<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1998
REGISTRATION NO. 333-
REGISTRATION NO. 333-
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
PHOENIX ASSOCIATES
INSIGHT COMMUNICATIONS OF CENTRAL OHIO, LLC
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
OHIO 4841 31-0975825
FLORIDA 4841 59-1798351
DELAWARE 4841 13-4017803
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBERS) IDENTIFICATION NUMBERS)
INCORPORATION OR
ORGANIZATION)
C/O INSIGHT COMMUNICATIONS COMPANY, L.P.
126 EAST 56TH STREET
NEW YORK, NY 10022
(212) 371-2266
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
--------------
SIDNEY R. KNAFEL
CHAIRMAN
INSIGHT COMMUNICATIONS, INC.
126 EAST 56TH STREET
NEW YORK, NY 10022
(212) 371-2266
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
ROBERT L. WINIKOFF, ESQ.
ELLIOT E. BRECHER, ESQ.
COOPERMAN LEVITT WINIKOFF LESTER & NEWMAN, P.C.
800 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 688-7000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
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 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. [_]
-------
--------------
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) FEE
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10% Senior Notes due
2006.................. $140,000,000 100% $140,000,000 $41,300
- ------------------------------------------------------------------------------------------
Guarantee with respect
to 10%
Senior Notes due
2006.................. N/A N/A N/A (2)
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457 under the Securities Act of
1933, as amended.
(2) In accordance with Rule 457(n), no separate registration fee is required.
--------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PROSPECTUS
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
PHOENIX ASSOCIATES
EXCHANGE OFFER
FOR
$140,000,000 AGGREGATE PRINCIPAL AMOUNT
OF
10% SENIOR NOTES DUE 2006
GUARANTEED ON A CONDITIONAL BASIS BY INSIGHT COMMUNICATIONS OF CENTRAL OHIO,
LLC
Terms of Exchange Offer
. Expires 5:00 p.m., New York City time, on , , unless extended.
. Subject to certain customary conditions, which may be waived by Coaxial and
Phoenix.
. All outstanding notes that are validly tendered and not withdrawn will be
exchanged.
. Tenders of outstanding notes may be withdrawn any time prior to the expira-
tion of the Exchange Offer.
. The exchange of the outstanding notes will not be a taxable exchange for
U.S. federal income tax purposes.
. We will not receive any cash proceeds from the Exchange Offer.
. The terms of the exchange notes to be issued are substantially identical to
the outstanding notes, except for certain transfer restrictions and regis-
tration rights relating to the outstanding notes.
. Any outstanding notes not validly tendered will remain subject to existing
transfer restrictions.
SEE "RISK FACTORS" BEGINNING ON PAGE 20 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS WHO TENDER THEIR NOTES IN THE EXCHANGE
OFFER.
There has not been previously any public market for the notes that will be
issued in the Exchange Offer. We do not intend to list these exchange notes on
any national stock exchange or on the Nasdaq Stock Market. There can be no as-
surance that an active market of such notes will develop.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COM-
MISSION HAS APPROVED OR DISAPPROVED THE NOTES TO BE DISTRIBUTED IN THE EX-
CHANGE OFFER, NOR HAVE ANY OF THESE ORGANIZATIONS PASSED UPON THE ADEQUACY OR
ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
,
<PAGE>
PROSPECTUS SUMMARY
The following summary highlights selected information from this Prospectus
and may not contain all of the information that is important to you. This Pro-
spectus includes specific terms of the notes we are offering, as well as infor-
mation regarding the business of the guarantor of the notes and detailed finan-
cial data. We encourage you to read this Prospectus in its entirety.
THE PRIVATE OFFERING OF YOUR NOTES
Coaxial Communications of Central Ohio, Inc. ("Coaxial") and Phoenix Associ-
ates ("Phoenix") completed on August 21, 1998 a private offering of
$140,000,000 aggregate principal amount of their 10% Senior Notes due 2006 in
connection with the "Financing Plan" discussed below, which included the acqui-
sition by Insight Communications of Central Ohio, LLC ("Insight Ohio") of sub-
stantially all of the assets comprising the cable television system (the "Sys-
tem") of Coaxial. As a result of this transaction, Coaxial and Phoenix have
only nominal assets except for Coaxial's ownership of voting preferred and non-
voting common membership interests in Insight Ohio. Coaxial and Phoenix do not
conduct any business. The notes are guaranteed on a conditional basis by In-
sight Ohio.
THE EXCHANGE OFFER
Coaxial, Phoenix and Insight Ohio entered into a Senior Notes Registration
Rights Agreement with CIBC Oppenheimer Corp. ("CIBC"), the initial purchaser in
the private offering, in which they agreed, among other things, to deliver to
you this Prospectus and to complete the Exchange Offer on or prior to February
17, 1999. You are entitled to exchange in the Exchange Offer your notes for
registered notes with substantially identical terms. If the Exchange Offer is
not completed on or prior to February 17, 1999, the interest rate on your notes
will be increased until the Exchange Offer is completed. You should read the
discussion under the heading "Summary of Terms of the Exchange Notes" and "De-
scription of the Notes" for further information regarding the registered notes.
We believe that the notes issued in the Exchange Offer may be resold by you
without compliance with the registration and prospectus delivery provisions of
the Securities Act of 1933, subject to certain conditions. You should read the
discussion under the headings "Summary of the Exchange Offer" and "The Exchange
Offer" for further information regarding the Exchange Offer and the resale of
notes.
SEPARATE EXCHANGE OFFER BY AFFILIATES OF COAXIAL AND PHOENIX
Simultaneously with the closing of the private offering of your notes and
also in connection with the Financing Plan, one of the owners of Coaxial ("Co-
axial LLC") and an affiliated corporation ("Coaxial Financing Corp.") completed
a private offering of 12 7/8% Senior Discount Notes due 2008 (the "Discount
Notes"). The Discount Notes are also guaranteed on a conditional basis by In-
sight Ohio, subordinated to the conditional guarantee of your notes. During the
same time as the Exchange Offer, Coaxial LLC and Coaxial Financing Corp. will
be conducting an exchange offer of the Discount Notes on terms similar to the
Exchange Offer.
BACKGROUND OF THE PRIVATE OFFERINGS
The private offerings of your notes and the Discount Notes were part of a fi-
nancing plan (the "Financing Plan") implemented to facilitate the organization
of Insight Ohio, the acquisition of the System by Insight Ohio and to provide
for the System's liquidity and operational
1
<PAGE>
and financial flexibility. Under of the Financing Plan:
. Coaxial contributed to Insight Ohio substantially all of the assets compris-
ing the System for which Coaxial received a 25% non-voting common membership
interest in Insight Ohio as well as voting preferred membership interests in
Insight Ohio;
. Insight contributed $10.0 million in cash to Insight Ohio for which it re-
ceived a 75% non-voting common membership interest in Insight Ohio;
. Coaxial and Phoenix effected the private offering of your notes;
. Coaxial LLC and Coaxial Financing Corp. effected the private offering of the
Discount Notes; and
. a portion of the existing indebtedness of Coaxial and Phoenix and certain of
their affiliates, including settlement of related party balances, was repaid
and the balance was purchased.
The private offerings of your notes and the Discount Notes were consummated
concurrently with the consummation of each of the other components of the Fi-
nancing Plan. Insight Ohio expects shortly to enter into a $25 million senior
credit facility (the "Senior Credit Facility") for the purpose of financing its
future working capital requirements, including the upgrade of the System's ca-
ble plant and the introduction of new video services. You should read the dis-
cussion under "Use of Proceeds," "Management's Discussion and Analysis of Fi-
nancial Condition and Results of Operations--Liquidity and Capital Resources"
and "Description of Certain Indebtedness--Senior Credit Facility" for further
information regarding the Financing Plan and the Senior Credit Facility.
THE INSIGHT OHIO SYSTEM
Overview
Insight Ohio was formed for the purpose of acquiring Coaxial's cable televi-
sion system in the Columbus, Ohio metropolitan area. As of June 30, 1998, the
System passed approximately 168,600 homes and served approximately 91,100 basic
subscribers in the eastern portion of the City of Columbus and the surrounding
suburban communities. All of the System's subscribers are served from a single
headend allowing for efficient capital deployment for new services. Columbus,
located in the 34th largest geographic television advertising market or desig-
nated market area (DMA) in the United States, is the capital of Ohio and home
of The Ohio State University.
Manager of Insight Ohio
Insight Holdings of Ohio, LLC, a wholly-owned subsidiary of Insight Communi-
cations Company, L.P. (together referred to as "Insight"), serves as the man-
ager of the System. After its pending transactions, Insight will be one of the
top 20 cable television operators in the United States. At the conclusion of
all of its currently signed transactions, Insight management estimates that In-
sight will own or manage cable television systems with 525,000 subscribers in
seven states with over 90% of the subscribers clustered in Illinois, Indiana
and Ohio. You should read the discussion under "Business--The Manager" and "--
Insight Business Strategy" for further information regarding Insight and its
business strategies.
Operating Strategy of Insight Ohio
Portions of the System operate in a competitive environment. Subscribers in
those areas have access to two wired cable television providers--the System and
a cable subsidiary of Ameritech Corporation ("Ameritech"), the telephone local
exchange carrier for Columbus. The areas of the System that are also served by
2
<PAGE>
Ameritech pass approximately 120,000 homes, representing 71% of the System's
total homes passed.
The prior strategy to compete with Ameritech has included the following:
. selectively constructing fiber optic cable deeper into areas where the Sys-
tem and Ameritech compete to create additional channel capacity;
. adding more movies, music, news, live sports and exclusive programming such
as TV Land and Central Ohio Sport! Television on the higher bandwidth;
. decreasing the System's standard rate to be slightly below that offered by
Ameritech;
. repackaging the System's pay services and selectively using promotions;
. significantly increasing the use of focused target marketing; and
. stressing local customer service.
In addition, Insight intends to aggressively implement its own upgrade
strategy in Columbus, which includes the following:
. increasing channel capacity in order to broaden core analog service
offerings;
. adding new services such as digital cable, high-speed modems and other newly
developing telecommunications services as upgrades are completed;
. repackaging channel offerings to more advantageously compete without reduc-
ing revenue per subscriber;
. utilizing its relationship with MediaOne (formerly Continental Cablevision),
to provide programming discounts; and
. implementing additional cost savings measures, including specific employee
reductions.
MEMBERS OF INSIGHT OHIO
Insight owns 75% of the non-voting common membership interests and Coaxial
owns 25% of the non-voting common membership interests in Insight Ohio. Coax-
ial also owns two separate series of voting preferred membership interests of
Insight Ohio (the "Series A Preferred Interests" and the "Series B Preferred
Interests") which provide for distributions to Coaxial. The distributions from
the Series A Preferred Interests will be used to pay the principal and inter-
est on your notes and the notes to be issued in the Exchange Offer. The dis-
tributions from the Series B Preferred Interests will be used to pay the prin-
cipal and interest on the Discount Notes and the Discount Notes to be issued
in the exchange offer being conducted by Coaxial LLC and Coaxial Financing
Corp. The ability of Insight Ohio to make such preferred distributions will be
subject to certain financial covenants and other conditions in the Senior
Credit Facility.
Insight also serves as manager of Insight Ohio and each of the three limited
liability companies that own Coaxial (the "Individual LLCs"), and thereby has
effective control of the management and affairs of the Individual LLCs, Coax-
ial and Insight Ohio. Insight will not have any liability for your notes or
the notes to be issued in the Exchange Offer.
3
<PAGE>
OWNERSHIP STRUCTURE
The following chart illustrates the ownership structure of Coaxial, Phoenix
and Insight Ohio:
CHART
- --------
* Managed by Insight.
4
<PAGE>
SUMMARY OF THE EXCHANGE OFFER
Registration Rights You are entitled to exchange your notes for
Agreement.................... registered notes with substantially identical
terms. The Exchange Offer is intended to sat-
isfy these rights. After the Exchange Offer is
complete, you will no longer be entitled to any
exchange or registration rights with respect to
your notes.
The Exchange Offer........... We are offering to exchange $1,000 principal
amount of our 10% Senior Notes due 2006, which
have been registered under the Securities Act
of 1933, for each $1,000 principal amount of
our outstanding 10% Senior Notes due 2006 which
were issued on August 21, 1998 in the private
offering. In order to be exchanged, an
outstanding note must be properly tendered and
accepted. All outstanding notes that are
validly tendered and not withdrawn will be
exchanged.
As of this date there are $140 million
principal amount of notes outstanding.
We will issue registered notes on or promptly
after the expiration of the Exchange Offer.
Resale....................... We believe that the notes issued in the
Exchange Offer may be offered for resale,
resold and otherwise transferred by you without
compliance with the registration and prospectus
delivery provisions of the Securities Act of
1933 provided that:
. the notes issued in the Exchange Offer
are being acquired in the ordinary course
of your business;
. you are not participating, and have no
arrangement or understanding with any
person to participate, in the distribu-
tion of the notes issued to you in the
Exchange Offer; and
. you are not an "affiliate" of Coaxial,
Phoenix or Insight Ohio.
If our belief is inaccurate and you transfer
any note issued to you in the Exchange Offer
without delivering a prospectus meeting the
requirements of the Securities Act of 1933 or
without an exemption from registration of your
notes from such requirements, you may incur
liability under the Securities Act of 1933. We
do not assume or indemnify you against such
liability.
Each broker-dealer that is issued notes in the
Exchange Offer for its own account in exchange
for notes which were
5
<PAGE>
acquired by such broker-dealer as a result of
market-making or other trading activities, must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act
of 1933 in connection with any resale of the
notes issued in the Exchange Offer. A broker-
dealer may use this Prospectus for an offer to
resell, resale or other retransfer of the notes
issued to it in the Exchange Offer.
Expiration Date.............. The Exchange Offer will expire at 5:00 p.m.,
New York City time, , , unless we
decide to extend the expiration date.
Conditions to the Exchange The Exchange Offer is subject to certain
Offer........................ customary conditions, which may be waived by
us.
Procedures for Tendering
Outstanding Notes............
If you wish to accept the Exchange Offer, you
must complete, sign and date the accompanying
Letter of Transmittal, or a facsimile thereof,
in accordance with the instructions contained
in this Prospectus and in the Letter of
Transmittal, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with the outstanding notes and any
other required documentation to Bank of
Montreal Trust Company at the address set forth
in the Letter of Transmittal. By executing the
Letter of Transmittal, you will represent to
us, among other things, that:
. the notes issued in the Exchange Offer are
being acquired in the ordinary course of
your business;
. you are not participating, and have no
arrangement or understanding with any
person to participate, in the distribution
of the notes issued to you in the Exchange
Offer; and
. you are not an "affiliate" of Coaxial,
Phoenix or Insight Ohio.
See "The Exchange Offer--Purpose and Effect of
the Exchange Offer" and "--Procedures for
Tendering."
Special Procedures for
Beneficial Owners............
If you are a beneficial owner whose notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and you wish to tender such notes in the
Exchange Offer, you should contact such
registered holder promptly and instruct such
registered holder to tender such notes on your
behalf.
6
<PAGE>
Guaranteed Delivery If you wish to tender your notes and time will
Procedures................... not permit your required documents to reach the
Exchange Agent by the Expiration Date, or the
procedure for book-entry transfer cannot be
completed on time or certificates for regis-
tered notes cannot be delivered on time, you
may tender your notes pursuant to the proce-
dures described in this Prospectus under the
heading "The Exchange Offer--Guaranteed Deliv-
ery Procedures."
Withdrawal Rights............ You may withdraw the tender of your notes at
any time prior to 5:00 p.m. New York City time
on , .
Acceptance of Outstanding
Notes and Delivery of
Exchange Notes............... We will accept for exchange any and all out-
standing notes which are properly tendered in
the Exchange Offer prior to 5:00 p.m., New York
City time, on the Expiration Date. The
registered notes issued pursuant to the Ex-
change Offer will be delivered on or promptly
after the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Shelf Registration If we are not permitted to effect the Exchange
Statement.................... Offer or if for any other reason the Exchange
Offer is not consummated by February 17, 1999,
we will file a shelf registration statement
covering resales of the outstanding notes, use
our reasonable best efforts to cause such reg-
istration statement to be declared effective
and use our reasonable best efforts to keep ef-
fective such registration statement until two
years after its effective date.
Untendered Outstanding Following the consummation of the Exchange Of-
Notes........................ fer, holders of outstanding notes eligible to
participate but who do not tender their notes
will not have any further exchange rights and
such notes will continue to be subject to cer-
tain restrictions on transfer. Accordingly, the
liquidity of the market for such notes could be
adversely affected.
Consequences of Failure to
Exchange.....................
The outstanding notes that are not exchanged
pursuant to the Exchange Offer will remain re-
stricted securities. Accordingly, such notes
may be resold only:
. to Coaxial, Phoenix and Insight Ohio;
. pursuant to Rule 144A or Rule 144 under
the Securities Act of 1933 or pursuant to
another exemption under the Securities
Act of 1933;
. outside the United States to a foreign
person pursuant to the requirements of
Rule 904 under the Securities Act of
1933;
7
<PAGE>
. to certain institutional "accredited in-
vestors" within the meaning of Rule
501(a) under the Securities Act of 1933
subject to a minimum principal amount of
$250,000; or
. pursuant to an effective registration
statement under the Securities Act of
1933.
Certain U.S. Federal Income
Tax Consequences.............
The exchange of notes will not be a taxable ex-
change for United States federal income tax
purposes. You will not recognize any taxable
gain or loss or any interest income as a result
of such exchange.
Use of Proceeds.............. We will not receive any proceeds from the issu-
ance of notes pursuant to the Exchange Offer.
We will pay all expenses incident to the Ex-
change Offer.
Exchange Agent............... Bank of Montreal Trust Company is serving as
exchange agent in connection with the Exchange
Offer.
8
<PAGE>
SUMMARY OF TERMS OF THE EXCHANGE NOTES
The form and terms of the notes to be issued in the Exchange Offer are the
same as the form and terms of the outstanding notes except that the notes to be
issued in the Exchange Offer will be registered under the Securities Act of
1933 and, therefore, will not bear legends restricting their transfer and will
not be entitled to further registration under the Securities Act of 1933. The
notes issued in the Exchange Offer will evidence the same debt as the outstand-
ing notes and both the outstanding notes and the notes to be issued are gov-
erned by the same indenture (the "Indenture").
Securities Offered........... $140 million principal amount of 10% Senior
Notes due 2006 of Coaxial Communications of
Central Ohio, Inc. and Phoenix Associates.
Maturity Date................ August 15, 2006.
Interest Payment Dates....... Interest will be payable in cash semi-annually
on each February 15 and August 15, commencing
on February 15, 1999.
Security..................... The notes are our joint and several non-re-
course obligations and are secured by a first
priority pledge of all issued and outstanding
Series A Preferred Interests in Insight Ohio.
Series A Preferred The Series A Preferred Interests have a liqui-
Interests.................... dation preference of $140.0 million and will
pay distributions in an amount equal to the in-
terest payments on the notes. All Series A Pre-
ferred Interests are owned by Coaxial and are
pledged to Bank of Montreal Trust Company, as
trustee, for the benefit of the holders of the
notes. Coaxial will utilize cash distributions
on the Series A Preferred Interests to make
payments on the notes. The Series A Preferred
Interests will become non-voting upon the en-
forcement of remedies under the securities
pledge agreement between Bank of Montreal Trust
Company and Coaxial (the "Pledge Agreement").
The Series A Preferred Interests are
mandatorily redeemable upon acceleration of in-
debtedness under the notes, enforcement of rem-
edies under the Pledge Agreement in respect of
the Series A Preferred Interests, the passage
of ten days and the request by the holders of
the notes. The Series A Preferred Interests are
redeemable at the option of Insight Ohio, so
long as the proceeds thereof are used by Coax-
ial to make a redemption of the notes or an of-
fer to purchase the notes, in each case, in ac-
cordance with the terms of the Indenture. Ex-
cept for the pledge to Bank of Montreal Trust
Company for the benefit of the holders of the
notes, the exercise of remedies in respect of
such pledge or any transfer after enforcement
of such remedies under such pledge, the Series
A Preferred Interests are non-transferable.
9
<PAGE>
Guarantees................... The notes are conditionally guaranteed on a se-
nior unsecured basis by Insight Ohio and any
future restricted subsidiaries of Coaxial and
Phoenix (the "Guarantors"). The guarantees will
only be effective to the extent and at the time
the holders of the notes are unable to realize
proceeds from the enforcement of the mandatory
redemption provisions of the Series A Preferred
Interests. Insight Ohio is currently the only
Guarantor in existence. See "Risk Factors--Con-
ditional Guarantees; Structural Subordination"
and "Description of the Notes--Guarantees."
Ranking...................... The notes are non-recourse senior obligations
of Coaxial and Phoenix who are not permitted
under the Indenture to incur any other indebt-
edness. Once effective, the guarantees will
rank equal in right of payment with all exist-
ing and future unsubordinated indebtedness of
the Guarantors and senior in right of payment
to all existing and future subordinated indebt-
edness of the Guarantors. The notes and any
guarantee are effectively subordinated in right
of payment to all secured indebtedness of the
Guarantors to the extent of the value of the
assets securing such indebtedness, including
indebtedness under the Senior Credit Facility
to be entered into by Insight Ohio. In addi-
tion, the notes will be effectively subordi-
nated to all indebtedness of the subsidiaries
of Coaxial and Phoenix that are not Guarantors.
See "Risk Factors--Conditional Guarantees;
Structural Subordination" and "Description of
the Notes."
Optional Redemption.......... The notes are redeemable at our option, in
whole or in part, at any time on or after Au-
gust 15, 2002, at the redemption prices de-
scribed in this Prospectus under the heading
"Description of the Notes--Optional Redemp-
tion," plus accrued and unpaid interest thereon
to the redemption date. In addition, we, at our
option, may redeem in the aggregate up to 35%
of the principal amount of the notes originally
issued at any time and from time to time prior
to August 15, 2001 at a redemption price equal
to 110% of the aggregate principal amount so
redeemed, plus accrued and unpaid interest
thereon to the redemption date, with the net
proceeds of one or more offerings of our common
stock; provided that at least $91.0 million of
the principal amount of the notes remains out-
standing immediately after the occurrence of
any such redemption and that any such redemp-
tion occurs within 90 days following the clos-
ing of any such offering. See "Description of
the Notes--Optional Redemption."
Change of Control............
Upon a change of control, we are required to
offer to repurchase all of the notes then out-
standing at a purchase price
10
<PAGE>
equal to 101% of the principal amount thereof,
plus accrued and unpaid interest thereon to the
repurchase date. See "Description of the
Notes--Change of Control Offer."
Certain Covenants............ The Indenture contains covenants that, among
other things, restricts the ability of Coaxial,
Phoenix and the Guarantors, including Insight
Ohio, to:
. incur additional indebtedness;
. pay dividends and make distributions;
. issue stock of subsidiaries to third par-
ties;
. make certain investments;
. repurchase stock;
. create liens;
. enter into transactions with affiliates;
. enter into sale and leaseback transac-
tions;
. create dividend or other payment restric-
tions affecting the Guarantors;
. merge or consolidate in a transaction in-
volving all or substantially all of the
assets of Coaxial, Phoenix and the Guar-
antors, taken as a whole;
. transfer or sell assets;
. use distributions on the Series A Pre-
ferred Interests or Series B Preferred
Interests for any purpose other than re-
quired payments of interest and principal
on the notes or Discount Notes, respec-
tively; and
. swap assets.
These covenants are subject to a number of im-
portant exceptions. See "Description of the
Notes--Certain Covenants."
Asset Sale Proceeds.......... We are obligated in certain instances to make
an offer to repurchase the notes at a purchase
price equal to 100% of the principal amount
thereof, plus accrued and unpaid interest
thereon to the repurchase date, with the net
cash proceeds of certain asset sales. See "De-
scription of the Notes--Certain Covenants--Lim-
itation on Certain Asset Sales."
11
<PAGE>
Asset Swap Offer............. We are obligated in certain instances to make
an offer to repurchase the notes at the redemp-
tion prices described in this Prospectus under
the heading "Description of the Notes--Certain
Covenants--Limitation on Asset Swaps," plus ac-
crued and unpaid interest, if any, to the re-
demption date in connection with certain asset
swaps.
12
<PAGE>
FORWARD-LOOKING STATEMENTS
Certain of the information contained in this Prospectus, including
information with respect to the plans and strategy of Insight Ohio for its
business and its financing, are forward-looking statements. For a discussion of
important factors that could cause actual results to differ materially from the
forward-looking statements, see "Risk Factors."
RISK FACTORS
See "Risk Factors" immediately following this summary for a discussion of
certain factors that you should consider in connection with your investment in
the notes to be issued in the Exchange Offer.
PRINCIPAL EXECUTIVE OFFICE
Our principal office is located at Insight Communications Company, L.P., 126
East 56th Street, New York, New York 10022; telephone number (212) 371-2266.
WHERE YOU CAN FIND MORE INFORMATION
Coaxial Communications of Central Ohio, Inc. and Phoenix Associates have
filed with the Securities and Exchange Commission (the "SEC") a Registration
Statement on Form S-4 under the Securities Act of 1933 covering the notes to be
issued in the Exchange Offer. This Prospectus does not contain all of the in-
formation included in the Registration Statement. Any statement made in this
Prospectus concerning the contents of any contract, agreement or other document
is not necessarily complete. If we have filed any such contract, agreement or
other document as an exhibit to the Registration Statement, you should read the
exhibit for a more complete understanding of the document or matter involved.
Each statement regarding a contract, agreement or other document is qualified
in its entirety by reference to the actual document.
Following the Exchange Offer, we will be required to file periodic reports
and other information with the SEC under the Securities Exchange Act of 1934.
Our obligation to file periodic reports with the SEC will be suspended if the
notes issued in the Exchange Offer are held of record by fewer than 300 holders
as of the beginning of any year. However, the indenture governing the notes
nevertheless requires us to file with the SEC financial and other information
for public availability. In addition, the indenture governing the notes
requires us to deliver to you, or to Bank of Montreal Trust Company for
forwarding to you, copies of all reports that we file with the SEC without any
cost to you. We will also furnish such other reports as we may determine or as
the law requires.
You may read and copy the Registration Statement, including the attached ex-
hibits, and any reports, statements or other information that we file at the
SEC's public reference room in Washington, D.C. You can request copies of these
documents, upon payment of a duplicating fee, by writing the SEC. Please call
the SEC at 1-800-SEC-0330 for further information on the operation of the pub-
lic reference rooms. Our SEC filings will also be available to the public on
the SEC Internet site (http://www.sec.gov).
You should rely only on the information provided in this Prospectus. No per-
son has been authorized to provide you with different information.
We are not making an offer to exchange notes in any jurisdiction where the
offer is not permitted.
The information in this Prospectus is accurate as of the date on the front
cover. You should not assume that the information contained in this Prospectus
is accurate as of any other date.
13
<PAGE>
SUMMARY HISTORICAL AND COMBINED PRO FORMA
FINANCIAL AND OPERATING DATA
The following tables present summary historical financial data for Coaxial
and Phoenix for the three years ended December 31, 1997, which have been de-
rived from the audited financial statements of Coaxial and Phoenix, and unau-
dited historical financial data for the six months ended June 30, 1997 and
1998, which have been derived from the unaudited interim financial statements
of Coaxial and Phoenix. In the opinion of management, such unaudited financial
statements have been prepared on the same basis as the audited financial state-
ments and include all normal and recurring adjustments and accruals necessary
for a fair presentation of such information. Financial results for the six
months ended June 30, 1998 are not necessarily indicative of the results that
may be expected for the full year.
In addition, the following tables present unaudited combined summary pro
forma financial data for Coaxial and Phoenix for the year ended December 31,
1997 and as of and for the six months ended June 30, 1998, as adjusted to give
pro forma effect to the Financing Plan and certain other adjustments, in the
case of the statement of operations and other financial and operating data as
if they had occurred on the first day of the respective periods, and in the
case of balance sheet data as if they had occurred as of such date.
The unaudited combined summary pro forma financial data have been prepared by
the management of Coaxial and Phoenix based upon their historical financial
statements and do not purport to represent what the results of operations or
financial condition of Coaxial and Phoenix would have actually been or what op-
erations in any future period would be if the transactions that give rise to
the pro forma adjustments had occurred on the dates assumed. Management be-
lieves that the combined pro forma data is a meaningful presentation because
Phoenix has no operations for the presented periods, and the ability of Coaxial
and Phoenix to satisfy debt and other obligations is dependent upon cash flow
from the System. The following information is qualified by reference to and
should be read in conjunction with "Selected Historical and Combined Pro Forma
Financial and Operating Data," "Capitalization," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Pro Forma Finan-
cial Statements" and the financial statements and notes thereto included else-
where in this Prospectus.
14
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
(DOLLARS IN THOUSANDS, EXCEPT SUBSCRIBER DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
-------------------------------------- -----------------------------
UNAUDITED UNAUDITED
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL COMBINED
------------------------- INFORMATION ---------------- INFORMATION
1995 1996 1997 1997 1997 1998 1998
------- ------- ------- ----------- ------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $46,831 $50,418 $48,229 $48,229 $24,493 $23,766 $ 23,766
Operating expenses:
Service and
administrative........ 21,920 25,236 27,391 24,430 13,247 14,634 12,881
Management fee......... -- -- -- 1,447 -- -- 713
Home office............ 1,695 1,697 1,498 -- 703 731 --
Depreciation and
amortization.......... 4,837 5,350 5,256 5,299 2,765 2,688 2,709
------- ------- ------- ------- ------- ------- ---------
Total operating
expenses.............. 28,452 32,283 34,145 31,176 16,715 18,053 16,303
Operating income........ 18,379 18,135 14,084 17,053 7,778 5,713 7,463
Interest expense, net.. 1,033 426 1,230 13,248 718 266 6,982
Gain on settlement of
limited partner
notes................. -- -- -- (3,315) -- -- --
Other expense.......... 251 248 271 360 83 115 167
------- ------- ------- ------- ------- ------- ---------
Net income.............. $17,095 $17,461 $12,583 $ 6,760 $ 6,977 $ 5,332 $ 314
======= ======= ======= ======= ======= ======= =========
FINANCIAL RATIOS AND
OTHER DATA:
System Cash Flow(1)..... $24,911 $25,182 $20,838 $23,799 $11,246 $ 9,132 $ 10,885
System Cash Flow
margin................. 53.2% 49.9% 43.2% 49.3% 45.9% 38.4% 45.8%
Annualized System Cash
Flow(2)................ 22,788 18,944 22,375
EBITDA(3)............... 23,216 23,485 19,340 22,352 10,543 8,401 10,172
Adjusted EBITDA(4)...... 23,216 23,485 19,340 22,352 10,543 9,249 11,020
Adjusted EBITDA margin.. 49.6% 46.6% 40.1% 46.3% 43.0% 38.9% 46.4%
Annualized Adjusted
EBITDA(2)(4)........... 21,268 18,448 21,778(14)
Capital expenditures.... 5,724 5,998 5,570 5,570 2,296 2,616 2,616
Ratio of total debt of Coaxial and Phoenix to
Annualized Adjusted EBITDA.................................................. 6.4x
Ratio of Adjusted EBITDA to interest expense................................. 1.6x(15)
Ratio of total debt of the Issuers to Annualized Adjusted
EBITDA...................................................................... 7.8x
Ratio of earnings to
fixed charges(5)....... 4.1x 4.0x 3.1x 1.1x(16) 3.4x 3.1x -- (16)
OPERATING DATA:
(AT END OF PERIOD,
EXCEPT AVERAGE AND
ANNUALIZED DATA)
Homes passed(6)......... 156,613 161,018 166,306 166,306 163,350 168,597 168,597
Basic subscribers(7).... 86,041 88,056 91,873 91,873 87,084 91,088 91,088
Basic penetration(8).... 54.9% 54.7% 55.2% 55.2% 53.3% 54.0% 54.0%
Premium service
units(9)............... 74,087 68,720 80,013 80,013 68,531 84,931 84,931
Premium
penetration(10)........ 86.1% 78.0% 87.1% 87.1% 78.7% 93.2% 93.2%
Average monthly revenue
per basic
subscriber(11)......... $ 46.40 $ 48.27 $ 44.67 $ 44.67 $ 46.62 $ 43.30 $ 43.30
Annualized System Cash
Flow per basic
subscriber(12)......... $296.20 $289.28 $231.62 $264.54 $260.18 $207.08 $ 244.59
Annualized Adjusted
EBITDA per basic
subscriber(13)......... $276.04 $269.79 $214.97 $248.45 $242.87 $201.66 $ 238.06
BALANCE SHEET DATA:
(AT END OF PERIOD)
Total assets................................................................. $ 47,520
Total debt................................................................... 140,268
Total liabilities............................................................ 149,535
Total shareholders' and partners' deficit.................................... (102,015)
</TABLE>
(footnotes to follow)
15
<PAGE>
PHOENIX ASSOCIATES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------- ----------------
HISTORICAL HISTORICAL
--------------------------- ----------------
1995 1996 1997 1997 1998
-------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gain on settlement of former
limited partner notes......... -- -- $(3,315) -- --
Interest expense, net.......... $ 12,362 $ 12,490 12,094 $ 5,814 $ 6,506
Other expense.................. 120 106 89 53 52
-------- -------- ------- ------- -------
Net loss........................ $(12,482) $(12,596) $(8,868) $(5,867) $(6,558)
======== ======== ======= ======= =======
FINANCIAL RATIOS AND OTHER DATA:
Ratio of earnings to fixed
charges(5).................... -- -- -- -- --
</TABLE>
(footnotes on following page)
16
<PAGE>
NOTES TO SUMMARY HISTORICAL AND COMBINED PRO FORMA
FINANCIAL AND OPERATING DATA
(1) Represents EBITDA (as defined below in Note 3) plus home office expense
for periods prior to the acquisition by Insight Ohio of the System (the
"System Acquisition"), and EBITDA plus management fees for periods after
or which give effect to the System Acquisition. Management believes that
System Cash Flow is a meaningful measure of performance because it is com-
monly used in the cable television industry to analyze and compare cable
television companies on the basis of operating performance, leverage and
liquidity. However, System Cash Flow is not intended to be a performance
measure that should be regarded as an alternative to, or more meaningful
than, either operating income or net income as an indicator of operating
performance or cash flows as a measure of liquidity, as determined in ac-
cordance with generally accepted accounting principles. System Cash Flow,
as computed by management, is not necessarily comparable to similarly ti-
tled amounts of other companies. See the financial statements, including
the Statements of Cash Flows, included elsewhere in this Prospectus.
(2) Represents results for the three months ended June 30 multiplied by four.
(3) Represents net income before depreciation, amortization, interest expense,
other expenses and gain on settlement of limited partners. Management be-
lieves that EBITDA is a meaningful measure of performance because it is
commonly used in the cable television industry to analyze and compare ca-
ble television companies on the basis of operating performance, leverage
and liquidity. However, EBITDA is not intended to be a performance measure
that should be regarded as an alternative to, or more meaningful than, ei-
ther operating income or net income as an indicator of operating perfor-
mance or cash flows as a measure of liquidity, as determined in accordance
with generally accepted accounting principles. EBITDA, as computed by man-
agement, is not necessarily comparable to similarly titled amounts of
other companies. See the financial statements, including the Statements of
Cash Flows, included elsewhere in this Prospectus.
(4) Represents EBITDA plus launch fees, which are deferred and amortized over
the applicable contract period for financial reporting purposes. Adjusted
EBITDA for the six months ended June 30, 1998 and Annualized Adjusted
EBITDA includes approximately $848,000 of launch fees.
(5) For purposes of calculating the ratio of earnings to fixed charges, earn-
ings include income (loss) before extraordinary items plus interest ex-
pense (which includes amortization of debt issuance costs). Fixed charges
consist of interest expense incurred (including amortization of debt issu-
ance costs) and the estimated interest component of rent expense (approxi-
mately one-third). For Phoenix, earnings were inadequate to cover fixed
charges by $12.4 million, $12.5 million and $8.8 million for the years
ended December 31, 1995, 1996 and 1997, respectively, and by $5.8 million
and $6.5 million for the six months ended June 30, 1997 and 1998, respec-
tively.
(6) Refers to estimates by management of the approximate number of dwelling
units in a particular community that can be connected to the System.
17
<PAGE>
(7) A home with one or more television sets connected to a cable system is
counted as one basic subscriber. Bulk accounts are included on an equiva-
lent basic unit basis in which the total monthly bill for the account is
divided by the basic monthly charge for a single outlet in the area.
(8) Calculated as basic subscribers as a percentage of homes passed.
(9) Includes only single channel services offered for a monthly fee per chan-
nel and does not include tiers of channels offered as a package for a sin-
gle monthly fee. A subscriber may purchase more than one premium service,
each of which is counted as a separate premium service unit.
(10) Calculated as premium service units as a percentage of basic subscribers.
(11) Represents revenues of the System during the respective period divided by
the months in the period divided by the average number of basic subscrib-
ers (beginning of period plus end of period divided by two) for such re-
spective period.
(12) Represents Annualized System Cash Flow during the respective period di-
vided by the average number of basic subscribers (beginning of period plus
end of period divided by two) for such respective period.
(13) Represents Annualized Adjusted EBITDA during the respective period divided
by the average number of basic subscribers (beginning of period plus end
of period divided by two) for such respective period.
(14) Management believes that the following adjustments to historical
annualized EBITDA for the three months ended June 30, 1998 are relevant to
evaluating the operating performance of the System. These annualized pro
forma adjustments reflect: (i) programming rate savings from MediaOne;
(ii) headcount reductions primarily due to duplication within the finance
and accounting departments; (iii) elimination of rent expense due to the
contribution of an office building to the System as part of the Contribu-
tion Agreement; (iv) elimination of home office expenses relating to
Coaxial's owners; and (v) management fees to be paid to Insight. Manage-
ment believes these adjustments to be reasonable. In addition, annualized
pro forma adjusted EBITDA reflects a supplemental adjustment for launch
fees for Fox News and Great American Country. The System has received
launch fees in the past, and management believes it will continue to re-
ceive launch fees in the normal course of business.
18
<PAGE>
The following table reflects the effects of these items on historical
annualized EBITDA:
<TABLE>
<S> <C>
Historical annualized EBITDA........................................ $17,599
Annualized pro forma adjustments:
Programming rate savings........................................... 2,164
Headcount reductions............................................... 1,162
Elimination of rent expense of contributed property................ 108
Elimination of home office expense................................. 1,342
Insight management fee............................................. (1,445)
-------
Annualized pro forma EBITDA......................................... 20,930
Launch fees for Fox News and Great American Country................ 848
-------
Annualized pro forma adjusted EBITDA................................ $21,778
=======
</TABLE>
(15) Represents Adjusted EBITDA to interest expense on the total debt of Coax-
ial and Phoenix.
(16) Represents pro forma ratio of earnings to fixed charges for Coaxial, Phoe-
nix and the issuers of the Discount Notes. Earnings were inadequate to
cover fixed charges by $1.6 million for the period ended June 30, 1998.
19
<PAGE>
RISK FACTORS
An investment in the registered notes to be issued pursuant to this
Prospectus (the "Exchange Notes") is subject to a number of risks. You should
carefully consider the following factors, as well as the more detailed
descriptions cross-referenced to the body of this Prospectus and the other
matters described in this Prospectus, in evaluating Coaxial, Phoenix
(together, the "Issuers"), Insight Ohio, the Exchange Notes, the System and
the cable television industry. The term "Note" or "Notes" includes the
outstanding notes (the "Original Notes") and the Exchange Notes. Unless
otherwise indicated, the term "Management" includes the management of Insight
and those members of Coaxial management who have remained with the System
since its acquisition by Insight Ohio.
HIGHLY LEVERAGED CAPITAL STRUCTURE
The Issuers' ability to make scheduled payments with respect to the Notes
will depend on the financial and operating performance of Insight Ohio. As of
June 30, 1998, on a pro forma basis after giving effect to the Financing Plan,
Insight Ohio would have had outstanding redeemable Series A Preferred Inter-
ests and Series B Preferred Interests (together the "Preferred Interests")
with an aggregate liquidation preference of $170.0 million. The Indenture and
the indenture under which the Discount Notes have been, and the new Discount
Notes are being, issued (the "Discount Notes Indenture") permit Insight Ohio
and its subsidiaries to incur or guarantee additional indebtedness, subject to
certain limitations. In addition, Insight Ohio will have borrowing capacity on
a revolving credit basis under the Senior Credit Facility. See "Description of
Certain Indebtedness--Senior Credit Facility." Insight Ohio is subject to pre-
vailing economic and competitive conditions and to certain financial, business
and other factors beyond its control, including interest rates, increased op-
erating costs and regulatory developments. There can be no assurance that In-
sight Ohio will maintain a level of cash flow from operations necessary to pay
the required distributions on the Preferred Interests and sufficient to permit
the Issuers to pay the principal, premium, if any, and interest on the Notes.
Insight Ohio's high degree of debt service and preferred distribution re-
quirements could have important consequences to the holders of the Notes, in-
cluding, but not limited to, the following:
. Insight Ohio's ability to obtain additional financing for working capi-
tal, capital expenditures, acquisitions, debt service and preferred dis-
tribution requirements, general corporate purposes and other purposes may
be impaired in the future;
. a substantial portion of Insight Ohio's cash flow from operations is re-
quired to be dedicated to the payment of principal and interest on its
indebtedness and the required distributions with respect to the Preferred
Interests, thereby reducing the funds available to Insight Ohio for other
purposes, including its operations and future business opportunities;
. the indebtedness outstanding under the Senior Credit Facility will be se-
cured by substantially all of the assets of Insight Ohio and will mature
prior to the maturity of the Notes; and
. Insight Ohio's leveraged position and the covenants contained in its debt
instruments could limit its flexibility to adjust to changing market con-
ditions and ability to withstand competitive pressures, and Insight Ohio
may be more vulnerable to a downturn in general economic conditions or in
its business or be unable to carry out capital spending that is important
to its growth and productivity improvement programs.
20
<PAGE>
If Insight Ohio's cash flow and capital resources are insufficient to fund
debt service and preferred distribution obligations, Insight Ohio and the Is-
suers may be forced to reduce or delay capital expenditures, sell assets or
seek to obtain additional equity capital or restructure or refinance debt (in-
cluding the Notes). There can be no assurance that such alternative measures
would be successful or would permit Insight Ohio and the Issuers to meet their
scheduled debt service and preferred distribution obligations. In the absence
of such operating results and resources, Insight Ohio could face substantial
liquidity problems and might be required to dispose of material assets or oper-
ations to meet debt service and preferred distribution and other obligations.
Insight Ohio's Operating Agreement, the Indenture and the Discount Notes Inden-
ture restrict, and the Senior Credit Facility is expected to restrict, the Is-
suers' and Insight Ohio's ability to sell assets and use the proceeds there-
from. There can be no assurance as to the ability of the Issuers or Insight
Ohio to consummate such sales or that the proceeds which they could realize
therefrom would be adequate to meet the obligations then due.
INSUFFICIENCY OF EARNINGS TO COVER FIXED CHARGES
On a pro forma basis after giving effect to the Financing Plan, the combined
earnings of the Issuers, the Discount Issuers and Insight Ohio would have been
insufficient to cover their combined fixed charges for the six months ended
June 30, 1998 by approximately $1.6 million. The ability of the Issuers to meet
their debt service obligations under the Notes will depend upon the future per-
formance of Insight Ohio and its ability to make the required distributions on
the Preferred Interests which, in turn, is subject to general economic condi-
tions and to financial, competitive, regulatory and other factors, many of
which are beyond its control. Management believes that Insight Ohio will con-
tinue to generate cash and obtain financing sufficient to meet such require-
ments in the future; however, there can be no assurance that the Issuers or In-
sight Ohio will be able to meet their debt service, preferred distribution and
other obligations. If the Issuers and Insight Ohio were unable to do so, they
would have to pursue one or more alternatives, such as refinancing their in-
debtedness or obtaining new financing, reducing or delaying capital expendi-
tures, selling assets of Insight Ohio or raising equity capital financing.
There can be no assurance that the Issuers or Insight Ohio would be able to re-
finance or obtain such new financing in the future or that, if the Issuers or
Insight Ohio were able to do so, the terms available would be favorable to the
Issuers or Insight Ohio. See "Selected Historical and Combined Pro Forma Finan-
cial and Operating Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
CONDITIONAL GUARANTEES; STRUCTURAL SUBORDINATION
The Issuers have no significant assets available to the holders of the Notes
other than Coaxial's common membership interests and Preferred Interests in In-
sight Ohio. The Issuers' ability to make interest and principal payments when
due to holders of the Notes will be dependent upon Coaxial's receipt of suffi-
cient funds from Insight Ohio with respect to the Series A Preferred Interests.
Under the expected terms of the Senior Credit Facility, upon the occurrence of
an event of default or if certain financial performance tests or other condi-
tions are not met, Insight Ohio will be restricted from making distributions on
the Preferred Interests. There can be no assurance that Insight Ohio will be
able to satisfy the financial tests and the related conditions expected to be
set forth in the Senior Credit Facility to make such distributions, or that In-
sight Ohio will not be in default of its financial covenants or otherwise under
the Senior Credit Facility which could prevent the Issuers from making any pay-
ments in respect of the Notes. In addition, because the Guarantors only condi-
tionally guarantee the payment of principal of and interest on the Notes (the
"Guarantees"), the claims of
21
<PAGE>
holders of the Notes effectively will be, for the most part, subordinated to
all existing and future claims of the creditors of the Guarantors, including
the lenders under the Senior Credit Facility and the Guarantors' trade credi-
tors, until all conditions to which the Guarantees are subject have been sat-
isfied. The ability of the holders of the Notes to realize upon any of Insight
Ohio's (or any other Guarantor's) assets upon its liquidation or reorganiza-
tion will be subject to the prior claims of Insight Ohio's (or any other Guar-
antor's) creditors including the lenders under the Senior Credit Facility un-
til the effectiveness of the Guarantees, which will only be effective to the
extent and at the time the holders of the Notes are unable to realize proceeds
from the enforcement of the mandatory redemption provisions of the Series A
Preferred Interests. The holders of the Notes will be required to prosecute a
claim until adjudication against Insight Ohio for failure to redeem the Series
A Preferred Interests before it can be determined that such a failure to real-
ize proceeds has occurred. This process may entail protracted and time consum-
ing litigation. In addition, the indebtedness outstanding from time to time
under the Senior Credit Facility will be secured by substantially all of the
assets of Insight Ohio and any of its future subsidiaries, and the lenders
thereunder will have a claim on such assets prior to the claims of holders of
the Notes. See "--Certain Bankruptcy Considerations" below, "Management's Dis-
cussion and Analysis of Financial Condition and Results of Operations--Liquid-
ity and Capital Resources," "Description of Certain Indebtedness" and "De-
scription of the Notes."
NON-RECOURSE DEBT; ABILITY TO REALIZE ON COLLATERAL
The Notes are non-recourse secured obligations of the Issuers. The Notes are
secured only by a first priority pledge of the issued and outstanding Series A
Preferred Interests of Insight Ohio (the "Senior Notes Collateral") which will
become non-voting upon the enforcement of remedies under the Pledge Agreement.
As non-recourse obligations, the only remedy available to holders will be to
enforce their rights under the Pledge Agreement in respect of the Senior Notes
Collateral. Any remedy will be limited to the value of the Senior Notes Col-
lateral and holders will have no claim against the Issuers for any difference
between amounts due under the Notes and amounts recovered in respect of the
Senior Notes Collateral. If an event of default occurs with respect to the
Notes, there can be no assurance that the liquidation of the Senior Notes Col-
lateral will produce proceeds in an amount sufficient to pay the principal of
or the accrued and unpaid interest, if any, on the Notes. Insight, the manager
of Insight Ohio, has discretion in certain circumstances in accordance with
Insight Ohio's Operating Agreement to make distributions with respect to the
Preferred Interests. See "--Certain Bankruptcy Considerations."
RESTRICTIONS IMPOSED BY TERMS OF INDEBTEDNESS
The Indenture and the Discount Notes Indenture impose, and the Senior Credit
Facility is expected to impose, (i) restrictions, that, among other things,
limit the amount of additional indebtedness that may be incurred by the Is-
suers and their subsidiaries (including Insight Ohio) and (ii) limitations on,
among other things, investments, loans and other payments, certain transac-
tions with affiliates and certain mergers and acquisitions. The Senior Credit
Facility also is expected to restrict the ability of Insight Ohio and its sub-
sidiaries to pay dividends or make capital contributions, including distribu-
tions on the Preferred Interests that are required to pay the Notes and Dis-
count Notes in the event of a payment default under the Senior Credit Facili-
ty, and to require Insight Ohio to maintain specified financial ratios and
meet certain financial tests. The ability of Insight Ohio to comply with such
covenants and restrictions can be affected by events beyond its control, and
there can be no assurance that Insight Ohio will achieve operating results
that would permit compliance with such provisions. The breach of certain pro-
visions of the Senior Credit Facility would, under certain circumstances, re-
sult in defaults thereunder, permitting the lenders thereunder to prevent dis-
tributions with respect to the Preferred Interests and to accelerate the in-
debtedness thereunder. If Insight Ohio were
22
<PAGE>
unable to repay the amounts due in respect of the Senior Credit Facility, the
lenders thereunder could foreclose upon the assets pledged to secure such re-
payment. Any of such events would adversely affect the Issuers' ability to
service the Notes or comply with the redemption provisions of the Series A Pre-
ferred Interests.
CERTAIN BANKRUPTCY CONSIDERATIONS
Creditors' Rights
The right of the trustee, which holds the Senior Notes Collateral on behalf
of the holders of the Notes, to repossess and dispose of the collateral upon
the occurrence of an event of default under the Indenture is likely to be sig-
nificantly impaired by applicable bankruptcy law if a bankruptcy case were to
be commenced by or against the Issuers, whether by a holder of the Notes or an-
other creditor, prior to such repossession and disposition. Under applicable
bankruptcy law, secured creditors, such as the holders of the Notes, are auto-
matically stayed from repossessing their security from a debtor in a bankruptcy
case, or from disposing of collateral in their possession, without bankruptcy
court approval. Moreover, applicable bankruptcy law permits the debtor to con-
tinue to retain and use the collateral even though the debtor is in default un-
der the applicable debt instruments, provided that the secured creditor is
given "adequate protection." The meaning of the term "adequate protection" may
vary according to circumstances, but it is intended in general to protect the
secured creditor from diminution in the value of the collateral as a result of
the stay of repossession or disposition or any use of the collateral by the
debtor during the pendency of the bankruptcy case. "Adequate protection" may
include cash payments or the granting of additional security at such time and
in such amount as the court may determine. In view of the lack of a precise
definition of the term "adequate protection," the broad discretionary powers of
a bankruptcy court and the possible complexity of valuation issues, it is im-
possible to predict how long payments under the Notes could be delayed follow-
ing commencement of a bankruptcy case, whether or when the trustee could repos-
sess or dispose of the collateral or whether or to what extent the holders of
the Notes would be compensated for any delay in payment of loss of value of the
collateral through the requirement for "adequate protection."
Limited Liability Companies
Insight Ohio is a limited liability company organized under the laws of the
State of Delaware. Limited liability companies ("LLCs") are relatively recent
creations not only under the laws of the State of Delaware but also under the
laws of other jurisdictions. Generally stated, LLCs are intended to provide
both the limited liability of the corporate form for their members and certain
advantages of partnerships, including "pass-through" income tax treatment for
members, and thus have attributes of both corporations and partnerships. Given
their recent creation, LLCs and their members have been involved in relatively
few bankruptcy cases as debtors, and there has been little reported judicial
authority addressing bankruptcy issues as they pertain to LLCs. Moreover, the
existing judicial authority on such issues in bankruptcies of analogous enti-
ties (e.g., partnerships) is not well settled. Consequently, a bankruptcy of
any LLC, their members or any of their affiliates or a claim with respect to
the collateral may be litigated and decided in the absence of dispositive judi-
cial precedent, and thus, no assurance can be made as to any particular outcome
including with respect to the contractual claims associated with enforcing
rights as a holder of the Preferred Interests after foreclosing on the collat-
eral.
23
<PAGE>
FRAUDULENT CONVEYANCE
Various fraudulent conveyance laws have been enacted for the protection of
creditors and may be utilized by a court to subordinate or avoid the Notes in
favor of other existing or future creditors of the Issuers. If a court in a
lawsuit on behalf of any unpaid creditor of the Issuers or a representative of
the Issuers' creditors were to find that, at the time the Issuers issued the
Notes, the Issuers (x) intended to hinder, delay or defraud any existing or fu-
ture creditor or contemplated insolvency with a design to prefer one or more
creditors to the exclusion in whole or in part of others or (y) did not receive
fair consideration or reasonably equivalent value for issuing the Notes and the
Issuers (i) were insolvent, (ii) were rendered insolvent by reason of such is-
suance, (iii) were engaged or about to engage in a business or transaction for
which their remaining assets constituted unreasonably small capital to carry on
their business or (iv) intended to incur, or believed that they would incur,
debts beyond their ability to pay such debts as they matured, such court could
void the Issuers' obligations under the Notes and void such transactions. Al-
ternatively, in such event, claims of the holders of the Notes could be subor-
dinated to claims of the other creditors of the Issuers. Based upon financial
and other information currently available to them, the Issuers believe that the
Notes are being incurred for proper purposes and in good faith and that the Is-
suers are solvent and will continue to be solvent after issuing the Notes, will
have sufficient capital for carrying on their business after such issuance and
will be able to pay their debts as they mature.
In addition, the Guarantees may be subject to review under relevant federal
and state fraudulent conveyance and similar statutes in a bankruptcy or reorga-
nization case or a lawsuit by or on behalf of creditors of any of the Guaran-
tors. In such a case, the analysis set forth above generally would apply. A
court could avoid a Guarantor's obligation under its Guarantee, subordinate the
Guarantee to other indebtedness of such Guarantor or take other action detri-
mental to the holders of the Notes.
SIGNIFICANT CAPITAL EXPENDITURES
Consistent with its business strategy, Management expects to make capital ex-
penditures to upgrade the System over the next several years. Insight Ohio's
potential inability to fund these capital expenditures could adversely affect
its ability to upgrade the System which could have a material adverse effect on
its operations and competitive position. See "Business" and "Management's Dis-
cussion and Analysis of Financial Condition and Results of Operations--Liquid-
ity and Capital Resources."
SIGNIFICANT COMPETITION IN THE CABLE TELEVISION INDUSTRY; OVERBUILDS
Cable television systems face competition from alternative methods of receiv-
ing and distributing television signals and from other sources of news, infor-
mation and entertainment, such as off-air television broadcast programming,
newspapers, movie theaters, live sporting events, online computer services and
home video products, including videotape cassette recorders. Because Insight
Ohio's franchises are generally non-exclusive, there is the potential for com-
petition with its systems from others (such as the situation with Ameritech de-
scribed below) including systems operated by local governmental authorities.
Other distribution systems capable of delivering programming to homes or busi-
nesses, including satellite master antenna television service ("SMATV"), direct
broadcast satellite ("DBS") systems and multichannel, multipoint distribution
service ("MMDS") systems now compete with the System. In recent years, there
has been significant national growth in the number of subscribers to DBS serv-
ices and such growth is expected to continue. See "Business--Competition."
24
<PAGE>
The number of choices available to the System's subscribers as a result of
other distribution systems may lead to a reduction in its market share. There
can be no assurance that the System will be able to obtain or maintain sub-
scribers.
Additionally, recent changes in federal law and recent administrative and ju-
dicial decisions have removed certain of the restrictions that have limited en-
try into the cable television business by potential competitors such as tele-
phone companies, registered utility holding companies and their subsidiaries.
Such developments will enable local telephone companies to provide a wide vari-
ety of video services in the telephone company's own service area which will be
directly competitive with services provided by cable television systems. Other
new technologies, including Internet-based services, may also become competi-
tive with services that cable television operators can offer.
In 1996, Ameritech, the telephone local exchange carrier for Columbus, ob-
tained a citywide cable television franchise for the City of Columbus.
Ameritech began offering cable television service in June 1996 and to date has
substantially built its entire citywide franchise, both in the System's service
area and in the Time Warner service area on the west side of Columbus. The Time
Warner system and the System service virtually distinct areas and therefore do
not compete with each other. The overbuild (as defined in the "Glossary") by
Ameritech passes approximately 71% of the homes passed by the System (approxi-
mately 120,000 homes), effectively allowing approximately 60,000 of the Sys-
tem's basic subscribers to choose between Ameritech and the System. Ameritech
has cable television franchise applications pending in two surrounding communi-
ties covering an additional 2,000 of the System's homes and 1,200 of the Sys-
tem's subscribers. See "Business--Overbuild."
The System competes for advertising revenue with other television programming
services described above, as well as with other national and international ca-
ble television programming services, superstations, broadcast television net-
works, local over-the-air television stations, radio and print media, in addi-
tion to alternative delivery services that now exist or are expected to develop
in the future. More generally, the System competes with various other leisure-
time activities such as home videos, movie theaters, personal computers and
other alternative sources of entertainment and information. See "Business--Com-
petition."
Many of the System's potential competitors have substantially greater re-
sources and Management cannot predict the extent to which competition will ma-
terialize in its franchise areas from other cable television operators, other
distribution systems for delivering video programming and other broadband tele-
communications services to the home, or from other potential competitors, or,
if such competition materializes, the extent of its effect on the System. See
"Business--Competition" and "Legislation and Regulation."
RISKS RELATING TO BUSINESS STRATEGY
Management plans to upgrade selectively the System to enhance the potential
for increasing revenues through the introduction of new technologies and serv-
ices, such as cable Internet access and high-speed data transmission. See
"Business--Insight's System Operating Strategy." While Management is optimistic
about the prospects for these new lines of business, there can be no assurance
that it will be able to enter them successfully or to generate additional cash
flow. Moreover, many of these new lines of business are likely to have signifi-
cant competition from businesses that may have substantial financial resources
and market presence such as local telephone companies, long distance
interexchange carriers and traditional online Internet service providers.
25
<PAGE>
Historically, an element of Insight's strategy has been to swap assets in or-
der to, among other things, geographically consolidate its holdings. Subject to
certain limitations, the Indenture and the Discount Notes Indenture permit as-
set swaps. Management will consider potential opportunities to swap cable tele-
vision systems. There can be no assurance that Management will be able to inte-
grate successfully any acquired systems, realize any efficiencies from any swap
or that any acquisition or swap will improve operating results.
RAPID TECHNOLOGICAL ADVANCES
The cable television business is characterized by rapid technological change
and the introduction of new products and services. There can be no assurance
that Insight Ohio will be able to fund the capital expenditures necessary to
keep pace with technological developments or that the System will successfully
anticipate the demand of its subscribers for products or services requiring new
technology. Insight Ohio's inability to provide enhanced services in a timely
manner or to anticipate the demands of the marketplace could have a material
adverse effect on the System's business, results of operations and financial
condition. See "Business--Competition."
In addition, the System's introduction of new technologies or services is
subject to uncertainties regarding subscriber demand, future competition, ap-
propriate pricing, and the costs and timing with respect to marketing and sales
efforts. There can be no assurances as to the effect of such technological
changes on the System's business, results of operations and financial condition
or that Insight Ohio will not be required to expend substantial financial re-
sources to implement new technologies, that capital expenditures for new tech-
nologies or services will approximate Management's expectations, or that suffi-
cient demand exists to recoup such expenditures.
NON-EXCLUSIVE FRANCHISES; NON-RENEWAL OR TERMINATION OF FRANCHISES
Cable television companies operate under non-exclusive franchises granted by
local authorities which are subject to renewal and renegotiation from time to
time. 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 com-
ply with its material provisions. The System's business is dependent upon the
retention and renewal of its local franchises. Franchises typically impose con-
ditions relating to the operation of cable television systems, including re-
quirements relating to the payment of fees, bandwidth capacity, customer serv-
ice requirements, franchise renewal and termination. The Cable Television Con-
sumer Protection and Competition Act of 1992 (the "1992 Cable Act") prohibits
franchising authorities from granting exclusive cable television franchises and
from unreasonably refusing to award additional competitive franchises; it also
permits municipal authorities to operate cable television systems in their com-
munities without franchises. The Cable Communication Policy Act of 1984 (the
"1984 Cable Act" and, together with the 1992 Cable Act, the "Cable Acts") pro-
vides, 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. Historically,
franchises have been renewed for cable operators that have provided satisfac-
tory services and have complied with the terms of their franchises. Although
Management believes that it generally has good relationships with its franchise
authorities, no assurance can be given that the System will be able to retain
or renew such fran- chises or that the terms of any such renewals will be on
terms as favorable to its existing franchises. Furthermore, it is possible that
a franchise authority might grant a franchise to another cable
26
<PAGE>
company. The non-renewal or termination of franchises relating to a significant
portion of the Sys- tem would have a material adverse effect on the System's
results of operations. See "Business-- Franchises."
REGULATION IN THE CABLE TELEVISION INDUSTRY
The cable television industry is subject to extensive regulation by federal,
local and, in some instances, state governmental agencies. The Cable Acts, both
of which amended the Communications Act of 1934 (as amended, the "Communica-
tions Act"), established a national policy to guide the development and regula-
tion of cable television systems. The Communications Act was recently substan-
tially amended by the Telecommunications Act of 1996 (the "1996 Telecom Act").
Principal responsibility for implementing the policies of the Cable Acts and
the 1996 Telecom Act has been allocated between the FCC and state or local reg-
ulatory authorities. It is not possible to predict the effect that ongoing or
future developments might have on the cable communications industry or on the
operations of the System. See "Legislation and Regulation."
Federal Law and Regulation
The 1992 Cable Act and the FCC's rules implementing such act generally have
resulted in additional regulatory oversight by the FCC and local or state fran-
chise authorities. In addition, they have resulted in increased administrative
and operational expenses for cable television systems. The Cable Acts and the
corresponding FCC regulations have established, among other things:
. rate regulations;
. 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;
. rules for franchise renewals and transfers; and
. other requirements covering a variety of operational areas such as equal
employment opportunity, technical standards and customer service
requirements.
The 1996 Telecom Act deregulates rates for cable programming services tiers
("CPST") commencing in March 1999 and, for certain small cable operators, imme-
diately eliminates rate regulation of CPST, and, in certain limited circum-
stances, basic services. The FCC is currently developing permanent regulations
to implement the rate deregulation provisions of the 1996 Telecom Act. Manage-
ment is currently unable to predict the ultimate effect of the 1992 Cable Act
or the 1996 Telecom Act.
The FCC and Congress continue to be concerned that rates for regulated pro-
gramming services are rising at a rate exceeding inflation. It is therefore
possible that the FCC will further restrict the ability of cable television op-
erators 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.
State and Local Regulation
Cable television systems generally operate pursuant to non-exclusive fran-
chises, permits or licenses granted by a municipality or other state or local
governmental entity. The terms and conditions of franchises vary materially
from jurisdiction to jurisdiction. A number of states subject cable
27
<PAGE>
television systems to the jurisdiction of centralized state governmental agen-
cies. Currently, Ohio, the state in which the System currently operates, has
not enacted state level regulation. Management cannot predict whether such
state will engage in such regulation in the future. See "Legislation and Regu-
lation."
DEPENDENCE ON INSIGHT AND KEY PERSONNEL OF INSIGHT
The System's success depends on its management by Insight and, therefore, on
Insight's ability to continue to attract, motivate and retain highly qualified
management, sales and technical personnel. In the event Insight is unable to
continue to do so, the operations and growth prospects of the System could be
adversely affected. In the event Insight were to lose the services of key per-
sonnel, its ability to conduct its business, which will include management of
the System, could be adversely affected. In addition, Insight's management of
cable systems other than the System may limit the availability and accessibil-
ity of certain Insight personnel, which could adversely affect Insight's abil-
ity to manage the System.
ABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Issuers will be required to
make an offer to purchase all outstanding Notes at a purchase price equal to
101% of the principal amount thereof, together with accrued and unpaid inter-
est, if any, to the date of repurchase. If a Change of Control were to occur,
there can be no assurance that the Issuers would have sufficient financial re-
sources, or would be able to arrange financing or be permitted under the terms
of other outstanding or future indebtedness arrangements, to pay the purchase
price for all Notes tendered by holders thereof. In addition, it is expected
that the Senior Credit Facility will include a "change of control" provision
that permits the lenders thereunder to accelerate the repayment of indebtedness
thereunder. It is expected that the Senior Credit Facility will not permit In-
sight Ohio to make distributions so as to permit the Issuers to effect a pur-
chase of the Notes upon a Change of Control without the prior satisfaction of
certain financial tests and other conditions. See "--Conditional Guarantees;
Structural Subordination" above and "Description of Certain Indebtedness." Any
future credit agreements or other agreements relating to other indebtedness to
which Insight Ohio becomes a party may contain similar restrictions and provi-
sions. In the event a Change of Control occurs at a time when the Issuers are
unable to purchase the Notes, the Issuers could seek the consent of their lend-
ers under such indebtedness to repurchase Notes or could attempt to refinance
the borrowings that contain such prohibition. If the Issuers do not obtain such
consent or repay such borrowing, the Issuers would remain prohibited from re-
purchasing the Notes. In such case, the Issuers' failure to repurchase tendered
Notes would constitute an Event of Default under the Indenture. In the event of
a Change of Control, and as a result of the inability of the Issuers to repur-
chase the Notes, the holder of the Notes would have no recourse against the Is-
suers other than any remedies they may have against the collateral or, failing
that, the conditional guarantee of Insight Ohio. See "--Non-Recourse Debt;
Ability to Realize on Collateral."
INDUSTRY AND ECONOMIC CONDITIONS
The operating results of the System are subject to various factors that af-
fect the cable television industry as a whole. The System may be affected by
numerous factors, including:
. changes in audience tastes;
. priorities of advertisers;
28
<PAGE>
. new laws and governmental regulations and policies;
. changes in technical requirements;
. technological changes;
. proposals to eliminate the tax deductibility of expenses incurred by
advertisers; and
. changes in the willingness of financial institutions and other lenders to
finance cable television system acquisitions and operations.
Insight Ohio cannot predict which, if any, of these or other factors might
have a significant impact on the cable television industry in the future, nor
can it predict what impact, if any, the occurrence of these or other events
might have on its operations. Generally, advertising tends to decline during
economic recession or downturn. Consequently, the System's cable television
revenue is likely to be adversely affected by a recession or downturn in the
United States economy or other events or circumstances that adversely affect
advertising activity. In addition, Insight Ohio's operating results in
individual geographic markets could be adversely affected by local regional
economic downturns.
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
Prior to the Exchange Offer, there was no public market for the Original
Notes. The Original Notes have not been registered under the Securities Act of
1933 (the "Securities Act") and will be subject to restrictions on transfera-
bility to the extent that they are not exchanged for Exchange Notes by holders
who are entitled to participate in this Exchange Offer. The holders of Origi-
nal Notes (other than any such holder that is an "affiliate" of the Issuers
and Insight Ohio within the meaning of Rule 405 under the Securities Act) who
are not eligible to participate in the Exchange Offer are entitled to certain
registration rights, and the Issuers and Insight Ohio are required to file a
Shelf Registration Statement with respect to such Original Notes. The Exchange
Notes will constitute a new issue of securities with no established trading
market. Although CIBC has informed the Issuers that it currently intends to
make a market in the Exchange Notes, it is not obligated to do so and any such
market making may be discontinued at any time without notice in the sole dis-
cretion of CIBC. In addition, such market making activity will be subject to
the limits imposed by the Securities Act and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and may be limited during the pendency
of the Exchange Offer or the effectiveness of a shelf registration statement
in lieu thereof. Accordingly, there can be no assurance as to the development
or liquidity of any market for the Exchange Notes. The Exchange Notes are ex-
pected to be eligible for trading by qualified buyers in the PORTAL market. If
an active public market does not develop, the market price and liquidity of
the Exchange Notes may be adversely affected. If a trading market develops for
the Exchange Notes, the future trading prices thereof will depend on many fac-
tors including, among other things, Insight Ohio's results of operations, pre-
vailing interest rates, the market for securities with similar terms and the
market for securities of other companies in similar businesses. The Issuers do
not intend to apply for listing of the Exchange Notes on any securities ex-
change or for their quotation through an automated dealer quotation system.
The Original Notes were offered in reliance upon an exemption from registra-
tion under the Securities Act and applicable state securities laws. Therefore,
the Original Notes may be transferred or resold only in a transaction regis-
tered under, or exempt from, the Securities Act and applicable state securi-
ties laws. Pursuant to the Registration Rights Agreement among Coaxial, Phoe-
nix, Insight Ohio and CIBC (the "Registration Rights Agreement"), Coaxial,
Phoenix and Insight Ohio have agreed to file the Exchange Offer Registration
Statement with the SEC and to use their reasonable
29
<PAGE>
best efforts to cause such registration statement to become effective with re-
spect to the Exchange Notes. After the registration statement becomes effec-
tive, the Exchange Notes generally will be permitted to be resold or otherwise
transferred (subject to the restrictions described under "The Exchange Offer--
Resale of Exchange Notes") by each holder without the requirement of further
registration. The Exchange Notes, however, also will constitute a new issue of
securities with no established trading market and will be issued only in the
amount of Original Notes being tendered for exchange. No assurance can be
given as to the liquidity of the trading market for the Exchange Notes, or, in
the case of non-tendering holders of Original Notes, the trading market for
the Original Notes following the Exchange Offer.
FAILURE TO FOLLOW EXCHANGE OFFER PROCEDURES COULD ADVERSELY AFFECT HOLDERS
Issuance of the Exchange Notes in exchange for the Original Notes pursuant
to the Exchange Offer will be made only after a timely receipt by Bank of Mon-
treal Trust Company of such Original Notes, a properly completed and duly exe-
cuted Letter of Transmittal and all other required documents. Therefore, hold-
ers of the Original Notes desiring to tender such Original Notes in exchange
for Exchange Notes should allow sufficient time to ensure timely delivery. The
Issuers are under no duty to give notification of defects or irregularities
with respect to the tenders of Original Notes for exchange. Original Notes
that are not tendered or are tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing re-
strictions upon transfer thereof and, upon consummation of the Exchange Offer,
certain registration rights under the Registration Rights Agreement will ter-
minate. In addition, any holder of Original Notes who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
may be deemed to have received restricted securities and, if so, will be re-
quired to comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any resale transactions. Each holder of
the Original Notes who wishes to exchange the Original Notes for Exchange
Notes in the Exchange Offer will be required to represent in the Letter of
Transmittal that at the time of the consummation of the Exchange Offer:
. it is not an affiliate of the Issuers or Insight Ohio or, if it is such
an affiliate, such holder will comply with the registration and prospec-
tus delivery requirements of the Securities Act to the extent applicable;
. the Exchange Notes to be received by it are being acquired in the ordi-
nary course of its business; and
. it has no arrangement or understanding with any person to participate in
the distribution of the Original or Exchange Notes within the meaning of
the Securities Act.
Each broker-dealer (a "Participating Broker-Dealer") that receives Exchange
Notes for its own account in exchange for Original Notes, where such Original
Notes were acquired by such Participating Broker-Dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. See
"Plan of Distribution." To the extent that Original Notes are tendered and ac-
cepted in the Exchange Offer, the trading market for untendered and tendered
but unaccepted Original Notes could be adversely affected. See "The Exchange
Offer."
FORWARD-LOOKING STATEMENTS
This Prospectus includes "forward-looking statements" within the meaning of
the Securities Act of 1933 and the Securities Exchange Act of 1934, including
statements containing the words
30
<PAGE>
"believes," "anticipates," "expects" and words of similar import. All state-
ments other than statements of historical fact included in this Prospectus, in-
cluding, without limitation, the statements under "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and Re-
sults of Operations," "Business," "The System Acquisition," and elsewhere in
this Prospectus, regarding the Issuers or any of the transactions described in
this Prospectus, including the timing, financing, strategies and effects of
such transactions, are forward-looking statements. Although the Issuers believe
that the expectations reflected in such forward-looking statements are reason-
able, they can give no assurance that such expectations will prove to have been
correct. Important factors that could cause actual results to differ materially
from expectations are disclosed in this Prospectus, including, without limita-
tion, in conjunction with the forward-looking statements in this Prospectus
and/or under "Risk Factors." The Issuers do not intend to update these forward-
looking statements.
31
<PAGE>
USE OF PROCEEDS
The Exchange Offer is intended to satisfy certain of the Issuers'
obligations under the Registration Rights Agreement. The Issuers will not
receive any cash proceeds from the issuance of the Exchange Notes in the
Exchange Offer.
The private offering of the Original Notes (the "Original Notes Offering")
was part of the Financing Plan, which was implemented to facilitate the
organization of Insight Ohio, the acquisition of the System by Insight Ohio
and to provide for the System's liquidity and operational and financial
flexibility. Pursuant to the Financing Plan:
. Coaxial contributed to Insight Ohio substantially all of the assets
comprising the System for which Coaxial received a 25% non-voting common
membership interest in Insight Ohio as well as the Preferred Interests in
Insight Ohio (such Preferred Interests will provide for distributions to
Coaxial, which will be used (directly and indirectly) to pay interest and
principal on the Notes and the Discount Notes, subject to certain
financial covenants and other conditions expected to be set forth in the
Senior Credit Facility);
. Insight contributed $10.0 million in cash to Insight Ohio for which it
received a 75% non-voting common membership interest in Insight Ohio;
. Coaxial and Phoenix effected the Original Notes Offering;
. Coaxial LLC and Coaxial Financing Corp. effected the private offering of
the Discount Notes (the "Discount Notes Offering"); and
. a portion of the existing indebtedness of the Issuers and certain of
their affiliates, including settlement of related party balances, was
repaid and the balance was purchased.
The gross proceeds received by the Issuers from the Original Notes Offering
were $140.0 million. The gross proceeds received by Coaxial LLC and Coaxial
Financing Corp. (together, the "Discount Notes Issuers") from the Discount
Notes Offering were approximately $30.0 million. The net proceeds from such
private offerings (approximately $160.9 million) and the $10.0 million cash
contribution from Insight was used for the purchase and repayment of
outstanding indebtedness, working capital and deferred compensation and
severance payments. Prior to October 1998, Insight Ohio is expected to enter
into the Senior Credit Facility for the purpose of financing its future
working capital requirements, including the upgrade of the System's cable
plant and the introduction of new video services. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources" and "Description of Certain Indebtedness--Senior Credit
Facility."
32
<PAGE>
CAPITALIZATION
The following table sets forth the combined capitalization of the Issuers as
of June 30, 1998 and as adjusted to give effect to each of the components of
the Financing Plan as if they had occurred on June 30, 1998. The information
contained in this table should be read in conjunction with the "Selected
Historical and Combined Pro Forma Financial and Operating Data," "Pro Forma
Financial Statements" and the financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Total debt:
Related party, net.................................. $ 23,998 $ --
Chase Credit Facility............................... 131,519 --
Original Notes...................................... -- 140,000
Capital lease obligations........................... 268 268
--------- ---------
Total debt...................................... 155,785 140,268
--------- ---------
Shareholders' and partners' deficit................... (118,454) (102,015)(1)
--------- ---------
Total capitalization............................ $ 37,331 $ 38,253
========= =========
</TABLE>
- --------
(1) Reflects the write-off of deferred loan acquisition costs, the settlement
of related party balances, the contribution of property, the use of
proceeds from the Original Notes to repay indebtedness of certain
affiliated entities and the $10.0 million cash contribution from Insight
to Insight Ohio.
33
<PAGE>
SELECTED HISTORICAL AND COMBINED PRO FORMA FINANCIAL AND OPERATING DATA
The following tables present selected historical financial data for Coaxial
and Phoenix as of and for the five years ended December 31, 1997, and
unaudited selected historical financial data as of and for the six months
ended June 30, 1997 and 1998. The statement of operations data for the periods
ended December 31, 1997, 1996, and 1995 and balance sheet data as of December
31, 1997 and 1996 have been derived from the audited financial statements of
Coaxial and Phoenix. The financial data of all other periods are derived from
the unaudited financial statements of Coaxial and Phoenix included elsewhere
in this Prospectus. In the opinion of management, such unaudited financial
statements have been prepared on the same basis as the audited financial
statements and include all normal and recurring adjustments and accruals
necessary for a fair presentation of such information. Financial results for
the six months ended June 30, 1998 are not necessarily indicative of the
results that may be expected for the full year.
In addition, the following tables present unaudited combined selected pro
forma financial data for Coaxial and Phoenix for the year ended December 31,
1997 and as of and for the six months ended June 30, 1998, as adjusted to give
pro forma effect to the Financing Plan and certain other adjustments, in the
case of the statement of operations and other financial and operating data as
if they had occurred on the first day of the respective periods, and in the
case of balance sheet data as if they had occurred as of such date.
The unaudited combined selected pro forma financial data have been prepared
by the management of Coaxial and Phoenix based upon their historical financial
statements and do not purport to represent what the results of operations or
financial condition of Coaxial and Phoenix would have actually been or what
operations in any future period would be if the transactions that give rise to
the pro forma adjustments had occurred on the dates assumed. Management
believes that the combined pro forma data is a meaningful presentation because
Phoenix has no operations for the presented periods, and the ability of
Coaxial and Phoenix to satisfy debt and other obligations is dependent upon
cash flow from the System. The following information is qualified by reference
to and should be read in conjunction with "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Pro Forma Financial Statements" and the financial statements and notes
thereto included elsewhere in this Prospectus.
34
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
(DOLLARS IN THOUSANDS, EXCEPT SUBSCRIBER DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------------------------- -------------------------------
UNAUDITED UNAUDITED
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL COMBINED
--------------------------------------------- INFORMATION ------------------ INFORMATION
1993 1994 1995 1996 1997 1997 1997 1998 1998
------- ------- ------- -------- -------- ----------- -------- -------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................. $41,020 $43,546 $46,831 $ 50,418 $ 48,229 $48,229 $ 24,493 $ 23,766 $ 23,766
Operating expenses:
Service and
administrative......... 19,490 20,830 21,920 25,236 27,391 24,430 13,247 14,634 12,881
Management fee.......... -- -- -- -- -- 1,447 -- -- 713
Home office............. 1,622 1,316 1,695 1,697 1,498 -- 703 731 --
Depreciation and
amortization........... 4,005 4,010 4,837 5,350 5,256 5,299 2,765 2,688 2,709
------- ------- ------- -------- -------- ------- -------- -------- ---------
Total operating
expenses............... 25,117 26,156 28,452 32,283 34,145 31,176 16,715 18,053 16,303
Operating income......... 15,903 17,390 18,379 18,135 14,084 17,053 7,778 5,713 7,463
Interest expense, net... 1,337 864 1,033 426 1,230 13,248 718 266 6,982
Gain on settlement of
limited partner notes.. -- -- -- -- -- (3,315) -- -- --
Other expense........... 241 261 251 248 271 360 83 115 167
------- ------- ------- -------- -------- ------- -------- -------- ---------
Net income before
extraordinary loss...... 14,325 16,265 17,095 17,461 12,583 6,760 6,977 5,332 314
Extraordinary loss--debt
retirement............. -- 130 -- -- -- -- -- -- --
------- ------- ------- -------- -------- ------- -------- -------- ---------
Net income............... $14,325 $16,135 $17,095 $ 17,461 $ 12,583 $ 6,760 $ 6,977 $ 5,332 $ 314
======= ======= ======= ======== ======== ======= ======== ======== =========
FINANCIAL RATIOS AND
OTHER DATA:
System Cash Flow(1)...... $21,530 $22,716 $24,911 $ 25,182 $ 20,838 $23,799 $ 11,246 $ 9,132 $ 10,885
System Cash Flow margin.. 52.5% 52.2% 53.2% 49.9% 43.2% 49.3% 45.9% 38.4% 45.8%
Annualized System Cash
Flow(2)................. 22,788 18,944 22,375
EBITDA(3)................ 19,908 21,400 23,216 23,485 19,340 22,352 10,543 8,401 10,172
Adjusted EBITDA(4)....... 19,908 21,400 23,216 23,485 19,340 22,352 10,543 9,249 11,020
Adjusted EBITDA margin... 48.5% 49.1% 49.6% 46.6% 40.1% 46.3% 43.0% 38.9% 46.4%
Annualized Adjusted
EBITDA(2)(4)............ 21,268 18,448 21,778 (14)
Capital Expenditures..... 2,812 5,486 5,724 5,998 5,570 5,570 2,296 2,616 2,616
Ratio of total debt of the Issuers
to Annualized Adjusted EBITDA.................................................................... 6.4x
Ratio of Adjusted EBITDA to
interest expense................................................................................. 1.6x(15)
Ratio of total debt of the Issuers to
Annualized Adjusted EBITDA....................................................................... 7.8x
Ratio of earnings to
fixed charges(5)........ 7.7x 6.6x 4.1x 4.0x 3.1x 1.1x(16) 3.4x 3.1x --(16)
OPERATING DATA:
(AT END OF PERIOD, EXCEPT
AVERAGE AND ANNUALIZED
DATA)
Homes passed(6).......... 147,952 152,562 156,613 161,018 166,306 166,306 163,350 168,597 168,597
Basic subscribers(7)..... 80,216 82,166 86,041 88,056 91,873 91,873 87,084 91,088 91,088
Basic penetration(8)..... 54.2% 53.9% 54.9% 54.7% 55.2% 55.2% 53.3% 54.0% 54.0%
Premium service
units(9)................ 69,922 74,529 74,087 68,720 80,013 80,013 68,531 84,931 84,931
Premium penetration(10).. 87.2% 90.7% 86.1% 78.0% 87.1% 87.1% 78.7% 93.2% 93.2%
Average monthly revenue
per basic
subscriber(11).......... $ 43.33 $ 44.70 $ 46.40 $ 48.27 $ 44.67 $ 44.67 $ 46.62 $ 43.30 $ 43.30
Annualized System Cash
Flow per basic
subscriber(12).......... $272.89 $279.78 $296.20 $ 289.28 $ 231.62 $264.54 $ 260.18 $ 207.08 $ 244.59
Annualized Adjusted
EBITDA per basic
subscriber(13).......... $252.33 $263.58 $276.04 $ 269.79 $ 214.97 $248.45 $ 242.87 $ 201.66 $ 238.06
BALANCE SHEET DATA:
(AT END OF PERIOD)
Total assets............. $47,809 $71,677 $87,946 $102,099 $110,829 $107,976 $118,226 $ 47,520
Total debt............... 27,485 34,123 40,375 50,442 47,236 51,161 50,220 140,268
Total liabilities........ 34,685 44,062 50,927 59,767 56,502 58,818 59,710 149,535
Total shareholders' and
partners' equity
(deficit)............... 13,124 27,615 37,019 42,332 54,327 49,158 58,516 (102,015)
</TABLE>
(footnotes to follow)
35
<PAGE>
PHOENIX ASSOCIATES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------------- --------------------
1993 1994 1995 1996 1997 1997 1998
----------- ----------- --------- --------- --------- --------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Home office............ -- $ 4 -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total operating
expenses............. -- 4 -- -- -- -- --
Operating loss.......... -- (4) -- -- -- -- --
Gain on settlement of
former limited partner
notes................. -- -- -- -- $ (3,315) -- --
Interest expense, net.. $ 6,947 7,265 $ 12,362 $ 12,490 12,094 $ 5,814 $ 6,506
Other expense.......... 278 167 120 106 89 53 52
--------- --------- --------- --------- --------- --------- ---------
Net loss before
extraordinary loss..... (7,225) (7,436) (12,482) (12,596) (8,868) (5,867) (6,558)
Extraordinary loss--
debt retirement....... -- 755 -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net loss................ $ (7,225) $ (8,191) $ (12,482) $ (12,596) $ (8,868) $ (5,867) $ (6,558)
========= ========= ========= ========= ========= ========= =========
FINANCIAL RATIOS AND
OTHER DATA:
Ratio of earning to
fixed charges(5)....... -- -- -- -- -- -- --
BALANCE SHEET DATA (AT
END OF PERIOD):
Total assets............ $ 7,336 $ 8,105 $ 8,592 $ 9,218 $ 7,954 $ 9,282 $ 8,129
Total debt.............. 134,014 144,514 157,448 170,762 178,365 176,657 185,066
Total liabilities....... 135,612 144,572 157,539 170,762 178,366 176,693 185,099
Total partners'
deficit................ (128,275) (136,466) (148,948) (161,544) (170,412) (167,411) (176,970)
</TABLE>
(footnotes on following page)
36
<PAGE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA
FINANCIAL AND OPERATING DATA
(1) Represents EBITDA (as defined below in Note 3) plus home office expense
for periods prior to the System Acquisition, and EBITDA plus management
fees for periods after or which give effect to the System Acquisition.
