. To enhance these clusters, our acquisition strategy
focuses, in part, on acquiring or trading for systems in close proximity to our
own systems. By further concentrating the geographic clustering of our cable
systems, we expect additional operating efficiencies through the consolidation
of many managerial, customer service, marketing, administrative and technical
functions.
50
<PAGE>
The clustering of systems also enables us to consolidate headend facilities,
resulting in lower fixed capital costs on a per home basis as we introduce new
and enhanced products and services because of the larger number of customers
served by a single headend facility. As a result of our clustering and upgrade
program, we expect to reduce the number of our headend facilities from 459 as
of June 30, 1999 to 90 by December 2002, so that 84% of our customers will be
served from 30 headend facilities.
Rapidly Upgrade Our Cable Network
We are rapidly upgrading our cable network to provide new and enhanced
products and services, improve our competitive position and increase overall
customer satisfaction. By December 2002, we anticipate that 91% of our basic
subscribers will be served by cable systems with 550MHz to 750MHz bandwidth
capacity and two-way communications capability. As part of our upgrade program,
we plan to deploy over 10,000 route miles of fiber optic cable to create large
regional fiber optic networks with the potential to provide advanced
telecommunications services. Our upgrade plans will allow us to:
. offer digital cable television, two-way, high-speed Internet access and
interactive video;
. increase channel capacity to a minimum of 82 channels, and significantly
more with digital video technology;
. activate the two-way communications capability of our systems, which
will give our customers the ability to send and receive signals over our
cable network;
. eliminate 369 headend facilities, lowering our fixed capital costs on a
per home basis as we introduce new products and services; and
. utilize our fiber optic networks to offer advanced telecommunications
services.
Introduce New and Enhanced Products and Services
We have acquired cable systems that prior to our ownership generally
underserved their customers. We believe that significant opportunities exist to
increase our revenues by expanding the array of products and services we offer.
We have used and will continue to use the expanded channel capacity of our
upgraded systems to introduce several new basic programming services,
additional premium services and numerous pay-per-view channels.
Utilizing digital video technology, we are offering multiple packages of
premium services, several pay-per-view channels on a near video-on-demand
basis, digital music services and interactive program guides. By December 1999,
we expect to offer digital cable services in systems passing 243,000 homes. As
a result of our strategic relationship with SoftNet's ISP Channel, we expect to
accelerate the deployment of two-way, high-speed Internet access throughout our
systems. By December 1999, we plan to launch ISP Channel's two-way, high-speed
Internet access service in systems passing over 155,000 homes. In addition, we
are currently exploring opportunities in interactive video programming and
telecommunications services.
Maximize Customer Satisfaction to Build Customer Loyalty
As a result of our strong regional and local management presence, we are
more responsive to customer needs and preferences and better positioned to
strengthen relations with the local government authorities and the communities
we serve. We seek a high level of customer satisfaction by providing superior
customer service and attractively priced product and service offerings. We
believe our investments in the cable network are increasing customer
satisfaction as a result of a wide array of new product and service
introductions, greater technical reliability and improved quality of service.
We have implemented stringent internal customer service standards, which we
believe meet or exceed those established by the National Cable Television
Association. We have regional calling centers servicing 87% of our customers
that are staffed with dedicated personnel who provide service 24 hours a day,
seven days a week. We believe that our focus on customer service has enhanced
51
<PAGE>
our reputation in the communities we serve, which has increased customer
loyalty and the potential demand for our new and enhanced products and
services.
Acquire Underperforming Cable Systems Principally in Non-Metropolitan Markets
Our disciplined acquisition strategy targets underperforming cable systems
serving primarily non-metropolitan markets with favorable demographic profiles.
These systems are typically within the top 50 to 100 television markets and
small and medium-sized communities where customers generally require cable to
clearly receive a full complement of off-air television signals. We believe
that there are advantages in acquiring and operating cable systems in such
markets, including:
. less direct competition given the lower housing densities and the
resulting higher costs per customer of constructing a cable network;
. higher penetration levels of our services and lower customer turnover as
a result of fewer competing entertainment alternatives; and
. generally lower overhead and operating costs than those incurred by
cable operators serving larger markets.
In addition, we seek to acquire or trade for cable systems in close
proximity to our existing operations because it is more cost effective to
provide cable television and advanced telecommunications services over an
expanded subscriber base within a concentrated geographic area. We believe that
we may be able to purchase "fill-in" acquisitions at favorable prices in
geographic regions where we are the dominant provider of cable television
services. In the second half of 1999, we signed five letters of intent to
acquire cable systems serving approximately 28,000 subscribers located in close
proximity to our systems, thereby complementing our operating clusters.
Implement a Flexible Financing Structure
To support our business strategy and enhance our financial flexibility, we
have developed a financing strategy utilizing a blend of equity and debt
capital to complement our acquisition and operating activities. We have
diversified our sources of debt capital by raising long term debt at the
holding company level, while utilizing our subsidiaries to access debt
principally in the commercial bank market, through stand-alone borrowing
groups.
We believe our financing strategy is beneficial because it broadens our
access to various equity and debt markets, enhances our flexibility in managing
our capital structure, reduces the overall cost of debt capital and permits us
to maintain a substantial liquidity position in the form of unused and
available subsidiary credit facilities. We intend to use the net proceeds of
this offering to repay approximately $280.5 million of outstanding indebtedness
under our subsidiary credit facilities. As a result, we will improve our
financial leverage, increase our unused credit commitments to approximately
$584 million and lower our overall cost of debt capital to 7.3%.
Products and Services
We provide our customers with the ability to tailor their product selection
from a full array of core cable television services. In addition, we have begun
to offer our customers new and enhanced products and services such as digital
cable services and two-way, high-speed Internet access. We also are exploring
opportunities in interactive video programming and telecommunications services.
52
<PAGE>
Core Cable Television Services
We design both our basic channel line-up and our additional channel
offerings for each system according to demographics, programming preferences,
channel capacity, competition, price sensitivity and local regulation. Our core
cable television service offering includes the following:
Limited Basic. Our limited basic service includes, for a monthly fee, local
broadcast channels, network and independent stations, available over-the-air
limited satellite-delivered programming, and local public, government, home-
shopping and leased access channels.
Family Cable. Our Family Cable service includes, for an additional monthly
fee, various satellite-delivered, non-broadcast channels such as CNN, MTV, USA
Network, ESPN, Lifetime, Nickelodeon and TNT.
Premium Channels. These services are satellite delivered channels consisting
principally of feature films, original programming, live sports events,
concerts and other special entertainment features, usually presented without
commercial interruption. HBO, Cinemax, Showtime, The Movie Channel and Starz
are typical examples. Such premium programming services are offered by the
systems both on a per-channel basis and as part of premium service packages
designed to enhance customer value and to enable us to take advantage of
programming agreements offering cost incentives based on premium service unit
growth.
The significant expansion of bandwidth capacity, resulting from our capital
improvement program, will allow us to expand the use of tiered and multichannel
packaging strategies for marketing and promoting premium and niche programming
services. We believe that these packaging strategies will increase basic and
premium penetration as well as revenue per basic subscriber.
Pay-Per-View. These channels allow customers to pay to view a single showing
of a feature film, live sporting event, concert and other special event, on an
unedited, commercial-free basis. Such pay-per-view services are offered by us
on a per-viewing basis, with subscribers only paying for programs which they
select for viewing.
Digital Cable Services
Digital video technology is a computerized method of defining, transmitting
and storing information that makes up a television signal. Digital video
technology allows us to greatly increase our channel offerings through the use
of compressed digital video technology, which converts one analog channel into
eight to 12 digital channels. The digitally compressed signal is uplinked to a
satellite, which sends the signal back down to our cable system's headend to be
distributed, via optical fiber and coaxial cable, to our customer's home. A
digital capable set-top box in the customer's home converts the digital signal
back into an analog format so that it can be viewed on a normal television
screen. We believe the implementation of digital technology has significantly
enhanced and expanded the video and service offerings we provide to our
customers.
We provided our digital video customers with programming packages that
include:
. up to 41 multichannel premium services;
. 35 pay-per-view movie and sports channels;
. up to 45 channels of digital music; and
. an interactive on-screen program guide to help them navigate the new
digital choices.
We introduced digital cable services in June 1999. To date, we have achieved
a penetration of 6.8%, representing the number of digital customers as a
percentage of basic subscribers, in the two systems where digital cable
services have been available since June 1999. For the month of October 1999,
per customer revenue was approximately $19.00 for our digital service. By
December 1999, we expect to offer digital cable services in systems passing
approximately 238,000 homes. We expect to rapidly introduce digital cable
53
<PAGE>
television in our remaining systems, including the Triax and Zylstra systems,
as we increase the channel capacity of our cable network and consolidate our
headend facilities.
High-Speed Internet Access
We plan to introduce two-way, high-speed Internet access over our network in
substantially all of our systems. The broadband cable network enables data to
be transmitted up to 100 times faster than traditional telephone modem
technologies. This high-speed capability allows our cable modem customer to
download large files from the Internet in a fraction of the time required when
using the traditional telephone modem. It also allows much quicker response
times when surfing the Internet, providing a richer experience for the
customer. In addition, the two-way communications capability of the cable
Internet connection eliminates the need for a telephone line, is always on and
does not require the customer to dial into the Internet service provider and
await authorization.
To ensure that inter-operable, non-proprietary cable modems are made
available for purchase by customers on a retail basis, the cable industry has
developed general software operating standards, known as Data Over Cable
Service Interface Specifications or DOCSIS. As of July 1999, ten cable industry
vendors, including equipment manufacturers such as Cisco, Motorola and
Nortel/Antec received official certification from Cable Television
Laboratories. As a result, standardized cable modems are currently available
for purchase through various distribution channels including retail outlets,
bundled with personal computer purchases, and directly through the cable
operator. Such availability will allow customers to use these modems in
different systems similar to the traditional telephone modem, and should
accelerate the deployment of high speed internet access over cable networks.
We believe that the speed, ease of installation and ubiquity of cable modems
will increase the use and impact of the Internet. Furthermore, we believe that
the cable television network combined with DOCSIS standards is currently the
best vehicle to deliver all Internet Protocol services including Internet
access, broadband content, streaming media and Internet Protocol telephony to
our customers both on the computer and to the television via a digital set-top
box, even though other high-speed alternatives are being developed.
In November 1999, we completed an agreement with SoftNet to deploy its two-
way, high-speed Internet access services throughout our cable systems. The
service will be marketed under SoftNet's branded name, ISP Channel. ISP Channel
also provides several additional services, such as the ability to dial-up from
the customer's home or business, multiple computer access and Internet fax
services. Through the agreement with SoftNet, we are required to upgrade our
cable network to provide two-way communications capability in systems passing
900,000 homes, including the Triax and Zylstra systems, and make available such
homes to SoftNet by December 2002. We have begun to launch ISP Channel's two-
way, high-speed Internet access in our systems passing 78,000 homes. By
December 1999, we anticipate that two-way, high-speed Internet access will be
available in our systems passing over 155,000 homes.
We currently provide high-speed Internet access to approximately 300
customers through the use of one-way cable modems, which permit data to be
downstreamed at high-speed while utilizing a telephone line return path. We
also provide dial-up telephone Internet access to approximately 4,500 customers
in two of our markets. The provision of this dial-up service creates a customer
base that can be upgraded to the two-way, high-speed cable modem service in the
future.
Telecommunications Services
During the last several years, the cable industry has been developing the
capability to provide telephony services. Several of the nation's largest cable
operators now offer residential and/or commercial phone service. We believe
recent developments, including AT&T's purchase of Tele-Communications, Inc.,
its proposed purchase of MediaOne, Inc. and its proposed joint ventures with
six other cable operators, will likely accelerate the pace of development of
the voice telephony business for the cable industry. We are exploring
technologies
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<PAGE>
using Internet Protocol telephony as well as traditional switching technologies
that are currently available to transmit telephony signals over our cable
network.
Our upgrade plans include the installation of over 10,000 route miles of
fiber optic cable resulting in the creation of large regional fiber optic
networks. We expect that the fiber capacity of our network upgrades will exceed
the requirements of our business, thereby affording us the flexibility to
pursue new data and telecommunications opportunities such as:
. providing wide area networks and point-to-point data services;
. offering virtual private networks;
. leasing dark fiber capacity to enable carriers to penetrate markets and
bypass incumbent providers;
. entering into strategic relationships, similar to our relationship with
SoftNet, to leverage our network footprints; and
. targeting corporate and governmental broadband communications
infrastructure customers with significant transmission and high security
needs.
Our Systems
Overview
Prior to the acquisitions of the Triax and Zylstra systems, we managed our
systems through four operating regions: Southern, Mid-Atlantic, Central and
Western. The table below and the discussion that follows provide an overview of
selected operating and technical statistics for our four established regions
and the Triax and Zylstra systems as of June 30, 1999, unless otherwise
indicated.
<TABLE>
<CAPTION>
Southern Mid-Atlantic Central Western Triax Zylstra Total
-------- ------------ ------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Data:
Homes passed............... 190,800 125,700 125,000 81,500 521,000 21,500 1,065,500
Basic subscribers.......... 134,700 87,100 81,100 52,900 341,500 14,000 711,300
Basic penetration.......... 70.6% 69.3% 64.9% 64.9% 65.5% 65.1% 66.8%
Premium service units...... 178,900 78,500 105,400 22,600 164,700 3,900 554,000
Premium penetration........ 132.8% 90.1% 130.0% 42.7% 48.2% 27.9% 77.9%
Average monthly revenues
per basic subscriber(1).. $36.83 $33.00 $34.98 $36.86 $33.07 $29.42 $34.20
Cable Network Data:
Miles of plant............. 4,800 2,950 2,975 1,350 9,720 280 22,075
Density(2)................. 40 43 42 60 54 77 48
Headend facilities......... 55 15 70 9 305 5 459
Headend facilities after
upgrade(3)................ 10 7 18 9 42 4 90
Percentage of basic
subscribers
at 550MHz to 750MHz....... 50.6% 91.0% 49.3% 65.7% 23.0% 0.0% 42.3%
</TABLE>
- ---------------------
(1) Represents average monthly revenues for the three months ended June 30,
1999, divided by basic subscribers as of the end of such period.
(2) Represents homes passed divided by miles of plant.
(3) Represents number of headends by December 2002 based on our current upgrade
program.
55
<PAGE>
Southern Region
Over 82% of our basic subscribers in this region are located in the suburbs
and outlying areas of Pensacola, Fort Walton Beach and Panama City, Florida;
Mobile and Huntsville, Alabama and Biloxi, Mississippi. As of June 30, 1999,
the region's systems passed approximately 190,800 homes and served
approximately 134,700 basic subscribers. The internal subscriber growth for
this region was 2.9% for the period ending June 30, 1999. We measure internal
subscriber growth as the percentage change in basic subscribers over a 12-month
period, excluding the effects of acquisitions. All of the region's basic
subscribers are serviced from a regional customer service center in Gulf
Breeze, Florida, which provides 24 hour, seven day per week service.
We have made and continue to make significant investments to upgrade the
Southern region's cable network. By June 2000, we expect that 85% of this
region's basic subscribers will be served by systems with 550MHz to 750MHz
bandwidth capacity. In June 1999, we began offering digital cable services in
systems passing 45,000 homes. By December 1999, we expect to offer digital
cable services in systems passing over 72,000 homes and to launch ISP Channel's
Internet services in systems passing 30,000 homes. By December 2002, we
anticipate that 95% of the region's basic subscribers will be served by systems
with two-way communications capability and that the number of headend
facilities will be reduced from 55 to ten. At that time, we expect that 85% of
this region's basic subscribers will be served by five headend facilities.
Mid-Atlantic Region
The Mid-Atlantic region's systems serve communities in lower Delaware,
southeastern Maryland and the northeastern and western areas of North Carolina.
Our two largest systems in this region are Hendersonville, North Carolina, near
Asheville, North Carolina, and Lower Delaware, outside of Ocean City, Maryland.
As of June 30, 1999, the region's systems passed approximately 125,700 homes
and served approximately 87,100 basic subscribers. The internal subscriber
growth for this region was 3.2% for the period ending June 30, 1999.
Approximately 65% of the region's basic subscribers are serviced from our
regional customer service centers, which provide 24 hour, seven day per week
service.
We have significantly upgraded the Mid-Atlantic region's systems with 91% of
basic subscribers served by systems with at least 550MHz bandwidth capacity. In
September 1999, we began offering digital cable services in systems passing
45,000 homes. By December 1999, we expect to offer digital cable services in
systems passing over 77,000 homes and to launch ISP Channel's Internet services
in systems passing over 45,000 homes. By December 2002, we expect that 95% of
the region's basic subscribers will be served by systems with two-way
communications capability and that the number of headend facilities will be
reduced from 15 to seven. At that time, we expect that 94% of the region's
basic subscribers will be served by three headend facilities.
Central Region
The Central region's systems serve the suburbs and outlying areas of Kansas
City and Springfield, Missouri, Topeka, Kansas, and communities in the western
portion of Kentucky. As of June 30, 1999, the region's systems passed
approximately 125,000 homes and served approximately 81,100 basic subscribers.
The internal subscriber growth rate of this region was 0.5% for the period
ending June 30, 1999. Substantially all of the region's basic subscribers are
serviced from a regional customer service center in Benton, Kentucky, which
provides 24 hour, seven day per week service.
As a result of our continuing investments in the cable network, the Central
region has seen significant increases in channel capacity. By June 2000, we
expect that 89% of this region's basic subscribers will be served by one system
with 550MHz to 750MHz bandwidth capacity. In September 1999, we began offering
digital cable services in systems passing 10,000 homes. By December 1999, we
expect to offer digital cable services in systems passing over 21,000 homes and
to launch ISP Channel's Internet services in systems passing over 10,000 homes.
By December 2002, we expect that 90% of the Central region's basic subscribers
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will be served by systems with two-way communications capability and that the
number of headend facilities will be reduced from 70 to 18. At that time, we
expect that 60% of the region's basic subscribers will be served by three
headend facilities.
Western Region
The Western region's systems serve communities in the following areas:
Clearlake, California; the Indian Wells Valley in central California; portions
of Riverside County and San Diego County, California; and Nogales, Arizona and
outlying areas. As of June 30, 1999, the region's systems passed approximately
81,500 homes and served approximately 52,900 basic subscribers. The region's
internal basic subscriber growth was flat for the period ending June 30, 1999.
The region's basic subscribers are serviced from seven local offices. In the
Western Region, we also provide high-speed Internet access to approximately 300
customers through the use of one-way cable modems and dial-up telephone
Internet access to approximately 4,500 customers.
We have significantly upgraded the Western region's systems with all basic
subscribers served by systems with a minimum 450MHz bandwidth capacity and over
65% served by systems with 550MHz bandwidth capacity. By December 1999, we
expect to offer digital cable services in systems passing over 45,000 homes and
to launch ISP Channel's Internet services in systems passing over 58,000 homes.
Where possible we plan to offer to all our existing Internet customers ISP
Channel's two-way, high-speed services. By December 2002, we expect that 90% of
the Western region's basic subscribers will be served by systems with at least
550MHz bandwidth capacity and two-way communications capability. The region's
basic subscribers are served by nine headend facilities.
Triax Systems
As of June 30, 1999, the Triax systems passed approximately 521,000 homes
and served approximately 341,500 basic subscribers. Many of Triax's systems are
located within 30 miles of major or medium-sized markets, including Minneapolis
and Rochester, Minnesota; Bloomington, Champaign, Decatur, Peoria, and
Springfield, Illinois; Elkhart, Fort Wayne, and South Bend, Indiana; and Cedar
Rapids, Iowa. Substantially all of Triax's basic subscribers are serviced from
two regional customer service centers, which provide 24 hour, seven day per
week service.
The Triax systems consist of two operating regions: the Midwest region and
the North Central region. The Midwest region manages and operates systems
serving approximately 172,500 basic subscribers principally in Illinois and
Indiana. The Midwest region's larger systems serve the communities of
Jacksonville, Ottawa, Pontiac and Streater, Illinois and Angola, Auburn,
Bluffton, Bremen, Kendallville and North Webster, Indiana. The North Central
region manages and operates systems serving approximately 161,000 basic
subscribers principally in Iowa, Minnesota and Wisconsin. The North Central
region's larger systems serve the communities of Lake Minnetonka, Savage and
Prior Lake, Minnesota; Praire du Chien, Mauston, Platteville and Viroqua,
Wisconsin; and Esterville and Spencer, Iowa. The Triax systems also include two
systems serving approximately 8,000 customers in Arizona, which our Western
region will manage and operate.
As of June 30, 1999, approximately 58% of Triax's subscribers were served by
systems with at least 400MHz bandwidth capacity. In April 1999, Triax
introduced digital cable services in one system passing over 14,000 homes. By
December 1999, we expect to offer digital cable services in systems passing
over 19,000 homes and to launch ISP Channel's Internet services in systems
passing over 10,000 homes. We plan to make significant capital investments in
the Triax systems to increase bandwidth capacity, activate two-way
communications capability and consolidate headend facilities. By December 2002,
as a result of our planned investments to upgrade Triax's cable network, we
expect that 88% of Triax's basic subscribers will be served by systems with
550MHz to 750MHz bandwidth capacity and two-way communications capability. At
that time, we expect the number of Triax's headend facilities will be reduced
from 305 to 42 and that 60% of Triax's basic subscribers will be served by five
headend facilities.
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Zylstra Systems
The Zylstra systems serve communities in Vermillion and Yankton, South
Dakota; Worthington and Luverne, Minnesota; and Orange City and Alton, Iowa. As
of June 30, 1999, these systems passed approximately 21,500 homes and served
approximately 14,000 basic subscribers. We anticipate expanding the level of
customer service that Zylstra's subscribers receive by utilizing our customer
service centers to provide 24 hour, seven day per week service.
As of June 30, 1999, approximately 36% of Zylstra's subscribers were served
by systems with at least 400MHz bandwidth capacity. By December 1999, we expect
to offer digital cable services in one system passing over 6,000 homes. By
December 2000, we expect that all of the Zylstra systems will be upgraded to
750MHz bandwidth capacity and that digital cable and ISP Channel's Internet
services will be made available to our customers. Zylstra's basic subscribers
are served by five headend facilities, one of which is scheduled to be
eliminated.
Technology Overview
As part of our commitment to maximize customer satisfaction, to improve our
competitive position and to introduce new and enhanced products and services to
our customers, we plan to make significant investments in our cable network,
including the Triax and Zylstra systems, over the three-year period ending
December 2002. During such period, we intend to invest approximately $400
million, with approximately $240 million used to upgrade our cable network. The
remaining $160 million will be spent on plant expansion, digital headends and
set-top boxes, cable modems and maintenance. The objectives of our upgrade
program are:
. to increase the bandwidth capacity to 750MHz or higher;
. to activate two-way communications capability;
. to consolidate our headend facilities, through the extensive deployment
of fiber optic networks; and
. to allow us to provide digital cable television, two-way, high-speed
Internet access, interactive video and other telecommunications
services.
The following table describes the technological state of our cable network,
including the Triax and Zylstra systems, as of June 30, 1999 and through
December 31, 2002, based on our current upgrade plans:
<TABLE>
<CAPTION>
Percentage of Basic Subscribers
---------------------------------
Less than 400MHz- 550MHz- Two-Way
400MHz 450MHz 750MHz Capable
--------- ------- ------- -------
<S> <C> <C> <C> <C>
June 30, 1999............................ 35% 23% 42% 4%
December 31, 1999........................ 19% 23% 58% 9%
December 31, 2000........................ 7% 21% 72% 41%
December 31, 2001........................ 0% 19% 81% 65%
December 31, 2002........................ 0% 9% 91% 91%
</TABLE>
By December 2002, we expect that 91% of our basic subscribers will be served
by systems with two-way communications capability. This will permit our
customers to send and receive signals over the cable network so that
interactive services, such as video-on-demand, will be accessible and high-
speed Internet access will not require a separate telephone line. Two-way
communications capability will also position us to offer cable telephony, using
either Internet protocol telephony as it becomes commercially feasible, or the
traditional switching technologies that are currently available.
A central feature of our upgrade program is the deployment of high capacity,
hybrid fiber-optic coaxial architecture referred to as HFC architecture. 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
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requires a more extensive signal amplification in order to obtain the desired
levels for delivering channels. In most of our systems, we connect fiber optic
cable to individual nodes serving an average of 250 homes or commercial
buildings. A node is a single connection to a 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
HFC architecture provides higher capacity, superior signal quality, greater
network reliability and reduced operating costs than traditional cable network
design. Together with our plans for two-way communications capability, we
believe HFC architecture will enhance our cable network's capability to provide
advanced telecommunications services.
As of June 30, 1999, our systems were operated from 459 headend facilities,
including the Triax and Zylstra systems. We believe that fiber optics and
advanced transmission technologies make it cost effective to consolidate our
headend facilities, allowing us to realize operating efficiencies and resulting
in lower fixed capital costs on a per home basis as we introduce new products
and services. By December 2002, we plan to eliminate 369 headend facilities so
that all of our customers will be served by 90 headend facilities and 84% of
our customers will be served by 30 headend facilities.
As part of this headend consolidation program, we plan to deploy over 10,000
route miles of fiber optic cable to create large regional fiber optic networks
with the potential to provide advanced telecommunications services.
Sales and Marketing
We seek to be the premier provider of entertainment, information and
telecommunications services in the markets we serve. Our marketing programs and
campaigns offer a variety of cable services creatively packaged and tailored to
appeal to each of our local markets and to segments within each market. We
routinely survey our customers to ensure that we are meeting their demands and
our customer surveys keep us abreast of our competition so that we can counter
effectively competitors' service offerings and promotional campaigns. With our
strong local presence, we interact with our customers on a more individualized
basis allowing us to better service our customers and enhance customer loyalty
and trust.
We use a coordinated array of marketing techniques to attract and retain
customers and to increase premium service penetration, including door-to-door
and direct mail solicitation, telemarketing, media advertising, local
promotional events typically sponsored by programming services and cross-
channel promotion of new services and pay-per-view.
We invest a significant amount of time, effort and financial resources in
the training and evaluation of our marketing professionals. Our approximately
100 sales representatives customize their sales presentation to fit each of our
customers' specific needs by conducting focused consumer research. As a result,
we believe we can accelerate the introduction of new products and services to
our customers and achieve high success rates in attracting and retaining
customers.
Programming Supply
We have various contracts to obtain basic and premium programming for the
systems from program suppliers whose compensation is typically based on a fixed
fee per customer. Our programming contracts are generally for a fixed period of
time and are subject to negotiated renewal. Some program suppliers provide
volume discount pricing structures or offer marketing support to us. Our
successful marketing of multiple premium service packages emphasizing customer
value enables us to take advantage of such cost incentives. In addition, we are
a member of the National Cable Television Cooperative, Inc., a programming
consortium consisting of small to medium-sized multiple system operators
serving, in the aggregate, over twelve million cable subscribers. The
consortium helps create efficiencies in the areas of obtaining and
administering programming contracts, as well as secures more favorable
programming rates and contract terms for small to
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medium-sized cable operators. We intend to negotiate programming contract
renewals both directly and through the consortium to obtain the best available
contract terms.
Our programming costs are expected to increase in the future due to
additional programming being provided to our customers, increased costs to
purchase programming, inflationary increases and other factors affecting the
cable television industry. Although we will legally be able to pass through
expected increases in our programming costs to customers, there can be no
assurance that the marketplace will allow us to do so. We also have various
retransmission consent arrangements with commercial broadcast stations which
generally expire in December 1999 and beyond. None of these consents require
payment of fees for carriage. However, we have entered into agreements with
certain stations to carry satellite-delivered cable programming which is
affiliated with the network carried by such stations.
Customer Rates
Monthly customer rates for services vary from market to market, primarily
according to the amount of programming provided. At June 30, 1999, our monthly
basic service rates for residential customers ranged from $4.73 to $35.95; the
combined monthly basic and expanded basic service rates for residential
customers ranged from $23.95 to $36.95; and per-channel premium service rates,
not including special promotions, ranged from $1.75 to $12.50 per service for
our systems, excluding the Triax and Zylstra systems. For the three months
ended June 30, 1999, excluding the Triax and Zylstra systems, the weighted
average monthly rate for our combined basic and expanded basic services was
approximately $27.08.
Prior to our acquisition of the Triax systems, we were an eligible small
cable company under FCC rules which enabled us to utilize a simplified rate
setting methodology for most of the systems in establishing maximum rates for
basic and expanded basic services. This methodology almost always results in
rates that exceed those produced by the cost-of-service rules applicable to
larger cable operators. Prior to our acquisition of their systems, Triax also
used this rate setting methodology, although in a small percentage of their
systems. Although we are no longer an eligible small cable company, in most
cases, our systems which utilized this methodology, including the recently
acquired Triax systems, are allowed to maintain the rates set thereby. For
additional information, see "Legislation and Regulation--Federal Regulation--
Rate Regulation." We believe that our rate practices are generally consistent
with the current practices in the industry.
A one-time installation fee, which we may wholly or partially waive during a
promotional period, is usually charged to new customers. We charge monthly fees
for converters and remote control tuning devices and also charge administrative
fees for delinquent payments for service. Customers are free to discontinue
service at any time without additional charge in the majority of the systems
and may be charged a reconnection fee to resume service. Commercial customers,
such as hotels, motels and hospitals, are charged negotiated monthly fees and a
non-recurring fee for the installation of service. Multiple dwelling unit
accounts may be offered a bulk rate in exchange for single-point billing and
basic service to all units.
In addition to customer fees, we derive modest amounts of revenues from the
sale of local spot advertising time on locally originated and satellite-
delivered programming and from affiliations with home shopping services, which
offer merchandise for sale to customers and compensate system operators with a
percentage of their sales receipts.
Customer Service and Community Relations
We are dedicated to providing superior customer service. Our emphasis on
system reliability and customer satisfaction is a cornerstone of our business
strategy. We expect that on-going investments in our cable network will
significantly strengthen customer service as it will enhance the reliability of
our cable network and allow us to introduce new programming and other services
to our customers. We have implemented stringent internal customer service
standards, which we believe meet or exceed those established by the National
Cable Television Association. We maintain five regional calling centers, which
service 87% of our systems'
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customers. They are staffed with dedicated personnel who provide service to our
customers 24 hours a day, seven days a week, on a toll-free basis. We believe
our regional calling centers allow us to coordinate more effectively
installation appointments and response time to customer inquiries. We continue
to invest in both personnel and equipment of our regional calling centers to
ensure that these operating units are professionally managed and employ state-
of-the-art technology.
In addition, we are dedicated to fostering strong community relations in the
communities served by our systems. We support local charities and community
causes in various ways, including staged events and promotional campaigns to
raise funds and supplies for persons in need and in-kind donations that include
production services and free airtime on cable networks. We participate in the
"Cable in the Classroom" program, which is a national effort by cable companies
to provide schools with free cable television service and, where available,
Internet access. We also install and provide free cable television service to
government buildings and not-for-profit hospitals in our franchise areas. We
believe that our relations with the communities in which our systems operate
are good.
Franchises
Cable systems are generally operated under non-exclusive franchises granted
by local governmental authorities. These franchises typically contain many
conditions, such as: time limitations on commencement and completion of
construction; conditions of service, including number of channels, types of
programming and the provision of free service to schools and other public
institutions; and the granting of insurance and indemnity bonds by the company.
The provisions of local franchises are subject to federal regulation under the
Cable Communications Policy Act of 1984, as amended by the Cable Television
Consumer Protection and Competition Act of 1992.
As of June 30, 1999, our systems, including the Triax and Zylstra systems,
were subject to 891 franchises. These franchises, which are non-exclusive,
provide for the payment of fees to the issuing authority. In most of the
systems, such franchise fees are passed through directly to the customers. The
1984 Cable Act prohibits franchising authorities from imposing franchise fees
in excess of 5% of gross revenues and also permits the cable television system
operator to seek renegotiation and modification of franchise requirements if
warranted by changed circumstances.
Substantially all of our systems' basic subscribers are in service areas
that require a franchise. The table below groups the franchises of our systems,
including the Triax and Zylstra systems, by date of expiration and presents the
approximate number and percentage of basic subscribers for each group of
franchises on a pro forma basis as of June 30, 1999.
<TABLE>
<CAPTION>
Percentage of Number of Percentage of
Year of Franchise Number of Total Basic Total Basic
Expiration Franchises Franchises Subscribers Subscribers
----------------- ---------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
1999 through 2002....... 313 35.1% 253,222 35.6%
2003 and thereafter..... 578 64.9% 458,078 64.4%
--- ----- ------- -----
Total................. 891 100.0% 711,300 100.0%
=== ===== ======= =====
</TABLE>
The 1984 Cable Act provides, among other things, for an orderly franchise
renewal process in which franchise renewal will not be unreasonably withheld
or, if renewal is denied and the franchising authority acquires ownership of
the system or effects a transfer of the system to another person, the operator
generally is entitled to the "fair market value" for the system covered by such
franchise. In addition, the 1984 Cable Act established comprehensive renewal
procedures which require that an incumbent franchisee's renewal application be
assessed on its own merits and not as part of a comparative process with
competing applications.
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We believe that we generally have good relationships with our franchising
communities. We have never had a franchise revoked or failed to have a
franchise renewed. In addition, substantially all of our franchises eligible
for renewal have been renewed or extended prior to their stated expirations,
and no franchise community has refused to consent to a franchise transfer to
us.
Competition
Providers of Broadcast Television and Other Entertainment
Cable systems compete with other communications and entertainment media,
including over-the-air television broadcast signals that a viewer is able to
receive directly. The extent to which a cable system competes with over-the-air
broadcasting depends upon the quality and quantity of the broadcast signals
available by direct antenna reception compared to the quality and quantity of
such signals and alternative services offered by a cable system. Cable systems
also face competition from alternative methods of distributing and receiving
television signals and from other sources of entertainment such as live
sporting events, movie theaters and home video products, including videotape
recorders and videodisc players. In recent years, the FCC has adopted policies
authorizing new technologies and a more favorable operating environment for
certain existing technologies that provide, or may provide, substantial
additional competition for cable television systems. The extent to which a
cable television service is competitive depends in significant part upon the
cable system's ability to provide a greater variety of programming, superior
technical performance and superior customer service than are available over the
air or through competitive alternative delivery sources.
Direct Broadcast Satellite Providers
Individuals can purchase home satellite dishes, which allow them to receive
satellite-delivered broadcast and non-broadcast program services that formerly
were available only to cable television subscribers. Most satellite-distributed
program signals are electronically scrambled to permit reception only with
authorized decoding equipment for which the consumer must pay a fee. The 1992
Cable Act enhances the right of cable competitors to purchase non-broadcast
satellite-delivered programming. For additional information, see "Legislation
and Regulation--Federal Regulation."
Television programming is now also being delivered to individuals by high-
powered direct broadcast satellites utilizing video compression technology.
This technology can provide more than 150 channels of programming over single
high-powered satellites with significantly higher capacity available if, as is
the case with DIRECTV, multiple satellites are placed in the same orbital
position. Unlike cable television systems, however, direct broadcast satellite
cannot legally deliver local broadcast signals. Legislation permitting direct
broadcast satellite operators to transmit local broadcast signals was passed by
the U.S. House of Representatives on November 9, 1999 and is currently awaiting
passage by the U.S. Senate. If direct broadcast satellite providers are
permitted to deliver local broadcast signals, cable television systems will
lose a significant competitive advantage. Direct broadcast satellite service
can be received virtually anywhere in the continental United States through the
installation of a small roof top or side-mounted antenna, and it is more
accessible than cable television service where a cable plant has not been
constructed or where it is not cost effective to construct cable television
facilities. Direct broadcast satellite service is being heavily marketed on a
nationwide basis by several service operators.
Multichannel Multipoint Distribution Systems
Multichannel multipoint distribution systems deliver programming services
over microwave channels licensed by the FCC and received by subscribers with
special antennas. These wireless cable systems are less capital intensive, are
not required to obtain local franchises or pay franchise fees, and are subject
to fewer regulatory requirements than cable television systems. To date, the
ability of wireless cable services to compete with cable television systems has
been limited by channel capacity (35-channel maximum) and the need for
unobstructed line-of-sight over-the-air transmission. Although relatively few
wireless cable systems in the
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United States are currently in operation or under construction, virtually all
markets have been licensed or tentatively licensed. The use of digital
compression technology, and the FCC's recent amendment to its rules to permit
reverse path or two-way transmission over wireless facilities, may enable
multichannel multipoint distribution systems to deliver more channels and
additional services, including Internet related services.
Private Cable Television Systems
Private cable television systems compete with conventional cable television
systems for the right to service condominiums, apartment complexes and other
multiple unit residential developments. The operators of these private systems,
known as satellite master antenna television systems, often enter into
exclusive agreements with apartment building owners or homeowners' associations
that preclude franchised cable television operators from serving residents of
such private complexes. However, the 1984 Cable Act gives franchised cable
operators the right to use existing compatible easements within their franchise
areas on nondiscriminatory terms and conditions. Accordingly, where there are
preexisting compatible easements, cable operators may not be unfairly denied
access or discriminated against with respect to access to the premises served
by those easements. Conflicting judicial decisions have been issued
interpreting the scope of the access right granted by the 1984 Cable Act,
particularly with respect to easements located entirely on private property.
Under the 1996 Telecom Act, satellite master antenna television systems can
interconnect non-commonly owned buildings without having to comply with local,
state and federal regulatory requirements that are imposed upon cable systems
providing similar services, as long as they do not use public rights of way.
The FCC has held that the latter provision is not violated so long as
interconnection across public rights of way is provided by a third party.
Advertising Sales
The cable television industry competes with radio, broadcast television,
print media, and the Internet for advertising revenues. As the cable television
industry continues to offer more of its own programming channels, such as
Discovery and USA Network, income from advertising revenues can be expected to
increase.
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. These franchising authorities have from time to time granted
additional franchises to other companies, including other cable operators or
telephone companies, and these additional franchises might contain terms and
conditions more favorable than those afforded us. In addition, entities willing
to establish an open video system, under which they offer unaffiliated
programmers non-discriminatory access to a portion of the system's cable system
may be able to avoid significant local franchising requirements. Well financed
businesses from outside the cable industry, such as public utilities which
already possess or are developing fiber optic and other transmission facilities
in the areas they serve may over time become competitors. We believe that
various entities are currently offering cable service to an estimated 17,000
homes passed in the service areas of our franchises.
The Impact of Regulation on Competition
The FCC has authorized a new interactive television service which permits
non-video transmission of information between an individual's home and
entertainment and information service providers. This service, which can be
used by direct broadcast satellite systems, television stations, and other
video programming distributors, including cable television systems, is an
alternative technology for the delivery of interactive video services. It does
not appear at the present time that this service will have a material impact on
the operations of cable television systems.
The FCC has allocated spectrum in the 28GHz range for a new multichannel
wireless service that can be used to provide video and telecommunications
services. The FCC recently completed the process of awarding
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licenses to use this spectrum via a market-by-market auction. We do not know
whether such a service would have a material impact on the operations of cable
television systems.
The 1992 Cable Act permits franchising authorities to build and operate
their own cable systems. Municipally-owned cable systems enjoy certain
competitive advantages such as lower-cost financing and exemption from the
payment of franchise fees. The 1992 Cable Act also prohibits the grant of
exclusive franchises, thus other private entities can obtain franchises in the
communities in which we operate.
The 1996 Telecom Act eliminates the restriction against ownership, subject
to certain exceptions, and operation of cable systems by local telephone
companies within their local exchange service areas. Telephone companies are
now free to enter the retail video distribution business through any means,
such as direct broadcast satellite, wireless cable, satellite master antenna
television or as traditional franchised cable system operators. Alternatively,
the 1996 Telecom Act authorizes local telephone companies to operate open video
systems, a facilities-based distribution system, like a cable system, but which
is open, i.e., also available for use by programmers other than the owner of
the facility. Up to two-thirds of the channel capacity on an "open video
system" must be available to programmers unaffiliated with the local telephone
company. As a result of these changes, well financed businesses from outside
the cable television industry--such as public utilities that own the poles to
which cable is attached--may become competitors for franchises or providers of
competing services. The 1996 Telecom Act, however, also includes numerous
provisions designed to make it easier for cable operators and others to compete
directly with local exchange telephone carriers in the provision of traditional
telephone service and other telecommunications services.
The 1996 Telecom Act directed the FCC to establish, and the FCC has adopted,
regulations and policies for the issuance of licenses for digital television to
incumbent television broadcast licensees. Digital television can deliver high
definition television pictures and multiple digital-quality program streams, as
well as CD-quality audio programming and advanced digital services, such as
data transfer or subscription video. The FCC also has authorized television
broadcast stations to transmit textual and graphic information that may be
useful to both consumers and businesses. The FCC also permits commercial and
noncommercial FM stations to use their subcarrier frequencies to provide non-
broadcast services, including data transmission.
We have begun to accelerate the offering by our cable systems of high-speed
Internet access to our basic subscribers. These cable systems will compete with
a number of other companies, many of which have substantial resources, such as
existing Internet service providers and local and long distance telephone
companies. Recently, a number of Internet service providers have asked local
authorities and the FCC to give them rights of access to cable systems'
broadband infrastructure so that they can deliver their services directly to
cable systems' customers. Several local franchising authorities have been
examining the issue and a few have required cable operators to provide such
access. A U.S. District Court recently ruled that localities are authorized to
require such access. This decision is being appealed. Some cable companies have
initiated litigation challenging municipal "open access" requirements. In a
recent report, the FCC declined to institute a proceeding to examine this
issue, and concluded that alternative means of access are or soon will be made
to a broad range of Internet service providers. Although the FCC declined to
take action on Internet service providers access to broadband cable facilities,
it indicated that it would continue to monitor this issue. Congress and several
state and local jurisdictions are also reviewing this issue.
Telephone companies are accelerating the deployment of Asymmetric Digital
Subscriber Line technology. These companies report this technology will allow
Internet access to subscribers at peak data transmission speeds greater than
that of modems over conventional telephone lines. Several of the Regional Bell
Operating Companies have asked the FCC to deregulate packet-switched networks
to allow them to provide high-speed broadband services, including interactive
online services, without regard to present service boundaries and other
regulatory restrictions. Packet-switched networks are a type of data
communication in which small blocks of data are independently transmitted and
reassembled at their destination. The online services offered by these
competitors could affect our business.
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Advances in communications technology, as well as changes in the marketplace
and the regulatory and legislative environment, are constantly occurring. Thus,
it is not possible to predict the competitive effect that ongoing or future
developments might have on the cable industry. See the discussion under
"Legislation and Regulation."
Properties
Our principal physical assets consist of cable television operating plant
and equipment, including signal receiving, encoding and decoding devices,
headend facilities and distribution systems and customer house drop equipment
for each of the systems. The signal receiving apparatus typically includes a
tower, antenna, ancillary electronic equipment and earth stations for reception
of satellite signals. Headend facilities, consisting of associated electronic
equipment necessary for the reception, amplification and modulation of signals,
are located near the receiving devices. Some basic subscribers of the systems
utilize converters that can be addressed by sending coded signals from the
headend facility over the cable network. Our distribution system consists
primarily of coaxial and fiber optic cables and related electronic equipment.
We own or lease parcels of real property for signal reception sites,
microwave facilities and business offices, and own all of our service vehicles.
We believe that our properties both owned and leased, are in good condition and
are suitable and adequate for our operations.
Our cables generally are attached to utility poles under pole rental
agreements with local public utilities, although in some areas the distribution
cable is buried in underground ducts or trenches. The physical components of
the systems require periodic upgrading to improve system performance and
capacity.
Employees
As of November 10, 1999, we employed 1,240 full-time employees and 217 part-
time employees after giving effect to our acquisitions of the Triax and Zylstra
systems. None of our employees are represented by a labor union. We consider
our relations with our employees to be good.
Legal Proceedings
There are no material pending legal proceedings to which we are a party or
to which any of our properties are subject. We have received notice from a
third party alleging that our use of the term "Mediacom" in connection with our
business infringes their right to use the mark. However, there are no legal
proceedings pending against us which challenge our right to use the term
"Mediacom." If we are found to have infringed the proprietary rights of this or
other third parties with respect to our use of the term "Mediacom" or
variations thereof, we could be required to pay material damages, cease further
use of the term in our business or take other remedial action.
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LEGISLATION AND REGULATION
A federal law known as the Communications Act of 1934, as amended,
establishes a national policy to guide the regulation, development and
operation of cable communications systems. In 1996, a comprehensive amendment
to the Communications Act became effective and is expected to promote
competition and decrease governmental regulation of various communications
industries, including the cable television industry. However, until the desired
competition develops, various federal, state and local governmental units will
have broad regulatory authority and responsibilities over telecommunications
and cable television matters. The courts, especially the federal courts, will
continue to play an important oversight role as the statutory and regulatory
provisions are interpreted and enforced by the various federal, state and local
governmental units.
The Communications Act allocates principal responsibility for enforcing the
federal policies between the FCC, state and local governmental authorities. The
FCC and state regulatory agencies regularly conduct administrative proceedings
to adopt or amend regulations implementing the statutory mandate of the
Communications Act. At various times, interested parties to these
administrative proceedings challenge the new or amended regulations and
policies in the courts with varying levels of success. We expect that further
court actions and regulatory proceedings will occur and will refine the rights
and obligations of various parties, including the government, under the
Communications Act. The results of these judicial and administrative
proceedings may materially affect the cable industry and our business and
operations. In the following paragraphs, we summarize the federal laws and
regulations materially affecting the growth and operation of the cable
industry. We also provide a brief description of certain state and local laws.
Federal Regulation
The Communications Act and the regulations and policies of the FCC affect
significant aspects of our cable system operations, including:
. subscriber rates;
. the content of the programming we offer to subscribers, as well as the
way we sell our program packages to subscribers;
. the use of our cable systems by the local franchising authorities, the
public and other unrelated companies;
. our franchise agreements with local governmental authorities;
. cable system ownership limitations and prohibitions; and
. our use of utility poles and conduit.
Rate Regulation
The Communications Act and the FCC's regulations and policies limit the
ability of cable systems to raise rates for basic services and equipment.
Federal law prohibits rate regulation of cable services and customer equipment
only in communities that are subject to "effective competition," as defined by
federal law. Federal law also prohibits the regulation of cable operators'
rates where comparable video programming services, other than direct broadcast
satellites, are offered by local telephone companies, or their related parties,
or by third parties using the local telephone company's facilities.
Where there is no effective competition to the cable operator's services,
federal law gives local franchising authorities the responsibility to regulate
the rates charged by the operator for:
. the lowest level of programming service offered by cable operator,
typically called basic service, which includes the local broadcast
channels and any public access or governmental channels that are
required by the operator's franchise; and
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. the installation, sale and lease of equipment used by subscribers to
receive basic service, such as converter boxes and remote control units.
Local franchising authorities who wish to regulate basic service rates and
related equipment rates must first obtain FCC certification to regulate by
following a simplified FCC certification process and agreeing to follow
established FCC rules and policies when regulating the operator's rates.
Several years ago, the FCC adopted detailed rate regulations, guidelines and
rate forms that a cable system operator and the local franchising authority
must use in connection with the regulation of basic service and equipment
rates. The FCC adopted a benchmark methodology as the principal method of
regulating rates. However, if this methodology produces unacceptable rates, the
operator may also justify rates using a detailed cost-of-service methodology.
The FCC's rules also require franchising authorities to regulate equipment
rates on the basis of "actual cost plus a reasonable profit," as defined by the
FCC.
If the local franchising authority concludes that an operator's rates are
too high under the FCC's rate rules, the local franchising authority may
require the operator to reduce rates and to refund overcharges to subscribers,
with interest. The operator may appeal adverse local rate decisions to the FCC.
The FCC's regulations allow an operator to modify regulated rates on a
quarterly or annual basis to account for changes in:
. the number of regulated channels;
. inflation; and
. certain external costs, such as franchise and other governmental fees,
copyright and retransmission consent fees, taxes, programming fees and
franchise-related obligations.
As a further alternative, in 1995 the FCC adopted a simplified cost-of-
service methodology which can be used by "small cable systems" owned by "small
cable companies." A "small cable system" is defined as a cable television
system which has, on a headend basis, 15,000 or fewer basic customers. A "small
cable company" is defined as an entity serving a total of 400,000 or fewer
basic customers that is not affiliated with a larger cable television company:
i.e., a larger cable television company does not own more that a 20 percent
equity share or exercise de jure control. This small system rate-setting
methodology almost always results in rates which exceed those produced by the
cost-of-service rules applicable to larger cable television operators. Once the
initial rates are set they can be adjusted periodically for inflation and
external cost changes as described above. When an eligible "small system" grows
larger than 15,000 basic customers, it can maintain its then current rates, but
it cannot increase its rates in the normal course until an increase would be
warranted under the rules applicable to systems that have more than 15,000
customers. When a small cable company grows larger than 400,000 basic
customers, the qualified systems it then owns will not lose their small system
eligibility. If a small cable company sells a qualified system, or if the
company itself is sold, the qualified systems retain that status even if the
acquiring company is not a small cable company. We were a small cable company,
but upon the completion of the Triax acquisition, we no longer enjoy this
status. However, as noted above, the systems with less than 15,000 customers
owned by us prior to the completion of the Triax acquisition remain eligible
for small cable system rate regulation.
The Communications Act and the FCC's regulations also:
. require operators to charge uniform rates throughout each franchise area
that is not subject to effective competition;
. prohibit regulation of non-predatory bulk discount rates offered by
operators to subscribers in commercial and residential developments; and
. permit regulated equipment rates to be computed by aggregating costs of
broad categories of equipment at the franchise, system, regional or
company level.
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Content Requirements
The Communications Act and the FCC's regulations contain broadcast signal
carriage requirements that allow local commercial television broadcast
stations:
. to elect once every three years to require a cable system to carry the
station, subject to certain exceptions; or
. to negotiate with us on the terms by which we carry the station on our
cable system, commonly called retransmission consent.
The Communications Act requires a cable operator to devote up to one-third
of its activated channel capacity for the mandatory carriage of local
commercial television stations. The Communications Act also gives local non-
commercial television stations mandatory carriage rights; however, such
stations are not given the option to negotiate retransmission consent for the
carriage of their signals by cable systems. Additionally, cable systems must
obtain retransmission consent for:
. all distant commercial television stations, except for commercial
satellite-delivered independent superstations such as WGN;
. commercial radio stations; and
. certain low-power television stations.
The FCC has also initiated an administrative proceeding to consider the
requirements, if any, for mandatory carriage of digital television signals
offered by local television broadcasters. We are unable to predict the ultimate
outcome of this proceeding or the impact of new carriage requirements on the
operations of our cable systems.
The Communications Act requires our cable systems to permit subscribers to
purchase video programming we offer on a per channel or a per program basis
without the necessity of subscribing to any tier of service, other than the
basic cable service tier. However, we are not required to comply with this
requirement until December 2002 for any of our cable systems that do not have
addressable converter boxes or that have other substantial technological
limitations. Many of our cable systems do not have the technological capability
to offer programming in the manner required by the statute and thus currently
are exempt from complying with the requirement. We anticipate having
significant capital expenditures over the next two to three years in order for
us to meet this requirement. We are unable to predict whether the full
implementation of this statutory provision in December 2002 will have a
material impact on the operation of our cable systems.
To increase competition between cable operators and other video program
distributors, the Communications Act and the FCC's regulations:
. preclude any satellite video programmer affiliated with a cable company,
or with a common carrier providing video programming directly to its
subscribers, from favoring an affiliated company over competitors;
. require such programmers to sell their programming to other unaffiliated
video program distributors; and
. limit the ability of such programmers to offer exclusive programming
arrangements to their related parties.
The Communications Act and the FCC's regulations contain restrictions on the
transmission by cable operators of obscene or indecent programming. It requires
cable operators to fully block both the video and audio portion of sexually
explicit or indecent programming on channels that are primarily dedicated to
sexually oriented programming or alternatively to carry such programming only
at safe harbor time periods, which are currently defined by the FCC as the
hours between 10 p.m. to 6 a.m. A three-judge federal district court
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recently determined that this provision was unconstitutional. The federal
government appealed the lower court's decision to the United States Supreme
Court which recently agreed to review this case.
The FCC actively regulates other aspects of our programming, involving such
areas as:
. our use of syndicated and network programs and local sports broadcast
programming;
. advertising in children's programming;
. political advertising;
. origination cablecasting;
. sponsorship identification; and
. closed captioning of video programming.
Use of Our Cable Systems by the Government and Unrelated Third Parties
The Communications Act allows local franchising authorities and unrelated
third parties to have access to our cable systems' channel capacity for their
own use. For example, it:
. permits franchising authorities to require cable operators to set aside
channels for public, educational and governmental access programming;
and
. requires a cable system with 36 or more activated channels to designate
a significant portion of its channel capacity for commercial leased
access by third parties to provide programming that may compete with
services offered by the cable operator.
The FCC regulates various aspects of third party commercial use of channel
capacity on our cable systems, including:
. the maximum reasonable rate a cable operator may charge for third party
commercial use of the designated channel capacity;
. the terms and conditions for commercial use of such channels; and
. the procedures for the expedited resolution of disputes concerning rates
or commercial use of the designated channel capacity.
The FCC is also considering proposals by Internet service providers to gain
access to our cable systems. We cannot predict if these or other similar
proposals will be adopted, or, if adopted, whether they will have an adverse
impact on our business and operations.
Franchise Matters
We have franchises in virtually every community in which we operate that
authorize us to construct, operate and maintain our cable systems. Although
franchising matters are normally regulated at the local level through a
franchise agreement and/or a local ordinance, the Communications Act provides
oversight and guidelines to govern our relationship with local franchising
authorities. For example, the Communications Act:
. affirms the right of franchising authorities (state or local, depending
on the practice in individual states) to award one or more franchises
within their jurisdictions;
. generally prohibits us from operating in communities without a
franchise;
. encourages competition with existing cable systems by:
-- allowing municipalities to operate their own cable systems without
franchises, and
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-- preventing franchising authorities from granting exclusive
franchises or from unreasonably refusing to award additional
franchises covering an existing cable system's service area;
. permits local authorities, when granting or renewing our franchises, to
establish requirements for cable-related facilities and equipment, but
prohibits franchising authorities from establishing requirements for
specific video programming or information services other than in broad
categories;
. permits us to obtain modification of our franchise requirements from the
franchise authority or by judicial action if warranted by commercial
impracticability; and
. generally prohibits franchising authorities from:
-- imposing requirements during the initial cable franchising process
or during franchise renewal that require, prohibit or restrict us
from providing telecommunications services,
-- imposing franchise fees on revenues we derived from providing
telecommunications services over our cable systems,
-- restricting our use of any type of subscriber equipment or
transmission technology, and
-- limits our payment of franchise fees to the local franchising
authority to 5.0% of our gross revenues derived from providing cable
services over our cable system.
The Communications Act contains renewal procedures designed to protect us
against arbitrary denials of renewal of our franchises although, under certain
circumstances, the franchising authority could deny us a franchise renewal.
Moreover, even if our franchise is renewed, the franchising authority may seek
to impose upon us new and more onerous requirements, such as significant
upgrades in facilities and services or increased franchise fees as a condition
of renewal. Similarly, if a franchising authority's consent is required for the
purchase or sale of our cable system or franchise, the franchising authority
may attempt to impose more burdensome or onerous franchise requirements on us
in connection with a request for such consent. Historically, cable operators
providing satisfactory services to their subscribers and complying with the
terms of their franchises have almost always obtained franchise renewals. We
believe that we have generally met the terms of our franchises and have
provided quality levels of service. We anticipate that our future franchise
renewal prospects generally will be favorable.
Various courts have considered whether franchising authorities have the
legal right to limit the number of franchises awarded within a community and to
impose substantive franchise requirements. These decisions have been
inconsistent and, until the U.S. Supreme Court rules definitively on the scope
of cable operators' First Amendment protections, the legality of the
franchising process generally and of various specific franchise requirements is
likely to be in a state of flux.
Ownership Limitations
The Communications Act generally prohibits us from owning or operating a
satellite master antenna television system or multichannel multipoint
distribution system in any area where we provide franchised cable service and
do not have "effective competition," as defined by federal law. We may,
however, acquire and operate a satellite master antenna television system in
our existing franchise service areas if the programming and other services
provided to the satellite master antenna television system subscribers are
offered according to the terms and conditions of our local franchise agreement.
The Communications Act also authorizes the FCC to adopt nationwide limits on
the number of subscribers under the control of a cable operator. A federal
district court has concluded that this subscriber limitation is
unconstitutional and the FCC has stayed its enforcement; an appeal of this
decision is pending in a federal
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appellate court. Pending further action by the federal courts, the FCC recently
reconsidered its cable ownership regulations and:
. reaffirmed its 30% nationwide subscriber ownership limit, but maintained
its voluntary stay on enforcement of that limitation pending further
action;
. reaffirmed its subscriber ownership information reporting rules that
require any person holding an attributable interest, as defined by FCC
rules, in cable systems reaching 20% or more of homes passed by cable
plant nationwide to notify the FCC of any incremental change in that
person's cable ownership interests; and
. revised its cable television ownership attribution rules that define
when other media and telephone ownership interests of shareholders,
partners, officers and directors of a cable company will be attributed
to the cable company for purposes of the FCC's ownership restrictions.
The Communications Act and FCC regulations also impose limits on the number
of channels that can be occupied on a cable system by a video programmer in
which a cable operator has an interest. A federal district court has also
declared this statutory provision unconstitutional. An appeal of the district
court's decision has been consolidated with the appeal challenging the FCC's
subscriber ownership limitation regulations.
The 1996 amendments to the Communications Act eliminated the statutory
prohibition on the common ownership, operation or control of a cable system and
a television broadcast station in the same service area. The identical FCC
regulation remains in place pending re-examination, although the FCC has
eliminated its regulatory restriction on cross-ownership of cable systems and
national broadcasting networks.
The 1996 amendments to the Communications Act also made far-reaching changes
in the relationship between local telephone companies and cable service
providers. These amendments:
. eliminated federal legal barriers to competition in the local telephone
and cable communications businesses, including allowing local telephone
companies to offer video services in their local telephone service
areas;
. preempted legal barriers to telecommunications competition that
previously existed in state and local laws and regulations;
. set basic standards for relationships between telecommunications
providers; and
. generally limited acquisitions and prohibited joint ventures between
local telephone companies and cable operators in the same market.
Local telephone companies may provide service as traditional cable operators
with local franchises or they may opt to provide their programming over open
video systems, subject to certain conditions, including, but not limited to,
setting aside a portion of their channel capacity for use by unaffiliated
program distributors on a non-discriminatory basis. A federal appellate court
recently overturned various parts of the FCC's open video rules, including the
FCC's preemption of local franchising requirements for open video operators. We
expect the FCC to modify its open video rules to comply with the federal
court's decision, but we are unable to predict the impact any rule
modifications may have on our business and operations.
Pole Attachment Regulation
The Communications Act requires the FCC to regulate the rates, terms and
conditions imposed by public utilities for cable systems' use of utility pole
and conduit space unless state authorities have demonstrated to the FCC that
they adequately regulate pole attachment rates, as is the case in certain
states in which we operate. In the absence of state regulation, the FCC
administers pole attachment rates on a formula basis. The FCC's current rate
formula, which is being reevaluated by the FCC, governs the maximum rate
certain utilities may charge for attachments to their poles and conduit by
cable operators providing only cable services and until
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2001, by certain companies providing telecommunications services. The FCC also
adopted a new rate formula that will be effective in 2001 and will govern the
maximum rate certain utilities may charge for attachments to their poles and
conduit by companies providing telecommunications services, including cable
operators.
Any resulting increase in attachment rates due to the FCC's new rate formula
will be phased in over a five-year period in equal annual increments, beginning
in February 2001. Several parties have requested the FCC to reconsider its new
regulations and several parties have challenged the new rules in court. A
federal district court recently upheld the constitutionality of the new
statutory provision which requires that utilities provide cable systems and
telecommunications carriers with nondiscriminatory access to any pole, conduit
or right-of-way controlled by the utility. The utilities involved in that
litigation have appealed the lower court's decision. We are unable to predict
the outcome of this litigation or the ultimate impact of any revised FCC rate
formula or of any new pole attachment rate regulations on our business and
operations.
Other Regulatory Requirements of the Communications Act and the FCC
The Communications Act also includes provisions, among others, regulating:
. customer service;
. subscriber privacy;
. equal employment opportunity; and
. regulation of technical standards and equipment compatibility.
The FCC has adopted cable inside wiring rules to provide a more specific
procedure for the disposition of residential home wiring and internal building
wiring that belongs to an incumbent cable operator that is forced by the
building owner to terminate its cable services in a building with multiple
dwelling units. The FCC is also considering additional rules relating to inside
wiring that, if adopted, may disadvantage incumbent cable operators.
The FCC actively regulates other parts of our cable operations, involving
such areas as:
. equal employment opportunity;
. consumer protection and customer service;
. technical standards and testing of cable facilities;
. consumer electronics equipment compatibility;
. registration of cable systems;
. maintenance of various records and public inspection files;
. microwave frequency usage; and
. antenna structure notification, marking and lighting.
The FCC may enforce its regulations through the imposition of fines, the
issuance of cease and desist orders and/or the imposition of other
administrative sanctions, such as the revocation of FCC licenses needed to
operate transmission facilities often used in connection with cable operations.
The FCC has ongoing rulemaking proceedings that may change its existing rules
or lead to new regulations. We are unable to predict the impact that any
further FCC rule changes may have on our business and operations.
Other bills and administrative proposals pertaining to cable communications
have previously been introduced in Congress or considered by other governmental
bodies over the past several years. It is probable that Congress and other
governmental bodies relating to the regulation of cable communications services
will make further attempts.
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Copyright
Our cable systems typically include in their channel line-ups local and
distant television and radio broadcast signals, which are protected by the
copyright laws. We generally do not obtain a license to use this programming
directly from the owners of the programming, but instead comply with an
alternative federal compulsory copyright licensing process. In exchange for
filing certain reports and contributing a percentage of our revenues to a
federal copyright royalty pool, we obtain blanket permission to retransmit the
copyrighted material carried on these broadcast signals. The nature and amount
of future copyright payments for broadcast signal carriage cannot be predicted
at this time.
Copyrighted music performed in programming supplied to cable television
systems by pay cable networks and basic cable networks is licensed by the
networks through private agreements with the American Society of Composers and
Publishers, commonly referred to as ASCAP, and BMI, Inc., the two major
performing rights organizations in the United States. Both ASCAP and BMI offer
"through to the viewer" licenses to the cable networks which cover the
retransmission of the cable networks' programming by cable television systems
to their customers.
Our cable systems also utilize music in other programming and advertising
that we provide to subscribers. The rights to use this music are controlled by
various music performing rights organizations which negotiate on behalf of
their copyright owners for license fees covering each performance. The cable
industry and the major music performing rights organizations are negotiating a
standard licensing agreement covering the performance of music contained in
advertising and other information inserted by operators into cable programming
and on local access and origination channels carried on cable systems. Rate
courts established by a New York federal court exist to determine appropriate
copyright coverage and royalty fees in the event the parties fail to reach a
settlement or to negotiate renewals of licensing agreements. 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 music, we
do not believe such license fees will be significant to our financial position,
results of operations or liquidity.
State and Local Regulation
Our cable systems use local streets and rights-of-way. Consequently, we must
comply with state and local regulation, which is typically imposed through the
franchising process. Our cable systems generally are operated pursuant to non-
exclusive franchises, permits or licenses granted by a municipality or other
state or local government entity. Our franchises generally are granted for
fixed terms and in many cases are terminable if we fail to comply with material
provisions. The terms and conditions of our franchises vary materially from
jurisdiction to jurisdiction. Each franchise generally contains provisions
governing:
. franchise fees;
. franchise term;
. system construction and maintenance obligations;
. system channel capacity;
. design and technical performance;
. customer service standards;
. sale or transfer of the franchise;
. territory of the franchise;
. indemnification of the franchising authority;
. use and occupancy of public streets; and
. types of cable services provided.
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A number of states 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. Attempts in other states to regulate cable
systems are continuing and can be expected to increase. To date, no state in
which we operate has enacted such state level regulation. State and local
franchising jurisdiction is not unlimited; however, it must be exercised
consistently with federal law. The Communications Act immunizes franchising
authorities from monetary damage awards arising from regulation of cable
systems or decisions made on franchise grants, renewals, transfers and
amendments.
The foregoing describes all material present and proposed federal, state and
local regulations and legislation affecting the cable industry. Other existing
federal regulations, copyright licensing, and, in many jurisdictions, state and
local franchise requirements, are currently the subject of judicial
proceedings, legislative hearings and administrative proposals which could
change, in varying degrees, the manner in which cable systems operate. Neither
the outcome of these proceedings nor their impact upon the cable industry or
our cable operations can be predicted at this time.
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MANAGEMENT
Directors and Executive Officers
The table below sets forth our directors and executive officers. As of the
date of this prospectus, we have two directors. Upon completion of this
offering, the director nominees set forth below will be appointed to our board
of directors.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Rocco B. Commisso................. 49 Chairman and Chief Executive Officer
Mark E. Stephan................... 43 Senior Vice President, Chief Financial
Officer, Treasurer and Director
James M. Carey.................... 48 Senior Vice President, Operations
Joseph Van Loan................... 57 Senior Vice President, Technology
Italia Commisso Weinand........... 46 Senior Vice President, Programming and
Human Resources and Secretary
William S. Morris III............. 65 Director Nominee
Craig S. Mitchell................. 40 Director Nominee
Robert L. Winikoff................ 53 Director Nominee
</TABLE>
Rocco B. Commisso has 21 years of experience with the cable television
industry and has served as our Chairman and Chief Executive Officer since
founding Mediacom LLC in July 1995. From 1986 to 1995, he served as Executive
Vice President, Chief Financial Officer and a director of Cablevision
Industries Corporation, the eighth largest cable television company in the
United States before its sale to Time Warner, Inc. Prior to that time, Mr.
Commisso served as Senior Vice President of Royal Bank of Canada's affiliate in
the United States from 1981, where he founded and directed a specialized
lending group to media and communications companies. Mr. Commisso began his
association with the cable television industry in 1978 at The Chase Manhattan
Bank, where he was assigned to manage the bank's lending activities to
communications firms including the cable television industry. He serves on the
board of directors of the National Cable Television Association. Mr. Commisso
holds a Bachelor of Science in Industrial Engineering and a Master of Business
Administration from Columbia University.
Mark E. Stephan has 12 years of experience with the cable television
industry and has served as our Senior Vice President, Chief Financial Officer
and Treasurer since the commencement of our operations in March 1996. He is a
member of the executive committee of Mediacom LLC. Before joining us, Mr.
Stephan served as Vice President, Finance for Cablevision Industries from July
1993. Prior to that time, Mr. Stephan served as Manager of the
telecommunications and media lending group of Royal Bank of Canada.
James M. Carey has 18 years of experience in the cable television industry.
Before joining us in September 1997, Mr. Carey was founder and President of
Infinet Results, a consulting firm to the telecommunications industry, from
December 1996. Mr. Carey served as Executive Vice President, Operations at
MediaOne Group from August 1995 to November 1996, where he was responsible for
MediaOne's Atlanta cluster comprised of 500,000 basic subscribers. Prior to
that time, Mr. Carey served as Regional Vice President of Cablevision
Industries' Southern Region serving 180,000 basic subscribers.
Joseph Van Loan has 23 years of experience in the cable television industry.
Before joining us in November 1996, Mr. Van Loan served as Senior Vice
President, Engineering for Cablevision Industries from 1990. Prior to that
time, Mr. Van Loan managed a private telecommunications consulting practice
specializing in domestic and international cable television and broadcasting
and served as Vice President, Engineering for Viacom Cable. Mr. Van Loan
received the 1986 Vanguard Award for Science and Technology from the National
Cable Television Association.
Italia Commisso Weinand has 23 years of experience in the cable television
industry. Before joining us in April 1996, Ms. Weinand served as Regional
Manager for Comcast Corporation from July 1985. Prior to that
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time, Ms. Weinand held various management positions with Tele-Communications,
Times Mirror Cable and Time Warner. She serves on the board of directors of the
National Cable Television Cooperative, Inc., a programming consortium
consisting of small to medium-sized multiple system operators. Ms. Weinand is
the sister of Mr. Commisso.
William S. Morris III is a nominee to become a member of our board of
directors upon the completion of this offering. He is a member of the executive
committee of Mediacom LLC. He has served as the Chairman of the Board and Chief
Executive Officer of Morris Communications for more than the past five years.
He is a member of the board of directors and President of the Newspapers
Association of America.
Craig S. Mitchell is a nominee to become a member of our board of directors
upon the completion of this offering. He is a member of the executive committee
of Mediacom LLC. Mr. Mitchell has held various management positions with Morris
Communications for more than the past five years. He currently serves as its
Vice President Finance and Treasurer and is also a member of its board of
directors.
Robert L. Winikoff is a nominee to become a member of our board of directors
upon the completion of this offering. He is a member of the executive committee
of Mediacom LLC. Mr. Winikoff has been a partner of the New York City law firm
of Cooperman Levitt Winikoff Lester & Newman, P.C. for more than the past five
years, which has served as our general outside counsel since 1995. He is a
member of the board of directors of Young Broadcasting Inc., an owner and
operator of broadcast television stations.
Key Employees
The table below sets forth our key employees as of the date of this
prospectus.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Calvin G. Craib............. 45 Vice President, Business Development
Bruce J. Gluckman........... 46 Vice President, Legal and Regulatory Affairs
Richard L. Hale............. 50 Vice President, Midwest Region
Dale E. Ordoyne............. 49 Vice President, Southern Region
John G. Pascarelli.......... 38 Vice President, Marketing
Brian M. Walsh.............. 33 Vice President and Controller
William D. Wegener.......... 38 Vice President, Network Development
Arnold P. Cool.............. 51 Regional Director, Central Region
Louis Gentile............... 39 Regional Director, Western Region
Richard P. Hanson........... 45 Regional Director, North Central Region
Donald E. Zagorski.......... 40 Regional Director, Mid-Atlantic Region
</TABLE>
Calvin G. Craib has 17 years experience in the cable television industry.
Before joining us in April 1999, Mr. Craib served as Vice President, Finance
and Administration for Interactive Marketing Group from June 1997 to December
1998. Mr. Craib served as Senior Vice President, Operations, and Chief
Financial Officer for Douglas Communications from 1986 to May 1997. Prior to
that time, Mr. Craib served in various financial management capacities at
Warner Amex Cable and Tribune Cable.
Bruce J. Gluckman has seven years of experience in the cable television
industry. Before joining us as Director of Legal Affairs in February 1998, Mr.
Gluckman was in private law practice from January 1996 to October 1997. From
June 1993 to January 1996, he served as a Staff Attorney for Cablevision
Industries. Mr. Gluckman has twenty years of experience in the practice of law.
Richard L. Hale has 15 years of experience in the cable television industry.
Before joining us as Regional Manager for the Central Region in January 1998,
Mr. Hale served as Regional Manager of Cablevision Systems' Kentucky/Missouri
region and as Sales and Marketing Director from 1988 to 1998. Mr. Hale began
his career in the cable television industry in 1984 as Regional Sales and
Marketing Director for Adams-Russell Cable.
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Dale E. Ordoyne has 17 years of experience in the cable television industry.
Before joining us in October 1999, Mr. Ordoyne served as Vice President,
Marketing for MediaOne Group from 1995, where he was responsible for all
marketing activities for the Atlanta cluster comprised of 500,000 basic
subscribers. Prior to that time, Mr. Ordoyne served in various marketing and
system management capacities for Cablevision Industries and Cox Communications.
John G. Pascarelli has 19 years of experience in the cable television
industry. Before joining us in March 1998, Mr. Pascarelli served as Vice
President, Marketing for Helicon from January 1996 to February 1998 and as
Corporate Director of Marketing for Cablevision Industries from 1988 to 1995.
Prior to that time, Mr. Pascarelli served in various marketing and system
management capacities for Continental Cablevision, Cablevision Systems and
Storer Communications.
Brian M. Walsh has 11 years of experience in the cable television industry.
Before joining us in April 1996 as Director of Accounting, Mr. Walsh served as
financial analyst for Helicon from January 1996. Prior to that time, Mr. Walsh
served in various financial management capacities for Cablevision Industries,
including Divisional Business Manager. Mr. Walsh began his career in the cable
television industry in 1988 when he joined Cablevision Industries as a staff
accountant.
William D. Wegener has 18 years of experience in the cable television
industry. Before joining us in February 1998, Mr. Wegener served as Senior
Sales Engineer for C-Cor Electronics from October 1995 to October 1997. Prior
to that time, Mr. Wegener served in various engineering capacities for
Cablevision Industries. He is a member of the Society of Cable
Telecommunications Engineers.
Arnold P. Cool has 21 years of experience in the cable television industry.
Before joining us in January 1998, he served in various capacities for
Cablevision Systems' cable television systems in Kentucky and Missouri from
April 1993. Prior to that time, Mr. Cool held various technical and supervisory
responsibilities for Cablevision Systems and for smaller cable television
companies.
Louis Gentile has 10 years of experience in the cable television industry.
Before joining us as Divisional Business Manager in January 1998, Mr. Gentile
served in various financial management capacities for Cablevision Systems from
January 1992. Mr. Gentile began his career in the cable television industry in
1989 when he joined MultiVision Cable as a financial analyst.
Richard P. Hanson has more than 20 years of experience in the cable
television industry. Mr. Hanson joined us upon the closing of the Triax
acquisition on November 5, 1999. Before joining us, Mr. Hanson served in
various capacities for Triax, most recently as Director of Operations, from
March 1988 to October 1999. Prior to joining Triax, he served as Manager for
Combined Cable and for Star Cablevision.
Donald E. Zagorski has 18 years of experience in the cable television
industry. Before joining us in June 1997, Mr. Zagorski served as System and
Regional Manager for Tele-Media Company from March 1990. Prior to that time,
Mr. Zagorski held various technical and supervisory positions with Outer Banks
Cablevision and Group W Cable.
All directors hold office until the next annual meeting of stockholders and
until their successors have been elected and qualify. All executive officers
and key employees serve at the discretion of the board of directors. Mr.
Commisso has agreed to cause the election of two directors designated by Morris
Communications so long as Morris Communications continues to own at least 20%
of our outstanding common stock, and one such director so long as it continues
to own at least 10% of such common stock. Pursuant to this agreement, Mr.
Morris and Mr. Mitchell have been designated as directors by Morris
Communications and will be appointed to our board of directors upon completion
of this offering.
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Committees of the Board of Directors
Upon closing of this offering, we will appoint an audit committee, a
compensation committee and a stock option committee.
Audit Committee
The audit committee will consist of directors, of whom will be
independent directors. The responsibilities of the audit committee include:
. recommending the appointment of independent accountants;
. reviewing the arrangements for and scope of the audit by independent
accountants;
. reviewing the independence of the independent accountants;
. considering the adequacy of the system of internal accounting controls
and review any proposed corrective actions;
. reviewing and monitoring our policies regarding business ethics and
conflicts of interest;
. discussing with management and the independent accountants our draft
annual financial statements and key accounting and reporting matters;
and
. reviewing the activities and recommendations of our accounting
department.
Compensation Committee
The compensation committee will consist of directors, of whom will
be independent directors. The compensation committee has authority to review
and make recommendations to our board of directors with respect to the
compensation of our executive officers.
Stock Option Committee
The stock option committee will consist of directors, each of whom will
be an independent director. The stock option committee administers our 1999
stock option plan and determines, among other things, the time or times at
which options will be granted, the recipients of grants, whether a grant will
consist of incentive stock options, nonqualified stock options or stock
appreciation rights (in tandem with an option or free-standing) or a
combination thereof, the option periods, whether an option is exercisable for
Class A common stock or Class B common stock, the limitations on option
exercise and the number of shares to be subject to such options, taking into
account the nature and value of services rendered and contributions made to our
success. The stock option committee also has authority to interpret the plan
and, subject to certain limitations, to amend provisions of the plan as it
deems advisable.
Director Compensation
Those directors who are not also our employees will receive an annual
retainer as fixed by our board of directors, which may be in the form of cash
or stock options, or a combination of both. Non-employee directors will also
receive reimbursement of out-of-pocket expenses incurred for each board meeting
or committee meeting attended.
Executive Compensation
Prior to the consummation of this offering, we did not make any payment in
respect of compensation to any of our executive officers. These executive
officers received compensation from Mediacom Management, which was entitled to
receive management fees from our subsidiaries. For more information regarding
the management fees paid by our subsidiaries to Mediacom Management, see
"Certain Relationships and Related
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Transactions--Management Agreements." Following the consummation of this
offering, we will pay compensation to our executive officers.
Except where otherwise indicated, the following table summarizes the
compensation paid in 1998 by Mediacom Management to our Chief Executive Officer
and our four other most highly compensated executive officers who received
total compensation in excess of $100,000:
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
----------------------------------
Other Annual
Name and Principal Position Year Salary($) Bonus($) Compensation($)
- --------------------------- ---- --------- -------- ---------------
<S> <C> <C> <C> <C>
Rocco B. Commisso ..................... 1998 100,000 -- --
Chairman and Chief Executive Officer
Mark E. Stephan........................ 1998 188,834 132,034 --
Senior Vice President, Chief Financial
Officer, Treasurer and Director
James M. Carey(1)...................... 1998 96,923 15,000 35,500(2)
Senior Vice President, Operations
Joseph Van Loan........................ 1998 188,834 132,034 --
Senior Vice President, Technology
Italia Commisso Weinand................ 1998 129,702 99,026 --
Senior Vice President, Programming and
Human Resources and Secretary
</TABLE>
- ------------
(1) Mr. Carey's compensation was paid by one of our operating subsidiaries,
Mediacom Southeast LLC.
(2) Represents consulting fees from January 1, 1998 to February 2, 1998.
401(k) Plan
We maintain a retirement plan established in conformity with Section 401(k)
of the Internal Revenue Code of 1986, covering all of our eligible employees.
Pursuant to the 401(k) plan, employees may elect to defer up to 15% of their
current pre-tax compensation and have the amount of the deferral contributed to
the 401(k) plan. The maximum elective deferral contribution was $10,000 in
1998, subject to adjustment for cost-of-living in subsequent years. Certain
highly compensated employees may be subject to a lesser limit on their maximum
elective deferral contribution. The 401(k) plan permits, but does not require,
us to make matching contributions and non-matching (profit sharing)
contributions up to a maximum dollar amount or maximum percentage of
participant or employee contributions.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Management Agreements
Each of our operating subsidiaries is a party to a management agreement with
Mediacom Management, which is owned by Mr. Commisso. Under these agreements,
Mediacom Management provides management services to our operating subsidiaries
and is paid annual management fees. Until November 19, 1999, the management fee
was 5.0% of the first $50.0 million of our annual gross operating revenues,
4.5% of annual gross operating revenues in excess of $50.0 million, up to $75.0
million, and 4.0% of annual gross operating revenues in excess of $75.0
million. For the years ended December 31, 1996, 1997 and 1998 and the six
months ended June 30, 1999, management fees paid to Mediacom Management were
$235,000, $812,000, $4.9 million and $3.8 million. The management agreements
were amended effective November 19, 1999 in connection with an amendment to
Mediacom LLC's operating agreement to provide for annual management fees equal
to 2% of annual gross operating revenues. In addition, Mediacom Management has
agreed to waive all management fees accrued from July 1, 1999 through November
19, 1999. Each of the management agreements will be terminated upon completion
of this offering, and employees of Mediacom Management will become our
employees.
Transaction Fees and Expense Reimbursement
Mediacom LLC's operating agreement was amended effective November 19, 1999.
Prior to the amendment, the operating agreement provided that Mediacom
Management be paid a fee of 1.0% of the purchase price of acquisitions made
directly or indirectly by Mediacom LLC until its pro forma annual consolidated
operating revenues equaled $75.0 million, and thereafter 0.5% of the purchase
price. For the years ended December 31, 1996, 1997 and 1998, acquisition fees
paid to Mediacom Management were $453,000, $540,000 and $3.3 million. No
acquisition fees were required to be paid during the six months ended June 30,
1999 because there were no acquisitions completed during the period.
Acquisition fees in the aggregate amount of $3.8 million in connection with the
Triax and Zylstra acquisitions have been waived by Mediacom Management.
Pursuant to the amended operating agreement, no further acquisition fees will
be payable after November 19, 1999.
The operating agreement also provides for reimbursement of reasonable out-
of-pocket expenses incurred by Mediacom Management in connection with the
operation of the business of Mediacom LLC and acting on behalf of Mediacom LLC
in connection with any potential acquisition of a cable system. During the year
ended December 31, 1996, Mediacom LLC reimbursed Mediacom Management for
$505,000 of out-of-pocket expenses incurred in connection with the start-up of
its operations. There were no further reimbursements made to Mediacom
Management.
Other Relationships
Chase Manhattan Capital, L.P. and CB Capital Investors, L.P. are parties
related to Chase Securities Inc. and The Chase Manhattan Bank. For the years
ended December 31, 1997 and 1998, Chase Securities received fees of $887,500
and $2.6 million, respectively, for its role as placement agent in connection
with the original placement of membership interests in Mediacom LLC and its
role as advisor in connection with our acquisition of the Cablevision systems.
For the year ended December 31, 1998, The Chase Manhattan Bank received fees of
$200,000 in connection with the provision of a letter of credit in favor of the
sellers of the Cablevision systems to secure our performance of certain
obligations under the acquisition agreement.
For the years ended December 31, 1996, 1997 and 1998, The Chase Manhattan
Bank received aggregate fees of $675,000, $375,000 and $2.9 million for its
services as the administrative agent and a lender under each of our former
subsidiary credit facilities. In addition, Chase Securities was the arranger
and The Chase Manhattan Bank is the administrative agent and a lender under
each of our subsidiary credit facilities. For these services, Chase Securities
and The Chase Manhattan Bank received fees of $1.0 million to date in 1999. We
expect to use the net proceeds from this offering to repay outstanding
indebtedness under our subsidiary credit
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<PAGE>
facilities. The Chase Manhattan Bank will receive its proportionate share of
the repayment. In 1998, we repaid promissory notes held by The Chase Manhattan
Bank in the aggregate principal amount of $20.0 million, plus accrued interest
in the amount of $300,000.
Chase Securities acted as an initial purchaser in connection with the
offering of our 8 1/2% senior notes in 1998 and our 7 7/8% senior notes in
1999. Chase received fees in the amount of $5.5 million in 1998 and $3.1
million in 1999 in connection with the offerings.
Chase Securities acted as an advisor in connection with our acquisition of
the Triax systems. For these services, Chase received a fee in the amount of
$3.0 million.
Morris Communications Corporation received fees of $2.0 million in 1998 and
$268,000 in 1999 in connection with its capital contributions to Mediacom LLC.
Upon completion of this offering, two individuals associated with Morris
Communications, William S. Morris III and Craig S. Mitchell, will become
members of our board of directors.
In connection with its purchase of a cable television system in Kern County,
California from Booth American Company, Mediacom California issued to Booth
American Company an unsecured senior subordinated note in the original amount
of $2.8 million. Interest on the note was deferred throughout the term and was
payable on prepayment or at maturity on June 28, 2006. In 1998, the annual
interest rate on the note was 9.0%. The note, together with all accrued
interest, was repaid on September 24, 1999.
Mediacom LLC's operating agreement obligates its members to make capital
contributions to Mediacom LLC. The following table sets forth the capital
contributions made by the members of Mediacom LLC since January 1, 1997.
<TABLE>
<CAPTION>
Date of Capital Contribution
----------------------------------------------
June 22, September 18, January 15, November 3,
Member 1997 1997 1998 1999
- ------ -------- ------------- ----------- -----------
(dollars in thousands)
<S> <C> <C> <C> <C>
U.S. Investor, Inc. ........... $1,950.0 $ 500.0 $ 2,293.8 $ 256.2
Morris Communications
Corporation................... 9,750.0 2,500.0 79,832.5 8,917.5
CB Capital Investors, L.P. .... 3,900.0 1,000.0 4,587.6 507.4
</TABLE>
Robert L. Winikoff, one of our director nominees, is a partner at the law
firm of Cooperman Levitt Winikoff Lester & Newman, P.C., that has served as our
general outside counsel on various matters. Cooperman Levitt Winikoff Lester &
Newman, P.C. received fees from Mediacom LLC in the amount of $409,000 in 1996,
$462,000 in 1997 and $807,000 in 1998.
Changes to Organizational Structure
We are a newly formed Delaware corporation. Immediately prior to this
offering, we will issue shares of our common stock in exchange for all of the
outstanding membership interests of Mediacom LLC, which currently serves as the
holding company for our operating subsidiaries. As a result, we will become the
parent company of Mediacom LLC which will continue to serve as the holding
company of our subsidiaries.
Immediately prior to this offering, additional membership interests will be
issued to all members of Mediacom LLC in accordance with a formula set forth in
Mediacom LLC's amended operating agreement which is based upon our valuation
established in this offering. Effective upon completion of this offering, a
provision in the amended operating agreement providing for a special allocation
of membership interests to Mr. Commisso and related parties based upon
valuations of Mediacom LLC performed from time to time shall be removed. In
connection with the removal of such provision, the amended operating agreement
provides for the issuance to Mr. Commisso and such parties of membership
interests representing 16.5% of the equity in
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Mediacom LLC in accordance with a formula based upon our valuation established
in this offering. These newly issued membership interests will be included as
part of the exchange for shares of our common stock.
Registration Rights
We and Rocco Commisso, Morris Communications, CB Capital Investors, Chase
Manhattan Capital, U.S. Investor, Private Market Fund and a less than 5%
stockholder have entered into a registration rights agreement with respect to
their shares of common stock. For additional information concerning the
registration rights agreement, see "Shares Eligible for Future Sale--
Registration Rights."
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of , 1999
with respect to the beneficial ownership of our common stock by each of the
following:
. each person known by us to beneficially own more than 5% of any class of
our common stock;
. each of our directors and director nominees;
. our Chief Executive Officer and our four other most highly compensated
executive officers; and
. all of our directors, director nominees and executive officers as a
group.
Unless otherwise indicated, the address of each beneficial owner named in
the table below is Mediacom Communications Corporation, 100 Crystal Run Road,
Middletown, New York 10941. The amounts and percentages of common stock
beneficially owned are reported on the basis of regulations of the Securities
and Exchange Commission governing the determination of beneficial ownership of
securities. Under the rules of the Securities and Exchange Commission, a person
is deemed to be a "beneficial owner" of a security if that person has or shares
"voting power," which includes the power to vote or to direct the voting of
such security, or "investment power," which includes the power to dispose of or
to direct the disposition of such security. Unless otherwise indicated below,
each beneficial owner named in the table below has sole voting and sole
investment power with respect to all shares beneficially owned, subject to
community property laws where applicable. Shares of common stock subject to
options that are currently exercisable or exercisable within 60 days of
are deemed to be outstanding and to be beneficially owned by the person
holding such options for the purpose of computing the percentage ownership of
such person but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person. The information set forth in the
following table excludes any shares purchased in this offering by the
respective beneficial owner.
<TABLE>
<CAPTION>
Beneficial Ownership Before Beneficial Ownership After
Offering Offering
----------------------------- -----------------------------
Class A Common Class B Class A Common Class B
Stock Common Stock Percent of Stock Common Stock Percent of
-------------- -------------- Total Votes -------------- -------------- Total Votes
Names of Beneficial Before After
Owner Shares Percent Shares Percent Offering(1) Shares Percent Shares Percent Offering(1)
------------------- ------ ------- ------ ------- ----------- ------ ------- ------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Morris Communications
Corporation............ % % % % % %
725 Broad Street
Augusta, GA 30901
CB Capital Investors,
L.P.(2)................
c/o Chase Manhattan
Capital Corporation
380 Madison Avenue
New York, NY 10017
U.S. Investor, Inc.(3)..
333 West Fort Street
Detroit, MI 48226
Private Market Fund,
L.P....................
c/o Pacific Corporate
Group
1200 Prospect Street,
Suite 200
La Jolla, CA 92037
Rocco B. Commisso.......
Mark E. Stephan.........
William S. Morris III...
725 Broad Street
Augusta, GA 30901
Craig S. Mitchell.......
725 Broad Street
Augusta, GA 30901
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Beneficial Ownership Before Beneficial Ownership After
Offering Offering
----------------------------- -----------------------------
Class A Common Class B Percent of Class A Common Class B Percent of
Stock Common Stock Total Votes Stock Common Stock Total Votes
-------------- -------------- Before -------------- -------------- After
Names of Beneficial Owner Shares Percent Shares Percent Offering(1) Shares Percent Shares Percent Offering(1)
- ------------------------- ------ ------- ------ ------- ----------- ------ ------- ------ ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Robert L. Winikoff....... % % % % % %
c/o Cooperman Levitt
Winikoff Lester &
Newman
800 Third Avenue
New York, New York 10022
James M. Carey...........
Joseph Van Loan..........
Italia Commisso Weinand..
All executive officers,
directors and director
nominees as a group (8
persons)................
</TABLE>
- ---------------------
* Represents beneficial ownership of less than 1%.
(1) Holders of Class A common stock are entitled to one vote per share, while
holders of Class B common stock are entitled to ten votes per share.
Holders of both classes of common stock will vote together as a single
class on all matters presented for a vote, except as otherwise required by
law.
(2) Includes approximately shares of Class A common stock owned by its
affiliate, Chase Manhattan Capital, L.P.
(3) A party related to Booth American Company.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Credit Facilities
Our operating subsidiaries, through two separate borrowing groups we refer
to as the Mediacom USA Group and the Mediacom Midwest Group, currently obtain
bank financing through two stand-alone credit facilities. The credit facilities
for each borrowing group have no cross-default provisions relating directly to
each other, have different revolving credit periods and contain separately
negotiated covenants tailored for each borrowing group. The credit facilities
restrict the ability of each borrowing group to make distributions to Mediacom
LLC, subject to limited exceptions.
Financing for the operations of the Mediacom USA Group is provided by a
credit agreement among the operating subsidiaries comprising the Mediacom USA
Group, the lenders party thereto and The Chase Manhattan Bank, as
administrative agent. The Mediacom USA credit facility is a $550.0 million
credit facility, consisting of a $450.0 million reducing revolving credit
facility and a $100.0 million term loan. The revolving credit facility expires
March 31, 2008, subject to earlier repayment on June 30, 2007 if we do not
refinance our 8 1/2% senior notes prior to March 31, 2007. Principal on the
outstanding term loan is payable in quarterly installments of $250,000 with the
balance due and payable on September 30, 2008, and is also subject to earlier
repayment on September 30, 2007 if we do not refinance our 8 1/2% senior notes
prior to March 31, 2007. At November 10, 1999, there was $446.5 million of
indebtedness outstanding under the Mediacom USA credit facility. The Mediacom
USA credit facility provides us with two interest rate options, at our
election, to which a margin is added: a base rate, the higher of the overnight
rate plus 1/2 of 1% and the prime commercial lending rate, and a eurodollar
rate, based on the interbank eurodollar interest rate. Interest rate margins
for the Mediacom USA credit facility depend upon the performance of the
Mediacom USA Group measured by its "leverage ratio," or the ratio of
indebtedness to the immediately preceding quarter's operating cash flow,
multiplied by four. The interest rate margins for the Mediacom USA credit
facility are as follows:
. interest on outstanding revolving loans is payable at either the
eurodollar rate plus a floating percentage ranging from 0.75% to 2.25%
depending on the leverage ratio or the base rate plus a floating
percentage ranging from 0% to 1.25% depending on the leverage ratio; and
. interest on term loans is payable at either the eurodollar rate plus a
floating percentage tied to the leverage ratio ranging from 2.50% to
2.75% or the base rate plus a floating percentage tied to the leverage
ratio ranging from 1.50% to 1.75%.
The weighted average interest rate at November 10, 1999 on the outstanding
borrowings under the Mediacom USA credit facility was approximately 7.9%. As of
November 10, 1999, interest rate swap agreements had been entered into to hedge
the underlying eurodollar rate exposure in the notional amount of $50.0 million
with an expiration date ranging from 2000 to 2002.
The reducing revolving credit facility is available to the Mediacom USA
Group to fund acquisitions, to make payments to us under limited circumstances,
to pay management fees, to make investments and to finance capital expenditures
and working capital needs. Up to $100.0 million of the revolving credit
facility is available for letters of credit.
Financing for the operations of the Mediacom Midwest Group is provided by a
credit agreement among the operating subsidiaries comprising the Mediacom
Midwest Group, the lenders party thereto and The Chase Manhattan Bank, as
administrative agent. The Mediacom Midwest credit facility is a $550.0 million
credit facility, consisting of a $450.0 million reducing revolving credit
facility and a $100.0 million term loan. The $450.0 million revolving credit
facility expires June 30, 2008, subject to earlier repayment on September 30,
2007 if we do not refinance our 8 1/2% senior notes prior to March 31, 2007.
Principal on the outstanding term loan is payable in quarterly installments of
between $125,000 and $250,000 with the balance due and payable on December 31,
2008, and is also subject to earlier repayment on December 31, 2007 if we do
not refinance our 8 1/2% senior notes prior to March 31, 2007. At November 10,
1999, there was $375.5 million of indebtedness outstanding under the Mediacom
Midwest credit facility. The Mediacom Midwest credit facility
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<PAGE>
provides us with two interest rate options, at our election, to which a margin
is added: a base rate, the higher of the overnight rate plus 1/2 of 1% and the
prime commercial lending rate, and a eurodollar rate based on the interbank
eurodollar interest rate. Interest rate margins for the Mediacom Midwest credit
facility depend upon performance measured by the leverage ratio of the Mediacom
Midwest Group. The interest rate margins for the Mediacom Midwest credit
facility are as follows:
. interest on outstanding revolving loans is payable at either the
eurodollar rate plus a floating percentage ranging from 0.75% to 2.25%
depending on the leverage ratio or the base rate plus a floating
percentage ranging from 0% to 1.25% depending on the leverage ratio; and
. interest on term loans is payable at either the eurodollar rate plus a
floating percentage tied to the leverage ratio ranging from 2.50% to
2.75% or the base rate plus a floating percentage tied to the leverage
ratio ranging from 1.50% to 1.75%.
The weighted average interest rate at November 10, 1999 on the outstanding
borrowings under the Mediacom Midwest credit facility was approximately 8.0%.
The reducing revolving credit facility is available to the Mediacom Midwest
Group to make restricted payments to us, to pay management fees, to make
investments and to finance capital expenditures, working capital needs and
acquisitions. Up to $100.0 million of the revolving credit facility is
available for letters of credit.
In general, each credit facility requires the borrowing groups to use the
proceeds from specified debt issuances and asset dispositions to prepay
borrowings under the relevant borrowing group's credit facility and to reduce
permanently commitments thereunder. Each facility also requires mandatory
prepayments of amounts outstanding and permanent reductions in the commitments
thereunder, beginning in 2002, based on a percentage of excess cash flow.
Each credit facility is secured by a pledge of Mediacom LLC's ownership
interests in the subsidiaries forming the relevant borrowing group, and is
guaranteed by Mediacom LLC on a limited recourse basis to the extent of such
ownership interests.
Each credit facility contains covenants, including:
. limitations on mergers and acquisitions, consolidations and sales of
assets;
. limitations on liens;
. incurrence of additional indebtedness;
. investments;
. restricted payments;
. maintenance of specified financial ratios;
. payment of management fees;
. capital expenditures; and
. restrictions on transactions with related parties.
In addition, an event of default will occur under each credit facility if,
among other things:
. Mr. Commisso ceases to be our Chairman and Chief Executive Officer and,
in the case of the Mediacom Midwest credit facility, the Chairman and
Chief Executive Officer of Zylstra;
. we or Mediacom LLC shall cease to act as manager of our subsidiaries;
. we or Mediacom LLC shall cease to own 50.1% or more of the aggregate
voting rights of the equity interests of our subsidiaries;
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<PAGE>
. specified "change of control" events occur and are continuing; or
. Mr. Commisso, his family members, his affiliates and our officers and
employees collectively cease to own at least 50.1% of the combined
voting power of our common stock on a fully-diluted basis.
Senior Notes
The following is a summary of the 8 1/2% senior notes and the 7 7/8% senior
notes:
. Aggregate Principal Amount
-- 8 1/2% senior notes: $200,000,000
-- 7 7/8% senior notes: $125,000,000
. Maturity
-- 8 1/2% senior notes: April 15, 2008
-- 7 7/8% senior notes: February 15, 2011
. Interest Rate and Payment Dates
-- 8 1/2% senior notes: Bear interest at a rate of 8 1/2% per annum,
payable semi-annually on April 15 and October 15 of each year.
-- 7 7/8% senior notes: Bear interest at the rate of 7 7/8% per annum,
payable semi-annually on February 15 and August 15 of each year.
. Optional Redemption. On or after April 15, 2003 with respect to the 8
1/2% senior notes and on or after February 15, 2006 with respect to the
7 7/8% senior notes, Mediacom LLC and Mediacom Capital Corporation may
redeem the notes, in whole or in part. On or before April 15, 2001 with
respect to the 8 1/2% senior notes and on or before February 15, 2002
with respect to the 7 7/8% senior notes, Mediacom LLC and Mediacom
Capital may redeem up to 35% of the aggregate principal amount of the
notes originally issued at the price specified in the relevant indenture
relating to the notes:
-- only with the proceeds of one or more equity offerings; and
-- only if at least 65% of the aggregate principal amount of the notes
originally issued remains outstanding after each redemption.
. Change of Control. If Mediacom LLC and Mediacom Capital sell specified
assets or if Mediacom LLC and Mediacom Capital experience specific kinds
of changes of control, holders of the 8 1/2% senior notes and the 7 7/8%
senior notes will have the opportunity to sell their notes to Mediacom
LLC and Mediacom Capital at 101% of the principal amount of such notes
plus accrued and unpaid interest and liquidated damages, if any, to the
date of purchase.
. Ranking. The 8 1/2% senior notes and the 7 7/8% senior notes:
-- are general unsecured obligations of Mediacom LLC and Mediacom
Capital;
-- rank on the same level, or "pari passu," with the existing and
future senior indebtedness of Mediacom LLC and Mediacom Capital; and
-- are subordinated to all indebtedness and other liabilities and
commitments of the subsidiaries of Mediacom LLC and Mediacom
Capital, including their credit facilities and trade payables.
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. Covenants. The indentures governing the 8 1/2% senior notes and the 7
7/8% senior notes limit the activities of Mediacom LLC and Mediacom
Capital and the activities of their "restricted" subsidiaries. The
provisions of the indentures limit their ability, subject to important
exceptions:
-- to incur additional indebtedness;
-- to pay dividends or make other restricted payments;
-- to sell assets or subsidiary stock;
-- to enter into transactions with related parties;
-- to create liens;
-- to enter into agreements that restrict dividends or other payments
from restricted subsidiaries;
-- to merge, consolidate or sell all or substantially all of our
assets; and
-- with respect to restricted subsidiaries, to issue capital stock.
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DESCRIPTION OF CAPITAL STOCK
General
Our authorized capitalization consists of shares of Class A common
stock, par value $.01 per share, shares of Class B common stock, par
value $.01 per share, and shares of preferred stock, par value $.01 per
share.
Concurrently with the completion of this offering, the holders of the
membership interests of Mediacom LLC will exchange all of their membership
interests for shares of our common stock in accordance with the relative
ownership percentages of membership interests in Mediacom LLC immediately prior
to the completion of this offering. As a result of the exchange, Mediacom LLC
will become our wholly-owned subsidiary and will continue to serve as the
holding company for our operating subsidiaries.
Upon completion of the exchange of membership interests for shares of our
common stock and without giving effect to this offering, shares of
Class A common stock will be outstanding and shares of Class B
common stock will be outstanding. No shares of preferred stock will be
outstanding.
Common Stock
The rights of the holders of Class A and Class B common stock are
substantially identical in all respects, except for their voting rights. Only
members of our management and certain permitted transferees, as defined in our
certificate of incorporation, may hold Class B common stock. There is no
limitation on who may hold Class A common stock. Holders of Class A common
stock are entitled to one vote per share. Holders of Class B common stock are
entitled to ten votes per share. Holders of all classes of common stock
entitled to vote will vote together as a single class on all matters presented
to the stockholders for their vote or approval, except as otherwise required by
the Delaware General Corporation Law. Under Delaware law, the holders of each
class of common stock are entitled to vote as a separate class with respect to
any amendment to our certificate of incorporation that would increase or
decrease the aggregate number of authorized shares of such class, increase or
decrease the par value of such class, or modify or change the powers,
preferences or special rights of the shares of such class so as to affect such
class adversely. Our certificate of incorporation does not provide for
cumulative voting for the election of our directors, with the result that
stockholders owning or controlling more than 50% of the total votes cast for
the election of directors can elect all of the directors. See "Risk Factors--
Our Chief Executive Officer has the ability to control all major corporate
decisions, which could inhibit or prevent a change of control or a change in
management."
Subject to the dividend rights of holders of preferred stock, holders of
common stock are entitled to receive dividends when, as and if declared by the
board of directors out of funds legally available for this purpose. In the
event of our liquidation, dissolution or winding up, the holders of both
classes of common stock are entitled to receive on a pro rata basis any assets
remaining available for distribution after payment of our liabilities and after
provision has been made for payment of liquidation preferences to all holders
of preferred stock. Holders of common stock have no conversion or redemption
provisions or preemptive or other subscription rights, except that in the event
any shares of Class B common stock held by a member of the management group are
transferred outside the management group, such shares will be converted
automatically into shares of Class A common stock on a one-for-one basis.
Preferred Stock
Our certificate of incorporation authorizes us to issue shares of
"blank check" preferred stock having rights senior to our common stock. Our
Board of Directors is authorized, without further stockholder approval, to
issue preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, conversion
rights, voting rights, redemption terms and liquidation preferences, and to fix
the number of shares constituting any series and the designations of these
series.
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<PAGE>
The issuance of preferred stock may have the effect of delaying or
preventing a change of control of us. The issuance of preferred stock could
decrease the amount of earnings and assets available for distribution to the
holders of common stock or could adversely affect the voting power or other
rights of the holders of common stock. We currently have no plans to issue any
shares of preferred stock.
Limitations on Liability
As permitted by Delaware law, our certificate of incorporation provides that
our directors shall not be personally liable to us or our stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability:
. for any breach of the director's duty of loyalty to us or our
stockholders;
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. under Section 174 of the Delaware General Corporation Law, relating to
unlawful payment of dividends or unlawful stock purchases or redemption;
or
. for any transaction from which the director derives an improper personal
benefit.