Management believes that System Cash Flow is a meaningful measure of
performance because it is commonly used in the cable television industry
to analyze and compare cable television companies on the basis of
operating performance, leverage and liquidity. However, System Cash Flow
is not intended to be a performance measure that should be regarded as an
alternative to, or more meaningful than, either operating income or net
income as an indicator of operating performance or cash flows as a
measure of liquidity, as determined in accordance with generally accepted
accounting principles. System Cash Flow, as computed by management, is
not necessarily comparable to similarly titled amounts of other
companies. See the financial statements, including the Statements of Cash
Flows, included elsewhere in this Prospectus.
(2) Represents results for the three months ended June 30 multiplied by four.
(3) Represents net income before depreciation, amortization, interest
expense, other expenses, and gain on settlement of limited partners.
Management believes that EBITDA is a meaningful measure of performance
because it is commonly used in the cable television industry to analyze
and compare cable television companies on the basis of operating
performance, leverage and liquidity. However, EBITDA is not intended to
be a performance measure that should be regarded as an alternative to, or
more meaningful than, either operating income or net income as an
indicator of operating performance or cash flows as a measure of
liquidity, as determined in accordance with generally accepted accounting
principles. EBITDA, as computed by management, is not necessarily
comparable to similarly titled amounts of other companies. See the
financial statements, including the Statements of Cash Flows included
elsewhere in this Prospectus.
(4) Represents EBITDA plus launch fees, which are deferred and amortized over
the applicable contract period for financial reporting purposes. Adjusted
EBITDA for the six months ended June 30, 1998 and Annualized Adjusted
EBITDA includes approximately $848,000 of launch fees.
(5) For purposes of calculating the ratio of earnings to fixed charges,
earnings include income (loss) before extraordinary items plus interest
expense (which includes amortization of debt issuance costs). Fixed
charges consist of interest expense incurred (including amortization of
debt issuance costs) and the estimated interest component of rent expense
(approximately one-third). For Phoenix, earnings were inadequate to cover
fixed charges by $7.0 million, $7.2 million, $12.4 million, $12.5 million
and $8.8 million for the years ended December 31, 1993, 1994, 1995, 1996
and 1997, respectively, and by $5.8 million and $6.5 million for the six
months ended June 30, 1997 and 1998, respectively.
(6) Refers to estimates by management of the approximate number of dwelling
units in a particular community that can be connected to the System.
(7) A home with one or more television sets connected to a cable system is
counted as one basic subscriber. Bulk accounts are included on an
equivalent basic unit basis in which the total monthly bill for the
account is divided by the basic monthly charge for a single outlet in the
area.
(8) Calculated as basic subscribers as a percentage of homes passed.
(9) Includes only single channel services offered for a monthly fee per
channel and does not include tiers of channels offered as a package for a
single monthly fee. A subscriber may purchase more than one premium
service, each of which is counted as a separate premium service unit.
(10) Calculated as premium service units as a percentage of basic subscribers.
(11) Represents revenues of the System during the respective period divided by
the months in the period divided by the average number of basic
subscribers (beginning of period plus end of period divided by two) for
such respective period.
(12) Represents Annualized System Cash Flow during the respective period
divided by the average number of basic subscribers (beginning of period
plus end of period divided by two) for such respective period.
37
<PAGE>
(13) Represents Annualized Adjusted EBITDA during the respective period divided
by the average number of basic subscribers (beginning of period plus end
of period divided by two) for such respective period.
(14) Management believes that the following adjustments to historical
annualized EBITDA for the three months ended June 30, 1998 are relevant to
evaluating the operating performance of the System. These annualized pro
forma adjustments reflect: (i) programming rate savings from MediaOne;
(ii) headcount reductions primarily due to duplication within the finance
and accounting departments; (iii) elimination of rent expense due to the
contribution of an office building to the System as part of the
Contribution Agreement; (iv) elimination of home office expenses relating
to Coaxial's owners; and (v) management fees to be paid to Insight.
Management believes these adjustments to be reasonable. In addition,
annualized pro forma adjusted EBITDA reflects a supplemental adjustment
for launch fees for Fox News and Great American Country. The System has
received launch fees in the past, and management believes it will continue
to receive launch fees in the normal course of business.
The following table reflects the effects of these items on historical
annualized EBITDA:
<TABLE>
<S> <C>
Historical annualized EBITDA........................................ $17,599
Annualized pro forma adjustments:
Programming rate savings........................................... 2,164
Headcount reductions............................................... 1,162
Elimination of rent expense of contributed property................ 108
Elimination of home office expense................................. 1,342
Insight management fee............................................. (1,445)
-------
Annualized pro forma EBITDA......................................... 20,930
Launch fees for Fox News and Great American Country................ 848
-------
Annualized pro forma adjusted EBITDA................................ $21,778
=======
</TABLE>
(15) Represents Adjusted EBITDA to interest expense on the total debt of the
Issuers.
(16) Represents pro forma ratio of earnings to fixed charges for the Issuers
and the Discount Notes Issuers. Earnings were inadequate to cover fixed
charges by $1.6 million for the period ended June 30, 1998.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the financial
statements and related notes which are included elsewhere in this Prospectus.
This Prospectus contains certain forward-looking statements that involve risks
and uncertainties. Future results could differ materially from those discussed
in this Prospectus. Factors that could cause or contribute to such differences
include, but are not limited to, those set forth under "Risk Factors" and
elsewhere in this Prospectus.
ACQUISITION OF SYSTEM BY INSIGHT OHIO
On August 21, 1998, as part of the Financing Plan, Coaxial contributed to
Insight Ohio substantially all of the assets comprising the System, and
Insight contributed to Insight Ohio $10.0 million in cash. As a result of the
Financing Plan, Insight and Coaxial own 75% and 25%, respectively, of the non-
voting common membership interests of Insight Ohio. Coaxial also owns the
Preferred Interests having distribution priorities which will provide for
distributions to Coaxial that will be used to pay interest and principal on
the Notes and to pay dividends to the Individual LLCs that will be used to pay
interest and principal on the Discount Notes. Distributions by Insight Ohio
will be subject to certain financial covenants and other conditions expected
to be set forth in the Senior Credit Facility. Phoenix has nominal assets.
Coaxial's principal assets are non-voting common membership interests and the
voting Preferred Interests in Insight Ohio. None of the Issuers conduct any
business. The Issuers are dependent upon the cash flow of Insight Ohio to meet
their obligations under the Notes. See "Risk Factors--Conditional Guarantees;
Structural Subordination" and "The System Acquisition."
The following discussion relates to the historical operations of the System
for the periods indicated. Such historical information reflects the operation
and management of the System by Coaxial and does not reflect any changes in
the operation or management of the System that Insight intends to make and is
not necessarily indicative of the historical results that would have been
achieved had the System been managed and operated by Insight during all of the
periods with respect to which financial information is presented in this
Prospectus. The historical operating results of the System presented below do
not reflect the actual results of Coaxial as presented in the financial
statements of Coaxial appearing elsewhere in this Prospectus, which also
include operations unrelated to the System. As the Issuers' ability to service
the Notes is dependent upon cash generated from the operations of the System,
it is more meaningful to compare the historical results of the System, which
results appear in the financial statements under the heading "Central Ohio
Cable System Operating Unit" elsewhere in this Prospectus. See page F-1 in
this Prospectus.
OVERVIEW
Revenues generated by the System are primarily attributable to monthly
subscription fees charged to basic subscribers for basic and premium cable
television programming services. Basic revenues consist of monthly
subscription fees for all services (other than premium programming) as well as
monthly charges for customer equipment rental. Premium revenues primarily
consist of monthly subscription fees for programming provided on a per channel
basis. In addition, other revenues are derived from installation and
reconnection fees charged to basic subscribers to commence or discontinue
service, pay-per-view charges, late payment fees, franchise fees, advertising
revenues and commissions related to the sale of goods by home shopping
services.
System operating expenses consist of service and administration expenses,
home office expenses and depreciation and amortization. Service and
administration expenses include direct costs, such as fees paid to programming
suppliers, expenses related to copyright fees, bad debt expense, and franchise
and use fees. Programming fees have historically increased at rates in excess
of inflation due to increases in the number of programming services offered by
the System and improvements in the quality of programming. While it has been
39
<PAGE>
difficult to pass these increases to subscribers in recent years because of
the necessity to meet promotional rates engendered by the introduction of a
competitive service, Management believes rates will stabilize and it will
again become possible to cover any increases in the costs of programming.
Service and administration expenses also include costs attributable to the
operation of the System, including wages and salaries and other expenses
related to plant operating activities, customer service operations, marketing,
billing, advertising sales, video production, finance and accounting, human
resources and other administrative functions.
The System relies on Insight for all of its strategic, managerial, financial
and operational oversight and advice. Insight also coordinates and provides
advice with respect to programming arrangements, engineering in the areas of
routine maintenance, system improvements and new technologies. In exchange for
all such services provided to the System and subject to certain restrictions
contained in the covenants with respect to the Senior Credit Facility, the
Notes and the Discount Notes, Insight is entitled to receive management fees
of 3.0% of gross operating revenues of the System. Such management fee is
payable only after distributions have been made in respect of the Preferred
Interests and only to the extent that such payment would be permitted by an
exception to the restricted payments covenants of the Notes and the Discount
Notes as well as the proposed Senior Credit Facility. See "Description of the
Notes--Certain Covenants--Limitation on Restricted Payments" and "The System
Acquisition."
COMPETITIVE OVERVIEW
In 1996, Ameritech, the telephone local exchange carrier for Columbus,
obtained a citywide cable television franchise for the City of Columbus.
Ameritech began offering cable television service in June 1996 and to date has
substantially built its entire citywide franchise, both in the System's
service area and in the Time Warner service area on the west side of Columbus.
The Time Warner system and the System service virtually distinct areas and
therefore do not compete with each other. The overbuild by Ameritech passes
approximately 71% of the homes passed by the System (approximately 120,000
homes), effectively allowing approximately 60,000 of the System's basic
subscribers to choose between Ameritech and the System. Ameritech has cable
television franchise applications pending in two surrounding communities
covering an additional 2,000 of the System's homes and 1,200 of the System's
subscribers.
Management's strategy to compete with the overbuild has included the
following:
. Management implemented technological upgrades in areas likely to be
overbuilt by constructing additional fiber optic cable and creating new
nodes. At the present time, the System has constructed 17 distinct
"enhanced areas" encompassing all of the 60,000 overbuilt subscribers.
. The effective bandwidth of each enhanced area was increased from 450 MHz
to 490 MHz, allowing for more movies, music, news, live sports and
exclusive programming such as TV Land and Central Ohio Sport! Television.
This brought the standard and premium offerings very close to what
Ameritech is able to provide on its newly constructed 750 MHz system.
. The System developed a packaging and pricing strategy that it believes
was seen as a value by customers, providing the System with a competitive
advantage over Ameritech.
. Marketing efforts were expanded in the enhanced areas by increasing the
number of promotional video spots targeted specifically to the
competitive area advertising the advantages of System service. Mail drops
were increased to at least twice monthly in each enhanced area with a
constantly changing series of promotional programs.
The promotions offered to certain of the System's subscribers had a negative
impact on operating results. Management believes that the adverse impact of
its promotional activities will be reduced in the future as the promotions
began expiring in July 1998. Management believes that the System has been
effective in competing with Ameritech and maintaining its overall subscriber
base. Since the beginning of the overbuild in June 1996, the System's
subscriber base has increased from approximately 87,700 to approximately
91,100 as of June 30, 1998. In the overbuild area, the System currently serves
approximately 60,000 subscribers. The System's net loss in the overbuild area
has been limited to approximately 1,100 subscribers since Ameritech entered
the market as the System has increased penetration from 46.1% to 50.2%.
40
<PAGE>
RESULTS OF OPERATIONS
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Revenues for the six months ended June 30, 1998 were $23.8 million, compared
to $24.5 million for the six months ended June 30, 1997. Revenues from basic,
standard and premium services decreased by $1.1 million, or 5.5%, from $20.1
million for the 1997 period to $19.0 million for the 1998 period. This
reduction reflects promotional rates offered to certain subscribers in the last
half of 1997. As noted above, promotional activities were reduced at the
beginning of 1998 but will continue to affect revenues through much of 1998 as
the year-long promotion ends and customers are then charged the System's
standard rates. The reduction in revenues also reflects the approximately
14,000 additional subscribers which were subject to the competitive environment
in 1998, compared to the first six months of 1997. Other revenues increased
slightly from $1.0 million to $1.1 million. Advertising revenues increased from
$1.6 million to $1.9 million, or 18.8%.
Service and administration expenses (including home office) rose to $15.4
million for the six months ended June 30, 1998, compared to $14.0 million for
the same period in 1997, an increase of $1.4 million, or 10.0%. Programming
expenses increased by 18.3%, from $6.0 million in 1997 to $7.1 million in 1998,
reflecting additional channels provided in the competitive areas (as discussed
above), an increase in subscribers and annual increases in programming rates.
Fees for basic and standard programming increased by $828,000, from $3.2
million in 1997 to $4.0 million in 1998, while premium services programming
costs increased by $300,000, from $1.9 million in 1997 to $2.2 million in 1998,
or 15.8%. Fees for pay-per-view programming services decreased by $60,000, or
10.8%, reflecting a drop in the number of special events available during 1998.
Other increases in operating expenses included sales and marketing expenses,
which increased by $121,000, or 25.0%, due primarily to initiation of a door-
to-door sales program and an increase in the number of promotional campaigns.
Technical operations increased $95,000 due primarily to increased installation
costs because of greater churn and increased underground locate charges due to
significant Ameritech construction activity early in the year. The System was
charged home office expenses that include costs incurred by the owners of
Coaxial and their direct employees relating to the System including salaries,
benefits, legal fees, travel and entertainment, accounting fees and other
office expenses. For the six months ended June 30, 1998, such expenses totaled
$731,000, an increase of $28,000, or 4.0%. Upon consummation of the System
Acquisition, Insight will provide management services to the System for which
it will receive a management fee.
Depreciation relating to the System increased by $157,000, or 6.3%, due to
construction in late 1997 and early 1998 to enhance the System in overbuilt
areas. Amortization decreased by $240,000, or 91.8%, as franchising costs have
become fully amortized.
Year Ended December 31, 1997 Compared to Year Ended December 31, 1996
Revenues for the year ended December 31, 1997 were $48.2 million, compared to
$50.4 million for the year ended December 31, 1996, a decrease of $2.2 million,
or 4.3%. Basic, standard and premium revenues accounted for nearly all of the
decrease, declining from $41.3 million in the 1996 period to $39.2 million in
the 1997 period, a decrease of $2.1 million, or 5.1%. This decline in revenue
reflects the full impact of the competitive environment for approximately
23,000 subscribers who were overbuilt in the last half of 1996, the addition of
approximately 23,000 subscribers to the overbuilt areas during 1997 and the
effect of a promotional campaign used to grow subscribers in the last half of
1997. The overall result of the rate reductions and promotional campaign was
alleviated by subscriber growth during 1997, from approximately 88,000 at the
end of 1996 to approximately 91,900 at year-end 1997, an increase of 4.4%.
Other revenue declined by $157,000, or 7.2%, to $2.0 million for 1997, from
$2.2 million in 1996, primarily due to installation revenues which were lower
due to promotional offerings. Advertising revenues increased to $3.4 million
for 1997, from $3.1 million in 1996, an increase of 9.7%.
Service and administration expenses (including home office) rose to $28.9
million for the year ended December 31, 1997, compared to $26.9 million for the
same period in 1996, an increase of 7.4%. Fees for basic
41
<PAGE>
and standard programming were $6.4 million in 1997, compared to $4.9 million
in 1996, an increase of 30.6%. The increase in programming costs reflected
additional services added in the competitive areas, subscriber growth and fee
increases. Home office expenses were $1.5 million in 1997, a decrease of
$200,000, or 11.8%, from $1.7 million in 1996. The reduction resulted
primarily from the elimination of salaries for shareholder officers. In
addition to programming costs, other expenses increased from $14.4 million in
1996 to $15.2 million in 1997, an increase of $800,000, or 5.6%. Of this
increase, $500,000 occurred in general and administrative and personnel
accounts due to increases in benefit costs, legal fees and office rent.
Depreciation and amortization decreased by $100,000, or 1.8%, to a total of
$5.2 million in 1997.
Year Ended December 31, 1996 Compared to Year Ended December 31, 1995
Revenues for the year ended December 31, 1996 were $50.4 million, compared
to $46.8 million for the year ended December 31, 1995, an increase of $3.6
million, or 7.7%. Basic, standard and premium revenues accounted for most of
the increase, rising $2.4 million, or 6.2%, from $38.9 million in 1995 to
$41.3 million in 1996, due to subscriber growth at a CAGR of approximately
2.3% and modest increases in rates. Pay-per-view revenues increased 33.3% to
$2.4 million in 1996, compared to $1.8 million in 1995. Advertising revenues
rose from $2.8 million in 1995 to $3.1 million in 1996, an increase of 10.7%,
and other revenue increased by $285,000 to $2.2 million in 1996.
Service and administration expenses (including home office) rose to $26.9
million for the year ended December 31, 1996, an increase of $3.3 million, or
14.0%, compared to 1995. Programming fees accounted for 61.0% of this
increase, rising from $8.9 million in 1995 to $10.9 million in 1996, an
increase of 22.5%. In addition to programming costs, other expenses increased
by 8.8% in 1996. Sales and marketing expenses were $1.1 million in 1996, an
increase of 27.1%, primarily due to increased campaign costs associated with
the beginning of the competitive overbuild. Customer service and collection
expenses increased by 13.7% to $1.5 million in 1996 due to higher collection
costs and wage increases intended to decrease turnover. Personnel expenses
increased by 17.2% to $819,000 in 1996 due to higher benefits costs. Home
office expenses were $1.7 million in 1996 and 1995, respectively.
Depreciation and amortization were $5.3 million in 1996, an increase of
$500,000, or 10.6%, compared to 1995, due primarily to increased construction
in 1996 associated with the competitive environment.
LIQUIDITY AND CAPITAL RESOURCES
The cable television business is a capital intensive business that generally
requires financing for the upgrade, expansion and maintenance of the technical
infrastructure. The capital expenditures of Coaxial relating to the System
totaled $5.7 million, $6.0 million and $5.6 million for the years ended
December 31, 1995, 1996 and 1997, respectively, and $2.6 million for the six
months ended June 30, 1998. These expenditures were primarily for serving new
homes, the rebuild of cable plant, equipment purchases, the upgrade and
replacement of service vehicles and routine maintenance and replacement of
cable plant and related equipment. These capital expenditures were financed
through borrowings under a senior credit facility among Coaxial, Phoenix,
certain of their affiliated entities, The Chase Manhattan Bank, as agent, and
certain lenders (the "Chase Credit Facility") and cash flows from operations.
Insight plans to further enhance the technical platform of the System by
upgrading the plant serving the majority of subscribers. The capability for
high-speed data transmission, impulse pay-per-view, digital tiers of service
and additional analog channels is intended to be provided by further
deployment of fiber optics, an increase in the bandwidth to 750 MHz,
activation of the reverse plant to allow two-way communications and the
installation of digital equipment.
42
<PAGE>
The Original Notes Offering was part of the Financing Plan implemented to
facilitate the organization of Insight Ohio, the acquisition of the System by
Insight Ohio and to provide for the System's liquidity and operational and
financial flexibility. Pursuant to the Financing Plan:
. Coaxial contributed to Insight Ohio substantially all of the assets
comprising the System for which Coaxial received a 25% non-voting common
membership interest in Insight Ohio as well as the Preferred Interests in
Insight Ohio, which provide for distributions to Coaxial that will be
used to pay interest and principal on the Notes and to pay dividends to
the Individual LLCs that will be used to pay interest and principal on
the Discount Notes;
. Insight contributed $10.0 million in cash to Insight Ohio for which it
received a 75% non-voting common membership interest in Insight Ohio;
. the Issuers effected the Original Offering;
. the Discount Notes Issuers effected the Discount Notes Offering; and
. a portion of the existing indebtedness of the Issuers and certain of
their affiliates will be repaid and the balance will be purchased and
restructured.
Distributions by Insight Ohio are subject to certain financial covenants and
other conditions expected to be set forth in the Senior Credit Facility. See
"Use of Proceeds."
Insight Ohio is expected to enter into the Senior Credit Facility prior to
October 1998 for the purpose of financing its future capital expenditures and
for working capital and general purposes, including the planned upgrade of the
System's technical capability, as discussed above. It is expected that the
Senior Credit Facility will be a six-year $25 million reducing revolving
credit facility. Upon consummation of the Financing Plan, there was
approximately $2.5 million available for Insight Ohio for working capital
purposes. It is expected that substantially all of the assets of Insight Ohio
will secure its performance under the Senior Credit Facility. See "Description
of Certain Indebtedness--Senior Credit Facility."
The Issuers expect to make interest payments on the Notes from funds
distributed to Coaxial in respect of the Series A Preferred Interests in
Insight Ohio to the extent permitted under the terms of the Senior Credit
Facility. Insight Ohio accrues preferred dividends in respect of the Series A
Preferred Interests in amounts necessary to make payments under the Notes. See
"The System Acquisition," "Description of Governing Documents" and
"Description of Certain Indebtedness--Senior Credit Facility."
Management anticipates that cash flows from operations, together with
amounts available under the Senior Credit Facility, will be sufficient to
finance the operating requirements of the System, debt service requirements,
distributions on the Preferred Interests and anticipated capital expenditures
for the foreseeable future.
INFLATION AND CHANGING PRICES
The System's costs and expenses are subject to inflation and price
fluctuations. Although changes in costs can be passed through to subscribers,
such changes may be constrained by competition. Management does not expect
inflation to have a material effect on the System's results of operations.
YEAR 2000
Management has performed a review of the Year 2000 preparedness relative to
the System, its accounting systems and customer billing arrangements.
Management believes that the System will not incur material costs in
connection with becoming Year 2000 compliant.
43
<PAGE>
BUSINESS
THE SYSTEM
Insight Ohio was recently formed for the purpose of acquiring Coaxial's
cable television system in the Columbus, Ohio metropolitan area. As a result
of the Financing Plan, Insight owns 75% of the common membership interests of
Insight Ohio. Insight, one of the nation's top 20 cable television operators
(after its pending transactions), manages the operations of the System and has
effective control over its business. As a result of the Financing Plan,
Coaxial owns a 25% common membership interest in Insight Ohio.
As of June 30, 1998, the System passed approximately 168,600 homes and
served approximately 91,100 basic subscribers in the eastern portion of the
City of Columbus and the surrounding suburban communities. Columbus, located
in the 34th largest designated market area ("DMA") in the United States, is
the capital of Ohio and home of The Ohio State University. In addition to the
state government and university, the Columbus economy is well diversified with
a significant presence of prominent companies such as The Limited, Merck,
Wendy's, Nationwide Insurance, Borden and Worthington Industries. The area's
strong economy provides for a well-paid employment base with an unemployment
rate of 2.9%. The average household income of the System's service area is
approximately $51,000 per year.
Portions of the System operate in a competitive environment. Subscribers in
those areas have access to two wired cable television providers--the System
and Ameritech's cable subsidiary, Ameritech New Media--as well as DBS systems
and MMDS systems. The areas of the System served by two wireline operators
pass approximately 120,000 homes, representing 71% of the System's total homes
passed. Even in this competitive environment, the System's basic subscribers
increased from approximately 86,000 at the end of 1995, prior to Ameritech's
entry into the marketplace, to approximately 91,100 as of June 30, 1998, a
compound annual growth rate ("CAGR") of 2.3%.
Offsetting some of the impact of competition, the System enjoys a high level
of population growth in the suburban communities east of Columbus. Over the
past three years, more than 14,400 homes passed have been added to the System
through new plant extensions, primarily in new housing developments. This
represents a 3.0% CAGR of homes passed for the System, which Management
believes is one of the highest levels in the cable television industry for a
major cable system.
Insight expects in the near future to upgrade the technical capability of
the System by increasing its bandwidth to 750 MHz. Currently, the System has
approximately 800 miles of 490 MHz plant and approximately 1,700 miles of 468
MHz plant. There also are approximately 160 miles of fiber optic cable
deployed in the System. The increase in bandwidth will allow the System to
deliver new services such as digital cable, high-speed Internet connections,
two-way data, and other telecommunications services.
The System has developed an award winning local-origination and production
team which has created a firm foundation for its position in the community as
a "good citizen." An impressive list of awards has further enhanced the
System's strong local presence, including:
.1997 OCTA Image Award: System Marketing
.1997 OCTA Image Award: Advertising
.1997 OCTA Image Award: Sports Programming
.1996 Pinnacle Award: Women In Cable & Telecommunications
.1996 OCTA Image Award: Best Overall Commitment to the Community
.1996 OCTA Image Award: Excellence in Local Programming
.1996 OCTA Image Award: Excellence Community Service
.1996 OCTA Image Award: Sports Programming
44
<PAGE>
.1996 OCTA Image Award: Advertising
.1996 ESPN Coaches Corner: Advertising Sales Team of the Year
.1996 CAB Individual Sales Achievement Award
THE MANAGER
Insight is one of the top 20 multiple system operators ("MSOs") in the
United States (after its pending transactions). For the past five years,
Insight's largely suburban properties have resulted in average growth rates
for homes passed and subscribers of 4.8% and 5.9%, respectively, among the
fastest growth rates achieved in the industry. Insight was co-founded in 1985
by Sidney R. Knafel, Chairman of Insight, and Michael S. Willner, President
and Chief Executive Officer of Insight, both of whom have been active in the
cable business since the early 1970's. Kim D. Kelly joined Insight in 1990 as
Executive Vice President and Chief Financial Officer and recently was named
Chief Operating Officer. In addition to many years of conventional cable
television experience, Insight's management team has been intimately involved
in the development and deployment of full service telecommunications networks.
In 1989, through an affiliated entity, Insight Communications Company U.K.,
L.P., Insight entered the U.K. cable television market, where today modern
hybrid fiber-coaxial networks are deployed widely. Messrs. Knafel and Willner
remain on the board of NTL, Inc., the publicly traded successor to the Insight
U.K. affiliate and one of the three major cable television operators in the
competitive U.K. market with franchises covering over five million homes,
including pending acquisitions.
A series of swaps, acquisitions and a joint venture have recently been
executed resulting in the current composition of Insight. The largest of these
transactions is the equal partnership between Insight and TeleCommunications,
Inc. ("TCI"), the largest MSO in the United States, which calls for, among
other things, the two companies to contribute most of their Indiana cable
systems into a joint venture which Insight will manage and control. Prior to
those transactions, as of June 30, 1998, Insight's systems were located in
seven states with approximately 65% of the subscribers clustered in Illinois
and Indiana. At the conclusion of all of its currently signed transactions,
Insight management estimates that Insight will own or manage cable television
systems with 525,000 subscribers in seven states with over 90% of the
subscribers clustered in Illinois, Indiana and Ohio.
Insight's relationship with TCI provides Insight with a depth of knowledge
and understanding regarding principal and material issues and challenges
presently facing the cable television industry. Because of this relationship,
Insight has participated in TCI affiliate meetings to discuss important
industry topics such as digital technology, new generation converter designs,
cable modems, and most recently the impact of the proposed AT&T acquisition of
TCI both on TCI's affiliates and on the industry as a whole.
THE INSIGHT SYSTEMS
The following table summarizes certain historical data relating to the cable
television systems operated by Insight during the five years ended December
31, 1997. Since there were no material acquisitions or divestitures of cable
systems during the period, the results depicted reflect only internal changes,
year-to-year:
<TABLE>
<CAPTION>
% % % % FOUR YEAR
1993 1994 CHANGE 1995 CHANGE 1996 CHANGE 1997(1) CHANGE CAGR
------- ------- ------ ------- ------ ------- ------ ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Homes passed............ 277,588 291,305 4.9% 304,261 4.4% 320,713 5.4% 335,347 4.6% 4.8%
Basic subscribers....... 142,327 153,523 7.9% 163,923 6.8% 171,164 4.4% 179,043 4.6% 5.9%
Basic penetration....... 51.3% 52.7% 2.8% 53.9% 2.2% 53.4% (0.9)% 53.4% 0.0% 1.0%
Revenue(2) ($000)....... $51,009 $52,820 3.6% $54,108 2.4% $61,839 14.3% $67,513 9.2% 7.3%
EBITDA.................. $24,456 $25,645 4.9% $28,115 9.6% $31,003 10.3% $34,090 10.0% 8.7%
Average revenue per
subscriber............. $ 30.89 $ 29.93 (3.1)% $ 30.10 0.6% $ 30.87 2.6% $ 32.01 3.7% 0.9%
EBITDA margin........... 47.9% 48.6% 1.3% 52.0% 7.0% 50.1% (3.5)% 50.5% 0.7% 1.3%
</TABLE>
- --------
(1) For presentation purposes, 1997 data does not reflect the swap of
Insight's Phoenix, Arizona systems for systems in Lafayette, Indiana,
which occurred on December 15, 1997.
(2) Revenue excludes franchise fees effective September 1, 1993.
45
<PAGE>
The table illustrates Insight's success in acquiring high-growth cable
television systems in growing markets. From 1993 to 1997, the CAGR for homes
passed and basic subscribers was 4.8% and 5.9%, respectively. During 1994,
when the effect of the re-regulation of the cable industry impacted the
financial statements of the companies, Insight's revenue-per-subscriber was
reduced by over 3%. However, unlike most of the industry, EBITDA still
increased by nearly 5%.
INSIGHT BUSINESS STRATEGY
Two years ago, Insight initiated a strategic plan designed to augment its
core business of delivering multi-channel video. The strategy calls for:
. the upgrade of plant to 750 MHz hybrid fiber-coaxial platforms from which
to deploy new value-added services such as high-speed data access,
digital video and telephony services;
. the reconfiguration of existing systems in a series of swaps to achieve
subscriber clusters with a strong market presence; and
. an acquisition plan focused on markets with attractive demographics and a
high ratio of subscribers to headends.
The acquisition of the System by Insight Ohio is an integral part of
Insight's long-term business strategy. The System has a strong market presence
in a state capital and academic center with a diverse, growing economy. All of
the System's approximately 91,100 subscribers are served from a single headend
allowing for efficient capital deployment for new services.
INSIGHT'S SYSTEM OPERATING STRATEGY
The System fits the profile of cable television systems that Insight seeks
to own and operate. The System is large enough to have a significant market
presence and all subscribers are serviced from one headend. In addition,
Columbus is geographically proximate to other Insight cable systems with a
subscriber universe having the type of demographic profile that Insight
believes will widely accept new telecommunications offerings. Insight intends
to aggressively implement its upgrade strategy in Columbus.
During the first year after the System Acquisition, Management expects to
increase the System's channel capacity in order to broaden its core analog
service offerings. Management also expects to increase revenues as the System
upgrade is completed by adding new services such as digital cable, high-speed
modems and other newly developing telecommunications services. Insight already
has a national affiliation agreement with @Home to provide high-speed Internet
connections over its cable television system infrastructure. Management either
will extend that agreement to the System or will affiliate the System with
Time Warner's Road Runner Internet service which is presently available in
Time Warner's Columbus cable system.
With respect to programming, Management believes it can effectively
repackage the channel offerings to more advantageously compete without
reducing revenue per subscriber. Management's strategy is to compete in the
marketplace with its exclusive local programming, higher quality local service
and increased new technology offerings as opposed to promotional discounts.
Due to its relationship with MediaOne (formerly Continental Cablevision),
Insight will provide programming discounts to the System through November
1999. After such date, Insight believes that through its strategic alliances
with other major MSOs, utilizing programming cooperatives or through its own
purchasing power, it will be able to continue to obtain programming for the
System at a cost lower than that presently available to Coaxial. Management
also plans to implement additional cost savings measures, including specific
employee reductions.
46
<PAGE>
OVERBUILD
In 1996, Ameritech, the telephone local exchange carrier for Columbus,
obtained a citywide cable television franchise for the City of Columbus.
Ameritech began offering cable television service in June 1996 and to date has
substantially built its entire citywide franchise, both in the System's
service area and in the Time Warner service area on the west side of Columbus.
The Time Warner system and the System service virtually distinct areas and
therefore do not compete with each other. The overbuild by Ameritech passes
approximately 71% of the homes passed by the System (approximately 120,000
homes), effectively allowing approximately 60,000 of the System's basic
subscribers to choose between Ameritech and the System. Ameritech has cable
television franchise applications pending in two surrounding communities
covering an additional 2,000 of the System's homes and 1,200 of the System's
subscribers.
Coaxial's strategy to compete with the overbuild has included the following:
. selectively constructing fiber optic cable deeper into the overbuild area
to create additional channel capacity;
. adding more movies, music, news, live sports and exclusive programming
such as TV Land and Central Ohio Sport! Television on the higher
bandwidth;
. decreasing the System's standard rate to be slightly below that offered
by Ameritech;
. repackaging the System's pay services and selectively using promotions;
. significantly increasing the use of focused target marketing; and
. stressing local customer service.
The promotions offered to certain of the System's subscribers had a negative
impact on operating results. Management believes that the adverse impact of
its promotional activities will be reduced in the future as the promotions
began expiring in July 1998.
Management believes that the System has been effective in competing with
Ameritech and maintaining its overall subscriber base. Since the beginning of
the overbuild in June 1996, the System's subscriber base has increased from
approximately 87,700 to approximately 91,100 as of June 30, 1998. In the
overbuild area, the System currently serves approximately 60,000 subscribers.
The System's net loss in the overbuild area has been limited to approximately
1,100 subscribers since Ameritech entered the market as the System has
increased penetration from 46.1% to 50.2%. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Competitive
Overview."
TECHNOLOGICAL DEVELOPMENTS
Management believes that in order to achieve consistently high levels of
customer service, maintain a strong competitive posture and deploy important
new technologies, a robust technical platform needs to be maintained.
Presently the System is comprised of approximately 2,500 miles of plant
passing approximately 168,600 homes resulting in a density of 67 homes per
mile. Approximately 32% of the plant has been expanded to 490 MHz and
approximately 68% is built at 468 MHz. The System is 100% addressable, with
approximately 84% of the basic subscribers having addressable converters.
The System's deployment of fiber optic cable began in 1989. Its use was
originally for two main purposes: to improve end-of-the-line performance and
to increase reach for service of areas as yet uncabled. In addition, the fiber
program created a redundant network allowing for automatic backup in case of
system failure. Presently, 72 nodes are active, allowing for narrow casting
and differentiation of channel lineups from the single headend.
A direct result of this fiber-rich platform is an improvement in picture
quality, and the impact of System outages has been diminished because outages
impact much smaller areas (especially in terms of commercial power problems).
The System now has the capability to run four separate lineups from a single
headend and has the ability to narrow-cast in terms of cross-channel
advertisement and zone areas for commercial insertion. In
47
<PAGE>
addition, this platform will allow for the roll out of future new revenue
streams such as high-speed data, Internet access and interactive services. A
self-healing ring is also in place that feeds the optical transition hub
building to prevent catastrophic failure in all associated areas. Internet
high-speed data services were launched in May 1998.
Insight plans to further enhance the technical platform of the System by
upgrading the plant serving the majority of subscribers. The capability for
high-speed data transmission, impulse pay-per-view, digital tiers of service
and additional analog channels is intended to be provided by further
deployment of fiber optics, an increase in the bandwidth to 750 MHz,
activation of the reverse plant to allow two-way communications and the
installation of digital equipment.
All of the System's basic subscribers currently have access to addressable
technology and approximately 84% have addressable converters in their homes.
Addressable technology enables the System to electronically control the cable
television services being delivered to the customer's home. As a result, the
System can electronically upgrade or downgrade services to a customer
immediately, from its customer service center, without the delay or expense
associated with dispatching a technician to the customer's home. Addressable
technology also reduces premium service theft, is an effective enforcement
tool in the collection of delinquent payments and enables the System to offer
pay-per-view services, including movies and special events.
Management believes that active use of fiber optic technology as an
alternative to coaxial cable is expected to play a major role in expanding
channel capacity and improving the performance of the System. Fiber optic
strands are capable of carrying hundreds of video, data and voice channels
over extended distances without the extensive signal amplification typically
required for coaxial cable. The System will continue to deploy fiber optic
cable further reducing amplifier cascades while improving picture quality and
system reliability.
Recently, high-speed cable modems and set-top boxes using digital
compression technology have become commercially viable. These developments
allow for the introduction of high-speed data services and Internet access and
will increase the programming services available to customers. Digital
compression technology provides for a significant expansion of channel
capacity with up to 12 digital channels to be carried in the bandwidth of one
analog channel. Insight has experimented with 3Com cable modems in its
Noblesville, Indiana system and plans to deploy a high-speed Internet service
in some systems before the end of 1998. Insight has a national affiliation
agreement with @Home, the largest high-speed Internet cable service.
Management intends to install two-way capability in the System rebuild and a
wide-spread rollout is planned for 1999.
MARKETING, PROGRAMMING AND RATES
Marketing
The System's marketing programs and campaigns are based upon offering a
variety of cable services creatively packaged and tailored to appeal to its
different markets and to segments within its markets. The System surveys its
customer base to ensure that it is meeting the demands of its customers and
stays abreast of its competition in order to effectively counter competitors'
promotional campaigns. The System uses 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. Using a skilled team of marketing professionals, the System has
competed by supporting an innovative variety of marketing activities,
including the following:
Promotion. The System's marketing team functions as an in-house ad agency
handling graphic design, art direction, television scripting and radio
scripting at significant savings over outside agencies. Using state-of-the-art
software packages, the marketing team is able to produce direct mail, video,
print and collateral marketing materials in-house. In addition, sophisticated
in-house capabilities allow for the quick and inexpensive production of
promotional and competitive educational spots to air on any of 20 channels for
which the System has inserted
48
<PAGE>
advertising spots. Management zones the System's service areas into two
regions: competitive and non-competitive. This zoning provides separate and
distinct channel line-ups to subscribers in the competitive and non-
competitive regions of the System. The System also has its CableData homes
passed database zoned similarly. This provides a significant advantage by
delivering a customized "competitive" message to only those subscribers in the
zoned competitive area. The System has run an average of 15,000 marketing
commercials per month, fully utilizing any unsold advertising spots.
Telemarketing. The System's in-house telemarketing operation consists of an
eight-person team including a supervisor and an order-entry person. A Telecorp
predictive dialer is used which allows the telemarketing group to achieve
better sales calls results. The telemarketing group also collects customer
surveys and provides additional phone capacity to customer service
representatives during peak periods such as heavy media campaigns.
Guide. The System produces a 200-page monthly programming guide. The guide
features extensive custom features including the cover, pay-per-view, sports
calendars, VCR+ Codes and a 16-page advertiser supported coupon section. The
guide also gives the System a vehicle to provide subscriber notifications and
any technical information that is traditionally delivered via more expensive
bill inserts or direct mail. It is also customized and zoned to competitive
and non-competitive areas. The guide is profitable with a 68% penetration.
Market Analysis. The System employs a full-time marketing analyst and
utilizes a wide variety of software programs, including Paradox and Claritas
Prism Cluster Coding. This support function supplies analysis and reporting
capabilities not normally available within cable industry MIS operations that
are traditionally supported by billing systems. This type of market analysis
is particularly effective in tracking competitive activity and promotional
offers in the overbuild areas.
Apartment Management. Approximately 32% of the System's subscribers reside
in apartment housing units or Multiple Dwelling Units ("MDUs"). Management
believes that in a competitive environment, the management of the MDU market
and the apartment owners will grow in importance. The apartment group provides
support for the entire MDU customer base. The group works with apartment
managers throughout the System to manage move-in and move-out lists in an
effort to maximize penetration within the market. It has developed strong
working relationships with key apartment owners and managers and is an active
member in The Greater Columbus Apartment Association. As of June 30, 1998, the
group had executed exclusive contracts with apartment complexes representing
26,000 of the System's homes passed, providing a significant competitive
advantage in the overbuilt market.
Network Spot Sales. In addition to customer fees, the System derives a
modest amount of revenue from the sale of local spot advertising time on
locally originated and satellite-delivered programming. The advertising sales
operation currently inserts advertising spots on the following 20 channels:
A&E, BET, Comedy Central, CNN, Discovery, ESPN, ESPN-2, Fox Family Channel,
Fox Sports, Golf, Headline News, Home & Garden, Lifetime, MTV, Nickelodeon,
TBS, TNN, TNT, TV Land and USA. The System utilizes digital insertion
technology supplied by SeaChange Digital. As a result of the latest insertion
equipment and an experienced and talented advertising team, the System
generates approximately $36.00 of total advertising revenue per subscriber on
an annual basis, placing it near the top of the industry in spot sales
revenue.
Home Shopping. The System also derives a modest amount of revenue from
affiliations with home shopping services (which offer merchandise for sale to
customers and compensate system operators with a percentage of their sales
receipts). Utilizing two full-time networks and one part-time network, the
System generated home shopping revenues of $3.95 per subscriber in 1997.
Other Advertising Sales. The System has also developed a classified channel
designed both to attract new advertising clients as well as to create value-
added programs which enhance subscriber satisfaction. Among the System's
programming are several real estate programs, a career search program, leased
access and a membership marketing program called "Cable Saver" which offers
discounts at local merchants to subscribers,
49
<PAGE>
thus helping subscribers partially offset their cable bills. The System
expects to generate approximately $7.30 per subscriber on an annual basis from
classifieds. When combined with network spot sales, the System's strong
advertising business affords it the top spot among MSOs when ranked by gross
advertising revenue per basic subscriber.
Central Ohio Sport! Television. In early 1998, the System teamed up with the
local Time Warner cable system to develop a local sports programming package
under the brand "Sport!". This exclusive package is not available to
Ameritech's cable subscribers. "Sport!" features as its cornerstone 31 Ohio
State University games including women's basketball, men's ice hockey, women's
volleyball, men's baseball and the annual Spring Football Game. In addition
"Sport!" will offer 40 to 50 additional professional, collegiate and high
school sporting events on the same exclusive basis.
Production. The System produces all of the local programming for Central
Ohio Sport! Television, as well as other events as varied as harness racing
and marching band competitions. The System has a state-of-the-art commercial
production facility, including a 1996 mobile production vehicle, electronic
field production ("EFP") equipment and an on-line edit suite. The combination
of the mobile truck, EFP equipment and the edit suite allow the vast majority
of commercial production work to be done in-house at significant cost savings
over outside production facilities.
High Speed Internet Access. In May 1998, the System began offering high-
speed Internet access via asymmetrical (telephone return) cable modems under
the brand name Coaxial Express. The service is provided in a "turnkey" fashion
under an agreement with Frontier Global Center. Customers can download files
and information from the Internet at speeds up to 1.5 megabits per second, or
30 to 50 times faster than traditional dial up Internet access services.
Ameritech does not offer high speed Internet access in the System's service
area, providing the System with a competitive advantage in the Internet access
market.
Programming
The System has various contracts to obtain basic and premium programming for
the System from program suppliers whose compensation is typically based on a
fixed fee per customer. Due to its relationship with MediaOne (formerly
Continental Cablevision), Insight will provide programming discounts to the
System through November 1999. After such date, Insight believes that through
its strategic alliances with other major MSOs, utilizing programming
cooperatives or through its own purchasing power, it will be able to continue
to obtain programming for the System at a cost lower than that presently
available to Coaxial.
Some program suppliers provide volume discount pricing structures or offer
marketing support to the System. The System's successful marketing of multiple
premium service packages emphasizing customer value enables the System to take
advantage of such cost incentives. The System's programming costs are expected
to increase in the future due to additional programming being provided to its
customers, increased costs to purchase programming, inflationary increases and
other factors affecting the cable television industry. The System also has
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, the System has entered into
agreements with certain stations to carry satellite-delivered cable
programming which is affiliated with the network carried by those stations.
See "Legislation and Regulation."
The System offers a "basic service tier," consisting of local television
channels (network and independent stations) available over-the-air, and local
public, governmental and educational access channels. The System offers, for a
monthly fee, an expanded basic tier of various satellite-delivered, non-
broadcast channels (such as CNN, MTV, USA, ESPN and TNT). In addition to these
services, the System provides premium services such as HBO, Cinemax, Showtime,
The Movie Channel and Starz!, which are combined in different formats to
appeal to the various segments of the viewing audience. 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. Such premium
programming services are offered by
50
<PAGE>
the System both on a per-channel basis and as part of premium service packages
designed to enhance customer value and to enable the System to take advantage
of programming agreements offering cost incentives based on premium service
unit growth. Subscribers may subscribe to one or more premium service units. A
"premium service unit" is a single premium service for which a subscriber must
pay an additional monthly fee in order to receive the service. Management
plans to upgrade the System using fiber optic technology, which will allow the
System to expand the number of multiplexed premium screens (additional
channels such as Showtime 2 and HBO Family) providing greater value for the
subscriber. The upgrade will also give the System the ability to use "tiered"
packaging strategies for marketing premium services and promoting niche
programming services. Management believes that this ability will increase
basic and premium penetration as well as revenue per basic subscriber. The
System also provides five pay-per-view services purchased from independent
suppliers such as Viewer's Choice and Showtime Event Television. These
services are satellite-delivered channels, consisting principally of feature
films, adult movies, live sporting events, concerts and other special events,
usually presented without commercial interruption. Such pay-per-view services
are offered by the System on a "per viewing" basis, with subscribers only
paying for programs which they select for viewing.
Rates
Monthly customer rates for services vary from market to market, primarily
according to the amount of programming provided. At June 30, 1998, the
System's stated monthly basic service rate for residential customers was
$11.47, the System's monthly expanded basic service rates for residential
customers ranged from $14.93 to $18.65, and per-channel premium service rates
(not including special promotions) ranged from $5.95 to $12.95 per service. At
June 30, 1998, because of System promotional offerings, the weighted average
revenue (including special promotions) for the System's monthly combined basic
and expanded basic service was approximately $25.00.
A one-time installation fee, which the System may wholly or partially waive
during a promotional period, is charged to new customers. The System charges
monthly fees for converters and remote control devices. The System also
charges administrative fees for delinquent payments for service. Customers are
free to discontinue service at any time without additional charge 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.
On February 11, 1997, a Petition for Determination of Effective Competition
filed by Coaxial challenging the certification of the City of Columbus was
granted by the FCC. This petition effectively revoked the City of Columbus'
right to regulate the System's basic cable and equipment rates.
EMPLOYEES
As of June 30, 1998, the System employed approximately 200 full-time
equivalent employees, none of whom are represented by a union or covered by a
collective bargaining agreement. Management believes that its relations with
its employees are good. Approximately 50% of the full-time employees have
tenure of five years or longer. Although the Columbus area has relatively low
unemployment and competition in hiring is intense, Management believes that it
will continue to be successful in attracting and retaining highly qualified
employees and maintaining good working relationships with its current
employees.
PROPERTIES
The System's principal physical assets consist of cable television operating
plant and equipment, including signal receiving, encoding and decoding
devices, headend and distribution systems and customer house drop equipment
for its cable television systems. The signal receiving apparatus includes a
tower, antenna, ancillary electronic equipment and earth stations for
reception of satellite signals. The headend, consisting of associated
electronic equipment necessary for the reception, amplification and modulation
of signals, is located near the
51
<PAGE>
receiving devices. Most basic subscribers of the System utilize converters
that can be addressed by sending coded signals from the headend facility over
the cable network. See "--Technological Developments" above. The System's
distribution system consists primarily of coaxial and fiber optic cables and
related electronic equipment.
The System owns parcels of real property for signal reception sites (one
antenna tower and one headend). The System also leases one small office and
one hub location. Management believes that its properties, both owned and
leased, are in suitable condition adequate for the System's operations.
The System's cables generally are attached to utility poles under pole
rental agreements with local public utilities, although in some areas the
distribution cable is buried in underground ducts or trenches. The physical
components of the System require periodic upgrading to improve system
performance and capacity.
CUSTOMER SERVICE AND COMMUNITY RELATIONS
The System is dedicated to quality customer service. Plans to make
significant system improvements are designed in part to strengthen customer
service through greater system reliability and the introduction of new
services. Management seeks a high level of customer satisfaction by also
employing a well-trained staff of customer service representatives and
experienced field technicians.
Overall, the System employs 54 customer service representatives, an average
of one for every 1,685 subscribers, who answer phone calls and handle walk-in
traffic. The System utilizes an automated response unit system to track and
monitor subscriber calls, which allows customers to perform common functions
such as checking account balances, recent payments or scheduled appointments
using a touch-tone phone, without talking to a customer service
representative. Customers can also use the automated response unit system to
instantly upgrade premium services or order pay-per-view movies and events, as
well as report service problems. All newly hired customer service
representatives and technicians are trained in-house. Programmers and vendors
provide training and product updates via representatives who visit the System
office on a continual basis. Technicians are on call 24 hours per day, 365
days per year. All on-call technicians are equipped with pagers and two-way
radios. During the work day, technicians communicate with the System office
via business radios. The majority of re-connects and new connects or drop
replacements are performed by in-house personnel. All disconnects are
performed in-house.
In addition, the System is dedicated to fostering strong community relations
in the communities served by the System. The System supports local charities
and community causes through staged events and promotional campaigns,
including Children's Hospital Miracle Network Telethon, the Penny-A-Day for
Children Program, strong United Way support and Red Cross Blood Drive
donations. The System also installs and provides free cable television service
and Internet access to public schools, government buildings and not-for-profit
hospitals in its franchise areas. Management believes that its relations with
the communities in which the System operates are generally excellent.
FRANCHISES
Cable television 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 certain other public
institutions; and
. the maintenance of insurance and indemnity bonds.
The provisions of local franchises are subject to federal regulation under
the Communications Act. See "Legislation and Regulation."
52
<PAGE>
The System provides cable television service to residents of 41 governmental
jurisdictions. Within each of these governmental jurisdictions, the System
operates under authority granted by the local community or the State of Ohio.
Actual franchise agreements are maintained with the 28 jurisdictions that
possess the legal basis to grant such franchises consistent with federal and
state law. These franchises, which are non-exclusive, provide for the payment
of fees to the issuing authority. In the System, such franchise fees are
passed through directly to the customers. The Cable Acts prohibit franchising
authorities from imposing franchise fees in excess of 5% of gross revenue and
also permit the cable television system operator to seek renegotiation and
modification of franchise requirements if warranted by changed circumstances.
See "Legislation and Regulation."
The majority of the System's basic subscribers are in governmental
jurisdictions that require a franchise. The table below groups all of the
System's governmental jurisdictions by date of expiration of the authority to
operate and presents the approximate number and percentage of basic
subscribers for each group as of April 22, 1998.
<TABLE>
<CAPTION>
PERCENTAGE OF PERCENTAGE OF
NUMBER OF TOTAL TOTAL BASIC
YEAR OF FRANCHISE EXPIRATION FRANCHISES FRANCHISES SUBSCRIBERS
- ---------------------------- ---------- ------------- -------------
<S> <C> <C> <C>
1998 through 2001......................... 9 22% 20%
2002 and thereafter....................... 32 78% 80%
--- ---- ----
Total................................... 41 100% 100%
=== ==== ====
</TABLE>
The Cable Acts provide, among other things, for an orderly franchise renewal
process in which franchise renewal will not be unreasonably withheld or, if
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 Cable Acts established comprehensive renewal
procedures which require that an incumbent franchisee's renewal application be
assessed on its own merits and not as part of a comparative process with
competing applications. See "Legislation and Regulation."
Management believes that it generally has good relationships with its
franchising communities. The System has never had a franchise revoked or
failed to have a franchise renewed. In addition, all of the franchises of the
System eligible for renewal have been renewed or extended at or prior to their
stated expirations, and no franchise community has refused to consent to a
franchise transfer to the System.
THE CABLE TELEVISION INDUSTRY
The cable television industry developed in the United States in the late
1940's and early 1950's in response to the needs of residents in predominantly
rural and mountainous areas of the country where the quality of off-air
television reception was inadequate due to factors such as topography and
remoteness from television broadcast towers. In the late 1960's, cable
television systems also developed in small and medium-sized cities and
suburban areas that had a limited availability of clear off-air television
station signals. All of these markets are regarded within the cable industry
as "classic" cable television station markets. In more recent years, cable
television systems have been constructed in large urban cities and nearby
suburban areas, where good off-air reception from multiple television stations
usually is already available, in order to provide the numerous, satellite-
delivered channels carried by cable television systems which are not otherwise
available via broadcast television reception.
A cable television system receives television, radio and data signals that
are transmitted to the system's headend site by means of off-air antennas,
microwave relay systems and satellite earth stations. These signals are then
modulated, amplified and distributed, primarily through coaxial, and in some
instances, fiber optic cable, to customers who pay a fee for this service.
Cable television systems may also originate their own television programming
and other information services for distribution through the system. Cable
television systems generally are constructed and operated pursuant to non-
exclusive franchises or similar licenses granted by local governmental
authorities for a specified term of years, generally for extended periods of
up to 15 years.
53
<PAGE>
Cable television systems offer customers various levels (or "tiers") of
cable television services consisting of:
. off-air television signals of local network, independent and educational
stations;
. various satellite-delivered, non-broadcast channels (such as CNN, MTV,
USA Network, ESPN and TNT);
. certain programming originated locally by the cable television system
(such as public, governmental and educational access programs); and
. informational displays featuring news, weather, stock market and
financial reports and public service announcements.
For an extra monthly charge, cable television systems also offer premium
television services to their customers. These services (such as Home Box
Office, Showtime and regional sports networks) are satellite-delivered
channels consisting principally of feature films, live sports events, concerts
and other special entertainment features, usually presented without commercial
interruption.
A customer generally pays an initial installation charge and fixed monthly
fees for basic and premium television services and for other services (such as
the rental of converters and remote control devices). Such monthly service
fees constitute the primary source of revenue for cable television operators.
In addition to customer revenue from these services, cable television
operators generate revenue from additional fees paid by customers for pay-per-
view programming of movies and special events and from the sale of available
advertising spots on advertiser-supported programming. Cable television
operators frequently also offer to their customers home shopping services,
which pay the systems a share of revenue from sales of products in the
systems' service areas. See "--Marketing, Programming and Rates" above.
COMPETITION
The major source of competition for the System is Ameritech. Ameritech has
overbuilt approximately 120,000 homes passed in the System's service areas, or
approximately 71% of the total homes in the service territory as of June 30,
1998. See "--Overbuild" above and "Risk Factors--Significant Competition in
the Cable Television Industry; Overbuilds."
Cable television systems face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment such as off-air television broadcast
programming, newspapers, movie theaters, live sporting events, interactive
online computer services and home video products, including videotape cassette
recorders. The extent to which a cable television system is competitive
depends, in part, upon that system's ability to provide, at a reasonable price
to customers, a greater variety of programming and other communications
services than those which are available off-air or through other alternative
delivery sources and upon superior technical performance and customer service.
Cable television systems generally operate pursuant to franchises granted on
a non-exclusive basis. The 1992 Cable Act prohibits franchising authorities
from unreasonably denying requests for additional franchises and permits
franchising authorities to operate cable television systems. See "Legislation
and Regulation." Well-financed businesses from outside the cable television
industry (such as the public utilities that own the poles to which cable is
attached) may become competitors for franchises or providers of competing
services. Competition from other video service providers exists in areas
served by the System. In a number of the franchise areas served by the System,
the System faces direct competition from other franchised cable television
operators. There can be no assurance, however, that additional cable
television systems will not be constructed in other franchise areas of the
System.
Cable television operators also face competition from private satellite
master antenna television ("SMATV") systems that serve condominiums, apartment
and office complexes and private residential developments. SMATV systems offer
both improved reception of local television stations and many of the same
satellite-delivered program services offered by franchised cable television
systems. SMATV operators often enter
54
<PAGE>
into exclusive agreements with building owners or homeowners associations,
although some states have enacted laws that authorize franchised cable
television operators access to such private complexes. These laws have been
challenged in the courts with varying results. In addition, some companies are
developing and/or offering to these private residential and commercial
developments packages of telephony, data and video services. Under the 1996
Telecom Act, SMATV systems can interconnect non-commonly owned buildings
without having to comply with local, state and federal regulatory requirements
that are imposed on cable television systems providing similar services, as
long as they do not use public rights-of-way. For instance, while a franchised
cable television system typically is obligated to extend service to all areas
of a community regardless of population density or economic risk, a SMATV
system may confine its operation to small areas that are easy to serve and are
more likely to be profitable. The System passes over 300 MDU complexes within
its service territory and currently has entry agreements, either exclusive or
non-exclusive, with complexes totaling approximately 60,000 MDUs. The System
currently provides programming to over 32,000 of these MDUs, or 54.1% of the
total MDUs passed. The ability of the System to compete for customers in
residential and commercial developments served by SMATV operators is
uncertain.
The FCC has recently allocated a sizable amount of spectrum in the 27 to 31
GHz band for use by a new wireless service, Local Multipoint Distribution
Service ("LMDS"), which, among other uses, can deliver over 100 channels of
programming directly to consumers' homes. The FCC completed an auction of this
spectrum to the public in March 1998, in which the participation of cable
television operators and local telephone companies was restricted. The extent
to which the winning licensees in this service will use this spectrum in
particular regions of the country to deliver multichannel video programming
and other services to subscribers, and therefore provide competition to
franchised cable television systems, is uncertain at this time.
Individuals presently have the option to purchase earth stations, which
allow the direct reception of satellite-delivered broadcast and non-broadcast
program services formerly available only to cable television subscribers. Most
satellite-distributed program signals are electronically scrambled so as to
permit reception only with authorized decoding equipment for which the
consumer must pay a fee. The 1992 Cable Act enhances the right of satellite
distributors and other competitors to purchase non-broadcast satellite-
delivered programming. The fastest growing method of satellite distribution is
by high-powered direct broadcast satellites ("DBS") utilizing video
compression technology. This technology has the capability of providing more
than 100 channels of programming over a single high-powered DBS satellite with
significantly higher capacity available if multiple satellites are placed in
the same orbital position. DBS service can be received virtually anywhere in
the United States through the installation of a small rooftop or side-mounted
antenna. DBS service is presently being heavily marketed on a nationwide basis
by three service providers. The 1996 Telecom Act and FCC regulations preempt
certain local restrictions on the location and use of DBS and other satellite
receiver dishes.
DBS systems currently have certain advantages over cable television systems
with respect to programming and digital quality, as well as disadvantages that
include high upfront costs and a lack of local programming, service and
equipment distribution. One DBS provider, EchoStar, has announced plans to
offer some local signals in a limited number of markets. A review by the U.S.
Copyright Office is underway to determine if such offerings are permissible
under the copyright law. In addition, legislation has been introduced in
Congress to include carriage of local signals by DBS providers under the
copyright law. The ability of DBS to deliver local signals would eliminate a
significant advantage that cable television operators currently have over DBS
providers. The System will magnify its competitive service price points and
seek to maintain programming parity with DBS by selectively increasing channel
capacities of the System and introducing new premium channels, pay-per-view
and other services. Management estimates that there are approximately 5,700
DBS subscribers in its service area. Management believes that DBS erosion will
be minimal due to the marketing department's ability to properly educate
subscribers regarding pricing and packaging and offering high value-added
channel line-ups.
Cable television systems also compete with wireless program distribution
services such as MMDS, which uses low-power microwave frequencies to transmit
video programming over the air to customers. Wireless distribution services
generally provide many of the programming services provided by cable
television systems, and digital compression technology is likely to increase
significantly the channel capacity of their systems.
55
<PAGE>
MMDS service requires unobstructed "line of sight" transmission paths. In the
majority of the System's franchise service areas, prohibitive topography and
"line of sight" access have and are likely to continue to limit competition
from MMDS systems. Moreover, in the majority of the System's franchise areas
MMDS operators face significant barriers to growth since the lower population
densities make these areas less attractive. Management is not aware of any
significant MMDS operation currently within its cable television franchise
service areas. American Telecasting Inc. ("ATI") is an MMDS operator providing
service in the Columbus area and covering most of the System's service areas.
The System has run numerous competitive ad campaigns educating consumers
regarding the shortfalls of the ATI product, such as the limited number of
channels, the massive antennae required and service issues. Management
estimates that ATI has built a subscriber base of less than 500 subscribers in
the System's service areas.
Other new technologies, including Internet-based services, may become
competitive with services that cable television systems can offer. The 1996
Telecom Act directed the FCC to establish, and the FCC has adopted,
regulations and policies for the issuance of licenses for digital television
("DTV") to incumbent television broadcast licensees. DTV is expected to
deliver high definition television pictures, multiple digital-quality program
streams, as well as CD-quality audio programming and advanced digital
services, such as data transfer or subscription video. The FCC also has
authorized television broadcast stations to transmit textual and graphic
information useful both to consumers and businesses. The FCC also permits
commercial and noncommercial FM stations to use their subcarrier frequencies
to provide nonbroadcast services including data transmissions. The FCC
established an over-the-air Interactive Video and Data Service that will
permit two-way interaction with commercial and educational programming along
with informational and data services. LECs and other common carriers provide
facilities for the transmission and distribution to homes and businesses of
video services, including interactive computer-based services like the
Internet, data and other nonvideo services.
The 1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utilities Holding Company Act of 1935,
as amended. Electric utilities must establish separate subsidiaries known as
"exempt telecommunications companies" and must apply to the FCC for operating
authority. Due to their financial resources, electric utilities could be
formidable competitors to traditional cable television systems.
Advances in communications technology as well as changes in the marketplace
and the regulatory and legislative environments are constantly occurring.
Thus, it is not possible to predict the effect that ongoing or future
developments might have on the cable industry or on the operations of the
System.
LEGAL PROCEEDINGS
There are no material pending legal proceedings to which any of the Issuers
or Insight Ohio is a party or to which any of their properties are subject.
56
<PAGE>
LEGISLATION AND REGULATION
The cable television industry is regulated by the FCC, some state
governments and the applicable local governments. In addition, various
legislative and regulatory proposals under consideration from time to time by
Congress and various federal agencies have in the past, and may in the future,
materially affect the System and the cable television industry. The following
is a summary of federal laws and regulations materially affecting the growth
and operation of the cable television industry and a description of certain
state and local laws. Management believes that the regulation of its industry
remains a matter of interest to Congress, the FCC and other regulatory
authorities. There can be no assurance as to what, if any, future actions such
legislative and regulatory authorities may take or the effect thereof on the
System.
FEDERAL LEGISLATION
The principal federal statute governing the cable television industry is the
Communications Act. As it affects the cable television industry, the
Communications Act has been significantly amended on three occasions, by the
1984 Cable Act, the 1992 Cable Act and the 1996 Telecom Act. The 1996 Telecom
Act altered the regulatory structure governing the nation's telecommunications
providers. It removed barriers to competition in both the cable television
market and the local telephone market. Among other things, it also reduced the
scope of cable rate regulation. In addition, the 1996 Telecom Act required the
FCC to undertake a host of rulemakings to implement the 1996 Telecom Act, the
final outcome of which cannot yet be determined.
FEDERAL REGULATION
The FCC, the principal federal regulatory agency with jurisdiction over
cable television, has adopted regulations covering such areas as cross-
ownership between cable television systems and other communications
businesses, carriage of television broadcast programming, cable rates,
consumer protection and customer service, leased access, indecent programming,
programmer access to cable television systems, programming agreements,
technical standards, consumer electronics equipment compatibility, ownership
of home wiring, program exclusivity, equal employment opportunity, consumer
education and lockbox enforcement, origination cablecasting and sponsorship
identification, children's programming, signal leakage and frequency use,
maintenance of various records, and antenna structure notification, marking
and lighting. The FCC has the authority to enforce these regulations through
the imposition of substantial fines, the issuance of cease and desist orders
and/or the imposition of other administrative sanctions, such as the
revocation of FCC licenses needed to operate certain transmission facilities
often used in connection with cable operations. A brief summary of certain of
these federal regulations as adopted to date follows.
Rate Regulation
The 1984 Cable Act codified existing FCC preemption of rate regulation for
premium channels and optional nonbasic program tiers. The 1984 Cable Act also
deregulated basic cable rates for cable television systems determined by the
FCC to be subject to effective competition. The 1992 Cable Act substantially
changed the previous statutory and FCC rate regulation standards. The 1992
Cable Act replaced the FCC's old standard for determining effective
competition, under which most cable television systems were not subject to
rate regulation, with a statutory provision that resulted in nearly all cable
television systems becoming subject to rate regulation of basic service. The
1996 Telecom Act expands the definition of effective competition to cover
situations where a local telephone company or its affiliate, or any
multichannel video provider using telephone company facilities, offers
comparable video service by any means except DBS. Satisfaction of this test
deregulates both basic and nonbasic tiers. Additionally, the 1992 Cable Act
required the FCC to adopt a formula for franchising authorities to assure that
basic cable rates are reasonable; allowed the FCC to review rates for cable
programming service tiers ("CPST") (other than per-channel or per-program
services) in response to complaints filed by franchising authorities and/or
cable customers; prohibited cable television systems from requiring basic
subscribers to purchase service tiers above basic service in order to purchase
premium services if the system is technically
57
<PAGE>
capable of doing so; required the FCC to adopt regulations to establish, on
the basis of actual costs, the price for installation of cable service, remote
controls, converter boxes and additional outlets; and allowed the FCC to
impose restrictions on the retiering and rearrangement of cable services under
certain limited circumstances. The 1996 Telecom Act limits the class of
complainants regarding CPST rates to franchising authorities only, after first
receiving two rate complaints from local basic subscribers, and ends FCC
regulation of CPST rates immediately for small systems owned by small cable
operators and on March 31, 1999 for all other cable television systems. The
System is not a "small cable operator" under the 1996 Telecom Act.
The FCC's implementing regulations contain standards for the regulation of
basic service and CPST rates (other than per-channel or per-program services).
Local franchising authorities and the FCC, respectively, are empowered to
order a reduction of existing rates which exceed the maximum permitted level
for either basic and CPST services and associated equipment, and refunds can
be required. The FCC adopted a benchmark price cap system for measuring the
reasonableness of existing basic service and CPST rates. Alternatively, cable
operators have the opportunity to make cost-of-service showings which, in some
cases, may justify rates above the applicable benchmarks. The rules also
require that charges for cable-related equipment (e.g., converter boxes and
remote control devices) and installation services be unbundled from the
provision of cable service and based upon actual costs plus a reasonable
profit. The regulations also provide that future rate increases may not exceed
an inflation-indexed amount, plus increases in certain costs beyond the cable
operator's control, such as taxes, franchise fees and increased programming
costs. Cost-based adjustments to these capped rates can also be made in the
event a cable television operator adds or deletes channels. In addition, new
product tiers consisting of services new to the cable television system can be
created free of rate regulation as long as certain conditions are met, such as
not moving services from existing tiers to the new tier. There is also a
streamlined cost-of-service methodology available to justify a rate increase
on basic and regulated CPST tiers for "significant" system rebuilds or
upgrades.
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" (the "small system rules"). A "small system" is defined as a
cable television system which has, on a headend basis, 15,000 or fewer basic
subscribers. A "small cable company" is defined as an entity serving a total
of 400,000 or fewer basic subscribers that is not affiliated with a larger
cable television company (i.e., a larger cable television company does not own
more than 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 subscribers, 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 subscribers. When a "small cable company"
grows larger than 400,000 basic subscribers, 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. The System is presently a "small cable company" but it will no longer
enjoy this status upon consummation by Insight of the TCI transaction.
On February 11, 1997, a Petition for Determination of Effective Competition
filed by Coaxial challenging the certification of the City of Columbus was
granted by the FCC. This petition revoked the City of Columbus' right to
regulate the System's basic cable and equipment rates, and the FCC's right to
regulate the System's CPST rates.
Finally, there are regulations which require cable television systems to
permit customers to purchase video programming on a per channel or a per
program basis without the necessity of subscribing to any tier of service,
other than the basic service tier, unless the cable television system is
technically incapable of doing so. Generally, this exemption from compliance
with the statute for cable television systems that do not have such technical
capability is available until a cable television system obtains the
capability, but not later than December 2002.
58
<PAGE>
Carriage of Broadcast Television Signals
The 1992 Cable Act contains signal carriage requirements which allow
commercial television broadcast stations that are "local" to a cable
television system (i.e., the system is located in the station's Area of
Dominant Influence) to elect every three years whether to require the cable
television system to carry the station, subject to certain exceptions, or
whether the cable television system will have to negotiate for "retransmission
consent" to carry the station. The next election between must-carry and
retransmission consent will be October 1, 1999. A cable television system is
generally required to devote up to one-third of its activated channel capacity
for the carriage of local commercial television stations whether pursuant to
mandatory carriage requirements or retransmission consent requirements of the
1992 Cable Act. Local non-commercial television stations are also given
mandatory carriage rights, subject to certain exceptions, within the larger
of: (i) a 50 mile radius from the station's city of license; or (ii) the
station's Grade B contour (a measure of signal strength). Unlike commercial
stations, noncommercial stations are not given the option to negotiate
retransmission consent for the carriage of their signal. In addition, cable
television systems have to obtain retransmission consent for the carriage of
all "distant" commercial broadcast stations, except for certain
"superstations" (i.e., commercial satellite-delivered independent stations
such as WGN). To date, compliance with the "retransmission consent" and "must
carry" provisions of the 1992 Cable Act has not had a material effect on the
System, although this result may change in the future depending on such
factors as market conditions, channel capacity and similar matters when such
arrangements are renegotiated. The FCC has initiated a rulemaking proceeding
on the carriage of television signals in high definition and digital formats.
The outcome of this proceeding could have a material effect on the number of
services that a cable operator will be required to carry.
Franchise Fees
Although franchising authorities may impose franchise fees under the 1984
Cable Act, such payments cannot exceed 5% of a cable television system's
annual gross revenues. Under the 1996 Telecom Act, franchising authorities may
not exact franchise fees from revenues derived from telecommunications
services, although they may be able to exact some additional compensation for
the use of public rights-of-way. Franchising authorities are also empowered,
in awarding new franchises or renewing existing franchises, to require cable
television operators to provide cable-related facilities and equipment and to
enforce compliance with voluntary commitments. In the case of franchises in
effect prior to the effective date of the 1984 Cable Act, franchising
authorities may enforce requirements contained in the franchise relating to
facilities, equipment and services, whether or not cable-related. The 1984
Cable Act, under certain limited circumstances, permits a cable operator to
obtain modifications of franchise obligations.
Renewal of Franchises
The 1984 Cable Act and the 1992 Cable Act establish renewal procedures and
criteria designed to protect incumbent franchisees against arbitrary denials
of renewal and to provide specific grounds for franchising authorities to
consider in making renewal decisions, including a franchisee's performance
under the franchise and community needs. Even after the formal renewal
procedures are invoked, franchising authorities and cable television operators
remain free to negotiate a renewal outside the formal process. Nevertheless,
renewal is by no means assured, as the franchisee must meet certain statutory
standards. Even if a franchise is renewed, a franchising authority may impose
new and more onerous requirements such as upgrading facilities and equipment,
although the municipality must take into account the cost of meeting such
requirements. Similarly, if a franchising authority's consent is required for
the purchase or sale of a cable television system or franchises, such
authority may attempt to impose burdensome or onerous franchise requirements
in connection with a request for such consent. Historically, franchises have
been renewed for cable television operators that have provided satisfactory
services and have complied with the terms of their franchises. At this time,
Management is not aware of any current or past material failure on its part to
comply with its franchise agreements. Management believes that it has
generally complied with the terms of its franchises and has provided quality
levels of service.
The 1992 Cable Act makes several changes to the process under which a cable
television operator seeks to enforce his renewal rights which could make it
easier in some cases for a franchising authority to deny renewal.
59
<PAGE>
Franchising authorities may consider the "level" of programming service
provided by a cable television operator in deciding whether to renew. For
alleged franchise violations occurring after December 29, 1984, franchising
authorities are no longer precluded from denying renewal based on failure to
substantially comply with the material terms of the franchise where the
franchising authority has "effectively acquiesced" to such past violations.
Rather, the franchising authority is estopped if, after giving the cable
television operator notice and opportunity to cure, it fails to respond to a
written notice from the cable television operator of its failure or inability
to cure. Courts may not reverse a denial of renewal based on procedural
violations found to be "harmless error."
Channel Set-Asides
The 1984 Cable Act permits local franchising authorities to require cable
television operators to set aside certain television channels for public,
educational and governmental access programming. The 1984 Cable Act further
requires cable television systems with thirty-six or more activated channels
to designate a portion of their channel capacity for commercial leased access
by unaffiliated third parties to provide programming that may compete with
services offered by the cable television operator. The 1992 Cable Act requires
leased access rates to be set according to a formula determined by the FCC.
Competing Franchises
Questions concerning the ability of municipalities to impose certain
franchise restrictions upon cable television companies have been considered in
several recent federal appellate and district court decisions. These decisions
have been somewhat inconsistent and, until the U.S. Supreme Court rules
definitively on the scope of cable television's First Amendment protections,
the legality of the franchising process and of various specific franchise
requirements is likely to be in a state of flux. It is not possible at the
present time to predict the constitutionally permissible bounds of cable
franchising and particular franchise requirements. However, the 1992 Cable
Act, among other things, prohibits franchising authorities from unreasonably
refusing to grant franchises to competing cable television systems and permits
franchising authorities to operate their own cable television systems without
franchises.
Ownership
The 1996 Telecom Act repealed the statutory ban against local exchange
carriers ("LECs") providing video programming directly to customers within
their local exchange telephone service areas. Consequently, the 1996 Telecom
Act permits telephone companies to compete directly with operations of cable
television systems. Under the 1996 Telecom Act and FCC rules adopted to
implement the 1996 Telecom Act, LECs may provide video service as
broadcasters, common carriers, or cable operators. In addition, LECs and
others may also provide video service through "open video systems" ("OVS"), a
regulatory regime that may give them more flexibility than traditional cable
television systems. OVS operators (including LECs) may operate open video
systems without obtaining a local cable franchise, although they can be
required to make payments to local governmental bodies in lieu of cable
franchise fees. In general, OVS operators must make their systems available to
programming providers on rates, terms and conditions that are reasonable and
nondiscriminatory. Where carriage demand by programming providers exceeds the
channel capacity of an OVS, two-thirds of the channels must be made available
to programmers unaffiliated with the OVS operator.
The 1996 Telecom Act generally prohibits LECs from purchasing cable
television systems (i.e, any ownership interest exceeding 10%) located within
the LEC's telephone service area, prohibits cable operators from purchasing
LECs whose service areas are located within the cable operator's franchise
area, and prohibits joint ventures between operators of cable television
systems and LECs operating in overlapping markets. There are some statutory
exceptions, including a rural exemption that permits buyouts in which the
purchased cable television system or LEC serves a non-urban area with fewer
than 35,000 inhabitants, and exemptions for the purchase of small cable
television systems located in non-urban areas. Also, the FCC may grant waivers
of the buyout provisions in cases where: (i) the operator of a cable
television system or the LEC would be subject to
60
<PAGE>
undue economic duress if such provisions were enforced; (ii) the system or
facilities would not be economically viable in the absence of a buyout or a
joint venture; or (iii) the anticompetitive effects of the proposed
transaction are clearly outweighed by the transaction's effect in light of
community needs. The respective local franchising authority must approve any
such waiver.
Pursuant to the 1992 Cable Act, the FCC has imposed limits on the number of
cable television systems which a single cable television operator can own. In
general, no cable television operator can have an attributable interest in
cable television systems which pass more than 30% of all homes nationwide.
Attributable interests for these purposes include voting interests of 5% or
more (unless there is another single holder of more than 50% of the voting
stock), officerships, directorships and general partnership interests. The FCC
has recently initiated a Notice of Proposed Rulemaking reviewing these cable
attribution rules, including whether various corporate, financial, partnership
or business relationships that confer influence or control over an entity
engaged in provision of cable services should be subject to regulation. The
FCC has stayed the effectiveness of these rules pending the outcome of the
appeal from the U.S. District Court decision holding the multiple ownership
limit provision of the 1992 Cable Act unconstitutional. The FCC has also
recently issued a Notice of Proposed Rulemaking seeking comment on possible
further revisions to this rule.
The FCC has also adopted rules which limit the number of channels on a cable
television system which can be occupied by national video programming services
in which the entity which owns the cable television system has an attributable
interest. The limit is 40% of the first 75 activated channels.
The 1996 Telecom Act provides that registered utility holding companies and
subsidiaries may provide telecommunications services (including cable
television) notwithstanding the Public Utilities Holding Company Act of 1935,
as amended. Electric utilities must establish separate subsidiaries known as
"exempt telecommunications companies" and must apply to the FCC for operating
authority. Due to their resources, electric utilities could be formidable
competitors to traditional cable television systems.
Equal Employment Opportunities
The 1984 Cable Act includes provisions to ensure that minorities and women
are provided equal employment opportunities within the cable television
industry. The statute requires the FCC to adopt reporting and certification
rules that apply to all cable television system operators with more than five
full-time employees. Pursuant to the requirements of the 1992 Cable Act, the
FCC has imposed more detailed annual Equal Employment Opportunities reporting
requirements on cable operators and has expanded those requirements to all
multichannel video service distributors. Failure to comply with the Equal
Employment Opportunities requirements can result in the imposition of fines
and/or other administrative sanctions, or may, in certain circumstances, be
cited by a franchising authority as a reason for denying a franchisee's
renewal request.
Privacy
The 1984 Cable Act imposes a number of restrictions on the manner in which
cable television operators can collect and disclose data about individual
system customers. The statute also requires that the system operator
periodically provide all customers with written information about its policies
regarding the collection and handling of data about customers, their privacy
rights under federal law and their enforcement rights. In the event that a
cable television operator were found to have violated the customer privacy
provisions of the 1984 Cable Act, it could be required to pay damages,
attorneys' fees and other costs. Under the 1992 Cable Act, the privacy
requirements were strengthened to require that cable television operators take
such actions as are necessary to prevent unauthorized access to personally
identifiable information.
Franchise Transfers
The 1992 Cable Act requires franchising authorities to act on any franchise
transfer request submitted after December 4, 1992 within 120 days after
receipt of all information required by FCC regulations and by the franchising
authority. Approval is deemed to be granted if the franchising authority fails
to act within such period.
61
<PAGE>
Technical Requirements
The FCC has imposed technical standards applicable to all classes of
channels which carry downstream National Television System Committee ("NTSC")
video programming. The FCC also has adopted additional standards applicable to
cable television systems using frequencies in the 108 to 137 MHz and 225 to
400 MHz bands in order to prevent harmful interference with aeronautical
navigation and safety radio services and has also established limits on cable
television system signal leakage. Periodic testing by cable television
operators for compliance with the technical standards and signal leakage
limits is required and an annual filing of the results of these measurements
is required. The 1992 Cable Act requires the FCC to periodically update its
technical standards to take into account changes in technology. Under the 1996
Telecom Act, local franchising authorities may not prohibit, condition or
restrict a cable television system's use of any type of subscriber equipment
or transmission technology.
The FCC has adopted regulations to implement the requirements of the 1992
Cable Act designed to improve the compatibility of cable television systems
and consumer electronics equipment. These regulations, inter alia, generally
prohibit cable television operators from scrambling their basic service tier.
The 1996 Telecom Act directs the FCC to set only minimal standards to assure
compatibility between television sets, VCRs and cable television systems, and
to rely on the marketplace. Pursuant to the 1992 Cable Act, the FCC has
adopted rules to assure the competitive availability to consumers of customer
premises equipment, such as converters, used to access the services offered by
cable television systems and other multichannel video programming distributors
("MVPD"). Pursuant to those rules, consumers are given the right to attach
compatible equipment to the facilities of their MVPD so long as the equipment
does not harm the network, does not interfere with the services purchased by
other customers, and is not used to receive unauthorized services. As of July
1, 2000, MVPDs (other than DBS operators) are required to separate security
from non-security functions in the customer premises equipment which they sell
or lease to their customers and offer their customers the option of using
component security modules obtained from the MVPD with set-top units purchased
or leased from retail outlets. As of January 1, 2005, MVPDs will be prohibited
from distributing new set-top equipment integrating both security and non-
security functions to their customers.
Pursuant to the 1992 Cable Act, the FCC has adopted rules implementing an
Emergency Alert System ("EAS"). The rules require all cable television systems
to provide an audio and video EAS message on at least one programmed channel
and a video interruption and an audio alert message on all programmed
channels. The audio alert message is required to state which channel is
carrying the full audio and video EAS message. The FCC rules permit cable
television systems either to provide a separate means of alerting persons with
hearing disabilities of EAS messages, such as a terminal that displays EAS
messages and activates other alerting mechanisms or lights, or to provide
audio and video EAS messages on all channels. Cable television systems with
10,000 or more basic subscribers per headend will be required to install EAS
equipment capable of providing audio and video EAS messages on all programmed
channels by December 31, 1998. Cable television systems with 5,000 or more but
fewer than 10,000 basic subscribers per headend will have until October 1,
2002 to comply with that requirement. Cable television systems with fewer than
5,000 basic subscribers per headend will have a choice of providing either a
national level EAS message on all programmed channels or installing EAS
equipment capable of providing audio alert messages on all programmed
channels, a video interrupt on all channels, and an audio and video EAS
message on one programmed channel. This must be accomplished by October 1,
2002.
Pole Attachments
The FCC currently regulates the rates and conditions imposed by certain
public utilities for use of their poles unless state public service
commissions are able to demonstrate that they adequately regulate the rates,
terms and conditions of cable television pole attachments. A number of states
and the District of Columbia have certified to the FCC that they adequately
regulate the rates, terms and conditions for pole attachments. Ohio, the state
in which the System operates, has made such a certification. In the absence of
state regulation, the FCC administers such pole attachment and conduit use
rates through use of a formula which it has devised. Pursuant
62
<PAGE>
to the 1996 Telecom Act, the FCC has adopted a new rate formula for any
attaching party, including cable television systems, which offer
telecommunications services. This new formula will result in higher attachment
rates than at present, but they will apply only to cable television systems
which elect to offer telecommunications services. Any increases pursuant to
this new formula will not begin until 2001, and will be phased in by equal
increments over the five ensuing years. The FCC has also initiated a
proceeding to determine whether it should adjust certain elements of the
current rate formula. If adopted, these adjustments could increase rates for
pole attachments and conduit space.
Other FCC Matters
FCC regulation pursuant to the Communications Act also includes matters
regarding a cable television system's carriage of local sports programming;
restrictions on origination and cablecasting by cable television operators;
rules governing political broadcasts; nonduplication of network programming;
deletion of syndicated programming; registration procedure and reporting
requirements; customer service; closed captioning; obscenity and indecency;
program access and exclusivity arrangements; and limitations on advertising
contained in nonbroadcast children's programming.
The FCC recently adopted new procedural guidelines governing the disposition
of home run wiring (a line running to an individual subscriber's unit from a
common feeder or riser cable) in MDUs. MDU owners can use these new rules to
attempt to force cable television operators without contracts to either sell,
abandon or remove home run wiring and terminate service to MDU subscribers
unless operators retain rights under common or state law to maintain ownership
rights in the home run wiring.
The 1996 Telecom Act requires video programming distributors to employ
technology to restrict the reception of programming by persons not subscribing
to those channels. In the case of channels primarily dedicated to sexually-
oriented programming, the distributor must fully block reception of the audio
and video portion of the channels; a distributor that is unable to comply with
this requirement may only provide such programming during a "safe harbor"
period when children are not likely to be in the audience, as determined by
the FCC. With respect to other kinds of channels, the 1996 Telecom Act
requires that the audio and video portions of the channel be fully blocked, at
no charge, upon request of the person not subscribing to the channel.
Copyright
Cable television systems are subject to federal copyright licensing covering
carriage of broadcast signals. In exchange for making semi-annual payments to
a federal copyright royalty pool and meeting certain other obligations, cable
television operators obtain a statutory license to retransmit broadcast
signals. The amount of this royalty payment varies, depending on the amount of
system revenues from certain sources, the number of distant signals carried,
and the location of the cable television system with respect to over-the-air
television stations. Any future adjustment to the copyright royalty rates will
be done through an arbitration process to be supervised by the U.S. Copyright
Office. Cable television operators are liable for interest on underpaid and
unpaid royalty fees, but are not entitled to collect interest on refunds
received for overpayment of copyright fees.
Various bills have been introduced into Congress over the past several years
that would eliminate or modify the cable television compulsory license.
Without the compulsory license, cable television operators would have to
negotiate rights from the copyright owners for all of the programming on the
broadcast stations carried by cable television systems. Such negotiated
agreements would likely increase the cost to cable television operators of
carrying broadcast signals. The 1992 Cable Act's retransmission consent
provisions expressly provide that retransmission consent agreements between
television broadcast stations and cable television operators do not obviate
the need for cable operators to obtain a copyright license for the programming
carried on each broadcaster's signal.
Copyrighted music performed in programming supplied to cable television
systems by pay cable networks (such as HBO) and basic cable networks (such as
USA Network) is licensed by the networks through private
63
<PAGE>
agreements with the American Society of Composers and Publishers ("ASCAP") and
BMI, Inc. ("BMI"), the two major performing rights organizations in the United
States. As a result of extensive litigation, both ASCAP and BMI now 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.
Licenses to perform copyrighted music by cable television systems
themselves, including on local origination channels, in advertisements
inserted locally on cable television networks, and in cross-promotional
announcements, must be obtained by the cable television operator. Cable
television industry negotiations with ASCAP, BMI and SESAC, Inc. (a smaller
performing rights organization) are in progress.
STATE AND LOCAL REGULATION
Cable television systems generally are operated pursuant to nonexclusive
franchises, permits or licenses granted by a municipality or other state or
local government entity. The terms and conditions of franchises vary
materially from jurisdiction to jurisdiction, and even from city to city
within the same state, historically ranging from reasonable to highly
restrictive or burdensome. Franchises generally contain provisions governing
fees to be paid to the franchising authority, length of the franchise term,
renewal, sale or transfer of the franchise, territory of the franchise, design
and technical performance of the system, use and occupancy of public streets
and number and types of cable television services provided. The terms and
conditions of each franchise and the laws and regulations under which it was
granted directly affect the profitability of the cable television system. The
1984 Cable Act places certain limitations on a franchising authority's ability
to control the operation of a cable television system. The 1992 Cable Act
prohibits exclusive franchises, and allows franchising authorities to exercise
greater control over the operation of franchised cable television systems,
especially in the area of customer service and rate regulation. The 1992 Cable
Act also allows franchising authorities to operate their own multichannel
video distribution system without having to obtain a franchise and permits
states or local franchising authorities to adopt certain restrictions on the
ownership of cable television systems. Moreover, franchising authorities are
immunized from monetary damage awards arising from regulation of cable
television systems or decisions made on franchise grants, renewals, transfers
and amendments. The 1996 Telecom Act prohibits a franchising authority from
either requiring or limiting a cable television operator's provision of
telecommunications services.
Various proposals have been introduced at the state and local levels with
regard to the regulation of cable television systems, and a number of states
have adopted legislation subjecting cable television systems to the
jurisdiction of centralized state governmental agencies, some of which impose
regulation of a character similar to that of a public utility. To date, Ohio,
the state in which the System currently operates, has not enacted state level
regulation.
The foregoing does not purport to describe all present and proposed federal,
state and local regulations and legislation relating to the cable television
industry. Other existing federal regulations, copyright licensing and, in many
jurisdictions, state and local franchise requirements, currently are the
subject of a variety of judicial proceedings, legislative hearings and
administrative and legislative proposals which could change, in varying
degrees, the manner in which cable television systems operate. Neither the
outcome of these proceedings nor their impact upon the cable television
industry or the System can be predicted at this time.
64
<PAGE>
MANAGEMENT
The following table sets forth certain information with respect to the
executive officers of the Individual LLCs, Coaxial, Insight Ohio and Insight.
Insight Communications Company, L.P. is the parent of Insight Holdings of
Ohio, LLC ("IHO") which serves as manager of the Individual LLCs and Insight
Ohio and thereby effectively controls the management and affairs of the
Individual LLCs, Coaxial and Insight Ohio. See "Prospectus Summary--Ownership
Structure." The executive officers of Insight are compensated by way of
management fees paid by Insight Ohio to IHO. Sidney R. Knafel serves as the
sole director of Insight Communications, Inc. ("ICI"), which serves as the
general partner of ICC Associates, L.P., the general partner of Insight
Communications Company, L.P. Sidney Knafel, Michael Willner and Kim Kelly
serve as the directors of Coaxial. The table also includes the members of the
Management Committee of Insight Ohio, which manage the business of Insight
Ohio and in doing so have delegated broad authority to IHO as manager of the
System. See "--Management and Management Committee" below. None of the
executive officers of the Issuers are compensated for their services as such.
Phoenix and Coaxial Financing Corp. only have nominal assets and will not
conduct any business.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Sidney R. Knafel 68 Chairman of the Individual LLCs, Coaxial, Insight
Ohio and Insight; Member of the Management
Committee of Insight Ohio
Michael S. Willner 46 President and Chief Executive Officer of the
Individual LLCs, Coaxial, Insight Ohio and Insight;
Member of the Management Committee of Insight Ohio
Kim D. Kelly 42 Executive Vice President and Chief Operating and
Financial Officer of the Individual LLCs, Coaxial,
Insight Ohio and Insight; Member of the Management
Committee of Insight Ohio
Dennis J. McGillicuddy 56 Member of the Management Committee of Insight Ohio
Daniel Mannino 38 Vice President and Controller of the Individual
LLCs, Coaxial, Insight Ohio and Insight
Gregory B. Graff 37 Senior Vice President and General Manager of
Insight Ohio
</TABLE>
Sidney R. Knafel has been Chairman of ICI since 1985. He is a director of
NTL, Inc., one of the three largest cable and telecommunications operators in
the United Kingdom. He was the founder, Chairman and an equity holder of
Vision Cable Communications, Inc. ("Vision Cable") from 1971 until its sale in
1982. Mr. Knafel is presently the managing partner of SRK Management Company,
a private investment company, and also serves as Chairman of BioReliance
Corporation, a biological testing company. He is a director of Cellular
Communications International, Inc., CoreComm Incorporated, General American
Investors Company, Inc. and IGENE Biotechnology, Inc., as well as several
private companies. Mr. Knafel is a graduate of Harvard College and the Harvard
Graduate School of Business Administration and serves on a number of the
school's committees.
Michael S. Willner co-founded and has served as President of ICI and Insight
since 1985. Previously, Mr. Willner served as Executive Vice President and
Chief Operating Officer of Vision Cable from 1979 through 1985, Vice President
of Marketing for Vision Cable from 1977 to 1979 and General Manager of Vision
Cable's Bergen County, New Jersey cable television system from 1975 to 1977.
Currently, Mr. Willner is a director of NTL, Inc. He also is a director of
Source Media, Inc., a technology and programming provider of Internet services
on digital cable platforms. He serves on the board of C-SPAN and the National
Cable Television Association where he chairs the association's State and Local
Government Committee. Mr. Willner graduated from Boston University's School of
Communications and serves on the school's Executive Committee.
Kim D. Kelly has been Executive Vice President, Finance of ICI and Executive
Vice President and Chief Financial Officer of Insight since 1990. Ms. Kelly
has also been Chief Operating Officer of Insight since January 1998. Prior
thereto, she served from 1982 to 1990 with Marine Midland Bank, becoming its
Senior Vice President in 1988, with primary responsibility for media lending
activities. Ms. Kelly serves as a member of the National Cable Television
Association ("NCTA") Subcommittee for Telecommunications Policy, as well as
the NCTA Subcommittee for Accounting. Ms. Kelly is a graduate of George
Washington University.
65
<PAGE>
Dennis J. McGillicuddy co-founded Coaxial in 1968 and served as Chairman of
the Board of Directors of Coaxial until the consummation of the System
Acquisition. Mr. McGillicuddy also serves as Chairman of CCX, Inc., a
manufacturer of building products, and is a director of Benz Research and
Development Corp. Mr. McGillicuddy served as a member of the Board of CCX,
Inc. at the time a petition under Federal bankruptcy laws was filed by CCX in
1994.
Daniel Mannino joined ICI as Controller in 1989 and became Vice President
and Controller in 1991. Previously, Mr. Mannino was employed by Vision Cable
from 1983 to 1989, becoming its Controller in 1986.
Gregory B. Graff has served as Senior Vice President, Marketing, Programming
and Advertising of Coaxial since 1997. He joined Coaxial as Vice President,
Marketing and Sales in 1995. Prior to joining Coaxial, Mr. Graff was Director
of Marketing for KBLCOM's Paragon Cable operation in San Antonio, Texas. He
began his cable television career in 1984 with Continental Cablevision.
MANAGEMENT AND MANAGEMENT COMMITTEE
The Operating Agreement of Insight Ohio provides for the establishment of a
four-member Management Committee. The Management Committee is responsible for
the management of the business of Insight Ohio. IHO, through its effective
control of Coaxial, is entitled to designate three of the members of the
Management Committee. The remaining member is designated by the principals of
the Individual LLCs. The Management Committee has delegated broad authority to
IHO in its capacity as manager of Insight Ohio. See "The System Acquisition--
Operating Agreement of Insight Ohio."
EXECUTIVE AND OTHER COMPENSATION
The Issuers do not make any payments in respect of compensation to any of
their executive management personnel. Rather, executive management personnel
of the Issuers receive compensation from Insight. Accordingly, IHO utilizes
its management fees from Insight Ohio to pay for all of its operating expenses
for managing the day-to-day affairs of the System, as well as executive
management salaries, benefits and overhead. See "Certain Relationships and
Related Transactions."
66
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INSIGHT MANAGEMENT FEES AND PROGRAMMING DISCOUNTS
In accordance with the Operating Agreement of Insight Ohio, IHO is entitled
to be paid management fees for managing the day-to-day operations of Insight
Ohio. Pursuant to the Operating Agreement, subject to certain covenants in the
Indenture and the Discount Notes Indenture, IHO is entitled to receive
management fees of 3.0% of gross revenues of Insight Ohio. See "Management--
Executive and Other Compensation."
IHO is entitled to reimbursement from Insight Ohio for all direct, out-of-
pocket expenses incurred by or on behalf of IHO that directly relate to its
management of the business and operations of Insight Ohio, including any such
expenses incurred in connection with the management of the Discount Notes
Issuers. However, IHO is not entitled to reimbursement from Insight Ohio for
corporate overhead (including employee bonuses and health, welfare,
retirement, and other employee benefits and overhead expenses of its corporate
office management, development, internal accounting, and finance management
personnel).
Due to its relationship with MediaOne (formerly Continental Cablevision),
Insight expects to continue to provide programming discounts to the System
through November 1999. After such date, Insight believes that through its
strategic alliances with other major MSOs, utilizing programming cooperatives
or through its own purchasing power, it will be able to continue to obtain
programming for the System at a cost lower than that presently available to
Coaxial.
COAXIAL
Tierra Associates
Coaxial leased office space in a building located at 3770/3776 East
Livingston Avenue, Columbus, Ohio. The building was owned by Tierra
Associates, an Ohio general partnership that was owned by the principals of
the Individual LLCs. Coaxial paid Tierra Associates $108,000 annually pursuant
to the lease for such space. Pursuant to the terms of the Contribution
Agreement, Coaxial acquired title to this building and contributed it to
Insight Ohio upon consummation of the System Acquisition.
MetroComm AxS L.P. ("MetroComm")
MetroComm provides competitive telephone service in the Columbus market.
MetroComm is 50% owned by Time Warner AxS of Columbus L.P. and 50% owned by
MetroComm Inc. (which is owned by Barry Silverstein, Dennis McGillicuddy and
D. Stevens McVoy, who are the sole members of each of their respective
Individual LLCs, and Dan Coy, the chief executive officer of MetroComm).
MetroComm contracted with Coaxial to build the necessary fiber plant needed by
MetroComm to service its customers that were in Coaxial's service area.
Coaxial then leased the fiber plant to MetroComm at a contracted price. In
1997, Coaxial received $187,180 in fiber lease revenues from MetroComm.
Coaxial negotiated a buy-out of the lease as of June 29, 1998. The fiber
continues to be used by MetroComm under a 30-year Indefeasible Right of Use
Agreement with reduced revenues. Coaxial also provided accounting services for
MetroComm. In 1997, Coaxial received $35,276 for such services. As of June 30,
1998, MetroComm owed Coaxial $98,461.
Paxton Cable Television Inc.
Paxton Cable Television Inc. had a note payable to Coaxial for $2,448,141
(as of June 30, 1998) which accrued interest at the average interest rate
charged by The Chase Manhattan Bank to Coaxial for its long-term financing.
Principal and interest is not due until June 30, 2000. This note was
distributed by Coaxial to its shareholders (the principals of the Individual
LLCs) upon the consummation of the System Acquisition and was not assumed by
Insight Ohio.
Coaxial Communications of Southern Ohio, Inc.
Coaxial allocated certain management costs to Coaxial Communications of
Southern Ohio, Inc., which is wholly-owned by the principals of the Individual
LLCs. The total amount allocated for 1997 was $284,400. Under a related party
account, $18.5 million was owed to Southern Ohio as of June 30, 1998. This
account was settled upon the consummation of the System Acquisition.
67
<PAGE>
Coaxial Associates of Columbus I, Coaxial Associates of Columbus II and
Phoenix Associates
Coaxial Associates of Columbus I ("Columbus I"), Coaxial Associates of
Columbus II ("Columbus II") and Phoenix are non-operating partnerships which
share common ownership and which were co-borrowers and co-obligors under the
Chase Credit Facility. The three entities exist due to several debt and tax
obligations which existed among these entities and former limited partners of
Columbus I and Columbus II. Coaxial funded the debt obligations of these
entities, which do not conduct operations. The result was a series of related
party notes and receivables/payables to and between Coaxial, Columbus I,
Columbus II and Phoenix. These notes and related party receivables/payables
with Coaxial were settled prior to the consummation of the System Acquisition.
Phoenix was a co-issuer of the Original Notes as described under "Prospectus
Summary--Ownership Structure" and Phoenix owns none of the Senior Notes
Collateral. All notes and related party receivables/payables with Phoenix were
settled upon the consummation of the System Acquisition excluding certain
amounts and notes due from Columbus I, Columbus II and the partners of
Phoenix, which were retained for tax purposes (the "Excluded Assets").
PRINCIPAL SECURITY HOLDERS
The outstanding shares of common stock of Coaxial are owned by the
Individual LLCs as described in the table below. All of the outstanding shares
of common stock of Coaxial Financing Corp. and all of the outstanding
partnership interests of Phoenix Associates are wholly-owned directly or
indirectly by the individuals indicated in the footnotes to the table in the
same ownership percentages as the respective Individual LLCs' ownership in
Coaxial. IHO is the manager of each of the Individual LLCs and thereby
effectively controls the business of each of such Individual LLCs and Coaxial.
Accordingly, Insight and members of its executive management may be deemed to
beneficially own (as defined by Rule 13d-3 under the Exchange Act) all of the
outstanding shares of common stock of Coaxial. See "Prospectus Summary--
Ownership Structure" and "Management."
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL OWNER PERCENTAGE OWNERSHIP
- ------------------------------------ --------------------
<S> <C>
Coaxial LLC(1)
c/o Coaxial Communications
5111 Ocean Boulevard, Suite C
Sarasota, FL 34242....................................... 67.5%
Coaxial DJM LLC(2)
c/o Coaxial Communications
5111 Ocean Boulevard, Suite C
Sarasota, FL 34242....................................... 22.5%
Coaxial DSM LLC(3)
c/o Coaxial Communications
5111 Ocean Boulevard, Suite C
Sarasota, FL 34242....................................... 10.0%
</TABLE>
- --------
(1) Wholly-owned by Barry Silverstein.
(2) Wholly-owned by Dennis J. McGillicuddy.
(3) Wholly-owned by D. Stevens McVoy.
68
<PAGE>
THE SYSTEM ACQUISITION
THE CONTRIBUTION AGREEMENT
The following summary of certain provisions of the Contribution Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Contribution Agreement.
On June 30, 1998, Coaxial and Insight entered into a Contribution Agreement,
as amended on July 15, 1998 and August 21, 1998 (the "Contribution
Agreement"), pursuant to which on August 21, 1998, as part of the Financing
Plan, Coaxial contributed to Insight Ohio, a newly organized Delaware limited
liability company, substantially all of the assets comprising the System, and
Insight, through IHO, contributed to Insight Ohio $10.0 million in cash.
Coaxial may be required to make future cash contributions to Insight Ohio to
offset any diminution of value of the contributed assets under certain
circumstances. There will be no other assessments for additional capital
contributions by the members. In accordance with the terms and conditions of
the Contribution Agreement, Insight Ohio assumed and undertook to perform
certain obligations and liabilities related to the contributed assets. As a
result of the Financing Plan, IHO and Coaxial own 75% and 25%, respectively,
of the common membership interests of Insight Ohio. IHO's common membership
interests are classified as "Class A" and Coaxial's common membership
interests are classified as "Class B." Coaxial also owns the Preferred
Interests of Insight Ohio. IHO serves as the manager of Insight Ohio and each
of the Individual LLCs and thereby has effective control of the management and
affairs of Insight Ohio.
The Contribution Agreement contains customary provisions for such
agreements, including representations and warranties with respect to the
condition and operations of the business.
OPERATING AGREEMENT OF INSIGHT OHIO
The following summary of certain provisions of the Operating Agreement of
Insight Ohio does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Operating
Agreement. Capitalized terms used in the following summary and not otherwise
defined in this Prospectus have the meanings ascribed to them in the Operating
Agreement.
General
The Operating Agreement of Insight Ohio provides for the formation,
organization and operation of Insight Ohio and for the respective rights,
obligations and interests of the members of Insight Ohio to each other and to
Insight Ohio. In addition, the Operating Agreement sets forth certain
additional agreements and understandings among its members and the sole
members of each of the Individual LLCs, which own Coaxial (Barry Silverstein,
Dennis McGillicuddy and D. Stevens McVoy, who, together with their respective
permitted successors and assigns, are referred to as the "Principals"),
concerning the ownership and operation of Insight Ohio and Coaxial.
Insight Ohio will be dissolved upon the happening of certain events,
including, among others:
. December 31, 2058;
. consent of the Principals to the resignation of Insight as manager;
. the affirmative vote of the holders of a majority of the outstanding
Voting Interests (as defined under "--Management" below), subject to
certain conditions;
. the sale of all or substantially all of the assets of Insight Ohio; and
. any other event causing the dissolution of a limited liability company.
IHO and Coaxial are the members of Insight Ohio. The Principals, although
parties to the Operating Agreement, are not members of Insight Ohio. The
members of Insight Ohio generally do not have any authority to act for, or
assume any obligation or responsibility on behalf of, Insight Ohio. The
members are not personally liable for the expenses, liabilities or obligations
of Insight Ohio, and in no event shall either member be required to make up a
deficiency in its capital account upon the dissolution and termination of
Insight Ohio.
69
<PAGE>
Distributions
Distributions on the Preferred Interests will be in such amounts as to allow
for the payment of interest on the Notes and the Discount Notes, with the
Series A Preferred Interests to receive payments in priority to the Series B
Preferred Interests. Insight Ohio will then make certain distributions to its
members holding common membership interests in an amount equal to an estimate
of certain tax liabilities recognized by the members or their owners. Insight
Ohio will then distribute to the Manager a management return equal to 3% of
gross revenues. Thereafter, distributions are to be made, as determined by the
Management Committee, to the members in proportion to their common membership
interests. Distributions in respect of the membership interests of Insight
Ohio are restricted under the Indenture and the Discount Notes Indenture and
will be restricted as well under the Senior Credit Facility. See "Description
of the Notes--Covenants--Limitation on Restricted Payments."
If (i) any default (other than a notification or delivery default) shall
have occurred and be continuing under either the Indenture or the Discount
Notes Indenture, or if IHO in good faith determines that such a default under
either the Indenture or the Discount Notes Indenture is reasonably likely to
occur, and (ii) IHO determines in good faith that, as a result of such
existing or anticipated default, it would be in the best interests of Insight
Ohio for Insight Ohio not to make any distribution required to be made with
respect to the Preferred Interests, and (iii) IHO notifies the Principals in
writing that it has made such determination, then IHO may cause Insight Ohio
not to make such distribution until such time as IHO determines that it is no
longer in the best interests of Insight Ohio for Insight Ohio not to make such
distribution.
Redemption of Preferred Interests
Insight Ohio may not redeem the Series A Preferred Interests, in whole or in
part, without the consent of the Principals, except upon certain events.
Insight Ohio will be required to redeem the Series A Preferred Interests in
full upon acceleration or maturity of the Notes, commencement of the
enforcement of remedies under the Pledge Agreement in respect of the Senior
Notes Collateral, the passage of ten days and upon request for redemption by
the holders of the Notes. If Insight Ohio redeems all or part of the Series A
Preferred Interests, the redemption price will equal the sum of (A) the amount
that would be distributed to the holder of the redeemed Series A Preferred
Interests upon dissolution and liquidation of Insight Ohio, assuming that
Insight Ohio had sufficient assets to make the full liquidating distributions
provided for in the Operating Agreement, plus (B) the amount of any premium
required to be paid by the Issuers to the holders of the Notes in connection
with the Issuers' use of the proceeds of the redemption of the Series A
Preferred Interests to repay or purchase the Notes.
Insight Ohio is also required to redeem the Series B Preferred Interests in
full on the tenth anniversary of the closing of the Discount Notes Offering.
Insight Ohio may not otherwise redeem the Series B Preferred Interests, in
whole or in part, without the consent of the Principals, except upon certain
events. Insight Ohio will be required to redeem the Series B Preferred
Interests in full upon acceleration of the Discount Notes, commencement of the
enforcement of remedies under the Discount Notes pledge agreement in respect
of the Discount Notes collateral (as defined in the Discount Notes Indenture),
the passage of ten days and upon request for redemption by the holders of the
Discount Notes. Notwithstanding the foregoing, Insight Ohio will not redeem
the Series B Preferred Interests if it is also required to redeem the Series A
Preferred Interests and it has not yet done so. If Insight Ohio redeems all or
part of the Series B Preferred Interests, the redemption price will equal the
sum of (A) the amount that would be distributed to the holder of the redeemed
Series B Preferred Interests upon dissolution and liquidation of Insight Ohio,
assuming that Insight Ohio had sufficient assets to make the full liquidating
distributions provided for in the Operating Agreement, plus (B) the amount of
any premium required to be paid by the Issuers to the holders of the Discount
Notes in connection with the Discount Notes Issuers' use of the proceeds of
the redemption of the Series B Preferred Interests to repay or purchase the
Discount Notes.
The Series A Preferred Interests have priority over the Series B Preferred
Interests with respect to redemption, if both Preferred Interests are required
to be redeemed.
Management
The Operating Agreement provides that certain decisions will be made by
holders of a majority of Insight Ohio's outstanding "Voting Interests." The
term "Voting Interests" means the Series A Preferred Interests and
70
<PAGE>
the Series B Preferred Interests, collectively, except that, following certain
events, "Voting Interests" will mean the common membership interests. A
majority of the Preferred Interests is determined based on the original
capital account balances attributable to the interests, and a majority of the
common membership interests is determined based on the number of units
assigned to the interests. The Preferred Interests will become non-voting upon
the enforcement of remedies under the Pledge Agreement.
Insight Ohio is managed by a Management Committee consisting of four
Representatives, three of which shall be appointed from time to time by
holders of a majority of the outstanding Voting Interests and one of which
shall be appointed from time to time by the Principals. The members of the
Management Committee are not compensated or reimbursed by Insight Ohio for
serving on the Management Committee.
The Operating Agreement permits the Management Committee to delegate to the
manager of Insight Ohio and the officers of Insight Ohio any of its authority
under the Operating Agreement. In accordance with this authorization, the
Management Committee delegated broad authority to the manager of Insight Ohio
to manage the business and operations of Insight Ohio. The Principals will
have the right to appoint a co-Manager in the event of a breach by IHO of
certain provisions of the Operating Agreement. The Operating Agreement
prohibits Insight Ohio and any of its subsidiaries from taking certain
actions, including most significant dispositions of assets, without the
consent of the Principals, which may be withheld by the Principals in their
sole discretion.
The Operating Agreement names IHO as the Manager of Insight Ohio. IHO may
not resign as the Manager without the consent of holders of a majority of the
outstanding Voting Interests and the consent of the Principals (except in the
case of a permitted transfer of all of IHO's membership interest to a
successor, who will then become the Manager). If holders of a majority of the
outstanding Voting Interests and the Principals consent to IHO's resignation
as Manager, Insight Ohio will dissolve unless the members and the Principals
elect to continue the business of Insight Ohio and agree to a successor
Manager.
The Manager is entitled to reimbursement from Insight Ohio for certain
expenses incurred by or on behalf of the Manager that directly relate to its
management of the business and operations of Insight Ohio, including any such
expenses incurred in connection with the management of the Individual LLCs.
However, the Manager is not entitled to reimbursement from Insight Ohio for
corporate overhead.
Refinancing and Modification of Indebtedness
IHO agrees to use commercially reasonable efforts to obtain and submit to
Coaxial and the Principals a proposal from a financial institution of
nationally recognized standing for the refinancing of the Notes at or prior to
its maturity. In addition, IHO agrees to use commercially reasonable efforts
to obtain and submit to Coaxial and the Principals either a proposal from a
financial institution of nationally recognized standing for the refinancing of
the Notes and the Discount Notes or a proposal from the holders of the Notes
and the Discount Notes to modify the terms thereof if any portion of the Notes
or the Discount Notes has become due and payable before its stated maturity or
if Insight Ohio failed to make, or is expected to be unable to make, any
required distributions with respect to the Preferred Interests. IHO also has
the right to obtain and submit to Coaxial and the Principals at any time and
from time to time a proposal from a financial institution of nationally
recognized standing for the refinancing of the Notes and the Discount Notes.
Upon the satisfaction of certain conditions, the Principals are required to
consent to the refinancing or modification of the Notes and the Discount Notes
as proposed by IHO. In addition, under the circumstances described in the
preceding paragraph where IHO is required to use commercially reasonable
efforts to obtain a proposal for the refinancing or modification of the Notes
and the Discount Notes, if the Principals are not required to consent, and do
not consent, to any proposed refinancing or modification, then the members of
the Individual LLCs will sell all the outstanding membership interests of the
Individual LLCs to IHO or to a person designated by IHO for nominal
consideration. The members of the Individual LLCs may also sell all of the
outstanding membership interests of the Individual LLCs under certain other
circumstances to IHO or a person designated by IHO for nominal consideration.
Certain conditions to the Principals' obligation to consent to any refinancing
or modification of the Notes and the Discount Notes depend on the Principals
receipt of an opinion of the Principals' counsel.
71
<PAGE>
Subject to the Indenture and the Discount Notes Indenture, Insight Ohio is
permitted to make loans to IHO or any affiliate of IHO for the purpose of
funding the acquisition by IHO or its affiliate of any of the outstanding
Notes and the Discount Notes. The terms of any such loan will (i) provide that
all obligations and liabilities of IHO or its affiliate with respect to the
loan would be secured by its interest in the Notes or Discount Notes so
purchased, and any replacements or proceeds thereof (but such loan shall
otherwise be non-recourse to IHO or its affiliate); (ii) require the payment
to Insight Ohio, either as principal, interest, or additional interest, of all
amounts received by IHO or its affiliate with respect to the Notes or the
Discount Notes so purchased; and (iii) if made to an affiliate of IHO, require
that it remain an affiliate thereof.
IHO agrees that, except as specifically permitted by the Operating
Agreement, neither IHO nor any of its affiliates (including Insight Ohio) will
take any willful or intentional action in any capacity that is intended to
have, and has, the effect of modifying the structure of the Notes or the
Discount Notes (such as by imposing any covenants on any person other than an
Issuer or a Discount Notes Issuer that are not imposed on such person under
the Notes or the Discount Notes as it will exist at the Closing or agreeing
that any person or its assets would be liable or otherwise responsible for the
payment or collection of the Notes or the Discount Notes, or for the
performance of the obligations of any Issuer or any Discount Notes Issuer, to
a greater extent than such person or its assets is liable or otherwise
responsible under the Notes and the Discount Notes as then in effect).
Reimbursement of Certain Expenses
Insight Ohio will reimburse the Issuers, the Discount Notes Issuers and the
Individual LLCs for all direct, out-of-pocket expenses incurred by or on
behalf of the Issuers, the Discount Notes Issuers and the Individual LLCs in
complying with the terms of the Indenture and the Discount Notes Indenture
(excluding any payment of principal or interest under the Notes or the
Discount Notes). Insight Ohio will also pay, or shall reimburse the Issuers,
the Discount Notes Issuers and the Individual LLCs for, any amounts required
to be paid by any Issuer, Discount Notes Issuer or Individual LLC as a result
of any indemnification or reimbursement obligation arising under the Indenture
or the Discount Notes Indenture or otherwise arising in connection with the
offer or sale of any of the Notes, the Discount Notes or any replacement
thereof.
Capital Defaults
If IHO breaches certain specified covenants under the Operating Agreement,
then, subject to the receipt of any required consents, approvals, waivers, or
authorizations of governmental authorities, (A) the size of the Management
Committee will be increased to six members, three of which shall be appointed
by holders of a majority of the outstanding Voting Interests and three of
which shall be appointed by the Principals, and (B) a person designated by the
Principals shall become an additional Manager of Insight Ohio and shall have
the authority to exercise, to the same extent as IHO, all powers designated in
this Agreement as powers of the Manager or delegated to the Manager by the
Management Committee, including the power to cause distributions to be made
with respect to the Series A Preferred Interests and the Series B Preferred
Interests. In the event of such a breach, IHO will indemnify the Issuers and
the Principals for certain damages, including certain tax liabilities, arising
from or relating to the breach.
Transfers of Interests
Neither member may sell, assign, transfer, or otherwise dispose of, or
pledge, hypothecate, or otherwise encumber all or any part of its membership
interest (whether voluntary, involuntary or by operation of law), unless
approved by the other member and the Principals, subject to a number of
significant exceptions, including the following: (i) a member may transfer its
membership interest to one of its affiliates; (ii) a permitted redemption of
the Preferred Interests; (iii) Coaxial may pledge its membership interest to
secure the Notes, the Discount Notes or any replacement thereof and IHO may
pledge its membership interest to secure Insight's senior debt; (iv) IHO may
sell any of its common interest if it affords Coaxial "tag-along" rights with
respect to Coaxial's common membership interest; (v) Coaxial shall sell all or
part of its common membership interest if IHO exercises its "drag-along"
rights upon a sale by IHO of all or part of its common membership interest;
and (vi) Coaxial may put its common membership interest to IHO and IHO may
call Coaxial's common membership interest upon a change in control of IHO.
72
<PAGE>
In addition, IHO may elect at any time, by delivering written notice of its
election to Coaxial and the Principals, to require that a person designated by
the Principals purchase all of IHO's membership interest, for a nominal
purchase price. The closing of the purchase and sale of IHO's membership
interest pursuant to this provision would occur on a date to be specified by
the Principals that is within 180 days after the Principals' receipt of IHO's
election. IHO would cease to manage Insight Ohio and the Individual LLCs upon
consummation of the sale.
IHO has agreed with Coaxial and the Principals that, if any transfer by IHO
of all or any part of its membership interest or any other transaction
involving ownership of IHO would trigger the right of any holder of any of the
Notes and Discount Notes to require that such Notes and Discount Notes be
repaid, purchased, or redeemed, then, as an additional condition to the
consummation of such transfer or other transaction, IHO or its assignee will
(a) agree to purchase such Notes and Discount Notes from the holder thereof in
the event the holder elects to require that such Notes and Discount Notes be
repaid, purchased, or redeemed, and, upon such purchase, IHO or its assignee
shall waive any right to require that such Notes and Discount Notes be repaid,
purchased, or redeemed, or (b) obtain an irrevocable, binding agreement of the
holder of such Notes and Discount Notes not to require that such Notes and
Discount Notes be repaid, purchased, or redeemed upon the consummation of such
transfer or other transaction. Like the other terms of the Operating
Agreement, this covenant of IHO will not be enforceable by any holder of the
Notes and Discount Notes.
Indemnification and Exculpation
Insight Ohio is required to indemnify, defend, and hold harmless its members
and related parties for costs and damages incurred by reason of acts performed
or omitted to be performed by such persons in connection with the business of
Insight Ohio, except in the case of fraud, gross negligence, breach of
fiduciary duty, willful misconduct or a breach of the Operating Agreement by
the indemnified party. The members and their related parties will not liable,
in damages or otherwise, to Insight Ohio or to either member for losses that
arise from acts performed or omitted to be performed in connection with the
business of Insight Ohio, except in the case of fraud, gross negligence,
breach of fiduciary duty, willful misconduct, or a breach of the Operating
Agreement by the member or its related party.
Rights of Principals
None of the rights of the Principals under the Operating Agreement may be
assigned or otherwise transferred except, following the death of a Principal,
pursuant to the laws of descent and distribution. All rights of the Principals
under the Operating Agreement will terminate at such time as the Principals
cease to own, directly or indirectly, any interest in Insight Ohio.
Amendments
The Operating Agreement may only be modified or amended with the consent of
all the members and the Principals.
DESCRIPTION OF GOVERNING DOCUMENTS
INDIVIDUAL LLCS' OPERATING AGREEMENTS AND MANAGEMENT AGREEMENTS
All of the issued and outstanding capital stock of Coaxial is held by the
Individual LLCs. Each Individual LLC is governed by the Delaware Limited
Liability Company Act and its operating agreement. The operating agreements of
the Individual LLCs are substantially identical. Each operating agreement
limits the purposes of the Individual LLC to acquiring, owning, holding and
disposing of shares of capital stock of Coaxial, or any assets or property
acquired in exchange for such shares of capital stock. The sole member of each
Individual LLC has contributed to his Individual LLC all his shares of Coaxial
capital stock. As a pass-through entity, all profits and losses of each
Individual LLC are allocated to its sole member.
The responsibility and control of the management of each Individual LLC is
granted to the member. The member may delegate to a manager any of the power
and authority of the member pursuant to a written management agreement.
However, notwithstanding any contrary provision in any such management
agreement,
73
<PAGE>
no Individual LLC shall take, and the manager shall not cause such Individual
LLC to take, any of the following actions without the consent of the member:
. sell or issue any membership interests in the Individual LLC;
. engage in any transaction with Insight Ohio, IHO, any successor manager
or any of their respective affiliates;
. engage in any business activity other than (i) the acquisition, ownership
and disposition of shares of Coaxial and (ii) the performance of its
obligations under any agreement or other instrument evidencing the
Discount Notes or any replacement thereof or pursuant to which the
Discount Notes or any replacement thereof exists;
. consent to any amendment to any provision of the Articles of
Incorporation of Coaxial;
. amend, alter, or repeal any provision of the Code of Regulations of
Coaxial;
. purchase, redeem, or otherwise acquire any membership interest in the
Individual LLC;
. merge or consolidate with or into any other person;
. liquidate or dissolve;
. acquire, by purchase or lease, any assets;
. sell, dispose of, pledge or otherwise encumber any part of its assets,
except, with respect to shares of Coaxial, as permitted by any agreement
or other instrument pursuant to which the Discount Notes or any
replacement thereof exists;
. incur or prepay any indebtedness (including any Discount Notes or any
replacement thereof other than in accordance with their terms);
. agree to any reorganization, arrangement, or similar adjustment of its
debts under any law relating to bankruptcy, insolvency, or reorganization
or relief of debtors;
. enter into or amend any contract or other agreement, including any
agreement with respect to the incurring or repayment of any indebtedness
(including any Discount Notes or any replacement thereof);
. take any action that would cause Coaxial's election to be treated as an
"S corporation" under the Internal Revenue Code to be terminated or
revoked; or
. hire any employee or independent contractor or pay any compensation to
any of its officers or directors.
Each Individual LLC has entered into a management agreement (the "Management
Agreement") with IHO (the "Manager"). Except as provided below, each
Individual LLC has delegated to the Manager all rights and powers of the
member of such Individual LLC with respect to the management and conduct of
the Individual LLC's activities and operation insofar as they relate to the
ownership of shares of Coaxial and any Discount Notes, and its performance of
its obligations under any agreement or other instrument evidencing the
Discount Notes or pursuant to which the Discount Notes exists. The Manager
does not have any authority, among other things, to:
. take any action which pursuant to the operating agreement of such
Individual LLC may not be delegated to the Manager;
. cause the Individual LLC to exercise any of its rights as a shareholder
of Coaxial under the Close Corporation Agreement of Coaxial (as described
under "--Close Corporation Agreement" below); or
. take any action with respect to any "Reserved Matter" as that term is
defined in the Close Corporation Agreement.
The Manager is not entitled to any compensation from any Individual LLCs
under any Management Agreement and is not deemed a partner, co-venturer or
other participant in the business or operations of any Individual LLC. The
Manager is not deemed a member of any Individual LLC.
Each member agrees in its Management Agreement that it will not cause its
Individual LLC to take or agree to take, any of the following actions:
. sell or issue any membership interest in the Individual LLC;
. admit any person as an additional member of the Individual LLC;
74
<PAGE>
. engage in any business activity other than (i) the ownership and
disposition of shares of Coaxial and (ii) the performance of its
obligations under any agreement or other instrument evidencing the
Discount Notes or any replacement thereof or pursuant to which the
Discount Notes or any replacement thereof exists;
. merge or consolidate with or into any other person;
. liquidate or dissolve;
. acquire, by purchase or lease, any assets;
. sell, dispose of, pledge or otherwise encumber its shares in Coaxial,
except in accordance with any agreement or other instrument evidencing
the Discount Notes or any replacement thereof or pursuant to which the
Discount Notes or any replacement thereof exists;
. prepay any Discount Notes or any replacement thereof;
. initiate any reorganization or any similar proceeding relating to
bankruptcy matters;
. enter into or amend any agreement with respect to the incurrence or
repayment of any Discount Notes or any replacement thereof other than in
accordance with their terms; or
. any action prohibited by any covenant contained in any agreement or other
instrument evidencing the Discount Notes or any replacement thereof or
pursuant to which the Discount Notes or any replacement thereof exists,
with respect to the management of the Individual LLC. In addition, each
member agrees in its Management Agreement that it will not take or agree
to take any action to sell, assign, pledge, or otherwise encumber or
transfer all or any part of his interest in the Individual LLC to any
person, except, following the death of the member, pursuant to the laws
of descent and distribution, or amend the operating agreement of the
Individual LLC.
COAXIAL CHARTER DOCUMENTS
The following summary of the terms and provisions of Coaxial's capital stock
does not purport to be complete and is qualified in its entirety by reference
to the actual terms and provisions of the capital stock contained in Coaxial's
Amended Articles of Incorporation and Close Corporation Agreement.
Amended Articles of Incorporation
Coaxial's Amended Articles of Incorporation authorize 2,000 common shares,
par value of $1.00 per share (the "Common Stock"), of which 1,080 shares are
issued and outstanding. No shares have been reserved for issuance. No
preferred shares are authorized. Each share of Common Stock is entitled to one
vote per share. The Amended Articles of Incorporation restrict the freedom of
officers and directors in governing the corporation and provide that the
internal affairs of Coaxial are to be governed by the Close Corporation
Agreement. In addition, the purposes of Coaxial are limited to (a) acquiring,
owning and disposing of membership interests in Insight Ohio or any successor-
in-interest thereto or any assets or property acquired in exchange for any
such membership interests and (b) engaging in the business of developing,
owning, designing, constructing, maintaining, operating, managing and selling
those cable television systems owned or held by Coaxial prior to the filing of
Coaxial's Amended Articles of Incorporation.
Close Corporation Agreement
The Close Corporation Agreement regulates the internal affairs of Coaxial
and the relations of its shareholders among themselves with respect to
Coaxial. In the event of any conflict between either the Amended Articles of
Incorporation or the Code of Regulations of Coaxial and the Close Corporation
Agreement, the Close Corporation Agreement governs.
The Close Corporation Agreement requires Coaxial to obtain shareholder
approval for various categories of actions, including (subject to certain
exceptions):
. to sell or issue any Coaxial capital stock;
. to engage in certain transactions with Insight, Insight Ohio, the manager
of the Individual LLCs or any of their respective affiliates;
75
<PAGE>
. to engage in any business other than owning and disposing of membership
interests in Insight Ohio;
. to amend the Articles of Incorporation or the Code of Regulations;
. to acquire any shares of Coaxial capital stock;
. to merge or consolidate with any other entity;
. to liquidate or dissolve;
. to acquire any assets;
. to amend the Operating Agreement of Insight Ohio;
. to sell or dispose of assets;
. to incur or prepay indebtedness;
. to agree to any reorganization or similar adjustment of its debts under
any bankruptcy or similar law;
. to enter into or amending any contract;
. to take any action that would cause Coaxial to no longer be treated as an
S corporation; or
. to hire any employee or independent contractor, or pay any compensation
to any officer or director.
Coaxial is also required to comply with any shareholder resolution regarding
certain "Reserved Matters," which include:
. preparing and filing tax returns;
. exercising, prosecuting or enforcing any rights or claims of Coaxial that
are not contributed to Insight Ohio;
. owning, operating, managing, selling or otherwise disposing of any
Excluded Asset (as defined in the Contribution Agreement);
. exercising, prosecuting or enforcing any rights or claims of Coaxial
arising under the Contribution Agreement; and
. any other matter that does not involve Coaxial's ownership of membership
interests in Insight Ohio and its incurrence of the indebtedness
evidenced by the Notes or any replacement thereof.
The shareholders have the right to declare and cause Coaxial to pay
dividends to the same extent as Coaxial's board of directors.
None of the rights of the shareholders of Coaxial may be exercised on behalf
of any of the shareholders of Coaxial by Insight in its capacity as manager of
such shareholder, or otherwise, except to the extent that Insight is expressly
granted the authority to exercise such right on behalf of such shareholder
pursuant to a Management Agreement executed by the member of such shareholder
and filed with Coaxial.
Coaxial undertakes to indemnify each shareholder and its members, officers
and directors from any liability, loss, or damage arising from the exercise of
any rights arising under the Close Corporation Agreement.
The Close Corporation Agreement can only be modified or terminated upon the
written consent of all holders of the outstanding capital stock of Coaxial.
Each share of Coaxial must bear a legend indicating that such shares are
subject to the Close Corporation Agreement.
GENERAL PARTNERSHIP AGREEMENT OF PHOENIX
Phoenix Associates ("Phoenix") is a Florida general partnership created
pursuant to a General Partnership Agreement, dated as of January 1, 1978, as
amended, among Phoenix BAS LLC, a limited liability company that is wholly-
owned and controlled by Barry Silverstein and that has a 67.5% partnership
interest in Phoenix, Phoenix DJM LLC, a limited liability company that is
wholly-owned and controlled by Dennis J. McGillicuddy and that has a 22.5%
partnership interest in Phoenix, and Phoenix DSM LLC, a limited liability
company that is wholly-owned and controlled by D. Stevens McVoy and that has a
10.0% partnership interest in Phoenix. Phoenix currently conducts no business
and has no assets other than debt instruments issued by certain of its
affiliates. As of June 30, 1998, Phoenix owed Coaxial $79,501,010.
76
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
SENIOR CREDIT FACILITY
Coaxial and Insight have entered into a commitment letter with Canadian
Imperial Bank of Commerce pursuant to which Insight Ohio is expected to enter
into the Senior Credit Facility prior to October 1998 with a group of banks
and other financial institutions led by Canadian Imperial Bank of Commerce
(which is an affiliate of CIBC), or one of its affiliates, as agent ("Canadian
Imperial Bank"). None of the elements of the Financing Plan were contingent on
the entering into of the Senior Credit Facility. The following is a summary of
certain expected provisions of the Senior Credit Facility and, therefore, does
not purport to be complete and is subject to, and is qualified in its entirety
by, the final terms of the Senior Credit Facility which may differ from the
provisions described in this summary. In addition, any commitment issued by
Canadian Imperial Bank will be subject to various conditions, and there can be
no assurance that Insight Ohio will be able to enter into a definitive credit
agreement implementing the terms and conditions set forth in the preliminary
statement of terms and conditions provided by Canadian Imperial Bank.
The Senior Credit Facility is expected to provide for revolving credit loans
of $25 million to finance capital expenditures and for working capital and
general purposes, including the upgrade of the System's cable plant and for
the introduction of new video services. The Senior Credit Facility is expected
to have a six-year maturity, with reductions to the amount of the commitment
commencing after three years. The amount available for borrowing is expected
to be reduced by any outstanding letter of credit obligations.
Insight Ohio's obligations under the Senior Credit Facility are expected to
be secured by substantially all the tangible and intangible assets of Insight
Ohio. Loans under the Senior Credit Facility are expected to bear interest, at
Insight Ohio's option, at Canadian Imperial Bank's prime rate or at a
Eurodollar rate. In addition to the index rates, Insight Ohio is expected to
pay an additional margin percentage tied to its ratio of total debt to
adjusted annualized operating cash flow, in the case of prime rate loans,
0.75% or, if under a 5:1 ratio, 0.25%; and in the case of Eurodollar loans,
2.0% or, if under a 5:1 ratio, 1.5%.
The Senior Credit Facility is expected to contain a number of covenants
that, among other things, may restrict the ability of Insight Ohio and its
subsidiaries to make capital expenditures, dispose of assets, incur additional
indebtedness, incur guaranty obligations, pay dividends or make capital
distributions, including distributions on the Preferred Interests that are
required to pay the Notes and the Discount Notes in the event of a payment
default under the Senior Credit Facility, create liens on assets, make
investments, make acquisitions, engage in mergers or consolidations, engage in
certain transactions with subsidiaries and affiliates and otherwise restrict
certain activities. In addition, the Senior Credit Facility is expected to
require compliance with certain financial ratios, including with respect to
total leverage, interest coverage and pro forma debt service coverage.
Management does not expect that such covenants will materially impact the
ability of Insight Ohio to operate its business.
The Senior Credit Facility is expected to contain customary events of
default, including the failure to pay principal when due or any interest or
other amount that becomes due within a period of time after the due date
thereof, any representation or warranty being made by Insight Ohio that is
incorrect in any material respect on or as of the date made, a default in the
performance of any negative covenants or a default in the performance of
certain other covenants or agreements for a specified period, default in
certain other indebtedness, certain insolvency events, certain change of
control events and a default under the Indenture or the Discount Notes
Indenture.
DISCOUNT NOTES
Concurrent with the Original Offering, the Discount Notes Issuers offered
$30.0 million gross proceeds ($55,869,000 principal amount at maturity) of the
Discount Notes.
The Discount Notes were issued at a substantial discount to their principal
amount at maturity. A holder of Discount Notes is required to include the
accretion of the original issue discount as gross income for U.S. federal
income tax purposes prior to the receipt of the cash payments to which such
income is attributable.
77
<PAGE>
Cash interest on the Discount Notes does not accrue and is not payable prior
to August 15, 2003. Thereafter, cash interest on the Discount Notes will
accrue at a rate of 12 7/8% per annum, on the principal amount at maturity of
the Discount Notes, and will be payable semiannually on each February 15 and
August 15, commencing February 15, 2004.
The Discount Notes are joint and several non-recourse obligations of the
Discount Notes Issuers and are secured by a pledge of all of the issued and
outstanding common equity of Coaxial and notes issued by Coaxial DJM LLC and
Coaxial DSM LLC to Coaxial LLC (together, the "LLC Mirror Notes").
The Series B Preferred Interests have an initial liquidation preference of
$30.0 million. All Series B Preferred Interests have been issued to Coaxial;
Insight Ohio will pay distributions to Coaxial in an amount equal to the
interest payments on the Discount Notes. Coaxial will use the distributions
received by it in respect of the Series B Preferred Interests to pay dividends
on its common stock. Pursuant to the LLC Mirror Notes, Coaxial DJM LLC and
Coaxial DSM LLC will pay dividends received by them to Coaxial LLC. Coaxial
LLC will utilize cash dividends from the Coaxial common stock and cash
interest payments from the LLC Mirror Notes to make payments on the Discount
Notes. Neither of the Discount Notes Issuers will conduct any business. The
Series B Preferred Interests will become non-voting upon the enforcement of
remedies under the Discount Notes pledge agreement (as defined in the Discount
Notes Indenture). Though the Series B Preferred Interests will make
distributions in amounts equal to the interest payments on the Discount Notes,
the Series B Preferred Interests will not serve as collateral for the Discount
Notes and the holders of the Discount Notes will not have any direct claim
with respect to the Series B Preferred Interests.
The Series B Preferred Interests are mandatorily redeemable upon
acceleration of indebtedness under the Discount Notes, enforcement of remedies
under the pledge agreement in respect of the Discount Notes collateral, the
passage of ten days and the request by the holders of the Discount Notes. The
Series B Preferred Interests are redeemable at the option of Insight Ohio, so
long as the proceeds thereof are used to make a redemption of the Discount
Notes or an offer to purchase Discount Notes, in each case, in accordance with
the terms of the Discount Notes Indenture. Except for the pledge to the
trustee (as defined in the Discount Notes Indenture) for the benefit of the
holders of the Discount Notes, the exercise of remedies in respect of such
pledge or any transfer after enforcement of such remedies under such pledge,
common stock of Coaxial and the LLC Mirror Notes are non-transferable. The
Series B Preferred Interests are non-transferable.
The Series A Preferred Interests have a priority over the Series B Preferred
Interests with respect to both distributions and redemption.
The Discount Notes are conditionally guaranteed on a senior unsecured basis,
by Insight Ohio and any future Restricted Subsidiaries (other than Coaxial) of
the Discount Notes Issuers (the "Discount Notes Guarantors"). The Discount
Notes Guarantees are only effective to the extent and at the time the holders
of the Discount Notes are unable to realize proceeds from the enforcement of
the mandatory redemption provisions of the Series B Preferred Interests.
Insight Ohio is the only Discount Notes Guarantor currently in existence. The
Discount Notes Guarantees are subordinated to the prior payment in full of all
obligations of the Guarantors with respect to the Guarantees.
The Discount Notes are non-recourse senior obligations of the Discount Notes
Issuers who are not permitted under the Discount Notes Indenture to incur any
other indebtedness. The Discount Notes Guarantees rank pari passu in right of
payment with all existing and future unsubordinated indebtedness of Insight
Ohio and any Restricted Subsidiaries and senior in right of payment to all
existing and future subordinated indebtedness of Insight Ohio and any
restricted subsidiaries (as defined in the Discount Notes Indenture). The
Discount Notes and any Discount Notes Guarantees are effectively subordinated
in right of payment to all secured indebtedness of the Discount Notes
Guarantors to the extent of the value of the assets securing such
indebtedness, including indebtedness under the Senior Credit Facility. In
addition, the Discount Notes are effectively subordinated to all indebtedness
of the Discount Notes Issuers' subsidiaries (including Coaxial) that are not
Discount Notes Guarantors. As of June 30, 1998, after giving pro forma effect
to the Financing Plan, other than the Discount Notes and $140.0 million
represented by the Notes, the Discount Notes Issuers and their Restricted
Subsidiaries
78
<PAGE>
(presently Coaxial and Insight Ohio) would have had approximately $270,000 of
indebtedness outstanding, all of which would have been secured indebtedness.
The Discount Notes are redeemable at the option of the Discount Notes
Issuers, in whole or in part, at any time on or after August 15, 2003, at the
redemption prices set forth in the Discount Notes Indenture, together with
accrued and unpaid interest thereon, if any, to the redemption date.
Upon a Change of Control (as defined in the Discount Notes Indenture), the
Discount Notes Issuers are required to offer to repurchase all of the
outstanding Discount Notes at a purchase price equal to:
. 101% of the accreted value (as defined in the Discount Notes Indenture)
thereof, if the repurchase date is on or prior to August 15, 2003 or
. 101% of the principal amount at maturity thereof, together with accrued
and unpaid interest thereon, if any, to the repurchase date, if such date
is after August 15, 2003.
The Discount Notes Indenture contains covenants that, among other things,
restrict the ability of the Discount Notes Issuers, Insight Ohio and any of
their restricted subsidiaries to:
. incur additional indebtedness;
. pay dividends and make distributions;
. issue stock of subsidiaries to third parties;
. make certain investments;
. repurchase stock;
. create liens;
. enter into transactions with affiliates;
. enter into sale and leaseback transactions;
. create dividend or other payment restrictions affecting restricted
subsidiaries;
. merge or consolidate in a transaction involving all or substantially all
of the assets of the Discount Notes Issuers and their restricted
subsidiaries, taken as a whole;
. transfer or sell assets; and
. use dividends received on the Coaxial common stock and payments received
in respect of the LLC Mirror Notes for any purpose other than required
payments of interest and principal on the Discount Notes.
The covenants are subject to a number of important exceptions.
The Discount Notes Issuers are obligated in certain instances to make an
offer to repurchase the Discount Notes at a purchase price equal to (i) 100%
of the accreted value thereof, if the repurchase date is on or prior to August
15, 2003, or (ii) 100% of the principal amount at maturity thereof, together
with accrued and unpaid interest thereon to the purchase date, if the
repurchase date is after August 15, 2003 with the net cash proceeds of certain
asset sales.
The Discount Notes Issuers are obligated in certain instances to make an
offer to repurchase the Discount Notes, at the redemption prices set forth in
the Discount Notes Indenture, plus accrued and unpaid interest, if any, to the
redemption date in connection with certain asset swaps.
Pursuant to the Discount Notes registration rights agreement (as defined in
the Discount Notes Indenture), the Discount Notes Issuers and any Discount
Notes Guarantors must use their reasonable best efforts to file by October 20,
1998, and use their best efforts to cause to become effective by January 18,
1999 an exchange offer registration statement (as defined in the Discount
Notes Indenture) with respect to an offer to exchange the Discount Notes (the
"Discount Notes Exchange Offer") for notes of the Discount Notes Issuers with
terms substantially identical to the Discount Notes (the "Exchange Discount
Notes"). In addition, under certain circumstances the Discount Notes Issuers
and any Discount Notes Guarantors may be required to file a shelf registration
statement (as defined in the Discount Notes Indenture). The Exchange Discount
Notes have terms substantially identical to the Discount Notes. In the event
that certain covenants contained in the Discount Notes registration rights
agreement are not complied with, the Discount Notes Issuers will be required
to pay liquidated damages.
79
<PAGE>
DESCRIPTION OF THE NOTES
The Original Notes were, and the Exchange Notes will be, issued under an
Indenture, dated as of August 21, 1998 (the "Indenture") by and among the
Issuers, Insight Ohio and Bank of Montreal Trust Company, as trustee (the
"Trustee"). The terms of the Notes include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act of
1939, as amended (the "TIA") as in effect on the date of the Indenture. The
Notes are subject to all such terms, and holders of the Notes are referred to
the Indenture and the TIA for a statement of them. The following is a summary
of the material terms and provisions of the Notes. This summary does not
purport to be a complete description of the Notes and is subject to the
detailed provisions of, and qualified in its entirety by reference to, the
Notes and the Indenture (including the definitions contained in the
Indenture). A copy of the Indenture will be provided without charge upon
request of the Issuers to each person to whom a copy of this Prospectus is
delivered. Definitions relating to certain capitalized terms are set forth
under "--Certain Definitions." Capitalized terms that are used but not
otherwise defined in this Prospectus have the meanings ascribed to them in the
Indenture and such definitions are incorporated in this Prospectus by
reference.
GENERAL
The Original Notes initially issued under the Indenture were limited in
aggregate principal amount to $140,000,000. The Notes are senior obligations
of the Issuers, who are not permitted under the Indenture to incur any other
Indebtedness. The Notes are non-recourse obligations of the Issuers and the
only recourse a holder of the Notes has with respect to the payment of
principal or interest on the Notes is the enforcement of the rights granted
pursuant to the Pledge Agreement with respect to the Senior Notes Collateral
(which will require mandatory redemption of the Series A Preferred Interests)
and, failing that, enforcement of the Guarantee. See "Risk Factors--Non-
Recourse Debt; Ability to Realize on Collateral."
GUARANTEES
The Notes are conditionally guaranteed, on a senior unsecured basis, by
Insight Ohio and by any future Restricted Subsidiaries of the Issuers. The
conditional Guarantee will become effective upon (i) enforcement by the
Trustee of the rights granted pursuant to the Pledge Agreement with respect to
the Senior Notes Collateral, (ii) Insight Ohio's failure to redeem the Series
A Preferred Interests after ten days as provided in the Operating Agreement
and (iii) an adjudication is obtained relating to such failure. Insight Ohio
is currently the only Guarantor in existence. The Guarantee of any Guarantor
is subordinate to any secured Indebtedness of such Guarantor to the extent of
the assets securing such Indebtedness.
The obligations of each Guarantor are limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by
or on behalf of any other Guarantor in respect of the obligations of such
other Guarantor under its Guarantee or pursuant to its contribution
obligations under the Indenture, result in the obligations of such Guarantor
under the Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Guarantor that makes a payment or
distribution under a Guarantee shall be entitled to a contribution from each
other Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if all of its assets or Capital Stock is sold, in each case in a
transaction in compliance with "--Certain Covenants--Limitation on Certain
Asset Sales" below, or the Guarantor merges with or into or consolidates with,
or transfers all or substantially
80
<PAGE>
all of its assets in compliance with "--Merger, Consolidation or Sale of
Assets" below, and such Guarantor has delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent herein provided for relating to such transaction have been complied
with.
SECURITY
Pursuant to the Pledge Agreement among Coaxial and the Trustee, Coaxial
pledged to the Trustee, for the benefit of the holders of the Notes, the
Series A Preferred Interests in Insight Ohio owned by Coaxial on the Issue
Date or so acquired by Coaxial thereafter all of which constitutes the Senior
Notes Collateral. Such pledge secures the payment and performance when due of
all the obligations of the Issuers under the Indenture and the Notes.
So long as no Event of Default occurs and is continuing, and subject to
certain terms and conditions in the Indenture, Coaxial is entitled to receive
all cash distributions made upon or with respect to the Senior Notes
Collateral pledged by it.
Upon the occurrence and during the continuance of an Event of Default, the
Trustee shall enforce its remedies with respect to the pledged Senior Notes
Collateral in accordance with instructions received from holders of a majority
of the aggregate principal amount at maturity of outstanding Notes, or in the
absence of such instructions, in such manner as the Trustee deems appropriate,
in each case as provided in the Indenture. The Series A Preferred Interests
are mandatorily redeemable ten days after acceleration or such enforcement.
All funds received by the Trustee upon any such enforcement shall be
distributed by the Trustee in accordance with the provisions of the Indenture.
Upon the full and final payment and performance of all obligations of the
Issuers under the Indenture and the Notes, the Senior Notes Collateral shall
be released.
The rights of the Trustee to foreclose upon and dispose of the Senior Notes
Collateral is likely to be significantly impaired by applicable bankruptcy law
if a bankruptcy proceeding were to be commenced by or against the Issuers
prior to the Trustee's having disposed of the Senior Notes Collateral. Under
Title XI of the United States Code (the "Bankruptcy Code"), a secured creditor
such as the Trustee is prohibited from disposing of security upon foreclosure
in a bankruptcy case, even though the debtor is in default under the
applicable debt instruments, without bankruptcy court approval. Moreover, in
general, the Bankruptcy Code prohibits the bankruptcy court from giving such
approval if the secured creditor is given "adequate protection." The meaning
of the term "adequate protection" may vary according to circumstances, but it
is intended in general to protect the value of the secured creditor's interest
in the collateral and may include cash payments or the granting of additional
security, if and at such times as the court in its discretion determines, for
any diminution in the value of the collateral as a result of the stay of
disposition during the pendency of the bankruptcy case. In view of the lack of
a precise definition of the term "adequate protection" and the broad
discretionary powers of a bankruptcy court, it is impossible to predict how
long payments under the Notes could be delayed following commencement of a
bankruptcy case, whether or when the Trustee could dispose of the Senior Notes
Collateral or whether or to what extent holders of the Notes would be
compensated for any delay in payment or loss of value of the pledged
collateral through the requirement of "adequate protection." See "Risk
Factors--Certain Bankruptcy Considerations."
MATURITY, INTEREST AND PRINCIPAL
The Notes mature on August 15, 2006. The Notes bear interest at a rate of
10% per annum from the Issue Date until maturity. Interest is payable semi-
annually in arrears on each February 15 and August 15, commencing February 15,
1999, to holders of record of the Notes at the close of business on the
immediately preceding February 1 and August 1, respectively. The interest rate
on the Notes is subject to increase, and such Additional Interest will be
payable on the payment dates set forth above, in certain circumstances, if the
Notes (or other securities substantially similar to the Notes) are not
registered with the SEC within the prescribed time periods. See "The Exchange
Offer--Purpose and Effect of the Exchange Offer."
81
<PAGE>
OPTIONAL REDEMPTION
The Notes are redeemable at the option of the Issuers, in whole at any time
or in part from time to time on or after August 15, 2002 at the following
redemption prices (expressed as percentages of the principal amount thereof),
together, in each case, with accrued and unpaid interest, if any, to the
redemption date, if redeemed during the twelve-month period beginning on
August 15 of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002................................... 105.000%
2003................................... 103.333%
2004................................... 101.667%
2005 and thereafter.................... 100.000%
</TABLE>
Notwithstanding the foregoing, the Issuers may redeem in the aggregate up to
35% of the original principal amount of Notes at any time and from time to
time prior to August 15, 2001 at a redemption price equal to 110% of the
aggregate principal amount so redeemed, plus accrued and unpaid interest, if
any, to the redemption date out of the Net Proceeds of one or more Equity
Offerings; provided that at least $91.0 million of the principal amount of
Notes remain outstanding immediately after the occurrence of any such
redemption and that any such redemption occurs within 90 days following the
closing of any such Equity Offering.
In the event of a redemption of fewer than all of the Notes, the Trustee
shall select the Notes to be redeemed in compliance with the requirements of
the principal national securities exchange, if any, on which such Notes are
listed, or if such Notes are not then listed on a national securities
exchange, on a pro rata basis, by lot or in such other manner as the Trustee
shall deem fair and equitable. The Notes will be redeemable in whole or in
part upon not less than 30 nor more than 60 days' prior written notice, mailed
by first class mail to a holder's last address as it shall appear on the
register maintained by the Registrar of the Notes. On and after any redemption
date, interest will cease to accrue on the Notes or portions thereof called
for redemption as long as funds are deposited with the Paying Agent.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants:
Limitation on Additional Indebtedness
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, incur (as defined) any Indebtedness
(including Acquired Indebtedness); provided that if no default or Event of
Default shall have occurred and be continuing at the time or as a consequence
of the incurrence of such Indebtedness, Insight Ohio or any of the Issuers'
Restricted Subsidiaries may incur Indebtedness (including Acquired
Indebtedness) if after giving effect to the incurrence of such Indebtedness
and the receipt and application of the proceeds thereof, the Consolidated
Leverage Ratio of the Issuers is less than 7 to 1.
Notwithstanding the foregoing, Insight Ohio and the Issuers' Restricted
Subsidiaries may incur Permitted Indebtedness; provided that such Person will
not incur any Permitted Indebtedness that ranks junior in right of payment to
the Notes that has a maturity or mandatory sinking fund payment prior to the
maturity of the Notes.
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, incur any Indebtedness which by its terms (or by the terms of
any agreement governing such Indebtedness) is subordinated in right of payment
to any other Indebtedness of the Issuers or such Restricted Subsidiary unless
such Indebtedness is also by its terms (or by the terms of any agreement
governing such Indebtedness) made expressly subordinate in right of payment to
the Notes or the Guarantee of such Guarantor, as the case may be, pursuant to
subordination provisions that are substantively identical to the subordination
provisions of such Indebtedness (or such
82
<PAGE>
agreement) that are most favorable to the holders of any other Indebtedness of
the Issuers or such Restricted Subsidiary, as the case may be.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories
of Permitted Indebtedness or is entitled to be incurred pursuant to the first
paragraph of this covenant, the Issuers shall, in their sole discretion,
classify such item of Indebtedness in any manner that complies with this
covenant and such item of Indebtedness shall be treated as having been
incurred pursuant to only one of such clauses or pursuant to the first
paragraph hereof.
Limitation on Restricted Payments
The Issuers will not make, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be continuing
at the time of or immediately after giving effect to such Restricted
Payment;
(b) immediately after giving pro forma effect to such Restricted Payment,
Insight Ohio and the Issuers' Restricted Subsidiaries could incur $1.00 of
additional Indebtedness (other than Permitted Indebtedness) under "--
Limitation on Additional Indebtedness" above; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of:
(1) 100% of the Issuers' Cumulative EBITDA minus 1.4 times the
Cumulative Consolidated Interest Expense of the Issuers;
(2) 100% of the aggregate Net Proceeds received by an Issuer from the
issue or sale after the Issue Date of Capital Stock (other than
Disqualified Capital Stock or Capital Stock of an Issuer issued to any
Subsidiary of an Issuer) of an Issuer or any Indebtedness or other
securities of an Issuer convertible into or exercisable or exchangeable
for Capital Stock (other than Disqualified Capital Stock) of an Issuer
which has been so converted, exercised or exchanged, as the case may
be;
(3) without duplication of any amounts included in clause (c)(2)
above, 100% of the aggregate Net Proceeds received by an Issuer from
any equity contribution from a holder of an Issuer's Capital Stock,
excluding, in the case of clauses (c)(2) and (3), any Net Proceeds from
an Equity Offering to the extent used to redeem the Notes;
(4) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment made after the Issue Date, an amount
(to the extent not included in the computation of Consolidated Net
Income) equal to the lesser of: (x) the return of capital with respect
to such Investment and (y) the amount of such Investment which was
treated as a Restricted Payment, in either case, less the cost of the
disposition of such Investment; and
(5) so long as the Designation Amount thereof was treated as a
Restricted Payment made after the Issue Date, with respect to any
Unrestricted Subsidiary that has been redesignated as a Restricted
Subsidiary after the Issue Date in accordance with the provisions of
the Indenture, an Issuer's proportionate interest in an amount equal to
the excess of (x) the total assets of such Subsidiary, valued on an
aggregate basis at fair market value, over (y) the total liabilities of
such Subsidiary, determined in accordance with GAAP (and provided that
such amount shall not in any case exceed the Designation Amount with
respect to such Restricted Subsidiary upon its Designation).
For purposes of determining under this clause (c) the amount expended for
Restricted Payments, cash distributed shall be valued at the face amount
thereof and property other than cash shall be valued at its fair market value.
The provisions of this covenant shall not prohibit:
(i) the payment of any distribution within 60 days after the date of
declaration thereof, if at such date of declaration such payment would
comply with the provisions of the Indenture;
83
<PAGE>
(ii) the repurchase, redemption or other acquisition or retirement of any
shares of Capital Stock of an Issuer or Indebtedness subordinated to the
Notes by conversion into, or by or in exchange for, shares of Capital Stock
of an Issuer (other than Disqualified Capital Stock), or out of the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary
of an Issuer) of other shares of Capital Stock of an Issuer (other than
Disqualified Capital Stock); provided, however, that any such Net Proceeds
or the value of any Capital Stock issued in exchange for such shares or
Indebtedness are excluded from clause (c)(2) above (and were not included
therein at any time);
(iii) the redemption or retirement of Indebtedness of an Issuer
subordinated to the Notes in exchange for, by conversion into, or out of
the Net Proceeds of, a substantially concurrent sale or incurrence of
Indebtedness of an Issuer (other than any Indebtedness owed to a
Subsidiary) that is contractually subordinated in right of payment to the
Notes to at least the same extent as the Indebtedness being redeemed or
retired;
(iv) the retirement of any shares of Disqualified Capital Stock of an
Issuer by conversion into, or by exchange for, shares of Disqualified
Capital Stock of an Issuer, or out of the Net Proceeds of the substantially
concurrent sale (other than to a Subsidiary of an Issuer) of other shares
of Disqualified Capital Stock of an Issuer; provided, however, that any
such Net Proceeds or the value of any Capital Stock issued in exchange for
such shares are excluded from clause (c)(2) above (and were not included
therein at any time);
(v) whether or not a Default or Event of Default shall have occurred and
be continuing or occur immediately after giving effect thereto (x)
Preferred Payments from Insight Ohio and (y) Pass Through Dividends by
Coaxial;
(vi) except if a default or Event of Default shall have occurred and be
continuing, Tax Distributions;
(vii) management fees and reimbursement of expenses payable to Insight
pursuant to the Operating Agreement provided that (i) the Issuers and their
Restricted Subsidiaries could incur at least $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under "--Certain
Covenants--Limitation on Additional Indebtedness" and (ii) no default or
Event of Default shall have occurred and be continuing in the case of both
clauses (i) and (ii) of this clause (vii) at (x) the time of payment of
such management fee and (y) at the Reported Period;
(viii) the purchase of Discount Notes pursuant to "Limitation on Certain
Asset Sales" and "Change of Control Offer" provisions of the Discount Notes
Indenture; and
(ix) the distribution by Phoenix of any of the Excluded Assets; provided
that in calculating the aggregate amount of Restricted Payments made
subsequent to the Issue Date for purposes of clause (c) of the immediately
preceding paragraph, amounts expended pursuant to clauses (i), (vi) and
(viii) shall be included in such calculation.
Limitation on Liens
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens) upon any property
or asset of an Issuer or any of their Restricted Subsidiaries or any shares of
Capital Stock or Indebtedness of any Restricted Subsidiary of an Issuer which
owns property or assets, now owned or hereafter acquired, unless:
. if such Lien secures Indebtedness which is pari passu with the Notes
(without giving effect to the principles of structural subordination),
then the Notes are secured on an equal and ratable basis with the
obligations so secured until such time as such obligation is no longer
secured by a Lien or
. if such Lien secures Indebtedness which is subordinated to any debt of a
Restricted Subsidiary, any such Lien shall be subordinated to the Lien
granted to the holders of the Notes to the same extent as such
Indebtedness is subordinated to the Notes.
84
<PAGE>
Limitation on Transactions with Affiliates
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with
any Affiliate (each an "Affiliate Transaction") or extend, renew, waive or
otherwise modify in any material respect the terms of any Affiliate
Transaction entered into prior to the Issue Date unless:
(i) such Affiliate Transaction is between or among the Issuers, or an
Issuer and a Restricted Subsidiary of an Issuer; or
(ii) the terms of such Affiliate Transaction are fair and reasonable to
an Issuer or such Restricted Subsidiary, as the case may be, and the terms
of such Affiliate Transaction are substantially similar to the terms which
could reasonably be expected to be obtained by an Issuer or such Restricted
Subsidiary, as the case may be, in a comparable transaction made on an
arm's-length basis between unaffiliated parties.
In any Affiliate Transaction (or any series of related Affiliate
Transactions which are similar or part of a common plan) involving an amount
or having a fair market value in excess of $3.0 million which is not permitted
under clause (i) above, an Issuer must obtain a resolution of the Board of
Directors of such Issuer certifying that such Affiliate Transaction complies
with clause (ii) above. In any Affiliate Transaction (or any series of related
Affiliate Transactions which are similar or part of a common plan) involving
an amount or having a fair market value in excess of $5.0 million which is not
permitted under clause (i) above, the Issuers must obtain a favorable written
opinion as to the fairness, from a financial point of view, of such
transaction or transactions, as the case may be, from an Independent Financial
Advisor.
The foregoing provisions will not apply to:
. any Restricted Payment that is not prohibited by the provisions described
under "--Limitation on Restricted Payments" above;
. reasonable fees and compensation paid to and indemnity provided on behalf
of, officers, directors or employees of the Issuers or any Restricted
Subsidiary of an Issuer as determined in good faith by the Issuer's Board
of Directors or senior management;
. arrangements now or hereafter in effect between Insight and third parties
which arrangements can be used for the benefit of a Restricted Subsidiary;
and
. any forgiveness or distribution by Phoenix of the Excluded Assets.
Notwithstanding anything contained in this Prospectus to the contrary, the
terms of the Operating Agreement and the indemnification provisions of the
Close Corporation Agreement and the performance by any party thereto of its
obligations thereunder shall not be considered an Affiliate Transaction.
Limitation on Creation of Subsidiaries
The Issuers will not create or acquire, and will not permit any of their
Restricted Subsidiaries to create or acquire, any Subsidiary other than:
(i) a Restricted Subsidiary existing as of the Issue Date; or
(ii) a Restricted Subsidiary that is acquired or created in connection
with the acquisition by an Issuer of a related business or asset; or
(iii) an Unrestricted Subsidiary;
provided, however, that each Restricted Subsidiary acquired or created
pursuant to clause (ii) shall have executed a guarantee, satisfactory in form
and substance to the Trustee (and with such documentation relating thereto as
the Trustee shall require, including, without limitation a supplement or
amendment to the Indenture and opinions of counsel as to the enforceability of
such guarantee), pursuant to which such Restricted Subsidiary will become a
Guarantor. As of the Issue Date, the Issuers had no Restricted Subsidiaries,
other than Insight Ohio. See "--General."
85
<PAGE>
Limitation on Certain Asset Sales
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, consummate an Asset Sale unless:
(i) the Issuer or such applicable Restricted Subsidiary, as the case may
be, receives consideration at the time of such sale or other disposition at
least equal to the fair market value of the assets sold or otherwise
disposed of;
(ii) not less than 80% of the consideration received by an Issuer or such
applicable Restricted Subsidiary, as the case may be, is in the form of
cash or Cash Equivalents; provided, however, that the amount of any (x)
Indebtedness of an Issuer or any Restricted Subsidiary that is actually
assumed by the transferee in such Asset Sale and from which an Issuer and
the Restricted Subsidiaries are fully released shall be deemed to be cash
for purposes of determining the percentage of cash consideration received
by an Issuer or the Restricted Subsidiaries and (y) notes or other similar
obligations received by an Issuer or the Restricted Subsidiaries from such
transferee that are immediately converted, sold or exchanged (or are
converted, sold or exchanged within 30 days of the related Asset Sale) by
an Issuer or the Restricted Subsidiaries into cash shall be deemed to be
cash, in an amount equal to the net cash proceeds realized upon such
conversion, sale or exchange for purposes of determining the percentage of
cash consideration received by an Issuer or the Restricted Subsidiaries;
and
(iii) the Asset Sale Proceeds received by an Issuer or such Restricted
Subsidiary are applied:
(a) to the extent an Issuer or any such Restricted Subsidiary, as the
case may be, elects, or is required, to prepay, repay or purchase
indebtedness under the Senior Credit Facility within 180 days following
the receipt of the Asset Sale Proceeds from any Asset Sale; provided
that any such repayment shall result in a permanent reduction of the
commitments thereunder (other than commitments under a revolving credit
facility) in an amount equal to the principal amount so repaid; or
(b) to the extent of the balance of Asset Sale Proceeds, after
application, if any, as described above, to the extent the Issuers
elect, on a pro rata basis to the repayment of an amount of Other Pari
Passu Debt not exceeding the Other Pari Passu Debt Pro Rata Share
(provided that any such repayment shall result in a permanent reduction
of any commitment in respect thereof in an amount equal to the
principal amount so repaid) within 180 days following the receipt of
the Asset Sale Proceeds from any Asset Sale; or
(c) to the extent of the balance of Asset Sale Proceeds after
application as described above, to the extent the Issuers or a
Restricted Subsidiary elect, to an investment in assets (including
Capital Stock or other securities purchased in connection with the
acquisition of Capital Stock or property of another Person) used or
useful in businesses similar, ancillary, complementary or otherwise
related to the business of an Issuer or any such Restricted Subsidiary
as then conducted; provided that (1) such investment occurs or an
Issuer or any such Restricted Subsidiary enters into contractual
commitments to make such investment, subject only to customary
conditions (other than the obtaining of financing), within 180 days
following receipt of such Asset Sale Proceeds and (2) Asset Sale
Proceeds so contractually committed are so applied within 270 days
following the receipt of such Asset Sale Proceeds; and
(d) if on such 180th day in the case of clauses (iii)(a), (iii)(b)
and (iii)(c)(1) or on such 270th day in the case of clause (iii)(c)(2)
with respect to any Asset Sale, the Available Asset Sale Proceeds
exceed $10.0 million, the Issuers shall apply an amount equal to the
Available Asset Sale Proceeds to an offer to repurchase the Notes, at a
purchase price in cash equal to 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the purchase date (an
"Excess Proceeds Offer").
If an Excess Proceeds Offer is not fully subscribed, the Issuers may retain
the portion of the Available Asset Sale Proceeds not required to repurchase
Notes.
86
<PAGE>
If the Issuers are required to make an Excess Proceeds Offer, the Issuers
shall mail, within 30 days following the date specified in clause (iii)(d)
above, a notice to the holders stating, among other things:
. that such holders have the right to require the Issuers to apply the
Available Asset Sale Proceeds to repurchase such Notes at a purchase
price in cash equal to 100% of the principal amount thereof plus accrued
and unpaid interest, if any, to the purchase date;
. the purchase date, which shall be no earlier than 30 days and not later
than 45 days from the date such notice is mailed;
. the instructions that each holder must follow in order to have such Notes
purchased; and
. the calculations used in determining the amount of Available Asset Sale
Proceeds to be applied to the purchase of such Notes.
In the event of the transfer of substantially all of the property and assets
of the Issuers and their Restricted Subsidiaries as an entirety to a Person in
a transaction permitted under "--Merger, Consolidation or Sale of Assets"
below, the successor Person shall be deemed to have sold the properties and
assets of the Issuers and their Restricted Subsidiaries not so transferred for
purposes of this covenant, and shall comply with the provisions of this
covenant with respect to such deemed sale as if it were an Asset Sale.
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to an Excess Proceeds Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Asset
Sale" provisions of the Indenture, the Issuers shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached their obligations under the "Asset Sale" provisions of the Indenture
by virtue thereof.
Limitation on Asset Swaps
The Issuers will not, and will not permit any Restricted Subsidiary to,
engage in any Asset Swaps which constitutes substantially all of the assets of
the Issuers, unless:
(i) at the time of entering into the agreement to swap assets and
immediately after giving effect to the proposed Asset Swap, no default or
Event of Default shall have occurred and be continuing or would occur as a
consequence thereof; and
(ii) the Issuers have been informed in writing by either S&P or Moody's
that any Indebtedness of the Issuers (including the Notes) will not be
downgraded as a result of such Asset Swap.