As a result of this provision, we and our stockholders may be unable to
obtain monetary damages from a director for breach of his or her duty of care.
Our certificate of incorporation and by-laws provide for the indemnification
of our directors and officers, and, to the extent authorized by the board of
directors in its sole and absolute discretion, employees and agents, to the
fullest extent authorized by, and subject to the conditions set forth in
Delaware law, except that we will indemnify a director or officer in connection
with a proceeding or part thereof, initiated by such person, only if the
proceeding or part thereof was authorized by our board of directors. The
indemnification provided under the certificate of incorporation and by-laws
includes the right to be paid the expenses, including attorneys's fees, in
advance of any proceeding for which indemnification may be had, provided that
the payment of these expenses, including attorneys' fees, incurred by a
director, officer, employee or agent in advance of the final disposition of a
proceeding may be made only upon delivery to us of an undertaking by or on
behalf of the director, officer, employee or agent to repay all amounts so paid
in advance if it is ultimately determined that the director or officer is not
entitled to be indemnified.
Under the by-laws, we have the power to purchase and maintain insurance on
behalf of any person who is or was one of our directors, officers, employees or
agents, against any liability asserted against the person or incurred by the
person in any such capacity, or arising out of the person's status as such, and
related expenses, whether or not we would have the power to indemnify the
person against such liability under the provisions of Delaware law. We
currently have no plans to purchase director and officer liability insurance on
behalf of our directors and officers.
Delaware Anti-Takeover Law
We will be subject to the provisions of Section 203 of Delaware law. Section
203 prohibits publicly held Delaware corporations from engaging in a "business
combination" with an "interested stockholder" for a period of three years after
the date of the transaction in which the person became an interested
stockholder, unless:
. prior to the business combination our board of directors approved either
the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder; or
. upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, such stockholder owned at least 85%
of our outstanding voting stock at the time such transaction commenced,
excluding for the purpose of determining the number of shares
outstanding
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those shares owned (i) by our officers and directors and (ii) by
employee stock plans in which employee participants do not have the
right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer; or
. at or subsequent to such time the business combination is approved by
our board of directors and authorized at an annual or special meeting of
our stockholders, and not by written consent, by the affirmative vote of
at least 66 2/3% of our outstanding voting stock which is not owned by
the interested stockholder.
A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder.
Subject to certain exceptions, an "interested stockholder" is a person who,
together with affiliates and associates, owns, or within three years did own,
15% or more of the corporation's voting stock. These provisions could have the
effect of delaying, deferring or preventing a change of control of us or
reducing the price that certain investors might be willing to pay in the future
for shares of our Class A common stock.
Listing
We will make application to list the Class A common stock on The Nasdaq
Stock Market's National Market under the symbol "MCCC."
Transfer Agent and Registrar
The transfer agent for our Class A common stock will be
.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
General
Upon the completion of this offering, we will have shares of common
stock issued and outstanding, including shares of Class A common stock
and shares of Class B common stock. All outstanding shares of common
stock other than those issued in this offering will be "restricted securities"
as that term is defined in Rule 144 and also subject to certain restrictions on
disposition. Restricted securities may be sold in the public market only if
registered or if they qualify for an exemption from registration under Rule 144
or Rule 701 under the Securities Act. Sales of restricted securities in the
public market, or the availability of such shares for sale, could have an
adverse effect on the price of the Class A common stock. See "Dilution."
Registration Rights
We and Rocco Commisso, Morris Communications, CB Capital Investors, Chase
Manhattan Capital, U.S. Investor, Private Market Fund and a less than a 5%
stockholder have entered into a registration rights agreement, pursuant to
which we have granted to such persons various demand rights commencing 180 days
after the completion of this offering to cause us to file a registration
statement under the Securities Act covering resales of all shares of common
stock held by such persons, and to use our best efforts to cause such
registration statement to become effective. The registration rights agreement
also grants "piggyback" registration rights which permit such persons to
include their registrable securities in a registration of securities by us. We
are obligated to pay the expenses of such registrations.
Rule 144
In general, under Rule 144, as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
Class A common stock for at least one year would be entitled to sell within any
three month period a number of shares that does not exceed the greater of
either of the following:
. 1% of the number of shares of Class A common stock then outstanding,
which will equal shares immediately after this offering; and
. the average weekly trading volume of the Class A common stock on The
Nasdaq Stock Market during the four calendar weeks preceding the filing
of a notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements and to the availability of current public information
about us.
Rule 144(k)
Under Rule 144(k), a person who is not deemed to have been one of our
"affiliates" at the time of or at any time during the three months preceding a
sale, and who has beneficially owned the shares proposed to be sold for at
least two years, including the holding period of any prior owner other than an
"affiliate," is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule
144. Therefore, unless otherwise restricted, shares covered by Rule 144(k) may
be sold immediately upon the completion of this offering. The sale of such
shares, or the perception that sales will be made, could adversely effect the
price of our Class A common stock after this offering because a greater supply
of shares would be, or would be perceived to be, available for sale in the
public market.
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<PAGE>
Further Restrictions on Transfer for Certain Persons
Our officers, directors and stockholders have agreed to enter into lock-up
agreements with the underwriters of this offering generally providing that they
will not offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any shares of our Class A common stock or securities
convertible into or exchangeable or exercisable for any of our Class A common
stock, or publicly disclose the intention to make any offer, sale, pledge,
disposition or filing, without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the date of this prospectus,
subject to certain exceptions. As a result of these contractual restrictions,
notwithstanding the possible earlier eligibility for sale under the provisions
of Rules 144 and 144(k), shares subject to lock-up agreements may not be sold
until such agreements expire or are waived by Credit Suisse First Boston
Corporation. In addition, we have agreed that we will not offer, sell, contract
to sell, pledge or otherwise dispose of, directly or indirectly, or file with
the Securities and Exchange Commission a registration statement under
Securities Act relating to any shares of our Class A common stock or securities
convertible into or exchangeable or exercisable for any of our Class A common
stock, or publicly disclose the intention to make any offer, sale, pledge,
disposition or filing, without the prior written consent of Credit Suisse First
Boston Corporation for a period of 180 days after the date of this prospectus,
subject to certain exceptions.
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<PAGE>
UNDERWRITERS
Credit Suisse First Boston Corporation and Salomon Smith Barney Inc. are
acting as joint book-running managers for this offering. Credit Suisse First
Boston Corporation, Salomon Smith Barney Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation are acting as co-lead managers, and Goldman, Sachs &
Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Chase Securities Inc.,
CIBC World Markets Corp. and First Union Securities, Inc. are acting as co-
managers.
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Salomon Smith
Barney Inc., Donaldson, Lufkin & Jenrette Securities Corporation, Goldman,
Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Chase
Securities Inc., CIBC World Markets Corp. and First Union Securities, Inc. are
acting as representatives, the following respective numbers of shares of our
Class A common stock:
<TABLE>
<CAPTION>
Number
of
Underwriters Shares
------------ -------
<S> <C>
Credit Suisse First Boston Corporation...............................
Salomon Smith Barney Inc.............................................
Donaldson, Lufkin & Jenrette Securities Corporation..................
Goldman, Sachs & Co..................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................
Chase Securities Inc.................................................
CIBC World Markets Corp..............................................
First Union Securities, Inc..........................................
-------
Total..............................................................
=======
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of our Class A common stock offered in this offering if
any are purchased, other than those shares covered by the over-allotment option
described below. The underwriting agreement also provides that if an
underwriter defaults, the purchase commitments of non-defaulting underwriters
may be increased or this offering of Class A common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares of our Class A common stock at the
initial public offering price less the underwriting discounts and commissions.
This option may be exercised only to cover any over-allotments of our Class A
common stock.
The underwriters propose to offer the shares of our Class A common stock
initially at the public offering price on the cover page of this prospectus and
to selling group members at that price less a concession of $ per share.
The underwriters and selling group members may allow a discount of $ per
share on sales to other broker/dealers. After the initial public offering, the
public offering price and concession and discount to broker/dealers may be
changed by the representatives.
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<PAGE>
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-Allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts
and commissions paid by
us..................... $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
We intend to use more than 10% of the net proceeds from the sale of the
Class A common stock to repay indebtedness owed by us to Credit Suisse First
Boston, New York branch, Citibank, N.A., The Chase Manhattan Bank, CIBC Inc.
and First Union National Bank, each an affiliate of one of the underwriters.
Accordingly, the offering is being made in compliance with the requirements of
Rule 2710(c)(8) of the National Association of Securities Dealers, Inc. Conduct
Rules. This rule provides generally that if more than 10% of the net proceeds
from the sale of stock, not including underwriting compensation, is paid to the
underwriters or their affiliates, the initial public offering price of the
stock may not be higher than that recommended by a "qualified independent
underwriter" meeting certain standards. Accordingly, Donaldson, Lufkin &
Jenrette Securities Corporation is assuming the responsibilities of acting as
the qualified independent underwriter in pricing the offering and conducting
due diligence. The initial public offering price of the shares of common stock
is no higher than the price recommended by Donaldson, Lufkin & Jenrette
Securities Corporation.
We and our officers, directors and stockholders have agreed that we and they
will not offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, or file with the Securities and Exchange Commission a
registration statement under the Securities Act relating to, any shares of our
Class A common stock or securities convertible into or exchangeable or
exercisable for any of our Class A common stock, or publicly disclose the
intention to make any offer, sale, pledge, disposition or filing, without the
prior written consent of Credit Suisse First Boston Corporation for a period of
180 days after the date of this prospectus, except in our case for grants of
employee stock options pursuant to the terms of a plan in effect on the date
hereof, issuances of Securities pursuant to the exercise of such options or the
exercise of any other employee stock options outstanding on the date hereof.
The underwriters have reserved for sale, at the initial public offering
price up to shares of the Class A common stock for employees, directors
and certain other persons associated with us who have expressed an interest in
purchasing Class A common stock in this offering. The number of shares
available for sale to the general public in this offering will be reduced to
the extent such persons purchase such reserved shares. Any reserved shares not
so purchased will be offered by the underwriters to the general public on the
same terms as the other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be
required to make in that respect.
We will make application to list the shares of Class A common stock on The
Nasdaq Stock Market's National Market under the symbol "MCCC."
Prior to this offering, there has been no public market for our Class A
common stock. The initial public offering price will be determined by
negotiation between us and the representatives, and does not reflect the market
price for our Class A common stock following this offering. The principal
factors to be considered in determining the initial public offering price
include:
. the information in this prospectus and otherwise available to the
representatives;
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. the history of and prospects for the industry in which we will compete;
. our past and present operations;
. our past and present earnings and current financial position;
. the ability of our management;
. our prospects for future earnings;
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies;
. the general condition of the securities markets at the time of this
offering; and
. other relevant factors.
We can offer no assurance that the initial public offering price will
correspond to the price at which the Class A common stock will trade in the
public market subsequent to this offering or that an active trading market for
the Class A common stock will develop and continue after this offering.
Individuals affiliated with Credit Suisse First Boston Corporation who
beneficially own 0.3% of our common stock, purchased an aggregate of 50.2
membership units in Mediacom LLC for a total purchase price of $50,240 on
November 3, 1999. An entity affiliated with Chase Securities Inc. which
beneficially owns 8.2% of our common stock, purchased an aggregate of 512.4
membership units in Mediacom LLC for a total purchase price of $512,440 on
November 3, 1999. Entities affiliated with Credit Suisse First Boston
Corporation, Salomon Smith Barney Inc., Chase Securities Inc., CIBC World
Markets Corp. and First Union Securities, Inc. are lenders under our subsidiary
credit facilities, a portion of which will be repaid with the net proceeds of
this offering. Chase Securities Inc. and its affiliates engage from time to
time in various general financing and banking transactions with us and our
affiliates. Chase Securities Inc. was the arranger and The Chase Manhattan Bank
is the administrative agent and a lender under each of our subsidiary credit
facilities. Chase Securities Inc. acted as financial advisor to us in
connection with the acquisition of the Triax systems. In addition, certain
investment affiliates of Donaldson, Lufkin & Jenrette Securities Corporation
previously owned an interest in the Triax systems.
The representatives, on behalf of the underwriters, may engage in over-
allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Exchange Act.
. Over-allotment involves syndicate sales in excess of this offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Syndicate covering transactions involve purchases of the Class A common
stock in the open market after the distribution has been completed in
order to cover syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the Class A common stock originally sold by
such syndicate member is purchased in a stabilizing transaction or a
syndicate covering transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of our Class A common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
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LEGAL MATTERS
The validity of the shares of Class A common stock offered hereby will be
passed upon for us by Cooperman Levitt Winikoff Lester & Newman, P.C., New
York, New York. Robert L. Winikoff, one of our director nominees, is a partner
of Cooperman Levitt Winikoff Lester & Newman, P.C. Cahill Gordon & Reindel, a
partnership including a professional corporation, will pass upon certain legal
matters in connection with this offering.
EXPERTS
The audited consolidated financial statements of Mediacom LLC and
subsidiaries included in this prospectus and elsewhere in the registration
statement have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in
giving said reports.
The consolidated balance sheets of the Cablevision Systems as of December
31, 1997 and 1996 and the related consolidated statements of operations,
partners' capital (deficiency) and cash flows for the year ended December 31,
1997 and for the periods January 1, 1996 to August 12, 1996, and August 13,
1996 to December 31, 1996 and the consolidated balance sheets of the
Cablevision Systems as of December 31, 1996 and 1995 and the related
consolidated statements of operations, partners' capital (deficiency) and cash
flows for the periods January 1, 1996 to August 12, 1996, and August 13, 1996
to December 31, 1996 and for the years ended December 31, 1995 and 1994, have
been included in this prospectus and in the registration statement in reliance
upon the reports of KPMG LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing. The reports of KPMG LLP include an explanatory
paragraph relating to a change in cost basis of the consolidated financial
information as a result of a redemption of certain limited and general
partnership interests effective August 13, 1996.
The audited financial statements of Triax Midwest Associates, LP included in
this prospectus and elsewhere in the registration statement have been audited
by Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including all amendments, exhibits, schedules and
supplements thereto, under the Securities Act and the rules and regulations
thereunder, for the registration of the Class A Common Stock offered hereby.
Although this prospectus, which forms a part of the registration statement,
contains all material information included in the registration statement, parts
of the registration statement have been omitted as permitted by the rules and
regulations of the Securities and Exchange Commission. For further information
about us and the Class A common stock 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 Securities and Exchange Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Securities and Exchange 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 Securities and Exchange
Commission at 450 Fifth Street, NW, Washington, D.C. 20549, at prescribed
rates. You can also review such material by accessing the Security and Exchange
Commission's Internet web site at http://www.sec.gov. This site contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Security and Exchange Commission.
We intend to furnish to each of our stockholders 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 of our stockholders such other reports as may be required
by law.
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<PAGE>
GLOSSARY
The following is a description of certain terms used in this prospectus:
<TABLE>
<C> <S>
Amplifier cascades............... The operation of two or more amplifiers in
series so that the output of one device
feeds the input of the next device.
Bandwidth........................ Bandwidth measures the information-carrying
capacity of a communication channel and
indicates the range of usable frequencies
that can be carried by a cable television
system.
Basic penetration................ Basic subscribers as a percentage of total
number of homes passed.
Basic service tier............... A package of over-the-air broadcast
stations, local access channels and/or
certain satellite-delivered cable
television services, other than premium
services.
Basic subscriber................. A subscriber to a cable television system
who receives the basic service tier and who
is usually charged a flat monthly rate for
a number of channels.
Broadband........................ The ability to deliver multiple channels
and/or services to customers via a single
communications channel.
Cable modem...................... A device similar to a telephone modem that
sends and receives signals over a cable
television network at speeds exceeding 100
times the current capacity of a telephone
modem.
Cable television................. A broadband communications technology in
which multiple television channels as well
as audio and video signals are transmitted
either one-way or bi-directionally through
a distribution system to single or multiple
specified locations.
Channel capacity................. The number of traditional video programming
channels that can be carried over a
communications system.
Clustering....................... A general term used to describe the
strategy of operating cable television
systems in a specific geographic region,
thus allowing for the achievement of
economies of scale and operating
efficiencies in such areas as system
management, marketing, administrative and
technical functions.
Cost-of-service.................. A rate-setting methodology prescribed by
the FCC which may give a cable television
operator the ability to establish maximum
rates for regulated services in excess of
the benchmark rate that would otherwise be
applicable.
Digital.......................... Technology that uses discrete levels
(usually 0 and 1) to represent characters
or numbers.
Digital compression.............. The conversion of the standard analog video
signal into a digital signal and the
compression of that signal to facilitate
multiple channel transmissions through a
single channel's signal.
</TABLE>
G-1
<PAGE>
<TABLE>
<C> <S>
Digital television............... A distribution technology where video
content is delivered in digital format.
Direct broadcast satellite
television system............... A service by which packages of television
programming are transmitted via high-
powered satellites to individual homes,
each served by a small satellite dish.
Expanded basic tier.............. Cable programming services other than
programming services provided on the basic
service tier or on a per-channel or per-
program basis.
Fiber optic cable................ Cable made of glass fibers through which
digital signals are transmitted as pulses
of light to the distribution portion of the
cable television network which in turn goes
to a customer's home. This technology's
high bandwidth allows for a very large
number of channels to be more easily
provided.
Headend facility................. A collection of hardware, typically
including satellite receivers, modulators,
amplifiers and video cassette playback
machines within which signals are processed
and then combined for distribution within
the cable television network.
High-speed Internet access....... High-speed access to the Internet that is
provided over the cable network.
Homes passed..................... The number of single residence homes,
apartments and condominium units passed by
the cable distribution network in a cable
system's service area.
Internet......................... The large, worldwide network of thousands
of smaller, interconnected computer
networks. Originally developed for use by
the military and for academic research
purposes, the Internet is now accessible by
millions of users.
Multiple dwelling units.......... Condominiums, apartment complexes,
hospitals, hotels and other commercial
complexes.
Multichannel, multipoint
distribution service............ A one-way radio transmission of television
channels over microwave frequencies from a
fixed station transmitting to multiple
receiving facilities located at fixed
points.
Multiple system operator......... A cable television operator that owns or
operates more than one cable television
system.
Near video-on-demand............. A pay-per-view service that allows
customers to select and order a movie of
their choice from a selection of movies
being broadcast on several dedicated
channels. Each movie is broadcast on
multiple channels to offer the customer
several start times for the same movie.
Network.......................... The distribution network element of a cable
television system consisting of coaxial and
fiber optic cable which begins at the
headend and is attached to power or
telephone company poles or buried
underground.
</TABLE>
G-2
<PAGE>
<TABLE>
<C> <S>
Node............................. The interface between the fiber optic and
coaxial distribution network.
Non-metropolitan markets......... Markets consisting of small cities and
their surrounding areas, typically with
populations of 500,000 or less, according
to the metropolitan areas measurement of
the U.S. Census Bureau.
Pay-per-view..................... Programming offered by a cable television
operator on a per-program basis which a
subscriber selects and for which a
subscriber pays a separate fee.
Premium penetration.............. Premium service units as a percentage of
the total number of basic subscribers. A
customer may purchase more than one premium
service, each of which is counted as a
separate premium service unit. This ratio
may be greater than 100% if the average
customer subscribes to more than one
premium service unit.
Premium service.................. Individual cable programming service
available only for monthly subscriptions on
a per-channel basis.
Premium service units............ The number of subscriptions to premium
services which are paid for on an
individual basis. A subscriber may purchase
more than one premium service, each of
which is counted as a separate premium
service unit.
Regional cluster................. Cable television systems grouped in
specific geographic regions and managed
together to achieve economies of scale and
operating efficiencies in such areas as
system management, marketing,
administrative and technical functions.
Route miles...................... The number of miles of the
telecommunications path in which company-
owned or leased fiber-optic cables are
installed.
Telephone modem.................. A device either inserted in a computer or
attached externally that encodes
(modulates) or decodes (demodulates) an
analog telephone signal to a digital signal
to transmit and receive data.
Telephony........................ The provision of telephone service.
Tiers............................ Varying levels of cable services consisting
of differing combinations of several over-
the-air broadcast and satellite delivered
cable television programming services.
Two-way communications The ability to have bandwidth available for
capability...................... upstream and downstream, or two-way,
communication.
Upgrade.......................... The upgrade or replacement of an existing
cable system, usually undertaken to improve
its technological performance and/or to
expand the system's channel capacity in
order to provide more services.
Video-on-demand.................. A pay-per-view service that allows
customers to select and order a movie of
their choice on demand from a large film
library.
</TABLE>
G-3
<PAGE>
INDEX TO FINANCIAL STATEMENTS
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Contents Page
-------- ----
<S> <C>
Report of Independent Public Accountants.................................. F-3
Consolidated Balance Sheets as of December 31, 1998 and 1997.............. F-4
Consolidated Statements of Operations for the Years Ended December 31,
1998 and 1997, for the Period from Commencement of Operations (March 12,
1996) through December 31, 1996, and for the Period from January 1, 1996
through March 11, 1996................................................... F-5
Consolidated Statements of Changes in Members' Equity for the Years Ended
December 31, 1998 and 1997, and for the Period from Commencement of
Operations (March 12, 1996) through December 31, 1996.................... F-6
Consolidated Statements of Cash Flows for the Years Ended December 31,
1998 and 1997, for the Period from Commencement of Operations (March 12,
1996) through December 31, 1996, and for the Period from January 1, 1996
through March 11, 1996................................................... F-7
Notes to Consolidated Financial Statements................................ F-8
Consolidated Balance Sheets as of June 30, 1999 (unaudited) and December
31, 1998................................................................. F-21
Consolidated Statements of Operations for the Three and Six Months Ended
June 30, 1999 and 1998 (unaudited)....................................... F-22
Consolidated Statements of Cash Flows for the Six Months Ended June 30,
1999 and 1998 (unaudited)................................................ F-23
Notes to Consolidated Financial Statements (unaudited).................... F-24
</TABLE>
U.S. CABLE TELEVISION GROUP, L.P. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Contents Page
-------- ----
<S> <C>
Independent Auditors' Report............................................. F-31
Consolidated Balance Sheets as of December 31, 1997 and 1996............. F-32
Consolidated Statements of Operations and Partners' Capital (Deficiency),
Year Ended December 31, 1997, Period from August 13, 1996 to December
31, 1996, and January 1, 1996 to August 12, 1996........................ F-33
Consolidated Statements of Cash Flows, Year Ended December 31, 1997,
Period from August 13, 1996 to December 31, 1996 and January 1, 1996 to
August 12, 1996......................................................... F-34
Notes to Consolidated Financial Statements............................... F-35
Independent Auditors' Report............................................. F-41
Consolidated Balance Sheets as of December 31, 1996 and 1995............. F-42
Consolidated Statements of Operations and Partners' Capital (Deficiency),
Period from January 1, 1996 to August 12, 1996, and August 13, 1996 to
December 31, 1996, and Years Ended December 31, 1995 and 1994........... F-43
Consolidated Statements of Cash Flows, Period from January 1, 1996 to
August 12, 1996, and August 13, 1996 to December 31, 1996, and Years
Ended December 31, 1995 and 1994........................................ F-44
Notes to Consolidated Financial Statements............................... F-45
</TABLE>
F-1
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Contents Page
-------- ----
<S> <C>
Report of Independent Public Accountants.................................. F-51
Balance Sheets as of December 31, 1997 and 1998 and June 30, 1999
(unaudited).............................................................. F-52
Statements of Operations for the Years Ended December 31, 1996, 1997 and
1998 and for the Six Months Ended June 30, 1998 and 1999 (unaudited)..... F-53
Statements of Partners' Deficit for the Years Ended December 31, 1996,
1997 and 1998 and for the Six Months Ended June 30, 1999 (unaudited)..... F-54
Statements of Cash Flows for the Years Ended December 31, 1996, 1997 and
1998 and for the Six Months Ended June 30, 1998 and 1999 (unaudited)..... F-55
Notes to Financial Statements............................................. F-56
</TABLE>
Note--Upon completion of this offering and the exchange of membership
interests in Mediacom LLC for our common stock, Mediacom LLC will become a
wholly-owned subsidiary of us. Prior to such time, Mediacom Communications
Corporation had no assets, liabilities, contingent liabilities or operations.
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mediacom LLC:
We have audited the accompanying consolidated balance sheets of Mediacom LLC
(a New York limited liability company) and subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of operations, changes
in members' equity and cash flows for the years ended December 31, 1998 and
1997, and for the period from the commencement of operations (March 12, 1996)
through December 31, 1996 and the statements of operations and cash flows from
the period January 1, 1996 through March 11, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 consolidated financial position of Mediacom LLC and
its subsidiaries as of December 31, 1998 and 1997, and the results of their
operations, members' equity and cash flows for the years ended December 31,
1998 and 1997, and for the period from commencement of operations (March 12,
1996) through December 31, 1996 and the statements of operations and cash
flows from the period January 1, 1996 through March 11, 1996 in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. Schedule II--Valuation and
Qualifying Accounts is presented for purposes of complying with the Securities
and Exchange Commissions rules and is not part of the basic consolidated
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic consolidated financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole.
Arthur Andersen LLP
Stamford, Connecticut
March 5, 1999
(except with respect to the
matter discussed in note 15,
as to which the date
is November 10, 1999)
F-3
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All dollar amounts in 000's)
<TABLE>
<CAPTION>
December 31,
------------------
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents.................................. $ 2,212 $ 1,027
Subscriber accounts receivable, net of allowance for
doubtful accounts of $298 in
1998 and $56 in 1997...................................... 2,512 618
Prepaid expenses and other assets.......................... 1,712 1,358
Investment in cable television systems:
Inventory................................................ 8,240 1,032
Property, plant and equipment, at cost................... 314,627 51,735
Less--accumulated depreciation........................... (45,423) (5,737)
-------- --------
Property, plant and equipment, net..................... 269,204 45,998
Intangible assets, net of accumulated amortization of
$26,307 in 1998 and $3,478 in 1997...................... 150,928 48,966
-------- --------
Total investment in cable television systems............... 428,372 95,996
Other assets, net of accumulated amortization of $3,854 in
1998 and $526 in 1997..................................... 16,344 3,792
-------- --------
Total assets........................................... $451,152 $102,791
======== ========
LIABILITIES AND MEMBERS' EQUITY
LIABILITIES
Debt....................................................... $337,905 $ 72,768
Accounts payable........................................... 2,678 853
Accrued expenses........................................... 29,446 4,021
Subscriber advances........................................ 1,510 603
Management fees payable.................................... 962 105
-------- --------
Total liabilities...................................... 372,501 78,350
MEMBERS' EQUITY
Capital contributions...................................... 124,990 30,990
Accumulated deficit........................................ (46,339) (6,549)
-------- --------
Total members' equity.................................. 78,651 24,441
-------- --------
Total liabilities and members' equity.................. $451,152 $102,791
======== ========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-4
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(All dollar amounts in 000's)
<TABLE>
<CAPTION>
The Company Predecessor
------------------------------- ---------------
March 12,
Year Ended 1996
December 31, through January 1, 1996
----------------- December 31, through
1998 1997 1996 March 11, 1996
-------- ------- ------------ ---------------
<S> <C> <C> <C> <C>
Revenues....................... $129,297 $17,634 $ 5,411 $1,038
Costs and expenses:
Service costs................ 43,849 5,547 1,511 297
Selling, general, and
administrative expenses..... 25,596 2,696 931 222
Management fee expense....... 5,797 882 270 52
Depreciation and
amortization................ 65,793 7,636 2,157 527
-------- ------- ------- ------
Operating income (loss)........ (11,738) 873 542 (60)
-------- ------- ------- ------
Interest expense, net.......... 23,994 4,829 1,528 201
Other expenses................. 4,058 640 967 --
-------- ------- ------- ------
Net loss....................... $(39,790) $(4,596) $(1,953) $ (261)
======== ======= ======= ======
Pro forma net loss and loss per
share:
Historical net loss before
income taxes................ $(39,790)
Pro forma income tax effects
(note 15)................... --
--------
Pro forma net loss............. $(39,790)
========
Pro forma common shares
outstanding (note 15).........
Pro forma basic and diluted
loss per share................
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-5
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
(All dollar amounts in 000's)
<TABLE>
<S> <C>
Balance, Commencement of Operations (March 12, 1996).................. $ 5,490
Capital contributions............................................... 1,000
Net loss............................................................ (1,953)
--------
Balance, December 31, 1996............................................ 4,537
Capital contributions............................................... 24,500
Net loss............................................................ (4,596)
--------
Balance, December 31, 1997............................................ 24,441
Capital contributions............................................... 94,000
Net loss............................................................ (39,790)
--------
Balance, December 31, 1998............................................ $ 78,651
========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-6
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts in 000's)
<TABLE>
<CAPTION>
The Company Predecessor
--------------------------------- -----------
March 12, January 1,
Year Ended 1996 1996
December 31, through through
------------------- December 31, March 11,
1998 1997 1996 1996
--------- -------- ------------ -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss........................ $ (39,790) $ (4,596) $ (1,953) $(261)
Adjustments to reconcile net
loss to net cash flows from
operating activities:
Accretion of interest on seller
note........................... 287 264 129 --
Depreciation and amortization... 65,793 7,636 2,157 527
Changes in assets and
liabilities, net of effects
from acquisitions:
Increase in subscriber
accounts receivable........... (1,437) (351) (267) (40)
Decrease (increase) in prepaid
expenses and other assets..... 329 (34) (1,323) --
Increase (decrease) in
accounts payable.............. 1,822 (242) 514 --
Increase in accrued expenses... 24,843 3,762 840 --
Increase in subscriber
advances...................... 852 498 105 --
Increase in management fees
payable....................... 857 70 35 --
--------- -------- -------- -----
Net cash flows from operating
activities................... 53,556 7,007 237 226
--------- -------- -------- -----
CASH FLOWS USED IN INVESTING
ACTIVITIES:
Capital expenditures............ (53,721) (4,699) (671) (86)
Acquisitions of cable television
systems........................ (343,330) (54,842) (44,539) --
Other, net...................... (34) (467) (47) --
--------- -------- -------- -----
Net cash flows used in
investing activities......... (397,085) (60,008) (45,257) (86)
--------- -------- -------- -----
CASH FLOWS FROM FINANCING
ACTIVITIES:
New borrowings.................. 488,200 72,225 39,200 --
Repayment of debt............... (223,350) (40,250) (1,600) --
Increase in seller note......... -- -- 2,800 --
Capital contributions........... 94,000 24,500 6,490 --
Financing costs................. (14,136) (2,843) (1,474) --
--------- -------- -------- -----
Net cash flows from financing
activities................... 344,714 53,632 45,416 --
--------- -------- -------- -----
Net increase in cash and cash
equivalents.................. 1,185 631 396 140
CASH AND CASH EQUIVALENTS,
beginning of period............. 1,027 396 -- 266
--------- -------- -------- -----
CASH AND CASH EQUIVALENTS, end of
period.......................... $ 2,212 $ 1,027 $ 396 $ 406
========= ======== ======== =====
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for
interest....................... $ 21,127 $ 4,485 $ 1,190 $ 201
========= ======== ======== =====
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
F-7
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
(1) The Limited Liability Company:
Organization
Mediacom LLC ("Mediacom" and collectively with its subsidiaries, the
"Company"), a New York limited liability company, was formed on July 17, 1995
and initially conducted its affairs pursuant to an operating agreement dated
March 12, 1996 (the "1996 Operating Agreement"). On March 31 and June 16, 1997,
the 1996 Operating Agreement was amended and restated upon the admission of new
members to Mediacom (the "1997 Operating Agreement"). On January 20, 1998, the
1997 Operating Agreement was amended and restated upon the admission of
additional members to Mediacom (the "1998 Operating Agreement"). As of December
31, 1998, the Company had acquired and was operating cable television systems
in fourteen states, principally Alabama, California, Florida, Kentucky,
Missouri and North Carolina. (See Note 3).
Mediacom Capital Corporation ("Mediacom Capital"), a New York corporation
wholly owned by Mediacom, was organized in March 1998 for the sole purpose of
acting as co-issuer with Mediacom of $200,000 aggregate principal amount of 8
1/2% Senior Notes due 2008 (the "8 1/2% Senior Notes"), which were issued on
April 1, 1998. Mediacom Capital has nominal assets and does not conduct
operations of its own. The 8 1/2% Senior Notes are joint and several
obligations of Mediacom and Mediacom Capital, although Mediacom received all
the net proceeds of the 8 1/2% Senior Notes.
Capitalization
The Company was initially capitalized on March 12, 1996, with equity
contributions of $5,445 from Mediacom's members and $45 from Mediacom
Management Corporation ("Mediacom Management"), a Delaware corporation. On June
28, 1996, Mediacom received additional equity contributions of $1,000 from an
existing member.
On June 22 and September 18, 1997, Mediacom received additional equity
contributions of $19,500 and $5,000, respectively, from its members. On January
22, 1998, Mediacom received additional equity contributions of $94,000 from its
members.
Allocation of Losses, Profits and Distributions
For 1996, pursuant to the 1996 Operating Agreement, net losses were
allocated 98% to the manager as defined in the operating agreements (the
"Manager") and the balance to the other members ratably in accordance with
their respective membership units. For 1997, pursuant to the 1997 Operating
Agreement, net losses were allocated first to the Manager and the balance to
the other members ratably in accordance with their respective membership units.
For 1998, pursuant to the 1998 Operating Agreement, net losses are to be
allocated first to the Manager; second, to the member owning the largest number
of membership units in Mediacom; and third, to the members, other than the
Manager, ratably in accordance with their respective positive capital account
balances and membership units.
Profits are allocated first to the members to the extent of their deficit
capital account; second, to the members to the extent of their preferred
capital; third, to the members (including the Manager) until they receive an 8%
preferred return on their preferred capital (the "Preferred Return"); fourth,
to the Manager until the Manager receives an amount equal to 25% of the amount
provided to deliver the Preferred Return to all members; the balance, 80% to
the members (including the Manager) in proportion to their respective
membership units and 20% to the Manager. The 1997 Operating Agreement increased
the Preferred Return from 8% to 12%.
F-8
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
Distributions are made first to the members (including the Manager) in
proportion to their respective membership units until they receive amounts
equal to their preferred capital; second, to the members (including the
Manager) in proportion to their percentage interests until all members receive
the Preferred Return; third, to the Manager until the Manager receives 25% of
the amount provided to deliver the Preferred Return; the balance, 80% to the
members (including the Manager) in proportion to their percentage interests and
20% to the Manager.
Redemption Rights
Except as set forth below, no member has the right to have its membership
interests redeemed or its capital contributions returned prior to dissolution
of Mediacom. Pursuant to the 1998 Operating Agreement, each member has the
right to require Mediacom to redeem its membership interests at any time if the
holding of such interests exceeds the amount permitted, or is otherwise
prohibited or becomes unduly burdensome, by any law to which such member is
subject, or, in the case of any member which is a Small Business Investment
Company as defined in and subject to regulation under the Small Business
Investment Act of 1958, as amended, upon a change in the Company's principal
business activities to an activity not eligible for investment by a Small
Business Investment Company or a change in the reported use of proceeds of a
member's investment in Mediacom. If Mediacom is unable to redeem for cash any
or all of such membership interests at such time, Mediacom will issue as
payment for such interests a junior subordinated promissory note with a five-
year maturity date and deferred interest which accrues and compounds at an
annual rate of 5% over the prime rate.
In addition, in connection with the Company's acquisition of the
Cablevision Systems on January 23, 1998 (See Note 3), the Federal
Communications Commission (the "FCC") issued a transactional forbearance from
its cross-ownership restrictions, effective for a period of one year,
permitting a certain existing member (the "Transactional Member") to purchase
additional units of membership interest in Mediacom. This temporary waiver was
originally set to expire on January 23, 1999. However, on January 15, 1999, the
FCC granted an extension of such waiver to July 23, 1999. If at the end of this
extension, the Transactional Member's membership interest in Mediacom remains
above the limitations imposed by the FCC's cross-ownership restrictions,
Mediacom will be required to repurchase such number of the Transactional
Member's units of membership interest which exceed the permissible ownership
level. If such repurchase were to occur on July 23, 1999 (i.e., upon expiration
of the transactional forbearance), and assuming no changes in the number of
outstanding membership units of Mediacom and no changes in such cross-ownership
rules, the repurchase price for such excess membership interests would be
approximately $7,500 plus accrued interest.
Duration and Dissolution
Mediacom will be dissolved upon the first to occur of the following: (i)
December 31, 2020; (ii) certain events of bankruptcy involving the Manager or
the occurrence of any other event terminating the continued membership of the
Manager, unless within one hundred eighty days after such event the Company is
continued by the vote or written consent of no less than two-thirds of the
remaining membership interests; or (iii) the entry of a decree of judicial
dissolution.
(2) Summary of Significant Accounting Policies:
Basis of Preparation of Consolidated Financial Statements
The consolidated financial statements include the accounts of Mediacom
and its subsidiaries. All significant intercompany transactions and balances
have been eliminated. The preparation of financial
F-9
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
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.
The financial statements for the period from January 1, 1996, through
March 11, 1996, and reflecting the results of operations and statement of cash
flows, are referred to as the "Predecessor" financial statements. The
Predecessor is Benchmark Acquisition Fund II Limited Partnership which owned
the assets comprising the cable television system serving at the time of its
acquisition by the Company 10,300 subscribers in Ridgecrest, California.
Accordingly, the accompanying financial statements of the Predecessor and the
Company are not comparable in all material respects since those financial
statements report results of operations and cash flows of these two separate
entities.
Revenue Recognition
Revenues are recognized in the period in which the related services are
provided to the Company's subscribers.
Cash and Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents.
Concentration of Credit Risk
The Company's accounts receivable is comprised of amounts due from
subscribers in varying regions throughout the United States. Concentration of
credit risk with respect to these receivables is limited due to the large
number of customers comprising the Company's customer base and their geographic
dispersion.
Property, Plant and Equipment
Property, plant and equipment is recorded at purchased and capitalized
cost. Repairs and maintenance are charged to operations, and replacements,
renewals and additions are capitalized. The Company capitalized a portion of
salaries and overhead related to the installation of property, plant and
equipment of approximately $6,548 and $681 in 1998 and 1997, respectively.
The Company capitalizes interest on funds borrowed for projects under
construction. Such interest is charged to property, plant and equipment and
amortized over the approximate life of the related assets. Capitalized interest
was approximately $1,014 in 1998.
Depreciation is calculated on a straight-line basis over the following
useful lives:
<TABLE>
<S> <C>
Buildings......................................... 45 years
Leasehold improvements............................ Life of respective lease
Cable systems and equipment....................... 5 to 10 years
Subscriber devices................................ 5 years
Vehicles.......................................... 5 years
Furniture, fixtures and office equipment.......... 5 to 10 years
</TABLE>
F-10
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
Intangible Assets
Intangible assets include franchising costs, goodwill, subscriber lists
and covenants not to compete. Amortization of intangible assets is calculated
on a straight-line basis over the following lives:
<TABLE>
<S> <C>
Franchising costs............................................. 15 years
Goodwill...................................................... 15 years
Subscriber lists.............................................. 5 years
Covenants not to compete...................................... 3 to 7 years
</TABLE>
Impairment of Long-Lived Assets
The Company follows the provisions of Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121"). SFAS 121 requires that long-
lived assets and certain identifiable intangibles to be held and used by any
entity, be reviewed for impairment whenever events or changes in circumstances
indicate the carrying amount of an asset may not be recoverable. There has been
no impairment of long-lived assets of the Company under SFAS 121.
Other Assets
Other assets include financing costs of approximately $8,492 and $3,963
as of December 31, 1998 and 1997, respectively. Financing costs incurred to
raise debt and equity capital are deferred and amortized on a straight-line
basis over the expected term of such financings.
Income Taxes
Since Mediacom is a limited liability company and the Predecessor is a
limited partnership, they are not subject to federal or state income taxes, and
no provision for income taxes relating to their statements of operations have
been reflected in the accompanying financial statements. The members of
Mediacom and the limited partners of the Predecessor are required to report
their share of income or loss in their respective income tax returns.
Reclassifications
Certain reclassifications have been made to prior year's amounts to
conform to the current year's presentation.
(3) Acquisitions:
The Company has completed the undernoted acquisitions (the "Acquired
Systems") in 1998 and 1997. These acquisitions were accounted for using the
purchase method of accounting, and accordingly, the purchase price of these
Acquired Systems have been allocated to the assets acquired and liabilities
assumed at their estimated fair values at their respective date of acquisition.
The results of operations of the Acquired Systems have been included with those
of the Company since the dates of acquisition.
1998
On January 9, 1998, Mediacom California LLC ("Mediacom California"), a
subsidiary of Mediacom, acquired the assets of a cable television system
serving approximately 17,200 subscribers in Clearlake,
F-11
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
California and surrounding communities (the "Clearlake System") for a purchase
price of $21,400. The purchase price has been preliminarily allocated as
follows: $8,560 to property, plant and equipment, and $12,840 to intangible
assets. Such allocations are subject to adjustments based upon the final
appraisal information received by the Company. The final allocations of the
purchase price are not expected to differ materially from the preliminary
allocations. Additionally, approximately $226 of direct acquisition costs has
been allocated to other assets. In the first quarter of 1998, the Company
recorded acquisition reserves related to this acquisition in the amount of
approximately $370, which are included in accrued expenses. The acquisition of
the Clearlake System and related closing costs and adjustments were financed
with borrowings under the Company's bank credit facilities. See Note 8.
On January 23, 1998, Mediacom Southeast LLC, ("Mediacom Southeast"), a
wholly-owned subsidiary of Mediacom, acquired the assets of cable television
systems serving approximately 260,100 subscribers in various regions of the
United States (the "Cablevision Systems") for a purchase price of $308,200. The
purchase price has been allocated based on independent appraisal as follows:
$205,500 to property, plant and equipment, and $102,700 to intangible assets.
Additionally, approximately $3,500 of direct acquisition costs has been
allocated to other assets. In the first quarter of 1998, the Company recorded
acquisition reserves related to this acquisition in the amount of $3,750, which
are included in accrued expenses. The acquisition of the Cablevision Systems
and related closing costs and adjustments were financed with equity
contributions, borrowings under the Company's bank credit facilities, and other
bank debt. See Notes 1 and 8.
On October 1, 1998, Mediacom Southeast acquired the assets of a cable
television system serving approximately 3,800 subscribers in Caruthersville,
Missouri (the "Caruthersville System") for a purchase price of $5,000. The
purchase price has been preliminarily allocated as follows: $2,000 to property,
plant and equipment, and $3,000 to intangible assets. Such allocations are
subject to adjustments based upon the final appraisal information received by
the Company. The final allocations of the purchase price are not expected to
differ materially from the preliminary allocations. The acquisition of the
Caruthersville System and related closing costs and adjustments were financed
with borrowings under the Company's bank credit facilities. See Note 8.
1997
On June 24, 1997, Mediacom Delaware LLC ("Mediacom Delaware"), a wholly-
owned subsidiary of Mediacom, acquired the assets of cable television systems
serving approximately 29,300 subscribers in lower Delaware and southwestern
Maryland (the "Lower Delaware System") for a purchase price of $42,600. The
purchase price has been allocated as follows: $21,300 to property, plant and
equipment, and $21,300 to intangible assets. Additionally, $409 of direct
acquisition costs has been allocated to other assets.
On September 19, 1997, Mediacom California acquired the assets of a cable
television system serving approximately 9,600 subscribers in Sun City,
California (the "Sun City System") for a purchase price of $11,500. The
purchase price has been allocated as follows: $7,150 to property, plant and
equipment, and $4,350 to intangible assets. Additionally, $52 of direct
acquisition costs has been allocated to other assets.
(4) Pro Forma Results:
Summarized below are the pro forma unaudited results of operations for
the years ended December 31, 1998 and 1997, assuming the purchase of the
Acquired Systems had been consummated as of January 1, 1997. Adjustments have
been made to: (i) depreciation and amortization reflecting the fair value of
the assets
F-12
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
acquired; and (ii) interest expense. The pro forma results may not be
indicative of the results that would have occurred if the combination had been
in effect on the dates indicated or which may be obtained in the future.
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Revenue................................................ $136,148 $120,511
Operating loss......................................... (11,809) (15,352)
Net loss............................................... $(41,340) $(42,921)
</TABLE>
(5) Recent Accounting Pronouncements:
In 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive
Income," Statement of Financial Accounting Standard No. 131, "Disclosure about
Segments of an Enterprise and Related Information" and Statement of Financial
Accounting Standard No. 132, "Employer's Disclosure about Pension and Other
Post Retirement Benefits" which are effective for the Company's fiscal 1998
financial statements. During the years ended December 31, 1998 and 1997 and the
period ended December 31, 1996, the Company had no items of comprehensive
income. Refer to Note 13 of the consolidated financial statements for
disclosure about segments and other related information. Additionally, the
Company does not have any defined benefit plans, therefore, additional
disclosures are not applicable to the notes of the financial statements.
In 1998, Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities," ("SFAS 133") and Statement
of Position 98-5, "Reporting on the Costs of Start up Activities" ("SOP 98-5")
were issued. SFAS 133 establishes accounting and reporting standards requiring
that every derivative instrument be recorded in the balance sheet as either an
asset or liability measured at its fair value. The Company will adopt SFAS 133
in fiscal 2001 but has not quantified the impact or not yet determined the
timing or method of the adoption. SOP 98-5 provides guidance on accounting for
the costs of start-up activities, which include preopening costs, preoperating
costs, organization costs, and start-up costs. The Company will adopt SOP 98-5
in fiscal 1999, but does not expect any impact on the financial statements.
(6) Property, Plant and Equipment:
As of December 31, 1998 and 1997, property, plant and equipment consisted
of:
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Land and land improvements.............................. $ 341 $ 108
Buildings and leasehold improvements.................... 5,731 337
Cable systems, equipment and subscriber devices......... 300,051 49,071
Vehicles................................................ 5,051 1,135
Furniture, fixtures and office equipment................ 3,453 1,084
-------- -------
$314,627 $51,735
Accumulated depreciation................................ (45,423) (5,737)
-------- -------
$269,204 $45,998
======== =======
</TABLE>
F-13
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
(7) Intangible Assets:
The following table summarizes the net asset value for each intangible
asset category as of December 31, 1998 and 1997:
<TABLE>
<CAPTION>
Gross Asset Net Asset
1998 Value Amortization Value
---- ----------- ------------ ---------
<S> <C> <C> <C>
Franchising costs....................... $ 87,509 $ 7,983 $ 79,526
Goodwill................................ 8,400 1,313 7,087
Subscriber lists........................ 76,484 15,701 60,783
Covenants not to compete................ 4,842 1,310 3,532
-------- ------- --------
$177,235 $26,307 $150,928
======== ======= ========
<CAPTION>
Gross Asset Net Asset
1997 Value Amortization Value
---- ----------- ------------ ---------
<S> <C> <C> <C>
Franchising costs....................... $ 22,181 $ 1,732 $ 20,449
Goodwill................................ 6,848 333 6,515
Subscriber list......................... 18,573 1,085 17,488
Covenants not to compete................ 4,842 328 4,514
-------- ------- --------
$ 52,444 $ 3,478 $ 48,966
======== ======= ========
</TABLE>
(8) Debt:
As of December 31, 1998 and 1997, debt consisted of:
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Mediacom:
8 1/2% Senior Notes(a)................................. $200,000 $ --
Subsidiaries:
Bank Credit Facilities(b).............................. 134,425 69,575
Seller Note(c)......................................... 3,480 3,193
-------- -------
$337,905 $72,768
======== =======
</TABLE>
(a) On April 1, 1998, Mediacom and Mediacom Capital jointly issued $200,000
aggregate principal amount of 8 1/2% Senior Notes due on April 15, 2008.
The 8 1/2% Senior Notes are unsecured obligations of the Company, and the
indenture for the 8 1/2% Senior Notes stipulates, among other things,
restrictions on incurrence of indebtedness, distributions, mergers and
asset sales and has cross-default provisions related to other debt of the
Company. Interest accrues at 8 1/2% per annum, beginning from the date of
issuance and is payable semi-annually on April 15 and October 15 of each
year, commencing on October 15, 1998. The 8 1/2% Senior Notes may be
redeemed at the option of Mediacom, in whole or part, at any time after
April 15, 2003, at redemption prices decreasing from 104.25% of their
principal amount to 100% in 2006, plus accrued and unpaid interest.
(b) On January 23, 1998, Mediacom Southeast entered into an eight and one-half
year, $225,000 reducing revolver and term loan agreement (the "Southeast
Credit Facility"). On June 24, 1997, Mediacom California, Mediacom Delaware
and Mediacom Arizona LLC, a wholly-owned subsidiary of Mediacom
(collectively, the "Western Group"), entered into an eight and one-half
year, $100,000 reducing revolver and term loan agreement (the "Western
Credit Facility" and, together with the Southeast Credit Facility, the
"Bank Credit Facilities"). At December 31, 1998, the aggregate commitments
under the Bank Credit Facilities were $324,400. The Bank Credit Facilities
are non-recourse to Mediacom and have no cross-default provisions relating
directly to each other. The reducing revolving credit lines under the Bank
Credit Facilities make available a maximum commitment amount for a period
of up to eight and one-half years,
F-14
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
which is subject to quarterly reductions, beginning September 30, 1998,
ranging from 0.21% to 12.42% of the original commitment amount of the
reducing revolver. The term loans under the Bank Credit Facilities are
repaid in consecutive installments beginning September 30, 1998, ranging
from 0.42% to 12.92% of the original term loan amount. The Bank Credit
Facilities require mandatory reductions of the reducing revolvers and
mandatory prepayments of the term loans from excess cash flow, as defined,
beginning December 31, 1999. The Bank Credit Facilities provide for interest
at varying rates based upon various borrowing options and the attainment of
certain financial ratios and for commitment fees of 3/8% to 1/2% per annum
on the unused portion of available credit under the reducing revolver credit
lines. The effective interest rates on outstanding debt under the Bank
Credit Facilities were 7.2% and 8.8% for the three months ending December
31, 1998 and December 31, 1997, respectively, after giving effect to the
interest rate swap agreements discussed below.
The applicable margins for the respective borrowing rate options have
the following ranges:
<TABLE>
<CAPTION>
Interest Rate Option Margin Rate
-------------------- ---------------
<S> <C>
Base Rate................................................. 0.250% to 1.625%
Eurodollar Rate........................................... 1.250% to 2.625%
</TABLE>
The Bank Credit Facilities require Mediacom's subsidiaries to maintain
compliance with certain financial covenants including, but not limited to,
the leverage ratio, the interest coverage ratio, the fixed charge coverage
ratio and the pro forma debt service coverage ratio, as defined in the
respective credit agreements. The Bank Credit Facilities also require
Mediacom's subsidiaries to maintain compliance with other covenants
including, but not limited to, limitations on mergers and acquisitions,
consolidations and sales of certain assets, liens, the incurrence of
additional indebtedness, certain restrictive payments, and certain
transactions with affiliates. The Company was in compliance with all
covenants as of December 31, 1998.
The Bank Credit Facilities are secured by Mediacom's pledge of all its
ownership interests in the subsidiaries and a first priority lien on all
the tangible and intangible assets of the operating subsidiaries, other
than real property in the case of the Southeast Credit Facility. The
indebtedness under the Bank Credit Facilities is guaranteed by Mediacom on
a limited recourse basis to the extent of its ownership interests in the
operating subsidiaries. At December 31, 1998, the Company had
approximately $189,900 of unused commitments under the Bank Credit
Facilities, all of which could have been borrowed by the operating
subsidiaries for purposes of distributing such borrowed proceeds to
Mediacom under the most restrictive covenants in the Company's bank credit
agreements.
As of December 31, 1998, the Company had entered into interest rate
exchange agreements (the "Swaps") with various banks pursuant to which the
interest rate on $60,000 is fixed at a weighted average swap rate of
approximately 6.2%, plus the average applicable margin over the Eurodollar
Rate option under the Bank Credit Facilities. Any amounts paid or received
due to swap arrangements are recorded as an adjustment to interest
expense. Under the terms of the Swaps, which expire from 1999 through
2002, the Company is exposed to credit loss in the event of nonperformance
by the other parties to the Swaps. However, the Company does not
anticipate nonperformance by the counterparties.
(c) In connection with the acquisition of the Kern Valley System, the Western
Group issued to the seller an unsecured senior subordinated note (the
"Seller Note") in the amount of $2,800, with a final maturity of June 28,
2006. Interest is deferred throughout the term of the note and is payable
at maturity or upon prepayment. For the five-year period ending June 28,
2001, the annual interest rate is 9.0%. After the initial five-year
period, the annual interest rate increases to 15.0%, with an interest
clawback for the first five years. After the initial seven-year period,
the interest rate increases to 18.0%, with an interest clawback for the
first seven years. The Company intends to prepay the Seller Note plus
accrued interest on or before June 28, 2001, subject to prior approval by
the parties to the Western Credit Facilities, which the Company
F-15
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
believes it will obtain. The Company expects to repay the Seller Note with
cash flow generated from operations and future borrowings. There are no
penalties associated with prepayment of this note.
The Seller Note agreement contains a debt incurrence covenant limiting the
ability of the Western Group to incur additional indebtedness. The Seller
Note is subordinated and junior in right of payment to all senior
obligations, as defined in the Western Credit Facility.
The stated maturities of all debt outstanding as of December 31, 1998,
are as follows:
<TABLE>
<S> <C>
1999.............................................................. $ 2,000
2000.............................................................. 2,300
2001.............................................................. 6,600
2002.............................................................. 9,500
2003.............................................................. 13,600
Thereafter........................................................ 303,905
--------
$337,905
========
</TABLE>
(9) Related Party Transactions:
Separate management agreements with each of Mediacom's subsidiaries
provide for Mediacom Management to be paid compensation for management services
performed for the Company. Under such agreements, Mediacom Management, which is
wholly-owned by the Manager, is entitled to receive annual management fees
calculated as follows: (i) 5.0% of the first $50,000 of annual gross operating
revenues of the Company; (ii) 4.5% of such revenues in excess thereof up to
$75,000; and (iii) 4.0% of such revenues in excess of $75,000. The Company
incurred management fees of approximately $5,797, $882, and $270 for the years
ended 1998 and 1997, and for the period ended December 31, 1996, respectively.
The operating agreement of Mediacom provides for Mediacom Management to
be paid a fee of 1.0% of the purchase price of acquisitions made by the Company
until the Company's pro forma consolidated annual operating revenues equal
$75,000 and 0.5% of such purchase price thereafter. The Company incurred
acquisition fees of approximately $3,327, $544, and $441 for the years ended
1998 and 1997, and for the period ended December 31, 1996, respectively. The
acquisition fees are included in other expenses in the statement of operations.
In addition, the operating agreements of the Company provide for the
reimbursement of reasonable out-of-pocket expenses of Mediacom Management
incurred in connection with the operation of the business of the Company and
acting for or on behalf of the Company in connection with any potential
acquisitions. The Company reimbursed Mediacom Management approximately $53,
$59, and $29 for the years ended 1998 and 1997, and for the period ended
December 31, 1996, respectively.
(10) Employee Benefit Plans:
Substantially all employees of the Company are eligible to participate in
a deferred arrangement pursuant to IRC Section 401(k) (the "Plan"). Under such
arrangement, eligible employees may contribute up to 15% of their current pre-
tax compensation to the Plan. The Plan permits, but does not require, matching
contributions and non-matching (profit sharing) contributions to be made by the
Company up to a maximum dollar amount or maximum percentage of participant
contributions, as determined annually by the Company. The Company presently
matches 50% on the first 6% of employee contributions. The Company's
contributions under the Plan totaled approximately $264, $14, and $10 for the
years ended 1998 and 1997, and for the period ended December 31, 1996,
respectively.
F-16
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
(11) Commitments and Contingencies:
Under various lease and rental agreements for offices, warehouses and
computer terminals, the Company had rental expense of approximately $588, $138,
and $22 for the years ended 1998 and 1997, and for the period ended December
31, 1996, respectively. Future minimum annual rental payments are as follows:
<TABLE>
<S> <C>
1999................................................................ $1,815
2000................................................................ 1,190
2001................................................................ 768
2002................................................................ 379
2003................................................................ 267
</TABLE>
In addition, the Company rents utility poles in its operations generally
under short-term arrangements, but the Company expects these arrangements to
recur. Total rental expense for utility poles was approximately $1,709, $102,
and $24 for the years ended 1998 and 1997, and for the period ended December
31, 1996, respectively.
Legal Proceedings
Management is not aware of any legal proceedings currently that will have
a material adverse impact on the Company's financial statements.
Regulation in the Cable Television Industry
The cable television industry is subject to extensive regulation by
federal, local and, in some instances, state government agencies. The Cable
Television Consumer Protection and Competition Act of 1992 and the Cable
Communication Policy Act of 1984 (collectively, the "Cable Acts"), both of
which amended the Communications Act of 1934 (as amended, the "Communications
Act"), established a national policy to guide the development and regulation of
cable television systems. The Communications Act was recently amended by the
Telecommunications Act of 1996 (the "1996 Telecom Act"). Principal
responsibility for implementing the policies of the Cable Acts and the 1996
Telecom Act has been allocated between the FCC and state or local regulatory
authorities.
Federal Law and Regulation
The Cable Acts and the FCC's rules implementing such acts 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, among other things: (i) rate regulations; (ii)
mandatory carriage and retransmission consent requirements that require a cable
television system under certain circumstances to carry a local broadcast
station or to obtain consent to carry a local or distant broadcast station;
(iii) rules for franchise renewals and transfers; and (iv) other requirements
covering a variety of operational areas such as equal employment opportunity,
technical standards and customer service requirements.
The 1996 Telecom Act deregulates rates for cable programming services
tiers ("CPST") on March 31, 1999 and, for certain small cable operators,
immediately eliminates rate regulation of CPST, and, in certain limited
circumstances, basic services. The FCC is currently developing permanent
regulations to implement the rate deregulation provisions of the 1996 Telecom
Act. The Company is currently unable to predict the ultimate effect of the
Cable Acts or the 1996 Telecom Act on its financial statements.
The FCC and Congress continue to be concerned that rates for regulated
programming services are rising at a rate exceeding inflation. It is therefore
possible that the FCC will further restrict the ability of cable television
operators to implement rate increases and/or Congress will enact legislation
which would, for example, delay or suspend the scheduled March 1999 termination
of CPST rate regulation.
F-17
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
State and Local Regulation
Cable television systems generally operate pursuant to non-exclusive
franchises, permits or licenses granted by a municipality or other state or
local governmental entity. The terms and conditions of franchises vary
materially from jurisdiction to jurisdiction. A number of states subject cable
television systems to the jurisdiction of centralized state government
agencies. To date, other than Delaware, no state in which the Company currently
operates has enacted state level regulation. The Company cannot predict whether
any of the states in which currently operates will engage in such regulation in
the future.
(12) Disclosures about Fair Value of Financial Instruments:
Debt
The fair value of the Company's debt is estimated based on the current
rates offered to the Company for debt of the same remaining maturities. The
fair value of the senior bank debt and the Seller Note approximates the
carrying value. The fair value at December 31, 1998 of the 8 1/2% Senior Notes
was approximately $204,500.
Interest Rate Exchange Agreements
The fair value of the Swaps is the estimated amount that the Company
would receive or pay to terminate the Swaps, taking into account current
interest rates and the current creditworthiness of the Swap counterparties. At
December 31, 1998, the Company would have paid approximately $1,464 to
terminate the Swaps, inclusive of accrued interest.
(13) FASB 131--Disclosure about Segments of an Enterprise and Related
Information:
During the fourth quarter of fiscal year 1998, the Company adopted
Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosure about
Segments of an Enterprise and Related Information". This statement requires the
Company to report segment financial information consistent with the
presentations made to the Company's management for decision-making purposes.
All revenues of the Company are derived solely from cable television operations
and related activities. When allocating capital and operational resources to
the cable television systems, the Company's management evaluates such factors
as the bandwidth capacity and other cable plant characteristics, the offered
programming services, and the rate structure. The decision making of the
Company's management is based primarily on the impact of such resource
allocations on the Company's consolidated system cash flow (defined as
operating income before management fee expense, and depreciation and
amortization). For the years ended 1998 and 1997, and for the period ended
December 31, 1996, the Company's consolidated system cash flow was
approximately $59,850, $9,390, and $2,960, respectively.
(14) Recent Events:
On February 26, 1999, Mediacom and Mediacom Capital, a New York
corporation wholly-owned by Mediacom, jointly issued $125,000 aggregate
principal amount of 7 7/8% Senior Notes due on February 15, 2011. The net
proceeds from this offering of approximately $121,900 were used to repay a
substantial portion of outstanding indebtedness under the Company's bank credit
facilities. Interest on the 7 7/8% Senior Notes will be payable semi-annually
on February 15 and August 15 of each year, commencing on August 15, 1999.
The Company is regularly presented with opportunities to acquire cable
television systems that are evaluated on the basis of the Company's acquisition
strategy. Although the Company presently does not have any definitive
agreements to acquire or sell any of its cable television systems, it is
negotiating with prospective sellers to acquire additional cable television
systems. If definitive agreements for all such potential acquisitions are
executed, and if such acquisitions are then consummated, the Company's customer
base would
F-18
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
approximately double in size. These acquisitions are subject to the negotiation
and completion of definitive documentation, which will include customary
representations and warranties and will be subject to a number of closing
conditions. Financing for these potential transactions has not been determined;
however, if such acquisitions are consummated, the Company believes its total
indebtedness would substantially increase. No assurance can be given that such
definitive documents will be entered into or that, if entered into, the
acquisitions will be consummated.
(15) Subsequent events:
The Company has filed a registration statement with the Securities and
Exchange Commission with the intent of having an initial public offering of its
common stock. In connection therewith, the members of the limited liability
company will exchange their membership interests for shares in a C corporation
and will become subject to federal and state income taxes. As of December 31,
1998, had the Company been a C corporation, the Company would have recognized a
non-recurring non-cash benefit to earnings of approximately $900 to record a
net deferred tax asset.
Pro forma earnings per share is calculated in accordance with SFAS No.
128 "Earnings Per Share" and is presented on a pro forma basis as if the shares
issued to effect the exchange of membership interests of Mediacom LLC for
shares in a C corporation were outstanding for all periods presented. The
anticipated exchange of common stock for membership interests are included at
an exchange ratio of shares per membership interest. The calculation does
not include the effect of any stock options that may be granted as part of the
IPO. The Company has operating losses for the periods presented and has not
reflected any income tax benefit as part of the pro forma loss.
At the time of the offering, the Company will terminate the management
services agreement with Mediacom Management and all employees of Mediacom
Management will become employees of the new C corporation.
F-19
<PAGE>
Schedule II
MEDIACOM LLC AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(All dollar amounts in 000's)
<TABLE>
<CAPTION>
Balance at Additions
beginning of charged to costs Balance at
period and expenses Deductions end of period
------------ ---------------- ---------- -------------
<S> <C> <C> <C> <C>
December 31, 1996
Allowance for doubtful
accounts
Current
receivables........ $ -- $ 91 $ 66 $ 25
Acquisition reserves
Accrued expenses.... $ -- $ -- $ -- $ --
December 31, 1997
Allowance for doubtful
accounts
Current
receivables........ $ 25 $ 45 $ 14 $ 56
Acquisition reserves
Accrued expenses.... $ -- $ -- $ -- $ --
December 31, 1998
Allowance for doubtful
accounts
Current
receivables........ $ 56 $1,694 $1,452 $ 298
Acquisition
reserves(1)
Accrued expenses.... $ -- $4,120 $ -- $4,120
</TABLE>
- -----------------------------
(/1/) Addition was charged to intangible assets
F-20
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(All dollar amounts in 000's)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents............................. $ 1,555 $ 2,212
Subscriber accounts receivable, net of allowance for
doubtful accounts of $397 in 1999 and $298 in 1998... 2,342 2,512
Prepaid expenses and other assets..................... 1,690 1,712
Investment in cable television systems:
Inventory........................................... 10,135 8,240
Property, plant and equipment, at cost.............. 346,260 314,627
Less--accumulated depreciation...................... (69,134) (45,423)
-------- --------
Property, plant and equipment, net................ 277,126 269,204
Intangible assets, net of accumulated amortization
of $38,888 in 1999 and $26,307 in 1998............. 140,956 150,928
-------- --------
Total investment in cable television systems...... 428,217 428,372
Other assets, net of accumulated amortization of
$7,039 in 1999 and $3,854 in 1998.................... 14,606 16,344
-------- --------
Total assets...................................... $448,410 $451,152
======== ========
LIABILITIES AND MEMBERS' EQUITY
LIABILITIES
Debt................................................ $359,629 $337,905
Accounts payable.................................... 1,204 2,678
Accrued expenses.................................... 29,931 29,446
Subscriber advances................................. 1,888 1,510
Management fees payable............................. 751 962
-------- --------
Total liabilities................................. 393,403 372,501
-------- --------
COMMITMENTS AND CONTINGENCIES......................... -- --
MEMBERS' EQUITY
Capital contributions............................... 124,990 124,990
Accumulated deficit................................. (69,983) (46,339)
-------- --------
Total members' equity............................. 55,007 78,651
-------- --------
Total liabilities and members' equity............. $448,410 $451,152
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
F-21
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(All dollar amounts in 000's)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------- ------------------
1999 1998 1999 1998
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenues................................ $ 38,178 $34,125 $ 74,178 $ 60,068
Costs and expenses:
Service costs......................... 12,350 11,641 24,175 21,463
Selling, general, and administrative
expenses............................. 7,301 6,238 14,502 11,541
Management fee expense................ 1,923 1,575 3,588 2,782
Depreciation and amortization......... 21,029 16,193 41,431 27,422
-------- ------- -------- --------
Operating loss.......................... (4,425) (1,522) (9,518) (3,140)
-------- ------- -------- --------
Interest expense, net................... 7,012 6,721 13,392 11,738
Other (income) expenses................. (259) 228 734 3,568
-------- ------- -------- --------
Net loss................................ $(11,178) $(8,471) $(23,644) $(18,446)
======== ======= ======== ========
Pro forma net loss and loss per share:
Historical net loss before income
taxes................................ $(23,644)
Pro forma income tax effects
(note 6)............................. --
--------
Pro forma net loss...................... $(23,644)
========
Pro forma common shares outstanding
(note 6)...............................
Pro forma basic and diluted loss per
share..................................
</TABLE>
See accompanying notes to consolidated financial statements
F-22
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts in 000's)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................... $ (23,644) $ (18,446)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Accretion of interest on seller note................. 149 136
Depreciation and amortization........................ 41,431 27,422
Decrease (increase) in subscriber accounts
receivable.......................................... 170 (4,425)
Decrease (increase) in prepaid expenses and other
assets.............................................. 22 (1,403)
(Decrease) increase in accounts payable.............. (1,474) 4,095
Increase in accrued expenses......................... 485 24,001
Increase in subscriber advances...................... 378 9
(Decrease) increase in management fees payable....... (211) 414
--------- ---------
Net cash flows from operating activities........... 17,306 31,803
--------- ---------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures................................... (35,891) (16,884)
Acquisitions of cable television systems............... -- (337,195)
Other, net............................................. (314) --
--------- ---------
Net cash flows used in investing activities........ (36,205) (354,079)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings......................................... 152,800 456,400
Repayment of debt...................................... (131,225) (214,175)
Capital contributions.................................. -- 94,000
Financing costs........................................ (3,333) (13,568)
--------- ---------
Net cash flows from financing activities........... 18,242 322,657
--------- ---------
Net (decrease) increase in cash and cash
equivalents....................................... ( 657) 381
CASH AND CASH EQUIVALENTS, beginning of period........... 2,212 1,027
--------- ---------
CASH AND CASH EQUIVALENTS, end of period................. $ 1,555 $ 1,408
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest............... $ 10,999 $ 7,482
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
F-23
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
(Unaudited)
(1) Statement of Accounting Presentation and Other Information
Mediacom LLC ("Mediacom" and collectively with its subsidiaries, the
"Company"), a New York limited liability company, was formed in July 1995
principally to acquire and operate cable television systems. As of June 30,
1999, the Company had acquired and was operating cable television systems in
fourteen states, principally Alabama, California, Florida, Kentucky, Missouri
and North Carolina.
Mediacom Capital Corporation ("Mediacom Capital"), a New York corporation
wholly owned by Mediacom, was organized in March 1998 for the sole purpose of
acting as co-issuer with Mediacom of $200,000 aggregate principal amount of 8
1/2% senior notes due 2008 (the "8 1/2% Senior Notes") and of $125,000
aggregate principal amount of 7 7/8% senior notes due 2011 (the "7 7/8% Senior
Notes" and collectively with the 8 1/2% Senior Notes, the "Senior Notes") (see
Note 3). Mediacom Capital has nominal assets and does not conduct operations of
its own. The Senior Notes are joint and several obligations of Mediacom and
Mediacom Capital, although Mediacom received all the net proceeds of the Senior
Notes.
The consolidated financial statements include the accounts of Mediacom
and its subsidiaries and 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.
The consolidated financial statements as of June 30, 1999 and 1998 are
unaudited; however, in the opinion of management, such statements include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results for the periods presented. The accounting
policies followed during such interim periods reported are in conformity with
generally accepted accounting principles and are consistent with those applied
during annual periods. For additional disclosures, including a summary of the
Company's accounting policies, the interim financial statements should be read
in conjunction with the Company's Annual Report on Form 10-K, as amended (File
Nos. 333-57285-01 and 333-57285). The results of operations for the interim
periods are not necessarily indicative of the results that might be expected
for future interim periods or for the full year ending December 31, 1999.
(2) Acquisitions
The Company completed the undernoted acquisitions (the "Acquired
Systems") in 1998. These acquisitions were accounted for using the purchase
method of accounting, and accordingly, the purchase price of these acquisitions
has been allocated to the assets acquired and liabilities assumed at their
estimated fair values at their respective date of acquisition. The results of
operations of the Acquired Systems have been included with those of the Company
since the dates of acquisition.
On January 9, 1998, the Company acquired the assets of a cable television
system serving approximately 17,200 basic subscribers in Clearlake, California
and surrounding communities (the "Clearlake System") for a purchase price of
$21,400. The purchase price has been allocated based on an independent
appraisal as follows: approximately $5,973 to property, plant and equipment,
and approximately $15,427 to intangible assets. Additionally, approximately
$226 of direct acquisition costs has been allocated to other assets. In the
first quarter of 1998, the Company recorded acquisition reserves related to
this acquisition in the amount of approximately $370, which are included in
accrued expenses. The acquisition of the Clearlake System and related closing
costs and adjustments were financed with borrowings under the Company's bank
credit facilities (see Note 3).
On January 23, 1998, the Company acquired the assets of cable television
systems serving approximately 260,100 basic subscribers in various regions of
the United States (the "Cablevision Systems")
F-24
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
(Unaudited)
for a purchase price of approximately $308,200. The purchase price has been
allocated based on an independent appraisal as follows: approximately $205,500
to property, plant and equipment, and approximately $102,700 to intangible
assets. Additionally, approximately $3,500 of direct acquisition costs has been
allocated to other assets. In the first quarter of 1998, the Company recorded
acquisition reserves related to this acquisition in the amount of approximately
$3,750, which are included in accrued expenses. The acquisition of the
Cablevision Systems and related closing costs and adjustments were financed
with equity contributions, borrowings under the Company's bank credit
facilities, and other bank debt (see Note 3).
On October 1, 1998, the Company acquired the assets of a cable television
system serving approximately 3,800 basic subscribers in Caruthersville,
Missouri (the "Caruthersville System") for a purchase price of $5,000. The
purchase price has been allocated as follows: approximately $2,300 to property,
plant and equipment, and approximately $2,700 to intangible assets. The
acquisition of the Caruthersville System and related closing costs and
adjustments were financed with borrowings under the Company's bank credit
facilities (see Note 3).
(3) Debt
As of June 30, 1999 and December 31, 1998, debt consisted of:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
-------- ------------
<S> <C> <C>
Mediacom:
8 1/2% Senior Notes(a)............................. $200,000 $200,000
7 7/8% Senior Notes(b)............................. 125,000 --
Subsidiaries:
Bank Credit Facilities(c).......................... 31,000 134,425
Seller Note(d)..................................... 3,629 3,480
-------- --------
$359,629 $337,905
======== ========
</TABLE>
(a) On April 1, 1998, Mediacom and Mediacom Capital jointly issued
$200,000 aggregate principal amount of 8 1/2% Senior Notes due on
April 15, 2008. The 8 1/2% Senior Notes are unsecured obligations of
the Company, and the indenture for the 8 1/2% Senior Notes
stipulates, among other things, restrictions on incurrence of
indebtedness, distributions, mergers and asset sales and has cross-
default provisions related to other debt of the Company. Interest
accrues at 8 1/2% per annum, beginning from the date of issuance and
is payable semi-annually on April 15 and October 15 of each year.
The 8 1/2% Senior Notes may be redeemed at the option of Mediacom,
in whole or part, at any time after April 15, 2003, at redemption
prices decreasing from 104.25% of their principal amount to 100% in
2006, plus accrued and unpaid interest.
(b) On February 26, 1999, Mediacom and Mediacom Capital jointly issued
$125,000 aggregate principal amount of 7 7/8% Senior Notes due on
February 15, 2011. The 7 7/8% Senior Notes are unsecured obligations
of the Company, and the indenture for the 7 7/8% Senior Notes
stipulates, among other things, restrictions on incurrence of
indebtedness, distributions, mergers and asset sales and has cross-
default provisions related to other debt of the Company. Interest
accrues at 7 7/8% per annum, beginning from the date of issuance and
is payable semi-annually on February 15 and August 15 of each year,
commencing on August 15, 1999. The 7 7/8% Senior Notes may be
redeemed at the option of Mediacom, in whole or part, at any time
after February 15, 2006, at redemption prices decreasing from
103.938% of their principal amount to 100% in 2008, plus accrued and
unpaid interest.
F-25
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
(Unaudited)
(c) On June 24, 1997, the Company entered into an eight and one-half
year, $100,000 reducing revolving credit and term loan agreement
(the "Western Credit Agreement"). On January 23, 1998, the Company
entered into a separate eight and one-half year, $225,000 reducing
revolving credit and term loan agreement (the "Southeast Credit
Agreement" and together with the Western Credit Agreement, the "Bank
Credit Agreements"). By separate amendments dated as of January 26,
1999 to each of the Bank Credit Agreements, the term loans were
converted into additional revolving credit loans. At June 30, 1999,
the aggregate commitments under the Bank Credit Agreements were
$321,000. The Bank Credit Agreements are non-recourse to Mediacom
and have no cross-default provisions relating directly to each
other. The reducing revolving credit lines under the Bank Credit
Agreements make available a maximum commitment amount for a period
of up to eight and one-half years, which is subject to quarterly
reductions, beginning September 30, 1998, ranging from 0.21% to
11.58% of the original commitment amount of the reducing revolver.
The Bank Credit Agreements require mandatory reductions of the
reducing revolver credit lines from excess cash flow, as defined,
beginning December 31, 1999. The Bank Credit Agreements provide for
interest at varying rates based upon various borrowing options and
the attainment of certain financial ratios, and for commitment fees
of 3/8% to 1/2% per annum on the unused portion of available credit
under the reducing revolver credit lines. The average interest rate
on outstanding debt under the Bank Credit Agreements was 6.3% and
6.9% for the three months ended June 30, 1999 and December 31, 1998,
respectively, before giving effect to the interest rate swap
agreements discussed below.
The Bank Credit Agreements require the Company to maintain
compliance with certain financial covenants including, but not
limited to, the leverage ratio, the interest coverage ratio, the
fixed charge coverage ratio and the pro forma debt service coverage
ratio, as defined therein. The Bank Credit Agreements also require
the Company to maintain compliance with other covenants including,
but not limited to, limitations on mergers and acquisitions,
consolidations and sales of certain assets, liens, the incurrence of
additional indebtedness, certain restrictive payments, and certain
transactions with affiliates. The Company was in compliance with all
covenants of its Bank Credit Agreements as of June 30, 1999.
The Bank Credit Agreements are secured by Mediacom's pledge of all
its ownership interests in the subsidiaries and a first priority
lien on all the tangible and intangible assets of the operating
subsidiaries, other than real property in the case of the Southeast
Credit Agreement. The indebtedness under the Bank Credit Agreements
is guaranteed by Mediacom on a limited recourse basis to the extent
of its ownership interests in the operating subsidiaries. At June
30, 1999, the Company had $260,000 of unused bank commitments under
the Bank Credit Agreements, all of which could have been borrowed by
the operating subsidiaries for purposes of distributing such
borrowed proceeds to Mediacom under the most restrictive covenants.
As of June 30, 1999, the Company had entered into interest rate
exchange agreements (the "Swaps") with various banks pursuant to
which the interest rate on $50,000 is fixed at a weighted average
swap rate of approximately 6.2%, plus the average applicable margin
over the Eurodollar Rate option under the Bank Credit Agreements.
Under the terms of the Swaps, which expire from 2000 through 2002,
the Company is exposed to credit loss in the event of nonperformance
by the other parties to the Swaps. However, the Company does not
anticipate nonperformance by the counterparties. During the first
quarter of 1999, the net proceeds from the offering of the 7 7/8%
Senior Notes, in the amount of approximately $121,900, were used to
repay a substantial portion of outstanding debt under the Bank
Credit Agreements. As a result of this repayment of floating
F-26
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
(Unaudited)
rate bank debt, approximately $19,000 of the $50,000 of Swaps
outstanding as of June 30, 1999, no longer qualify as hedge
instruments. Accordingly, such Swaps have been marked to market as of
June 30, 1999, with a fair value of approximately $135 which is
included in accrued expenses. The related effect to the consolidated
statement of operations was approximately $619, which is included in
other income for the three months ended June 30, 1999 and $135, which
is included in other expenses for the six months ended June 30, 1999.
(d) In connection with an acquisition completed in 1996, certain
subsidiaries of Mediacom issued to the seller an unsecured senior
subordinated note (the "Seller Note") in the amount of $2,800, with
a final maturity of June 28, 2006. Interest is deferred throughout
the term of the Seller Note and is payable at maturity or upon
prepayment. For the five-year period ending June 28, 2001, the
annual interest rate is 9.0%. After the initial five-year period,
the annual interest rate increases to 15.0%, with an interest
clawback for the first five years. After the initial seven-year
period, the interest rate increases to 18.0%, with an interest
clawback for the first seven years. There are no penalties
associated with prepayment of this note.
The Seller Note agreement contains a debt incurrence covenant
limiting the ability of the Company to incur additional indebtedness
under the Western Credit Agreement. The Seller Note is subordinated
and junior in right of payment to all senior obligations of certain
subsidiaries, as defined in the Western Credit Agreement.
All debt outstanding as of June 30, 1999, matures after December 31,
2004.
(4) Commitments and Contingencies
Pursuant to the Cable Television Consumer Protection and Competition Act
of 1992, the Federal Communications Commission (the "FCC") adopted
comprehensive regulations governing rates charged to subscribers for basic
cable and cable programming services. The FCC's authority to regulate the
rates charged for cable programming services expired on March 31, 1999. Basic
cable rates must be set using a benchmark formula. Alternatively, a cable
operator can attempt to establish higher rates through a cost-of-service
showing. The FCC has also adopted regulations that permit qualifying small
cable operators to justify their regulated rates using a simplified rate-
setting methodology. This methodology almost always results in rates which
exceed those produced by the cost-of-service rules applicable to larger cable
television operators. Approximately 70% of the basic subscribers served by the
Company's cable television systems are covered by such FCC rules. Once rates
for basic cable service have been established pursuant to one of these
methodologies, the rate level can subsequently be adjusted only to reflect
changes in the number of regulated channels, inflation, and increases in
certain external costs, such as franchise and other governmental fees,
copyright and retransmission consent fees, taxes, programming costs and
franchise-related obligations. FCC regulations also govern the rates which can
be charged for the lease of customer premises equipment and for installation
services.
As a result of such legislation and FCC regulations, the Company's basic
cable service rates and its equipment and installation charges (the "Regulated
Services") are subject to the jurisdiction of local franchising authorities.
The Company believes that it has complied in all material respects with the
rate regulation provisions of the federal law. However, the Company's rates
for Regulated Services are subject to review by the appropriate franchise
authority if it is certified by the FCC to regulate basic cable service rates.
If, as a result of the review process, the Company cannot substantiate the
rates charged by its cable television systems for Regulated Services, the
Company could be required to reduce its rates for Regulated Services to the
appropriate level and refund the excess portion of rates received for up to
one year prior to the implementation of any increase in rates for Regulated
Services.
F-27
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
(Unaudited)
The Company's agreements with franchise authorities require the payment
of fees of up to 5% of annual revenues. Such franchises are generally
nonexclusive and are granted by local governmental authorities for a specified
term of years, generally for periods of up to fifteen years.
On April 29, 1999, a bank issued two irrevocable letters of credit in the
aggregate amount of $30,000 in favor of the seller of the Triax Systems
(defined below) to secure the Company's performance under the related
definitive agreement. On November 5, 1999, the Company completed the
acquisition of the Triax Systems and accordingly, such letters were cancelled.
(5) FASB 131--Disclosure about Segments of an Enterprise and Related
Information
As of December 31, 1998, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 131, "Disclosure about Segments of an
Enterprise and Related Information". This statement requires the Company to
report segment financial information consistent with the presentations made to
the Company's management for decision-making purposes. All revenues of the
Company are derived solely from cable television operations and related
activities. The decision making of the Company's management is based primarily
on the impact of capital and operational resource allocations on the Company's
consolidated system cash flow (defined as operating income (loss) before
management fee expense, and depreciation and amortization). The Company's
management evaluates such factors as the bandwidth capacity and other cable
plant characteristics, the offered programming services, and the customer
rates, when allocating capital and operational resources. The Company's
consolidated system cash flow for the three months ended June 30, 1999 and 1998
was approximately $18,500, and $16,200, respectively, and for the six months
ended June 30, 1999 and 1998 was approximately $35,500 and $27,000,
respectively.
(6) Subsequent Events
Financings and Acquisitions
On September 24, 1999, the Seller Note was prepaid in full with no
penalties associated with such prepayment.
On September 30, 1999, the Company replaced its existing credit
facilities with a new $550,000 credit facility consisting of an eight and one-
half year, $450,000 reducing revolver expiring March 2008 and a $100,000 term
loan due September 2008 (the "USA Credit Facilities"). On November 5, 1999, the
Company entered into an additional eight and one half year, $450,000 reducing
revolver expiring on June 2008 and a $100,000 term loan due December 2008 (the
"Midwest Credit Facilities" and together with the USA Credit Facilities, the
"Subsidiary Credit Facilities".) The terms of these Subsidiary Credit
Facilities are substantially similar to the Company's former subsidiary credit
facilities except for these facilities only being secured by the Company's
pledge of all its ownership interests in the subsidiaries.
On October 15, 1999, the Company acquired the stock of cable television
systems owned by Zylstra Communications Corporation (the "Zylstra Systems") for
a purchase price of approximately $19,500 subject to certain adjustments. The
Zylstra systems serve approximately 14,000 subscribers in Iowa, Minnesota and
South Dakota. On November 5, 1999, the Company acquired the assets of cable
television systems owned by Triax Midwest Associates, L.P. (the "Triax
Systems") for a purchase price of approximately $740,000 subject to certain
adjustments. The Triax Systems serve approximately 341,500 subscribers in
Arizona, Illinois, Indiana, Iowa, Michigan, Minnesota, Ohio and Wisconsin. The
acquisitions were financed with $10,500 of additional equity contributions from
the Company's members and borrowings under the Subsidiary Credit Facilities.
F-28
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
(Unaudited)
Management Agreements
Each of the Company's operating subsidiaries is a party to a management
agreement with Mediacom Management. Under these agreements, Mediacom Management
provides management services to the Company's operating subsidiaries and is
paid annual management fees of 5% of the first $50,000 of annual gross
operating revenues, 4.5% of revenues in excess of $50,000, up to $75,000, and
4% of revenues in excess of $75,000. Mediacom Management utilized such fees to
compensate its employees as well as fund corporate overhead. The management
agreements were revised effective November 19, 1999 in connection with an
amendment to Mediacom's operating agreement, to provide for management fees
equal to 2% of annual gross revenues. In addition, Mediacom Management has
agreed to forgive the management fees accrued from July 1, 1999 through
November 19, 1999.
The operating agreement of Mediacom provides that Mediacom Management is
paid an acquisition fee of 1% of the purchase price of acquisitions made by
Mediacom until its pro forma consolidated annual revenues equaled $75,000, and
thereafter 0.5% of such purchase price. No such fees were paid during the six
months ended June 30, 1999 since there were no acquisitions completed during
this period. Pursuant to the amendment to Mediacom's operating agreement, no
further acquisition fees will be payable.
During the fourth quarter of fiscal 1999, the Company will record a one-
time $12,500 non-recurring, non-cash charge associated with the amendments to
Mediacom Management's management agreements for which additional membership
interests will be issued to an existing member of Mediacom upon occurrence of a
future valuation of Mediacom including an initial public offering.
Initial Public Offering
The Company has filed a registration statement with the Securities and
Exchange Commission with the intent of having an initial public offering of
common stock. In connection therewith, Mediacom Communications Corporation (the
"Corporation"), a Delaware Corporation, was formed. Immediately prior to this
offering, the Corporation will issue shares of common stock in exchange for all
of the outstanding membership interests of Mediacom, which currently serves as
the holding company for the operating subsidiaries. As a result, the
Corporation will become the parent company of Mediacom which will continue to
serve as the holding company of the subsidiaries. Immediately prior to this
offering, additional membership interests will be issued to all members of
Mediacom in accordance with a formula set forth in Mediacom's amended operating
agreement which is based upon a valuation of Mediacom established in this
offering. Effective upon completion of this offering, a provision in the
amended operating agreement providing for a special allocation of membership
interests to certain members based upon valuations of Mediacom performed from
time to time shall be removed. In connection with the removal of such
provision, the amended operating agreement also provides for the issuance to
the certain members of membership interests representing 16.5% of the equity in
Mediacom in accordance with a formula based upon the valuation established at
the completion of this initial public offering. These newly issued membership
interests will be included as part of the exchange for shares of the
Corporation's common stock.
The management agreements between Mediacom Management and each of the
operating subsidiaries will be terminated upon completion of this offering, and
Mediacom Management's employees will become the Corporation's employees and its
corporate overhead will become the Corporation's corporate overhead. These
expenses will be reflected as corporate expense in the consolidated statement
of operations.
F-29
<PAGE>
MEDIACOM LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(All dollar amounts in 000's)
(Unaudited)
The Company is currently a limited liability company and its members are
required to report their share of income or loss in their respective income tax
returns. After completion of this offering and the exchange of membership
interests in Mediacom for shares of the Corporation's common stock, the results
of the Corporation will be included in the Corporation's corporate tax returns.
The Corporation will also record a one-time non-recurring charge to earnings to
record a net deferred tax liability. Had the Company been a C corporation as of
June 30, 1999, a charge of $4,318 would have been recorded.
Pro forma earnings per share is calculated in accordance with SFAS No.
128 "Earnings Per Share" and is presented on a pro forma basis as if the shares
issued to effect the exchange of membership interests of Mediacom for shares in
a corporation were outstanding for all periods presented. The anticipated
exchange of membership interests for common stock is included at an exchange
ratio of shares per membership interest. The calculation does not include
the effect of shares that may be issued or any stock options that may be
granted as part of the IPO. The Company has operating losses for the periods
presented and has not reflected any income tax benefit as part of the pro forma
loss.
Other
On November 4, 1999, the Company completed an agreement with SoftNet
Systems, Inc. ("SoftNet"), a high-speed broadband Internet access and content
services company, to deploy SoftNet Systems' high-speed Internet access
services throughout the Company's cable television systems. In addition to a
revenue sharing arrangement, the Company will receive 3.5 million shares of
SoftNet's common stock, representing a fair value of approximately $85,300 as
of November 4, 1999, in exchange for SoftNet's exclusive long-term rights to
deliver high-speed Internet access services to the Company's customers. These
shares represent approximately 16.2% of SoftNet's outstanding stock as of
November 4, 1999. Under the terms of this agreement, over a period of three
years the Company is required to upgrade its cable network to provide two-way
communications capability in cable systems passing 900,000 homes, including the
Triax and Zylstra Systems, and make available such homes to SoftNet.
F-30
<PAGE>
Independent Auditors' Report
The Board of Directors
U.S. Cable Television Group, L.P.
We have audited the accompanying consolidated balance sheets of U.S.
Cable Television Group, L.P. and subsidiaries (a wholly-owned subsidiary of
Cablevision Systems Corporation) as of December 31, 1997 and 1996, and the
related consolidated statements of operations and partners' capital
(deficiency) and cash flows for the year ended December 31, 1997, and for the
periods from January 1, 1996 to August 12, 1996, and August 13, 1996 to
December 31, 1996. 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 U.S. Cable
Television Group, L.P. and subsidiaries as of December 31, 1997 and 1996, and
the results of their operations and their cash flows for the year ended
December 31, 1997, and the periods from January 1, 1996 to August 12, 1996, and
August 13, 1996 to December 31, 1996, in conformity with generally accepted
accounting principles.
As discussed in note 1 to the consolidated financial statements,
effective August 13, 1996, U.S. Cable Television Group L.P. redeemed certain
limited and general partnership interests in a business combination accounted
for as a purchase. As a result of the redemption, the consolidated financial
information for the period after the redemption is presented on a different
cost basis than that for the period before the redemption and therefore, is not
comparable.
KPMG LLP
Jericho, New York
March 20, 1998
F-31
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 281 $ 49
Accounts receivable-subscribers (less allowance for doubtful
accounts of $218 and $122)................................. 1,082 995
Other receivables........................................... 502 383
Prepaid expenses and other assets........................... 632 477
Property, plant and equipment, net.......................... 84,363 93,543
Excess costs over fair value of net assets acquired (less
accumulated amortization of $29,158 and $7,952)............ 119,363 140,487
Deferred financing costs (less accumulated amortization of
$1,062 and $292)........................................... 1,771 1,997
-------- --------
$207,994 $237,931
======== ========
LIABILITIES AND PARTNER'S CAPITAL
Accounts payable............................................ $ 11,605 $ 10,246
Accrued expenses:
Franchise fees............................................ 1,087 1,089
Payroll and related benefits.............................. 4,463 4,728
Interest.................................................. 879 947
Other..................................................... 7,174 3,688
Accounts payable-affiliates................................. 1,367 500
Bank debt................................................... 154,960 159,460
-------- --------
Total liabilities....................................... 181,535 180,658
Partners' capital........................................... 26,459 57,273
-------- --------
$207,994 $237,931
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-32
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
PARTNERS' CAPITAL (DEFICIENCY)
(Dollars in thousands)
<TABLE>
<CAPTION>
Period from Period from
Year ended August 13, 1996 to January 1, 1996 to
December 31, 1997 December 31, 1996 August 12, 1996
----------------- -------------------- ------------------
<S> <C> <C> <C>
Revenues................ $ 89,016 $ 32,144 $ 49,685
Operating expenses:
Technical expenses.... 38,513 15,111 23,467
Selling, general and
administrative
expenses............. 22,099 6,677 11,021
Depreciation and
amortization......... 46,116 17,842 21,034
-------- -------- ---------
Operating loss...... (17,712) (7,486) (5,837)
Other (expense) income:
Interest expense...... (12,727) (5,136) (10,922)
Interest income....... 25 14 33
Other, net............ (400) (119) (69)
-------- -------- ---------
Net loss................ (30,814) (12,727) (16,795)
Partners' capital (defi-
ciency):
Beginning of period... 57,273 -- (92,795)
Capital contribution.. -- 70,000 --
-------- -------- ---------
End of period......... $ 26,459 $ 57,273 $(109,590)
======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-33
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Period from Period from
Year ended August 13, 1996 to January 1, 1996 to
December 31, 1997 December 31, 1996 August 12, 1996
----------------- ------------------ ------------------
<S> <C> <C> <C>
Cash flows from
operating activities
Net loss.............. $(30,814) $ (12,727) $(16,795)
Adjustments to
reconcile net loss to
net cash provided by
operating activities:
Depreciation and
amortization....... 46,116 17,842 21,034
Amortization of
deferred financing
costs.............. 770 292 477
(Gain) loss on
disposal of
equipment.......... (116) 43 39
Changes in assets and
liabilities, net of
effects of
acquisition:
Accounts receivable,
net................ (87) 634 (625)
Other receivables... (119) 94 (129)
Prepaid expenses and
other assets....... (155) 131 (204)
Accounts payable and
accrued expenses... 4,510 265 (2,318)
Accounts payable to
affiliates......... 867 (576) 1,029
-------- --------- --------
Net cash provided by
operating activities... 20,972 5,998 2,508
-------- --------- --------
Cash flows from
investing activities:
Capital expenditures.. (15,769) (5,317) (11,995)
Proceeds from sale of
equipment............ 155 53 48
-------- --------- --------
Net cash used in
investing
activities........... (15,614) (5,264) (11,947)
-------- --------- --------
Cash flows from
financing activities:
Advance from V Cable.. -- -- 70,000
Cash paid for
redemption of
partners' interests.. -- (4,010) --
Additions to excess
costs................ (82) (98) --
Additions to deferred
financing costs...... (544) (2,289)
Proceeds from bank
debt................. 10,300 159,810 --
Repayment of bank
debt................. (14,800) (350) --
Repayment of senior
debt................. -- (153,538) (60,807)
-------- --------- --------
Net cash (used in)
provided by financing
activities........... (5,126) (475) 9,193
-------- --------- --------
Net increase (decrease)
in cash and cash
equivalents............ 232 259 (246)
Cash and cash
equivalents at
beginning of period.... 49 (210) 36
-------- --------- --------
Cash and cash
equivalents at end of
period................. $ 281 $ 49 $ (210)
======== ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-34
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(1) The Company
U.S. Cable Television Group, L.P. (the "Company") was formed for the
purpose of acquiring, owning and operating cable television systems, which are
generally operated pursuant to non-exclusive franchises awarded by states or
local government authorities for specified periods of time. The Company
currently operates cable television systems serving portions of the
southeastern and midwestern United States. The Company's revenues are derived
principally from the provision of cable television services, which include
recurring monthly fees paid by subscribers.
Prior to the Redemption discussed in the next paragraph, the partnership
consisted of V Cable, Inc. ("V Cable"), a wholly-owned subsidiary of
Cablevision Systems Corporation ("CSC"), with an indirect 1% general
partnership interest and a 19% limited partnership interest, General Electric
Capital Corporation ("GECC"), with a 72% limited partnership interest and
various individuals and entities owning the remaining 8% partnership interest,
as general and/or limited partners (the "Predecessor Company"). Profits and
losses were allocated in accordance with the Amended and Restated Agreement of
Limited Partnership.
On March 18, 1996, V Cable advanced $70 million to the Company which was
considered a capital contribution coincident with the Redemption. On August 13,
1996, the Company redeemed the partnership interests not already owned by V
Cable ("the Redemption") for a payment of approximately $4 million to the
holders of 8% of the partnership interests and the repayment of the balance of
the debt owed to General Electric Capital Corporation ("GECC") of approximately
$154 million. The payment of $4 million and repayment of the GECC debt was
financed under a new $175 million credit facility (Note 4). As a result of the
Redemption, which was accounted for as a purchase, the consolidated financial
information for the periods after the Redemption is presented on a different
cost basis than that for the period before the Redemption and, therefore, is
not comparable due to the change in ownership.
Subsequent to the Redemption, V Cable, through wholly-owned subsidiaries,
holds an indirect 1% general partnership interest and a direct 99% limited
partnership interest (the "Successor Company"). The partnership will terminate
December 1, 2030, unless earlier termination occurs as provided in the Amended
and Restated Agreement of Limited Partnership.
As a result of the capital contribution of $70,000 (discussed above), the
$4,010 Redemption price and $98 of miscellaneous transaction costs, the
Successor Company effectively paid $74,108 to acquire net liabilities of
$74,331, which resulted in excess costs over fair value of $148,439, as
follows:
<TABLE>
<S> <C>
Purchase price and transaction costs............................ $ 74,108
---------
Net liabilities acquired:
Cash, receivables and prepaids................................ 2,504
Property, plant and equipment................................. 98,212
Accounts payables and accrued expenses........................ (20,433)
Accounts payable-affiliate.................................... (1,076)
Senior debt................................................... (153,538)
---------
(74,331)
---------
Excess costs over fair value of net liabilities acquired...... $ 148,439
=========
</TABLE>
F-35
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
For purposes of the consolidated financial statements for the year ended
December 31, 1997, and for the period from August 13, 1996 to December 31,
1996, this excess cost is being amortized over a 7 year period.
On August 29, 1997, the Company and CSC entered into an agreement with
Mediacom LLC ("Mediacom") to sell to Mediacom substantially all of the assets
and cable systems owned by the Company. The transaction was consummated on
January 23, 1998, for a sales price of approximately $311 million (the
"Mediacom Sale").
(2) Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.
Revenue Recognition
The Company recognizes revenues as cable television services are provided
to subscribers.
Long-Lived Assets
Property, plant and equipment, including construction materials, are
recorded at cost, which includes all direct costs and certain indirect costs
associated with the construction of cable television transmission and
distribution systems and the costs of new subscriber installations. Property,
plant and equipment are being depreciated over their estimated useful lives
using the straight-line method. Leasehold improvements are amortized over the
shorter of their useful lives or the terms of the related leases.
With respect to the Predecessor Company, franchise costs were amortized
on the straight-line basis over the average term of the franchises
(approximately 4-12 years) and excess costs over fair value of net assets
acquired were amortized over a 15 year period on the straight-line basis. As
mentioned in note 1, the Successor Company is amortizing excess costs over fair
value of net assets acquired over 7 years.
The Company implemented the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," effective January 1, 1996.
The Company reviews its long-lived assets (property, plant and equipment, and
related intangible assets that arose from business combinations accounted for
under the purchase method) for impairment whenever events or circumstances
indicate that the carrying amount of an asset may not be recoverable. If the
sum of the expected cash flows, undiscounted and without interest, is less than
the carrying amount of the asset, an impairment loss is recognized as the
amount by which the carrying amount of the asset exceeds its fair value. The
adoption of Statement No. 121 had no impact on the Company's financial position
or results of operations.
Deferred Financing Costs
Costs incurred to obtain debt are deferred and amortized on the straight-
line basis over the term of the related debt.
F-36
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
Income Taxes
The Company operates as a limited partnership; accordingly, its taxable
income or loss is includable in the tax returns of the partners, and therefore,
no provision for income taxes has been made on the books of the Company. ECC
Holding Corporation ("ECC"), one of the Company's subsidiaries, is a corporate
entity and as such is subject to federal and state income taxes. Income tax
amounts in these consolidated financial statements pertain to ECC.
ECC accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
requires the liability method of accounting for deferred income taxes and
permits the recognition of deferred tax assets, subject to an ongoing
assessment of realizability.
Cash Flows
For purposes of the statement of cash flows, the Company considers short-
term investments with a maturity at date of purchase of three months or less to
be cash equivalents. The Company paid cash interest of approximately $12,026
for the year ended December 31, 1997, $13,610 for the period from January 1,
1996 to August 12, 1996, and $4,189 for the period from August 13, 1996 to
December 31, 1996, respectively.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-37
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
(3) Property, Plant and Equipment
Property, plant and equipment and estimated useful lives at December 31,
1997 and 1996, are as follows:
<TABLE>
<CAPTION>
Estimated
1997 1996 Useful lives
-------- -------- -------------
<S> <C> <C> <C>
Cable television transmission and
distribution systems:
Customer equipment......................... $ 5,175 $ 6,810 5 years
Headends................................... 7,539 6,338 9 years
Infrastructure............................. 94,920 81,502 10 years
Program, service and test equipment........ 2,824 2,141 4-7 years
Microwave equipment........................ 95 78 4-7 years
Construction in progress (including
materials and supplies)................... 699 521
-------- --------
111,252 97,390
Furniture and fixtures....................... 722 591 5 years
Transportation............................... 3,782 2,886 4 years
Land and land improvements................... 863 1,074 30 years
Leasehold improvements....................... 1,612 1,305 Term of Lease
-------- --------
118,231 103,246
Less accumulated depreciation................ (33,868) (9,703)
-------- --------
$ 84,363 $ 93,543
======== ========
</TABLE>
(4) Debt
Bank Debt
In August 1996, the Successor Company repaid the balance of the debt owed
to GECC of approximately $154,000. The repayment of the GECC debt was financed
under a new $175,000 credit facility. The credit facility is with a group of
banks led by the Bank of New York, as agent, and consists of a three year
$175,000 revolving credit facility maturing on August 13, 1999. The revolving
credit facility is payable in full upon maturity. As of December 31, 1997 and
1996, the Company had outstanding borrowings under its revolving credit
facility of $154,960 and $159,460, inclusive of overdraft amounts of $1,900 and
$0, respectively, leaving unrestricted and undrawn funds available amounting to
$21,940 and $15,540. Amounts outstanding under the facility bear interest at
varying rates based upon the bank's LIBOR rate, as defined in the loan
agreement. The weighted average interest rate was 7.1% and 7.6% on December 31,
1997 and 1996, respectively. The Company is also obligated to pay fees of .375%
per annum on the unused loan commitment. Substantially all of the general and
limited partnership interests in the Company have been pledged in support of
the borrowings under the credit agreement. The credit facility contains various
restrictive covenants, with which the Company was in compliance at December 31,
1997.
In January 1998, all amounts outstanding under the bank debt were repaid
from the proceeds from the Mediacom Sale.
F-38
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
Junior Subordinated Note
In August 1996, the Predecessor Company's Junior Term Loan and related
accrued interest was forgiven by GECC in the amount of $35,560.
(5) Income Taxes
ECC has a net operating loss carryforward for federal income tax purposes
of approximately $65,500 expiring in varying amounts through 2012.
The tax effects of temporary differences which give rise to significant
deferred tax assets or liabilities and the corresponding valuation allowance at
December 31, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
Deferred Assets 1997 1996
--------------- ------- -------
<S> <C> <C>
Depreciation and amortization............................ $ 7,132 $ 7,132
Allowance for doubtful accounts.......................... 51 51
Benefits of tax loss carry forward....................... 27,510 26,166
------- -------
Net deferred tax assets.................................. 34,693 33,349
Valuation allowance...................................... (34,693) (33,349)
------- -------
-- --
======= =======
</TABLE>
ECC has provided a valuation allowance for the total amount of the net
deferred tax assets since realization of these assets is not assured.