Notwithstanding clause (ii) of the immediately preceding sentence, the
Issuers will be allowed to consummate an Asset Swap even if such Asset Swap
will result in such a downgrade, if within five days of the occurrence of such
Asset Swap, the Issuers make an offer to purchase Notes in accordance with the
procedures described in "--Change of Control Offer" (the "Asset Swap Offer")
at the following redemption prices (expressed as percentages of the principal
amount thereof) not less than 103.000% together, in each case, with accrued
and unpaid interest, if any, to the redemption date, if redeemed during the
twelve-month period beginning on August 15 of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
1998................................... 110.0000%
1999................................... 108.7500%
2000................................... 107.5000%
2001................................... 106.2500%
2002................................... 105.0000%
2003................................... 103.7500%
2004 and thereafter.................... 103.0000%
</TABLE>
87
<PAGE>
Limitation on Disqualified Capital Stock of Restricted Subsidiaries
The Issuers will not permit any of their Restricted Subsidiaries to issue
any Disqualified Capital Stock (except Disqualified Capital Stock issued to an
Issuer or a Wholly Owned Subsidiary of an Issuer) or permit any Person (other
than an Issuer or a Wholly Owned Subsidiary of an Issuer) to hold any such
Disqualified Capital Stock unless an Issuer or such Restricted Subsidiary
would be entitled to incur or assume Indebtedness under "--Limitation on
Additional Indebtedness" above (other than Permitted Indebtedness) in the
aggregate principal amount equal to the aggregate liquidation value of the
Disqualified Capital Stock to be issued.
Limitation on Capital Stock of Restricted Subsidiaries
The Issuers will not (i) sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of a Restricted Subsidiary of an Issuer (other
than under the Senior Credit Facility or pursuant to the Pledge Agreement) or
(ii) permit any of its Restricted Subsidiaries to issue any Capital Stock,
other than to an Issuer or a Wholly Owned Subsidiary of an Issuer, provided,
that Insight Ohio may issue additional common membership interests to Insight
in consideration of capital contributions made by Insight. The foregoing
restrictions shall not apply to an Asset Sale made in compliance with "--
Limitation on Certain Asset Sales" above or the issuance of Preferred Stock in
compliance with "--Limitation on Disqualified Capital Stock of Restricted
Subsidiaries" above.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer
to exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of an Issuer to;
(a)(i) pay dividends or make any other distributions to an Issuer or any
Restricted Subsidiary of an Issuer (A) on its Capital Stock or (B) with
respect to any other interest or participation in, or measured by, its
profits or (ii) repay any Indebtedness or any other obligation owed to an
Issuer or any Restricted Subsidiary of an Issuer;
(b) make loans or advances or capital contributions to an Issuer or any
of its Restricted Subsidiaries; or
(c) transfer any of its properties or assets to an Issuer or any of their
Restricted Subsidiaries, except for such encumbrances or restrictions
existing under or by reason of:
(i) encumbrances or restrictions existing on the Issue Date to the
extent and in the manner such encumbrances and restrictions are in
effect on the Issue Date;
(ii) (x) the Indenture, the Notes and the Guarantees and (y) the
Discount Notes Indenture, the Discount Notes and the guarantees of the
Discount Notes;
(iii) applicable law;
(iv) the Senior Credit Facility;
(v) any instrument governing Acquired Indebtedness, which encumbrance
or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets
of the Person (including any Subsidiary of the Person), so acquired;
(vi) customary non-assignment provisions in leases or other
agreements entered in the ordinary course of business and consistent
with past practices;
(vii) Refinancing Indebtedness; provided that such restrictions are
no more restrictive than those contained in the agreements governing
the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded;
88
<PAGE>
(viii) customary restrictions in security agreements or mortgages
securing Indebtedness of an Issuer or a Restricted Subsidiary to the
extent such restrictions restrict the transfer of the property subject
to such security agreements and mortgages; or
(ix) customary restrictions with respect to a Restricted Subsidiary
of an Issuer pursuant to an agreement that has been entered into for
the sale or disposition of all or substantially all of the Capital
Stock or assets of such Restricted Subsidiary.
Limitation on Conduct of Business
The Issuers will not engage in any business other than holding common
membership interests and the Preferred Interests of Insight Ohio and issuing
the Notes and, in the case of Phoenix, holding the Excluded Assets. The
Issuers will not permit their Restricted Subsidiaries to engage in any
businesses which are not the same, similar, related, ancillary or
complementary to the businesses in which Insight Ohio and their Restricted
Subsidiaries are then engaged.
Limitation on Sale and Lease-Back Transactions
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, enter into any Sale and Lease-Back Transaction unless (i) the
consideration received in such Sale and Lease-Back Transaction is at least
equal to the fair market value of the property sold, as determined in good
faith by the Board of Directors of an Issuer and evidenced by a board
resolution and (ii) the Issuers could incur the Attributable Indebtedness in
respect of such Sale and Lease-Back Transaction in compliance with "--
Limitation on Additional Indebtedness" above.
Payments for Consent
The Issuers will not, and will not permit any of their Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of the Indenture or the Notes unless such consideration is offered
to be paid or agreed to be paid to all holders of the Notes which so consent,
waive or agree to amend in the time frame set forth in solicitation documents
relating to such consent, waiver or agreement.
Payment of Pass Through Dividends
Coaxial will immediately use all proceeds received from Insight Ohio as
Preferred Payments in respect of the Series B Preferred Interests to pay a
dividend in like amount to Coaxial LLC, Coaxial DJM LLC and Coaxial DSM LLC.
Enforcement of Rights
In the event that the Series A Preferred Interests become mandatorily
redeemable, Coaxial will exercise all rights and remedies available to enforce
Coaxial's rights with respect to the Series A Preferred Interests.
CHANGE OF CONTROL OFFER
Upon the occurrence of a Change of Control, the Issuers shall be obligated
to make an offer to purchase (the "Change of Control Offer") each holder's
outstanding Notes at a purchase price (the "Change of Control Purchase Price")
equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the Change of Control Payment Date (as defined) in
accordance with the procedures set forth below.
Within 20 days of the occurrence of a Change of Control, the Issuers shall
(i) cause a notice of the Change of Control Offer to be sent at least once to
the Dow Jones News Service or similar business news service in the United
States and (ii) send by first-class mail, postage prepaid, to the Trustee and
to each holder of the Notes, at the address appearing in the register
maintained by the Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment;
89
<PAGE>
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 30 days nor later than 45 days from
the date such notice is mailed (the "Change of Control Payment Date"));
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Issuers default in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Notes delivered for purchase, and a
statement that such holder is withdrawing his election to have such Notes
purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Senior Notes surrendered;
(8) any other procedures that a holder must follow to accept a Change of
Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Issuers. The Paying Agent shall promptly mail to each
holder of Notes so accepted payment in an amount equal to the purchase price
for such Notes, and the Issuers shall execute and issue, and the Trustee shall
promptly authenticate and mail to such holder, a new note equal in principal
amount to any unpurchased portion of the Notes surrendered; provided that each
such new note shall be issued in an original principal amount in denominations
of $1,000 and integral multiples thereof.
The Indenture requires that if the Senior Credit Facility is in effect, or
any amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change of Control, prior to the mailing of the notice to
holders described in the second preceding paragraph, but in any event within
20 days following any Change of Control, the Issuers covenant to (i) repay in
full all obligations and terminate all commitments under or in respect of the
Senior Credit Facility or offer to repay in full all obligations and terminate
all commitments under or in respect of the Senior Credit Facility and repay
the Indebtedness owed to each such lender who has accepted such offer or (ii)
obtain the requisite consents under the Senior Credit Facility to permit the
repurchase of the Notes as described above. The Issuers must first comply with
the covenant described in the preceding sentence before it shall be required
to purchase Notes in the event of a Change of Control; provided that the
Issuers' failure to comply with the covenant described in the preceding
sentence constitutes an Event of Default described in clause (iii) under "--
Events of Default" below if not cured within 30 days after the notice required
by such clause. As a result of the foregoing, a holder of the Notes may not be
able to compel the Issuers to purchase the Notes unless the Issuers are able
at the time to refinance all of the obligations under or in respect of the
Senior Credit Facility or obtain requisite consents under the Senior Credit
Facility.
90
<PAGE>
The Indenture provides that, (A) if an Issuer or any Restricted Subsidiary
thereof has issued any outstanding (i) indebtedness that is subordinated in
right of payment to the Notes or senior in right of payment with respect to
Indebtedness of Restricted Subsidiaries (other than under the Senior Credit
Facility) or (ii) Preferred Stock, and an Issuer or such Restricted Subsidiary
is required to make a Change of Control Offer or to make a distribution with
respect to such indebtedness or Preferred Stock in the event of a change of
control, the Issuers shall not consummate any such offer or distribution with
respect to such indebtedness or Preferred Stock until such time as the Issuers
shall have paid the Change of Control Purchase Price in full to the holders of
Notes that have accepted the Issuers' change of control offer and shall
otherwise have consummated the change of control offer made to holders of the
Notes and (B) the Issuers will not issue Indebtedness that is subordinated in
right of payment to the Notes or Preferred Stock with change of control
provisions requiring the payment of such Indebtedness or Preferred Stock prior
to the payment of the Notes in the event of a Change in Control under the
Indenture.
The Issuers will not be required to make a Change of Control Offer if a
third party makes the Change of Control Offer in the manner, at the time and
otherwise in compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by the Issuers and purchases all
Notes or portions thereof validly tendered and not withdrawn under such Change
of Control Offer.
If a Change of Control were to occur, the Issuers may not have sufficient
available funds to make the Change of Control Offer for all Notes that might
be delivered by holders of the Notes seeking to accept the Change of Control
Offer. The failure of the Issuers to make or consummate the Change of Control
Offer or to pay the Change of Control Payment when due will give the Trustee
and the holders of the Notes the right described under "Events of Default"
below. See "Risk Factors--Ability to Purchase Notes Upon a Change of Control."
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Issuers shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached their obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Issuers will not and will not permit any of their Restricted
Subsidiaries to consolidate with, merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
the assets of the Issuers (as an entirety or substantially as an entirety in
one transaction or a series of related transactions), to any Person unless:
(i) an Issuer or such Restricted Subsidiary, as the case may be, shall be the
continuing Person, or the Person (if other than an Issuer or such Restricted
Subsidiary) formed by such consolidation or into which an Issuer or such
Restricted Subsidiary, as the case may be, is merged or to which the
properties and assets of an Issuer or such Restricted Subsidiary, as the case
may be, are sold, assigned, transferred, leased, conveyed or otherwise
disposed of shall be a corporation organized and existing under the laws of
the United States or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all of the obligations of an
Issuer or such Restricted Subsidiary, as the case may be, under the Indenture,
the Notes and the Guarantees, and the obligations thereunder shall remain in
full force and effect; (ii) immediately before and immediately after giving
effect to such transaction, no default or Event of Default shall have occurred
and be continuing; and (iii) immediately after giving effect to such
transaction on a pro forma basis the Issuers or such Person could incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
under "--Certain Covenants--Limitation on Additional Indebtedness" above;
provided that Insight Ohio may merge with Coaxial without complying with this
clause (iii).
91
<PAGE>
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Issuers shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an Officers' Certificate and an opinion of counsel, each stating
that such consolidation, merger or transfer and the supplemental indenture in
respect thereto comply with this provision and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
For purposes of the foregoing, the transfer (by lease, assignment, sale or
otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of an Issuer the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Issuers, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Issuers.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) default in payment of any principal of, or premium, if any, on the
Notes whether at maturity, upon redemption or otherwise;
(ii) default for 30 days in payment of any interest on the Notes;
(iii) default by an Issuer or any Restricted Subsidiary in the observance
or performance of any other covenant in the Notes or the Indenture for 30
days after written notice from the Trustee as directed by the holders of
not less than 25% in aggregate principal amount of the Notes then
outstanding (except in the case of a default with respect to the "Change of
Control" or "Merger, Consolidation or Sale of Assets" covenant which shall
constitute an Event of Default with such notice requirement but without
such passage of time requirement);
(iv) failure to pay when due principal, interest or premium in an
aggregate amount of $7.5 million or more with respect to any Indebtedness
of an Issuer or any Restricted Subsidiary thereof, or the acceleration of
any such Indebtedness aggregating $7.5 million or more which default shall
not be cured, waived or postponed pursuant to an agreement with the holders
of such Indebtedness within 60 days after written notice as provided in the
Indenture, or such acceleration shall not be rescinded or annulled within
20 days after written notice as provided in the Indenture;
(v) any final judgment or judgments which can no longer be appealed for
the payment of money in excess of $7.5 million, net of any amounts covered
by insurance, shall be rendered against an Issuer or any Restricted
Subsidiary thereof, and shall not be discharged for any period of 60
consecutive days during which a stay of enforcement shall not be in effect;
(vi) certain events involving bankruptcy, insolvency or reorganization of
an Issuer or any Restricted Subsidiary thereof;
(vii) any modification of the mandatory redemption provisions relating to
the Preferred Interests contained in the Operating Agreement;
(viii) any of the Guarantees ceases to be in full force and effect or any
of the Guarantees is declared to be null and void and unenforceable or any
of the Guarantees is found to be invalid or any of the Guarantors denies
its liability under its Guarantee (other than by reason of release of a
Guarantor in accordance with the terms of the Indenture);
(ix) failure to have a first priority perfected security interest with
respect to the Senior Notes Collateral; and
(x) the occurrence of an "Event of Default" under the Discount Notes
Indenture.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of principal or premium, if
any, or interest on the Notes) if the Trustee considers it to be in the best
interest of the holders of the Notes to do so.
92
<PAGE>
The Indenture provides that if an Event of Default (other than an Event of
Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, then the Trustee or the
holders as directed by not less than 25% in aggregate principal amount of the
Notes then outstanding may declare to be immediately due and payable the
entire principal amount of all the Notes then outstanding plus accrued
interest to the date of acceleration (i) and the same shall become immediately
due and payable or (ii) if there are any amounts outstanding under the Senior
Credit Facility, shall become immediately due and payable upon the first to
occur of an acceleration under the Senior Credit Facility or 5 business days
after receipt by an Issuer and the representative under the Senior Credit
Facility of a notice of acceleration; provided, however, that after such
acceleration but before a judgment or decree based on acceleration is obtained
by the Trustee, the holders of a majority in aggregate principal amount of
outstanding Notes may, under certain circumstances, rescind and annul such
acceleration if (i) all Events of Default, other than nonpayment of principal,
premium, if any, or interest that has become due solely because of the
acceleration, have been cured or waived as provided in the Indenture, (ii) to
the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due otherwise
than by such declaration of acceleration, has been paid, (iii) if the Issuers
have paid the Trustee its reasonable compensation and reimbursed the Trustee
for its expenses, disbursements and advances and (iv) in the event of the cure
or waiver of an Event of Default of the type described in clause (vi) of the
above Events of Default, the Trustee shall have received an Officers'
Certificate and an opinion of counsel that such Event of Default has been
cured or waived. No such rescission shall affect any subsequent default or
impair any right consequent thereto. In case an Event of Default resulting
from certain events of bankruptcy, insolvency or reorganization shall occur,
the principal, premium and interest amount with respect to all of the Notes
shall be due and payable immediately without any declaration or other act on
the part of the Trustee or the holders of the Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Notes Indenture or the Notes and to direct the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, subject to certain limitations provided for in the Indenture and
under the TIA.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder
shall have previously given to the Trustee written notice of a continuing
Event of Default and unless the holders of at least 25% in aggregate principal
amount of the outstanding Notes shall have made written request and offered
reasonable indemnity to the Trustee to institute such proceeding as Trustee,
and unless the Trustee shall not have received from the holders of a majority
in aggregate principal amount of the outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. Notwithstanding the foregoing, such limitations do
not apply to a suit instituted on such Note on or after the respective due
dates expressed in such Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Issuers may elect either (a) to defease and
be discharged from any and all of their and any Guarantor's obligations with
respect to the Notes (except for the obligations to register the transfer or
exchange of such Notes, to replace temporary or mutilated, destroyed, lost or
stolen Notes, to maintain an office or agency in respect of the Notes and to
hold monies for payment in trust) ("defeasance") or (b) to be released from
their obligations with respect to the Notes under certain covenants contained
in the Indenture ("covenant defeasance") upon the deposit with the Trustee (or
other qualifying trustee), in trust for such purpose, of money and/or non-
callable U.S. government obligations which through the payment of principal
and interest in accordance with their terms will provide money, in an amount
sufficient to pay the principal of, premium, if any, and interest on the
Notes, on the scheduled due dates therefor or on a selected date of redemption
in accordance with the terms of the Indenture. Such a trust may only be
established if, among other things:
. the Issuers have delivered to the Trustee an opinion of counsel (as
specified in the Indenture) (A) to the effect that neither the trust nor
the Trustee will be required to register as an investment company under
the Investment Company Act of 1940, as amended, and (B) describing either
a private ruling concerning
93
<PAGE>
the Notes or a published ruling of the Internal Revenue Service, to the
effect that holders of the Notes or persons in their positions will not
recognize income, gain or loss for federal income tax purposes as a result
of such deposit, defeasance and discharge and will be subject to federal
income tax on the same amount and in the same manner and at the same
times, as would have been the case if such deposit, defeasance and
discharge had not occurred;
. no default or Event of Default shall have occurred and be continuing on
the date of such deposit or insofar as Events of Default from bankruptcy,
insolvency or reorganization events are concerned, at any time in the
period ending on the 91st day after the date of deposit;
. such defeasance or covenant defeasance shall not result in a breach or
violation of, or constitute a default under the Indenture or any other
material agreement or instrument to which an Issuer or any of their
Subsidiaries is a party or by which an Issuer or any or their Subsidiaries
is bound;
. the Issuers shall have delivered to the Trustee an Officers' Certificate
stating that the deposit was not made by the Issuers with the intent of
preferring the holders of the Notes over any other creditors of the
Issuers or with the intent of defeating, hindering, delaying or defrauding
any other creditors of the Issuers or others;
. the Issuers shall have delivered to the Trustee an Officers' Certificate
and an opinion of counsel, each stating that all conditions precedent
provided for or relating to the defeasance or the covenant defeasance have
been complied with;
. the Issuers shall have delivered to the Trustee an opinion of counsel to
the effect after the 91st day following the deposit, the trust funds will
not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; and
. certain other customary conditions precedent are satisfied.
MODIFICATION OF INDENTURE
From time to time, the Issuers, the Guarantors and the Trustee may, without
the consent of holders of the Notes, amend or supplement the Notes Indenture
for certain specified purposes, including providing for uncertificated Notes
in addition to certificated Notes, and curing any ambiguity, defect or
inconsistency, or making any other change that does not, in the opinion of the
Trustee, materially and adversely affect the rights of any holder. The
Indenture contains provisions permitting the Issuers, the Guarantors and the
Trustee, with the consent of holders of at least a majority in principal
amount of the outstanding Notes, to modify or supplement the Indenture and the
Pledge Agreement, except that no such modification shall, without the consent
of each holder affected thereby:
. reduce the amount of Notes whose holders must consent to an amendment,
supplement, or waiver to the Indenture;
. reduce the rate of or change the time for payment of interest, including
defaulted interest, on any Note;
. reduce the principal of or premium on or change the stated maturity of
any Note or change the date on which any Notes may be subject to
redemption or repurchase or reduce the redemption or repurchase price
therefor;
. make any Note payable in money other than that stated in the Note or
change the place of payment from New York, New York;
. waive a default on the payment of the principal of, interest on, or
redemption payment with respect to any Note;
. make any change in provisions of the Indenture protecting the right of
each holder of Notes to receive payment of principal of and interest on
such Note on or after the due date thereof or to bring suit to enforce
such payment, or permitting holders of a majority in principal amount of
Notes to waive defaults or Events of Default;
. amend, change or modify in any material respect the obligation of the
Issuers to make and consummate a Change of Control Offer in the event of a
Change of Control or make and consummate an Asset Sale Offer with respect
to any Asset Sale that has been consummated or modify any of the
provisions or definitions with respect thereto;
94
<PAGE>
. modify or change any provision of the Indenture or the related
definitions affecting the ranking of the Notes or any Guarantee in a
manner which adversely affects the holders of Notes;
. release any Guarantor from any of its obligations under its Guarantee or
the Indenture otherwise than in accordance with the terms of the
Indenture;
. modify or waive a default with respect to clause (vii) under "Events of
Default".
REPORTS TO HOLDERS
So long as the Issuers are subject to the periodic reporting requirements of
the Exchange Act, they will continue to furnish the information required
thereby to the SEC and to the holders of the Notes. The Indenture provides
that even if the Issuers are entitled under the Exchange Act not to furnish
such information to the SEC or to the holders of the Notes, it will
nonetheless continue to furnish such information to the SEC (unless the SEC
does not permit such filing) and holders of the Notes.
COMPLIANCE CERTIFICATE
The Issuers will deliver to the Trustee on or before 90 days after the end
of the Notes Issuers' fiscal year an Officers' Certificate stating whether or
not the signers know of any Default or Event of Default that has occurred and
is continuing. If they do, the certificate will describe the Default or Event
of Default, its status and the intended method of cure, if any.
THE TRUSTEE
The Trustee under the Indenture is the Registrar and Paying Agent with
regard to the Notes. The Indenture provides that, except during the
continuance of an Event of Default, the Trustee will perform only such duties
as are specifically set forth in the Indenture. During the existence of an
Event of Default, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Notes Indenture. The Registrar under the Indenture may require a holder, among
other things, to furnish appropriate endorsements and transfer documents, and
to pay any taxes and fees required by law or permitted by the Indenture. The
Registrar is not required to transfer or exchange any Note selected for
redemption and, further, is not required to transfer or exchange any Note for
a period of 15 days before selection of the Notes to be redeemed.
The Original Notes have been issued in a transaction exempt from
registration under the Securities Act and will be subject to the restrictions
on transfer described in "Notice to Investors."
The registered holder of a Note may be treated as the owner of it for all
purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used in this Prospectus for
which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or is merged into or consolidated with any other Person or which is
assumed in connection with the acquisition of assets from such Person and, in
each case, not incurred by such Person in connection with, or in anticipation
or contemplation of, such Person becoming a Restricted Subsidiary or such
merger, consolidation or acquisition.
"Adjusted Net Assets" of any Person at any date shall mean the lesser of the
amount by which (x) the fair value of the property of such Person exceeds the
total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent
liabilities), but excluding liabilities under the Guarantee of such Person at
such date and (y) the present fair salable value of the assets of such Person
95
<PAGE>
at such date exceeds the amount that will be required to pay the probable
liability of such Person on its debts (after giving effect to all other fixed
and contingent liabilities and after giving effect to any collection from any
Subsidiary of such Person in respect of the obligations of such Person under
the Guarantee of such Person), excluding Indebtedness in respect of the
Guarantee of such Person, as they become absolute and matured.
"Affiliate" means, with respect to any specific Person, any other Person
that directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement
or otherwise; provided that, for purposes of the covenant described under "--
Certain Covenants--Limitation on Transactions with Affiliates" beneficial
ownership of at least 10% of the voting securities of a Person, either
directly or indirectly, shall be deemed to be control.
"Annualized EBITDA" means EBITDA of the Issuers and their Restricted
Subsidiaries for the latest fiscal quarter for which financial statements are
available multiplied by four (such fiscal quarter the "One Quarter Period").
For purposes of this definition, "EBITDA" shall be calculated for any period
after giving effect on a pro forma basis to (i) the incurrence or repayment of
any Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or repayment
of Indebtedness in the ordinary course of business for working capital
purposes pursuant to working capital facilities, occurring during the One
Quarter Period or at any time subsequent to the last day of the One Quarter
Period and on or prior to the Transaction Date, as if such incurrence or
repayment, as the case may be (and the application of the proceeds thereof),
occurred on the first day of the One Quarter Period and (ii) any Asset Sales
or Asset Acquisitions (including, without limitation, any Asset Acquisition
giving rise to the need to make such calculation as a result of such Person or
one of its Restricted Subsidiaries (including any Person who becomes a
Restricted Subsidiary as a result of the Asset Acquisition) incurring,
assuming or otherwise being liable for Acquired Indebtedness and also
including any EBITDA (provided that such EBITDA shall be included only to the
extent includable pursuant to the definition of "Consolidated Net Income")
attributable to the assets which are the subject of the Asset Acquisition or
Asset Sale during the One Quarter Period) occurring during the One Quarter
Period or at any time subsequent to the last day of the One Quarter Period and
on or prior to the Transaction Date, as if such Asset Sale or Asset
Acquisition (including the incurrence, assumption or liability for any such
Acquired Indebtedness) occurred on the first day of the One Quarter Period. If
such Person or any of its Restricted Subsidiaries directly or indirectly
guarantees Indebtedness of a third Person, the preceding sentence shall give
effect to the incurrence of such guaranteed Indebtedness as if such Person or
any Restricted Subsidiary or such Person had directly incurred or otherwise
assumed such guaranteed Indebtedness. For purposes of this definition,
whenever pro forma effect is to be given to an Asset Sale or Asset Acquisition
(including pursuant to the System Acquisition), the amount of income or
earnings and any net cost savings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness incurred in
connection therewith, the pro forma calculations shall be determined in
accordance with Regulation S-X under the Securities Act.
"Asset Acquisition" means (a) an Investment by an Issuer or any Restricted
Subsidiary of an Issuer in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of an Issuer or any Restricted Subsidiary
of an Issuer, or shall be merged with or into an Issuer or any Restricted
Subsidiary of an Issuer or (b) the acquisition by an Issuer or any Restricted
Subsidiary of an Issuer of the assets of any Person (other than a Restricted
Subsidiary of an Issuer) which constitute all or substantially all of the
assets of such Person or comprise any division or line of business of such
Person or any other properties or assets of such Person other than in the
ordinary course of business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
assignment, transfer, lease or other disposition (excluding Asset Swaps),
other than to an Issuer or any of its Wholly Owned Subsidiaries, in any
96
<PAGE>
single transaction or series of related transactions of (a) any Capital Stock
of or other equity interest in any Restricted Subsidiary of an Issuer or (b)
any other property or assets of an Issuer or of any Restricted Subsidiary
thereof; provided that Asset Sales shall not include (i) a transaction or
series of related transactions for which an Issuer or its Restricted
Subsidiaries receive aggregate consideration of less than $1.5 million, (ii)
the sale, lease, conveyance, disposition or other transfer of all or
substantially all of the assets of an Issuer as permitted under "--Merger,
Consolidation or Sale of Assets," (iii) any transaction consummated in
compliance with the covenant described above under "--Limitation on Restricted
Payments" and (iv) any sale, lease, conveyance, disposition or other transfer
of all or any portion of the Excluded Assets.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by an Issuer or any Restricted Subsidiary of an Issuer from such
Asset Sale (including cash received as consideration for the assumption of
liabilities incurred in connection with or in anticipation of such Asset
Sale), after (a) provision for all income or other taxes measured by or
resulting from such Asset Sale, (b) payment of all brokerage commissions,
underwriting and other fees and expenses related to such Asset Sale, (c)
provision for minority interest holders in any Restricted Subsidiary of an
Issuer as a result of such Asset Sale, (d) repayment of Indebtedness that is
required to be repaid in connection with such Asset Sale and (e) deduction of
appropriate amounts to be provided by an Issuer or a Restricted Subsidiary of
an Issuer as a reserve, in accordance with GAAP, against any liabilities
associated with the assets sold or disposed of in such Asset Sale and retained
by an Issuer or a Restricted Subsidiary after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such Asset Sale,
and (ii) promissory notes and other noncash consideration received by an
Issuer or any Restricted Subsidiary of an Issuer from such Asset Sale or other
disposition upon the liquidation or conversion of such notes or noncash
consideration into cash.
"Asset Swap" means the execution of a definitive agreement, subject only to
customary closing conditions that the Issuers in good faith believe will be
satisfied, for a concurrent purchase and sale or exchange of Related Business
Assets, between an Issuer or any of its Restricted Subsidiaries and another
Person, provided that any amendment to or waiver of any closing condition
which individually or in the aggregate is material to any Asset Swap shall be
deemed to be a new Asset Swap that must comply with the "Limitation on Asset
Swaps" covenant; it being understood that an Asset Swap may include a cash
equalization payment made in connection therewith, provided that any such cash
payment shall be applied in accordance with the covenant described above under
"--Certain Covenants--Limitation on Asset Swaps."
"Attributable Indebtedness" in respect of a Sale and Lease-Back Transaction
means, as at the time of determination, the greater of (i) the fair value of
the property subject to such arrangement and (ii) the present value of the
notes (discounted at the rate borne by the Notes, compounded semi-annually) of
the total obligations of the lessee for rental payments during the remaining
term of the lease included in such Sale and Lease-Back Transaction (including
any period for which such lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that have not been applied
in accordance with clauses (iii)(a), (iii)(b), or (iii)(c), and that have not
yet been the basis for an Excess Proceeds Offer in accordance with clause
(iii)(d) of the first paragraph of "--Certain Covenants--Limitation on Certain
Asset Sales".
"Board of Directors" of any Person means the board of directors, management
committee or other body governing the management and affairs of such Person.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, partnership interests or any other
participation, right or other interest in the nature of an equity interest in
such Person including, without limitation, Common Stock and Preferred Stock of
such Person, or any option, warrant or other security convertible into any of
the foregoing.
97
<PAGE>
"Capitalized Lease Obligations" means with respect to any Person,
Indebtedness represented by obligations under a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such Indebtedness shall be the capitalized amount of such
obligations determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency or instrumentality thereof and backed by the full faith and credit of
the United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation ("S&P")
or Moody's Investors Service, Inc. ("Moody's"); (iii) commercial paper
maturing no more than one year from the date of creation thereof and, at the
time of acquisition, having a rating of at least A-1 from S&P or at least P-1
from Moody's; (iv) certificates of deposit or bankers' acceptances maturing
within one year from the date of acquisition thereof issued by any bank
organized under the laws of the United States of America or any state thereof
or the District of Columbia or any U.S. branch of a foreign bank having at the
date of acquisition thereof combined capital and surplus of not less than
$250,000,000; and (v) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i)
above entered into with any bank meeting the qualifications specified in
clause (iv) above; and (vi) investments in money market funds which invest
substantially all their assets in securities of the types described in clauses
(i) through (v) above.
A "Change of Control" will be deemed to have occurred at such time as (i)
any Person (including a Person's Affiliates and associates), other than a
Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of 50% or
more of the total voting and economic power of Insight Ohio's Capital Stock,
(ii) any Person (including a Person's Affiliates and associates), other than a
Permitted Holder, becomes the beneficial owner of more than 33 1/3% of the
total voting power of Insight Ohio's Capital Stock and the Permitted Holders
beneficially own, in the aggregate, a lesser percentage of the total voting
power of the Capital Stock of Insight Ohio than such other Person and do not
have the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of Insight Ohio,
(iii) there shall be consummated any consolidation or merger of Insight Ohio
in which Insight Ohio is not the continuing or surviving corporation or
pursuant to which the Capital Stock of Insight Ohio would be converted into
cash, securities or other property, other than a merger or consolidation of
Insight Ohio which the holders of the Capital Stock of Insight Ohio,
outstanding immediately prior to the consolidation or merger hold, directly or
indirectly, at least a majority of the Capital Stock of the surviving
corporation immediately after such consolidation or merger, (iv) during any
period of two consecutive years, individuals who at the beginning of such
period constituted the Board of Directors of Insight Ohio (together with any
new directors whose election by such Board of Directors or whose nomination
for election by the shareholders or members of the Insight Ohio has been
approved by 66 2/3% of the directors then still in office who either were
directors at the beginning of such period or whose election or recommendation
for election was previously so approved) cease to constitute a majority of the
Board of Directors of Insight Ohio or (v) Insight is the beneficial owner of
less than 50% of the total voting and economic power of Insight Ohio's Capital
Stock and ceases to have management control of the day-to-day operations of
Insight Ohio; provided, however, that a Change of Control will be deemed not
to have occurred as provided above if Insight continues to be the manager of
Insight Ohio pursuant to the Operating Agreement or designees of Insight
constitute a majority of the members of the Management Committee.
"Close Corporation Agreement" means the Close Corporation Agreement of
Coaxial Communications of Central Ohio, Inc. by and among Coaxial, Coaxial
LLC, Coaxial DJM LLC and Coaxial DSM LLC as in effect on the Issue Date.
"Coaxial" means Coaxial Communications of Central Ohio, Inc., an Ohio
corporation.
98
<PAGE>
"Coaxial LLC" means Coaxial LLC, a Delaware limited liability company.
"Common Stock" of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will
control the management and policies of such Person.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Restricted Subsidiaries on a
consolidated basis (including, but not limited to, (i) imputed interest
included in Capitalized Lease Obligations, (ii) all commissions, discounts and
other fees and charges owed with respect to letters of credit and bankers'
acceptance financing, (iii) the net costs associated with Interest Rate
Agreements and other hedging obligations, (iv) amortization of other financing
fees and expenses, (v) the interest portion of any deferred payment
obligation, (vi) amortization of discount or premium, if any, and (vii) all
other non-cash interest expense (other than interest amortized to cost of
sales)) plus, without duplication, all net capitalized interest for such
period and all interest incurred or paid under any guarantee of Indebtedness
(including a guarantee of principal, interest or any combination thereof) of
any Person, plus the amount of all dividends or distributions paid on
Disqualified Capital Stock (other than dividends paid or payable in shares of
Capital Stock of an Issuer).
"Consolidated Leverage Ratio" means, with respect to any Person, the ratio
of (i) the sum of the aggregate outstanding amount of Indebtedness of such
Person and its Restricted Subsidiaries as of the date of calculation (the
"Transaction Date") on a consolidated basis determined in accordance with GAAP
to (ii) Annualized EBITDA.
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (a) the Net Income of any Person (the "other Person")
in which the Person in question or any of its Restricted Subsidiaries has less
than a 100% interest (which interest does not cause the Net Income of such
other Person to be consolidated into the Net Income of the Person in question
in accordance with GAAP) shall be included only to the extent of the amount of
dividends or distributions paid to the Person in question or the Restricted
Subsidiary, (b) the Net Income of any Restricted Subsidiary of the Person in
question that is subject to any restriction or limitation on the payment of
dividends or the making of other distributions shall be excluded to the extent
of such restriction or limitation, (c)(i) the Net Income of any Person
acquired in a pooling of interests transaction for any period prior to the
date of such acquisition and (ii) any net gain resulting from an Asset Sale by
the Person in question or any of its Restricted Subsidiaries other than in the
ordinary course of business shall be excluded, (d) extraordinary gains and
losses shall be excluded, (e) income or loss attributable to discontinued
operations (including, without limitation, operations disposed of during such
period whether or not such operations were classified as discontinued) shall
be excluded, (f) in the case of a successor to the referent Person by
consolidation or merger or as a transferee of the referent Person's assets,
any earnings of the successor corporation prior to such consolidation, merger
or transfer of assets shall be excluded and (g) Net Income of Phoenix with
respect to the Excluded Assets shall be excluded.
"Cumulative Consolidated Interest Expense" means, with respect to any
Person, as of any date of determination, Consolidated Interest Expense from
July 1, 1998 to the end of such Person's most recently ended full fiscal
quarter prior to such date, taken as a single accounting period.
"Cumulative EBITDA" means, with respect to any Person, as of any date of
determination, EBITDA from July 1, 1998 to the end of such Person's most
recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
"Designation Amount" means an amount equal to the fair market value of the
Issuer's aggregate Investment in a Restricted Subsidiary.
99
<PAGE>
"Discount Notes" means the Senior Discount Notes due 2008 of Coaxial LLC and
Coaxial Financing Corp., as joint issuers, issued to generate gross proceeds
of $30.0 million.
"Discount Notes Indenture" means the Indenture pursuant to which the
Discount Notes are issued.
"Discount Notes Issuers" means Coaxial LLC and Coaxial Financing Corp.
"Disqualified Capital Stock" means any Capital Stock of a Person or a
Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include any Preferred Stock of a Person or a Restricted
Subsidiary of such Person, with respect to either of which, under the terms of
such Preferred Stock, by agreement or otherwise, such Person or Restricted
Subsidiary is obligated to pay current dividends or distributions in cash
during the period prior to the maturity date of the Notes; provided, however,
that Preferred Stock of a Person or any Restricted Subsidiary thereof that is
issued with the benefit of provisions requiring a change of control offer to
be made for such Preferred Stock in the event of a change of control of such
Person or Restricted Subsidiary which provisions have substantially the same
effect as the provisions of the Indenture described under "Change of Control,"
shall not be deemed to be Disqualified Capital Stock solely by virtue of such
provisions.
"EBITDA" means, with respect to any Person and its Restricted Subsidiaries,
for any period, an amount equal to (a) the sum of (i) Consolidated Net Income
for such period, plus (ii) the provision for taxes for such period based on
income or profits to the extent such income or profits were included in
computing Consolidated Net Income and any provision for taxes utilized in
computing net loss under clause (i) hereof, plus (iii) Consolidated Interest
Expense; provided, however for purposes of this definition only, that
dividends or distributions paid on Disqualified Capital Stock shall not be
included in the definition of Consolidated Interest Expense to the extent such
dividends or distributions have not been included in the computation of
Consolidated Net Income for such period, plus (iv) depreciation for such
period on a consolidated basis, plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other non-cash items reducing
Consolidated Net Income for such period, minus (b) all non-cash items
increasing Consolidated Net Income for such period, all for such Person and
its Restricted Subsidiaries determined on a consolidated basis in accordance
with GAAP; and provided, however, that, for purposes of calculating EBITDA
during any fiscal quarter, cash income from a particular Investment of such
Person shall be included only (x) if cash income has been received by such
Person with respect to such Investment during each of the previous four fiscal
quarters, or (y) if the cash income derived from such Investment is
attributable to Cash Equivalents.
"Equity Offering" means an offering by an Issuer of shares of its Common
Stock (however designated and whether voting or non-voting) and any and all
rights, warrants or options to acquire such Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended and the
rules and regulations of the SEC promulgated thereunder.
"Excluded Assets" means (i) any notes and accounts receivable held by
Phoenix and owed by Coaxial Associates of Columbus I ("Columbus I") and
Coaxial Associates of Columbus II ("Columbus II"), and (ii) any debt owed to
Phoenix by its partners as a result of advances made to such partners, in each
case as in effect on the Issue Date.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom
is under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined
100
<PAGE>
by the Board of Directors of an Issuer acting reasonably and in good faith,
and whose determination shall be conclusive and shall be evidenced by a
resolution of the Board of Directors of an Issuer delivered to the Trustee.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States on the Issue Date.
"Guarantors" means (i) Insight Ohio and (ii) any Restricted Subsidiary of an
Issuer formed, created or acquired after the Issue Date.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness
or other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred," "incurable," and "incurring"
shall have meanings correlative to the foregoing); provided that a change in
GAAP that results in an obligation of such Person that exists at such time
becoming Indebtedness shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the
ordinary course of business) if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, and shall also include, to the extent not
otherwise included (i) any Capitalized Lease Obligations of such Person, (ii)
obligations secured by a lien to which the property or assets owned or held by
such Person is subject, whether or not the obligation or obligations secured
thereby shall have been assumed, (iii) guarantees of items of other Persons
which would be included within this definition for such other Persons (whether
or not such items would appear upon the balance sheet of the guarantor), (iv)
all obligations for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (v) Disqualified Capital
Stock of such Person or any Restricted Subsidiary thereof, and (vi)
obligations of any such Person under any currency agreement or any interest
rate agreement applicable to any of the foregoing (if and to the extent such
currency agreement or interest rate agreement obligations would appear as a
liability upon a balance sheet of such Person prepared in accordance with
GAAP). The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and, with respect to contingent obligations, the maximum liability upon
the occurrence of the contingency giving rise to the obligation; provided that
(i) the amount outstanding at any time of any Indebtedness issued with
original issue discount is the principal amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP and (ii)
Indebtedness shall not include any liability for federal, state, local or
other taxes. Notwithstanding any other provision of the foregoing definition,
any trade payable arising from the purchase of goods or materials or for
services obtained in the ordinary course of business shall not be deemed to be
"Indebtedness" of an Issuer or any of its Restricted Subsidiaries for purposes
of this definition. Furthermore, guarantees of (or obligations with respect to
letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Independent Financial Advisor" means an investment banking firm of national
reputation in the United States (i) which does not, and whose directors,
officers and employees or Affiliates do not, have a direct or indirect
financial interest in an Issuer and (ii) which, in the judgment of the Board
of Directors of an Issuer, is otherwise independent and qualified to perform
the task for which it is to be engaged.
"Insight" means, collectively, Insight Communications Company, L.P. and
Insight Holdings of Ohio, LLC.
101
<PAGE>
"Insight Ohio" means Insight Communications of Central Ohio, LLC, a Delaware
limited liability company.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar
agreement or other similar agreement designed to protect the party indicated
therein against fluctuations in interest rates.
"Investments" means, with respect of any Person, directly or indirectly, any
advance, account receivable (other than an account receivable arising in the
ordinary course of business of such Person), loan or capital contribution to
(by means of transfers of property to others, payments for property or
services for the account or use of others or otherwise), the purchase of any
Capital Stock, bonds, notes, debentures, partnership or joint venture
interests or other securities (other than the purchase of the Notes pursuant
to "Limitation on Certain Asset Sales" or "Change of Control Offer") of, the
acquisition, by purchase or otherwise, of all or substantially all of the
business or assets or stock or other evidence of beneficial ownership of, any
Person or the making of any investment in any Person. Investments shall
exclude (i) extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices of such Person and (ii) the repurchase
of securities of any Person by such Person. For the purposes of the
"Limitation on Restricted Payments" covenant, (i) "Investment" shall include
and be valued at the fair market value of the net assets of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by an Issuer or any of its Restricted Subsidiaries,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment, reduced by the
payment of cash distributions which constitute a return of capital in
connection with such Investment; provided that the aggregate of all such
reductions shall not exceed the amount of such initial Investment plus the
cost of all additional Investments; provided, further, that no such payment of
distributions or receipt of any such other amounts shall reduce the amount of
any Investment if such payment of distributions or receipt of any such amounts
would be included in Consolidated Net Income. If an Issuer or any Restricted
Subsidiary of such Issuer sells or otherwise disposes of any Common Stock of
any direct or indirect Restricted Subsidiary of such Issuer such that, after
giving effect to any such sale or disposition, the Issuer no longer owns,
directly or indirectly, greater than 50% of the outstanding Common Stock of
such Restricted Subsidiary, the Issuer shall be deemed to have made an
Investment on the date of any such sale or disposition equal to the fair
market value of the Common Stock of such Restricted Subsidiary not sold or
disposed of.
"Issue Date" means August 21, 1998, the date the Notes were first issued by
the Issuers and authenticated by the Trustee under the Indenture.
"Lien" means, with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement
of any kind or nature whatsoever on or with respect to such property or assets
(including without limitation, any Capitalized Lease Obligation, conditional
sales, or other title retention agreement having substantially the same
economic effect as any of the foregoing).
"Net Income" means, with respect to any Person, for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by or
equity contribution to any Person, the aggregate net proceeds received by such
Person, after payment of expenses, commissions and the like incurred in
connection therewith, whether such proceeds are in cash or in property (valued
at the fair market value thereof, as determined in good faith by the Board of
Directors of such Person, at the time of receipt) and (b) in the case of any
exchange, exercise, conversion or surrender of outstanding securities of any
kind for or into shares of Capital Stock of an Issuer which is not
Disqualified Capital Stock, the net book value of such outstanding securities
on the date of such exchange, exercise, conversion or surrender (plus any
additional
102
<PAGE>
amount required to be paid by the holder to such Person upon such exchange,
exercise, conversion or surrender, less any and all payments made to the
holders, e.g., on account of fractional shares and less all expenses incurred
by such Person in connection therewith).
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President and
the Chief Financial Officer or any Treasurer of such Person that shall comply
with applicable provisions of the Indenture and delivered to the Trustee.
"Operating Agreement" means the Operating Agreement of Insight
Communications of Central Ohio, LLC, as in effect on the Issue Date.
"Other Pari Passu Debt" means Indebtedness of a Restricted Subsidiary of an
Issuer that is pari passu in right of payment to the Notes (without giving
effect to the principles of structural subordination).
"Other Pari Passu Debt Pro Rata Share" means the amount of the applicable
Available Asset Sale Proceeds obtained by multiplying the amount of such
available Asset Sale Proceeds by a fraction, (i) the numerator of which is the
aggregate principal amount and/or accreted value, as the case may be, of all
Other Pari Passu Debt outstanding at the time of the applicable Asset Sale
with respect to which any Restricted Subsidiary of an Issuer is required to
use Available Asset Proceeds to repay or make an offer to purchase or repay
and (ii) the denominator of which is the sum of (a) the aggregate principal
amount of all Notes outstanding at the time of the applicable Asset Sale and
(b) the aggregate principal amount and/or accreted value, as the case may be,
of all Other Pari Passu Debt outstanding at the time of the applicable Asset
Sale Offer with respect to which any Restricted Subsidiary of an Issuer is
required to use the applicable Available Asset Proceeds to offer to repay or
make an offer to purchase or repay.
"Pass Through Dividend" means the dividend required to be made by Coaxial to
Coaxial LLC, Coaxial DJM LLC and Coaxial DSM LLC pursuant to the Indenture
from the proceeds of a Preferred Payment in respect of the Series B Preferred
Interests.
"Permitted Holders" means (x) Insight and (y) Coaxial LLC.
"Permitted Indebtedness" means:
(i) Indebtedness of an Issuer or any Restricted Subsidiary arising under
or in connection with the Senior Credit Facility in an aggregate principal
amount not to exceed $25.0 million outstanding at any time less any
mandatory prepayment actually made thereunder (to the extent, in the case
of payments of revolving credit borrowings, that the corresponding
commitments have been permanently reduced) or scheduled payments actually
made thereunder;
(ii) Indebtedness under the Original Notes, the Exchange Notes, the
Guarantees and the guarantees of the Discount Notes;
(iii) Indebtedness not covered by any other clause of this definition
which is outstanding on the Issue Date;
(iv) Indebtedness of an Issuer to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to an Issuer or another
Restricted Subsidiary;
(v) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Purchase Money Indebtedness and Capitalized Lease Obligations do not in the
aggregate exceed $7.5 million;
(vi) Interest Rate Agreements;
(vii) Refinancing Indebtedness; and
(viii) additional Indebtedness of the Restricted Subsidiaries of the
Issuers not to exceed $7.5 million in aggregate principal amount at any one
time outstanding.
103
<PAGE>
"Permitted Investments" means Investments made on or after the Issue Date
consisting of:
(i) Investments by an Issuer, or by a Restricted Subsidiary thereof, in
the Issuer or a Restricted Subsidiary;
(ii) Investments by the Issuer, or by a Restricted Subsidiary thereof, in
a Person, if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary of the Issuer or (b) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Issuer or a
Restricted Subsidiary thereof;
(iii) Investments in cash and Cash Equivalents;
(iv) an Investment that is made by an Issuer or a Restricted Subsidiary
thereof in the form of any Capital Stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are issued
by a third party to an Issuer or such Restricted Subsidiary solely as
partial consideration for the consummation of an Asset Sale that is
otherwise permitted under "--Certain Covenants--Limitation on Certain Asset
Sales" above;
(v) Interest Rate Agreements entered into in the ordinary course of an
Issuer's or its Restricted Subsidiaries' business; and
(vi) additional Investments not to exceed $500,000 at any one time
outstanding.
"Permitted Liens" means (i) Liens on property or assets of, or any shares of
Capital Stock of or secured indebtedness of, any corporation existing at the
time such corporation becomes a Restricted Subsidiary of an Issuer or at the
time such corporation is merged into an Issuer or any of its Restricted
Subsidiaries; provided that such Liens are not incurred in connection with, or
in contemplation of, such corporation becoming a Restricted Subsidiary of an
Issuer or merging into an Issuer or any of its Restricted Subsidiaries, (ii)
Liens securing Indebtedness under the Senior Credit Facility which
Indebtedness is incurred pursuant to clause (i) of the definition of Permitted
Indebtedness, (iii) Liens securing Refinancing Indebtedness; provided that any
such Lien does not extend to or cover any Property, Capital Stock or
Indebtedness other than the Property, shares or debt securing the Indebtedness
so refunded, refinanced or extended, (iv) Liens in favor of an Issuer or any
of its Restricted Subsidiaries, (v) Liens securing industrial revenue bonds,
(vi) Liens to secure Purchase Money Indebtedness that is otherwise permitted
under the Indenture; provided that (a) any such Lien is created solely for the
purpose of securing Indebtedness representing, or incurred to finance,
refinance or refund, the cost (including sales and excise taxes, installation
and delivery charges and other direct costs of, and other direct expenses paid
or charged in connection with, such purchase or construction) of such
Property, (b) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of such costs, and (c) such Lien does not extend to or
cover any Property other than such item of Property and any improvements on
such item, (vii) statutory liens or landlords', carriers', warehouseman's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens arising
in the ordinary course of business which do not secure any Indebtedness and
with respect to amounts not yet delinquent or being contested in good faith by
appropriate proceedings, if a reserve or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made therefor,
(viii) Liens for taxes, assessments or governmental charges that are being
contested in good faith by appropriate proceedings or are not yet delinquent,
(ix) Liens securing Capitalized Lease Obligations permitted to be incurred
under clause (v) of the definition of "Permitted Indebtedness"; provided that
such Lien does not extend to any property other than that subject to the
underlying lease, (x) easements, rights-of-way, zoning restrictions and other
similar charges or encumbrances in respect of real property not interfering in
any material respect with the ordinary conduct of the business of the Issuer
or any of its Restricted Subsidiaries, (xi) Liens securing obligations under
Interest Rate Agreements, (xii) attachment or judgment Liens not giving rise
to a Default or an Event of Default, (xiii) other Liens securing obligations
incurred in the ordinary course of business; provided, that such Liens do not
serve Indebtedness incurred pursuant to the first paragraph of "Certain
Covenants--Limitation on Additional Indebtedness," (xiv) liens securing the
Senior Notes Collateral and the Discount Notes collateral and (xv) any
extensions, substitutions, replacements or renewals of the foregoing.
104
<PAGE>
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
"Phoenix" means Phoenix Associates, a Florida general partnership.
"Preferred Interests" means collectively the Series A Preferred Interests
and the Series B Preferred Interests.
"Preferred Payments" means any distribution or mandatory redemption required
to be made to the holder of the Preferred Interests pursuant to the Operating
Agreement.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the
cost of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Indebtedness of an Issuer outstanding on the Issue Date or other
Indebtedness permitted to be incurred by an Issuer or its Restricted
Subsidiaries pursuant to the terms of the Indenture (other than pursuant to
clauses (i), (iv), (v), (vi), (vii) and (viii) of the definition of Permitted
Indebtedness), but only to the extent that (i) the Refinancing Indebtedness is
subordinated to the Notes to at least the same extent as the Indebtedness
being refunded, refinanced or extended, if at all, (ii) the Refinancing
Indebtedness is scheduled to mature either (a) no earlier than the
Indebtedness being refunded, refinanced or extended, or (b) after the maturity
date of the Notes, (iii) the portion, if any, of the Refinancing Indebtedness
that is scheduled to mature on or prior to the maturity date of the Notes has
a weighted average life to maturity at the time such Refinancing Indebtedness
is incurred that is equal to or greater than the weighted average life to
maturity of the portion of the Indebtedness being refunded, refinanced or
extended that is scheduled to mature on or prior to the maturity date of the
Notes, (iv) such Refinancing Indebtedness is in an aggregate principal amount
that is equal to or less than the sum of (a) the aggregate principal amount
then outstanding under the Indebtedness being refunded, refinanced or extended
and the amount of any premium reasonably necessary to accomplish such
refinancing, (b) the amount of accrued and unpaid interest, if any, and
premiums owed, if any, not in excess of preexisting prepayment provisions on
such Indebtedness being refunded, refinanced or extended and (c) the amount of
customary fees, expenses and costs related to the incurrence of such
Refinancing Indebtedness, and (v) such Refinancing Indebtedness is incurred by
the same Person that initially incurred the Indebtedness being refunded,
refinanced or extended.
"Related Business" means any business related, ancillary or complementary to
the businesses of the Issuers and their Restricted Subsidiaries.
"Related Business Assets" means assets used or useful in a Related Business.
"Reported Period" means with respect to any Person the most recently ended
full fiscal quarter.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock
of an Issuer or any Restricted Subsidiary of an Issuer or any
105
<PAGE>
payment made to the direct or indirect holders (in their capacities as such)
of Capital Stock of an Issuer or any Restricted Subsidiary of an Issuer (other
than (x) dividends or distributions payable solely in Capital Stock (other
than Disqualified Capital Stock) or in options, warrants or other rights to
purchase such Capital Stock (other than Disqualified Capital Stock), and (y)
in the case of Restricted Subsidiaries of an Issuer, dividends or
distributions payable to an Issuer or to a Wholly Owned Subsidiary of an
Issuer), (ii) the purchase, redemption or other acquisition or retirement for
value of any Capital Stock of an Issuer or any of its Restricted Subsidiaries
(other than Capital Stock owned by an Issuer or a Restricted Subsidiary of an
Issuer, excluding Disqualified Capital Stock) or any option, warrants or other
rights to purchase such Capital Stock, (iii) the making of any principal
payment on, or the purchase, defeasance, repurchase, redemption or other
acquisition or retirement for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, of any Indebtedness
which is subordinated in right of payment to the Notes (other than
subordinated Indebtedness acquired in anticipation of satisfying a scheduled
sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition), (iv) the making of any
Investment or guarantee of any Investment in any Person other than a Permitted
Investment, and (v) any designation of a Restricted Subsidiary as an
Unrestricted Subsidiary on the basis of the Investment by an Issuer therein
and (vi) forgiveness of any Indebtedness of an Affiliate of an Issuer to an
Issuer or a Restricted Subsidiary of an Issuer. For purposes of determining
the amount expected for Restricted Payments, cash distributed or invested
shall be valued at the face amount thereof and property other than cash shall
be valued at its Fair Market Value.
"Restricted Subsidiary" means a Subsidiary of an Issuer other than an
Unrestricted Subsidiary and includes Insight Ohio. The Board of Directors of
an Issuer may designate any Unrestricted Subsidiary or any Person that is to
become a Subsidiary as a Restricted Subsidiary if immediately after giving
effect to such action (and treating any Acquired Indebtedness as having been
incurred at the time of such action), (i) the Issuers could have incurred at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness)
pursuant to "--Certain Covenants--Limitation on Additional Indebtedness" above
and (ii) no Default or Event of Default shall have occurred and be continuing.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by an Issuer or any Restricted Subsidiary of an
Issuer of any real or tangible personal property, which property has been or
is to be sold or transferred by an Issuer or such Restricted Subsidiary to
such Person in contemplation of such leasing.
"Senior Credit Facility" means the Credit Agreement to be entered into
between Insight Ohio, the lenders party thereto in their capacities as lenders
thereunder and Canadian Imperial Bank of Commerce, as agent, together with the
related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
increase in borrowings is permitted by the "Limitation on Additional
Indebtedness" covenant) or adding Restricted Subsidiaries of the Issuer as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"Senior Notes Collateral" means the Series A Preferred Interests which
secure the payment of principal, interest and premium, if any, on the Notes.
"Series A Preferred Interests" means the Series A Preferred Interests of
Insight Ohio with a liquidation preference of $140.0 million.
"Series B Preferred Interests" means the Series B Preferred Interests of
Insight Ohio with an initial liquidation preference of $30.0 million.
106
<PAGE>
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which
more than 50% of the total voting power of the Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the
direction of the management and policies of such entity by contract or
otherwise or if in accordance with GAAP such entity is consolidated with the
first-named Person for financial statement purposes.
"Tax Distributions" means (i) the distributions required to be made by
Insight Ohio to its members, pursuant to the Operating Agreement, equal to the
estimated taxes (assuming taxes are imposed based on the highest marginal
combined, federal, state, and local tax rate imposed on an individual resident
of New York City) of such members arising from the allocation of income of
Insight Ohio to such members, and (ii) distributions made by Coaxial to
Coaxial LLC, Coaxial DJM LLC and Coaxial DSM LLC of Tax Distributions received
from Insight Ohio.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of an Issuer which is designated (a
"Designation") after the Issue Date as an Unrestricted Subsidiary by a
resolution adopted by the Board of Directors of an Issuer; provided that a
Subsidiary may be so Designated as an Unrestricted Subsidiary only if such
classification is in compliance with the "Limitation on Restricted Payments"
covenant. The Trustee shall be given prompt notice by an Issuer of each
resolution adopted by the Board of Directors of an Issuer under this
provision, together with a copy of each such resolution adopted.
"Wholly Owned Subsidiary" means (i) Insight Ohio and (ii) any Restricted
Subsidiary, all of the outstanding voting securities (other than directors'
qualifying shares) of which are owned, directly or indirectly (including
through Insight Ohio), by a Issuer.
107
<PAGE>
BOOK-ENTRY; DELIVERY AND FORM
The Original Notes were offered and sold in connection with the Original
Notes Offering solely to "qualified institutional buyers," as defined in Rule
144A under the Securities Act ("QIBs"), pursuant to Rule 144A and in offshore
transactions to persons other than "U.S. persons", as defined in Regulation S
under the Securities Act ("Non-U.S. Persons"), in reliance on Regulation S.
THE GLOBAL NOTES
Except as described below, the Exchange Notes initially will be represented
by permanent global certificates in definitive, fully registered form (the
"Global Notes"). The Global Notes will be deposited on the Exchange Date with,
or on behalf of, The Depository Trust Company ("DTC") and registered in the
name of Cede & Co., as nominee of DTC, or will remain in the custody of the
Trustee pursuant to the FAST Balance Certificate Agreement between DTC and the
Trustee.
All interests in the Global Notes, including those held through Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of the
Euroclear System ("Euroclear"), or Cedel Bank, societe anonyme ("Cedel"), may
be subject to the procedures and requirements of DTC. Those interests held
through Euroclear or Cedel may also be subject to the procedures and
requirements of such systems.
Any beneficial interest in one of the Global Notes that is transferred to a
person who takes delivery in the form of an interest in another Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in the other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such
an interest.
CERTAIN BOOK-ENTRY PROCEDURES FOR THE GLOBAL NOTES
The descriptions of the operations and procedures of DTC, Euroclear and
Cedel set forth below are provided solely as a matter of convenience. These
operations and procedures are solely within the control of the respective
settlement systems and are subject to change by them from time to time.
Neither the Issuers nor CIBC takes any responsibility for these operations or
procedures, and investors are urged to contact the relevant system or its
participants directly to discuss these matters.
DTC has advised the Issuers that it is (i) a limited purpose trust company
organized under the laws of the State of New York, (ii) a "banking
organization" within the meaning of the New York Banking Law, (iii) a member
of the Federal Reserve System, (iv) a "clearing corporation" within the
meaning of the Uniform Commercial Code, as amended, and (v) a "clearing
agency" registered pursuant to Section 17A of the Exchange Act. DTC was
created to hold securities for its participants (collectively, the
"Participants") and facilitates the clearance and settlement of securities
transactions between Participants through electronic book-entry changes to the
accounts of its Participants, thereby eliminating the need for physical
transfer and delivery of certificates. DTC's Participants include securities
brokers and dealers (including CIBC), banks and trust companies, clearing
corporations and certain other organizations. Indirect access to DTC's system
is also available to other entities such as banks, brokers, dealers and trust
companies (collectively, the "Indirect Participants") that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly. Investors who are not Participants may beneficially own securities
held by or on behalf of DTC only through Participants or Indirect
Participants.
The Issuers expect that pursuant to procedures established by DTC (i) upon
deposit of each Global Note, DTC will credit the accounts of Participants
designated by CIBC with an interest in the Global Note and (ii) ownership of
the Notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
interests of Participants) and the records of Participants and the Indirect
Participants (with respect to the interests of persons other than
Participants).
108
<PAGE>
The laws of some jurisdictions may require that certain purchasers of
securities take physical delivery of such securities in definitive form.
Accordingly, the ability to transfer interests in the Notes represented by a
Global Note to such persons may be limited. In addition, because DTC can act
only on behalf of its Participants, who in turn act on behalf of persons who
hold interests through Participants, the ability of a person having an
interest in Notes represented by a Global Note to pledge or transfer such
interest to persons or entities that do not participate in DTC's system, or to
otherwise take actions in respect of such interest, may be affected by the
lack of a physical definitive security in respect of such interest.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by the Global Note for all purposes under the
Indenture. Except as provided below, owners of beneficial interests in a
Global Note will not be entitled to have Notes represented by such Global Note
registered in their names, will not receive or be entitled to receive physical
delivery of Certificated Notes, and will not be considered the owners or
holders thereof under the Indenture for any purpose, including with respect to
the giving of any direction, instruction or approval to the Trustee
thereunder. Accordingly, each holder owning a beneficial interest in a Global
Note must rely on the procedures of DTC and, if such holder is not a
Participant or an Indirect Participant, on the procedures of the Participant
through which such holder owns its interest, to exercise any rights of a
holder of Notes under the Indenture or such Global Note. The Issuers
understand that under existing industry practice, in the event that the
Issuers request any action of holders of Notes, or a holder that is an owner
of a beneficial interest in a Global Note desires to take any action that DTC,
as the holder of such Global Note, is entitled to take, DTC would authorize
the Participants to take such action and the Participants would authorize
holders owning through such Participants to take such action or would
otherwise act upon the instruction of such holders. Neither the Issuers nor
the Trustee will have any responsibility or liability for any aspect of the
records relating to or payments made on account of Notes by DTC, or for
maintaining, supervising or reviewing any records of DTC relating to such
Notes.
Payments with respect to the principal of, and premium, if any, Liquidated
Damages, if any, and interest on, any Notes represented by a Global Note
registered in the name of DTC or its nominee on the applicable record date
will be payable by the Trustee to or at the direction of DTC or its nominee in
its capacity as the registered holder of the Global Note representing such
Notes under the Indenture. Under the terms of the Indenture, the Issuers and
the Trustee may treat the persons in whose names the Notes, including the
Global Notes, are registered as the owners thereof for the purpose of
receiving payment thereon and for any and all other purposes whatsoever.
Accordingly, neither the Issuers nor the Trustee have or will have any
responsibility or liability for the payment of such amounts to owners of
beneficial interests in a Global Note (including principal, premium, if any,
Liquidated Damages, if any, and interest). Payments by the Participants and
the Indirect Participants to the owners of beneficial interests in a Global
Note will be governed by standing instructions and customary industry practice
and will be the responsibility of the Participants or the Indirect
Participants and DTC.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures, and will be settled in same-day funds. Transfers between
participants in Euroclear or Cedel will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
Subject to compliance with the transfer restrictions applicable to the
Notes, cross-market transfers between the Participants in DTC, on the one
hand, and Euroclear or Cedel participants, on the other hand, will be effected
through DTC in accordance with DTC's rules on behalf of Euroclear or Cedel, as
the case may be, by its respective depositary; however, such cross-market
transactions will require delivery of instructions to Euroclear or Cedel, as
the case may be, by the counterparts in such system in accordance with the
rules and procedures and within the established deadlines (Brussels time) of
such system. Euroclear or Cedel, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to its respective
depositary to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global Notes in DTC, and
making or receiving payment in accordance with normal procedures for same-day
funds settlement
109
<PAGE>
applicable to DTC. Euroclear participants and Cedel participants may not
deliver instructions directly to the depositaries for Euroclear or Cedel.
Because of time zone differences, the securities account of a Euroclear or
Cedel participant purchasing an interest in a Global Note from a Participant
in DTC will be credited, and any such crediting will be reported to the
relevant Euroclear or Cedel participant, during the securities settlement
processing day (which must be a business day for Euroclear and Cedel)
immediately following the settlement date of DTC. Cash received in Euroclear
or Cedel as a result of sales of interest in a Global Security by or through a
Euroclear or Cedel participant to a Participant in DTC will be received with
value on the settlement date of DTC but will be available in the relevant
Euroclear or Cedel cash account only as of the business day for Euroclear or
Cedel following DTC's settlement date.
Although DTC, Euroclear and Cedel have agreed to the foregoing procedures to
facilitate transfers of interests in the Global Notes among participants in
DTC, Euroclear and Cedel, they are under no obligation to perform or to
continue to perform such procedures, and such procedures may be discontinued
at any time. Neither the Issuers nor the Trustee will have any responsibility
for the performance by DTC, Euroclear or Cedel or their respective
participants or indirect participants of their respective obligations under
the rules and procedures governing their operations.
CERTIFICATED NOTES
If (i) the Issuers notify the Trustee in writing that DTC is no longer
willing or able to act as a depositary or DTC ceases to be registered as a
clearing agency under the Exchange Act and a successor depositary is not
appointed within 90 days of such notice or cessation, (ii) the Issuers, at
their option, notify the Trustee in writing that it elects to cause the
issuance of Notes in definitive form under the Indenture or (iii) upon the
occurrence of certain other events as provided in the Indenture, then, upon
surrender by DTC of the Global Notes, Certificated Notes will be issued to
each person that DTC identifies as the beneficial owner of the Notes
represented by the Global Notes. Upon any such issuance, the Trustee is
required to register such Certificated Notes in the name of such person or
persons (or the nominee of any thereof) and cause the same to be delivered
thereto.
Neither the Issuers nor the Trustee shall be liable for any delay by DTC or
any Participant or Indirect Participant in identifying the beneficial owners
of the related Notes and each such person may conclusively rely on, and shall
be protected in relying on, instructions from DTC for all purposes (including
with respect to the registration and delivery, and the respective principal
amounts, of the Notes to be issued).
110
<PAGE>
THE EXCHANGE OFFER
The following description of the Registration Rights Agreement is a summary
only, does not purport to be complete and is subject to, and qualified in its
entirety by reference to, all provisions of the Registration Rights Agreement,
a copy of which is filed as an exhibit to the Exchange Offer Registration
Statement of which this Prospectus is a part.
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Original Notes were originally sold by the Issuers on August 21, 1998 to
CIBC pursuant to a Restructuring Agreement. CIBC subsequently resold the
Original Notes within the United States to qualified institutional buyers in
reliance on Rule 144A under the Securities Act and outside the United States
in accordance with Regulation S under the Securities Act. As a condition to
the Restructuring Agreement, the Issuers and Insight Ohio have entered into
the Registration Rights Agreement pursuant to which they have agreed, for the
benefit of the holders of the Original Notes, that they will, at their cost,
(i) by October 20, 1998, file a registration statement (the "Exchange Offer
Registration Statement") with the SEC with respect to a registered offer to
exchange the Original Notes for the Exchange Notes, which will have terms
substantially identical in all material respects to the Original Notes (except
that the Exchange Notes will not contain terms with respect to transfer
restrictions), and (ii) by January 18, 1999, use their reasonable best efforts
to cause the Exchange Offer Registration Statement to be declared effective
under the Securities Act. Upon the Exchange Offer Registration Statement being
declared effective, the Issuers will offer the Exchange Notes in exchange for
surrender of the Original Notes. The Issuers will keep the Exchange Offer open
for not less than 20 business days (or longer if required by applicable law)
after the date notice of the Exchange Offer is mailed to the holders of the
Original Notes. For each Original Note surrendered to the Issuers pursuant to
the Exchange Offer, the holder of such Original Note will receive an Exchange
Note having a principal amount equal to that of the surrendered Original Note.
Under existing SEC interpretations, the Exchange Notes would in general be
freely transferable after the Exchange Offer without further registration
under the Securities Act; provided that in the case of broker-dealers, a
prospectus meeting the requirements of the Securities Act must be delivered as
required. The Issuers have agreed for a period of 180 days after consummation
of the Exchange Offer to make available a prospectus meeting the requirements
of the Securities Act to any broker-dealer for use in connection with any
resale of any such Exchange Notes acquired as described below. A broker-dealer
which delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification rights and obligations).
Each holder of the Original Notes that wishes to exchange such Original
Notes for Exchange Notes in the Exchange Offer will be required to make
certain representations including representations that:
. any Exchange Notes to be received by it will be acquired in the ordinary
course of its business;
. it has no arrangement or understanding with any person to participate in
the distribution of the Exchange Notes;
. it is not an "affiliate," as defined in Rule 405 of the Securities Act,
of the Issuers, or if it is an affiliate, it will comply with the
registration and prospectus delivery requirements of the Securities Act
to the extent applicable; and
. it is not acting on behalf of any person who could not truthfully make
the foregoing representations.
If the holder is not a broker-dealer, it will be required to represent that
it is not engaged in, and does not intend to engage in, the distribution of
the Exchange Notes. If the holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange for Original Notes that were
acquired as a result of marketmaking activities or other trading activities,
it will be required to acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
111
<PAGE>
In the event that applicable interpretations of the staff of the SEC do not
permit the Issuers to effect the Exchange Offer, or if for any other reason
the Exchange Offer is not consummated within 180 days of the Issue Date, the
Issuers will, at their own expense, (a) as promptly as practicable, file a
shelf registration statement covering resales of the Original Notes (the
"Shelf Registration Statement"), (b) use their reasonable best efforts to
cause the Shelf Registration Statement to be declared effective under the
Securities Act, and (c) use their reasonable best efforts to keep effective
the Shelf Registration Statement until two years after its effective date. The
Issuers will, in the event of the Shelf Registration Statement, provide to
each holder of the Original Notes copies of the prospectus which is a part of
the Shelf Registration Statement, notify each such holder when the Shelf
Registration Statement for the Original Notes has become effective and take
certain other actions as are required to permit unrestricted resales of the
Original Notes. A holder of the Original Notes that sells such Original Notes
pursuant to the Shelf Registration Statement generally will be required to be
named as a selling securityholder in the related prospectus and to deliver a
prospectus to purchasers, will be subject to certain of the civil liability
provisions under the Securities Act in connection with such sales and will be
bound by the provisions of the Registration Rights Agreement which are
applicable to such a holder (including certain indemnification rights and
obligations).
If (i) the Exchange Offer Registration Statement is not filed by October 20,
1998, (ii) an Exchange Offer Registration Statement is not declared effective
by January 18, 1999 (iii) the Shelf Registration is not filed or is not
declared effective within the periods specified in the Registration Rights
Agreement, or (iv) either (A) the Issuers have not exchanged the Exchange
Notes for all Original Notes validly tendered in accordance with the terms of
the Exchange Offer on or prior to February 17, 1999 or (B) the Exchange Offer
Registration Statement ceases to be effective at any time prior to the time
that the Exchange Offer is consummated as to all Original Notes validly
tendered or (C) if applicable, the Shelf Registration Statement has been
declared effective and such Shelf Registration Statement ceases to be
effective at any time prior to the second anniversary of its effective date
(each of such events referred to in clauses (i) through (iii) above is a
"Registration Default"), the sole remedy available to holders of the Original
Notes will be the immediate assessment of additional interest (the "Additional
Interest") as follows: the per annum interest rate on the Original Notes will
increase by 50 basis points for the first 90 days during which any such
default exists, and the per annum interest rate will increase by an additional
25 basis points for each subsequent 90-day period during which the
Registration Default remains uncured, up to a maximum additional interest rate
of 200 basis points per annum in excess of the interest rate on the cover of
this Prospectus. All Additional Interest will be payable to holders of the
Original Notes in cash on each interest payment date, commencing with the
first such date occurring after any such Additional Interest commences to
accrue, until such Registration Default is cured. After the date on which such
Registration Default is cured, the interest rate on the Original Notes will
revert to the interest rate originally borne by the Original Notes (as shown
on the cover of this Prospectus).
If the Exchange Offer is made and CIBC continues to hold Original Notes,
CIBC may exchange Original Notes for other notes identical to the Exchange
Notes except for transfer restrictions ("Private Exchange Notes"). If they
receive Private Exchange Notes, CIBC thereafter will have the right for a
period after consummation of the Exchange Offer to request the Issuers to file
a shelf registration statement covering the Private Exchange Notes. If such
requested shelf registration is not filed or does not become effective by the
times provided in the Registration Rights Agreement, the Issuers shall pay as
liquidated damages to holders of the Private Exchange Notes the Additional
Interest as provided above until such time as it does become effective.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Issuers will accept any and all Original
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. The Issuers will issue $1,000 principal amount
of Exchange Notes in exchange for each $1,000 principal amount of outstanding
Original Notes accepted in the Exchange Offer. Holders may tender some or all
of their Original Notes pursuant to the Exchange Offer. However, Original
Notes may be tendered only in integral multiples of $1,000.
112
<PAGE>
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the Exchange Notes bear a different
CUSIP Number from the Original Notes, (ii) the Exchange Notes have been
registered under the Securities Act and hence will not bear legends
restricting the transfer thereof and (iii) the holders of the Exchange Notes
will not be entitled to certain rights under the Registration Rights
Agreement, which rights will terminate when the Exchange Offer is terminated.
The Exchange Notes will evidence the same debt as the Original Notes and will
be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $140,000,000 aggregate principal amount
of Original Notes were outstanding. The Issuers have fixed the close of
business on , as the record date for the Exchange Offer for purposes
of determining the persons to whom this Prospectus and the Letter of
Transmittal will be mailed initially.
Holders of Original Notes do not have any appraisal or dissenters' rights
under the Ohio Corporation Law, the Florida Partnership Laws, the Delaware
Limited Liability Company Law or the Indenture in connection with the Exchange
Offer. The Issuers intend to conduct the Exchange Offer in accordance with the
applicable requirements of the Exchange Act and the rules and regulations of
the SEC thereunder.
The Issuers shall be deemed to have accepted validly tendered Original Notes
when, as and if the Issuers have given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering holders
for the purpose of receiving the Exchange Notes from the Issuers.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth in this
Prospectus or otherwise, the certificates for any such unaccepted Original
Notes will be returned, without expense, to the tendering holder thereof as
promptly as practicable after the Expiration Date.
Holders who tender Original Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Original
Notes pursuant to the Exchange Offer. The Issuers will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection
with the Exchange Offer. See "--Fees and Expenses" below.
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
, , unless the Issuers, in their sole discretion, extend the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended. Notwithstanding the
foregoing, the Issuers will not extend the Expiration Date beyond ,
.
In order to extend the Exchange Offer, the Issuers will notify the Exchange
Agent of any extension by oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date.
The Issuers reserve the right, in their sole discretion, (i) to delay
accepting any Original Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "--Conditions"
shall not have been satisfied, by giving oral or written notice of such delay,
extension or termination to the Exchange Agent or (ii) to amend the terms of
the Exchange Offer in any manner. Any such delay in acceptance, extension,
termination or amendment will be followed as promptly as practicable by oral
or written notice thereof to the registered holders.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from their date of issuance. Holders
of Original Notes that are accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the date
113
<PAGE>
of issuance of the Exchange Notes. Such interest will be paid with the first
interest payment on the Exchange Notes on February 15, 1999. Interest on the
Original Notes accepted for exchange will cease to accrue upon issuance of the
Exchange Notes.
Interest on the Exchange Notes is payable semi-annually on each February 15
and August 15.
PROCEDURES FOR TENDERING
Only a holder of Original Notes may tender such Original Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal, or such facsimile,
together with the Original Notes and any other required documents, to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
To be tendered effectively, the Original Notes, Letter of Transmittal and
other required documents must be completed and received by the Exchange Agent
at the address set forth below under "Exchange Agent" prior to 5:00 p.m., New
York City time, on the Expiration Date. Delivery of the Original Notes may be
made by book-entry transfer in accordance with the procedures described below.
Confirmation of such book-entry transfer must be received by the Exchange
Agent prior to the Expiration Date.
By executing the Letter of Transmittal, each holder will make to the Issuers
the representations set forth above under the heading "--Purpose and Effect of
the Exchange Offer."
The tender by a holder and the acceptance thereof by the Issuers will
constitute the agreement between such holder and the Issuers in accordance
with the terms and subject to the conditions set forth in this Prospectus and
in the Letter of Transmittal.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND SOLE
RISK OF THE HOLDER. AS AN ALTERNATIVE TO DELIVERY BY MAIL, HOLDERS MAY WISH TO
CONSIDER OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR ORIGINAL NOTES SHOULD BE SENT TO
THE ISSUERS. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
Any beneficial owner whose Original Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf. See
"Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of the Medallion System (an
"Eligible Institution") unless the Original Notes tendered pursuant thereto
are tendered (i) by a registered holder who has not completed the box entitled
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter
of Transmittal or a notice of withdrawal, as the case may be, are required to
be guaranteed, such guarantee must be by an Eligible Institution.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Original Notes listed therein, such Original Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered holder as such registered holder's name appears on such Original
Notes with the signature thereon guaranteed by an Eligible Institution.
114
<PAGE>
If the Letter of Transmittal or any Original Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and evidence satisfactory to the
Issuers of their authority to so act must be submitted with the Letter of
Transmittal.
The Issuers understand that the Exchange Agent will make a request promptly
after the date of this Prospectus to establish accounts with respect to the
Original Notes at the book-entry transfer facility, The Depository Trust
Company (the "Book-Entry Transfer Facility"), for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Original Notes by causing such Book-Entry
Transfer Facility to transfer such Original Notes into the Exchange Agent's
account with respect to the Original Notes in accordance with the Book-Entry
Transfer Facility's procedures for such transfer. Although delivery of the
Original Notes may be effected through book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility, an appropriate Letter of
Transmittal properly completed and duly executed with any required signature
guarantee and all other required documents must in each case be transmitted to
and received or confirmed by the Exchange Agent at its address set forth below
on or prior to the Expiration Date, or, if the guaranteed delivery procedures
described below are complied with, within the time period provided under such
procedures. Delivery of documents to the Book-Entry Transfer Facility does not
constitute delivery to the Exchange Agent.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of tendered Original Notes and withdrawal of tendered
Original Notes will be determined by the Issuers in their sole discretion,
which determination will be final and binding. The Issuers reserve the
absolute right to reject any and all Original Notes not properly tendered or
any Original Notes the Issuers' acceptance of which would, in the opinion of
counsel for the Issuers, be unlawful. The Issuers also reserve the right in
their sole discretion to waive any defects, irregularities or conditions of
tender as to particular Original Notes. The Issuers' interpretation of the
terms and conditions of the Exchange Offer (including the instructions in the
Letter of Transmittal) will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Original
Notes must be cured within such time as the Issuers shall determine. Although
the Issuers intend to notify holders of defects or irregularities with respect
to tenders of Original Notes, neither the Issuers, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Original Notes will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any Original Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
by the Exchange Agent to the tendering holders, unless otherwise provided in
the Letter of Transmittal, as soon as practicable following the Expiration
Date.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original Notes
are not immediately available, (ii) who cannot deliver their Original Notes,
the Letter of Transmittal or any other required documents to the Exchange
Agent or (iii) who cannot complete the procedures for book-entry transfer,
prior to the Expiration Date, may effect a tender if;
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Original Notes and the principal amount of Original Notes tendered,
stating that the tender is being made thereby and guaranteeing that, within
five New York Stock Exchange trading days after the Expiration Date, the
Letter of Transmittal (or facsimile thereof) together with the
certificate(s) representing the Original Notes (or a confirmation of book-
entry transfer of such Original Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility), and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent; and
115
<PAGE>
(c) such properly completed and executed Letter of Transmittal (of
facsimile thereof), as well as the certificate(s) representing all tendered
Original Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Original Notes into the Exchange Agent's account at the
Book-Entry Transfer Facility), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent upon five New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided in this Prospectus, tenders of Original Notes
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the
Expiration Date.
To withdraw a tender of Original Notes in the Exchange Offer, a telegram,
telex, letter or facsimile transmission notice of withdrawal must be received
by the Exchange Agent at its address set forth in this Prospectus prior to
5:00 p.m., New York City time, on the Expiration Date. Any such notice of
withdrawal must (i) specify the name of the person having deposited the
Original Notes to be withdrawn (the "Depositor"), (ii) identify the Original
Notes to be withdrawn (including the certificate number(s) and principal
amount of such Original Notes, or, in the case of Original Notes transferred
by book-entry transfer, the name and number of the account at the Book-Entry
Transfer Facility to be credited), (iii) be signed by the holder in the same
manner as the original signature on the Letter of Transmittal by which such
Original Notes were tendered (including any required signature guarantees) or
be accompanied by documents of transfer sufficient to have the Trustee with
respect to the Original Notes register the transfer of such Original Notes
into the name of the person withdrawing the tender and (iv) specify the name
in which any such Original Notes are to be registered, if different from that
of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such notices will be determined by the Issuers,
whose determination shall be final and binding on all parties. Any Original
Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no Exchange Notes will be issued with
respect thereto unless the Original Notes so withdrawn are validly retendered.
Any Original Notes which have been tendered but which are not accepted for
exchange will be returned to the holder thereof without cost to such holder as
soon as practicable after withdrawal, rejection of tender or termination of
the Exchange Offer. Properly withdrawn Original Notes may be retendered by
following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Issuers shall not
be required to accept for exchange, or exchange Exchange Notes for, any
Original Notes, and may terminate or amend the Exchange Offer as provided in
this Prospectus before the acceptance of such Original Notes, if:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Issuers, might materially impair
the ability of the Issuers to proceed with the Exchange Offer or any
material adverse development has occurred in any existing action or
proceeding with respect to the Issuers or any of their Subsidiaries; or
(b) any law, rule, regulation or interpretation by the staff of the SEC
is proposed, adopted or enacted, which, in the reasonable judgment of the
Issuers, might materially impair the ability of the Issuers to proceed with
the Exchange Offer or materially impair the contemplated benefits of the
Exchange Offer to the Issuers; or
(c) any governmental approval has not been obtained, which approval the
Issuers shall, in their reasonable discretion, deem necessary for the
consummation of the Exchange Offer and contemplated hereby.
116
<PAGE>
If the Issuers determine in their reasonable judgment that any of the
conditions are not satisfied, the Issuers may (i) refuse to accept any
Original Notes and return all tendered Original Notes to the tendering
holders, (ii) extend the Exchange Offer and retain all Original Notes tendered
prior to the expiration of the Exchange Offer, subject, however, to the rights
of holders to withdraw such Original Notes (see "--Withdrawal of Tenders") or
(iii) waive such unsatisfied conditions with respect to the Exchange Offer and
accept all properly tendered Original Notes which have not been withdrawn.