(6) Operating Leases
The Company leases certain office and transmission facilities under terms
of operating leases expiring at various dates through 2008. The leases
generally provide for fixed annual rental payments plus real estate taxes and
certain other costs. Rent expense for the year ended December 31, 1997, and the
periods from January 1, 1996 to August 12, 1996, and from August 13, 1996 to
December 31, 1996, amounted to approximately $778, $505, and $303,
respectively.
The Company rents space on utility poles for its operations. Pole rental
expense for the year ended December 31, 1997, and for the periods from January
1, 1996 to August 12, 1996, and from August 13, 1996 to December 31, 1996,
amounted to approximately $1,440, $912, and $547, respectively.
In connection with the Mediacom sale, the Company was relieved of all of
its future obligations under its operating leases.
(7) Related Party Transactions
CSC has interests in several entities engaged in providing cable
television programming and other services to the cable television industry.
During the year ended December 31, 1997 and for the periods from January 1,
1996 to August 12, 1996, and from August 13, 1996 to December 31, 1996, the
Company was charged approximately $742, $510 and $268, respectively, by these
entities for such services. At December 31, 1997 and 1996, the Company owed
approximately $65 and $60, respectively, to these companies for such
programming services which is included in accounts payable-affiliates in the
accompanying consolidated balance sheet.
F-39
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
CSC provides the Company with general and administrative services. For
the year ended December 31, 1997 and for the periods from January 1, 1996 to
August 12, 1996, and from August 13, 1996 to December 31, 1996, these charges
totaled approximately $3,059, $2,274 and $1,712, respectively. Amounts owed to
CSC at December 31, 1997 and 1996, for such expenses were approximately $1,109
and $408, respectively, and is included in accounts payable-affiliates in the
accompanying consolidated balance sheet.
(8) Benefit Plan
During 1989, the Company adopted a 401 (k) savings plan (the "Plan").
Employee participation is voluntary. Under the provisions of the Plan,
employees may defer up to 15% of their annual compensation (as defined). The
Company currently contributes 50% of the contributions made by participating
employees subject to a limit of 6% of the employee's compensation. The Company
may make additional contributions at its discretion. For the year ended
December 31, 1997, and for the periods from January 1, 1996 to August 12,
1996, and from August 13, 1996 to December 31, 1996, expense relating to this
Plan amounted to $165, $189 and $138, respectively.
The Company does not provide postretirement benefits for any of its
employees.
(9) Disclosures About The Fair Value Of Financial Instruments
Cash and Cash Equivalents, Accounts Receivable-Subscribers, Other
Receivables, Accounts Payable, Accrued Expenses, and Accounts Payable-
Affiliates
Carrying amounts approximate fair value due to the short maturity of
these instruments.
Bank Debt
The carrying amounts of the Company's long term debt instruments
approximate fair value as the underlying variable interest rates are adjusted
for market rate fluctuations.
F-40
<PAGE>
Independent Auditor's Report
The Board of Directors
U.S. Cable Television Group, L.P.
We have audited the accompanying consolidated balance sheets of U.S.
Cable Television Group, L.P. and subsidiaries as of December 31, 1996 and 1995,
and the related consolidated statements of operations and partners' capital
(deficiency) and cash flows for the periods from January 1, 1996 to August 12,
1996 and August 13, 1996 to December 31, 1996, and for each of the years in the
two year period ended December 31, 1995. 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 financial statements referred to above present
fairly, in all material respects, the financial position of U.S. Cable
Television Group, L.P. and subsidiaries as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for the periods from
January 1, 1996 to August 12, 1996 and August 13, 1996 to December 31, 1996,
and for each of the years in the two year period ended December 31, 1995 in
conformity with generally accepted accounting principles.
As discussed in note 1 to the consolidated financial statements,
effective August 13, 1996, U.S. Cable Television Group L.P. redeemed certain
limited and general partnership interests in a business combination accounted
for as a purchase. As a result of the redemption, the consolidated financial
information for the period after the redemption is presented on a different
cost basis than that for the period before the redemption, and therefore, is
not comparable.
KPMG LLP
Jericho, New York
April 1, 1997, except as to Note 11,
which is as of January 23, 1998
F-41
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
ASSETS
------
Cash and cash equivalents.................................. $ 49 $ 36
Accounts receivable--subscribers (less allowance for
doubtful accounts of $122 and $202)....................... 995 1,004
Other receivables.......................................... 383 348
Accounts receivable from affiliates........................ -- 75
Prepaid expenses and other assets.......................... 477 404
Property, plant and equipment, net......................... 93,543 101,439
Deferred franchise costs (less accumulated amortization of
$92,787).................................................. -- 13,738
Excess cost over fair value of net assets acquired (less
accumulated amortization of $7,952 and $22,272)........... 140,487 61,197
Deferred financing and other costs (less accumulated
amortization of $292 and $4,452).......................... 1,997 1,620
-------- --------
$237,931 $179,861
======== ========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
----------------------------------------------
Accounts payable........................................... $ 10,246 $ 4,170
Accrued expenses:
Franchise fees........................................... 1,089 995
Payroll and related benefits............................. 4,728 3,796
Programming costs........................................ -- 7,216
Interest................................................. 947 --
Other.................................................... 3,688 7,442
Accounts payable to affiliates............................. 500 --
Bank debt.................................................. 159,460 --
Senior debt................................................ -- 214,392
Junior subordinated note................................... -- 34,645
-------- --------
Total liabilities...................................... 180,658 272,656
Partners' capital (deficiency)............................. 57,273 (92,795)
-------- --------
$237,931 $179,861
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-42
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND
PARTNERS' CAPITAL (DEFICIENCY)
(see note 1)
(Dollars in thousands)
<TABLE>
<CAPTION>
Period from Period from
August 13, January 1, Year Ended
1996 to 1996 to December 31,
December 31, August 12, ------------------
1996 1996 1995 1994
------------ ----------- -------- --------
<S> <C> <C> <C> <C>
Revenue........................... $ 32,144 $ 49,685 $ 76,568 $ 71,960
-------- --------- -------- --------
Operating expenses:
Technical expenses.............. 15,111 23,467 34,895 29,674
Selling, general and
administrative expenses........ 6,677 11,021 19,875 20,776
Depreciation and amortization... 17,842 21,034 36,329 41,861
-------- --------- -------- --------
Operating loss.................. (7,486) (5,837) (14,531) (20,351)
Other (expense) income:
Interest expense................ (5,136) (10,922) (26,157) (24,195)
Interest income................. 14 33 70 236
Other, net...................... (119) (69) (241) (1,280)
-------- --------- -------- --------
Net loss.......................... (12,727) (16,795) (40,859) (45,590)
Partners' capital (deficiency):
Beginning of period............. -- (92,795) (51,936) (6,346)
Capital contribution............ 70,000 -- -- --
-------- --------- -------- --------
End of year....................... $ 57,273 $(109,590) $(92,795) $(51,936)
======== ========= ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-43
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(see note 1)
(Dollars in thousands)
<TABLE>
<CAPTION>
Period from Period from
August 13, January 1, Year Ended
1996 to 1996 to December 31,
December 31, August 12, ------------------
1996 1996 1995 1994
------------ ----------- -------- --------
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss........................ $ (12,727) $(16,795) $(40,859) $(45,590)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and
amortization................. 17,842 21,034 36,329 41,861
Amortization of deferred
financing costs.............. 292 477 746 752
Loss on disposal of
equipment.................... 43 39 104 192
Interest on senior
subordinated debentures...... -- -- 10,022 9,038
Interest on junior
subordinated debentures...... -- -- 3,970 3,516
Changes in assets and
liabilities, net of effects of
acquisition:
Accounts receivables, net..... 634 (625) (546) (47)
Other receivables............. 94 (129) (225) (54)
Prepaid expenses and other
assets....................... 131 (204) (3) 80
Accounts payable and accrued
expenses..................... 265 (2,318) 3,193 2,995
Accounts payable to
affiliates................... (576) 1,029 (744) 575
--------- -------- -------- --------
Net cash provided by operating
activities....................... 5,998 2,508 11,987 13,318
--------- -------- -------- --------
Cash flows used in investing
activities:
Capital expenditures............ (5,317) (11,995) (20,502) (21,359)
Proceeds from sale of
equipment...................... 53 48 430 --
--------- -------- -------- --------
Net cash used in investing
activities..................... (5,264) (11,947) (20,072) (21,359)
--------- -------- -------- --------
Cash flows from financing
activities:
Advance from V Cable............ -- 70,000 -- --
Cash paid for redemption of
partners' interests............ (4,010) -- -- --
Additions to excess costs....... (98) -- -- --
Additions to deferred financing
costs.......................... (2,289) -- -- --
Proceeds from bank debt......... 159,810 -- 8,000 --
Repayment of bank debt.......... (350) -- -- --
Repayment of senior debt........ (153,538) (60,807) -- --
Repayment of note payable....... -- -- -- (35)
--------- -------- -------- --------
Net cash used in financing
activities..................... (475) 9,193 8,000 (35)
Net increase in cash and cash
equivalents...................... 259 (246) (85) (8,076)
Cash and cash equivalents at
beginning of period.............. (210) 36 121 8,197
--------- -------- -------- --------
Cash and cash equivalents at end
of period........................ $ 49 $ (210) $ 36 $ 121
========= ======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-44
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(1) The Company
U.S. Cable Television Group, L.P. (the "Company") was formed for the
purpose of acquiring, owning and operating cable television systems, which are
generally operated pursuant to non-exclusive franchises awarded by states or
local government authorities for specified periods of time. The Company
currently operates cable television systems serving portions of the
southeastern and Midwestern United States. The Company's revenues are derived
principally from the provision of cable television services, which include
recurring monthly fees paid by subscribers.
Prior to the Redemption discussed in the next paragraph, the partnership
consisted of V Cable, Inc. ("V Cable"), a wholly-owned subsidiary of
Cablevision Systems Corporation ("CSC"), with an indirect 1% general
partnership interest and a 19% limited partnership interest, General Electric
Capital Corporation ("GECC"), with a 72% limited partnership interest and
various individuals and entities owning the remaining 8% partnership interest,
as general and/or limited partners (the "Predecessor Company"). Profits and
losses were allocated in accordance with the Amended and Restated Agreement of
Limited Partnership.
On March 18, 1996, V Cable advanced $70 million to the Company which was
considered a capital contribution coincident with the Redemption. On August 13,
1996, the Company redeemed the partnership interests not already owned by V
Cable ("the Redemption") for a payment of approximately $4 million to the
holders of 8% of the partnership interests and the repayment of the balance of
the debt owed to General Electric Capital Corporation ("GECC") of approximately
$154 million. The payment of $4 million and repayment of the GECC debt was
financed under a new $175 million credit facility (Note 4). As a result of the
Redemption, which was accounted for as a purchase, the consolidated financial
information for the periods after the Redemption is presented on a different
cost basis than that for the period before the Redemption and, therefore, is
not comparable due to the change in ownership.
Subsequent to the Redemption, V Cable, through wholly-owned subsidiaries,
holds an indirect 1% general partnership interest and a direct 99% limited
partnership interest (the "Successor Company"). The partnership will terminate
December 1, 2030, unless earlier termination occurs as provided in the Amended
and Restated Agreement of Limited Partnership.
As a result of the capital contribution of $70,000 (discussed above), the
$4,010 Redemption price and $98 of miscellaneous transaction costs, the
Successor Company effectively paid $74,108 to acquire net liabilities of
$74,331, which resulted in excess costs over fair value of $148,439, as
follows:
<TABLE>
<S> <C>
Purchase price and transaction costs............................ $ 74,108
---------
Net liabilities acquired:
Cash, receivables and prepaids................................ 2,504
Property, plant and equipment................................. 98,212
Accounts payables and accrued expenses........................ (20,433)
Accounts payable--affiliate................................... (1,076)
Senior debt................................................... (153,538)
---------
(74,331)
---------
Excess costs over fair value of net liabilities acquired........ $ 148,439
=========
</TABLE>
For purposes of the consolidated financial statements for the period from
August 13, 1996 to December 31, 1996, this excess cost amount is being
amortized over a 7 year period.
F-45
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
(2) Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany transactions
and balances have been eliminated in consolidation.
Revenue Recognition
The Company recognizes revenues as cable television services are provided
to subscribers.
Long-Lived Assets
Property, plant and equipment, including construction materials, are
recorded at cost, which includes all direct costs and certain indirect costs
associated with the construction of cable television transmission and
distribution systems and the costs of new subscriber installations. Property,
plant and equipment are being depreciated over their estimated useful lives
using the straight-line method. Leasehold improvements are amortized over the
shorter of their useful lives or the terms of the related leases.
With respect to the Predecessor Company, franchise costs were amortized
on the straight-line basis over the average term of the franchises
(approximately 4-12 years) and excess costs over fair value of net assets
acquired were amortized over a 15 year period on the straight-line basis. As
mentioned in note 1, the Successor Company is amortizing excess costs over fair
value of net assets acquired over 7 years.
The Company implemented the provisions of Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of," effective January 1, 1996.
The Company reviews its long-lived assets (property, plant and equipment, and
related intangible assets that arose from business combinations accounted for
under the purchase method) for impairment whenever events or circumstances
indicate that the carrying amount of an asset may not be recoverable. If the
sum of the expected cash flows, undiscounted and without interest, is less than
the carrying amount of the asset, an impairment loss is recognized as the
amount by which the carrying amount of the asset exceeds its fair value. The
adoption of Statement No. 121 had no impact on the Company's financial position
or results of operations.
Deferred Financing and Other Costs
Costs incurred to obtain debt are deferred and amortized on the straight-
line basis over the term of the related debt. Other costs consist of
organization costs in 1995 which were amortized over a five year period on the
straight line basis.
Income Taxes
The Company operates as a limited partnership; accordingly, its taxable
income or loss is includable in the tax returns of the partners, and therefore,
no provision for income taxes has been made on the books of the Company. ECC
Holdings Corporation ("ECC"), one of the Company's subsidiaries, is a corporate
entity and as such is subject to federal and state income taxes. Income tax
amounts in these consolidated financial statements pertain to ECC.
F-46
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
(2) Significant Accounting Policies (continued)
ECC accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", which
requires the liability method of accounting for deferred income taxes and
permits the recognition of deferred tax assets, subject to an ongoing
assessment of realizability.
Cash Flows
For purposes of the statement of cash flows, the Company considers short-
term investments with a maturity at date of purchase of three months or less to
be cash equivalents. The Company paid cash interest of approximately $13,610
for the period from January 1, 1996 to August 12, 1996, $4,189 for the period
from August 13, 1996 to December 31, 1996 and $8,761 and $12,900 for the years
ended December 31, 1995 and 1994, respectively.
Use of Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(3) Property, Plant and Equipment
Property, plant and equipment and estimated useful lives at December 31,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
Estimated
1996 1995 Useful lives
-------- --------- -------------
<S> <C> <C> <C>
Cable television transmission and
distribution systems:
Converters............................... $ 6,810 $ 18,609 5 years
Headends................................. 6,338 27,363 9 years
Distribution systems..................... 81,502 171,570 10 years
Program, service, microwave and test
equipment................................. 2,219 4,396 4-7 years
Construction in progress (including
materials and supplies)................... 521 675
-------- ---------
97,390 222,613
Furniture and fixtures..................... 591 4,429 5 years
Vehicles................................... 2,886 7,411 4 years
Building and improvements.................. 1,074 2,895 30 years
Leasehold improvements..................... 1,305 -- Term of Lease
Land....................................... -- 852
-------- ---------
103,246 238,200
Less accumulated depreciation.............. (9,703) (136,761)
-------- ---------
$ 93,543 $ 101,439
======== =========
</TABLE>
F-47
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
(4) Debt
Bank Debt
As discussed in Note 1, on August 13, 1996, the Successor Company paid
GECC approximately $154,000 in exchange for GECC's limited partnership
interests in the Company and in satisfaction of the outstanding balance of all
indebtedness due GECC. The repayment of the GECC debt was financed under a new
$175,000 credit facility. The credit facility is with a group of banks led by
the Bank of New York, as agent, and consists of a three year $175,000 revolving
credit facility maturing on August 13, 1999. The revolving credit facility is
payable in full upon maturity. As of December 31, 1996, the Company has
outstanding borrowings under its revolving credit facility of $159,460, leaving
unrestricted and undrawn funds available amounting to $15,540. Amounts
outstanding under the facility bear interest at varying rates based upon the
bank's LIBOR rate, as defined in the loan agreement. The weighted average
interest rate was 7.6% on December 31, 1996. The Company is also obligated to
pay fees of .375% per annum on the unused loan commitment.
Substantially all of the general and limited partnership interests in the
Company have been pledged in support of the borrowings under the credit
agreement. The credit facility contains various restrictive covenants, with
which the Company was in compliance at December 31, 1996.
Senior Debt and Junior Subordinated Note
At December 31, 1995, the credit agreement between the Predecessor
Company and GECC (the "Credit Agreement") was composed of a Senior Loan
Agreement and a Junior Loan Agreement. Under the Senior Loan Agreement, GECC
had provided a $30,000 revolving line of credit (the "Revolving Line"), a
$104,443 term loan (the "Series A Term Loan") with interest payable currently
and, a $92,302 term loan (the "Series B Term Loan") with payment of interest
deferred until December 31, 2001. Under the Junior Loan Agreement, GECC had
provided a $24,039 term loan (the "Junior Term Loan") with payment of interest
deferred until December 31, 2001. The senior loan agreement and junior loan
agreement are collectively referred to as the "Loan Agreements".
At December 31, 1995, the Predecessor Company's outstanding debt to GECC,
which was all due on December 31, 2001, was comprised of the following:
<TABLE>
<S> <C>
Senior Debt
Revolving line of credit, with interest at varying rates....... $ 8,000
Series A Term Loan, with interest at 10.12%.................... 104,443
Series B Term Loan, with interest at 10.62%.................... 101,949
--------
Total Senior Debt............................................ 214,392
Junior Subordinated Note, with interest at 12.55%................ 34,645
--------
Total debt................................................... $249,037
========
</TABLE>
(5) Income Taxes
ECC has a net operating loss carryforward for federal income tax purposes
of approximately $21,708 expiring in varying amounts through 2011.
F-48
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
The tax effects of temporary differences which give rise to significant
deferred tax assets or liabilities and the corresponding valuation allowance at
December 31, 1996 and 1995 are as follows:
Deferred Assets
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Depreciation and amortization......................... $ 7,132 $ (9,572)
Allowance for doubtful accounts....................... 51 85
Benefits of tax loss carry forwards................... 9,117 24,783
-------- --------
Net deferred tax assets............................... 16,300 15,296
Valuation allowance................................... (16,300) (15,296)
-------- --------
$ -- $ --
======== ========
</TABLE>
ECC has provided a valuation allowance for the total amount of the net
deferred tax assets since realization of these assets is not assured due
principally to a history of operating losses. The amount of the valuation
allowance increased by $1,004 during the year ended December 31, 1996.
(6) Operating Leases
The Company leases certain office and transmission facilities under terms
of operating leases expiring at various dates through 2008. The leases
generally provide for fixed annual rental payments plus real estate taxes and
certain other costs. Rent expense for the periods from January 1, 1996 to
August 12, 1996 and from August 13, 1996 to December 31, 1996 amounted to
approximately $505 and $303, respectively, and for the years ended December 31,
1995 and 1994 amounted to $705 and $635, respectively.
The Company rents space on utility poles for its operations. The
Company's pole rental agreements are for varying terms, and management
anticipates renewals as they expire. Pole rental expense for the periods from
January 1, 1996 to August 12, 1996 and from August 13, 1996 to December 31,
1996 amounted to approximately $912 and $547, respectively, and for the years
ended December 31, 1995 and 1994 amounted to $1,312 and $1,199, respectively.
The minimum future annual rental payments for all operating leases,
including pole rentals from January 1, 1997 through December 31, 2008, at rates
presently in force at December 31, 1996, are approximately: 1997, $1,902; 1998,
$1,764; 1999, $1,735; 2000, $1,657; 2001, $1,599; and thereafter $2,945.
(7) Related Party Transactions
CSC has interests in several entities engaged in providing cable
television programming and other services to the cable television industry. For
the periods from January 1, 1996 to August 12, 1996 and from August 13, 1996 to
December 31, 1996, the Company was charged approximately $510 and $268,
respectively, and for the years ended December 31, 1995 and 1994 the Company
was charged approximately $568 and $407, respectively, by these entities for
such services. At December 31, 1996 and 1995, the Company owed approximately
$60 and $107 to these companies for such programming services which is included
in accounts payable-affiliates in the accompanying consolidated balance sheets.
CSC provides the Company with general and administrative services. For
the periods from January 1, 1996 to August 12, 1996 and from August 13, 1996 to
December 31, 1996, the Company was charged $2,274
F-49
<PAGE>
U.S. CABLE TELEVISION GROUP, L.P.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Dollars in thousands)
and $1,712, respectively, and for the years ended December 31, 1995 and 1994
these charges totaled approximately $3,530 and $3,300. Amounts owed to CSC at
December 31, 1996 and 1995 for such expenses were approximately $408 and $365
and is included in accounts payable-affiliates in the accompanying consolidated
balance sheet.
(8) Benefit Plan
During 1989, the Company adopted a 401K savings plan (the "Plan").
Employee participation is voluntary. Under the provisions of the Plan,
employees may defer up to 15% of their annual compensation (as defined). The
Company currently contributes 50% of the contributions made by participating
employees subject to a contribution cap of 6% of the employee's compensation.
The Company may make additional contributions at its discretion. Expense
relating to this Plan amounted to $327, $321 and $295 in 1996, 1995 and 1994,
respectively.
The Company does not provide postretirement benefits for any of its
employees.
(9) Disclosures About The Fair Value Of Financial Instruments
Cash and Cash Equivalents, Accounts Receivable--Subscribers, Other
Receivables, Prepaid Expenses and Other Assets, Accounts Payable, Accrued
Expenses, and Accounts Payable to Affiliates
The carrying amount approximates fair value due to the short maturity of
these instruments.
Bank Debt
The fair value of the company's long term debt instruments approximates
its book value since the interest rate is LIBOR-based and accordingly is
adjusted for market rate fluctuations.
Senior and Junior Debt
At December 31, 1995, the carrying amount of the Senior and Junior Debt
approximated fair value.
(10) Commitments
CSC and its cable television affiliates (including the Company) have an
affiliation agreement with a program supplier whereby CSC and its cable
television affiliates are obligated to make Base Rate Annual Payments, as
defined and subject to certain adjustments pursuant to the agreement, through
2004. The Company would be contingently liable for its proportionate share of
Base Rate Annual Payments, based on subscriber usage, of approximately; $1,276
in 1997; $1,320 in 1998 and $1,366 in 1999. For the years 2000 through 2004,
such payments would increase by percentage increases in the Consumer Price
Index, or five percent, whichever is less, over the prior year's Base Annual
Payment.
(11) Subsequent Event
On August 29, 1997, CSC and certain of its wholly-owned subsidiaries
entered into an agreement with Mediacom LLC ("Mediacom") to sell to Mediacom
cable systems owned by the Company. The transaction was consummated on January
23, 1998 for a sales price of approximately $311 million.
F-50
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Triax Midwest Associates, L.P.:
We have audited the accompanying balance sheets of TRIAX MIDWEST ASSOCIATES,
L.P. (a Missouri limited partnership) as of December 31, 1997 and 1998, and
the related statements of operations, partners' deficit and cash flows for
each of the three years in the period ended December 31, 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 Triax Midwest Associates,
L.P. as of 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.
Arthur Andersen LLP
Denver, Colorado
February 26, 1999
F-51
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
BALANCE SHEETS
As of December 31, 1997 and 1998 and June 30, 1999 (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
June 30,
1997 1998 1999
-------- -------- -----------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Cash.......................................... $ 3,297 $ 2,327 $ 2,820
Receivables, net of allowance of $554, $331
and $330, respectively....................... 2,555 2,303 1,890
Property, plant and equipment, net............ 124,616 153,224 162,168
Purchased intangibles, net.................... 157,671 185,268 165,170
Deferred costs, net........................... 5,980 6,995 3,511
Other assets.................................. 2,202 2,911 2,324
-------- -------- --------
$296,321 $353,028 $337,883
======== ======== ========
LIABILITIES AND PARTNERS' DEFICIT
Accrued interest expense...................... $ 6,057 $ 5,383 $ 5,003
Accounts payable and other accrued expenses... 11,582 11,714 12,113
Subscriber prepayments and deposits........... 695 828 823
Payables to affiliates........................ 359 348 350
Debt.......................................... 323,604 404,418 409,290
-------- -------- --------
342,297 422,691 427,579
Partners' deficit............................. (45,976) (69,663) (89,696)
-------- -------- --------
$296,321 $353,028 $337,883
======== ======== ========
</TABLE>
The accompanying notes to the financial statements are an integral part of
these balance sheets.
F-52
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
STATEMENTS OF OPERATIONS
For the Years Ended December 31, 1996, 1997 and 1998
and for the Six Months Ended June 30, 1998 and 1999 (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the
Six Months Ended
For the Years Ended December 31, June 30,
---------------------------------- ------------------
1996 1997 1998 1998 1999
---------- ---------- ---------- -------- --------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Revenues................ $ 60,531 $ 101,521 $ 119,669 $ 57,155 $ 67,257
Operating expenses:
Programming........... 12,934 20,066 25,275 11,882 15,213
Operating, selling,
general and
administrative....... 16,459 26,050 32,241 13,935 16,263
Management fees....... 2,667 3,573 4,048 1,933 2,218
Administration fees
paid to an
affiliate............ 444 1,482 1,826 843 1,040
Depreciation and
amortization......... 26,492 48,845 65,391 28,451 35,644
---------- ---------- ---------- -------- --------
58,996 100,016 128,781 57,044 70,378
---------- ---------- ---------- -------- --------
Operating income
(loss)................. 1,535 1,505 (9,112) 111 (3,121)
Other expenses:
Interest.............. 18,311 26,006 29,358 13,558 16,252
---------- ---------- ---------- -------- --------
Net loss before
cumulative effect of
accounting change...... (16,776) (24,501) (38,470) (13,447) (19,373)
Cumulative effect of
accounting change...... -- -- -- -- (660)
---------- ---------- ---------- -------- --------
Net loss................ $ (16,776) $ (24,501) $ (38,470) $(13,447) $(20,033)
========== ========== ========== ======== ========
</TABLE>
The accompanying notes in the financial statements are an integral part of
these statements.
F-53
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
STATEMENTS OF PARTNERS' DEFICIT
For the Years Ended December 31, 1996, 1997 and 1998
and for the Six Months Ended June 30, 1999 (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Pre Recapitalization Limited
Partners (Note 1)
------------------------------- Post
Accumulated Recapitalization
Residual Special Limited
Non-Managing Managing Equity Interest Limited Cavalier Partners
General Partner General Partner of TTC Partner Cable, L.P. All Others (Note 1) Total
--------------- --------------- --------------- ------- ----------- ---------- ---------------- --------
(Effective (Effective
August 30, August 30,
1996) 1996)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES,
December 31,
1995............ $(83,549) $ -- $ -- $ -- $ -- $ -- $ -- $(83,549)
Net loss for the
eight month
period ended
August 30,
1996............ (9,022) -- -- -- -- -- -- (9,022)
-------- ----- ------ ------- -------- -------- -------- --------
BALANCES, August
30, 1996........ (92,571) -- -- -- -- -- -- (92,571)
Cash redemption
of partnership
interests....... -- -- -- (6,680) (12,071) (19,500) -- (38,251)
Allocation of
partners'
capital in
connection with
recapitalization.. -- -- -- 6,680 12,071 19,500 (38,251) --
Accumulation of
residual equity
interest of
TTC............. (62) -- 62 -- -- -- -- --
Cash
contributions... 1,100 -- -- -- -- -- 50,250 51,350
Issuance of
limited
partnership
units in
connection with
acquisition of
cable
properties...... -- -- -- -- -- -- 59,765 59,765
Cash
distributions to
DD Cable
Partners........ -- -- -- -- -- -- (4,200) (4,200)
Syndication
costs........... (26) -- -- -- -- -- (2,578) (2,604)
Net loss for the
four month
period ended
December 31,
1996............ (78) -- -- -- -- -- (7,676) (7,754)
-------- ----- ------ ------- -------- -------- -------- --------
BALANCES,
December 31,
1996............ (91,637) -- 62 -- -- -- 57,310 (34,265)
Accumulation of
residual equity
interest of
TTC............. (488) -- 488 -- -- -- -- --
Cash
contributions... -- -- -- -- -- -- 13,043 13,043
Syndication
costs........... -- -- -- -- -- -- (253) (253)
Net loss for the
year ended
December 31,
1997............ (245) -- -- -- -- -- (24,256) (24,501)
-------- ----- ------ ------- -------- -------- -------- --------
BALANCES,
December 31,
1997............ (92,370) -- 550 -- -- -- 45,844 (45,976)
Accumulation of
residual equity
interest of
TTC............. (738) -- 738 -- -- -- -- --
Cash
contributions... -- -- -- -- -- -- 15,000 15,000
Syndication
costs........... -- -- -- -- -- -- (217) (217)
Net loss for the
year ended
December 31,
1998............ (385) -- -- -- -- -- (38,085) (38,470)
-------- ----- ------ ------- -------- -------- -------- --------
BALANCES,
December 31,
1998............ (93,493) -- 1,288 -- -- -- 22,542 (69,663)
Accumulation of
residual equity
interest of TTC
(Unaudited)..... (472) -- 472 -- -- -- -- --
Net loss for the
six months ended
June 30, 1999
(Unaudited)..... (200) -- -- -- -- -- (19,833) (20,033)
-------- ----- ------ ------- -------- -------- -------- --------
BALANCES, June
30, 1999
(Unaudited)..... $(94,165) $ -- $1,760 $ -- $ -- $ -- $ 2,709 $(89,696)
======== ===== ====== ======= ======== ======== ======== ========
</TABLE>
The accompanying notes to the financial statements are an integral part of
these statements.
F-54
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1996, 1997 and 1998
and For the Six Months Ended June 30, 1998 and 1999 (Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
For the Years Ended For the Six Months
December 31, Ended June 30,
------------------------------ -----------------------
1996 1997 1998 1998 1999
--------- -------- --------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss.............. (16,776) (24,501) (38,470) (13,447) (20,033)
Adjustments to
reconcile net loss to
net cash flows from
operating
activities--
Depreciation and
amortization......... 26,492 48,845 65,391 28,451 35,644
Accretion of interest
on preferred stock
obligation........... 90 -- -- -- --
Amortization of
deferred loan costs.. 370 651 790 348 446
Cumulative effect of
accounting change.... -- -- -- -- 660
Loss (gain) on asset
dispositions......... -- -- 1,732 (492) 2
Decrease (increase) in
subscriber
receivables, net..... 1,926 (503) 93 (550) 413
(Increase) decrease in
other assets......... (7) (556) (623) (516) 672
Increase (decrease) in
accrued interest
expense.............. 181 1,312 (674) (6,057) (381)
Increase (decrease) in
accounts payable and
other accrued
expenses............. 4,502 525 (452) (1,555) 199
(Decrease) increase in
subscriber
prepayments and
deposits............. (2,684) 13 129 62 (5)
Write-off loan costs.. 174 -- -- -- --
(Decrease) increase in
payables to
affiliates........... (31) 113 (11) 23 2
--------- -------- --------- --------- --------
Net cash flows from
operating
activities.......... 14,237 25,899 27,905 6,267 17,619
--------- -------- --------- --------- --------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property,
plant and equipment.. (10,275) (23,101) (36,122) (14,906) (21,358)
Acquisition of
properties, including
purchased
intangibles.......... -- (71,850) (86,255) (23,112) (20)
Proceeds from exchange
of properties,
including
intangibles.......... -- -- 1,594 1,594 --
Proceeds from sale of
properties, including
intangibles.......... -- -- 1,674 367 268
Cash paid for
franchise costs...... (582) (776) (2,122) (3,664) (528)
Cash paid for other
intangibles.......... (823) (37) -- -- (90)
--------- -------- --------- --------- --------
Net cash flows from
investing
activities.......... (11,680) (95,764) (121,231) (39,721) (21,728)
--------- -------- --------- --------- --------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from
borrowings........... 275,000 67,000 399,000 345,000 12,000
Repayment of debt..... (268,477) (14,000) (319,000) (313,000) (7,000)
Contributions from
partners............. 51,350 13,043 15,000 -- --
Cash redemptions of
partnership
interests............ (38,251) -- -- -- --
Cash distributions to
DD Cable Partners.... (4,200) -- -- -- --
Payments on capital
leases............... (314) (322) (703) (272) (392)
Cash paid for loan
costs................ (5,683) (80) (1,724) (1,570) (6)
Cash paid for
syndication costs.... (2,604) (253) (217) -- --
Repayment of preferred
stock obligations.... (2,760) -- -- -- --
--------- -------- --------- --------- --------
Net cash flows from
financing
activities.......... 4,061 65,388 92,356 30,158 4,602
--------- -------- --------- --------- --------
NET INCREASE (DECREASE)
IN CASH............... 6,618 (4,477) (970) (3,296) 493
CASH, beginning of
period................ 1,156 7,774 3,297 3,297 2,327
--------- -------- --------- --------- --------
CASH, end of period.... $ 7,774 $ 3,297 $ 2,327 $ 1 $ 2,820
========= ======== ========= ========= ========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION:
Cash paid during the
period for interest.. $ 16,848 $ 24,043 $ 29,209 $ 19,267 $ 16,186
========= ======== ========= ========= ========
SUPPLEMENTAL SCHEDULE
OF NON-CASH INVESTING
AND FINANCING
ACTIVITIES:
Property additions
financed by capital
leases............... $ 391 $ 1,313 $ 1,517 $ 678 $ 481
========= ======== ========= ========= ========
Net book value of
assets divested in
exchange............. $ -- $ -- $ 4,404 $ 4,404 $ --
========= ======== ========= ========= ========
Net book value of non-
monetary assets
acquired in
exchange............. $ -- $ -- $ 2,958 $ 2,958 $ --
========= ======== ========= ========= ========
</TABLE>
The accompanying notes to the financial statements are an integral part of
these statements.
F-55
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
(1) THE PARTNERSHIP
Organization and Capitalization
Triax Midwest Associates, L.P. (the "Partnership") is a Missouri limited
partnership originally formed for the purpose of acquiring, constructing and
operating cable television properties, located primarily in Indiana, Illinois,
Iowa, Minnesota and Wisconsin. The Partnership was capitalized and commenced
operations on June 1, 1988. The non-managing general partner is Triax Cable
General Partner, L.P. ("Triax Cable GP"), a Missouri limited partnership. The
general partner of Triax Cable GP is Midwest Partners, L.L.C. The managing
general partner of the Partnership is Triax Midwest General Partner, L.P., a
Delaware limited partnership, and its general partner is Triax Midwest, L.L.C.
Partnership Recapitalization
On August 30, 1996 (the "Contribution Date"), the Partnership completed a
recapitalization of the Partnership in which new credit facilities were put in
place (Note 4), additional partnership interests were issued and selected
partnership interests were redeemed. Under the terms of a partnership amendment
and other related documents, the Partnership received approximately $50.3
million in cash from new limited partners in exchange for limited partnership
interests ("New Cash Partners"). Approximately $38.3 million in cash was then
utilized to redeem the special limited partnership interest and certain other
existing limited partnership interests. For financial reporting purposes, this
portion of the Partnership Recapitalization was accounted for as an equity
transaction with no effect on the carrying value of the Partnership's assets.
However, for tax purposes, even though the New Cash Partners assumed the
redeemed limited partners' tax basis capital accounts, they will be entitled to
additional outside tax basis reflecting the amount invested.
In addition, the Partnership purchased certain net assets of DD Cable Partners,
L.P. and DD Cable Holdings, Inc. ("DD Cable") through the net issuance of
approximately $55.6 million in limited partnership interests. For financial
reporting purposes, the acquisition was accounted for under the purchase method
of accounting at fair market value. For tax purposes, the basis in the acquired
net assets was recorded at DD Cable's historical tax basis. This results in a
built-in gain on these assets based on the difference between the fair market
value and tax basis of the assets at August 30, 1996.
In connection with the Partnership Recapitalization, the general partnership
interest of Triax Cable GP was converted to a non-managing general partnership
interest. Triax Cable GP then contributed an additional $1.1 million to
maintain its approximate 1% proportionate interest in the Partnership. Triax
Midwest General Partner, L.P. ("Midwest GP" or the "Managing General Partner")
was appointed the managing general partner. The general partner of Midwest GP
is Triax Midwest, L.L.C., a wholly-owned subsidiary of Triax Telecommunications
Company, L.L.C. ("TTC"). Midwest GP made no partnership equity contributions to
the Partnership and received only a residual interest in the Partnership, as
discussed below under "Allocations of Profits, Losses, Distributions and
Credits Subsequent to Partnership Recapitalization".
As provided for in the Partnership Agreement, as amended, certain of the New
Cash Partners (the "Committed Partners") committed to fund additional monies
totaling $50.0 million for future acquisitions of the Partnership through
August 1999. In conjunction with the Partnership's Indiana and Illinois
Acquisitions during 1997 and the Illinois acquisition of September 30, 1998
(Note 3), certain limited partners contributed approximately $13.0 million and
$15.0 million, respectively. Of these total contributions, approximately $27.0
million was contributed by the Committed Partners, which reduced their total
funding commitment to approximately $23.0 million.
F-56
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
During 1997, TTC and certain officers of TTC (the "Officers") purchased limited
partner interests in Triax Investors Midwest, L.P. ("Investors Midwest"), which
holds a limited partner interest in the Partnership. Subsequent to TTC's and
the Officers' purchase of these Investors Midwest interests, Investors Midwest
elected to distribute its interest in the Partnership to certain of its
partners, resulting in TTC owning a direct limited partner interest in the
Partnership.
The Partnership Agreement, as amended, provides that on August 30, 2001 each
limited partner has the option to sell its interest to the Partnership for fair
market value at the time of the sale. The fair market value is to be determined
by appraised value approved by a majority vote of the Advisory Committee. In
accordance with the Partnership Agreement, if the Partnership is unable to
finance the acquisition of such interests, such selling limited partners can
cause the liquidation of the Partnership.
Allocation of Profits, Losses, Distributions and Credits Subsequent to
Partnership Recapitalization
Distributions
Cash distributions are to be made to both the limited partners and Triax Cable
GP equal to their adjusted capital contributions, then to the limited partners
and Triax Cable GP in an amount sufficient to yield a return of 13% per annum,
compounded annually (the "Priority Return"), then varying rates of distribution
to the Managing General Partner (17% to 20%) and to the limited partners and
Triax Cable GP (83% to 80%) based on internal rates of return earned by the New
Cash Partners, as set forth in the Amended and Restated Partnership Agreement,
on their adjusted capital contributions.
Losses from Operations
The Partnership will allocate its losses to the limited partners and Triax
Cable GP according to their proportionate interests in the book value of the
Partnership, except losses will not be allocated to any limited partner which
would cause the limited partner's capital account to become negative by an
amount greater than an amount which the limited partners are obligated to
contribute to the Partnership.
Profits and Gains
Generally, the Partnership will allocate its profits according to the limited
partners' and Triax Cable GP's proportionate interests in the book value of the
Partnership until profits allocated to limited partners equal losses previously
allocated to them. A special allocation of gain equal to the difference between
the fair value and tax basis of contributed property will be made, with respect
to partners contributing property to the Partnership, upon the sale of the
contributed Partnership assets.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-57
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
Revenue Recognition
Revenues are recognized in the period the related services are provided to the
subscribers.
Income Taxes
No provision has been made for federal, state or local income taxes because
they are the responsibility of the individual partners. The principal
difference between tax and financial reporting results from different
depreciable tax basis in various assets acquired (Note 1).
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Replacements, renewals and
improvements are capitalized and costs for repairs and maintenance are charged
directly to expense when incurred. The Partnership capitalized a portion of
technician and installer salaries to property, plant and equipment, which
amounted to $1,134,000 in 1996, $1,196,132 in 1997, $1,333,296 in 1998 and
$601,889 and $590,351 for the six months ended June 30, 1998 and 1999,
respectively.
Depreciation and amortization are computed using the straight-line method over
the following estimated useful lives (amounts in thousands):
<TABLE>
<CAPTION>
1997 1998 June 30, 1999 Life
--------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Predominantly
Property, plant and
equipment.............. $ 217,561 $ 266,965 $ 288,560 10 years
Less--Accumulated
depreciation........... (92,945) (113,741) (126,392)
--------- --------- ---------
$ 124,616 $ 153,224 $ 162,168
========= ========= =========
Purchased Intangibles
Purchased intangibles are being amortized using the straight-line method over
the following estimated useful lives (amounts in thousands):
<CAPTION>
1997 1998 June 30, 1999 Life
--------- --------- ------------- -------------
<S> <C> <C> <C> <C>
Franchises.............. $ 245,028 $ 310,544 $ 311,056 5-11.5 years
Noncompete.............. 400 1,595 1,595 3 years
Goodwill................ 12,804 12,804 12,804 20 years
--------- --------- ---------
258,232 324,943 325,455
Less--Accumulated
amortization........... (100,561) (139,675) (160,285)
--------- --------- ---------
$ 157,671 $ 185,268 $ 165,170
========= ========= =========
</TABLE>
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable from future undiscounted cash flows. Impairment losses are
recorded for the difference between the carrying value and fair value of the
long-lived asset.
F-58
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
Deferred Costs
Deferred costs are being amortized using the straight-line method over the
following estimated useful lives (amounts in thousands):
<TABLE>
<CAPTION>
June 30,
1997 1998 1999 Life
------- ------- -------- ----------
<S> <C> <C> <C> <C>
Deferred loan costs................ $ 5,763 $ 7,488 $ 7,493 2-7 years
Organizational costs............... 858 858 -- 5-10 years
Other.............................. 500 500 500
------- ------- -------
7,121 8,846 7,993
Less--Accumulated amortization..... (1,141) (1,851) (4,482)
------- ------- -------
$ 5,980 $ 6,995 $ 3,511
======= ======= =======
</TABLE>
Organizational Costs
American Institute of Certified Public Accountants Statement of Position 98-5
("SOP 98-5") provides guidance on the financial reporting of start-up and
organization costs. SOP 98-5 broadly defines start-up activities and requires
the costs of such start-up activities and organization costs to be expensed as
incurred. SOP 98-5 is effective for fiscal years beginning after December 15,
1998 and the initial application is reported as a cumulative effect of a change
in accounting principle. Effective January 1, 1999, the Partnership recognized
a cumulative effect of an accounting change adjustment related to net deferred
organization costs totaling approximately $660,000 as of December 31, 1998.
Reclassifications
Certain amounts in the accompanying financial statements have been reclassified
to conform to the current year presentation.
(3) ACQUISITIONS/SALES
On August 30, 1996, the Partnership purchased certain cable television system
assets, located in Illinois, Minnesota, Wisconsin and Iowa, from DD Cable,
including the assumption of certain liabilities of the acquired business. The
acquisition was financed by issuing net limited partnership interests valued at
approximately $55.6 million. In addition, the Partnership utilized a portion of
newly executed $375 million credit facility (Note 4) to repay approximately
$116 million of existing indebtedness of DD Cable.
F-59
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
The purchase price was allocated to the acquired assets and liabilities as
follows (amounts in thousands):
<TABLE>
<S> <C>
Current assets $ 3,519
Property, plant and equipment 59,786
Franchise costs 117,007
---------
Subtotal 180,312
Less--current liabilities assumed (4,579)
---------
175,733
Less--cash distributed for:
Payment of existing DD Cable debt (115,968)
Cash distributions to DD Cable (4,200)
---------
Total net partnership interest issued $ 55,565
=========
On June 30, 1997, the Partnership acquired certain cable television system
assets, located in Indiana, including certain liabilities of the acquired
business, from Triax Associates I, L.P. (the "Indiana Acquisition"). The
purchase price of $52.0 million was accounted for by the purchase method of
accounting and was allocated to the acquired assets and liabilities as follows
(amounts in thousands):
Current assets $ 316
Property, plant and equipment 18,793
Franchise costs 33,007
Non-compete 200
---------
Subtotal 52,316
Less--current liabilities assumed (403)
---------
Total cash paid for acquisition $ 51,913
=========
</TABLE>
Also on June 30, 1997, the Partnership acquired certain cable television system
assets, located in Illinois, including certain liabilities of the acquired
business, from an unrelated third party (the "Illinois Acquisition"). The
purchase price of $20.1 million was accounted for by the purchase method of
accounting.
The Indiana and Illinois Acquisitions were financed by partners' contributions
of approximately $13.0 million and proceeds of $60.0 million on the revolving
credit facility.
On September 30, 1998, the Partnership purchased certain cable television
system assets, located in Illinois, from an unrelated third party ("Marcus"),
including the assumption of certain liabilities of the acquired business. The
acquisition was financed by partners' contributions of $15.0 million and
proceeds of approximately $45.8 million from the revolving credit facility.
F-60
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
The purchase price was allocated to the acquired assets and liabilities as
follows (amounts in thousands):
<TABLE>
<S> <C>
Current assets $ 109
Property, plant and equipment 10,000
Franchise costs 50,555
Non-compete 500
-------
Subtotal 61,164
Less--current liabilities assumed (328)
-------
Total cash paid for acquisition $60,836
=======
</TABLE>
The Partnership has reported the operating results of DD Cable, the Indiana
Acquisition and Marcus from the respective acquisition dates. The following
tables show the unaudited pro forma results of operations for the year of the
acquisitions and their prior year:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1996
-----------------------------------------------------------------
Unaudited
Actual Pro Forma Results(/1/)
-------- ----------------------
<S> <C> <C>
REVENUES $ 60,531 $ 99,554
======== ========
NET LOSS $(16,776) $(28,878)
======== ========
(/1/) Presents pro forma effect of the DD Cable Acquisition and the Indiana
Acquisition.
<CAPTION>
For the Year Ended December 31, 1997
-----------------------------------------------------------------
Unaudited
Actual Pro Forma Results(/2/)
-------- ----------------------
<S> <C> <C>
REVENUES $101,521 $118,722
======== ========
NET LOSS $(24,501) $(31,001)
======== ========
(/2/) Presents pro forma effect of the Indiana Acquisition and Marcus.
<CAPTION>
For the Year Ended December 31, 1998
-----------------------------------------------------------------
Unaudited
Actual Pro Forma Results(/3/)
-------- ----------------------
<S> <C> <C>
REVENUES $119,669 $128,182
======== ========
NET LOSS $(38,470) $(41,754)
======== ========
</TABLE>
(/3/) Presents pro forma effect of Marcus.
F-61
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
On June 30, 1998, the Partnership purchased certain cable television system
assets, located in Indiana, from an unrelated third party, including the
assumption of certain liabilities of the acquired business. The acquisition was
financed by proceeds of approximately $22.8 million from the revolving credit
facility. The purchase price was allocated to the acquired assets and
liabilities as follows (amounts in thousands):
<TABLE>
<S> <C>
Property, plant and equipment..................................... $ 8,383
Franchise costs................................................... 14,499
Non-compete....................................................... 200
-------
Subtotal........................................................ 23,082
Less--current liabilities assumed................................. (270)
-------
Total cash paid for acquisition................................. $22,812
=======
</TABLE>
On January 21, 1998, the Partnership acquired certain cable television system
assets located in Gilberts, Illinois, including certain liabilities of the
acquired business, from an unrelated third party (the "Gilberts Acquisition").
The purchase price of approximately $307,000 was accounted for by the purchase
method of accounting.
On December 31, 1998, the Partnership acquired certain cable television system
assets, located in Kentland, Indiana, including certain liabilities of the
acquired business, from an unrelated third party (the "Kentland Acquisition").
The purchase price of $2.5 million was accounted for by the purchase method of
accounting, $200,000 of which will be paid during 1999, and has been recorded
as other accrued expenses in the accompanying balance sheet.
The Indiana, Kentland and Gilberts Acquisitions were financed by proceeds on
the revolving credit facility.
On February 27, 1998, the Partnership closed on an Asset Exchange Agreement
with an unrelated third party whereby the Partnership conveyed certain systems
serving approximately 3,700 subscribers in exchange for another system in
Illinois serving approximately 2,400 subscribers and received approximately
$1,600,000 in cash consideration. A gain of approximately $150,000 was
recognized on this transaction, and was recorded against write-off of retired
plant in the accompanying statement of operations.
On June 30, 1998, the Partnership sold certain cable television system assets
located in Central City, Iowa, including certain liabilities of the system, to
an unrelated third party for cash of approximately $367,000.
On September 30, 1998, the Partnership sold certain cable television system
assets related to five systems in Iowa, including certain liabilities of the
systems, to an unrelated third party for cash of approximately $1.3 million.
F-62
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
(4) DEBT
Debt consists of the following at December 31, 1997, 1998 and June 30, 1999
(amounts in thousands):
<TABLE>
<CAPTION>
June 30,
1997 1998 1999
-------- -------- -----------
(Unaudited)
<S> <C> <C> <C>
Bank Revolving credit loan, due June 30,
2006, interest payable at rates based on
varying interest rate options............. $ 82,000 $ 97,000 $102,000
Term A Loan, due June 30, 2006, interest
payable at rates based on varying interest
rate options.............................. 180,000 220,000 220,000
Term B Loan, due June 30, 2007, interest
payable at rates based on varying interest
rate options.............................. 35,000 60,000 60,000
Term C Loan, due June 30, 2007, interest
payable at 9.48%.......................... 25,000 25,000 25,000
Various equipment loans and vehicle
leases.................................... 1,604 2,418 2,290
-------- -------- --------
$323,604 $404,418 $409,290
======== ======== ========
</TABLE>
In connection with the Partnership Recapitalization discussed in Note 1, the
Partnership entered into a $375 million credit facility with a group of
lenders, consisting of a Revolving Credit Loan, Term A, Term B and Term C
Loans. A commitment fee is charged on the daily unused portion of the available
commitment. This fee ranges from 1/4% to 3/8% per annum based on the
Partnership's leverage ratio, as defined. The Revolving Credit Loan and each of
the Term A, B, and C Loans are collateralized by all of the property, plant and
equipment of the Partnership, as well as the rights under all present and
future permits, licenses and franchises.
On June 24, 1998, the Partnership completed a restructuring of the Revolving
Credit Loan and the Term A, B and C Loans. Under the terms of the restructuring
agreement, the total availability of this facility increased from $375 million
to $475 million, in order to complete certain planned acquisitions (see Note 3)
and to provide for future growth.
The Partnership entered into LIBOR interest rate agreements with the lenders
related to the Revolving Credit Loan and the Term A and Term B Loans. The
Partnership fixed the interest rate for the Revolving Credit Loan on $71
million at 7.38% for the period from April 6, 1999 to July 6, 1999 and on $25
million at 7.38% for the period from April 26, 1999 to July 26, 1999. The Term
A Loan and Term B Loans are fixed at 7.38% and 7.50%, respectively, for the
period from April 26, 1999 to July 26, 1999. In addition, the Partnership has
entered into various interest rate swap transactions covering $195 million in
notional amount as of June 30, 1999, which fixes the weighted average three-
month variable rate at 5.6%. These swap transactions expire at various dates
through October 2000.
The Term A Loan requires principal payments to be made quarterly, beginning in
September 2000. The quarterly payments begin at $1,375,000 per quarter and
increase each September 30th thereafter. The Term B and Term C Loans require
total quarterly principal payments of $177,083 for the quarters ending
September 2000 and December 2000. Quarterly principal payments totaling $88,542
are then required through December 31, 2005, at which time the quarterly
payments increase to $3,187,500 through December 31, 2006 and $35,062,500 at
March 31, 2007. The Loans are due in full on June 30, 2007.
F-63
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
The loan agreements contain various covenants, the most restrictive of which
relate to maintenance of certain debt coverage ratios, meeting cash flow goals
and limitations on indebtedness.
Debt maturities required on all debt as of December 31, 1998 are as follows
(amounts in thousands):
<TABLE>
<CAPTION>
Year Amount
---- --------
<S> <C>
1999.............................................................. $ 775
2000.............................................................. 3,861
2001.............................................................. 16,375
2002.............................................................. 31,417
2003.............................................................. 39,407
Thereafter........................................................ 312,583
--------
$404,418
========
</TABLE>
(5) RELATED PARTY TRANSACTIONS
During the eight month period ending August 31, 1996, TTC provided management
services to the Partnership for a fee equal to 5% of gross revenues, as
defined. Charges for such management services amounted to approximately
$1,567,000. TTC also allocated certain overhead expenses to the Partnership
which primarily relate to employment costs. These overhead expenses amounted to
approximately $371,000 for the eight months ended August 31, 1996.
Commencing August 30, 1996, the Partnership entered into an agreement with TTC
to provide management services to the Partnership for a fee equal to 4% of
gross revenues, as defined. The agreement also states the Partnership will only
be required to pay a maximum fixed monthly payment of $275,000, which can be
adjusted for any acquisitions or dispositions by the Partnership at a rate of
$.8333 per acquired/disposed subscriber. Charges for such management services
provided by TTC amounted to approximately $1,100,000, $3,573,000 and $4,048,000
in 1996, 1997 and 1998, respectively, and $1,933,000 and $2,218,000 for the six
months ended June 30, 1998 and 1999, respectively. The remainder of the
management fees earned but unpaid will be distributable to TTC only after Triax
Cable GP and the limited partners have been distributed their original capital
investments and then the deferred and unpaid portion of the management fee will
be paid pari passu with the first 7.5% of the Priority Return, as defined. The
earned but unpaid fees totaled approximately $62,000, $488,000 and $738,000 in
1996, 1997 and 1998, respectively, and $353,000 and $422,000 for the six months
ended June 30, 1998 and 1999, respectively. The cumulative unpaid fees totaled
approximately $62,000, $550,000, $1,288,000 and $1,760,000 as of December 31,
1996, 1997, 1998 and June 30, 1999, respectively. These amounts have been
reflected in the statement of partners' deficit as "accumulated residual equity
interest of TTC", which has been allocated to the non-managing General Partner.
Commencing August 30, 1996, the Partnership entered into a programming
agreement with InterMedia Capital Management II, L.P. ("InterMedia"), an
affiliate of DD Cable, to purchase programming at InterMedia's cost, which
includes volume discounts InterMedia might earn. Included in this agreement is
a provision that requires the Partnership to remit to InterMedia an
administrative fee, based on a calculation stipulated in the agreement, which
amounted to approximately $444,000, $1,482,000 and $1,826,000 in 1996, 1997 and
1998, respectively, and $843,000 and $1,040,000 for the six months ended June
30, 1998 and 1999, respectively.
F-64
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
(6) LEASES
The Partnership leases office facilities, headend sites and other equipment
under noncancelable operating lease agreements, some of which contain renewal
options. Total rent expense, including month-to-month rental arrangements, was
approximately $364,000, $583,000 and $737,000 in 1996, 1997 and 1998,
respectively, and $336,000 and $413,000 for the six months ended June 30, 1998
and 1999, respectively. Pole attachment fees totaled approximately $496,000,
$798,000 and $970,000 in 1996, 1997 and 1998, respectively, and $473,000 and
$538,000 for the six months ended June 30, 1998 and 1999, respectively.
Future minimum rental commitments under noncancelable operating leases
subsequent to December 31, 1998 are as follows (amounts in thousands):
<TABLE>
<CAPTION>
Year Amount
---- ------
<S> <C>
1999................................................................ $685
2000................................................................ $511
2001................................................................ $377
2002................................................................ $298
2003................................................................ $238
Thereafter.......................................................... $757
</TABLE>
(7) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents approximates fair value
because of the nature of the investments and the length of maturity of the
investments.
The estimated fair value of the Partnership's debt instruments are based on
borrowing rates that would be substantially equivalent to existing rates,
therefore, there is no material difference in the fair market value and the
current value.
(8) REGULATORY MATTERS
In October 1992, Congress enacted the Cable Television Consumer and Competition
Act of 1992 (the "1992 Cable Act") which greatly expanded federal and local
regulation of the cable television industry. In April 1993, the Federal
Communications Commission ("FCC") adopted comprehensive regulations, effective
September 1, 1993, governing rates charged to subscribers for basic cable and
cable programming services (other than programming offered on a per-channel or
per-program basis). The FCC implemented regulation, which allowed cable
operators to justify regulated rates in excess of the FCC benchmarks through
cost of service showings at both the franchising authority level for basic
service and to the FCC in response to complaints on rates for cable programming
services.
On February 22, 1994, the FCC issued further regulations which modified the
FCC's previous benchmark approach, adopted interim rules to govern cost of
service proceedings initiated by cable operators, and lifted the stay of rate
regulations for small cable systems, which were defined as all systems serving
1,000 or fewer subscribers.
On November 10, 1994, the FCC adopted "going forward" rules that provided cable
operators with the ability to offer new product tiers priced as operators
elect, provided certain limited conditions are met, permit cable operators to
add new channels at reasonable prices to existing cable programming service
tiers, and created an additional option pursuant to which small cable operators
may add channels to cable programming service tiers.
F-65
<PAGE>
TRIAX MIDWEST ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1997 and 1998 and June 30, 1999
(All amounts related to the June 30, 1998 and 1999 periods are unaudited)
In May 1995, the FCC adopted small company rules that provided small systems
regulatory relief by implementing an abbreviated cost of service rate
calculation method. Using this methodology, for small systems seeking to
establish rates no higher than $1.24 per channel, the rates are deemed to be
reasonable.
In February 1996, the Telecommunications Act of 1996 ("1996 Act") was enacted
which, among other things, deregulated cable rates for small systems on their
programming tiers.
Federal law is expected to eliminate the regulation of rates for non-basic
cable programming service tiers after March 31, 1999.
Management of the Partnership believes they have complied in all material
respects with the provisions of the 1992 Cable Act and the 1996 Act, including
rate setting provisions. To date, the FCC's regulations have not had a material
adverse effect on the Partnership due to the lack of certifications by the
local franchising authorities. Several rate complaints have been filed against
the Partnership with the FCC. However, management does not believe this matter
will have a material adverse impact on the Partnership.
(9) COMMITMENTS AND CONTINGENCIES
The Partnership has been named as a defendant in a class action lawsuit in the
state of Illinois, challenging the Partnership's policy for charging late
payment fees when customers fail to pay for subscriber services in a timely
manner. The Partnership is currently in settlement negotiations with the
plaintiffs and expects the litigation to be settled by the end of the year.
However, management does not believe the ultimate outcome of this matter will
have a material adverse effect on its financial condition.
(10) EVENTS SUBSEQUENT TO DATE OF AUDITOR'S REPORT (UNAUDITED)
On April 29, 1999, the Partnership entered into a definitive agreement to sell
its cable television system assets to Mediacom LLC for $740 million, subject to
adjustment for subscriber benchmarks and other pro-rations in the normal
course. The sale is expected to occur in the fourth quarter of 1999 subject to
regulatory and other customary approvals.
On July 31, 1999, the Partnership acquired certain cable television system
assets, located in Illinois, including certain liabilities of the acquired
business, from an unrelated third party. The purchase price of approximately
$4.0 million was accounted for by the purchase method of accounting.
Effective September 30, 1999, the Partnership acquired certain cable television
system assets, located in Illinois, including certain liabilities of the
acquired business, from an unrelated third party. The purchase price of $1.1
million was accounted for by the purchase method of accounting.
In September 1999, the Partnership's independent billing company notified the
Partnership of its intent to assess additional charges should the Partnership
terminate the existing contract between the parties prior to the contractual
termination date of June 24, 2004. Mediacom LLC intends to change the billing
service provider for subscribers obtained in connection with its asset purchase
from the Partnership. The Partnership intends to vigorously defend against any
claims by the billing company, and believes the ultimate resolution of this
matter will not have a material adverse impact on its financial position or
results of operations.
F-66
<PAGE>
[Mediacom Communications Corporation Logo]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth various expenses, other than underwriting
discounts, which will be incurred in connection with this offering:
<TABLE>
<S> <C>
SEC registration fee............................................. $95,910
Nasdaq National Market listing fee............................... *
NASD filing fee.................................................. 30,500
Blue sky fees and expenses....................................... *
Printing and engraving expenses.................................. *
Legal fees and expenses.......................................... *
Accounting fees and expenses..................................... *
Transfer Agent fees.............................................. *
Miscellaneous expenses........................................... *
-------
Total.......................................................... $ *
=======
</TABLE>
* To be filed by amendment.
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with any threatened, pending or completed actions, suits or
proceedings in which such person is made a party by reason of such person being
or having been a director, officer, employee of or agent to the Registrant. The
statute provides that it is not exclusive of other rights to which those
seeking indemnification may be entitled under any by-law, agreement, vote of
stockholders or disinterested directors or otherwise. The Registrant's by-laws
provides for indemnification by the Registrant of any director or officer (as
such term is defined in the by-laws) of the Registrant who is or was a director
of any of its subsidiaries, or, at the request of the Registrant, is or was
serving as a director or officer of, or in any other capacity for, any other
enterprise, to the fullest extent permitted by law. The by-laws also provide
that the Registrant shall advance expenses to a director or officer and, if
reimbursement of such expenses is demanded in advance of the final disposition
of the matter with respect to which such demand is being made, upon receipt of
an undertaking by or on behalf of such director or officer to repay such amount
if it is ultimately determined that the director or officer is not entitled to
be indemnified by the Registrant. To the extent authorized from time to time by
the board of directors of the Registrant, the Registrant may provide to any one
or more employees of the Registrant, one or more officers, employees and other
agents of any subsidiary or one or more directors, officers, employees and
other agents of any other enterprise, rights of indemnification and to receive
payment or reimbursement of expenses, including attorneys' fees, that are
similar to the rights conferred in the by-laws of the Registrant on directors
and officers of the Registrant or any subsidiary or other enterprise. The by-
laws do not limit the power of the Registrant or its board of directors to
provide other indemnification and expense reimbursement rights to directors,
officers, employees, agents and other persons otherwise than pursuant to the
by-laws. The Registrant intends to enter into agreements with certain
directors, officers and employees who are asked to serve in specified
capacities at subsidiaries and other entities.
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for payments of
II-1
<PAGE>
unlawful dividends or unlawful stock repurchases or redemptions, or (iv) for
any transaction from which the director derived an improper personal benefit.
The Registrant's certificate of incorporation provides for such limitation of
liability.
The Registrant intends to maintain policies of insurance under which its
directors and officers will be insured, within the limits and subject to the
limitations of the policies, against certain expenses in connection with the
defense of, and certain liabilities which might be imposed as a result of,
actions, suits or proceedings to which they are parties by reason of being or
having been such directors or officers.
Reference is also made to Section 7 of the underwriting agreement filed as
Exhibit 1.1 to the registration statement for information concerning the
underwriters' obligation to indemnify the Registrant and its officers and
directors in certain circumstances.
Item 15. Recent Sales of Unregistered Securities
The Registrant has not issued any common stock since its formation on
November 8, 1999. Concurrently with the consummation of the offering to which
this registration statement relates, the Registrant will issue shares of common
stock in exchange for outstanding membership interests in Mediacom LLC in
accordance with the relative ownership percentages of membership interests in
Mediacom LLC immediately prior to this offering. The offering and sale of the
shares of common stock will not be registered under the Securities Act of 1933
because the offering and sale will be made in reliance on the exemption
provided by Section 4(2) of the Securities Act of 1933 and Rule 506 thereunder
for transactions by an issuer not involving a public offering (with the
recipients representing their intentions to acquire the securities for their
own accounts and not with a view to the distribution thereof and acknowledging
that the securities will be issued in a transaction not registered under the
Securities Act of 1933).
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits
The following exhibits are filed as part of this Registration Statement:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
1.1* Form of Underwriting Agreement between Registrant and the underwriters
2.1 Asset Purchase and Sale Agreement, dated as of May 23, 1996, by and
between Mediacom California LLC and Booth American Company (1)
2.2 Asset Purchase Agreement, dated as of August 29, 1996, between
Mediacom LLC and Saguaro Cable TV Investors, L.P. (1)
2.3 Asset Purchase Agreement, dated as of August 29, 1996, between
Mediacom California LLC and Valley Center Cablesystems, L.P. (1)
2.4 Asset Purchase Agreement, dated as of December 24, 1996, by and
between Mediacom LLC and American Cable TV Investors 5, Ltd. (1)
2.5 Asset Purchase Agreement, dated May 22, 1997, between Mediacom
California LLC and CoxCom, Inc. (1)
2.6 Asset Purchase Agreement, dated September 17, 1997, between Mediacom
California LLC and Jones Cable Income Fund 1-B/C Venture (1)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
2.7 Asset Purchase Agreement, dated August 29, 1997, among Mediacom LLC,
U.S. Cable Television Group, L.P., ECC Holding Corporation, Missouri
Cable Partners, L.P. and Cablevision Systems Corporation (1)
2.8 Asset Purchase Agreement, dated June 24, 1998, among Mediacom
Southeast, Mediacom LLC, Bootheel Video, Inc. and CSC Holdings (2)
2.9 Asset Purchase Agreement, dated April 29, 1999 between Mediacom LLC
and Triax Midwest Associates, L.P. (3)
2.10 Stock Purchase Agreement, dated May 25, 1999 among Mediacom LLC,
Charles D. Zylstra, Kara M. Zylstra and Trusts created under the Will
dated June 3, 1982 of Roger E. Zylstra, deceased, for the benefit of
Charles D. Zylstra and Kara M. Zylstra (4)
3.1 Certificate of Incorporation of Registrant prior to the effective date
of this registration statement
3.2* Form of Restated Certificate of Incorporation of Registrant to be
filed on the effective date of this registration statement
3.3 By-laws of Registrant
4.1* Form of certificate evidencing shares of Class A common stock
5.1* Opinion of Cooperman Levitt Winikoff Lester & Newman, P.C.
10.1 Management Agreement dated as of December 27, 1996 by and between
Mediacom Arizona LLC and Mediacom Management (1)
10.2 First Amended and Restated Management Agreement dated December 27,
1996 by and between Mediacom California LLC and Mediacom Management
(1)
10.3 Management Agreement dated June 24, 1997 by and between Mediacom
Delaware LLC and Mediacom Management (1)
10.4 Management Agreement dated January 23, 1998 by and between Mediacom
Southeast LLC and Mediacom Management (1)
10.5 Credit Agreement dated as of September 30, 1999 for the Mediacom USA
Credit Facility
10.6 Credit Agreement dated as of November 5, 1999 for the Mediacom Midwest
Credit Facility
10.7* 1999 Stock Option Plan
10.8* Amended and Restated Registration Rights Agreement, dated as of
October 1, 1997, by and among Mediacom LLC, Rocco B. Commisso, BMO
Financial, Inc., CB Capital Investors, L.P., Chase Manhattan Capital,
L.P., Morris Communications Corporation, Private Market Fund, L.P. and
U.S. Investor, Inc.
10.9* ISP Channel Affiliate Agreement, as of November 4, 1999, between ISP
Channel Inc., a subsidiary of SoftNet Systems, Inc. and Mediacom LLC
10.10* Stock Purchase Agreement, dated as of November 4, 1999, between
SoftNet Systems, Inc. and Mediacom LLC
21.1 Subsidiaries of Registrant
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Arthur Andersen LLP
23.3 Consent of KPMG LLP
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<C> <S>
23.5* Consent of Cooperman Levitt Winikoff Lester & Newman, P.C.
23.6* Consent of William S. Morris III
23.7* Consent of Craig S. Mitchell
23.8* Consent of Robert L. Winikoff
Powers of Attorney (included on the signature page of this
24.1 registration statement)
27.1 Financial Data Schedule of Mediacom LLC (4)
</TABLE>
- ------------
* To be filed by amendment.
(1) Filed as an exhibit to the Registration Statement on Form S-4 (File No.
333-57285) of Mediacom LLC and Mediacom Capital Corporation and
incorporated herein by reference.
(2) Filed as an exhibit to the Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 of Mediacom LLC and Mediacom Capital Corporation
and incorporated herein by reference.
(3) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1999 of Mediacom LLC and Mediacom Capital
Corporation and incorporated herein by reference.
(4) Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1999 of Mediacom LLC and Mediacom Capital
Corporation and incorporated herein by reference.
(b) Financial Statement Schedules.
Schedule II--Valuation and Qualifying Accounts--Reference is made to page
F-20 of the prospectus that is a part of this Registration Statement.
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus 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.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
Registrant pursuant to Item 14 of this Part II to the registration statement,
or otherwise, Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a director, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Middletown, State of New
York, on November 11, 1999.
Mediacom Communications Corporation
By: /s/ Rocco B. Commisso
-----------------------------------
Rocco B. Commisso, Chairman and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Rocco B. Commisso and Mark E. Stephan as such
person's true and lawful attorney-in-fact and agent, acting alone, with full
powers of substitution and revocation, for such person and in such person's
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration statement
and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, acting alone, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as such person might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, acting alone, 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 Title Date
--------- ----- ----
<S> <C> <C>
/s/ Rocco B. Commisso Chairman and Chief November 11,
___________________________________________ Executive Officer 1999
Rocco B. Commisso (principal executive
officer)
/s/ Mark E. Stephan Senior Vice President, November 11,
___________________________________________ Chief Financial Officer, 1999
Mark E. Stephan Treasurer and Director
(principal financial
officer and principal
accounting officer)
</TABLE>
II-5
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
MEDIACOM COMMUNICATIONS CORPORATION
The undersigned, acting as the incorporator of the corporation hereby
being formed under the General Corporation Law of the State of Delaware,
certifies that:
FIRST. The name of the corporation is Mediacom Communications
Corporation.
SECOND. The address, including the street, number, city and county,
of the registered office of the corporation in the State of Delaware is 30 Old
Rudnick Lane, Suite 100, Dover, Delaware 19901, County of Kent; and the name of
the registered agent of the corporation in the State of Delaware at such address
is LEXIS Document Services Inc.
THIRD. 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, and to have and exercise all the
powers conferred by the laws of the State of Delaware upon corporations formed
under the General Corporation Law of the State of Delaware.
FOURTH. The number of shares which the corporation shall have
authority to issue is 1,000, all of which are of a par value of $0.01 each. All
such shares are of one class and are shares of Common Stock.
FIFTH. The name and mailing address of the incorporator are as
follows:
Stephen W. Semian
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
SIXTH. The personal liability of the directors of the corporation
is hereby eliminated to the fullest extent permitted by the provisions of
paragraph (7) of subsection (b) of Section 102 of the General Corporation Law of
the State of Delaware, as the same may be amended and supplemented.
<PAGE>
SEVENTH. The corporation shall, to the fullest extent permitted by
the provisions of Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented, indemnify any and all
persons whom it shall have power to indemnify under said section from and
against any and all of the expenses, liabilities, or other matters referred to
in or covered by said section, and the indemnification provided for herein shall
not be deemed exclusive of any other rights to which those indemnified 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, and shall 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.
Signed on November 8, 1999
/s/ Stephen W. Semian
------------------------------------
Stephen W. Semian, Incorporator
<PAGE>
EXHIBIT 3.3
BY-LAWS
OF
MEDIACOM COMMUNICATIONS CORPORATION
ARTICLE I
Stockholders
------------
Section 1. Annual Meeting. A meeting of stockholders of the Corporation
--------------
shall be held annually at such place within or without the State of Delaware, at
such time and on such date as may from time to time be fixed by the Board of
Directors, for the election of directors and for the transaction of such other
business as may come before the meeting.
Section 2. Special Meetings. Special meetings of stockholders of the
----------------
Corporation may be called by the Board of Directors or the President, and shall
be called by the Secretary upon the written request of stockholders of record
holding at least a majority in number of the issued and outstanding shares of
the Corporation entitled to vote at such meeting. Special meetings shall be
held at such places within or without the State of Delaware, at such time and on
such date as shall be specified in the call thereof. At any special meeting,
only such business may be transacted which is related to the purpose or purposes
set forth in the notice of such special meeting.
Section 3. Notice of Meetings. Written notice of each meeting of
------------------
stockholders stating the place, date and hour thereof and, unless it is an
annual meeting, the purpose or purposes for which the meeting is called and that
it is being issued by or at the direction of the person or persons calling the
meeting, shall be given personally or by mail, not less than ten nor more than
fifty days before the date of such meeting, to each stockholder entitled to vote
at such meeting. If
<PAGE>
mailed, such notice is given when deposited in the United States mail, with
postage thereon prepaid, directed to the stockholder at his or her address as it
appears on the record of stockholders or, if he or she shall have filed with the
Secretary a written request that notices to him or her be mailed to some other
address, then directed to him or her at such other address.
Section 4. Waiver of Notice. Notice of any meeting of stockholders need
----------------
not be given to any stockholder who submits a signed waiver of notice, in person
or by proxy, whether before or after the meeting. The attendance of any
stockholder at a meeting in person or by proxy, without protesting prior to the
conclusion of the meeting the lack of notice of such meeting, shall constitute a
waiver of notice by him or her.
Section 5. Adjournment. When any meeting of stockholders is adjourned to
-----------
another time or place, it shall not be necessary to give any notice of the
adjourned meeting if the time and place to which the meeting is adjourned are
announced at the meeting at which the adjournment is taken, and at the adjourned
meeting any business may be transacted that might have been transacted on the
original date of the meeting. However, if after such adjournment the Board of
Directors fixes a new record date for the adjourned meeting, a notice of the
adjourned meeting shall be given to each stockholder of record on the new record
date entitled to vote at such meeting.
Section 6. Quorum. Except as otherwise provided by law, the holders of a
------
majority of the shares entitled to vote at any meeting of stockholders, shall
constitute a quorum thereat for the transaction of any business. When a quorum
is once present to organize a meeting, it is not broken by the subsequent
withdrawal of any stockholders. The stockholders present may adjourn a meeting
despite the absence of a quorum.
Section 7. Proxies. Every stockholder entitled to vote at a meeting of
-------
stockholders or to
2
<PAGE>
express consent or dissent without a meeting may authorize another person or
persons to act for him or her by proxy. Every proxy must be signed by the
stockholder or his or her attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the stockholder
executing it, except as otherwise provided by law.
Section 8. Voting. Every stockholder of record shall be entitled at every
------
meeting of stockholders to one vote for every share standing in his or her name
on the record of stockholders. Directors shall, except as otherwise required by
law, be elected by a plurality of the votes cast at a meeting of stockholders by
the holders of shares entitled to vote in such election. Whenever any corporate
action, other than the election of directors, is to be taken by vote of the
stockholders, it shall, except as otherwise required by law, be authorized by a
majority of the votes cast at a meeting of stockholders by the holders of shares
entitled to vote thereon.
Section 9. Action Without a Meeting. Any action required or permitted to
------------------------
be taken by stockholders by vote may be taken without a meeting on written
consent, setting forth the action so taken, signed by the holders of all
outstanding shares entitled to vote thereon.
Section 10. Record Date. The Board of Directors may fix, in advance, a
-----------
date, which date shall not be more than fifty nor less than ten days before the
date of any meeting of stockholders nor more than fifty days prior to any other
action, as the record date for the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining stockholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action. When a determination of
3
<PAGE>
stockholders of record entitled to notice of or to vote at any meeting of
stockholders has been made as provided herein, such determination shall apply to
any adjournment thereof, unless the Board of Directors fixes a new record date
for the adjourned meeting.
ARTICLE II
Directors
---------
Section 1. Number and Qualifications. The Board of Directors shall consist
-------------------------
of one or more members. The number of directors shall be fixed by the Board of
Directors. Directors need not be stockholders of the Corporation. Each of the
directors shall be at least eighteen years of age.
Section 2. Election and Term of Office. At each annual meeting of
---------------------------
stockholders, directors shall be elected to hold office until the next annual
meeting of stockholders. Each director shall hold office until the expiration
of such term, and until his or her successor has been elected and qualified,
unless he or she shall sooner die, resign or be removed.
Section 3. Meetings. A meeting of the Board of Directors shall be held for
--------
the election of officers and for the transaction of such other business as may
properly come before such meeting as soon as practicable after the annual
meeting of stockholders. Other regular meetings of the Board of Directors may
be held at such times as the Board of Directors may from time to time determine.
Special meetings of the Board of Directors may be called at any time by the
President or by a majority of the directors then in office. Meetings of the
Board of Directors shall be held at the principal office of the Corporation in
the State of Delaware or at such other place within or without the State of
Delaware as may from time to time be fixed by the Board of
4
<PAGE>
Directors.
Section 4. Notice of Meetings; Adjournment. No notice need be given of the
-------------------------------
first meeting of the Board of Directors after the annual meeting of stockholders
or of any other regular meeting of the Board of Directors, provided the time and
place of such meetings are fixed by the Board of Directors. Notice of each
special meeting of the Board of Directors and of each regular meeting the time
and place of which has not been fixed by the Board of Directors, specifying the
place, date and time thereof, shall be given personally, by mail or telegraphed
to each director at his or her address as such address appears upon the books of
the Corporation at least two business days (Saturdays, Sundays and legal
holidays not being considered business days for the purpose of these By-Laws)
before the date of such meeting. Notice of any meeting need not be given to any
director who submits a signed waiver of notice, whether before or after the
meeting, or who attends the meeting without protesting, prior thereto or at its
commencement, the lack of notice to him or her. Notice of any directors'
meeting or any waiver thereof need not state the purpose of the meeting. A
majority of the directors present, whether or not a quorum is present, may
adjourn any meeting to another time and place. Notice of any adjournment of a
meeting of the Board of Directors to another time or place shall be given to the
directors who were not present at the time of the adjournment and, unless such
time and place are announced at the meeting, to the other directors.
Section 5. Quorum; Voting. At any meeting of the Board of Directors, a
--------------
majority of the entire Board of Directors shall constitute a quorum for the
transaction of business or of any specified item of business. Except as
otherwise required by law, the vote of a majority of the directors present at
the time of the vote, if a quorum is present at such time, shall be the act of
5
<PAGE>
the Board of Directors.
Section 6. Participation by Telephone. Any one or more members of the
--------------------------
Board of Directors or any committee thereof may participate in a meeting of the
Board of Directors or such committee by means of a conference telephone or
similar communications equipment allowing all persons participating in the
meeting to hear each other at the same time. Participation by such means shall
constitute presence in person at a meeting.
Section 7. Action Without a Meetings. Any action required or permitted to
-------------------------
be taken by the Board of Directors or any committee thereof may be taken without
a meeting if all members of the Board of Directors or such committee consent in
writing to the adoption of a resolution authorizing the action. The resolution
and the written consents thereto by the members of the Board of Directors or
such committee shall be filed with the minutes of the proceedings of the Board
of Directors or such committee.
Section 8. Committees. The Board of Directors, by resolution adopted by a
----------
majority of the entire Board of Directors, may designate from among its members
an Executive Committee and other committees, each consisting of three or more
directors. Each such committee, to the extent provided in such resolution,
shall have all the authority of the Board of Directors, except that no such
committee shall have authority as to the following matters: (a) the submission
to stockholders of any action that needs stockholders' approval pursuant to law,
(b) the filling of vacancies in the Board of Directors or in any committee, (c)
the fixing of the compensation of the directors for serving on the Board of
Directors or on any committee, (d) the amendment or repeal of these By-Laws, or
the adoption of new By-Laws, or (e) the amendment or repeal of any resolution of
the Board of Directors which by its terms shall not be so amendable or
repealable.
6
<PAGE>
The Board of Directors may designate one or more directors as alternate members
of any such committee, who may replace any absent member or members at any
meeting of such committee. Each such committee shall serve at the pleasure of
the Board of Directors.
Section 9. Removal; Resignation. Any or all of the directors may be
--------------------
removed for cause by vote of the stockholders, and any of the directors may be
removed for cause by action of the Board of Directors. Any director may resign
at any time, such resignation to be made in writing and to take effect
immediately or on any future date stated in such writing, without acceptance by
the Corporation.
Section 10. Vacancies. Newly created directorships resulting from an
---------
increase in the number of directors and vacancies occurring in the Board of
Directors for any reason may be filled by vote the Board of Directors or by vote
of the stockholders. If any newly created directorship or vacancy is to be
filled by vote of the Board of Directors and the number of directors then in
office is less than a quorum, such newly created directorship or vacancy may be
filled by vote of a majority of the directors then in office. A director
elected to fill a vacancy, unless elected by the stockholders, shall hold office
until the next meeting of stockholders at which the election of directors is in
the regular order of business, and until his or her successor has been elected
and qualified, and any director elected by the stockholders to fill a vacancy
shall hold office for the unexpired term of his or her predecessor unless, in
either case, he or she shall sooner die, resign or be removed.
ARTICLE III
Officers
--------
7
<PAGE>
Section 1. Election; Qualifications. At the first meeting of the Board of
------------------------
Directors and as soon as practicable after each annual meeting of stockholders,
the Board of Directors shall elect or appoint a President, one or more Vice-
Presidents, a Secretary and a Treasurer, and may elect or appoint at such time
and from time to time such other officers as it may determine. No officer need
be a director of the Corporation. Any two or more offices may be held by the
same person, except the offices of President and Secretary. When all of the
issued and outstanding stock of the Corporation is owned by one person, such
person may hold all or any combination of offices.
Section 2. Term of Office; Vacancies. All officers shall be elected or
-------------------------
appointed to hold office until the meeting of the Board of Directors following
the next annual meeting of stockholders. Each officer shall hold office for
such term and until his or her successor has been elected or appointed and
qualified unless he or she shall earlier resign, die, or be removed. Any
vacancy occurring in any office, whether because of death, resignation or
removal, with cause, or any other reason, shall be filled by the Board of
Directors.
Section 3. Removal; Resignation. Any officer may be removed by the Board
--------------------
of Directors with cause. Any officer may resign his or her office at any time,
such resignation to be made in writing and to take effect immediately or on any
future date stated in such writing, without acceptance by the Corporation.
Section 4. Powers and Duties of the President. The President shall be the
----------------------------------
chief executive, operating and administrative officer of the Corporation and
shall have general charge and supervision of its business, affairs,
administration and operations. The President shall from time to time make such
reports concerning the Corporation as the Board of Directors may direct. The
President shall preside at all meetings of stockholders and the Board of
Directors. The President
8
<PAGE>
shall have such other powers and shall perform such other duties as may from
time to time be assigned to him or her by the Board of Directors.
Section 5. Powers and Duties of the Vice-Presidents. Each of the Vice-
----------------------------------------
Presidents shall have such powers and shall perform such duties as may from time
to time be assigned to him or her by the Board of Directors.
Section 6. Powers and Duties of the Secretary. The Secretary shall record
----------------------------------
and keep the minutes of all meetings of stockholders and of the Board of
Directors. The Secretary shall attend to the giving and serving of all notices
by the Corporation. The Secretary shall be the custodian of, and shall make or
cause to be made the proper entries in, the minute book of the Corporation and
such books and records as the Board of Directors may direct. The Secretary
shall be the custodian of the seal of the Corporation and shall affix or cause
to be affixed such seal to such contracts, instruments and other documents as
the Board of Directors may direct. The Secretary shall have such other powers
and shall perform such other duties as may from time to time be assigned to him
or her by the Board of Directors.
Section 7. Powers and Duties of the Treasurer. The Treasurer shall be the
----------------------------------
custodian of all funds and securities of the Corporation. Whenever required by
the Board of Directors, the Treasurer shall render a statement of the
Corporation's cash and other accounts, and shall cause to be entered regularly
in the proper books and records of the Corporation to be kept for such purpose
full and accurate accounts of the Corporation's receipts and disbursements. The
Treasurer shall at all reasonable times exhibit the Corporation's books and
accounts to any director of the Corporation upon application at the principal
office of the corporation during business hours. The Treasurer shall have such
other powers and shall perform such other duties
9
<PAGE>
as may from time to time be assigned to him or her by the Board of Directors.
Section 8. Delegation. In the event of the absence of any officer of the
----------
Corporation or for any other reason that the Board of Directors may deem
sufficient, the Board of Directors may at any time and from time to time
delegate all or any part of the powers or duties of any officer to any other
officer or officers or to any director or directors.
ARTICLE IV
Shares
------
The shares of the Corporation shall be represented by certificates signed
by the President or any Vice-President and by the Secretary, an Assistant
Secretary, the Treasurer or an Assistant Treasurer, and may be sealed with the
seal of the Corporation or a facsimile thereof. Each certificate representing
shares shall state upon the face thereof (a) that the Corporation is formed
under the laws of the State of Delaware, (b) the name of the person or persons
to whom it is issued, (c) the number and class of shares which such certificate
represents and (d) the designation of the series, if any, which such certificate
represents.
ARTICLE V
Execution of Documents
----------------------
All contracts, instruments, agreements, bills payable, notes, checks,
drafts, warrants or other obligations of the Corporation shall be made in the
name of the Corporation and shall be signed by such officer or officers as the
Board of Directors may from time to time designate.
10
<PAGE>
ARTICLE VI
Seal
----
The seal of the Corporation shall contain the name of the Corporation, the
words "Corporate Seal", the year of its organization and the word "Delaware".
ARTICLE VII
Indemnification
---------------
The Corporation shall indemnify any person to the full extent permitted,
and in the manner provided, by the General Corporation Law of the State of
Delaware, as the same now exists or may hereafter be amended.
ARTICLE VIII
Fiscal Year
-----------
The fiscal year of the Corporation shall end on December 31 of each year or
on such other date as shall be determined by the Board of Directors.
11
<PAGE>
ARTICLE IX
Amendment of By-Laws
--------------------
Except as otherwise provided by law, these By-Laws may be amended or
repealed, and any new By-Law may be adopted, by vote of the holders of the
shares at the time entitled to vote in the election of any directors or by a
majority of the entire Board of Directors, but any by-law adopted by the Board
of Directors may be amended or repealed by the stockholders entitled to vote
thereon as herein provided.
12
<PAGE>
EXHIBIT 10.5
************************************************************
MEDIACOM SOUTHEAST LLC
MEDIACOM CALIFORNIA LLC
MEDIACOM DELAWARE LLC
MEDIACOM ARIZONA LLC
______________________________
CREDIT AGREEMENT
Dated as of September 30, 1999
______________________________
THE CHASE MANHATTAN BANK,
as Administrative Agent
************************************************************
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
<TABLE>
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<S> <C>
Section 1. Definitions and Accounting Matters...................................................................... 1
1.01 Certain Defined Terms.................................................................................... 1
1.02 Accounting Terms and Determinations...................................................................... 29
1.03 Classes and Types of Loans............................................................................... 30
1.04 Subsidiaries............................................................................................. 30
1.05 Nature of Obligations of Borrowers....................................................................... 30
Section 2. Commitments, Loans and Prepayments...................................................................... 30
2.01 Loans.................................................................................................... 30
2.02 Borrowings............................................................................................... 32
2.03 Letters of Credit........................................................................................ 32
2.04 Changes of Commitments................................................................................... 37
2.05 Commitment Fee........................................................................................... 39
2.06 Lending Offices.......................................................................................... 40
2.07 Several Obligations; Remedies Independent................................................................ 40
2.08 Loan Accounts; Promissory Notes.......................................................................... 40
2.09 Optional Prepayments and Conversions or Continuations of Loans........................................... 41
2.10 Mandatory Prepayments and Reductions of Commitments...................................................... 42
Section 3. Payments of Principal and Interest...................................................................... 45
3.01 Repayment of Loans....................................................................................... 45
3.02 Interest................................................................................................. 47
3.03 Determination of Applicable Margin....................................................................... 48
Section 4. Payments; Pro Rata Treatment; Computations; Etc......................................................... 49
4.01 Payments................................................................................................. 49
4.02 Pro Rata Treatment....................................................................................... 50
4.03 Computations............................................................................................. 50
4.04 Minimum Amounts.......................................................................................... 51
4.05 Certain Notices.......................................................................................... 51
4.06 Non-Receipt of Funds by the Administrative Agent......................................................... 52
4.07 Sharing of Payments, Etc................................................................................. 53
</TABLE>
(i)
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Section 5. Yield Protection, Etc................................................................................... 55
5.01 Additional Costs......................................................................................... 55
5.02 Limitation on Types of Loans............................................................................. 57
5.03 Illegality............................................................................................... 57
5.04 Treatment of Affected Loans.............................................................................. 57
5.05 Compensation............................................................................................. 58
5.06 Additional Costs in Respect of Letters of Credit......................................................... 59
5.07 U.S. Taxes............................................................................................... 59
5.08 Replacement of Lenders................................................................................... 61
Section 6. Conditions Precedent.................................................................................... 61
6.01 Initial Extension of Credit.............................................................................. 61
6.02 Initial and Subsequent Extensions of Credit.............................................................. 64
Section 7. Representations and Warranties.......................................................................... 64
7.01 Existence................................................................................................ 64
7.02 Financial Condition...................................................................................... 65
7.03 Litigation............................................................................................... 65
7.04 No Breach................................................................................................ 65
7.05 Action................................................................................................... 66
7.06 Approvals................................................................................................ 66
7.07 ERISA.................................................................................................... 66
7.08 Taxes.................................................................................................... 66
7.09 Investment Company Act................................................................................... 67
7.10 Public Utility Holding Company Act....................................................................... 67
7.11 Material Agreements and Liens............................................................................ 67
7.12 Environmental Matters.................................................................................... 68
7.13 Capitalization........................................................................................... 68
7.14 Subsidiaries, Etc........................................................................................ 69
7.15 True and Complete Disclosure............................................................................. 69
7.16 Franchises............................................................................................... 69
7.17 The CATV Systems......................................................................................... 70
7.18 Rate Regulation.......................................................................................... 71
7.19 Year 2000 Issues.......................................................................................... 72
7.20 Use of Credit............................................................................................ 72
Section 8. Covenants of the Borrowers.............................................................................. 73
8.01 Financial Statements Etc................................................................................. 73
8.02 Litigation............................................................................................... 75
8.03 Existence, Etc........................................................................................... 76
8.04 Insurance................................................................................................ 77
</TABLE>
(ii)
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8.05 Prohibition of Fundamental Changes....................................................................... 77
8.06 Limitation on Liens...................................................................................... 82
8.07 Indebtedness............................................................................................. 83
8.08 Investments.............................................................................................. 84
8.09 Restricted Payments...................................................................................... 84
8.10 Certain Financial Covenants.............................................................................. 87
8.11 Management Fees.......................................................................................... 88
8.12 Capital Expenditures..................................................................................... 89
8.13 Interest Rate Protection Agreements...................................................................... 91
8.14 Affiliate and Additional Subordinated Indebtedness....................................................... 91
8.15 Lines of Business........................................................................................ 92
8.16 Transactions with Affiliates............................................................................. 92
8.17 Use of Proceeds.......................................................................................... 93
8.18 Certain Obligations Respecting Subsidiaries; Further Assurances.......................................... 93
8.19 Modifications of Certain Documents....................................................................... 95
Section 9. Events of Default....................................................................................... 95
9.01 Events of Default........................................................................................ 95
9.02 Certain Cure Rights...................................................................................... 100
Section 10. The Administrative Agent............................................................................... 102
10.01 Appointment, Powers and Immunities...................................................................... 102
10.02 Reliance by Administrative Agent........................................................................ 102
10.03 Defaults................................................................................................ 103
10.04 Rights as a Lender...................................................................................... 103
10.05 Indemnification......................................................................................... 104
10.06 Non-Reliance on Administrative Agent and Other Lenders.................................................. 104
10.07 Failure to Act.......................................................................................... 104
10.08 Resignation or Removal of Administrative Agent.......................................................... 105
10.09 Consents under Other Loan Documents..................................................................... 105
Section 11. Miscellaneous.......................................................................................... 106
11.01 Waiver.................................................................................................. 106
11.02 Notices................................................................................................. 106
11.03 Expenses, Etc........................................................................................... 106
11.04 Amendments, Etc......................................................................................... 107
11.05 Successors and Assigns.................................................................................. 109
11.06 Assignments and Participations.......................................................................... 109
11.07 Survival................................................................................................ 112
11.08 Captions................................................................................................ 113
11.09 Counterparts............................................................................................ 113
11.10 Governing Law; Submission to Jurisdiction............................................................... 113
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(iii)
<PAGE>
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11.11 Waiver of Jury Trial.................................................................................... 113
11.12 Treatment of Certain Information; Confidentiality....................................................... 114
</TABLE>
SCHEDULE I - Commitments
SCHEDULE II - Material Agreements and Liens
SCHEDULE III - Investments
SCHEDULE IV - Franchises
SCHEDULE V - Certain Matters Related to CATV Systems
SCHEDULE VI - Certain Adjustments to System Cash Flow
EXHIBIT A - Form of Assignment and Acceptance
EXHIBIT B - Form of Quarterly Officer's Report
EXHIBIT C - Form of Pledge Agreement
EXHIBIT D - Form of Guarantee and Pledge Agreement
EXHIBIT E - Form of Subsidiary Guarantee Agreement
EXHIBIT F - Form of Management Fee Subordination Agreement
EXHIBIT G - Form of Opinion of Counsel to the Obligors
EXHIBIT H - Form of Opinion of Special New York Counsel to Chase
EXHIBIT I - Form of Confidentiality Agreement
EXHIBIT J - Form of Affiliate Subordinated Indebtedness Subordination
Agreement
(iv)
<PAGE>
CREDIT AGREEMENT dated as of September 30, 1999, between: MEDIACOM
SOUTHEAST LLC, a limited liability company duly organized and validly existing
under the laws of the State of Delaware ("Mediacom Southeast"); MEDIACOM
------------------
CALIFORNIA LLC, a limited liability company duly organized and validly existing
under the laws of the State of Delaware ("Mediacom California"); MEDIACOM
-------------------
DELAWARE LLC, a limited liability company duly organized and validly existing
under the laws of the State of Delaware ("Mediacom Delaware"); MEDIACOM ARIZONA
-----------------
LLC, a limited liability company duly organized and validly existing under the
laws of the State of Delaware ("Mediacom Arizona" and, together with Mediacom
----------------
Southeast, Mediacom California, Mediacom Delaware, the "Borrowers"); each of the
---------
lenders that is a signatory hereto identified under the caption "Lenders" on the
signature pages hereto and each lender that becomes a "Lender" after the date
hereof pursuant to Section 11.06(b) hereof (individually, a "Lender" and,
------
collectively, the "Lenders"); and THE CHASE MANHATTAN BANK, a New York banking
-------
corporation, as administrative agent for the Lenders (in such capacity, together
with its successors in such capacity, the "Administrative Agent").
--------------------
The Borrowers have requested that the Lenders extend credit to them
(by making loans and issuing letters of credit) in an aggregate principal or
face amount not exceeding $550,000,000 (which may, in the circumstances herein
provided, be increased to $750,000,000) at any one time outstanding to enable
the Borrowers to refinance and replace certain existing credit facilities and
for general corporate purposes. The Lenders are prepared to extend such credit
on the terms and conditions hereof and, accordingly, the parties hereto agree as
follows:
Section 1. Definitions and Accounting Matters.
----------------------------------
1.01 Certain Defined Terms. As used herein, the following terms shall
---------------------
have the following meanings (all terms defined in this Section 1.01 or in other
provisions of this Agreement in the singular to have the same meanings when used
in the plural and vice versa):
---- -----
"Acquisition" shall mean any acquisition permitted under 8.05(d)(iv)
-----------
hereof, provided that for the purposes of this Agreement the Triax Acquisition
--------
(other than the Apache Acquisition) shall not be an Acquisition hereunder.
"Additional Capital Expenditures" shall mean Capital Expenditures made
-------------------------------
in accordance with the requirements of Section 8.12(b) hereof.
"Adjusted Operating Cash Flow" shall mean, for any period during which
----------------------------
the Borrowers shall have consummated an Acquisition, the sum, for the Borrowers
and their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP), of the following, in each case determined under the
assumption that such Acquisition had been consummated on the first day of such
period: (i) Operating Cash Flow minus (ii) without duplication of the
-----
Management Fees actually paid during such period, the additional
<PAGE>
-2-
Management Fees that would have been paid during such period at a rate equal to
the then applicable rate or percentage specified in the Management Agreement of
the gross operating revenue of the Borrowers and their Subsidiaries for such
period (determined, as specified above under the assumption that such
Acquisition had been consummated on the first day of such period).
"Adjusted System Cash Flow" shall mean, for any period during which
-------------------------
the Borrowers shall have consummated an Acquisition, the sum, for the Borrowers
and their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP), of the following, in each case determined under the
assumption that such Acquisition had been consummated on the first day of such
period: (i) System Cash Flow for such period plus (ii) the sum of (x) non-
----
recurring expenses incurred by the relevant sellers prior to the actual closing
of such Acquisition (to the extent such items were included as operating
expenses in the determination of System Cash Flow for such period) and (y) in
the case of the Apache Acquisition, the amounts set forth in Schedule VI hereto
for such period, or, in the case of any other Acquisition after the date hereof,
the amounts set forth in a statement of adjustments to System Cash Flow provided
by the Borrowers in connection with such Acquisition and acceptable to the
Administrative Agent and Majority Lenders (in each case representing certain
cost savings and programming cost increases in respect of the CATV Systems being
acquired in such Acquisition).
"Administrative Questionnaire" shall mean an Administrative
----------------------------
Questionnaire in a form supplied by the Administrative Agent.
"Affiliate" shall mean any Person that directly or indirectly
---------
controls, or is under common control with, or is controlled by, a Borrower and,
if such Person is an individual, any member of the immediate family (including
parents, spouse, children and siblings) of such individual and any trust whose
principal beneficiary is such individual or one or more members of such
immediate family and any Person who is controlled by any such member or trust.
As used in this definition, "control" (including, with its correlative meanings,
-------
"controlled by" and "under common control with") shall mean possession,
------------- -------------------------
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise), provided that, in any event, any
--------
Person that owns directly or indirectly securities having 5% or more of the
voting power for the election of directors or other governing body of a
corporation or 5% or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, (a) no individual shall be an Affiliate solely by reason of his or
her being a director, officer or employee of any Borrower or any of its
Subsidiaries and (b) none of the Borrowers or their Wholly Owned Subsidiaries
shall be Affiliates.
<PAGE>
-3-
"Affiliate Letters of Credit" shall mean Letters of Credit issued in
---------------------------
accordance with the requirements of Section 8.08(g) hereof.
"Affiliate Subordinated Indebtedness" shall mean Indebtedness to an
-----------------------------------
Affiliate (i) for which a Borrower is directly and primarily liable, (ii) in
respect of which none of its Subsidiaries is contingently or otherwise
obligated, (iii) that is subordinated to the obligations of the Borrowers to pay
principal of and interest on the Loans, Reimbursement Obligations, fees and
other amounts payable hereunder pursuant to an Affiliate Subordinated
Indebtedness Subordination Agreement, (iv) that does not mature prior to
September 30, 2009, and that is issued pursuant to documentation containing
terms (including interest, covenants and events of default) in form and
substance satisfactory to the Majority Lenders and (v) that states by its terms
that principal and interest in respect thereof shall only be payable to the
extent permitted under Section 8.09 hereof.
"Affiliate Subordinated Indebtedness Subordination Agreement" shall
-----------------------------------------------------------
mean an Affiliate Subordinated Indebtedness Subordination Agreement
substantially in the form of Exhibit J hereto between any Person to whom a
Borrower or any of its Subsidiaries may be obligated to pay Affiliate
Subordinated Indebtedness, the Borrowers and the Administrative Agent, as the
same shall be modified and supplemented and in effect from time to time.
"Apache Acquisition" shall mean the acquisition by Mediacom Arizona
------------------
of the Apache Junction, Arizona cable television system from Triax Midwest
Associates, L.P. as part of the Triax Acquisition.
"Applicable Lending Office" shall mean, for each Lender and for each
-------------------------
Type of Loan, the "Lending Office" of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan in the Administrative Questionnaire
submitted by such Lender or such other office of such Lender (or of an affiliate
of such Lender) as such Lender may from time to time specify to the
Administrative Agent and the Borrowers as the office by which its Loans of such
Type are to be made and maintained.
"Applicable Margin" shall mean, with respect to (a) Term Loans that
-----------------
are Base Rate Loans, (i) when the then-current Rate Ratio (determined pursuant
to Section 3.03 hereof) is 5.00 to 1 or less, 1.50% per annum and (ii) at all
other times, 1.75% per annum, (b) Term Loans that are Eurodollar Loans, (i) when
the then-current Rate Ratio (determined pursuant to Section 3.03 hereof) is 5.00
to 1 or less, 2.50% per annum and (ii) at all other times, 2.75% per annum and
(c) Revolving Credit Loans of any Type, the respective rates indicated below for
Loans of such Type opposite the then-current Rate Ratio (determined pursuant to
Section 3.03 hereof) indicated below (except that anything in this Agreement to
the contrary notwithstanding, the Applicable Margin with respect to any Loans
shall be 1.75% with respect to Base Rate Loans
<PAGE>
-4-
and 2.75% with respect to Eurodollar Loans during any period when an Event of
Default shall have occurred and be continuing):
Range Applicable Margin (% p.a.)
-------------------------
of
Rate Ratio Base Rate Loans Eurodollar Loans
---------- --------------- ----------------
Greater than 5.75 to 1 1.250% 2.250%
Greater than or equal to
5.50 to 1 but less than
or equal to 5.75 to 1 1.000% 2.000%
Greater than or equal to
5.00 to 1 but less than
5.50 to 1 0.750% 1.750%
Greater than or equal to
4.50 but less than
5.00 to 1 0.500% 1.500%
Greater than or equal to
3.75 to 1 but
less than 4.50 to 1 0.250% 1.250%
Greater than or equal to
3.00 to 1 but
less than 3.75 to 1 0.250% 1.000%
Less than 3.00 to 1 0.000% 0.750%
"Applicable Permitted Transaction Amount" shall mean, as at any date
---------------------------------------
during any fiscal quarter during any Fiscal Period, the sum of (a) the Equity
Contribution Amount and the outstanding principal amount of Affiliate
Subordinated Indebtedness, as at the beginning of such fiscal quarter plus (b)
----
the total cash equity capital contributions made, and the aggregate principal
amount of Affiliate Subordinated Indebtedness advanced, to the Borrowers during
the period (the "current period") commencing on the first day of such fiscal
--------------
quarter through and including such date minus (c) the sum of (i) the aggregate
-----
amount of repayments of Affiliate Subordinated Indebtedness, and distributions
in respect of equity capital, made during the current period plus (ii) the
----
aggregate face amount of Affiliate Letters of Credit issued during the current
period or during the period (the "prior period") commencing on the Closing Date
------------
through and
<PAGE>
-5-
including the last day of the fiscal quarter immediately preceding such fiscal
quarter minus (iii) the aggregate amount of reductions in the undrawn face
-----
amount of Affiliate Letters of Credit (i.e. excluding reductions in such face
amount that occur upon a drawing thereunder) during the current period or the
prior period, together with the aggregate amount of Affiliate Letters of Credit
that expire or are terminated during the current period or the prior period
without being drawn.