EXCHANGE AGENT
Bank of Montreal Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notice of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
Bank of Montreal Trust Company
88 Pine Street, 19th Floor
New York, New York 10005
Attn: Corporate Trust Department
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Issuers. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telecopy, telephone or in person by officers and
regular employees of the Issuers and their affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Issuers. Such expenses include fees and expenses of the
Exchange Agent and Trustee, accounting and legal fees and printing costs,
among others.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Original Notes, which is face value, as reflected in the Issuers' accounting
records on the date of exchange. Accordingly, no gain or loss for accounting
purposes will be recognized by the Issuers. The expenses related to the
issuance of the Notes and of the Exchange Offer will be amortized over the
term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Original Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Original
Notes may be resold only (i) to the Issuers (upon redemption thereof or
otherwise), (ii) so long as the Original Notes are eligible for resale
pursuant to Rule 144A under the Securities Act, to a person inside the United
States whom the seller reasonably believes is a qualified institutional buyer
within the meaning of Rule 144A in a transaction meeting the requirements of
Rule 144A, in accordance with Rule 144 under the Securities Act, or pursuant
to another exemption from the registration requirements of the Securities Act
(and based upon an opinion of counsel reasonably acceptable to the Issuers),
(iii) outside the United States to a foreign person in a transaction meeting
the requirements of Rule 904 under the Securities Act, (iv) to certain
institutional "accredited investors" within the meaning of Rule 501(a) under
the Securities Act, in a minimum principal amount of $250,000, or (v) pursuant
to an effective registration statement under the Securities Act, in each case
in accordance with any applicable securities laws of any state of the United
States.
117
<PAGE>
RESALE OF EXCHANGE NOTES
With respect to resales of Exchange Notes, based on no-action letters issued
by the staff of the SEC to third parties, the Issuers believe that a holder or
other person who receives Exchange Notes, whether or not such person is the
holder (other than a person that is an "affiliate" of the Issuers within the
meaning of Rule 405 under the Securities Act), who receives Exchange Notes in
exchange for Original Notes in the ordinary course of business and who is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes, will be allowed to resell the Exchange Notes to the public
without further registration under the Securities Act and without delivering
to the purchasers of the Exchange Notes a prospectus that satisfies the
requirements of Section 10 of the Securities Act. However, if any holder
acquires Exchange Notes in the Exchange Offer for the purpose of distributing
or participating in a distribution of the Exchange Notes, such holder cannot
rely on the position of the staff of the SEC enunciated in such no-action
letters, and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Further, each
Participating Broker-Dealer that receives Exchange Notes for its own account
in exchange for Original Notes, where such Original Notes were acquired by
such Participating Broker-Dealer as a result of market-making activities or
other trading activities, must acknowledge that it will deliver a prospectus
in connection with any resale of such Exchange Notes. See "Plan of
Distribution."
As contemplated by these no-action letters and the Registration Rights
Agreement, each holder accepting the Exchange Offer is required to represent
to the Issuers in the Letter of Transmittal that (i) the Exchange Notes are to
be acquired by the holder or the person receiving such Exchange Notes, whether
or not such person is the holder, in the ordinary course of business, (ii) the
holder or any such other person (other than a broker-dealer referred to in the
next sentence) is not engaging and does not intend to engage, in the
distribution of the Exchange Notes, (iii) the holder or any such other person
has no arrangement or understanding with any person to participate in the
distribution of the Exchange Notes, (iv) neither the holder nor any such other
person is an "affiliate" of the Issuers within the meaning of Rule 405 under
the Securities Act, and (v) the holder or any such other person acknowledges
that if such holder or other person participates in the Exchange Offer for the
purpose of distributing the Exchange Notes it must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale of the Exchange Notes and cannot rely on those no-
action letters. As indicated above, each Participating Broker-Dealer that
receives an Exchange Note for its own account in exchange for Original Notes
that were acquired as a result of market-making or other trading activities
must acknowledge that it will deliver a prospectus in connection with any
resale of such Exchange Notes. For a description of the procedures for such
resales by Participating Broker-Dealers, see "Plan of Distribution."
118
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain federal tax consequences under the
Internal Revenue Code of 1986, as amended (the "Code"). This summary is based
upon the laws, regulations, rulings and judicial decisions in effect on the
date of this offering circular, all of which are subject to change at any time
(possibly on a retroactive basis). There can be no assurance that the Internal
Revenue Service (the "IRS") will not take a contrary view, and no ruling from
the IRS has been or will be sought. Unless otherwise specifically noted, this
summary applies only to those persons who acquire Notes for cash and who hold
Notes as capital assets, and it does not discuss all aspects of federal income
taxation that may be relevant to Holders in light of their particular
investment circumstances. This Summary does not address the consequences to
certain types of Holders subject to special treatment under the federal income
tax laws (for example, tax-exempt organizations, dealers in securities,
financial institutions, life insurance companies and persons holding Notes as
part of a hedging or "conversion" transaction or a straddle). This summary
also does not discuss the federal alternative minimum tax consequences to a
Holder under state, local or foreign tax laws, which may differ from the
corresponding federal income tax laws. Holders of Original Notes and
prospective investors in Exchange Notes are advised to consult their own tax
advisors regarding the particular tax considerations pertaining to them with
respect to the exchanging of Original Notes for Exchange Notes, and the
ownership and disposition of Exchange Notes, in each case including the
effects of applicable federal, state, local, foreign or other tax laws to
which they may be subject, as well as possible changes in the tax laws.
For purposes of this discussion, a U.S. Holder is a Holder that is: a
citizen or resident (as determined for United States federal income tax
purposes) of the United States; a corporation or partnership (or other entity
treated for U.S. income tax purposes as a corporation or partnership) created
or organized in the United States or under the laws of the United States or of
any political subdivision thereof; an estate the income of which is includible
in gross income for U.S. federal income tax purposes, regardless of its
source; or a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more
United States fiduciaries have the authority to control all substantial
decisions of the trust. A Foreign Holder is any Holder that is not a U.S.
Holder.
EXCHANGE OF ORIGINAL NOTES FOR EXCHANGE NOTES
Cooperman Levitt Winikoff Lester & Newman, P.C., counsel to the Issuers, has
advised the Issuers that in its opinion, the exchange of the Original Notes
for Exchange Notes pursuant to the Exchange Offer will not be treated as an
"exchange" for federal income tax purposes because the Exchange Notes will not
be considered to differ materially in kind or extent from the Original Notes.
Rather, in the opinion of counsel to the Issuers, the Exchange Notes received
by a Holder will be treated as a continuation of the Original Notes in the
hands of such Holder and consequently, in the opinion of counsel to the
Issuers, there will be no federal income tax consequences to Holders
exchanging Original Notes for Exchange Notes pursuant to the Exchange Offer.
The Issuers recommend that each Holder of Original Notes consult such
Holder's own tax adviser as to the particular tax consequences of exchanging
such Holder's Original Notes for Exchange Notes, including the applicability
and effect of any state, local or foreign tax laws.
INVESTMENTS IN EXCHANGE NOTES BY U.S. HOLDERS
Payments of Interest
A U.S. Holder generally will be required to report as ordinary income for
federal income tax purposes interest received or accrued on an Exchange Note
in accordance with the U.S. Holder's method of tax accounting.
Market Discount
If a U.S. Holder purchases an Exchange Note for an amount that is less than
its "stated redemption price at maturity" (which, in the case of the Exchange
Notes, is their principal amount), the amount of the difference
119
<PAGE>
will be treated as "market discount" for federal income tax purposes, unless
such difference is less than a specified de minimis amount. Under the market
discount rules, a U.S. Holder is required to treat any principal payment on,
or any gain on the sale, exchange, retirement or other disposition of, an
Exchange Note as ordinary income to the extent of the accrued market discount
which has not previously been included in income at the time of such payment
or disposition. In addition, such a U.S. Holder may be required to defer until
maturity of the Exchange Note or its earlier disposition in a taxable
transaction the deduction of all or a portion of the interest expense of any
indebtedness incurred or continued to purchase or carry such Exchange Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Exchange Note, unless
the U.S. Holder elects to accrue the market discount on a constant interest
method. A U.S. Holder of an Exchange Note may elect to include market discount
in income currently as it accrues (on either a ratable or constant interest
method), in which case the rule described above regarding deferral of interest
deductions will not apply. This election to include market discount in income
currently, once made, applies to all market discount obligations acquired
during or after the first taxable year to which the election applies and may
not be revoked without the consent of the IRS.
Bond Premium
A U.S. Holder who purchases an Exchange Note for an amount in excess of its
stated redemption price at maturity will be considered to have purchased the
Exchange Note with "amortizable bond premium" equal to the amount of such
excess. A U.S. Holder generally may elect to amortize the premium on the
constant yield to maturity method. The amount amortized in any year will be
treated as a reduction of the U.S. Holder's interest income from the Exchange
Note during such year and will reduce the U.S. Holder's adjusted tax basis in
the Exchange Note by such amount. A U.S. Holder of an Exchange Note that does
not make the election to amortize the premium will not reduce its tax basis in
the Exchange Note and thus effectively will realize a smaller gain, or a
larger loss, on a taxable disposition of the Exchange Note than it would have
realized had the election been made. The election to amortize the premium on a
constant yield to maturity method, once made, applies to all debt obligations
held or subsequently acquired by the electing U.S. Holder on or after the
first day of the first taxable year to which the election applies and may not
be revoked without the consent of the IRS.
Sale, Exchange or Retirement of Exchange Notes
A U.S. Holder's tax basis in an Exchange Note generally will equal the
purchase price paid therefor, increased by market discount previously included
in income by such U.S. Holder and reduced by any amortized premium and any
principal payments on the Exchange Note. Upon the sale, exchange or retirement
(including redemption) of an Exchange Note, a U.S. Holder of an Exchange Note
generally will recognize gain or loss equal to the difference between the
amount realized upon the sale, exchange or retirement of the Exchange Note
(other than in respect of accrued and unpaid interest on the Exchange Note,
which will be taxable as ordinary income) and the adjusted tax basis in the
Exchange Note. Such gain or loss generally will be capital gain or loss,
except to the extent of any accrued market discount, which will be taxable as
ordinary income.
Under current law, net capital gains of individuals generally are subject to
the following maximum federal tax rates: (i) twenty percent, for property held
more than one year; and (ii) beginning in the year 2006, eighteen percent, for
property acquired after the year 2000 and held for more than five years. The
deductibility of capital losses is subject to limitations.
INVESTMENTS IN EXCHANGE NOTES BY FOREIGN HOLDERS
If the income or gain on the Exchange Notes is "effectively connected with
the conduct of a trade or business within the United States" ("ECI") of a
Foreign Holder, such income or gain will be subject to tax essentially in the
same manner as if the Exchange Notes were held by a U.S. Holder, as discussed
above, and in the case of a Foreign Holder that is a foreign corporation, may
also be subject to the federal branch profits tax.
120
<PAGE>
If the income on the Exchange Notes is not ECI, then under the "portfolio
interest" exception to the general rules for the withholding of tax on
interest paid to a Foreign Holder, a Foreign Holder will not be subject to
United States tax (or to withholding) on interest on an Exchange Note,
provided that (i) the Foreign Holder does not actually or constructively own
10% or more of the outstanding voting stock of Coaxial and is not a partner
owning a 10% or greater capital or profits interest in Phoenix, in each case
within the meaning of Section 871(h)(3) of the Code, (ii) the Foreign Holder
is not a controlled foreign corporation that is considered related to the
Issuers and (iii) the Issuers, their paying agent or the person who would
otherwise be required to withhold tax received either (a) a statement (an
"Owner's Statement") on IRS Form W-8 (which must be renewed periodically),
signed under penalties of perjury by the beneficial owner of the Exchange
Note, on which the owner certifies that the owner is not a United States
person and which provides the owner's name and address, or (B) a statement
signed under penalties of perjury by a financial institution holding the
Exchange Note on behalf of the beneficial owners, together with a copy of each
beneficial owner's Owner's Statement. A Foreign Holder who does not qualify
for the "portfolio interest" exception would be subject to United States
withholding tax at a flat rate of 30% (or a lower applicable treaty rate upon
delivery of requisite certification of eligibility) on interest payments on
the Exchange Notes.
If the gain on the Exchange Notes is not ECI, then gain recognized by a
Foreign Holder upon the redemption, sale or exchange of an Exchange Note
(including any gain representing accrued market discount) will not be subject
to United States tax unless the Foreign Holder is an individual present in the
United States for 183 days or more during the taxable year in which the
Exchange Note is redeemed, sold or exchanged, and certain other requirements
are met, in which case the Foreign Holder will be subject to United States tax
at a flat rate of 30% (unless exempt by applicable treaty upon delivery of
requisite certification of eligibility). Foreign Holders who are individuals
may also be subject to tax pursuant to provisions of United States federal
income tax law applicable to certain United States expatriates.
An Exchange Note that is held by an individual who at the time of death is
not a citizen or resident of the United States will not be subject to U.S.
federal estate tax as a result of such individual's death, provided that, at
the time of the individual's death, payments of interest with respect to such
Exchange Note would have qualified for the portfolio interest exception.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Certain (generally, non-corporate) U.S. Holders may be subject to backup
withholding at a rate of 31% on payments of principal, premium and interest
on, and the proceeds of the disposition of, the Exchange Notes. In general,
backup withholding will be imposed only if the U.S. Holder (i) fails to
furnish its taxpayer identification number ("TIN"), which, for an individual,
would be his or her Social Security number, (ii) furnishes an incorrect TIN,
(iii) is notified by the IRS that it has failed to report payments of interest
or dividends or (iv) under certain circumstances, fails to certify, under
penalty of perjury, that it has furnished a correct TIN and that it is not
subject to backup withholding. In addition, such payments of principal and
interest to U.S. Holders will generally be subject to information reporting.
Backup withholding and information reporting generally will not apply to
interest payments made to a Foreign Holder of an Exchange Note who provides
the requisite certification or otherwise establishes an exemption from backup
withholding. Payments of the proceeds of a disposition of the Exchange Notes
by or through a United States office of a broker generally will be subject to
backup withholding at a rate of 31% and information reporting unless the
Foreign Holder certifies that it is a Foreign Holder under penalty of perjury
or otherwise establishes an exemption. Payments of the proceeds of a
disposition of the Exchange Notes by or through a foreign office of a United
States broker or foreign broker with certain relationships to the United
States generally will be subject to information reporting, but not backup
withholding.
The amount of any backup withholding imposed on a payment to a Holder of an
Exchange Note will be allowed as a credit against such Holder's United States
federal income tax liability, and such Holder may be entitled to a refund,
provided that the required information is furnished to the IRS.
121
<PAGE>
Holders should consult their tax advisors as to their qualification for
exemption from backup withholding and the procedure for obtaining such an
exemption.
RECENTLY ISSUED TREASURY REGULATIONS
The U.S. Treasury Department recently issued final Treasury regulations
governing information reporting and the certification procedures regarding
withholding and backup withholding on certain amounts paid to Foreign Holders
after December 31, 1999. The new Treasury regulations generally would not
alter the treatment of Foreign Holders described above. The new Treasury
regulations would alter the procedures for claiming the benefits of an income
tax treaty and may change the certification procedures relating to the receipt
by intermediaries of payments on behalf of a beneficial owner of an Exchange
Note. Prospective investors should consult their tax advisors concerning the
effect, if any, of such new Treasury regulations on an investment in the
Exchange Notes.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY. HOLDERS OF
ORIGINAL NOTES AND PROSPECTIVE PURCHASERS OF EXCHANGE NOTES SHOULD CONSULT
THEIR OWN TAX ADVISORS AS TO SPECIFIC CONSEQUENCES OF THE EXCHANGING OF
ORIGINAL NOTES FOR EXCHANGE NOTES, AND OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF EXCHANGE NOTES, IN EACH CASE INCLUDING THE APPLICATION AND
EFFECT OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.
122
<PAGE>
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be
used in connection with resales of Exchange Notes received in exchange for
Original Notes only by Participating Broker-Dealers ("Eligible Participating
Broker-Dealers") who acquired such Original Notes as a result of market-making
activities or other trading activities and not by Participating Broker-Dealers
who acquired such Original Notes directly from the Issuers. The Issuers have
agreed that for a period of 90 days after the Expiration Date, they will make
this Prospectus, as amended or supplemented, available to any Eligible
Participating Broker-Dealer for use in connection with any such resale. In
addition, until , all dealers effecting transactions in the Exchange
Notes may be required to deliver a prospectus.
The Issuers will not receive any proceeds from any sales of the Exchange
Notes by Participating Broker-Dealers. Exchange Notes received by
Participating Broker-Dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the over-
the-counter market, in negotiated transactions, through the writing of options
on the Exchange Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to such prevailing
market prices or negotiated prices. Any such resale may be made directly to
purchasers or to or through brokers or dealers who may receive compensation in
the form of commissions or concessions from any such Participating Broker-
Dealer and/or the purchasers of any such Exchange Notes. Any Participating
Broker-Dealer that resells the Exchange Notes that were received by it for its
own account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by
any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that, by acknowledging that
it will deliver and by delivering a prospectus, a Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
For a period of 90 days after the Expiration Date, the Issuers will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any Eligible Participating Broker-Dealer that requests such
documents in the Letter of Transmittal. The Issuers have agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the Holders of the Notes) other than commissions or concessions of any
Participating Broker-Dealer and will indemnify the Holders of the Notes
(including any Participating Broker-Dealers) against certain liabilities
including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Exchange Notes offered hereby will
be passed upon for the Issuers by Cooperman Levitt Winikoff Lester & Newman,
P.C., New York, New York.
EXPERTS
The balance sheets of Central Ohio Cable System Operating Unit, Coaxial
Communications of Central Ohio, Inc. and Phoenix Associates as of December 31,
1996 and 1997 and the statements of operations and accumulated deficit and
cash flows for the three years ended December 31, 1997 included in this
Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as stated in their
reports appearing in this Prospectus, and are included in this Prospectus in
reliance upon the authority of said firm as experts in accounting and
auditing.
123
<PAGE>
ADDITIONAL AVAILABLE INFORMATION
The Issuers have filed with the SEC a Registration Statement on Form S-4
(together with all amendments, exhibits and schedules thereto, the
"Registration Statement") under the Securities Act with respect to the
Exchange Notes offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the SEC, and to
which reference is hereby made. Statements contained in this Prospectus as to
the contents of any contract, agreement or any other document referred to are
not necessarily complete. With respect to each such contract, agreement or
other document filed as an exhibit to the Registration Statement, reference is
made to such exhibit to the Registration Statement for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference.
The Registration Statement can be inspected and copied at the Public
Reference Section of the SEC at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20459, and at the SEC's regional offices at Seven World Trade Center, New
York, New York 10048, and Citicorp Center, 600 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511. Copies of the Registration Statement can
be obtained from the Public Reference Section of the SEC at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20459, at prescribed rates. The Issuers
are filing the Registration Statement with the SEC electronically. The SEC
maintains a web site that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
SEC. The address of that web site is http://www.sec.gov.
As a result of the Exchange Offer, the Issuers will be subject to the
information reporting requirements of the Exchange Act. So long as the Issuers
are subject to such periodic reporting requirements under the Exchange Act,
they will continue to furnish the information required thereby to the SEC. The
Issuers will be required to file periodic reports with the SEC pursuant to the
Exchange Act during the Issuers' current fiscal year and thereafter so long as
the Notes are held by at least 300 registered holders. The Issuers do not
anticipate that, for periods following December 31, 1998, the Notes will be
held of record by more than 300 holders. Accordingly, after such date, the
Issuers do not expect to be required to comply with the periodic reporting
obligations imposed under the Exchange Act. However, the Indenture provides
that the Issuers will furnish copies of the periodic reports required to be
filed with the SEC under the Exchange Act to the holders of the Notes. If the
Issuers are not subject to the periodic reporting and informational
requirements of the Exchange Act, they will, to the extent such filings are
accepted by the SEC, and whether or not the Issuers have a class of securities
registered under the Exchange Act, file with the SEC, and provide the Trustee
and the holders of the Notes within 15 days after such filings with, annual
reports containing the information required to be contained in Form 10-K
promulgated under the Exchange Act, quarterly reports containing the
information required to be contained in Form 10-Q promulgated under the
Exchange Act, and from time to time such other information as is required to
be contained in Form 8-K promulgated under the Exchange Act. If filing such
reports with the SEC is not accepted by the SEC or prohibited by the Exchange
Act, the Issuers will also provide copies of such reports, at their cost, to
prospective purchasers of the Notes promptly upon written request.
124
<PAGE>
GLOSSARY
The following is a description of certain terms used in this Prospectus:
Addressability............... Addressable technology enables the cable
television operator to electronically control
from its central facilities the cable
television services delivered to the
subscriber. This technology facilitates pay-
per-view services, reduces service theft, and
provides a cost-effective method to upgrade and
downgrade programming services to subscribers.
@Home........................ The @Home Network is an integrated system for
providing broadband data services to personal
computers using the cable television
infrastructure. It brings the Internet to
residential and business consumers at higher
speeds and with greater levels of service than
previously possible. @Home is a joint venture
of Tele-Communications Inc. and Kleiner Perkins
Caufield & Byers, founded in 1995 and located
in Mountain View, California.
Bandwidth.................... Bandwidth measures the information-carrying
capacity of a communication channel. Bandwidth
corresponds to the difference between the
lowest and highest frequency signal which can
be carried by the 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 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.
CPST......................... Cable programming services other than
programming services provided on the Basic
Service Tier or on a per-channel or per-program
basis. Also referred to as expanded basic
service.
Cable Modem.................. A device similar to a telephone modem that
sends and receives signals over a cable
television network at speeds up to 50 times the
capacity of a telephone modem.
Converter.................... An electronic device that permits tuning of a
cable television signal to permit reception by
subscriber television sets and VCRs and
provides a means of access control for cable
television programming.
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.
125
<PAGE>
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 bandwidth.
Digital Video................ A distribution technology where video content
is delivered in digital format.
Direct Broadcast Satellite A service by which packages of television
(DBS)........................ programming are transmitted via high-powered
satellites to individual homes, each served by
a small satellite dish.
Fiber Optic Cable............ A cable made of glass fibers through which
signals are transmitted as pulses of light to
the distribution portion of the cable
television which in turn goes to the customer's
home. Capacity for a very large number of
channels can be more easily provided.
Headend...................... 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 Data Network...... Any network dedicated to the transmission of
data to residences and commercial
establishments. Includes Local Area Networks
(LAN).
Homes Passed................. A home is deemed to be passed if it can be
connected to the distribution system without
further extension of the distribution network.
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.
LAN.......................... Local Area Network. A communications network
that serves users within a confined
geographical area, consisting of servers,
workstations, a network operating system and a
communications link.
Local Multipoint A proposed method of distribution for
Distribution Service......... television and information using microwave
transmissions at a higher frequency than MMDS.
MDU.......................... Multiple dwelling units such as condominiums,
apartment complexes, hospitals, hotels and
other commercial complexes.
Multichannel Multipoint
Distribution Service A one-way radio transmission of television
(MMDS)....................... 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
(MSO)........................ operates more than one cable television system.
Must Carry................... The provisions of the 1992 Cable Act that
require cable television operators to carry
local commercial and noncommercial television
broadcast stations on their systems.
126
<PAGE>
Overbuild.................... The construction of a second cable television
system in a franchise area in which such a
system had previously been constructed.
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.
Plant........................ The distribution network element of a cable
television system consisting of coaxial and
fiber optic cable leaving the headend on power
or telephone company poles or buried
underground.
Premium Penetration..........
Premium service units as a percentage of the
total number of basic service subscribers. A
customer may purchase more than one premium
service, each of which is counted as a separate
premium service unit. This 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.
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 receive data.
The upgrade of an existing cable television
Upgrade...................... system, usually undertaken to improve either
its technological performance or to expand the
system's channel or bandwidth capacity in order
to provide more programming and other services.
127
<PAGE>
INDEX TO FINANCIAL STATEMENTS
CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................. F-3
Statement of Net Assets to be Contributed as of December 31, 1997 and 1996
......................................................................... F-4
Statements of Operations Related to Net Assets to be Contributed for the
Years Ended December 31, 1997, 1996 and 1995............................. F-5
Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and
1995..................................................................... F-6
Notes to Financial Statements............................................. F-7
Condensed Statements of Net Assets to be Contributed as of June 30, 1998
(unaudited) and December 31, 1997 ....................................... F-11
Condensed Statements of Operations Related to Net Assets to be Contributed
for the Three Months Ended June 30, 1998 and 1997 and for the Six Months
Ended June 30, 1998 and 1997 (unaudited)................................. F-12
Condensed Statements of Cash Flows for the Six Months Ended June 30, 1998
and June 30, 1997 (unaudited)............................................ F-13
Notes to Interim Condensed Financial Statements (unaudited)............... F-14
</TABLE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants.................................. F-16
Balance Sheets as of December 31, 1997 and 1996........................... F-17
Statements of Operations and Changes in Shareholders' Equity for the Years
Ended December 31, 1997, 1996 and 1995 .................................. F-18
Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and
1995 .................................................................... F-19
Notes to Financial Statements............................................. F-21
Condensed Balance Sheets as of June 30, 1998 (unaudited) and December 31,
1997..................................................................... F-30
Condensed Statements of Operations and Changes in Shareholders' Equity for
the Three Months Ended June 30, 1998 and 1997 and for the Six Months
Ended June 30, 1998 and 1997 (unaudited)................................. F-31
Condensed Statements of Cash Flows for the Six Months Ended June 30, 1998
and 1997 (unaudited)..................................................... F-32
Notes to Interim Condensed Financial Statements (unaudited)............... F-33
</TABLE>
F-1
<PAGE>
PHOENIX ASSOCIATES
FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<S> <C>
Report of Independent Public Accountants................................. F-38
Balance Sheets as of December 31, 1997 and 1996.......................... F-39
Statements of Operations and Change in Partners' Deficit for the Years
Ended December 31, 1997, 1996 and 1995 ................................. F-40
Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and
1995 ................................................................... F-41
Notes to Financial Statements............................................ F-42
Condensed Balance Sheets as of June 30, 1998 (unaudited) and December 31,
1997.................................................................... F-48
Condensed Statements of Operations and Partners' Deficit for the Three
Months Ended June 30, 1998
and 1997 and for the Six Months Ended June 30, 1998 and 1997
(unaudited)............................................................. F-49
Condensed Statements of Cash Flows for the Six Months Ended June 30, 1998
and June 30, 1997 (unaudited)........................................... F-50
Notes to Interim Condensed Financial Statements (unaudited).............. F-51
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Coaxial Communications of Central Ohio, Inc.:
We have audited the accompanying statements of net assets to be contributed
of Central Ohio Cable System Operating Unit as of December 31, 1997 and 1996,
and the related statements of operations and cash flows relating to the net
assets to be contributed for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our 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.
The accompanying financial statements of net assets to be contributed were
prepared to present the net assets of Central Ohio Cable System Operating Unit
to be contributed to a newly formed company pursuant to the Contribution
Agreement described in Note 10, and is not intended to be a complete
presentation of Central Ohio Cable System Operating Unit.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net assets to be contributed of Central Ohio
Cable System Operating Unit as described in Note 10, as of December 31, 1997
and 1996, and the results of its operations and cash flows for each of the
three years in the period ended December 31, 1997 in conformity with generally
accepted accounting principles.
Arthur Andersen LLP
Columbus, Ohio,
July 17, 1998.
F-3
<PAGE>
CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
STATEMENTS OF NET ASSETS TO BE CONTRIBUTED
AS OF DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................. $ 573,989 $ 905,721
Subscriber receivables, less allowance for doubtful
accounts of $202,000 in 1997 and $203,000 in 1996... 1,834,558 1,982,003
Other accounts receivable, less allowance for
doubtful accounts of $172,000 in 1997 and $215,000
in 1996............................................. 1,037,145 1,096,059
Material, supplies and construction inventories...... 855,373 951,632
Prepaid expenses and other current assets............ 201,429 371,471
----------- -----------
Total current assets............................... 4,502,494 5,306,886
----------- -----------
PROPERTY AND EQUIPMENT, at cost:
CATV systems......................................... 64,093,984 59,444,114
Equipment............................................ 6,941,263 6,723,739
Furniture............................................ 211,232 208,367
Leasehold improvements............................... 70,409 67,575
----------- -----------
71,316,888 66,443,795
Less-Accumulated depreciation and amortization....... (42,433,809) (38,273,023)
----------- -----------
Total property and equipment, net.................. 28,883,079 28,170,772
----------- -----------
INTANGIBLE ASSETS, at cost:
Franchise rights and other........................... 7,392,000 7,392,000
Less-Accumulated amortization........................ (7,323,026) (6,855,198)
----------- -----------
Total intangible assets, net....................... 68,974 536,802
----------- -----------
OTHER ASSETS:
Due from related parties............................. 98,584 47,603
----------- -----------
Total other assets................................. 98,584 47,603
----------- -----------
Total assets....................................... $33,553,131 $34,062,063
=========== ===========
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES:
Current portion of capital lease obligations......... $ 213,103 $ 256,484
Accounts payable..................................... 2,804,766 2,383,108
Accrued liabilities.................................. 3,596,922 4,288,435
Advance subscriber deposits.......................... 1,173,375 1,138,425
----------- -----------
Total current liabilities.......................... 7,788,166 8,066,452
----------- -----------
CAPITAL LEASE OBLIGATIONS.............................. 194,194 358,755
----------- -----------
Total liabilities.................................. 7,982,360 8,425,207
COMMITMENTS AND CONTINGENCIES
Net assets to be contributed....................... 25,570,771 25,636,856
----------- -----------
Total liabilities and net assets................... $33,553,131 $34,062,063
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-4
<PAGE>
CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
STATEMENTS OF OPERATIONS RELATED TO NET ASSETS TO BE CONTRIBUTED
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUES:
Service fees......................... $42,544,417 $44,763,413 $41,666,562
Advertising.......................... 3,373,064 3,072,567 2,822,872
Connection fees...................... 282,374 395,673 439,862
Other................................ 2,029,632 2,186,172 1,901,419
----------- ----------- -----------
Total operating revenues........... 48,229,487 50,417,825 46,830,715
----------- ----------- -----------
OPERATING EXPENSES:
Service and administrative........... 28,889,394 26,932,679 23,614,567
Depreciation......................... 4,755,017 4,812,346 4,300,540
Amortization......................... 482,675 522,216 522,858
----------- ----------- -----------
Total operating expenses........... 34,127,086 32,267,241 28,437,965
----------- ----------- -----------
OPERATING INCOME....................... 14,102,401 18,150,584 18,392,750
OTHER EXPENSES, net.................... (271,456) (248,384) (251,429)
INTEREST INCOME........................ 69,990 29,449 38,930
----------- ----------- -----------
NET INCOME FROM NET ASSETS TO BE
CONTRIBUTED (Note 3).................. $13,900,935 $17,931,649 $18,180,251
=========== =========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-5
<PAGE>
CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income........................ $ 13,900,935 $ 17,931,649 $ 18,180,251
ADJUSTMENTS TO RECONCILE NET INCOME
TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Depreciation...................... 4,755,017 4,812,346 4,300,540
Amortization...................... 482,675 522,216 522,858
Loss on disposals of property and
equipment........................ 77,452 69,187 23,066
Changes in certain assets and
liabilities:
(Increase) decrease in assets--
Subscriber receivables........ 147,445 (674,368) (283,064)
Other accounts receivable,
prepaid expenses and other
current assets............... 228,956 246,105 (355,621)
Increase (decrease) in
liabilities--
Accounts payable.............. 421,658 (361,633) (190,834)
Accrued liabilities........... (691,513) (1,317,378) 450,395
Deferred income............... -- (9,613) 9,613
Advance subscriber deposits... 34,950 421,954 77,473
------------ ------------ ------------
Net cash provided by
operating activities....... 19,357,575 21,640,465 22,734,677
------------ ------------ ------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
(Increase) decrease in materials,
supplies and construction
inventories...................... 96,259 334,595 (543,119)
Capital expenditures for property
and equipment.................... (5,528,669) (5,992,164) (5,701,705)
Proceeds from disposal of property
and equipment.................... 25,753 17,667 24,405
(Increase) decrease in amounts due
from related parties............. (50,981) 263,559 (277,668)
------------ ------------ ------------
Net cash used in investing
activities................. (5,457,638) (5,376,343) (6,498,087)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVI-
TIES:
Principal payments on capital lease
obligations........................ $ (264,649) $ (234,630) $ (183,114)
Cash used for activities not
included in net assets to be
contributed........................ (13,967,020) (15,793,342) (15,696,088)
------------ ------------ ------------
Net cash used in financing
activities................. (14,231,669) (16,027,972) (15,879,202)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH..... (331,732) 236,150 357,388
CASH, beginning of year........... 905,721 669,571 312,183
------------ ------------ ------------
CASH, end of year................. $ 573,989 $ 905,721 $ 669,571
============ ============ ============
</TABLE>
SUPPLEMENTAL DISCLOSURE OF INVESTING AND FINANCING NONCASH TRANSACTIONS
During 1997, 1996 and 1995, the Operating Unit entered into capital leases
to acquire vehicles and equipment totaling $56,707, $198,985 and $180,175,
respectively.
The accompanying notes to financial statements are an integral part of these
statements.
F-6
<PAGE>
CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) BUSINESS ORGANIZATION AND PURPOSE
Central Ohio Cable System Operating Unit (the Operating Unit), an operating
unit within Coaxial Communications of Central Ohio, Inc. (Central Ohio),
operates a cable television system which provides basic and expanded cable
services to homes in Columbus, Ohio and surrounding areas. The Operating
Unit's financial statements include only those assets, liabilities, revenues
and expenses directly related to the cable television system to be contributed
(see Note 10).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH
The Operating Unit considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUES
In December 1991, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments," which requires disclosure of fair value information
about both on- and off-balance sheet financial instruments for which it is
practicable to estimate that value. The carrying amounts of current assets and
liabilities approximate their fair market value because of the immediate or
short-term maturity of these financial instruments.
OPERATING REVENUE RECOGNITION
Service fees are recorded in the month cable television and pay television
services are provided to subscribers. Connection fees are charges for the
hook-up of new customers and are recognized when billed on the subscriber's
first bill. Unearned revenues are recorded as advance subscriber deposits in
the accompanying financial statements.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Operating Unit to
concentrations of credit risk consist principally of trade accounts
receivable. The Operating Unit's customer base consists of a number of homes
concentrated in the central Ohio area. The Operating Unit continually monitors
the exposure for credit losses and maintains allowances for anticipated
losses. As of December 31, 1997, the Operating Unit had no significant
concentrations of credit risk.
MATERIAL, SUPPLIES AND CONSTRUCTION INVENTORIES
Material, supplies and construction inventories are stated at the lower of
cost (first-in, first-out basis) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, while maintenance and repairs are
expensed as incurred. Upon retirement or disposal of assets, the cost and
related accumulated depreciation and amortization are removed from
F-7
<PAGE>
CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
the balance sheet, and any gain or loss is reflected in earnings. Depreciation
and amortization are provided using the straight-line method over the
estimated useful lives of the related assets as follows:
<TABLE>
<CAPTION>
YEARS
-------------
<S> <C>
CATV systems................................................ 10 to 15
Equipment................................................... 5
Furniture................................................... 5
Leasehold improvements...................................... Life of lease
</TABLE>
The Operating Unit internally constructs certain CATV systems. Construction
costs capitalized include payroll, fringe benefits and other overhead costs
associated with construction activity.
The Operating Unit reviews its property, plant and equipment and other long
term assets when events or changes in circumstances indicate the carrying
amounts may not be recoverable. When such conditions exist, management
estimates the future cash flows from operations or disposition. If the
estimated undiscounted future cash flows are less than the carrying amount of
the asset, an adjustment to reduce the carrying amount would be recorded, and
an impairment loss would be recognized. The Operating Unit does not believe
that there is an impairment of such assets.
INTANGIBLE ASSETS
Intangible assets are amortized using the straight-line method over the
estimated useful lives of the related assets as follows:
<TABLE>
<CAPTION>
YEARS
-------
<S> <C>
Franchise rights................................................... 7 to 15
</TABLE>
HOME OFFICE EXPENSES
Home office expenses of approximately $1,498,000, $1,697,000 and $1,695,000
in 1997, 1996 and 1995 (included in selling and administrative expenses)
include billings for legal fees, management fees, salaries, travel and other
management expenses for services provided by an affiliated services company.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense primarily
for campaign and telemarketing-related efforts was approximately $1,025,000,
$1,060,000 and $817,000 in 1997, 1996 and 1995, respectively.
CHANGE IN NET ASSETS
The components of the change in net assets are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Beginning Balance................ $ 25,636,856 $ 23,498,549 $ 21,014,386
Net income..................... 13,900,935 17,931,649 18,180,251
Cash used to finance activities
not included in net assets to
be contributed................ (13,967,020) (15,793,342) (15,696,088)
------------ ------------ ------------
Ending Balance................... $ 25,570,771 $ 25,636,856 $ 23,498,549
============ ============ ============
</TABLE>
(3) INCOME TAXES
The Operating Unit is an operating unit within Central Ohio, which is a
Subchapter S corporation. Therefore, each shareholder reports his distributive
share of income or loss on his respective income tax returns. As a result, the
Operating Unit does not provide for Federal or state income taxes in its
accounts.
F-8
<PAGE>
CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(4) THRIFT PLAN
The Operating Unit participates in an employer sponsored Thrift Plan (the
Plan) for employees having at least one full year of service. Employees can
contribute up to 6% of their salary to the Plan which is matched 50% by the
Operating Unit. Employees can also contribute an additional 1% to 10% which is
not matched by the Operating Unit. Employees become fully vested in matching
contributions after 5 years. There is no partial vesting. The Operating Unit's
contributed approximately $133,000, $111,000 and $120,000 to the Plan in 1997,
1996 and 1995, respectively.
(5) WORKERS' COMPENSATION RESERVES
The Operating Unit is partially self-insured for workers' compensation
benefits. The amounts charged to expense for workers' compensation were
approximately $89,200, $110,200 and $143,500 for 1997, 1996 and 1995,
respectively, and were based on actual and estimated claims incurred. The
liability for workers' compensation obligations, as of December 31, 1997 and
1996, is approximately $78,000 and $131,000, respectively.
(6) RELATED PARTY TRANSACTIONS
The Operating Unit has a receivable from a related party as of December 31,
1997 and 1996 of $98,584 and $47,603, respectively, relating to the leasing of
fiber optic facilities.
The Operating Unit pays rent to a partnership owned by Central Ohio's
shareholders for two facilities. Total charges for rent were approximately
$99,500 in 1997, $72,000 in 1996 and $72,000 in 1995.
(7) OPERATING LEASE AGREEMENTS
The Operating Unit leases land for tower locations, office equipment, office
space, vehicles and the use of utility poles under various operating lease
agreements. Rental expense for all operating leases was approximately $218,500
in 1997, $160,500 in 1996 and $161,400 in 1995. These amounts exclude year-to-
year utility pole leases of $186,400, $182,700 and $190,200, respectively,
which provide for payments based on the number of poles used.
Minimum rental commitments required under noncancellable operating leases
are as follows:
<TABLE>
<S> <C>
1998.............................................................. $157,214
1999.............................................................. 146,389
2000.............................................................. 89,421
2001.............................................................. 200
--------
$393,224
========
</TABLE>
(8) CAPITAL LEASE AGREEMENTS
The Operating Unit leases vehicles, computer equipment and Xerox equipment
under capital leases. These leases have various terms of 4-5 years. Future
minimum payments under the leases are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDING DECEMBER 31,
---------------------------------
<S> <C>
1998............................................................ $ 244,516
1999............................................................ 124,019
2000............................................................ 66,283
2001............................................................ 24,370
2002............................................................ 3,005
---------
462,193
Less: Amount representing interest.............................. 54,896
Less: Current portion of capital lease obligations.............. 213,103
---------
Long-term capital lease obligations............................. $ 194,194
=========
</TABLE>
F-9
<PAGE>
CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 1997, the Operating Unit has assets held under capital
leases as follows:
<TABLE>
<S> <C>
Total costs................................................... $ 1,151,354
Related accumulated amortization.............................. (628,973)
-----------
Net book value as of December 31, 1997........................ $ 522,381
===========
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
The Operating Unit is party in or may be affected by various matters under
litigation. Management believes that the ultimate outcome of these matters
will not have a significant adverse effect on either the Operating Unit's
future results of operations or financial position.
Capital expenditures for the Operating Unit for 1998 are expected to be
approximately $5,515,000.
(10) SUBSEQUENT EVENT
On June 30, 1998, Central Ohio and Insight Communications Company, L.P.
(Insight) entered into a Contribution Agreement (the Contribution Agreement)
pursuant to which Central Ohio will contribute to a newly formed subsidiary (a
limited liability company) of Central Ohio (the Operating Company)
substantially all of the assets and liabilities comprising the Operating Unit,
and Insight will contribute $10 million in cash to the Operating Company. As a
result of this Contribution Agreement, Central Ohio will own 25% of the non-
voting common equity and Insight will own 75% of the non-voting common equity
of the Operating Company, subject to possible adjustments pursuant to the
Contribution Agreement. Central Ohio will also own two separate series of
voting preferred equity (a $140 preferred equity interest and a $30 million
preferred equity interest) of the Operating Company; the voting preferred
equity interest will provide for distributions to Central Ohio equal in amount
to the payments on the senior and senior discount notes described below.
Insight or an affiliate will serve as the manager of the Operating Company.
The closing of the Contribution Agreement is conditioned upon, among other
things, the private placement of $140 million senior notes by Central Ohio and
Phoenix Associates (a related entity) and the private placement of $30 million
of senior discount notes by the majority shareholder of Central Ohio.
F-10
<PAGE>
CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
CONDENSED STATEMENTS OF NET ASSETS TO BE CONTRIBUTED
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
JUNE 30, DECEMBER
1998 31, 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................. $ 266,439 $ 573,989
Subscriber receivables, less allowance for
doubtful accounts of $229,000 in 1998 and
$202,000 in 1997................................ 1,266,369 1,834,558
Other accounts receivable, less allowance for
doubtful accounts of $166,000 in 1998 and
$172,000 in 1997................................ 2,106,208 1,037,145
Other current assets............................. 1,172,585 1,056,802
------------ ------------
Total current assets........................... 4,811,601 4,502,494
------------ ------------
PROPERTY AND EQUIPMENT, at cost:
CATV systems..................................... 66,359,613 64,093,984
Equipment........................................ 7,013,595 6,941,263
Other............................................ 291,082 281,641
------------ ------------
73,664,290 71,316,888
Less--Accumulated depreciation and amortization.. (44,884,117) (42,433,809)
------------ ------------
Total property and equipment, net.............. 28,780,173 28,883,079
------------ ------------
INTANGIBLE ASSETS, at cost:
Franchise rights and other....................... 7,392,000 7,392,000
Less--Accumulated amortization................... (7,336,941) (7,323,026)
------------ ------------
Total intangible assets, net................... 55,059 68,974
------------ ------------
OTHER ASSETS:
Due from related parties......................... 98,461 98,584
------------ ------------
Total other assets............................. 98,461 98,584
------------ ------------
Total assets................................... $ 33,745,294 $ 33,553,131
============ ============
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES:
Current portion of capital lease obligations..... $ 134,063 $ 213,103
Accounts payable................................. 2,236,130 2,804,766
Accrued liabilities.............................. 3,735,854 3,596,922
Advance subscriber deposits...................... 1,160,503 1,173,375
------------ ------------
Total current liabilities...................... 7,266,550 7,788,166
------------ ------------
CAPITAL LEASE OBLIGATIONS.......................... 133,702 194,194
DEFERRED INCOME.................................... 837,618 --
------------ ------------
Total liabilities.............................. 8,237,870 7,982,360
------------ ------------
COMMITMENTS AND CONTINGENCIES
Net assets to be contributed................... 25,507,424 25,570,771
------------ ------------
Total liabilities and net assets............... $ 33,745,294 $ 33,553,131
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-11
<PAGE>
CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
CONDENSED STATEMENTS OF OPERATIONS RELATED TO NET ASSETS TO BE CONTRIBUTED
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED
ENDED JUNE 30, JUNE 30,
------------------------ --------------------------
1998 1997 1998 1997
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES...... $12,041,537 $12,401,638 $ 23,766,363 $ 24,493,281
OTHER EXPENSES:
Service and
administrative....... 7,641,713 7,084,263 15,364,766 13,950,071
Depreciation and
amortization......... 1,364,770 1,390,039 2,674,194 2,757,179
----------- ----------- ------------ ------------
Total operating
expenses........... 9,006,483 8,474,302 18,038,960 16,707,250
----------- ----------- ------------ ------------
OPERATING INCOME........ 3,035,054 3,927,336 5,727,403 7,786,031
OTHER EXPENSES, net..... (59,318) (49,595) (115,273) (83,445)
INTEREST INCOME......... -- 17,798 22,632 31,876
----------- ----------- ------------ ------------
NET INCOME FROM NET
ASSETS TO BE
CONTRIBUTED (Note 4)... $ 2,975,736 $ 3,895,539 $ 5,634,762 $ 7,734,462
=========== =========== ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-12
<PAGE>
CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
--------------------------
JUNE 30, JUNE 30,
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES............... $ 8,287,634 $ 9,558,985
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in materials, supplies and construction
inventories..................................... (145,277) (70,467)
Capital expenditures for property and equipment.. (2,614,287) (2,254,626)
Other............................................ 2,021 23,112
------------ ------------
Net cash used in investing activities.......... (2,757,543) (2,301,981)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations.. (139,532) (128,833)
Cash used for activities not included in net
assets to be contributed........................ (5,698,109) (6,408,219)
------------ ------------
Net cash used in financing activities.......... (5,837,641) (6,537,052)
------------ ------------
NET INCREASE (DECREASE) IN CASH.................... (307,550) 719,952
CASH, beginning of period.......................... 573,989 905,721
------------ ------------
CASH, end of period................................ $ 266,439 $ 1,625,673
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-13
<PAGE>
CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
(1) GENERAL
The results of operations for the interim periods shown are not necessarily
indicative of the results to be expected for the fiscal year. In the opinion
of Management, the information contained herein reflects all adjustments
necessary to make a fair statement of the results for the three and six months
ended June 30, 1998 and 1997. All such adjustments are of a normal recurring
nature.
(2) BUSINESS ORGANIZATION AND PURPOSE
Central Ohio Cable System Operating Unit (the Operating Unit), an operating
unit within Coaxial Communications of Central Ohio, Inc. (Central Ohio),
operates a cable television system which provides basic and expanded cable
services to homes in Columbus, Ohio and surrounding areas. The Operating
Unit's financial statements include only those assets, liabilities, revenues
and expenses directly related to the cable television system to be contributed
(see Note 7).
(3) ACCOUNTING POLICIES
Note 2 to the Notes to Financial Statements in the Operating Unit's 1997
Financial Statements summarizes the Operating Unit's significant accounting
policies.
(4) INCOME TAXES
The Operating Unit is an operating unit within Central Ohio, which is a
Subchapter S corporation. Therefore, each shareholder reports his distributive
share of income or loss on his respective income tax returns. As a result, the
Operating Unit does not provide for Federal or state income taxes in its
accounts.
(5) RELATED PARTY TRANSACTIONS
The Operating Unit has a receivable from a related party as of June 30, 1998
and December 31, 1997 of $98,461 and $98,584, respectively, relating to the
leasing of fiber optic facilities.
The Operating Unit was charged home office expenses of approximately
$336,000 and $731,000 for the three and six months ended June 30, 1998 and
$379,000 and $703,000 for the three and six months ended June 30, 1997
(included in selling and administrative expenses). Home office expenses
include billings for legal fees, management fees, salaries, travel and other
management expenses for services provided by an affiliated services company.
The Operating Unit pays rent to a partnership owned by Central Ohio's
shareholders for two facilities. Total charges for rent were approximately
$99,500 in 1997, $72,000 in 1996 and $72,000 in 1995.
(6) COMMITMENTS AND CONTINGENCIES
The Operating Unit is party in or may be affected by various matters under
litigation. Management believes that the ultimate outcome of these matters
will not have a significant adverse effect on either the Operating Unit's
future results of operations or financial position.
Capital expenditures for the Operating Unit for 1998 are expected to be
approximately $5,515,000.
F-14
<PAGE>
CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(7) SUBSEQUENT EVENT
On June 30, 1998, Central Ohio and Insight Communications Company, L.P.
(Insight) entered into a Contribution Agreement (the Contribution Agreement)
pursuant to which Central Ohio will contribute to a newly formed subsidiary (a
limited liability company) of Central Ohio (the Operating Company)
substantially all of the assets and liabilities comprising the Operating Unit,
and Insight will contribute $10 million in cash to the Operating Company. As a
result of this Contribution Agreement, Central Ohio will own 25% of the non-
voting common equity and Insight will own 75% of the non-voting common equity
of the Operating Company, subject to possible adjustments pursuant to the
Contribution Agreement. Central Ohio will also own two separate series of
voting preferred equity of the Operating Company; the voting preferred equity
interest will provide for distributions to Central Ohio equal in amount to the
payments on the senior and subordinated debt described below. Insight or an
affiliate will serve as the manager of the Operating Company.
The closing of the Contribution Agreement is conditioned upon, among other
things, the private placement of $140 million senior notes by Central Ohio and
Phoenix Associates (a related entity) and the private placement of $30 million
of subordinated debt by the majority shareholder of Central Ohio.
F-15
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of
Coaxial Communications of Central Ohio, Inc.
We have audited the accompanying balance sheets of Coaxial Communications of
Central Ohio, Inc. (an Ohio corporation) as of December 31, 1997 and 1996, and
the related statements of operations and changes in shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our 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 Coaxial Communications of
Central Ohio, Inc. as of December 31, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Columbus, Ohio,
July 17, 1998.
F-16
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash................................................ $ 574,064 $ 905,796
Subscriber receivables, less allowance for doubtful
accounts of $202,000 in 1997 and $203,000 in 1996.. 1,834,558 1,982,003
Other accounts receivable, less allowance for doubt-
ful accounts of $172,000 in 1997 and $215,000 in
1996............................................... 1,040,582 1,098,796
Material, supplies and construction inventories..... 855,373 951,632
Prepaid expenses and other current assets........... 223,262 393,304
------------ ------------
Total current assets............................... 4,527,839 5,331,531
------------ ------------
PROPERTY AND EQUIPMENT, at cost:
CATV systems........................................ 64,093,984 59,444,114
Equipment........................................... 7,082,619 6,824,199
Furniture........................................... 246,232 243,367
Leasehold improvements.............................. 220,231 216,577
------------ ------------
71,643,066 66,728,257
Less-Accumulated depreciation and amortization...... (42,699,293) (38,520,057)
------------ ------------
Total property and equipment, net.................. 28,943,773 28,208,200
------------ ------------
INTANGIBLE ASSETS, at cost:
Franchise rights.................................... 7,385,000 7,385,000
Deferred loan acquisition costs and other........... 2,661,399 2,544,335
------------ ------------
10,046,399 9,929,335
Less-Accumulated amortization....................... (8,951,090) (7,934,293)
------------ ------------
Total intangible assets, net....................... 1,095,309 1,995,042
------------ ------------
OTHER ASSETS:
Due from related parties............................ 76,261,666 66,564,378
------------ ------------
Total other assets................................. 76,261,666 66,564,378
------------ ------------
Total assets....................................... $110,828,587 $102,099,151
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable.................... $ 369,860 $ 5,436,624
Current portion of capital lease obligations........ 213,103 256,484
Accounts payable.................................... 2,804,766 2,383,108
Accrued interest.................................... 1,690,147 1,514,626
Accrued liabilities................................. 3,596,922 4,288,435
Advance subscriber deposits......................... 1,173,375 1,138,425
------------ ------------
Total current liabilities.......................... 9,848,173 15,017,702
------------ ------------
NOTES PAYABLE:
Affiliated entities................................. 2,933,236 2,933,236
Other............................................... 26,437,957 26,557,765
------------ ------------
Total notes payable................................ 29,371,193 29,491,001
------------ ------------
CAPITAL LEASE OBLIGATIONS............................. 194,194 358,755
DUE TO RELATED PARTIES................................ 17,088,121 14,899,398
------------ ------------
Total liabilities.................................. 56,501,681 59,766,856
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock--authorized 2,000 shares, 1,080 shares
issued and outstanding in 1997 and 1996, stated
value of $1 per share ............................. 1,080 1,080
Paid-in capital..................................... 9,501,170 9,501,170
Retained earnings................................... 44,824,656 32,830,045
------------ ------------
Total shareholders' equity......................... 54,326,906 42,332,295
------------ ------------
Total liabilities and shareholders' equity......... $110,828,587 $102,099,151
============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-17
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
STATEMENTS OF OPERATIONS AND CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ------------ -----------
<S> <C> <C> <C>
OPERATING REVENUES:
Service fees......................... $42,544,417 $ 44,763,413 $41,666,562
Advertising.......................... 3,373,064 3,072,567 2,822,872
Connection fees...................... 282,374 395,673 439,862
Other................................ 2,029,632 2,186,172 1,901,419
----------- ------------ -----------
Total operating revenues........... 48,229,487 50,417,825 46,830,715
----------- ------------ -----------
OPERATING EXPENSES:
Service and administrative........... 28,889,394 26,932,679 23,614,567
Depreciation......................... 4,773,467 4,827,594 4,313,875
Amortization......................... 482,675 522,216 522,858
----------- ------------ -----------
Total operating expenses........... 34,145,536 32,282,489 28,451,300
----------- ------------ -----------
OPERATING INCOME....................... 14,083,951 18,135,336 18,379,415
OTHER EXPENSES, net.................... (271,456) (248,384) (251,429)
INTEREST INCOME (EXPENSE), net
Interest income--related parties..... 4,296,510 5,210,678 4,239,158
Interest income...................... 69,990 29,449 38,930
Interest expense--related parties.... (2,412,417) (2,639,915) (2,476,485)
Interest expense..................... (3,183,800) (3,026,260) (2,834,607)
----------- ------------ -----------
Total interest expense, net........ (1,229,717) (426,048) (1,033,004)
----------- ------------ -----------
NET INCOME (Note 3).................... 12,582,778 17,460,904 17,094,982
SHAREHOLDERS' EQUITY, beginning of
year.................................. 42,332,295 37,018,958 27,614,790
CAPITAL DISTRIBUTIONS.................. (588,167) (12,147,567) (8,347,064)
SHAREHOLDER CONTRIBUTIONS.............. -- -- 656,250
----------- ------------ -----------
SHAREHOLDERS' EQUITY, end of year...... $54,326,906 $ 42,332,295 $37,018,958
=========== ============ ===========
EARNINGS PER COMMON SHARE:
Basic and diluted.................... $ 11,651 $ 16,168 $ 15,829
Weighted average number of common
shares.............................. 1,080 1,080 1,080
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-18
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income........................... $12,582,778 $17,460,904 $17,094,982
ADJUSTMENTS TO RECONCILE NET INCOME TO
NET CASH PROVIDED BY OPERATING
ACTIVITIES:
Depreciation......................... 4,773,467 4,827,594 4,313,875
Amortization......................... 1,031,644 1,029,683 1,031,203
Loss on disposals of property and
equipment........................... 77,452 69,187 23,066
Changes in certain assets and
liabilities:
(Increase) decrease in assets--
Subscriber receivables........... 147,445 (674,368) (283,064)
Other accounts receivable,
prepaid expenses and other
current assets.................. 228,256 245,905 (355,270)
Increase (decrease) in
liabilities--
Accounts payable................. 421,658 (361,633) (190,834)
Accrued interest................. 175,521 39,320 266,430
Accrued liabilities.............. (691,513) 1,026,569 450,395
Deferred income.................. -- (9,613) 9,613
Advance subscriber deposits...... 34,950 421,954 77,473
----------- ----------- -----------
Net cash provided by operating
activities.................... 18,781,658 24,075,502 22,437,869
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Increase) decrease in materials,
supplies and construction
inventories......................... 96,259 334,595 (543,119)
Capital expenditures for property and
equipment........................... (5,570,385) (5,998,166) (5,723,650)
Proceeds from disposal of property
and equipment....................... 25,753 17,667 24,405
Increase in amounts due from related
parties............................. (9,697,288) (13,570,306) (14,215,160)
----------- ----------- -----------
Net cash used in investing
activities........................ (15,145,661) (19,216,210) (20,457,524)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of notes
payable............................. 750,000 5,500,000 6,050,000
Principal payments on notes payable.. (5,680,764) (2,114,000) (2,861,500)
Increase in deferred compensation.... -- 193,140 --
Principal payments on deferred
compensation........................ (255,808) (234,400) --
Costs incurred in debt financing..... (117,064) -- (3,995)
Principal payments on capital lease
obligations......................... (264,649) (234,630) (183,114)
Shareholder contributions............ -- -- 656,250
Capital distributions................ (588,167) (12,147,567) (8,347,064)
Increase in amounts due to related
parties............................. 2,188,723 4,414,315 3,066,466
----------- ----------- -----------
Net cash used in financing
activities.................... (3,967,729) (4,623,142) (1,622,957)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH........ (331,732) 236,150 357,388
CASH, beginning of year................ 905,796 669,646 312,258
----------- ----------- -----------
CASH, end of year...................... $ 574,064 $ 905,796 $ 669,646
=========== =========== ===========
</TABLE>
F-19
<PAGE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
During 1997, 1996 and 1995, the Company paid interest of $2,390,851,
$2,315,231 and $2,360,059, respectively.
SUPPLEMENTAL DISCLOSURE OF INVESTING AND FINANCING NONCASH TRANSACTIONS
During 1997, 1996 and 1995, the Company entered into capital leases to
acquire vehicles and equipment totaling $56,707, $198,985 and $180,175,
respectively.
During 1996, Central Ohio converted an accrued liability for deferred
compensation of $2,343,947 to a note payable. See Note 13.
During 1995, the shareholders contributed $656,250 of initial contract costs
on interest rate cap agreements.
The accompanying notes to financial statements are an integral part of these
statements.
F-20
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) BUSINESS ORGANIZATION AND PURPOSE
Coaxial Communications of Central Ohio, Inc. (Central Ohio or the Company),
an Ohio corporation, operates a cable television system which provides basic
and expanded cable services to homes in Columbus, Ohio and surrounding areas.
Central Ohio has 2,000 shares of common stock authorized and 1,080 shares
issued and outstanding. The 1,080 outstanding shares are owned by three
individuals. The shares have a stated value of $1 per share.
Other related entities owned or controlled by the majority shareholder of
Central Ohio include Phoenix Associates (Phoenix), Coaxial Communications of
Southern Ohio, Inc. (Southern Ohio), Coaxial Associates of Columbus I
(Columbus I), Coaxial Associates of Columbus II (Columbus II), Paxton Cable
Television, Inc. (Paxton Cable) and Paxton Communications, Inc. (Paxton
Communications).
Central Ohio, as joint and several issuer, with Phoenix, Southern Ohio,
Columbus I and Columbus II, of the note payable described in Note 7(b)
provides the funding that will allow Phoenix to repay its share of the notes
payable, as Phoenix has no operations.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUES
In December 1991, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments," which requires disclosure of fair value information
about both on- and off- balance sheet financial instruments for which it is
practicable to estimate that value.
The carrying amounts of current assets and liabilities approximate their
fair market value because of the immediate or short-term maturity of these
financial instruments. The fair value of related party receivables and
payables are not determinable. The carrying amounts of the loan agreement
debt, including term loans and revolving credit loans, approximate fair value
as the underlying instruments are at variable rates that reprice frequently.
The carrying amounts and related estimated fair values for the Company's
remaining financial instruments are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------ -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Interest rate swaps..................... $(9,594) $(11,468) $70,732 $243,187
</TABLE>
F-21
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The fair value of the interest rate swaps is based upon the estimated amount
that the Company would receive or pay to terminate the swap agreement at the
reporting date, taking into consideration current interest rates and the
creditworthiness of the counterparties.
DERIVATIVE FINANCIAL INSTRUMENTS
During 1995, the Company adopted Statement of Financial Accounting Standards
No. 119 (SFAS No. 119), "Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments." SFAS No. 119 requires that a distinction
be made between derivative financial instruments held or issued for trading
purposes and derivative instruments held for purposes other than trading,
including hedging. The Company utilizes derivative financial instruments for
hedging purposes to reduce exposure to adverse changes in interest rates. The
amounts to be paid or received related to these transactions are recognized,
on an accrual basis, over the life of the hedged instrument as an adjustment
to interest expense. The related amounts payable to, or receivable from, the
counterparties are included in prepaid expenses and other current assets. The
fair value of the swap agreements is not recognized in the combined financial
statements, since they are accounted for as hedges. Disclosures required by
SFAS No. 119 are shown in Note 10.
OPERATING REVENUE RECOGNITION
Service fees are recorded in the month cable television and pay television
services are provided to subscribers. Connection fees are charges for the
hook-up of new customers and are recognized when billed on the subscriber's
first bill. Unearned revenues are recorded as advance subscriber deposits in
the accompanying financial statements.
CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable. The Company's
customer base consists of a number of homes concentrated in the central Ohio
area. The Company continually monitors the exposure for credit losses and
maintain allowances for anticipated losses. As of December 31, 1997, the
Company had no significant concentrations of credit risk.
MATERIAL, SUPPLIES AND CONSTRUCTION INVENTORIES
Material, supplies and construction inventories are stated at the lower of
cost (first-in, first-out basis) or market.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost, while maintenance and repairs are
expensed as incurred. Upon retirement or disposal of assets, the cost and
related accumulated depreciation and amortization are removed from the balance
sheet, and any gain or loss is reflected in earnings. Depreciation and
amortization are provided using the straight-line method over the estimated
useful lives of the related assets as follows:
<TABLE>
<CAPTION>
YEARS
-------------
<S> <C>
CATV systems.................................................. 10 to 15
Equipment..................................................... 5
Furniture..................................................... 5
Leasehold improvements........................................ Life of lease
</TABLE>
The Company internally constructs certain CATV systems. Construction costs
capitalized include payroll, fringe benefits and other overhead costs
associated with construction activity.
The Company reviews its property, plant and equipment and other long term
assets when events or changes in circumstances indicate the carrying amounts
may not be recoverable. When such conditions exist, management estimates the
future cash flows from operations or disposition. If the estimated
undiscounted future
F-22
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
cash flows are less than the carrying amount of the asset, an adjustment to
reduce the carrying amount would be recorded, and an impairment loss would be
recognized. The Company does not believe that there is an impairment of such
assets.
INTANGIBLE ASSETS
Intangible assets are amortized using the straight-line method over the
estimated useful lives of the related assets as follows:
<TABLE>
<CAPTION>
YEARS
------------
<S> <C>
Franchise rights................................................ 7 to 15
Deferred loan acquisition costs................................. Term of debt
</TABLE>
Deferred loan acquisition costs relate to costs, primarily legal fees and
bank facility fees incurred to negotiate and secure bank loans (see Note 7).
These costs are being amortized on a straight-line basis over the life of the
applicable loans. The amount amortized, approximately $549,000, $508,000 and
$508,000 in 1997, 1996 and 1995, respectively, is included in interest
expense.
HOME OFFICE EXPENSES
Home office expenses of approximately $1,498,000, $1,697,000 and $1,695,000
in 1997, 1996 and 1995 (included in selling and administrative expenses)
include billings for legal fees, management fees, salaries, travel and other
management expenses for services provided by an affiliated services company.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expense primarily
for campaign and telemarketing-related efforts was approximately $1,025,000,
$1,060,000 and $817,000 in 1997, 1996 and 1995, respectively.
EARNINGS PER SHARE
Basic and Diluted earnings per share were calculated as net income divided
by the weighted average number of common shares outstanding.
(3) INCOME TAXES
Central Ohio is a Subchapter S corporation. Therefore, each shareholder
reports his distributive share of income or loss on his respective income tax
returns. As a result, the Company does not provide for Federal or state income
taxes in its accounts. In the event that the Subchapter S corporation election
is terminated, deferred taxes related to book and tax temporary differences
would be required to be reflected in the financial statements.
(4) THRIFT PLAN
The Company has an employer sponsored Thrift Plan (the Plan) for employees
having at least one full year of service. Employees can contribute up to 6% of
their salary to the Plan which is matched 50% by the Company. Employees can
also contribute an additional 1% to 10% which is not matched by the Company.
Employees become fully vested in matching contributions after 5 years. There
is no partial vesting. The Company's contributed approximately $133,000,
$111,000 and $120,000 to the Plan in 1997, 1996 and 1995, respectively. The
Thrift Plan will not be contributed as part of the Contribution Agreement
described in note 10.
(5) WORKERS' COMPENSATION RESERVES
Central Ohio is partially self-insured for workers' compensation benefits.
The amounts charged to expense for workers' compensation were approximately
$89,200, $110,200 and $143,500 for 1997, 1996 and 1995, respectively, and were
based on actual and estimated claims incurred. The liability for workers'
compensation obligations, as of December 31, 1997 and 1996, is approximately
$78,000 and $131,000, respectively.
F-23
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(6) RELATED PARTY TRANSACTIONS
Central Ohio also pays rent to a partnership owned by Central Ohio's
shareholders for two facilities. Total charges for rent were approximately
$99,500 in 1997, $72,000 in 1996 and $72,000 in 1995.
Central Ohio has advanced funds to and received advances from related
entities for working capital and debt service requirements. These amounts bear
interest at 5.66% at December 31, 1997, except the Paxton advance which bears
interest at 9.47%. Central Ohio recognized interest income of approximately
$4,296,500 in 1997, $5,210,700 in 1996 and $4,239,200 in 1995 and interest
expense of approximately $914,300 in 1997, $1,039,900 in 1996 and $874,400 in
1995 related to such advances.
Advances to and from related entities as of December 31, 1997 and 1996 are
as follows:
<TABLE>
<CAPTION>
ENTITY 1997 1996
------ ----------- -----------
<S> <C> <C>
Advances to:
Phoenix........................................... $72,439,984 $64,091,634
Paxton............................................ 2,361,387 2,124,629
Columbus I........................................ 1,357,768 295,547
Other............................................. 102,527 52,568
----------- -----------
Due from related entities........................... $76,261,666 $66,564,378
=========== ===========
Advances from:
Columbus II....................................... $ 662,178 $ 766,328
Southern Ohio..................................... 16,425,943 14,133,070
----------- -----------
Due to related entities............................. $17,088,121 $14,899,398
=========== ===========
</TABLE>
These related entities are under the control of the shareholders of Central
Ohio. The shareholders have represented that these amounts will be settled
among the parties (see Note 14).
Other related party transactions are described in Note 7.
(7) NOTES PAYABLE
Notes payable at December 31, 1997 and 1996 consisted of:
<TABLE>
<CAPTION>
LENDER 1997 1996
------ ----------- -----------
<S> <C> <C>
Columbus I(a)....................................... $ 2,467,137 $ 2,467,137
Columbus II(a)...................................... 466,099 466,099
----------- -----------
Total related parties............................. 2,933,236 2,933,236
Banks(b)............................................ 24,760,937 24,624,937
Former limited partners(a).......................... -- 5,066,764
Retired officer(c).................................. 2,046,880 2,302,688
----------- -----------
Total all notes payable........................... $29,741,053 $34,927,625
=========== ===========
</TABLE>
F-24
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Notes payable at December 31, 1997, will mature as follows:
<TABLE>
<S> <C>
1998............................................................ $ 369,860
1999............................................................ 24,902,797
2000............................................................ 255,860
2001............................................................ 255,860
2002............................................................ 3,189,096
Thereafter...................................................... 767,580
-----------
Total all notes payable....................................... $29,741,053
===========
</TABLE>
- --------
(a) In November, 1982, Columbus I and Columbus II exchanged all of their
assets and certain liabilities with Central Ohio for common stock and
notes. These notes bear interest at a rate of 20% and had been scheduled
to mature on October 31, 1997. A portion of these notes ($5,066,764) had
been assigned and was payable to the former Limited Partners of Columbus I
and Columbus II as part of their consideration when they sold their
partnership interest to the General Partners. The notes payable to former
Limited Partners were paid in 1997. The maturity date of the remaining
notes (payable to Columbus I and Columbus II) was extended to October 31,
2002. Interest expense was approximately $1,498,100, $1,600,000 and
$1,600,000 in 1997, 1996 and 1995, respectively, related to the notes
payable.
(b) On November 15, 1994, Central Ohio, Phoenix, Southern Ohio, Columbus I and
Columbus II (collectively referred to as the borrowers), executed a loan
agreement with a lead bank and several other financial institutions to
replace an existing loan agreement. On May 12, 1998, the loan agreement
was amended. The loan agreement provides for principal term loans up to
$150,000,000 and revolving credit loans up to $23,000,000 ($22,000,000
after the May 12, 1998 amendment). Principal payments on the term loans
are due in 19 quarterly installments of $250,000 beginning March 15, 1995,
and a final quarterly installment for the remaining balance outstanding.
Revolving credit loans are payable at December 31, 1999. Interest on the
outstanding balances under the loan agreement is payable at either a) a
rate comparable to prime rate as defined in the agreement plus 2%, or b)
at a rate comparable to the Eurodollar rate as defined in the agreement
plus 3.25% depending on the borrowers' option at the time the loan is
drawn. These margins have been amended to 2.25% and 3.50%, respectively,
effective March 3, 1997. Interest rates on borrowings outstanding at
December 31, 1997 range from 9.25% to 9.47%. The termination date of the
loan agreement is December 31, 1999. Interest expense was approximately
$2,284,500, $1,920,500 and $1,785,300 in 1997, 1996 and 1995,
respectively. The letters of credit discussed in Note 8 aggregating
$1,100,000 decrease availability of borrowings under the loan agreement.
Unused and unreserved borrowing availability under the loan agreement at
December 31, 1997 was $5,900,000.
A revolving credit commitment fee of .5% is paid on the average daily
balance available for draw under the revolving credit loan.
The funds borrowed under the loan agreement were allocated to the following
entities as of December 31, 1997:
<TABLE>
<CAPTION>
REVOLVING
ENTITY TERM LOAN LOAN
------ ------------ -----------
<S> <C> <C>
Central Ohio..................................... $ 16,760,937 $ 8,000,000
Phoenix.......................................... 105,925,208 --
Southern Ohio.................................... 20,568,238 8,000,000
Columbus I....................................... 2,385,682 --
Columbus II...................................... 1,359,935 --
------------ -----------
Total.......................................... $147,000,000 $16,000,000
============ ===========
</TABLE>
F-25
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The loans are secured by substantially all of the borrowers' assets and are
joint and several obligations of the borrowers. Significant notes
receivable are pledged as collateral. In addition, the shareholders and
partners of the borrowers have pledged all of their shares and partnership
interests in the borrowers. The proceeds of the loans were used to
refinance existing bank and other notes payable, make capital distributions
to the shareholders and partners, and to finance capital expenditures of
Central Ohio and Southern Ohio. Repayment of the Phoenix debt is dependent
upon funding from Central Ohio or Southern Ohio as Phoenix has no
operations.
Among other covenants, the borrowers must comply with restrictive covenants
relating to leverage coverage, interest coverage and cash ratios. In
addition, repayments of principal on the loan are required if certain
conditions relating to asset dispositions, new debt, distributions or
excess cash flow are met. The borrowers are in compliance with these
covenants, as amended, as of December 31, 1997.
The borrowers are entitled to issue letters of credit for general corporate
purposes or to replace existing letters of credit up to an amount not
exceeding $2,000,000. The borrowers pay a fee equal to 2% per annum of the
amount available for draw under any letters of credit issued. Any draws on
letters of credit issued will be made a part of the outstanding balance on
the revolving credit loan.
Due to loan agreement requirements, the borrowers have entered into
interest rate swap agreements to reduce the impact of changes in interest
rates on the outstanding principal balances (see Notes 9 and 10).
(c) In January 1996, Central Ohio issued an unsecured note payable to a key
officer for deferred compensation. The officer retired in 1997. See Note
13 for related discussion.
(8) LETTERS OF CREDIT
The Company, with the other borrowers defined in Note 7, have letters of
credit for the benefit of certain program suppliers and former Limited
Partners. At December 31, 1997 and 1996, the aggregate value of these letters
of credit for the benefit of certain program suppliers was $1,100,000 and
$850,000, respectively. At December 31, 1997 and 1996, the aggregate value of
these letters of credit for the benefit of the former Limited Partners was $0
(due to final settlement with Limited Partners) and $1,140,775, respectively.
(9) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company, with the other borrowers defined in Note 7, become a party to
financial instruments with off-balance-sheet risk in the normal course of
business in managing its interest rate risk. These financial instruments
include interest rate swap agreements, and previously, forward interest rate
agreements and interest rate caps. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized on the Company's balance sheets. The contract or notional amounts
of these instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.
The Company has utilized interest rate caps, interest rate swap agreements
and forward interest rate agreements as hedge instruments to reduce exposure
to adverse changes in interest rates. The notional amounts of these
instruments do not represent exposure to credit loss. Risks associated with
these types of financial instruments arise from the movement of interest rates
and failure of the other party to the transaction to meet its obligation. Note
10 provides additional disclosures on the Company's derivative financial
instruments.
The following table shows the contract or notional amount of the Company's
off-balance-sheet financial instruments at December 31, 1997 and 1996.
<TABLE>
<CAPTION>
CONTRACT OR NOTIONAL AMOUNT
----------------------------
1997 1996
------------- --------------
<S> <C> <C>
Interest rate swap agreements.................. $ 40,000,000 $ 115,000,000
</TABLE>
F-26
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(10) DERIVATIVE FINANCIAL INSTRUMENTS
The Company, with the other borrowers defined in Note 7, holds derivative
financial instruments only for purposes other than trading. The Company's
primary objective is the "hedging" or management of interest rate risk
associated with its long-term debt. The two parties to an interest rate swap
agreement agree to exchange, at particular intervals, payment streams
calculated on a specified notional amount, with one stream based on a floating
interest rate and the other stream based on a fixed interest rate. The swaps
were entered into in order to reduce the overall interest rate sensitivity of
the Company. These interest rate swap agreements are the standard
fixed/floating type of swap agreements, whereby the Company pays a fixed rate
(i.e., swapped rate) and receives a floating rate from the counterparty based
upon the LIBOR index. All of the interest rate swaps are treated as hedges,
and accordingly, are accounted for on the same basis as the underlying asset
or liability being hedged. The amounts to be paid or received related to
derivative financial instruments are recognized on an accrual basis, over the
estimated life of the hedged instrument, as an adjustment to interest expense.
The counterparty to all of the Company's off-balance-sheet financial
instrument agreements is the lead bank on the loan agreement.
The following table summarizes the interest rate swap agreements:
<TABLE>
<CAPTION>
FIXED
NOTIONAL INITIAL RATE FLOATING
PRINCIPAL EFFECTIVE TERMINATION CONTRACT (PAY RATE RATE
AMOUNT TERM DATE DATE COST RATE) (RECEIVE RATE) FIXING DATES
--------- ------ --------- ----------- -------- ----- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$40,000,000............. 1 year 1/15/97 1/15/98 $0 5.87% 5.59% to 5.82% April/July/Oct/Jan
</TABLE>
In accordance with the loan agreement, the Company also had previously
purchased interest rate caps to aid in the management of its interest rate
risk. The seller of these caps was obligated to pay the Company the amount, if
any, by which a specified market interest rate exceeded the fixed cap applied
to the notional amount. There were no interest rate cap agreements in effect
at December 31, 1997, and the initial contract costs related to previous
interest rate cap agreements were fully amortized as of December 31, 1997.
(11) OPERATING LEASE AGREEMENTS
Central Ohio leases land for tower locations, office equipment, office
space, vehicles and the use of utility poles under various operating lease
agreements. Rental expense for all operating leases was approximately $218,500
in 1997, $160,500 in 1996 and $161,400 in 1995. These amounts exclude year-to-
year utility pole leases of $186,400, $182,700 and $190,200, respectively,
which provide for payments based on the number of poles used.
Minimum rental commitments required under noncancellable operating leases
are as follows:
<TABLE>
<S> <C>
1998.............................................................. $157,214
1999.............................................................. 146,389
2000.............................................................. 89,421
2001.............................................................. 200
--------
$393,224
========
</TABLE>
F-27
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(12) CAPITAL LEASE AGREEMENTS
Central Ohio leases vehicles, computer equipment and Xerox equipment under
capital leases. These leases have various terms of 4-5 years. Future minimum
payments under the leases are as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDING DECEMBER 31,
---------------------------------
<S> <C>
1998............................................................. $244,516
1999............................................................. 124,019
2000............................................................. 66,283
2001............................................................. 24,370
2002............................................................. 3,005
--------
462,193
Less: Amount representing interest............................... 54,896
Less: Current portion of capital lease obligations............... 213,103
--------
Long-term capital lease obligations.............................. $194,194
========
</TABLE>
As of December 31, 1997, Central has assets held under capital leases as
follows:
<TABLE>
<S> <C>
Total costs.................................................... $1,151,354
Related accumulated amortization............................... (628,973)
----------
Net book value as of December 31, 1997......................... $ 522,381
==========
</TABLE>
(13) COMMITMENTS AND CONTINGENCIES
Through December 31, 1995, Central Ohio had an agreement with a key officer
to defer certain discretionary compensation amounts each year. On January 1,
1996, Central Ohio entered into an unsecured note payable to this officer in
the amount of $2,343,947, which represented all vested deferred compensation
at December 31, 1995. During 1996, this officer earned additional
discretionary compensation in the amount of $193,140. This amount was added to
the unpaid December 31, 1996 principal balance of the above note and the
payment amount was adjusted accordingly. As of December 31, 1997 and 1996, the
outstanding balance of the note was $2,046,880 and $2,302,688, respectively.
The note is payable in equal monthly installments of $21,322 plus accrued
interest at the prime rate (8.50% at December 31, 1997), and matures in
December 2005. Interest expense on the note was $184,810 and $185,005 in 1997
and 1996, respectively.
The Company is party in or may be affected by various matters under
litigation. Management believes that the ultimate outcome of these matters
will not have a significant adverse effect on either the Company's future
results of operation or financial position.
Capital expenditures for Central Ohio for 1998 is expected to be
approximately $5,515,000.
The Company has an executive severance program and an incentive bonus plan
that entitles certain employees to receive compensation, as defined, in an
event of a change in control of the Company.
(14) SUBSEQUENT EVENT
On June 30, 1998, Central Ohio and Insight Communications Company, L.P.
(Insight) entered into a Contribution Agreement (the Contribution Agreement)
pursuant to which Central Ohio will contribute to a newly formed subsidiary (a
limited liability company) of Central Ohio (the Operating Company)
substantially all of the assets and liabilities comprising the cable system,
and Insight will contribute $10 million in cash to the Operating
F-28
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Company. As a result of this Contribution Agreement, Central Ohio will own 25%
of the non-voting common equity and Insight will own 75% of the non-voting
common equity of the Operating Company, subject to possible adjustments
pursuant to the Contribution Agreement. Central Ohio will also own two
separate series (a $140 million preferred equity interest and a $30 million
preferred equity interest) of voting preferred equity of the Operating
Company; the voting preferred equity interest will provide for distributions
to Central Ohio equal in amount to the payments on the senior and senior
discount notes described below. Insight or an affiliate will serve as the
manager of the Operating Company.
The closing of the Contribution Agreement is conditioned upon, among other
things, the private placement of $140 million senior notes by Central Ohio and
Phoenix (which will replace Central Ohio's and Phoenix's notes payable to
banks) and the private placement of $30 million of senior discount notes by
the majority shareholder of Central Ohio.
In conjunction with this transaction, there will be a settlement or net
distribution of related party receivables and payables. The impact on Central
Ohio at December 31, 1997 would be a decrease to shareholder's equity of
approximately $53.2 million.
The pro forma balances of Central Ohio's total assets and shareholders
equity if this Contribution Agreement, private placement, and the settlement
of related party balances, that will happen in conjunction with the
transactions, would have occurred as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31,
1997
------------
<S> <C>
Total Assets................................................. $43,204,000
Shareholders' Equity......................................... (1,468,000)
</TABLE>
In addition, this transaction will trigger the executive severance program
and incentive bonus plan described in Note 13 above. Approximately $1.2
million of compensation could be paid under these plans.
F-29
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
CONDENSED BALANCE SHEETS
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
JUNE 30, DECEMBER
1998 31, 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................. $ 266,514 $ 574,064
Subscriber receivables, less allowance for
doubtful accounts of $229,000 in 1998 and
$202,000 in 1997................................ 1,266,369 1,834,558
Other accounts receivable, less allowance for
doubtful accounts of $166,000 in 1998 and
$172,000 in 1997................................ 2,109,845 1,040,582
Other current assets............................. 1,194,418 1,078,635
------------ ------------
Total current assets........................... 4,837,146 4,527,839
------------ ------------
PROPERTY AND EQUIPMENT, at cost:
CATV systems..................................... 66,359,613 64,093,984
Other............................................ 7,632,588 7,549,082
------------ ------------
73,992,201 71,643,066
Less--Accumulated depreciation and amortization.. (45,163,475) (42,699,293)
------------ ------------
Total property and equipment, net.............. 28,828,726 28,943,773
------------ ------------
INTANGIBLE ASSETS, net............................. 996,034 1,095,309
------------ ------------
OTHER ASSETS:
Due from related parties......................... 83,564,141 76,261,666
------------ ------------
Total other assets............................. 83,564,141 76,261,666
------------ ------------
Total assets................................... $118,226,047 $110,828,587
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of notes payable................. $ 369,860 $ 369,860
Current portion of capital lease obligations..... 134,063 213,103
Accounts payable, accrued liabilities and other
current liabilities............................. 8,652,161 9,265,210
------------ ------------
Total current liabilities...................... 9,156,084 9,848,173
------------ ------------
NOTES PAYABLE:
Affiliated entities.............................. 2,933,236 2,933,236
Other............................................ 27,503,028 26,437,957
------------ ------------
Total notes payable............................ 30,436,264 29,371,193
------------ ------------
CAPITAL LEASE OBLIGATIONS.......................... 133,702 194,194
DEFERRED INCOME.................................... 837,618 --
DUE TO RELATED PARTIES............................. 19,146,447 17,088,121
------------ ------------
Total liabilities.............................. 59,710,115 56,501,681
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock..................................... 1,080 1,080
Paid-in capital.................................. 9,501,170 9,501,170
Retained earnings................................ 49,013,682 44,824,656
------------ ------------
Total shareholders' equity..................... 58,515,932 54,326,906
------------ ------------
Total liabilities and shareholders' equity..... $118,226,047 $110,828,587
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-30
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
CONDENSED STATEMENTS OF OPERATIONS AND CHANGES IN SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED
ENDED JUNE 30, JUNE 30,
------------------------ --------------------------
1998 1997 1998 1997
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES......... $12,041,537 $12,401,638 $ 23,766,363 $ 24,493,281
OPERATING EXPENSES:
Service and
administrative.......... 7,641,713 7,084,263 15,364,766 13,950,071
Depreciation and
amortization............ 1,371,707 1,393,957 2,688,068 2,765,001
----------- ----------- ------------ ------------
Total operating
expenses.............. 9,013,420 8,478,220 18,052,834 16,715,072
----------- ----------- ------------ ------------
OPERATING INCOME........... 3,028,117 3,923,418 5,713,529 7,778,209
OTHER EXPENSES, net........ (59,318) (49,595) (115,273) (83,445)
INTEREST INCOME (EXPENSE),
net
Interest income--related
parties................. 1,115,110 1,083,724 2,183,370 2,055,592
Interest income.......... -- 17,798 22,632 31,876
Interest expense--related
parties................. (402,537) (633,769) (791,730) (1,246,843)
Interest expense......... (874,270) (797,140) (1,680,170) (1,558,369)
----------- ----------- ------------ ------------
Total interest expense,
net................... (161,697) (329,387) (265,898) (717,744)
----------- ----------- ------------ ------------
NET INCOME (Note 4)........... 2,807,102 3,544,436 5,332,358 6,977,020
SHAREHOLDERS' EQUITY,
beginning of period....... 55,708,830 44,853,391 54,326,906 42,332,295
CAPITAL DISTRIBUTIONS...... -- (464,805) (1,143,332) (1,376,293)
SHAREHOLDER CONTRIBUTIONS.. -- 1,225,388 -- 1,225,388
----------- ----------- ------------ ------------
SHAREHOLDERS' EQUITY, end
of period................. $58,515,932 $49,158,410 $ 58,515,932 $ 49,158,410
=========== =========== ============ ============
EARNINGS PER COMMON SHARE:
Basic and diluted........ $ 2,599 $ 3,282 $ 4,937 $ 6,460
Weighted average number
of shares............... 1,080 1,080 1,080 1,080
</TABLE>
The accompanying notes are an integral part of these statements.
F-31
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
-------------------------
JUNE 30, JUNE 30,
1998 1997
------------ -----------
<S> <C> <C>
NET CASH FLOWS PROVIDED BY OPERATING ACTIVITIES...... $ 8,176,938 $ 9,119,438
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment.... (2,616,020) (2,296,342)
Increase in amounts due from related parties....... (7,302,475) (6,474,320)
Other cash flows from investing activities......... (143,379) (47,308)
------------ -----------
Net cash used in investing activities............ (10,061,874) (8,817,970)
------------ -----------
NET CASH PROVIDED BY FINANCING ACTIVITY.............. 1,577,386 418,484
NET INCREASE (DECREASE) IN CASH...................... (307,550) 719,952
CASH, beginning of period............................ 574,064 905,796
------------ -----------
CASH, end of period.................................. $ 266,514 $ 1,625,748
============ ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-32
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
(1) GENERAL
The results of operations for the interim periods shown are not necessarily
indicative of the results to be expected for the fiscal year. In the opinion
of Management, the information contained herein reflects all adjustments
necessary to make a fair statement of the results for the three and six months
ended June 30, 1998 and 1997. All such adjustments are of a normal recurring
nature.
(2) BUSINESS ORGANIZATION AND PURPOSE
Coaxial Communications of Central Ohio, Inc. (Central Ohio or the Company),
an Ohio corporation, operates a cable television system which provides basic
and expanded cable services to homes in Columbus, Ohio and surrounding areas.
Central Ohio has 2,000 shares of common stock authorized and 1,080 shares
issued and outstanding. The 1,080 outstanding shares are owned by three
individuals. The shares have a stated value of $1 per share.
Other related entities owned or controlled by the majority shareholder of
Central Ohio include Phoenix Associates (Phoenix), Coaxial Communications of
Southern Ohio, Inc. (Southern Ohio), Coaxial Associates of Columbus I
(Columbus I), Coaxial Associates of Columbus II (Columbus II) and Paxton Cable
Television, Inc. (Paxton Cable) and Paxton Communications, Inc. (Paxton
Communications).
Central Ohio, as joint and several issuer, with Phoenix, Southern Ohio,
Columbus I and Columbus II, of the note payable described in Note 6(b)
provides the funding that will allow Phoenix to repay its share of the note
payable, as Phoenix has no operations.
(3) ACCOUNTING POLICIES
Note 2 to the Notes to Financial Statements in the Company's December 31,
1997 Financial Statements summarize the Company's significant accounting
policies.
EARNINGS PER SHARE
Basic and Diluted earnings per share were calculated as net income divided
by the weighted average number of common shares outstanding.
(4) INCOME TAXES
Central Ohio is a Subchapter S corporation. Therefore, each shareholder
reports his distributive share of income or loss on his respective income tax
returns. As a result, the Company does not provide for Federal or state income
taxes in its accounts. In the event that the Subchapter S corporation election
is terminated, deferred taxes related to book and tax temporary differences
would be required to be reflected in the financial statements.
(5) RELATED PARTY TRANSACTIONS
Central Ohio incurred home office expenses of approximately $336,000 and
$731,000 for the three and six months ended June 30, 1998 and $379,000 and
$703,000 for the three and six months ended June 30, 1997 (included in selling
and administrative expenses). Home office expenses include billings for legal
fees, management fees, salaries, travel and other management expenses for
services provided by an affiliated services company.
Central Ohio also pays rent to a partnership owned by Central Ohio's
shareholders for two facilities. Total charges for rent were approximately
$27,000 and $54,000 for the three and six months ended June 30, 1998 and
$27,000 and $45,500 for the three and six and months ended June 30, 1997.
F-33
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
Central Ohio has advanced funds to and received advances from related
entities for working capital and debt service requirements. These amounts bear
interest at 5.46% at June 30, 1998, except the Paxton advance that bears
interest at 9.30%. Central Ohio recognized interest income of approximately
$1,115,100 and $2,183,400 for the three and six months ended June 30, 1998 and
$1,083,700 and $2,055,600 for the three and six and months ended June 30,
1997. Central Ohio recognized interest expense of approximately $255,900 and
$498,400 for the three and six months ended June 30, 1998 and $233,800 and
$446,900 for the three and six and months ended June 30, 1997.
Advances to and from related entities as of June 30, 1998 and December 31,
1997 are as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ENTITY 1998 1997
------ ----------- ------------
<S> <C> <C>
Advances to:
Phoenix........................................... $79,501,010 $72,439,984
Paxton............................................ 2,448,141 2,361,387
Columbus I........................................ 1,512,759 1,357,768
Other............................................. 102,231 102,527
----------- -----------
Due from related entities........................... $83,564,141 $76,261,666
=========== ===========
Advances from:
Columbus II....................................... $ 618,208 $ 662,178
Southern Ohio..................................... 18,528,239 16,425,943
----------- -----------
Due to related entities............................. $19,146,447 $17,088,121
=========== ===========
</TABLE>
These related entities are under the control of the shareholders of Central
Ohio. The shareholders have represented that these amounts will be settled
among the parties (see Note 10).
Other related party transactions are described in Note 6.
(6) NOTES PAYABLE
Notes payable at June 30, 1998 and December 31, 1997 consisted of:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
LENDER 1998 1997
------ ----------- ------------
<S> <C> <C>
Columbus I(a)....................................... $ 2,467,137 $ 2,467,137
Columbus II(a)...................................... 466,099 466,099
----------- -----------
Total related parties............................. 2,933,236 2,933,236
Banks(b)............................................ 25,953,938 24,760,937
Retired officer(c).................................. 1,918,950 2,046,880
----------- -----------
Total all notes payable........................... $30,806,124 $29,741,053
=========== ===========
</TABLE>
- --------
(a) In November, 1982, Columbus I and Columbus II exchanged all of their
assets and certain liabilities with Central Ohio for common stock and
notes. These notes bear interest at a rate of 20% and had been scheduled
to mature on October 31, 1997. A portion of these notes ($5,066,764) had
been assigned and was payable to the former Limited Partners of Columbus I
and Columbus II as part of their consideration when they sold their
partnership interest to the General Partners. The notes payable to former
Limited Partners were paid in 1997. The maturity date of the remaining
notes (payable to Columbus I and Columbus II) was extended to October 31,
2002. Interest expense was approximately $146,700 and $293,300 for the
three and six months ended June 30, 1998 and $400,000 and $800,000 for the
three and six months ended June 30, 1997.
F-34
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(b) On November 15, 1994, Central Ohio, Phoenix, Southern Ohio, Columbus I and
Columbus II (collectively referred to as the borrowers), executed a loan
agreement with a lead bank and several other financial institutions to
replace an existing loan agreement. On May 12, 1998, the loan agreement
was amended. The loan agreement provides for principal term loans up to
$150,000,000 and revolving credit loans up to $22,000,000. Principal
payments on the term loans are due in 19 quarterly installments of
$250,000 beginning March 15, 1995, and a final quarterly installment for
the remaining balance outstanding. Revolving credit loans are payable at
December 31, 1999. Interest on the outstanding balances under the loan
agreement is payable at either a) a rate comparable to prime rate as
defined in the agreement plus 2%, or b) at a rate comparable to the
Eurodollar rate as defined in the agreement plus 3.25% depending on the
borrowers' option at the time the loan is drawn. These margins have been
amended to 2.25% and 3.50%, respectively, effective March 3, 1997.
Interest rates on borrowings outstanding at June 30, 1998 range from 9.16%
to 10.75%. The termination date of the loan agreement is December 31,
1999. Interest expense was $596,856 and $1,186,285 for the three and six
months ended June 30, 1998 and $567,530 and $1,110,178 for the three and
six months ended June 30, 1997. There are letters of credit aggregating
$1,100,000 for the benefit of certain program suppliers that decrease
availability of borrowings under the loan agreement. Unused and unreserved
borrowing availability under the loan agreement at June 30, 1998 was
$2,400,000.
A revolving credit commitment fee of .5% is paid on the average daily
balance available for draw under the revolving credit loan.
The funds borrowed under the loan agreement were allocated to the following
entities as of June 30, 1998:
<TABLE>
<CAPTION>
REVOLVING
ENTITY TERM LOAN LOAN
------ ------------ -----------
<S> <C> <C>
Central Ohio........................................ $ 16,703,938 $ 9,250,000
Phoenix............................................. 105,564,908 --
Southern Ohio....................................... 20,498,287 9,250,000
Columbus I.......................................... 2,377,582 --
Columbus II......................................... 1,355,285 --
------------ -----------
Total............................................. $146,500,000 $18,500,000
============ ===========
</TABLE>
The loans are secured by substantially all of the borrowers' assets and are
joint and several obligations of the borrowers. Significant notes
receivable are pledged as collateral. In addition, the shareholders and
partners of the borrowers have pledged all of their shares and partnership
interests in the borrowers. The proceeds of the loans were used to
refinance existing bank and other notes payable, make capital distributions
to the shareholders and partners, and to finance capital expenditures of
Central Ohio and Southern Ohio. Repayment of the Phoenix debt is dependent
upon funding from Central Ohio or Southern Ohio as Phoenix has no
operations.
Among other covenants, the borrowers must comply with restrictive covenants
relating to leverage coverage, interest coverage and cash ratios. In
addition, repayments of principal on the loan are required if certain
conditions relating to asset dispositions, new debt, distributions or
excess cash flow are met. The borrowers are in compliance with these
covenants, as amended, as of June 30, 1998.
The borrowers are entitled to issue letters of credit for general corporate
purposes or to replace existing letters of credit up to an amount not
exceeding $2,000,000. The borrowers pay a fee equal to 2% per annum of the
amount available for draw under any letters of credit issued. Any draws on
letters of credit issued will be made a part of the outstanding balance on
the revolving credit loan.
Due to loan agreement requirements, the borrowers have entered into
interest rate swap agreements to reduce the impact of changes in interest
rates on the outstanding principal balances (see Notes 7 and 8).
(c) In January 1996, Central issued an unsecured note payable to a key officer
for deferred compensation. The officer retired in 1997. See Note 9 for
related discussion.
F-35
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(7) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company, with the other borrowers defined in Note 6, became a party to
financial instruments with off-balance-sheet risk in the normal course of
business in managing its interest rate risk. These financial instruments
include interest rate swap agreements, and previously, forward interest rate
agreements and interest rate caps. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized on the Company's balance sheets. The contract or notional amounts
of these instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.
The Company has utilized interest rate caps, interest rate swap agreements
and forward interest rate agreements as hedge instruments to reduce exposure
to adverse changes in interest rates. The notional amounts of these
instruments do not represent exposure to credit loss. Risks associated with
these types of financial instruments arise from the movement of interest rates
and failure of the other party to the transaction to meet its obligation. Note
8 provides additional disclosures on the Company's derivative financial
instruments.
(8) DERIVATIVE FINANCIAL INSTRUMENTS
The Company, with the other borrowers defined in Note 6, may hold derivative
financial instruments only for purposes other than trading. The Company's
primary objective is the "hedging" or management of interest rate risk
associated with its long-term debt. The two parties to an interest rate swap
agreement agree to exchange, at particular intervals, payment streams
calculated on a specified notional amount, with one stream based on a floating
interest rate and the other stream based on a fixed interest rate. The swaps
were entered into in order to reduce the overall interest rate sensitivity of
the Company. These interest rate swap agreements are the standard
fixed/floating type of swap agreements, whereby the Company pays a fixed rate
(i.e., swapped rate) and receives a floating rate from the counterparty based
upon the LIBOR index. All of the interest rate swaps are treated as hedges,
and accordingly, are accounted for on the same basis as the underlying asset
or liability being hedged. The amounts to be paid or received related to
derivative financial instruments are recognized on an accrual basis, over the
estimated life of the hedged instrument, as an adjustment to interest expense.
The counterparty to all of the Company's off-balance-sheet financial
instrument agreements is the lead bank on the loan agreement. The Company held
no derivative financial instruments at June 30, 1998.
(9) COMMITMENTS AND CONTINGENCIES
Through December 31, 1995, Central Ohio had an agreement with a key officer
to defer certain discretionary compensation amounts each year. On January 1,
1996, Central Ohio entered into an unsecured note payable to this officer in
the amount of $2,343,947, which represented all vested deferred compensation
at December 31, 1995. During 1996, this officer earned additional
discretionary compensation in the amount of $193,140. This amount was added to
the unpaid December 31, 1996 principal balance of the above note and the
payment amount was adjusted accordingly. As of June 30, 1998 and December 31,
1997, the outstanding balance of the note was $1,918,950 and $2,046,880,
respectively. The note is payable in equal monthly installments of $21,322
plus accrued interest at the prime rate (8.50% at June 30, 1998), and matures
in December 2005. Interest expense on the note was $41,684 and $84,727 for the
three and six months ended June 30, 1998 and $47,121 and $94,646 for the three
and six months ended June 30, 1997.
The Company is party in or may be affected by various matters under
litigation. Management believes that the ultimate outcome of these matters
will not have a significant adverse effect on either the Company's future
results of operation or financial position.
Capital expenditures for Central Ohio for 1998 is expected to be
approximately $5,515,000.
The Company has an executive severance program and an incentive bonus plan
that entitles certain employees to receive compensation, as defined, in an
event of a change in control of the Company.
F-36
<PAGE>
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
(10) SUBSEQUENT EVENT
On June 30, 1998, Central Ohio and Insight Communications Company, L.P.
(Insight) entered into a Contribution Agreement (the Contribution Agreement)
pursuant to which Central Ohio will contribute to a newly formed subsidiary (a
limited liability company) of Central Ohio (the Operating Company)
substantially all of the assets and liabilities comprising the cable system,
and Insight will contribute $10 million in cash to the Operating Company. As a
result of this Contribution Agreement, Central Ohio will own 25% of the non-
voting common equity and Insight will own 75% of the non-voting common equity
of the Operating Company, subject to possible adjustments pursuant to the
Contribution Agreement. Central Ohio will also own two separate series of
voting preferred equity (a $140 million preferred equity interest and a $30
million preferred equity interest) of the Operating Company; the voting
preferred equity interest will provide for distributions to Central Ohio equal
in amount to the payments on the senior and senior discount notes described
below. Insight or an affiliate will serve as the manager of the Operating
Company.
The closing of the Contribution Agreement is conditioned upon, among other
things, the private placement of $140 million senior notes by Central Ohio and
Phoenix (which will replace Central Ohio's and Phoenix's notes payable to
banks) and the private placement of $30 million of senior discount notes by
the majority shareholder of Central Ohio.
In conjunction with this transaction, there will be a settlement or net
distribution of related party receivables and payables. The impact on Central
Ohio at December 31, 1997 would be a decrease to shareholders' equity of
approximately $53.2 million.
The pro forma balances of Central Ohio's total assets and shareholders'
equity if this Contribution Agreement, private placement, and the settlement
of related party balances, that will happen in conjunction with the
transactions, would have occurred as of December 31, 1997 are as follows:
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, 1997
-----------------
<S> <C>
Total Assets............................................. $43,204,000
Shareholders' Equity..................................... (1,468,000)
</TABLE>
In addition, this transaction will trigger the executive severance program
and incentive bonus plan described in Note 9 above. Approximately $1.2 million
of compensation could be paid under these plans.
F-37
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the General Partners of
Phoenix Associates:
We have audited the accompanying balance sheets of Phoenix Associates (a
Florida partnership) as of December 31, 1997 and 1996, and the related
statements of operations and changes in partners' deficit and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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 Phoenix Associates as of
December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
As indicated in Note 1, Phoenix Associates has no operations. It's ability
to satisfy debt and other obligations is dependent upon funding from related
entities, which are under the common control of the owners of Phoenix
Associates.
Arthur Andersen LLP
Columbus, Ohio,
July 17, 1998.
F-38
<PAGE>
PHOENIX ASSOCIATES
BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................ $ 247 $ 115,090
Other accounts receivable....................... 1,067 --
------------- -------------
Total current assets.......................... 1,314 115,090
------------- -------------
OTHER ASSETS:
Due from related parties........................ 6,409,505 6,050,685
Notes receivable--related parties............... 775,643 2,284,266
Advances to partners............................ 768,000 768,000
------------- -------------
Total other assets............................ 7,953,148 9,102,951
------------- -------------
Total assets.................................. $ 7,954,462 $ 9,218,041
============= =============
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES:
Current portion of notes payable................ $ 720,600 $ 745,035
Accounts payable................................ 973 355
------------- -------------
Total current liabilities..................... 721,573 745,390
------------- -------------
NOTES PAYABLE..................................... 105,204,608 105,925,208
DUE TO RELATED PARTIES............................ 72,439,984 64,091,634
------------- -------------
Total liabilities............................. 178,366,165 170,762,232
------------- -------------
COMMITMENTS AND CONTINGENCIES
PARTNERS' DEFICIT................................. (170,411,703) (161,544,191)
------------- -------------
Total liabilities and partners' deficit....... $ 7,954,462 $ 9,218,041
============= =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
F-39
<PAGE>
PHOENIX ASSOCIATES
STATEMENTS OF OPERATIONS AND CHANGE IN PARTNERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------- -------------
<S> <C> <C> <C>
HOME OFFICE EXPENSES............. $ -- $ -- $ (267)
GAIN ON SETTLEMENT OF FORMER LIM-
ITED PARTNER NOTES.............. 3,315,337 -- --
OTHER EXPENSES, net.............. (88,879) (106,467) (119,538)
INTEREST INCOME (EXPENSE), net
Interest income--related par-
ties.......................... 1,785,142 2,034,542 2,023,980
Interest income................ 2,826 1,905 558
Interest expense--related par-
ties.......................... (4,025,789) (5,027,565) (4,078,975)
Interest expense............... (9,856,149) (9,498,874) (10,307,072)
------------- ------------- -------------
Total interest expense, net.. (12,093,970) (12,489,992) (12,361,509)
------------- ------------- -------------
NET LOSS (Note 3)................ (8,867,512) (12,596,459) (12,481,314)
PARTNERS' DEFICIT, beginning of
year............................ (161,544,191) (148,947,732) (136,466,418)
------------- ------------- -------------
PARTNERS' DEFICIT, end of year... $(170,411,703) $(161,544,191) $(148,947,732)
============= ============= =============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-40
<PAGE>
PHOENIX ASSOCIATES
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
INCREASE (DECREASE) IN CASH
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVI-
TIES:
Net loss.......................... $ (8,867,512) $(12,596,459) $(12,481,314)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED IN OPERATING ACTIVI-
TIES:
Gain on settlement of former lim-
ited partner notes............... (3,315,337) -- --
Changes in certain assets and lia-
bilities:
(Increase) decrease in the ac-
counts receivable.............. (1,067) -- 14,019
Increase (decrease) in accounts
payable........................ 618 (91,114) 33,870
------------ ------------ ------------
Net cash used in operating ac-
tivities..................... (12,183,298) (12,687,573) (12,433,425)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVI-
TIES:
Increase in amounts due from re-
lated parties.................... (358,820) (511,217) (500,655)
Notes receivable.................. 4,823,960 -- --
------------ ------------ ------------
Net cash provided by (used in)
investing activities......... 4,465,140 (511,217) (500,655)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVI-
TIES:
Principal payments on notes pay-
able............................. (745,035) (748,625) (747,335)
Increase in amounts due to related
parties.......................... 8,348,350 14,062,505 13,681,415
------------ ------------ ------------
Net cash provided by financing
activities................... 7,603,315 13,313,880 12,934,080
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH..... (114,843) 115,090 --
CASH, beginning of year............. 115,090 -- --
------------ ------------ ------------
CASH, end of year................... $ 247 $ 115,090 $ --
============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
F-41
<PAGE>
PHOENIX ASSOCIATES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) BUSINESS ORGANIZATION AND PURPOSE
Phoenix Associates (Phoenix or the Company) is a Florida general partnership
organized for the primary purpose of purchasing promissory notes, mortgages,
deeds of trust, debt securities and other types of securities, and purchasing
and acquiring rights in any loan agreements or other documents relating to
those securities. Phoenix Associates has no operations. Its ability to satisfy
debt and other obligations is dependent upon funding from related entities,
which are under the common control of the owners of Phoenix Associates. As
discussed in Note 5, the bank borrowings are joint and several obligations of
five related entities.
Phoenix consists of three individual partners who share profits and losses
in the ratio of 67 1/2%, 22 1/2% and 10%, respectively.
Other related entities owned or controlled by the majority partner of
Phoenix include Coaxial Communications of Central Ohio, Inc. (Central Ohio),
Coaxial Communications of Southern Ohio, Inc. (Southern Ohio), Coaxial
Associates of Columbus I (Columbus I), Coaxial Associates of Columbus II
(Columbus II), Paxton Cable Television, Inc. (Paxton Cable) and Paxton
Communications, Inc. (Paxton Communications).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FAIR VALUES
In December 1991, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 107, "Disclosures about Fair Value of
Financial Instruments," which requires disclosure of fair value information
about both on- and off-balance sheet financial instruments for which it is
practicable to estimate that value.
The carrying amounts of current assets and liabilities approximate their
fair market value because of the immediate or short-term maturity of these
financial instruments. The fair value of related party receivables and
payables are not determinable. The carrying amounts of the notes payable (loan
agreement debt) approximate fair value as the underlying instruments are at
variable rates that reprice frequently.
DERIVATIVE FINANCIAL INSTRUMENTS
During 1995, the Company adopted Statement of Financial Accounting Standards
No. 119 (SFAS No. 119), "Disclosure about Derivative Financial Instruments and
Fair Value of Financial Instruments." SFAS No. 119 requires that a distinction
be made between derivative financial instruments held or issued for trading
purposes and derivative instruments held for purposes other than trading,
including hedging. The Company utilizes derivative financial instruments for
hedging purposes to reduce exposure to adverse changes in interest rates. The
amounts to be paid or received related to these transactions are recognized,
on an accrual basis, over the life of the hedged instrument as an adjustment
to interest expense. The related amounts payable to, or receivable from, the
counterparties are included in prepaid expenses and other current assets. The
fair value of the swap agreements is not recognized in the financial
statements, since they are accounted for as hedges. Disclosures required by
SFAS No. 119 are shown in Note 8.
F-42
<PAGE>
PHOENIX ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(3) INCOME TAXES
Phoenix is a general partnership. Therefore, each partner reports his
distributive share of income or loss on his respective income tax returns. As
a result, the Company does not provide for Federal or state income taxes in
its accounts.
(4) RELATED PARTY TRANSACTIONS
As of December 31, 1997 and 1996, Phoenix has advances due from two general
partners of $768,000.
Phoenix has advanced funds to and received advances from related entities
for working capital and for debt service. These amounts bear interest at 5.66%
as of December 31, 1997. Phoenix recognized interest income of approximately
$358,800 in 1997, $511,200 in 1996 and $500,700 in 1995 and recognized
interest expense of approximately $4,025,800 in 1997, $5,027,600 in 1996 and
$4,079,000 in 1995 relating to such advances.
Advances to and from related entities as of December 31, 1997 and 1996 are
as follows:
<TABLE>
<CAPTION>
ENTITY 1997 1996
------ ----------- -----------
<S> <C> <C>
Advances to:
Columbus I........................................ $ 1,283,596 $ 1,211,736
Columbus II....................................... 721,869 681,458
Southern Ohio..................................... 4,404,040 4,157,491
----------- -----------
Due from related entities........................... $ 6,409,505 $ 6,050,685
=========== ===========
Advances from Central Ohio.......................... $72,439,984 $64,091,634
=========== ===========
</TABLE>
Phoenix has the following notes and accrued interest receivable from related
parties at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Columbus I(a)...................................... $ 2,348,892 $ 2,348,892
Former Limited Partners of Columbus I(a)........... -- 3,714,858
----------- -----------
Subtotal......................................... 2,348,892 6,063,750
----------- -----------
Columbus II(b)..................................... 443,773 443,773
Former Limited Partners of Columbus II (b)......... -- 1,109,102
----------- -----------
Subtotal......................................... 443,773 1,552,875
----------- -----------
Total face amount of notes receivable............ 2,792,665 7,616,625
Less: Amounts in excess of purchase price.......... (2,017,022) (5,332,359)
----------- -----------
Net notes and accrued interest receivable.......... $ 775,643 $ 2,284,266
=========== ===========
</TABLE>
- --------
(a) The $2,348,892 due from Columbus I represents a note, including past due
interest that was added to the principal, which were purchased from CNA
Financial Corporation on November 24, 1982. Interest is payable to Phoenix
monthly at an annual rate of 20% of the face amount of the notes
receivable. Phoenix recognized interest income of approximately
$1,138,000, $1,212,800 and $1,212,800 in 1997, 1996 and 1995,
respectively, related to the note receivable. The principal is due and
payable to Phoenix on October 31, 2002.
(b) The $443,773 due from Columbus II represents a note, including past due
interest that was added to the principal, which were purchased from CNA
Financial Corporation on November 24, 1982. Interest is payable to Phoenix
monthly at an annual rate of 20% of the face amount of the notes
receivable. Phoenix recognized interest income of approximately $288,300,
$310,600 and $310,600 in 1997, 1996 and 1995, respectively, related to the
note receivable. The principal is due and payable to Phoenix on October
31, 2002.
F-43
<PAGE>
PHOENIX ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Amounts in excess of purchase price represent the difference between the
face amount and the accrued interest receivable on the notes purchased and the
price paid. The amounts in excess of purchase price will be recognized when
the principal due on the notes is received, net of any costs associated with
final settlement.
In 1997, the notes receivable from former Limited Partners of Columbus I and
Columbus II matured. The "amounts in excess of purchase price" relating to
these notes were realized at the time of settlement. The financial statements
reflect gain on the settlement of the notes of $3,315,337 (amounts in excess
of purchase price).
These related entities are under the control of the partners of Phoenix. The
partners have represented that substantially all of these amounts will be
settled among the parties (see Note 9).
(5) NOTES PAYABLE
Notes payable at December 31, 1997 and 1996 consisted of:
<TABLE>
<CAPTION>
LENDER 1997 1996
------ ------------ ------------
<S> <C> <C>
Banks(a).......................................... $105,925,208 $106,645,808
Estate of Morris Telechansky(b)................... -- 11,280
Estate of Zorabel Telechansky(c).................. -- 13,155
------------ ------------
Total........................................... $105,925,208 $106,670,243
============ ============
</TABLE>
Notes payable at December 31, 1997, will mature as follows:
<TABLE>
<S> <C>
1998........................................................... $ 720,600
1999........................................................... 105,204,608
------------
Total all notes payable...................................... $105,925,208
============
</TABLE>
- --------
(a) On November 15, 1994, Phoenix, Central Ohio, Southern Ohio, Columbus I and
Columbus II (collectively referred to as the borrowers), executed a loan
agreement with a lead bank and several other financial institutions to
replace an existing loan agreement. On May 12, 1998, the loan agreement
was amended. The loan agreement provides for principal term loans up to
$150,000,000 and revolving credit loans up to $23,000,000 ($22,000,000
after the May 12, 1998 amendment). Principal payments on the term loans
are due in 19 quarterly installments of $250,000 beginning March 15, 1995,
and a final quarterly installment for the remaining balance outstanding.
Revolving credit loans are payable at December 31, 1999. Interest on the
outstanding balances under the loan agreement is payable at either a) a
rate comparable to prime rate as defined in the agreement plus 2%, or b)
at a rate comparable to the Eurodollar rate as defined in the agreement
plus 3.25% depending on the borrowers' option at the time the loan is
drawn. These margins have been amended to 2.25% and 3.50%, respectively,
effective March 3, 1997. Interest rates on borrowings outstanding at
December 31, 1997 range from 9.25% to 9.47%. The termination date of the
loan agreement is December 31, 1999. Interest expense for 1997, 1996 and
1995 was $9,855,120, $9,495,420 and $10,301,191, respectively. The letters
of credit discussed in Note 6 aggregating $1,100,000 decrease availability
of borrowings under the loan agreement. Unused and unreserved borrowing
availability under the loan agreement at December 31, 1997 was $5,900,000.
A revolving credit commitment fee of .5% is paid on the average daily
balance available for draw under the revolving credit loan.
F-44
<PAGE>
PHOENIX ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The funds borrowed under the loan agreement were allocated to the following
entities as of December 31, 1997:
<TABLE>
<CAPTION>
ENTITY TERM LOAN REVOLVING LOAN
------ ------------ --------------
<S> <C> <C>
Phoenix........................................ $105,925,208 $ --
Central Ohio................................... 16,760,937 8,000,000
Southern Ohio.................................. 20,568,238 8,000,000
Columbus I..................................... 2,385,682 --
Columbus II.................................... 1,359,935 --
------------ -----------
Total........................................ $147,000,000 $16,000,000
============ ===========
</TABLE>
The loans are secured by substantially all of the borrowers' assets and
are joint and several obligations of the borrowers. Significant notes
receivable are pledged as collateral. In addition, the shareholders and
partners of the borrowers have pledged all of their shares and partnership
interests in the borrowers. The proceeds of the loans were used to
refinance existing bank and other notes payable, make capital distributions
to the shareholders and partners, and to finance capital expenditures of
Central Ohio and Southern Ohio. Repayment of the Phoenix debt is dependent
upon funding from Central Ohio or Southern Ohio.
Among other covenants, the borrowers must comply with restrictive
covenants relating to leverage coverage, interest coverage and cash ratios.
In addition, repayments of principal on the loan are required if certain
conditions relating to asset dispositions, new debt, distributions or
excess cash flow are met. The borrowers are in compliance with these
covenants, as amended, as of December 31, 1997.
The borrowers are entitled to issue letters of credit for general
corporate purposes or to replace existing letters of credit up to an amount
not exceeding $2,000,000. The borrowers pay a fee equal to 2% per annum of
the amount available for draw under any letters of credit issued. Any draws
on letters of credit issued will be made a part of the outstanding balance
on the revolving credit loan.
Due to loan agreement requirements, the borrowers have entered into
interest rate swap agreements to reduce the impact of changes in interest
rates on the outstanding principal balances (see Notes 7 and 8).
(b) In November 1980, Phoenix issued an unsecured promissory note to the
Estate of Morris Telechansky. Monthly principal installments of $1,253
commencing December, 1992 were due through 1997. The note bore interest at
a rate of 1.25% above the prevailing $100,000 Certificate of Deposit rate.
This note was paid in full during fiscal year 1997.
(c) In November 1980, Phoenix issued an unsecured promissory note to the
Estate of Zorabel Telechansky. Monthly combined principal and interest
installments of $1,260 commencing October, 1992 were due through November,
1997 and include interest at 10.5%. This note was paid in full during
fiscal year 1997.
(6) LETTERS OF CREDIT
The Company, with the borrowers defined in Note 5, has letters of credit for
the benefit of certain program suppliers and former Limited Partners (see Note
4). At December 31, 1997 and 1996, the aggregate value of these letters of
credit for the benefit of certain program suppliers was $1,100,000 and
$850,000, respectively. At December 31, 1997 and 1996, the aggregate value of
these letters of credit for the benefit of the former Limited Partners was $0
(due to final settlement with Limited Partners) and $1,140,775, respectively.
(7) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company, with the borrowers defined in Note 5, become a party to
financial instruments with off-balance-sheet risk in the normal course of
business in managing its interest rate risk. These financial instruments
F-45
<PAGE>
PHOENIX ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
include interest rate swap agreements, and previously, forward interest rate
agreements and interest rate caps. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized on the Company's balance sheets. The contract or notional amounts
of these instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.
The Company has utilized interest rate caps, interest rate swap agreements
and forward interest rate agreements as hedge instruments to reduce exposure
to adverse changes in interest rates. The notional amounts of these
instruments do not represent exposure to credit loss. Risks associated with
these types of financial instruments arise from the movement of interest rates
and failure of the other party to the transaction to meet its obligation. Note
8 provides additional disclosures on the Company's derivative financial
instruments.
The following table shows the contract or notional amount of the Company's
off-balance-sheet financial instruments at December 31, 1997 and 1996.
<TABLE>
<CAPTION>
CONTRACT OR NOTIONAL AMOUNT
----------------------------
1997 1996
------------- --------------
<S> <C> <C>
Interest rate swap agreements.................. $ 40,000,000 $ 115,000,000
</TABLE>
(8) DERIVATIVE FINANCIAL INSTRUMENTS
The Company, with the borrowers as defined in Note 5, currently hold
derivative financial instruments only for purposes other than trading. The
Company's primary objective is the "hedging" or management of interest rate
risk associated with its long-term debt. The two parties to an interest rate
swap agreement agree to exchange, at particular intervals, payment streams
calculated on a specified notional amount, with one stream based on a floating
interest rate and the other stream based on a fixed interest rate. The swaps
were entered into in order to reduce the overall interest rate sensitivity of
the Company. These interest rate swap agreements are the standard
fixed/floating type of swap agreements, whereby the Company pays a fixed rate
(i.e., swapped rate) and receive a floating rate from the counterparty based
upon the LIBOR index. All of the interest rate swaps are treated as hedges,
and accordingly, are accounted for on the same basis as the underlying asset
or liability being hedged. The amounts to be paid or received related to
derivative financial instruments are recognized on an accrual basis, over the
estimated life of the hedged instrument, as an adjustment to interest expense.
The counterparty to all of the Company's off-balance-sheet financial
instrument agreements is the lead bank on the loan agreement.
The following table summarizes the interest rate swap agreements:
<TABLE>
<CAPTION>
FIXED FLOATING
INITIAL RATE RATE
NOTIONAL EFFECTIVE TERMINATION CONTRACT (PAY (RECEIVE
PRINCIPAL AMOUNT TERM DATE DATE COST RATE) RATE) RATE FIXING DATES
---------------- ------ --------- ----------- -------- ----- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$40,000,000............. 1 year 1/15/97 1/15/98 $ 0 5.87% 5.59% to 5.82% April/July/Oct/Jan
</TABLE>
In accordance with the loan agreement, the Company also had previously
purchased interest rate caps to aid in the management of its interest rate
risk. The seller of these caps was obligated to pay the Company the amount, if
any, by which a specified market interest rate exceeded the fixed cap applied
to the notional amount. There were no interest rate cap agreements in effect
at year-end, and the initial contract costs related to previous interest rate
cap agreements were fully amortized as of December 31, 1997.
(9) SUBSEQUENT EVENT
Phoenix, with Central Ohio, is currently contemplating the offering,
initially through a private placement, of $140 million of senior notes. These
senior notes would replace Phoenix's and Central Ohio's notes payable to
banks.
F-46
<PAGE>
PHOENIX ASSOCIATES
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
In connection with the offering, Central Ohio and Insight Communications,
L.P. (Insight) entered into a Contribution Agreement (the Contribution
Agreement) pursuant to which Central Ohio will contribute to a newly formed
subsidiary (a limited liability company) of Central Ohio (the Operating
Company) substantially all of the assets and liabilities comprising the cable
system of Central Ohio, and Insight will contribute $10 million in cash to the
Operating Company. As a result of this Contribution Agreement, Central Ohio
will own 25% of the non-voting common equity and Insight will own 75% of the
non-voting common equity of the Operating Company, subject to possible
adjustment pursuant to the Contribution Agreement. Central Ohio will also own
two separate series of voting preferred equity (a $140 million preferred
equity interest and a $30 million preferred equity interest) of the Operating
Company; the voting preferred equity interest will provide for distributions
to Central Ohio equal in amount to the payments on the senior and senior
discount notes (described below).
The closing of the Contribution Agreement is conditioned upon, among other
things, the private placement of the senior notes by Phoenix and Central Ohio
and the private placement of $30 million of senior discount notes by the
majority shareholder of Central Ohio.
In conjunction with this transaction, there will be a settlement or net
distribution of related party receivables and payables. The impact on Phoenix
at December 31, 1997 would be an increase to partners' equity of approximately
$69.3 million.
The pro forma balance of Phoenix's partners' deficit if the private
placement and the settlement of related party balances, that will happen in
conjunction with the transactions, would have occurred as of December 31, 1997
is as follows:
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31,
1997
-------------
<S> <C>
Partners' Deficit .......................................... $(104,224,000)
</TABLE>
F-47
<PAGE>
PHOENIX ASSOCIATES
CONDENSED BALANCE SHEETS
AS OF JUNE 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
JUNE 30, DECEMBER
1998 31, 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash............................................ $ -- $ 247
Other accounts receivable....................... -- 1,067
------------- -------------
Total current assets.......................... -- 1,314
------------- -------------
OTHER ASSETS:
Due from related parties........................ 6,585,782 6,409,505
Notes receivable--related parties............... 775,643 775,643
Advances to partners............................ 768,000 768,000
------------- -------------
Total other assets............................ 8,129,425 7,953,148
------------- -------------
Total assets.................................. $ 8,129,425 $ 7,954,462
============= =============
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES:
Current portion of notes payable................ $ 720,600 $ 720,600
Accounts payable................................ 33,318 973
------------- -------------
Total current liabilities..................... 753,918 721,573
------------- -------------
NOTES PAYABLE..................................... 104,844,308 105,204,608
DUE TO RELATED PARTIES............................ 79,501,010 72,439,984
------------- -------------
Total liabilities............................. 185,099,236 178,366,165
------------- -------------
COMMITMENTS AND CONTINGENCIES
PARTNERS' DEFICIT................................. (176,969,811) (170,411,703)
------------- -------------
Total liabilities and partners' deficit....... $ 8,129,425 $ 7,954,462
============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-48
<PAGE>
PHOENIX ASSOCIATES
CONDENSED STATEMENTS OF OPERATIONS AND PARTNERS' DEFICIT
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OTHER EXPENSES, net..... $ (33,722) $ (35,728) $ (52,445) $ (53,193)
INTEREST INCOME
(EXPENSE), net
Interest income--
related parties...... 228,261 473,461 455,544 940,237
Interest expense--
related parties...... (1,053,056) (1,029,245) (2,060,773) (1,953,990)
Interest expense...... (2,451,646) (2,450,772) (4,900,434) (4,800,167)
------------- ------------- ------------- -------------
Total interest
expense, net....... (3,276,441) (3,006,556) (6,505,663) (5,813,920)
------------- ------------- ------------- -------------
NET LOSS (Note 4)....... (3,310,163) (3,042,284) (6,558,108) (5,867,113)
PARTNERS' DEFICIT,
beginning of period.... (173,659,648) (164,369,020) (170,411,703) (161,544,191)
------------- ------------- ------------- -------------
PARTNERS' DEFICIT, end
of period.............. $(176,969,811) $(167,411,304) $(176,969,811) $(167,411,304)
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements.
F-49
<PAGE>
PHOENIX ASSOCIATES
CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED
------------------------
JUNE 30, JUNE 30,
1998 1997
----------- -----------
<S> <C> <C>
NET CASH FLOWS USED IN OPERATING ACTIVITES........... $(6,524,696) $(5,831,720)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in amounts due from related parties....... (176,277) (178,574)
----------- -----------
Net cash used in investing activities............ (176,277) (178,574)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable................ (360,300) (374,839)
Increase in amounts due to related parties......... 7,061,026 6,270,330
----------- -----------
Net cash provided by financing activities........ 6,700,726 5,895,491
----------- -----------
NET DECREASE IN CASH................................. (247) (114,803)
CASH, beginning of period............................ 247 115,090
----------- -----------
CASH, end of period.................................. $ -- $ 287
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-50
<PAGE>
PHOENIX ASSOCIATES
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1998
(UNAUDITED)
(1) GENERAL
The results of operations for the interim periods shown are not necessarily
indicative of the results to be expected for the fiscal year. In the opinion
of Management, the information contained herein reflects all adjustments
necessary to make a fair statement of the results for the three and six months
ended June 30, 1998 and 1997. All such adjustments are of a normal recurring
nature.
(2) BUSINESS ORGANIZATION AND PURPOSE
Phoenix Associates (Phoenix or the Company) is a Florida general partnership
organized for the primary purpose of purchasing promissory notes, mortgages,
deeds of trust, debt securities and other types of securities, and purchasing
and acquiring rights in any loan agreements or other documents relating to
those securities. Phoenix Associates has no operations. Its ability to satisfy
debt and other obligations is dependent upon funding from related entities,
which are under the common control of the owners of Phoenix Associates. As
discussed in Note 6, the bank borrowings are joint and several obligations of
five related entities.
Phoenix consists of three individual partners who share profits and losses
in the ratio of 67 1/2%, 22 1/2% and 10%, respectively.
Other related entities owned or controlled by the majority partner of
Phoenix include Coaxial Communications of Central Ohio, Inc. (Central Ohio),
Coaxial Communications of Southern Ohio, Inc. (Southern Ohio), Coaxial
Associates of Columbus I (Columbus I), Coaxial Associates of Columbus II
(Columbus II), Paxton Cable Television, Inc. (Paxton Cable) and Paxton
Communications, Inc. (Paxton Communications).
(3) ACCOUNTING POLICIES
Note 2 to the Notes to the Financial Statements in the Company's December
31, 1997 Financial Statements summarize the Company's significant accounting
policies.
(4) INCOME TAXES
Phoenix is a general partnership. Therefore, each partner reports his
distributive share of income or loss on his respective income tax returns. As
a result, the Company does not provide for Federal or state income taxes in
its accounts.
(5) RELATED PARTY TRANSACTIONS
As of June 30, 1998 and December 31, 1997, Phoenix has advances due from two
general partners of $768,000.
Phoenix has advanced funds to and received advances from related entities
for working capital and for debt service. These amounts bear interest at 5.46%
as of June 30, 1998. Phoenix recognized interest income of approximately
$88,600 and $176,300 for the three and six months ended June 30, 1998 and
$92,600 and $178,600 for the three and six months ended June 30, 1997. Phoenix
recognized interest expense of approximately $1,053,100 and $2,060,800 for the
three and six months ended June 30, 1998 and $1,029,200 and $1,954,000 for the
three and six months ended June 30, 1997.
F-51
<PAGE>
PHOENIX ASSOCIATES
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
Advances to and from related entities as of June 30, 1998 and December 31,
1997 are as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ENTITY 1998 1997
------ ----------- ------------
<S> <C> <C>
Advances to:
Columbus I........................................ $ 1,318,897 $ 1,283,596
Columbus II....................................... 741,723 721,869
Southern Ohio..................................... 4,525,162 4,404,040
----------- -----------
Due from related entities........................... $ 6,585,782 $ 6,409,505
=========== ===========
Advances from Central Ohio.......................... $79,501,010 $72,439,984
=========== ===========
</TABLE>
Phoenix has the following notes and accrued interest receivable from related
parties at June 30, 1998 and December 31, 1997:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER
1998 31, 1997
---------- -----------
<S> <C> <C>
Columbus I (a)...................................... $2,348,892 $ 2,348,892
Columbus II (b)..................................... 443,773 443,773
---------- -----------
Total face amount of notes receivable............. 2,792,665 2,792,665
Less: Amounts in excess of purchase price........... (2,017,022) (2,017,022)
---------- -----------
Net notes and accrued interest receivable........... $ 775,643 $ 775,643
========== ===========
</TABLE>
- --------
(a) The $2,348,892 due from Columbus I represents a note, including past due
interest that was added to the principal, which were purchased from CNA
Financial Corporation on November 24, 1982. Interest is payable to Phoenix
monthly at an annual rate of 20% of the face amount of the notes
receivable. Phoenix recognized interest income of approximately $117,400
and $234,900 for the three and six months ended June 30, 1998 and $303,200
and $606,400 for the three and six months ended June 30, 1997, related to
the note receivable. The principal is due and payable to Phoenix on
October 31, 2002.
(b) The $443,773 due from Columbus II represents a note, including past due
interest that was added to the principal, which were purchased from CNA
Financial Corporation on November 24, 1982. Interest is payable to Phoenix
monthly at an annual rate of 20% of the face amount of the notes
receivable. Phoenix recognized interest income of approximately $22,200
and $44,400 for the three and six months ended June 30, 1998 and $77,600
and $155,300 for the three and six months ended June 30, 1997, related to
the note receivable. The principal is due and payable to Phoenix on
October 31, 2002.
Amounts in excess of purchase price represent the difference between the
face amount and the accrued interest receivable on the notes purchased and the
price paid. The amounts in excess of purchase price will be recognized when
the principal due on the notes is received, net of any costs associated with
final settlement.
These related entities are under the control of the partners of Phoenix. The
shareholders have represented that substantially all of these amounts will be
settled among the parties (see Note 9).
(6) NOTES PAYABLE
On November 15, 1994, Phoenix, Central Ohio, Southern Ohio, Columbus I and
Columbus II (collectively referred to as the borrowers), executed a loan
agreement with a lead bank and several other financial institutions to replace
an existing loan agreement. On May 12, 1998, the loan agreement was amended.
The loan agreement provides for principal term loans up to $150,000,000 and
revolving credit loans up to $22,000,000. Principal payments on the term loans
are due in 19 quarterly installments of $250,000 beginning March 15, 1995, and
a
F-52
<PAGE>
PHOENIX ASSOCIATES
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
final quarterly installment for the remaining balance outstanding. Revolving
credit loans are payable at December 31, 1999. Interest on the outstanding
balances under the loan agreement is payable at either a) a rate comparable to
prime rate as defined in the agreement plus 2%, or b) at a rate comparable to
the Eurodollar rate as defined in the agreement plus 3.25% depending on the
borrowers' option at the time the loan is drawn. These margins have been
amended to 2.25% and 3.50%, respectively, effective March 3, 1997. Interest
rates on borrowings outstanding at June 30, 1998 range from 9.16% to 10.75%.
The termination date of the loan agreement is December 31, 1999. Interest
expense was $2,451,600 and $4,900,400 for the three and six months ended June
30, 1998 and $2,450,500 and $4,799,400 for the three and six months ended June
30, 1997. There are letters of credit aggregating $1,100,000 for the benefit
of certain program suppliers that decrease availability of borrowings under
the loan agreement. Unused and unreserved borrowing availability under the
loan agreement at June 30, 1998 was $2,400,000.
A revolving credit commitment fee of .5% is paid on the average daily
balance available for draw under the revolving credit loan.
The funds borrowed under the loan agreement were allocated to the following
entities as of June 30, 1998:
<TABLE>
<CAPTION>
REVOLVING
ENTITY TERM LOAN LOAN
------ ------------ -----------
<S> <C> <C>
Phoenix............................................. $105,564,908 $ --
Central Ohio........................................ 16,703,938 9,250,000
Southern Ohio....................................... 20,498,287 9,250,000
Columbus I.......................................... 2,377,582 --
Columbus II......................................... 1,355,285 --
------------ -----------
Total............................................. $146,500,000 $18,500,000
============ ===========
</TABLE>
The loans are secured by substantially all of the borrowers' assets and are
joint and several obligations of the borrowers. Significant notes receivable
are pledged as collateral. In addition, the shareholders and partners of the
borrowers have pledged all of their shares and partnership interests in the
borrowers. The proceeds of the loans were used to refinance existing bank and
other notes payable, make capital distributions to the shareholders and
partners, and to finance capital expenditures of Central Ohio and Southern
Ohio. Repayment of the Phoenix debt is dependent upon funding from Central
Ohio or Southern Ohio.
Among other covenants, the borrowers must comply with restrictive covenants
relating to leverage coverage, interest coverage and cash ratios. In addition,
repayments of principal on the loan are required if certain conditions
relating to asset dispositions, new debt, distributions or excess cash flow
are met. The borrowers are in compliance with these covenants, as amended, as
of June 30, 1998.
The borrowers are entitled to issue letters of credit for general corporate
purposes or to replace existing letters of credit up to an amount not
exceeding $2,000,000. The borrowers pay a fee equal to 2% per annum of the
amount available for draw under any letters of credit issued. Any draws on
letters of credit issued will be made a part of the outstanding balance on the
revolving credit loan.
Due to loan agreement requirements, the borrowers have entered into interest
rate swap agreements to reduce the impact of changes in interest rates on the
outstanding principal balances (see Notes 7 and 8).
(7) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
The Company, with the borrowers defined in Note 6, become a party to
financial instruments with off-balance-sheet risk in the normal course of
business in managing its interest rate risk. These financial instruments
F-53
<PAGE>
PHOENIX ASSOCIATES
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
include interest rate swap agreements, and previously, forward interest rate
agreements and interest rate caps. These instruments involve, to varying
degrees, elements of credit and interest rate risk in excess of the amount
recognized on the Company's balance sheets. The contract or notional amounts
of these instruments reflect the extent of involvement the Company has in
particular classes of financial instruments.
The Company has utilized interest rate caps, interest rate swap agreements
and forward interest rate agreements as hedge instruments to reduce exposure
to adverse changes in interest rates. The notional amounts of these
instruments do not represent exposure to credit loss. Risks associated with
these types of financial instruments arise from the movement of interest rates
and failure of the other party to the transaction to meet its obligation. Note
8 provides additional disclosures on the Company's derivative financial
instruments.
(8) DERIVATIVE FINANCIAL INSTRUMENTS
The Company, with the borrowers as defined in Note 6, may hold derivative
financial instruments only for purposes other than trading. The Company's
primary objective is the "hedging" or management of interest rate risk
associated with its long-term debt. The two parties to an interest rate swap
agreement agree to exchange, at particular intervals, payment streams
calculated on a specified notional amount, with one stream based on a floating
interest rate and the other stream based on a fixed interest rate. The swaps
were entered into in order to reduce the overall interest rate sensitivity of
the Company. These interest rate swap agreements are the standard
fixed/floating type of swap agreements, whereby the Company pays a fixed rate
(i.e., swapped rate) and receives a floating rate from the counterparty based
upon the LIBOR index. All of the interest rate swaps are treated as hedges,
and accordingly, are accounted for on the same basis as the underlying asset
or liability being hedged. The amounts to be paid or received related to
derivative financial instruments are recognized on an accrual basis, over the
estimated life of the hedged instrument, as an adjustment to interest expense.
The counterparty to all of the Company's off-balance-sheet financial
instrument agreements is the lead bank on the loan agreement. The Company held
no derivative financial instruments at June 30, 1998.
(9) SUBSEQUENT EVENT
Phoenix, with Central Ohio, is currently contemplating the offering,
initially through a private placement, of $140 million of senior notes. These
senior notes would replace Phoenix's and Central Ohio's notes payable to
banks.
In connection with the offering, Central Ohio and Insight Communications,
L.P. (Insight) entered into a Contribution Agreement (the Contribution
Agreement) pursuant to which Central Ohio will contribute to a newly formed
subsidiary (a limited liability company) of Central Ohio (the Operating
Company) substantially all of the assets and liabilities comprising the cable
system of Central Ohio, and Insight will contribute $10 million in cash to the
Operating Company. As a result of this Contribution Agreement, Central Ohio
will own 25% of the non-voting common equity and Insight will own 75% of the
non-voting common equity of the Operating Company, subject to possible
adjustment pursuant to the Contribution Agreement. Central Ohio will also own
two separate series of voting preferred equity (a $140 million preferred
equity interest and a $30 million preferred equity interest) of the Operating
Company; the voting preferred equity interest will provide for distributions
to Central Ohio equal in amount to the payments on the senior and senior
discount notes (described below).
In conjunction with this transaction, there will be a settlement or net
distribution of related party receivables and payables. The impact on Phoenix
at December 31, 1997 would be an increase to partner's equity of approximately
$69.3 million.
The closing of the Contribution Agreement is conditioned upon, among other
things, the private placement of the senior notes by Phoenix and Central Ohio
and the private placement of $30 million of senior discount notes by the
majority shareholder of Central Ohio.
F-54
<PAGE>
PHOENIX ASSOCIATES
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS--(CONTINUED)
The pro forma balance of Phoenix's partners' deficit if the private placement
and the settlement of related party balances, that will happen in conjunction
with the transactions, would have occurred as of December 31, 1997 is as
follows:
<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31,
1997
-------------
<S> <C>
Partners' Deficit............. $(104,224,000)
</TABLE>
F-55
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
COAXIAL COMMUNICATIONS OF CENTRAL OHIO INC.
The unaudited pro forma balance sheet of Coaxial as of June 30, 1998 (the
"Pro Forma Balance Sheet") and the unaudited pro forma statements of
operations of Coaxial for the year ended December 31, 1997 and the six months
ended June 30, 1998 (the "Pro Forma Statements of Operations" and, together
with the Pro Forma Balance Sheet, the "Pro Forma Financial Statements") give
effect to the Financing Plan and certain other adjustments. The unaudited pro
forma adjustments are based upon available information and certain assumptions
that management believes are reasonable. The Pro Forma Financial Statements do
not purport to be indicative of the results that would have actually been
obtained had such transactions been completed as of the assumed dates and for
the periods presented, or which may be obtained in the future. The Pro Forma
Financial Statements are presented on a consolidated basis, which includes the
results of the System.
The Pro Forma Statement of Operations for the year ended December 31, 1997
has been derived from the audited financial statements of Coaxial included
elsewhere herein, adjusted to give effect to the Financing Plan and certain
other adjustments as if they had occurred on January 1, 1997. The Pro Forma
Balance Sheet and Pro Forma Statement of Operations as of and for the six
months ended June 30, 1998 have been derived from the unaudited financial
statements of Coaxial included elsewhere herein, adjusted to give effect to
the Financing Plan and certain other adjustments as if they had occurred on
January 1, 1998 with respect to the Pro Forma Statements of Operations, and on
June 30, 1998 with respect to the Pro Forma Balance Sheet.
The Pro Forma Financial Statements and the accompanying notes should be read
in conjunction with the financial statements of Coaxial and of Phoenix,
together with the related notes thereto, included elsewhere herein.
P-1
<PAGE>
PRO FORMA BALANCE SHEET
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
JUNE 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash..................................... $ 267 $ 10,000 (1) $ 7,272(19)
(1,076)(3)
(1,919)(6)
Accounts receivable...................... 1,266 -- 1,266
Other accounts receivable................ 2,110 -- 2,110
Other current assets..................... 1,194 -- 1,194
-------- -------- -------
Total current assets................... 4,837 7,005 11,842
Property plant and equipment (net)......... 28,829 650 (2) 29,479
Deferred loan acquisition cost............. 941 1,076 (3) 1,076
(941)(4)
Franchise rights and other intangibles..... 55 55
Due from related parties and other assets.. 83,564 (83,466)(5) 98
-------- -------- -------
Total assets........................... $118,226 $(75,676) $42,550
======== ======== =======
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities........................ $ 9,156 $ (256)(6) $ 8,530
(370)(7)
Notes payable:
Related Entity........................... 2,933 (2,933)(5) --
Bank..................................... 25,840 4,531 (5) --
(30,371)(7)
Senior Notes............................. -- 34,435 (7) 34,435
Other.................................... 1,663 (1,663)(6) --
-------- -------- -------
Total notes payable.................... 30,436 3,999 34,435
Capital lease obligation................... 134 -- 134
Deferred income............................ 838 -- 838
Due to related entity...................... 19,146 (19,146)(5) --
-------- -------- -------
Total liabilities...................... 59,710 (15,773) 43,937
-------- -------- -------
Shareholders' equity....................... 58,516 10,000 (1) (1,387)
650 (2)
(941)(4)
(65,918)(5)
(3,694)(7)
-------- -------- -------
Total liabilities and shareholders'
equity................................ $118,226 $(75,676) $42,550
======== ======== =======
</TABLE>
See Footnotes to Pro Forma Financial Statements
P-2
<PAGE>
PRO FORMA STATEMENTS OF OPERATIONS
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
FISCAL YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues....................................... $48,229 $ -- $48,229
Operating expenses
Service and administrative................... 27,391 (2,853)(8) 24,430
(108)(9)
Management fees.............................. -- 1,447 (10) 1,447
Home office.................................. 1,498 (1,498)(11) --
Depreciation and amortization................ 5,256 43 (12) 5,299
------- ------- -------
Total operating expenses................... 34,145 (2,969) 31,176
Operating income............................... 14,084 2,969 17,053
Interest expense, net........................ 1,230 1,050 (13) 3,565
1,699 (14)
(549)(15)
135 (16)
Other expense, net........................... 271 -- 271
------- ------- -------
Net Income..................................... $12,583 $ 634 $13,217
======= ======= =======
Other Data:
EBITDA(17)..................................... $19,340 $22,352
System Cash Flow(18)........................... 20,838 23,799
</TABLE>
See Footnotes to Pro Forma Financial Statements
P-3
<PAGE>
PRO FORMA STATEMENTS OF OPERATIONS
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues....................................... $23,766 $ -- $23,766
Operating expenses
Service and administrative................... 14,634 (1,699)(8) 12,881
(54)(9)
Management fees.............................. -- 713 (10) 713
Home office.................................. 731 (731)(11) --
Depreciation and amortization................ 2,688 21 (12) 2,709
------- ------- -------
Total operating expenses................... 18,053 (1,750) 16,303
Operating income............................... 5,713 1,750 7,463
Interest expense, net........................ 266 494 (13) 1,785
1,307 (14)
(349)(15)
67 (16)
Other expense, net........................... 115 -- 115
------- ------- -------
Net Income..................................... $ 5,332 $ 231 $ 5,563
======= ======= =======
Other Data:
EBITDA(17)..................................... $ 8,401 $10,172
System Cash Flow(18)........................... 9,132 10,885
</TABLE>
See Footnotes to Pro Forma Financial Statements
P-4
<PAGE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(1) Contribution of $10.0 million cash from Insight.
(2) Fair value of property at 3770 East Livingston Avenue contributed
pursuant to Contribution Agreement.
(3) Capitalization of the estimated deferred loan acquisition costs related
to the offering of Senior Notes.
(4) Reflects the write-off of net deferred loan acquisition costs related to
the Chase Credit Facility which is being purchased and restructured with
the proceeds from the Offering.
(5) As part of the financing and restructuring, certain related party
balances will be settled at the closing of the Offering. Approximately
$4,531,000 of Bank notes payable will be assumed by Central in connection
with the settlement of certain related party balances.
(6) As part of the financing and restructuring, deferred compensation owed to
a former executive is to be paid at the closing of the Offering.
(7) Purchase and restructuring of the Chase Credit Facility, and issuance of
Senior Notes in connection with the Offering. The debt consists of the
allocation of principal amount of $34.4 million to Coaxial and $105.6
million to Phoenix pursuant to the Offering. Approximately $3.7 million
will be distributed to the shareholders of Central, who will then
contribute that amount to Phoenix to pay for loan acquisition costs.
(8) Represents estimated cost savings as a result of contractual programming
rates from Insight. In addition Insight Ohio is required by the Employee
Transition Agreement to reduce headcount and benefits as a result of
position duplication within the accounting and finance departments, as
well as other redundant management positions. Each individual has been
specifically identified in the Employee Transition Agreement. These
accounting and finance functions will be replaced with services provided
by Insight going forward. The estimated cost savings associated with
these actions are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Programming rate savings................. $1,872 $1,080
Headcount savings........................ 981 619
------ ------
$2,853 $1,699
</TABLE>
(9) Elimination of rent expenses associated with 3770 East Livingston Avenue
property contributed pursuant to the Contribution Agreement.
(10) Management fees to be paid to Insight at 3.0% of revenues per year.
(11) Elimination of home office expenses. These expenses include costs for
legal fees, consulting fees, salaries, travel and entertainment and other
management expenses of the owners and their staff. Any such costs in the
future are solely the obligations of Insight and will be covered by the
Insight management fees.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Home office.............................. $1,498 $731
</TABLE>
(12) Depreciation of contributed property at 3770 East Livingston Avenue.
(13) Incremental interest expense related to borrowings under the Senior
Notes. The interest rate on the Senior Notes is 10%.
(14) Elimination of interest income on related party balances.
(15) Elimination of amortization on the net deferred loan acquisition costs
write-off (see footnote (4)).
(16) Amortization of the deferred loan acquisition costs described in footnote
(3).
(17) EBITDA represents net income before depreciation, amortization, interest
expense, other expense, and gain on settlement of limited partner notes.
Management believes that EBITDA is a meaningful measure of
P-5
<PAGE>
performance because it is commonly used in the cable television industry
to analyze and compare cable television companies on the basis of
operating performance, leverage, and liquidity. However, EBITDA is not
intended to be a performance measure that should be regarded as an
alternative to, or more meaningful than, either operating income or net
income as an indicator of operating performance or cash flows as a measure
of liquidity, as determined in accordance with generally accepted
accounting principles. EBITDA, as computed by management, is not
necessarily comparable to similarly titled amounts of other companies.
(18) System Cash Flow represents EBITDA plus home office prior to system
acquisition and EBITDA plus management fees after the system acquisition.
Management believes that System Cash Flow is a meaningful measure of
performance because it is commonly used in the cable television industry
to analyze and compare cable television companies on the basis of
operating performance, leverage and liquidity. However, System Cash Flow
is not intended to be a performance measure that should be regarded as an
alternative to, or more meaningful than, either operating income or net
income as an indicator of operating performance or cash flows as a
measure of liquidity, as determined in accordance with generally accepted
accounting principles. System Cash Flow, as computed, is not necessarily
comparable to similarly titled amounts of other companies. See the
financial statements, including the Statement of Cash Flows, included
elsewhere herein. System Cash Flow, as computed by management, is not
necessarily comparable to similarly titled amounts of other companies.
(19) Approximately $1.1 million of cash will be used for severance payments
and approximately 3.3 million will be used to pay expenses associated
with structure costs.
P-6
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
PHOENIX ASSOCIATES
The unaudited pro forma balance sheet of Phoenix as of June 30, 1998 (the
"Pro Forma Balance Sheet") and the unaudited pro forma statements of
operations of Phoenix for the year ended December 31, 1997 and the six months
ended June 30, 1998 (the "Pro Forma Statements of Income" and, together with
the Pro Forma Balance Sheet, the "Pro Forma Financial Statements") give effect
to the Financing Plan and certain other adjustments. The unaudited pro forma
adjustments are based upon available information and certain assumptions that
management believes are reasonable. The Pro Forma Financial Statements do not
purport to be indicative of the results that would have actually been obtained
had such transactions been completed as of the assumed dates and for the
periods presented, or which may be obtained in the future.
The Pro Forma Statement of Operations for the year ended December 31, 1997
has been derived from the audited financial statements of Phoenix included
elsewhere herein, adjusted to give effect to the Financing Plan and certain
other adjustments as if they had occurred on January 1, 1997. The Pro Forma
Balance Sheet and Pro Forma Statement of Operations as of and for the six
months ended June 30, 1998 have been derived from the unaudited financial
statements of Phoenix included elsewhere herein, adjusted to give effect to
the Financing Plan and certain other adjustments as if they had occurred on
January 1, 1998 with respect to the Pro Forma Statements of Operations, and on
June 30, 1998 with respect to the Pro Forma Balance Sheet.
The Pro Forma Financial Statements and the accompanying notes should be read
in conjunction with the financial statements of Phoenix and Coaxial, together
with the related notes thereto, included elsewhere herein.
P-7
<PAGE>
PRO FORMA BALANCE SHEET
PHOENIX ASSOCIATES
JUNE 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
--------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash.................................... $ -- $ -- $ --
Accounts receivable..................... -- -- --
Inventory............................... -- -- --
Other current assets.................... -- -- --
--------- --------- ---------
Total current assets.................. -- -- --
Property plant and equipment (net)........ -- -- --
Deferred loan acquisition costs........... -- 3,299 (3) 3,299
Franchise rights and other intangibles.... -- -- --
Due from related parties.................. 8,129 (6,458)(1) 1,671
--------- --------- ---------
Total assets.......................... $ 8,129 $ (3,159) $ 4,970
========= ========= =========
LIABILITIES & PARTNERS' DEFICIT
Current liabilities....................... $ 754 $ (721)(2) $ 33
Notes payable:
Shareholders............................ -- -- --
Bank.................................... 104,844 (104,844)(2) --
Senior Notes............................ -- 105,565 (2) 105,565
Other................................... -- -- --
--------- --------- ---------
Total notes payable................... 104,844 721 105,565
Capital lease obligation.................. -- -- --
Due to related entity..................... 79,501 (79,501)(1) --
--------- --------- ---------
Total liabilities..................... 185,099 (79,501) 105,598
--------- --------- ---------
Partners' deficit......................... (176,970) 73,043 (1) (100,628)
3,299 (3)
--------- --------- ---------
Total liabilities and partners'
equity............................... $ 8,129 $ (3,159) $ 4,970
========= ========= =========
</TABLE>
See footnotes to Pro Forma Financial Statements
P-8
<PAGE>
PRO FORMA STATEMENTS OF OPERATIONS
PHOENIX ASSOCIATES
FISCAL YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues...................................... $ -- $ -- $ --
Operating expenses
Service and administrative.................. -- -- --
Management fees............................. -- -- --
Home office................................. -- -- --
Depreciation and amortization............... -- -- --
------- ------- -------
Total operating expenses.................. -- -- --
Operating income.............................. -- -- --
Interest expense, net....................... 12,094 703 (4) 9,683
412 (5)
(3,526)(6)
Gain on settlement of former limited partner
notes...................................... (3,315) -- (3,315)
Other expense............................... 89 -- 89
------- ------- -------
Net Loss...................................... $(8,868) $ 2,411 $(6,457)
======= ======= =======
</TABLE>
See Footnotes to Pro Forma Financial Statements
P-9
<PAGE>
PRO FORMA STATEMENTS OF OPERATIONS
PHOENIX ASSOCIATES
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues...................................... $ -- $ -- $ --
Operating expenses
Service and administrative.................. -- -- --
Management fees............................. -- -- --
Home office................................. -- -- --
Depreciation and amortization............... -- -- --
------- ------- -------
Total operating expenses.................. -- -- --
Operating income.............................. -- -- --
Interest expense, net....................... 6,506 375 (4) 5,197
206 (5)
(1,890)(6)
Other expense .............................. 52 -- 52
------- ------- -------
Net Loss...................................... $(6,558) $ 1,309 $(5,249)
======= ======= =======
</TABLE>
See Footnotes to Pro Forma Financial Statements
P-10
<PAGE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(1) As part of the financing and restructuring, certain related party balances
will be settled at the closing of the Offering.
(2) Purchase and restructuring of the Chase Credit Facility, and issuance of
Senior Notes in connection with the Offering. The debt consist of the
allocation of principal amount of $34.4 million to Coaxial and $105.6
million to Phoenix pursuant to the Offering.
(3) Capitalization of the estimated deferred loan acquisition costs.
Contributions received from the partners of Phoenix will be used to pay
for the loan acquisition costs.
(4) Incremental interest expense related to borrowings under the Senior Notes.
The interest rate on the Senior Notes is 10%.
(5) Amortization of the deferred loan acquisition costs described in footnote
(3).
(6) Elimination of interest expense (income), net, on certain related party
balances.
P-11
<PAGE>
PRO FORMA FINANCIAL STATEMENTS
THE SYSTEM
The unaudited pro forma balance sheet of the System as of June 30, 1998 (the
"Pro Forma Balance Sheet") and the unaudited pro forma statements of
operations of the System for the year ended December 31, 1997 and the six
months ended June 30, 1998 (the "Pro Forma Statements of Operations" and,
together with the Pro Forma Balance Sheet, the "Pro Forma Financial
Statements") give effect to the Financing Plan and certain other adjustments.
The unaudited pro forma adjustments are based upon available information and
certain assumptions that management believes are reasonable. The Pro Forma
Financial Statements do not purport to be indicative of the results that would
have actually been obtained had such transactions been completed as of the
assumed dates and for the periods presented, or which may be obtained in the
future.
The Pro Forma Statement of Operations for the year ended December 31, 1997
has been derived from the audited financial statements of "Central Ohio Cable
System Operating Unit" included elsewhere herein, adjusted to give effect to
the Financing Plan and certain other adjustments as if they had occurred on
January 1, 1997. The Pro Forma Balance Sheet and Pro Forma Statement of
Operations as of and for the six months ended June 30, 1998 have been derived
from the unaudited financial statements of "Central Ohio Cable System
Operating Unit" included elsewhere herein, adjusted to give effect to the
Financing Plan and certain other adjustments as if they had occurred on
January 1, 1998 with respect to the Pro Forma Statements of Operations, and on
June 30, 1998 with respect to the Pro Forma Balance Sheet.
The Pro Forma Financial Statements and the accompanying notes should be read
in conjunction with the financial statements of "Central Ohio Cable System
Operating Unit" together with the related notes thereto, included elsewhere
herein.
P-12
<PAGE>
PRO FORMA BALANCE SHEET
THE SYSTEM
JUNE 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash....................................... $ 266 $ 10,000 (1) $ 10,266
Accounts receivable........................ 1,266 -- 1,266
Other accounts receivable.................. 2,107 -- 2,107
Other current assets....................... 1,173 -- 1,173
------- --------- ---------
Total current assets..................... 4,812 10,000 14,812
Property plant and equipment (net)........... 28,780 650 (2) 29,430
Franchise rights and other intangibles....... 55 -- 55
Due from related parties and other assets.... 98 -- 98
------- --------- ---------
Total assets............................. $33,745 $ 10,650 $ 44,395
======= ========= =========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities.......................... $ 7,266 $ -- $ 7,266
Capital lease obligation..................... 134 -- 134
Deferred income.............................. 838 -- 838
------- --------- ---------
Total liabilities........................ 8,238 -- 8,238
======= ========= =========
Series A Preferred Interest.................. -- 140,000 (3) 140,000
Series B Preferred Interest.................. -- 30,000 (3) 30,000
Shareholders' equity......................... 25,507 10,000 (1) (133,843)
650 (2)
(170,000)(3)
------- --------- ---------
Total liabilities and shareholders'
equity.................................. $33,745 $ 10,650 $ 44,395
======= ========= =========
</TABLE>
See footnotes to Pro Forma Financial Statements
P-13
<PAGE>
PRO FORMA STATEMENTS OF OPERATIONS
THE SYSTEM
YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues..................................... $48,229 $ -- $48,229
Operating expenses
Service and administrative................. 27,391 (2,853)(4) 24,430
(108)(5)
Management fees............................ -- 1,447 (6) 1,447
Home office................................ 1,498 (1,498)(7) --
Depreciation and amortization.............. 5,238 43 (8) 5,281
------- -------- -------
Total operating expenses................. 34,127 (2,969) 31,158
Operating income............................. 14,102 2,969 17,071
Interest income.............................. (70) -- (70)
Other expense................................ 271 -- 271
------- -------- -------
Net Income................................... 13,901 2,969 16,870
Preferred distribution....................... -- 17,863 (9) 17,863
------- -------- -------
Earnings on common........................... $13,901 $(14,894) $ (993)
======= ======== =======
Other Data:
EBITDA(10)................................... $19,340 $22,352
System Cash Flow(11)......................... 20,838 23,799
</TABLE>
See Footnotes to Pro Forma Financial Statements
P-14
<PAGE>
PRO FORMA STATEMENTS OF OPERATIONS
THE SYSTEM
SIX MONTHS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues....................................... $23,766 $ -- $23,766
Operating expenses
Service and administrative................... 14,634 (1,699)(4) 12,881
(54)(5)
Management fees.............................. -- 713 (6) 713
Home office.................................. 731 (731)(7) --
Depreciation and amortization................ 2,674 21 (8) 2,695
------- ------- -------
Total operating expenses................... 18,039 (1,750) 16,289
Operating income............................... 5,727 1,750 7,477
Interest income................................ (23) -- (23)
Other expense.................................. 115 -- 115
------- ------- -------
Net Income..................................... 5,635 1,750 7,385
Preferred distribution......................... -- 8,931 (9) 8,931
------- ------- -------
Earnings on common............................. 5,635 (7,181) (1,546)
======= ======= =======
Other Data:
EBITDA(10)..................................... 8,401 10,172
System Cash Flow(11)........................... 9,132 10,885
</TABLE>
See Footnotes to Pro Forma Financial Statements
P-15
<PAGE>
NOTES TO PRO FORMA FINANCIAL STATEMENTS
(1) Contribution of $10.0 million cash from Insight.
(2) Fair value of property at 3770 East Livingston Avenue contributed
pursuant to Contribution Agreement.
(3) Recording of Preferred Interests issued to Coaxial.
(4) Represents estimated cost savings as a result of contractual programming
rates from Insight. In addition, Insight Ohio is required by the Employee
Transition Agreement to reduce headcount and benefits as a result of
position duplication within the accounting and finance departments, as
well as other redundant management positions. Each individual has been
specifically identified in the Employee Transition Agreement. These
accounting and finance functions will be replaced with services provided
by Insight going forward. The estimated cost savings associated with
these actions are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Programming rate savings................. $1,872 $1,080
Headcount savings........................ 981 619
------ ------
$2,853 $1,699
====== ======
</TABLE>
(5) Elimination of rent expenses associated with 3770 East Livingston Avenue
property contributed pursuant to the Contribution Agreement.
(6) Management fees to be paid to Insight at 3.0% of revenues per year.
(7) Elimination of home office expenses. These expenses include costs for
legal fees, consulting fees, salaries, travel and entertainment and other
management expenses of the owners and their staff. Any such costs in the
future are solely the obligations of Insight and will be covered by
Insight Management Fees.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1997 JUNE 30, 1998
----------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Home Office.............................. $1,498 $731
</TABLE>
(8) Depreciation of contributed property at 3770 East Livingston Avenue.
(9) Represents the preferred distribution on the Preferred Interests. The
preferred distribution is 10% on the Series A Preferred Interest and 12
7/8% on the Series B Preferred Interest.
(10) EBITDA represents net income before depreciation, amortization, interest
expense, other expenses and gain on settlement of limited partner notes.
Management believes that EBITDA is a meaningful measure of performance
because it is commonly used in the cable television industry to analyze
and compare cable television companies on the basis of operating
performance, leverage and liquidity. However, EBITDA is not intended to
be a performance measure that should be regarded as an alternative to, or
more meaningful than, either operating income or net income as an
indicator of operating performance or cash flows as a measure of
liquidity, as determined in accordance with generally accepted accounting
principles. EBITDA, as computed by management, is not necessarily
comparable to similarly titled amounts of other companies.
(11) System Cash Flow represents EBITDA plus home office prior to system
acquisition and EBITDA plus management fees after the system acquisition.
Management believes that System Cash Flow is a meaningful measure of
performance because it is commonly used in the cable television industry
to analyze and compare cable television companies on the basis of
operating performance, leverage and liquidity. However, System Cash Flow
is not intended to be a performance measure that should be regarded as an
alternative to, or more meaningful than, either operating income or net
income as an indicator of operating performance or cash flows as a
measure of liquidity, as determined in accordance with generally accepted
accounting principles. System Cash Flow, as computed, by the management,
is not necessarily comparable to similarly titled amounts of other
companies. See the financial statements, including the Statement of Cash
Flows, included elsewhere herein. System Cash Flow, as computed by
management, is not necessarily comparable to similarly titled amounts of
other companies.
P-16
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED HEREIN OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES, NOR DOES IT
CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN OFFER TO BUY, TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER
OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 1
Risk Factors............................................................. 20
Use of Proceeds.......................................................... 32
Capitalization........................................................... 33
Selected Historical and Combined Pro Forma Financial and Operating Data.. 34
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 39
Business................................................................. 44
Legislation and Regulation............................................... 57
Management............................................................... 65
Certain Relationships and Related Transactions........................... 67
Principal Security Holders............................................... 68
The System Acquisition................................................... 69
Description of Governing Documents....................................... 73
Description of Certain Indebtedness...................................... 77
Description of the Notes................................................. 80
Book-Entry; Delivery and Form............................................ 108
The Exchange Offer....................................................... 111
Certain U.S. Federal Income Tax Considerations........................... 119
Plan of Distribution..................................................... 123
Legal Matters............................................................ 123
Experts.................................................................. 123
Additional Available Information......................................... 124
Glossary................................................................. 125
Index to Financial Statements............................................ F-1
Pro Forma Financial Statements........................................... P-1
</TABLE>
------------
UNTIL , , 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 DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PROSPECTUS
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
PHOENIX ASSOCIATES
EXCHANGE OFFER
FOR
$140,000,000 AGGREGATE PRINCIPAL AMOUNT
OF
10% SENIOR NOTES DUE 2006
GUARANTEED ON A CONDITIONAL BASIS
BY INSIGHT COMMUNICATIONS OF
CENTRAL OHIO, LLC
,
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
(A) Coaxial Communications of Central Ohio, Inc. ("Coaxial")
Division (E) of Section 1701.13 of the Ohio Revised Code addresses
indemnification by an Ohio corporation and provides in pertinent part as
follows:
A corporation may indemnify or agree to indemnify any person who was or
is a party, or is threatened to be made a party, to any threatened,
pending, or completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative, other than an action by or in the right
of the corporation, by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, trustee, officer, employee,
member, manager, or agent of another corporation, domestic or foreign,
nonprofit or for profit, a limited liability company, or a partnership,
joint venture, trust, or other enterprise, against expenses, including
attorney's fees, judgments, fines, and amounts paid in settlement actually
and reasonably incurred by him in connection with such action, suit, or
proceeding, if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation
and, with respect of any criminal action or proceeding, if he had no
reasonable cause to believe his conduct was unlawful.
Sections 5.01 and 5.02 of the Regulations (By-Laws) of Coaxial govern the
indemnification of officers and directors of Coaxial as follows:
Section 5.01. Mandatory Indemnification. The corporation shall indemnify
any officer or director of the corporation who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, any action threatened or
instituted by or in the right of the corporation), by reason of the fact
that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, against expenses (including, without limitation,
attorney's fees, filing fees, court reporters' fees and transcript costs),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and with respect to any
criminal action or proceeding, he had no reasonable cause to believe his
conduct was unlawful.
Section 5.02. Court-Approved Indemnification. Anything contained in the
Regulations (By-Laws) or elsewhere to the contrary notwithstanding, the
corporation shall not indemnify any officer or director of the corporation
who was a party to any completed action or suit instituted by or in the
right of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, in respect of any claim, issue or matter
asserted in such action or suit as to which he shall have been adjudged to
be liable for gross negligence or misconduct (other than negligence) in the
performance of his duty to the corporation unless and only to the extent
that the Court of Common Pleas of Franklin County, Ohio or the court in
which such action or suit was brought shall determination upon application
that, despite such adjudication of liability, and in view of all the
circumstances of the case, he is fairly and reasonably entitled to such
indemnity as such Court of Common Pleas or such other court shall deem
proper.
Sections 4.1 through 4.9 of the Close Corporation Agreement of Coaxial,
effective as of August 21, 1998, provide additional indemnification provisions
applicable to the officers and directors of Coaxial. Section 2.2 of such Close
Corporation Agreement provides that, to the extent that the Regulations of
Coaxial are inconsistent
II-1
<PAGE>
with any provision of the Close Corporation Agreement, the Close Corporation
Agreement shall, to the extent permitted by the Ohio Revised Code, control. To
the extent that the Regulations of Coaxial are not inconsistent with the Close
Corporation Agreement, the Regulations govern.
(B) Insight Communications of Central Ohio, LLC ("Insight Ohio").
Section 18-108 of the Delaware Limited Liability Company Act (the "Delaware
LLC Act") empowers a limited liability company to indemnify and hold harmless
any member or manager or other person from and against any and all claims and
demands whatsoever; subject to such standards and restriction, if any, set
forth in the operating agreement.