"Approved Fund" means 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.
"Assignment and Acceptance" means an assignment and acceptance
-------------------------
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 11.05 hereof), and accepted by the Administrative
Agent, in the form of Exhibit A or any other form approved by the Administrative
Agent.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as
---------------
amended from time to time.
"Base Rate" shall mean, for any day, a rate per annum equal to the
---------
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
---------------
upon the Base Rate.
"Basic Documents" shall mean, collectively, this Agreement and the
---------------
other Loan Documents.
"Basic Subscribers" shall mean, as at any date, (a) Subscribers who
-----------------
subscribe to a CATV System at the regular basic monthly subscription rate for
such CATV System to a single household Subscriber (exclusive of "secondary
outlets", as such term is commonly understood in the cable television industry),
plus (b) the number of Subscribers determined by dividing the aggregate dollar
- ----
monthly amount billed for basic service to bulk Subscribers (hotels, motels,
apartment buildings, hospitals and the like) located in each Region by the
weighted average of the regular basic monthly subscription rates for basic
service charged by the CATV Systems in such Region.
"Basle Accord" shall mean the proposals for risk-based capital
------------
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper
<PAGE>
-6-
entitled "International Convergence of Capital Measurement and Capital
Standards" dated July 1988, as amended, modified and supplemented and in effect
from time to time or any replacement thereof.
"Business Day" shall mean any day (a) on which commercial banks are
------------
not authorized or required to close in New York City and (b) if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
by a Borrower with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, that is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"Capital Expenditures" shall mean, for any period, expenditures made
--------------------
by the Borrowers or any of their Subsidiaries to acquire or construct fixed
assets, plant and equipment (including renewals, improvements and replacements,
but excluding repairs and the Acquisitions) during such period computed in
accordance with GAAP.
"Capital Lease Obligations" shall mean, for any Person, all
-------------------------
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Casualty Event" shall mean, with respect to any Property of any
--------------
Person, any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, or proceeds of a condemnation award or other compensation.
"CATV System" shall mean any cable distribution system that receives
-----------
broadcast signals by antennae, microwave transmission, satellite transmission or
any other form of transmission and that amplifies such signals and distributes
them to Persons who pay to receive such signals, but shall exclude wireless
cable.
"Chase" shall mean The Chase Manhattan Bank.
-----
"Class" shall have the meaning assigned to such term in Section 1.03
-----
hereof.
"Closing Date" shall mean the date on which the initial extension of
------------
credit hereunder is made.
<PAGE>
-7-
"Code" shall mean the Internal Revenue Code of 1986, as amended from
----
time to time.
"Collateral Account" shall have the meaning assigned to such term in
------------------
the Pledge Agreement.
"Commisso Entity" shall mean, collectively, (i) Rocco Commisso, (ii)
---------------
any entity controlled by Rocco Commisso and owned by Rocco Commisso, (iii)
members of the immediate family of Rocco Commisso or (iv) trusts established for
the benefit of Rocco Commisso or members of the immediate family of Rocco
Commisso. Following a Qualified Public Offering, the term "Commisso Entity"
shall also include any officer or employee of Holdco and Mediacom who owns
shares of the capital stock of Holdco.
"Commitments" shall mean, collectively, the Revolving Credit
-----------
Commitments, the Term Loan Commitments and the Incremental Facility Commitments
(if any).
"Continue", "Continuation" and "Continued" shall refer to the
-------- ------------ ---------
continuation pursuant to Section 2.09 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
"Convert", "Conversion" and "Converted" shall refer to a conversion
------- ---------- ---------
pursuant to Section 2.09 hereof of one Type of Loans into another Type of Loans,
which may be accompanied by the transfer by a Lender (at its sole discretion) of
a Loan from one Applicable Lending Office to another.
"Cure Monies" shall mean proceeds of Affiliate Subordinated
-----------
Indebtedness and/or equity contributions received by the Borrowers after the
date hereof that, at the time the same are received by the Borrowers are
identified by the Borrowers, in a certificate of a Senior Officer delivered by
the Borrowers to the Administrative Agent within one Business Day of such
receipt, as constituting "Cure Monies" for purposes of Section 9.02 hereof.
"Debt Issuance" shall mean any issuance or sale by a Borrower or any
-------------
of its Subsidiaries after the Closing Date of any debt securities, excluding,
however, any Indebtedness incurred pursuant to Section 8.07(c) or 8.07(f)
hereof.
"Debt Service" shall mean, for any period, the sum, for the Borrowers
------------
and their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP), of the following: (a) in the case of Revolving Credit
Loans under this Agreement, the aggregate amount of payments of principal of
such Loans that, giving effect to Commitment reductions or terminations
scheduled to be made during such period pursuant to Section 2.04(a) hereof, were
required to be made pursuant to Section 3.01(a) hereof during such period plus
----
(b) in the case of
<PAGE>
-8-
Term Loans and Incremental Facility Loans under this Agreement and all other
Indebtedness (other than Revolving Credit Loans), all regularly scheduled
payments or regularly scheduled prepayments of principal of such Indebtedness
(including, without limitation, the principal component of any payments in
respect of Capital Lease Obligations) made or payable during such period (other
than the principal component of any payments in respect of Affiliate
Subordinated Indebtedness) plus (c) all Interest Expense for such period.
----
"Default" shall mean an Event of Default or an event that with
-------
notice or lapse of time or both would become an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or other
-----------
disposition of any Property (whether now owned or hereafter acquired) by the
Borrowers or any of their Subsidiaries to any other Person excluding any sale,
assignment, transfer or other disposition of any Property sold or disposed of in
the ordinary course of business and on ordinary business terms.
"Dollars" and "$" shall mean lawful money of the United States of
------- -
America.
"Environmental Claim" shall mean, with respect to any Person, any
-------------------
written or oral notice, claim, demand or other communication (collectively, a
"claim") by any other Person alleging or asserting such Person's liability for
-----
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or (ii) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law. The term "Environmental Claim"
shall include, without limitation, any claim by any governmental authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
pursuant to any applicable Environmental Law, and any claim by any third party
seeking damages, contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence of Hazardous Materials or arising
from alleged injury or threat of injury to health, safety or the environment.
"Environmental Laws" shall mean any and all present and future
------------------
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
<PAGE>
-9-
"Equity Contribution Amount" shall mean, as at any date of
--------------------------
determination, (a) the aggregate amount of cash contributions made to the equity
capital of the Borrowers during the period from and including the respective
dates of organization of each of the Borrowers through and including such date
of determination minus (b) the aggregate amount of distributions made in respect
-----
of the equity capital of the Borrowers during such period (other than
distributions of equity capital of the Borrowers made pursuant to Section
8.09(e) hereof).
"Equity Rights" shall mean, with respect to any Person, any
-------------
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shares of capital stock of any class or other
ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
-----
1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business
---------------
that is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Code of which a Borrower is a member and (ii) solely for purposes
of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11)
of the Code and the lien created under Section 302(f) of ERISA and Section
412(n) of the Code, described in Section 414(m) or (o) of the Code of which a
Borrower is a member.
"Eurodollar Base Rate" shall mean, for the Interest Period for any
--------------------
Eurodollar Loan, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for purposes of providing quotations of
interest rates applicable to Dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for the offering of Dollar
deposits with a maturity comparable to such Interest Period. In the event that
such rate is not available at such time for any reason, then the Eurodollar Base
Rate for such Interest Period shall be the rate at which Dollar deposits of
$5,000,000 and for a maturity comparable to such Interest Period are offered by
the principal London office of the Administrative Agent in immediately available
funds in the London interbank market at approximately 11:00 a.m., London time,
two Business Days prior to the commencement of such Interest Period.
"Eurodollar Loans" shall mean Loans that bear interest at rates
----------------
based on rates referred to in the definition of "Eurodollar Base Rate" in this
Section 1.01.
<PAGE>
-10-
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any
---------------
Interest Period therefor, a rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to
the Eurodollar Base Rate for such Loan for such Interest Period divided by 1
minus the Reserve Requirement (if any) for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in
----------------
Section 9 hereof.
"Excess Cash Flow" shall mean, for any period, the excess of (a)
----------------
Operating Cash Flow for such period over (b) the sum of (i) Capital Expenditures
made during such period plus (ii) the aggregate amount of Debt Service for such
----
period plus (iii) the Tax Payment Amount for such period plus (iv) any decreases
---- ----
(or minus any increases) in Working Capital from the first day to the last day
-----
of such period.
"Executive Compensation" shall mean, for any period, the aggregate
----------------------
amount of compensation (including, without limitation, salaries, withholding
taxes, unemployment insurance contributions, pension, health and other benefits)
of the Manager's executive management personnel during such period. For purposes
hereof, "executive management personnel" shall not include any individual (such
as a system manager) who is employed solely in connection with the day-to-day
operations of a CATV System.
"Existing Credit Agreements" shall mean, collectively, (a) the
--------------------------
Mediacom Southeast Credit Agreement and (b) the Second Amended and Restated
Credit Agreement dated as of June 24, 1997 between Mediacom California, Mediacom
Delaware and Mediacom Arizona, the lenders party thereto and Chase as
administrative agent for such lenders, as heretofore modified, supplemented and
in effect.
"FCC" shall mean the Federal Communications Commission or any
---
governmental authority substituted therefor.
"Federal Funds Rate" shall mean, for any day, the rate per annum
------------------
(rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if the day for which such rate is to
--------
be determined is not a Business Day, the Federal Funds Rate for such day shall
be such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day and (b) if such rate is not so
published for any Business Day, the Federal Funds
<PAGE>
-11-
Rate for such Business Day shall be the average rate charged to Chase on such
Business Day on such transactions as determined by the Administrative Agent.
"Fiscal Period" means any fiscal year or the period from the Closing
-------------
Date to and including December 31, 1999.
"Franchise" shall mean a franchise, license, authorization or right by
---------
contract or otherwise to construct, own, operate, promote, extend and/or
otherwise exploit any CATV System operated or to be operated by the Borrowers or
any of their Subsidiaries granted by any state, county, city, town, village or
other local or state government authority or by the FCC. The term "Franchise"
shall include each of the Franchises set forth on Schedule IV hereto.
"GAAP" shall mean generally accepted accounting principles applied on
----
a basis consistent with those that, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for purposes
of determining compliance with this Agreement.
"Guarantee" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "Guarantee" and "Guaranteed" used as a verb shall
--------- ----------
have a correlative meaning.
"Guarantee and Pledge Agreement" shall mean a Guarantee and Pledge
------------------------------
Agreement substantially in the form of Exhibit D hereto between Mediacom, the
Manager and the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Hazardous Material" shall mean, collectively, (a) any petroleum or
------------------
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other equipment
that contain polychlorinated biphenyls ("PCB's"), (b) any chemicals or other
materials or substances that are now or hereafter become defined as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under
<PAGE>
-12-
any Environmental Law and (c) any other chemical or other material or substance,
exposure to which is now or hereafter prohibited, limited or regulated under any
Environmental Law.
"Holdco" shall mean, a corporation to be formed in connection with a
------
Qualified Public Offering, that will issue capital stock to the holders of
equity interests in Mediacom in exchange for the equity interests held by such
holders, and of which Mediacom will thereby become a Subsidiary.
"Incremental Facility Availability Period" shall mean the period from
----------------------------------------
and including the Closing Date to but excluding December 31, 2001 (or, if such
date is not a Business Day, to but excluding the immediately preceding Business
Day).
"Incremental Facility Commitment" shall mean, for each Incremental
-------------------------------
Facility Lender, and for any Series thereof, the obligation of such Incremental
Facility Lender to make Incremental Facility Loans of such Series (as the same
may be reduced from time to time pursuant to Section 2.04 or 2.10 hereof or
increased or reduced from time to time pursuant to assignments permitted under
Section 11.06(b) hereof). The amount of each Lender's Incremental Facility
Commitment of any Series shall be determined in accordance with the provisions
of Section 2.01(d) hereof. The aggregate amount of the Incremental Facility
Commitments of all Series shall not exceed $200,000,000.
"Incremental Facility Lenders" shall mean, in respect of any Series of
----------------------------
Incremental Facility Loans, the Lenders from time to time holding Incremental
Facility Loans and Incremental Facility Commitments of such Series after giving
effect to any assignments thereof permitted by Section 11.06(b) hereof.
"Incremental Facility Loans" shall mean the loans provided for by
--------------------------
Section 2.01(c) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Indebtedness" shall mean, for any Person: (a) obligations created,
------------
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person), including, without limitation, Affiliate
Subordinated Indebtedness; (b) obligations of such Person to pay the deferred
purchase or acquisition price of Property or services, other than trade accounts
payable (other than for borrowed money) arising, and accrued expenses incurred,
in the ordinary course of business so long as such trade accounts payable are
payable within 90 days of the date the respective goods are delivered or the
respective services are rendered; (c) Indebtedness of others secured by a Lien
on the Property of such Person, whether or not the respective indebtedness so
secured has been assumed by such Person; (d) obligations of such Person in
respect of letters of credit or similar instruments issued or accepted by banks
and other financial institutions for
<PAGE>
-13-
account of such Person; (e) Capital Lease Obligations of such Person; and (f)
Indebtedness of others Guaranteed by such Person; provided that Indebtedness
shall exclude (i) obligations in respect of surety and performance bonds backing
pole rental or conduit attachments and the like, or backing obligations under
Franchises, arising in the ordinary course of business of the CATV Systems and
related telecommunications services of the Borrowers and their Subsidiaries and
(ii) all obligations in respect of Interest Rate Protection Agreements.
"Information Memorandum" shall mean the Confidential Information
----------------------
Memorandum dated August, 1999 prepared in connection with the syndication of the
credit facilities provided for in this Agreement.
"Interest Coverage Ratio" shall mean, as at any date, the ratio of (a)
-----------------------
Operating Cash Flow for the fiscal quarter ending on, or most recently ended
prior to, such date to (b) Interest Expense for such fiscal quarter.
Notwithstanding the foregoing, the Interest Coverage Ratio for any
fiscal quarter during which an Acquisition is consummated shall be deemed to be
equal to the ratio of Adjusted Operating Cash Flow for such fiscal quarter to
Interest Expense for such fiscal quarter.
"Interest Expense" shall mean, for any period, the sum, for the
----------------
Borrowers and their Subsidiaries (determined on a combined basis without
duplication in accordance with GAAP), of the following: (a) all interest in
respect of Indebtedness (including, without limitation, the interest component
of any payments in respect of Capital Lease Obligations) accrued or capitalized
during such period (whether or not actually paid during such period) and all
commitment fees payable hereunder, but excluding all interest in respect of
Affiliate Subordinated Indebtedness (to the extent not paid in cash during such
period), plus (b) the net amount payable (or minus the net amount receivable)
---- -----
under Interest Rate Protection Agreements during such period (whether or not
actually paid or received during such period) plus (c) the aggregate amount of
----
upfront or one-time fees or expenses payable in respect of Interest Rate
Protection Agreements to the extent such fees or expenses are amortized during
such period.
Notwithstanding the foregoing, if during any period for which Interest
Expense is being determined the Borrowers or any of their Subsidiaries shall
have consummated any acquisition of any CATV System or other business, or
consummated any Disposition, then, for all purposes of this Agreement, Interest
Expense shall be determined on a pro forma basis as if such acquisition or
Disposition had been made or consummated (and any related Indebtedness incurred
or repaid) on the first day of such period.
"Interest Period" shall mean, with respect to any Eurodollar Loan,
---------------
each period commencing on the date such Eurodollar Loan is made or Converted
from a Base Rate Loan or (in the event of a Continuation) the last day of the
next preceding Interest Period for such Loan
<PAGE>
-14-
and (subject to the provisions of Section 2.01(d) hereof) ending on the
numerically corresponding day in the first, second, third or sixth calendar
month thereafter, as the Borrowers may select as provided in Section 4.05
hereof, except that each Interest Period that commences on the last Business Day
of a calendar month (or on any day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall end on the
last Business Day of the appropriate subsequent calendar month. Notwithstanding
the foregoing:
(i) if any Interest Period for any Revolving Credit Loan would
otherwise end after the Revolving Credit Commitment Termination Date, such
Interest Period shall end on the Revolving Credit Commitment Termination
Date;
(ii) no Interest Period for any Revolving Credit Loan may commence
before and end after any Revolving Credit Commitment Reduction Date unless,
after giving effect thereto, the aggregate principal amount of Revolving
Credit Loans having Interest Periods that end after such Revolving Credit
Commitment Reduction Date shall be equal to or less than the aggregate
principal amount of Revolving Credit Loans scheduled to be outstanding
after giving effect to the payments of principal required to be made on
such Revolving Credit Commitment Reduction Date;
(iii) no Interest Period for any Term Loan may commence before and
end after any Principal Payment Date unless, after giving effect thereto,
the aggregate principal amount of the Term Loans having Interest Periods
that end after such Principal Payment Date shall be equal to or less than
the aggregate principal amount of the Term Loans scheduled to be
outstanding after giving effect to the payments of principal required to be
made on such Principal Payment Date;
(iv) no Interest Period for any Incremental Facility Loan of any
Series may commence before and end after any Principal Payment Date unless,
after giving effect thereto, the aggregate principal amount of the
Incremental Facility Loans of such Series having Interest Periods that end
after such Principal Payment Date shall be equal to or less than the
aggregate principal amount of the Incremental Facility Loans of such Series
scheduled to be outstanding after giving effect to the payments of
principal required to be made on such Principal Payment Date;
(v) each Interest Period that would otherwise end on a day that is
not a Business Day shall end on the next succeeding Business Day (or, if
such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); and
(vi) notwithstanding clauses (i), (ii), (iii) and (iv) above, no
Interest Period shall have a duration of less than one month and, if the
Interest Period for any Eurodollar Loan
<PAGE>
-15-
would otherwise be a shorter period, such Loan shall not be available
hereunder for such period.
"Interest Rate Protection Agreement" shall mean, for any Person, an
----------------------------------
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
For purposes hereof, the "credit exposure" at any time of any Person under an
---------------
Interest Rate Protection Agreement to which such Person is a party shall be
determined at such time in accordance with the standard methods of calculating
credit exposure under similar arrangements as prescribed from time to time by
the Administrative Agent, taking into account potential interest rate movements
and the respective termination provisions and notional principal amount and term
of such Interest Rate Protection Agreement.
"Investment" shall mean, for any Person: (a) the acquisition (whether
----------
for cash, Property, services or securities or otherwise) of capital stock,
bonds, notes, debentures, partnership or other ownership interests or other
securities of any other Person or any agreement to make any such acquisition
(including, without limitation, any "short sale" or any sale of any securities
at a time when such securities are not owned by the Person entering into such
sale); (b) the making of any deposit with, or advance, loan or other extension
of credit to, any other Person (including the purchase of Property from another
Person subject to an understanding or agreement, contingent or otherwise, to
resell such Property to such Person), but excluding any such advance, loan or
extension of credit having a term not exceeding 90 days arising in connection
with the sale of programming or advertising time by such Person in the ordinary
course of business; (c) the entering into of any Guarantee of, or other
contingent obligation with respect to, Indebtedness or other liability of any
other Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person; or (d) the entering into of any Interest Rate
Protection Agreement.
"Issuing Lender" shall mean Chase, as the issuer of Letters of Credit
--------------
under Section 2.03 hereof, together with its successors and assigns in such
capacity.
"Letter of Credit" shall have the meaning assigned to such term in
----------------
Section 2.03 hereof.
"Letter of Credit Documents" shall mean, with respect to any Letter of
--------------------------
Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (a) the
rights and obligations of the parties concerned or at risk with respect to such
Letter of Credit or (b) any collateral security for any of such obligations,
each as the same may be modified and supplemented and in effect from time to
time.
<PAGE>
-16-
"Letter of Credit Interest" shall mean, for each Revolving Credit
-------------------------
Lender, such Lender's participation interest (or, in the case of the Issuing
Lender, the Issuing Lender's retained interest) in the Issuing Lender's
liability under Letters of Credit and such Lender's rights and interests in
Reimbursement Obligations and fees, interest and other amounts payable in
connection with Letters of Credit and Reimbursement Obligations.
"Letter of Credit Liability" shall mean, without duplication, at any
--------------------------
time and in respect of any Letter of Credit, the sum of (a) the undrawn face
amount of such Letter of Credit plus (b) the aggregate unpaid principal amount
----
of all Reimbursement Obligations of the Borrowers at such time due and payable
in respect of all drawings made under such Letter of Credit. For purposes of
this Agreement, a Revolving Credit Lender (other than the Issuing Lender) shall
be deemed to hold a Letter of Credit Liability in an amount equal to its
participation interest in the related Letter of Credit under Section 2.03
hereof, and the Issuing Lender shall be deemed to hold a Letter of Credit
Liability in an amount equal to its retained interest in the related Letter of
Credit after giving effect to the acquisition by the Revolving Credit Lenders
other than the Issuing Lender of their participation interests under said
Section 2.03.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
----
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Loan Documents, a Person
shall be deemed to own subject to a Lien any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.
"Loan Documents" shall mean, collectively, this Agreement, the Letter
--------------
of Credit Documents, the Security Documents, each Affiliate Subordinated
Indebtedness Agreement and each Management Fee Subordination Agreement.
"Loans" shall mean, collectively, the Revolving Credit Loans, the Term
-----
Loans and the Incremental Facility Loans.
"Majority Incremental Facility Lenders" shall mean, with respect to
-------------------------------------
any Series of Incremental Facility Loans, Incremental Facility Lenders holding
more than 50% of the aggregate outstanding principal amount of the Incremental
Facility Loans of such Series or, if the Incremental Facility Loans shall not
have been made, more than 50% of the Incremental Facility Commitments of such
Series.
"Majority Lenders" shall mean, subject to the last paragraph of
----------------
Section 11.04 hereof, Lenders having more than 50% of the sum of (a) the
aggregate outstanding principal amount of the Term Loans or, if the Term Loans
shall not have been made, the aggregate
<PAGE>
-17-
outstanding principal amount of the Term Loan Commitments plus (b) the aggregate
----
outstanding principal amount of the Incremental Facility Loans or, if the
Incremental Facility Loans shall not have been made, the aggregate outstanding
principal amount of the Incremental Facility Commitments plus (c) the sum of (i)
----
the aggregate unused amount, if any, of the Revolving Credit Commitments at such
time plus (ii) the aggregate outstanding principal amount of the Revolving
----
Credit Loans at such time.
"Majority Revolving Credit Lenders" shall mean Revolving Credit
---------------------------------
Lenders having more than 50% of the aggregate amount of the Revolving Credit
Commitments or, if the Revolving Credit Commitments shall have terminated,
Revolving Credit Lenders holding more than 50% of the sum of (a) the aggregate
unpaid principal amount of the Revolving Credit Loans plus (b) the aggregate
----
amount of all Letter of Credit Liabilities.
"Majority Term Loan Lenders" shall mean Term Loan Lenders holding more
--------------------------
than 50% of the aggregate outstanding principal amount of the Term Loans or, if
the Term Loans shall not have been made, more than 50% of the Term Loan
Commitments.
"Management Agreements" shall mean, collectively, (a) the Management
---------------------
Agreement dated January 23, 1998 between Mediacom Southeast and Mediacom
Management Corporation, (b) the Management Agreement dated March 12, 1996
between Mediacom California and Mediacom Management Corporation, (c) the
Management Agreement dated December 27, 1996 between Mediacom Arizona and
Mediacom Management Corporation, and (d) the Management Agreement dated June 24,
1997 between Mediacom Delaware and Mediacom Management Corporation, in each case
as the same shall, subject to Section 8.19 hereof, be modified and supplemented
and in effect from time to time.
"Management Fee Subordination Agreement" shall mean a Management Fee
--------------------------------------
Subordination Agreement substantially in the form of Exhibit F hereto between
the Manager (or, as contemplated by Section 8.11 hereof, any other Person to
whom the Borrowers or any of their Subsidiaries may be obligated to pay
Management Fees), the Borrowers and the Administrative Agent, as the same shall
be modified and supplemented and in effect from time to time.
"Management Fees" shall mean, for any period, the sum of all fees,
---------------
salaries and other compensation (including, without limitation, all Executive
Compensation) paid or incurred by the Borrowers to Affiliates (other than
Affiliates that are employees of the Borrowers and their Subsidiaries) in
respect of services rendered in connection with the management or supervision of
the Borrowers and their Subsidiaries, provided that Management Fees shall
--------
exclude the aggregate amount of intercompany shared expenses payable to Mediacom
that are allocated by Mediacom to the Borrowers and their Subsidiaries in
accordance with Section 5.04 of the Guarantee and Pledge Agreement (other than
the allocated amount of Executive
<PAGE>
-18-
Compensation, which Executive Compensation shall in any event constitute
Management Fees hereunder).
"Manager" shall mean Mediacom Management Corporation, or any successor
-------
in such capacity as manager of the Borrowers.
"Margin Stock" shall mean "margin stock" within the meaning of
------------
Regulations T, U and X.
"Material Adverse Effect" shall mean a material adverse effect on (a)
-----------------------
the Property, business, operations, financial condition, prospects, liabilities
or capitalization of the Borrowers and their Subsidiaries taken as a whole, (b)
the ability of any Obligor to perform its obligations under any of the Loan
Documents to which it is a party, (c) the validity or enforceability of any of
the Loan Documents, (d) the rights and remedies of the Lenders and the
Administrative Agent under any of the Loan Documents or (e) the timely payment
of the principal of or interest on the Loans or the Reimbursement Obligations or
other amounts payable in connection therewith.
"Mediacom" shall mean Mediacom LLC, a New York limited liability
--------
company.
"Mediacom Arizona Operating Agreement" shall mean the Operating
------------------------------------
Agreement of Mediacom Arizona dated December 27, 1996 between Mediacom and
Mediacom California, as the same shall, subject to Section 8.19 hereof, be
modified and supplemented and in effect from time to time.
"Mediacom California Operating Agreement" shall mean the Operating
---------------------------------------
Agreement of Mediacom California dated March 12, 1996 between Mediacom and
Mediacom Management Corporation, as the same shall, subject to Section 8.19
hereof, be modified and supplemented and in effect from time to time.
"Mediacom Delaware Operating Agreement" shall mean the Operating
-------------------------------------
Agreement of Mediacom Delaware dated January 1, 1997 as the same shall, subject
to Section 8.19 hereof, be modified and supplemented and in effect from time to
time.
"Mediacom Southeast Credit Agreement" shall mean the Credit Agreement
-----------------------------------
dated as of January 23, 1998 between Mediacom Southeast, the lenders party
thereto and Chase as administrative agent for such lenders, as heretofore
modified, supplemented and in effect.
"Mediacom Southeast Operating Agreement" shall mean the Operating
--------------------------------------
Agreement of Mediacom Southeast dated as of January 23, 1998, as the same shall,
subject to Section 8.19 hereof, be modified and supplemented and in effect from
time to time.
<PAGE>
-19-
"Multiemployer Plan" shall mean a multiemployer plan defined as such
------------------
in Section 3(37) of ERISA to which contributions have been made by a Borrower or
any ERISA Affiliate and that is covered by Title IV of ERISA.
"Net Available Proceeds" shall mean:
----------------------
(i) in the case of any Disposition, the amount of Net Cash
Payments received in connection with such Disposition;
(ii) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Borrowers and their Subsidiaries in respect of such Casualty Event
net of (A) reasonable expenses incurred by the Borrowers and their
Subsidiaries in connection therewith and (B) contractually required
repayments of Indebtedness to the extent secured by a Lien on such Property
and any income and transfer taxes payable by the Borrowers or any of their
Subsidiaries in respect of such Casualty Event (C) the Tax Payment Amount,
if any, attributable to such Casualty Event and (D) any transfer taxes
payable by the Borrowers or any of their Subsidiaries in respect of such
Casualty Event; and
(iii) in the case of any Debt Issuance, the aggregate amount of
all cash received by the Borrowers or any of their Subsidiaries in respect
of such Debt Issuance, net of reasonable expenses incurred by the Borrowers
and their Subsidiaries in connection therewith.
"Net Cash Payments" shall mean, with respect to any Disposition, the
-----------------
aggregate amount of all cash payments, and the fair market value of any non-cash
consideration, received by the Borrowers and their Subsidiaries directly or
indirectly in connection with such Disposition; provided that (a) Net Cash
--------
Payments shall be net of the amount of any legal, accounting, broker, title and
recording tax expenses, commissions, finders' fees and other fees and expenses
paid by the Borrowers and their Subsidiaries in connection with such Disposition
and (b) Net Cash Payments shall be net of any repayments by the Borrowers and
their Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is
secured by a Lien on the Property that is the subject of such Disposition and
(ii) the transferee of (or holder of a Lien on) such Property requires that such
Indebtedness be repaid as a condition to the purchase of such Property.
"1998 Senior Notes" shall mean the 8-1/2% senior notes due 2008 in an
-----------------
aggregate principal amount of $200,000,000 issued by Mediacom.
<PAGE>
-20-
"Obligors" shall mean, collectively, the Borrowers, Mediacom, Mediacom
--------
Management Corporation and, effective upon execution and delivery of any
Subsidiary Guarantee Agreement, each Subsidiary of the Borrowers so executing
and delivering such Subsidiary Guarantee Agreement.
"Operating Agreements" shall mean, collectively, the Mediacom
--------------------
Southeast Operating Agreement, the Mediacom Arizona Operating Agreement, the
Mediacom California Operating Agreement and the Mediacom Delaware Operating
Agreement.
"Operating Cash Flow" shall mean, for any period, the sum, for the
-------------------
Borrowers and their Subsidiaries (determined on a combined basis without
duplication in accordance with GAAP), of the following: (a) System Cash Flow
minus (b) Management Fees paid during such period to the extent not exceeding
- -----
the then applicable rate or percentage specified in the Management Agreement of
the gross operating revenue of the Borrowers and their Subsidiaries for such
period.
"Pay TV Units" shall mean the aggregate number of premium or pay
------------
television services to which Subscribers subscribe.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
----
entity succeeding to any or all of its functions under ERISA.
"Permitted Investments" shall mean: (a) direct obligations of the
---------------------
United States of America, or of any agency thereof, or obligations guaranteed as
to principal and interest by the United States of America, or of any agency
thereof, in either case maturing not more than 90 days from the date of
acquisition thereof; (b) certificates of deposit issued by any bank or trust
company organized under the laws of the United States of America or any state
thereof and having capital, surplus and undivided profits of at least
$500,000,000, maturing not more than 90 days from the date of acquisition
thereof; and (c) commercial paper rated A-1 or better or P-1 by Standard &
Poor's Ratings Services, a division of McGraw-Hill Companies, Inc., or Moody's
Investors Services, Inc., respectively, maturing not more than 90 days from the
date of acquisition thereof; in each case so long as the same (x) provide for
the payment of principal and interest (and not principal alone or interest
alone) and (y) are not subject to any contingency regarding the payment of
principal or interest.
"Person" shall mean any individual, corporation, company, voluntary
------
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
<PAGE>
-21-
"Plan" shall mean an employee benefit or other plan established or
----
maintained by the Borrowers or any ERISA Affiliates and that is covered by Title
IV of ERISA, other than a Multiemployer Plan.
"Pledge Agreement" shall mean a Pledge Agreement substantially in the
----------------
form of Exhibit C hereto between the Borrowers, each of the additional parties,
if any, that becomes a "Securing Party" thereunder, and the Administrative
Agent, as the same shall be modified and supplemented and in effect from time to
time.
"Post-Default Rate" shall mean a rate per annum equal to 2% plus the Base
----------------- ----
Rate as in effect from time to time plus the Applicable Margin for Base Rate
----
Loans, provided that, with respect to principal of a Eurodollar Loan that shall
--------
become due (whether at stated maturity, by acceleration, by optional or
mandatory prepayment or otherwise) on a day other than the last day of the
Interest Period therefor, the "Post-Default Rate" shall be, for the period from
and including such due date to but excluding the last day of such Interest
Period, 2% plus the interest rate for such Loan as provided in Section 3.02(b)
----
hereof and, thereafter, the rate provided for above in this definition.
"Preferred Membership Interests" shall mean the equity rights provided
------------------------------
for in Section 6.2 of the Mediacom Southeast Operating Agreement.
"Prime Rate" shall mean the rate of interest from time to time
----------
announced by Chase at its principal office in New York City as its prime
commercial lending rate.
"Principal Payment Dates" shall mean (a) in the case of the Term
-----------------------
Loans, the last Business Day of March, June, September and December of each
year, commencing with September 30, 2002, through and, subject to the last
sentence of Section 3.01(b), including September 30, 2008 and (b) in the case of
Incremental Facility Loans of any Series, such dates as shall have been agreed
upon between the Borrowers and the respective Incremental Facility Lenders of
such Series pursuant to Section 2.01(c) hereof at the time such Lenders become
obligated to make such Incremental Facility Loans hereunder.
"Pro Forma Debt Service Coverage Ratio" shall mean, as at any date,
-------------------------------------
the ratio of (a) the product of (x) Operating Cash Flow for the fiscal quarter
ending on, or most recently ended prior to, such date times (y) four to (b) Debt
-----
Service (other than payments in respect of Affiliate Subordinated Indebtedness)
for the period of four consecutive fiscal quarters immediately following the
last day of the most recently ended fiscal quarter, determined under the
assumptions that (1) the rate of interest applicable to Indebtedness of the
Borrowers and their Subsidiaries (other than Affiliate Subordinated
Indebtedness) during such period will not change from the weighted average rate
of interest in effect on such last day and (2) all regularly scheduled payments
or regularly scheduled prepayments of principal of such Indebtedness
<PAGE>
-22-
required to be made during such period will be made when due (including, without
limitation, the principal component of any payments in respect of Capital Lease
Obligations).
Notwithstanding the foregoing, the Pro Forma Debt Service Coverage
Ratio for any fiscal quarter during which an Acquisition is consummated shall be
deemed to be equal to the ratio of (a) the product of (x) Adjusted Operating
Cash Flow for such fiscal quarter times (y) four to (b) Debt Service (other than
-----
payments in respect of Affiliate Subordinated Indebtedness) for the period of
four consecutive fiscal quarters immediately following the last day of such
fiscal quarter, determined on the assumptions set forth above.
"Property" shall mean any right or interest in or to property of any
--------
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Purchase Price" shall mean, without duplication, with respect to any
--------------
Acquisition, an amount equal to the sum of (i) the aggregate consideration,
whether cash, Property or securities (including, without limitation, any
Indebtedness incurred pursuant to paragraph (f) of Section 8.07 hereof), paid or
delivered by the Borrowers and their Subsidiaries in connection with such
acquisition plus (ii) the aggregate amount of liabilities of the acquired
----
business (net of current assets of the acquired business) that would be
reflected on a balance sheet (if such were to be prepared) of the Borrowers and
their Subsidiaries after giving effect to such acquisition.
"Qualified Public Offering" shall mean an offer or offerings of
-------------------------
capital stock of Holdco under one or more effective registration statements
under the Securities Act of 1933, as amended, such that, after giving effect
thereto, (a) at least 15% of the aggregate equity interests (without regard to
voting rights) in Holdco on a fully diluted basis (i.e., giving effect to the
exercise of any warrants, options and conversion and other rights) has been sold
pursuant to such offerings and (b) such offerings result in aggregate cash
proceeds being received by Holdco (and contributed by Holdco to Mediacom) of at
least $75,000,000 exclusive of underwriter's discounts and other expenses.
"Quarterly Dates" shall mean the twentieth day of January, April, July
---------------
and October in each year, the first of which shall be the first such day after
the date of this Agreement; provided that if any such day is not a Business Day,
--------
then such Quarterly Date shall be the next succeeding Business Day.
"Quarterly Officer's Report" shall mean a quarterly report of a Senior
--------------------------
Officer with respect to Basic Subscribers, homes passed, revenues per Subscriber
and Pay TV Units, substantially in the form of Exhibit B hereto.
<PAGE>
-23-
"Quarterly Payment Period" shall mean each successive three-month
------------------------
period from and including a Quarterly Date (or, in the case of the initial
Quarterly Payment Period, from and including the Closing Date) to but not
including the next following Quarterly Date.
"Rate Ratio" shall mean, for any Quarterly Payment Period, the daily
----------
average of the Total Leverage Ratio during the fiscal quarter ending on, or most
recently ended prior to, the first day of such Quarterly Payment Period,
provided that (a) the Rate Ratio on the Closing Date shall be the Total Leverage
- --------
Ratio on such date, (b) the Rate Ratio on the date of the Triax Acquisition
shall be the Total Leverage Ratio (computed on a pro forma basis after giving
effect to the borrowings to be made (i) to enable the Borrowers to make
Restricted Payments to Mediacom pursuant to Section 8.09(e) hereof in connection
with the Triax Acquisition and (ii) to enable Mediacom Arizona to effect the
Apache Acquisition) and (c) for purposes of determining the Rate Ratio for the
period from and after the date of the Triax Acquisition until such time as one
complete fiscal quarter shall have elapsed subsequent to the date of the Triax
Acquisition, the daily average of the Total Leverage Ratio shall be determined
only for the portion of such fiscal quarter commencing on the date of the Triax
Acquisition.
"Rate Ratio Certificate" shall mean, for any Quarterly Payment Period,
----------------------
a certificate of a Senior Officer setting forth, in reasonable detail, the
calculation (and the basis for such calculation) of the Rate Ratio for use in
determining the Applicable Margin hereunder during such Quarterly Payment
Period.
"Region" shall mean each geographic region into which the CATV Systems
------
of the Borrowers and their Subsidiaries are divided for operating and management
purposes.
"Register" shall have the meaning assigned to such term in Section
--------
11.06(g) hereof.
"Regulations A, D, T, U and X" shall mean, respectively, Regulations
----------------------------
A, D, T, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"Regulatory Change" shall mean, with respect to any Lender, any change
-----------------
after the date hereof in Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks including such Lender of or under any Federal, state or foreign law or
regulations (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
<PAGE>
-24-
"Reimbursement Obligations" shall mean, at any time, the obligations
-------------------------
of the Borrowers then outstanding, or that may thereafter arise in respect of
all Letters of Credit then outstanding, to reimburse amounts paid by the Issuing
Lender in respect of any drawings under a Letter of Credit.
"Release" shall mean any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Reserve Requirement" shall mean, for any Interest Period for any
-------------------
Eurodollar Loan, the average maximum rate at which reserves (including, without
limitation, any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change with respect to (i) any category of liabilities
that includes deposits by reference to which the Eurodollar Base Rate is to be
determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.01 or (ii) any category of extensions of credit or other assets that
includes Eurodollar Loans.
"Reserved Commitment Amount" shall have the meaning assigned to such
--------------------------
term in Section 2.01(a) hereof.
"Restricted Payments" shall mean, collectively, (a) all distributions
-------------------
of the Borrowers (in cash, Property or obligations) on, or other payments or
distributions on account of, or the setting apart of money for a sinking or
other analogous fund for, or the purchase, redemption, retirement or other
acquisition of, any portion of any ownership interest in the Borrowers or of any
warrants, options or other rights to acquire any such ownership interest (or to
make any payments to any Person, such as "phantom stock" payments, where the
amount thereof is calculated with reference to fair market or equity value of
the Borrowers or any of their Subsidiaries), (b) any payments made by a Borrower
to any holders of any equity interests in the Borrowers that are designed to
reimburse such holders for the payment of any taxes attributable to the
operations of the Borrowers and their Subsidiaries, (c) any payments of
principal of or interest on Affiliate Subordinated Indebtedness, (d) any
payments in respect of Management Fees, and (e) any Affiliate Letters of Credit
issued by the Issuing Lender for the account of the Borrowers.
"Revolving Credit Commitment" shall mean, as to each Revolving Credit
---------------------------
Lender, the obligation of such Lender to make Revolving Credit Loans, and to
issue or participate in
<PAGE>
-25-
Letters of Credit pursuant to Section 2.03 hereof, in an aggregate principal or
face amount at any one time outstanding up to but not exceeding the amount set
forth opposite the name of such Lender on Schedule I hereto (as the same may be
reduced from time to time pursuant to Section 2.04 or 2.10 hereof or increased
or reduced from time to time pursuant to assignments permitted under Section
11.06(b) hereof). The original aggregate principal amount of the Revolving
Credit Commitments is $450,000,000.
"Revolving Credit Commitment Percentage" shall mean, with respect to
any Revolving Credit Lender, the ratio of (a) the amount of the Revolving Credit
Commitment of such Lender to (b) the aggregate amount of the Revolving Credit
Commitments of all of the Lenders.
"Revolving Credit Commitment Reduction Dates" shall mean the last
-------------------------------------------
Business Day of March, June, September and December in each year, commencing
with September 30, 2002, through and including March 31, 2008.
"Revolving Credit Commitment Termination Date" shall mean the
--------------------------------------------
Revolving Credit Commitment Reduction Date falling on or nearest to March 31,
2008, provided that if Mediacom does not refinance its 1998 Senior Notes prior
--------
to March 31, 2007, with new financing having a maturity no earlier than two
years after the payment of all amounts due under this Agreement and on terms
satisfactory to the Administrative Agent and the Majority Lenders, the Revolving
Credit Termination Date shall mean the Revolving Credit Commitment Reduction
Date falling on or nearest to June 30, 2007.
"Revolving Credit Lenders" shall mean (a) on the date hereof, the
------------------------
Lenders having Revolving Credit Commitments on Schedule I hereto and (b)
thereafter, the Lenders from time to time holding Revolving Credit Loans and
Revolving Credit Commitments after giving effect to any assignments thereof
permitted by Section 11.06(b) hereof.
"Revolving Credit Loans" shall mean the loans provided for in Section
----------------------
2.01(a) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Security Documents" shall mean, collectively, the Pledge Agreement,
------------------
the Guarantee and Pledge Agreement and the Subsidiary Guarantee Agreements, and
all Uniform Commercial Code financing statements required by the Pledge
Agreement, the Guarantee and Pledge Agreement and the Subsidiary Guarantee
Agreements, to be filed with respect to the security interests created pursuant
to the Pledge Agreement, the Guarantee and Pledge Agreement and the Subsidiary
Guarantee Agreements.
"Senior Officer" shall mean the chairman, chief executive officer or
--------------
chief financial officer of the Manager, acting for and on behalf of the
Borrowers.
<PAGE>
-26-
"Series" has the meaning set forth in Section 2.01(c).
------
"Special Reductions" shall mean, as at any date during any fiscal
------------------
quarter, the aggregate amount of reductions during such fiscal quarter through
such date in the undrawn face amount of Affiliate Letters of Credit issued
during such fiscal quarter (i.e. excluding reductions in such face amount that
occur upon a drawing under such Affiliate Letters of Credit), together with the
aggregate amount of Affiliate Letters of Credit issued during such fiscal
quarter that expire or are terminated during such fiscal quarter through such
date without being drawn.
"Subscriber" shall mean a Person who subscribes to one or more of the
----------
cable television services of the Borrowers and their Subsidiaries and includes
both Basic Subscribers and Persons who subscribe to Pay TV Units, but excluding
each such Person who is pending disconnection for any reason or is delinquent in
payment for such services for more than 60 days or who has not paid in full
without discount at least one monthly bill generated in the ordinary course of
business.
"Subsidiary" shall mean, with respect to any Person, any corporation,
----------
partnership, limited liability company or other entity of which at least a
majority of the securities or other ownership interests having by the terms
thereof ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions of such corporation, partnership,
limited liability company or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership, limited liability company or other entity shall
have or might have voting power by reason of the happening of any contingency)
is at the time directly or indirectly owned or controlled by such Person or one
or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person.
"Subsidiary Guarantee Agreement" shall mean a Subsidiary Guarantee
------------------------------
Agreement substantially in the form of Exhibit E hereto by a Subsidiary of a
Borrower in favor of the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Subsidiary Guarantor" shall mean any Subsidiary of the Borrowers that
--------------------
executes and delivers a Subsidiary Guarantee Agreement.
"Supplemental Capital" shall mean (a) advances made by an Affiliate to
--------------------
the Borrowers constituting Affiliate Subordinated Indebtedness (excluding any
Cure Monies) and (b) equity contributions by an Affiliate subsequent to the date
of this Agreement (excluding any Cure Monies).
<PAGE>
-27-
"System Cash Flow" shall mean, for any period, the sum, for the
----------------
Borrowers and their Subsidiaries (determined on a combined basis without
duplication in accordance with GAAP), of the following: (a) gross operating
revenues for such period minus (b) all operating expenses for such period,
-----
including, without limitation, technical, programming and selling, general and
administrative expenses, but excluding (to the extent included in operating
expenses) income taxes, Management Fees, depreciation, amortization and interest
expense (including, without limitation, all items included in Interest Expense),
provided that gross operating revenues and operating expenses for any period
- --------
shall exclude all extraordinary and unusual items and all non-cash items. For
the purposes of determining System Cash Flow, gross operating revenues will
include revenues received in cash in respect of investments, so long as such
investments are recurring (i.e. reasonably expected to continue for four or more
fiscal quarters) and do not for any period exceed 20% of gross operating
revenues for such period (not including (i) extraordinary items and (ii) such
investment revenues).
Notwithstanding the foregoing, if during any period for which System
Cash Flow is being determined the Borrowers or any of their Subsidiaries shall
have consummated any acquisition of any CATV System or other business, or
consummated any Disposition, then, for all purposes of this Agreement (other
than for purposes of the definition of Excess Cash Flow), System Cash Flow shall
be determined on a pro forma basis as if such acquisition or Disposition had
been made or consummated on the first day of such period.
"Tax Payment Amount" shall mean, for any period, an amount not
------------------
exceeding in the aggregate the amount of Federal, state and local income taxes
the Borrowers would otherwise have paid in the event they were corporations
(other than "S corporations" within the meaning of Section 1361 of the Code) for
such period and all prior periods.
"Term Loan Commitment" shall mean, as to each Term Loan Lender, the
--------------------
obligation of such Lender to make one or more Term Loans in an aggregate
principal amount equal to the amount set opposite the name of such Lender on
Schedule I hereto. The original aggregate principal amount of the Term Loan
Commitments is $100,000,000.
"Term Loan Commitment Termination Date" shall mean the date that is 45
-------------------------------------
days after the Closing Date (or, if such date is not a Business Day, the
immediately preceding Business Day).
"Term Loan Lenders" shall mean (a) on the date hereof, the Lenders
-----------------
having Term Loan Commitments on Schedule I hereto and (b) thereafter, the
Lenders from time to time holding Term Loans and Term Commitments after giving
effect to any assignments thereof permitted by Section 11.06(b) hereof.
<PAGE>
-28-
"Term Loans" shall mean the loans provided for by Section 2.01(b)
----------
hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Total Leverage Ratio" shall mean, as at any date, the ratio of (a)
--------------------
the aggregate amount of all Indebtedness of the Borrowers and their Subsidiaries
(including, without limitation, Capital Lease Obligations, but excluding
Affiliate Subordinated Indebtedness) as at such date to (b) the product of (x)
System Cash Flow for the fiscal quarter ending on, or most recently ended prior
to, such date times (y) four.
-----
Notwithstanding the foregoing, the Total Leverage Ratio for any fiscal
quarter during which an Acquisition is consummated shall be deemed to be equal
to the ratio of (a) the aggregate amount of all Indebtedness of the Borrowers
and their Subsidiaries (including, without limitation, Capital Lease
Obligations, but excluding Affiliate Subordinated Indebtedness) as at the
relevant date to (b) the product of Adjusted System Cash Flow for such fiscal
quarter times four.
-----
"Triax Acquisition" shall mean the acquisition by Mediacom (directly
-----------------
or indirectly through Subsidiaries) of the cable systems and related assets of
Triax Midwest Associates, L.P.
"Type" shall have the meaning assigned to such term in Section 1.03
----
hereof.
"U.S. Person" shall mean a citizen or resident of the United States of
-----------
America, a corporation, partnership, limited liability company or other entity
created or organized in or under any laws of the United States of America or any
State thereof, or any estate or trust that is subject to Federal income taxation
regardless of the source of its income.
"U.S. Taxes" shall mean any present or future tax, assessment or other
----------
charge or levy imposed by or on behalf of the United States of America or any
taxing authority thereof.
"Wholly Owned Subsidiary" shall mean, with respect to any Person, any
-----------------------
corporation, partnership, limited liability company or other entity of which all
of the equity securities or other ownership interests (other than, in the case
of a corporation, directors' qualifying shares) are directly or indirectly owned
or controlled by such Person or one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
"Working Capital" shall mean, as at such date, for the Borrowers and
---------------
their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP) (a) current assets (excluding cash and cash equivalents)
minus (b) current liabilities (excluding the current portion of long term debt
- -----
and of any installments of principal payable hereunder).
<PAGE>
-29-
1.02 Accounting Terms and Determinations.
-----------------------------------
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at
the time of delivery thereof in the manner described in paragraph (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Lenders hereunder (which, prior to the delivery of
the first financial statements under Section 8.01 hereof, shall mean the audited
financial statements as at December 31, 1998 referred to in Section 7.02
hereof). All calculations made for the purposes of determining compliance with
this Agreement shall (except as otherwise expressly provided herein) be made by
application of generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest annual or quarterly
financial statements furnished to the Lenders pursuant to Section 8.01 hereof
(or, prior to the delivery of the first financial statements under Section 8.01
hereof, used in the preparation of the audited financial statements as at
December 31, 1998 referred to in Section 7.02 hereof) unless
(i) the Borrowers shall have objected to determining such compliance
on such basis at the time of delivery of such financial statements, or
(ii) the Majority Lenders shall so object in writing within 30 days
after delivery of such financial statements,
in either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 8.01 hereof,
shall mean the unaudited financial statements referred to in Section 7.02
hereof).
(b) The Borrowers shall deliver to the Lenders at the same time as
the delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
paragraph (a) above and (ii) reasonable estimates of the difference between such
statements arising as a consequence thereof.
<PAGE>
-30-
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 8 hereof, none of the Borrowers will
change the last day of its fiscal year from December 31, or the last days of the
first three fiscal quarters in each of its fiscal years from March 31, June 30
and September 30 of each year, respectively.
1.03 Classes and Types of Loans. Loans hereunder are distinguished
--------------------------
by "Class" and by "Type". The "Class" of a Loan (or of a Commitment to make a
Loan) refers to whether such Loan is a Revolving Credit Loan, a Term Loan or an
Incremental Facility Loan, each of which constitutes a Class. The "Type" of a
Loan refers to whether such Loan is a Base Rate Loan or a Eurodollar Loan, each
of which constitutes a Type. Loans may be identified by both Class and Type.
Incremental Facility Loans and Incremental Facility Commitments shall be
classified by Series, each of which shall be considered a separate Class.
1.04 Subsidiaries. None of the Borrowers has any Subsidiaries on the
------------
date hereof; reference in this Agreement to Subsidiaries of the Borrowers shall
be deemed inapplicable until such time as the Majority Lenders shall consent to
the creation of such Subsidiaries or such Subsidiaries shall in fact come into
existence in accordance with the terms hereof.
1.05 Nature of Obligations of Borrowers. It is the intent of the
----------------------------------
parties hereto that the Borrowers shall be jointly and severally obligated
hereunder and under the notes executed and delivered by the Borrowers pursuant
to Section 2.08(d) hereof, as co-borrowers under this Agreement and as co-makers
on such notes, in respect of the principal of and interest on, and all other
amounts owing in respect of, the Loans and such notes.
Section 2. Commitments, Loans and Prepayments.
----------------------------------
2.01 Loans.
-----
(a) Revolving Credit Loans. Each Revolving Credit Lender severally
----------------------
agrees, on the terms and conditions of this Agreement, to make loans to the
Borrowers in Dollars during the period from and including the Closing Date to
but not including the Revolving Credit Commitment Termination Date in an
aggregate principal amount at any one time outstanding up to but not exceeding
the amount of the Revolving Credit Commitment of such Lender as in effect from
time to time, provided that in no event shall the aggregate principal amount of
--------
all Revolving Credit Loans, together with the aggregate amount of all Letter of
Credit Liabilities, exceed the aggregate amount of the Revolving Credit
Commitments as in effect from time to time. Subject to the terms and conditions
of this Agreement, during such period the Borrowers may borrow, repay and
reborrow the amount of the Revolving Credit Commitments by means of Base Rate
Loans and Eurodollar Loans and may Convert Revolving Credit Loans of one Type
into Revolving Credit Loans of another Type (as provided in Section 2.09 hereof)
or Continue
<PAGE>
-31-
Revolving Credit Loans of one Type as Revolving Credit Loans of the same Type
(as provided in Section 2.09 hereof).
Proceeds of Revolving Credit Loans shall be available for any use
permitted under Section 8.17(a) hereof, provided that, in the event that as
--------
contemplated by Section 2.10(d) hereof, the Borrowers shall prepay Revolving
Credit Loans from the proceeds of a Disposition hereunder, then an amount of
Revolving Credit Commitments equal to the amount of such prepayment (herein the
"Reserved Commitment Amount") shall be reserved and shall not be available for
--------------------------
borrowings hereunder except and to the extent that the proceeds of such
borrowings are to be applied to make Acquisitions permitted under Section 8.05
hereof or to make prepayments of Loans under Section 2.10(d) hereof. The
Borrowers agree, upon the occasion of any borrowing of Revolving Credit Loans
hereunder that is to constitute a utilization of any Reserved Commitment Amount,
to advise the Administrative Agent in writing of such fact at the time of such
borrowing, identifying the amount of such borrowing that is to constitute such
utilization, the Acquisition in respect of which the proceeds of such borrowing
are to be applied and the reduced Reserved Commitment Amount to be in effect
after giving effect to such borrowing.
(b) Term Loans. Each Term Lender severally agrees, on the terms and
----------
conditions of this Agreement, to make term loans to the Borrowers in Dollars in
up to two drawings, with the first drawing to occur on the Closing Date and the
second drawing to occur on a date no later than 45 days after the Closing Date
in an aggregate principal amount equal to the amount of the Term Loan Commitment
of such Lender. Subject to the terms and conditions of this Agreement, on and
after the Closing Date the Borrowers may borrow the Term Loan Commitments by
means of Base Rate Loans and Eurodollar Loans, and thereafter the Borrowers may
Convert Term Loans of one Type into Term Loans of another Type (as provided in
Section 2.09 hereof) or Continue Term Loans of one Type as Term Loans of the
same Type (as provided in Section 2.09 hereof).
Proceeds of Term Loans hereunder shall be available for any use
permitted under the first sentence of Section 8.17(b) hereof.
(c) Incremental Facility Loans. In addition to borrowings of Term
--------------------------
Loans and Revolving Credit Loans provided above, at any time during the
Incremental Facility Availability Period the Borrowers may from time to time
request that the Lenders offer to enter into commitments to make additional term
loans to the Borrowers hereunder, which commitment of any Lender shall not be
less than $10,000,000 and not greater than $100,000,000. In the event that one
or more of the Lenders offer, in their sole discretion, to enter into such
commitments, and such Lenders and the Borrowers agree pursuant to an instrument
in writing (the form and substance of which shall be satisfactory, and a copy of
which shall be delivered, to the Administrative Agent and the Lenders making
such Loans) as to the amount of such
<PAGE>
-32-
commitments that shall be allocated to the respective Lenders making such
offers, the fees (if any) to be payable by the Borrowers in connection therewith
and the amortization and interest rate to be applicable thereto, such Lenders
shall become obligated to make Incremental Facility Loans under this Agreement
in an amount equal to the amount of their respective Incremental Facility
Commitments. The Incremental Facility Loans to be made pursuant to any such
agreement between the Borrowers and one or more Lenders in response to any such
request by the Borrowers shall be deemed to be a separate "Series" of
------
Incremental Facility Loans for all purposes of this Agreement. Anything herein
to the contrary notwithstanding, (i) the minimum aggregate principal amount of
Incremental Facility Commitments entered into pursuant to any such request (and,
accordingly, the minimum aggregate principal amount of any Series of Incremental
Facility Loans) shall be $25,000,000, (ii) the aggregate principal amount of all
unused Incremental Facility Commitments and Incremental Facility Loans shall not
exceed $200,000,000 and (iii) in no event shall the final maturity date for the
Incremental Facility Loans of any Series be earlier than the final Principal
Payment Date for the Term Loans, nor shall the amortization for any Incremental
Facility Loans of any Series be at a rate faster (i.e. earlier) than the rate of
amortization of the Term Loans (the determination of whether or not such
amortization is faster to be made by the Administrative Agent).
Proceeds of Incremental Facility Loans hereunder shall be available
for any use permitted under the last sentence of Section 8.17(b) hereof.
(d) Limit on Eurodollar Loans. No more than seven separate Interest
-------------------------
Periods in respect of Eurodollar Loans of a Class from each Lender may be
outstanding at any one time.
2.02 Borrowings. The Borrowers shall give the Administrative Agent
----------
notice of each borrowing hereunder as provided in Section 4.05 hereof. Not later
than 1:00 p.m. New York time on the date specified for each borrowing hereunder,
each Lender shall make available the amount of the Loan or Loans to be made by
it on such date to the Administrative Agent, at an account designated by the
Administrative Agent to the Lenders, in immediately available funds, for account
of the Borrowers. The amount so received by the Administrative Agent shall,
subject to the terms and conditions of this Agreement, be made available to the
Borrowers by depositing the same, in immediately available funds, in an account
of the Borrowers designated by the Borrowers and maintained with Chase at its
principal office.
2.03 Letters of Credit. Subject to the terms and conditions of this
-----------------
Agreement, the Revolving Credit Commitments may be utilized, upon the request of
the Borrowers, in addition to the Revolving Credit Loans provided for by Section
2.01(a) hereof, by the issuance by the Issuing Lender of letters of credit
(collectively, "Letters of Credit") for account of the Borrowers or any of their
-----------------
Subsidiaries (as specified by the relevant Borrower), provided that in no event
--------
shall (i) the aggregate amount of all Letter of Credit Liabilities, together
with the aggregate principal amount of the Revolving Credit Loans, exceed the
aggregate amount of the Revolving
<PAGE>
-33-
Credit Commitments as in effect from time to time, (ii) the outstanding
aggregate amount of all Letter of Credit Liabilities exceed $100,000,000 and
(iii) the expiration date of any Letter of Credit extend beyond the earlier of
the date five Business Days prior to the Revolving Credit Commitment Termination
Date and the date twelve months following the issuance of such Letter of Credit
(or, in the case of any renewal or extension thereof, twelve months after the
then-current expiration date of such Letter of Credit, so long as such renewal
or extension occurs within three months of such then-current expiration date).
The Borrowers may request the Issuing Lender to issue Letters of Credit for the
account of the Borrowers to support an obligation of an Affiliate of the
Borrowers so long as the face amount of such Letter of Credit does not exceed
the amount of Restricted Payments the Borrowers may then make pursuant to
Section 8.09(d). The following additional provisions shall apply to Letters of
Credit:
(a) The Borrowers shall give the Administrative Agent at least three
Business Days' irrevocable prior notice (effective upon receipt) specifying
the Business Day (which shall be no later than 30 days preceding the
Revolving Credit Commitment Termination Date) each Letter of Credit is to
be issued and the account party or parties therefor and describing in
reasonable detail the proposed terms of such Letter of Credit (including
the beneficiary thereof) and the nature of the transactions or obligations
proposed to be supported thereby (including whether such Letter of Credit
is to be a commercial letter of credit or a standby letter of credit). Upon
receipt of any such notice, the Administrative Agent shall advise the
Issuing Lender of the contents thereof.
(b) On each day during the period commencing with the issuance by the
Issuing Lender of any Letter of Credit and until such Letter of Credit
shall have expired or been terminated, the Revolving Credit Commitment of
each Revolving Credit Lender shall be deemed to be utilized for all
purposes of this Agreement in an amount equal to such Lender's Revolving
Credit Commitment Percentage of the then undrawn face amount of such Letter
of Credit. Each Revolving Credit Lender (other than the Issuing Lender)
agrees that, upon the issuance of any Letter of Credit hereunder, it shall
automatically acquire a participation in the Issuing Lender's liability
under such Letter of Credit in an amount equal to such Lender's Revolving
Credit Commitment Percentage of such liability, and each Revolving Credit
Lender (other than the Issuing Lender) thereby shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as
surety, and shall be unconditionally obligated to the Issuing Lender to pay
and discharge when due, its Revolving Credit Commitment Percentage of the
Issuing Lender's liability under such Letter of Credit.
(c) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the Issuing Lender shall
promptly notify the Borrowers (through the Administrative Agent) of the
amount to be paid by the Issuing Lender as a result of such demand and the
date on which payment is to be made by the
<PAGE>
-34-
Issuing Lender to such beneficiary in respect of such demand.
Notwithstanding the identity of the account party of any Letter of Credit,
the Borrowers hereby jointly and severally unconditionally agree to pay and
reimburse the Administrative Agent for account of the Issuing Lender for
the amount of each demand for payment under such Letter of Credit that is
in substantial compliance with the provisions of such Letter of Credit at
or prior to the date on which payment is to be made by the Issuing Lender
to the beneficiary thereunder, without presentment, demand, protest or
other formalities of any kind.
(d) Forthwith upon its receipt of a notice referred to in paragraph
(c) of this Section 2.03, the Borrowers shall advise the Administrative
Agent whether or not the Borrowers intend to borrow hereunder to finance
their obligation to reimburse the Issuing Lender for the amount of the
related demand for payment and, if they do, submit a notice of such
borrowing as provided in Section 4.05 hereof.
(e) Each Revolving Credit Lender (other than the Issuing Lender)
shall pay to the Administrative Agent for account of the Issuing Lender at
its principal office in Dollars and in immediately available funds, the
amount of such Lender's Revolving Credit Commitment Percentage of any
payment under a Letter of Credit upon notice by the Issuing Lender (through
the Administrative Agent) to such Revolving Credit Lender requesting such
payment and specifying such amount. Each such Revolving Credit Lender's
obligation to make such payment to the Administrative Agent for account of
the Issuing Lender under this paragraph (e), and the Issuing Lender's right
to receive the same, shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limitation, the
failure of any other Revolving Credit Lender to make its payment under this
paragraph (e), the financial condition of the Borrowers (or any other
account party), the existence of any Default or the termination of the
Commitments. Each such payment to the Issuing Lender shall be made without
any offset, abatement, withholding or reduction whatsoever. If any
Revolving Credit Lender shall default in its obligation to make any such
payment to the Administrative Agent for account of the Issuing Lender, for
so long as such default shall continue the Administrative Agent may at the
request of the Issuing Lender withhold from any payments received by the
Administrative Agent under this Agreement for account of such Revolving
Credit Lender the amount so in default and, to the extent so withheld, pay
the same to the Issuing Lender in satisfaction of such defaulted
obligation.
(f) Upon the making of each payment by a Revolving Credit Lender to
the Issuing Lender pursuant to paragraph (e) above in respect of any Letter
of Credit, such Lender shall, automatically and without any further action
on the part of the Administrative Agent, the Issuing Lender or such Lender,
acquire (i) a participation in an amount equal to such payment in the
Reimbursement Obligation owing to the Issuing
<PAGE>
-35-
Lender by the Borrowers hereunder and under the Letter of Credit Documents
relating to such Letter of Credit and (ii) a participation in a percentage
equal to such Lender's Revolving Credit Commitment Percentage in any
interest or other amounts payable by the Borrowers hereunder and under such
Letter of Credit Documents in respect of such Reimbursement Obligation
(other than the commissions, charges, costs and expenses payable to the
Issuing Lender pursuant to paragraph (g) of this Section 2.03). Upon
receipt by the Issuing Lender from or for account of the Borrowers of any
payment in respect of any Reimbursement Obligation or any such interest or
other amount (including by way of setoff or application of proceeds of any
collateral security) the Issuing Lender shall promptly pay to the
Administrative Agent for account of each Revolving Credit Lender entitled
thereto, such Revolving Credit Lender's Revolving Credit Commitment
Percentage of such payment, each such payment by the Issuing Lender to be
made in the same money and funds in which received by the Issuing Lender.
In the event any payment received by the Issuing Lender and so paid to the
Revolving Credit Lenders hereunder is rescinded or must otherwise be
returned by the Issuing Lender, each Revolving Credit Lender shall, upon
the request of the Issuing Lender (through the Administrative Agent), repay
to the Issuing Lender (through the Administrative Agent) the amount of such
payment paid to such Lender, with interest at the rate specified in
paragraph (j) of this Section 2.03.
(g) The Borrowers shall pay to the Administrative Agent for account
of each Revolving Credit Lender (ratably in accordance with their
respective Commitment Percentages) a letter of credit fee in respect of
each Letter of Credit in an amount equal to the Applicable Margin, in
effect from time to time, for Revolving Credit Loans that are Eurodollar
Loans on the daily average undrawn face amount of such Letter of Credit for
the period from and including the date of issuance of such Letter of Credit
(i) in the case of a Letter of Credit that expires in accordance with its
terms, to and including such expiration date and (ii) in the case of a
Letter of Credit that is drawn in full or is otherwise terminated other
than on the stated expiration date of such Letter of Credit, to but
excluding the date such Letter of Credit is drawn in full or is terminated
(such fee to be non-refundable, to be paid in arrears on each Quarterly
Date and on the Revolving Credit Commitment Termination Date and to be
calculated for any day after giving effect to any payments made under such
Letter of Credit on such day).
In addition, the Borrowers shall pay to the Administrative Agent for
account of the Issuing Lender a fronting fee in respect of each Letter of
Credit in an amount equal to 1/4 of 1% per annum of the daily average
undrawn face amount of such Letter of Credit for the period from and
including the date of issuance of such Letter of Credit (i) in the case of
a Letter of Credit that expires in accordance with its terms, to and
including such expiration date and (ii) in the case of a Letter of Credit
that is drawn in full or is otherwise terminated other than on the stated
expiration date of such Letter of Credit, to
<PAGE>
-36-
but excluding the date such Letter of Credit is drawn in full or is
terminated (such fee to be non-refundable, to be paid in arrears on each
Quarterly Date and on the Revolving Credit Commitment Termination Date and
to be calculated for any day after giving effect to any payments made under
such Letter of Credit on such day) plus all commissions, charges, costs and
expenses in the amounts customarily charged by the Issuing Lender from time
to time in like circumstances with respect to the issuance of each Letter
of Credit and drawings and other transactions relating thereto.
(h) Promptly following the end of each calendar month, the Issuing
Lender shall deliver (through the Administrative Agent) to each Revolving
Credit Lender and the Borrowers a notice describing the aggregate amount of
all Letters of Credit outstanding at the end of such month. Upon the
request of any Revolving Credit Lender from time to time, the Issuing
Lender shall deliver any other information reasonably requested by such
Lender with respect to each Letter of Credit then outstanding.
(i) The issuance by the Issuing Lender of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 6
hereof, be subject to the conditions precedent that (i) such Letter of
Credit shall be in such form, contain such terms and support such
transactions as shall be satisfactory to the Issuing Lender consistent with
its then current practices and procedures with respect to letters of credit
of the same type and (ii) the Borrowers shall have executed and delivered
such applications, agreements and other instruments relating to such Letter
of Credit as the Issuing Lender shall have reasonably requested consistent
with its then current practices and procedures with respect to letters of
credit of the same type, provided that in the event of any conflict between
--------
any such application, agreement or other instrument and the provisions of
this Agreement or any Security Document, the provisions of this Agreement
and the Security Documents shall control.
(j) To the extent that any Lender shall fail to pay any amount
required to be paid pursuant to paragraph (e) or (f) of this Section 2.03
on the due date therefor, such Lender shall pay interest to the Issuing
Lender (through the Administrative Agent) on such amount from and including
such due date to but excluding the date such payment is made at a rate per
annum equal to the Federal Funds Rate, provided that if such Lender shall
--------
fail to make such payment to the Issuing Lender within three Business Days
of such due date, then, retroactively to the due date, such Lender shall be
obligated to pay interest on such amount at the Post-Default Rate.
(k) The issuance by the Issuing Lender of any modification or
supplement to any Letter of Credit hereunder shall be subject to the same
conditions applicable under this Section 2.03 to the issuance of new
Letters of Credit, and no such modification or supplement shall be issued
hereunder unless either (i) the respective Letter of Credit
<PAGE>
-37-
affected thereby would have complied with such conditions had it originally
been issued hereunder in such modified or supplemented form or (ii) each
Revolving Credit Lender shall have consented thereto.
(l) Pursuant to Section 2.03 of the Mediacom Southeast Credit
Agreement, the Issuing Lender may from time to time have issued "Letters of
Credit" (as defined therein). Each of the parties hereto agrees that any
such "Letter of Credit" that shall be outstanding on the Closing Date shall
constitute, on and after the Closing Date, a Letter of Credit for all
purposes of this Agreement.
The Borrowers hereby indemnify and hold harmless each Revolving Credit Lender
and the Administrative Agent from and against any and all claims and damages,
losses, liabilities, costs or expenses that such Lender or the Administrative
Agent may incur (or that may be claimed against such Lender or the
Administrative Agent by any Person whatsoever) by reason of or in connection
with the execution and delivery or transfer of or payment or refusal to pay by
the Issuing Lender under any Letter of Credit; provided that the Borrowers shall
--------
not be required to indemnify any Lender or the Administrative Agent for any
claims, damages, losses, liabilities, costs or expenses to the extent, but only
to the extent, caused by (x) the willful misconduct or gross negligence of the
Issuing Lender in determining whether a request presented under any Letter of
Credit complied with the terms of such Letter of Credit or (y) in the case of
the Issuing Lender, such Lender's failure to pay under any Letter of Credit
after the presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit. Nothing in this Section 2.03 is intended
to limit the other obligations of the Borrowers, any Lender or the
Administrative Agent under this Agreement.
2.04 Changes of Commitments.
----------------------
(a) Subject to the last sentence of this Section 2.04(a), the aggregate
amount of the Revolving Credit Commitments shall be automatically reduced to
zero on the Revolving Credit Commitment Termination Date. In addition, the
aggregate amount of the Revolving Credit Commitments shall be automatically
reduced on each Revolving Credit Commitment Reduction Date set forth in column
(A) below, (x) by an amount (subject to reduction pursuant to paragraph (c)
below) equal to the amount set forth in column (B) below opposite such Revolving
Credit Commitment Reduction Date, (y) to an amount (subject to reduction
pursuant to paragraph (c) below) equal to the amount set forth in column (C)
below opposite such Revolving Credit Commitment Reduction Date:
<PAGE>
-38-
<TABLE>
<CAPTION>
(A) (B) (C)
Revolving Credit Revolving Credit Revolving Credit
Commitment Reduction Commitments Reduced Commitments Reduced
Date Falling on or by the Following to the Following
Nearest to: Amounts: Amounts:
---------- -------- --------
<S> <C> <C>
September 30, 2002 $ 5,625,000 $444,375,000
December 31, 2002 $ 5,625,000 $438,750,000
March 31, 2003 $ 5,625,000 $433,125,000
June 30, 2003 $ 5,625,000 $427,500,000
September 30, 2003 $ 5,625,000 $421,875,000
December 31, 2003 $ 5,625,000 $416,250,000
March 31, 2004 $16,875,000 $399,375,000
June 30, 2004 $16,875,000 $382,500,000
September 30, 2004 $16,875,000 $365,625,000
December 31, 2004 $16,875,000 $348,750,000
March 31, 2005 $22,500,000 $326,250,000
June 30, 2005 $22,500,000 $303,750,000
September 30, 2005 $22,500,000 $281,250,000
December 31, 2005 $22,500,000 $258,750,000
March 31, 2006 $22,500,000 $236,250,000
June 30, 2006 $22,500,000 $213,750,000
September 30, 2006 $22,500,000 $191,250,000
December 31, 2006 $22,500,000 $168,750,000
March 31, 2007 $22,500,000 $146,250,000
June 30, 2007 $22,500,000 $123,750,000
September 30, 2007 $22,500,000 $101,250,000
December 31, 2007 $22,500,000 $ 78,750,000
March 31, 2008 $78,750,000 $ 0
</TABLE>
As provided for in the definition of "Revolving Credit Commitment Termination
Date" in Section 1.01, if Mediacom does not refinance its 1998 Senior Notes
prior to March 31, 2007, with new Indebtedness having a maturity no earlier than
two years after the payment of all amounts due under this Agreement and on terms
satisfactory to the Administrative Agent and the Majority Lenders, the Revolving
Credit Commitments shall be terminated, and the entire principal amount of the
Revolving Credit Loans then outstanding shall, as provided for in
<PAGE>
-39-
Section 2.10(g) hereof, be paid in full, on the Revolving Credit Commitment
Reduction Date falling on or nearest to June 30, 2007.
(b) The Borrowers shall have the right at any time or from time to
time (i) so long as no Revolving Credit Loans or Letter of Credit Liabilities
are outstanding, to terminate the Revolving Credit Commitments, (ii) so long as
no Term Loans are outstanding, to terminate the Term Loan Commitments, (iii) so
long as no Incremental Facility Loans of a Series are outstanding, to terminate
the Incremental Facility Commitments of such Series and (iv) to reduce the
aggregate unused amount of the Revolving Credit Commitments or Incremental
Facility Commitments of any Series (for which purpose use of the Revolving
Credit Commitments shall be deemed to include the aggregate amount of Letter of
Credit Liabilities); provided that (x) the Borrowers shall give notice of each
--------
such termination or reduction as provided in Section 4.05 hereof, (y) each
partial reduction shall be in an aggregate amount at least equal to $1,000,000
(or a larger multiple of $500,000) and (z) prior to the making of the initial
Loans hereunder, each such reduction of Commitments shall be applied ratably to
the Commitments of each Class.
(c) Each reduction in the aggregate amount of the Revolving Credit
Commitments pursuant to paragraph (b) above, or pursuant to Section 2.10 hereof,
on any date shall be applied to the reductions set forth in the schedule in
paragraph (a) above ratably as follows: each such reduction shall result in an
automatic and simultaneous reduction (but not below zero) of the respective
amounts set forth in column (B) at the end of paragraph (a) above (ratably in
accordance with the respective remaining amounts thereof, after giving effect to
any prior reductions pursuant to this paragraph (c)), with appropriate
reductions (but not below zero) being made to the respective amounts set forth
in column (C) of said paragraph (a) after giving effect to such reduction of the
amounts in said column (B).
(d) The aggregate amount of the Term Loan Commitments shall be
automatically reduced to zero on the close of business on the Term Loan
Commitment Termination Date. The aggregate amount of the Incremental Facility
Commitments shall be automatically reduced to zero on the close of business on
the last day of the Incremental Facility Availability Period.
(e) The Commitments once terminated or reduced may not be reinstated.
2.05 Commitment Fee. The Borrowers shall pay to the Administrative
--------------
Agent for account of each Revolving Credit Lender a commitment fee on the daily
average unused amount of such Lender's Revolving Credit Commitment (for which
purpose (i) the aggregate amount of any Letter of Credit Liabilities shall be
deemed to be a pro rata (based on the Revolving Credit Commitments) use of each
Lender's Revolving Credit Commitment and (ii) any Reserved Commitment Amount
shall be deemed to be unused), for the period from and including the date hereof
to but not including the earlier of the date such Revolving Credit Commitment is
terminated and the Revolving Credit Commitment Termination Date, at a rate per
annum equal
<PAGE>
-40-
to (x) 3/8 of 1% at any time the then-current Rate Ratio (determined pursuant to
Section 3.03 hereof) is greater than 5.00 to 1 and (y) 1/4 of 1% at any time the
then-current Rate Ratio (so determined) is equal to or less than 5.00 to 1. The
Borrowers shall pay to the Administrative Agent for account of each Incremental
Facility Lender of any Series a commitment fee in such amounts, and on such
dates, as shall have been agreed to by the Borrowers and such Incremental
Facility Lender upon the allocation of the Incremental Facility Commitment of
such Series to such Lender pursuant to Section 2.01(c) hereof. Accrued
commitment fee shall be payable on each Quarterly Date and on the earlier of the
date the relevant Commitments are terminated and the Revolving Credit Commitment
Termination Date or the Incremental Facility Commitment Termination Date, as the
case may be.
2.06 Lending Offices. The Loans of each Type made by each Lender
---------------
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.
2.07 Several Obligations; Remedies Independent. The failure of any
-----------------------------------------
Lender to make any Loan to be made by it on the date specified therefor shall
not relieve any other Lender of its obligation to make its Loan on such date,
but neither any Lender nor the Administrative Agent shall be responsible for the
failure of any other Lender to make a Loan to be made by such other Lender, and
(except as otherwise provided in Section 4.06 hereof) no Lender shall have any
obligation to the Administrative Agent or any other Lender for the failure by
such Lender to make any Loan required to be made by such Lender. Anything in
this Agreement to the contrary notwithstanding, each Lender hereby agrees with
each other Lender that no Lender shall take any action to protect or enforce its
rights arising out of this Agreement (including, without limitation, exercising
any rights of off-set) without first obtaining the prior written consent of the
Administrative Agent or the Majority Lenders, it being the intent of the Lenders
that any such action to protect or enforce rights under this Agreement shall be
taken in concert and at the direction or with the consent of the Administrative
Agent or the Majority Lenders and not individually by a single Lender.
2.08 Loan Accounts; Promissory Notes.
-------------------------------
(a) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing the indebtedness of the Borrowers to such
Lender resulting from each Loan made by such Lender to the Borrowers, including
the amounts of principal and interest payable and paid to such Lender by the
Borrowers from time to time hereunder.
(b) The Administrative Agent shall maintain accounts in which it
shall record (i) the amount of each Loan made hereunder to the Borrowers, the
Class and Type thereof and the Interest Period applicable thereto, (ii) the
amount of any principal or interest due and payable or to become due and payable
from the Borrowers to each Lender hereunder and (iii) the amount
<PAGE>
-41-
of any sum received by the Administrative Agent hereunder from the Borrowers for
the account of the Lenders and each Lender's share thereof.
(c) The entries made in the accounts maintained pursuant to paragraph
(a) or (b) of this Section shall be prima facie evidence of the existence and
----- -----
amounts of the obligations recorded therein; provided that the failure of any
--------
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of the Borrowers to repay
the Loans in accordance with the terms of this Agreement.
(d) Any Lender may request that Loans of any Class made by it to the
Borrowers be evidenced by a promissory note. In such event, the Borrowers shall
prepare, execute and deliver to such Lender a promissory note payable to the
order of such Lender (or, if requested by such Lender, to such Lender and its
registered assigns) and in a form approved by the Administrative Agent.
Thereafter, the Loans of the Borrowers evidenced by such promissory note and
interest thereon shall at all times (including after assignment pursuant to
Section 11.06 hereof) be represented by one or more promissory notes in such
form payable to the order of the payee named therein (or, if such promissory
note is a registered note, to such payee and its registered assigns).
2.09 Optional Prepayments and Conversions or Continuations of Loans.
--------------------------------------------------------------
Subject to Section 4.04 hereof, the Borrowers shall have the right to prepay
Loans, or to Convert Loans of one Type into Loans of another Type or Continue
Loans of one Type as Loans of the same Type, at any time or from time to time,
provided that:
- --------
(a) the Borrowers shall give the Administrative Agent notice of each
such prepayment, Conversion or Continuation as provided in Section 4.05
hereof (and, upon the date specified in any such notice of prepayment, the
amount to be prepaid shall become due and payable hereunder);
(b) Eurodollar Loans may be prepaid or Converted at any time from
time to time, provided that the Borrowers shall pay any amounts owing
--------
under Section 5.05 hereof in the event of any such prepayment or Conversion
on any date other than the last day of an Interest Period for such Loans;
(c) prepayments of any Term Loan shall be effected in such manner so
that the Term Loans (and, to the extent that Incremental Loans are
outstanding, the Incremental Loans of all Series) are concurrently prepaid
ratably in accordance with the respective outstanding principal amounts
thereof and the aggregate principal amount of all such concurrent
prepayments is at least equal to $1,000,000 or a greater multiple of
$500,000;
<PAGE>
-42-
(d) prepayments of the Term Loans and Incremental Facility Loans
shall be applied to the remaining installments of such Loans ratably in
accordance with the respective principal amounts thereof; and
(e) any Conversion or Continuation of Eurodollar Loans shall be
subject to the provisions of Section 2.01(d) hereof.
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 9 hereof, in the event that any Event of Default shall
have occurred and be continuing, the Administrative Agent may (and at the
request of the Majority Lenders shall) suspend the right of the Borrowers to
Convert any Loan into a Eurodollar Loan, or to Continue any Loan as a Eurodollar
Loan, in which event all Loans shall be Converted (on the last day(s) of the
respective Interest Periods therefor) or Continued, as the case may be, as Base
Rate Loans.
2.10 Mandatory Prepayments and Reductions of Commitments.
---------------------------------------------------
(a) Casualty Events. Upon the date 270 days following the receipt by
---------------
any Borrower or any of its Subsidiaries of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event
affecting any Property of any of the Borrowers or any of their Subsidiaries (or
upon such earlier date as the Borrowers or any such Subsidiary, as the case may
be, shall have determined not to repair or replace the Property affected by such
Casualty Event), the Borrowers shall prepay the Loans (and/or provide cover for
Letter of Credit Liabilities as specified in paragraph (f) below), and the
Commitments shall be subject to automatic reduction, in an aggregate amount, if
any, equal to 100% of the Net Available Proceeds of such Casualty Event not
theretofore applied (or committed to be applied pursuant to executed
construction contracts or equipment orders) to the repair or replacement of such
Property, such prepayment to be effected in each case in the manner and to the
extent specified in paragraph (e) of this Section 2.10. Notwithstanding the
foregoing, the Borrowers shall not be required to make any prepayment (and/or
provide cover for Letter of Credit Liabilities) under this paragraph (a), and
the Commitments shall not be subject to automatic reduction, until the aggregate
amount of the Net Available Proceeds that must be prepaid under this paragraph
(a) (reduced by the amount of such Net Available Proceeds that has previously
been applied to the prepayment of Loans or reduction of Commitments hereunder as
a result of previous Casualty Events) exceeds $10,000,000.
(b) Excess Cash Flow. Not later than the date 150 days after the end
----------------
of each fiscal year of the Borrowers (or, if earlier, 30 days after the delivery
of the audited financial statements for such fiscal year pursuant to Section
8.01(b) hereof), commencing with the fiscal year ending on December 31, 2002,
the Borrowers shall prepay the Loans (and/or provide cover for Letter of Credit
Liabilities as specified in paragraph (f) below), and the Commitments shall be
subject to automatic reduction, in an aggregate amount equal to the excess of
(A) 50% of
<PAGE>
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Excess Cash Flow for such fiscal year over (B) the aggregate amount of voluntary
prepayments of Term Loans and Incremental Facility Loans made during such fiscal
year pursuant to Section 2.09 hereof (other than that portion, if any, of such
prepayments applied to installments of the Term Loans and Incremental Facility
Loans falling due in such fiscal year), such prepayment and reduction to be
effected in each case in the manner and to the extent specified in paragraph (e)
of this Section 2.10.
(c) Debt Issuances. Upon any Debt Issuance, the Borrowers shall
--------------
prepay the Loans (and/or provide cover for Letter of Credit Liabilities as
specified in paragraph (f) below), and the Commitments shall be subject to
automatic reduction, in an aggregate amount equal to 100% of the Net Available
Proceeds thereof, such prepayment and reduction to be effected in each case in
the manner and to the extent specified in paragraph (e) of this Section 2.10.
(d) Sale of Assets. Without limiting the obligation of the Borrowers
--------------
to obtain the consent of the Majority Lenders pursuant to Section 8.05 hereof to
any Disposition not otherwise permitted hereunder, in the event that the Net
Available Proceeds of any Disposition (herein, the "Current Disposition"), and
-------------------
of all prior Dispositions after the date hereof as to which a prepayment has not
yet been made under this Section 2.10(d), shall exceed $10,000,000 then, no
later than five Business Days prior to the occurrence of the Current
Disposition, the Borrowers will deliver to the Lenders a statement, certified by
a Senior Officer, in form and detail satisfactory to the Administrative Agent,
of the amount of the Net Available Proceeds of the Current Disposition and of
all such prior Dispositions and will prepay the Loans (and/or provide cover for
Letter of Credit Liabilities as specified in paragraph (f) below), and the
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to 100% of the Net Available Proceeds of the Current Disposition and such
prior Dispositions, such prepayment and reduction to be effected in each case in
the manner and to the extent specified in paragraph (e) of this Section 2.10.
Notwithstanding the foregoing, the Borrowers shall not be required to
make a prepayment pursuant to this paragraph (d) with respect to Net Available
Proceeds from any Disposition in the event that the Borrowers advise the
Administrative Agent at the time the Net Available Proceeds from such
Disposition are received that they intend to reinvest such Net Available
Proceeds in replacement assets pursuant to an Acquisition so long as
(x) such Net Available Proceeds are either (i) held by the
Administrative Agent in the Collateral Account pending such reinvestment,
in which event the Administrative Agent need not release such Net Available
Proceeds except upon presentation of evidence satisfactory to it that such
Net Available Proceeds are to be so reinvested in compliance with the
provisions of this Agreement or (ii) applied by the Borrowers to the
prepayment of Revolving Credit Loans hereunder (in which event the
Borrowers agree to advise the Administrative Agent in writing at the time
of such prepayment of Revolving
<PAGE>
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Credit Loans that such prepayment is being made from the proceeds of a
Disposition and that, as contemplated by Section 2.01(a) hereof, a portion
of the Revolving Credit Commitments hereunder equal to the amount of such
prepayment gives rise to a Reserved Commitment Amount that shall be
available hereunder only for purposes of making an acquisition under
Section 8.05(d)(iv) hereof),
(y) the Net Available Proceeds from any Disposition are in fact so
reinvested within 270 days of such Disposition (it being understood that,
in the event Net Available Proceeds from more than one Disposition are paid
into the Collateral Account or applied to the prepayment of Revolving
Credit Loans as provided in clause (x) above, such Net Available Proceeds
shall be deemed to be released (or, as the case may be, Revolving Credit
Loans utilizing the Reserved Commitment Amount shall be deemed to be made)
in the same order in which such Dispositions occurred and, accordingly, (A)
any such Net Available Proceeds so held for more than 270 days shall be
forthwith applied to the prepayment of Loans and reductions of Commitments
as provided above and (B) any Reserved Commitment Amount that remains so
unutilized for more than 270 days shall, subject to the satisfaction of the
conditions precedent to such borrowing in Section 6.02 hereof, be utilized
through the borrowing by the Borrowers of Revolving Credit Loans the
proceeds of which shall be applied to the prepayment of Loans and
reductions of Commitments as provided in paragraph (e) of this Section
2.10) and
(z) the aggregate amount of Net Available Proceeds (together with
investment earnings thereon) so held at any time by the Administrative
Agent pending reinvestment as contemplated by this sentence, together with
the aggregate amount of the Reserved Commitment Amount, shall not at any
time exceed $40,000,000 or such greater amount as the Majority Lenders may
otherwise agree.
As contemplated by Section 4.01 of the Pledge Agreement, nothing in this
paragraph (d) shall be deemed to obligate the Administrative Agent to release
any of such proceeds from the Collateral Account to the Borrowers for purposes
of reinvestment as aforesaid upon the occurrence and during the continuance of
any Event of Default.
(e) Application. Prepayments and reductions of Commitments described
-----------
above in this Section 2.10 shall be applied to the Term Loans and Incremental
Facility Loans of each Series then outstanding, and to the reduction of the
Revolving Credit Commitments, ratably in accordance with the respective amounts
of such Loans and Commitments and shall be applied:
(x) to the prepayment of the respective installments of the Term
Loans and Incremental Facility Loans ratably in accordance with the
respective principal amounts thereof and
<PAGE>
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(y) to the extent that, after giving effect to any such reduction of
Revolving Credit Commitments, the sum of the aggregate outstanding
principal amount of the Revolving Credit Loans and Letter of Credit
Liabilities shall exceed the aggregate amount of the Revolving Credit
Commitments, to the prepayment of Revolving Credit Loans (and to provide
cover for Letter of Credit Liabilities as specified in paragraph (f)
below), so that, after giving effect thereto, such sum does not exceed the
aggregate amount of the Revolving Credit Commitments.
(f) Cover for Letter of Credit Liabilities. In the event that the
--------------------------------------
Borrowers shall be required pursuant to this Section 2.10, to provide cover for
Letter of Credit Liabilities, the Borrowers shall effect the same by paying to
the Administrative Agent immediately available funds in an amount equal to the
required amount, which funds shall be retained by the Administrative Agent in
the Collateral Account (as provided therein as collateral security in the first
instance for the Letter of Credit Liabilities) until such time as the Letters of
Credit shall have been terminated and all of the Letter of Credit Liabilities
paid in full.
(g) Change in Commitments. If at any time the aggregate outstanding
---------------------
amount of Revolving Credit Loans and Letter of Credit Liabilities exceeds the
aggregate amount of the Revolving Credit Commitments then in effect, the
Borrowers shall prepay the Revolving Credit Loans (and/or provide cover for
Letter of Credit Liabilities as specified in paragraph (f) above) in such
amounts as shall be necessary so that after giving effect to such prepayment
(and cover), the aggregate outstanding amount of the Revolving Credit Loans and
Letter of Credit Liabilities does not exceed the aggregate amount of the
Revolving Credit Commitments, provided that any such prepayment shall be
--------
accompanied by any amounts payable under Section 5.05 hereof.
Section 3. Payments of Principal and Interest.
----------------------------------
3.01 Repayment of Loans.
------------------
(a) The Borrowers hereby jointly and severally promise to pay to the
Administrative Agent for account of each Lender the entire outstanding principal
amount of such Lender's Revolving Credit Loans, and each Revolving Credit Loan
shall mature, on the Revolving Credit Commitment Termination Date. In addition,
if following any Revolving Credit Commitment Reduction Date the aggregate
principal amount of the Revolving Credit Loans shall exceed the Revolving Credit
Commitments, the Borrowers shall pay Revolving Credit Loans, and provide cover
for Letter of Credit Liabilities as specified in Section 2.10(f), in an
aggregate amount equal to such excess.
(b) Subject to the last sentence of this Section 3.01(b), the
Borrowers hereby jointly and severally promise to pay to the Administrative
Agent for account of the Term Loan
<PAGE>
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Lenders the principal of the Term Loans in twenty-five consecutive quarterly
installments payable on the Principal Payment Dates as follows:
Principal Payment Date Amount of Installment ($)
---------------------- -------------------------
September 30, 2002 $ 250,000
December 31, 2002 $ 250,000
March 31, 2003 $ 250,000
June 30, 2003 $ 250,000
September 30, 2003 $ 250,000
December 31, 2003 $ 250,000
March 31, 2004 $ 250,000
June 30, 2004 $ 250,000
September 30, 2004 $ 250,000
December 31, 2004 $ 250,000
March 31, 2005 $ 250,000
June 30, 2005 $ 250,000
September 30, 2005 $ 250,000
December 31, 2005 $ 250,000
March 31, 2006 $ 250,000
June 30, 2006 $ 250,000
September 30, 2006 $ 250,000
December 31, 2006 $ 250,000
March 31, 2007 $ 250,000
June 30, 2007 $ 250,000
September 30, 2007 $ 250,000
December 31, 2007 $ 250,000
March 31, 2008 $ 250,000
June 30, 2008 $ 250,000
September 30, 2008 $94,000,000
If Mediacom does not refinance its 1998 Senior Notes prior to March 31, 2007,
with new Indebtedness having a maturity no earlier than two years after the
payment of all amounts due under this Agreement and on terms satisfactory to the
Administrative Agent and the Majority
<PAGE>
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Lenders, the entire outstanding principal amount of the Term Loans shall be
payable on September 30, 2007.
(c) The Borrowers hereby jointly and severally promise to pay to the
Administrative Agent for account of the Incremental Facility Lenders of any
Series the principal of the Incremental Facility Loans of such Series on the
respective Principal Payment Dates agreed upon between the Borrowers and such
Incremental Facility Lenders pursuant to Section 2.01(c) hereof at the time such
Lenders become obligated to make such Incremental Facility Loans hereunder.
3.02 Interest. The Borrowers hereby jointly and severally promise to
--------
pay to the Administrative Agent for account of each Lender interest on the
unpaid principal amount of each Loan made by such Lender for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) plus the Applicable Margin and
----
(b) during such periods as such Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Rate for such Loan for
such Interest Period plus the Applicable Margin.
----
Notwithstanding the foregoing, the Borrowers jointly and severally promise to
pay to the Administrative Agent for account of each Lender interest at the
applicable Post-Default Rate on any principal of any Loan made by such Lender,
on any Reimbursement Obligation held by such Lender and on any other amount
payable by the Borrowers hereunder to or for account of such Lender, that shall
not be paid in full when due (whether at stated maturity, by acceleration, by
mandatory prepayment or otherwise), for the period from and including the due
date thereof to but excluding the date the same is paid in full. Accrued
interest on each Loan shall be payable (i) in the case of a Base Rate Loan,
quarterly on the Quarterly Dates, (ii) in the case of a Eurodollar Loan, on the
last day of each Interest Period therefor and, if such Interest Period is longer
than three months, at three-month intervals following the first day of such
Interest Period, (iii) in the case of any Eurodollar Loan, upon the payment,
prepayment or Conversion thereof (but only on the principal amount so paid,
prepaid or Converted) and (iv) in the case of all Loans, upon the payment or
prepayment in full of the principal of the Loans, and the termination of the
Commitments, hereunder, except that interest payable at the Post-Default Rate
shall be payable from time to time on demand. Promptly after the determination
of any interest rate provided for herein or any change therein, the
Administrative Agent shall give notice thereof to the Lenders to which such
interest is payable and to the Borrowers.
<PAGE>
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3.03 Determination of Applicable Margin.
----------------------------------
(a) The Applicable Margin for the period from the Closing Date to the
date of the Triax Acquisition shall be determined based upon the certificate
delivered pursuant to Section 6.01(l) hereof. The Applicable Margin for the
period from and including the date of the Triax Acquisition to the day prior to
the first Quarterly Date occurring after the date of the Triax Acquisition shall
be determined based upon a Rate Ratio Certificate (computed on a pro forma
basis, after giving effect to the borrowings to be made in connection with the
Triax Acquisition), which Rate Ratio Certificate shall be delivered three or
more days prior to the date of the Triax Acquisition. Thereafter, the Applicable
Margin for each Quarterly Payment Period shall be determined based upon a Rate
Ratio Certificate for such Quarterly Payment Period delivered by the Borrowers
to the Lenders and the Administrative Agent under this Section 3.03. If the Rate
Ratio Certificate for any Quarterly Payment Period is delivered to the
Administrative Agent three or more days prior to the first day of such Quarterly
Payment Period, any adjustment in the Applicable Margin required to be made, as
shown in such Rate Ratio Certificate, shall be effective on the first day of
such Quarterly Payment Period.
(b) If the Rate Ratio Certificate for any Quarterly Payment Period
(or for the period from and including the date of the Triax Acquisition to the
first Quarterly Payment Period occurring after the date of the Triax
Acquisition) is delivered by the Borrowers to the Administrative Agent later
than three days prior to the commencement of such Quarterly Payment Period (or
the Triax Acquisition), then (i) any decrease in the Applicable Margin for such
Quarterly Payment Period (or such period) shall not become effective on the
first day of such Quarterly Payment Period (or such period) but shall instead
become effective on the third day following receipt by the Administrative Agent
of such Rate Ratio Certificate and (ii) any increase in the Applicable Margin
for such Quarterly Payment Period (or such period) shall become effective
retroactively from the first day of such Quarterly Payment Period (or such
period).
(c) If it shall be determined at any time, on the basis of a
certificate of a Senior Officer delivered pursuant to the last sentence of
Section 8.01 hereof, that the Applicable Margin then in effect for the current
Quarterly Payment Period, or any previous Quarterly Payment Period, is or was
incorrect, and that a correction would have the effect of increasing the
Applicable Margin, then the Applicable Margin shall be so increased effective
retroactively from the first day of such Quarterly Payment Period, provided that
--------
in the event such certificate for any fiscal quarter is not delivered to the
Lenders pursuant to said Section 8.01 within 60 days of the end of such fiscal
quarter, then, unless the Borrowers shall deliver such certificate within 10
days after notice of such non-delivery shall be given by any Lender or the
Administrative Agent to the Borrowers, the Applicable Margin for such Quarterly
Payment Period shall be deemed to be the highest Applicable Margin provided for
in the definition of such term in Section 1.01 hereof.
<PAGE>
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(d) In the event of any retroactive increase in the Applicable Margin
for any Quarterly Payment Period pursuant to paragraph (a), (b) or (c) above,
the amount of interest in respect of any Loan outstanding during all or any
portion of such Quarterly Payment Period shall be recalculated using the
Applicable Margin as so increased. On the Business Day immediately following
receipt by the Borrowers of notice from the Administrative Agent of such
increase, the Borrowers shall pay to the Administrative Agent, for account of
the Lenders, an amount equal to the difference between (i) the amount of
interest previously paid or payable by the Borrowers in respect of such Loan for
such Quarterly Payment Period and (ii) the amount of interest in respect of such
Loan as so recalculated for such Quarterly Payment Period.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
------------------------------------------------
4.01 Payments.
--------
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
the Borrowers under this Agreement, and except to the extent otherwise provided
therein, all payments to be made by the Borrowers under any other Loan Document
shall be made in Dollars, in immediately available funds, without deduction,
set-off or counterclaim, to the Administrative Agent at an account designated by
the Administrative Agent to the Borrowers, not later than 1:00 p.m. New York
time on the date on which such payment shall become due (each such payment made
after such time on such due date to be deemed to have been made on the next
succeeding Business Day).
(b) Any Lender for whose account any such payment is to be made may
(but shall not be obligated to) debit the amount of any such payment that is not
made by such time to any ordinary deposit account of the Borrowers with such
Lender (with notice to the Borrowers and the Administrative Agent), provided
--------
that such Lender's failure to give such notice shall not affect the validity
thereof.
(c) The Borrowers shall, at the time of making each payment under
this Agreement for account of any Lender, specify to the Administrative Agent
(which shall so notify the intended recipient(s) thereof) the Loans,
Reimbursement Obligations or other amounts payable by the Borrowers hereunder to
which such payment is to be applied (and in the event that the Borrowers fail to
so specify, or if an Event of Default has occurred and is continuing, the
Administrative Agent may distribute such payment to the Lenders for application
in such manner as it or the Majority Lenders, subject to Section 4.02 hereof,
may determine to be appropriate).
(d) Except to the extent otherwise provided in the last sentence of
Section 2.03(e) hereof, each payment received by the Administrative Agent under
this Agreement for account of any Lender shall be paid by the Administrative
Agent promptly to such Lender, in immediately
<PAGE>
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available funds, for account of such Lender's Applicable Lending Office for the
Loan or other obligation in respect of which such payment is made.
(e) If the due date of any payment under this Agreement would
otherwise fall on a day that is not a Business Day, such date shall be extended
to the next succeeding Business Day, and interest shall be payable for any
principal so extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise provided
------------------
herein:
(a) each borrowing of Loans of a particular Class (including of a
particular Series of Incremental Facility Loans) from the Lenders under
Section 2.01 hereof shall be made from the relevant Lenders, each payment
of commitment fee under Section 2.05 hereof in respect of Commitments of a
particular Class shall be made for account of the relevant Lenders, and
each termination or reduction of the amount of the Commitments of a
particular Class under Section 2.04 hereof shall be applied to the
respective Commitments of such Class of the relevant Lenders, pro rata
according to the amounts of their respective Commitments of such Class;
(b) except as otherwise provided in Section 5.04 hereof, Eurodollar
Loans of any Class (including of a particular Series of Incremental
Facility Loans) having the same Interest Period shall be allocated pro rata
among the relevant Lenders according to the amounts of their respective
Revolving Credit, Term Loan and Incremental Facility Loan Commitments of
the relevant Series (in the case of the making of Loans) or their
respective Revolving Credit, Term and Incremental Facility Loans of the
relevant Series (in the case of Conversions and Continuations of Loans);
(c) each payment or prepayment of principal of Revolving Credit, Term
and Incremental Facility Loans by the Borrowers shall be made for account
of the relevant Lenders pro rata in accordance with the respective unpaid
principal amounts of the Loans of such Class held by them; and
(d) each payment of interest on Revolving Credit, Term and
Incremental Facility Loans by the Borrowers shall be made for account of
the relevant Lenders pro rata in accordance with the amounts of interest on
such Loans then due and payable to the respective Lenders.
4.03 Computations. Interest on Eurodollar Loans shall be computed on
------------
the basis of a year of 360 days and actual days elapsed (including the first day
but excluding the last day) occurring in the period for which payable and
interest on Base Rate Loans and Reimbursement Obligations, commitment fee and
letter of credit fees shall be computed on the basis of a year of 365 or 366
days, as the case may be, and actual days elapsed (including the first day but,
except
<PAGE>
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as otherwise provided in Section 2.03(g) hereof, excluding the last day)
occurring in the period for which payable. Notwithstanding the foregoing, for
each day that the Base Rate is calculated by reference to the Federal Funds
Rate, interest on Base Rate Loans shall be computed on the basis of a year of
360 days and actual days elapsed.
4.04 Minimum Amounts. Except for mandatory prepayments made pursuant
---------------
to Section 2.10 hereof and Conversions or prepayments made pursuant to Section
5.04 hereof, each borrowing, Conversion and partial prepayment of principal of
Base Rate Loans (other than prepayments of Term Loans, as to which the
provisions of Section 2.09(c) hereof shall apply) shall be in an aggregate
amount at least equal to $100,000 or a larger multiple of $100,000 and each
borrowing, Conversion and partial prepayment of Eurodollar Loans (other than
prepayments of Term Loans, as to which the provisions of Section 2.09(c) hereof
shall apply) shall be in an aggregate amount at least equal to $3,000,000 or a
larger multiple of $500,000 (borrowings, Conversions or prepayments of or into
Loans of different Types or, in the case of Eurodollar Loans, having different
Interest Periods at the same time hereunder to be deemed separate borrowings,
Conversions and prepayments for purposes of the foregoing, one for each Type or
Interest Period). If any Eurodollar Loans would otherwise be in a lesser
principal amount for any period, such Loans shall be Base Rate Loans during such
period.
4.05 Certain Notices. Notices by the Borrowers to the Administrative
---------------
Agent of terminations or reductions of the Commitments, of borrowings,
Conversions, Continuations and optional prepayments of Loans and of Classes of
Loans, of Types of Loans and of the duration of Interest Periods shall be
irrevocable and shall be effective only if received by the Administrative Agent
not later than 1:00 p.m. New York time on the number of Business Days prior to
the date of the relevant termination, reduction, borrowing, Conversion,
Continuation or prepayment or the first day of such Interest Period specified
below:
<PAGE>
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Number of
Business
Notice Days Prior
------ ----------
Termination or reduction
of Commitments 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans (including, if applicable, the particular Series of Incremental
Facility Loans) to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day). Each such
notice of the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate.