Section 11.1 of Insight Ohio's Operating Agreement (the "Operating
Agreement") provides as follows:
Insight Ohio shall indemnify, defend and hold harmless each member of
Insight Ohio and its members, partner, officers, directors shareholders,
employees, and agents, the employees, officers and agents of Insight Ohio,
the Principals (as defined in the Operating Agreement), and the
Representatives (as defined in the Operating Agreement) (collectively,
"Indemnified Persons") from any liability, loss, or damage incurred by the
Indemnified Person by reason of any act performed or omitted to be
performed by the Indemnified Person in connection with the business of
Insight Ohio (including, in the case of Insight Holdings of Ohio, LLC
("Insight"), any such act in connection with the management of the
Shareholders (as defined in the Operating Agreement) pursuant to the
management agreements between Shareholders and Insight, or arising by
reason of Insight's status as manager of the Shareholders), including costs
and attorneys' fees (which attorneys' fees may be paid as incurred) and any
amounts expended in the settlement of any claims of liability, loss or
damage; provided, however, that if the liability, loss, damage or claim
arises out of any action or inaction of an Indemnified Person,
indemnification shall not be available if the action or inaction
constitutes fraud, gross negligence, breach of fiduciary duty (which shall
not be construed to encompass mistakes in judgment or any breach of any
Indemnified Person's duty of care that did not constitute gross negligence)
willful misconduct, or breach of the Operating Agreement by the Indemnified
Person; and provided, further, however, that indemnification shall be
recoverable only from the assets of Insight Ohio and not from any assets of
the members of Insight Ohio. Insight Ohio may pay for insurance covering
liability of the Indemnified Persons for negligence in operation of Insight
Ohio's affairs.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
<C> <S>
2.1 Contribution Agreement by and between Insight Holdings of Ohio,
LLC, as assignee of Insight Communications Company, L.P., and
Coaxial Communications of Central Ohio, Inc. dated as of June
30, 1998 (the "Contribution Agreement")
2.2 Amendment to Contribution Agreement dated as of July 15, 1998
2.3 Second Amendment to Contribution Agreement dated as of August
21, 1998
3.1(a) Articles of Incorporation of Coaxial Communications of Central
Ohio, Inc. filed January 22, 1980*
3.1(b) Certificate of Merger of BroadBand Services, Inc., Cablenet
International Corporation, Coaxial Communications of
Reynoldsburg, Inc., Coaxial Communications Cable Operations,
Inc. and Telecinema of Columbus, Inc., merging into Coaxial
Communications of Central Ohio, Inc. filed December 26, 1986*
3.1(c) Amended Articles of Incorporation of Coaxial Communications of
Central Ohio, Inc. filed December 26, 1986*
3.1(d) Amended Articles of Incorporation of Coaxial Communications of
Central Ohio, Inc. filed August 14, 1998
3.2 Amended Regulations (By-Laws) of Coaxial Communications of
Central Ohio, Inc.
3.3 Phoenix Associates Partnership Agreement
3.4 Certificate of Formation of Insight Communications of Central
Ohio, LLC filed July 23, 1998
3.5 Operating Agreement of Insight Communications of Central Ohio,
LLC dated August 21, 1998
4.1 Restructuring Agreement among Coaxial Communications of Central
Ohio, Inc., Phoenix Associates, Insight Communications of
Central Ohio, LLC and CIBC Oppenheimer Corp. dated August 21,
1998
4.2 Senior Notes Registration Rights Agreement among Coaxial
Communications of Central Ohio, Inc., Phoenix Associates,
Insight Communications of Central Ohio, LLC and CIBC
Oppenheimer Corp. dated August 21, 1998
4.3 Indenture among Coaxial Communications of Central Ohio, Inc.,
Phoenix Associates, Insight Communications of Central Ohio,
LLC, CIBC Oppenheimer Corp. and Bank of Montreal Trust Company
dated August 21, 1998
4.4 Pledge Agreement between Coaxial Communications of Central
Ohio, Inc. and Bank of Montreal Trust Company dated August 21,
1998
5.1 Opinion of Cooperman Levitt Winikoff Lester & Newman, P.C.
regarding the validity of the Exchange Notes
8.1 Opinion of Cooperman Levitt Winikoff Lester & Newman, P.C.
regarding federal income tax matters
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT DESCRIPTION
-------------- -------------------
<C> <S>
10.1 Close Corporation Agreement of Coaxial Communications of
Central Ohio, Inc. dated August 21, 1998 among Coaxial LLC,
Coaxial DSM LLC, Coaxial DJM LLC and Coaxial Communications of
Central Ohio, Inc.
10.2 Management Agreement of Coaxial LLC dated August 21, 1998 among
Insight Holdings of Ohio, LLC, Coaxial LLC and Barry
Silverstein
10.3 Management Agreement of Coaxial DSM LLC dated August 21, 1998
among Insight Holdings of Ohio, LLC, Coaxial DSM LLC and D.
Stevens McVoy
10.4 Management Agreement of Coaxial DJM LLC dated August 21, 1998
among Insight Holdings of Ohio, LLC, Coaxial DJM LLC and Dennis
J. McGillicuddy
10.5 Management Agreement between Coaxial Communications of Central
Ohio, Inc. and Insight Communications of Central Ohio, LLC
dated August 21, 1998
12.1 Statement re Computation of Ratios
23.1 Consent of Arthur Andersen LLP
23.2 Consents of Cooperman Levitt Winikoff Lester & Newman, P.C.
(included in Exhibits 5.1 and 8.1)
24.1 Powers of Attorney (included as part of signature pages)
25.1 Statement of Eligibility of Trustee
27.1 Financial Data Schedule for Phoenix Associates
27.2 Financial Data Schedule for Coaxial Communications
27.3 Financial Data Schedule for Central Ohio Cable System
99.1 Form of Letter of Transmittal with respect to the Exchange
Offer
99.2 Form of Instruction Letter to Registered Shareholders
99.3 Form of Notice of Guaranteed Delivery
</TABLE>
- --------
* To be filed by amendment
b) Financial Statement Schedules
None.
ITEM 22. UNDERTAKINGS
Coaxial Communications of Central Ohio, Inc., Phoenix Associates and Insight
Communications of Central Ohio, Inc. (the "Registrants") hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii)
to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective registration statement; (iii) to include any material information
with respect to the plan of distribution not previously disclosed in the
Registration Statement or any material change to such information in the
Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE>
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of Form S-4, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through
the date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the Registration Statement when it became effective.
The undersigned Registrants hereby undertake as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the Registrants undertake that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
The Registrants undertake that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act of 1933 and is used in
connection with an offering of securities subject to Rule 415, will be filed
as a part of an amendment to the Registration Statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrants of expenses incurred or paid by a director, officer
or controlling person of the Registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrants will, unless in the opinion of their counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by them is against
public policy as expressed in the Securities Act of 1933 and will be governed
by the final adjudication of such issue.
The undersigned Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
the Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrants pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 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
of 1933, 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.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF NEW YORK, STATE OF NEW
YORK ON SEPTEMBER 17, 1998.
COAXIAL COMMUNICATIONS OF CENTRAL
OHIO, INC.
/s/ Michael S. Willner
By: _________________________________
MICHAEL S. WILLNER
President
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.
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Sidney R. Knafel, Michael S. Willner and Kim D.
Kelly 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.
SIGNATURE TITLE DATE
Director and
- ------------------------------------- Chairman
SIDNEY R. KNAFEL
/s/ Michael S. Willner Director, President September 17,
- ------------------------------------- and Chief Executive 1998
MICHAEL S. WILLNER Officer (Principal
Executive Officer)
/s/ Kim D. Kelly Director, Executive September 17,
- ------------------------------------- Vice President, 1998
KIM D. KELLY Chief Financial and
Operating Officer
and Treasurer
(Principal
Financial and
Accounting Officer)
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF SARASOTA, STATE OF
FLORIDA ON SEPTEMBER 16, 1998.
PHOENIX ASSOCIATES
By: Phoenix DJM LLC, a general
partner
/s/ Dennis J. McGillicuddy
By: _________________________________
DENNIS J. MCGILLICUDDY
Sole Member
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.
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Sidney R. Knafel, Michael S. Willner and Kim D.
Kelly 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.
SIGNATURE TITLE DATE
/s/ Dennis J. McGillicuddy Sole Member of September 16,
- ------------------------------------- Phoenix DJM LLC, a 1998
DENNIS J. MCGILLICUDDY General Partner
(Principal
Executive, Financial
and Accounting
Officer)
/s/ Barry Silverstein Sole Member of September 16,
- ------------------------------------- Phoenix BAS LLC, a 1998
BARRY SILVERSTEIN General Partner
/s/ D. Stevens McVoy Sole Member of September 16,
- ------------------------------------- Phoenix DSM LLC, a 1998
D. STEVENS MCVOY General Partner
II- 7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF NEW YORK, STATE OF NEW
YORK ON SEPTEMBER 17, 1998.
INSIGHT COMMUNICATIONS OF CENTRAL
OHIO, LLC
/s/ Michael S. Willner
By: _________________________________
MICHAEL S. WILLNER
President
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.
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints Sidney R. Knafel, Michael S. Willner and Kim D.
Kelly 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.
SIGNATURE TITLE DATE
Director and
- ------------------------------------- Chairman
SIDNEY R. KNAFEL
/s/ Michael S. Willner Director, President September 17,
- ------------------------------------- and Chief Executive 1998
MICHAEL S. WILLNER Officer (Principal
Executive Officer)
/s/ Kim D. Kelly Director, Executive September 17,
- ------------------------------------- Vice President, 1998
KIM D. KELLY Chief Financial and
Operating Officer
and Treasurer
(Principal
Financial and
Accounting Officer)
II-8
<PAGE>
Exhibit 2.1
CONTRIBUTION AGREEMENT, DATED AS OF JUNE
30, 1998
<PAGE>
CONTRIBUTION AGREEMENT, DATED AS OF JUNE
30, 1998
----------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE 1 DEFINITIONS
-----------
1.1 Terms Defined in this Section........................................1
-----------------------------
1.2 Terms Defined Elsewhere in this Agreement............................7
-----------------------------------------
1.3 Terms Generally......................................................7
---------------
ARTICLE 2 CONTRIBUTIONS
-------------
2.1 Formation of the Company and Contributions to the Company............8
---------------------------------------------------------
2.2 Excluded Assets.....................................................10
---------------
2.3 Refinancing.........................................................11
-----------
ARTICLE 3 VALUE OF CONTRIBUTIONS
----------------------
3.1 Fair Market Value of Contributed Assets.............................11
---------------------------------------
3.2 Certain Adjustments.................................................12
-------------------
ARTICLE 4 ASSUMED LIABILITIES
-------------------
4.1 Assumption of Central Liabilities...................................13
---------------------------------
4.2 Liabilities Not Assumed.............................................13
-----------------------
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF CENTRAL
-----------------------------------------
5.1 Organization, Standing, and Authority...............................14
-------------------------------------
5.2 Authorization and Binding Obligation................................14
------------------------------------
5.3 Absence of Conflicting Agreements...................................14
---------------------------------
5.4 Financial Statements................................................14
--------------------
5.5 Interim Operations..................................................15
------------------
5.6 Title to Assets; Liens..............................................15
----------------------
5.7 Franchises..........................................................15
----------
5.8 Governmental Permits................................................16
--------------------
5.9 Real Property and Real Property Interests...........................16
-----------------------------------------
5.10 Tangible Personal Property.........................................16
--------------------------
5.11 Contracts..........................................................16
---------
5.12 Intangibles........................................................17
-----------
-i-
<PAGE>
Page
----
5.13 System Information.................................................17
------------------
5.14 Employees and Compensation.........................................20
--------------------------
5.15 Taxes..............................................................21
-----
5.16 Environmental Matters..............................................21
---------------------
5.17 Compliance with Laws...............................................22
--------------------
5.18 Claims and Legal Actions...........................................22
------------------------
5.19 Insurance and Bonds................................................22
-------------------
5.20 Transactions with Affiliates.......................................22
----------------------------
5.21 Brokers............................................................22
-------
5.22 Assets.............................................................23
------
5.23 Accounts Receivable................................................23
-------------------
5.24 No Undisclosed Liabilities.........................................23
--------------------------
5.25 Liabilities to Customers...........................................23
------------------------
5.26 Restoration........................................................23
-----------
5.27 Overbuilds.........................................................23
----------
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF INSIGHT
-----------------------------------------
6.1 Organization, Standing, and Authority...............................24
-------------------------------------
6.2 Authorization and Binding Obligation................................24
------------------------------------
6.3 Absence of Conflicting Agreements...................................24
---------------------------------
6.4 Claims and Legal Actions............................................25
------------------------
6.5 Brokers.............................................................25
-------
ARTICLE 7 OPERATIONS OF SYSTEM PRIOR TO CLOSING
-------------------------------------
7.1 Generally...........................................................25
---------
7.2 Contracts or Commitments............................................25
------------------------
7.3 Disposition of Assets...............................................25
---------------------
7.4 Distributions.......................................................26
-------------
7.5 Encumbrances........................................................26
------------
7.6 Franchises and Governmental Permits.................................26
-----------------------------------
7.7 Access to Information...............................................26
---------------------
7.8 Maintenance of Assets...............................................26
---------------------
7.9 Insurance and Bonds.................................................26
-------------------
7.10 Compliance with Contracts and Laws.................................26
----------------------------------
7.11 Changes to Employee Compensation and Benefits......................27
---------------------------------------------
7.12 Delivery of Financial Information..................................27
---------------------------------
7.13 Acquisition of Business Office and Headend Site....................27
-----------------------------------------------
7.14 Marketing Programs.................................................27
------------------
7.15 Accounts Payable...................................................27
----------------
ARTICLE 8 SPECIAL COVENANTS AND AGREEMENTS
--------------------------------
8.1 Consents............................................................28
--------
-ii-
<PAGE>
Page
----
8.2 Cooperation.........................................................29
-----------
8.3 Deferred Contributions..............................................29
----------------------
8.4 Confidentiality.....................................................30
---------------
8.5 Bulk Sales Law......................................................31
--------------
8.6 Further Assurances..................................................31
------------------
8.7 HSR Act.............................................................31
-------
8.8 Risk of Loss........................................................32
------------
8.9 Use of Names and Logos..............................................32
----------------------
8.10 Power of Attorney..................................................32
-----------------
8.11 Access to Books and Records........................................32
---------------------------
8.12 Other Transaction Documents........................................32
---------------------------
ARTICLE 9 CLOSING CONDITIONS
------------------
9.1 Conditions to Obligations of Insight................................33
------------------------------------
9.2 Conditions to Obligations of Central................................34
------------------------------------
ARTICLE 10 CLOSING AND CLOSING DELIVERIES
------------------------------
10.1 Time and Place of Closing..........................................35
-------------------------
10.2 Deliveries by Central..............................................36
---------------------
10.3 Deliveries by the Company..........................................36
-------------------------
10.4 Deliveries by Insight..............................................37
---------------------
ARTICLE 11 TERMINATION RIGHTS
------------------
11.1 Termination by Agreement...........................................37
------------------------
11.2 Termination by Central.............................................37
----------------------
11.3 Termination by Insight.............................................38
----------------------
11.4 Due Diligence Termination..........................................38
-------------------------
11.5 Escrow Deposit.....................................................38
--------------
11.6 Rights on Termination..............................................39
---------------------
11.7 Specific Performance...............................................40
--------------------
ARTICLE 12 MISCELLANEOUS
-------------
12.1 Survival of Representations and Warranties.........................40
------------------------------------------
12.2 Taxes, Fees, and Expenses..........................................41
-------------------------
12.3 Notices............................................................42
-------
12.4 Benefit and Binding Effect.........................................43
--------------------------
12.5 Entire Agreement...................................................43
----------------
12.6 Waiver of Compliance; Consents.....................................43
------------------------------
12.7 Severability.......................................................44
------------
12.8 GOVERNING LAW......................................................44
-------------
12.9 Disputed Matters...................................................44
----------------
12.10 Headings..........................................................46
--------
-iii-
<PAGE>
12.11 Rights Cumulative.................................................46
-----------------
12.12 Construction......................................................46
------------
12.13 Business Day......................................................46
------------
12.14 Counterparts......................................................47
------------
12.15 No Third-Party Beneficiaries......................................47
----------------------------
-iv-
<PAGE>
CONTENTS OF OMITTED EXHIBITS
Exhibit Description
- ------- -----------
Exhibit A Form of Operating Agreement
Exhibit B Form of Amended Articles of Incorporation of
Central
Exhibit C Form of Close Corporation Agreement of
Central
Exhibit D Form of Single-Member LLC Operating Agreement
Exhibit E Form of Single-Member LLC Management
Agreement
Registrants agree to furnish supplementally a copy of such Exhibits to the SEC
upon request.
-v-
<PAGE>
CONTENTS OF OMITTED SCHEDULES
Schedule Description
- -------- -----------
Schedule 2.2 Certain Excluded Assets
Schedule 2.3(a) Use of Refinancing Proceeds
Schedule 5.3 Consents
Schedule 5.5 Interim Operations
Schedule 5.6 Liens
Schedule 5.7 Franchises
Schedule 5.8 Governmental Permits
Schedule 5.9 Real Property
Schedule 5.10 Tangible Personal Property
Schedule 5.11 Contracts
Schedule 5.12 Intangibles
Schedule 5.13 System Information
Schedule 5.14 Employees and Compensation
Schedule 5.17 Compliance with Laws
Schedule 5.18 Claims and Legal Actions
Schedule 5.19 Insurance and Bonds
Schedule 5.20 Transactions with Affiliates
Schedule 5.24 Liabilities
Schedule 5.27 Overbuilds
Schedule 6.3 Absence of Conflicting Agreements: Insight Consents
Schedule 7.2 Post-Signing Contracts
Schedule 7.11 Changes to Compensation
Registrants agree to furnish supplementally a copy of such Exhibits to the SEC
upon request.
-vi-
<PAGE>
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT is made and entered into as of June 30, 1998 by
and between Coaxial Communications of Central Ohio, Inc., an Ohio corporation
("Central"), and Insight Communications Company, L.P., a Delaware limited
partnership ("Insight").
PRELIMINARY STATEMENT
Central owns and operates a cable television system serving Columbus, Ohio,
and the surrounding communities identified on Schedule 5.7.
Central and Insight desire to form Insight Communications of Central Ohio,
LLC, a Delaware limited liability company (the "Company"), pursuant to the
Delaware Limited Liability Company Act and an Operating Agreement to be entered
into between Insight and Central.
Central and Insight desire that Central contribute to the Company
substantially all the assets of the System, subject to certain liabilities being
assumed by the Company, and that Insight or its permitted assignee contribute to
the Company cash in the amount of Ten Million Dollars, all as specified in this
Agreement.
The parties desire to enter into this Agreement to provide for the
transactions described above and certain other matters.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS
-----------
1.1 Terms Defined in this Section.
-----------------------------
For purposes of this Agreement, the following terms shall have the
following meanings (all terms used in this Agreement that are not defined in
this Section 1.1 shall have the meanings set forth elsewhere in this Agreement
as indicated in Section 1.2):
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person. For
purposes of this definition, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities or
voting interests, by contract or otherwise.
"Agreement" means this Contribution Agreement, as it may be amended from
time to time.
<PAGE>
"Assets" means the assets to be contributed by Central to the Company under
this Agreement, as specified in Section 2.1(b).
"Assumed Contracts" means (a) all Contracts listed in Schedule 5.11, other
than Contracts that are Excluded Assets, other Contracts designated on
Schedule 5.11 as not being Assumed Contracts, and Contracts that terminate or
expire prior to Closing, (b) Contracts of Central in existence on the date of
this Agreement that are not required by Section 5.11 to be listed on Schedule
5.11, other than Contracts that are Excluded Assets, (c) Contracts of Central in
existence on the Closing Date that were entered into after the date of this
Agreement in compliance with Section 7.2, other than Contracts that are Excluded
Assets, and (d) all other Contracts of Central in existence on the Closing Date
that Insight has agreed in writing will be assumed by the Company at the
Closing.
"Business Day" means any day other than a Saturday or Sunday or a day on
which banking institutions in Columbus, Ohio or New York, New York, are required
or authorized to be closed.
"Central's Knowledge" means the actual knowledge of any of Central's
President and Chief Executive Officer, Executive Vice President and Chief
Financial Officer, Barry Silverstein, Dennis McGillicuddy, or D. Stevens McVoy.
"Close Corporation Agreement" means the Close Corporation Agreement of
Central, substantially in the form of Exhibit C, with any changes thereto that
are agreed to by the parties.
"Closing" means the consummation of the contribution of the Assets to the
Company, as contemplated by this Agreement, as described in Article 10.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder, or any subsequent legislative enactment thereof, as in
effect from time to time.
"Communications Act" means the Communications Act of 1934, as amended,
including the Cable Communications Policy Act of 1984, the Cable Television
Consumer Protection and Competition Act of 1992, and the Telecommunications Act
of 1996, each as amended, and all rules, regulations, and policies thereunder.
"Compensation Arrangement" means any written plan or compensation
arrangement other than an Employee Plan or a Multiemployer Plan that provides to
employees of Central employed at the System any compensation or other benefits,
whether deferred or not, in excess of base salary or wages and excluding
overtime pay, including any bonus or incentive plan, stock rights plan, deferred
compensation arrangement, stock purchase plan, severance pay plan, and any other
perquisites and employee fringe benefit plan.
-2-
<PAGE>
"Consent Conditions" means those conditions specified in Section 9.1(c),
Section 9.1(d), Section 9.1(e), and Section 9.1(f).
"Consents" means all of the consents, permits, approvals, or other actions
of Governmental Authorities and other third parties necessary to permit the
transfer of the Assets to the Company or otherwise to consummate lawfully the
transactions contemplated by this Agreement.
"Contracts" means all pole attachment and conduit agreements,
retransmission consent agreements and must-carry elections, leases, non-
governmental licenses, employment agreements, subscriber agreements, and other
agreements, written or oral (including any amendments and other modifications
thereto), to which Central is a party or which are binding upon Central and
which relate to the Assets or the business or operations of the System, and (a)
which are in effect on the date of this Agreement or (b) which are entered into
by Central between the date of this Agreement and the Closing Date.
"Copyright Act" means the Copyright Act of 1976, as amended, all rules,
regulations, orders, and policies of the United States Copyright Office
thereunder.
"Employee Plan" means any written pension, retirement, profit-sharing,
deferred compensation, vacation, severance, bonus, incentive, medical, vision,
dental, disability, life insurance, or other employee benefit plan as defined in
Section 3(3) of ERISA (other than a Multiemployer Plan) to which Central
contributes or which Central sponsors or maintains or by which Central otherwise
is bound, that provides benefits to employees of Central employed at the System.
"Employee Transition Agreement" means the Employee Transition Agreement,
substantially in the form to be agreed to by the parties prior to the funding of
the escrow deposit described in Section 11.5, to be entered into at Closing
between the Company and Central.
"Environmental Law" means any Legal Requirement pertaining to the release
or threatened release of hazardous substances or pollution or protection of the
environment, including the following federal laws as they may be amended from
time to time: (a) Clean Air Act; (b) Clean Water Act; (c) Resource Conservation
and Recovery Act; (d) Comprehensive Environmental Response, Compensation and
Liability Act; (e) Safe Drinking Water Act; (f) Toxic Substance Control Act; (g)
Occupational Safety and Health Act; (h) Rivers and Harbors Act of 1899; and (i)
Endangered Species Act of 1973.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder, as in effect from time to
time.
"Escrow Agreement" means that certain Escrow Agreement to be entered into
among Insight, Central, and the Escrow Agent pursuant to Section 11.5.
-3-
<PAGE>
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communications Commission.
"Franchises" means all authorizations (including any applications therefor)
issued to Central by Governmental Authorities empowered by federal, state, or
local law to issue such authorizations, whether such authorizations are
designated as franchises, permits, licenses, resolutions, contracts,
certificates, agreements, or otherwise, in connection with the construction,
operation, or maintenance of the System, including the authorizations listed in
Schedule 5.7, and all amendments thereto and renewals and modifications thereof,
together with any additions thereto between the date of this Agreement and the
Closing Date.
"Franchising Authorities" means the Governmental Authorities that have
issued the Franchises, or before which there are pending any applications filed
by Central relating to the operation of the System.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Governmental Authority" means the United States of America, any state,
commonwealth, territory, or possession of the United States of America and any
political subdivision thereof, and any agency, authority, or instrumentality of
any of the foregoing, including any court, tribunal, department, bureau,
commission, or board.
"Governmental Permits" means all licenses, permits, and other
authorizations (other than the Franchises) issued by the FCC, the FAA, or any
other federal, state, or local Governmental Authority and held by Central in
connection with the conduct of the business or operations of the System,
including the items listed in Schedule 5.8, together with any additions thereto
between the date of this Agreement and the Closing Date.
"Hazardous Substance" means any substance designated as "hazardous" or
"toxic," including petroleum and petroleum related substances, or having
characteristics identified as "hazardous" or "toxic" under any Environmental
Law.
"Homes Passed" means the total number of single family residences or
dwelling units within a building containing multiple dwelling units (including
hotel rooms and similar units) capable of being serviced by the System without
further line construction, plus the total number of commercial and other
buildings (including hotels) actually served by the System.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations thereunder, as in effect from time to
time.
-4-
<PAGE>
"Intangibles" means all copyrights, trademarks, trade names, service marks,
service names, licenses, patents, permits, proprietary information, technical
information and data, machinery and equipment warranties, and other intangible
property rights and interests (and any goodwill associated with any of the
foregoing) applied for, issued to, transferred to, or owned by Central or under
which Central is licensed or franchised and which are used or held for use in
connection with the business and operations of the System, including the items
listed in Schedule 5.12, together with any additions thereto between the date of
this Agreement and the Closing Date.
"Judgment" means any judgment, writ, order, injunction, award or decree of
any court, judge, justice, arbitrator, panel of arbitrators, or magistrate,
including any bankruptcy court or judge, and any order of or by any Governmental
Authority.
"Legal Requirements" means applicable common law and any applicable
statute, ordinance, code, or other law, rule, regulation, order, technical or
other standard, requirement, or procedure enacted, adopted, promulgated, or
applied by any Governmental Authority, including any applicable Judgment that
may have been handed down, adopted, or imposed by any Governmental Authority.
"Lien" means any lien, mortgage, deed of trust, hypothecation, pledge,
easement, right-of-way, building or use restriction, exception, reservation,
security interest, or similar third-party right.
"Multiemployer Plan" means a plan, as defined in ERISA Section 3(37) or
4001(a)(3), to which Central or any trade or business which would be considered
a single employer with Central under Section 4001(b)(1) of ERISA contributed,
contributes or is required to contribute that provides benefits to employees of
Central employed at the System.
"Operating Agreement" means the Operating Agreement of the Company,
substantially in the form of Exhibit A, with any changes thereto that are agreed
to by the parties, to be entered into between Insight and Central pursuant to
this Agreement.
"Permitted Liens" means any of the following: (a) liens for taxes,
assessments, and governmental charges not yet due and payable or that Central is
contesting in good faith through appropriate proceedings, (b) mechanic's,
materialmen's, and similar liens, (c) purchase money liens and liens securing
rental payments under capital lease arrangements, (d) in the case of Real
Property Interests that are leaseholds, the rights of any lessor and any lien
encumbering any lessor's interest in the underlying Real Property, (e) zoning
laws and ordinances and similar Legal Requirements and rights reserved to any
Governmental Authority to regulate the affected property, (f) liens,
liabilities, or encumbrances that secure liabilities to be assumed by the
Company pursuant to Article 4, and (g) as to any Real Property Interest, any
easements, rights-of-way, servitudes, permits, restrictions, and minor
imperfections or irregularities in title that are reflected in the public
records and do not individually or in the aggregate, materially affect the value
of, or materially interfere with the right or ability to own, use, or operate
the underlying Real Property.
-5-
<PAGE>
"Person" means any association, corporation, general or limited
partnership, Governmental Authority, joint venture, limited liability company,
natural person, trust, or unincorporated entity of any kind.
"Principals" means Barry Silverstein, Dennis McGillicuddy, and D. Stevens
McVoy.
"Real Property" means all real property, and all buildings and other
improvements thereon, used or held for use in connection with the business or
operations of the System.
"Real Property Interests" means all interests of Central in any of the Real
Property, including fee estates, leaseholds, and subleaseholds, purchase
options, licenses, easements, rights to access, and rights of way, including the
items listed in Schedule 5.9, together with any additions thereto between the
date of this Agreement and the Closing Date (including that contemplated by
Section 7.13).
"Service Area" means any of the geographic areas in which Central is
authorized to provide cable television service pursuant to a municipal, county,
or state Franchise or provides cable television service without a municipal,
county, or state Franchise being required by any applicable Legal Requirement.
"Single-Member LLCs" means the three Delaware limited liability companies
to be formed by the Principals to own the stock of Central.
"Single-Member LLC Management Agreements" means the three management
agreements, substantially in the form of Exhibit E, with any changes thereto
that are agreed to by the parties, to be entered into between Insight and each
Single-Member LLC.
"Single-Member LLC Operating Agreements" means the Operating Agreements of
Single-Member LLCs, substantially in the form of Exhibit D, with any changes
thereto that are agreed to by the parties.
"System" means the cable television systems of Central in and around the
areas listed on Schedule 5.7.
"Tangible Personal Property" means all plant, machinery, equipment, tools,
vehicles, furniture, leasehold improvements that are not Real Property, office
equipment, inventory, spare parts, supplies, customer billing systems, and other
tangible personal property which is owned, leased, used or held for use by
Central in connection with the conduct of the business or operations of the
System, including the items listed in Schedule 5.10, together with any additions
thereto between the date of this Agreement and the Closing Date.
"Taxes" means any federal, state or local taxes or assessments.
-6-
<PAGE>
"Transferable Service Area" means any Service Area with respect to which
(a) any Consent necessary for the assignment of any municipal, county, or state
Franchise for such Service Area in connection with the consummation of the
transactions contemplated by this Agreement shall have been obtained without any
condition or qualification that would impose conditions or obligations
materially more burdensome than those currently contained in the Franchise that
is the subject of the Consent, or (b) no Consent is necessary for the assignment
of any municipal, county, or state Franchise for such Service Area in connection
with the consummation of the transactions contemplated by this Agreement, or (c)
no municipal, county, or state Franchise is required for the provision of cable
television service in the Service Area.
1.2 Terms Defined Elsewhere in this Agreement.
-----------------------------------------
For purposes of this Agreement, the following terms have the meanings set
forth in the sections indicated:
Term Section
- ---- -------
AAA Section 12.9(b)
Arbitration Notice Section 12.9(e)
Central Preamble
Company Preliminary Statement
Escrow Agent Section 11.5
Excluded Assets Section 2.2
Financial Statements Section 5.4
Insight Preamble
Management Agreement Section 8.3(b)(2)
Marketing Programs Section 5.13(c)
Refinancing Proposals Section 2.3(a)
Retained Assets Section 8.3(a)
System Employee Section 5.14(a)
1.3 Terms Generally.
---------------
The definitions in Section 1.1 and elsewhere in this Agreement shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context requires, any pronoun includes the corresponding masculine,
feminine, and neuter forms. The words "include," "includes," and "including"
are not limiting. Any reference in this Agreement to a "day" or number of
"days"
-7-
<PAGE>
(without the explicit qualification of "Business") shall be interpreted
as a reference to a calendar day or number of calendar days.
ARTICLE 2
CONTRIBUTIONS
-------------
2.1 Formation of the Company and Contributions to the Company.
---------------------------------------------------------
(a) At or prior to the Closing, Central and Insight shall execute and
deliver the Operating Agreement.
(b) At the Closing, subject to the terms and conditions set forth in
this Agreement and in accordance with the Operating Agreement, Central shall
contribute or cause to be contributed to the Company, and the Company shall
acquire from Central, all of the tangible and intangible assets owned or held by
Central and used or held for use by Central in connection with the ownership and
conduct of the business or operations of the System (other than the Excluded
Assets and any assets disposed of by Central prior to the Closing Date in
compliance with this Agreement), together with any additions thereto between the
date of this Agreement and the Closing Date, free and clear of all Liens except
for Permitted Liens, including the following:
(1) the Tangible Personal Property;
(2) the Real Property Interests;
(3) the Franchises;
(4) the Assumed Contracts;
(5) the Governmental Permits;
(6) the Intangibles and the goodwill of the System, if any;
(7) all of Central's proprietary information, customer lists,
technical information and data, maps, computer discs and tapes, plans, diagrams,
blueprints and schematics relating to the business and operation of the System;
(8) all accounts receivable of the System as of the Closing;
(9) Central's cash on hand as of the Closing Date and all other
cash and cash equivalents in Central's bank, savings, or other depository
accounts;
-8-
<PAGE>
(10) any and all bonds, surety instruments, letters of credit, or
other similar items and any cash surrender value in regard thereto, and any
stocks, bonds, certificates of deposit, and similar investments;
(11) all choses in action of Central;
(12) any insurance policies and rights or claims thereunder;
(13) all deposits, advance payments, and prepaid expenses
relating to the System; and
(14) all books and records (including copies of Central's filings
with Franchising Authorities and FCC and copyright filings) relating to the
business or operations of the System.
(c) At the Closing, subject to the terms and conditions set forth in
this Agreement and in accordance with the Operating Agreement, Insight shall
contribute or cause to be contributed to the Company, in cash, the sum of Ten
Million Dollars.
(d) Central shall also contribute cash to the Company as provided in
this Section 2.1(d).
(1) If any amendment to this Agreement pursuant to Section 3.2
reduces the net fair market value of the Assets, then Central shall contribute
to the Company, at the time specified in Section 2.1(d)(3) and otherwise in
accordance with this Section 2.1(d), cash in an amount equal to the amount of
such reduction.
(2) Concurrently with the making of each capital contribution
pursuant to this Section 2.1(d), Central shall pay to the Company interest at a
rate of eleven percent per year, compounded annually, from the Closing Date
through the date on which such capital contribution is made, on the amount of
such capital contribution. Interest paid or payable pursuant to this
Section 2.1(d)(2) shall not, for purposes of the Operating Agreement, be deemed
to be a Capital Contribution (as defined in the Operating Agreement).
(3) Central may make its capital contributions and interest
payments pursuant to this Section 2.1(d) at any time, subject to the other
provisions of this Section 2.1(d)(3) and Section 2.1(d)(4). Central shall be
required to make capital contributions and interest payments pursuant to this
Section 2.1 concurrently with, and to the extent of, any distributions to
Central (or any assignee of any portion of its membership interest in the
Company) pursuant to the Operating Agreement, other than any distributions with
respect to the Preferred A Interest or the Preferred B Interest (each as defined
in the Operating Agreement) and distributions based on the amount of any taxable
income allocated to the members of the Company (including the April
Distributions and the Estimated Tax Distributions, as defined in the Operating
Agreement). The Company shall withhold
-9-
<PAGE>
from any distributions to Central (or any assignee described in this Section
2.13(d)(3) pursuant to the Operating Agreement (other than any distributions
with respect to the Preferred A Interest or the Preferred B Interest (each as
defined in the Operating Agreement) and distributions based on the amount of any
taxable income allocated to the members of the Company (including the April
Distributions and the Estimated Tax Distributions, as defined in the Operating
Agreement)) the amount of its remaining obligations under this Section 2.1(d)
and any amount so withheld shall be treated for purposes of the Operating
Agreement and this Agreement as having been distributed in accordance with the
Operating Agreement on the date on which Central would otherwise have received
such distribution and contributed or paid (as applicable) the amount of such
distribution in accordance with this Section 2.1(d) on the same date.
(4) To the extent that the effect of any circumstance giving
rise to an amendment to this Agreement pursuant to Section 3.2(b) is to reduce
the operating income of the Company such that the Company is unable to make any
required distribution with respect to the Preferred A Interest or the Preferred
B Interest (each as defined in the Operating Agreement), then Central shall be
required to make capital contributions and interest payments pursuant to this
Section 2.1(d) at any time within ten Business Days after a demand therefor by
the Manager (as defined in the Operating Agreement).
2.2 Excluded Assets.
---------------
The assets to be contributed to the Company by Central pursuant to Section
2.1(a) exclude the following assets (the "Excluded Assets"):
(a) all programming agreements (other than retransmission agreements
and must-carry elections) and all other Contracts of Central that are designated
on Schedule 5.11 as not being Assumed Contracts;
(b) any books and records that Central is required by any Legal
Requirement to retain, Central's corporate minute books, and any other books and
records related to internal corporate matters of Central;
(c) any claims, rights, and interest in and to any refunds of Taxes
for periods prior to the Closing Date;
(d) all choses in action of Central relating to any Excluded Asset or
any liability that is not assumed by the Company,
(e) any chose in action of Central relating to any circumstance
giving rise to any reduction to the net fair market value of the Assets pursuant
to Section 3.2 to the extent such chose of action is not assignable;
-10-
<PAGE>
(f) any trademarks, service marks, service names, logos, and similar
proprietary rights incorporating the name "Coaxial";
(g) the accounting system, the account books of original entry,
general ledgers, and financial records used in connection with the System;
(h) any insurance policies and rights or claims thereunder relating
to any Excluded Asset or any liability that is not assumed by the Company;
(i) any insurance policies and rights or claims thereunder relating
to any circumstance giving rise to any reduction to the net fair market value of
the Assets pursuant to Section 32 to the extent such insurance policies, rights,
or claims are not assignable;
(j) any other assets of Central not used or held for use in
connection with the business or operations of the System; and
(k) any assets (including accounts receivable or notes owed by
Affiliates of Central) described on Schedule 2.2.
2.3 Refinancing.
-----------
(a) Central has received proposals (collectively, the "Refinancing
Proposals") from CIBC Oppenheimer Corp., copies of which have been delivered to
Insight, concerning (1) the issuance by the Single-Member LLCs of certain senior
deferred interest notes, a portion of the net proceeds of which will be used to
repay, in part, obligations under the Credit Agreement, dated November 15, 1994,
among Central, certain other parties, and the lenders named therein, as amended,
(2) the purchase of the remaining obligations of Central under such Credit
Agreement from the lenders under the Credit Agreement and the restructuring of
such obligations, and (3) the granting to the Company of a revolving line of
credit. Insight acknowledges that the proceeds of the transactions contemplated
by the Refinancing Proposals will be used as described on Schedule 2.3(a).
(b) Central and Insight will each use their commercially reasonable
efforts to cause the transactions contemplated by the Refinancing Proposals to
be consummated in accordance with the terms thereof (without regard to any
change in interest rates for the senior notes from those contemplated by the
Refinancing Proposals).
ARTICLE 3
VALUE OF CONTRIBUTIONS
----------------------
-11-
<PAGE>
3.1 Fair Market Value of Contributed Assets.
---------------------------------------
Central and Insight agree that the net fair market value of the Assets as
of the Closing Date for purposes of this Agreement and the Operating Agreement
(subject to adjustment as provided in Section 3.2) shall equal (a) $3,333,333
plus (b) the sum of the Preferred A Capital Amount and the Preferred B Capital
Amount (each as defined in the Operating Agreement) as of the Closing Date.
3.2 Certain Adjustments.
-------------------
(a) If any loss, damage, confiscation, or condemnation of any of the
Assets occurs prior to the Closing, and the effect of such loss, damage,
confiscation, or condemnation is to reduce the net fair market value of the
Assets as of the Closing (taking into account any increase in liabilities and
obligations and any reduction in operating income resulting from such loss,
damage, confiscation, or condemnation and any insurance, condemnation, or other
proceeds received or to be received by the Company as a result of such loss,
damage, confiscation, or condemnation) by more than $500,000, then this
Agreement shall be amended to reduce the net fair market value of the Assets for
purposes of Section 3.1 by the amount by which the reduction in the net fair
market value of the Assets after the Closing as a result of such loss, damage,
confiscation, or condemnation exceeds $500,000.
(b) If (1) any of the representations and warranties of Central in
this Agreement or in the certificate delivered by Central pursuant to Section
10.2(e) was not true when made or if Central fails to perform and comply with
any covenant or agreement required by this Agreement to be performed or complied
with by Central prior to or on the Closing Date, and (2) Insight delivers a
written notice to Central (A) with respect to a breach of any representation or
warranty in Section 5.6 relating to title to the Assets, Section 5.15 relating
to Taxes, or Section 5.18 relating to third-party claims (including any third-
party claims relating to environmental matters), at any time, or (B) with
respect to a breach of any other representation or warranty, prior to or within
one year after the Closing, in each case identifying any circumstance described
in clause (1), and (3) the net fair market value of the Assets as of the Closing
(taking into account any increase in liabilities and obligations and any
reduction in operating income and any proceeds received by the Company as a
result of such circumstances under any chose of action or any insurance policy
or claim thereunder assigned by Central to the Company) is reduced by those
circumstances described in clause (1) that are identified in one or more notices
delivered by Insight pursuant to clause (2) by more than $500,000, then this
Agreement shall be amended to reduce the net fair market value of the Assets for
purposes of Section 31 by the lesser of (x) the amount by which the reduction in
the net fair market value of the Assets as of the Closing (taking into account
any increase in liabilities and obligations and any reduction in operating
income) attributable to the circumstances described in clause (1) that are
identified in any notice delivered by Insight pursuant to clause (2) exceeds
$500,000, or (y) $3,333,333.
(c) Insight and Central shall use good faith efforts to negotiate and
enter into any amendment to this Agreement required by this Section 3.2. If
Insight and Central are unable to agree on such an amendment, the matter shall
be resolved pursuant to Section 12.9. Upon final
-12-
<PAGE>
determination, this Agreement shall be deemed amended in accordance with any
mediated resolution or arbitrators' decision, as applicable.
ARTICLE 4
ASSUMED LIABILITIES
-------------------
4.1 Assumption of Central Liabilities.
---------------------------------
Effective as of the Closing, Insight shall cause the Company to assume and
undertake to pay, discharge, and perform the following:
(a) all obligations of Central to customers of the System for (1)
customer deposits held by Central as of the Closing that are refundable, (2)
customer, advertising, and other advance payments held by Central as of the
Closing for services to be rendered by the Company on or after the Closing Date,
and (3) the delivery of cable television service to cable television service
customers and the exhibition of advertising for advertising customers of the
System on or after the Closing Date;
(b) all obligations of Central under the Franchises, Governmental
Permits, and Assumed Contracts;
(c) all costs and expenses of Central and Insight that are set
forth in Section 12.2; and
(d) all other obligations and liabilities arising out of the
Company's ownership of the Assets or operation of the System, other than
obligations or liabilities arising under any Contract that is not included in
the Assumed Contracts, any obligations or liabilities relating to any Excluded
Asset, and any obligations and liabilities with respect to any Taxes for periods
prior to the Closing Date.
4.2 Liabilities Not Assumed.
-----------------------
Notwithstanding any provision of this Agreement to the contrary, except as
expressly provided in Section 4.1 or Section 12.2, the Company shall not assume
by virtue of this Agreement or the transactions contemplated hereby, and the
Company shall not have any liability for, any obligations or liabilities of
Central or of Insight of any kind, character, or description whatsoever.
-13-
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF CENTRAL
-----------------------------------------
Central represents and warrants to Insight as follows:
5.1 Organization, Standing, and Authority.
-------------------------------------
Central is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Ohio. Central has all requisite
corporate power and authority (a) to own, lease, and use the Assets as now
owned, leased, and used by Central, (b) to conduct the business and operations
of the System as now conducted by Central, and (c) to execute and deliver this
Agreement and the documents contemplated hereby, and to perform and comply with
all of the terms, covenants, and conditions to be performed and complied with by
Central hereunder and thereunder.
5.2 Authorization and Binding Obligation.
------------------------------------
The execution, delivery, and performance by Central of this Agreement and
the documents contemplated hereby have been duly authorized by all necessary
corporate actions on the part of Central. This Agreement has been duly executed
and delivered by Central, and this Agreement constitutes, and when executed and
delivered the documents contemplated hereby will constitute, the legal, valid,
and binding obligations of Central, enforceable against Central in accordance
with their terms, except as the enforceability of this Agreement and the
documents contemplated hereby may be affected by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally and by the application of
general equitable principles.
5.3 Absence of Conflicting Agreements.
---------------------------------
Subject to obtaining the Consents listed on Schedule 5.3 or as otherwise
disclosed on Schedule 5.3, the execution, delivery, and performance by Central
of this Agreement and the documents contemplated hereby (with or without the
giving of notice, the lapse of time, or both): (a) do not require the consent
of, notice to, or filing with any Governmental Authority or any third party;
(b) will not conflict with any provision of the Articles of Incorporation, Code
of Regulations, or any other organizational document of Central; (c) will not
conflict with, result in a breach of, or constitute a default under, any Legal
Requirement or any Judgment; (d) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of, any
agreement, instrument, license, or permit to which Central is a party or by
which Central or any of the Assets may be bound; and (e) will not create any
Lien upon any of the Assets.
-14-
<PAGE>
5.4 Financial Statements.
--------------------
Central has previously delivered to Insight audited financial statements
for the System containing a balance sheet, statement of income, and statement of
cash flows as at and for the fiscal year ended December 31, 1997, and unaudited
financial statements for the System containing a balance sheet, statement of
income, and statement of cash flows as at and for the three months ended March
31, 1998 (collectively, the "Financial Statements"). The Financial Statements
have been prepared from the books and records of Central with respect to the
System, have been prepared in accordance with GAAP consistently applied and
maintained throughout the periods indicated, accurately reflect the books,
records, and accounts of the System, and present fairly the financial condition
of the System as at their respective dates and results of operations for the
periods then ended.
5.5 Interim Operations.
------------------
Except as disclosed on Schedule 55, since March 31, 1998, Central has
conducted the business and operations of the System in the ordinary course of
business consistent with past practice and has not:
(a) sold or otherwise disposed of any assets that would have been
included in the Assets, except obsolete assets where suitable replacements have
been made therefor;
(b) suffered any material adverse change in its ability to conduct
the business and operations of the System in a manner consistent with Central's
past practices;
(c) waived or released any material claim or right of Central
against any third party; or
(d) mortgaged, pledged, or subjected to any Lien any of the Assets
(other than the Liens disclosed in Schedule 5.6).
5.6 Title to Assets; Liens.
----------------------
Except as disclosed on Schedule 5.6, Central has good title to the Assets
free and clear of all Liens, except for Permitted Liens. The Company will, at
the Closing, acquire good title to, and all of Central's right, title, and
interest in and to, the Assets free and clear of all Liens, except for Permitted
Liens. No Person has an option to purchase, right of first refusal, or other
similar right with respect to any Assets.
5.7 Franchises.
----------
Schedule 5.7 lists all Franchises held by Central (including the Service
Area covered by each such Franchise, the Franchising Authority that is party to
each such Franchise, Consent requirement,
-15-
<PAGE>
if any, and the effective date and expiration date for each such Franchise).
Central has delivered to Insight true and complete copies of all Franchises. The
Franchises listed on Schedule 5.7 constitute all of the governmental
authorizations (whether designated as franchises or otherwise), other than the
Governmental Permits, required to conduct the business of the System and operate
the System lawfully and in the same manner as the business of the System is
currently conducted and the System is currently operated by Central. Each
Franchise is in full force and effect in accordance with its terms. Central is
the authorized legal holder of each Franchise. Except as disclosed on Schedule
5.7, Central is not in violation of or in default in the performance of its
obligations under any Franchise. All appropriate requests for renewal under the
Communications Act have been filed with the appropriate Franchising Authorities
within the time frame required by each Franchise and pursuant to applicable
Legal Requirements. Central has no reason to believe that under existing Legal
Requirements, any of the Franchises would not be renewed by the granting
authority in the ordinary course. Central has not made any commitments (oral or
written) to any Franchising Authorities with respect to the System other than
those contained in the Franchises.
5.8 Governmental Permits.
--------------------
Each Governmental Permit held by Central is listed in Schedule 5.8.
Central holds all governmental licenses, permits, and other authorizations that
are required by any applicable Legal Requirement in connection with the conduct
of the business and operation of the System as it is currently conducted and
operated by Central. Each Governmental Permit is valid and in full force and
effect. Central has delivered to Insight true and complete copies of all written
Governmental Permits. Central is not in violation or default of any Governmental
Permit. No proceeding is pending or, to Central's Knowledge, threatened, to
revoke, terminate, cancel, or modify any Governmental Permit.
5.9 Real Property and Real Property Interests.
-----------------------------------------
Schedule 5.9 contains a complete and accurate description of all Real
Property and the nature of all Real Property Interests with respect thereto
(including street address, owner, and use and location of all improvements
thereon). On the date of this Agreement, none of the Real Property Interests
are fee estates. All buildings and improvements occupied by Central on the Real
Property are available for immediate use in the conduct of the business and
operations of the System. There are no pending or, to Central's Knowledge,
threatened condemnation proceedings, special assessments, proceedings for
changes in zoning, lawsuits, or administrative actions that could adversely
affect Central's current use or occupancy of any Real Property. All Real
Property has full legal and practical access to public roads or streets and
facilities necessary for the operation of the System. To Central's Knowledge,
there are no leases, subleases, licenses, concessions, or other agreements,
whether written or oral, granting to any Person the right to use or occupy any
of the Real Property that would impair the Company's ability to use such Real
Property after the Closing for its intended purpose.
-16-
<PAGE>
5.10 Tangible Personal Property.
--------------------------
Schedule 5.10 describes all material items of Tangible Personal Property
(including the name of the lessor with respect to such property which is
leased). The Tangible Personal Property, taken as a whole, is in good operating
condition and repair, subject to ordinary wear and tear.
5.11 Contracts.
---------
Schedule 5.11 is a true and complete list of all written Contracts, other
than (a) Contracts entered into in the ordinary course of business that may be
canceled by Central without penalty on not more than thirty days' notice (other
than material agreements to provide cable television service to multiple
dwelling units), (b) subscription agreements with customers for cable services
provided by the System in the ordinary course of business, (c) programming
agreements (other than retransmission agreements and must-carry elections), and
(d) any Contracts through which Central obtains access or rights-of-entry to any
real property that do not require periodic payments by Central. Central has
delivered to Insight true and complete copies of all Assumed Contracts listed on
Schedule 5.11. Central has given Insight reasonable access to review all other
Assumed Contracts. All of the Assumed Contracts are validly existing, in full
force and effect, and binding and enforceable against Central and the other
parties thereto (subject to bankruptcy, insolvency, or similar laws affecting
creditors' rights generally and to the application of general equitable
principles). No default exists under any Assumed Contract. Central has not, nor
has any other party to a Contract, given or received any notice that any party
to any Assumed Contract intends to terminate or not to renew such Assumed
Contract or amend the terms thereof and, subject to receipt of the Consents, the
consummation of the transactions contemplated by this Agreement is not likely to
result in any such termination, non-renewal, or amendment. Except for the need
to obtain the Consents described in Schedule 5.3, Central has full legal power
and authority to assign its rights under all Assumed Contracts to the Company in
accordance with this Agreement, and such assignment will not affect the
validity, enforceability, or continuation of any such Assumed Contract.
5.12 Intangibles.
-----------
Schedule 5.12 is a true and complete list of the Intangibles, all of which
are valid and in full force and effect and uncontested. Central does not
possess any patent, patent right, trademark, or copyright used or held for use
in connection with the operation of the System and is not party to any license
or royalty agreement with respect to any patent, trademark, or copyright except
for licenses respecting program material and obligations under Section 111 of
the Copyright Act applicable to cable television systems generally. Central, in
its operations of the System, is not infringing upon or otherwise acting
adversely to any trademarks, trade names, copyrights, patents, patent
applications, know-how, methods, or processes owned by any other Person, and
there is no claim or action pending or, to Central's Knowledge, threatened with
respect thereto.
-17-
<PAGE>
5.13 System Information.
------------------
(a) Schedule 5.13 sets forth, as of the date indicated on
Schedule 5.13, for each Service Area, the approximate number of customers of the
System in each class of service. The System consists of approximately 2,300
miles of total plant, of which approximately 736 miles are underground and
approximately 1,564 miles are aerial, from one headend and not fewer than
160,000 Homes Passed.
(b) All of the communities to which the System provides cable
television service have been registered with the FCC. Schedule 5.13 contains a
true and complete, as of the date indicated on Schedule 5.13, list of each such
community and its corresponding FCC community unit identification number.
Except as disclosed on Schedule 5.13, Central has not received notice from any
community or other political subdivision served by the System that it has
applied to or become certified by the FCC for the purpose of regulating the
System's basic rates. Central has used reasonable efforts to establish rates
charged to customers that would be allowable under the rules and regulations
promulgated by the FCC under the Communications Act and any authoritative
interpretation thereof, if such rates were subject to regulation by any
Governmental Authority, including the local franchising authority, or the FCC,
and to Central's Knowledge, such rates as computed under the FCC's rules and
regulations are permitted rates except as set forth in Schedule 5.13. Central
has delivered to Insight true and complete copies of the most recent FCC Forms
393, 1200, 1205, 1210, 1215, 1220, 1230, and 1240 (as applicable) that have been
prepared with respect to the System. Central has given Insight reasonable
access to review all other such FCC Forms. No rate order of any Governmental
Authority is in effect or, to Central's Knowledge, threatened and no complaints
have been filed with the FCC with respect to the rates charged by Central with
respect to the System.
(c) Schedule 5.13 also sets forth a true and complete list of the
current channel alignment or lineup, channel capacity, and bandwidth capability
for the System. Central has delivered to Insight true and accurate records of
the rates, including installation charges, charged to customers for each class
of service and each category of customers of the System. Except as disclosed in
Schedule 5.13, the System is carrying channels and is providing reception on all
such channels in compliance with the technical standards set forth in all
applicable FCC rules, regulations, and requirements. All offset notifications
required to be filed by Central in connection with its operation of the System
have been filed pursuant to Section 76.615 of the FCC's regulations for all
aeronautical frequencies in use by the System. Schedule 5.13 also sets forth
all broadcast and non-broadcast stations or signals carried by the System, with
a breakdown as to each signal as between satellite and off-air reception,
current channel and frequencies utilized (including system radius and designated
coordinates reported to the FCC); all marketing programs pursuant to which any
customers of the System currently are receiving discounts, whether or not such
programs currently are being offered to customers or potential customers of the
System, and all marketing programs active as of the date of this Agreement as
described in written materials distributed to customers or potential customers
of the System (collectively, "Marketing Programs"); and all FCC call signs and
licenses, including business radio, earth station, and microwave licenses.
-18-
<PAGE>
(d) All broadcast television station signals carried on the
System, excluding superstations carried pursuant to 47 C.F.R. (S) 76.64, are
being carried either pursuant to a valid must-carry election or a retransmission
consent agreement authorizing the retransmission of the station's signal. Each
such retransmission consent agreement is in full force and effect and consistent
with FCC rules, and there is no dispute pending or, to Central's Knowledge,
threatened, with respect to the carriage or non-carriage or channel position of
any broadcast station by the System. Central has complied with the must-carry
and retransmission consent provisions of the Communications Act and the FCC
rules and regulations promulgated thereunder as they relate to the System. No
retransmission consent agreement requires a cash payment by Central or imposes
other material onerous conditions. Central has not received any request or
demand to lease channel capacity on the System pursuant to Section 612 of the
Communications Act.
(e) Central and the System are currently in compliance with 47
C.F.R. (S) 76.92 and (S) 76.151, with respect to network non-duplication
protection and syndicated exclusivity, and Central is not aware of any complaint
filed with the FCC alleging noncompliance with such regulations with respect to
the System.
(f) All required authorizations, certificates, licenses, permits,
and clearances from Governmental Authorities (including the FCC and the FAA)
with respect to the System's operations, including all of Central's towers,
earth stations, business radios, and frequencies utilized and carried by the
System, have been obtained by Central and are currently valid and in full force
and effect, and the towers are being operated in compliance with all applicable
FCC and FAA rules.
(g) Schedule 513 contains a true and complete list of each of the
System's towers (including tower coordinates and height for each such tower).
Copies of all relevant determinations of the FAA, if any, with respect thereto
have been delivered to Insight.
(h) Central has filed all reports, applications, financial
statements, and other documents required to be filed by Central with the FCC or
any other Governmental Authority with respect to its ownership and operation of
the System. All of such returns, reports, and documents filed by Central were,
complete and correct in all material respects as filed.
(i) (1) Central has filed with the U.S. Copyright Office all
copyright notices, statements of accounts, supplements, and other documents
required to be filed under Section 111 of the Copyright Act with respect to
Central's ownership and operation of the System and has paid all royalties,
supplemental royalties, fees, and other sums to the U.S. Copyright Office under
the Copyright Act (with all required interest and penalties, if any) required to
be paid by it with respect to such filings, (2) the operations of the System are
in compliance with the Copyright Act and the rules and regulations of the U.S.
Copyright Office, and (3) the System qualifies for, and has obtained, holds, and
maintains, the compulsory license under Section 111 of the Copyright Act, which
compulsory copyright license is in full force and effect. Central has made
available to Insight complete and correct copies of all reports and filings for
the past three years made or filed pursuant
-19-
<PAGE>
to the Copyright Act with respect to the System. Central has not received any
notice or inquiry from the United States Copyright Office or from any other
party concerning any claim, action, or demand relating to its copyright filings,
statements of accounts, or royalty payments or any notice, inquiry, or claim
from any other Person to the effect that the conduct of the business or
operations of the System has infringed, or as currently conducted infringes, on
the intellectual property rights of any Person.
(j) Without limiting the generality of the foregoing, and except
as set forth in Schedule 5.13 hereto:
(1) all of the annual performance tests on the System
required under the rules and regulations of the FCC have been performed and the
results of such tests demonstrate satisfactory compliance in all material
respects;
(2) the System currently meets or exceeds 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);
(3) the System is being operated in compliance with the
provisions of 47 C.F.R. Section 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);
(4) all notices to subscribers of the System required by the
rules and regulations of the FCC have been provided;
(5) Central is in compliance with its obligations with
regard to the protection of subscriber privacy pursuant to Section 631 of the
Communications Act; and
(6) no programmer is currently auditing the System with
respect to the number of System subscribers or amounts paid to any programmer.
5.14 Employees and Compensation.
--------------------------
(a) Schedule 5.14 contains a true and complete list of the names,
present titles and work assignments, respective dates of initial employment, and
current annual salary or hourly rate for all employees of Central as of the date
hereof who perform services primarily in connection with the operation of the
System (each a "System Employee"). Central generally enjoys good employer-
employee relations with the System Employees. Central does not have any written
or oral contracts of employment with any System Employee, other than those
listed in Schedule 5.11.
(b) Except as set forth on Schedule 5.14, neither Central nor any
of its Affiliates is party to, administers, sponsors, maintains, or contributes
to any Employee Plan or Compensation Arrangement for the System Employees,
including any plans subject to ERISA. Except as disclosed
-20-
<PAGE>
in Schedule 5.14, there is not now in effect or to become effective after the
date of this Agreement and until the Closing Date, any new Employee Plan or
Compensation Arrangement or any amendment to an existing Employee Plan or
Compensation Arrangement that will affect the benefits of System Employees and
former System Employees. All Employee Plans that are subject to Section 4980B(f)
of the Code and Sections 601 through 607 of ERISA comply in all material
respects with and have been administered in material compliance with the health
care continuation-coverage requirements for tax-favored status under Section
4980B(f) of the Code, and Sections 601 through 607 of ERISA. Central has
complied in all material respects with all applicable provisions of ERISA, the
Code, the National Labor Relations Act, Title VII of the Civil Rights Act of
1964, the Age Discrimination in Employment Act and all other laws pertaining to
employee benefit plans. Central has no liability for any delinquent
contributions due to employee benefit plans within the meaning of Section 515 of
ERISA (including related attorneys' fees, costs, liquidated damages and
interest) or for any arrearages of wages. Central does not contribute to and is
not required to contribute to any Multiemployer Plan with respect to System
Employees.
(c) Central has complied in all material respects with all
applicable Legal Requirements relating to the employment of labor, including
those related to wages, hours, collective bargaining, discrimination, and the
payment of Social Security or similar taxes. Central has not been and is not a
party to or subject to any collective bargaining agreement with respect to the
System. No proceedings or material controversies or disputes are pending or, to
Central's Knowledge, threatened between it and any System Employee (singly or
collectively). No labor union or other collective bargaining unit represents or
claims to represent any of the System Employees.
5.15 Taxes.
-----
All federal, state and local tax returns required to be filed by Central
in connection with the operation of the System with respect to any Taxes have
been filed and all Taxes which are due and payable have been paid, except such
amounts as are being contested diligently and in good faith and are not in the
aggregate material. There are no legal, administrative, or tax proceedings
pursuant to which Central is or could be made liable for any taxes, penalties,
interest, or other charges, the liability of which could extend to the Company
as transferee of the System or Assets or business related thereto, and no event
has occurred that could impose on the Company any transferee liability for any
taxes, penalties, or interest due or to become due from Central.
5.16 Environmental Matters.
---------------------
Central's operation of the System and use of the Real Property and Assets
complies and has complied with all Environmental Laws, and Central has no
liability under any Environmental Law based on its operation of the System and
use of the Real Property and Assets. Central has not received notice of any
claim or investigation based on Environmental Laws that relates to the
operations of the System, any Real Property or any operations conducted by
Central on such Real Property, including any such notice indicating that the
Real Property has been or may be placed on any federal or state "Superfund" or
"Superlien" list. Neither Central nor, to Central's Knowledge,
-21-
<PAGE>
any other Person has released any reportable quantity of any Hazardous Substance
on the Real Property, treated or disposed of any Hazardous Substance on the Real
Property, or transported any Hazardous Substance to or from any Real Property,
except for such substances found in commercial cleaning products or standard
office supplies of the types and in the amounts customarily used by businesses
similar to the business of the System. Neither Central nor, to Central's
Knowledge, any other Person has installed or removed any tanks on or below the
surface of the Real Property. Central has provided Insight with complete and
correct copies of (1) all studies, reports, surveys or other materials in
Central's possession relating to the presence or alleged presence of Hazardous
Substances on the Real Property, (2) all notices or other materials in Central's
possession that were received from any Governmental Authority having the power
to administer or enforce any Environmental Law relating to current or past
ownership, use, or operation of the Real Property or activities at the Real
Property, and (3) all materials in Central's possession relating to any claim,
allegation, or action by any Person under any Environmental Law relating to
current or past ownership, use, or operation of the Real Property.
5.17 Compliance with Laws.
--------------------
Except as disclosed on Schedule 5.17, neither Central nor the ownership of
the Assets as they are currently owned by Central or the operation of the System
as it is currently operated by Central, is in violation of (a) any applicable
Judgment relating to the System or Assets or (b) any Legal Requirement
applicable to the System or the Assets.
5.18 Claims and Legal Actions.
------------------------
Except as disclosed on Schedule 5.18 and except for proceedings generally
affecting the cable television industry, (a) there is no action, suit, claim,
demand, arbitration, or other proceeding (or, to Central's Knowledge, any
investigation), administrative or judicial, pending (or, to Central's Knowledge,
threatened) against or relating to Central with respect to its ownership or
operation of the System or otherwise relating to the Assets, and (b) no Judgment
been issued against or relating to any of the foregoing.
5.19 Insurance and Bonds.
-------------------
Schedule 5.19 is a true and complete list of all insurance policies of
Central that insure any part of the Assets or the business of the System and all
performance, surety, or other bonds maintained by Central with respect to the
Assets or the business of the System. All of such policies and bonds are in
full force and effect, and Central has received no notice of non-renewal or
cancellation of any such policies or bonds.
5.20 Transactions with Affiliates.
----------------------------
-22-
<PAGE>
Except as disclosed on Schedule 5.20, Central has not been involved in any
business arrangement or relationship relating to the System with any Affiliate
of Central, and no Affiliate of Central owns any property or right, tangible or
intangible, that is used in the business of the System.
5.21 Brokers.
-------
Neither Central nor any Person acting on Central's behalf has incurred any
liability for any finders' or brokers' fees or commissions in connection with
the transaction contemplated by this Agreement, except for fees or commissions
payable to Waller Capital Corporation.
5.22 Assets.
------
Central uses no properties or assets in the business or operations of the
System, other than the Assets and the Excluded Assets, and the Assets and the
Excluded Assets together include all material properties and assets necessary
for the conduct of the business of the System in the ordinary course of business
in substantially the same manner as now conducted.
5.23 Accounts Receivable.
-------------------
All accounts receivable reflected on the Financial Statements, and all
accounts receivable of Central that arose after the date of the Financial
Statements and prior to the date of this Agreement, arose from bona fide
transactions in the ordinary course of business.
5.24 No Undisclosed Liabilities.
--------------------------
Except as and to the extent set forth on Schedule 5.24, Central does not
have any liability or obligation (direct or indirect, absolute, fixed,
contingent, or otherwise) arising out of the Assets or operation of the System
that would be required by GAAP to be reflected or reserved on the Financial
Statements but which are not so reflected or reserved, other than any such
liability or obligation incurred since March 31, 1998 in the ordinary course of
business.
5.25 Liabilities to Customers.
------------------------
Central has no obligations or liabilities to customers of the System
except with respect to (a) prepayments or deposits made by such customers as set
forth in the Financial Statements or, since March 31, 1998, incurred in the
ordinary course of business consistent with past practices, and (b) obligations
to supply services to customers in the ordinary course of business in accordance
with and pursuant to the terms of the Franchises, the Governmental Permits, and
Contracts.
5.26 Restoration.
-----------
No property of any third party has been damaged, destroyed, disturbed or
removed in the process of constructing or maintaining the System that has not
been, or will not be, prior to the
-23-
<PAGE>
Closing, repaired, restored, or replaced, other than in connection with
installation and work projects undertaken in the ordinary course of business and
ongoing as of Closing.
5.27 Overbuilds.
----------
Except as set forth in Schedule 5.27, to Central's Knowledge, on the date
of this Agreement, (a) no construction programs have been undertaken or are
proposed or threatened to be undertaken by any municipality or other cable
television, multichannel multipoint distribution system, or multipoint
distribution system provider or operator in any Service Area; and (b) no
application of any Person for any franchise to provide cable television service
in any Service Area is pending. Except as set forth in Schedule 5.27, Central is
not, nor is an affiliate of Central, a party to any agreement restricting the
ability of a third party to operate cable television systems in the Franchise
areas.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF INSIGHT
-----------------------------------------
Insight represents and warrants to Central as follows:
6.1 Organization, Standing, and Authority.
-------------------------------------
Insight is a limited partnership duly organized, validly existing, and in
good standing under the laws of the State of Delaware. Insight has all
requisite partnership power and authority to own, lease, and use its properties
and assets, to engage in the business or businesses in which it is engaged, and
to execute and deliver this Agreement and the documents contemplated hereby, and
to perform and comply with all of the terms, covenants, and conditions to be
performed and complied with by Insight hereunder and thereunder.
6.2 Authorization and Binding Obligation.
------------------------------------
The execution, delivery, and performance of this Agreement by Insight have
been duly authorized by all necessary actions on the part of Insight. This
Agreement has been duly executed and delivered by Insight, and this Agreement
constitutes, and when executed and delivered the documents contemplated hereby
will constitute, the legal, valid, and binding obligations of Insight,
enforceable against Insight in accordance with their terms, except as the
enforceability of this Agreement and the documents contemplated hereby may be
affected by bankruptcy, insolvency, or similar laws affecting creditors' rights
generally and by the application of general equitable principles.
-24-
<PAGE>
6.3 Absence of Conflicting Agreements.
---------------------------------
Except as set forth on Schedule 6.3, subject to obtaining any Consents
required to be disclosed by Central on Schedule 5.3, the execution, delivery,
and performance by Insight of this Agreement and the documents contemplated
hereby (with or without the giving of notice, the lapse of time, or both): (a)
do not require the consent of, notice to, or filing with any Governmental
Authority or any third party; (b) will not conflict with any provision of
Insight's agreement of limited partnership or certificate of limited
partnership; (c) will not conflict with, result in a breach of, or constitute a
default under, any Legal Requirement or any Judgment; and (d) will not conflict
with, constitute grounds for termination of, result in a breach of, constitute a
default under, or accelerate or permit the acceleration of any performance
required by the terms of, any agreement, instrument, license, or permit to which
Insight is a party or by which Insight may be bound.
6.4 Claims and Legal Actions.
------------------------
Except for proceedings generally affecting the cable television industry,
there is no claim, legal action, counterclaim, suit, arbitration, governmental
investigation, or other legal, administrative, or tax proceeding in progress or
pending or, to the knowledge of Insight, threatened, nor any Judgment
outstanding, against or relating to Insight, that may impair Insight's ability
to perform its obligations under this Agreement, the Operating Agreement, or the
Single-Member LLC Management Agreements.
6.5 Brokers.
-------
Neither Insight nor any Person acting on its behalf has incurred any
liability for any finders' or brokers' fees or commissions in connection with
the transactions contemplated by this Agreement, except for fees or commissions
payable to Lazard Freres & Co. LLC.
ARTICLE 7
OPERATIONS OF SYSTEM PRIOR TO CLOSING
-------------------------------------
7.1 Generally.
---------
Central agrees that, between the date of this Agreement and the Closing
Date, Central shall operate the System in the ordinary course of business
consistent with past practices and in compliance with the other covenants in
this Article 7, except as specifically required by this Agreement or consented
to by Insight.
7.2 Contracts or Commitments.
------------------------
Central shall not (a) modify or amend in any material respect any
Franchise, Governmental Permit, or Assumed Contract, (b) terminate, suspend, or
abrogate any Franchise, Governmental
-25-
<PAGE>
Permit, or Assumed Contract, or (c) enter into any contract that will be binding
on the Company after Closing other than (1) contracts entered into in the
ordinary course of business that do not involve consideration individually in
excess of $75,000 and, in the aggregate, in excess of $350,000, measured at
Closing, and (2) contracts described on Schedule 7.2.
7.3 Disposition of Assets.
---------------------
Central shall not sell, lease or otherwise dispose of any of the Assets
other than in the ordinary course of business where suitable replacements have
been made therefor.
7.4 Distributions.
-------------
Central shall not make any distributions to its shareholders, except for
distributions made consistent with past practices for the purpose of offsetting
tax liabilities attributable to the allocation of taxable income to the
shareholders of Central.
7.5 Encumbrances.
------------
Central shall not create, assume, or permit to exist any Lien upon the
Assets, except for Permitted Liens and Liens that are disclosed on Schedule 5.6.
7.6 Franchises and Governmental Permits.
-----------------------------------
Central shall not cause or permit, by any act or failure to act, any of the
Franchises or Governmental Permits to expire or to be revoked, suspended, or
modified, or take any action that would cause any Franchising Authority or other
Governmental Authority to institute proceedings for the suspension, revocation,
or adverse modification of any of the Franchises or Governmental Permits.
7.7 Access to Information.
---------------------
Central shall, upon reasonable advance notice, give Insight and its
counsel, accountants, engineers, and other authorized representatives reasonable
access to the Assets and to all other properties, equipment, books, records,
Contracts, and documents relating to the System and the Assets for the purpose
of audit and inspection, and will, upon reasonable advance notice, furnish or
cause to be furnished to Insight or its authorized representatives all
information with respect to the affairs and business of the System that Insight
may reasonably request.
7.8 Maintenance of Assets.
---------------------
Central shall maintain all of the Tangible Personal Property in good
operating condition (ordinary wear and tear excepted), use, operate, and
maintain all of the Assets in a reasonable manner, and maintain inventories
consistent with past practices.
-26-
<PAGE>
7.9 Insurance and Bonds.
-------------------
Central shall at all times prior to and through the Closing maintain the
insurance policies (or comparable replacement policies) and bonds described in
Section 5.19 in amounts not less than those in effect on the date hereof.
7.10 Compliance with Contracts and Laws.
----------------------------------
Central shall comply in all material respects with all contractual
obligations and Legal Requirements applicable or relating to its ownership and
operation of the System.
7.11 Changes to Employee Compensation and Benefits.
---------------------------------------------
Except as described on Schedule 7.11, Central shall not cause or permit (a)
any change in the existing salary or compensation rates payable to any System
Employees (other than as required by any Legal Requirement or regularly
scheduled bonuses and increases in salary or compensation in the ordinary course
of business consistent with past practice as described on Schedule 7.11), or (b)
any change in the employee benefits or benefit plans existing on the date of
this Agreement or the establishment of any new employee benefits or benefit
plans (other than as required by any Legal Requirement).
7.12 Delivery of Financial Information.
---------------------------------
Central shall furnish to Insight within 20 days after the end of each month
ending between the date of this Agreement and the Closing Date a flash report of
income and expense for the month just ended for the System and such other
financial information (including information on payables and receivables) as
Insight may reasonably request. Promptly after the preparation thereof, Central
shall deliver to Insight copies of any other financial statements, subscriber
counts, and other operational data regularly prepared by Central for its
internal use.
7.13 Acquisition of Business Office and Headend Site.
-----------------------------------------------
Prior to Closing, Central will acquire, at no cost (net of any capital
contributions received by Central from its shareholders to finance such
acquisition, if required) to Central, good title, free and clear of all Liens
except for Permitted Liens (other than any purchase money liens), to the Real
Property designated on Schedule 5.9 as being owned by Tierra Associates, an
Affiliate of Central, and leased to Central for use as a business office,
warehouse, and headend site.
7.14 Marketing Programs.
------------------
Central shall not initiate any Marketing Programs other than as described
in Schedule 5.13.
-27-
<PAGE>
7.15 Accounts Payable.
----------------
Central shall pay its accounts payable, on average, within forty-five days.
ARTICLE 8
SPECIAL COVENANTS AND AGREEMENTS
--------------------------------
8.1 Consents.
--------
(a) Central shall use commercially reasonable efforts to obtain as
expeditiously as possible all Consents required for the performance of its
obligations under this Agreement and the documents contemplated hereby. No such
Consent shall include any condition or qualification that would impose terms or
conditions that are materially more burdensome than those set forth in the
Franchise, Governmental Permit, or other Assumed Contract that is the subject of
the Consent, unless otherwise agreed to by Insight. Any instrument evidencing
any Consent shall be in form and substance reasonably satisfactory to Insight.
(b) Central will submit an FCC Form 394 to each Franchising Authority
that granted any of the Franchises (excluding any Franchising Authority the
consent of which is not required to assign to the Company the Franchise issued
by such Franchising Authority) within fifteen days after Central receives from
Insight all information regarding Insight that is required to complete such FCC
Form 394.
(c) Nothing in this Agreement shall require Central to make any
expenditure or payment of funds or give any other consideration in order to
obtain any Consent required for the performance of their obligations under this
Agreement and the documents contemplated hereby, except for fees of attorneys
for Central, filing fees, and other reasonable fees or out-of-pocket costs (for
example, application fees) imposed by any Franchising Authority, Governmental
Authority or other third party and any costs required to remedy any item of
breach by Central with the terms of any Franchise, Governmental Permit, or other
Contract.
(d) Insight will cooperate fully with Central in obtaining any
necessary Consents, but Insight will not be required (1) to make any payment to
any Person or Franchising Authority from which such Consent is sought or (2) to
accept any terms, conditions, or obligations that are materially more burdensome
than those currently contained in any Franchise, Governmental Permit, or Assumed
Contract as a condition to obtaining any Consent. Insight may participate with
Central in negotiations with Franchising Authorities and other third parties
with respect to the Consents. Insight will not, without the prior written
consent of Central, seek amendments or modifications to the Franchises or other
Assumed Contracts.
(e) Insight shall promptly furnish to any Franchising Authority or
other third party any information regarding Insight, including financial
information concerning Insight and other
-28-
<PAGE>
information relating to the cable and other operations of Insight (other than
information that Insight reasonably deems to be proprietary), that such
Franchising Authority or other third party may reasonably require in connection
with obtaining any Consent, and Insight shall promptly furnish to Central a copy
of any such information provided to such Franchising Authority or other third
party. Each of Insight and Central shall use reasonable efforts to ensure that
its appropriate officers and employees shall be available to attend, as the
Franchising Authority may reasonably request, any scheduled hearings or meetings
in connection with obtaining such Consent.
8.2 Cooperation.
-----------
The parties to this Agreement will cooperate fully with each other and
their respective counsel and accountants in connection with any actions required
to be taken as part of their respective obligations under this Agreement, and
each party shall execute such other documents as may be reasonably necessary and
desirable to the implementation and consummation of this Agreement, and
otherwise shall use its commercially reasonable efforts to consummate the
transactions contemplated by this Agreement and to fulfill its obligations
hereunder.
8.3 Deferred Contributions.
----------------------
If on the date specified for the Closing pursuant to Section 10.1(a), any
Service Area is not a Transferable Service Area, then, notwithstanding any other
provision of this Agreement, the following provisions shall apply:
(a) At the Closing, Central shall contribute to the Company, only
those Assets that do not relate solely to a Service Area that is not a
Transferable Service Area (including any Assets, such as head-ends and business
offices and the Real Property Interests and equipment related thereto, that may
relate both to Transferable Service Areas and Service Areas that are not
Transferable Service Areas). The Assets that are not contributed to the Company
at the Closing in accordance with the preceding sentence are referred to in this
Section 8.3 as the "Retained Assets." From and after the Closing, Central shall
retain the Retained Assets, and Central shall contribute the Retained Assets to
the Company in accordance with the terms of this Section 8.3.
(b) At the Closing:
(1) All conveyancing documents, certificates, and other documents
contemplated by this Agreement to be delivered at the Closing shall be in the
form and substance provided for in this Agreement with such modifications as are
necessary or appropriate to reflect the provisions of this Section 8.3 and to
relate only to the Assets being contributed to the Company at the Closing.
(2) Central and the Company shall enter into a management
agreement (each, a "Management Agreement"), in form and substance reasonably
satisfactory to Insight and Central, which will provide that the Company will
manage the Retained Assets for Central's benefit
-29-
<PAGE>
and the Company will be entitled to receive and retain all revenues, and will be
responsible for all costs and expenses, attributable to the operations of such
Retained Assets after the Closing.
(c) After the Closing, Central, Insight, and the Company shall
continue to undertake, in accordance with this Agreement, to obtain any Consent
necessary to cause any Service Area that was not a Transferable Service Area on
the Closing Date to become a Transferable Service Area, and the agreements and
obligations of Central and Insight under Section 8.1 shall be fully applicable
in seeking such Consents after the Closing. Central shall give Insight written
notice of the receipt of any Consent necessary to cause any Service Area that
was not a Transferable Service Area on the Closing Date to become a Transferable
Service Area. As soon as practicable after any Service Area that was not a
Transferable Service Area on the Closing Date becomes a Transferable Service
Area, on a date to be specified by Insight, a closing shall be held at which
Central shall contribute to the Company those Retained Assets relating to such
Service Area and the Company and Central shall execute and deliver conveyancing
documents, certificates, and other documents corresponding to those delivered at
the Closing with such modifications as are necessary or appropriate to reflect
the provisions of this Section 8.3 (including the Company's management of the
Retained Assets) and to relate only to the Retained Assets being contributed to
the Company at such closing. Upon such closing, the applicable Management
Agreement will be terminated insofar as it relates to the Retained Assets
transferred at such closing. The value of such Retained Assets is reflected in
the net fair market value of the Assets as calculated in accordance with this
Agreement, and any such contribution by Central shall not increase the amount of
capital contributions made by Central for purposes of the Operating Agreement.
(d) If any Retained Assets have not been contributed to the Company
prior to the dissolution of the Company pursuant to the Operating Agreement,
then, upon the dissolution and liquidation of the Company, the Liquidator (as
defined in the Operating Agreement) shall have the authority to sell such
Retained Assets on behalf of Central in connection with the liquidation of the
Company in accordance with the liquidation procedures in the Operating
Agreement. Upon the consummation of any such sale of the Retained Assets,
Central shall contribute to the Company an amount in cash equal to the net pre-
tax proceeds of such sale, and the Company shall treat such amount as if it were
proceeds from the liquidating sale of assets of the Company. The right to
receive such net sale proceeds in lieu of the Retained Assets, under the
circumstances described in this Section 8.3(d), is reflected in the net fair
market value of the Assets as calculated in accordance with this Agreement, and
neither such contribution by Central nor Central's failure to contribute the
Retained Assets shall increase or decrease the amount of capital contributions
made by Central for purposes of the Operating Agreement.
8.4 Confidentiality.
---------------
(a) Except as and to the extent required by any Legal Requirement or
as provided in Section 8.4(c), each party will keep confidential any information
obtained from the other party in connection with the transactions contemplated
by this Agreement. If this Agreement is terminated, each party will return to
the other party or destroy all information obtained by such party from the
-30-
<PAGE>
other party in connection with the transactions contemplated by this Agreement.
The obligations of the parties under this Section 8.4(a) will survive the
termination of this Agreement.
(b) Except as provided in Section 8.4(c), neither party shall publish
any press release or make any other public announcement concerning this
Agreement or the transactions contemplated hereby without the prior written
consent of the other party, which shall not be withheld unreasonably.
(c) Nothing contained in this Agreement shall prevent either party
from making any filings with Governmental Authorities, including in connection
with any securities filings with any Governmental Authorities or exchanges that,
in its judgment, may be required or advisable in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby.
8.5 Bulk Sales Law.
--------------
Insight, for itself and on behalf of the Company, waives compliance by
Central with Article 6 of the Uniform Commercial Code (regarding bulk sales) as
in effect in the states in which the Assets are located and the business of the
System is conducted.
8.6 Further Assurances.
------------------
After the Closing, Central shall take such actions, and execute and deliver
to the Company such further deeds, bills of sale, assignments, or other transfer
documents as, in the opinion of counsel for Insight, may be reasonably necessary
to ensure the full and effective transfer of the Assets to the Company pursuant
to this Agreement.
8.7 HSR Act.
-------
Each party to this Agreement has determined that neither such party nor its
ultimate parent entity (within the meaning of the HSR Act) is required to make
any filings with the Department of Justice or the Federal Trade Commission under
the HSR Act in connection with the transactions contemplated by this Agreement.
If either party subsequently determines that any filing under the HSR Act is
required in connection with the transactions contemplated by this Agreement, (a)
each party and its Affiliates will cooperate with the other party in causing
such filing to be made as expeditiously as practicable, (b) each party and its
Affiliates will promptly file, after any request by the Department of Justice or
the Federal Trade Commission and after appropriate negotiation with the
Department of Justice or the Federal Trade Commission of the scope of such
request, any information or documents so requested, and (c) each party will
furnish to other party any correspondence from or to, and notify the other party
of any other communications with, the Department of Justice or the Federal Trade
Commission that relates to the transactions contemplated by this Agreement.
-31-
<PAGE>
8.8 Risk of Loss.
------------
The risk of any loss, damage, impairment, confiscation, or condemnation of
any of the Assets from any cause whatsoever shall be borne by Central at all
times prior to the Closing and thereafter shall be borne by the Company.
8.9 Use of Names and Logos.
----------------------
For a period of 180 days after Closing, the Company shall be entitled to
use the trademarks, trade names, service marks, service names, logos, and
similar proprietary rights of Central to the extent incorporated in or on the
Assets transferred to the Company at Closing, provided that Insight shall
exercise reasonable efforts to cause the Company to remove all such names,
marks, logos, and similar proprietary rights of Central from such Assets as soon
as reasonably practicable following Closing.