The Administrative Agent shall promptly notify the Lenders of the
contents of each such notice. In the event that the Borrowers fail to select the
Type of Loan, or the duration of any Interest Period for any Eurodollar Loan,
within the time period and otherwise as provided in this Section 4.05, such Loan
(if outstanding as a Eurodollar Loan) will be automatically Converted into a
Base Rate Loan on the last day of the then current Interest Period for such Loan
or (if outstanding as a Base Rate Loan) will remain as, or (if not then
outstanding) will be made as, a Base Rate Loan.
4.06 Non-Receipt of Funds by the Administrative Agent. Unless the
------------------------------------------------
Administrative Agent shall have been notified by a Lender or the Borrowers (the
"Payor") prior to the date on which the Payor is to make payment to the
-----
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender hereunder or (in the case of the Borrowers) a payment to the
Administrative Agent for account of one or more of the Lenders hereunder (such
payment being herein called the "Required Payment"), which notice shall be
----------------
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has
<PAGE>
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been made and may, in reliance upon such assumption (but shall not be required
to), make the amount thereof available to the intended recipient(s) on such
date; and, if the Payor has not in fact made the Required Payment to the
Administrative Agent, the recipient(s) of such payment shall, on demand, repay
to the Administrative Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date (the
"Advance Date") such amount was so made available by the Administrative Agent
------------
until the date the Administrative Agent recovers such amount at a rate per annum
equal to the Federal Funds Rate for such day and, if such recipient(s) shall
fail promptly to make such payment, the Administrative Agent shall be entitled
to recover such amount, on demand, from the Payor, together with interest as
aforesaid, provided that if neither the recipient(s) nor the Payor shall return
--------
the Required Payment to the Administrative Agent within three Business Days of
the Advance Date, then, retroactively to the Advance Date, the Payor and the
recipient(s) shall each be obligated to pay interest on the Required Payment as
follows:
(i) if the Required Payment shall represent a payment to be made by
the Borrowers to the Lenders, the Borrowers and the recipient(s) shall each
be obligated retroactively to the Advance Date to pay interest in respect
of the Required Payment at the Post-Default Rate (without duplication of
the obligation of the Borrowers under Section 3.02 hereof to pay interest
on the Required Payment at the Post-Default Rate), it being understood that
the return by the recipient(s) of the Required Payment to the
Administrative Agent shall not limit such obligation of the Borrowers under
said Section 3.02 to pay interest at the Post-Default Rate in respect of
the Required Payment and
(ii) if the Required Payment shall represent proceeds of a Loan to be
made by the Lenders to the Borrowers, the Payor and the Borrowers shall
each be obligated retroactively to the Advance Date to pay interest in
respect of the Required Payment pursuant to whichever of the rates
specified in Section 3.02 hereof is applicable to the Type of such Loan, it
being understood that the return by the Borrowers of the Required Payment
to the Administrative Agent shall not limit any claim the Borrowers may
have against the Payor in respect of such Required Payment.
4.07 Sharing of Payments, Etc.
-------------------------
(a) Each Borrower agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option (to the fullest extent
permitted by law), to set off and apply any deposit (general or special, time or
demand, provisional or final), or other indebtedness, held by it for the credit
or account of such Borrower at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans,
Reimbursement Obligations or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of
<PAGE>
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whether such deposit or other indebtedness are then due to such Borrower), in
which case it shall promptly notify such Borrower and the Administrative Agent
thereof, provided that such Lender's failure to give such notice shall not
--------
affect the validity thereof.
(b) If any Lender shall obtain from any Borrower payment of any
principal of or interest on any Loan of any Class or Letter of Credit Liability
owing to it or payment of any other amount under this Agreement or any other
Loan Document through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise (other than from the Administrative
Agent as provided herein), and, as a result of such payment, such Lender shall
have received a greater percentage of the principal of or interest on the Loans
of such Class or Letter of Credit Liabilities or such other amounts then due
hereunder or thereunder by such Borrower to such Lender than the percentage
received by any other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Loans of such Class or Letter of Credit Liabilities or such
other amounts, respectively, owing to such other Lenders (or in interest due
thereon, as the case may be) in such amounts, and make such other adjustments
from time to time as shall be equitable, to the end that all the Lenders shall
share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) pro rata
in accordance with the unpaid principal of and/or interest on the Loans of such
Class or Letter of Credit Liabilities or such other amounts, respectively, owing
to each of the Lenders. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored.
(c) Each Borrower agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or other amounts (as the case
may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any
such right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Borrowers. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a set-off to
which this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
<PAGE>
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Section 5. Yield Protection, Etc.
----------------------
5.01 Additional Costs.
----------------
(a) The Borrowers shall pay directly to each Lender from time to
time such amounts as such Lender may determine to be necessary to compensate
such Lender for any costs that such Lender determines are attributable to its
making or maintaining of any Eurodollar Loans or its obligation to make any
Eurodollar Loans hereunder, or any reduction in any amount receivable by such
Lender hereunder in respect of any of such Loans or such obligation (such
increases in costs and reductions in amounts receivable being herein called
"Additional Costs"), resulting from any Regulatory Change that:
----------------
(i) shall subject any Lender (or its Applicable Lending Office for
any of such Loans) to any tax, duty or other charge in respect of such
Loans or changes the basis of taxation of any amounts payable to such
Lender under this Agreement in respect of any of such Loans (excluding
changes in the rate of tax on the overall net income of such Lender or of
such Applicable Lending Office by the jurisdiction in which such Lender has
its principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including, without limitation, any of such
Loans or any deposits referred to in the definition of "Eurodollar Base
Rate" in Section 1.01 hereof), or any commitment of such Lender (including,
without limitation, the Commitments of such Lender hereunder); or
(iii) imposes any other condition affecting this Agreement (or any of
such extensions of credit or liabilities) or its Commitments.
If any Lender requests compensation from the Borrowers under this Section
5.01(a), the Borrowers may, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender thereafter to make
or Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar
Loans, until the Regulatory Change giving rise to such request ceases to be in
effect (in which case the provisions of Section 5.04 hereof shall be
applicable), provided that such suspension shall not affect the right of such
--------
Lender to receive the compensation so requested.
(b) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Borrowers shall pay directly to each
Lender from time to time on
<PAGE>
-56-
request such amounts as such Lender may determine to be necessary to compensate
such Lender (or, without duplication, the bank holding company of which such
Lender is a subsidiary) for any costs that it determines are attributable to the
maintenance by such Lender (or any Applicable Lending Office or such bank
holding company), pursuant to any law or regulation or any interpretation,
directive or request (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) of any court or governmental or
monetary authority (i) following any Regulatory Change or (ii) implementing any
risk-based capital guideline or other requirement (whether or not having the
force of law and whether or not the failure to comply therewith would be
unlawful) hereafter issued by any government or governmental or supervisory
authority implementing at the national level the Basle Accord, of capital in
respect of its Commitments or Loans (such compensation to include, without
limitation, an amount equal to any reduction of the rate of return on assets or
equity of such Lender (or any Applicable Lending Office or such bank holding
company) to a level below that which such Lender (or any Applicable Lending
Office or such bank holding company) could have achieved but for such law,
regulation, interpretation, directive or request).
(c) Each Lender shall notify the Borrowers of any event occurring
after the date hereof entitling such Lender to compensation under paragraph (a)
or (b) of this Section 5.01 as promptly as practicable, but in any event within
45 days, after such Lender obtains actual knowledge thereof; provided that (i)
--------
if any Lender fails to give such notice within 45 days after it obtains actual
knowledge of such an event, such Lender shall, with respect to compensation
payable pursuant to this Section 5.01 in respect of any costs resulting from
such event, only be entitled to payment under this Section 5.01 for costs
incurred from and after the date 45 days prior to the date that such Lender does
give such notice and (ii) each Lender will designate a different Applicable
Lending Office for the Loans of such Lender affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Lender, be disadvantageous to such
Lender, except that such Lender shall have no obligation to designate an
Applicable Lending Office located in the United States of America. Each Lender
will furnish to the Borrowers a certificate setting forth the basis and amount
of each request by such Lender for compensation under paragraph (a) or (b) of
this Section 5.01. Determinations and allocations by any Lender for purposes of
this Section 5.01 of the effect of any Regulatory Change pursuant to paragraph
(a) of this Section 5.01, or of the effect of capital maintained pursuant to
paragraph (b) of this Section 5.01, on its costs or rate of return of
maintaining Loans or its obligation to make Loans, or on amounts receivable by
it in respect of Loans, and of the amounts required to compensate such Lender
under this Section 5.01, shall be conclusive, provided that such determinations
--------
and allocations are made on a reasonable basis.
<PAGE>
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5.02 Limitation on Types of Loans. Anything herein to the contrary
----------------------------
notwithstanding, if, on or prior to the determination of any Eurodollar Base
Rate for any Interest Period:
(a) the Administrative Agent determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Eurodollar
Loans as provided herein; or
(b) if the related Loans are Revolving Credit Loans, the Majority
Revolving Credit Lenders, if the related Loans are Term Loans, the Majority
Term Loan Lenders, or if the related Loans are Incremental Facility Loans
of any Series, the Majority Incremental Facility Lenders of such Series
determine, which determination shall be conclusive, and notify the
Administrative Agent that the relevant rates of interest referred to in the
definition of "Eurodollar Base Rate" in Section 1.01 hereof upon the basis
of which the rate of interest for Eurodollar Loans for such Interest Period
is to be determined are not likely adequately to cover the cost to such
Lenders of making or maintaining Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Borrowers and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans, and the
Borrowers shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans
into Base Rate Loans in accordance with Section 2.09 hereof.
5.03 Illegality. Notwithstanding any other provision of this
----------
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder (and, in the sole opinion of such Lender, the designation of a
different Applicable Lending Office would either not avoid such unlawfulness or
would be disadvantageous to such Lender), then such Lender shall promptly notify
the Borrowers thereof (with a copy to the Administrative Agent) and such
Lender's obligation to make or Continue, or to Convert Loans of any other Type
into, Eurodollar Loans shall be suspended until such time as such Lender may
again make and maintain Eurodollar Loans (in which case the provisions of
Section 5.04 hereof shall be applicable).
5.04 Treatment of Affected Loans. If the obligation of any Lender to
---------------------------
make Eurodollar Loans of any Class or to Continue, or to Convert Base Rate Loans
into, Eurodollar Loans of any Class shall be suspended pursuant to Section 5.01
or 5.03 hereof, such Lender's Eurodollar Loans of such Class shall be
automatically Converted into Base Rate Loans of such
<PAGE>
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Class on the last day(s) of the then current Interest Period(s) for Eurodollar
Loans (or, in the case of a Conversion resulting from a circumstance described
in Section 5.03 hereof, on such earlier date as such Lender may specify to the
Borrowers with a copy to the Administrative Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
Section 5.01 or 5.03 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans of such Class
have been so Converted, all payments and prepayments of principal that
would otherwise be applied to such Lender's Eurodollar Loans of such Class
shall be applied instead to its Base Rate Loans of such Class; and
(b) all Loans of such Class that would otherwise be made or Continued
by such Lender as Eurodollar Loans shall be made or Continued instead as
Base Rate Loans, and all Base Rate Loans of such Class of such Lender that
would otherwise be Converted into Eurodollar Loans shall remain as Base
Rate Loans.
If such Lender gives notice to the Borrowers with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans of the same
Class made by other Lenders are outstanding, such Lender's Base Rate Loans of
such Class shall be automatically Converted, on the first day(s) of the next
succeeding Interest Period(s) for such outstanding Eurodollar Loans, to the
extent necessary so that, after giving effect thereto, all Base Rate and
Eurodollar Loans of such Class are allocated among the Lenders ratably (as to
principal amounts, Types and Interest Periods) in accordance with their
respective Commitments of such Class.
5.05 Compensation. The Borrowers shall pay to the Administrative Agent
------------
for account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a
Eurodollar Loan made by such Lender for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 9 hereof) on
a date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrowers for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 6 hereof to be satisfied) to borrow a Eurodollar Loan from such
Lender on the date for such borrowing specified in the relevant notice of
borrowing given pursuant to Section 2.02 hereof.
<PAGE>
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Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest that otherwise would have accrued on
such principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with maturities comparable to such period (as reasonably determined by such
Lender).
5.06 Additional Costs in Respect of Letters of Credit. Without
------------------------------------------------
limiting the obligations of the Borrowers under Section 5.01 hereof (but without
duplication), if as a result of any Regulatory Change or any risk-based capital
guideline or other requirement heretofore or hereafter issued by any government
or governmental or supervisory authority implementing at the national level the
Basle Accord there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, capital adequacy or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender or
Lenders of issuing (or purchasing participations in) or maintaining its
obligation hereunder to issue (or purchase participations in) any Letter of
Credit hereunder or reduce any amount receivable by any Lender hereunder in
respect of any Letter of Credit (which increases in cost, or reductions in
amount receivable, shall be the result of such Lender's or Lenders' reasonable
allocation of the aggregate of such increases or reductions resulting from such
event), then, upon demand by such Lender or Lenders (through the Administrative
Agent), the Borrowers shall pay immediately to the Administrative Agent for
account of such Lender or Lenders, from time to time as specified by such Lender
or Lenders (through the Administrative Agent), such additional amounts as shall
be sufficient to compensate such Lender or Lenders (through the Administrative
Agent) for such increased costs or reductions in amount. A statement as to such
increased costs or reductions in amount incurred by any such Lender or Lenders,
submitted by such Lender or Lenders to the Borrowers shall be conclusive in the
absence of manifest error as to the amount thereof.
5.07 U.S. Taxes.
----------
(a) The Borrowers jointly and severally agree to pay to each Lender
that is not a U.S. Person such additional amounts as are necessary in order that
the net payment of any amount due to such non-U.S. Person hereunder after
deduction for or withholding in respect of any U.S. Taxes imposed with respect
to such payment (or in lieu thereof, payment of such U.S. Taxes by such non-U.S.
Person), will not be less than the amount stated herein to be then
<PAGE>
-60-
due and payable, provided that the foregoing obligation to pay such additional
--------
amounts shall not apply:
(i) if such Lender is a "bank" within the meaning of Section
881(c)(3)(A) of the Code, to any payment to any Lender hereunder unless
such Lender is, on the date hereof (or on the date it becomes a Lender
hereunder as provided in Section 11.06(b) hereof) and on the date of any
change in the Applicable Lending Office of such Lender, either entitled to
submit a Form 1001 (relating to such Lender and entitling it to a complete
exemption from withholding on all interest to be received by it hereunder
in respect of the Loans) or a Form 4224 (relating to all interest to be
received by such Lender hereunder in respect of the Loans), or (B) if such
Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and is entitled to claim 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 Form W-8, or any subsequent versions thereof or
successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a
certificate representing that such Non-U.S. Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder
(within the meaning of Section 864(d)(4) of the Code)), properly completed
and duly executed by such Non-U.S. Lender claiming complete exemption from,
or a reduced rate of, U.S. Federal withholding tax on payments of interest
by the Borrower under this Agreement and the other Loan Documents, or
(ii) to any U.S. Taxes imposed solely by reason of the failure by such
non-U.S. Person (or, if such non-U.S. Person is not the beneficial owner of
the relevant Loan, such beneficial owner) to comply with applicable
certification, information, documentation or other reporting requirements
concerning the nationality, residence, identity or connections with the
United States of America of such non-U.S. Person (or beneficial owner, as
the case may be) if such compliance is required by statute or regulation of
the United States of America as a precondition to relief or exemption from
such U.S. Taxes.
For the purposes of this Section 5.06(a), (A) "Form 1001" shall mean Form 1001
---------
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America and (B) "Form 4224" shall mean Form
---------
4224 (Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms (including Form W-8EC1 or Form W-8BEN) as may
from time to time be adopted by the relevant taxing authorities of the United
States of America to document a claim to which such Form relates).
<PAGE>
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(b) Within 30 days after paying any amount to the Administrative
Agent or any Lender from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing or other authority, the
Borrowers shall deliver to the Administrative Agent for delivery to such non-
U.S. Person evidence satisfactory to such Person of such deduction, withholding
or payment (as the case may be).
5.08 Replacement of Lenders. If any Lender requests compensation
----------------------
pursuant to Section 5.01, 5.06 or 5.07 hereof, or any Lender's obligation to
make or Continue, or to Convert Loans of any Type into, the other Type of Loan
shall be suspended pursuant to Section 5.01 or 5.03 hereof (any such Lender
requesting such compensation being herein called a "Requesting Lender"), the
-----------------
Borrowers, upon three Business Days notice, may require that such Requesting
Lender transfer all of its right, title and interest under this Agreement to any
bank or other financial institution (a "Proposed Lender") identified by the
--------------
Borrowers that is reasonably satisfactory to the Administrative Agent (i) if
such Proposed Lender agrees to assume all of the obligations of such Requesting
Lender hereunder, and to purchase all of such Requesting Lender's Loans
hereunder for consideration equal to the aggregate outstanding principal amount
of such Requesting Lender's Loans, together with interest thereon to the date of
such purchase, and satisfactory arrangements are made for payment to such
Requesting Lender of all other amounts payable hereunder to such Requesting
Lender on or prior to the date of such transfer (including any fees accrued
hereunder and any amounts that would be payable under Section 5.05 hereof, as if
all of such Requesting Lender's Loans were being prepaid in full on such date)
and (ii) if such Requesting Lender has requested compensation pursuant to said
Section 5.01, 5.06 or 5.07 hereof, such Proposed Lender's aggregate requested
compensation, if any, pursuant to said Section 5.01, 5.06 or 5.07 with respect
to such Requesting Lender's Loans is lower than that of the Requesting Lender.
Subject to the provisions of Section 11.06(b) hereof, such Proposed Lender shall
be a "Lender" for all purposes hereunder. Without prejudice to the survival of
any other agreement of the Borrowers hereunder the agreements of the Borrowers
contained in Sections 5.01, 5.06, 5.07 and 11.03 hereof (without duplication of
any payments made to such Requesting Lender by the Borrowers or the Proposed
Lender) shall survive for the benefit of such Requesting Lender under this
Section 5.08 with respect to the time prior to such replacement.
Section 6. Conditions Precedent.
--------------------
6.01 Initial Extension of Credit. The obligation of any Lender to make
---------------------------
its initial extension of credit hereunder (whether by making a Loan or issuing a
Letter of Credit) is subject to the conditions precedent that (i) such extension
of credit shall occur on or before September 30, 1999 and (ii) the
Administrative Agent shall have received the following documents (with, in the
case of clauses (a), (b), (c) and (d) below, sufficient copies for each Lender),
each of which
<PAGE>
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shall be satisfactory to the Administrative Agent (and to the extent specified
below, to each Lender) in form and substance:
(a) Organizational Documents. Certified copies of the Operating
------------------------
Agreements and of the charter and by-laws (or equivalent documents) of each
Obligor and of all limited liability company and corporate authority for
each Obligor (including, without limitation, board of director resolutions,
member approvals and evidence of incumbency, including specimen signatures,
of officers of each Obligor) with respect to the execution, delivery and
performance of the Basic Documents to which such Obligor is to be a party
and each other document to be delivered by such Obligor from time to time
in connection herewith and the extensions of credit hereunder (and the
Administrative Agent and each Lender may conclusively rely on such
certificate until it receives notice in writing from such Obligor to the
contrary).
(b) Officer's Certificate. A certificate of a Senior Officer, dated
---------------------
the Closing Date, to the effect set forth in the first sentence of Section
6.02 hereof.
(c) Opinion of Counsel to the Obligors. An opinion, dated the Closing
----------------------------------
Date, of Cooperman Levitt Winikoff Lester & Newman, P.C., counsel to the
Obligors, substantially in the form of Exhibit G hereto and covering such
other matters as the Administrative Agent or any Lender may reasonably
request (and the Borrowers hereby instructs such counsel to deliver such
opinion to the Lenders and the Administrative Agent).
(d) Opinion of Special New York Counsel to Chase. An opinion, dated
--------------------------------------------
the Closing Date, of Milbank, Tweed, Hadley & McCloy LLP, special New York
counsel to Chase, substantially in the form of Exhibit H hereto (and Chase
hereby instructs such counsel to deliver such opinion to the Lenders).
(e) Notes. Promissory notes for each Lender that shall have requested
-----
the execution and delivery of a promissory note, on or prior to the Closing
Date, pursuant to Section 2.08(d) hereof.
(f) Pledge Agreement. The Pledge Agreement, duly executed and
----------------
delivered by the Borrowers and the Administrative Agent. In addition, each
such Obligor shall have taken such other action as the Administrative Agent
shall have requested in order to perfect the security interests created
pursuant to the Pledge Agreement, including, without limitation, delivering
to the Administrative Agent, for filing, appropriately completed and duly
executed copies of Uniform Commercial Code financing statements.
<PAGE>
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(g) Guarantee and Pledge Agreement. The Guarantee and Pledge
------------------------------
Agreement, duly executed and delivered by Mediacom, the Manager and the
Administrative Agent and the certificates (if any) evidencing the ownership
interests in the Borrowers held by Mediacom and the Manager, accompanied by
undated powers executed in blank. In addition, Mediacom and the Manager
shall have taken such other action as the Administrative Agent shall have
requested in order to perfect the security interests created pursuant to
the Guarantee and Pledge Agreement, including, without limitation,
delivering to the Administrative Agent, for filing, appropriately completed
and duly executed copies of Uniform Commercial Code financing statements.
(h) Management Fee Subordination Agreement. The Management Fee
--------------------------------------
Subordination Agreement, duly executed and delivered by the Manager, the
Borrowers and the Administrative Agent.
(i) Affiliate Subordinated Indebtedness Subordination Agreements.
------------------------------------------------------------
Affiliate Subordinated Indebtedness Subordination Agreements, duly executed
and delivered by the Borrowers, the Administrative Agent and by Mediacom
and the Manager, respectively.
(j) Termination of Existing Credit Agreements. Evidence that (i) the
-----------------------------------------
principal of and interest on, and all other amounts owing under the
Existing Credit Agreements (other than "Letters of Credit" thereunder
which, as provided in Section 2.03(l) hereof, are being continued as
Letters of Credit hereunder) are being paid in full with the proceeds of
the initial Loans and the commitments thereunder terminated and (ii) to the
extent the assets of the Borrowers and their Subsidiaries are subject to
Liens not permitted hereunder, such Liens shall have been released (or
arrangements for such release satisfactory to the Administrative Agent
shall have been made).
(k) Approvals. Evidence of receipt of all material licenses, permits,
---------
approvals and consents, if any, required (or, in the discretion of the
Administrative Agent, advisable) with respect to the continuing operation
of the Borrowers and their Subsidiaries.
(l) Rate Ratio Certificate. A certificate of a Senior Officer, dated
----------------------
the Closing Date, setting forth, in reasonable detail, the calculation (and
the basis for such calculation) of Rate Ratio as of such date.
(m) Conversion of Preferred Membership Interests. Evidence that the
--------------------------------------------
Borrowers shall have converted all of their Preferred Membership Interests
into Affiliate Subordinated Indebtedness or that such conversion is being
effected on the Closing Date.
<PAGE>
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(n) Other Documents. Such other documents as the Administrative Agent
---------------
or any Lender or special New York counsel to Chase may reasonably request.
The obligation of any Lender to make its initial extension of credit hereunder
is also subject to the payment by the Borrowers of such fees as the Borrowers
shall have agreed to pay or deliver to any Lender or the Administrative Agent in
connection herewith, including, without limitation, the reasonable fees and
expenses of Milbank, Tweed, Hadley & McCloy LLP, special New York counsel to
Chase, in connection with the negotiation, preparation, execution and delivery
of this Agreement and the other Loan Documents and the extensions of credit
hereunder (to the extent that statements for such fees and expenses have been
delivered to the Borrowers).
6.02 Initial and Subsequent Extensions of Credit. The obligation of
-------------------------------------------
the Lenders to make any Loan or otherwise extend any credit to the Borrowers
upon the occasion of each borrowing or other extension of credit hereunder
(including the initial borrowing) is subject to the further conditions precedent
that, both immediately prior to the making of such Loan or other extension of
credit and also after giving effect thereto and to the intended use thereof:
(a) no Default shall have occurred and be continuing; and
(b) the representations and warranties made by the Borrowers in
Section 7 hereof, and by each Obligor in the other Loan Documents to which
it is a party, shall be true and complete on and as of the date of the
making of such Loan or other extension of credit with the same force and
effect as if made on and as of such date (or, if any such representation or
warranty is expressly stated to have been made as of a specific date, as of
such specific date).
Each notice of borrowing or request for the issuance of a Letter of Credit by
the Borrowers hereunder shall constitute a certification by the Borrowers to the
effect set forth in the preceding sentence (both as of the date of such notice
or request and, unless the Borrowers otherwise notify the Administrative Agent
prior to the date of such borrowing or issuance, as of the date of such
borrowing or issuance).
Section 7. Representations and Warranties. The Borrowers represent
------------------------------
and warrant to the Administrative Agent and the Lenders that:
7.01 Existence. Each Borrower and its Subsidiaries: (a) is a
---------
corporation, partnership, limited liability company or other entity duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization; (b) has all requisite corporate or other
power, and has all material governmental licenses, authorizations, consents and
approvals necessary to own its assets and carry on its business as now being or
as proposed to be
<PAGE>
-65-
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could (either
individually or in the aggregate) have a Material Adverse Effect.
7.02 Financial Condition. The Borrowers have heretofore furnished to
-------------------
each of the Lenders the following financial statements:
(i) audited financial statements of each Borrower and its respective
Subsidiaries (or, in the case of Mediacom California, Mediacom Arizona and
Mediacom Delaware, combined financial statements of such Borrowers and
their Subsidiaries) for the fiscal years ended December 31, 1997 and
December 31, 1998;
(ii) unaudited interim financial statements of each Borrower and its
respective Subsidiaries (or, in the case of Mediacom California, Mediacom
Arizona and Mediacom Delaware, combined financial statements of such
Borrowers and their Subsidiaries) for the fiscal quarters ended March 31,
1999 and June 30, 1999, respectively; and
(iii) unaudited pro forma combined financial statements of the
Borrowers and their Subsidiaries as at and for the fiscal quarter ended
June 30, 1999.
All such financial statements are complete and correct and fairly present in all
material respects the actual or pro forma (as the case may be) combined
financial condition of the respective entities as at said respective dates and
the actual or pro forma (as the case may be) results of their operations for the
applicable periods ended on said respective dates, all in accordance with
generally accepted accounting principles and practices applied on a consistent
basis.
Since June 30, 1999, there has been no material adverse change in the
combined financial condition, operations, business or prospects of the Borrowers
and their Subsidiaries taken as a whole from that set forth in said pro forma
financial statements as at said date referred to in clause (iii) above.
7.03 Litigation. There are no legal or arbitral proceedings, or any
----------
proceedings or investigations by or before any governmental or regulatory
authority or agency, now pending or (to the knowledge of any Borrower)
threatened against any Borrowers or any of its Subsidiaries, that, if adversely
determined could (either individually or in the aggregate) have a Material
Adverse Effect.
7.04 No Breach. None of the execution and delivery of this Agreement
---------
and the other Basic Documents, the consummation of the transactions herein and
therein contemplated or compliance with the terms and provisions hereof and
thereof will conflict with or result in a breach of, or require any consent
under, the Operating Agreements, or any applicable law or
<PAGE>
-66-
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which any
Borrower or any of its Subsidiaries is a party or by which any of them or any of
their Property is bound or to which any of them is subject, or constitute a
default under any such agreement or instrument, or (except for the Liens created
pursuant to the Security Documents) result in the creation or imposition of any
Lien upon any Borrower or any of its Subsidiaries pursuant to the terms of any
such agreement or instrument.
7.05 Action. Each Borrower has all necessary limited liability
------
company power, authority and legal right to execute, deliver and perform its
obligations under each of the Basic Documents to which it is a party; the
execution, delivery and performance by each Borrower of each of the Basic
Documents to which it is a party have been duly authorized by all necessary
limited liability company action on its part (including, without limitation, any
required member approvals); and this Agreement has been duly and validly
executed and delivered by each Borrower and constitutes, and the other Basic
Documents to which it is a party when executed and delivered will constitute,
its legal, valid and binding obligation, enforceable against each Borrower in
accordance with its terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or similar laws of general
applicability affecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
7.06 Approvals. No authorizations, approvals or consents of, and no
---------
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by any Borrower of this Agreement or any of the other Basic
Documents to which it is a party or for the legality, validity or enforceability
hereof or thereof, except for (i) filings and recordings in respect of the Liens
created pursuant to the Security Documents and (ii) the exercise of remedies
under the Security Documents may require prior approval of the FCC or the
issuing municipalities or States under one or more of the Franchises.
7.07 ERISA. Each Plan, and, to the knowledge of each Borrower, each
-----
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which such Borrower would be
under an obligation to furnish a report to the Lenders under Section 8.01(e)
hereof.
7.08 Taxes. Each Borrower and each of its Subsidiaries has filed all
-----
Federal income tax returns and all other material tax returns and information
statements that are required to be filed by them and have paid all taxes due
pursuant to such returns or pursuant to any
<PAGE>
-67-
assessment received by such Borrower or any of its Subsidiaries, except such
taxes, if any, as are being contested in good faith and as to which adequate
reserves have been set aside by such Borrower in accordance with GAAP. The
charges, accruals and reserves on the books of the Borrowers and their
Subsidiaries in respect of taxes and other governmental charges are, in the
opinion of the Borrowers, adequate. None of the Borrowers has given or been
requested to give a waiver of the statute of limitations relating to the payment
of any Federal, state, local and foreign taxes or other impositions.
7.09 Investment Company Act. None of the Borrowers nor any of its
----------------------
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
7.10 Public Utility Holding Company Act. None of the Borrowers nor
----------------------------------
any of its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
7.11 Material Agreements and Liens.
-----------------------------
(a) Part A of Schedule II hereto sets forth (i) a complete and
correct list of each credit agreement, loan agreement, indenture, purchase
agreement, guarantee, letter of credit or other arrangement (other than the Loan
Documents) providing for or otherwise relating to any Indebtedness or any
extension of credit (or commitment for any extension of credit) to, or guarantee
by, the Borrowers or any of their Subsidiaries, outstanding on the date hereof,
or that (after giving effect to the transactions contemplated hereunder to occur
on or before the Closing Date) will be outstanding on the Closing Date, the
aggregate principal or face amount of which equals or exceeds (or may equal or
exceed) $1,000,000, and the aggregate principal or face amount outstanding or
that may become outstanding under each such arrangement is correctly described
in Part A of said Schedule II, and (ii) a statement of the aggregate amount of
obligations in respect of surety and performance bonds backing pole rental or
conduit attachments and the like, or backing obligations under Franchises, of
the Borrowers or any of their Subsidiaries outstanding on the date hereof.
(b) Part B of Schedule II hereto is a complete and correct list of
each Lien (other than the Liens created pursuant to the Security Documents)
securing Indebtedness of any Person outstanding on the date hereof, the
aggregate principal or face amount of which equals or exceeds (or may equal or
exceed) $1,000,000 and covering any Property of the Borrowers or any of their
Subsidiaries, and the aggregate Indebtedness secured (or that may be secured) by
each such Lien and the Property covered by each such Lien is correctly described
in Part B of said Schedule II.
<PAGE>
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7.12 Environmental Matters. Each of the Borrowers and their
---------------------
Subsidiaries has obtained all environmental, health and safety permits, licenses
and other authorizations required under all Environmental Laws to carry on its
business as now being or as proposed to be conducted, except to the extent
failure to have any such permit, license or authorization would not (either
individually or in the aggregate) have a Material Adverse Effect. Each of such
permits, licenses and authorizations is in full force and effect and each of the
Borrowers and its Subsidiaries is in compliance with the terms and conditions
thereof, and is also in compliance with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules and
timetables contained in any applicable Environmental Law or in any regulation,
code, plan, order, decree, judgment, injunction, notice or demand letter issued,
entered, promulgated or approved thereunder, except to the extent failure to
comply therewith would not (either individually or in the aggregate) have a
Material Adverse Effect. In addition, no notice, notification, demand, request
for information, citation, summons or order has been issued, no complaint has
been filed, no penalty has been assessed and, to the Borrowers' knowledge, no
investigation or review is pending or threatened by any governmental or other
entity with respect to any alleged failure by the Borrowers or any of their
Subsidiaries to have any environmental, health or safety permit, license or
other authorization required under any Environmental Law in connection with the
conduct of the business of the Borrowers or any of their Subsidiaries or with
respect to any generation, treatment, storage, recycling, transportation,
discharge or disposal, or any Release of any Hazardous Materials generated by
the Borrowers or any of their Subsidiaries. All environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or that are in
the possession of the Borrowers or any of their Subsidiaries in relation to
facts, circumstances or conditions at or affecting any site or facility now or
previously owned, operated or leased by the Borrowers or any of their
Subsidiaries and that could result in a Material Adverse Effect have been made
available to the Lenders.
7.13 Capitalization. The Borrowers have heretofore delivered to the
--------------
Lenders true and complete copies of the Operating Agreements. The only members
of Mediacom California on the date hereof are Mediacom and Mediacom Management
Corporation, the only member of Mediacom Delaware and Mediacom Southeast on the
date hereof is Mediacom and the only members of Mediacom Arizona on the date
hereof are Mediacom and Mediacom California. As of the date hereof, except for
Sections 6.2 and 7.3 of the Mediacom Southeast Operating Agreement relating to
Preferred Membership Interests, (x) there are no outstanding Equity Rights with
respect to any of the Borrowers and (y) except for the redemption permitted
pursuant to Section 8.09(f) hereof, there are no outstanding obligations of any
of the Borrowers or any of their Subsidiaries to repurchase, redeem, or
otherwise acquire any equity interests in the Borrowers nor are there any
outstanding obligations of any Borrower or any of their Subsidiaries to make
payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with reference to the fair market value or equity value of
such Borrowers or any of their Subsidiaries.
<PAGE>
-69-
7.14 Subsidiaries, Etc.
-----------------
(a) As of the date hereof, none of the Borrowers has any
Subsidiaries.
(b) Set forth in Schedule III hereto is a complete and correct list
of all Investments (other than Investments of the type referred to in paragraphs
(b), (c) and (e) of Section 8.08 hereof) held by the Borrowers or any of their
Subsidiaries in any Person on the date hereof and, for each such Investment, (x)
the identity of the Person or Persons holding such Investment and (y) the nature
of such Investment. Except as disclosed in Schedule III hereto, each of the
Borrowers and their Subsidiaries owns, free and clear of all Liens (other than
the Liens created pursuant to the Security Documents), all such Investments.
(c) None of the Subsidiaries of the Borrowers is, on the date
hereof, subject to any indenture, agreement, instrument or other
arrangement of the type described in Section 8.18(d) hereof.
7.15 True and Complete Disclosure. The information, reports,
----------------------------
financial statements, exhibits and schedules (including the Information
Memorandum) furnished in writing by or on behalf of the Borrowers to the
Administrative Agent or any Lender in connection with the negotiation,
preparation or delivery of this Agreement and the other Loan Documents or
included herein or therein or delivered pursuant hereto or thereto, when taken
as a whole do not contain any untrue statement of material fact or omit to state
any material fact necessary to make the statements herein or therein, in light
of the circumstances under which they were made, not misleading. All written
information furnished after the date hereof by the Borrowers and their
Subsidiaries to the Administrative Agent and the Lenders in connection with this
Agreement and the other Loan Documents and the transactions contemplated hereby
and thereby will be true, complete and accurate in every material respect, or
(in the case of projections) based on reasonable estimates, on the date as of
which such information is stated or certified. There is no fact known to the
Borrowers that could reasonably be expected to have a Material Adverse Effect
(other than facts affecting the cable television industry in general) that has
not been disclosed herein, in the other Loan Documents or in a report, financial
statement, exhibit, schedule, disclosure letter or other writing furnished to
the Lenders for use in connection with the transactions contemplated hereby or
thereby.
7.16 Franchises.
----------
(a) Set forth in Schedule IV hereto is a complete and correct list
of all Franchises (identified by issuing authority, franchisee and expiration
date) owned by the Borrowers and their Subsidiaries on the date hereof.
(b) Each of the Borrowers and their Subsidiaries possesses or has
the right to
<PAGE>
-70-
use all such Franchises, and all copyrights, licenses, trademarks, service
marks, trade names or other rights, including licenses and permits granted by
the FCC, agreements with public utilities and microwave transmission companies,
pole or conduit attachment, use, access or rental agreements and utility
easements that are necessary for the conduct of the CATV Systems of the
Borrowers and their Subsidiaries, except for such of the foregoing the absence
of which could not have a Material Adverse Effect on the Borrowers or any of
their Subsidiaries, and each of such Franchises, copyrights, licenses, patents,
trademarks, service marks, trade names and rights is in full force and effect
and no material default has occurred and is continuing thereunder. None of the
Borrowers nor any of its Subsidiaries has received any notice from the granting
body or any other governmental authority with respect to any breach of any
covenant under, or any default with respect to, any Franchise. Complete and
correct copies of all Franchises have heretofore been made available to the
Administrative Agent.
7.17 The CATV Systems.
----------------
(a) Each of the Borrowers and their Subsidiaries, and the CATV
Systems owned by it, are in compliance in all material respects with all
applicable federal, state and local laws, rules and regulations, including
without limitation, the Communications Act, the Copyright Revision Act of 1976,
and the rules and regulations of the FCC and the United States Copyright Office,
including, without limitation, rules and laws governing system registration, use
of aeronautical frequencies and signal carriage, equal employment opportunity,
cumulative leakage index testing and reporting, signal leakage, and subscriber
privacy, except to the extent that the failure to so comply with any of the
foregoing could not (either individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect. Without limiting the generality of
the foregoing except to the extent that the failure to comply with any of the
following could not (either individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect and except as set forth in Schedule V
hereto:
(i) the communities included in the areas covered by the Franchises
have been registered with the FCC;
(ii) all of the annual performance tests on such CATV Systems
required under the rules and regulations of the FCC have been performed and
the results of such tests demonstrate satisfactory compliance with the
applicable requirements being tested in all material respects;
(iii) such CATV Systems currently meet or exceed the technical
standards set forth in the rules and regulations of the FCC, including,
without limitation, the leakage limits contained in 47 C.F.R. Section
76.605(a)(11);
<PAGE>
-71-
(iv) such CATV Systems are being operated in compliance with the
provisions of 47 C.F.R. Sections 76.610 through 76.619 (mid-band and super-
band signal carriage), including 47 C.F.R. Section 76.611 (compliance with
the cumulative signal leakage index); and
(v) where required, appropriate authorizations from the FCC have
been obtained for the use of all aeronautical frequencies in use in such
CATV Systems and such CATV Systems are presently being operated in
compliance with such authorizations (and all required certificates, permits
and clearances from governmental agencies, including the Federal Aviation
Administration, with respect to all towers, earth stations, business radios
and frequencies utilized and carried by such CATV Systems have been
obtained) .
(b) All notices, statements of account, supplements and other
documents required under Section 111 of the Copyright Act of 1976 and under the
rules of the Copyright Office with respect to the carriage of broadcast station
signals by the CATV Systems (the "Copyright Filings") owned by the Borrowers and
-----------------
their Subsidiaries have been duly filed, and the proper amount of copyright fees
have been paid on a timely basis, and each such CATV System qualifies for the
compulsory license under Section 111 of the Copyright Act of 1976, except to the
extent that the failure to so file or pay could not (either individually or in
the aggregate) reasonably be expected to have a Material Adverse Effect, it
being understood that this representation and warranty is given to the knowledge
of the Borrowers with respect to periods prior to the ownership of such CATV
Systems by the Borrowers and their Subsidiaries. To the knowledge of the
Borrowers, there is no pending claim, action, demand or litigation by any other
person with respect to the Copyright Filings or related royalty payments made by
the CATV Systems.
(c) The carriage of all off-air signals by the CATV Systems owned by
the Borrowers and their Subsidiaries is permitted by valid transmission consent
agreements or by must-carry elections by broadcasters, or is otherwise permitted
under applicable law, except to the extent the failure to obtain any of the
foregoing could not (either individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect.
(d) The assets of the CATV Systems owned by the Borrowers and their
Subsidiaries are adequate and sufficient in all material respects for all of the
current operations of such CATV Systems.
7.18 Rate Regulation. Each of the Borrowers and their Subsidiaries
---------------
have each reviewed and evaluated in detail the FCC rules currently in effect
(the "Rate Regulation Rules") implementing the rate regulation provisions of the
---------------------
Cable Television Consumer Protection and Competition Act of 1992 (the "Rate
----
Regulation Act"). Based upon such review by the Borrowers and their
- --------------
Subsidiaries:
<PAGE>
-72-
(i) except as set forth in Schedule V hereto, none the CATV Systems
of the Borrowers is subject to effective competition as of the date hereof;
(ii) except as set forth in Schedule V hereto, no franchising
authority has notified the Borrowers or any of their Subsidiaries of its
application to be certified to regulate rates as provided in Section 76.910
of the Rate Regulation Rules;
(iii) except as set forth in Schedule V hereto, no franchising
authority has notified the Borrowers or any of their Subsidiaries that it
has been certified and has adopted regulations required to commence
regulation as provided in Section 76.910(c)(2) of the Rate Regulation
Rules;
(iv) to the knowledge of the Borrowers and except as set forth in
Schedule V hereto, there are no pending cable service programming rate
complaints filed with the FCC; and
(v) no reduction of rates or refunds to subscribers is required by
an outstanding order of the FCC or any local franchising authority as of
the date hereof under the Rate Regulation Act and the Rate Regulation Rules
applicable to the CATV Systems of the Borrowers and their Subsidiaries.
7.19 Year 2000 Issues. Any reprogramming required to permit the
----------------
proper functioning, in and following the year 2000, of (i) the Borrowers'
material operating computer systems and (ii) material operating equipment
containing embedded microchips (including systems and equipment supplied by
others or, to the knowledge of the Borrowers, with which the Borrowers' material
operating systems interface) and the testing of all such systems and equipment,
as so reprogrammed, will be completed by September 30, 1999. The cost to the
Borrowers of such reprogramming and testing and of the reasonably foreseeable
consequences of year 2000 to the Borrowers (including reprogramming errors and
the failure of others' systems or equipment) will not result in a Default or a
Material Adverse Effect. Except for such of the reprogramming referred to in the
preceding sentence as may be necessary, the computer and management information
systems of the Borrowers and their Subsidiaries are and, with ordinary course
upgrading and maintenance, will continue for the term of this Agreement to be,
sufficient to permit the Borrowers to conduct their business without a Material
Adverse Effect.
7.20 Use of Credit. None of the Borrowers or any of their
-------------
Subsidiaries is engaged principally, or as one of their important activities, in
the business of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying Margin Stock in violation of Regulations T, U
or X.
<PAGE>
-73-
Section 8. Covenants of the Borrowers. The Borrowers covenant and
--------------------------
agree with the Lenders and the Administrative Agent that, so long as any
Commitment, Loan or Letter of Credit Liability is outstanding and until payment
in full of all amounts payable by the Borrowers hereunder:
8.01 Financial Statements Etc. The Borrowers shall deliver to each of
------------------------
the Lenders:
(a) as soon as available and in any event within 60 days after the
end of each quarterly fiscal period of each fiscal year of the Borrowers,
combined statements of income, retained earnings and cash flows of the
Borrowers and their Subsidiaries for such period and for the period from
the beginning of the respective fiscal year to the end of such period, and
the related combined balance sheet of the Borrowers and their Subsidiaries
as at the end of such period, setting forth in each case in comparative
form the corresponding figures for the corresponding periods in the
preceding fiscal year (except that, in the case of balance sheets, such
comparison shall be to the last day of the prior fiscal year), accompanied
by a certificate of a Senior Officer, which certificate shall state that
said financial statements fairly present in all material respects the
combined financial condition and results of operations of the Borrowers and
their Subsidiaries in accordance with generally accepted accounting
principles consistently applied as at the end of, and for, such period
(subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 120 days after the
end of each fiscal year of the Borrowers, combined statements of income,
retained earnings and cash flows of the Borrowers and their Subsidiaries
for such fiscal year and the related combined balance sheet of the
Borrowers and their Subsidiaries as at the end of such fiscal year, setting
forth in each case in comparative form the corresponding combined figures
for the preceding fiscal year and accompanied by an opinion thereon of
independent certified public accountants of recognized national standing,
which opinion shall state that said combined financial statements fairly
present in all material respects the combined financial condition and
results of operations of the Borrowers and their Subsidiaries as at the end
of, and for, such fiscal year in accordance with generally accepted
accounting principles, and a statement of such accountants to the effect
that, in making the examination necessary for their opinion, nothing came
to their attention that caused them to believe that the Borrowers were not
in compliance with Sections 8.07, 8.08, 8.09, 8.10, 8.11, 8.12 or 8.15
hereof, insofar as such Sections relate to accounting matters;
(c) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that the
Borrowers shall have filed with the Securities
<PAGE>
-74-
and Exchange Commission (or any governmental agency substituted therefor)
or any national securities exchange;
(d) promptly upon the mailing thereof by the Borrowers to the members
of the Borrowers generally, to holders of Affiliate Subordinated
Indebtedness generally, or by Mediacom to the holders of its senior notes
(if any), copies of all financial statements, reports and proxy statements
so mailed;
(e) as soon as possible, and in any event within ten days after any
Borrower knows or has reason to believe that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan
has occurred or exists, a statement signed by a Senior Officer setting
forth details respecting such event or condition and the action, if any,
that the Borrowers or their ERISA Affiliates propose to take with respect
thereto (and a copy of any report or notice required to be filed with or
given to the PBGC by the Borrowers or an ERISA Affiliate with respect to
such event or condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan,
as to which the PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event (provided that a failure to meet the minimum
--------
funding standard of Section 412 of the Code or Section 302 of ERISA,
including, without limitation, the failure to make on or before its
due date a required installment under Section 412(m) of the Code or
Section 302(e) of ERISA, shall be a reportable event regardless of the
issuance of any waivers in accordance with Section 412(d) of the
Code); and any request for a waiver under Section 412(d) of the Code
for any Plan;
(ii) the distribution under Section 4041 of ERISA of a notice of
intent to terminate any Plan or any action taken by the Borrowers or
an ERISA Affiliate to terminate any Plan;
(iii) the institution by the PBGC of proceedings under Section
4042 of ERISA for the termination of, or the appointment of a trustee
to administer, any Plan, or the receipt by the Borrowers or any ERISA
Affiliate of a notice from a Multiemployer Plan that such action has
been taken by the PBGC with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from a Multiemployer
Plan by the Borrowers or any ERISA Affiliate that results in liability
under Section 4201 or 4204 of ERISA (including the obligation to
satisfy secondary liability as a result of a purchaser default) or the
receipt by any Borrower or any ERISA
<PAGE>
-75-
Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA
or that it intends to terminate or has terminated under Section 4041A
of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Borrowers or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and
(vi) the adoption of an amendment to any Plan that, pursuant to
Section 401(a)(29) of the Code or Section 307 of ERISA, would result
in the loss of tax-exempt status of the trust of which such Plan is a
part if the Borrowers or an ERISA Affiliate fails to timely provide
security to the Plan in accordance with the provisions of said
Sections;
(f) within 60 days of the end of each quarterly fiscal period of the
Borrowers, a Quarterly Officer's Report as at the end of such period;
(g) promptly after any Borrower knows or has reason to believe that
any Default has occurred, a notice of such Default describing the same in
reasonable detail and, together with such notice or as soon thereafter as
possible, a description of the action that the Borrowers have taken or
propose to take with respect thereto; and
(h) from time to time such other information regarding the financial
condition, operations, business or prospects of the Borrowers or any of
their Subsidiaries (including, without limitation, any Plan or
Multiemployer Plan and any reports or other information required to be
filed under ERISA) as any Lender or the Administrative Agent may reasonably
request.
The Borrowers will furnish to each Lender, at the time they furnish each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
Senior Officer (i) to the effect that no Default has occurred and is continuing
(or, if any Default has occurred and is continuing, describing the same in
reasonable detail and describing the action that the Borrowers have taken or
proposes to take with respect thereto) and (ii) setting forth in reasonable
detail the computations necessary to determine whether the Borrowers are in
compliance with Sections 8.07, 8.08, 8.09, 8.10, 8.11, 8.12 and 8.15 hereof
(including, without limitation, calculations demonstrating compliance with the
requirements of Section 8.09(d)(ii) hereof after giving effect to any Capital
Expenditure pursuant to Section 8.12(b) hereof) as of the end of the respective
quarterly fiscal period or fiscal year.
8.02 Litigation. The Borrowers will promptly give to each Lender
----------
notice of all legal or arbitral proceedings, and of all proceedings or
investigations by or before any
<PAGE>
-76-
governmental or regulatory authority or agency, and any material development in
respect of such legal or other proceedings, affecting the Borrowers or any of
their Subsidiaries or any of their Franchises, except proceedings that, if
adversely determined, would not (either individually or in the aggregate) have a
Material Adverse Effect. Without limiting the generality of the foregoing, the
Borrowers will give to each Lender (i) notice of the assertion of any
Environmental Claim by any Person against, or with respect to the activities of,
the Borrowers or any of their Subsidiaries and notice of any alleged violation
of or non-compliance with any Environmental Laws or any permits, licenses or
authorizations, other than any Environmental Claim or alleged violation that, if
adversely determined, would not (either individually or in the aggregate) have a
Material Adverse Effect and (ii) copies of any notices received by the Borrowers
or any of their Subsidiaries under any Franchise of a material default by the
Borrowers or any of their Subsidiaries in the performance of its obligations
thereunder.
8.03 Existence, Etc. Each Borrower will, and will cause each of its
--------------
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (provided that nothing
--------
in this Section 8.03 shall prohibit any transaction expressly permitted
under Section 8.05 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if failure
to comply with such requirements could (either individually or in the
aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of
its Property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and against which
adequate reserves are being maintained;
(d) maintain, in all material respects, all of its Properties used
or useful in its business in good working order and condition, ordinary
wear and tear excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Lender or the Administrative
Agent, during normal business hours, to examine, copy and make extracts
from its books and records, to inspect any of its Properties, and to
discuss its business and affairs with its officers, all to
<PAGE>
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the extent reasonably requested by such Lender or the Administrative Agent
(as the case may be).
8.04 Insurance. Each Borrower will, and will cause each of its
---------
Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, and with respect to Property and risks of a character
usually maintained by Persons engaged in the same or similar business similarly
situated, against loss, damage and liability of the kinds and in the amounts
customarily maintained by such corporations, provided that each Borrower will in
--------
any event maintain (with respect to itself and each of its Subsidiaries)
casualty insurance and insurance against claims for damages with respect to
defamation, libel, slander, privacy or other similar injury to person or
reputation (including misappropriation of personal likeness), in such amounts as
are then customary for Persons engaged in the same or similar business similarly
situated.
8.05 Prohibition of Fundamental Changes.
----------------------------------
(a) Restrictions on Merger. None of the Borrowers will nor will it
----------------------
permit any of its Subsidiaries to, enter into any transaction of merger or
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution).
(b) Restrictions on Acquisitions. None of the Borrowers will nor
----------------------------
will it permit any of its Subsidiaries to, acquire any business or Property
from, or capital stock of, or be a party to any acquisition of, any Person
except for purchases of equipment, programming rights and other Property to be
sold or used in the ordinary course of business, Investments permitted under
Section 8.08(f) hereof, and Capital Expenditures permitted under Section 8.12
hereof.
(c) Restrictions on Sales and Other Dispositions. None of the
--------------------------------------------
Borrowers will nor will it permit any of its Subsidiaries to, convey, sell,
lease, transfer or otherwise dispose of, in one transaction or a series of
transactions, any part of its business or Property, whether now owned or
hereafter acquired (including, without limitation, receivables and leasehold
interests, but excluding (i) obsolete or worn-out Property, tools or equipment
no longer used or useful in its business so long as the amount thereof sold in
any single fiscal year by the Borrowers and their Subsidiaries shall not have a
fair market value in excess of $5,000,000 and (ii) any equipment, programming
rights or other Property sold or disposed of in the ordinary course of business
and on ordinary business terms).
(d) Certain Permitted Transactions. Notwithstanding the foregoing
------------------------------
provisions of this Section 8.05:
(i) Intercompany Mergers and Consolidations. Any Borrower may be
---------------------------------------
merged or consolidated with any other Borrower, and any Subsidiary of a
Borrower may be merged or consolidated with or into: (x) such Borrower if
such Borrower shall be the continuing
<PAGE>
-78-
or surviving corporation or (y) any other such Subsidiary; provided that if
--------
any such transaction shall be between a Subsidiary and a Wholly Owned
Subsidiary, the Wholly Owned Subsidiary shall be the continuing or
surviving corporation.
(ii) Intercompany Dispositions. Any Borrower may sell, lease,
-------------------------
transfer or otherwise dispose of any or all of its Property to any other
Borrower, and any Subsidiary of a Borrower may sell, lease, transfer or
otherwise dispose of any or all of its Property (upon voluntary liquidation
or otherwise) to the Borrowers or a Wholly Owned Subsidiary of the
Borrowers.
(iii) Permitted Dispositions. The Borrowers or any Wholly owned
----------------------
Subsidiary of the Borrowers may enter into one or more transactions
intended to trade (by means of either an exchange or a sale and subsequent
purchase) one or more of the CATV Systems owned by the Borrowers and their
Subsidiaries for one or more CATV Systems owned by any other Person, which
transactions may be effected either by
(I) the Borrowers or such Wholly Owned Subsidiary selling one or
more CATV Systems owned by it, and either depositing the Net Available
Proceeds thereof into the Collateral Account, or prepaying Revolving
Credit Loans (and creating a Reserved Commitment Amount), as
contemplated by the second paragraph of Section 2.10(d) hereof, and
then within 270 days acquiring one or more other CATV Systems or
(II) exchanging one or more CATV Systems, together with cash not
exceeding 20% of the fair market value of such acquired CATV Systems,
so long as
(x) at the time of any such transactions and after giving
effect thereto, no Default shall have occurred and be continuing and
(B) after giving effect to such transaction the Borrowers shall be in
compliance with Section 8.10 hereof (the determination of such
compliance to be calculated on a pro forma basis, as at the end of and
for the fiscal quarter most recently ended prior to the date of such
transaction for which financial statements of the Borrowers and their
Subsidiaries are available, under the assumption that such transaction
shall have occurred, and any Indebtedness in connection therewith
shall have been incurred, at the beginning of the applicable period,
and under the assumption that interest for such period had been equal
to the actual weighted average interest rate in effect for the Loans
hereunder on the date of such transaction), and the Borrowers shall
have delivered to the Administrative Agent a certificate of a Senior
Officer showing such calculations in reasonable detail to demonstrate
such compliance,
<PAGE>
-79-
(y) with respect to any single exchange of CATV Systems
pursuant to clause (II) above, the sum of the System Cash Flow for the
period of four fiscal quarters ending on, or most recently ended prior
to, the date of such exchange attributable to the CATV Systems being
exchanged does not exceed more than 15% of System Cash Flow for such
period and
(z) the sum of (A) the System Cash Flow for the period referred
to in subclause (y) above plus (B) the System Cash Flow attributable
----
to all other CATV Systems previously exchanged pursuant to clause (II)
above (whether during the period referred to in subclause (y) above,
or prior thereto), does not exceed an amount equal to 35% of Adjusted
System Cash Flow for the period referred to in subclause (y) above.
If, in connection with an exchange permitted under this subparagraph (iii),
the Borrowers or Wholly Owned Subsidiary receives cash in excess of 20% the
fair market value of the acquired CATV Systems, such exchange shall be
permitted as a sale under this subparagraph (iii) and the cash received by
the Borrowers in connection with such transaction shall be applied in
accordance with Section 2.10(d).
(iv) Acquisitions. Any Borrower or a Wholly Owned Subsidiary of
------------
such Borrower may acquire any business or Property from, or capital stock
of, or be a party to any acquisition of, any Person, so long as:
(A) the aggregate Purchase Price of any individual such
acquisition shall not exceed $200,000,000;
(B) such acquisition (if by purchase of assets, merger or
consolidation) shall be effected in such manner so that the acquired
business, and the related assets, are owned either by a Borrower or a
Wholly Owned Subsidiary of a Borrower and, if effected by merger or
consolidation involving a Borrower, such Borrower shall be the
continuing or surviving entity and, if effected by merger or
consolidation involving a Wholly Owned Subsidiary of a Borrower, such
Wholly Owned Subsidiary shall be the continuing or surviving entity;
(C) such acquisition (if by purchase of stock) shall be
effected in such manner so that the acquired entity becomes a Wholly
Owned Subsidiary of a Borrower;
(D) with respect to any acquisition involving an
aggregate Purchase Price in excess of $25,000,000, the Borrowers shall
deliver to the Administrative Agent
<PAGE>
-80-
(which shall promptly forward a copy to each Lender which requests
one) (1) no later than five Business Days prior to the consummation of
each such acquisition (or such earlier date as shall be five Business
Days after the execution and delivery thereof), copies of the
respective agreements or instruments pursuant to which such
acquisition is to be consummated (including, without limitation, any
related management, non-compete, employment, option or other material
agreements), any schedules to such agreements or instruments and all
other material ancillary documents to be executed or delivered in
connection therewith and (2) promptly following request therefor (but
in any event within three Business Days following such request),
copies of such other information or documents relating to each such
acquisition as the Administrative Agent shall have requested;
(E) with respect to any acquisition involving an aggregate
Purchase Price in excess of $25,000,000, the Administrative Agent
shall have received (and shall promptly forward a copy thereof to each
Lender which requests one) a letter (in the case of each legal opinion
delivered to the Borrowers pursuant to such acquisition) from each
Person delivering such opinion (which shall in any event include an
opinion of special FCC counsel) authorizing reliance thereon by the
Administrative Agent and the Lenders;
(F) with respect to any acquisition involving an aggregate
Purchase Price in excess of $25,000,000, the Borrowers shall have
delivered to the Administrative Agent and the Lenders evidence
satisfactory to the Administrative Agent and the Majority Lenders of
receipt of all licenses, permits, approvals and consents, if any,
required with respect to such acquisition (including, without
limitation, the consents of the respective municipal franchising
authorities to the acquisition of the respective CATV Systems being
acquired (if any));
(G) the entire amount of the consideration payable by the
Borrowers and their Subsidiaries in connection with such acquisition
(other than customary post-closing adjustments and indemnity
obligations, and other than Indebtedness incurred in connection with
such acquisition that is permitted under paragraphs (c) or (f) of
Section 8.07 hereof) shall be payable on the date of such acquisition;
(H) none of the Borrowers nor any of its Subsidiaries shall, in
connection with such acquisition, assume or remain liable in respect
of (x) any Indebtedness of the seller or sellers (except for
Indebtedness permitted under Section 8.07(f) hereof) or (y) other
obligations of the seller or sellers (except for obligations incurred
in the ordinary course of business in operating the CATV System so
<PAGE>
-81-
acquired and necessary or desirable to the continued operation of such
CATV System);
(I) to the extent the assets purchased in such acquisition shall
be subject to any Liens not permitted hereunder, such Liens shall have
been released (or arrangements for such release satisfactory to the
Administrative Agent shall have been made);
(J) to the extent applicable, the Borrowers shall have complied
with the provisions of Section 8.18 hereof, including, without
limitation, to the extent not theretofore delivered, delivery to the
Administrative Agent of (x) the shares of stock or other ownership
interests, accompanied by undated stock powers or other powers
executed in blank, and (y) the agreements, instruments, opinions of
counsel and other documents required under Section 8.18 hereof;
(K) after giving effect to such acquisition the Borrowers shall
be in compliance with Section 8.10 hereof (the determination of such
compliance to be calculated on a pro forma basis, as at the end of and
for the fiscal quarter most recently ended prior to the date of such
acquisition for which financial statements of the Borrowers and their
Subsidiaries are available, under the assumption that such acquisition
shall have occurred, and any Indebtedness in connection therewith
shall have been incurred, at the beginning of the applicable period,
and under the assumption that interest for such period had been equal
to the actual weighted average interest rate in effect for the Loans
hereunder on the date of such acquisition), and the Borrowers shall
have delivered to the Administrative Agent a certificate of a Senior
Officer showing such calculations in reasonable detail to demonstrate
such compliance;
(L) immediately prior to such acquisition and after giving
effect thereto, no Default shall have occurred and be continuing; and
(M) the Borrowers shall deliver such other documents and shall
have taken such other action as the Majority Lenders or the
Administrative Agent may request (which may include evidence that the
Borrowers shall have received an equity contribution from Mediacom or
the proceeds of the issuance of Affiliate Subordinated Indebtedness
pursuant to documentation and in amounts in form and substance
satisfactory to the Majority Lenders and the Administrative Agent).
<PAGE>
-82-
8.06 Limitation on Liens. None of the Borrowers will, nor will it
-------------------
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon any of its Property, whether now owned or hereafter acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the date hereof and listed in Part B of
Schedule II hereto (or, to the extent not meeting the minimum thresholds
for required listing on said Schedule II pursuant to Section 7.11 hereof,
in an aggregate amount not exceeding $10,000,000);
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Borrowers or the affected
Subsidiaries, as the case may be, in accordance with GAAP;
(d) 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 and by appropriate proceedings and Liens securing judgments but
only to the extent for an amount and for a period not resulting in an Event
of Default under Section 9.01(i) hereof;
(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(f) deposits to secure the performance of bids, trade contracts
(other than for Indebtedness), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on the
use of Property or minor imperfections in title thereto that, in the
aggregate, are not material in amount, and that do not in any case
materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Borrowers or any
of their Subsidiaries; and
(h) Liens upon real and/or tangible personal Property acquired after
the date hereof (by purchase, construction or otherwise) by the Borrowers
or any of their Subsidiaries and securing Indebtedness permitted under
Section 8.07(f) hereof, each of which Liens either (A) existed on such
Property before the time of its acquisition and was
<PAGE>
-83-
not created in anticipation thereof or (B) was created solely for the
purpose of securing Indebtedness representing, or incurred to finance,
refinance or refund, the cost (including the cost of construction) of such
Property; provided that (i) no such Lien shall extend to or cover any
--------
Property of a Borrower or any such Subsidiary other than the Property so
acquired and improvements thereon and (ii) the principal amount of
Indebtedness secured by any such Lien shall at no time exceed the fair
market value (as determined in good faith by a Senior Officer) of such
Property at the time it was acquired (by purchase, construction or
otherwise).
8.07 Indebtedness. None of the Borrowers will, nor will it permit any
------------
of its Subsidiaries to, create, incur or suffer to exist any Indebtedness
except:
(a) Indebtedness to the Lenders hereunder, including, without
limitation, Incremental Facility Loans in an aggregate principal amount up
to but not exceeding $200,000,000;
(b) Indebtedness outstanding on the date hereof and listed in Part A
of Schedule II hereto (or, to the extent not meeting the minimum thresholds
for required listing on said Schedule II pursuant to Section 7.11 hereof,
in an aggregate amount not exceeding $10,000,000);
(c) Affiliate Subordinated Indebtedness incurred in accordance with
Section 8.14 hereof ;
(d) Indebtedness of the Borrowers to any Subsidiary of the Borrowers,
and of any Subsidiary of the Borrowers to the Borrowers or its other
Subsidiaries;
(e) Indebtedness of the Borrowers and their Subsidiaries that is
subordinated in right of payment to the obligations of the Borrowers and
their Subsidiaries under the Loan Documents (and which contains terms,
including in respect of interest, amortization, defaults, mandatory
redemptions and prepayments, and covenants) that are in each case
satisfactory to the Administrative Agent and the Majority Lenders; and
(f) additional Indebtedness of the Borrowers and their Subsidiaries
(including, without limitation, Capital Lease Obligations and other
Indebtedness secured by Liens permitted under Section 8.06(h) hereof) up to
but not exceeding an aggregate amount of $25,000,000 at any one time
outstanding.
In addition to the foregoing, the Borrowers will not, nor will they
permit their Subsidiaries to, incur or suffer to exist any obligations in an
aggregate amount in excess of $10,000,000 at any one time outstanding in respect
of surety and performance bonds backing
<PAGE>
-84-
pole rental or conduit attachments and the like, or backing obligations under
Franchises, arising in the ordinary course of business of the CATV Systems of
the Borrowers and their Subsidiaries.
8.08 Investments. The Borrowers will not, nor will they permit any of
-----------
their Subsidiaries to, make or permit to remain outstanding any Investments
except:
(a) Investments outstanding on the date hereof and identified in
Schedule III hereto;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) subject to the last sentence of this Section 8.08, Investments by
the Borrowers and their Subsidiaries in the Borrowers and their
Subsidiaries;
(e) Interest Rate Protection Agreements entered into in the ordinary
course of business of the Borrowers and not for speculative purposes;
(f) Investments by the Borrowers and their Subsidiaries consisting of
acquisitions permitted under subparagraphs (iii) or (iv) of Section
8.05(d);
(g) Investments consisting of the issuance of a Letter of Credit for
the account of the Borrowers to support an obligation of an Affiliate of
the Borrowers, in such amounts as would be permitted under Section
8.09(d)(ii) hereof; and
(h) additional Investments (including, without limitation,
Investments by the Borrowers or any of their Subsidiaries in Affiliates of
the Borrowers), so long as (i) the aggregate amount of all such Investments
shall not exceed $100,000,000 and (ii) at the time of making such
additional investments as contemplated by this Section 8.08(h) and after
giving effect thereto, the Total Leverage Ratio shall be less than 5.75 to
1 or if lower, the applicable requirement at the time under Section 8.10(a)
hereof.).
Without limiting the generality of the forgoing, the Borrowers will not create,
or make any Investment in, any Subsidiary after the date hereof without the
prior written consent of the Majority Lenders.
8.09 Restricted Payments. The Borrowers will not make any Restricted
-------------------
Payment at any time, provided that, so long as at the time thereof, and after
--------
giving effect thereto, no Default or Event of Default shall have occurred and be
continuing, the Borrowers may make the
<PAGE>
-85-
following Restricted Payments (subject, in each case, to the applicable
conditions set forth below):
(a) the Borrowers may make Restricted Payments in cash to their
members on or after April 12 of each fiscal year (the "current year") in an
------------
amount equal to the Tax Payment Amount for the immediately preceding fiscal
year (the "prior year"), so long as at least fifteen days prior to making
----------
any such Restricted Payment, the Borrowers shall have delivered to each
Lender (i) notification of the amount and proposed payment date of such
Restricted Payment and (ii) a statement from the Borrowers' independent
certified public accountants setting forth a detailed calculation of the
Tax Payment Amount for the prior year and showing the amount of such
Restricted Payment and all prior Restricted Payments;
(b) the Borrowers may make payments in cash in respect of Management
Fees to the extent permitted under Section 8.11 hereof;
(c) the Borrowers may make payments in cash in respect of the
interest on Affiliate Subordinated Indebtedness constituting Supplemental
Capital or Cure Monies ;
(d) the Borrowers may make payments in cash in respect of the
principal of Affiliate Subordinated Indebtedness and distributions in
respect of the equity capital of the Borrowers and may request the issuance
of Affiliate Letters of Credit (such payment and issuance being
collectively called "Permitted Transactions"), so long as
----------------------
(i) in the case of any Permitted Transaction consisting of a
payment in respect of the principal of Affiliate Subordinated
Indebtedness, or distribution in respect of equity capital,
constituting Cure Monies, at least one complete fiscal quarter shall
have elapsed subsequent to the last date upon which the Borrowers
shall have utilized their cure rights under Section 9.02 hereof,
without the occurrence of any Event of Default (and, for purposes
hereof, unless the Borrowers indicate otherwise at the time of any
such payment, such payment or distribution shall be deemed to be made
first from Cure Monies and second from Supplemental Capital);
(ii) after giving effect to any Permitted Transaction
during any fiscal quarter (the "current fiscal quarter") and to the
----------------------
making of any Capital Expenditures pursuant to Section 8.12(b) hereof
during the current fiscal quarter, the Borrowers would (as at the last
day of the most recent fiscal quarter immediately prior to the current
fiscal quarter) have been in compliance on a pro forma basis with
Section 8.10 hereof and the Total Leverage Ratio calculated on a pro
forma basis is at the time less than 5.75 to 1 (or, if lower, the
applicable
<PAGE>
-86-
requirement at the time under Section 8.10(a) hereof), the
determination of such compliance and such Total Leverage Ratio to be
determined as if
(x) for purposes of calculating the Total Leverage Ratio,
there were added to Indebtedness the sum (herein, the "Relevant
--------
Sum") of the amount of such Permitted Transaction plus the amount
--- ----
of all other Permitted Transactions made during the current
fiscal quarter through the date of such Permitted Transaction,
minus the amount of Special Reductions through such date plus the
----- ----
amount of any such Capital Expenditures, and
(y) for purposes of calculating the Interest Coverage Ratio
and Pro Forma Debt Service Coverage Ratio, the Relevant Sum plus
----
any Cure Monies received during the period for which the Interest
Coverage Ratio or Pro Forma Debt Service Coverage Ratio is
calculated represented additional principal of the Loans
outstanding hereunder at all times during the respective fiscal
quarter for which such Ratios are calculated and the amount of
interest that would have been payable hereunder during such
fiscal quarter was recalculated to take into account such
additional principal;
(iii) after giving effect to distributions made in respect of
the equity capital of any Borrower, the Equity Contribution Amount
shall not be less than zero; and
(iv) the aggregate amount of Permitted Transactions as at any
date (minus the aggregate amount of Special Reductions through such
-----
date), shall not exceed the Applicable Permitted Transaction Amount
for such date;
(e) the Borrowers may make distributions in cash to Mediacom of (i)
up to $21,500,000 simultaneously with the acquisition of the stock of
Zylstra Communications Corporation and (ii) up to $239,500,000
simultaneously with the consummation of the Triax Acquisition from the
proceeds of the Loans so long as the conditions specified in paragraph
(d)(ii) are satisfied as if such distribution constituted a "Permitted
Transaction"; and
(f) the Borrowers may convert all of their outstanding Preferred
Membership Interests to Affiliate Subordinated Indebtedness on or before
the Closing Date.
Nothing herein shall be deemed to prohibit the payment of dividends by
any Subsidiary of a Borrower to such Borrower or to any other Subsidiary of such
Borrower.
<PAGE>
-87-
8.10 Certain Financial Covenants.
---------------------------
(a) Total Leverage Ratio. The Borrowers will not permit the Total
--------------------
Leverage Ratio to exceed the following respective ratios at any time during the
following respective periods:
Total
Period Leverage Ratio
------ --------------
From the Closing Date
through December 31, 2000 6.00 to 1
From January 1, 2001
through December 31, 2001 5.75 to 1
From January 1, 2002
through December 31, 2002 5.50 to 1
From January 1, 2003
through December 31, 2003 4.75 to 1
From January 1, 2004
and at all times thereafter 4.50 to 1
(b) Interest Coverage Ratio. The Borrowers will not permit the
-----------------------
Interest Coverage Ratio to be less than the following respective ratios as at
the last day of any fiscal quarter ending during the following respective
periods:
<PAGE>
-88-
Period Ratio
------ -----
From the Closing Date
through December 31, 2000 1.40 to 1
From January 1, 2001
through December 31, 2001 1.50 to 1
From January 1, 2002
through December 31, 2002 1.60 to 1
From January 1, 2003
through December 31, 2003 1.80 to 1
From January 1, 2004
and at all times thereafter 2.00 to 1
(c) Pro Forma Debt Service Coverage Ratio. The Borrowers will not
-------------------------------------
permit the Pro Forma Debt Service Coverage Ratio to be less than 1.15 to 1 at
any time.
8.11 Management Fees. The Borrowers will not permit the aggregate
---------------
amount of Management Fees accrued in respect of any fiscal year of the Borrowers
to exceed 4.5% of the Gross Operating Revenue of the Borrowers and their
Subsidiaries for such fiscal year. In addition, the Borrowers will not, as at
the last day of the first, second and third fiscal quarters in any fiscal year,
permit the amount of Management Fees paid during the portion of such fiscal year
ending with such fiscal quarter to exceed 4.5% of the Gross Operating Revenue of
the Borrowers and their Subsidiaries for such portion of such fiscal year (based
upon the financial statements of the Borrowers provided pursuant to Section
8.01(a) hereof), provided that in any event the Borrowers will not pay any
--------
Management Fees at any time following the occurrence and during the continuance
of any Default. Any Management Fees that are accrued for any fiscal quarter (the
"current fiscal quarter") but which are not paid during the current fiscal
----------------------
quarter may be paid at any time during the period of four fiscal quarters
following the current fiscal quarter (and for these purposes any payment of
Management Fees during such period shall be deemed to be applied to Management
Fees in the order of the fiscal quarters in respect of which such Management
Fees are accrued). Any Management Fees which may not be paid as a result of the
limitations set forth in the forgoing provisions of this Section 8.11 shall be
deferred and shall not be payable until the principal of and interest on the
Loans, and all other amounts owing hereunder, shall have been paid in full. For
purposes of this Section 8.11 "Gross Operating Revenue" shall mean the aggregate
-----------------------
gross operating revenues derived by the Borrowers from their CATV Systems and
from other telecommunications services as determined in accordance
<PAGE>
-89-
with GAAP excluding, however, revenue or income derived by the Borrowers from
any of the following sources: (i) from the sale of any asset of such CATV
Systems not in the ordinary course of business, (ii) interest income, (iii)
proceeds from the financing or refinancing of any Indebtedness of the Borrowers
or any of their Subsidiaries and (iv) extraordinary gains in accordance with
GAAP.
None of the Borrowers nor any of its Subsidiaries shall be obligated
to pay Management Fees to any Person, unless the Borrowers and such Person shall
have executed and delivered to the Administrative Agent a Management Fee
Subordination Agreement, and none of the Borrowers nor any of its Subsidiaries
shall pay Management Fees to any Person except to the extent permitted under the
respective Management Fee Subordination Agreement to which such Person is a
party.
None of the Borrowers nor any of its Subsidiaries shall employ or
retain any executive management personnel (or pay any Person, other than the
Manager, in respect of executive management personnel or matters, for the
Borrowers or any of their Subsidiaries), it being the intention of the parties
hereto that all executive management personnel required in connection with the
business or operations of the Borrowers and their Subsidiaries shall be
employees of the Manager (and that the Executive Compensation for such employees
shall be covered by Management Fees payable hereunder). For purposes hereof,
"executive management personnel" shall not include any individual (such as a
system manager or a regional manager) who is employed solely in connection with
the day-to-day operations of a CATV System or a Region.
8.12 Capital Expenditures.
--------------------
(a) Scheduled Capital Expenditures. The Borrowers will not permit
------------------------------
the aggregate amount of Capital Expenditures to exceed the following respective
amounts for the following respective Fiscal Periods of the Borrowers:
<PAGE>
-90-
Fiscal Period Ending Amount
-------------------- ------
December 31, 1999 $30,000,000
December 31, 2000 $53,900,000
December 31, 2001 $56,100,000
December 31, 2002 $52,200,000
December 31, 2003 $39,200,000
December 31, 2004 $26,100,000
December 31, 2005 $25,300,000
December 31, 2006 $24,600,000
December 31, 2007 $24,500,000
provided that, the amounts set forth above for any Fiscal Period of the
- --------
Borrowers in which the Borrowers enter into an Acquisition pursuant to Section
8.05(d)(iv) shall be increased by such amount as the Borrowers shall propose in
a notice to the Administrative Agent and the Lenders (which amount shall be
based on a proposed budget and operating plan set forth in such notice) which
increase shall become effective unless Requisite Lenders object to such amount,
by notice to the Administrative Agent, within 10 Business Days following receipt
of the Borrowers' notice. For purposes of this Section 8.12(a), "Requisite
---------
Lenders" shall mean Lenders having at least 50% of the sum of (a) the aggregate
- -------
outstanding principal amount of the Term Loans or, if the Term Loans shall not
have been made, the aggregate outstanding principal amount of the Term Loan
Commitments plus (b) the aggregate outstanding principal amount of the
----
Incremental Facility Loans or, if the Incremental Facility Loans shall not have
been made, the aggregate outstanding principal amount of the Incremental
Facility Commitments plus (c) the sum of (i) the aggregate unused amount, if
----
any, of the Revolving Credit Commitments at such time plus (ii) the aggregate
----
outstanding principal amount of the Revolving Credit Loans at such time
If the aggregate amount of Capital Expenditures for any Fiscal Period
of the Borrowers shall be less than the amount set forth opposite such Fiscal
Period in the schedule above, then the shortfall shall be added to the amount of
Capital Expenditures permitted for the immediately succeeding (but not any
other) Fiscal Period and, for purposes hereof, the amount of Capital
Expenditures made during any Fiscal Period shall be deemed to have been made
first from the carryover from any previous Fiscal Period and last from the
permitted amount for such Fiscal Period.
(b) Additional Capital Expenditures. In addition to the Capital
-------------------------------
Expenditures permitted under paragraph (a) above, the Borrowers and their
Subsidiaries may make Additional Capital Expenditures during any fiscal quarter
in such amounts as would be permitted under Section 8.09(d)(ii) (in the case of
a payment of principal of Affiliate Subordinated Indebtedness, as if such
Capital Expenditure constituted a payment in respect of Supplemental Capital
thereunder).
<PAGE>
-91-
8.13 Interest Rate Protection Agreements. The Borrowers will within
-----------------------------------
90 days of the Closing Date, enter into, and thereafter maintain in full force
and effect, one or more Interest Rate Protection Agreements with one or more of
the Lenders or their affiliates (and/or with a bank or other financial
institution having capital, surplus and undivided profits of at least
$500,000,000), that effectively enables the Borrowers (in a manner satisfactory
to the Majority Lenders) to protect themselves, in a manner and on terms
reasonably satisfactory to the Majority Lenders, against adverse fluctuations in
the three-month London interbank offered rates as to a notional principal amount
which, together with that portion of the aggregate outstanding principal amount
of Indebtedness of the Borrowers bearing a fixed rate of interest, shall in the
aggregate be at least equal to 50% of the aggregate outstanding principal amount
of the Indebtedness (including Affiliate Subordinated Indebtedness) of the
Borrowers.
8.14 Affiliate and Additional Subordinated Indebtedness.
--------------------------------------------------
(a) The Borrowers may at any time after the date hereof incur
Affiliate Subordinated Indebtedness to Mediacom or one or more other
Affiliates, so long as the proceeds of any such Affiliate Subordinated
Indebtedness constituting Cure Monies are immediately applied to the reduction
of the Revolving Credit Commitments and the prepayment of principal of the Term
Loans and Incremental Facility Loans of each Series hereunder, applied ratably
to the Revolving Credit Commitments, the Term Loans and the Incremental
Facility Loans of each Series in accordance with the respective then-
outstanding aggregate amounts of such Commitments and Loans (and to the
simultaneous prepayment of the Revolving Credit Loans in an amount equal to
such required reduction of Revolving Credit Commitments), provided that to the
--------
extent any such required prepayment of Revolving Credit Loans shall exceed the
then-outstanding aggregate principal amount of Revolving Credit Loans, such
excess shall be applied to the ratable prepayment of Term Loans and Incremental
Facility Loans of each Series.
(b) The Borrowers will not, nor will they permit any of their
Subsidiaries to, purchase, redeem, retire or otherwise acquire for value, or set
apart any money for a sinking, defeasance or other analogous fund for the
purchase, redemption, retirement or other acquisition of, or make any voluntary
payment or prepayment of the principal of or interest on, or any other amount
owing in respect of, any Affiliate Subordinated Indebtedness, except to the
extent permitted under Section 8.09 hereof.
(c) The Borrowers will not, nor will they permit any of their
Subsidiaries to, purchase, redeem, retire or otherwise acquire for value, or set
apart any money for a sinking, defeasance or other analogous fund for the
purchase, redemption, retirement or other acquisition of, or make any voluntary
payment or prepayment of the principal of or interest on, or any other amount
owing in respect of, any Indebtedness at any time issued pursuant to Section
8.07(e).
<PAGE>
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8.15 Lines of Business. The Borrowers will at all times ensure that
-----------------
not more than 15% of gross operating revenue of the Borrowers and their
Subsidiaries for any fiscal year shall be derived from any line or lines of
business activity other than the business of owning and operating CATV Systems
and related communications businesses.
8.16 Transactions with Affiliates. Except as expressly permitted by
----------------------------
this Agreement, none of the Borrowers will, nor will it permit any of its
Subsidiaries to, directly or indirectly: (a) make any Investment in an Affiliate
except for Investments permitted under Section 8.08(h), provided that, the
--------
monetary or business consideration arising therefrom would be substantially as
advantageous to a Borrower and its Subsidiaries as the monetary or business
consideration that would obtain in a comparable transaction with a Person not an
Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
Property to an Affiliate; (c) merge into or consolidate with or purchase or
acquire Property from an Affiliate; (d) make any contribution towards, or
reimbursement for, any Federal income taxes payable by any member of a Borrower
or any of its Subsidiaries in respect of income of a Borrower; or (e) enter into
any other transaction directly or indirectly with or for the benefit of an
Affiliate (including, without limitation, Guarantees and assumptions of
obligations of an Affiliate); provided that
--------
(i) any Affiliate who is an individual may serve as a director,
officer or employee of a Borrower or any of its Subsidiaries and receive
reasonable compensation for his or her services in such capacity,
(ii) a Borrower and its Subsidiaries may enter into transactions
(other than extensions of credit by such Borrower or any of its
Subsidiaries to an Affiliate) providing for the leasing of Property, the
rendering or receipt of services or the purchase or sale of equipment,
programming rights, advertising time and other Property in the ordinary
course of business if the monetary or business consideration arising
therefrom would be substantially as advantageous to such Borrower and its
Subsidiaries as the monetary or business consideration that would obtain in
a comparable transaction with a Person not an Affiliate,
(iii) the Borrowers may enter into and perform their respective
obligations under, the Management Agreements, and
(iv) the Borrowers and their Subsidiaries may pay to the Manager the
aggregate amount of intercompany shared expenses payable to Mediacom that
are allocated by Mediacom to the Borrowers and their Subsidiaries in
accordance with Section 5.04 of the Guarantee and Pledge Agreement.
<PAGE>
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8.17 Use of Proceeds.
---------------
(a) Revolving Credit Loans. The Borrowers will use the proceeds of
----------------------
the Revolving Credit Loans hereunder solely to (i) provide financing for
Acquisitions and to pay the fees and expenses related thereto, (ii) make
Restricted Payments, (iii) pay Management Fees, (iv) make Investments permitted
under Section 8.08 hereof and (v) finance capital expenditures and working
capital needs of the Borrowers and their Subsidiaries and acquisitions permitted
hereunder (in each case in compliance with all applicable legal and regulatory
requirements); provided that (x) any borrowing of Revolving Credit Loans
hereunder that would constitute a utilization of any Reserved Commitment Amount
shall be applied solely to make acquisitions permitted under Section 8.05(d)(iv)
hereof, or to make prepayments of Loans under Section 2.10(d) hereof and (y)
neither the Administrative Agent nor any Lender shall have any responsibility as
to the use of any of such proceeds.
(b) Term Loans and Incremental Facility Loans. The Borrowers will use
-----------------------------------------
the proceeds of the Term Loans to refinance indebtedness outstanding under the
Existing Credit Agreements, to make distributions to (or repay advances made to
the Borrowers by) Mediacom, and, in the case of Mediacom Arizona, to effect the
Apache Acquisition. The Borrowers will use the proceeds of the Incremental
Facility Loans for general corporate purposes and to make Acquisitions.
8.18 Certain Obligations Respecting Subsidiaries; Further Assurances.
-------------------------------------------
(a) Subsidiary Guarantors. In the event that any Borrower or any of
---------------------
its Subsidiaries shall form or acquire any Subsidiary after the date hereof
(after obtaining any necessary consent of the Lenders), such Borrower shall
cause, and shall cause its Subsidiaries to cause, such Subsidiary to:
(i) execute and deliver to the Administrative Agent a Subsidiary
Guarantee Agreement in the form of Exhibit E hereto (and, thereby, to
become a "Subsidiary Guarantor", and an "Obligor" hereunder and a "Securing
Party" under the Pledge Agreement);
(ii) deliver the shares of its stock or other ownership interests
accompanied by undated stock powers or other powers executed in blank to
the Administrative Agent, and to take other such action, as shall be
necessary to create and perfect valid and enforceable first priority Liens
(subject to Liens permitted under Section 8.06 hereof) on substantially all
of the Property of such new Subsidiary as collateral security for the
obligations of such new Subsidiary under the Subsidiary Guarantee
Agreement, and
<PAGE>
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(iii) deliver such proof of corporate action, limited liability
company action or partnership action, as the case may be, incumbency of
officers, opinions of counsel and other documents as is consistent with
those delivered by each Obligor pursuant to Section 6.01 hereof on the
Closing Date or as the Administrative Agent shall have reasonably
requested.
(b) Ownership of Subsidiaries. Each Borrower will, and will cause
-------------------------
each of its Subsidiaries to, take such action from time to time as shall be
necessary to ensure that each of its Subsidiaries is a Wholly Owned Subsidiary.
In the event that any additional shares of stock or other ownership interests
shall be issued by Subsidiary of a Borrower, such Borrower agrees forthwith to
deliver to the Administrative Agent pursuant to the Pledge Agreement the
certificates evidencing such shares of stock or other ownership interests,
accompanied by undated stock or other powers executed in blank and to take such
other action as the Administrative Agent shall request to perfect the security
interest created therein pursuant to the Pledge Agreement.
(c) Further Assurances. Each Borrower will, and will cause each of
------------------
its Subsidiaries to, take such action from time to time (including filing
appropriate Uniform Commercial Code financing statements and executing and
delivering such assignments, security agreements and other instruments) as shall
be requested by the Administrative Agent to create, in favor of the
Administrative Agent for the benefit of the Lenders, perfected security
interests and Liens in shares of stock or other ownership interests of their
Subsidiaries. In addition, the Borrowers will not issue additional equity
interests ("Additional Equity Interests") after the date hereof to any Person (a
---------------------------
"New Equity Owner") other than Mediacom unless such New Equity Owner shall:
----------------
(i) pledge such Additional Equity Interests to the Administrative
Agent on behalf of the Lenders pursuant to a pledge agreement in
substantially the form (other than negative covenants) of the Guarantee and
Pledge Agreement and otherwise in form and substance satisfactory to the
Administrative Agent;
(ii) deliver to the Administrative Agent any certificates evidencing
the Additional Equity Interests accompanied by undated powers executed in
blank;
(iii) deliver to the Administrative Agent such proof of corporate
action, limited liability company, partnership or other action, as
applicable, incumbency of officers, opinions of counsel and other documents
as is consistent with those delivered by Mediacom and the Manager pursuant
to Section 6.01 hereof on the Closing Date or as the Administrative Agent
shall have reasonably requested; and
<PAGE>
-95-
(iv) take other such additional action, as shall be necessary to
create and perfect valid and enforceable first priority security interests
in the Additional Equity Interests in favor of the Administrative Agent.
(d) Certain Restrictions. The Borrowers will not, and will not permit
--------------------
any of their Subsidiaries to, directly or indirectly, enter into, incur or
permit to exist any agreement or other arrangement that prohibits, restricts or
imposes any condition upon (a) the ability of the Borrowers or any Subsidiary to
create, incur or permit to exist any Lien upon any of its property or assets
securing the obligations of the Borrowers or any Subsidiary under any of the
Loan Documents, or in respect of any Interest Rate Protection Agreement, or (b)
the ability of any Subsidiary to pay dividends or other distributions with
respect to any shares of its capital stock or other ownership interests or to
make or repay loans or advances to the Borrowers or any Subsidiary or to
Guarantee Indebtedness of the Borrowers or any Subsidiary under any of the Loan
Documents; provided that (i) the foregoing shall not apply to restrictions and
--------
conditions imposed by law or by any of the Loan Documents, (ii) the foregoing
shall not apply to customary restrictions and conditions contained in agreements
relating to the sale of a Subsidiary pending such sale, provided such
--------
restrictions and conditions apply only to the Subsidiary that is to be sold and
such sale is permitted hereunder, (iii) clause (a) of the foregoing shall not
apply to restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement or any other Loan Document if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness and (iv) clause (a) of the foregoing shall not apply to customary
provisions in leases and other contracts restricting the assignment thereof.
8.19 Modifications of Certain Documents. The Borrowers will not
----------------------------------
consent to any modification, supplement or waiver of any of the provisions of
any Management Agreement (other than modifications, supplements or waivers that
do not alter any of the material rights or obligations of the Borrowers
thereunder, it being understood that any modification of the management fee
provisions thereof that would have the effect of increasing the management fees
payable pursuant thereto shall be deemed material for purposes hereof), or any
agreement, instrument or other document evidencing or relating to Affiliate
Subordinated Indebtedness or Indebtedness permitted under Section 8.07(e) hereof
without the prior consent of the Administrative Agent (with the approval of the
Majority Lenders).
Section 9. Events of Default.
-----------------
9.01 Events of Default. If one or more of the following events
-----------------
(herein called "Events of Default") shall occur and be continuing:
-----------------
(a) The Borrowers shall default in the payment when due (whether at
stated maturity or upon mandatory or optional prepayment) of any principal of or
interest on
<PAGE>
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any Loan or any Reimbursement Obligation, any fee or any other amount
payable by them hereunder or under any other Loan Document; or
(b) Any Borrower or any Subsidiary of a Borrower shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating $5,000,000 or more; or any event specified in any
note, agreement, indenture or other document evidencing or relating to any
such Indebtedness shall occur if the effect of such event is to cause, or
(without the lapse of time or the taking of any action, other than the
giving of notice) to permit the holder or holders of such Indebtedness (or
a trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise), prior to its stated
maturity; or any Borrower shall default in the payment when due of any
amount aggregating $5,000,000 or more under any Interest Rate Protection
Agreement; or any event specified in any Interest Rate Protection Agreement
shall occur if the effect of such event is to cause, or (with the giving of
any notice or the lapse of time or both) to permit, termination or
liquidation payment or payments aggregating $1,000,000 or more to become
due; or
(c) Any representation, warranty or certification made or deemed made
herein or in any other Loan Document (or in any modification or supplement
hereto or thereto) by any Obligor, or any certificate furnished to any
Lender or the Administrative Agent pursuant to the provisions hereof or
thereof, shall prove to have been false or misleading as of the time made
or furnished in any material respect; or
(d) Any Borrower shall default in the performance of any of its
obligations under any of Sections 8.01(g), 8.05, 8.06, 8.07, 8.08, 8.09,
8.10, 8.11, 8.12, 8.14, 8.16, 8.18 or 8.19 hereof; or any Borrower shall
default in the performance of any of its other obligations in this
Agreement or any Obligor shall default in the performance of its
obligations under any other Loan Document to which it is a party, and such
default shall continue unremedied for a period of thirty or more days after
notice thereof to the Borrowers by the Administrative Agent or any Lender
(through the Administrative Agent); or
(e) Any Obligor shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) Any Obligor shall (i) apply for or consent to the appointment of,
or the taking of possession by, a receiver, custodian, trustee, examiner or
liquidator of itself or of all or a substantial part of its Property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Bankruptcy Code, (iv) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
<PAGE>
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reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code or (vi) take
any corporate action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of any Obligor, in any court of competent jurisdiction, seeking
(i) its reorganization, liquidation, dissolution, arrangement or winding-
up, or the composition or readjustment of its debts, (ii) the appointment
of a receiver, custodian, trustee, examiner, liquidator or the like of such
Obligor or of all or any substantial part of its Property or (iii) similar
relief in respect of such Obligor under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more
days; or an order for relief against such Obligor shall be entered in an
involuntary case under the Bankruptcy Code; or
(h) Any Borrower shall be terminated, dissolved or liquidated (as a
matter of law or otherwise), or proceedings shall be commenced by a
Borrower seeking the termination, dissolution or liquidation of a Borrower,
or proceedings shall be commenced by any Person (other than the Borrowers)
seeking the termination, dissolution or liquidation of a Borrower and such
proceeding shall continue undismissed for a period of 60 or more days; or
(i) A final judgment or judgments for the payment of money of
$5,000,000 or more in the aggregate (exclusive of judgment amounts fully
covered by insurance where the insurer has admitted liability in respect of
such judgment) or of $10,000,000 or more in the aggregate (regardless of
insurance coverage) shall be rendered by one or more courts, administrative
tribunals or other bodies having jurisdiction against the Borrowers or any
of their Subsidiaries and the same shall not be discharged (or provision
shall not be made for such discharge), or a stay of execution thereof shall
not be procured, within 30 days from the date of entry thereof and the
relevant Borrower or Subsidiary shall not, within said period of 30 days,
or such longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
(j) An event or condition specified in Section 8.01(e) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Borrowers or any ERISA Affiliate shall incur or in the
opinion of the Majority Lenders shall be reasonably likely to
<PAGE>
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incur a liability to a Plan, a Multiemployer Plan or the PBGC (or any
combination of the foregoing) that, in the determination of the Majority
Lenders, would (either individually or in the aggregate) have a Material
Adverse Effect; or
(k) A reasonable basis shall exist for the assertion against any
Borrower or any of its Subsidiaries, or any predecessor in interest of any
Borrower or any of its Subsidiaries or Affiliates, of (or there shall have
been asserted against any Borrower or any of its Subsidiaries) an
Environmental Claim that, in the judgment of the Majority Lenders is
reasonably likely to be determined adversely to such Borrower or any of its
Subsidiaries, and the amount thereof (either individually or in the
aggregate) is reasonably likely to have a Material Adverse Effect (insofar
as such amount is payable by such Borrower or any of its Subsidiaries but
after deducting any portion thereof that is reasonably expected to be paid
by other creditworthy Persons jointly and severally liable therefor); or
(l) Any one or more of the following events shall occur and be
continuing:
(i) Rocco Commisso shall, by reason other than death or
permanent disability, cease to be Chairman and Chief Executive Officer
of the Manager (or, following a Qualified Public Offering, of Holdco),
or if Rocco Commisso shall cease to be the Chairman and Chief
Executive Officer of the Manager (or, as applicable, Holdco) by reason
of death or permanent disability, a period of 120 days shall have
elapsed without the appointment of a successor Chairman and Chief
Executive Officer with a Person with knowledge and experience in the
cable television industry reasonably acceptable to the Majority
Lenders;
(ii) Mediacom Management Corporation or Mediacom shall cease
to act as Manager of the Borrowers;
(iii) Mediacom, Mediacom Management Corporation and Mediacom
California shall cease to own, collectively, 50.1% of the aggregate
voting power of the ownership interests in each Borrower, provided
that nothing in this paragraph shall affect the obligation of the
Borrowers pursuant to Section 8.18(c) hereof, or of Mediacom pursuant
to Section 6.04 of the Guarantee and Pledge Agreement, to ensure that
Administrative Agent shall maintain on behalf of the Lenders at all
times a pledge of 100% of the equity interests in the Borrowers;
(iv) any person or group (within the meaning of Rule 13d-5
under the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act") and Section 13(d) and 14(d) of the Exchange Act) other than a
---
Commisso Entity or any entity controlled by or under common control
with Chase Manhattan Capital Corporation or Morris Communications
Corporation becomes, directly or
<PAGE>
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indirectly, in a single transaction or in a related series of
transactions by way of merger, consolidation or other business
combination or otherwise, the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than 25% of the aggregate voting
power of the capital stock of Mediacom or after a Qualified Public
Offering, Holdco, on a fully-diluted basis (in other words, giving
effect to the exercise of any warrants, options and conversion and
other rights);
(v) at any time prior to a Qualified Public Offering, the
Commisso Entities shall sell, transfer or otherwise dispose of more
than 20% of the aggregate equity interests in Mediacom held by them on
the date hereof (excluding in any event any additional equity
interests issued after the date hereof, including upon a revaluation
after the date hereof as provided in the operating agreement for
Mediacom, and excluding also any such transfer following the death or
permanent disability of Rocco Commisso and any such transfer that
consists of an exchange by the holders of the equity generally of
Mediacom of their equity interests in Mediacom for equity interests in
Holdco); or
(vi) at any time after a Qualified Public Offering, the
Commisso Entities shall cease to own at least 50.1% of the aggregate
voting power of the capital stock of Holdco on a fully-diluted basis
(in other words, giving effect to the exercise of any warrants,
options and conversion and other rights); or
(m) Except for Franchises that cover fewer than 10% of the
Subscribers of the Borrowers and their Subsidiaries (determined as at the
last day of the most recent fiscal quarter for which a Quarterly Officers'
Report shall have been delivered) one or more Franchises relating to the
CATV Systems of the Borrowers and their Subsidiaries shall be terminated or
revoked such that the respective Borrower or Subsidiary is no longer able
to operate such Franchises and retain the revenue received therefrom or the
respective Borrower or Subsidiary or the grantors of such Franchises shall
fail to renew such Franchises at the stated expiration thereof such that
the respective Borrower or Subsidiary is no longer able to operate such
Franchises and retain the revenue received therefrom; or
(n) The Liens created by the Security Documents shall at any time not
constitute a valid and perfected Lien on the collateral intended to be
covered thereby (to the extent perfection by filing, registration,
recordation or possession is required herein or therein) in favor of the
Administrative Agent, free and clear of all other Liens (other than Liens
permitted under Section 8.06 hereof or under the respective Security
Documents), or, except for expiration in accordance with its terms, any of
the Security Documents shall for whatever reason be terminated or cease to
be in full force and effect, or the enforceability thereof shall be
contested by any Borrower; or
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<PAGE>
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(o) Any Operating Agreement shall be modified in any manner that
would adversely affect the obligations of the Borrowers, or the rights of
the Lenders or the Administrative Agent, hereunder or under any of the
other Loan Documents;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9 with respect to any Borrower, the
Administrative Agent shall, if instructed by the Majority Lenders, by notice to
the Borrowers, terminate the Commitments and/or declare the principal amount
then outstanding of, and the accrued interest on, the Loans, the Reimbursement
Obligations and all other amounts payable by the Borrowers hereunder (including,
without limitation, any amounts payable under Section 5.05 or 5.06 hereof) to be
forthwith due and payable, whereupon such amounts shall be immediately due and
payable without presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrowers; and (2) in the case
of the occurrence of an Event of Default referred to in clause (f) or (g) of
this Section 9 with respect to any Borrower, the Commitments shall automatically
be terminated and the principal amount then outstanding of, and the accrued
interest on, the Loans, Reimbursement Obligations and all other amounts payable
by the Borrowers hereunder (including, without limitation, any amounts payable
under Section 5.05 or 5.06 hereof) shall automatically become immediately due
and payable without presentment, demand, protest or other formalities of any
kind, all of which are hereby expressly waived by the Borrowers.
In addition, upon the occurrence and during the continuance of any
Event of Default (if the Administrative Agent has declared the principal amount
then outstanding of, and accrued interest on, the Revolving Credit Loans and all
other amounts payable by the Borrowers hereunder to be due and payable), the
Borrowers agree that they shall, if requested by the Administrative Agent or the
Majority Revolving Credit Lenders through the Administrative Agent (and, in the
case of any Event of Default referred to in clause (f) or (g) of this Section 9
with respect to the Borrowers, forthwith, without any demand or the taking of
any other action by the Administrative Agent or such Lenders) provide cover for
the Letter of Credit Liabilities by paying to the Administrative Agent
immediately available funds in an amount equal to the then aggregate undrawn
face amount of all Letters of Credit, which funds shall be held by the
Administrative Agent in the Collateral Account as collateral security in the
first instance for the Letter of Credit Liabilities and be subject to withdrawal
only as therein provided.
9.02 Certain Cure Rights.
-------------------
(a) Notwithstanding the provisions of Section 9.01 hereof, but
without limiting the obligations of the Borrowers under Section 8.10(a) hereof,
a breach by the Borrowers as of the last day of any fiscal quarter or any fiscal
year of its obligations under said Section 8.10(a) shall not constitute an Event
of Default hereunder (except for purposes of Section 6 hereof) until the date
(the "Cut-Off Date") which is the earlier of the date thirty days after (a) the
-------------
date the
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financial statements for the Borrowers and their Subsidiaries with respect to
such fiscal quarter or fiscal year, as the case may be, are delivered pursuant
to Section 8.01(a) or 8.01(b) hereof or (b) the latest date on which such
financial statements are required to be delivered pursuant to said Section
8.01(a) or 8.01(b), provided that, if following the last day of such fiscal
--------
quarter or fiscal year and prior to the Cut-Off Date, the Borrowers shall have
received Cure Monies (and shall have applied the proceeds thereof to the
prepayment of the Loans hereunder, which prepayment, in the case of Affiliate
Subordinated Indebtedness, shall be effected in the manner provided in Section
8.14(a) hereof), or shall have prepaid the Loans hereunder from available cash,
in an amount sufficient to bring the Borrowers into compliance with said Section
8.10(a) assuming that the Total Leverage Ratio, as of the last day of such
fiscal quarter or fiscal year, as the case may be, were recalculated to subtract
such prepayment from the aggregate outstanding amount of Indebtedness, then such
breach or breaches shall be deemed to have been cured; provided, further, that
-------- -------
breaches of Section 8.10 hereof (including pursuant to paragraph (b) below) may
not be deemed to be cured pursuant to this Section 9.02 (x) more than three
times during the term of this Agreement or (y) during consecutive fiscal
quarters.
(b) Notwithstanding the provisions of Section 9.01 hereof, but
without limiting the obligations of the Borrowers under Section 8.10(b) or
8.10(c) hereof, a breach by the Borrowers as of the last day of any fiscal
quarter or any fiscal year of its obligations under said Section 8.10(b) or
8.10(c) shall not constitute an Event of Default hereunder (except for purposes
of Section 6 hereof) until the date (the "Cut-Off Date") which is the earlier of
------------
the date thirty days after (a) the date the financial statements for the
Borrowers and their Subsidiaries with respect to such fiscal quarter or fiscal
year, as the case may be, are delivered pursuant to Section 8.01(a) or 8.01(b)
hereof or (b) the latest date on which such financial statements are required to
be delivered pursuant to said Section 8.01(a) or 8.01(b), provided that, if
--------
following the last day of such fiscal quarter or fiscal year and prior to the
Cut-Off Date, the Borrowers shall have received Cure Monies (and shall have
applied the proceeds thereof to the prepayment of the Loans hereunder, which
prepayment, in the case of Affiliate Subordinated Indebtedness, shall be
effected in the manner provided in Section 8.14(a) hereof), or shall have
prepaid the Loans hereunder from available cash, in an amount sufficient to
bring the Borrowers into compliance with said Section 8.10(b) or 8.10(c)
assuming that the Interest Coverage Ratio and the Pro Forma Debt Service
Coverage Ratio (as the case may be), as of the last day of such fiscal quarter
or fiscal year, as the case may be, were recalculated to deduct from Interest
Expense the aggregate amount of interest that would not have been required to be
paid hereunder if such prepayment had been made on the first day of the period
for which the Interest Coverage Ratio and the Pro Form Debt Service Coverage
Ratio is determined under said Section 8.10(b) or 8.10(c), then such breach or
breaches shall be deemed to have been cured; provided, further, that breaches of
-------- -------
Section 8.10 hereof (including pursuant to paragraph (a) above) may not be
deemed to be cured pursuant to this Section 9.02 (x) more than three times
during the term of this Agreement or (y) during consecutive fiscal quarters.
<PAGE>
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Section 10. The Administrative Agent.
------------------------
10.01 Appointment, Powers and Immunities. Each Lender hereby appoints
----------------------------------
and authorizes the Administrative Agent to act as its agent hereunder and under
the other Loan Documents with such powers as are specifically delegated to the
Administrative Agent by the terms of this Agreement and under the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent (which term as used in this sentence and in Section
10.05 and the first sentence of Section 10.06 hereof shall include reference to
its affiliates and its own and its affiliates' officers, directors, employees
and agents):
(a) shall have no duties or responsibilities except those expressly
set forth in this Agreement and in the other Loan Documents, and shall not
by reason of this Agreement or any other Loan Document be a trustee for any
Lender;
(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or in
any other Loan Document, or in any certificate or other document referred
to or provided for in, or received by any of them under, 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 any other document referred to or provided for herein or
therein or for any failure by the Borrowers or any other Person to perform
any of its obligations hereunder or thereunder;
(c) shall not, except to the extent expressly instructed by the
Majority Lenders with respect to the collateral security under the Security
Documents, be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Loan Document; and
(d) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other Loan Document or under any other
document or instrument referred to or provided for herein or therein or in
connection herewith or therewith, except for its own gross negligence or
willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or attorneys-
in-fact selected by it in good faith.
10.02 Reliance by Administrative Agent. The Administrative Agent
--------------------------------
shall be entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telegram or
cable) reasonably believed by it to be
<PAGE>
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genuine and correct and to have been signed or sent by or on behalf of the
proper Person or Persons, and upon advice and statements of legal counsel,
independent accountants and other experts selected by the Administrative Agent.
As to any matters not expressly provided for by this Agreement or any other Loan
Document, the Administrative Agent shall in all cases be fully protected in
acting, or in refraining from acting, hereunder or thereunder in accordance with
instructions given by the Majority Lenders or, if provided herein, in accordance
with the instructions given by the Majority Revolving Credit Lenders, the
Majority Term Loan Lenders, the Majority Incremental Facility Lenders of a
Series or all of the Lenders as is required in such circumstance, and such
instructions of such Lenders and any action taken or failure to act pursuant
thereto shall be binding on all of the Lenders.
10.03 Defaults. The Administrative Agent shall not be deemed to have
--------
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Lender or the Borrowers specifying such Default
and stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Section 10.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders or, if
provided herein, the Majority Revolving Credit Lenders , the Majority Term Loan
Lenders or the Majority Incremental Facility Lenders of a Series, provided that,
--------
unless and until the Administrative Agent shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default as it shall
deem advisable in the best interest of the Lenders except to the extent that
this Agreement expressly requires that such action be taken, or not be taken,
only with the consent or upon the authorization of the Majority Lenders, the
Majority Revolving Credit Lenders, the Majority Term Loan Lenders or the
Majority Incremental Facility Lenders of a Series or all of the Lenders.
10.04 Rights as a Lender. With respect to its Commitments and the
------------------
Loans made by it, Chase (and any successor acting as Administrative Agent) in
its capacity as a Lender hereunder shall have the same rights and powers
hereunder as any other Lender and may exercise the same as though it were not
acting as the Administrative Agent, and the term "Lender" or "Lenders" shall,
unless the context otherwise indicates, include the Administrative Agent in its
individual capacity. Chase (and any successor acting as Administrative Agent)
and its affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Borrowers (and any of their
Subsidiaries or Affiliates) as if it were not acting as the Administrative
Agent, and Chase (and any such successor) and its affiliates may accept fees and
other consideration from the Borrowers for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.
<PAGE>
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10.05 Indemnification. The Lenders agree to indemnify the
---------------
Administrative Agent (to the extent not reimbursed under Section 11.03 hereof,
but without limiting the obligations of the Borrowers under said Section 11.03)
ratably in accordance with the aggregate principal amount of the Loans and
Reimbursement Obligations held by the Lenders (or, if no Loans or Reimbursement
Obligations are at the time outstanding, ratably in accordance with their
respective Commitments), for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever that may be imposed on, incurred by or
asserted against the Administrative Agent (including by any Lender) arising out
of or by reason of any investigation in or in any way relating to or arising out
of this Agreement or any other Loan Document any other documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby (including, without limitation, the costs and expenses that the
Borrowers are obligated to pay under Section 11.03 hereof, but excluding, unless
a Default has occurred and is continuing, normal administrative costs and
expenses incident to the performance of its agency duties hereunder) or the
enforcement of any of the terms hereof or thereof or of any such other
documents, provided that no Lender shall be liable for any of the foregoing to
the extent they arise from the gross negligence or willful misconduct of the
party to be indemnified.
10.06 Non-Reliance on Administrative Agent and Other Lenders. Each
------------------------------------------------------
Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrowers and their Subsidiaries and decision to enter into this Agreement and
that it will, independently and without reliance upon the Administrative Agent
or any other Lender, and based on such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and decisions in
taking or not taking action under this Agreement or under any other Loan
Document. The Administrative Agent shall not be required to keep itself informed
as to the performance or observance by the Borrowers of this Agreement or any of
the other Loan Documents or any other document referred to or provided for
herein or therein or to inspect the Properties or books of the Borrowers or any
of their Subsidiaries. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the
Administrative Agent hereunder or under the Security Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Borrowers or any of their Subsidiaries (or any of
their affiliates) that may come into the possession of the Administrative Agent
or any of its affiliates.
10.07 Failure to Act. Except for action expressly required of the
--------------
Administrative Agent hereunder and under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder or thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under
<PAGE>
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Section 10.05 hereof against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action.
10.08 Resignation or Removal of Administrative Agent. Subject to the
----------------------------------------------
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving five days prior
notice thereof to the Lenders and the Borrowers, and the Administrative Agent
may be removed at any time with or without cause by the Majority Lenders. Upon
any such resignation or removal, the Majority Lenders shall have the right, in
consultation with the Borrowers, to appoint a successor Administrative Agent. If
no successor Administrative Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders, in consultation with the
Borrowers, appoint a successor Administrative Agent, that shall be a bank that
has an office in New York, New York with a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this Section 10
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Administrative Agent.
10.09 Consents under Other Loan Documents. Except as otherwise
provided in Section 11.04 hereof with respect to this Agreement, the
Administrative Agent may, with the prior consent of the Majority Lenders (but
not otherwise), consent to any modification, supplement or waiver under any of
the Loan Documents, provided that, without the prior consent of each Lender, the
--------
Administrative Agent shall not (except as provided herein or in the Security
Documents) release all or substantially all of the Subsidiary Guarantors from
their obligations under the Security Documents, or release all or substantially
all of the collateral or otherwise terminate all or substantially all of the
Liens under the Security Documents (taken as a whole), or agree to additional
obligations being secured by all or substantially all such collateral security
(unless the Lien for such additional obligations shall be junior to the Lien in
favor of the other obligations secured by such Security Document, in which event
the Administrative Agent may consent to such junior Lien provided that it
--------
obtains the consent of the Majority Lenders thereto), alter the relative
priorities of the obligations entitled to the benefits of all or substantially
all of the Liens under the Security Documents, except that no such consent shall
be required, and the Administrative Agent is hereby authorized, to release any
Lien covering Property (and to release any Subsidiary Guarantor) that is the
subject of either a disposition of Property permitted hereunder or a Disposition
to which the Majority Lenders have consented.
<PAGE>
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Section 11. Miscellaneous.
-------------
11.01 Waiver. No failure on the part of the Administrative Agent or
------
any Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
Each Borrower irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by the
Administrative Agent or any Lender relating in any way to this Agreement should
be dismissed or stayed by reason, or pending the resolution, of any action or
proceeding commenced by a Borrower relating in any way to this Agreement whether
or not commenced earlier. To the fullest extent permitted by applicable law,
the Borrowers shall take all measures necessary for any such action or
proceeding commenced by the Administrative Agent or any Lender to proceed to
judgment prior to the entry of judgment in any such action or proceeding
commenced by a Borrower.
11.02 Notices. All notices, requests and other communications
-------
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers, requests or consents under, this
Agreement) shall be given or made in writing (including, without limitation, by
telecopy) delivered to the intended recipient at (i) in the case of the
Borrowers and the Administrative Agent, at the "Address for Notices" specified
below its name on the signature pages hereof and (ii) in the case of each of the
Lenders, the address (or telecopy number) set forth in its Administrative
Questionnaire; or, as to any party, at such other address as shall be designated
by such party in a notice to each other party. Notwithstanding the foregoing,
notices of borrowing, prepayment and Conversion of Loans pursuant to Section
4.05 hereof may be made by telephone, so long as the same are promptly confirmed
in writing. Except as otherwise provided in this Agreement, all such
communications shall be deemed to have been duly given when transmitted by
telecopier or personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
11.03 Expenses, Etc. The Borrowers jointly and severally agree to pay
--------------
or reimburse each of the Lenders and the Administrative Agent for: (a) all
reasonable out-of-pocket costs and expenses of the Administrative Agent
(including, without limitation, the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy LLP, special New York counsel to Chase) in connection
with (i) the negotiation, preparation, execution and delivery of this Agreement
and the other Loan Documents and the extension of credit hereunder and (ii) the
negotiation or preparation of any modification, supplement or waiver of any of
the terms of this
<PAGE>
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Agreement or any of the other Loan Documents (whether or not consummated); (b)
all reasonable out-of-pocket costs and expenses of the Lenders and the
Administrative Agent (including, without limitation, the reasonable fees and
expenses of legal counsel) in connection with (i) any Default and any
enforcement or collection proceedings resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (x)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 11.03; and (c) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Agreement or any of the other Loan
Documents or any other document referred to herein or therein and all costs,
expenses, taxes, assessments and other charges incurred in connection with any
filing, registration, recording or perfection of any security interest
contemplated by any Security Document or any other document referred to therein.
The Borrowers hereby jointly and severally agree to indemnify the
Administrative Agent, each Lender, each of their affiliates and their respective
directors, officers, employees, attorneys and agents from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages or expenses
incurred by any of them (including, without limitation, any and all losses,
liabilities, claims, damages or expenses incurred by the Administrative Agent to
any Lender, whether or not the Administrative Agent or any Lender is a party
thereto) arising out of or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings) relating to the extensions of credit hereunder or any actual or
proposed use by the Borrowers or any of their Subsidiaries of the proceeds of
any of the extensions of credit hereunder, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings (but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified).
11.04 Amendments, Etc. Except as otherwise expressly provided in this
---------------
Agreement, any provision of this Agreement may be modified or supplemented only
by an instrument in writing signed by the Borrowers and the Majority Lenders, or
by the Borrowers and the Administrative Agent acting with the consent of the
Majority Lenders, and any provision of this Agreement may be waived by the
Majority Lenders or by the Administrative Agent acting with the consent of the
Majority Lenders; provided that:
--------
(a) no modification, supplement or waiver shall, unless by an
instrument signed by all of the Lenders or by the Administrative Agent
acting with the consent of all of the Lenders:
<PAGE>
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(i) increase, or extend the term of any of the Commitments, or
extend the time or waive any requirement for the reduction or
termination of any of the Commitments,
(ii) extend the date fixed for the payment of principal of or
interest on any Loan, the Reimbursement Obligations or any fee
hereunder,
(iii) reduce the amount of any such payment of principal,
(iv) reduce the rate at which interest is payable thereon or
any fee is payable hereunder,
(v) alter the manner in which payments or prepayments of
principal, interest or other amounts hereunder shall be applied, or
provide that any Class of Loans or Lenders are subordinate in right of
payment or have junior priority as to Collateral, as between the
Lenders or Classes of Loans,
(vi) alter the terms of this Section 11.04,
(vii) modify the percentages set forth in the definition of the
term "Majority Lenders", "Majority Revolving Credit Lenders",
"Majority Term Loan Lenders" or "Majority Incremental Facility
Lenders",
(viii) waive or amend any provision requiring the consent or
approval of all Lenders; or
(ix) waive any of the conditions precedent set forth in Section
6.01 hereof; and
(b) any modification or supplement of Section 10 hereof, or of any of
the rights or duties of the Administrative Agent hereunder, shall require
the consent of the Administrative Agent.
Anything in this Agreement to the contrary notwithstanding, no waiver
or modification of any provision of this Agreement that has the effect (either
immediately or at some later time) of enabling the Borrowers to satisfy a
condition precedent to the making of a Revolving Credit Loan, Term Loan or
Incremental Facility Loan of any Series shall be effective against the Revolving
Credit Lenders for the purposes of the Revolving Credit Commitments, the Term
Loan Lenders for purposes of the Term Loan Commitments and Incremental Facility
Commitments of such Series unless the Majority Revolving Credit Lenders or
Majority Incremental Facility Lenders of such Series, as applicable, shall have
concurred with such waiver
<PAGE>
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or modification, and no waiver or modification of any provision of this
Agreement or any other Loan Document that could reasonably be expected to
adversely affect the Lenders of any Class shall be effective against the Lenders
of such Class unless the Majority Revolving Credit Lenders, Majority Term Loan
Lenders or Majority Incremental Facility Lenders or the applicable Series, as
the case may be, shall have concurred with such waiver or modification.
11.05 Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
11.06 Assignments and Participations.
------------------------------
(a) None of the Borrowers may assign any of its rights or obligations
hereunder without the prior consent of all of the Lenders and the Administrative
Agent.
(b) Each Lender may assign any of its Loans, its Commitments and, if
such Lender is a Revolving Credit Lender, its Letter of Credit Interest (but
only with the consent of, in the case of its outstanding Commitments, the
Borrowers and the Administrative Agent and, in the case of the Revolving Credit
Commitment or a Letter of Credit Interest, the Issuing Lender, which consents
shall not be unreasonably withheld or delayed); provided that
--------
(i) no such consent by the Borrowers or the Administrative Agent
shall be required in the case of any assignment to another Lender, an
affiliate or an Approved Fund of a Lender;
(ii) except to the extent the Borrowers and the Administrative Agent
shall otherwise consent, any such partial assignment (other than to another
Lender or an affiliate or an Approved Fund of a Lender) shall be in an
amount at least equal to $5,000,000;
(iii) each such assignment by a Lender of its Revolving Credit Loans
or Revolving Credit Commitment or Letter of Credit Interest shall be made
in such manner so that the same portion of its Revolving Credit Loans,
Revolving Credit Commitment and Letter of Credit Interest is assigned to
the respective assignee;
(iv) each such assignment by a Lender of its Term Loans or Term Loan
Commitment shall be made in such manner so that the same portion of its
Term Loans and Term Loan Commitment is assigned to the respective assignee;
(v) each such assignment by a Lender of its Incremental Facility
Loans of any Series shall be made in such manner so that the same portion
of its Incremental Facility Loans and Incremental Facility
<PAGE>
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Commitment of such Series is assigned to the respective assignee; and
(vi) upon each such assignment, the assignor and assignee shall
deliver to the Borrowers, the Administrative Agent and the Issuing Lender
an Assignment and Acceptance in the form of Exhibit A hereto and the
assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an Administrative Questionnaire.
Upon execution and delivery by the assignor and the assignee to the Borrowers,
the Administrative Agent and the Issuing Lender of such Assignment and
Acceptance, and upon consent thereto by the Borrowers, the Administrative Agent
and the Issuing Lender to the extent required above, the assignee shall have, to
the extent of such assignment (unless otherwise consented to by the Borrowers,
the Administrative Agent and the Issuing Lender), the obligations, rights and
benefits of a Lender hereunder holding the Commitment(s), Loans and, if
applicable, Letter of Credit Interest (or portions thereof) assigned to it and
specified in such Assignment and Acceptance (in addition to the Commitment(s),
Loans and Letter of Credit Interest, if any, theretofore held by such assignee)
and the assigning Lender shall, to the extent of such assignment, be released
from the Commitment(s) (or portion(s) thereof) so assigned. Upon each such
assignment the assigning Lender shall pay the Administrative Agent an assignment
fee of $3,500; provided, however, that no such fee shall be payable in the case
-------- -------
of an assignment to another Lender, an Affiliate of a Lender or an Approved
Fund; and provided further that, in the case of contemporaneous assignments by a
-------- -------
Lender to more than one fund managed by the same investment advisor (which funds
are not then Lenders hereunder), only a single such fee shall be payable for all
such contemporaneous assignments.
(c) A Lender may sell or agree to sell to one or more other Persons
(each a "Participant") a participation in all or any part of any Loans or Letter
-----------
of Credit Interest held by it, or in its Commitments, provided that (i) such
--------
Participant shall not have any rights or obligations under this Agreement or any
other Loan Document (the Participant's rights against such Lender in respect of
such participation to be those set forth in the agreements executed by such
Lender in favor of the Participant) and (ii) such Lender shall promptly notify
the Borrowers of the sale of such participation. All amounts payable by the
Borrowers to any Lender under Section 5 hereof in respect of Loans and Letter of
Credit Interests held by it, and its Commitments, shall be determined as if such
Lender had not sold or agreed to sell any participations in such Loans, Letter
of Credit Interest and Commitments, and as if such Lender were funding each of
such Loan, Letter of Credit Interest and Commitments in the same way that it is
funding the portion of such Loan, Letter of Credit Interest and Commitments in
which no participations have been sold. In no event shall a Lender that sells a
participation agree with the Participant to take or refrain from taking any
action hereunder or under any other Loan Document except that such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term of such Lender's related
Commitment or extend the amount or
<PAGE>
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date of any scheduled reduction of such Commitment pursuant to Section 2.04
hereof, (ii) extend the date fixed for the payment of principal of or interest
on the related Loan or Loans, Reimbursement Obligations or any portion of any
fee hereunder payable to the Participant, (iii) reduce the amount of any such
payment of principal, (iv) reduce the rate at which interest is payable thereon,
or any fee hereunder payable to the Participant, to a level below the rate at
which the Participant is entitled to receive such interest or fee or (v) consent
to any modification, supplement or waiver hereof or of any of the other Loan
Documents to the extent that the same, under Section 10.09 or Section 11.04
hereof, requires the consent of each Lender.
(d) In addition to the assignments and participations permitted under
the foregoing provisions of this Section 11.06, any Lender may (without notice
to the Borrowers, the Administrative Agent or any other Lender and without
payment of any fee) (i) assign and pledge all or any portion of its Loans to any
Federal Reserve Bank as collateral security pursuant to Regulation A and any
Operating Circular issued by such Federal Reserve Lender and (ii) assign all or
any portion of its rights under this Agreement and its Loans to an affiliate.
Any Lender that is a fund that invests in bank loans may (without the consent of
the Borrowers or the Administrative Agent) pledge all or any portion of its
rights in connection with this Agreement to the trustee for holders of
obligations owed, or securities issued, by such fund as security for such
obligations or such securities, provided that any foreclosure or other exercise
of remedies by such trustee shall be subject to the provisions of this Section
11.06 in all respects. No assignment or pledge described in this paragraph shall
release the assigning Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning the Borrowers or
any of their Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 11.12(b) hereof.
(f) Anything in this Section 11.06 to the contrary notwithstanding,
no Lender may assign or participate any interest in any Loan or Reimbursement
Obligation held by it hereunder to the Borrowers or any of their Affiliates or
Subsidiaries without the prior consent of each Lender.
(g) The Administrative Agent, acting for this purpose as an agent of
the Borrowers, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the "Register"). The entries in the Register shall be
--------
conclusive, and the Borrowers, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding
notice to the contrary.
<PAGE>
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The Register shall be available for inspection by the Borrowers and any Lender,
at any reasonable time and from time to time upon reasonable prior notice.
(h) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) above, the Administrative Agent shall accept such Assignment and Acceptance
and record the information contained therein in the Register. No assignment
shall be effective for purposes of this Agreement unless it has been recorded in
the Register as provided in this paragraph.
(i) Notwithstanding anything to the contrary contained herein, any
lender (a "Granting Lender") may grant to a special purpose funding vehicle (a
---------------
"SPC"), identified as such in writing from time to time by the Granting Lender
---
to the Administrative Agent and the Borrowers, the option to provide to the
Borrowers all or any part of any Loan that such Granting Lender would otherwise
be obligated to make to the Borrowers pursuant to this Agreement; provided that
-------------
(i) nothing herein shall constitute a commitment by any SPC to make any Loan,
(ii) if an SPC elects not to exercise such option or otherwise fails to provide
all or any part of such Loan, the Granting Lender shall be obligated to make
such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as
if, such Loan were made by such Granting Lender. Each party hereto hereby agrees
that no SPC shall be liable for any indemnity or similar payment obligation
under this Agreement (all liability for which shall remain with the Granting
Lender). In furtherance of the foregoing, each party hereto hereby agrees (which
agreement shall survive the termination of this Agreement) that, prior to the
date that is one year and one day after the payment in full of all outstanding
commercial paper, or other senior indebtedness of any SPC, it will not institute
against, or join any other person in instituting against, such SPC any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
under the laws of the United States or any State thereof in respect of claims
arising out of this Agreement. In addition, notwithstanding anything to the
contrary contained in this Section 11.06(i), any SPC may (i) with notice to, but
without the prior written consent of, the Borrowers and the Administrative Agent
and without paying any processing fee therefor, assign all or a portion of its
interests in any Loans to the Granting Lender or to any financial institutions
(consented to by the Borrowers and Administrative Agent) providing liquidity
and/or credit support to or for the account of such SPC to support the funding
or maintenance of Loans and (ii) disclose on a confidential basis any non-public
information relating to its Loans to any rating agency, commercial paper dealer
or provider of any surety, guarantee or credit or liquidity enhancement to such
SPC.
11.07 Survival. The obligations of the Borrowers under Sections 5.01,
--------
5.05, 5.06, 5.07 and 11.03 hereof, and the obligations of the Lenders under
Section 10.05 hereof, shall
<PAGE>
-113-
survive the repayment of the Loans and Reimbursement Obligations and the
termination of the Commitments and, in the case of any Lender that may assign
any interest in its Commitments, Loans or Letter of Credit Interest hereunder,
shall survive the making of such assignment, notwithstanding that such assigning
Lender may cease to be a "Lender" hereunder. In addition, each representation
and warranty made, or deemed to be made by a notice of any extension of credit
(whether by means of a Loan or a Letter of Credit), herein or pursuant hereto
shall survive the making of such representation and warranty, and no Lender
shall be deemed to have waived, by reason of making any extension of credit
hereunder (whether by means of a Loan or a Letter of Credit), any Default that
may arise by reason of such representation or warranty proving to have been
false or misleading, notwithstanding that such Lender or the Administrative
Agent may have had notice or knowledge or reason to believe that such
representation or warranty was false or misleading at the time such extension of
credit was made.
11.08 Captions. The table of contents and captions and section
--------
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
11.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.10 Governing Law; Submission to Jurisdiction. This Agreement shall
-----------------------------------------
be governed by, and construed in accordance with, the law of the State of New
York. Each Borrower hereby submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York and of the
Supreme Court of the State of New York sitting in New York County (including its
Appellate Division), and of any other appellate court in the State of New York,
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each Borrower hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient
11.11 Waiver of Jury Trial. EACH OF THE BORROWERS, THE ADMINISTRATIVE
--------------------
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
<PAGE>
-114-
11.12 Treatment of Certain Information; Confidentiality.
-------------------------------------------------
(a) The Borrowers acknowledge that from time to time financial
advisory, investment banking and other services may be offered or provided to
the Borrowers or one or more of their Subsidiaries (in connection with this
Agreement or otherwise) by any Lender or by one or more subsidiaries or
affiliates of such Lender and the Borrowers hereby authorize each Lender to
share any information delivered to such Lender by the Borrowers and their
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such subsidiary or affiliate,
it being understood that any such subsidiary or affiliate receiving such
information shall be bound by the provisions of paragraph (b) below as if it
were a Lender hereunder. Such authorization shall survive the repayment of the
Loans and Reimbursement Obligations and the termination of the Commitments.
(b) Each Lender and the Administrative Agent agrees (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by any Obligor pursuant to this Agreement
or any other Loan Document that is identified by the Borrowers as being
confidential at the time the same is delivered to the Lenders or the
Administrative Agent, provided that nothing herein shall limit the disclosure of
--------
any such information (i) after such information shall have become public (other
than through a violation of this Section 11.12), (ii) to the extent required by
statute, rule, regulation or judicial process, (iii) to counsel for any of the
Lenders or the Administrative Agent, (iv) to bank examiners (or any other
regulatory authority having jurisdiction over any Lender or the Administrative
Agent), or to auditors or accountants, (v) to the Administrative Agent or any
other Lender (or to Chase Securities Inc.), (vi) in connection with any
litigation to which any one or more of the Lenders or the Administrative Agent
is a party, or in connection with the enforcement of rights or remedies
hereunder or under any other Loan Document, (vii) to a subsidiary or affiliate
of such Lender as provided in paragraph (a) above or (viii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and delivers
to the respective Lender a Confidentiality Agreement substantially in the form
of Exhibit I hereto (or executes and delivers to such Lender an acknowledgement
to the effect that it is bound by the provisions of this Section 11.12(b), which
acknowledgement may be included as part of the respective assignment or
participation agreement pursuant to which such assignee or participant acquires
an interest in the Loans or Letter of Credit Interest hereunder); provided,
--------
further, that obligations of any assignee that has executed a Confidentiality
- -------
Agreement in the form of Exhibit I hereto shall be superseded by this Section
11.12 upon the date upon which such assignee becomes a Lender hereunder pursuant
to Section 11.06(b) hereof.
<PAGE>
-115-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
MEDIACOM SOUTHEAST LLC
MEDIACOM CALIFORNIA LLC
MEDIACOM DELAWARE LLC
MEDIACOM ARIZONA LLC
By MEDIACOM LLC, a Member
By: /s/ Rocco Commisso.
-------------------------------
Title: Manager
Address for Notices:
c/o Mediacom LLC
100 Crystal Road
Middletown, New York 10941
Attention: Rocco B. Commisso
Telecopier No.: (914) 755-2839
Telephone No.: (914) 696-2600
<PAGE>
-116-
THE CHASE MANHATTAN BANK
By: /s/ Constance M. Coleman.
--------------------------------
Title: Vice President
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: /s/ Constance M. Coleman.
--------------------------------
Title: Vice President
Address for Notices to
Chase as Administrative Agent:
The Chase Manhattan Bank
Agent Bank Services
1 Chase Manhattan Plaza
New York, New York 10081
Telecopier No.: (212) 552-5700
Telephone No.: (212) 552-7440
<PAGE>
-117-
BANK OF MONTREAL
By: /s/ Allegra Griffiths
-------------------------------
Name: Allegra Griffiths
Title: Director
FIRST UNION NATIONAL BANK
By:/s/ Douglas E. Blackman
-------------------------------
Name: Douglas E. Blackman
Title: Vice President
CIBC INC.
By: /s/ Tefta Ghilaga
-------------------------------
Name: Tefta Ghilaga
Title: Executive Director
CIBC World Markets Corp. As Agent
CREDIT SUISSE FIRST BOSTON
By: /s/ Kristin Lepri
-------------------------------
Name: Kristin Lepri
Title: Associate
By: /s/ Todd C. Morgan
--------------------------------
Name: Todd C. Morgan
Title: Director
<PAGE>
-118-
DRESDNER BANK AG NEW YORK AND
GRAND CAYMAN BRANCHES
By: /s/ Constance Loosemore
------------------------------------
Name: Constance Loosemore
Title: Assistant Vice President
By: /s/ Jane A. Majeski
------------------------------------
Name: Jane A. Majeski
Title: First Vice President
FLEET NATIONAL BANK
By: /s/ Eric S. Meyer
------------------------------------
Name: Eric S. Meyer
Title: Vice President
MELLON BANK, N.A.
By: /s/ Raghunatha Reddy
------------------------------------
Name: Raghunatha Reddy
Title: Lending Officer
PNC BANK, NATIONAL ASSOCIATION
By: /s/ John T. Wilden
------------------------------------
Name: John T. Wilden
Title: Vice President
THE BANK OF NOVA SCOTIA
By: /s/ Vincent J. Fitzgerald, Jr.
------------------------------------
Name: Vincent J. Fitzgerald, Jr.
Title: Authorized Signatory
<PAGE>
-119-
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By: /s/ W. David Wisdom
------------------------------------
Name: W. David Wisdom
Title: Vice President
BANQUE NATIONALE DE PARIS
By: /s/ Gregg W. Bonardi
------------------------------------
Name: Gregg W. Bonardi
Title: Vice President
By: /s/ Stephanie Rogers
------------------------------------
Name: Stephanie Rogers
Title: Vice President
BANK OF AMERICA, N.A.
By: /s/ Todd Shipley
------------------------------------
Name: Todd Shipley
Title: Senior Vice President
THE FUJI BANK, LIMITED
By: /s/ Teiji Teramoto
------------------------------------
Name: Teiji Teramoto
Title: Vice President & Manager
<PAGE>
-120-
MEES PIERSON CAPITAL CORP.
By: /s/ John C. Preneta
-------------------------------------
Name: John C. Preneta
Title: Chief Credit and Risk Officer
By: /s/ Hendrik Vroege
-------------------------------------
Name: Hendrik Vroege
Title: Managing Director
UNION BANK OF CALIFORNIA, N.A.
By: /s/ Stender E. Sweeney
-------------------------------------
Name: Stender E. Sweeney
Title: Assistant Vice President
CITIBANK, N.A.
By: /s/ Nicolas T. Erni
-------------------------------------
Name: Nicolas T. Erni
Title: Attorney in Fact
SOCIETE GENERALE
By: /s/ Robert G. Robin
-------------------------------------
Name: Robert G. Robin
Title: Vice President
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Thomas P. Waters
-------------------------------------
Name: Thomas P. Waters
Title: Duly Authorized Signatory
<PAGE>
-121-
FLOATING RATE PORTFOLIO
By: INVESCO Senior Secured Management, Inc.,
as attorney in fact
By:/s/ Anne M. McCarthy
----------------------------------
Name: Anne M. McCarthy
Title: Authorized Signatory
KZH-ING-1 LLC
By:/s/ Peter Chin
----------------------------------
Name: Peter Chin
Title: Authorized Agent
<PAGE>
SCHEDULE I
Commitments
-----------
<TABLE>
<CAPTION>
Revolving Term
Lender Credit Commitment Loan Commitment
- ------ ------------------- ---------------------
<S> <C> <C>
The Chase Manhattan Bank $ 41,000,000.00 $ 62,500,000.00
First Union National Bank 37,000,000.00 4,000,000.00
Bank of Montreal 37,000,000.00 4,000,000.00
CIBC Inc. 30,000,000.00 0
Credit Suisse First Boston 30,000,000.00 0
Dresdner Bank AG New York and 30,000,000.00 0
Grand Cayman Branches
Fleet National Bank 30,000,000.00 0
Mellon Bank, N.A. 30,000,000.00 0
PNC Bank, National Association 30,000,000.00 0
The Bank of Nova Scotia 30,000,000.00 0
SunTrust Bank, Central 20,000,000.00 3,000,000.00
Florida, N.A.
Bank of America, N.A. 20,000,000.00 0
Citibank, N.A. 15,000,000.00 0
The Fuji Bank, Limited 15,000,000.00 0
Mees Pierson Capital Corp. 10,000,000.00 2,000,000.00
Societe Generale 15,000,000.00 0
Union Bank of California, N.A. 15,000,000.00 3,000,000.00
Banque Nationale de Paris 15,000,000.00 3,000,000.00
General Electric Capital Corporation 0 13,500,000.00
Floating Rate Portfolio 0 2,500,000.00
KZH-ING-1 LLC 2,500,000.00
Total $450,000,000.00 $100,000,000.00
=============== ===============
</TABLE>
<PAGE>
SCHEDULE II
Material Agreements and Liens
-----------------------------
[See Sections 7.11, 8.06(b) and 8.07(b)]
Part A - Material Agreements
-------------------
Part B - Liens
-----
<PAGE>
SCHEDULE III
Investments
-----------
[See Sections 7.14 and 8.08(a)]
<PAGE>
SCHEDULE IV
Franchises
----------
[See definition of "Franchises" in
Section 1.01 and Section 7.16]
<PAGE>
SCHEDULE V
Certain Matters related to CATV Systems
---------------------------------------
[See definition of CATV Systems in Section 1.01 and Section 7.17]
<PAGE>
SCHEDULE VI
Certain Adjustments to System Cash Flow
---------------------------------------
[See definition of "Adjusted System Cash Flow" in Section 1.01]
<PAGE>
EXHIBIT 10.6
************************************************************
MEDIACOM ILLINOIS LLC
MEDIACOM INDIANA LLC
MEDIACOM IOWA LLC
MEDIACOM MINNESOTA LLC
MEDIACOM WISCONSIN LLC
ZYLSTRA COMMUNICATIONS CORP.
_____________________________
CREDIT AGREEMENT
Dated as of November 5, 1999
______________________________
THE CHASE MANHATTAN BANK,
as Administrative Agent
************************************************************
<PAGE>
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is attached
but is inserted for convenience of reference only.
Page
Section 1. Definitions and Accounting Matters............. 1
1.01 Certain Defined Terms........................... 1
1.02 Accounting Terms and Determinations............. 30
1.03 Classes and Types of Loans...................... 31
1.04 Subsidiaries.................................... 31
1.05 Nature of Obligations of Borrowers.............. 32
Section 2. Commitments, Loans and Prepayments............. 32
2.01 Loans........................................... 32
2.02 Borrowings...................................... 34
2.03 Letters of Credit............................... 34
2.04 Changes of Commitments.......................... 39
2.05 Commitment Fee.................................. 41
2.06 Lending Offices................................. 42
2.07 Several Obligations; Remedies Independent....... 42
2.08 Loan Accounts; Promissory Notes................. 42
2.09 Optional Prepayments and Conversions or
Continuations of Loans......................... 43
2.10 Mandatory Prepayments and Reductions of
Commitments.................................... 44
Section 3. Payments of Principal and Interest............. 48
3.01 Repayment of Loans.............................. 48
3.02 Interest........................................ 49
3.03 Determination of Applicable Margin.............. 50
Section 4. Payments; Pro Rata Treatment; Computations;
Etc........................................... 51
4.01 Payments........................................ 51
4.02 Pro Rata Treatment.............................. 52
4.03 Computations.................................... 53
4.04 Minimum Amounts................................. 53
4.05 Certain Notices................................. 53
4.06 Non-Receipt of Funds by the Administrative
Agent.......................................... 54
4.07 Sharing of Payments, Etc........................ 55
(i)
<PAGE>
Page
----
Section 5. Yield Protection, Etc.......................... 57
5.01 Additional Costs................................ 57
5.02 Limitation on Types of Loans.................... 59
5.03 Illegality...................................... 59
5.04 Treatment of Affected Loans..................... 59
5.05 Compensation.................................... 60
5.06 Additional Costs in Respect of Letters of
Credit......................................... 61
5.07 U.S. Taxes...................................... 62
5.08 Replacement of Lenders.......................... 63
Section 6. Conditions Precedent........................... 64
6.01 Initial Extension of Credit..................... 64
6.02 Initial and Subsequent Extensions of Credit..... 67
Section 7. Representations and Warranties................. 67
7.01 Existence....................................... 67
7.02 Financial Condition............................. 68
7.03 Litigation...................................... 68
7.04 No Breach....................................... 69
7.05 Action.......................................... 69
7.06 Approvals....................................... 69
7.07 ERISA........................................... 70
7.08 Taxes........................................... 70
7.09 Investment Company Act.......................... 70
7.10 Public Utility Holding Company Act.............. 70
7.11 Material Agreements and Liens................... 70
7.12 Environmental Matters........................... 71
7.13 Capitalization.................................. 72
7.14 Subsidiaries, Etc............................... 72
7.15 True and Complete Disclosure.................... 72
7.16 Franchises...................................... 73
7.17 The CATV Systems................................ 74
7.18 Rate Regulation................................. 75
7.19 Year 2000 Issues. To the knowledge of the
Borrowers, a................................... 76
7.20 Triax Acquisition Agreement..................... 76
7.21 Use of Credit................................... 76
Section 8. Covenants of the Borrowers..................... 77
8.01 Financial Statements Etc........................ 77
8.02 Litigation...................................... 79
8.03 Existence, Etc.................................. 80
(ii)
<PAGE>
Page
----
8.04 Insurance....................................... 81
8.05 Prohibition of Fundamental Changes.............. 81
8.06 Limitation on Liens............................. 86
8.07 Indebtedness.................................... 87
8.08 Investments..................................... 88
8.09 Restricted Payments............................. 89
8.10 Certain Financial Covenants..................... 91
8.11 Management Fees................................. 92
8.12 Capital Expenditures............................ 93
8.13 Interest Rate Protection Agreements............. 95
8.14 Affiliate and Additional Subordinated
Indebtedness................................... 95
8.15 Lines of Business............................... 96
8.16 Transactions with Affiliates.................... 96
8.17 Use of Proceeds................................. 97
8.18 Certain Obligations Respecting Subsidiaries;
Further Assurances............................. 97
8.19 Modifications of Certain Documents.............. 99
Section 9. Events of Default.............................. 100
9.01 Events of Default............................... 100
9.02 Certain Cure Rights............................. 105
Section 10. The Administrative Agent...................... 106
10.01 Appointment, Powers and Immunities............. 106
10.02 Reliance by Administrative Agent............... 107
10.03 Defaults....................................... 107
10.04 Rights as a Lender............................. 108
10.05 Indemnification................................ 108
10.06 Non-Reliance on Administrative Agent and Other
Lenders........................................ 108
10.07 Failure to Act................................. 109
10.08 Resignation or Removal of Administrative Agent. 109
10.09 Consents under Other Loan Documents............ 110
Section 11. Miscellaneous................................. 110
11.01 Waiver......................................... 110
11.02 Notices........................................ 111
11.03 Expenses, Etc.................................. 111
11.04 Amendments, Etc................................ 112
11.05 Successors and Assigns......................... 113
11.06 Assignments and Participations................. 114
11.07 Survival....................................... 117
11.08 Captions....................................... 118
11.09 Counterparts................................... 118
(iii)
<PAGE>
Page
----
11.10 Governing Law; Submission to Jurisdiction...... 118
11.11 Waiver of Jury Trial........................... 118
11.12 Treatment of Certain Information;
Confidentiality............................... 118
SCHEDULE I - Commitments
SCHEDULE II - Taxes
SCHEDULE III - Material Agreements and Liens
SCHEDULE IV - Investments
SCHEDULE V - Franchises
SCHEDULE VI - Certain Matters Related to CATV Systems
SCHEDULE VII - Certain Adjustments to System Cash Flow
EXHIBIT A - Form of Assignment and Acceptance
EXHIBIT B - Form of Quarterly Officer's Report
EXHIBIT C - Form of Pledge Agreement
EXHIBIT D - Form of Guarantee and Pledge Agreement
EXHIBIT E - Form of Subsidiary Guarantee Agreement
EXHIBIT F - Form of Management Fee Subordination Agreement
EXHIBIT G - Form of Opinion of Counsel to the Obligors
EXHIBIT H - Form of Opinion of Special New York Counsel to Chase
EXHIBIT I - Form of Confidentiality Agreement
EXHIBIT J - Form of Affiliate Subordinated Indebtedness Subordination Agreement
(iv)
<PAGE>
CREDIT AGREEMENT dated as of November 5, 1999, between each of the following
parties:
MEDIACOM ILLINOIS LLC, a limited liability company duly organized and validly
existing under the laws of the State of Delaware ("Mediacom Illinois");
-----------------
MEDIACOM INDIANA LLC, a limited liability company duly organized and
validly existing under the laws of the State of Delaware ("Mediacom
--------
Indiana"); MEDIACOM IOWA LLC, a limited liability company duly organized
and validly existing under the laws of the State of Delaware ("Mediacom
--------
Iowa"); MEDIACOM MINNESOTA LLC, a limited liability company duly organized
----
and validly existing under the laws of the State of Delaware ("Mediacom
--------
Minnesota"); MEDIACOM WISCONSIN LLC, a limited liability company duly
---------
organized and validly existing under the laws of the State of Delaware
("Mediacom Wisconsin"); and ZYLSTRA COMMUNICATIONS CORP., a corporation
--------------------
validly existing under the laws of the State of Minnesota ("Zylstra", and,
-------
together with Mediacom Illinois, Mediacom Indiana, Mediacom Iowa, Mediacom
Minnesota and Mediacom Wisconsin, the "Borrowers");
---------
each of the lenders that is a signatory hereto identified under the
caption "Lenders" on the signature pages hereto and each lender that
becomes a "Lender" after the date hereof pursuant to Section 11.06(b)
hereof (individually, a "Lender" and, collectively, the "Lenders"); and
------ -------
THE CHASE MANHATTAN BANK, a New York banking corporation, as
administrative agent for the Lenders (in such capacity, together with its
successors in such capacity, the "Administrative Agent").
--------------------
The Borrowers have requested that the Lenders extend credit to them (by making
loans and issuing letters of credit) in an aggregate principal or face amount
not exceeding $550,000,000 (which may, in the circumstances herein provided, be
increased to $750,000,000) at any one time outstanding to enable the Borrowers
to finance the Triax Acquisition (as hereinafter defined) and to provide funds
for additional acquisitions of cable televisions systems and for general
corporate purposes. The Lenders are prepared to extend such credit on the terms
and conditions hereof and, accordingly, the parties hereto agree as follows:
Section 1. Definitions and Accounting Matters.
----------------------------------
1.01 Certain Defined Terms.
---------------------
As used herein, the following terms shall have the following meanings (all
terms defined in this Section 1.01 or in other provisions of this Agreement in
the singular to have the same meanings when used in the plural and vice versa):
---- -----
"Acquisition Agreements" shall mean, collectively, the Triax Acquisition
----------------------
Agreement and any Subsequent Acquisition Agreements.
Credit Agreement
----------------
<PAGE>
-2-
"Acquisitions" shall mean, collectively, the Triax Acquisition and any
------------
Subsequent Acquisitions.
"Additional Capital Expenditures" shall mean Capital Expenditures made in
-------------------------------
accordance with the requirements of Section 8.12(b) hereof.
"Adjusted Operating Cash Flow" shall mean, for any period during which the
----------------------------
Borrowers shall have consummated an Acquisition, the sum, for the Borrowers and
their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP), of the following, in each case determined under the
assumption that such Acquisition had been consummated on the first day of such
period: (i) Operating Cash Flow minus (ii) without duplication of the
-----
Management Fees actually paid during such period, the additional Management Fees
that would have been paid during such period at a rate equal to the then
applicable rate or percentage specified in the Management Agreement of the gross
operating revenue of the Borrowers and their Subsidiaries for such period
(determined, as specified above under the assumption that such Acquisition had
been consummated on the first day of such period).
"Adjusted System Cash Flow" shall mean, for any period during which the
-------------------------
Borrowers shall have consummated an Acquisition, the sum, for the Borrowers and
their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP), of the following, in each case determined under the
assumption that such Acquisition had been consummated on the first day of such
period: (i) System Cash Flow for such period plus (ii) the sum of (x) non-
----
recurring expenses incurred by the relevant sellers prior to the actual closing
of such Acquisition (to the extent such items were included as operating
expenses in the determination of System Cash Flow for such period) and (y) in
the case of the Triax Acquisition, the amounts set forth in Schedule VII hereto
for such period, or, in the case of any Subsequent Acquisition, the amounts set
forth in a statement of adjustments to System Cash Flow provided by the
Borrowers in connection with such Subsequent Acquisition and acceptable to the
Administrative Agent and Majority Lenders (in each case representing certain
cost savings and programming cost increases in respect of the CATV Systems being
acquired in such Acquisition).
"Administrative Questionnaire" shall mean an Administrative Questionnaire in a
----------------------------
form supplied by the Administrative Agent.
"Affiliate" shall mean any Person that directly or indirectly controls, or is
---------
under common control with, or is controlled by, a Borrower and, if such Person
is an individual, any member of the immediate family (including parents, spouse,
children and siblings) of such individual and any trust whose principal
beneficiary is such individual or one or more members
Credit Agreement
----------------
<PAGE>
-3-
of such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "control" (including, with its correlative
--------
meanings, "controlled by" and "under common control with") shall mean
------------- -------------------------
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
--------
event, any Person that owns directly or indirectly securities having 5% or more
of the voting power for the election of directors or other governing body of a
corporation or 5% or more of the partnership or other ownership interests of any
other Person (other than as a limited partner of such other Person) will be
deemed to control such corporation or other Person. Notwithstanding the
foregoing, (a) no individual shall be an Affiliate solely by reason of his or
her being a director, officer or employee of any Borrower or any of its
Subsidiaries and (b) none of the Borrowers or their Wholly Owned Subsidiaries
shall be Affiliates.
"Affiliate Letters of Credit" shall mean Letters of Credit issued in
---------------------------
accordance with the requirements of Section 8.08(g) hereof.
"Affiliate Subordinated Indebtedness" shall mean Indebtedness to an Affiliate
-----------------------------------
(i) for which a Borrower is directly and primarily liable, (ii) in respect of
which none of its Subsidiaries is contingently or otherwise obligated, (iii)
that is subordinated to the obligations of the Borrowers to pay principal of and
interest on the Loans, Reimbursement Obligations, fees and other amounts payable
hereunder pursuant to an Affiliate Subordinated Indebtedness Subordination
Agreement, (iv) that does not mature prior to December 31, 2009, and that is
issued pursuant to documentation containing terms (including interest, covenants
and events of default) in form and substance satisfactory to the Majority
Lenders and (v) that states by its terms that principal and interest in respect
thereof shall only be payable to the extent permitted under Section 8.09 hereof.
"Affiliate Subordinated Indebtedness Subordination Agreement" shall mean an
-----------------------------------------------------------
Affiliate Subordinated Indebtedness Subordination Agreement substantially in the
form of Exhibit J hereto between any Person to whom a Borrower or any of its
Subsidiaries may be obligated to pay Affiliate Subordinated Indebtedness, the
Borrowers and the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Apache Acquisition" shall mean the acquisition by Mediacom Arizona LLC, a
------------------
Subsidiary of Mediacom, of the Apache Junction, Arizona cable television system
from Triax as part of the Triax Acquisition.
"Applicable Lending Office" shall mean, for each Lender and for each Type of
-------------------------
Loan, the "Lending Office" of such Lender (or of an affiliate of such Lender)
designated for such Type of Loan in the Administrative Questionnaire submitted
by such Lender or such other office of such Lender (or of an affiliate of such
Lender) as such Lender may from time to time specify
Credit Agreement
----------------
<PAGE>
-4-
to the Administrative Agent and the Borrowers as the office by which its Loans
of such Type are to be made and maintained.
"Applicable Margin" shall mean, with respect to (a) Term Loans that are Base
-----------------
Rate Loans, (i) when the then-current Rate Ratio (determined pursuant to Section
3.03 hereof) is 5.00 to 1 or less, 1.50% per annum and (ii) at all other times,
1.75% per annum, (b) Term Loans that are Eurodollar Loans, (i) when the then-
current Rate Ratio (determined pursuant to Section 3.03 hereof) is 5.00 to 1 or
less, 2.50% per annum and (ii) at all other times, 2.75% per annum and (c)
Revolving Credit Loans of any Type, the respective rates indicated below for
Loans of such Type opposite the then-current Rate Ratio (determined pursuant to
Section 3.03 hereof) indicated below (except that anything in this Agreement to
the contrary notwithstanding, the Applicable Margin with respect to any Loans
shall be 1.75% with respect to Base Rate Loans and 2.75% with respect to
Eurodollar Loans during any period when an Event of Default shall have occurred
and be continuing):
Range Applicable Margin (% p.a.)
-------------------------
of
Rate Ratio Base Rate Loans Eurodollar Loans
---------- --------------- ----------------
Greater than 5.75 to 1 1.250% 2.250%
Greater than or equal to
5.50 to 1 but less than
or equal to 5.75 to 1 1.000% 2.000%
Greater than or equal to
5.00 to 1 but less than
5.50 to 1 0.750% 1.750%
Greater than or equal to
4.50 but less than
5.00 to 1 0.500% 1.500%
Greater than or equal to
3.75 to 1 but
less than 4.50 to 1 0.250% 1.250%
Greater than or equal to
3.00 to 1 but
less than 3.75 to 1 0.250% 1.000%
Less than 3.00 to 1 0.000% 0.750%
Credit Agreement
----------------
<PAGE>
-5-
"Applicable Permitted Transaction Amount" shall mean, as at any date
---------------------------------------
during any fiscal quarter during any Fiscal Period, the sum of (a) the Equity
Contribution Amount and the outstanding principal amount of Affiliate
Subordinated Indebtedness, as at the beginning of such fiscal quarter plus (b)
----
the total cash equity capital contributions made, and the aggregate principal
amount of Affiliate Subordinated Indebtedness advanced, to the Borrowers during
the period (the "current period") commencing on the first day of such fiscal
--------------
quarter through and including such date minus (c) the sum of (i) the aggregate
-----
amount of repayments of Affiliate Subordinated Indebtedness, and distributions
in respect of equity capital, made during the current period plus (ii) the
----
aggregate face amount of Affiliate Letters of Credit issued during the current
period or during the period (the "prior period") commencing on the Closing Date
------------
through and including the last day of the fiscal quarter immediately preceding
such fiscal quarter minus (iii) the aggregate amount of reductions in the
-----
undrawn face amount of Affiliate Letters of Credit (i.e. excluding reductions in
such face amount that occur upon a drawing thereunder) during the current period
or the prior period, together with the aggregate amount of Affiliate Letters of
Credit that expire or are terminated during the current period or the prior
period without being drawn.
"Approved Fund" means 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.
"Assignment and Acceptance" means an assignment and acceptance entered into by
-------------------------
a Lender and an assignee (with the consent of any party whose consent is
required by Section 11.05 hereof), and accepted by the Administrative Agent, in
the form of Exhibit A or any other form approved by the Administrative Agent.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as amended
---------------
from time to time.
"Base Rate" shall mean, for any day, a rate per annum equal to the higher of
---------
(a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the Prime Rate
for such day. Each change in any interest rate provided for herein based upon
the Base Rate resulting from a change in the Base Rate shall take effect at the
time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based upon the
---------------
Base Rate.
"Basic Documents" shall mean, collectively, this Agreement, the other Loan
---------------
Documents and the Triax Acquisition Agreement.
Credit Agreement
----------------
<PAGE>
-6-
"Basic Subscribers" shall mean, as at any date, (a) Subscribers who subscribe
-----------------
to a CATV System at the regular basic monthly subscription rate for such CATV
System to a single household Subscriber (exclusive of "secondary outlets", as
such term is commonly understood in the cable television industry), plus (b) the
----
number of Subscribers determined by dividing the aggregate dollar monthly amount
billed for basic service to bulk Subscribers (hotels, motels, apartment
buildings, hospitals and the like) located in each Region by the weighted
average of the regular basic monthly subscription rates for basic service
charged by the CATV Systems in such Region.
"Basle Accord" shall mean the proposals for risk-based capital framework
------------
described by the Basle Committee on Banking Regulations and Supervisory
Practices in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as amended, modified and
supplemented and in effect from time to time or any replacement thereof.
"Business Day" shall mean any day (a) on which commercial banks are not
------------
authorized or required to close in New York City and (b) if such day relates to
a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
by a Borrower with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, that is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"Capital Expenditures" shall mean, for any period, expenditures made by the
--------------------
Borrowers or any of their Subsidiaries to acquire or construct fixed assets,
plant and equipment (including renewals, improvements and replacements, but
excluding repairs and the Acquisitions) during such period computed in
accordance with GAAP.
"Capital Lease Obligations" shall mean, for any Person, all obligations of
-------------------------
such Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) Property to the extent such obligations are required
to be classified and accounted for as a capital lease on a balance sheet of such
Person under GAAP, and, for purposes of this Agreement, the amount of such
obligations shall be the capitalized amount thereof, determined in accordance
with GAAP.
"Casualty Event" shall mean, with respect to any Property of any Person, any
--------------
loss of or damage to, or any condemnation or other taking of, such Property for
which such Person or any of its Subsidiaries receives insurance proceeds, or
proceeds of a condemnation award or other compensation.
"CATV System" shall mean any cable distribution system that receives broadcast
-----------
signals by antennae, microwave transmission, satellite transmission or any other
form of
Credit Agreement
----------------
<PAGE>
-7-
transmission and that amplifies such signals and distributes them to Persons who
pay to receive such signals, but shall exclude wireless cable.
"Chase" shall mean The Chase Manhattan Bank.
-----
"Class" shall have the meaning assigned to such term in Section 1.03 hereof.
-----
"Closing Date" shall mean the date on which the initial extension of credit
------------
hereunder is made.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
----
time.
"Collateral Account" shall have the meaning assigned to such term in the
------------------
Pledge Agreement.
"Commisso Entity" shall mean, collectively, (i) Rocco Commisso, (ii) any
---------------
entity controlled by Rocco Commisso and owned by Rocco Commisso, (iii) members
of the immediate family of Rocco Commisso or (iv) trusts established for the
benefit of Rocco Commisso or members of the immediate family of Rocco Commisso.
Following a Qualified Public Offering, the term "Commisso Entity" shall also
include any officer or employee of Holdco and Mediacom who owns shares of the
capital stock of Holdco.
"Commitments" shall mean, collectively, the Revolving Credit Commitments, the
-----------
Term Loan Commitments and the Incremental Facility Commitments (if any).
"Continue", "Continuation" and "Continued" shall refer to the continuation
-------- ------------ ---------
pursuant to Section 2.09 hereof of a Eurodollar Loan from one Interest Period to
the next Interest Period.
"Convert", "Conversion" and "Converted" shall refer to a conversion pursuant
------- ---------- ---------
to Section 2.09 hereof of one Type of Loans into another Type of Loans, which
may be accompanied by the transfer by a Lender (at its sole discretion) of a
Loan from one Applicable Lending Office to another.
"Cure Monies" shall mean proceeds of Affiliate Subordinated Indebtedness
-----------
and/or equity contributions received by the Borrowers after the date hereof
that, at the time the same are received by the Borrowers are identified by the
Borrowers, in a certificate of a Senior Officer delivered by the Borrowers to
the Administrative Agent within one Business Day of such receipt, as
constituting "Cure Monies" for purposes of Section 9.02 hereof.
Credit Agreement
----------------
<PAGE>
-8-
"Debt Issuance" shall mean any issuance or sale by a Borrower or any of its
-------------
Subsidiaries after the Closing Date of any debt securities, excluding, however,
any Indebtedness incurred pursuant to Section 8.07(c) or 8.07(f) hereof.
"Debt Service" shall mean, for any period, the sum, for the Borrowers and
------------
their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP), of the following: (a) in the case of Revolving Credit
Loans under this Agreement, the aggregate amount of payments of principal of
such Loans that, giving effect to Commitment reductions or terminations
scheduled to be made during such period pursuant to Section 2.04(a) hereof, were
required to be made pursuant to Section 3.01(a) hereof during such period plus
----
(b) in the case of Term Loans and Incremental Facility Loans under this
Agreement and all other Indebtedness (other than Revolving Credit Loans), all
regularly scheduled payments or regularly scheduled prepayments of principal of
such Indebtedness (including, without limitation, the principal component of any
payments in respect of Capital Lease Obligations) made or payable during such
period (other than the principal component of any payments in respect of
Affiliate Subordinated Indebtedness) plus (c) all Interest Expense for such
----
period.
"Default" shall mean an Event of Default or an event that with notice or lapse
-------
of time or both would become an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or other disposition
-----------
of any Property (whether now owned or hereafter acquired) by the Borrowers or
any of their Subsidiaries to any other Person excluding any sale, assignment,
transfer or other disposition of any Property sold or disposed of in the
ordinary course of business and on ordinary business terms.
"Dollars" and "$" shall mean lawful money of the United States of America.
------- -
"Environmental Claim" shall mean, with respect to any Person, any written or
-------------------
oral notice, claim, demand or other communication (collectively, a "claim") by
-----
any other Person alleging or asserting such Person's liability for investigatory
costs, cleanup costs, governmental response costs, damages to natural resources
or other Property, personal injuries, fines or penalties arising out of, based
on or resulting from (i) the presence, or Release into the environment, of any
Hazardous Material at any location, whether or not owned by such Person, or (ii)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law. The term "Environmental Claim" shall include, without
limitation, any claim by any governmental authority for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and any claim by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence of Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
Credit Agreement
----------------
<PAGE>
-9-
"Environmental Laws" shall mean any and all present and future Federal, state,
------------------
local and foreign laws, rules or regulations, and any orders or decrees, in each
case as now or hereafter in effect, relating to the regulation or protection of
human health, safety or the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or toxic or hazardous
substances or wastes into the indoor or outdoor environment, including, without
limitation, ambient air, soil, surface water, ground water, wetlands, land or
subsurface strata, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, chemicals or toxic or hazardous substances or wastes.
"Equity Contribution Amount" shall mean, as at any date of determination, (a)
--------------------------
the aggregate amount of cash contributions made to the equity capital of the
Borrowers during the period from and including the respective dates of
organization in the case of the LLC Borrowers and, from and including the date
of acquisition by Mediacom thereof, in the case of Zylstra, through and
including such date of determination minus (b) the aggregate amount of
-----
distributions made in respect of the equity capital of the Borrowers during such
period.
"Equity Rights" shall mean, with respect to any Person, any subscriptions,
-------------
options, warrants, commitments, preemptive rights or agreements of any kind
(including, without limitation, any stockholders' or voting trust agreements)
for the issuance, sale, registration or voting of, or securities convertible
into, any additional shares of capital stock of any class or other ownership
interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business that is a
---------------
member of any group of organizations (i) described in Section 414(b) or (c) of
the Code of which a Borrower is a member and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code of which a Borrower
is a member.
"Eurodollar Base Rate" shall mean, for the Interest Period for any Eurodollar
--------------------
Loan, the rate appearing on Page 3750 of the Telerate Service (or on any
successor or substitute page of such Service, or any successor to or substitute
for such Service, providing rate quotations comparable to those currently
provided on such page of such Service, as determined by the Administrative Agent
from time to time for purposes of providing quotations of interest rates
applicable to Dollar deposits in the London interbank market) at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period, as the rate
Credit Agreement
----------------
<PAGE>
-10-
for the offering of Dollar deposits with a maturity comparable to such Interest
Period. In the event that such rate is not available at such time for any
reason, then the Eurodollar Base Rate for such Interest Period shall be the rate
at which Dollar deposits of $5,000,000 and for a maturity comparable to such
Interest Period are offered by the principal London office of the Administrative
Agent in immediately available funds in the London interbank market at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
"Eurodollar Loans" shall mean Loans that bear interest at rates based on rates
----------------
referred to in the definition of "Eurodollar Base Rate" in this Section 1.01.
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any Interest Period
---------------
therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/100
of 1%) determined by the Administrative Agent to be equal to the Eurodollar Base
Rate for such Loan for such Interest Period divided by 1 minus the Reserve
Requirement (if any) for such Loan for such Interest Period.
"Event of Default" shall have the meaning assigned to such term in Section 9
----------------
hereof.
"Excess Cash Flow" shall mean, for any period, the excess of (a) Operating
----------------
Cash Flow for such period over (b) the sum of (i) Capital Expenditures made
during such period plus (ii) the aggregate amount of Debt Service for such
----
period plus (iii) in the case of the LLC Borrowers, the Tax Payment Amount for
----
such period plus (iv) in the case of Zylstra, the aggregate amount of income
----
taxes for such period (to the extent not deducted in determining Operating Cash
Flow for such period) plus (v) any decreases (or minus any increases) in Working
---- -----
Capital from the first day to the last day of such period.
"Executive Compensation" shall mean, for any period, the aggregate amount of
----------------------
compensation (including, without limitation, salaries, withholding taxes,
unemployment insurance contributions, pension, health and other benefits) of the
Manager's executive management personnel during such period. For purposes
hereof, "executive management personnel" shall not include any individual (such
as a system manager) who is employed solely in connection with the day-to-day
operations of a CATV System.
"FCC" shall mean the Federal Communications Commission or any governmental
---
authority substituted therefor.
"Federal Funds Rate" shall mean, for any day, the rate per annum (rounded
------------------
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by
Credit Agreement
----------------
<PAGE>
-11-
Federal funds brokers on such day, as published by the Federal Reserve Bank of
New York on the Business Day next succeeding such day, provided that (a) if the
--------
day for which such rate is to be determined is not a Business Day, the Federal
Funds Rate for such day shall be such rate on such transactions on the next
preceding Business Day as so published on the next succeeding Business Day and
(b) if such rate is not so published for any Business Day, the Federal Funds
Rate for such Business Day shall be the average rate charged to Chase on such
Business Day on such transactions as determined by the Administrative Agent.
"Fiscal Period" means any fiscal year or the period from the Closing Date to
-------------
and including December 31, 1999.
"Franchise" shall mean a franchise, license, authorization or right by
---------
contract or otherwise to construct, own, operate, promote, extend and/or
otherwise exploit any CATV System operated or to be operated by the Borrowers or
any of their Subsidiaries granted by any state, county, city, town, village or
other local or state government authority or by the FCC. The term "Franchise"
shall include each of the Franchises set forth on Schedule V hereto.
"GAAP" shall mean generally accepted accounting principles applied on a basis
----
consistent with those that, in accordance with the last sentence of Section
1.02(a) hereof, are to be used in making the calculations for purposes of
determining compliance with this Agreement.
"Guarantee" shall mean a guarantee, an endorsement, a contingent agreement to
---------
purchase or to furnish funds for the payment or maintenance of, or otherwise to
be or become contingently liable under or with respect to, the Indebtedness,
other obligations, net worth, working capital or earnings of any Person, or a
guarantee of the payment of dividends or other distributions upon the stock or
equity interests of any Person, or an agreement to purchase, sell or lease (as
lessee or lessor) Property, products, materials, supplies or services primarily
for the purpose of enabling a debtor to make payment of such debtor's
obligations or an agreement to assure a creditor against loss, and including,
without limitation, causing a bank or other financial institution to issue a
letter of credit or other similar instrument for the benefit of another Person,
but excluding endorsements for collection or deposit in the ordinary course of
business. The terms "Guarantee" and "Guaranteed" used as a verb shall have a
--------- ----------
correlative meaning.
"Guarantee and Pledge Agreement" shall mean a Guarantee and Pledge Agreement
------------------------------
substantially in the form of Exhibit D hereto between Mediacom, the Manager and
the Administrative Agent, as the same shall be modified and supplemented and in
effect from time to time.
"Hazardous Material" shall mean, collectively, (a) any petroleum or petroleum
------------------
products, flammable materials, explosives, radioactive materials, asbestos, urea
formaldehyde foam insulation, and transformers or other equipment that contain
polychlorinated biphenyls
Credit Agreement
----------------
<PAGE>
-12-
("PCB's"), (b) any chemicals or other materials or substances that are now or
-----
hereafter become defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials", "extremely hazardous
wastes", "restricted hazardous wastes", "toxic substances", "toxic pollutants",
"contaminants", "pollutants" or words of similar import under any Environmental
Law and (c) any other chemical or other material or substance, exposure to which
is now or hereafter prohibited, limited or regulated under any Environmental
Law.
"Holdco" shall mean a corporation to be formed in connection with a Qualified
------
Public Offering, that will issue capital stock to the holders of equity
interests in Mediacom in exchange for the equity interests held by such holders,
and of which Mediacom will thereby become a Subsidiary.
"Incremental Facility Availability Period" shall mean the period from and
----------------------------------------
including the Closing Date to but excluding December 31, 2001 (or, if such date
is not a Business Day, to but excluding the immediately preceding Business Day).
"Incremental Facility Commitment" shall mean, for each Incremental Facility
-------------------------------
Lender, and for any Series thereof, the obligation of such Incremental Facility
Lender to make Incremental Facility Loans of such Series (as the same may be
reduced from time to time pursuant to Section 2.04 or 2.10 hereof or increased
or reduced from time to time pursuant to assignments permitted under Section
11.06(b) hereof). The amount of each Lender's Incremental Facility Commitment
of any Series shall be determined in accordance with the provisions of Section
2.01(c) hereof. The aggregate amount of the Incremental Facility Commitments of
all Series shall not exceed $200,000,000.
"Incremental Facility Lenders" shall mean, in respect of any Series of
----------------------------
Incremental Facility Loans, the Lenders from time to time holding Incremental
Facility Loans and Incremental Facility Commitments of such Series after giving
effect to any assignments thereof permitted by Section 11.06(b) hereof.
"Incremental Facility Loans" shall mean the loans provided for by Section
--------------------------
2.01(c) hereof, which may be Base Rate Loans and/or Eurodollar Loans.
"Indebtedness" shall mean, for any Person: (a) obligations created, issued or
------------
incurred by such Person for borrowed money (whether by loan, the issuance and
sale of debt securities or the sale of Property to another Person subject to an
understanding or agreement, contingent or otherwise, to repurchase such Property
from such Person), including, without limitation, Affiliate Subordinated
Indebtedness; (b) obligations of such Person to pay the deferred purchase or
acquisition price of Property or services, other than trade accounts payable
(other than for borrowed money) arising, and accrued expenses incurred, in the
ordinary course of business so long as such trade accounts payable are payable
within 90 days of the date the
Credit Agreement
----------------
<PAGE>
-13-
respective goods are delivered or the respective services are rendered; (c)
Indebtedness of others secured by a Lien on the Property of such Person, whether
or not the respective indebtedness so secured has been assumed by such Person;
(d) obligations of such Person in respect of letters of credit or similar
instruments issued or accepted by banks and other financial institutions for
account of such Person; (e) Capital Lease Obligations of such Person; and (f)
Indebtedness of others Guaranteed by such Person; provided that Indebtedness
--------
shall exclude (i) obligations in respect of surety and performance bonds backing
pole rental or conduit attachments and the like, or backing obligations under
Franchises, arising in the ordinary course of business of the CATV Systems and
related telecommunications services of the Borrowers and their Subsidiaries and
(ii) all obligations in respect of Interest Rate Protection Agreements.
"Information Memorandum" shall mean the Confidential Information Memorandum
----------------------
dated September, 1999 prepared in connection with the syndication of the credit
facilities provided for in this Agreement.
"Interest Coverage Ratio" shall mean, as at any date, the ratio of (a)
-----------------------
Operating Cash Flow for the fiscal quarter ending on, or most recently ended
prior to, such date to (b) Interest Expense for such fiscal quarter.
Notwithstanding the foregoing, the Interest Coverage Ratio for any fiscal
quarter during which an Acquisition is consummated shall be deemed to be equal
to the ratio of Adjusted Operating Cash Flow for such fiscal quarter to Interest
Expense for such fiscal quarter.
"Interest Expense" shall mean, for any period, the sum, for the Borrowers and
----------------
their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP), of the following: (a) all interest in respect of
Indebtedness (including, without limitation, the interest component of any
payments in respect of Capital Lease Obligations) accrued or capitalized during
such period (whether or not actually paid during such period) and all commitment
fees payable hereunder, but excluding all interest in respect of Affiliate
Subordinated Indebtedness (to the extent not paid in cash during such period),
plus (b) the net amount payable (or minus the net amount receivable) under
- ---- -----
Interest Rate Protection Agreements during such period (whether or not actually
paid or received during such period) plus (c) the aggregate amount of upfront or
----
one-time fees or expenses payable in respect of Interest Rate Protection
Agreements to the extent such fees or expenses are amortized during such period.
Notwithstanding the foregoing, if during any period for which Interest Expense
is being determined the Borrowers or any of their Subsidiaries shall have
consummated any acquisition of any CATV System or other business, or consummated
any Disposition, then, for all purposes of this Agreement, Interest Expense
shall be determined on a pro forma basis as if such acquisition or Disposition
had been made or consummated (and any related Indebtedness incurred or repaid)
on the first day of such period.
Credit Agreement
----------------
<PAGE>
-14-
"Interest Period" shall mean, with respect to any Eurodollar Loan, each period
---------------
commencing on the date such Eurodollar Loan is made or Converted from a Base
Rate Loan or (in the event of a Continuation) the last day of the next preceding
Interest Period for such Loan and ending on the numerically corresponding day in
the first, second, third or sixth calendar month thereafter, as the Borrowers
may select as provided in Section 4.05 hereof, except that each Interest Period
that commences on the last Business Day of a calendar month (or on any day for
which there is no numerically corresponding day in the appropriate subsequent
calendar month) shall end on the last Business Day of the appropriate subsequent
calendar month. Notwithstanding the foregoing:
(i) if any Interest Period for any Revolving Credit Loan would
otherwise end after the Revolving Credit Commitment Termination Date, such
Interest Period shall end on the Revolving Credit Commitment Termination
Date;
(ii) no Interest Period for any Revolving Credit Loan may
commence before and end after any Revolving Credit Commitment Reduction
Date unless, after giving effect thereto, the aggregate principal amount of
Revolving Credit Loans having Interest Periods that end after such
Revolving Credit Commitment Reduction Date shall be equal to or less than
the aggregate principal amount of Revolving Credit Loans scheduled to be
outstanding after giving effect to the payments of principal required to be
made on such Revolving Credit Commitment Reduction Date;
(iii) no Interest Period for any Term Loan may commence before
and end after any Principal Payment Date unless, after giving effect
thereto, the aggregate principal amount of the Term Loans having Interest
Periods that end after such Principal Payment Date shall be equal to or
less than the aggregate principal amount of the Term Loans scheduled to be
outstanding after giving effect to the payments of principal required to be
made on such Principal Payment Date;
(iv) no Interest Period for any Incremental Facility Loan of any
Series may commence before and end after any Principal Payment Date unless,
after giving effect thereto, the aggregate principal amount of the
Incremental Facility Loans of such Series having Interest Periods that end
after such Principal Payment Date shall be equal to or less than the
aggregate principal amount of the Incremental Facility Loans of such Series
scheduled to be outstanding after giving effect to the payments of
principal required to be made on such Principal Payment Date;
(v) each Interest Period that would otherwise end on a day that
is not a Business Day shall end on the next succeeding Business Day (or, if
such next succeeding Business
Credit Agreement
----------------
<PAGE>
-15-
Day falls in the next succeeding calendar month, on the next preceding
Business Day); and
(vi) notwithstanding clauses (i), (ii), (iii) and (iv) above, no
Interest Period shall have a duration of less than one month and, if the
Interest Period for any Eurodollar Loan would otherwise be a shorter
period, such Loan shall not be available hereunder for such period.
"Interest Rate Protection Agreement" shall mean, for any Person, an interest
----------------------------------
rate swap, cap or collar agreement or similar arrangement between such Person
and one or more financial institutions providing for the transfer or mitigation
of interest risks either generally or under specific contingencies. For
purposes hereof, the "credit exposure" at any time of any Person under an
---------------
Interest Rate Protection Agreement to which such Person is a party shall be
determined at such time in accordance with the standard methods of calculating
credit exposure under similar arrangements as prescribed from time to time by
the Administrative Agent, taking into account potential interest rate movements
and the respective termination provisions and notional principal amount and term
of such Interest Rate Protection Agreement.
"Investment" shall mean, for any Person: (a) the acquisition (whether for
----------
cash, Property, services or securities or otherwise) of capital stock, bonds,
notes, debentures, partnership or other ownership interests or other securities
of any other Person or any agreement to make any such acquisition (including,
without limitation, any "short sale" or any sale of any securities at a time
when such securities are not owned by the Person entering into such sale); (b)
the making of any deposit with, or advance, loan or other extension of credit
to, any other Person (including the purchase of Property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such Property to such Person), but excluding any such advance, loan or extension
of credit having a term not exceeding 90 days arising in connection with the
sale of programming or advertising time by such Person in the ordinary course of
business; (c) the entering into of any Guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of any other Person
and (without duplication) any amount committed to be advanced, lent or extended
to such Person; or (d) the entering into of any Interest Rate Protection
Agreement.
"Issuing Lender" shall mean Chase, as the issuer of Letters of Credit under
--------------
Section 2.03 hereof, together with its successors and assigns in such capacity.
"Letter of Credit" shall have the meaning assigned to such term in Section
----------------
2.03 hereof.
"Letter of Credit Documents" shall mean, with respect to any Letter of Credit,
--------------------------
collectively, any application therefor and any other agreements, instruments,
guarantees or other
Credit Agreement
----------------
<PAGE>
-16-
documents (whether general in application or applicable only to such Letter of
Credit) governing or providing for (a) the rights and obligations of the parties
concerned or at risk with respect to such Letter of Credit or (b) any collateral
security for any of such obligations, each as the same may be modified and
supplemented and in effect from time to time.
"Letter of Credit Interest" shall mean, for each Revolving Credit Lender, such
-------------------------
Lender's participation interest (or, in the case of the Issuing Lender, the
Issuing Lender's retained interest) in the Issuing Lender's liability under
Letters of Credit and such Lender's rights and interests in Reimbursement
Obligations and fees, interest and other amounts payable in connection with
Letters of Credit and Reimbursement Obligations.
"Letter of Credit Liability" shall mean, without duplication, at any time and
--------------------------
in respect of any Letter of Credit, the sum of (a) the undrawn face amount of
such Letter of Credit plus (b) the aggregate unpaid principal amount of all
----
Reimbursement Obligations of the Borrowers at such time due and payable in
respect of all drawings made under such Letter of Credit. For purposes of this
Agreement, a Revolving Credit Lender (other than the Issuing Lender) shall be
deemed to hold a Letter of Credit Liability in an amount equal to its
participation interest in the related Letter of Credit under Section 2.03
hereof, and the Issuing Lender shall be deemed to hold a Letter of Credit
Liability in an amount equal to its retained interest in the related Letter of
Credit after giving effect to the acquisition by the Revolving Credit Lenders
other than the Issuing Lender of their participation interests under said
Section 2.03.
"Lien" shall mean, with respect to any Property, any mortgage, lien, pledge,
----
charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Loan Documents, a Person
shall be deemed to own subject to a Lien any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.
"LLC Borrowers" shall mean, collectively, Mediacom Illinois, Mediacom Indiana,
-------------
Mediacom Iowa, Mediacom Minnesota and Mediacom Wisconsin.
"Loan Documents" shall mean, collectively, this Agreement, the Letter of
--------------
Credit Documents, the Security Documents, each Management Fee Subordination
Agreement and each Affiliate Subordinated Indebtedness Subordination Agreement.
"Loans" shall mean, collectively, the Revolving Credit Loans, the Term Loans
-----
and the Incremental Facility Loans.
Credit Agreement
----------------
<PAGE>
-17-
"Majority Incremental Facility Lenders" shall mean, with respect to any Series
-------------------------------------
of Incremental Facility Loans, Incremental Facility Lenders holding more than
50% of the aggregate outstanding principal amount of the Incremental Facility
Loans of such Series or, if the Incremental Facility Loans shall not have been
made, more than 50% of the Incremental Facility Commitments of such Series.
"Majority Lenders" shall mean, subject to the last paragraph of Section 11.04
----------------
hereof, Lenders having more than 50% of the sum of (a) the aggregate outstanding
principal amount of the Term Loans or, if the Term Loans shall not have been
made, the aggregate outstanding principal amount of the Term Loan Commitments
plus (b) the aggregate outstanding principal amount of the Incremental Facility
- ----
Loans or, if the Incremental Facility Loans shall not have been made, the
aggregate outstanding principal amount of the Incremental Facility Commitments
plus (c) the sum of (i) the aggregate unused amount, if any, of the Revolving
- ----
Credit Commitments at such time plus (ii) the aggregate amount of Letter of
----
Credit Liabilities at such time plus (iii) the aggregate outstanding principal
----
amount of the Revolving Credit Loans at such time.
"Majority Revolving Credit Lenders" shall mean Revolving Credit Lenders having
---------------------------------
more than 50% of the aggregate amount of the Revolving Credit Commitments or, if
the Revolving Credit Commitments shall have terminated, Revolving Credit Lenders
holding more than 50% of the sum of (a) the aggregate unpaid principal amount of
the Revolving Credit Loans plus (b) the aggregate amount of all Letter of Credit
----
Liabilities.
"Majority Term Loan Lenders" shall mean Term Loan Lenders holding more than
--------------------------
50% of the aggregate outstanding principal amount of the Term Loans or, if the
Term Loans shall not have been made, more than 50% of the Term Loan Commitments.
"Management Agreements" shall mean, collectively, (a) the Management Agreement
---------------------
dated as of October 15, 1999 between Mediacom Illinois and Mediacom Management
Corporation, (b) the Management Agreement dated as of October 15, 1999 between
Mediacom Indiana and Mediacom Management Corporation, (c) the Management
Agreement dated as of October 15, 1999 between Mediacom Iowa and Mediacom
Management Corporation, (d) the Management Agreement dated as of October 15,
1999 between Mediacom Minnesota and Mediacom Management Corporation, (e) the
Management Agreement dated as of October 15, 1999 between Mediacom Wisconsin and
Mediacom Management Corporation and (f) the Management Agreement dated as of
October 15, 1999 between Zylstra and Mediacom Management Corporation, in each
case as the same shall, subject to Section 8.19 hereof, be modified and
supplemented and in effect from time to time.
"Management Fee Subordination Agreement" shall mean a Management Fee
--------------------------------------
Subordination Agreement substantially in the form of Exhibit F hereto between
the Manager (or,
Credit Agreement
----------------
<PAGE>
-18-
as contemplated by Section 8.11 hereof, any other Person to whom the Borrowers
or any of their Subsidiaries may be obligated to pay Management Fees), the
Borrowers and the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Management Fees" shall mean, for any period, the sum of all fees, salaries
---------------
and other compensation (including, without limitation, all Executive
Compensation) paid or incurred by the Borrowers to Affiliates (other than
Affiliates that are employees of the Borrowers and their Subsidiaries) in
respect of services rendered in connection with the management or supervision of
the Borrowers and their Subsidiaries, provided that Management Fees shall
--------
exclude the aggregate amount of intercompany shared expenses payable to Mediacom
that are allocated by Mediacom to the Borrowers and their Subsidiaries in
accordance with Section 5.04 of the Guarantee and Pledge Agreement (other than
the allocated amount of Executive Compensation, which Executive Compensation
shall in any event constitute Management Fees hereunder).
"Manager" shall mean Mediacom Management Corporation, or any successor in such
-------
capacity as manager of the Borrowers.
"Margin Stock" shall mean "margin stock" within the meaning of Regulations T,
------------
U and X.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
-----------------------
Property, business, operations, financial condition, prospects, liabilities or
capitalization of the Borrowers and their Subsidiaries taken as a whole, (b) the
ability of any Obligor to perform its obligations under any of the Loan
Documents to which it is a party, (c) the validity or enforceability of any of
the Loan Documents, (d) the rights and remedies of the Lenders and the
Administrative Agent under any of the Loan Documents or (e) the timely payment
of the principal of or interest on the Loans or the Reimbursement Obligations or
other amounts payable in connection therewith.
"Mediacom" shall mean Mediacom LLC, a New York limited liability company.
--------
"Mediacom Illinois Operating Agreement" shall mean the Operating Agreement of
-------------------------------------
Mediacom Illinois dated as of September 15, 1999, as the same shall, subject to
Section 8.19 hereof, be modified and supplemented and in effect from time to
time.
"Mediacom Indiana Operating Agreement" shall mean the Operating Agreement of
------------------------------------
Mediacom Indiana dated as of September 15, 1999, as the same shall, subject to
Section 8.19 hereof, be modified and supplemented and in effect from time to
time.
Credit Agreement
----------------
<PAGE>
-19-
"Mediacom Iowa Operating Agreement " shall mean the Operating Agreement of
----------------------------------
Mediacom Iowa dated as of September 15, 1999, as the same shall, subject to
Section 8.19 hereof, be modified and supplemented and in effect from time to
time.
"Mediacom Minnesota Operating Agreement" shall mean the Operating Agreement of
--------------------------------------
Mediacom Minnesota dated as of September 15, 1999, as the same shall, subject to
Section 8.19 hereof, be modified and supplemented and in effect from time to
time.
"Mediacom Wisconsin Operating Agreement" shall mean the Operating Agreement of
--------------------------------------
Mediacom Wisconsin dated as of September 15, 1999, as the same shall, subject to
Section 8.19 hereof, be modified and supplemented and in effect from time to
time.
"Multiemployer Plan" shall mean a multiemployer plan defined as such in
------------------
Section 3(37) of ERISA to which contributions have been made by a Borrower or
any ERISA Affiliate and that is covered by Title IV of ERISA.
"Net Available Proceeds" shall mean:
----------------------
(i) in the case of any Disposition, the amount of Net Cash
Payments received in connection with such Disposition net of (A) in the
case of the LLC Borrowers, the Tax Payment Amount, if any, attributable to
such Disposition, (B) in the case of Zylstra, any income taxes payable by
Zylstra or any of its Subsidiaries in respect of such Disposition and (C)
in the case of any Borrower, any transfer taxes payable by the Borrowers or
any of their Subsidiaries in respect of such Disposition;
(ii) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Borrowers and their Subsidiaries in respect of such Casualty Event
net of (A) reasonable expenses incurred by the Borrowers and their
Subsidiaries in connection therewith, (B) contractually required repayments
of Indebtedness to the extent secured by a Lien on such Property, (C) in
the case of the LLC Borrowers, the Tax Payment Amount, if any, attributable
to such Casualty Event, (D) in the case of Zylstra, any income taxes
payable by Zylstra or any of its Subsidiaries in respect of such Casualty
Event and (E) in the case of any Borrower, any transfer taxes payable by
the Borrowers or any of their Subsidiaries in respect of such Casualty
Event; and
(iii) in the case of any Debt Issuance, the aggregate amount of
all cash received by the Borrowers or any of their Subsidiaries in respect
of such Debt Issuance, net of reasonable expenses incurred by the Borrowers
and their Subsidiaries in connection therewith.
Credit Agreement
----------------
<PAGE>
-20-
"Net Cash Payments" shall mean, with respect to any Disposition, the aggregate
-----------------
amount of all cash payments, and the fair market value of any non-cash
consideration, received by the Borrowers and their Subsidiaries directly or
indirectly in connection with such Disposition; provided that (a) Net Cash
--------
Payments shall be net of the amount of any legal, accounting, broker, title and
recording tax expenses, commissions, finders' fees and other fees and expenses
paid by the Borrowers and their Subsidiaries in connection with such Disposition
and (b) Net Cash Payments shall be net of any repayments by the Borrowers and
their Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is
secured by a Lien on the Property that is the subject of such Disposition and
(ii) the transferee of (or holder of a Lien on) such Property requires that such
Indebtedness be repaid as a condition to the purchase of such Property.
"1998 Senior Notes" shall mean the 8-1/2% senior notes due 2008 in an
-----------------
aggregate principal amount of $200,000,000 issued by Mediacom.
"Obligors" shall mean, collectively, the Borrowers, Mediacom, Mediacom
--------
Management Corporation and, effective upon execution and delivery of any
Subsidiary Guarantee Agreement, each Subsidiary of the Borrowers so executing
and delivering such Subsidiary Guarantee Agreement.
"Operating Agreements" shall mean, collectively, the Mediacom Illinois
--------------------
Operating Agreement, the Mediacom Indiana Operating Agreement, the Mediacom Iowa
Operating Agreement, the Mediacom Minnesota Operating Agreement and the Mediacom
Wisconsin Operating Agreement.
"Operating Cash Flow" shall mean, for any period, the sum, for the Borrowers
-------------------
and their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP), of the following: (a) System Cash Flow minus (b)
-----
Management Fees paid during such period to the extent not exceeding the then
applicable rate or percentage specified in the Management Agreement of the gross
operating revenue of the Borrowers and their Subsidiaries for such period.
"Pay TV Units" shall mean the aggregate number of premium or pay television
------------
services to which Subscribers subscribe.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any entity
----
succeeding to any or all of its functions under ERISA.
"Permitted Investments" shall mean: (a) direct obligations of the United
---------------------
States of America, or of any agency thereof, or obligations guaranteed as to
principal and interest by the United States of America, or of any agency
thereof, in either case maturing not more than 90
Credit Agreement
----------------
<PAGE>
-21-
days from the date of acquisition thereof; (b) certificates of deposit issued by
any bank or trust company organized under the laws of the United States of
America or any state thereof and having capital, surplus and undivided profits
of at least $500,000,000, maturing not more than 90 days from the date of
acquisition thereof; and (c) commercial paper rated A-1 or better or P-1 by
Standard & Poor's Ratings Services, a division of McGraw-Hill Companies, Inc.,
or Moody's Investors Services, Inc., respectively, maturing not more than 90
days from the date of acquisition thereof; in each case so long as the same (x)
provide for the payment of principal and interest (and not principal alone or
interest alone) and (y) are not subject to any contingency regarding the payment
of principal or interest.
"Person" shall mean any individual, corporation, company, voluntary
------
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or maintained
----
by the Borrowers or any ERISA Affiliates and that is covered by Title IV of
ERISA, other than a Multiemployer Plan.
"Pledge Agreement" shall mean a Pledge Agreement substantially in the form of
----------------
Exhibit C hereto between the Borrowers, each of the additional parties, if any,
that becomes a "Securing Party" thereunder, and the Administrative Agent, as the
same shall be modified and supplemented and in effect from time to time.
"Post-Default Rate" shall mean a rate per annum equal to 2% plus the Base Rate
----------------- ----
as in effect from time to time plus the Applicable Margin for Base Rate Loans,
----
provided that, with respect to principal of a Eurodollar Loan that shall become
- --------
due (whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise) on a day other than the last day of the Interest Period
therefor, the "Post-Default Rate" shall be, for the period from and including
such due date to but excluding the last day of such Interest Period, 2% plus the
----
interest rate for such Loan as provided in Section 3.02(b) hereof and,
thereafter, the rate provided for above in this definition.
"Prime Rate" shall mean the rate of interest from time to time announced by
----------
Chase at its principal office in New York City as its prime commercial lending
rate.
"Principal Payment Dates" shall mean (a) in the case of the Term Loans, the
-----------------------
last Business Day of March, June, September and December of each year,
commencing with September 30, 2002, through and, subject to the last sentence of
Section 3.01(b), including December 31, 2008 and (b) in the case of Incremental
Facility Loans of any Series, such dates as shall have been agreed upon between
the Borrowers and the respective Incremental Facility
Credit Agreement
----------------
<PAGE>
-22-
Lenders of such Series pursuant to Section 2.01(c) hereof at the time such
Lenders become obligated to make such Incremental Facility Loans hereunder.
"Pro Forma Debt Service Coverage Ratio" shall mean, as at any date, the ratio
-------------------------------------
of (a) the product of (x) Operating Cash Flow for the fiscal quarter ending on,
or most recently ended prior to, such date times (y) four to (b) Debt Service
-----
(other than payments in respect of Affiliate Subordinated Indebtedness) for the
period of four consecutive fiscal quarters immediately following the last day of
the most recently ended fiscal quarter, determined under the assumptions that
(1) the rate of interest applicable to Indebtedness of the Borrowers and their
Subsidiaries (other than Affiliate Subordinated Indebtedness) during such period
will not change from the weighted average rate of interest in effect on such
last day and (2) all regularly scheduled payments or regularly scheduled
prepayments of principal of such Indebtedness required to be made during such
period will be made when due (including, without limitation, the principal
component of any payments in respect of Capital Lease Obligations).
Notwithstanding the foregoing, the Pro Forma Debt Service Coverage Ratio for
any fiscal quarter during which an Acquisition is consummated shall be deemed to
be equal to the ratio of (a) the product of (x) Adjusted Operating Cash Flow for
such fiscal quarter times (y) four to (b) Debt Service (other than payments in
-----
respect of Affiliate Subordinated Indebtedness) for the period of four
consecutive fiscal quarters immediately following the last day of such fiscal
quarter, determined on the assumptions set forth above.
"Property" shall mean any right or interest in or to property of any kind
--------
whatsoever, whether real, personal or mixed and whether tangible or intangible.
"Purchase Price" shall mean, without duplication, with respect to any
--------------
Subsequent Acquisition, an amount equal to the sum of (i) the aggregate
consideration, whether cash, Property or securities (including, without
limitation, any Indebtedness incurred pursuant to paragraph (f) of Section 8.07
hereof), paid or delivered by the Borrowers and their Subsidiaries in connection
with such acquisition plus (ii) the aggregate amount of liabilities of the
----
acquired business (net of current assets of the acquired business) that would be
reflected on a balance sheet (if such were to be prepared) of the Borrowers and
their Subsidiaries after giving effect to such acquisition.
"Qualified Public Offering" shall mean an offer or offerings of capital stock
-------------------------
of Holdco under one or more effective registration statements under the
Securities Act of 1933, as amended, such that, after giving effect thereto, (a)
at least 15% of the aggregate equity interests (without regard to voting rights)
in Holdco on a fully diluted basis (i.e., giving effect to the exercise of any
warrants, options and conversion and other rights) has been sold pursuant to
such offerings and (b) such offerings result in aggregate cash proceeds being
received by Holdco (and
Credit Agreement
----------------
<PAGE>
-23-
contributed by Holdco to Mediacom) of at least $75,000,000 exclusive of
underwriter's discounts and other expenses.
"Quarterly Dates" shall mean the twentieth day of January, April, July and
---------------
October in each year, the first of which shall be the first such day after the
date of this Agreement; provided that if any such day is not a Business Day,
--------
then such Quarterly Date shall be the next succeeding Business Day.
"Quarterly Officer's Report" shall mean a quarterly report of a Senior Officer
--------------------------
with respect to Basic Subscribers, homes passed, revenues per Subscriber and Pay
TV Units, substantially in the form of Exhibit B hereto.
"Quarterly Payment Period" shall mean each successive three-month period from
------------------------
and including a Quarterly Date (or, in the case of the initial Quarterly Payment
Period, from and including the Closing Date) to but not including the next
following Quarterly Date.
"Rate Ratio" shall mean, for any Quarterly Payment Period, the daily average
----------
of the Total Leverage Ratio during the fiscal quarter ending on, or most
recently ended prior to, the first day of such Quarterly Payment Period,
provided that (a) the Rate Ratio on the Closing Date shall be the Total Leverage
- --------
Ratio on such date (computed on a pro forma basis after giving effect to the
borrowings to be made to enable the Borrowers to effect the Triax Acquisition on
the Closing Date) and (b) for purposes of determining the Rate Ratio for the
period from and after the Closing Date until such time as one complete fiscal
quarter shall have elapsed subsequent to the Closing Date, the daily average of
the Total Leverage Ratio shall be determined only for the portion of such fiscal
quarter commencing on the Closing Date.
"Rate Ratio Certificate" shall mean, for any Quarterly Payment Period, a
----------------------
certificate of a Senior Officer setting forth, in reasonable detail, the
calculation (and the basis for such calculation) of the Rate Ratio for use in
determining the Applicable Margin hereunder during such Quarterly Payment
Period.
"Region" shall mean each geographic region into which the CATV Systems of the
------
Borrowers and their Subsidiaries are divided for operating and management
purposes.
"Register" shall have the meaning assigned to such term in Section 11.06(g)
--------
hereof.
"Regulations A, D, T, U and X" shall mean, respectively, Regulations A, D, T,
----------------------------
U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
Credit Agreement
----------------
<PAGE>
-24-
"Regulatory Change" shall mean, with respect to any Lender, any change after
-----------------
the date hereof in Federal, state or foreign law or regulations (including,
without limitation, Regulation D) or the adoption or making after such date of
any interpretation, directive or request applying to a class of banks including
such Lender of or under any Federal, state or foreign law or regulations
(whether or not having the force of law and whether or not failure to comply
therewith would be unlawful) by any court or governmental or monetary authority
charged with the interpretation or administration thereof.
"Reimbursement Obligations" shall mean, at any time, the obligations of the
-------------------------
Borrowers then outstanding, or that may thereafter arise in respect of all
Letters of Credit then outstanding, to reimburse amounts paid by the Issuing
Lender in respect of any drawings under a Letter of Credit.
"Release" shall mean any release, spill, emission, leaking, pumping,
-------
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Reserve Requirement" shall mean, for any Interest Period for any Eurodollar
-------------------
Loan, the average maximum rate at which reserves (including, without limitation,
any marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion Dollars
against "Eurocurrency liabilities" (as such term is used in Regulation D).
Without limiting the effect of the foregoing, the Reserve Requirement shall
include any other reserves required to be maintained by such member banks by
reason of any Regulatory Change with respect to (i) any category of liabilities
that includes deposits by reference to which the Eurodollar Base Rate is to be
determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.01 or (ii) any category of extensions of credit or other assets that
includes Eurodollar Loans.
"Reserved Commitment Amount" shall have the meaning assigned to such term in
--------------------------
Section 2.01(a) hereof.
"Restricted Payments" shall mean, collectively, (a) all distributions of the
-------------------
Borrowers (in cash, Property or obligations) on, or other payments or
distributions on account of, or the setting apart of money for a sinking or
other analogous fund for, or the purchase, redemption, retirement or other
acquisition of, any portion of any ownership interest in the Borrowers or of any
warrants, options or other rights to acquire any such ownership interest (or to
make any payments to any Person, such as "phantom stock" payments, where the
amount thereof is calculated with reference to fair market or equity value of
the Borrowers or any of their Subsidiaries), (b) any payments made by a Borrower
to any holders of any equity interests in the
Credit Agreement
----------------
<PAGE>
-25-
Borrowers that are designed to reimburse such holders for the payment of any
taxes attributable to the operations of the Borrowers and their Subsidiaries,
(c) any payments of principal of or interest on Affiliate Subordinated
Indebtedness, (d) any payments in respect of Management Fees, and (e) any
Affiliate Letters of Credit issued by the Issuing Lender for the account of the
Borrowers.
"Revolving Credit Commitment" shall mean, as to each Revolving Credit Lender,
---------------------------
the obligation of such Lender to make Revolving Credit Loans, and to issue or
participate in Letters of Credit pursuant to Section 2.03 hereof, in an
aggregate principal or face amount at any one time outstanding up to but not
exceeding the amount set forth opposite the name of such Lender on Schedule I
hereto (as the same may be reduced from time to time pursuant to Section 2.04 or
2.10 hereof or increased or reduced from time to time pursuant to assignments
permitted under Section 11.06(b) hereof). The original aggregate principal
amount of the Revolving Credit Commitments is $450,000,000.
"Revolving Credit Commitment Percentage" shall mean, with respect to any
--------------------------------------
Revolving Credit Lender, the ratio of (a) the amount of the Revolving Credit
Commitment of such Lender to (b) the aggregate amount of the Revolving Credit
Commitments of all of the Lenders.
"Revolving Credit Commitment Reduction Dates" shall mean the last Business Day
-------------------------------------------
of March, June, September and December in each year, commencing with September
30, 2002, through and including June 30, 2008.
"Revolving Credit Commitment Termination Date" shall mean the Revolving Credit
--------------------------------------------
Commitment Reduction Date falling on or nearest to June 30, 2008, provided that
--------
if Mediacom does not refinance its 1998 Senior Notes prior to March 31, 2007,
with new financing having a maturity no earlier than two years after the payment
of all amounts due under this Agreement and on terms satisfactory to the
Administrative Agent and the Majority Lenders, the Revolving Credit Termination
Date shall mean the Revolving Credit Commitment Reduction Date falling on or
nearest to September 30, 2007.
"Revolving Credit Lenders" shall mean (a) on the date hereof, the Lenders
------------------------
having Revolving Credit Commitments on Schedule I hereto and (b) thereafter, the
Lenders from time to time holding Revolving Credit Loans and Revolving Credit
Commitments after giving effect to any assignments thereof permitted by Section
11.06(b) hereof.
"Revolving Credit Loans" shall mean the loans provided for in Section 2.01(a)
----------------------
hereof, which may be Base Rate Loans and/or Eurodollar Loans.
Credit Agreement
----------------
<PAGE>
-26-
"Security Documents" shall mean, collectively, the Pledge Agreement, the
------------------
Guarantee and Pledge Agreement and the Subsidiary Guarantee Agreements, and all
Uniform Commercial Code financing statements required by the Pledge Agreement,
the Guarantee and Pledge Agreement and the Subsidiary Guarantee Agreements, to
be filed with respect to the security interests created pursuant to the Pledge
Agreement, the Guarantee and Pledge Agreement and the Subsidiary Guarantee
Agreements.
"Senior Officer" shall mean an individual that (a) in the case of the LLC
--------------
Borrowers, is the chairman, chief executive officer or chief financial officer
of the Manager, acting for and on behalf of the LLC Borrowers, and (b) in the
case of Zylstra, is the chairman, chief executive officer or chief financial
officer of Zylstra. To the extent that, at any time, no single individual
qualifies under both of the foregoing clauses (a) and (b) then, whenever in this
Agreement reference is made to a statement, certificate, report or determination
of a "Senior Officer", such statement, certificate or report shall be jointly
signed, and such determination jointly made, by an individual meeting the
criteria in said clause (a) and by an individual meeting the criteria in said
clause (b).
"Series" has the meaning set forth in Section 2.01(c).
------
"Special Reductions" shall mean, as at any date during any fiscal quarter, the
------------------
aggregate amount of reductions during such fiscal quarter through such date in
the undrawn face amount of Affiliate Letters of Credit issued during such fiscal
quarter (i.e. excluding reductions in such face amount that occur upon a drawing
under such Affiliate Letters of Credit), together with the aggregate amount of
Affiliate Letters of Credit issued during such fiscal quarter that expire or are
terminated during such fiscal quarter through such date without being drawn.
"Subscriber" shall mean a Person who subscribes to one or more of the cable
----------
television services of the Borrowers and their Subsidiaries and includes both
Basic Subscribers and Persons who subscribe to Pay TV Units, but excluding each
such Person who is pending disconnection for any reason or is delinquent in
payment for such services for more than 60 days or who has not paid in full
without discount at least one monthly bill generated in the ordinary course of
business.
"Subsequent Acquisition Agreements" shall mean each agreement pursuant to
---------------------------------
which a Subsequent Acquisition shall be consummated, as the same shall, be
modified and supplemented and in effect from time to time.
"Subsequent Acquisitions" shall mean any acquisition permitted under
-----------------------
8.05(d)(v) hereof.
Credit Agreement
----------------
<PAGE>
-27-
"Subsidiary" shall mean, with respect to any Person, any corporation,
----------
partnership, limited liability company or other entity of which at least a
majority of the securities or other ownership interests having by the terms
thereof ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions of such corporation, partnership,
limited liability company or other entity (irrespective of whether or not at the
time securities or other ownership interests of any other class or classes of
such corporation, partnership, limited liability company or other entity shall
have or might have voting power by reason of the happening of any contingency)
is at the time directly or indirectly owned or controlled by such Person or one
or more Subsidiaries of such Person or by such Person and one or more
Subsidiaries of such Person.
"Subsidiary Guarantee Agreement" shall mean a Subsidiary Guarantee Agreement
------------------------------
substantially in the form of Exhibit E hereto by a Subsidiary of a Borrower in
favor of the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Subsidiary Guarantor" shall mean any Subsidiary of the Borrowers that
--------------------
executes and delivers a Subsidiary Guarantee Agreement.
"Supplemental Capital" shall mean (a) advances made by an Affiliate to the
--------------------
Borrowers constituting Affiliate Subordinated Indebtedness (excluding any Cure
Monies) and (b) equity contributions by an Affiliate subsequent to the date of
this Agreement (excluding any Cure Monies).
"System Cash Flow" shall mean, for any period, the sum, for the Borrowers and
----------------
their Subsidiaries (determined on a combined basis without duplication in
accordance with GAAP), of the following: (a) gross operating revenues for such
period minus (b) all operating expenses for such period, including, without
-----
limitation, technical, programming and selling, general and administrative
expenses, but excluding (to the extent included in operating expenses) income
taxes, Management Fees, depreciation, amortization and interest expense
(including, without limitation, all items included in Interest Expense), plus
----
(c) any compensation received for management services provided by the Borrowers
during such period in respect of any Franchises retained by (i) Triax pursuant
to the Triax Acquisition Agreement and (ii) any Franchises retained by the
seller pursuant to any Subsequent Acquisition Agreement during any such period
plus (d) all Capital Expenditures made by Triax (or any such seller) in respect
of Franchises retained during such period, provided that gross operating
--------
revenues and operating expenses for any period shall exclude all extraordinary
and unusual items and all non-cash items. For the purposes of determining
System Cash Flow, gross operating revenues will include revenues received in
cash in respect of investments, so long as such investments are recurring (i.e.
reasonably expected to continue for four or more fiscal quarters) and do not for
any period
Credit Agreement
----------------
<PAGE>
-28-
exceed 20% of gross operating revenues for such period (not including (i)
extraordinary items and (ii) such investment revenues).
Notwithstanding the foregoing, if during any period for which System Cash Flow
is being determined the Borrowers or any of their Subsidiaries shall have
consummated any acquisition of any CATV System or other business, or consummated
any Disposition, then, for all purposes of this Agreement (other than for
purposes of the definition of Excess Cash Flow), System Cash Flow shall be
determined on a pro forma basis as if such acquisition or Disposition had been
made or consummated on the first day of such period.
"Tax Payment Amount" shall mean, for any period, an amount not exceeding in
------------------
the aggregate the amount of Federal, state and local income taxes the LLC
Borrowers would otherwise have paid in the event they were corporations (other
than "S corporations" within the meaning of Section 1361 of the Code) for such
period and all prior periods.
"Term Loan Commitment" shall mean, as to each Term Loan Lender, the obligation
--------------------
of such Lender to make one or more Term Loans in an aggregate principal amount
equal to the amount set opposite the name of such Lender on Schedule I hereto.
The original aggregate principal amount of the Term Loan Commitments is
$100,000,000.
"Term Loan Lenders" shall mean (a) on the date hereof, the Lenders having Term
-----------------
Loan Commitments on Schedule I hereto and (b) thereafter, the Lenders from time
to time holding Term Loans and Term Commitments after giving effect to any
assignments thereof permitted by Section 11.06(b) hereof.
"Term Loans" shall mean the loans provided for by Section 2.01(b) hereof,
----------
which may be Base Rate Loans and/or Eurodollar Loans.
"Total Leverage Ratio" shall mean, as at any date, the ratio of (a) the
--------------------
aggregate amount of all Indebtedness of the Borrowers and their Subsidiaries
(including, without limitation, Capital Lease Obligations, but excluding
Affiliate Subordinated Indebtedness) as at such date to (b) the product of (x)
System Cash Flow for the fiscal quarter ending on, or most recently ended prior
to, such date times (y) four.
-----
Notwithstanding the foregoing, the Total Leverage Ratio for any fiscal quarter
during which an Acquisition is consummated shall be deemed to be equal to the
ratio of (a) the aggregate amount of all Indebtedness of the Borrowers and their
Subsidiaries (including, without limitation, Capital Lease Obligations, but
excluding Affiliate Subordinated Indebtedness) as at the relevant date to (b)
the product of Adjusted System Cash Flow for such fiscal quarter times four.
-----
Credit Agreement
----------------
<PAGE>
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"Triax" shall mean Triax Midwest Associates, L.P., a limited partnership
-----
organized and existing under the laws of the State of Missouri.
"Triax Acquisition" shall mean the acquisition by the LLC Borrowers of the
-----------------
cable systems (other than the Apache Junction, Arizona cable system, which shall
be acquired by Mediacom Arizona LLC) and related assets of Triax.
"Triax Acquisition Agreement " shall mean the Asset Purchase Agreement between
----------------------------
Triax, as Seller, and Mediacom, as Buyer, dated April 29, 1999, as the same
shall, subject to Section 8.19 hereof, be modified and supplemented and in
effect from time to time.
"Triax Credit Agreement" shall mean the Amended and Restated Credit Agreement
----------------------
dated as of June 24, 1998 among Triax, the lenders party thereto, Bank of
Montreal, Chicago Branch as Documentation Agent and Arranging Agent, Canadian
Imperial Bank of Commerce as Syndication Agent and Arranging Agent, Chase
Securities, Inc., as Arranging Agent, The Chase Manhattan Bank as Administrative
Agent and General Electric Capital Corporation as Arranging Agent, as modified
and supplemented and in effect on the date hereof.
"Type" shall have the meaning assigned to such term in Section 1.03 hereof.
----
"U.S. Person" shall mean a citizen or resident of the United States of
-----------
America, a corporation, partnership, limited liability company or other entity
created or organized in or under any laws of the United States of America or any
State thereof, or any estate or trust that is subject to Federal income taxation
regardless of the source of its income.
"U.S. Taxes" shall mean any present or future tax, assessment or other charge
----------
or levy imposed by or on behalf of the United States of America or any taxing
authority thereof.
"Wholly Owned Subsidiary" shall mean, with respect to any Person, any
-----------------------
corporation, partnership, limited liability company or other entity of which all
of the equity securities or other ownership interests (other than, in the case
of a corporation, directors' qualifying shares) are directly or indirectly owned
or controlled by such Person or one or more Wholly Owned Subsidiaries of such
Person or by such Person and one or more Wholly Owned Subsidiaries of such
Person.
"Working Capital" shall mean, as at such date, for the Borrowers and their
---------------
Subsidiaries (determined on a combined basis without duplication in accordance
with GAAP) (a) current assets (excluding cash and cash equivalents) minus (b)
-----
current liabilities (excluding the current portion of long term debt and of any
installments of principal payable hereunder).
Credit Agreement
----------------
<PAGE>
-30-
1.02 Accounting Terms and Determinations.
-----------------------------------
(a) Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Lenders
hereunder shall (unless otherwise disclosed to the Lenders in writing at the
time of delivery thereof in the manner described in paragraph (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Lenders hereunder (which, prior to the delivery of
the first financial statements under Section 8.01 hereof, shall mean the
unaudited pro forma financial statements as at September 30, 1999, referred to
in Section 7.02 hereof). All calculations made for the purposes of determining
compliance with this Agreement shall (except as otherwise expressly provided
herein) be made by application of generally accepted accounting principles
applied on a basis consistent with those used in the preparation of the latest
annual or quarterly financial statements furnished to the Lenders pursuant to
Section 8.01 hereof (or, prior to the delivery of the first financial statements
under Section 8.01 hereof, used in the preparation of the unaudited pro forma
financial statements as at September 30, 1999 referred to in Section 7.02
hereof) unless
(i) the Borrowers shall have objected to determining such
compliance on such basis at the time of delivery of such financial
statements, or
(ii) the Majority Lenders shall so object in writing within 30
days after delivery of such financial statements,
in either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 8.01 hereof,
shall mean the unaudited financial statements referred to in Section 7.02
hereof).
(b) The Borrowers shall deliver to the Lenders at the same time as the
delivery of any annual or quarterly financial statement under Section 8.01
hereof (i) a description in reasonable detail of any material variation between
the application of accounting principles employed in the preparation of such
statement and the application of accounting principles employed in the
preparation of the next preceding annual or quarterly financial statements as to
which no objection has been made in accordance with the last sentence of
paragraph (a) above and (ii) reasonable estimates of the difference between such
statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance with the
covenants set forth in Section 8 hereof, none of the Borrowers will change the
last day of its
Credit Agreement
----------------
<PAGE>
-31-
fiscal year from December 31, or the last days of the first three fiscal
quarters in each of its fiscal years from March 31, June 30 and September 30 of
each year, respectively.
1.03 Classes and Types of Loans. Loans hereunder are distinguished by
--------------------------
"Class" and by "Type". The "Class" of a Loan (or of a Commitment to make a Loan)
refers to whether such Loan is a Revolving Credit Loan, a Term Loan or an
Incremental Facility Loan, each of which constitutes a Class. The "Type" of a
Loan refers to whether such Loan is a Base Rate Loan or a Eurodollar Loan, each
of which constitutes a Type. Loans may be identified by both Class and Type.
Incremental Facility Loans and Incremental Facility Commitments shall be
classified by Series, each of which shall be considered a separate Class.
1.04 Subsidiaries. None of the Borrowers has any Subsidiaries on the date
------------
hereof; reference in this Agreement to Subsidiaries of the Borrowers shall be
deemed inapplicable until such time as the Majority Lenders shall consent to the
creation of such Subsidiaries or such Subsidiaries shall in fact come into
existence in accordance with the terms hereof.
1.05 Nature of Obligations of Borrowers. It is the intent of the parties
----------------------------------
hereto that the Borrowers shall be jointly and severally obligated hereunder and
under the notes executed and delivered by the Borrowers pursuant to Section
2.08(d) hereof, as co-borrowers under this Agreement and as co-makers on such
notes, in respect of the principal of and interest on, and all other amounts
owing in respect of, the Loans and such notes.
Section 2. Commitments, Loans and Prepayments.
----------------------------------
2.01 Loans.
-----
(a) Revolving Credit Loans. Each Revolving Credit Lender severally agrees,
----------------------
on the terms and conditions of this Agreement, to make loans to the Borrowers in
Dollars during the period from and including the Closing Date to but not
including the Revolving Credit Commitment Termination Date in an aggregate
principal amount at any one time outstanding up to but not exceeding the amount
of the Revolving Credit Commitment of such Lender as in effect from time to
time, provided that in no event shall the aggregate principal amount of all
--------
Revolving Credit Loans, together with the aggregate amount of all Letter of
Credit Liabilities, exceed the aggregate amount of the Revolving Credit
Commitments as in effect from time to time. Subject to the terms and conditions
of this Agreement, during such period the Borrowers may borrow, repay and
reborrow the amount of the Revolving Credit Commitments by means of Base Rate
Loans and Eurodollar Loans and may Convert Revolving Credit Loans of one Type
into Revolving Credit Loans of another Type (as provided in Section 2.09 hereof)
or Continue Revolving Credit Loans of one Type as Revolving Credit Loans of the
same Type (as provided
Credit Agreement
----------------
<PAGE>
-32-
in Section 2.09 hereof). Anything herein to the contrary notwithstanding,
Revolving Credit Loans shall not be available hereunder unless the Term Loans
are fully drawn.
Proceeds of Revolving Credit Loans shall be available for any use permitted
under Section 8.17(a) hereof, provided that, in the event that as contemplated
--------
by Section 2.10(d) hereof, the Borrowers shall prepay Revolving Credit Loans
from the proceeds of a Disposition hereunder, then an amount of Revolving Credit
Commitments equal to the amount of such prepayment (herein the "Reserved
--------
Commitment Amount") shall be reserved and shall not be available for borrowings
- -----------------
hereunder except and to the extent that the proceeds of such borrowings are to
be applied to make Subsequent Acquisitions permitted under Section 8.05 hereof
or to make prepayments of Loans under Section 2.10(d) hereof. The Borrowers
agree, upon the occasion of any borrowing of Revolving Credit Loans hereunder
that is to constitute a utilization of any Reserved Commitment Amount, to advise
the Administrative Agent in writing of such fact at the time of such borrowing,
identifying the amount of such borrowing that is to constitute such utilization,
the Subsequent Acquisition in respect of which the proceeds of such borrowing
are to be applied and the reduced Reserved Commitment Amount to be in effect
after giving effect to such borrowing.
(b) Term Loans. Each Term Lender severally agrees, on the terms and
----------
conditions of this Agreement, to make term loans to the Borrowers in Dollars on
the Closing Date in an aggregate principal amount equal to the amount of the
Term Loan Commitment of such Lender. Subject to the terms and conditions of
this Agreement, on the Closing Date the Borrowers may borrow the Term Loan
Commitments by means of Base Rate Loans and Eurodollar Loans, and thereafter the
Borrowers may Convert Term Loans of one Type into Term Loans of another Type (as
provided in Section 2.09 hereof) or Continue Term Loans of one Type as Term
Loans of the same Type (as provided in Section 2.09 hereof).
Proceeds of Term Loans hereunder shall be available for any use permitted
under the first sentence of Section 8.17(b) hereof.
(c) Incremental Facility Loans. In addition to borrowings of Term Loans and
--------------------------
Revolving Credit Loans provided above, at any time during the Incremental
Facility Availability Period the Borrowers may from time to time request that
the Lenders offer to enter into commitments to make additional term loans to the
Borrowers hereunder, which commitment of any Lender shall not be less than
$10,000,000 and not greater than $100,000,000. In the event that one or more of
the Lenders offer, in their sole discretion, to enter into such commitments, and
such Lenders and the Borrowers agree pursuant to an instrument in writing (the
form and substance of which shall be satisfactory, and a copy of which shall be
delivered, to the Administrative Agent and the Lenders making such Loans) as to
the amount of such commitments that shall be allocated to the respective Lenders
making such offers, the fees (if any) to be payable by the Borrowers in
connection therewith and the amortization and interest
Credit Agreement
----------------
<PAGE>
-33-
rate to be applicable thereto, such Lenders shall become obligated to make
Incremental Facility Loans under this Agreement in an amount equal to the amount
of their respective Incremental Facility Commitments. The Incremental Facility
Loans to be made pursuant to any such agreement between the Borrowers and one or
more Lenders in response to any such request by the Borrowers shall be deemed to
be a separate "Series" of Incremental Facility Loans for all purposes of this
------
Agreement. Anything herein to the contrary notwithstanding, (i) the minimum
aggregate principal amount of Incremental Facility Commitments entered into
pursuant to any such request (and, accordingly, the minimum aggregate principal
amount of any Series of Incremental Facility Loans) shall be $25,000,000, (ii)
the aggregate principal amount of all unused Incremental Facility Commitments
and Incremental Facility Loans shall not exceed $200,000,000 and (iii) in no
event shall the final maturity date for the Incremental Facility Loans of any
Series be earlier than the final Principal Payment Date for the Term Loans, nor
shall the amortization for any Incremental Facility Loans of any Series be at a
rate faster (i.e. earlier) than the rate of amortization of the Term Loans (the
determination of whether or not such amortization is faster to be made by the
Administrative Agent).
Proceeds of Incremental Facility Loans hereunder shall be available for any
use permitted under the last sentence of Section 8.17(b) hereof.
(d) Limit on Eurodollar Loans. No more than seven separate Interest Periods
-------------------------
in respect of Eurodollar Loans of a Class from each Lender may be outstanding at
any one time.
2.02 Borrowings. The Borrowers shall give the Administrative Agent notice of
----------
each borrowing hereunder as provided in Section 4.05 hereof. Not later than 1:00
p.m. New York time on the date specified for each borrowing hereunder, each
Lender shall make available the amount of the Loan or Loans to be made by it on
such date to the Administrative Agent, at an account designated by the
Administrative Agent to the Lenders, in immediately available funds, for account
of the Borrowers. The amount so received by the Administrative Agent shall,
subject to the terms and conditions of this Agreement, be made available to the
Borrowers by depositing the same, in immediately available funds, in an account
of the Borrowers designated by the Borrowers and maintained with Chase at its
principal office.
2.03 Letters of Credit. Subject to the terms and conditions of this
-----------------
Agreement, the Revolving Credit Commitments may be utilized, upon the request of
the Borrowers, in addition to the Revolving Credit Loans provided for by Section
2.01(a) hereof, by the issuance by the Issuing Lender of letters of credit
(collectively, "Letters of Credit") for account of the Borrowers or any of their
-----------------
Subsidiaries (as specified by the relevant Borrower), provided that in no event
--------
shall (i) the aggregate amount of all Letter of Credit Liabilities, together
with the aggregate principal amount of the Revolving Credit Loans, exceed the
aggregate amount of the Revolving Credit Commitments as in effect from time to
time, (ii) the outstanding aggregate amount of all Letter of Credit Liabilities
exceed $100,000,000 and (iii) the expiration date of any Letter of
Credit Agreement
----------------
<PAGE>
-34-
Credit extend beyond the earlier of the date five Business Days prior to the
Revolving Credit Commitment Termination Date and the date twelve months
following the issuance of such Letter of Credit (or, in the case of any renewal
or extension thereof, twelve months after the then-current expiration date of
such Letter of Credit, so long as such renewal or extension occurs within three
months of such then-current expiration date). The Borrowers may request the
Issuing Lender to issue Letters of Credit for the account of the Borrowers to
support an obligation of an Affiliate of the Borrowers so long as the face
amount of such Letter of Credit does not exceed the amount of Restricted
Payments the Borrowers may then make pursuant to Section 8.09(d). The following
additional provisions shall apply to Letters of Credit:
(a) The Borrowers shall give the Administrative Agent at least three Business
Days' irrevocable prior notice (effective upon receipt) specifying the
Business Day (which shall be no later than 30 days preceding the Revolving
Credit Commitment Termination Date) each Letter of Credit is to be issued
and the account party or parties therefor and describing in reasonable
detail the proposed terms of such Letter of Credit (including the
beneficiary thereof) and the nature of the transactions or obligations
proposed to be supported thereby (including whether such Letter of Credit
is to be a commercial letter of credit or a standby letter of credit).
Upon receipt of any such notice, the Administrative Agent shall advise the
Issuing Lender of the contents thereof.
(b) On each day during the period commencing with the issuance by the Issuing
Lender of any Letter of Credit and until such Letter of Credit shall have
expired or been terminated, the Revolving Credit Commitment of each
Revolving Credit Lender shall be deemed to be utilized for all purposes of
this Agreement in an amount equal to such Lender's Revolving Credit
Commitment Percentage of the then undrawn face amount of such Letter of
Credit. Each Revolving Credit Lender (other than the Issuing Lender)
agrees that, upon the issuance of any Letter of Credit hereunder, it shall
automatically acquire a participation in the Issuing Lender's liability
under such Letter of Credit in an amount equal to such Lender's Revolving
Credit Commitment Percentage of such liability, and each Revolving Credit
Lender (other than the Issuing Lender) thereby shall absolutely,
unconditionally and irrevocably assume, as primary obligor and not as
surety, and shall be unconditionally obligated to the Issuing Lender to pay
and discharge when due, its Revolving Credit Commitment Percentage of the
Issuing Lender's liability under such Letter of Credit.
(c) Upon receipt from the beneficiary of any Letter of Credit of any demand for
payment under such Letter of Credit, the Issuing Lender shall promptly
notify the Borrowers (through the Administrative Agent) of the amount to be
paid by the Issuing Lender as a result of such demand and the date on which
payment is to be made by the Issuing Lender to such beneficiary in respect
of such demand. Notwithstanding the identity of the account party of any
Letter of Credit, the Borrowers hereby jointly and
Credit Agreement
----------------
<PAGE>
-35-
severally unconditionally agree to pay and reimburse the Administrative
Agent for account of the Issuing Lender for the amount of each demand for
payment under such Letter of Credit that is in substantial compliance with
the provisions of such Letter of Credit at or prior to the date on which
payment is to be made by the Issuing Lender to the beneficiary thereunder,
without presentment, demand, protest or other formalities of any kind.
(d) Forthwith upon its receipt of a notice referred to in paragraph (c) of this
Section 2.03, the Borrowers shall advise the Administrative Agent whether
or not the Borrowers intend to borrow hereunder to finance their obligation
to reimburse the Issuing Lender for the amount of the related demand for
payment and, if they do, submit a notice of such borrowing as provided in
Section 4.05 hereof.
(e) Each Revolving Credit Lender (other than the Issuing Lender) shall pay to
the Administrative Agent for account of the Issuing Lender at its principal
office in Dollars and in immediately available funds, the amount of such
Lender's Revolving Credit Commitment Percentage of any payment under a
Letter of Credit upon notice by the Issuing Lender (through the
Administrative Agent) to such Revolving Credit Lender requesting such
payment and specifying such amount. Each such Revolving Credit Lender's
obligation to make such payment to the Administrative Agent for account of
the Issuing Lender under this paragraph (e), and the Issuing Lender's right
to receive the same, shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever, including, without limitation, the
failure of any other Revolving Credit Lender to make its payment under this
paragraph (e), the financial condition of the Borrowers (or any other
account party), the existence of any Default or the termination of the
Commitments. Each such payment to the Issuing Lender shall be made without
any offset, abatement, withholding or reduction whatsoever. If any
Revolving Credit Lender shall default in its obligation to make any such
payment to the Administrative Agent for account of the Issuing Lender, for
so long as such default shall continue the Administrative Agent may at the
request of the Issuing Lender withhold from any payments received by the
Administrative Agent under this Agreement for account of such Revolving
Credit Lender the amount so in default and, to the extent so withheld, pay
the same to the Issuing Lender in satisfaction of such defaulted
obligation.
(f) Upon the making of each payment by a Revolving Credit Lender to the Issuing
Lender pursuant to paragraph (e) above in respect of any Letter of Credit,
such Lender shall, automatically and without any further action on the part
of the Administrative Agent, the Issuing Lender or such Lender, acquire (i)
a participation in an amount equal to such payment in the Reimbursement
Obligation owing to the Issuing Lender by the Borrowers hereunder and under
the Letter of Credit Documents relating to such Letter of Credit and (ii) a
participation in a percentage equal to such Lender's
Credit Agreement
----------------
<PAGE>
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Revolving Credit Commitment Percentage in any interest or other amounts
payable by the Borrowers hereunder and under such Letter of Credit
Documents in respect of such Reimbursement Obligation (other than the
commissions, charges, costs and expenses payable to the Issuing Lender
pursuant to paragraph (g) of this Section 2.03). Upon receipt by the
Issuing Lender from or for the account of the Borrowers of any payment in
respect of any Reimbursement Obligation or any such interest or other
amount (including by way of setoff or application of proceeds of any
collateral security) the Issuing Lender shall promptly pay to the
Administrative Agent for the account of each Revolving Credit Lender
entitled thereto, such Revolving Credit Lender's Revolving Credit
Commitment Percentage of such payment, each such payment by the Issuing
Lender to be made in the same money and funds in which received by the
Issuing Lender. In the event any payment received by the Issuing Lender and
so paid to the Revolving Credit Lenders hereunder is rescinded or must
otherwise be returned by the Issuing Lender, each Revolving Credit Lender
shall, upon the request of the Issuing Lender (through the Administrative
Agent), repay to the Issuing Lender (through the Administrative Agent) the
amount of such payment paid to such Lender, with interest at the rate
specified in paragraph (j) of this Section 2.03.
(g) The Borrowers shall pay to the Administrative Agent for account of each
Revolving Credit Lender (ratably in accordance with their respective
Commitment Percentages) a letter of credit fee in respect of each Letter of
Credit in an amount equal to the Applicable Margin, in effect from time to
time, for Revolving Credit Loans that are Eurodollar Loans on the daily
average undrawn face amount of such Letter of Credit for the period from
and including the date of issuance of such Letter of Credit (i) in the case
of a Letter of Credit that expires in accordance with its terms, to and
including such expiration date and (ii) in the case of a Letter of Credit
that is drawn in full or is otherwise terminated other than on the stated
expiration date of such Letter of Credit, to but excluding the date such
Letter of Credit is drawn in full or is terminated (such fee to be non-
refundable, to be paid in arrears on each Quarterly Date and on the
Revolving Credit Commitment Termination Date and to be calculated for any
day after giving effect to any payments made under such Letter of Credit on
such day).
In addition, the Borrowers shall pay to the Administrative Agent for
account of the Issuing Lender a fronting fee in respect of each Letter of
Credit in an amount equal to 1/4 of 1% per annum of the daily average
undrawn face amount of such Letter of Credit for the period from and
including the date of issuance of such Letter of Credit (i) in the case of
a Letter of Credit that expires in accordance with its terms, to and
including such expiration date and (ii) in the case of a Letter of Credit
that is drawn in full or is otherwise terminated other than on the stated
expiration date of such Letter of Credit, to but excluding the date such
Letter of Credit is drawn in full or is terminated (such fee to be non-
refundable, to be paid in arrears on each Quarterly Date and on the
Revolving
Credit Agreement
----------------
<PAGE>
-37-
Credit Commitment Termination Date and to be calculated for any day after
giving effect to any payments made under such Letter of Credit on such day)
plus all commissions, charges, costs and expenses in the amounts
customarily charged by the Issuing Lender from time to time in like
circumstances with respect to the issuance of each Letter of Credit and
drawings and other transactions relating thereto.
(h) Promptly following the end of each calendar month, the Issuing Lender shall
deliver (through the Administrative Agent) to each Revolving Credit Lender
and the Borrowers a notice describing the aggregate amount of all Letters
of Credit outstanding at the end of such month. Upon the request of any
Revolving Credit Lender from time to time, the Issuing Lender shall deliver
any other information reasonably requested by such Lender with respect to
each Letter of Credit then outstanding.
(i) The issuance by the Issuing Lender of each Letter of Credit shall, in
addition to the conditions precedent set forth in Section 6 hereof, be
subject to the conditions precedent that (i) such Letter of Credit shall be
in such form, contain such terms and support such transactions as shall be
satisfactory to the Issuing Lender consistent with its then current
practices and procedures with respect to letters of credit of the same type
and (ii) the Borrowers shall have executed and delivered such applications,
agreements and other instruments relating to such Letter of Credit as the
Issuing Lender shall have reasonably requested consistent with its then
current practices and procedures with respect to letters of credit of the
same type, provided that in the event of any conflict between any such
--------
application, agreement or other instrument and the provisions of this
Agreement or any Security Document, the provisions of this Agreement and
the Security Documents shall control.
(j) To the extent that any Lender shall fail to pay any amount required to be
paid pursuant to paragraph (e) or (f) of this Section 2.03 on the due date
therefor, such Lender shall pay interest to the Issuing Lender (through the
Administrative Agent) on such amount from and including such due date to
but excluding the date such payment is made at a rate per annum equal to
the Federal Funds Rate, provided that if such Lender shall fail to make
--------
such payment to the Issuing Lender within three Business Days of such due
date, then, retroactively to the due date, such Lender shall be obligated
to pay interest on such amount at the Post-Default Rate.
(k) The issuance by the Issuing Lender of any modification or supplement to any
Letter of Credit hereunder shall be subject to the same conditions
applicable under this Section 2.03 to the issuance of new Letters of
Credit, and no such modification or supplement shall be issued hereunder
unless either (i) the respective Letter of Credit affected thereby would
have complied with such conditions had it originally been issued
Credit Agreement
----------------
<PAGE>
-38-
hereunder in such modified or supplemented form or (ii) each Revolving
Credit Lender shall have consented thereto.
(l) Pursuant to the Triax Credit Agreement, Chase has issued various "Letters
of Credit" for the account of Triax in an aggregate face amount outstanding
on the date hereof approximately equal to $405,750. As provided in Section
6.01(m) hereof, all Liens in favor of the lenders (or an agent for such
lenders) under the Triax Credit Agreement on assets purchased in the Triax
Acquisition are to be released (or arrangements for such release are to be
made) on the Closing Date. In that connection, the Borrowers hereby agree,
effective on the Closing Date, to assume all of the obligations of Triax
under the Triax Credit Agreement in respect of such "Letters of Credit",
and each of the Lenders hereunder (including the Issuing Lender hereunder)
hereby agrees that, on the Closing Date, all such "Letters of Credit" under
the Triax Credit Agreement shall automatically become Letters of Credit
hereunder. To the extent that, in order to permit drawings under such
Letters of Credit by the respective beneficiaries, it shall be necessary to
change references in such Letters of Credit to become references to one or
more of the Borrowers, the Issuing Lender is hereby authorized to execute
and deliver appropriate amendments to such Letters of Credit.
The Borrowers hereby indemnify and hold harmless each Revolving Credit Lender
and the Administrative Agent from and against any and all claims and damages,
losses, liabilities, costs or expenses that such Lender or the Administrative
Agent may incur (or that may be claimed against such Lender or the
Administrative Agent by any Person whatsoever) by reason of or in connection
with the execution and delivery or transfer of or payment or refusal to pay by
the Issuing Lender under any Letter of Credit; provided that the Borrowers shall
--------
not be required to indemnify any Lender or the Administrative Agent for any
claims, damages, losses, liabilities, costs or expenses to the extent, but only
to the extent, caused by (x) the willful misconduct or gross negligence of the
Issuing Lender in determining whether a request presented under any Letter of
Credit complied with the terms of such Letter of Credit or (y) in the case of
the Issuing Lender, such Lender's failure to pay under any Letter of Credit
after the presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit. Nothing in this Section 2.03 is intended
to limit the other obligations of the Borrowers, any Lender or the
Administrative Agent under this Agreement.
2.04 Changes of Commitments.
----------------------
(a) Subject to the last sentence of this Section 2.04(a), the aggregate
amount of the Revolving Credit Commitments shall be automatically reduced to
zero on the Revolving Credit Commitment Termination Date. In addition, the
aggregate amount of the Revolving Credit Commitments shall be automatically
reduced on each Revolving Credit Commitment Reduction Date set forth in column
(A) below, (x) by an amount (subject to reduction pursuant to
Credit Agreement
----------------
<PAGE>
-39-
paragraph (c) below) equal to the amount set forth in column (B) below opposite
such Revolving Credit Commitment Reduction Date, (y) to an amount (subject to
reduction pursuant to paragraph (c) below) equal to the amount set forth in
column (C) below opposite such Revolving Credit Commitment Reduction Date:
(A) (B) (C)
Revolving Credit Revolving Credit Revolving Credit
Commitment Reduction Commitments Reduced Commitments Reduced
Date Falling on or by the Following to the Following
Nearest to: Amounts: Amounts:
----------- -------- --------
September 30, 2002 5,625,000 444,375,000
December 31, 2002 5,625,000 438,750,000
March 31, 2003 5,625,000 433,125,000
June 30, 2003 5,625,000 427,500,000
September 30, 2003 5,625,000 421,875,000
December 31, 2003 5,625,000 416,250,000
March 31, 2004 16,875,000 399,375,000
June 30, 2004 16,875,000 382,500,000
September 30, 2004 16,875,000 365,625,000
December 31, 2004 16,875,000 348,750,000
March 31, 2005 22,500,000 326,250,000
June 30, 2005 22,500,000 303,750,000
September 30, 2005 22,500,000 281,250,000
December 31, 2005 22,500,000 258,750,000
March 31, 2006 22,500,000 236,250,000
June 30, 2006 22,500,000 213,750,000
September 30, 2006 22,500,000 191,250,000
December 31, 2006 22,500,000 168,750,000
March 31, 2007 22,500,000 146,250,000
June 30, 2007 22,500,000 123,750,000
September 30, 2007 22,500,000 101,250,000
December 31, 2007 22,500,000 78,750,000
March 31, 2008 39,375,000 39,375,000
June 30, 2008 39,375,000 0
Credit Agreement
----------------
<PAGE>
-40-
As provided for in the definition of "Revolving Credit Commitment Termination
Date" in Section 1.01, if Mediacom does not refinance its 1998 Senior Notes
prior to March 31, 2007, with new Indebtedness having a maturity no earlier than
two years after the payment of all amounts due under this Agreement and on terms
satisfactory to the Administrative Agent and the Majority Lenders, the Revolving
Credit Commitments shall be terminated, and the entire principal amount of the
Revolving Credit Loans then outstanding shall, as provided for in Section
2.10(g) hereof, be paid in full, on the Revolving Credit Commitment Reduction
Date falling on or nearest to September 30, 2007.
(b) The Borrowers shall have the right at any time or from time to time (i)
so long as no Revolving Credit Loans or Letter of Credit Liabilities are
outstanding, to terminate the Revolving Credit Commitments, (ii) so long as no
Term Loans are outstanding, to terminate the Term Loan Commitments, (iii) so
long as no Incremental Facility Loans of a Series are outstanding, to terminate
the Incremental Facility Commitments of such Series and (iv) to reduce the
aggregate unused amount of the Revolving Credit Commitments or Incremental
Facility Commitments of any Series (for which purpose use of the Revolving
Credit Commitments shall be deemed to include the aggregate amount of Letter of
Credit Liabilities); provided that (x) the Borrowers shall give notice of each
--------
such termination or reduction as provided in Section 4.05 hereof, (y) each
partial reduction shall be in an aggregate amount at least equal to $1,000,000
(or a larger multiple of $500,000) and (z) prior to the making of the initial
Loans hereunder, each such reduction of Commitments shall be applied ratably to
the Commitments of each Class.
(c) Each reduction in the aggregate amount of the Revolving Credit
Commitments pursuant to paragraph (b) above, or pursuant to Section 2.10 hereof,
on any date shall be applied to the reductions set forth in the schedule in
paragraph (a) above ratably as follows: each such reduction shall result in an
automatic and simultaneous reduction (but not below zero) of the respective
amounts set forth in column (B) at the end of paragraph (a) above (ratably in
accordance with the respective remaining amounts thereof, after giving effect to
any prior reductions pursuant to this paragraph (c)), with appropriate
reductions (but not below zero) being made to the respective amounts set forth
in column (C) of said paragraph (a) after giving effect to such reduction of the
amounts in said column (B).
(d) The aggregate amount of the Term Loan Commitments shall be automatically
reduced to zero on the close of business on the Closing Date. The aggregate
amount of the Incremental Facility Commitments shall be automatically reduced to
zero on the close of business on the last day of the Incremental Facility
Availability Period.
(e) The Commitments once terminated or reduced may not be reinstated.
Credit Agreement
----------------
<PAGE>
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2.05 Commitment Fee. The Borrowers shall pay to the Administrative Agent for
--------------
account of each Revolving Credit Lender a commitment fee on the daily average
unused amount of such Lender's Revolving Credit Commitment (for which purpose
(i) the aggregate amount of any Letter of Credit Liabilities shall be deemed to
be a pro rata (based on the Revolving Credit Commitments) use of each Lender's
Revolving Credit Commitment and (ii) any Reserved Commitment Amount shall be
deemed to be unused), for the period from and including the date hereof to but
not including the earlier of the date such Revolving Credit Commitment is
terminated and the Revolving Credit Commitment Termination Date, at a rate per
annum equal to (x) 3/8 of 1% at any time the then-current Rate Ratio (determined
pursuant to Section 3.03 hereof) is greater than 5.00 to 1 and (y) 1/4 of 1% at
any time the then-current Rate Ratio (so determined) is equal to or less than
5.00 to 1, provided that for the period from and including the date hereof to
but excluding the Closing Date, such commitment fee shall be determined based on
the assumption that the Rate Ratio is less than 5.00 to 1. The Borrowers shall
pay to the Administrative Agent for account of each Incremental Facility Lender
of any Series a commitment fee in such amounts, and on such dates, as shall have
been agreed to by the Borrowers and such Incremental Facility Lender upon the
allocation of the Incremental Facility Commitment of such Series to such Lender
pursuant to Section 2.01(c) hereof. Accrued commitment fee shall be payable on
each Quarterly Date and on the earlier of the date the relevant Commitments are
terminated and the Revolving Credit Commitment Termination Date or the
Incremental Facility Commitment Termination Date, as the case may be.
2.06 Lending Offices. The Loans of each Type made by each Lender shall be
---------------
made and maintained at such Lender's Applicable Lending Office for Loans of such
Type.
2.07 Several Obligations; Remedies Independent. The failure of any Lender to
-----------------------------------------
make any Loan to be made by it on the date specified therefor shall not relieve
any other Lender of its obligation to make its Loan on such date, but neither
any Lender nor the Administrative Agent shall be responsible for the failure of
any other Lender to make a Loan to be made by such other Lender, and (except as
otherwise provided in Section 4.06 hereof) no Lender shall have any obligation
to the Administrative Agent or any other Lender for the failure by such Lender
to make any Loan required to be made by such Lender. Anything in this Agreement
to the contrary notwithstanding, each Lender hereby agrees with each other
Lender that no Lender shall take any action to protect or enforce its rights
arising out of this Agreement (including, without limitation, exercising any
rights of off-set) without first obtaining the prior written consent of the
Administrative Agent or the Majority Lenders, it being the intent of the Lenders
that any such action to protect or enforce rights under this Agreement shall be
taken in concert and at the direction or with the consent of the Administrative
Agent or the Majority Lenders and not individually by a single Lender.
Credit Agreement
----------------
<PAGE>
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2.08 Loan Accounts; Promissory Notes.
-------------------------------
(a) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrowers to such Lender
resulting from each Loan made by such Lender to the Borrowers, including the
amounts of principal and interest payable and paid to such Lender by the
Borrowers from time to time hereunder.
(b) The Administrative Agent shall maintain accounts in which it shall record
(i) the amount of each Loan made hereunder to the Borrowers, the Class and Type
thereof and the Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrowers to each Lender hereunder and (iii) the amount of any sum received by
the Administrative Agent hereunder from the Borrowers for the account of the
Lenders and each Lender's share thereof.
(c) The entries made in the accounts maintained pursuant to paragraph (a) or
(b) of this Section shall be prima facie evidence of the existence and amounts
----- -----
of the obligations recorded therein; provided that the failure of any Lender or
--------
the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligation of the Borrowers to repay the Loans in
accordance with the terms of this Agreement.
(d) Any Lender may request that Loans of any Class made by it to the
Borrowers be evidenced by a promissory note. In such event, the Borrowers shall
prepare, execute and deliver to such Lender a promissory note payable to the
order of such Lender (or, if requested by such Lender, to such Lender and its
registered assigns) and in a form approved by the Administrative Agent.
Thereafter, the Loans of the Borrowers evidenced by such promissory note and
interest thereon shall at all times (including after assignment pursuant to
Section 11.06 hereof) be represented by one or more promissory notes in such
form payable to the order of the payee named therein (or, if such promissory
note is a registered note, to such payee and its registered assigns).
2.09 Optional Prepayments and Conversions or Continuations of Loans. Subject
--------------------------------------------------------------
to Section 4.04 hereof, the Borrowers shall have the right to prepay Loans, or
to Convert Loans of one Type into Loans of another Type or Continue Loans of one
Type as Loans of the same Type, at any time or from time to time, provided that:
--------
(a) the Borrowers shall give the Administrative Agent notice of each such
prepayment, Conversion or Continuation as provided in Section 4.05 hereof
(and, upon the date specified in any such notice of prepayment, the amount
to be prepaid shall become due and payable hereunder);
Credit Agreement
----------------
<PAGE>
-43-
(b) Eurodollar Loans may be prepaid or Converted at any time from time to time,
provided that the Borrowers shall pay any amounts owing under Section 5.05
--------
hereof in the event of any such prepayment or Conversion on any date other
than the last day of an Interest Period for such Loans;
(c) prepayments of any Term Loan shall be effected in such manner so that the
Term Loans (and, to the extent that Incremental Loans are outstanding, the
Incremental Loans of all Series) are concurrently prepaid ratably in
accordance with the respective outstanding principal amounts thereof and
the aggregate principal amount of all such concurrent prepayments is at
least equal to $1,000,000 or a greater multiple of $500,000;
(d) prepayments of the Term Loans and Incremental Facility Loans shall be
applied to the remaining installments of such Loans ratably in accordance
with the respective principal amounts thereof; and
(e) any Conversion or Continuation of Eurodollar Loans shall be subject to the
provisions of Section 2.01(d) hereof.
Notwithstanding the foregoing, and without limiting the rights and remedies of
the Lenders under Section 9 hereof, in the event that any Event of Default shall
have occurred and be continuing, the Administrative Agent may (and at the
request of the Majority Lenders shall) suspend the right of the Borrowers to
Convert any Loan into a Eurodollar Loan, or to Continue any Loan as a Eurodollar
Loan, in which event all Loans shall be Converted (on the last day(s) of the
respective Interest Periods therefor) or Continued, as the case may be, as Base
Rate Loans.
2.10 Mandatory Prepayments and Reductions of Commitments.
---------------------------------------------------
(a) Casualty Events. Upon the date 270 days following the receipt by any
---------------
Borrower or any of its Subsidiaries of the proceeds of insurance, condemnation
award or other compensation in respect of any Casualty Event affecting any
Property of any of the Borrowers or any of their Subsidiaries (or upon such
earlier date as the Borrowers or any such Subsidiary, as the case may be, shall
have determined not to repair or replace the Property affected by such Casualty
Event), the Borrowers shall prepay the Loans (and/or provide cover for Letter of
Credit Liabilities as specified in paragraph (f) below), and the Commitments
shall be subject to automatic reduction, in an aggregate amount, if any, equal
to 100% of the Net Available Proceeds of such Casualty Event not theretofore
applied (or committed to be applied pursuant to executed construction contracts
or equipment orders) to the repair or replacement of such Property, such
prepayment to be effected in each case in the manner and to the extent specified
in paragraph (e) of this Section 2.10. Notwithstanding the foregoing, the
Borrowers shall not be required to make any prepayment (and/or provide cover for
Letter of Credit Liabilities) under this paragraph (a), and the Commitments
shall not be subject to automatic reduction, until the
Credit Agreement
----------------
<PAGE>
-44-
aggregate amount of the Net Available Proceeds that must be prepaid under this
paragraph (a) (reduced by the amount of such Net Available Proceeds that has
previously been applied to the prepayment of Loans or reduction of Commitments
hereunder as a result of previous Casualty Events) exceeds $10,000,000.
(b) Excess Cash Flow. Not later than the date 150 days after the end of each
----------------
fiscal year of the Borrowers (or, if earlier, 30 days after the delivery of the
audited financial statements for such fiscal year pursuant to Section 8.01(b)
hereof), commencing with the fiscal year ending on December 31, 2002, the
Borrowers shall prepay the Loans (and/or provide cover for Letter of Credit
Liabilities as specified in paragraph (f) below), and the Commitments shall be
subject to automatic reduction, in an aggregate amount equal to the excess of
(A) 50% of Excess Cash Flow for such fiscal year over (B) the aggregate amount
of voluntary prepayments of Term Loans and Incremental Facility Loans made
during such fiscal year pursuant to Section 2.09 hereof (other than that
portion, if any, of such prepayments applied to installments of the Term Loans
and Incremental Facility Loans falling due in such fiscal year), such prepayment
and reduction to be effected in each case in the manner and to the extent
specified in paragraph (e) of this Section 2.10.
(c) Debt Issuances. Upon any Debt Issuance, the Borrowers shall prepay the
--------------
Loans (and/or provide cover for Letter of Credit Liabilities as specified in
paragraph (f) below), and the Commitments shall be subject to automatic
reduction, in an aggregate amount equal to 100% of the Net Available Proceeds
thereof, such prepayment and reduction to be effected in each case in the manner
and to the extent specified in paragraph (e) of this Section 2.10.
(d) Sale of Assets. Without limiting the obligation of the Borrowers to
--------------
obtain the consent of the Majority Lenders pursuant to Section 8.05 hereof to
any Disposition not otherwise permitted hereunder, in the event that the Net
Available Proceeds of any Disposition (herein, the "Current Disposition"), and
-------------------
of all prior Dispositions after the date hereof as to which a prepayment has not
yet been made under this Section 2.10(d), shall exceed $10,000,000 then, no
later than five Business Days prior to the occurrence of the Current
Disposition, the Borrowers will deliver to the Lenders a statement, certified by
a Senior Officer, in form and detail satisfactory to the Administrative Agent,
of the amount of the Net Available Proceeds of the Current Disposition and of
all such prior Dispositions and will prepay the Loans (and/or provide cover for
Letter of Credit Liabilities as specified in paragraph (f) below), and the
Commitments shall be subject to automatic reduction, in an aggregate amount
equal to 100% of the Net Available Proceeds of the Current Disposition and such
prior Dispositions, such prepayment and reduction to be effected in each case in
the manner and to the extent specified in paragraph (e) of this Section 2.10.
Notwithstanding the foregoing, the Borrowers shall not be required to make a
prepayment pursuant to this paragraph (d) with respect to Net Available Proceeds
from any
Credit Agreement
----------------
<PAGE>
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Disposition in the event that the Borrowers advise the Administrative Agent at
the time the Net Available Proceeds from such Disposition are received that they
intend to reinvest such Net Available Proceeds in replacement assets pursuant to
an acquisition permitted under Section 8.05(d)(v) hereof so long as
(x) such Net Available Proceeds are either (i) held by (A) the Administrative
Agent or (B) as permitted under the Section 4.01 of the Pledge Agreement, a
Qualified Intermediary (as defined thereunder), in the Collateral Account
pending such reinvestment, in which event the Administrative Agent (or the
Qualified Intermediary, as the case may be) need not release such Net
Available Proceeds except upon presentation of evidence satisfactory to it
that such Net Available Proceeds are to be so reinvested in compliance with
the provisions of this Agreement or (ii) applied by the Borrowers to the
prepayment of Revolving Credit Loans hereunder (in which event the
Borrowers agree to advise the Administrative Agent in writing at the time
of such prepayment of Revolving Credit Loans that such prepayment is being
made from the proceeds of a Disposition and that, as contemplated by
Section 2.01(a) hereof, a portion of the Revolving Credit Commitments
hereunder equal to the amount of such prepayment gives rise to a Reserved
Commitment Amount that shall be available hereunder only for purposes of
making an acquisition under Section 8.05(d)(v) hereof),
(y) the Net Available Proceeds from any Disposition are in fact so reinvested
within 270 days of such Disposition (it being understood that, in the event
Net Available Proceeds from more than one Disposition are paid into the
Collateral Account or applied to the prepayment of Revolving Credit Loans
as provided in clause (x) above, such Net Available Proceeds shall be
deemed to be released (or, as the case may be, Revolving Credit Loans
utilizing the Reserved Commitment Amount shall be deemed to be made) in the
same order in which such Dispositions occurred and, accordingly, (A) any
such Net Available Proceeds so held for more than 270 days shall be
forthwith applied to the prepayment of Loans and reductions of Commitments
as provided above and (B) any Reserved Commitment Amount that remains so
unutilized for more than 270 days shall, subject to the satisfaction of the
conditions precedent to such borrowing in Section 6.02 hereof, be utilized
through the borrowing by the Borrowers of Revolving Credit Loans the
proceeds of which shall be applied to the prepayment of Loans and
reductions of Commitments as provided in paragraph (e) of this Section
2.10) and
(z) the aggregate amount of Net Available Proceeds (together with investment
earnings thereon) so held at any time by the Administrative Agent (or the
Qualified Intermediary) pending reinvestment as contemplated by this
sentence, together with the aggregate amount of the Reserved Commitment
Amount, shall not at any time exceed $40,000,000 or such greater amount as
the Majority Lenders may otherwise agree.
Credit Agreement
----------------
<PAGE>
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As contemplated by Section 4.01 of the Pledge Agreement, nothing in this
paragraph (d) shall be deemed to obligate the Administrative Agent to release
any of such proceeds from the Collateral Account to the Borrowers for purposes
of reinvestment as aforesaid upon the occurrence and during the continuance of
any Event of Default.
(e) Application. Prepayments and reductions of Commitments described above
-----------
in this Section 2.10 shall be applied to the Term Loans and Incremental Facility
Loans of each Series then outstanding, and to the reduction of the Revolving
Credit Commitments, ratably in accordance with the respective amounts of such
Loans and Commitments and shall be applied:
(x) to the prepayment of the respective installments of the Term Loans and
Incremental Facility Loans ratably in accordance with the respective
principal amounts thereof and
(y) to the extent that, after giving effect to any such reduction of Revolving
Credit Commitments, the sum of the aggregate outstanding principal amount
of the Revolving Credit Loans and Letter of Credit Liabilities shall exceed
the aggregate amount of the Revolving Credit Commitments, to the prepayment
of Revolving Credit Loans (and to provide cover for Letter of Credit
Liabilities as specified in paragraph (f) below), so that, after giving
effect thereto, such sum does not exceed the aggregate amount of the
Revolving Credit Commitments.
(f) Cover for Letter of Credit Liabilities. In the event that the Borrowers
--------------------------------------
shall be required pursuant to this Section 2.10, to provide cover for Letter of
Credit Liabilities, the Borrowers shall effect the same by paying to the
Administrative Agent immediately available funds in an amount equal to the
required amount, which funds shall be retained by the Administrative Agent in
the Collateral Account (as collateral security in the first instance for the
Letter of Credit Liabilities) until such time as the Letters of Credit shall
have been terminated and all of the Letter of Credit Liabilities paid in full.
(g) Change in Commitments. If at any time the aggregate outstanding amount
---------------------
of Revolving Credit Loans and Letter of Credit Liabilities exceeds the aggregate
amount of the Revolving Credit Commitments then in effect, the Borrowers shall
prepay the Revolving Credit Loans (and/or provide cover for Letter of Credit
Liabilities as specified in paragraph (f) above) in such amounts as shall be
necessary so that after giving effect to such prepayment (and cover), the
aggregate outstanding amount of the Revolving Credit Loans and Letter of Credit
Liabilities does not exceed the aggregate amount of the Revolving Credit
Commitments, provided that any such prepayment shall be accompanied by any
--------
amounts payable under Section 5.05 hereof.
Credit Agreement
----------------
<PAGE>
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Section 3. Payments of Principal and Interest.
----------------------------------
3.01 Repayment of Loans.
------------------
(a) The Borrowers hereby jointly and severally promise to pay to the
Administrative Agent for account of each Lender the entire outstanding principal
amount of such Lender's Revolving Credit Loans, and each Revolving Credit Loan
shall mature, on the Revolving Credit Commitment Termination Date. In addition,
if following any Revolving Credit Commitment Reduction Date the aggregate
principal amount of the Revolving Credit Loans shall exceed the Revolving Credit
Commitments, the Borrowers shall pay Revolving Credit Loans, and provide cover
for Letter of Credit Liabilities as specified in Section 2.10(f), in an
aggregate amount equal to such excess.
(b) Subject to the last sentence of this Section 3.01(b), the Borrowers
hereby jointly and severally promise to pay to the Administrative Agent for
account of the Term Loan Lenders the principal of the Term Loans in twenty-six
consecutive quarterly installments payable on the Principal Payment Dates as
follows:
Principal Payment Date Amount of Installment ($)
---------------------- -------------------------
September 30, 2002 125,000
December 31, 2002 125,000
March 31, 2003 250,000
June 30, 2003 250,000
September 30, 2003 250,000
December 31, 2003 250,000
March 31, 2004 250,000
June 30, 2004 250,000
September 30, 2004 250,000
December 31, 2004 250,000
March 31, 2005 250,000
June 30, 2005 250,000
September 30, 2005 250,000
December 31, 2005 250,000
Credit Agreement
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<PAGE>
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March 31, 2006 250,000
June 30, 2006 250,000
September 30, 2006 250,000
December 31, 2006 250,000
March 31, 2007 250,000
June 30, 2007 250,000
September 30, 2007 250,000
December 31, 2007 250,000
March 31, 2008 250,000
June 30, 2008 250,000
September 30, 2008 250,000
December 31, 2008 94,000,000
If Mediacom does not refinance its 1998 Senior Notes prior to March 31,
2007, with new Indebtedness having a maturity no earlier than two years after
the payment of all amounts due under this Agreement and on terms satisfactory to
the Administrative Agent and the Majority Lenders, the entire outstanding
principal amount of the Term Loans shall be payable on December 31, 2007.
(c) The Borrowers hereby jointly and severally promise to pay to the
Administrative Agent for account of the Incremental Facility Lenders of any
Series the principal of the Incremental Facility Loans of such Series on the
respective Principal Payment Dates agreed upon between the Borrowers and such
Incremental Facility Lenders pursuant to Section 2.01(c) hereof at the time such
Lenders become obligated to make such Incremental Facility Loans hereunder.
3.02 Interest. The Borrowers hereby jointly and severally promise to pay to
--------
the Administrative Agent for account of each Lender interest on the unpaid
principal amount of each Loan made by such Lender for the period from and
including the date of such Loan to but excluding the date such Loan shall be
paid in full, at the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base Rate (as in
effect from time to time) plus the Applicable Margin and
----
(b) during such periods as such Loan is a Eurodollar Loan, for each Interest
Period relating thereto, the Eurodollar Rate for such Loan for such
Interest Period plus the Applicable Margin.
----
Credit Agreement
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<PAGE>
-49-
Notwithstanding the foregoing, the Borrowers jointly and severally promise to
pay to the Administrative Agent for account of each Lender interest at the
applicable Post-Default Rate on any principal of any Loan made by such Lender,
on any Reimbursement Obligation held by such Lender and on any other amount
payable by the Borrowers hereunder to or for account of such Lender, that shall
not be paid in full when due (whether at stated maturity, by acceleration, by
mandatory prepayment or otherwise), for the period from and including the due
date thereof to but excluding the date the same is paid in full. Accrued
interest on each Loan shall be payable (i) in the case of a Base Rate Loan,
quarterly on the Quarterly Dates, (ii) in the case of a Eurodollar Loan, on the
last day of each Interest Period therefor and, if such Interest Period is longer
than three months, at three-month intervals following the first day of such
Interest Period, (iii) in the case of any Eurodollar Loan, upon the payment,
prepayment or Conversion thereof (but only on the principal amount so paid,
prepaid or Converted) and (iv) in the case of all Loans, upon the payment or
prepayment in full of the principal of the Loans, and the termination of the
Commitments, hereunder, except that interest payable at the Post-Default Rate
shall be payable from time to time on demand. Promptly after the determination
of any interest rate provided for herein or any change therein, the
Administrative Agent shall give notice thereof to the Lenders to which such
interest is payable and to the Borrowers.
3.03 Determination of Applicable Margin.
----------------------------------
(a) The Applicable Margin for the period from the Closing Date to the day
prior to the first Quarterly Date shall be determined based upon the certificate
delivered pursuant to Section 6.01(o) hereof. Thereafter, the Applicable Margin
for each Quarterly Payment Period shall be determined based upon a Rate Ratio
Certificate for such Quarterly Payment Period delivered by the Borrowers to the
Lenders and the Administrative Agent under this Section 3.03. If the Rate Ratio
Certificate for any Quarterly Payment Period is delivered to the Administrative
Agent three or more days prior to the first day of such Quarterly Payment
Period, any adjustment in the Applicable Margin required to be made, as shown in
such Rate Ratio Certificate, shall be effective on the first day of such
Quarterly Payment Period.
(b) If the Rate Ratio Certificate for any Quarterly Payment Period is
delivered by the Borrowers to the Administrative Agent later than three days
prior to the commencement of such Quarterly Payment Period, then (i) any
decrease in the Applicable Margin for such Quarterly Payment Period shall not
become effective on the first day of such Quarterly Payment Period but shall
instead become effective on the third day following receipt by the
Administrative Agent of such Rate Ratio Certificate and (ii) any increase in the
Applicable Margin for such Quarterly Payment Period shall become effective
retroactively from the first day of such Quarterly Payment Period.
(c) If it shall be determined at any time, on the basis of a certificate of a
Senior Officer delivered pursuant to the last sentence of Section 8.01 hereof,
that the Applicable Margin
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then in effect for the current Quarterly Payment Period, or any previous
Quarterly Payment Period, is or was incorrect, and that a correction would have
the effect of increasing the Applicable Margin, then the Applicable Margin shall
be so increased effective retroactively from the first day of such Quarterly
Payment Period, provided that in the event such certificate for any fiscal
--------
quarter is not delivered to the Lenders pursuant to said Section 8.01 within 60
days of the end of such fiscal quarter, then, unless the Borrowers shall deliver
such certificate within 10 days after notice of such non-delivery shall be given
by any Lender or the Administrative Agent to the Borrowers, the Applicable
Margin for such Quarterly Payment Period shall be deemed to be the highest
Applicable Margin provided for in the definition of such term in Section 1.01
hereof.
(d) In the event of any retroactive increase in the Applicable Margin for any
Quarterly Payment Period pursuant to paragraph (a), (b) or (c) above, the amount
of interest in respect of any Loan outstanding during all or any portion of such
Quarterly Payment Period shall be recalculated using the Applicable Margin as so
increased. On the Business Day immediately following receipt by the Borrowers
of notice from the Administrative Agent of such increase, the Borrowers shall
pay to the Administrative Agent, for account of the Lenders, an amount equal to
the difference between (i) the amount of interest previously paid or payable by
the Borrowers in respect of such Loan for such Quarterly Payment Period and (ii)
the amount of interest in respect of such Loan as so recalculated for such
Quarterly Payment Period.
Section 4. Payments; Pro Rata Treatment; Computations; Etc.
------------------------------------------------
4.01 Payments.
--------
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
the Borrowers under this Agreement, and except to the extent otherwise provided
therein, all payments to be made by the Borrowers under any other Loan Document
shall be made in Dollars, in immediately available funds, without deduction,
set-off or counterclaim, to the Administrative Agent at an account designated by
the Administrative Agent to the Borrowers, not later than 1:00 p.m. New York
time on the date on which such payment shall become due (each such payment made
after such time on such due date to be deemed to have been made on the next
succeeding Business Day).
(b) Any Lender for whose account any such payment is to be made may (but
shall not be obligated to) debit the amount of any such payment that is not made
by such time to any ordinary deposit account of the Borrowers with such Lender
(with notice to the Borrowers and the Administrative Agent), provided that such
--------
Lender's failure to give such notice shall not affect the validity thereof.
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(c) The Borrowers shall, at the time of making each payment under this
Agreement for account of any Lender, specify to the Administrative Agent (which
shall so notify the intended recipient(s) thereof) the Loans, Reimbursement
Obligations or other amounts payable by the Borrowers hereunder to which such
payment is to be applied (and in the event that the Borrowers fail to so
specify, or if an Event of Default has occurred and is continuing, the
Administrative Agent may distribute such payment to the Lenders for application
in such manner as it or the Majority Lenders, subject to Section 4.02 hereof,
may determine to be appropriate).
(d) Except to the extent otherwise provided in the last sentence of Section
2.03(e) hereof, each payment received by the Administrative Agent under this
Agreement for account of any Lender shall be paid by the Administrative Agent
promptly to such Lender, in immediately available funds, for account of such
Lender's Applicable Lending Office for the Loan or other obligation in respect
of which such payment is made.
(e) If the due date of any payment under this Agreement would otherwise fall
on a day that is not a Business Day, such date shall be extended to the next
succeeding Business Day, and interest shall be payable for any principal so
extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise provided herein:
------------------
(a) each borrowing of Loans of a particular Class (including of a particular
Series of Incremental Facility Loans) from the Lenders under Section 2.01
hereof shall be made from the relevant Lenders, each payment of commitment
fee under Section 2.05 hereof in respect of Commitments of a particular
Class shall be made for account of the relevant Lenders, and each
termination or reduction of the amount of the Commitments of a particular
Class under Section 2.04 hereof shall be applied to the respective
Commitments of such Class of the relevant Lenders, pro rata according to
the amounts of their respective Commitments of such Class;
(b) except as otherwise provided in Section 5.04 hereof, Eurodollar Loans of
any Class (including of a particular Series of Incremental Facility Loans)
having the same Interest Period shall be allocated pro rata among the
relevant Lenders according to the amounts of their respective Revolving
Credit, Term Loan and Incremental Facility Loan Commitments of the relevant
Series (in the case of the making of Loans) or their respective Revolving
Credit, Term and Incremental Facility Loans of the relevant Series (in the
case of Conversions and Continuations of Loans);
(c) each payment or prepayment of principal of Revolving Credit, Term and
Incremental Facility Loans by the Borrowers shall be made for account of
the relevant Lenders pro rata in accordance with the respective unpaid
principal amounts of the Loans of such Class held by them; and
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(d) each payment of interest on Revolving Credit, Term and Incremental Facility
Loans by the Borrowers shall be made for account of the relevant Lenders
pro rata in accordance with the amounts of interest on such Loans then due
and payable to the respective Lenders.
4.03 Computations. Interest on Eurodollar Loans shall be computed on the
------------
basis of a year of 360 days and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable and interest
on Base Rate Loans and Reimbursement Obligations, commitment fee and letter of
credit fees shall be computed on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed (including the first day but, except as
otherwise provided in Section 2.03(g) hereof, excluding the last day) occurring
in the period for which payable. Notwithstanding the foregoing, for each day
that the Base Rate is calculated by reference to the Federal Funds Rate,
interest on Base Rate Loans shall be computed on the basis of a year of 360 days
and actual days elapsed.
4.04 Minimum Amounts. Except for mandatory prepayments made pursuant to
---------------
Section 2.10 hereof and Conversions or prepayments made pursuant to Section 5.04
hereof, each borrowing, Conversion and partial prepayment of principal of Base
Rate Loans (other than prepayments of Term Loans, as to which the provisions of
Section 2.09(c) hereof shall apply) shall be in an aggregate amount at least
equal to $100,000 or a larger multiple of $100,000 and each borrowing,
Conversion and partial prepayment of Eurodollar Loans (other than prepayments of
Term Loans, as to which the provisions of Section 2.09(c) hereof shall apply)
shall be in an aggregate amount at least equal to $3,000,000 or a larger
multiple of $500,000 (borrowings, Conversions or prepayments of or into Loans of
different Types or, in the case of Eurodollar Loans, having different Interest
Periods at the same time hereunder to be deemed separate borrowings, Conversions
and prepayments for purposes of the foregoing, one for each Type or Interest
Period). If any Eurodollar Loans would otherwise be in a lesser principal amount
for any period, such Loans shall be Base Rate Loans during such period.
4.05 Certain Notices. Notices by the Borrowers to the Administrative Agent
---------------
of terminations or reductions of the Commitments, of borrowings, Conversions,
Continuations and optional prepayments of Loans and of Classes of Loans, of
Types of Loans and of the duration of Interest Periods shall be irrevocable and
shall be effective only if received by the Administrative Agent not later than
1:00 p.m. New York time on the number of Business Days prior to the date of the
relevant termination, reduction, borrowing, Conversion, Continuation or
prepayment or the first day of such Interest Period specified below:
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Number of
Business
Notice Days Prior
------ ----------
Termination or reduction
of Commitments 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
Each such notice of termination or reduction shall specify the amount and the
Class of the Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans (including, if applicable, the particular Series of Incremental
Facility Loans) to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day). Each such
notice of the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate.
The Administrative Agent shall promptly notify the Lenders of the contents of
each such notice. In the event that the Borrowers fail to select the Type of
Loan, or the duration of any Interest Period for any Eurodollar Loan, within the
time period and otherwise as provided in this Section 4.05, such Loan (if
outstanding as a Eurodollar Loan) will be automatically Converted into a Base
Rate Loan on the last day of the then current Interest Period for such Loan or
(if outstanding as a Base Rate Loan) will remain as, or (if not then
outstanding) will be made as, a Base Rate Loan.
4.06 Non-Receipt of Funds by the Administrative Agent. Unless the
------------------------------------------------
Administrative Agent shall have been notified by a Lender or the Borrowers (the
"Payor") prior to the date on which the Payor is to make payment to the
- ------
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender hereunder or (in the case of the Borrowers) a payment to the
Administrative Agent for account of one or more of the Lenders hereunder (such
payment being herein called the "Required Payment"), which notice shall be
----------------
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
the Required Payment has
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been made and may, in reliance upon such assumption (but shall not be required
to), make the amount thereof available to the intended recipient(s) on such
date; and, if the Payor has not in fact made the Required Payment to the
Administrative Agent, the recipient(s) of such payment shall, on demand, repay
to the Administrative Agent the amount so made available together with interest
thereon in respect of each day during the period commencing on the date (the
"Advance Date") such amount was so made available by the Administrative Agent
------------
until the date the Administrative Agent recovers such amount at a rate per annum
equal to the Federal Funds Rate for such day and, if such recipient(s) shall
fail promptly to make such payment, the Administrative Agent shall be entitled
to recover such amount, on demand, from the Payor, together with interest as
aforesaid, provided that if neither the recipient(s) nor the Payor shall return
--------
the Required Payment to the Administrative Agent within three Business Days of
the Advance Date, then, retroactively to the Advance Date, the Payor and the
recipient(s) shall each be obligated to pay interest on the Required Payment as
follows:
(i) if the Required Payment shall represent a payment to be made
by the Borrowers to the Lenders, the Borrowers and the recipient(s) shall
each be obligated retroactively to the Advance Date to pay interest in
respect of the Required Payment at the Post-Default Rate (without
duplication of the obligation of the Borrowers under Section 3.02 hereof to
pay interest on the Required Payment at the Post-Default Rate), it being
understood that the return by the recipient(s) of the Required Payment to
the Administrative Agent shall not limit such obligation of the Borrowers
under said Section 3.02 to pay interest at the Post-Default Rate in respect
of the Required Payment and
(ii) if the Required Payment shall represent proceeds of a Loan
to be made by the Lenders to the Borrowers, the Payor and the Borrowers
shall each be obligated retroactively to the Advance Date to pay interest
in respect of the Required Payment pursuant to whichever of the rates
specified in Section 3.02 hereof is applicable to the Type of such Loan, it
being understood that the return by the Borrowers of the Required Payment
to the Administrative Agent shall not limit any claim the Borrowers may
have against the Payor in respect of such Required Payment.
4.07 Sharing of Payments, Etc.
-------------------------
(a) Each Borrower agrees that, in addition to (and without limitation of) any
right of set-off, banker's lien or counterclaim a Lender may otherwise have,
each Lender shall be entitled, at its option (to the fullest extent permitted by
law), to set off and apply any deposit (general or special, time or demand,
provisional or final), or other indebtedness, held by it for the credit or
account of such Borrower at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans,
Reimbursement Obligations or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of
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----------------
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whether such deposit or other indebtedness are then due to such Borrower), in
which case it shall promptly notify such Borrower and the Administrative Agent
thereof, provided that such Lender's failure to give such notice shall not
--------
affect the validity thereof.
(b) If any Lender shall obtain from any Borrower payment of any principal of
or interest on any Loan of any Class or Letter of Credit Liability owing to it
or payment of any other amount under this Agreement or any other Loan Document
through the exercise of any right of set-off, banker's lien or counterclaim or
similar right or otherwise (other than from the Administrative Agent as provided
herein), and, as a result of such payment, such Lender shall have received a
greater percentage of the principal of or interest on the Loans of such Class or
Letter of Credit Liabilities or such other amounts then due hereunder or
thereunder by such Borrower to such Lender than the percentage received by any
other Lender, it shall promptly purchase from such other Lenders participations
in (or, if and to the extent specified by such Lender, direct interests in) the
Loans of such Class or Letter of Credit Liabilities or such other amounts,
respectively, owing to such other Lenders (or in interest due thereon, as the
case may be) in such amounts, and make such other adjustments from time to time
as shall be equitable, to the end that all the Lenders shall share the benefit
of such excess payment (net of any expenses that may be incurred by such Lender
in obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and/or interest on the Loans of such Class or Letter of
Credit Liabilities or such other amounts, respectively, owing to each of the
Lenders. To such end all the Lenders shall make appropriate adjustments among
themselves (by the resale of participations sold or otherwise) if such payment
is rescinded or must otherwise be restored.
(c) Each Borrower agrees that any Lender so purchasing such a participation
(or direct interest) may exercise all rights of set-off, banker's lien,
counterclaim or similar rights with respect to such participation as fully as if
such Lender were a direct holder of Loans or other amounts (as the case may be)
owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise any such
right or shall affect the right of any Lender to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of the Borrowers. If, under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a set-off to
which this Section 4.07 applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this Section 4.07 to share in the
benefits of any recovery on such secured claim.
Credit Agreement
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Section 5. Yield Protection, Etc.
----------------------
5.01 Additional Costs.
----------------
(a) The Borrowers shall pay directly to each Lender from time to time such
amounts as such Lender may determine to be necessary to compensate such Lender
for any costs that such Lender determines are attributable to its making or
maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any of such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called "Additional
----------
Costs"), resulting from any Regulatory Change that:
- -----
(i) shall subject any Lender (or its Applicable Lending Office
for any of such Loans) to any tax, duty or other charge in respect of such
Loans or changes the basis of taxation of any amounts payable to such
Lender under this Agreement in respect of any of such Loans (excluding
changes in the rate of tax on the overall net income of such Lender or of
such Applicable Lending Office by the jurisdiction in which such Lender has
its principal office or such Applicable Lending Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar Rate for such Loan) relating to any
extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including, without limitation, any of such
Loans or any deposits referred to in the definition of "Eurodollar Base
Rate" in Section 1.01 hereof), or any commitment of such Lender (including,
without limitation, the Commitments of such Lender hereunder); or
(iii) imposes any other condition affecting this Agreement (or
any of such extensions of credit or liabilities) or its Commitments.
If any Lender requests compensation from the Borrowers under this Section
5.01(a), the Borrowers may, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender thereafter to make
or Continue Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar
Loans, until the Regulatory Change giving rise to such request ceases to be in
effect (in which case the provisions of Section 5.04 hereof shall be
applicable), provided that such suspension shall not affect the right of such
--------
Lender to receive the compensation so requested.
(b) Without limiting the effect of the foregoing provisions of this Section
5.01 (but without duplication), the Borrowers shall pay directly to each Lender
from time to time on
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----------------
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request such amounts as such Lender may determine to be necessary to compensate
such Lender (or, without duplication, the bank holding company of which such
Lender is a subsidiary) for any costs that it determines are attributable to the
maintenance by such Lender (or any Applicable Lending Office or such bank
holding company), pursuant to any law or regulation or any interpretation,
directive or request (whether or not having the force of law and whether or not
failure to comply therewith would be unlawful) of any court or governmental or
monetary authority (i) following any Regulatory Change or (ii) implementing any
risk-based capital guideline or other requirement (whether or not having the
force of law and whether or not the failure to comply therewith would be
unlawful) hereafter issued by any government or governmental or supervisory
authority implementing at the national level the Basle Accord, of capital in
respect of its Commitments or Loans (such compensation to include, without
limitation, an amount equal to any reduction of the rate of return on assets or
equity of such Lender (or any Applicable Lending Office or such bank holding
company) to a level below that which such Lender (or any Applicable Lending
Office or such bank holding company) could have achieved but for such law,
regulation, interpretation, directive or request).
(c) Each Lender shall notify the Borrowers of any event occurring after the
date hereof entitling such Lender to compensation under paragraph (a) or (b) of
this Section 5.01 as promptly as practicable, but in any event within 45 days,
after such Lender obtains actual knowledge thereof; provided that (i) if any
--------
Lender fails to give such notice within 45 days after it obtains actual
knowledge of such an event, such Lender shall, with respect to compensation
payable pursuant to this Section 5.01 in respect of any costs resulting from
such event, only be entitled to payment under this Section 5.01 for costs
incurred from and after the date 45 days prior to the date that such Lender does
give such notice and (ii) each Lender will designate a different Applicable
Lending Office for the Loans of such Lender affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Lender, be disadvantageous to such
Lender, except that such Lender shall have no obligation to designate an
Applicable Lending Office located in the United States of America. Each Lender
will furnish to the Borrowers a certificate setting forth the basis and amount
of each request by such Lender for compensation under paragraph (a) or (b) of
this Section 5.01. Determinations and allocations by any Lender for purposes of
this Section 5.01 of the effect of any Regulatory Change pursuant to paragraph
(a) of this Section 5.01, or of the effect of capital maintained pursuant to
paragraph (b) of this Section 5.01, on its costs or rate of return of
maintaining Loans or its obligation to make Loans, or on amounts receivable by
it in respect of Loans, and of the amounts required to compensate such Lender
under this Section 5.01, shall be conclusive, provided that such determinations
--------
and allocations are made on a reasonable basis.
Credit Agreement
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5.02 Limitation on Types of Loans. Anything herein to the contrary
----------------------------
notwithstanding, if, on or prior to the determination of any Eurodollar Base
Rate for any Interest Period:
(a) the Administrative Agent determines, which determination shall be
conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Eurodollar
Loans as provided herein; or
(b) if the related Loans are Revolving Credit Loans, the Majority Revolving
Credit Lenders, if the related Loans are Term Loans, the Majority Term Loan
Lenders, or if the related Loans are Incremental Facility Loans of any
Series, the Majority Incremental Facility Lenders of such Series determine,
which determination shall be conclusive, and notify the Administrative
Agent that the relevant rates of interest referred to in the definition of
"Eurodollar Base Rate" in Section 1.01 hereof upon the basis of which the
rate of interest for Eurodollar Loans for such Interest Period is to be
determined are not likely adequately to cover the cost to such Lenders of
making or maintaining Eurodollar Loans for such Interest Period;
then the Administrative Agent shall give the Borrowers and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans, and the
Borrowers shall, on the last day(s) of the then current Interest Period(s) for
the outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans
into Base Rate Loans in accordance with Section 2.09 hereof.
5.03 Illegality. Notwithstanding any other provision of this Agreement, in
----------
the event that it becomes unlawful for any Lender or its Applicable Lending
Office to honor its obligation to make or maintain Eurodollar Loans hereunder
(and, in the sole opinion of such Lender, the designation of a different
Applicable Lending Office would either not avoid such unlawfulness or would be
disadvantageous to such Lender), then such Lender shall promptly notify the
Borrowers thereof (with a copy to the Administrative Agent) and such Lender's
obligation to make or Continue, or to Convert Loans of any other Type into,
Eurodollar Loans shall be suspended until such time as such Lender may again
make and maintain Eurodollar Loans (in which case the provisions of Section 5.04
hereof shall be applicable).
5.04 Treatment of Affected Loans. If the obligation of any Lender to make
---------------------------
Eurodollar Loans of any Class or to Continue, or to Convert Base Rate Loans
into, Eurodollar Loans of any Class shall be suspended pursuant to Section 5.01
or 5.03 hereof, such Lender's Eurodollar Loans of such Class shall be
automatically Converted into Base Rate Loans of such
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Class on the last day(s) of the then current Interest Period(s) for Eurodollar
Loans (or, in the case of a Conversion resulting from a circumstance described
in Section 5.03 hereof, on such earlier date as such Lender may specify to the
Borrowers with a copy to the Administrative Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
Section 5.01 or 5.03 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans of such Class have been
so Converted, all payments and prepayments of principal that would
otherwise be applied to such Lender's Eurodollar Loans of such Class shall
be applied instead to its Base Rate Loans of such Class; and
(b) all Loans of such Class that would otherwise be made or Continued by such
Lender as Eurodollar Loans shall be made or Continued instead as Base Rate
Loans, and all Base Rate Loans of such Class of such Lender that would
otherwise be Converted into Eurodollar Loans shall remain as Base Rate
Loans.
If such Lender gives notice to the Borrowers with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans of the same
Class made by other Lenders are outstanding, such Lender's Base Rate Loans of
such Class shall be automatically Converted, on the first day(s) of the next
succeeding Interest Period(s) for such outstanding Eurodollar Loans, to the
extent necessary so that, after giving effect thereto, all Base Rate and
Eurodollar Loans of such Class are allocated among the Lenders ratably (as to
principal amounts, Types and Interest Periods) in accordance with their
respective Commitments of such Class.
5.05 Compensation. The Borrowers shall pay to the Administrative Agent for
------------
account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a Eurodollar
Loan made by such Lender for any reason (including, without limitation, the
acceleration of the Loans pursuant to Section 9 hereof) on a date other
than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrowers for any reason (including, without limitation,
the failure of any of the conditions precedent specified in Section 6
hereof to be satisfied) to borrow a Eurodollar Loan from such Lender on the
date for such borrowing specified in the relevant notice of borrowing given
pursuant to Section 2.02 hereof.
Credit Agreement
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Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest that otherwise would have accrued on
such principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with maturities comparable to such period (as reasonably determined by such
Lender).
5.06 Additional Costs in Respect of Letters of Credit. Without limiting the
------------------------------------------------
obligations of the Borrowers under Section 5.01 hereof (but without
duplication), if as a result of any Regulatory Change or any risk-based capital
guideline or other requirement heretofore or hereafter issued by any government
or governmental or supervisory authority implementing at the national level the
Basle Accord there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, capital adequacy or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender or
Lenders of issuing (or purchasing participations in) or maintaining its
obligation hereunder to issue (or purchase participations in) any Letter of
Credit hereunder or reduce any amount receivable by any Lender hereunder in
respect of any Letter of Credit (which increases in cost, or reductions in
amount receivable, shall be the result of such Lender's or Lenders' reasonable
allocation of the aggregate of such increases or reductions resulting from such
event), then, upon demand by such Lender or Lenders (through the Administrative
Agent), the Borrowers shall pay immediately to the Administrative Agent for
account of such Lender or Lenders, from time to time as specified by such Lender
or Lenders (through the Administrative Agent), such additional amounts as shall
be sufficient to compensate such Lender or Lenders (through the Administrative
Agent) for such increased costs or reductions in amount. A statement as to such
increased costs or reductions in amount incurred by any such Lender or Lenders,
submitted by such Lender or Lenders to the Borrowers shall be conclusive in the
absence of manifest error as to the amount thereof.
5.07 U.S. Taxes.
----------
(a) The Borrowers jointly and severally agree to pay to each Lender that is
not a U.S. Person such additional amounts as are necessary in order that the net
payment of any amount due to such non-U.S. Person hereunder after deduction for
or withholding in respect of any U.S. Taxes imposed with respect to such payment
(or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person), will
not be less than the amount stated herein to be then
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due and payable, provided that the foregoing obligation to pay such additional
--------
amounts shall not apply:
(i) if such Lender is a "bank" within the meaning of Section
881(c)(3)(A) of the Code, to any payment to any Lender hereunder unless
such Lender is, on the date hereof (or on the date it becomes a Lender
hereunder as provided in Section 11.06(b) hereof) and on the date of any
change in the Applicable Lending Office of such Lender, either entitled to
submit a Form 1001 (relating to such Lender and entitling it to a complete
exemption from withholding on all interest to be received by it hereunder
in respect of the Loans) or a Form 4224 (relating to all interest to be
received by such Lender hereunder in respect of the Loans), or (B) if such
Lender is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code and is entitled to claim 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 Form W-8, or any subsequent versions thereof or
successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a
certificate representing that such Non-U.S. Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10-percent shareholder
(within the meaning of Section 864(d)(4) of the Code)), properly completed
and duly executed by such Non-U.S. Lender claiming complete exemption from,
or a reduced rate of, U.S. Federal withholding tax on payments of interest
by the Borrower under this Agreement and the other Loan Documents, or
(ii) to any U.S. Taxes imposed solely by reason of the failure
by such non-U.S. Person (or, if such non-U.S. Person is not the beneficial
owner of the relevant Loan, such beneficial owner) to comply with
applicable certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity or connections
with the United States of America of such non-U.S. Person (or beneficial
owner, as the case may be) if such compliance is required by statute or
regulation of the United States of America as a precondition to relief or
exemption from such U.S. Taxes.
For the purposes of this Section 5.06(a), (A) "Form 1001" shall mean Form 1001
---------
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America and (B) "Form 4224" shall mean Form
---------
4224 (Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms (including Form W-8EC1 or Form W-8BEN) as may
from time to time be adopted by the relevant taxing authorities of the United
States of America to document a claim to which such Form relates).
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(b) Within 30 days after paying any amount to the Administrative Agent or any
Lender from which it is required by law to make any deduction or withholding,
and within 30 days after it is required by law to remit such deduction or
withholding to any relevant taxing or other authority, the Borrowers shall
deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence satisfactory to such Person of such deduction, withholding or payment
(as the case may be).
5.08 Replacement of Lenders. If any Lender requests compensation pursuant to
----------------------
Section 5.01, 5.06 or 5.07 hereof, or any Lender's obligation to make or
Continue, or to Convert Loans of any Type into, the other Type of Loan shall be
suspended pursuant to Section 5.01 or 5.03 hereof (any such Lender requesting
such compensation being herein called a "Requesting Lender"), the Borrowers,
-----------------
upon three Business Days notice, may require that such Requesting Lender
transfer all of its right, title and interest under this Agreement to any bank
or other financial institution (a "Proposed Lender") identified by the Borrowers
---------------
that is reasonably satisfactory to the Administrative Agent (i) if such Proposed
Lender agrees to assume all of the obligations of such Requesting Lender
hereunder, and to purchase all of such Requesting Lender's Loans hereunder for
consideration equal to the aggregate outstanding principal amount of such
Requesting Lender's Loans, together with interest thereon to the date of such
purchase, and satisfactory arrangements are made for payment to such Requesting
Lender of all other amounts payable hereunder to such Requesting Lender on or
prior to the date of such transfer (including any fees accrued hereunder and any
amounts that would be payable under Section 5.05 hereof, as if all of such
Requesting Lender's Loans were being prepaid in full on such date) and (ii) if
such Requesting Lender has requested compensation pursuant to said Section 5.01,
5.06 or 5.07 hereof, such Proposed Lender's aggregate requested compensation, if
any, pursuant to said Section 5.01, 5.06 or 5.07 with respect to such Requesting
Lender's Loans is lower than that of the Requesting Lender. Subject to the
provisions of Section 11.06(b) hereof, such Proposed Lender shall be a "Lender"
for all purposes hereunder. Without prejudice to the survival of any other
agreement of the Borrowers hereunder the agreements of the Borrowers contained
in Sections 5.01, 5.06, 5.07 and 11.03 hereof (without duplication of any
payments made to such Requesting Lender by the Borrowers or the Proposed Lender)
shall survive for the benefit of such Requesting Lender under this Section 5.08
with respect to the time prior to such replacement.
Section 6. Conditions Precedent.
--------------------
6.01 Initial Extension of Credit. The obligation of any Lender to make its
---------------------------
initial extension of credit hereunder (whether by making a Loan or issuing a
Letter of Credit) is subject to the conditions precedent that (i) such extension
of credit shall occur on or before December 31, 1999 and (ii) the Administrative
Agent shall have received the following documents (with, in the case of clauses
(a), (b), (c) and (d) below, sufficient copies for each Lender), each of which
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shall be satisfactory to the Administrative Agent (and to the extent specified
below, to each Lender) in form and substance:
(a) Organizational Documents. Certified copies of the Operating Agreements and
------------------------
of the charter and by-laws (or equivalent documents) of each Obligor and of
all limited liability company and corporate authority for each Obligor
(including, without limitation, board of director and shareholder
resolutions, member approvals and evidence of incumbency, including
specimen signatures, of officers of each Obligor) with respect to the
execution, delivery and performance of the Basic Documents to which such
Obligor is to be a party and each other document to be delivered by such
Obligor from time to time in connection herewith and the extensions of
credit hereunder (and the Administrative Agent and each Lender may
conclusively rely on such certificate until it receives notice in writing
from such Obligor to the contrary).
(b) Officer's Certificate. A certificate of a Senior Officer, dated the
---------------------
Closing Date, to the effect set forth in the first sentence of Section 6.02
hereof.
(c) Opinion of Counsel to the Obligors. An opinion, dated the Closing Date, of
----------------------------------
Cooperman Levitt Winikoff Lester & Newman, P.C., counsel to the Obligors,
substantially in the form of Exhibit G hereto and covering such other
matters as the Administrative Agent or any Lender may reasonably request
(and the Borrowers hereby instruct such counsel to deliver such opinion to
the Lenders and the Administrative Agent).
(d) Opinion of Special New York Counsel to Chase. An opinion, dated the
--------------------------------------------
Closing Date, of Milbank, Tweed, Hadley & McCloy LLP, special New York
counsel to Chase, substantially in the form of Exhibit H hereto (and Chase
hereby instructs such counsel to deliver such opinion to the Lenders).
(e) Notes. Promissory notes for each Lender that shall have requested the
-----
execution and delivery of a promissory note, on or prior to the Closing
Date, pursuant to Section 2.08(d) hereof.
(f) Pledge Agreement. The Pledge Agreement, duly executed and delivered by the
----------------
Borrowers and the Administrative Agent. In addition, each such Obligor
shall have taken such other action as the Administrative Agent shall have
requested in order to perfect the security interests created pursuant to
the Pledge Agreement, including, without limitation, delivering to the
Administrative Agent, for filing, appropriately completed and duly executed
copies of Uniform Commercial Code financing statements.
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(g) Guarantee and Pledge Agreement. The Guarantee and Pledge Agreement, duly
------------------------------
executed and delivered by Mediacom, the Manager and the Administrative
Agent and the certificates (if any) evidencing the ownership interests in
the Borrowers held by Mediacom and the Manager, accompanied by undated
powers executed in blank. In addition, Mediacom and the Manager shall have
taken such other action as the Administrative Agent shall have requested in
order to perfect the security interests created pursuant to the Guarantee
and Pledge Agreement, including, without limitation, delivering to the
Administrative Agent, for filing, appropriately completed and duly executed
copies of Uniform Commercial Code financing statements.
(h) Management Fee Subordination Agreement. The Management Fee
--------------------------------------
Subordination Agreement, duly executed and delivered by the Manager, the
Borrowers and the Administrative Agent.
(i) Affiliate Subordinated Indebtedness Subordination Agreements.
------------------------------------------------------------
The Affiliate Subordinated Indebtedness Subordination Agreement, duly
executed and delivered by the Borrowers, the Administrative Agent and by
Mediacom.
(j) Investment by Mediacom. The Lenders shall have received evidence that the
----------------------
Borrowers shall have received cash proceeds from Mediacom (i) in an amount
of not less than $228,500,000 in respect of the equity capital of the
Borrowers and (ii) in an amount of not less than $105,000,000 in respect of
Affiliate Subordinated Indebtedness advanced by Mediacom to the Borrowers,
in each case upon terms satisfactory to the Lenders.
(k) Triax Acquisition. Evidence that (x) Mediacom shall have assigned all of
-----------------
its rights to acquire the CATV Systems to be sold by Triax under the Triax
Acquisition Agreement to the LLC Borrowers (except that the rights to
acquire the CATV System in Apache Junction, Arizona, shall be assigned to
Mediacom Arizona LLC), (y) concurrently with the initial extension of
credit, the Triax Acquisition will be duly consummated by the LLC Borrowers
for an aggregate purchase price not exceeding $740,000,000 (subject to
purchase price adjustments as set forth in the Triax Acquisition Agreement)
in all material respects in accordance with the terms of the Triax
Acquisition Agreement, including the schedules and exhibits thereto (and no
material provision thereof shall have been waived, amended, supplemented or
otherwise modified in any material respect without the consent of the
Majority Lenders) and (z) the number of Equivalent Basic Subscribers (as
defined in the Triax Acquisition Agreement) served by Retained Franchises
(as so defined) shall not exceed 3% of the Subscriber Threshold (as so
defined); and the Administrative Agent shall have received a certificate of
a Senior Officer to such effect, together with (in the case of each legal
opinion being delivered to the LLC Borrowers pursuant thereto) a letter
from each Person delivering such opinion
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(which shall in any event include an opinion of special FCC counsel)
authorizing reliance thereon by the Administrative Agent and the Lenders.
(l) Apache Acquisition. Evidence that Mediacom Arizona LLC, concurrently with
------------------
the initial extension of credit, shall purchase the Apache Junction,
Arizona cable television system from Triax pursuant to the Triax
Acquisition Agreement for $20,000,000 in cash.
(m) Triax Credit Agreement. Evidence that, to the extent the assets purchased
----------------------
in the Triax Acquisition shall be subject to any Liens in favor of the
lenders (or an agent for such lenders) under the Triax Credit Agreement,
such Liens shall have been released (or arrangements for such release
satisfactory to the Administrative Agent shall have been made).
(n) Approvals. Evidence of receipt of all material licenses, permits,
---------
approvals and consents, if any, required (or, in the reasonable discretion
of the Administrative Agent, advisable) with respect to the Triax
Acquisition (including, without limitation, the consents of the respective
municipal franchising authorities to the acquisition of the CATV Systems
being acquired by the LLC Borrowers pursuant to the Triax Acquisition,
exclusive of those pertaining to Retained Franchises).
(o) Rate Ratio Certificate. A certificate of a Senior Officer, dated the
----------------------
Closing Date, setting forth, in reasonable detail, the calculation (and the
basis for such calculation) of Rate Ratio as of such date.
(p) Other Documents. Such other documents as the Administrative Agent or any
---------------
Lender or special New York counsel to Chase may reasonably request.
The obligation of any Lender to make its initial extension of credit hereunder
is also subject to the payment by the Borrowers of such fees as the Borrowers
shall have agreed to pay or deliver to any Lender or the Administrative Agent in
connection herewith, including, without limitation, the reasonable fees and
expenses of Milbank, Tweed, Hadley & McCloy LLP, special New York counsel to
Chase, in connection with the negotiation, preparation, execution and delivery
of this Agreement and the other Loan Documents and the extensions of credit
hereunder (to the extent that statements for such fees and expenses have been
delivered to the Borrowers).
6.02 Initial and Subsequent Extensions of Credit. The obligation of the
-------------------------------------------
Lenders to make any Loan or otherwise extend any credit to the Borrowers upon
the occasion of each borrowing or other extension of credit hereunder (including
the initial borrowing) is subject to the further conditions precedent that, both
immediately prior to the making of such Loan or other extension of credit and
also after giving effect thereto and to the intended use thereof:
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(a) no Default shall have occurred and be continuing; and
(b) the representations and warranties made by the Borrowers in Section 7
hereof, and by each Obligor in the other Loan Documents to which it is a
party, shall be true and complete on and as of the date of the making of
such Loan or other extension of credit with the same force and effect as if
made on and as of such date (or, if any such representation or warranty is
expressly stated to have been made as of a specific date, as of such
specific date).
Each notice of borrowing or request for the issuance of a Letter of Credit by
the Borrowers hereunder shall constitute a certification by the Borrowers to the
effect set forth in the preceding sentence (both as of the date of such notice
or request and, unless the Borrowers otherwise notify the Administrative Agent
prior to the date of such borrowing or issuance, as of the date of such
borrowing or issuance).
Section 7. Representations and Warranties. The Borrowers represent and
------------------------------
warrant to the Administrative Agent and the Lenders that:
7.01 Existence. Each Borrower and its Subsidiaries: (a) is a corporation,
---------
partnership, limited liability company or other entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify could (either
individually or in the aggregate) have a Material Adverse Effect.
7.02 Financial Condition. The Borrowers have heretofore furnished to each of
-------------------
the Lenders the following financial statements:
(i) the audited financial statements of Triax, including balance
sheets, as of December 31, 1997 and 1998, and the related audited
statements of operation and cash flow for the years ended on said
respective dates, in each case certified by Arthur Andersen, LLP;
(ii) the unaudited financial statements of Triax, including balance
sheets, as of June 30, 1999, and the related unaudited statements of
operation and cash flow for the and six-month period ended on said date;
and
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(iii) an unaudited pro forma combined balance sheet and calculation
of Adjusted System Cash Flow of the Borrowers and their Subsidiaries as at
and for the fiscal quarter ended September 30, 1999 prepared under the
assumption that the Triax Acquisition had occurred on July 1, 1999.
All such financial statements fairly present in all material respects the actual
or pro forma (as the case may be) individual or combined financial condition of
the respective entities as at said respective dates and the actual or pro forma
(as the case may be) individual or combined results of their operations for the
applicable periods ended on said respective dates, all in accordance with
generally accepted accounting principles and practices applied on a consistent
basis. As of the date hereof, there are no material contingent liabilities,
material liabilities for taxes, unusual forward or long-term commitments or
unrealized or anticipated material losses from any unfavorable commitments of
Triax, or any of the CATV Systems to be acquired pursuant to the Triax
Acquisition Agreement, except as referred to or reflected or provided for in
said unaudited financial statements as at June 30, 1999.
Since June 30, 1999, there has been no material adverse change in the combined
financial condition, operations, business or prospects of the Borrowers and
their Subsidiaries taken as a whole from that set forth in said pro forma
financial statements as at said date referred to in clause (iii) above.
7.03 Litigation. There are no legal or arbitral proceedings, or any
----------
proceedings or investigations by or before any governmental or regulatory
authority or agency, now pending or (to the knowledge of any Borrower)
threatened against any Borrower or any of its Subsidiaries, or against Triax
(and in respect of which the Borrowers would be obligated after giving effect to
the Triax Acquisition) that, if adversely determined could (either individually
or in the aggregate) reasonably be expected to have a Material Adverse Effect.
7.04 No Breach. None of the execution and delivery of this Agreement and the
---------
other Basic Documents, the consummation of the transactions herein and therein
contemplated or compliance with the terms and provisions hereof and thereof will
conflict with or result in a breach of, or require any consent under, the
Operating Agreements, or (except for the authorizations, approvals, consents,
filings and registrations contemplated by the Triax Acquisition Agreement (each
of which shall have been made or obtained on or before the Triax Acquisition is
consummated, to the extent required by the Triax Acquisition Agreement to be
obtained before such date, except (a) for Retained Franchises and (b) that
orders of the FCC may not have become final under the rules and regulations of
the FCC) any applicable law or regulation, or any order, writ, injunction or
decree of any court or governmental authority or agency, or any agreement or
instrument to which any Borrower or any of its Subsidiaries is a party or by
which any of them or any of their Property is bound or to which any of them is
subject, or constitute a default under any such agreement or instrument, or
(except for the Liens
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created pursuant to the Security Documents) result in the creation or imposition
of any Lien upon any Borrower or any of its Subsidiaries pursuant to the terms
of any such agreement or instrument.
7.05 Action. Each Borrower has all necessary corporate or limited liability
------
company power, authority and legal right to execute, deliver and perform its
obligations under each of the Basic Documents to which it is a party; the
execution, delivery and performance by each Borrower of each of the Basic
Documents to which it is a party have been duly authorized by all necessary
corporate or limited liability company action on its part (including, without
limitation, any required shareholder or member approvals); and this Agreement
has been duly and validly executed and delivered by each Borrower and
constitutes, and the other Basic Documents to which it is a party when executed
and delivered will constitute, its legal, valid and binding obligation,
enforceable against each Borrower in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
7.06 Approvals. No authorizations, approvals or consents of, and no filings
---------
or registrations with, any governmental or regulatory authority or agency, or
any securities exchange, are necessary for the execution, delivery or
performance by any Borrower of this Agreement or any of the other Basic
Documents to which it is a party or for the legality, validity or enforceability
hereof or thereof, except for (i) filings and recordings in respect of the Liens
created pursuant to the Security Documents, (ii) the authorizations, approvals,
consents, filings and registrations contemplated by the Triax Acquisition
Agreement (each of which shall have been made or obtained on or before the Triax
Acquisition is consummated, to the extent required by the Triax Acquisition
Agreement to be obtained before such date, except (a) for Retained Franchises
and (b) that orders of the FCC may not have become final under the rules and
regulations of the FCC) and (iii) the exercise of remedies under the Security
Documents may require prior approval of the FCC or the issuing municipalities or
States under one or more of the Franchises.
7.07 ERISA. Each Plan, and, to the knowledge of each Borrower, each
-----
Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable
provisions of ERISA, the Code and any other Federal or State law, and no event
or condition has occurred and is continuing as to which such Borrower would be
under an obligation to furnish a report to the Lenders under Section 8.01(e)
hereof.
7.08 Taxes. Except as set forth in Schedule II hereto, each Borrower and
-----
each of its Subsidiaries has filed all Federal income tax returns and all other
material tax returns and
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----------------
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information statements that are required to be filed by them and have paid all
taxes due pursuant to such returns or pursuant to any assessment received by
such Borrower or any of its Subsidiaries, except such taxes, if any, as are
being contested in good faith and as to which adequate reserves have been set
aside by such Borrower in accordance with GAAP. The charges, accruals and
reserves on the books of the Borrowers and their Subsidiaries in respect of
taxes and other governmental charges are, in the opinion of the Borrowers,
adequate. None of the Borrowers has given or been requested to give a waiver of
the statute of limitations relating to the payment of any Federal, state, local
and foreign taxes or other impositions.
7.09 Investment Company Act. None of the Borrowers nor any of its
----------------------
Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
7.10 Public Utility Holding Company Act. None of the Borrowers nor any of
----------------------------------
its Subsidiaries is a "holding company", or an "affiliate" of a "holding
company" or a "subsidiary company" of a "holding company", within the meaning of
the Public Utility Holding Company Act of 1935, as amended.
7.11 Material Agreements and Liens.
-----------------------------
(a) Part A of Schedule III hereto sets forth (i) a complete and correct list of
each credit agreement, loan agreement, indenture, purchase agreement,
guarantee, letter of credit or other arrangement (other than the Loan
Documents) providing for or otherwise relating to any Indebtedness or any
extension of credit (or commitment for any extension of credit) to, or
guarantee by, the Borrowers or any of their Subsidiaries, outstanding on
the date hereof, or that (after giving effect to the transactions
contemplated hereunder to occur on or before the Closing Date) will be
outstanding on the Closing Date, the aggregate principal or face amount of
which equals or exceeds (or may equal or exceed) $1,000,000, and the
aggregate principal or face amount outstanding or that may become
outstanding under each such arrangement is correctly described in Part A of
said Schedule III, and (ii) a statement of the aggregate amount of
obligations in respect of surety and performance bonds backing pole rental
or conduit attachments and the like, or backing obligations under
Franchises, of the Borrowers or any of their Subsidiaries outstanding on
the date hereof.
(b) Part B of Schedule III hereto is a complete and correct list of each Lien
(other than the Liens created pursuant to the Security Documents) securing
Indebtedness of any Person outstanding on the date hereof, or that (after giving
effect to the transactions contemplated hereunder to occur on the Closing Date)
will be outstanding on the Closing Date, the aggregate principal or face amount
of which equals or exceeds (or may equal or exceed) $1,000,000 and covering any
Property of the Borrowers or any of their Subsidiaries, and the aggregate
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Indebtedness secured (or that may be secured) by each such Lien and the Property
covered by each such Lien is correctly described in Part B of said Schedule III.
7.12 Environmental Matters. Each of the Borrowers and their Subsidiaries has
---------------------
obtained all environmental, health and safety permits, licenses and other
authorizations required under all Environmental Laws to carry on its business as
now being or as proposed to be conducted, except to the extent failure to have
any such permit, license or authorization would not (either individually or in
the aggregate) have a Material Adverse Effect. Each of such permits, licenses
and authorizations is in full force and effect and each of the Borrowers and its
Subsidiaries is in compliance with the terms and conditions thereof, and is also
in compliance with all other limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
any applicable Environmental Law or in any regulation, code, plan, order,
decree, judgment, injunction, notice or demand letter issued, entered,
promulgated or approved thereunder, except to the extent failure to comply
therewith would not (either individually or in the aggregate) have a Material
Adverse Effect. In addition, no notice, notification, demand, request for
information, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and, to the Borrowers' knowledge, no
investigation or review is pending or threatened by any governmental or other
entity with respect to any alleged failure by the Borrowers or any of their
Subsidiaries to have any environmental, health or safety permit, license or
other authorization required under any Environmental Law in connection with the
conduct of the business of the Borrowers or any of their Subsidiaries or with
respect to any generation, treatment, storage, recycling, transportation,
discharge or disposal, or any Release of any Hazardous Materials generated by
the Borrowers or any of their Subsidiaries. All environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or that are in
the possession of the Borrowers or any of their Subsidiaries in relation to
facts, circumstances or conditions at or affecting any site or facility now or
previously owned, operated or leased by the Borrowers or any of their
Subsidiaries and that could result in a Material Adverse Effect have been made
available to the Lenders.
7.13 Capitalization. The Borrowers have heretofore delivered to the Lenders
--------------
true and complete copies of the Operating Agreements. The only member of the LLC
Borrowers on the date hereof is Mediacom. Zylstra is a Wholly-Owned Subsidiary
of Mediacom. As of the date hereof, there are no outstanding Equity Rights with
respect to any of the Borrowers and there are no outstanding obligations of any
of the Borrowers or any of their Subsidiaries to repurchase, redeem, or
otherwise acquire any equity interests in the Borrowers nor are there any
outstanding obligations of any Borrower or any of their Subsidiaries to make
payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with reference to the fair market value or equity value of
such Borrowers or any of their Subsidiaries.
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7.14 Subsidiaries, Etc.
------------------
(a) As of the date hereof, none of the Borrowers has any Subsidiaries.
(b) Set forth in Schedule IV hereto is a complete and correct list of all
Investments (other than Investments of the type referred to in paragraphs (b),
(c) and (e) of Section 8.08 hereof) held by the Borrowers or any of their
Subsidiaries in any Person on the date hereof and, for each such Investment, (x)
the identity of the Person or Persons holding such Investment and (y) the nature
of such Investment. Except as disclosed in Schedule IV hereto, each of the
Borrowers and their Subsidiaries owns, free and clear of all Liens (other than
the Liens created pursuant to the Security Documents), all such Investments.
(c) None of the Subsidiaries of the Borrowers is, on the date hereof, subject
to any indenture, agreement, instrument or other arrangement of the type
described in Section 8.18(d) hereof.
7.15 True and Complete Disclosure. The information, reports, financial
----------------------------
statements, exhibits and schedules (including the Information Memorandum)
furnished in writing by or on behalf of the Borrowers to the Administrative
Agent or any Lender in connection with the negotiation, preparation or delivery
of this Agreement and the other Loan Documents or included herein or therein or
delivered pursuant hereto or thereto, when taken as a whole do not contain any
untrue statement of material fact or omit to state any material fact necessary
to make the statements herein or therein, in light of the circumstances under
which they were made, not misleading. All written information furnished after
the date hereof by the Borrowers and their Subsidiaries to the Administrative
Agent and the Lenders in connection with this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby will be true,
complete and accurate in every material respect, or (in the case of projections)
based on reasonable estimates, on the date as of which such information is
stated or certified. There is no fact known to the Borrowers that could
reasonably be expected to have a Material Adverse Effect (other than facts
affecting the cable television industry in general) that has not been disclosed
herein, in the other Loan Documents or in a report, financial statement,
exhibit, schedule, disclosure letter or other writing furnished to the Lenders
for use in connection with the transactions contemplated hereby or thereby.
7.16 Franchises.
----------
(a) Set forth in Schedule V hereto is a complete and correct list of all
Franchises (identified by issuing authority, franchisee and expiration date) (i)
owned by the Borrowers and their Subsidiaries on the date hereof or (ii) that,
with the exception of any Retained Franchises (as defined in the Triax
Acquisition Agreement), will be owned by the Borrowers and their Subsidiaries on
the Closing Date (after giving effect to the Triax Acquisition).
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(b) Each of the Borrowers and their Subsidiaries possesses or has the right
to use, or will possess or will have the right to use on the Closing Date (after
giving effect to the Triax Acquisition) all such Franchises, and all copyrights,
licenses, trademarks, service marks, trade names or other rights, including
licenses and permits granted by the FCC, agreements with public utilities and
microwave transmission companies, pole or conduit attachment, use, access or
rental agreements and utility easements that are necessary for the conduct of
the CATV Systems of the Borrowers and their Subsidiaries, except for such of the
foregoing the absence of which could not reasonably be expected to have a
Material Adverse Effect on the Borrowers or any of their Subsidiaries, and each
of such Franchises, copyrights, licenses, patents, trademarks, service marks,
trade names and rights is (or on the Closing Date will be) in full force and
effect and no material default has occurred and is continuing thereunder. None
of the Borrowers, any of its Subsidiaries or (to the knowledge of the Borrowers)
Triax has received any notice from the granting body or any other governmental
authority with respect to any breach of any covenant under, or any default with
respect to, any Franchise which could reasonably be expected to have a Material
Adverse Effect. Complete and correct copies of all Franchises have heretofore
been made available to the Administrative Agent.
7.17 The CATV Systems.
----------------
(a) Each of the Borrowers and their Subsidiaries, and, (after giving effect
to the transactions contemplated hereunder to occur on the Closing Date) the
CATV Systems to be owned by it, are in compliance in all material respects with
all applicable federal, state and local laws, rules and regulations, including
without limitation, the Communications Act, the Copyright Revision Act of 1976,
and the rules and regulations of the FCC and the United States Copyright Office,
including, without limitation, rules and laws governing system registration, use
of aeronautical frequencies and signal carriage, equal employment opportunity,
cumulative leakage index testing and reporting, signal leakage, and subscriber
privacy, except to the extent that the failure to so comply with any of the
foregoing could not (either individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect. Without limiting the generality of
the foregoing except to the extent that the failure to comply with any of the
following could not (either individually or in the aggregate) reasonably be
expected to have a Material Adverse Effect and except as set forth in Schedule
VI hereto:
(i) the communities included in the areas covered by the
Franchises have been registered with the FCC;
(ii) all of the annual performance tests on such CATV Systems
required under the rules and regulations of the FCC have been performed and
the results of such tests demonstrate satisfactory compliance with the
applicable requirements being tested in all material respects;
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(iii) to the knowledge of the Borrowers, such CATV Systems
currently meet or exceed the technical standards set forth in the rules and
regulations of the FCC, including, without limitation, the leakage limits
contained in 47 C.F.R. Section 76.605(a)(11);
(iv) to the knowledge of the Borrowers, such CATV Systems are
being operated in compliance with the provisions of 47 C.F.R. Sections
76.610 through 76.619 (mid-band and super-band signal carriage), including
47 C.F.R. Section 76.611 (compliance with the cumulative signal leakage
index); and
(v) to the knowledge of the Borrowers, where required,
appropriate authorizations from the FCC have been obtained for the use of
all aeronautical frequencies in use in such CATV Systems and such CATV
Systems are presently being operated in compliance with such authorizations
(and all required certificates, permits and clearances from governmental
agencies, including the Federal Aviation Administration, with respect to
all towers, earth stations, business radios and frequencies utilized and
carried by such CATV Systems have been obtained).
(b) To the knowledge of the Borrowers, all notices, statements of account,
supplements and other documents required under Section 111 of the Copyright Act
of 1976 and under the rules of the Copyright Office with respect to the carriage
of broadcast station signals by the CATV Systems (the "Copyright Filings") owned
-----------------
or to be owned by the Borrowers and their Subsidiaries (after giving effect to
the transactions contemplated hereunder to occur on the Closing Date) have been
duly filed, and the proper amount of copyright fees have been paid on a timely
basis, and each such CATV System qualifies for the compulsory license under
Section 111 of the Copyright Act of 1976, except to the extent that the failure
to so file or pay could not (either individually or in the aggregate) reasonably
be expected to have a Material Adverse Effect. To the knowledge of the
Borrowers, there is no pending claim, action, demand or litigation by any other
person with respect to the Copyright Filings or related royalty payments made by
the CATV Systems.
(c) The carriage of all off-air signals by the CATV Systems owned or to be
owned by the Borrowers and their Subsidiaries (after giving effect to the
transactions contemplated hereunder to occur on the Closing Date) is permitted
by valid transmission consent agreements or by must-carry elections by
broadcasters, or is otherwise permitted under applicable law, except to the
extent the failure to obtain any of the foregoing could not (either individually
or in the aggregate) reasonably be expected to have a Material Adverse Effect.
(d) The assets of the CATV Systems owned or to be owned by the Borrowers and
their Subsidiaries (after giving effect to the transactions contemplated
hereunder to occur on the
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Closing Date) are adequate and sufficient in all material respects for all of
the current operations of such CATV Systems.
7.18 Rate Regulation. Each of the Borrowers and their Subsidiaries have each
reviewed and evaluated in detail the FCC rules currently in effect (the "Rate
----
Regulation Rules") implementing the rate regulation provisions of the Cable
- ----------------
Television Consumer Protection and Competition Act of 1992 (the "Rate Regulation
---------------
Act"). Based upon such review by the Borrowers and their Subsidiaries with
- ---
respect to the CATV Systems owned and to be owned (after giving effect to the
transactions contemplated hereunder to occur on or before the Closing Date):
(i) except as set forth in Schedule VI hereto, to the knowledge
of the Borrowers, none of such CATV Systems is subject to effective
competition as of the date hereof;
(ii) except as set forth in Schedule VI hereto, no franchising
authority has notified the Borrowers or any of their Subsidiaries of its
application to be certified to regulate rates as provided in Section 76.910
of the Rate Regulation Rules;
(iii) except as set forth in Schedule VI hereto, no franchising
authority has notified the Borrowers or any of their Subsidiaries that it
has been certified and has adopted regulations required to commence
regulation as provided in Section 76.910(c)(2) of the Rate Regulation
Rules;
(iv) to the knowledge of the Borrowers and except as set forth
in Schedule VI hereto, there are no pending cable service programming rate
complaints filed with the FCC; and
(v) no reduction of rates or refunds to subscribers is required
by an outstanding order of the FCC or any local franchising authority as of
the date hereof under the Rate Regulation Act and the Rate Regulation Rules
applicable to the CATV Systems of the Borrowers and their Subsidiaries.
7.19 Year 2000 Issues. To the knowledge of the Borrowers, any reprogramming
----------------
required to permit the proper functioning, in and following the year 2000, of
(i) the Borrowers' material operating computer systems and (ii) material
operating equipment containing embedded microchips (including systems and
equipment supplied by others or, to the knowledge of the Borrowers, with which
the Borrowers' material operating systems interface) and the testing of all such
systems and equipment, as so reprogrammed, is expected to be completed by
November 30, 1999. To the knowledge of the Borrowers, the cost to the Borrowers
of such reprogramming and testing and of the reasonably foreseeable consequences
of year 2000 to the Borrowers (including reprogramming errors and the failure of
others' systems or equipment) will not result in a
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Default or a Material Adverse Effect. Except for such of the reprogramming
referred to in the preceding sentence as may be necessary, the computer and
management information systems of the Borrowers and their Subsidiaries are and,
with ordinary course upgrading and maintenance, will continue for the term of
this Agreement to be, sufficient to permit the Borrowers to conduct their
business without a Material Adverse Effect.
7.20 Triax Acquisition Agreement. The Borrowers have heretofore delivered to
---------------------------
the Administrative Agent a complete and correct copy of the Triax Acquisition
Agreement, as in effect on the date hereof, including all schedules, exhibits
and annexes thereto. The Triax Acquisition Agreement has been duly executed and
delivered by each party thereto and is in full force and effect and, to the
knowledge of the Borrowers, no party is in default in any material respect of
any of its obligations thereunder.
7.21 Use of Credit. None of the Borrowers or any of their Subsidiaries is
-------------
engaged principally, or as one of their important activities, in the business of
extending credit for the purpose, whether immediate, incidental or ultimate, of
buying or carrying Margin Stock in violation of Regulations T, U or X.
Section 8. Covenants of the Borrowers. The Borrowers covenant and agree with
--------------------------
the Lenders and the Administrative Agent that, so long as any Commitment, Loan
or Letter of Credit Liability is outstanding and until payment in full of all
amounts payable by the Borrowers hereunder:
8.01 Financial Statements Etc. The Borrowers shall deliver to each of the
-------------------------
Lenders:
(a) as soon as available and in any event within 60 days after the end of each
quarterly fiscal period of each fiscal year of the Borrowers, combined
statements of income, retained earnings and cash flows of the Borrowers and
their Subsidiaries for such period and for the period from the beginning of
the respective fiscal year to the end of such period, and the related
combined balance sheet of the Borrowers and their Subsidiaries as at the
end of such period, setting forth in each case in comparative form the
corresponding figures for the corresponding periods in the preceding fiscal
year (except that, in the case of balance sheets, such comparison shall be
to the last day of the prior fiscal year), accompanied by a certificate of
a Senior Officer, which certificate shall state that said financial
statements fairly present in all material respects the combined financial
condition and results of operations of the Borrowers and their Subsidiaries
in accordance with generally accepted accounting principles consistently
applied as at the end of, and for, such period (subject to normal year-end
audit adjustments);
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(b) as soon as available and in any event within 120 days after the end of each
fiscal year of the Borrowers, combined statements of income, retained
earnings and cash flows of the Borrowers and their Subsidiaries for such
fiscal year and the related combined balance sheet of the Borrowers and
their Subsidiaries as at the end of such fiscal year, setting forth in each
case in comparative form the corresponding combined figures for the
preceding fiscal year and accompanied by an opinion thereon of independent
certified public accountants of recognized national standing, which opinion
shall state that said combined financial statements fairly present in all
material respects the combined financial condition and results of
operations of the Borrowers and their Subsidiaries as at the end of, and
for, such fiscal year in accordance with generally accepted accounting
principles, and a statement of such accountants to the effect that, in
making the examination necessary for their opinion, nothing came to their
attention that caused them to believe that the Borrowers were not in
compliance with Sections 8.07, 8.08, 8.09, 8.10, 8.11, 8.12 or 8.15 hereof,
insofar as such Sections relate to accounting matters;
(c) promptly upon their becoming available, copies of all registration
statements and regular periodic reports, if any, that the Borrowers shall
have filed with the Securities and Exchange Commission (or any governmental
agency substituted therefor) or any national securities exchange;
(d) promptly upon the mailing thereof by the Borrowers to the shareholders or
members of the Borrowers generally, to holders of Affiliate Subordinated
Indebtedness generally, or by Mediacom to the holders of its senior notes
(if any), copies of all financial statements, reports and proxy statements
so mailed;
(e) as soon as possible, and in any event within ten days after any Borrower
knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has occurred
or exists, a statement signed by a Senior Officer setting forth details
respecting such event or condition and the action, if any, that the
Borrowers or their ERISA Affiliates propose to take with respect thereto
(and a copy of any report or notice required to be filed with or given to
the PBGC by the Borrowers or an ERISA Affiliate with respect to such event
or condition):
(i) any reportable event, as defined in Section 4043(b) of
ERISA and the regulations issued thereunder, with respect to a Plan,
as to which the PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event (provided that a failure to meet the minimum
--------
funding standard of Section 412 of the Code or Section 302 of ERISA,
including, without limitation, the failure to make on or before its
due date a required installment under Section 412(m) of the Code or
Section 302(e) of
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ERISA, shall be a reportable event regardless of the issuance of any
waivers in accordance with Section 412(d) of the Code); and any
request for a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a
notice of intent to terminate any Plan or any action taken by the
Borrowers or an ERISA Affiliate to terminate any Plan;
(iii) the institution by the PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Borrowers or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by the PBGC with respect to such Multiemployer
Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by the Borrowers or any ERISA Affiliate that
results in liability under Section 4201 or 4204 of ERISA (including
the obligation to satisfy secondary liability as a result of a
purchaser default) or the receipt by any Borrower or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA
or that it intends to terminate or has terminated under Section 4041A
of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Borrowers or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed within
30 days; and
(vi) the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA,
would result in the loss of tax-exempt status of the trust of which
such Plan is a part if the Borrowers or an ERISA Affiliate fails to
timely provide security to the Plan in accordance with the provisions
of said Sections;
(f) within 60 days of the end of each quarterly fiscal period of the Borrowers,
a Quarterly Officer's Report as at the end of such period;
(g) promptly after any Borrower knows or has reason to believe that any Default
has occurred, a notice of such Default describing the same in reasonable
detail and, together with such notice or as soon thereafter as possible, a
description of the action that the Borrowers have taken or propose to take
with respect thereto; and
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(h) from time to time such other information regarding the financial condition,
operations, business or prospects of the Borrowers or any of their
Subsidiaries (including, without limitation, any Plan or Multiemployer Plan
and any reports or other information required to be filed under ERISA) as
any Lender or the Administrative Agent may reasonably request.
The Borrowers will furnish to each Lender, at the time they furnish each set of
financial statements pursuant to paragraph (a) or (b) above, a certificate of a
Senior Officer (i) to the effect that no Default has occurred and is continuing
(or, if any Default has occurred and is continuing, describing the same in
reasonable detail and describing the action that the Borrowers have taken or
proposes to take with respect thereto) and (ii) setting forth in reasonable
detail the computations necessary to determine whether the Borrowers are in
compliance with Sections 8.07, 8.08, 8.09, 8.10, 8.11, 8.12 and 8.15 hereof
(including, without limitation, calculations demonstrating compliance with the
requirements of Section 8.09(d)(ii) hereof after giving effect to any Capital
Expenditure pursuant to Section 8.12(b) hereof) as of the end of the respective
quarterly fiscal period or fiscal year.
8.02 Litigation. The Borrowers will promptly give to each Lender notice of
----------
all legal or arbitral proceedings, and of all proceedings or investigations by
or before any governmental or regulatory authority or agency, and any material
development in respect of such legal or other proceedings, affecting the
Borrowers or any of their Subsidiaries or any of their Franchises, except
proceedings that, if adversely determined, would not (either individually or in
the aggregate) have a Material Adverse Effect. Without limiting the generality
of the foregoing, the Borrowers will give to each Lender (i) notice of the
assertion of any Environmental Claim by any Person against, or with respect to
the activities of, the Borrowers or any of their Subsidiaries and notice of any
alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations, other than any Environmental Claim or
alleged violation that, if adversely determined, would not (either individually
or in the aggregate) have a Material Adverse Effect and (ii) copies of any
notices received by the Borrowers or any of their Subsidiaries under any
Franchise of a material default by the Borrowers or any of their Subsidiaries in
the performance of its obligations thereunder.
8.03 Existence, Etc. Each Borrower will, and will cause each of its
---------------
Subsidiaries to:
(a) preserve and maintain its legal existence and all of its material rights,
privileges, licenses and franchises (provided that nothing in this Section
--------
8.03 shall prohibit any transaction expressly permitted under Section 8.05
hereof);
(b) comply with the requirements of all applicable laws, rules, regulations and
orders of governmental or regulatory authorities if failure to comply with
such
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requirements could (either individually or in the aggregate) have a
Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental charges or levies
imposed on it or on its income or profits or on any of its Property prior
to the date on which penalties attach thereto, except for any such tax,
assessment, charge or levy the payment of which is being contested in good
faith and by proper proceedings and against which adequate reserves are
being maintained;
(d) maintain, in all material respects, all of its Properties used or useful in
its business in good working order and condition, ordinary wear and tear
excepted;
(e) keep adequate records and books of account, in which complete entries will
be made in accordance with generally accepted accounting principles
consistently applied; and
(f) permit representatives of any Lender or the Administrative Agent, during
normal business hours, to examine, copy and make extracts from its books
and records, to inspect any of its Properties, and to discuss its business
and affairs with its officers, all to the extent reasonably requested by
such Lender or the Administrative Agent (as the case may be).
8.04 Insurance. Each Borrower will, and will cause each of its Subsidiaries
---------
to, maintain insurance with financially sound and reputable insurance companies,
and with respect to Property and risks of a character usually maintained by
Persons engaged in the same or similar business similarly situated, against
loss, damage and liability of the kinds and in the amounts customarily
maintained by such corporations, provided that each Borrower will in any event
--------
maintain (with respect to itself and each of its Subsidiaries) casualty
insurance and insurance against claims for damages with respect to defamation,
libel, slander, privacy or other similar injury to person or reputation
(including misappropriation of personal likeness), in such amounts as are then
customary for Persons engaged in the same or similar business similarly
situated.
8.05 Prohibition of Fundamental Changes.
----------------------------------
(a) Restrictions on Merger. None of the Borrowers will nor will it permit
----------------------
any of its Subsidiaries to, enter into any transaction of merger or
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution).
(b) Restrictions on Acquisitions. None of the Borrowers will nor will it
----------------------------
permit any of its Subsidiaries to, acquire any business or Property from, or
capital stock of, or be a party to any acquisition of, any Person except for
purchases of equipment, programming rights and
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other Property to be sold or used in the ordinary course of business,
Investments permitted under Section 8.08(f) hereof, and Capital Expenditures
permitted under Section 8.12 hereof.
(c) Restrictions on Sales and Other Dispositions. None of the Borrowers will
--------------------------------------------
nor will it permit any of its Subsidiaries to, convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, any part
of its business or Property, whether now owned or hereafter acquired (including,
without limitation, receivables and leasehold interests, but excluding (i)
obsolete or worn-out Property, tools or equipment no longer used or useful in
its business so long as the amount thereof sold in any single fiscal year by the
Borrowers and their Subsidiaries shall not have a fair market value in excess of
$5,000,000 and (ii) any equipment, programming rights or other Property sold or
disposed of in the ordinary course of business and on ordinary business terms).
(d) Certain Permitted Transactions. Notwithstanding the foregoing provisions
------------------------------
of this Section 8.05:
(i) Intercompany Mergers and Consolidations. Any Borrower may
---------------------------------------
be merged or consolidated with any other Borrower, and any Subsidiary of a
Borrower may be merged or consolidated with or into: (x) such Borrower if
such Borrower shall be the continuing or surviving corporation or (y) any
other such Subsidiary; provided that if any such transaction shall be
--------
between a Subsidiary and a Wholly Owned Subsidiary, the Wholly Owned
Subsidiary shall be the continuing or surviving corporation.
(ii) Intercompany Dispositions. Any Borrower may sell, lease,
-------------------------
transfer or otherwise dispose of any or all of its Property to any other
Borrower, and any Subsidiary of a Borrower may sell, lease, transfer or
otherwise dispose of any or all of its Property (upon voluntary liquidation
or otherwise) to the Borrowers or a Wholly Owned Subsidiary of the
Borrowers.
(iii) Triax Acquisition. The LLC Borrowers may consummate the
-----------------
Triax Acquisition, so long as the same is consummated in all material
respects in accordance with the Triax Acquisition Agreement.
(iv) Permitted Dispositions. The Borrowers or any Wholly Owned
----------------------
Subsidiary of the Borrowers may enter into one or more transactions
intended to trade (by means of either an exchange or a sale and subsequent
purchase) one or more of the CATV Systems owned by the Borrowers and their
Subsidiaries for one or more CATV Systems owned by any other Person, which
transactions may be effected either by
(I) the Borrowers or such Wholly Owned Subsidiary selling one or
more CATV Systems owned by it, and either depositing the Net Available
Proceeds
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thereof into the Collateral Account, or prepaying Revolving Credit
Loans (and creating a Reserved Commitment Amount), as contemplated by
the second paragraph of Section 2.10(d) hereof, and then within 270
days acquiring one or more other CATV Systems or
(II) exchanging one or more CATV Systems, together with cash not
exceeding 20% of the fair market value of such acquired CATV Systems,
so long as
(x) (A) at the time of any such transactions and after giving
effect thereto, no Default shall have occurred and be continuing and
(B) after giving effect to such transaction the Borrowers shall be in
compliance with Section 8.10 hereof (the determination of such
compliance to be calculated on a pro forma basis, as at the end of and
for the fiscal quarter most recently ended prior to the date of such
transaction for which financial statements of the Borrowers and their
Subsidiaries are available, under the assumption that such transaction
shall have occurred, and any Indebtedness in connection therewith
shall have been incurred, at the beginning of the applicable period,
and under the assumption that interest for such period had been equal
to the actual weighted average interest rate in effect for the Loans
hereunder on the date of such transaction), and the Borrowers shall
have delivered to the Administrative Agent a certificate of a Senior
Officer showing such calculations in reasonable detail to demonstrate
such compliance,
(y) with respect to any single exchange of CATV Systems pursuant
to clause (II) above, the sum of the System Cash Flow for the period
of four fiscal quarters ending on, or most recently ended prior to,
the date of such exchange attributable to the CATV Systems being
exchanged does not exceed more than 15% of System Cash Flow for such
period and
(z) the sum of (A) the System Cash Flow for the period referred
to in subclause (y) above plus (B) the System Cash Flow attributable
----
to all other CATV Systems previously exchanged pursuant to clause (II)
above (whether during the period referred to in subclause (y) above,
or prior thereto), does not exceed an amount equal to 35% of Adjusted
System Cash Flow for the period referred to in subclause (y) above.
If, in connection with an exchange permitted under this subparagraph (iv),
the Borrowers or Wholly Owned Subsidiary receives cash in excess of 20% the
fair market value of the acquired CATV Systems, such exchange shall be
permitted as a sale under this
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subparagraph (iii) and the cash received by the Borrowers in connection
with such transaction shall be applied in accordance with Section 2.10(d).
(v) Subsequent Acquisitions. Any Borrower or a Wholly Owned
-----------------------
Subsidiary of such Borrower may acquire any business or Property from, or
capital stock of, or be a party to any acquisition of, any Person, so long
as:
(A) the aggregate Purchase Price of any individual such acquisition shall
not exceed $200,000,000;
(B) such acquisition (if by purchase of assets, merger or consolidation)
shall be effected in such manner so that the acquired business, and
the related assets, are owned either by a Borrower or a Wholly Owned
Subsidiary of a Borrower and, if effected by merger or consolidation
involving a Borrower, such Borrower shall be the continuing or
surviving entity and, if effected by merger or consolidation involving
a Wholly Owned Subsidiary of a Borrower, such Wholly Owned Subsidiary
shall be the continuing or surviving entity;
(C) such acquisition (if by purchase of stock) shall be effected in such
manner so that the acquired entity becomes a Wholly Owned Subsidiary
of a Borrower;
(D) with respect to any acquisition involving an aggregate Purchase Price
in excess of $25,000,000, the Borrowers shall deliver to the
Administrative Agent (which shall promptly forward a copy to each
Lender which requests one) (1) no later than five Business Days prior
to the consummation of each such acquisition (or such earlier date as
shall be five Business Days after the execution and delivery thereof),
copies of the respective agreements or instruments pursuant to which
such acquisition is to be consummated (including, without limitation,
any related management, non-compete, employment, option or other
material agreements), any schedules to such agreements or instruments
and all other material ancillary documents to be executed or delivered
in connection therewith and (2) promptly following request therefor
(but in any event within three Business Days following such request),
copies of such other information or documents relating to each such
acquisition as the Administrative Agent shall have requested;
(E) with respect to any acquisition involving an aggregate Purchase Price
in excess of $25,000,000, the Administrative Agent shall have received
(and shall promptly forward a copy thereof to each Lender which
requests one) a letter (in the case of each legal opinion delivered to
the Borrowers pursuant to such
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acquisition) from each Person delivering such opinion (which shall in
any event include an opinion of special FCC counsel) authorizing
reliance thereon by the Administrative Agent and the Lenders;
(F) with respect to any acquisition involving an aggregate Purchase Price
in excess of $25,000,000, the Borrowers shall have delivered to the
Administrative Agent and the Lenders evidence satisfactory to the
Administrative Agent and the Majority Lenders of receipt of all
licenses, permits, approvals and consents, if any, required with
respect to such acquisition (including, without limitation, the
consents of the respective municipal franchising authorities to the
acquisition of the respective CATV Systems being acquired (if any));
(G) the entire amount of the consideration payable by the Borrowers and
their Subsidiaries in connection with such acquisition (other than
customary post-closing adjustments and indemnity obligations, and
other than Indebtedness incurred in connection with such acquisition
that is permitted under paragraphs (c) or (f) of Section 8.07 hereof)
shall be payable on the date of such acquisition;
(H) none of the Borrowers nor any of its Subsidiaries shall, in connection
with such acquisition, assume or remain liable in respect of (x) any
Indebtedness of the seller or sellers (except for Indebtedness
permitted under Section 8.07(f) hereof) or (y) other obligations of
the seller or sellers (except for obligations incurred in the ordinary
course of business in operating the CATV System so acquired and
necessary or desirable to the continued operation of such CATV
System);
(I) to the extent the assets purchased in such acquisition shall be
subject to any Liens not permitted hereunder, such Liens shall have
been released (or arrangements for such release satisfactory to the
Administrative Agent shall have been made);
(J) to the extent applicable, the Borrowers shall have complied with the
provisions of Section 8.18 hereof, including, without limitation, to
the extent not theretofore delivered, delivery to the Administrative
Agent of (x) the shares of stock or other ownership interests,
accompanied by undated stock powers or other powers executed in blank,
and (y) the agreements, instruments, opinions of counsel and other
documents required under Section 8.18 hereof;
(K) after giving effect to such acquisition the Borrowers shall be in
compliance with Section 8.10 hereof (the determination of such
compliance to be calculated on a pro forma basis, as at the end of and
for the fiscal quarter most
Credit Agreement
----------------
<PAGE>
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recently ended prior to the date of such acquisition for which
financial statements of the Borrowers and their Subsidiaries are
available, under the assumption that such acquisition shall have
occurred, and any Indebtedness in connection therewith shall have been
incurred, at the beginning of the applicable period, and under the
assumption that interest for such period had been equal to the actual
weighted average interest rate in effect for the Loans hereunder on
the date of such acquisition), and the Borrowers shall have delivered
to the Administrative Agent a certificate of a Senior Officer showing
such calculations in reasonable detail to demonstrate such compliance;
(L) immediately prior to such acquisition and after giving effect thereto,
no Default shall have occurred and be continuing; and
(M) the Borrowers shall deliver such other documents and shall have taken
such other action as the Majority Lenders or the Administrative Agent
may request (which may include evidence that the Borrowers shall have
received an equity contribution from Mediacom or the proceeds of the
issuance of Affiliate Subordinated Indebtedness pursuant to
documentation and in amounts in form and substance satisfactory to the
Majority Lenders and the Administrative Agent).
8.06 Limitation on Liens. None of the Borrowers will, nor will it permit any
-------------------
of its Subsidiaries to, create, incur, assume or suffer to exist any Lien upon
any of its Property, whether now owned or hereafter acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the date hereof and listed in Part B of Schedule III
hereto (or, to the extent not meeting the minimum thresholds for required
listing on said Schedule III pursuant to Section 7.11 hereof, in an
aggregate amount not exceeding $10,000,000);
(c) Liens imposed by any governmental authority for taxes, assessments or
charges not yet due or that are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Borrowers or the affected Subsidiaries, as
the case may be, in accordance with GAAP;
(d) 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
and by appropriate proceedings and Liens securing judgments but only to the
extent for an amount and for a period not resulting in an Event of Default
under Section 9.01(i) hereof;
Credit Agreement
----------------
<PAGE>
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(e) pledges or deposits under worker's compensation, unemployment insurance and
other social security legislation;
(f) deposits to secure the performance of bids, trade contracts (other than for
Indebtedness), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business and encumbrances consisting of
zoning restrictions, easements, licenses, restrictions on the use of
Property or minor imperfections in title thereto that, in the aggregate,
are not material in amount, and that do not in any case materially detract
from the value of the Property subject thereto or interfere with the
ordinary conduct of the business of the Borrowers or any of their
Subsidiaries; and
(h) Liens upon real and/or tangible personal Property acquired after the date
hereof (by purchase, construction or otherwise) by the Borrowers or any of
their Subsidiaries and securing Indebtedness permitted under Section
8.07(f) hereof, each of which Liens either (A) existed on such Property
before the time of its acquisition and was not created in anticipation
thereof or (B) was created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost
(including the cost of construction) of such Property; provided that (i) no
--------
such Lien shall extend to or cover any Property of a Borrower or any such
Subsidiary other than the Property so acquired and improvements thereon and
(ii) the principal amount of Indebtedness secured by any such Lien shall at
no time exceed the fair market value (as determined in good faith by a
Senior Officer) of such Property at the time it was acquired (by purchase,
construction or otherwise).
8.07 Indebtedness. None of the Borrowers will, nor will it permit any of its
------------
Subsidiaries to, create, incur or suffer to exist any Indebtedness except:
(a) Indebtedness to the Lenders hereunder, including, without limitation,
Incremental Facility Loans in an aggregate principal amount up to but not
exceeding $200,000,000;
(b) Indebtedness outstanding on the date hereof and listed in Part A of
Schedule III hereto (or, to the extent not meeting the minimum thresholds
for required listing on said Schedule III pursuant to Section 7.11 hereof,
in an aggregate amount not exceeding $10,000,000);
Credit Agreement
----------------
<PAGE>
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(c) Affiliate Subordinated Indebtedness incurred in accordance with Section
8.14 hereof;
(d) Indebtedness of the Borrowers to any Subsidiary of the Borrowers, and of
any Subsidiary of the Borrowers to the Borrowers or its other Subsidiaries;
(e) Indebtedness of the Borrowers and their Subsidiaries that is subordinated
in right of payment to the obligations of the Borrowers and their
Subsidiaries under the Loan Documents (and which contains terms, including
in respect of interest, amortization, defaults, mandatory redemptions and
prepayments, and covenants) that are in each case satisfactory to the
Administrative Agent and the Majority Lenders; and
(f) additional Indebtedness of the Borrowers and their Subsidiaries (including,
without limitation, Capital Lease Obligations and other Indebtedness
secured by Liens permitted under Section 8.06(h) hereof) up to but not
exceeding an aggregate amount of $25,000,000 at any one time outstanding.
In addition to the foregoing, the Borrowers will not, nor will they permit
their Subsidiaries to, incur or suffer to exist any obligations in an aggregate
amount in excess of $10,000,000 at any one time outstanding in respect of surety
and performance bonds backing pole rental or conduit attachments and the like,
or backing obligations under Franchises, arising in the ordinary course of
business of the CATV Systems of the Borrowers and their Subsidiaries.
8.08 Investments. The Borrowers will not, nor will they permit any of their
-----------
Subsidiaries to, make or permit to remain outstanding any Investments except:
(a) Investments outstanding on the date hereof and identified in Schedule IV
hereto;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
(d) subject to the last sentence of this Section 8.08, Investments by the
Borrowers and their Subsidiaries in the Borrowers and their Subsidiaries;
(e) Interest Rate Protection Agreements entered into in the ordinary course of
business of the Borrowers and not for speculative purposes;
(f) Investments by the Borrowers and their Subsidiaries consisting of
acquisitions permitted under subparagraphs (iv) or (v) of Section 8.05(d);
Credit Agreement
----------------
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(g) Investments consisting of the issuance of a Letter of Credit for the
account of the Borrowers to support an obligation of an Affiliate of the
Borrowers, in such amounts as would be permitted under Section 8.09(d)(ii)
hereof; and
(h) additional Investments (including, without limitation, Investments by the
Borrowers or any of their Subsidiaries in Affiliates of the Borrowers), so
long as (i) the aggregate amount of all such Investments shall not exceed
$100,000,000 and (ii) at the time of making such additional investments as
contemplated by this Section 8.08(h) and after giving effect thereto, the
Total Leverage Ratio shall be less than 5.75 to 1 or if lower, the
applicable requirement at the time under Section 8.10(a) hereof.).
Without limiting the generality of the forgoing, the Borrowers will not create,
or make any Investment in, any Subsidiary after the date hereof without the
prior written consent of the Majority Lenders.
8.09 Restricted Payments. The Borrowers will not make any Restricted Payment
-------------------
at any time, provided that, so long as at the time thereof, and after giving
--------
effect thereto, no Default or Event of Default shall have occurred and be
continuing, the Borrowers may make the following Restricted Payments (subject,
in each case, to the applicable conditions set forth below):
(a) the LLC Borrowers may make Restricted Payments in cash to their members on
or after April 12 of each fiscal year (the "current year") in an amount
------------
equal to the Tax Payment Amount for the immediately preceding fiscal year
(the "prior year"), so long as at least fifteen days prior to making any
----------
such Restricted Payment, the Borrowers shall have delivered to each Lender
(i) notification of the amount and proposed payment date of such Restricted
Payment and (ii) a statement from the Borrowers' independent certified
public accountants setting forth a detailed calculation of the Tax Payment
Amount for the prior year and showing the amount of such Restricted Payment
and all prior Restricted Payments;
(b) the Borrowers may make payments in cash in respect of Management Fees to
the extent permitted under Section 8.11 hereof;
(c) the Borrowers may make payments in cash in respect of the interest on
Affiliate Subordinated Indebtedness constituting Supplemental Capital or
Cure Monies; and
(d) the Borrowers may make payments in cash in respect of the principal of
Affiliate Subordinated Indebtedness and distributions in respect of the
equity capital of
Credit Agreement
----------------
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the Borrowers and may request the issuance of Affiliate Letters of Credit
(such payment and issuance being collectively called "Permitted
---------
Transactions"), so long as
------------
(i) in the case of any Permitted Transaction consisting of
a payment in respect of the principal of Affiliate Subordinated
Indebtedness, or distribution in respect of equity capital,
constituting Cure Monies, at least one complete fiscal quarter shall
have elapsed subsequent to the last date upon which the Borrowers
shall have utilized their cure rights under Section 9.02 hereof,
without the occurrence of any Event of Default (and, for purposes
hereof, unless the Borrowers indicate otherwise at the time of any
such payment, such payment or distribution shall be deemed to be made
first from Cure Monies and second from Supplemental Capital);
(ii) after giving effect to any Permitted Transaction
during any fiscal quarter (the "current fiscal quarter") and to the
----------------------
making of any Capital Expenditures pursuant to Section 8.12(b) hereof
during the current fiscal quarter, the Borrowers would (as at the last
day of the most recent fiscal quarter immediately prior to the current
fiscal quarter) have been in compliance on a pro forma basis with
Section 8.10 hereof and the Total Leverage Ratio calculated on a pro
forma basis is at the time less than 5.75 to 1 (or, if lower, the
applicable requirement at the time under Section 8.10(a) hereof), the
determination of such compliance and such Total Leverage Ratio to be
determined as if
(x) for purposes of calculating the Total Leverage Ratio, there
were added to Indebtedness the sum (herein, the "Relevant Sum")
------------
of the amount of such Permitted Transaction plus the amount of
----
all other Permitted Transactions made during the current fiscal
quarter through the date of such Permitted Transaction, minus the
-----
amount of Special Reductions through such date plus the amount of
----
any such Capital Expenditures, and
(y) for purposes of calculating the Interest Coverage Ratio and
Pro Forma Debt Service Coverage Ratio, the Relevant Sum plus any
----
Cure Monies received during the period for which the Interest
Coverage Ratio or Pro Forma Debt Service Coverage Ratio is
calculated represented additional principal of the Loans
outstanding hereunder at all times during the respective fiscal
quarter for which such Ratios are calculated and the amount of
interest that would have been payable hereunder during such
fiscal quarter was recalculated to take into account such
additional principal;
Credit Agreement
----------------
<PAGE>
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(iii) after giving effect to distributions made in respect of
the equity capital of any Borrower, the Equity Contribution Amount
shall not be less than zero; and
(iv) the aggregate amount of Permitted Transactions as at any
date (minus the aggregate amount of Special Reductions through such
-----
date), shall not exceed the Applicable Permitted Transaction Amount
for such date.
Nothing herein shall be deemed to prohibit the payment of dividends by any
Subsidiary of a Borrower to such Borrower or to any other Subsidiary of such
Borrower.
8.10 Certain Financial Covenants.
---------------------------
(a) Total Leverage Ratio. The Borrowers will not permit the Total Leverage
--------------------
Ratio to exceed the following respective ratios at any time during the following
respective periods:
Total
Period Leverage Ratio
------ --------------
From the Closing Date
through December 31, 2000 6.00 to 1
From January 1, 2001
through December 31, 2001 5.75 to 1
From January 1, 2002
through December 31, 2002 5.50 to 1
From January 1, 2003
through December 31, 2003 4.75 to 1
From January 1, 2004
and at all times thereafter 4.50 to 1
(b) Interest Coverage Ratio. The Borrowers will not permit the Interest
-----------------------
Coverage Ratio to be less than the following respective ratios as at the last
day of any fiscal quarter ending during the following respective periods:
Credit Agreement
----------------
<PAGE>
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Period Ratio
------ -----
From the Closing Date
through December 31, 2000 1.40 to 1
From January 1, 2001
through December 31, 2001 1.50 to 1
From January 1, 2002
through December 31, 2002 1.60 to 1
From January 1, 2003
through December 31, 2003 1.80 to 1
From January 1, 2004
and at all times thereafter 2.00 to 1
(c) Pro Forma Debt Service Coverage Ratio. The Borrowers will not permit the
-------------------------------------
Pro Forma Debt Service Coverage Ratio to be less than 1.15 to 1 at any time.
8.11 Management Fees. The Borrowers will not permit the aggregate amount of
---------------
Management Fees accrued in respect of any fiscal year of the Borrowers to exceed
4.5% of the Gross Operating Revenue of the Borrowers and their Subsidiaries for
such fiscal year. In addition, the Borrowers will not, as at the last day of the
first, second and third fiscal quarters in any fiscal year, permit the amount of
Management Fees paid during the portion of such fiscal year ending with such
fiscal quarter to exceed 4.5% of the Gross Operating Revenue of the Borrowers
and their Subsidiaries for such portion of such fiscal year (based upon the
financial statements of the Borrowers provided pursuant to Section 8.01(a)
hereof), provided that in any event the Borrowers will not pay any Management
--------
Fees at any time following the occurrence and during the continuance of any
Default. Any Management Fees that are accrued for any fiscal quarter (the
"current fiscal quarter") but which are not paid during the current fiscal
----------------------
quarter may be paid at any time during the period of four fiscal quarters
following the current fiscal quarter (and for these purposes any payment of
Management Fees during such period shall be deemed to be applied to Management
Fees in the order of the fiscal quarters in respect of which such Management
Fees are accrued). Any Management Fees which may not be paid as a result of the
limitations set forth in the forgoing provisions of this Section 8.11 shall be
deferred and shall not be payable until the principal of and interest on the
Loans, and all other amounts owing hereunder, shall have been paid in full. For
purposes of this Section 8.11 "Gross Operating Revenue" shall mean the aggregate
-----------------------
gross operating revenues derived by the Borrowers from their CATV Systems and
from other telecommunications services as determined in accordance
Credit Agreement
----------------
<PAGE>
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with GAAP excluding, however, revenue or income derived by the Borrowers from
any of the following sources: (i) from the sale of any asset of such CATV
Systems not in the ordinary course of business, (ii) interest income, (iii)
proceeds from the financing or refinancing of any Indebtedness of the Borrowers
or any of their Subsidiaries and (iv) extraordinary gains in accordance with
GAAP.
None of the Borrowers nor any of its Subsidiaries shall be obligated to pay
Management Fees to any Person, unless the Borrowers and such Person shall have
executed and delivered to the Administrative Agent a Management Fee
Subordination Agreement, and none of the Borrowers nor any of its Subsidiaries
shall pay Management Fees to any Person except to the extent permitted under the
respective Management Fee Subordination Agreement to which such Person is a
party.
None of the Borrowers nor any of its Subsidiaries shall employ or retain any
executive management personnel (or pay any Person, other than the Manager, in
respect of executive management personnel or matters, for the Borrowers or any
of their Subsidiaries), it being the intention of the parties hereto that all
executive management personnel required in connection with the business or
operations of the Borrowers and their Subsidiaries shall be employees of the
Manager (and that the Executive Compensation for such employees shall be covered
by Management Fees payable hereunder). For purposes hereof, "executive
management personnel" shall not include any individual (such as a system manager
or a regional manager) who is employed solely in connection with the day-to-day
operations of a CATV System or a Region.
8.12 Capital Expenditures.
--------------------
(a) Scheduled Capital Expenditures. The Borrowers will not permit the
------------------------------
aggregate amount of Capital Expenditures to exceed the following respective
amounts for the following respective Fiscal Periods of the Borrowers:
Credit Agreement
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Fiscal Period Ending Amount
-------------------- ------
December 31, 1999 $10,000,000
December 31, 2000 $67,000,000
December 31, 2001 $82,000,000
December 31, 2002 $81,000,000
December 31, 2003 $47,000,000
December 31, 2004 $23,000,000
December 31, 2005 $21,000,000
December 31, 2006 $20,000,000
December 31, 2007 $19,000,000
provided that, the amounts set forth above for any Fiscal Period of the
- --------
Borrowers in which the Borrowers enter into a Subsequent Acquisition pursuant to
Section 8.05(d)(v) shall be increased by such amount as the Borrowers shall
propose in a notice to the Administrative Agent and the Lenders (which amount
shall be based on a proposed budget and operating plan set forth in such notice)
which increase shall become effective unless Requisite Lenders object to such
amount, by notice to the Administrative Agent, within 10 Business Days following
receipt of the Borrowers' notice. For purposes of this Section 8.12(a),
"Requisite Lenders" shall mean Lenders having at least 50% of the sum of (a) the
- ------------------
aggregate outstanding principal amount of the Term Loans or, if the Term Loans
shall not have been made, the aggregate outstanding principal amount of the Term
Loan Commitments plus (b) the aggregate outstanding principal amount of the
----
Incremental Facility Loans or, if the Incremental Facility Loans shall not have
been made, the aggregate outstanding principal amount of the Incremental
Facility Commitments plus (c) the sum of (i) the aggregate unused amount, if
----
any, of the Revolving Credit Commitments at such time plus (ii) the aggregate
----
amount of Letter of Credit Liabilities at such time plus (iii) the aggregate
----
outstanding principal amount of the Revolving Credit Loans at such time
If the aggregate amount of Capital Expenditures for any Fiscal Period of the
Borrowers shall be less than the amount set forth opposite such Fiscal Period in
the schedule above, then the shortfall shall be added to the amount of Capital
Expenditures permitted for the immediately succeeding (but not any other) Fiscal
Period and, for purposes hereof, the amount of Capital Expenditures made during
any Fiscal Period shall be deemed to have been made first from the carryover
from any previous Fiscal Period and last from the permitted amount for such
Fiscal Period.
(b) Additional Capital Expenditures. In addition to the Capital Expenditures
-------------------------------
permitted under paragraph (a) above, the Borrowers and their Subsidiaries may
make Additional Capital Expenditures during any fiscal quarter in such amounts
as would be permitted under Section 8.09(d)(ii) (in the case of a payment of
principal of Affiliate Subordinated Indebtedness,
Credit Agreement
----------------
<PAGE>
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as if such Capital Expenditure constituted a payment in respect of Supplemental
Capital thereunder).
8.13 Interest Rate Protection Agreements. The Borrowers will within 90 days
-----------------------------------
of the Closing Date, enter into, and thereafter maintain in full force and
effect, one or more Interest Rate Protection Agreements with one or more of the
Lenders or their affiliates (and/or with a bank or other financial institution
having capital, surplus and undivided profits of at least $500,000,000), that
effectively enables the Borrowers (in a manner satisfactory to the Majority
Lenders) to protect themselves, in a manner and on terms reasonably satisfactory
to the Majority Lenders, against adverse fluctuations in the three-month London
interbank offered rates as to a notional principal amount which, together with
that portion of the aggregate outstanding principal amount of Indebtedness of
the Borrowers bearing a fixed rate of interest, shall in the aggregate be at
least equal to 50% of the aggregate outstanding principal amount of the
Indebtedness (including Affiliate Subordinated Indebtedness) of the Borrowers.
8.14 Affiliate and Additional Subordinated Indebtedness.
--------------------------------------------------
(a) The Borrowers may at any time after the date hereof incur Affiliate
Subordinated Indebtedness to Mediacom or one or more other Affiliates, so long
as the proceeds of any such Affiliate Subordinated Indebtedness constituting
Cure Monies are immediately applied to the reduction of the Revolving Credit
Commitments and the prepayment of principal of the Term Loans and Incremental
Facility Loans of each Series hereunder, applied ratably to the Revolving Credit
Commitments, the Term Loans and the Incremental Facility Loans of each Series in
accordance with the respective then-outstanding aggregate amounts of such
Commitments and Loans (and to the simultaneous prepayment of the Revolving
Credit Loans in an amount equal to such required reduction of Revolving Credit
Commitments), provided that to the extent any such required prepayment of
--------
Revolving Credit Loans shall exceed the then-outstanding aggregate principal
amount of Revolving Credit Loans, such excess shall be applied to the ratable
prepayment of Term Loans and Incremental Facility Loans of each Series.
(b) The Borrowers will not, nor will they permit any of their Subsidiaries
to, purchase, redeem, retire or otherwise acquire for value, or set apart any
money for a sinking, defeasance or other analogous fund for the purchase,
redemption, retirement or other acquisition of, or make any voluntary payment or
prepayment of the principal of or interest on, or any other amount owing in
respect of, any Affiliate Subordinated Indebtedness, except to the extent
permitted under Section 8.09 hereof.
(c) The Borrowers will not, nor will they permit any of their Subsidiaries
to, purchase, redeem, retire or otherwise acquire for value, or set apart any
money for a sinking, defeasance or other analogous fund for the purchase,
redemption, retirement or other acquisition
Credit Agreement
----------------
<PAGE>
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of, or make any voluntary payment or prepayment of the principal of or interest
on, or any other amount owing in respect of, any Indebtedness at any time issued
pursuant to Section 8.07(e).
8.15 Lines of Business. The Borrowers will at all times ensure that not more
-----------------
than 15% of gross operating revenue of the Borrowers and their Subsidiaries for
any fiscal year shall be derived from any line or lines of business activity
other than the business of owning and operating CATV Systems and related
communications businesses.
8.16 Transactions with Affiliates. Except as expressly permitted by this
----------------------------
Agreement, none of the Borrowers will, nor will it permit any of its
Subsidiaries to, directly or indirectly: (a) make any Investment in an Affiliate
except for Investments permitted under Section 8.08(h), provided that, the
--------
monetary or business consideration arising therefrom would be substantially as
advantageous to a Borrower and its Subsidiaries as the monetary or business
consideration that would obtain in a comparable transaction with a Person not an
Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
Property to an Affiliate; (c) merge into or consolidate with or purchase or
acquire Property from an Affiliate; (d) make any contribution towards, or
reimbursement for, any Federal income taxes payable by any shareholder or member
of a Borrower or any of its Subsidiaries in respect of income of a Borrower; or
(e) enter into any other transaction directly or indirectly with or for the
benefit of an Affiliate (including, without limitation, Guarantees and
assumptions of obligations of an Affiliate); provided that
--------
(i) any Affiliate who is an individual may serve as a director,
officer or employee of a Borrower or any of its Subsidiaries and receive
reasonable compensation for his or her services in such capacity,
(ii) a Borrower and its Subsidiaries may enter into transactions
(other than extensions of credit by such Borrower or any of its
Subsidiaries to an Affiliate) providing for the leasing of Property, the
rendering or receipt of services or the purchase or sale of equipment,
programming rights, advertising time and other Property in the ordinary
course of business if the monetary or business consideration arising
therefrom would be substantially as advantageous to such Borrower and its
Subsidiaries as the monetary or business consideration that would obtain in
a comparable transaction with a Person not an Affiliate,
(iii) the Borrowers may enter into and perform their respective
obligations under, the Management Agreements, and
(iv) the Borrowers and their Subsidiaries may pay to the Manager
the aggregate amount of intercompany shared expenses payable to Mediacom
that are allocated by Mediacom to the Borrowers and their Subsidiaries in
accordance with Section 5.04 of the Guarantee and Pledge Agreement.
Credit Agreement
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<PAGE>
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8.17 Use of Proceeds.
---------------
(a) Revolving Credit Loans. The Borrowers will use the proceeds of the
----------------------
Revolving Credit Loans hereunder solely to (i) provide financing for the Triax
Acquisition and Subsequent Acquisitions and to pay the fees and expenses related
thereto, (ii) make Restricted Payments, (iii) pay Management Fees, (iv) make
Investments permitted under Section 8.08 hereof and (v) finance capital
expenditures and working capital needs of the Borrowers and their Subsidiaries
and acquisitions permitted hereunder (in each case in compliance with all
applicable legal and regulatory requirements); provided that (x) any borrowing
--------
of Revolving Credit Loans hereunder that would constitute a utilization of any
Reserved Commitment Amount shall be applied solely to make acquisitions
permitted under Section 8.05(d)(v) hereof, or to make prepayments of Loans under
Section 2.10(d) hereof and (y) neither the Administrative Agent nor any Lender
shall have any responsibility as to the use of any of such proceeds.
(b) Term Loans and Incremental Facility Loans. The Borrowers will use the
-----------------------------------------
proceeds of the Term Loans to finance the Triax Acquisition and to pay fees and
expenses related thereto. The Borrowers will use the proceeds of the
Incremental Facility Loans for general business purposes and to make Subsequent
Acquisitions.
8.18 Certain Obligations Respecting Subsidiaries; Further Assurances.
---------------------------------------------------------------
(a) Subsidiary Guarantors. In the event that any Borrower or any of its
---------------------
Subsidiaries shall form or acquire any Subsidiary after the date hereof (after
obtaining any necessary consent of the Lenders), such Borrower shall cause, and
shall cause its Subsidiaries to cause, such Subsidiary to:
(i) execute and deliver to the Administrative Agent a Subsidiary
Guarantee Agreement in the form of Exhibit E hereto (and, thereby, to
become a "Subsidiary Guarantor", and an "Obligor" hereunder and a "Securing
Party" under the Pledge Agreement);
(ii) deliver the shares of its stock or other ownership
interests accompanied by undated stock powers or other powers executed in
blank to the Administrative Agent, and to take other such action, as shall
be necessary to create and perfect valid and enforceable first priority
Liens (subject to Liens permitted under Section 8.06 hereof) on
substantially all of the Property of such new Subsidiary as collateral
security for the obligations of such new Subsidiary under the Subsidiary
Guarantee Agreement, and
(iii) deliver such proof of corporate action, limited liability
company action or partnership action, as the case may be, incumbency of
officers, opinions of counsel and
Credit Agreement
----------------
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other documents as is consistent with those delivered by each Obligor
pursuant to Section 6.01 hereof on the Closing Date or as the
Administrative Agent shall have reasonably requested.
(b) Ownership of Subsidiaries. Each Borrower will, and will cause each of
-------------------------
its Subsidiaries to, take such action from time to time as shall be necessary to
ensure that each of its Subsidiaries is a Wholly Owned Subsidiary. In the event
that any additional shares of stock or other ownership interests shall be issued
by Subsidiary of a Borrower, such Borrower agrees forthwith to deliver to the
Administrative Agent pursuant to the Pledge Agreement the certificates
evidencing such shares of stock or other ownership interests, accompanied by
undated stock or other powers executed in blank and to take such other action as
the Administrative Agent shall request to perfect the security interest created
therein pursuant to the Pledge Agreement.
(c) Further Assurances. Each Borrower will, and will cause each of its
------------------
Subsidiaries to, take such action from time to time (including filing
appropriate Uniform Commercial Code financing statements and executing and
delivering such assignments, security agreements and other instruments) as shall
be requested by the Administrative Agent to create, in favor of the
Administrative Agent for the benefit of the Lenders, perfected security
interests and Liens in shares of stock or other ownership interests of their
Subsidiaries. In addition, the Borrowers will not issue additional equity
interests ("Additional Equity Interests") after the date hereof to any Person (a
---------------------------
"New Equity Owner") other than Mediacom unless such New Equity Owner shall:
----------------
(i) pledge such Additional Equity Interests to the Administrative Agent on
behalf of the Lenders pursuant to a pledge agreement in substantially the
form (other than negative covenants) of the Guarantee and Pledge
Agreement and otherwise in form and substance satisfactory to the
Administrative Agent;
(ii) deliver to the Administrative Agent any certificates evidencing the
Additional Equity Interests accompanied by undated powers executed in
blank;
(iii) deliver to the Administrative Agent such proof of corporate action,
limited liability company, partnership or other action, as applicable,
incumbency of officers, opinions of counsel and other documents as is
consistent with those delivered by Mediacom and the Manager pursuant to
Section 6.01 hereof on the Closing Date or as the Administrative Agent
shall have reasonably requested; and,
(iv) take other such additional action, as shall be necessary to create and
perfect valid and enforceable first priority security interests in the
Additional Equity Interests in favor of the Administrative Agent.
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(d) Certain Restrictions. The Borrowers will not, and will not permit any of
--------------------
their Subsidiaries to, directly or indirectly, enter into, incur or permit to
exist any agreement or other arrangement that prohibits, restricts or imposes
any condition upon (a) the ability of the Borrowers or any Subsidiary to create,
incur or permit to exist any Lien upon any of its property or assets securing
the obligations of the Borrowers or any Subsidiary under any of the Loan
Documents, or in respect of any Interest Rate Protection Agreement, or (b) the
ability of any Subsidiary to pay dividends or other distributions with respect
to any shares of its capital stock or other ownership interests or to make or
repay loans or advances to the Borrowers or any Subsidiary or to Guarantee
Indebtedness of the Borrowers or any Subsidiary under any of the Loan Documents;
provided that (i) the foregoing shall not apply to restrictions and conditions
- --------
imposed by law or by any of the Loan Documents, (ii) the foregoing shall not
apply to customary restrictions and conditions contained in agreements relating
to the sale of a Subsidiary pending such sale, provided such restrictions and
--------
conditions apply only to the Subsidiary that is to be sold and such sale is
permitted hereunder, (iii) clause (a) of the foregoing shall not apply to
restrictions or conditions imposed by any agreement relating to secured
Indebtedness permitted by this Agreement or any other Loan Document if such
restrictions or conditions apply only to the property or assets securing such
Indebtedness and (iv) clause (a) of the foregoing shall not apply to customary
provisions in leases and other contracts restricting the assignment thereof.
8.19 Modifications of Certain Documents. The Borrowers will not consent to
----------------------------------
any modification, supplement or waiver of any of the provisions of any
Management Agreement (other than modifications, supplements or waivers that do
not alter any of the material rights or obligations of the Borrowers thereunder,
it being understood that any modification of the management fee provisions
thereof that would have the effect of increasing the management fees payable
pursuant thereto shall be deemed material for purposes hereof), the Triax
Acquisition Agreement (other than modifications, supplements or waivers that do
not alter in any material respect the rights of the Borrowers thereunder) or any
agreement, instrument or other document evidencing or relating to Affiliate
Subordinated Indebtedness or Indebtedness permitted under Section 8.07(e) hereof
without the prior consent of the Administrative Agent (with the approval of the
Majority Lenders).
Section 9. Events of Default.
-----------------
9.01 Events of Default. If one or more of the following events (herein
-----------------
called "Events of Default") shall occur and be continuing:
-----------------
(a) The Borrowers shall default in the payment when due (whether at stated
maturity or upon mandatory or optional prepayment) of any principal of or
interest on
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any Loan or any Reimbursement Obligation, any fee or any other amount
payable by them hereunder or under any other Loan Document; or
(b) Any Borrower or any Subsidiary of a Borrower shall default in the payment
when due of any principal of or interest on any of its other Indebtedness
aggregating $5,000,000 or more; or any event specified in any note,
agreement, indenture or other document evidencing or relating to any such
Indebtedness shall occur if the effect of such event is to cause, or
(without the lapse of time or the taking of any action, other than the
giving of notice) to permit the holder or holders of such Indebtedness (or
a trustee or agent on behalf of such holder or holders) to cause, such
Indebtedness to become due, or to be prepaid in full (whether by
redemption, purchase, offer to purchase or otherwise), prior to its stated
maturity; or any Borrower shall default in the payment when due of any
amount aggregating $5,000,000 or more under any Interest Rate Protection
Agreement; or any event specified in any Interest Rate Protection Agreement
shall occur if the effect of such event is to cause, or (with the giving of
any notice or the lapse of time or both) to permit, termination or
liquidation payment or payments aggregating $1,000,000 or more to become
due; or
(c) Any representation, warranty or certification made or deemed made herein or
in any other Loan Document (or in any modification or supplement hereto or
thereto) by any Obligor, or any certificate furnished to any Lender or the
Administrative Agent pursuant to the provisions hereof or thereof, shall
prove to have been false or misleading as of the time made or furnished in
any material respect; or
(d) Any Borrower shall default in the performance of any of its obligations
under any of Sections 8.01(g), 8.05, 8.06, 8.07, 8.08, 8.09, 8.10, 8.11,
8.12, 8.14, 8.16, 8.18 or 8.19 hereof; or any Borrower shall default in the
performance of any of its other obligations in this Agreement or any
Obligor shall default in the performance of its obligations under any other
Loan Document to which it is a party, and such default shall continue
unremedied for a period of thirty or more days after notice thereof to the
Borrowers by the Administrative Agent or any Lender (through the
Administrative Agent); or
(e) Any Obligor shall admit in writing its inability to, or be generally unable
to, pay its debts as such debts become due; or
(f) Any Obligor shall (i) apply for or consent to the appointment of, or the
taking of possession by, a receiver, custodian, trustee, examiner or
liquidator of itself or of all or a substantial part of its Property, (ii)
make a general assignment for the benefit of its creditors, (iii) commence
a voluntary case under the Bankruptcy Code, (iv) file a petition seeking to
take advantage of any other law relating to bankruptcy, insolvency,
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reorganization, liquidation, dissolution, arrangement or winding-up, or
composition or readjustment of debts, (v) fail to controvert in a timely
and appropriate manner, or acquiesce in writing to, any petition filed
against it in an involuntary case under the Bankruptcy Code or (vi) take
any corporate action for the purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application or consent
of any Obligor, in any court of competent jurisdiction, seeking (i) its
reorganization, liquidation, dissolution, arrangement or winding-up, or the
composition or readjustment of its debts, (ii) the appointment of a
receiver, custodian, trustee, examiner, liquidator or the like of such
Obligor or of all or any substantial part of its Property or (iii) similar
relief in respect of such Obligor under any law relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of
debts, and such proceeding or case shall continue undismissed, or an order,
judgment or decree approving or ordering any of the foregoing shall be
entered and continue unstayed and in effect, for a period of 60 or more
days; or an order for relief against such Obligor shall be entered in an
involuntary case under the Bankruptcy Code; or
(h) Any Borrower shall be terminated, dissolved or liquidated (as a matter of
law or otherwise), or proceedings shall be commenced by a Borrower seeking
the termination, dissolution or liquidation of a Borrower, or proceedings
shall be commenced by any Person (other than the Borrowers) seeking the
termination, dissolution or liquidation of a Borrower and such proceeding
shall continue undismissed for a period of 60 or more days; or
(i) A final judgment or judgments for the payment of money of $5,000,000 or
more in the aggregate (exclusive of judgment amounts fully covered by
insurance where the insurer has admitted liability in respect of such
judgment) or of $10,000,000 or more in the aggregate (regardless of
insurance coverage) shall be rendered by one or more courts, administrative
tribunals or other bodies having jurisdiction against the Borrowers or any
of their Subsidiaries and the same shall not be discharged (or provision
shall not be made for such discharge), or a stay of execution thereof shall
not be procured, within 30 days from the date of entry thereof and the
relevant Borrower or Subsidiary shall not, within said period of 30 days,
or such longer period during which execution of the same shall have been
stayed, appeal therefrom and cause the execution thereof to be stayed
during such appeal; or
(j) An event or condition specified in Section 8.01(e) hereof shall occur or
exist with respect to any Plan or Multiemployer Plan and, as a result of
such event or condition, together with all other such events or conditions,
the Borrowers or any ERISA Affiliate shall incur or in the opinion of the
Majority Lenders shall be reasonably likely to
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incur a liability to a Plan, a Multiemployer Plan or the PBGC (or any
combination of the foregoing) that, in the determination of the Majority
Lenders, would (either individually or in the aggregate) have a Material
Adverse Effect; or
(k) A reasonable basis shall exist for the assertion against any Borrower or
any of its Subsidiaries, or any predecessor in interest of any Borrower or
any of its Subsidiaries or Affiliates, of (or there shall have been
asserted against any Borrower or any of its Subsidiaries) an Environmental
Claim that, in the judgment of the Majority Lenders is reasonably likely to
be determined adversely to such Borrower or any of its Subsidiaries, and
the amount thereof (either individually or in the aggregate) is reasonably
likely to have a Material Adverse Effect (insofar as such amount is payable
by such Borrower or any of its Subsidiaries but after deducting any portion
thereof that is reasonably expected to be paid by other creditworthy
Persons jointly and severally liable therefor); or
(l) Any one or more of the following events shall occur and be continuing:
(i) Rocco Commisso shall, by reason other than death or
permanent disability, cease to be Chairman and Chief Executive Officer
of the Manager and Zylstra (or, following a Qualified Public Offering,
of Holdco), or if Rocco Commisso shall cease to be the Chairman and
Chief Executive Officer of the Manager and Zylstra (or, as applicable,
Holdco) by reason of death or permanent disability, a period of 120
days shall have elapsed without the appointment of a successor
Chairman and Chief Executive Officer with a Person with knowledge and
experience in the cable television industry reasonably acceptable to
the Majority Lenders;
(ii) Mediacom Management Corporation or Mediacom shall cease to
act as Manager of the LLC Borrowers;
(iii) Mediacom and Mediacom Management Corporation shall cease
to own, collectively, 50.1% of the aggregate voting power of the
ownership interests in each Borrower, provided that nothing in this
paragraph shall affect the obligation of the Borrowers pursuant to
Section 8.18(c) hereof, or of Mediacom pursuant to Section 6.04 of the
Guarantee and Pledge Agreement, to ensure that Administrative Agent
shall maintain on behalf of the Lenders at all times a pledge of 100%
of the equity interests in the Borrowers;
(iv) any person or group (within the meaning of Rule 13d-5
under the Securities Exchange Act of 1934, as amended (the "Exchange
--------
Act") and Section 13(d) and 14(d) of the Exchange Act) other than a
---
Commisso Entity or any entity controlled by or under common control
with Chase Manhattan Capital
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Corporation or Morris Communications Corporation becomes, directly or
indirectly, in a single transaction or in a related series of
transactions by way of merger, consolidation or other business
combination or otherwise, the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of more than 25% of the aggregate voting
power of the capital stock of Mediacom or after a Qualified Public
Offering, Holdco on a fully-diluted basis (in other words, giving
effect to the exercise of any warrants, options and conversion and
other rights);
(v) at any time prior to a Qualified Public Offering, the
Commisso Entities shall sell, transfer or otherwise dispose of more
than 20% of the aggregate equity interests in Mediacom held by them on
the date hereof (excluding in any event any additional equity
interests issued after the date hereof, including upon a revaluation
after the date hereof as provided in the operating agreement for
Mediacom, and excluding also any such transfer following the death or
permanent disability of Rocco Commisso and any such transfer that
consists of an exchange by the holders of the equity generally of
Mediacom of their equity interests in Mediacom for equity interests in
Holdco); or
(vi) at any time after a Qualified Public Offering, the Commisso
Entities shall cease to own at least 50.1% of the aggregate voting
power of the capital stock of Holdco on a fully-diluted basis (in
other words, giving effect to the exercise of any warrants, options
and conversion and other rights); or
(m) Except for Franchises that cover fewer than 10% of the Subscribers of the
Borrowers and their Subsidiaries (determined as at the last day of the most
recent fiscal quarter for which a Quarterly Officers' Report shall have
been delivered) one or more Franchises relating to the CATV Systems of the
Borrowers and their Subsidiaries shall be terminated or revoked such that
the respective Borrower or Subsidiary is no longer able to operate such
Franchises and retain the revenue received therefrom or the respective
Borrower or Subsidiary or the grantors of such Franchises shall fail to
renew such Franchises at the stated expiration thereof such that the
respective Borrower or Subsidiary is no longer able to operate such
Franchises and retain the revenue received therefrom; or
(n) The Liens created by the Security Documents shall at any time not
constitute a valid and perfected Lien on the collateral intended to be
covered thereby (to the extent perfection by filing, registration,
recordation or possession is required herein or therein) in favor of the
Administrative Agent, free and clear of all other Liens (other than Liens
permitted under Section 8.06 hereof or under the respective Security
Documents), or, except for expiration in accordance with its terms, any of
the Security Documents shall for whatever reason be terminated or cease to
be in full force and effect, or the enforceability thereof shall be
contested by any Borrower; or
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(o) Any Operating Agreement shall be modified in any manner that would
adversely affect the obligations of the Borrowers, or the rights of the
Lenders or the Administrative Agent, hereunder or under any of the other
Loan Documents;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 9.01 with respect to any Borrower, the
Administrative Agent shall, if instructed by the Majority Lenders, by notice to
the Borrowers, terminate the Commitments and/or declare the principal amount
then outstanding of, and the accrued interest on, the Loans, the Reimbursement
Obligations and all other amounts payable by the Borrowers hereunder (including,
without limitation, any amounts payable under Section 5.05 or 5.06 hereof) to be
forthwith due and payable, whereupon such amounts shall be immediately due and
payable without presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by the Borrowers; and (2) in the case
of the occurrence of an Event of Default referred to in clause (f) or (g) of
this Section 9.01 with respect to any Borrower, the Commitments shall
automatically be terminated and the principal amount then outstanding of, and
the accrued interest on, the Loans, Reimbursement Obligations and all other
amounts payable by the Borrowers hereunder (including, without limitation, any
amounts payable under Section 5.05 or 5.06 hereof) shall automatically become
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by the
Borrowers.
In addition, upon the occurrence and during the continuance of any Event of
Default (if the Administrative Agent has declared the principal amount then
outstanding of, and accrued interest on, the Revolving Credit Loans and all
other amounts payable by the Borrowers hereunder to be due and payable), the
Borrowers agree that they shall, if requested by the Administrative Agent or the
Majority Revolving Credit Lenders through the Administrative Agent (and, in the
case of any Event of Default referred to in clause (f) or (g) of this Section
9.01 with respect to the Borrowers, forthwith, without any demand or the taking
of any other action by the Administrative Agent or such Lenders) provide cover
for the Letter of Credit Liabilities by paying to the Administrative Agent
immediately available funds in an amount equal to the then aggregate undrawn
face amount of all Letters of Credit, which funds shall be held by the
Administrative Agent in the Collateral Account as collateral security in the
first instance for the Letter of Credit Liabilities and be subject to withdrawal
only as therein provided.
9.02 Certain Cure Rights.
-------------------
(a) Notwithstanding the provisions of Section 9.01 hereof, but without
limiting the obligations of the Borrowers under Section 8.10(a) hereof, a breach
by the Borrowers as of the last day of any fiscal quarter or any fiscal year of
its obligations under said Section 8.10(a) shall not constitute an Event of
Default hereunder (except for purposes of Section 6 hereof) until
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the date (for purposes of this clause (a), the "Cut-Off Date") which is the
------------
earlier of the date thirty days after (a) the date the financial statements for
the Borrowers and their Subsidiaries with respect to such fiscal quarter or
fiscal year, as the case may be, are delivered pursuant to Section 8.01(a) or
8.01(b) hereof or (b) the latest date on which such financial statements are
required to be delivered pursuant to said Section 8.01(a) or 8.01(b), provided
--------
that, if following the last day of such fiscal quarter or fiscal year and prior
to the Cut-Off Date, the Borrowers shall have received Cure Monies (and shall
have applied the proceeds thereof to the prepayment of the Loans hereunder,
which prepayment, in the case of Affiliate Subordinated Indebtedness, shall be
effected in the manner provided in Section 8.14(a) hereof), or shall have
prepaid the Loans hereunder from available cash, in an amount sufficient to
bring the Borrowers into compliance with said Section 8.10(a) assuming that the
Total Leverage Ratio, as of the last day of such fiscal quarter or fiscal year,
as the case may be, were recalculated to subtract such prepayment from the
aggregate outstanding amount of Indebtedness, then such breach or breaches shall
be deemed to have been cured; provided, further, that breaches of Section 8.10
-------- -------
hereof (including pursuant to paragraph (b) below) may not be deemed to be cured
pursuant to this Section 9.02 (x) more than three times during the term of this
Agreement or (y) during consecutive fiscal quarters.
(b) Notwithstanding the provisions of Section 9.01 hereof, but without
limiting the obligations of the Borrowers under Section 8.10(b) or 8.10(c)
hereof, a breach by the Borrowers as of the last day of any fiscal quarter or
any fiscal year of its obligations under said Section 8.10(b) or 8.10(c) shall
not constitute an Event of Default hereunder (except for purposes of Section 6
hereof) until the date (for purposes of this clause (b), the "Cut-Off Date")
------------
which is the earlier of the date thirty days after (a) the date the financial
statements for the Borrowers and their Subsidiaries with respect to such fiscal
quarter or fiscal year, as the case may be, are delivered pursuant to Section
8.01(a) or 8.01(b) hereof or (b) the latest date on which such financial
statements are required to be delivered pursuant to said Section 8.01(a) or
8.01(b), provided that, if following the last day of such fiscal quarter or
--------
fiscal year and prior to the Cut-Off Date, the Borrowers shall have received
Cure Monies (and shall have applied the proceeds thereof to the prepayment of
the Loans hereunder, which prepayment, in the case of Affiliate Subordinated
Indebtedness, shall be effected in the manner provided in Section 8.14(a)
hereof), or shall have prepaid the Loans hereunder from available cash, in an
amount sufficient to bring the Borrowers into compliance with said Section
8.10(b) or 8.10(c) assuming that the Interest Coverage Ratio and the Pro Forma
Debt Service Coverage Ratio (as the case may be), as of the last day of such
fiscal quarter or fiscal year, as the case may be, were recalculated to deduct
from Interest Expense the aggregate amount of interest that would not have been
required to be paid hereunder if such prepayment had been made on the first day
of the period for which the Interest Coverage Ratio and the Pro Form Debt
Service Coverage Ratio is determined under said Section 8.10(b) or 8.10(c), then
such breach or breaches shall be deemed to have been cured; provided, further,
-------- -------
that breaches of Section 8.10 hereof (including pursuant to paragraph (a) above)
may not be deemed to be cured pursuant to this Section 9.02 (x) more than three
times during the term of this Agreement or (y) during consecutive fiscal
quarters.
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Section 10. The Administrative Agent.
------------------------
10.01 Appointment, Powers and Immunities. Each Lender hereby appoints and
----------------------------------
authorizes the Administrative Agent to act as its agent hereunder and under the
other Loan Documents with such powers as are specifically delegated to the
Administrative Agent by the terms of this Agreement and under the other Loan
Documents, together with such other powers as are reasonably incidental thereto.
The Administrative Agent (which term as used in this sentence and in Section
10.05 and the first sentence of Section 10.06 hereof shall include reference to
its affiliates and its own and its affiliates' officers, directors, employees
and agents):
(a) shall have no duties or responsibilities except those expressly set forth
in this Agreement and in the other Loan Documents, and shall not by reason
of this Agreement or any other Loan Document be a trustee for any Lender;
(b) shall not be responsible to the Lenders for any recitals, statements,
representations or warranties contained in this Agreement or in any other
Loan Document, or in any certificate or other document referred to or
provided for in, or received by any of them under, 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 any other document referred to or provided for herein or
therein or for any failure by the Borrowers or any other Person to perform
any of its obligations hereunder or thereunder;
(c) shall not, except to the extent expressly instructed by the Majority
Lenders with respect to the collateral security under the Security
Documents, be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Loan Document; and
(d) shall not be responsible for any action taken or omitted to be taken by it
hereunder or under any other Loan Document or under any other document or
instrument referred to or provided for herein or therein or in connection
herewith or therewith, except for its own gross negligence or willful
misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or attorneys-
in-fact selected by it in good faith.
10.02 Reliance by Administrative Agent. The Administrative Agent shall be
--------------------------------
entitled to rely upon any certification, notice or other communication
(including, without
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limitation, any thereof by telephone, telecopy, telegram or cable) reasonably
believed by it to be genuine and correct and to have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by the
Administrative Agent. As to any matters not expressly provided for by this
Agreement or any other Loan Document, the Administrative Agent shall in all
cases be fully protected in acting, or in refraining from acting, hereunder or
thereunder in accordance with instructions given by the Majority Lenders or, if
provided herein, in accordance with the instructions given by the Majority
Revolving Credit Lenders, the Majority Term Loan Lenders, the Majority
Incremental Facility Lenders of a Series or all of the Lenders as is required in
such circumstance, and such instructions of such Lenders and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders.
10.03 Defaults. The Administrative Agent shall not be deemed to have
--------
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Lender or the Borrowers specifying such Default
and stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Section 10.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders or, if
provided herein, the Majority Revolving Credit Lenders , the Majority Term Loan
Lenders or the Majority Incremental Facility Lenders of a Series, provided that,
--------
unless and until the Administrative Agent shall have received such directions,
the Administrative Agent may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to such Default as it shall
deem advisable in the best interest of the Lenders except to the extent that
this Agreement expressly requires that such action be taken, or not be taken,
only with the consent or upon the authorization of the Majority Lenders, the
Majority Revolving Credit Lenders, the Majority Term Loan Lenders or the
Majority Incremental Facility Lenders of a Series or all of the Lenders.
10.04 Rights as a Lender. With respect to its Commitments and the Loans made
------------------
by it, Chase (and any successor acting as Administrative Agent) in its capacity
as a Lender hereunder shall have the same rights and powers hereunder as any
other Lender and may exercise the same as though it were not acting as the
Administrative Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity. Chase (and any successor acting as Administrative Agent) and its
affiliates may (without having to account therefor to any Lender) accept
deposits from, lend money to, make investments in and generally engage in any
kind of banking, trust or other business with the Borrowers (and any of their
Subsidiaries or Affiliates) as if it were not acting as the Administrative
Agent, and Chase (and any such successor) and its affiliates may accept fees and
other consideration from the Borrowers for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.
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10.05 Indemnification. The Lenders agree to indemnify the Administrative
---------------
Agent (to the extent not reimbursed under Section 11.03 hereof, but without
limiting the obligations of the Borrowers under said Section 11.03) ratably in
accordance with the aggregate principal amount of the Loans and Letter of Credit
Liabilities held by the Lenders (or, if no Loans or Letter of Credit Liabilities
are at the time outstanding, ratably in accordance with their respective
Commitments), for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind and nature whatsoever that may be imposed on, incurred by or asserted
against the Administrative Agent (including by any Lender) arising out of or by
reason of any investigation in or in any way relating to or arising out of this
Agreement or any other Loan Document any other documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
(including, without limitation, the costs and expenses that the Borrowers are
obligated to pay under Section 11.03 hereof, but excluding, unless a Default has
occurred and is continuing, normal administrative costs and expenses incident to
the performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents, provided that no Lender
shall be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the party to be indemnified.
10.06 Non-Reliance on Administrative Agent and Other Lenders. Each Lender
------------------------------------------------------
agrees that it has, independently and without reliance on the Administrative
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Borrowers and their
Subsidiaries and decision to enter into this Agreement and that it will,
independently and without reliance upon the Administrative Agent or any other
Lender, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own analysis and decisions in taking or not
taking action under this Agreement or under any other Loan Document. The
Administrative Agent shall not be required to keep itself informed as to the
performance or observance by the Borrowers of this Agreement or any of the other
Loan Documents or any other document referred to or provided for herein or
therein or to inspect the Properties or books of the Borrowers or any of their
Subsidiaries. Except for notices, reports and other documents and information
expressly required to be furnished to the Lenders by the Administrative Agent
hereunder or under the Security Documents, the Administrative Agent shall not
have any duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Borrowers or any of their Subsidiaries (or any of their affiliates) that may
come into the possession of the Administrative Agent or any of its affiliates.
10.07 Failure to Act. Except for action expressly required of the
--------------
Administrative Agent hereunder and under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder or thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under
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Section 10.05 hereof against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action.
10.08 Resignation or Removal of Administrative Agent. Subject to the
----------------------------------------------
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving five days prior
notice thereof to the Lenders and the Borrowers, and the Administrative Agent
may be removed at any time with or without cause by the Majority Lenders. Upon
any such resignation or removal, the Majority Lenders shall have the right, in
consultation with the Borrowers, to appoint a successor Administrative Agent. If
no successor Administrative Agent shall have been so appointed by the Majority
Lenders and shall have accepted such appointment within 30 days after the
retiring Administrative Agent's giving of notice of resignation or the Majority
Lenders' removal of the retiring Administrative Agent, then the retiring
Administrative Agent may, on behalf of the Lenders, in consultation with the
Borrowers, appoint a successor Administrative Agent, that shall be a bank that
has an office in New York, New York with a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this Section 10
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Administrative Agent.
10.09 Consents under Other Loan Documents. Except as otherwise provided in
-----------------------------------
Section 11.04 hereof with respect to this Agreement, the Administrative Agent
may, with the prior consent of the Majority Lenders (but not otherwise), consent
to any modification, supplement or waiver under any of the Loan Documents,
provided that, without the prior consent of each Lender, the Administrative
Agent shall not (except as provided herein or in the Security Documents) release
all or substantially all of the Subsidiary Guarantors from their obligations
under the Security Documents, or release all or substantially all of the
collateral or otherwise terminate all or substantially all of the Liens under
the Security Documents (taken as a whole), or agree to additional obligations
being secured by all or substantially all such collateral security (unless the
Lien for such additional obligations shall be junior to the Lien in favor of the
other obligations secured by such Security Document, in which event the
Administrative Agent may consent to such junior Lien provided that it obtains
the consent of the Majority Lenders thereto), alter the relative priorities of
the obligations entitled to the benefits of all or substantially all of the
Liens under the Security Documents, except that no such consent shall be
required, and the Administrative Agent is hereby authorized, to release any Lien
covering Property (and to release any Subsidiary Guarantor) that is the subject
of either a disposition of Property permitted hereunder or a Disposition to
which the Majority Lenders have consented.
Credit Agreement
----------------
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Section 11. Miscellaneous.
-------------
11.01 Waiver. No failure on the part of the Administrative Agent or any
------
Lender to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right, power
or privilege under this Agreement preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The remedies provided
herein are cumulative and not exclusive of any remedies provided by law.
Each Borrower irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by the
Administrative Agent or any Lender relating in any way to this Agreement should
be dismissed or stayed by reason, or pending the resolution, of any action or
proceeding commenced by a Borrower relating in any way to this Agreement whether
or not commenced earlier. To the fullest extent permitted by applicable law,
the Borrowers shall take all measures necessary for any such action or
proceeding commenced by the Administrative Agent or any Lender to proceed to
judgment prior to the entry of judgment in any such action or proceeding
commenced by a Borrower.
11.02 Notices. All notices, requests and other communications provided for
-------
herein and under the Security Documents (including, without limitation, any
modifications of, or waivers, requests or consents under, this Agreement) shall
be given or made in writing (including, without limitation, by telecopy)
delivered to the intended recipient at (i) in the case of the Borrowers and the
Administrative Agent, at the "Address for Notices" specified below its name on
the signature pages hereof and (ii) in the case of each of the Lenders, the
address (or telecopy number) set forth in its Administrative Questionnaire; or,
as to any party, at such other address as shall be designated by such party in a
notice to each other party. Notwithstanding the foregoing, notices of borrowing,
prepayment and Conversion of Loans pursuant to Section 4.05 hereof may be made
by telephone, so long as the same are promptly confirmed in writing. Except as
otherwise provided in this Agreement, all such communications shall be deemed to
have been duly given when transmitted by telecopier or personally delivered or,
in the case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid.
11.03 Expenses, Etc. The Borrowers jointly and severally agree to pay or
--------------
reimburse each of the Lenders and the Administrative Agent for: (a) all
reasonable out-of-pocket costs and expenses of the Administrative Agent
(including, without limitation, the reasonable fees and expenses of Milbank,
Tweed, Hadley & McCloy LLP, special New York counsel to Chase) in connection
with (i) the negotiation, preparation, execution and delivery of this Agreement
and the other Loan Documents and the extension of credit hereunder and (ii) the
negotiation or preparation of any modification, supplement or waiver of any of
the terms of this
Credit Agreement
----------------
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Agreement or any of the other Loan Documents (whether or not consummated); (b)
all reasonable out-of-pocket costs and expenses of the Lenders and the
Administrative Agent (including, without limitation, the reasonable fees and
expenses of legal counsel) in connection with (i) any Default and any
enforcement or collection proceedings resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (x)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 11.03; and (c) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Agreement or any of the other Loan
Documents or any other document referred to herein or therein and all costs,
expenses, taxes, assessments and other charges incurred in connection with any
filing, registration, recording or perfection of any security interest
contemplated by any Security Document or any other document referred to therein.
The Borrowers hereby jointly and severally agree to indemnify the
Administrative Agent, each Lender, each of their affiliates and their respective
directors, officers, employees, attorneys and agents from, and hold each of them
harmless against, any and all losses, liabilities, claims, damages or expenses
incurred by any of them (including, without limitation, any and all losses,
liabilities, claims, damages or expenses incurred by the Administrative Agent to
any Lender, whether or not the Administrative Agent or any Lender is a party
thereto) arising out of or by reason of any investigation or litigation or other
proceedings (including any threatened investigation or litigation or other
proceedings) relating to the extensions of credit hereunder or any actual or
proposed use by the Borrowers or any of their Subsidiaries of the proceeds of
any of the extensions of credit hereunder, including, without limitation, the
reasonable fees and disbursements of counsel incurred in connection with any
such investigation or litigation or other proceedings (but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or willful misconduct of the Person to be indemnified).
11.04 Amendments, Etc. Except as otherwise expressly provided in this
----------------
Agreement, any provision of this Agreement may be modified or supplemented only
by an instrument in writing signed by the Borrowers and the Majority Lenders, or
by the Borrowers and the Administrative Agent acting with the consent of the
Majority Lenders, and any provision of this Agreement may be waived by the
Majority Lenders or by the Administrative Agent acting with the consent of the
Majority Lenders; provided that:
--------
(a) no modification, supplement or waiver shall, unless by an instrument signed
by all of the Lenders or by the Administrative Agent acting with the
consent of all of the Lenders:
Credit Agreement
----------------
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(i) increase, or extend the term of any of the Commitments, or extend the
time or waive any requirement for the reduction or termination of any of
the Commitments,
(ii) extend the date fixed for the payment of principal of or interest on any
Loan, the Reimbursement Obligations or any fee hereunder,
(iii) reduce the amount of any such payment of principal,
(iv) reduce the rate at which interest is payable thereon or any fee is
payable hereunder,
(v) alter the manner in which payments or prepayments of principal, interest
or other amounts hereunder shall be applied, or provide that any Class of
Loans or Lenders are subordinate in right of payment or have junior
priority as to Collateral, as between the Lenders or Classes of Loans,
(vi) alter the terms of this Section 11.04,
(vii) modify the percentages set forth in the definition of the term "Majority
Lenders", "Majority Revolving Credit Lenders", "Majority Term Loan
Lenders" or "Majority Incremental Facility Lenders",
(viii) waive or amend any provision requiring the consent or approval of all
Lenders, or
(ix) waive any of the conditions precedent set forth in Section 6.01 hereof;
and
(b) any modification or supplement of Section 10 hereof, or of any of the
rights or duties of the Administrative Agent hereunder, shall require the
consent of the Administrative Agent.
Anything in this Agreement to the contrary notwithstanding, no waiver or
modification of any provision of this Agreement that has the effect (either
immediately or at some later time) of enabling the Borrowers to satisfy a
condition precedent to the making of a Revolving Credit Loan or Incremental
Facility Loan of any Series shall be effective against the Revolving Credit
Lenders for the purposes of the Revolving Credit Commitments and Incremental
Facility Commitments of such Series unless the Majority Revolving Credit Lenders
or Majority Incremental Facility Lenders of such Series, as applicable, shall
have concurred with such waiver or modification, and no waiver or modification
of any provision of this Agreement
Credit Agreement
----------------
<PAGE>
-111-
or any other Loan Document that could reasonably be expected to adversely affect
the Lenders of any Class shall be effective against the Lenders of such Class
unless the Majority Revolving Credit Lenders, Majority Term Loan Lenders or
Majority Incremental Facility Lenders or the applicable Series, as the case may
be, shall have concurred with such waiver or modification.
11.05 Successors and Assigns. This Agreement shall be binding upon and inure
----------------------
to the benefit of the parties hereto and their respective successors and
permitted assigns.
11.06 Assignments and Participations.
------------------------------
(a) None of the Borrowers may assign any of its rights or obligations
hereunder without the prior consent of all of the Lenders and the Administrative
Agent.
(b) Each Lender may assign any of its Loans, its Commitments and, if such
Lender is a Revolving Credit Lender, its Letter of Credit Interest (but only
with the consent of, in the case of its outstanding Commitments, the Borrowers
and the Administrative Agent and, in the case of the Revolving Credit Commitment
or a Letter of Credit Interest, the Issuing Lender, which consents shall not be
unreasonably withheld or delayed); provided that
--------
(i) no such consent by the Borrowers or the Administrative Agent
shall be required in the case of any assignment to another Lender, an
affiliate of a Lender or an Approved Fund of a Lender;
(ii) except to the extent the Borrowers and the Administrative
Agent shall otherwise consent, any such partial assignment (other than to
another Lender or an affiliate or an Approved Fund of a Lender) shall be in
an amount at least equal to $5,000,000;
(iii) each such assignment by a Lender of its Revolving Credit
Loans or Revolving Credit Commitment or Letter of Credit Interest shall be
made in such manner so that the same portion of its Revolving Credit Loans,
Revolving Credit Commitment and Letter of Credit Interest is assigned to
the respective assignee;
(iv) each such assignment by a Lender of its Term Loans or Term
Loan Commitment shall be made in such manner so that the same portion of
its Term Loans and Term Loan Commitment is assigned to the respective
assignee;
(v) each such assignment by a Lender of its Incremental Facility
Loans of any Series shall be made in such manner so that the same portion
of its Incremental Facility Loans and Incremental Facility Commitment of
such Series is assigned to the respective assignee; and
Credit Agreement
----------------
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(vi) upon each such assignment, the assignor and assignee shall
deliver to the Borrowers, the Administrative Agent and the Issuing Lender
an Assignment and Acceptance in the form of Exhibit A hereto and the
assignee, if it shall not be a Lender, shall deliver to the Administrative
Agent an Administrative Questionnaire.
Upon execution and delivery by the assignor and the assignee to the Borrowers,
the Administrative Agent and the Issuing Lender of such Assignment and
Acceptance, and upon consent thereto by the Borrowers, the Administrative Agent
and the Issuing Lender to the extent required above, the assignee shall have, to
the extent of such assignment (unless otherwise consented to by the Borrowers,
the Administrative Agent and the Issuing Lender), the obligations, rights and
benefits of a Lender hereunder holding the Commitment(s), Loans and, if
applicable, Letter of Credit Interest (or portions thereof) assigned to it and
specified in such Assignment and Acceptance (in addition to the Commitment(s),
Loans and Letter of Credit Interest, if any, theretofore held by such assignee)
and the assigning Lender shall, to the extent of such assignment, be released
from the Commitment(s) (or portion(s) thereof) so assigned. Upon each such
assignment the assigning Lender shall pay the Administrative Agent an assignment
fee of $3,500; provided, however, that no such fee shall be payable in the case
-------- -------
of an assignment to another Lender, an Affiliate of a Lender or an Approved
Fund; and provided further that, in the case of contemporaneous assignments by a
-------- -------
Lender to more than one fund managed by the same investment advisor (which funds
are not then Lenders hereunder), only a single such fee shall be payable for all
such contemporaneous assignments.
(c) A Lender may sell or agree to sell to one or more other Persons (each a
"Participant") a participation in all or any part of any Loans or Letter of
- ------------
Credit Interest held by it, or in its Commitments, provided that (i) such
--------
Participant shall not have any rights or obligations under this Agreement or any
other Loan Document (the Participant's rights against such Lender in respect of
such participation to be those set forth in the agreements executed by such
Lender in favor of the Participant) and (ii) such Lender shall promptly notify
the Borrowers of the sale of such participation. All amounts payable by the
Borrowers to any Lender under Section 5 hereof in respect of Loans and Letter of
Credit Interests held by it, and its Commitments, shall be determined as if such
Lender had not sold or agreed to sell any participations in such Loans, Letter
of Credit Interest and Commitments, and as if such Lender were funding each of
such Loan, Letter of Credit Interest and Commitments in the same way that it is
funding the portion of such Loan, Letter of Credit Interest and Commitments in
which no participations have been sold. In no event shall a Lender that sells a
participation agree with the Participant to take or refrain from taking any
action hereunder or under any other Loan Document except that such Lender may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) increase or extend the term of such Lender's related
Commitment or extend the amount or date of any scheduled reduction of such
Commitment pursuant to Section 2.04 hereof, (ii) extend the date fixed for the
payment of principal of or interest on the related Loan or Loans,
Credit Agreement
----------------
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Reimbursement Obligations or any portion of any fee hereunder payable to the
Participant, (iii) reduce the amount of any such payment of principal, (iv)
reduce the rate at which interest is payable thereon, or any fee hereunder
payable to the Participant, to a level below the rate at which the Participant
is entitled to receive such interest or fee or (v) consent to any modification,
supplement or waiver hereof or of any of the other Loan Documents to the extent
that the same, under Section 10.09 or Section 11.04 hereof, requires the consent
of each Lender.
(d) In addition to the assignments and participations permitted under the
foregoing provisions of this Section 11.06, any Lender may (without notice to
the Borrowers, the Administrative Agent or any other Lender and without payment
of any fee) (i) assign and pledge all or any portion of its Loans to any Federal
Reserve Bank as collateral security pursuant to Regulation A and any Operating
Circular issued by such Federal Reserve Lender and (ii) assign all or any
portion of its rights under this Agreement and its Loans to an affiliate. Any
Lender that is a fund that invests in bank loans may (without the consent of the
Borrowers or the Administrative Agent) pledge all or any portion of its rights
in connection with this Agreement to the trustee for holders of obligations
owed, or securities issued, by such fund as security for such obligations or
such securities, provided that any foreclosure or other exercise of remedies by
such trustee shall be subject to the provisions of this Section 11.06 in all
respects. No assignment or pledge described in this paragraph shall release
the assigning Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning the Borrowers or any of
their Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 11.12(b) hereof.
(f) Anything in this Section 11.06 to the contrary notwithstanding, no Lender
may assign or participate any interest in any Loan or Reimbursement Obligation
held by it hereunder to the Borrowers or any of their Affiliates or Subsidiaries
without the prior consent of each Lender.
(g) The Administrative Agent, acting for this purpose as an agent of the
Borrowers, shall maintain at one of its offices in The City of New York a copy
of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitments of,
and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the "Register"). The entries in the Register shall be
--------
conclusive, and the Borrowers, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register pursuant to the terms
hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding
notice to the contrary. The Register shall be available for inspection by the
Borrowers and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.
Credit Agreement
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(h) Upon its receipt of a duly completed Assignment and Acceptance executed
by an assigning Lender and an assignee, the assignee's completed Administrative
Questionnaire (unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) of this Section and
any written consent to such assignment required by paragraph (b) above, the
Administrative Agent shall accept such Assignment and Acceptance and record the
information contained therein in the Register. No assignment shall be effective
for purposes of this Agreement unless it has been recorded in the Register as
provided in this paragraph.
(i) Notwithstanding anything to the contrary contained herein, any lender (a
"Granting Lender") may grant to a special purpose funding vehicle (a "SPC"),
- ---------------- ---
identified as such in writing from time to time by the Granting Lender to the
Administrative Agent and the Borrowers, the option to provide to the Borrowers
all or any part of any Loan that such Granting Lender would otherwise be
obligated to make to the Borrowers pursuant to this Agreement; provided that (i)
-------------
nothing herein shall constitute a commitment by any SPC to make any Loan, (ii)
if an SPC elects not to exercise such option or otherwise fails to provide all
or any part of such Loan, the Granting Lender shall be obligated to make such
Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as
if, such Loan were made by such Granting Lender. Each party hereto hereby
agrees that no SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the
Granting Lender). In furtherance of the foregoing, each party hereto hereby
agrees (which agreement shall survive the termination of this Agreement) that,
prior to the date that is one year and one day after the payment in full of all
outstanding commercial paper, or other senior indebtedness of any SPC, it will
not institute against, or join any other person in instituting against, such SPC
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under the laws of the United States or any State thereof in respect
of claims arising out of this Agreement. In addition, notwithstanding anything
to the contrary contained in this Section 11.06(i), any SPC may (i) with notice
to, but without the prior written consent of, the Borrowers and the
Administrative Agent and without paying any processing fee therefor, assign all
or a portion of its interests in any Loans to the Granting Lender or to any
financial institutions (consented to by the Borrowers and Administrative Agent)
providing liquidity and/or credit support to or for the account of such SPC to
support the funding or maintenance of Loans and (ii) disclose on a confidential
basis any non-public information relating to its Loans to any rating agency,
commercial paper dealer or provider of any surety, guarantee or credit or
liquidity enhancement to such SPC.
11.07 Survival. The obligations of the Borrowers under Sections 5.01, 5.05,
--------
5.06, 5.07 and 11.03 hereof, and the obligations of the Lenders under Section
10.05 hereof, shall survive the repayment of the Loans and Reimbursement
Obligations and the termination of the Commitments and, in the case of any
Lender that may assign any interest in its Commitments,
Credit Agreement
----------------
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Loans or Letter of Credit Interest hereunder, shall survive the making of such
assignment, notwithstanding that such assigning Lender may cease to be a
"Lender" hereunder. In addition, each representation and warranty made, or
deemed to be made by a notice of any extension of credit (whether by means of a
Loan or a Letter of Credit), herein or pursuant hereto shall survive the making
of such representation and warranty, and no Lender shall be deemed to have
waived, by reason of making any extension of credit hereunder (whether by means
of a Loan or a Letter of Credit), any Default that may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that such Lender or the Administrative Agent may have had notice
or knowledge or reason to believe that such representation or warranty was false
or misleading at the time such extension of credit was made.
11.08 Captions. The table of contents and captions and section headings
--------
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
11.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
11.10 Governing Law; Submission to Jurisdiction. This Agreement shall be
-----------------------------------------
governed by, and construed in accordance with, the law of the State of New York.
Each Borrower hereby submits to the nonexclusive jurisdiction of the United
States District Court for the Southern District of New York and of the Supreme
Court of the State of New York sitting in New York County (including its
Appellate Division), and of any other appellate court in the State of New York,
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. Each Borrower hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
11.11 Waiver of Jury Trial. EACH OF THE BORROWERS, THE ADMINISTRATIVE AGENT
--------------------
AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
11.12 Treatment of Certain Information; Confidentiality.
-------------------------------------------------
(a) The Borrowers acknowledge that from time to time financial advisory,
investment banking and other services may be offered or provided to the
Borrowers or one or
Credit Agreement
----------------
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more of their Subsidiaries (in connection with this Agreement or otherwise) by
any Lender or by one or more subsidiaries or affiliates of such Lender and the
Borrowers hereby authorize each Lender to share any information delivered to
such Lender by the Borrowers and their Subsidiaries pursuant to this Agreement,
or in connection with the decision of such Lender to enter into this Agreement,
to any such subsidiary or affiliate, it being understood that any such
subsidiary or affiliate receiving such information shall be bound by the
provisions of paragraph (b) below as if it were a Lender hereunder. Such
authorization shall survive the repayment of the Loans and Reimbursement
Obligations and the termination of the Commitments.
(b) Each Lender and the Administrative Agent agrees (on behalf of itself and
each of its affiliates, directors, officers, employees and representatives) to
use reasonable precautions to keep confidential, in accordance with their
customary procedures for handling confidential information of the same nature
and in accordance with safe and sound banking practices, any non-public
information supplied to it by any Obligor pursuant to this Agreement or any
other Loan Document that is identified by the Borrowers as being confidential at
the time the same is delivered to the Lenders or the Administrative Agent,
provided that nothing herein shall limit the disclosure of any such information
- --------
(i) after such information shall have become public (other than through a
violation of this Section 11.12), (ii) to the extent required by statute, rule,
regulation or judicial process, (iii) to counsel for any of the Lenders or the
Administrative Agent, (iv) to bank examiners (or any other regulatory authority
having jurisdiction over any Lender or the Administrative Agent), or to auditors
or accountants, (v) to the Administrative Agent or any other Lender (or to Chase
Securities Inc.), (vi) in connection with any litigation to which any one or
more of the Lenders or the Administrative Agent is a party, or in connection
with the enforcement of rights or remedies hereunder or under any other Loan
Document, (vii) to a subsidiary or affiliate of such Lender as provided in
paragraph (a) above, (viii) to any direct or indirect contractual counterparty
in swap agreements or such counterparty's professional advisor or (ix) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant (or prospective assignee or participant) first executes
and delivers to the respective Lender a Confidentiality Agreement substantially
in the form of Exhibit I hereto (or executes and delivers to such Lender an
acknowledgement to the effect that it is bound by the provisions of this Section
11.12(b), which acknowledgement may be included as part of the respective
assignment or participation agreement pursuant to which such assignee or
participant acquires an interest in the Loans or Letter of Credit Interest
hereunder); provided, further, that obligations of any assignee that has
-------- -------
executed a Confidentiality Agreement in the form of Exhibit I hereto shall be
superseded by this Section 11.12 upon the date upon which such assignee becomes
a Lender hereunder pursuant to Section 11.06(b) hereof.
Credit Agreement
----------------
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
MEDIACOM ILLINOIS LLC
MEDIACOM INDIANA LLC
MEDIACOM IOWA LLC
MEDIACOM MINNESOTA LLC
MEDIACOM WISCONSIN LLC
By MEDIACOM LLC, a Member
By: /s/
-------------------------
Name:
Title:
ZYLSTRA COMMUNICATIONS CORP.
By: /s/
-------------------------
Name:
Title:
c/o Mediacom LLC
100 Crystal Road
Middletown, New York 10941
Attention: Rocco B. Commisso
Telecopier No.: (914) 695-2889
Telephone No.: (914) 695-2600
Credit Agreement
----------------
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THE CHASE MANHATTAN BANK,
individually and as Administrative Agent
By: /s/
--------------------------
Name: Constance Coleman
Title: Vice President
Address for Notices to
Chase as Administrative Agent:
The Chase Manhattan Bank
Agent Bank Services
1 Chase Manhattan Plaza
New York, New York 10081
Telecopier No.: (212) 552-5700
Telephone No.: (212) 552-7440
CIBC INC.
By: /s/
-------------------------
Name:
Title:
MELLON BANK, N.A.
By: /s/
-------------------------
Name:
Title:
Credit Agreement
----------------
<PAGE>
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BANK OF MONTREAL
By: /s/
-------------------------
Name:
Title:
FIRST UNION NATIONAL BANK
By: /s/
-------------------------
Name:
Title:
CREDIT SUISSE FIRST BOSTON
By: /s/
-------------------------
Name:
Title:
By: /s/
-------------------------
Name:
Title:
DRESDNER BANK AG NEW YORK AND
GRAND CAYMAN BRANCHES
By: /s/
-------------------------
Name:
Title:
FLEET NATIONAL BANK
By: /s/
-------------------------
Name:
Title:
Credit Agreement
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PNC BANK, NATIONAL ASSOCIATION
By: /s/
-------------------------
Name:
Title:
THE BANK OF NOVA SCOTIA
By: /s/
-------------------------
Name:
Title:
SUNTRUST BANK, CENTRAL FLORIDA, N.A.
By: /s/
-------------------------
Name:
Title:
BANK OF AMERICA, N.A.
By: /s/
-------------------------
Name:
Title:
THE FUJI BANK, LIMITED
By: /s/
-------------------------
Name:
Title:
Credit Agreement
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<PAGE>
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MEES PIERSON CAPITAL CORP.
By: /s/
------------------------------
Name:
Title:
By: /s/
------------------------------
Name:
Title:
UNION BANK OF CALIFORNIA, N.A.
By: /s/
------------------------------
Name:
Title:
CITIBANK, N.A.
By: /s/
------------------------------
Name:
Title:
SOCIETE GENERALE
By: /s/
------------------------------
Name:
Title:
Credit Agreement
----------------
<PAGE>
-122-
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/
------------------------------
Name:
Title:
CREDIT AGRICOLE INDOSUEZ
By: /s/
------------------------------
Name:
Title:
By: /s/
------------------------------
Name:
Title:
KZH SOLEIL LLC
By: /s/
------------------------------
Name:
Title:
KZH SOLEIL-2 LLC
By: /s/
------------------------------
Name:
Title:
Credit Agreement
----------------
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Commitments
-----------
Revolving Term
Lender Credit Commitment Loan Commitment
- ------ ----------------- ---------------
<S> <C> <C>
The Chase Manhattan Bank $ 36,000,000.00 $ 18,000,000.00
CIBC Inc. 33,000,000.00 3,000,000.00
Mellon Bank, N.A. 33,000,000.00
First Union National Bank 26,000,000.00 5,000,000.00
Bank of Montreal 26,000,000.00 5,000,000.00
Credit Suisse First Boston 26,000,000.00
Dresdner Bank AG New York and 26,000,000.00
Grand Cayman Branches
Fleet National Bank 26,000,000.00
PNC Bank, National Association 26,000,000.00
The Bank of Nova Scotia 26,000,000.00
SunTrust Bank, Central 26,000,000.00 5,000,000.00
Florida, N.A.
Bank of America, N.A. 26,000,000.00 5,000,000.00
Citibank, N.A. 26,000,000.00
Societe Generale 26,000,000.00
Union Bank of California, N.A. 26,000,000.00 10,000,000.00
Credit Agricole Indosuez 16,000,000.00 4,000,000.00
The Fuji Bank, Limited 10,000,000.00 5,000,000.00
Mees Pierson Capital Corp. 10,000,000.00 5,000,000.00
General Electric Capital Corporation 15,000,000.00
KZH SOLEIL LLC 10,000,000.00
KZH SOLEIL-2 LLC 10,000,000.00
Total $450,000,000.00 $100,000,000.00
=============== ===============
</TABLE>
Schedule I
----------
<PAGE>
SCHEDULE II
Taxes
-----
[See Section 7.08]
Schedule II
-----------
<PAGE>
SCHEDULE III
Material Agreements and Liens
-----------------------------
[See Sections 7.11, 8.06(b) and 8.07(b)]
Part A - Material Agreements
-------------------
Part B - Liens
-----
Schedule III
------------
<PAGE>
SCHEDULE IV
Investments
-----------
[See Sections 7.14 and 8.08(a)]
Schedule IV
-----------
<PAGE>
SCHEDULE V
Franchises
----------
[See definition of "Franchises" in
Section 1.01 and Section 7.16]
Schedule V
----------
<PAGE>
SCHEDULE VI
Certain Matters related to CATV Systems
---------------------------------------
[See definition of CATV Systems in Section 1.01 and Section 7.17]
Schedule VI
-----------
<PAGE>
SCHEDULE VII
Certain Adjustments to System Cash Flow
---------------------------------------
[See definition of "Adjusted System Cash Flow" in Section 1.01]
Schedule VII
------------
<PAGE>
Exhibit 21.1
Subsidiaries of Mediacom Communications Corporation
---------------------------------------------------
<TABLE>
<CAPTION>
State of Incorporation Names under which
Subsidiary Or Organization subsidiary does business
- ---------- ----------------------- ------------------------
<S> <C> <C>
Mediacom LLC New York
Mediacom Arizona LLC Delaware Mediacom Arizona Cable Network LLC
Mediacom California LLC Delaware Mediacom California LLC
Mediacom Capital Corporation New York Mediacom Capital Corporation
Mediacom Delaware LLC Delaware Mediacom Delaware LLC
Maryland Mediacom Delaware LLC
Mediacom Illinois LLC Delaware Mediacom Illinois LLC
Mediacom Indiana LLC Delaware Mediacom Indiana LLC
Mediacom Iowa LLC Delaware Mediacom Iowa LLC
Mediacom Minnesota LLC Delaware Mediacom Minnesota LLC
Mediacom Southeast LLC Delaware Mediacom Southeast LLC
Mediacom Wisconsin LLC Delaware Mediacom Wisconsin LLC
Zylstra Communications Corporation Minnesota Zylstra Communications Corporation
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Stamford, Connecticut
November 10, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report (and to all references to our Firm) included in or made a part of this
registration statement.
/s/ Arthur Andersen LLP
Denver, Colorado
November 10, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Cablevision Systems Corporation
We consent to the inclusion of our report dated March 20, 1998, on the
consolidated balance sheets of U.S. Cable Television Group, L.P. and
subsidiaries as of December 31, 1997 and 1996, and the related consolidated
statements of operations and partners' capital (deficiency) and cash flows for
the year ended December 31, 1997, and for the periods from January 1, 1996 to
August 12, 1996, and August 13, 1996 to December 31, 1996, in the registration
statement on Form S-1 and related prospectus of Mediacom Communications
Corporation. We also consent to the inclusion of our report dated April 1, 1997,
except as to Note 11 which is as of January 23, 1998, on the consolidated
balance sheets of U.S. Cable Television Group, L.P. and subsidiaries as of
December 31, 1996 and 1995 and the related consolidated statements of operations
and partners' capital (deficiency) and cash flows for the periods from January
1, 1996 to August 12, 1996, and August 13, 1996 to December 31, 1996, and for
the years ended December 31, 1995 and 1994, in the registration statement on
Form S-1 and related prospectus of Mediacom Communications Corporation and to
the reference to our firm under the heading "Experts" in the registration
statement and related prospectus. Such reports include an explanatory paragraph
related to a change in cost basis of the consolidated financial information as a
result of a redemption of certain limited and general partnership interests
effective August 13, 1996.
/s/ KPMG LLP
Melville, New York
November 10, 1999