8.10 Power of Attorney.
-----------------
At Closing, Central shall grant to the Company the limited, irrevocable
right, in Central's name, place, and stead, as Central's attorney-in-fact, to
cash, deposit, endorse, or negotiate checks received on or after the Closing
Date made out to Central in payment for cable television and related services
provided by the System. In addition, on or prior to the Closing Date, Central
shall provide written instructions to its lock-box service provider or similar
agents to promptly forward to the Company all such cash, deposits, and checks
that it may receive. From and after the Closing, Central shall promptly remit
to the Company any payment received by Central on or after the Closing Date in
respect of any accounts receivable of the System as of the Closing.
8.11 Access to Books and Records.
---------------------------
Central shall provide the Company with access and the right to copy for a
period of three years after the Closing Date any books and records that are
Excluded Assets.
8.12 Other Transaction Documents.
---------------------------
Central agrees that, on or prior to the Closing Date, (a) each Principal
will execute the Single-Member LLC Operating Agreement to which he is a party,
(b) each Principal will cause the Single-Member LLC of which he is sole member
to execute and deliver to Insight the Single-Member LLC Management Agreement to
which it is a party, (c) the Amended Articles of Incorporation of Central will
be duly adopted and filed with the Secretary of State of the State of Ohio, and
(d) Central and each Single-Member LLC will execute the Close Corporation
Agreement. Central and Insight agree that, on the Closing Date, the Company
will enter into the Employee Transition Agreement.
-32-
<PAGE>
ARTICLE 9
CLOSING CONDITIONS
------------------
9.1 Conditions to Obligations of Insight.
------------------------------------
All obligations of Insight at the Closing are subject, at Insight's option,
to the fulfillment prior to and at the Closing Date of each of the following
conditions (any one or more of which may be waived by Insight, in its
discretion):
(a) All representations and warranties of Central in this Agreement
shall be true in all material respects at and as of the Closing Date as though
made at and as of such date.
(b) Central shall have performed and complied with in all material
respects all covenants and agreements required by this Agreement to be performed
or complied with by Central prior to or on the Closing Date.
(c) Each Consent designated on Schedule 5.3 as a "Required Consent"
shall have been duly obtained and delivered to Insight without any conditions,
qualifications, or obligations that are materially more burdensome than those
currently set forth in the Governmental Permit or Assumed Contract that is the
subject of such Consent.
(d) The aggregate number of customers in those Service Areas that are
Transferable Service Areas shall be at least two-thirds of the aggregate number
of customers in all Service Areas. For purposes of this Section 9.1(d) and
Section 9.2(e), the number of customers in a Service Area shall be the number of
customers set forth next to the name of such Service Area on Schedule 5.13
(regardless of the actual number of customers in such Service Area on the
Closing Date).
(e) The FCC shall have consented, to the extent such consent is
legally required, to the transfer to the Company of all Governmental Permits
issued by the FCC.
(f) All waiting periods under the HSR Act applicable to this Agreement
or the transactions contemplated by this Agreement to be consummated at the
Closing shall have expired or been terminated.
(g) Central shall have made or stand willing and able to make all the
deliveries required to be made by Central pursuant to Section 10.2.
(h) There shall not be in effect any Judgment that would prevent or
make unlawful the Closing.
-33-
<PAGE>
(i) The transactions contemplated by the Refinancing Proposals shall
have been consummated substantially in accordance with the terms of the
Refinancing Proposals (without regard to any change in interest rates for the
senior notes from those contemplated by the Refinancing Proposals).
(j) Central's operating income for the quarter ended June 30, 1998
shall not have been less than $5,200,000, where Central's operating income for
such period means the net income (or loss) of Central for such period (exclusive
of any extraordinary gain or loss) determined in accordance with GAAP applied in
a manner consistent with Central's past practices, plus interest, depreciation,
amortization, income tax expense, any home office expenses, any non-operating
expenses, and any expenses incurred in connection with the transactions
contemplated by this Agreement or the procurement of any financing, to the
extent such items were deducted in determining Central's net income (or loss)
for such period.
(k) Each Principal shall have executed the Single-Member LLC Operating
Agreement to which he is a party, each Single-Member LLC shall have executed and
delivered to Insight the Single-Member LLC Management Agreement to which it is a
party, the Amended Articles of Incorporation of Central shall have been duly
adopted and filed with the Secretary of State of the State of Ohio, Central and
each Single-Member LLC shall have executed the Close Corporation Agreement, and
Central shall have executed and delivered to the Company the Employee Transition
Agreement.
9.2 Conditions to Obligations of Central.
------------------------------------
All obligations of Central at the Closing are subject, at Central's option,
to the fulfillment prior to and at the Closing Date of each of the following
conditions (any one or more of which may be waived by Central, in its
discretion):
(a) All representations and warranties of Insight in this Agreement
shall be true in all material respects at and as of the Closing Date as though
made at and as of such date.
(b) Insight shall have performed and complied with in all material
respects all covenants and agreements required by this Agreement to be performed
or complied with by it prior to or on the Closing Date.
(c) The aggregate number of customers in those Service Areas that are
Transferable Service Areas shall be at least two-thirds of the aggregate number
of customers in all Service Areas.
(d) The FCC shall have consented, to the extent such consent is
legally required, to the transfer to the Company of all Governmental Permits
issued by the FCC.
-34-
<PAGE>
(e) All waiting periods under the HSR Act applicable to this Agreement
or the transactions contemplated by this Agreement to be consummated at the
Closing shall have expired or been terminated.
(f) Insight shall have caused or stand willing and able to cause the
Company to make all the deliveries to Central set forth in Section 10.3, and
Insight shall have made or shall stand willing and able to make all the
deliveries to the Company set forth in Section 10.4.
(g) There shall not be in effect any Judgment that would prevent or
make unlawful the Closing.
(h) The transactions contemplated by the Refinancing Proposals shall
have been consummated substantially in accordance with the terms of the
Refinancing Proposals (without regard to any change in interest rates for the
senior notes from those contemplated by the Refinancing Proposals).
(i) The Operating Agreement and the Single-Member LLC Management
Agreements shall have been executed and delivered by Insight, and the Employee
Transition Agreement shall have been executed and delivered by the Company.
ARTICLE 10
CLOSING AND CLOSING DELIVERIES
------------------------------
10.1 Time and Place of Closing.
-------------------------
(a) Closing Date.
------------
(1) Except as provided in Section 10.1(a)(2), or as otherwise
agreed to by Central and Insight, the Closing shall take place at 10:00 a.m. on
the fifth Business Day after the satisfaction of the last of the Consent
Conditions to be satisfied.
(2) If on the date on which the Closing would otherwise be
required to take place pursuant to Section 10.1(a)(1), (A) there shall be in
effect any Judgment that would prevent or make unlawful the Closing, (B) any
other circumstance beyond the reasonable control of the party making an election
under this Section 10.1(a)(2) shall exist that would prevent the Closing or the
satisfaction of any of the conditions precedent to the obligations of either
party set forth in this Agreement, or (C) the conditions specified in Section
9.1(i) and Section 9.2(h) shall not be satisfied, then Insight or Central may,
at its option, postpone the date on which the Closing is required to take place
until the fifth Business Day after such Judgment ceases to be in effect, such
other circumstance ceases to exist, or such conditions have been satisfied or
are capable of being satisfied concurrently with the Closing; provided, however,
that any postponement of the date on which the Closing is
-35-
<PAGE>
required to take place pursuant to this Section 10.1(a)(2) shall not restrict
the exercise by either Central or Insight of its rights under Section 11.2(b) or
Section 11.3(b), as applicable.
(b) Closing Place. The Closing shall be held at the offices of
-------------
Cooperman Levitt Winikoff Lester & Newman, P.C., 800 Third Avenue, New York, New
York 10022, or any other place that is agreed upon by Central and Insight.
10.2 Deliveries by Central.
---------------------
On the Closing Date, Central shall deliver to the Company the following, in
form and substance reasonably satisfactory to Insight and its counsel:
(a) Duly executed bills of sale, motor vehicle titles, assignments of
the Franchises, Governmental Permits, and Assumed Contracts, special warranty
deeds and such other transfer documents which shall be sufficient to vest good
title to the Assets in the name of the Company (or its designee), free and clear
of all Liens except for Permitted Liens.
(b) A manually executed copy of any instrument evidencing any Consent
that has been obtained.
(c) Any Management Agreement required pursuant to Section 8.3, duly
executed by Central.
(d) An opinion of counsel to Central, dated as of the Closing Date and
including FCC matters, in form and substance reasonably satisfactory to Insight
and its counsel.
(e) A certificate, dated as of the Closing Date, executed by Central,
certifying that except as disclosed in such certificate, all representations and
warranties of Central contained in this Agreement are true in all material
respects at and as of the Closing Date as though made at and as of that date.
(f) Such additional documents, information, and materials as Insight
shall reasonably request.
10.3 Deliveries by the Company.
-------------------------
On the Closing Date, the Company shall deliver to Central the following, in
form and substance reasonably satisfactory to Central and its counsel:
(a) Appropriate assumption agreements, pursuant to which the Company
shall assume the obligations and liabilities described in Section 4.1.
-36-
<PAGE>
(b) Any Management Agreement required pursuant to Section 8.3, duly
executed by the Company.
(c) The Employee Transition Agreement, duly executed by the Company.
(d) Such additional documents, information, and materials as Central
shall reasonably request.
10.4 Deliveries by Insight.
---------------------
On the Closing Date, Insight shall contribute or cause to be contributed to
the Company, in cash, the sum of Ten Million Dollars and shall deliver to
Central:
(a) An opinion of counsel to Insight, dated as of the Closing Date, in
form and substance reasonably satisfactory to Central and its counsel.
(b) The Operating Agreement, duly executed by Insight.
(c) The Single-Member LLC Management Agreements, duly executed by
Insight.
ARTICLE 11
TERMINATION RIGHTS
------------------
11.1 Termination by Agreement.
------------------------
This Agreement may be terminated at any time prior to the Closing by
agreement between Insight and Central.
11.2 Termination by Central.
----------------------
This Agreement may be terminated by Central prior to the Closing, by
delivering written notice to Insight of its election to terminate this
Agreement, under any of the following circumstances (unless any of such
circumstances occurred as a result of the failure of Central to act in good
faith or as a result of any breach by Central of its representations,
warranties, covenants, or other obligations in this Agreement):
(a) If on the date on which the Closing is required to take place
pursuant to Section 10.1(a) any of the conditions precedent to the obligations
of Central set forth in this Agreement has not been satisfied or waived in
writing by Central.
(b) If the Closing shall not have occurred on or before December 31,
1998.
-37-
<PAGE>
(c) If Insight breaches any of its covenants under this Agreement in
any material respect and fails to cure such breach within thirty days after its
receipt of notice thereof from Central.
(d) After July 15, 1998, if Insight fails to make the escrow deposit
described in Section 11.5.
11.3 Termination by Insight.
----------------------
This Agreement may be terminated by Insight prior to the Closing, by
delivering written notice to Central of its election to terminate this
Agreement, under any of the following circumstances (unless any of such
circumstances occurred as a result of the failure of Insight to act in good
faith or as a result of any breach by Insight of its representations,
warranties, covenants, or other obligations in this Agreement):
(a) If on the date on which the Closing is required to take place
pursuant to Section 10.1(a) any of the conditions precedent to the obligations
of Insight set forth in this Agreement has not been satisfied or waived in
writing by Insight.
(b) If the Closing shall not have occurred on or before December 31,
1998.
(c) If Central breaches any of its covenants under this Agreement in
any material respect and fails to cure such breach within thirty days after its
receipt of notice thereof from Insight.
11.4 Due Diligence Termination.
-------------------------
This Agreement may be terminated by Insight, by delivering written notice
to Central of its election to terminate this Agreement, on or before July 15,
1998 (but in no event after Insight's funding of the escrow deposit described in
Section 11.5), if Insight has determined in its sole discretion that, after
completing its due diligence, Insight is not satisfied with any matter relating
to the System or the transactions contemplated by this Agreement (including the
Exhibits and Schedules to this Agreement).
11.5 Escrow Deposit.
--------------
On or prior to July 15, 1998, if Insight has not terminated this Agreement
pursuant to Section 11.4, Insight shall deposit with an escrow agent agreed to
between Central and Insight (the "Escrow Agent") the amount of $2,000,000 in
accordance with an Escrow Agreement among Insight, Central, and the Escrow
Agent, in form and substance reasonably satisfactory to the parties. All funds
and documents deposited with the Escrow Agent shall be held and disbursed in
accordance with the terms of the Escrow Agreement and the following provisions:
(a) At the Closing, Insight and Central shall jointly instruct the
Escrow Agent to disburse all amounts held by the Escrow Agent pursuant to the
Escrow Agreement, including any
-38-
<PAGE>
interest or other proceeds from the investment of funds held by the Escrow
Agent, to or at the direction of Insight.
(b) If this Agreement is terminated pursuant to this Article 11 and
Section 11.5(c) does not apply, Insight and Central shall jointly instruct the
Escrow Agent to disburse all amounts held by the Escrow Agent pursuant to the
Escrow Agreement, including any interest or other proceeds from the investment
of funds held by the Escrow Agent, to or at the direction of Insight.
(c) If this Agreement is terminated by Central due to Insight's breach
of this Agreement, then Insight and Central shall jointly instruct the Escrow
Agent to disburse all amounts held by the Escrow Agent pursuant to the Escrow
Agreement, including any interest or other proceeds from the investment of funds
held by the Escrow Agent, to or at the direction of Central.
11.6 Rights on Termination.
---------------------
(a) If this Agreement is terminated by Central and Section 11.5(c)
applies, then the payment to Central pursuant to Section 11.5(c) shall be
liquidated damages and shall constitute full payment and the exclusive remedy
for any damages suffered by Central by reason of Insight's breach of this
Agreement. Central and Insight agree in advance that actual damages would be
difficult to ascertain and that the amount of the payment to be made to Central
pursuant to Section 11.5(c) is a fair and equitable amount to reimburse Central
for damages sustained due to Insight's breach of this Agreement.
(b) Upon termination of this Agreement pursuant to this Article 11,
(1) The transactions contemplated by this Agreement shall be
terminated and abandoned, without further action by Insight or Central.
(2) Each party shall return to the other party or destroy all
documents and other material received from the other party and relating to the
transactions contemplated by this Agreement, whether received from the other
party before or after the execution of this Agreement.
(3) All confidential information received by either party to this
Agreement with respect to the business of the other party or any of its
Affiliates shall be treated in accordance with Section 8.4(a).
(4) The provisions of Section 12.2 shall continue in effect.
(5) Neither party to this Agreement shall have any further
obligation or liability under this Agreement to the other party, or to any of
the members, partners, officers, directors, shareholders, employees, or agents
of the other party, except as provided in this Section 11.6, or otherwise in
this Agreement.
-39-
<PAGE>
(c) Following the termination of this Agreement pursuant to this
Article 11, each party agrees to indemnify, defend, and hold harmless the other
party from any liability, loss, or damage incurred by the other party by reason
of any claim made against the other party under this Agreement, in violation of
Section 11.6(b)(5), by any of the members, partners, officers, directors,
shareholders, employees, or agents of the indemnifying party.
11.7 Specific Performance.
--------------------
The parties recognize that if Central breaches this Agreement and refuses
to perform under the provisions of this Agreement, monetary damages alone would
not be adequate to compensate Insight for its injury. Insight shall therefore
be entitled, in addition to any other remedies that may be available, including
money damages, to obtain specific performance of the terms of this Agreement.
If any action is brought by Insight to enforce this Agreement, Central shall
waive the defense that there is an adequate remedy at law.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 Survival of Representations and Warranties.
------------------------------------------
(a) The representations and warranties contained in this Agreement
with respect to (1) title to any asset to be contributed to the Company pursuant
to Section 2.1, (2) Taxes, as set forth in Section 5.15, (3) third-party claims,
as set forth in Section 5.18 and Section 6.4, (4) the authority of each party to
execute and deliver this Agreement and the documents contemplated hereby and to
perform and comply with the terms, covenants, and conditions of this Agreement
and the documents contemplated hereby, as set forth in Section 5.2 and Section
6.2 and (5) the enforceability of this Agreement, as set forth in Section 5.2
and Section 6.2, shall survive the Closing indefinitely. All covenants contained
in this Agreement that by their terms are to be performed in whole or in part at
or following the Closing shall survive until fully discharged or performed.
(b) All representations and warranties contained in this Agreement and
not described in Section 12.1(a) and all covenants in this Agreement that by
their terms are only to be performed prior to the Closing shall not survive the
Closing. Except with respect to those representations, warranties, and covenants
that survive the Closing pursuant to Section 12.1(a), after the Closing, neither
party shall have any recourse against the other party as a result of the breach
of any representation, warranty, or covenant contained in this Agreement, and
each party hereby unconditionally and irrevocably waives and releases any and
all actual or potential claims that it may have against the other party (and its
officers, directors, stockholders, partners, and affiliates) as a result of the
breach by the other party of any representation, warranty, or covenant contained
in this Agreement; provided, however, that nothing in this Section 12.1(b) is
intended to limit the application of Section 3.2(b) to any of the circumstances
described in clause (1) thereof that are identified in a timely notice by
Insight pursuant to clause (2) thereof.
-40-
<PAGE>
(c) In determining the accuracy of representations and warranties in
this Agreement as of a date other than the date of this Agreement, any
representation and warranty in this Agreement that expressly refers to facts
existing on the date of this Agreement or on any other specified date shall
continue to be construed only to refer to facts existing on the date specified
and shall not be construed as a representation or warranty concerning facts
existing at any later date.
12.2 Taxes, Fees, and Expenses.
-------------------------
(a) All filing fees (including all FCC filing fees and all fees
required in connection with filings under the HSR Act), transfer taxes,
recordation taxes, sales taxes, document stamps, or other charges (other than
income taxes) levied by any Governmental Authority prior to the Closing in
connection with the transactions contemplated by this Agreement shall be paid
equally by Central and by Insight. Insight and Central shall pay fees and
expenses of the Escrow Agent as provided in the Escrow Agreement.
(b) Following the Closing, the Company shall:
(1) pay all filing fees, transfer taxes, recordation taxes, sales
taxes, document stamps, or other charges (other than income taxes) levied by any
Governmental Authority at or after the Closing in connection with the
transactions contemplated by this Agreement,
(2) reimburse Insight for all costs and expenses required to be
paid by Insight pursuant to Section 12.2(a), for all attorney's fees and
expenses incurred by Insight in connection with the authorization, preparation,
execution, and closing of this Agreement, for all costs and expenses incurred by
Insight in connection with the consummation of the transactions contemplated by
the Refinancing Proposals, and for all fees or commissions payable to Lazard
Freres & Co. LLC in connection with the transactions contemplated by this
Agreement, and
(3) reimburse Central for all costs and expenses required to be
paid by Central pursuant to Section 12.2(a), for all attorney's fees and
expenses incurred by Central in connection with the authorization, preparation,
execution, and closing of this Agreement, for all costs and expenses incurred by
Central in connection with the consummation of the transactions contemplated by
the Refinancing Proposals, for all fees or commissions payable to Waller Capital
Corporation in connection with the transactions contemplated by this Agreement,
and for any obligations or liabilities incurred by Central as a result of the
termination or cancellation of any programming agreement to which Central is a
party that relates to the business or operations of the System.
(c) Except as otherwise provided in this Agreement, each party hereto
shall pay its own fees and other expenses incurred in connection with the
authorization, preparation, execution, and performance of this Agreement.
-41-
<PAGE>
(d) The obligations of the parties under this Section 12.2 will
survive the termination of this Agreement.
12.3 Notices.
-------
All notices, demands, and requests required or permitted to be given under
the provisions of this Agreement shall be (a) in writing, (b) delivered by
personal delivery, sent by commercial delivery service or registered or
certified mail, return receipt requested, or transmitted by telecopy, (c) deemed
to have been given on the date of receipt, and (d) addressed as follows:
If to Central: Coaxial Communications of Central Ohio, Inc.
c/o Coaxial Communications
5111 Ocean Boulevard
Suite C
Sarasota, Florida 34242
Attention: Dennis McGillicuddy
Telecopier: 941-346-2788
With copies to: Coaxial Communications of Central Ohio, Inc.
3770 East Livingston
Columbus, Ohio 43227
Attention: Thomas E. Wilson
Telecopier: 614-236-1737
and
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036-6802
Attention: David D. Wild
Telecopier: 202-776-2222
If to Insight: Insight Communications, Inc.
126 E. 56th Street
New York, N.Y. 10022
Attention: Michael S. Willner
Telecopier: 212-371-1549
-42-
<PAGE>
With a copy to: Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Attention: Robert L. Winikoff
Telecopier: 212-755-2839
or to any other or additional Persons and addresses as the parties may from time
to time designate in a writing delivered in accordance with this Section 12.3.
12.4 Benefit and Binding Effect.
--------------------------
Neither party hereto may assign this Agreement without the prior written
consent of the other party hereto, except that Insight may, without the consent
of Central, prior to Closing, assign all of Insight's rights and delegate all of
Insight's obligations under this Agreement to a Delaware limited liability
company of which Insight is the sole member if such assignee executes and
delivers to Central an assignment and assumption agreement, in form and
substance reasonably satisfactory to Central, pursuant to which such assignee
shall assume all obligations of Insight under this Agreement. Upon such
assignee's execution and delivery to Central of such assignment and assumption
agreement, Insight shall be released from its obligations hereunder, except that
Insight shall continue to be obligated to make the escrow deposit described in
Section 11.5, and Insight shall execute and deliver to Central and the
Principals a Parent Undertaking substantially in the form to be agreed to by the
parties prior to the funding of the escrow deposit described in Section 11.5.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
12.5 Entire Agreement.
----------------
This Agreement, and all Schedules and Exhibits hereto (which are hereby
incorporated herein), and all documents and certificates to be delivered by the
parties pursuant hereto collectively represent the entire understanding and
agreement between the parties with respect to the subject matter hereof. This
Agreement supersedes all prior negotiations, letters of intent, or other
writings between the parties with respect to the subject matter hereof and
cannot be amended, supplemented, or modified except by waiver pursuant to
Section 12.6 or a written agreement which makes specific reference to this
Agreement and which is signed by the party against which enforcement of any such
amendment, supplement, or modification is sought.
12.6 Waiver of Compliance; Consents.
------------------------------
Any failure of either party to comply with any obligation, representation,
warranty, covenant, or agreement herein may be waived by the party entitled to
the benefits thereof only by a written instrument signed by the party granting
such waiver, but such waiver or failure to insist upon strict compliance with
such obligation, representation, warranty, covenant, or agreement shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure. Whenever this
-43-
<PAGE>
Agreement requires or permits consent by or on behalf of either party hereto,
such consent shall be given in writing in a manner consistent with the
requirements for a waiver of compliance as set forth in this Section 12.6.
12.7 Severability.
------------
If any provision hereof or the application thereof to any Person or
circumstance shall be invalid or unenforceable to any extent, the remainder of
this Agreement and the application of such provision to other Persons or
circumstances shall not be affected thereby and shall be enforced to the
greatest extent permitted by law.
12.8 GOVERNING LAW.
-------------
THIS AGREEMENT SHALL BE GOVERNED, CONSTRUED, AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CHOICE OF LAW
PROVISIONS THEREOF) AND THE UNITED STATES ARBITRATION ACT, TO THE EXTENT
PROVIDED IN SECTION 12.9.
12.9 Disputed Matters.
----------------
(a) Generally. If a dispute arises out of or relates to this
---------
Agreement or any alleged breach thereof, Central and Insight will attempt in
good faith to resolve such dispute through negotiation. Either party may
initiate negotiations by providing written notice in letter form to the other
party setting forth in general terms the subject of the dispute. Representatives
of each party with full settlement authority shall meet at a mutually agreeable
time and place in order to attempt to resolve the dispute. If the dispute is not
resolved in this manner, either party may proceed to arbitration pursuant to
Section 12.9(c) hereof, or, if they so agree, first proceed to mediation
pursuant to Section 12.9(b) hereof.
(b) Mediation. If a dispute arises out of or relates to this
---------
Agreement or any alleged breach thereof and if the dispute is not settled
through negotiation as described in Section 12.9(a), Central and Insight may
agree to submit the dispute for mediation administered by the American
Arbitration Association (or any organization successor thereto) ("AAA") under
its Commercial Mediation Rules before resorting to arbitration. Either party may
initiate mediation pursuant to Rule 2 of the AAA's Commercial Mediation Rules.
The parties will cooperate with the AAA and with one another in the appointment
of a mediator and in scheduling the mediation proceedings. Unless otherwise
agreed by Central and Insight, the first mediation session shall be held no
later than thirty days after the date of filing the written request for
mediation, and the memorandum provided for under Rule 9 of the Commercial
Mediation Rules shall be provided to the mediator at least five days prior to
the first mediation session. All offers, promises, conduct, and statements,
whether oral or written, made in the course of the mediation by any of the
parties, their agents, employees, experts, and attorneys, and by the mediator or
any AAA employees, shall be confidential and inadmissible for any purposes,
including impeachment, in any arbitration or other
-44-
<PAGE>
proceeding involving the parties, but evidence that is otherwise admissible or
discoverable shall not be rendered inadmissible or non-discoverable as a result
of its use in the mediation. Either party may initiate arbitration with respect
to the matters submitted to mediation by filing a written demand for arbitration
with the AAA no sooner than thirty days after the first mediation session. The
mediation may continue after the commencement of arbitration if the parties so
agree. Unless otherwise agreed by Central and Insight, the mediator shall be
disqualified from serving as arbitrator in the case.
(c) Arbitration. If a dispute arises out of or relates to this
-----------
Agreement or any alleged breach thereof, and if the dispute is not resolved
through negotiation and, if so agreed, mediation as described in Section 12.9(a)
and Section 12.9(b), such dispute shall be settled by arbitration in New York,
New York, in accordance with the Commercial Arbitration Rules of the AAA and the
Supplementary Procedures for Large, Complex Disputes of the AAA or other rules
agreed to by Central and Insight, by a panel of three arbitrators.
(d) United States Arbitration Act. The parties acknowledge that this
-----------------------------
Agreement evidences a transaction involving interstate commerce. Insofar as it
applies, the United States Arbitration Act shall govern the interpretation of,
enforcement of, and proceedings pursuant to the arbitration clause in this
Agreement. After arbitration has commenced pursuant to Rule 6 of the Commercial
Arbitration Rules, either party may make an application to the arbitrator
seeking injunctive relief to maintain the status quo until such time as the
arbitration award is rendered or the dispute is otherwise resolved.
(e) Request for Arbitration. The party requesting arbitration shall
-----------------------
do so by giving notice to that effect (the "Arbitration Notice") to the party
and by filing the notice with the AAA in accordance with Rule 6 of the
Commercial Arbitration Rules. Within thirty days after the Arbitration Notice
is filed, Central and Insight shall select an arbitrator using the procedures
for arbitrator selection of the AAA from the arbitrators in the Large, Complex
case pool for the New York, New York, AAA office.
(f) Administrative Conference and Hearing. Upon selection of the
-------------------------------------
arbitrator, Central and Insight shall conduct an initial administrative
conference provided for by the Supplementary Procedures for Large, Complex
Disputes of the AAA at which Central and Insight shall agree to a schedule and
procedures for the exchange of relevant information and the hearing and to any
other matters the arbitrator or Central and Insight deem appropriate. Either
party may submit to the arbitrator prior to the hearing any written information
and may make any oral presentation at the hearing that it deems appropriate to
support its position with respect to the disputed matter. At any hearing before
the arbitrator at which witnesses present testimony either in person or
telephonically Central and Insight shall be entitled to cross examine the
witnesses.
(g) Decision and Award. The arbitrator shall render his written
------------------
decision and award, including a statement of reasons upon which such award is
based, within thirty days after the arbitration hearing. Except insofar as the
United States Arbitration Act applies to such matters, the agreement to
arbitrate set forth in this Section 12.9 shall be construed, and the legal
relations
-45-
<PAGE>
between the parties shall be determined in accordance with, the substantive laws
of the State of New York as provided for in Section 12.8 of this Agreement. The
decision of the arbitrators shall be in writing and shall be binding upon
Central and Insight, final, and non-appealable. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.
(h) Exclusivity of Arbitration. Except as provided under the United
--------------------------
States Arbitration Act, no action at law or in equity based upon any dispute
that is subject to arbitration under this Section 12.9 shall be instituted.
(i) Fees and Expenses. All expenses of any arbitration pursuant to
-----------------
this Section 12.9, including fees and expenses of the parties' attorneys, fees
and expenses of the arbitrator, and fees and expenses of any witness or the cost
of any proof produced at the request of the arbitrator, shall be borne as
determined by the arbitrator. If either party institutes any action in law or in
equity in violation of Section 12.9(h) and the other party successfully compels
arbitration under this Section 12.9, the party instituting such action shall pay
all reasonable expenses incurred by the other party relating to such action,
including reasonable fees and expenses of the other party's attorneys.
12.10 Headings.
--------
The headings in this Agreement are included for ease of reference only and
shall not control or affect the meaning or construction of the provisions of
this Agreement.
12.11 Rights Cumulative.
-----------------
Except as specified in this Agreement, all rights and remedies of each of
the parties under this Agreement will be cumulative, and the exercise of one or
more rights or remedies will not preclude the exercise of any other right or
remedy available under this Agreement or applicable law.
12.12 Construction.
------------
This Agreement has been negotiated by the parties and their respective
legal counsel, and legal or equitable principles that might require the
construction of this Agreement or any provision of this Agreement against the
party drafting this Agreement will not apply in any construction or
interpretation of this Agreement.
12.13 Business Day.
------------
If the last day permitted for the giving of any notice or the performance
of any act required or permitted under this Agreement falls on a day which is
not a Business Day, the time for the giving of such notice or the performance of
such act will be extended to the next succeeding Business Day.
-46-
<PAGE>
12.14 Counterparts.
------------
This Agreement may be executed in two counterparts, each of which, when so
executed and delivered, shall be an original, and both of which counterparts
together shall constitute one and the same fully executed instrument.
12.15 No Third-Party Beneficiaries.
----------------------------
This Agreement is not intended to, and shall not be construed to, create
any right enforceable by any Person that is not a party to this Agreement.
-47-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Contribution Agreement
as of the day first mentioned above.
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
By: /s/ Dennis J. McGillicuddy
-------------------------------
Name: Dennis J. McGillicuddy
Title: Chairman
INSIGHT COMMUNICATIONS COMPANY, L.P.
By: ICC Associates, L.P., its General Partner
By: Insight Communications, Inc., General Partner
By: /s/ Michael S. Willner
-------------------------------
Name: Michael S. Willner
Title: President
-48-
<PAGE>
Exhibit 2.2
AMENDMENT TO CONTRIBUTION AGREEMENT
This AMENDMENT TO CONTRIBUTION AGREEMENT (this "Amendment") is entered into
as of July 15, 1998, by and between Coaxial Communications of Central Ohio,
Inc., an Ohio corporation ("Central"), and Insight Communications Company, L.P.,
a Delaware limited partnership ("Insight").
PRELIMINARY STATEMENT
Central and Insight entered into a Contribution Agreement, dated as of June
30, 1998 (the "Contribution Agreement"). Central and Insight desire to amend
the Contribution Agreement as provided in this Amendment.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS
-----------
Capitalized terms used in this Amendment and not defined in this Amendment
shall have the meanings assigned to them in the Contribution Agreement.
ARTICLE 2
AMENDMENTS TO EXHIBITS
----------------------
2.1 Form of Operating Agreement.
---------------------------
The Contribution Agreement is amended by deleting Exhibit A thereto in its
entirety and substituting therefor the form of Operating Agreement attached to
this Amendment as Exhibit A.
2.2 Form of Amended Articles of Incorporation of Central.
----------------------------------------------------
The Contribution Agreement is amended by deleting Exhibit B thereto in its
entirety and substituting therefor the form of Amended Articles of Incorporation
of Central attached to this Amendment as Exhibit B.
2.3 Form of Close Corporation Agreement of Central.
----------------------------------------------
The Contribution Agreement is amended by deleting Exhibit C thereto in its
entirety and substituting therefor the form of Close Corporation Agreement of
Central attached to this Amendment as Exhibit C.
<PAGE>
2.4 Form of Single-Member LLC Operating Agreement.
---------------------------------------------
The Contribution Agreement is amended by deleting Exhibit D thereto in its
entirety and substituting therefor the form of Single-Member LLC Operating
Agreement attached to this Amendment as Exhibit D.
2.5 Form of Single-Member LLC Management Agreement.
----------------------------------------------
The Contribution Agreement is amended by deleting Exhibit E thereto in its
entirety and substituting therefor the form of Single-Member LLC Management
Agreement attached to this Amendment as Exhibit E.
2.6 Employee Transition Agreement.
-----------------------------
Insight and Central agree that the Employee Transition Agreement shall be
substantially in the form attached to this Amendment as Exhibit F.
2.7 Parent Undertaking.
------------------
Insight and Central agree that the Parent Undertaking referred to in
Section 12.4 of the Contribution Agreement shall be substantially in the form
attached to this Amendment as Exhibit G.
2.8 Schedules.
---------
The Contribution Agreement is amended by deleting the Schedules thereto in
their entirety and substituting therefor the schedules attached to this
Amendment.
2.9 Other Provisions.
----------------
Except where inconsistent with the express terms of this Amendment, all
provisions of the Contribution Agreement as originally entered into shall remain
in full force and effect.
ARTICLE 3
MISCELLANEOUS
-------------
3.1 Benefit and Binding Effect.
--------------------------
This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
-2-
<PAGE>
3.2 Entire Agreement.
----------------
This Amendment represents the entire understanding and agreement between
the parties with respect to the subject matter hereof.
3.3 Governing Law.
-------------
THIS AMENDMENT SHALL BE GOVERNED, CONSTRUED, AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CHOICE OF LAW
PROVISIONS THEREOF).
3.4 Headings.
--------
The headings in this Amendment are included for ease of reference only and
shall not control or affect the meaning or construction of the provisions of
this Amendment.
3.5 Construction.
------------
The rules of construction set forth in the Contribution Agreement shall
govern the construction and interpretation of this Amendment.
3.6 Counterparts.
------------
This Amendment may be executed in two counterparts, each of which, when so
executed and delivered, shall be an original, and both of which counterparts
together shall constitute one and the same fully executed instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment to
Contribution Agreement as of the day first mentioned above.
COAXIAL COMMUNICATIONS OF CENTRAL OHIO,
INC.
By: /s/ Dennis J. McGillicuddy
-----------------------------------
Name: Dennis J. McGillicuddy
Title: Chairman
INSIGHT COMMUNICATIONS COMPANY, L.P.
By: ICC Associates, L.P.,
its General Partner
By: Insight Communications, Inc.,
General Partner
By: /s/ Michael S. Willner
-----------------------------------
Name: Michael S. Willner
Title: President
-4-
<PAGE>
Exhibit 2.3
SECOND AMENDMENT TO CONTRIBUTION AGREEMENT
This AMENDMENT TO CONTRIBUTION AGREEMENT (this "Amendment") is entered into
as of August 21, 1998, by and among Coaxial Communications of Central Ohio,
Inc., an Ohio corporation ("Central"), Insight Communications Company, L.P., a
Delaware limited partnership ("Insight"), and Insight Holdings of Ohio, LLC, a
Delaware limited liability company ("Insight Holdings").
PRELIMINARY STATEMENT
Central and Insight entered into a Contribution Agreement, dated as of June
30, 1998, and an Amendment to Contribution Agreement, dated as of July 15, 1998.
Insight assigned its rights and delegated its obligations under such
Contribution Agreement, as so amended (the "Contribution Agreement"), to Insight
Holdings. The parties desire to amend the Contribution Agreement as provided in
this Amendment.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS
-----------
Capitalized terms used in this Amendment and not defined in this Amendment
shall have the meanings assigned to them in the Contribution Agreement.
ARTICLE 2
AMENDMENTS
----------
2.1 Form of Operating Agreement.
---------------------------
The Contribution Agreement is amended by deleting Exhibit A thereto in its
entirety and substituting therefor the form of Operating Agreement attached to
this Amendment as Exhibit A.
2.2 Certain Contributions.
---------------------
Section 2.1(d)(4) of the Contribution Agreement is amended to read in its
entirety as follows:
(4) To the extent that the effect of any circumstance
giving rise to an amendment to this Agreement pursuant to Section 3.2(b) is
to reduce the operating income of the Company such that the Company is
unable to make any required distribution with respect to the Preferred A
Interest or the Preferred B
<PAGE>
Interest (each as defined in the Operating Agreement), then Central shall
be required to make capital contributions and interest payments pursuant to
this Section 2.1(d) at any time within ten Business Days after a demand
therefor by the Manager (as defined in the Operating Agreement), subject to
the following:
(A) If Central fails to make any capital contributions
and interest payments described in this Section 2.1(d)(4) within ten Business
Days after a demand therefor by the Manager (as defined in the Operating
Agreement), then Insight may, at its option, at any time thereafter and prior to
such time, if any, that Central makes such capital contributions and interest
payments, elect:
(1) to make a capital contribution to the Company
equal to the amount of the capital contributions otherwise required to be made
by Central and pay to the Company interest in the amount of the interest
payments otherwise required to be paid by Central; or
(2) to cause the Company to issue a Common
Interest (as defined in the Operating Agreement) to any Person in exchange for a
capital contribution to the Company equal to the amount of the capital
contributions otherwise required to be made by Central and a payment to the
Company of interest in the amount of the interest payments otherwise required to
be paid by Central; or
(3) to cause the provisions of Section
2.1(d)(4)(B) to apply without further capital contributions to the Company.
(B) If Insight makes an election pursuant to Section
2.1(d)(4)(A) with respect to any capital contributions and interest payments
described in this Section 2.1(d)(4), then (i) Central's obligation under this
Section 2.1(d) to make such capital contributions and interest payments shall be
canceled and Central shall have no further obligation under any provision of
this Section 2.1(d) to make such capital contributions and interest payments and
shall have no liability or obligation to the Company or Insight as a result of
its failure to make such capital contributions and interest payments or as a
result of the circumstance giving rise to the applicable amendment to this
Agreement pursuant to Section 3.2(b), and (ii) the number of Units assigned to
the Common Interests of the Members shall be adjusted as provided in the
Operating Agreement.
(C) Insight shall have no obligation to make an
election pursuant to Section 2.1(d)(4)(A).
-2-
<PAGE>
2.3 Assumption of Liabilities.
-------------------------
(a) Section 4.1(d) of the Contribution Agreement is amended to read
in its entirety as follows:
(d) all other obligations and liabilities arising out of
Central's ownership of the Assets or operation of the System (other than
obligations or liabilities arising under any Contract that is not included in
the Assumed Contracts, any obligations or liabilities relating to any Excluded
Asset, and any obligations and liabilities with respect to any Taxes for periods
prior to the Closing Date) and the obligations and liabilities of Central
described on Schedule 4.1(d).
(b) The Contribution Agreement is amended by adding Schedule 4.1(d)
in the form attached to this Amendment.
2.4 Other Provisions.
----------------
Except where inconsistent with the express terms of this Amendment, all
provisions of the Contribution Agreement as originally entered into shall remain
in full force and effect.
ARTICLE 3
MISCELLANEOUS
-------------
3.1 Benefit and Binding Effect.
--------------------------
This Amendment shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
3.2 Entire Agreement.
----------------
This Amendment represents the entire understanding and agreement among the
parties with respect to the subject matter hereof.
3.3 Governing Law.
-------------
THIS AMENDMENT SHALL BE GOVERNED, CONSTRUED, AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD TO THE CHOICE OF LAW
PROVISIONS THEREOF).
-3-
<PAGE>
3.4 Headings.
--------
The headings in this Amendment are included for ease of reference only and
shall not control or affect the meaning or construction of the provisions of
this Amendment.
3.5 Construction.
------------
The rules of construction set forth in the Contribution Agreement shall
govern the construction and interpretation of this Amendment.
3.6 Counterparts.
------------
This Amendment may be executed in two counterparts, each of which, when so
executed and delivered, shall be an original, and both of which counterparts
together shall constitute one and the same fully executed instrument.
-4-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment to
Contribution Agreement as of the day first mentioned above.
COAXIAL COMMUNICATIONS OF CENTRAL OHIO,
INC.
By: /s/ Dennis J. McGillicuddy
-----------------------------
Name: Dennis J. McGillicuddy
Title: Chairman
INSIGHT COMMUNICATIONS COMPANY, L.P.
By: ICC Associates, L.P., its general
partner
By: Insight Communications, Inc., its
general partner
By: /s/ Michael S. Willner
-----------------------------
Name: Michael S. Willner
Title: President
INSIGHT HOLDINGS OF OHIO, LLC
By: Insight Communications Company,
L.P., its member
By: ICC Associates, L.P., its general
partner
By: Insight Communications, Inc., its
general partner
By: /s/ Michael S. Willner
-----------------------------
Name: Michael S. Willner
Title: President
-5-
<PAGE>
Exhibit 3.1(d)
AMENDED ARTICLES OF INCORPORATION
OF
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
FIRST: The name of the corporation is Coaxial Communications of Central
Ohio, Inc.
SECOND: The place in Ohio where the principal office of the corporation is
to be located is in the City of Columbus, County of Franklin.
THIRD: The purposes for which the corporation is formed are:
1. to acquire, own, hold, and dispose of membership interests in Insight
Communications of Central Ohio, LLC, a Delaware limited liability company, or
any successor-in-interest thereto, or any assets or property acquired in
exchange for any such membership interests, and to exercise all rights incident
to such membership interests or other property or assets, and
2. to engage in the business of developing, owning, designing,
constructing, maintaining, operating, managing, and selling those cable
television systems and other properties and assets owned or held by the
corporation prior to the filing of these amended articles of incorporation, and
3. to do all lawful acts and things necessary, appropriate, proper,
advisable, incidental to, or convenient for the furtherance and accomplishment
of the foregoing purpose, including incurring and maintaining those debt
obligations originally incurred by the corporation under that certain Credit
Agreement, dated November 15, 1994, among the corporation, certain other
parties, and the lenders named therein, as amended, as such debt obligations may
hereafter be amended, modified, restructured, extended, renewed, or
consolidated, and any obligations incurred in refinancing or replacement of or
substitution for any such debt obligations, and performing its obligations and
enforcing its rights under any agreement or other instrument, including any note
or indenture, evidencing all or any part of such debt obligations or pursuant to
which all or any part of such debt obligations exist or are outstanding.
FOURTH: The authorized number of shares of the corporation shall be 2,000,
all of which shall be common shares, each with a par value of $1.00 per share.
FIFTH: Certain aspects of the internal affairs of the corporation and the
relations of the shareholders of the corporation among themselves shall be
regulated by a "close corporation agreement" entered into pursuant to Section
1701.591 of the Ohio General Corporation Law,
<PAGE>
until such time, if any, as such "close corporation agreement" is terminated in
accordance with its terms or the Ohio General Corporation Law.
SIXTH: In accordance with Section 1701.72 of the Ohio General Corporation
Law, these amended articles of incorporation supersede the articles of
incorporation of the corporation as in effect prior to the filing of these
amended articles of incorporation.
-2-
<PAGE>
Exhibit 3.2
Adopted by Shareholder
Action Effective as of
December 18, 1986
----------------------
1986 AMENDED REGULATIONS
OF
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
ARTICLE ONE
MEETINGS OF SHAREHOLDERS
Section 1.01. Annual Meetings. The annual meeting of the
-------------------------------
shareholders for the election of directors, for the consideration of reports to
be laid before such meeting and for the transaction of such other business as
may properly come before such meeting, shall be held on the second Tuesday in
April in each year or on such other date as may be fixed from time to time by
the directors.
Section 1.02. Calling of Meetings. Meetings of the shareholders may
------------------------------------
be called only by the chairman of the board, the president, or, in case of the
president's absence, death, or disability, the vice president authorized to
exercise the authority of the president; the secretary; the directors by action
at a meeting, or a majority of the directors acting without a meeting; or the
holders of at least twenty-five percent (25%) of all shares outstanding and
entitled to vote thereat.
Section 1.03. Place of Meetings. All meetings of shareholders
-----------------------------------
shall be held at the principal office of the corporation, unless otherwise
provided by action of the directors. Meetings of shareholders may be held at any
place within or without the State of Ohio.
<PAGE>
Section 1.04. Notice of Meetings.
---------------------------------
(A) Written notice stating the time, place and purposes of a
meeting of the shareholders shall be given either by personal delivery or by
mail not less than seven nor more than ten days before the date of the meeting,
(1) to each shareholder of record entitled to notice of the meeting, (2) by or
at the direction of the president or the secretary. If mailed, such notice shall
be addressed to the shareholder at his address as it appears on the records of
the corporation. Notice of adjournment of a meeting need not be given if the
time and place to which it is adjourned are fixed and announced at such meeting.
In the event of a transfer of shares after the record date for determining the
shareholders who are entitled to receive notice of a meeting of shareholders, it
shall not be necessary to give notice to the transferee. Nothing herein
contained shall prevent the setting of a record date in the manner provided by
law, the Articles or the Regulations for the determination of shareholders who
are entitled to receive notice of or to vote at any meeting of shareholders or
for any purpose required or permitted by law.
(B) Following receipt by the president or the secretary of a
request in writing, specifying the purpose or purposes for which the persons
properly making such request have called a meeting of the shareholders,
delivered either in person or by registered mail to such officer by any persons
entitled to call a meeting of shareholders, such officer shall cause to be given
to the shareholders entitled thereto notice of a meeting to be held on a date
not less than seven nor more than sixty days
-2-
<PAGE>
after the receipt of such request, as such officer may fix. If such notice is
not given within fifteen days after the receipt of such request by the president
or the secretary, then, and only then, the persons properly calling the meeting
may fix the time of meeting and give notice thereof in accordance with the
provisions of the Regulations.
Section 1.05 Waiver of Notice. Notice of the time, place and purpose
-------------------------------
or purposes of any meeting of shareholders may be waived in writing, either
before or after the holding of such meeting, by any shareholders, which writing
shall be filed with or entered upon the records of such meeting. The attendance
of any shareholder, in person or by proxy, at any such meeting without
protesting the lack of proper notice, prior to or at the commencement of the
meeting, shall be deemed to be a waiver by such shareholder of notice of such
meeting.
Section 1.06. Quorum. At any meeting of shareholders, the holders of
---------------------
a majority of the voting shares of the corporation then outstanding and entitled
to vote thereat, present in person or by proxy, shall constitute a quorum for
such meeting. The holders of a majority of the voting shares represented at a
meeting, whether or not a quorum is present, or the chairman of the board, the
president, or the officer of the corporation acting as chairman of the meeting,
may adjourn such meeting from time to time, and if a quorum is present at such
adjourned meeting any business may be transacted as if the meeting had been held
as originally called.
-3-
<PAGE>
Section 1.07. Votes Required. At all elections of directors the
-----------------------------
candidates receiving the greatest number of votes shall be elected. Any other
matter submitted to the shareholders for their vote shall be decided by the vote
of such proportion of the shares, or of any class of shares, or of each class,
as is required by law, the Articles or the Regulations.
Section 1.08. Order of Business. The order of business at any
--------------------------------
meeting of shareholders shall be determined by the officer of the corporation
acting as chairman of such meeting unless otherwise determined by a vote of the
holders of a majority of the voting shares of the corporation then outstanding,
present in person or by proxy, and entitled to vote at such meeting.
Section 1.09. Shareholders Entitled to Vote. Each shareholder of
----------------------------------------------
record on the books of the corporation on the record date for determining the
shareholders who are entitled to vote at a meeting of shareholders shall be
entitled at such meeting to one vote for each share of the corporation standing
in his name on the books of the corporation on such record date. The directors
may fix a record date for the determination of the shareholders who are entitled
to receive notice of and to vote at a meeting of shareholders, which record date
shall not be a date earlier than the date on which the record date is fixed and
which record date may be a maximum of sixty days preceding the date of the
meeting of shareholders.
Section 1.10. Cumulative Voting. If notice in writing shall be given
--------------------------------
by a shareholder to the president, a vice presi
-4-
<PAGE>
dent or the secretary of the corporation, not less than forty-eight hours before
the time fixed for holding a meeting of the shareholders for the purpose of
electing directors if notice of such meeting shall have been given at least ten
days prior thereto, and otherwise not less than twenty-four hours before such
time, that such shareholder desires that the voting at such election shall be
cumulative, and if an announcement of the giving of such notice is made upon the
convening of the meeting by the chairman or secretary or by or on behalf of the
shareholder giving such notice, each shareholder shall have the right to
cumulate such voting power as he possesses and to give one candidate as many
votes as is determined by multiplying the number of directors to be elected by
the number of votes to which such shareholder is entitled, or to distribute such
number of votes on the same principle among two or more candidates, as he sees
fit.
Section 1.11. Proxies. At meetings of the shareholders any
----------------------
shareholder of record entitled to vote thereat may be represented and may vote
by a proxy or proxies appointed by an instrument in writing signed by such
shareholder, but such instrument shall be filed with the secretary of the
meeting before the person holding such proxy shall be allowed to vote
thereunder. No proxy shall be valid after the expiration of eleven months after
the date of its execution, unless the shareholder executing it shall have
specified therein the length of time it is to continue in force.
Section 1.12. Inspectors of Election. In advance of any meeting of
-------------------------------------
shareholders, the directors may appoint inspectors
-5-
<PAGE>
of election to act at such meeting or any adjournment thereof; if inspectors are
not so appointed, the officer of the corporation acting as chairman of any such
meeting may make such appointment. In case any person appointed as inspector
fails to appear or act, the vacancy may be filled only by appointment made by
the directors in advance of such meeting or, if not so filled, at the meeting by
the officer of the corporation acting as chairman of such meeting. No other
person or persons may appoint or require the appointment of inspectors of
election.
ARTICLE TWO
DIRECTORS
Section 2.01. Authority and Qualifications. Except where the law,
--------------------------------------------
the Articles or the Regulations otherwise provide, all authority of the
corporation shall be vested in and exercised by its directors. Directors need
not be shareholders of the corporation.
Section 2.02. Number of Directors and Term of Office.
-----------------------------------------------------
(A) The number of directors of the corporation shall be one (1) so
long as all shares of the corporation are owned of record by one shareholder;
and at any time when all shares of the corporation are owned of record by two or
more shareholders, the number of directors of the corporation shall be three
(3). Each director shall be elected to serve until the next annual meeting of
shareholders and until his successor is duly elected and qualified or until his
earlier resignation, removal from office, or death.
-6-
<PAGE>
(B) The number of directors may be fixed or changed at a meeting
of the shareholders called for the purpose of electing directors at which a
quorum is present, only by the affirmative vote of the holders of not less than
a majority of the voting shares which are represented at the meeting, in person
or by proxy, and entitled to vote on such proposal.
(C) The directors may fix or change the number of directors and
may fill any director's office that is created by an increase in the number of
directors; provided, however, that the directors may not increase the number of
directors to more than three (3).
(D) No reduction in the number of directors shall of itself have
the effect of shortening the term of any incumbent director.
Section 2.03. Election. At each annual meeting of shareholders for
-----------------------
the election of directors, the successors to the directors whose term shall
expire in that year shall be elected, but if the annual meeting is not held or
if one or more of such directors are not elected thereat, they may be elected at
a special meeting called for that purpose. The election of directors shall be by
ballot whenever requested by the presiding officer of the meeting or by the
holders of a majority of the voting shares outstanding, entitled to vote at such
meeting and present in person or by proxy, but unless such request is made, the
election shall be viva voce.
Section 2.04. Removal. A director or directors may be removed from
----------------------
office, with or without assigning any cause, only by
-7-
<PAGE>
the vote of the holders of shares entitling them to exercise not less than a
majority of the voting power of the corporation to elect directors in place of
those to be removed, provided that unless all the directors, or all the
directors of a particular class (if the directors of the corporation are divided
into classes), are removed, no individual director shall be removed in case the
votes of a sufficient number of shares are cast against his removal which, if
cumulatively voted at an election of all directors, or all the directors of a
particular class, as the case may be, would be sufficient to elect at least one
director. In case of any such removal, a new director may be elected at the same
meeting for the unexpired term of each director removed. Failure to elect a
director to fill the unexpired term of any director removed shall be deemed to
create a vacancy in the board.
Section 2.05. Vacancies. The remaining directors, through less than
------------------------
a majority of the whole authorized number of directors, may, by the vote of a
majority of their number, fill any vacancy in the board for the unexpired term.
A vacancy in the board exists within the meaning of this Section 2.05 in case
the shareholders increase the authorized number of directors but fail at the
meeting at which such increase is authorized, or an adjournment thereof, to
elect the additional directors provided for, or in case the shareholders fail at
any time to elect the whole authorized number of directors.
Section 2.06. Meetings. A meeting of the directors shall be held
-----------------------
immediately following the adjournment of each
-8-
<PAGE>
annual meeting of shareholders at which directors are elected, and notice of
such meeting need not be given. The directors shall hold such other meetings as
may from time to time be called, and such other meetings of directors may be
called only by the chairman of the board, the president, or any two directors.
All meetings of directors shall be held at the principal office of the
corporation in Columbus, Ohio or at such other place within or without the State
of Ohio, as the directors may from time to time determine by a resolution.
Meetings of the directors may be held through any communications equipment if
all persons participating can hear each other and participation in a meeting
pursuant to this provision shall constitute presence at such meeting.
Section 2.07. Notice of Meetings. Notice of the time and place of
----------------------------------
each meeting of directors for which such notice is required by law, the
Articles, the Regulations or the By-Laws shall be given to each of the
directors by at least one of the following methods:
(A) In a writing mailed not less than three days before such
meeting and addressed to the residence or usual place of
business of a director, as such address appears on the
records of the corporation; or
(B) By telegraph, cable, radio, wireless, or a writing sent or
delivered to the residence or usual place of business of a
director as the same appears on the records of the corpora-
-9-
<PAGE>
tion, not later than the day before the date on which such
meeting is to be held; or
(C) Personally or by telephone not later than the day before the
date on which such meeting is to be held.
Notice given to a director by any one of the methods specified in the
Regulations shall be sufficient, and the method of giving notice to all
directors need not be uniform. Notice of any meeting of directors may be given
only by the chairman of the board, the president or the secretary of the
corporation. Any such notice need not specify the purpose or purposes of the
meeting. Notice of adjournment of a meeting of directors need not be given if
the time and place to which it is adjourned are fixed and announced at such
meeting.
Section 2.08. Waiver of Notice. Notice of any meeting of directors
-------------------------------
may be waived in writing, either before or after the holding of such meeting, by
any director, which writing shall be filed with or entered upon the records of
the meeting. The attendance of any director at any meeting of directors without
protesting, prior to or at the commencement of the meeting, the lack of proper
notice, shall be deemed to be a waiver by him of notice of such meeting.
Section 2.09. Quorum. A majority of the whole authorized number of
---------------------
directors shall be necessary to constitute a quorum for a meeting of directors,
except that a majority of the directors in office shall constitute a quorum for
filling a vacancy in the board. The act of a majority of the directors pre-
-10-
<PAGE>
sent at a meeting at which a quorum is present is the act of the board, except
as otherwise provided by law, the Articles or the Regulations.
Section 2.10. Executive Committee. The directors may create an
-----------------------------------
executive committee or any other committee of directors, to consist of not less
than three (3) directors, and may authorize the delegation to such executive
committee or other committees of any of the authority of the directors, however
conferred, other than that of filling vacancies among the directors or in the
executive committee or in any other committee of the directors.
Such executive committee or any other committee of directors shall
serve at the pleasure of the directors, shall act only in the intervals between
meetings of the directors, and shall be subject to the control and direction of
the directors. Such executive committee or other committee of directors may act
by a majority of its members at a meeting or by a writing or writings signed by
all of its members.
Any act or authorization of any act by the executive committee or any
other committee within the authority delegated to it shall be as effective for
all purposes as the act or authorization of the directors. No notice of a
meeting of the executive committee or of any other committee of directors shall
be required. A meeting of the executive committee or of any other committee of
directors may be called only by the president or by a member of such executive
or other committee of directors. Meetings of the executive committee or of any
other committee of
-11-
<PAGE>
directors may be held through any communications equipment if all persons
participating can hear each other and participation in such a meeting shall
constitute presence thereat.
Section 2.11. Compensation. Directors shall be entitled to receive as
--------------------------
compensation for services rendered and expenses incurred as directors, such
amounts as the directors may determine.
Section 2.12. By-Laws. The directors may adopt, and amend from time
---------------------
to time, By-Laws for their own government, which By-Laws shall not be
inconsistent with the law, the Articles or the Regulations.
ARTICLE THREE
OFFICERS
Section 3.01. Officers. The officers of the corporation to be
------------------------
elected by the directors shall be a president, a secretary, a treasurer, and, if
desired, one or more vice presidents and such other officers and assistant
officers as the directors may from time to time elect. The directors may elect a
chairman of the board, who must be a director. Officers need not be shareholders
of the corporation, and may be paid such compensation as the board of directors
may determine. Any two or more offices may be held by the same person, but no
officer shall execute, acknowledge, or verify any instrument in more than one
capacity if such instrument is required by law, the Articles, the Regulations or
the By--Laws to be executed, acknowledged, or verified by two or more officers.
-12-
<PAGE>
Section 3.02. Tenure of Office. The officers of the corporation
--------------------------------
shall hold office at the pleasure of the directors. Any officer of the
corporation may be removed, either with or without cause, at any time, by the
affirmative vote of a majority of all the directors then in office; such
removal, however, shall be without prejudice to the contract rights, if any, of
the person so removed.
Section 3.03. Duties of the Chairman of the Board. The chairman
------------------------------------------------------
of the board, if any, shall preside at all meetings of the directors. He shall
have such other powers and duties as the directors shall from time to time
assign to him.
Section 3.04. Duties of the President. The president shall be the
---------------------------------------
chief executive officer of the corporation and shall exercise supervision over
the business of the corporation and shall have, among such additional powers and
duties as the directors may from time to time assign to him, the power and
authority to sign all certificates evidencing shares of the corporation and all
deeds, mortgages, bonds, contracts, notes and other instruments requiring the
signature of the president of the corporation. It shall be the duty of the
president to preside at all meetings of shareholders.
Section 3.05. Duties of the Vice Presidents. In the absence of the
----------------------------------------------
president or in the event of his inability or refusal to act, the vice
president, if any (or in the event there be more than one vice president, the
vice presidents in the order designated, or in the absence of any designation,
then in the order of their election), shall perform the duties of the presi-
-13-
<PAGE>
dent, and when so acting, shall have all the powers of and be subject to all
restrictions upon the president. The vice presidents shall perform such other
duties and have such other powers as the directors may from time to time
prescribe.
Section 3.06. Duties of the Secretary. It shall be the duty of the
---------------------------------------
secretary, or of an assistant secretary, if any, in case of the absence or
inability to act of the secretary, to keep minutes of all the proceedings of the
shareholders and the directors and to make a proper record of the same; to
perform such other duties as may be required by law, the Articles or the
Regulations; to perform such other and further duties as may from time to time
be assigned to him by the directors or the president; and to deliver all books,
paper and property of the corporation in his possession to his successor, or to
the president.
Section 3.07. Duties of the Treasurer. The treasurer, or an assistant
--------------------------------------
treasurer, if any, in case of the absence or inability to act of the treasurer,
shall receive and safely keep in charge all money, bills, notes, choses in
action, securities and similar property belonging to the corporation, and shall
do with or disburse the same as directed by the president or the directors;
shall keep an accurate account of the finances and business of the corporation,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, stated capital and shares, together with such other accounts as may be
required and hold the same open for inspection and examination by the directors;
shall give bond in such sum with such security as the directors may require for
the faithful performance of his
-14-
<PAGE>
duties; shall, upon the expiration of his term of office, deliver all money and
other property of the corporation in his possession or custody to his successor
or the president; and shall perform such other duties as from time to time may
be assigned to him by the directors.
ARTICLE FOUR
SHARES
Section 4.01. Certificates. Certificates evidencing ownership of
----------------------------
shares of the corporation shall be issued to those entitled to them. Each
certificate evidencing shares of the corporation shall bear a distinguishing
number; the signatures of the chairman of the board, the president, or a vice
president, and of the secretary or an assistant secretary (except that when any
such certificate is countersigned by an incorporated transfer agent or
registrar, such signatures may be facsimile, engraved, stamped or printed); and
such recitals as may be required by law. Certificates evidencing shares of the
corporation shall be of such tenor and design as the directors may from time to
time adopt and may bear such recitals as are permitted by law.
Section 4.02. Transfers. Where a certificate evidencing a share or
------------------------
shares of the corporation is presented to the corporation or its proper agents
with a request to register transfer, the transfer shall be registered as
requested if:
(A) An appropriate person signs on each certificate so presented
or signs on a separate document an assignment or transfer of shares evidenced by
each such certificate, or signs a power to assign or transfer such shares, or
when the
-15-
<PAGE>
signature of an appropriate person is written without more on the back of each
such certificate; and
(B) Reasonable assurance is given that the indorsement of each
appropriate person is genuine and effective; the corporation or its agents may
refuse to register a transfer of shares unless the signature of each appropriate
person is guaranteed by a commercial bank or trust company having an office or a
correspondent in the City of New York or by a firm having membership in the New
York Stock Exchange; and
(C) All applicable laws relating to the collection of transfer or
other taxes have been complied with; and
(D) The corporation or its agents are not otherwise required or
permitted to refuse to register such transfer.
Section 4.03. Transfer Agents and Registrars. The directors may
--------------------------------------------
appoint one or more agents to transfer or to register shares of the corporation,
or both.
Section 4.04. Lost, Wrongfully Taken or Destroyed Certificates.
---------------------------------------------------------------
Except as otherwise provided by law, where the owner of a certificate evidencing
shares of the corporation claims that such certificate has been lost, destroyed
or wrongfully taken, the directors must cause the corporation to issue a new
certificate in place of the original certificate if the owner:
(A) So requests before the corporation has notice that such
original certificate has been acquired by a bona fide purchaser; and
-16-
<PAGE>
(B) Files with the corporation, unless waived by the directors,
an indemnity bond, with surety or sureties satisfactory to the corporation, in
such sums as the directors may, in their discretion, deem reasonably sufficient
as indemnity against any loss or liability that the corporation may incur by
reason of the issuance of each such new certificate; and
(C) Satisfies any other reasonable requirements which may be
imposed by the directors, in their discretion.
Section 4.05. Uncertificated Shares. Anything contained in this
--------------------------------------
Article Fourth to the contrary notwithstanding, the directors may provide by
resolution that some or all of any or all classes and series of shares of the
corporation shall be uncertificated shares, provided that such resolution shall
not apply to (A) shares of the corporation represented by a certificate until
such certificate is surrendered to the corporation in accordance with applicable
provisions of Ohio law or (B) any certificated security of the corporation
issued in exchange for an uncertificated security in accordance with applicable
provisions of Ohio law. The rights and obligations of the holders of
uncertificated shares and the rights and obligations of the holders of
certificates representing shares of the same class and series shall be
identical, except as otherwise expressly provided by law.
ARTICLE FIVE
INDEMNIFICATION AND INSURANCE
Section 5.01. Mandatory Indemnification. The corporation shall
----------------------------------------
indemnify any officer or director of the corporation
-17-
<PAGE>
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (including, without limitation, any action
threatened or instituted by or in the right of the corporation), by reason of
the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee or agent of another corporation (domestic
or foreign, nonprofit or for profit), partnership, joint venture, trust or other
enterprise, against expenses (including, without limitation, attorneys' fees,
filing fees, court reporters' fees and transcript costs), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, he had no
reasonable cause to believe his conduct was unlawful. A person claiming
indemnification under this Section 5.01 shall be presumed, in respect of any act
or omission giving rise to such claim for indemnification, to have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal matter, to have
had no reasonable cause to believe his conduct was unlawful, and the termination
of any action, suit or proceeding by judgment, order, settlement or conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
rebut such presumption.
-18-
<PAGE>
Section 5.02. Court--Approved Indemnification. Anything
-----------------------------------------------
contained in the Regulations or elsewhere to the contrary notwithstanding:
(A) The corporation shall not indemnify any officer or director
of the corporation who was a party to any completed action or suit instituted by
or in the right of the corporation to procure a judgment in its favor by reason
of the fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, trustee, officer, employee or agent of another corporation (domestic
or foreign, nonprofit or for profit), partnership, joint venture, trust or other
enterprise, in respect of any claim, issue or matter asserted in such action or
suit as to which he shall have been adjudged to be liable for gross negligence
or misconduct (other than negligence) in the performance of his duty to the
corporation unless and only to the extent that the Court of Common Pleas of
Franklin County, Ohio or the court in which such action or suit was brought
shall determine upon application that, despite such adjudication of liability,
and in view of all the circumstances of the case, he is fairly and reasonably
entitled to such indemnity as such Court of Common Pleas or such other court
shall deem proper; and
(B) The corporation shall promptly make any such unpaid
indemnification as is determined by a court to be proper as contemplated by this
Section 5.02.
Section 5.03. Indemnification for Expenses. Anything contained in
--------------------------------------------
the Regulations or elsewhere to the contrary not-
-19-
<PAGE>
withstanding, to the extent that an officer or director of the corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 5.01, or in defense of any claim, issue or
matter therein, he shall be promptly indemnified by the corporation against
expenses (including, without limitation, attorneys' fees, filing fees, court
reporters' fees and transcript costs) actually and reasonably incurred by him in
connection therewith.
Section 5.04 Determination Required. Any indemnification required
--------------------------------------
under Section 5.01 and not precluded under Section 5.02 shall be made by the
corporation only upon a determination that such indemnification of the officer
or director is proper in the circumstances because he has met the applicable
standard of conduct set forth in Section 5.01. Such determination may be made
only (A) by a majority vote of a quorum consisting of directors of the
corporation who were not and are not parties to, or threatened with, any such
action, suit or proceeding, or (B) if such a quorum is not obtainable or if a
majority of a quorum of disinterested directors so directs, in a written opinion
by independent legal counsel other than an attorney, or a firm having associated
with it an attorney, who has been retained by or who has performed services for
the corporation, or any person to be indemnified, within the past five years, or
(C) by the shareholders, or (D) by the Court of Common Pleas of Franklin County,
Ohio or (if the corporation is a party thereto) the court in which such action,
suit or proceeding was brought, if any; any such determination may be made by a
court under division (D) of
-20-
<PAGE>
this Section 5.04 at any time including, without limitation, any time before,
during or after the time when any such determination may be requested of, be
under consideration by or have been denied or disregarded by the disinterested
directors under division (A) or by independent legal counsel under division (B)
or by the shareholders under division (C) of this Section 5.04]; and no failure
for any reason to make any such determination, and no decision for any reason to
deny any such determination, by the disinterested directors under division (A)
or by independent legal counsel under division (B) or by shareholders under
division (C) of this Section 5.04 shall be evidence in rebuttal of the
presumption recited in Section 5.01. Any determination made by the disinterested
directors under division (A) or by independent legal counsel under division (B)
of this Section 5.04 to make indemnification in respect of any claim, issue or
matter asserted in an action or suit threatened or brought by or in the right of
the corporation shall be promptly communicated to the person who threatened or
brought such action or suit, and within ten (10) days after receipt of such
notification such person shall have the right to petition the Court of Common
Pleas of Franklin County, Ohio or the court in which such action or suit was
brought, if any, to review the reasonableness of such determination.
Section 5.05. Advances for Expenses. Expenses (including, without
--------------------------------------
limitation, attorneys' fees, filing fees, court reporters' fees and transcript
costs) incurred in defending any action, suit or proceeding referred to in
Section 5.01 shall be
-21-
<PAGE>
paid by the corporation in advance of the final disposition of such action, suit
or proceeding to or on behalf of the officer or director promptly as such
expenses are incurred by him, but only if such officer or director shall first
agree, in writing, to repay all amounts so paid in respect of any claim, issue
or other matter asserted in such action, suit or proceeding in defense of which
he shall not have been successful on the merits or otherwise:
(A) Unless it shall ultimately be determined as provided in Section
5.04 that he is entitled to be indemnified by the corporation as provided under
Section 5.01; or
(B) If, in respect of any claim, issue or other matter asserted by or
in the right of the corporation in such action or suit, he shall have been
adjuged to be liable for gross negligence or misconduct (other than negligence)
in the performance of his duty to the corporation, unless and only to the extent
that the Court of Common Pleas of Franklin County, Ohio or the court in which
such action or suit was brought shall determine upon application that, despite
such adjudication of liability, and in view of all the circumstances, he is
fairly and reasonably entitled to all or part of such indemnification.
Section 5.06. Article Five Not Exclusive. The indemnification provided
------------------------------------------
by this Article Five shall not be deemed exclusive of any other rights to which
any person seeking indemnification may be entitled under the Articles or the
Regulations or any agreement, vote of shareholders or disinterested directors,
or otherwise, both as to action in his official capacity
-22-
<PAGE>
and as to action in another capacity while holding such office, and shall
continue as to a person who has ceased to be an officer or director of the
corporation and shall inure to the benefit of the heirs, executors, and
administrators of such a person.
Section 5.07. Insurance. The corporation may purchase and maintain
------------------------
insurance on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, trustee, officer, employee, or agent of another corporation
(domestic or foreign, nonprofit or for profit), partnership, joint venture,
trust or other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as such,
whether or not the corporation would have the obligation or the power to
indemnify him against such liability under the provisions of this Article Five.
Section 5.08. Certain Definitions. For purposes of this Article
------------------------------------
Five, and as examples and not by way of limitation:
(A) A person claiming indemnification under this Article 5 shall
be deemed to have been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section 5.01, or in defense of any
claim, issue or other matter therein, if such action, suit or proceeding shall
be terminated as to such person, with or without prejudice, without the entry of
a judgment or order against him, without a conviction of him, without the
imposition of a fine upon him and without his payment or agreement to pay any
amount in settlement thereof (whether or not any such termination is based upon
a
-23-
<PAGE>
judicial or other determination of the lack of merit of the claims made against
him or otherwise results in a vindication of him); and
(B) References to an "other enterprise" shall include employee benefit
plans; references to a "fine" shall include any excise taxes assessed on a
person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee or agent with respect to
an employee benefit plan, its participants or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the best
interests of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests of
the corporation" within the meaning of that term as used in this Article Five.
Section 5.09. Venue. Any action, suit or proceeding to determine a
---------------------
claim for indemnification under this Article Five may be maintained by the
person claiming such indemnification, or by the corporation, in the Court of
Common Pleas of Franklin County, Ohio. The corporation and (by claiming such
indemnification) each such person consent to the exercise of jurisdiction over
its or his person by the Court of Common Pleas of Franklin County, Ohio in any
such action, suit or proceeding.
-24-
<PAGE>
ARTICLE SIX
MISCELLANEOUS
Section 6.01. Amendments. The Regulations may be amended, or new
---------------------------
regulations may be adopted, at a meeting of shareholders held for such purpose,
only by the affirmative vote of the holders of shares entitling them to exercise
not less than a majority of the voting power of the corporation on such
proposal, or without a meeting by the written consent of the holders of shares
entitling them to exercise not less than a majority of the voting power of the
corporation on such proposal.
Section 6.02. Action by Shareholders or Directors Without a
-----------------------------------------------------------------
Meeting. Anything contained in the Regulations to the contrary notwithstanding,
- -------
except as provided in Section 6.01, any action which may be authorized or taken
at a meeting of the shareholders or of the directors or of a committee of the
directors, as the case may be, may be authorized or taken without a meeting with
the affirmative vote or approval of, and in a writing or writings signed by, all
the shareholders who would be entitled to notice of a meeting of the
shareholders held for such purpose, or all the directors, or all the members of
such committee of the directors, respectively, which writings shall be filed
with or entered upon the records of the corporation.
Section 6.03. Pronouns. The number and gender of each pronoun used in
-----------------------
the Regulations shall be construed to be such number and gender as the context,
circumstances or its antecedent may require.
-25-
<PAGE>
Exhibit 3.3
PHOENIX ASSOCIATES
------------------
AMENDMENT TO GENERAL PARTNERSHIP AGREEMENT
------------------------------------------
Amendment dated as of February 20, 1978 to the General Partnership
Agreement dated as of January 1, 1978 (the "Partnership Agreement") of Phoenix
Associates, a Florida partnership, among Barry Silverstein, Dennis J.
McGillicuddy and D. Stevens McVoy.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the parties hereto constitute all the General Partners of and
signatories to the Partnership Agreement; and
WHEREAS, the parties heretofore orally agreed to amend the Partnership
Agreement on February 20, 1978.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
1. ARTICLE IX of the Partnership Agreement is hereby amended in its
entirety to read as follows:
"Profit and Loss
---------------
The net profits of the PARTNERSHIP shall be divided and the net
losses shall be borne for each fiscal year according to the percentage
set forth next to each partner's name as follows:
Barry Silverstein 67.5%
Dennis J. McGillicuddy 22.5%
D. Stevens McVoy 10.0%
These percentages shall be adjusted in accordance with any proper
assignment of interest in the PARTNERSHIP."
2. In all other respects, the Partnership Agreement shall remain in full
force and effect
IN WITNESS WHEREOF, the parties hereto have signed this Amendment as of
the day and year first above written.
/s/ Barry Silverstein
------------------------------------
Barry Silverstein
/s/ Dennis J. McGillicuddy
------------------------------------
Dennis J. McGillicuddy
/s/ D. Stevens McVoy
------------------------------------
D. Stevens McVoy
<PAGE>
PHOENIX ASSOCIATES
------------------
GENERAL PARTNERSHIP AGREEMENT
-----------------------------
THIS GENERAL PARTNERSHIP AGREEMENT is dated as of the _____ day of January,
1978, and made, and entered into, by and between Barry Silverstein, Dennis J.
McGillicuddy and D. Stevens McVoy (as general partners),
WITNESSETH THAT:
WHEREAS, the parties hereto desire to enter into a general partnership for
the purposes hereinafter set forth; and
WHEREAS, the parties hereto desire to set forth their agreement herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements, covenants, promises, representations, warranties hereinafter set
forth, and of other good and valuable consideration, the receipt and sufficiency
of which, prior to the execution of these presents, is hereby acknowledged, the
persons intending to be legally bound hereby, agree, covenant, promise,
represent and warrant as follows:
ARTICLE I
Formation
---------
The parties hereto agree and do hereby form a general partnership under the
laws of the State of Florida and upon the terms and conditions hereinafter set
forth.
ARTICLE II
Name
----
The name of the general partnership shall be PHOENIX ASSOCIATES
(hereinafter referred to as the "PARTNERSHIP").
ARTICLE III
Purposes
--------
The purposes of the PARTNERSHIP are (1) to purchase and otherwise acquire
promissory notes, mortgages, deeds of trust,
<PAGE>
security agreements, conditional sales contracts, options, stock, bonds, debt
securities, and other types of securities of any kind or nature whatsoever; (2)
to purchase and otherwise acquire rights in any loan agreements or other
documents relating to the securities of the kind described above; (3) to operate
certain businesses in the communications field; (4) to engage in and carry out
the transaction, and all matters related or incidental thereto, described in
Exhibit A; and (5) to engage in any other activity not prohibited by law or this
Agreement which the majority in interest of the general partners shall deem
advisable.
ARTICLE IV
Place of Business
-----------------
The principal place of business of the PARTNERSHIP shall be located at
5111 Ocean Boulevard, Sarasota, Florida. The principal place of business and
any branch offices of the PARTNERSHIP may be located at such other places as the
PARTNERSHIP from time to time may designate.
ARTICLE V
Term
----
The PARTNERSHIP shall commence on the day and year first above written
and shall continue until terminated as provided in this Agreement or by
operation of law.
ARTICLE VI
Capital Contributions
---------------------
The original capital of the PARTNERSHIP shall consist of Five Hundred
Dollars ($500.00) contributed by the partners as follows:
Barry Silverstein $400.00
Dennis J. McGillicuddy $ 50.00
D. Stevens McVoy $ 50.00
Each partner shall have his own capital account. No partner shall have
the right to withdraw or reduce his contribution to the capital of the
PARTNERSHIP except upon the consent of all of the partners, upon the voluntary
dissolution of the PARTNERSHIP in association with ARTICLE XIII hereof or upon
his withdrawal in
-2-
<PAGE>
accordance with ARTICLE XIV hereof. Contributions to the capital of the
PARTNERSHIP shall not bear interest.
ARTICLE VII
Management
----------
Decisions relating to the management and business of the PARTNERSHIP
shall be made by the majority in interest as set forth below, of the general
partners. Each general partner shall have a vote in making decisions that is
directly proportional to the percentage of the profit and loss of the
PARTNERSHIP to which he is entitled under ARTICLE IX hereof. Any decision
reached or agreement executed by the general partner or general partners
representing such a majority shall be binding, in all respects, upon all of the
other general partners. No partner shall do any act, or bind the PARTNERSHIP to
do any act, that is contrary to the Uniform Partnership Act of Florida of this
Agreement. Each of the partners shall devote such time to the business of the
PARTNERSHIP as he may deem, in his sole discretion, to be necessary.
ARTICLE VIII
Restriction on Sale of Partnership Interest
-------------------------------------------
No partner, without the consent of all other general partners, shall
sell or assign to any person not a partner herein, or create a security interest
in, pledge, hypothecate, or otherwise transfer by operation of law his
partnership interest, except on account of his withdrawal from the PARTNERSHIP
in accordance with ARTICLE XIV hereof or on account of his death, bankruptcy, or
incompetency in accordance with ARTICLE XV hereof.
ARTICLE IX
Profit and Loss
---------------
The net profits of the PARTNERSHIP shall be divided and the net losses
shall be borne for each fiscal year according to the percentage set forth next
to each partner's name as follows:
Barry Silverstein 80%
Dennis J. McGillicuddy 10%
D. Stevens McVoy 10%
These percentages shall be adjusted in accordance with any proper assignment of
interest in the PARTNERSHIP.
-3-
<PAGE>
ARTICLE X
Income Accounts
---------------
In addition to a capital account, there shall be maintained for each
partner an income account, which shall be credited or charged with the net
profits and/or net losses of the PARTNERSHIP.
ARTICLE XI
Books
-----
The PARTNERSHIP shall keep, or cause to be kept, accurate books of account
in which all transactions of the PARTNERSHIP shall be entered. Any partner, or
his duly authorized representative, shall have the right to inspect and examine
said books and records during reasonable business hours for a reasonable period
of time.
ARTICLE XII
Bank Accounts
-------------
All funds of the PARTNERSHIP shall be deposited in the name of the
PARTNERSHIP in such bank account or accounts as the PARTNERSHIP shall determine
from time to time. Funds may be withdrawn from any such bank account or accounts
upon such signature or signatures as the PARTNERSHIP shall designate from time
to time.
ARTICLE XIII
Voluntary Dissolution and Termination
-------------------------------------
The PARTNERSHIP may be dissolved and terminated only upon approval of all
the partners. In the event of such election to dissolve and terminate, all
partners shall be given notice thereof and the partners (or a liquidating
partner selected and authorized by them) shall proceed with reasonable
promptness to wind up the business of the PARTNERSHIP. The method of winding up
the business of the PARTNERSHIP shall be either to sell the assets of the
PARTNERSHIP, in whole or in part, or to distribute the assets in kind. The
method of winding up the business of the PARTNERSHIP and the terms of such sale
or distribution shall be only as determined by all the partners. The assets of
the PARTNERSHIP, or the money or other property resulting from the sale of such
assets, shall be distributed in the following
-4-
<PAGE>
order: (1) to the creditors of the PARTNERSHIP, including any partner who is a
creditor of the PARTNERSHIP; (2) to the partners, in respect of their capital
contribution; (3) to the partners in respect of their share of any undistributed
profits in their income accounts; and (4) to the partners in accordance with
their percentages of profit and loss for the fiscal year in which such
distribution occurs in respect of any remaining funds.
ARTICLE XIV
Withdrawal
----------
If any one or more but less than all of the partners desire to terminate or
withdraw from the PARTNERSHIP, they shall give notice of such desire to the
remaining partners. The partner or partners giving such notice are hereinafter
referred to as the "withdrawing partner". The withdrawing partner shall deliver
to the non-withdrawing partner or partners an offer (herein called the "Offer")
in writing stating the price at which the withdrawing partner is willing to
purchase all of the assets of the PARTNERSHIP and the terms and conditions upon
which such price shall be payable. The non-withdrawing partners shall within
sixty (60) days after receipt of such Offer elect to either: (1) purchase the
interest of the withdrawing partner at a price computed by multiplying the price
set forth in the Offer by the percentage of interest in the PARTNERSHIP of the
withdrawing partner (any down-payments and deferred payments provided for in the
Offer shall be reduced in the same proportion as the reduction of the purchase
price provided for in the preceding sentence, but otherwise the purchase price
shall be on the same terms and conditions as contained in the Offer); or (2) the
PARTNERSHIP shall sell to the withdrawing partner and the withdrawing partner
shall purchase all of the assets of the PARTNERSHIP at a price and on the terms
and conditions set forth in the Offer; or (3) if less than all of the non-
withdrawing partners elect to purchase the interest of the withdrawing partner
pursuant to subparagraph (1) above, then the non-withdrawing partners who do not
elect to purchase shall be deemed to be withdrawing partners and the offer to
sell made by the first withdrawing partner shall be deemed to have been adopted
by said non-withdrawal
-5-
<PAGE>
partners who have not elected to purchase. If a non-withdrawing partner fails to
give the withdrawing partner notice of its election within the time hereinabove
provided for, it shall be conclusively presumed that the non-withdrawing partner
who has failed to give such notice has elected to sell to the withdrawing
partner pursuant to subparagraph (2) above. The closing of the purchase shall be
held in a mutually convenient place in Sarasota County, Florida, at a time
agreed upon by the partners, but not more than one hundred twenty (120) days
after the receipt of the Offer by the non-withdrawing partner. The PARTNERSHIP
of the partners, as the case may be, shall convey the property or their interest
in the PARTNERSHIP by appropriate instruments to the purchasing party free and
clear of all encumbrances save those to which the purchasing party has agreed
shall continue. The purchase or sale of the assets of the PARTNERSHIP or
PARTNERSHIP interest pursuant to this paragraph shall not terminate the
PARTNERSHIP and the partner or partners acquiring said assets or interest may
continue the PARTNERSHIP or wind up its business. If either the withdrawing
partner or non-withdrawing partner pursuant to the election provided above are
to purchase the assets or interest of the other but thereafter such partner
fails to close such purchase, then the non-defaulting partner may continue the
PARTNERSHIP and/or purchase the interest in the PARTNERSHIP of the defaulting
partner at the price set forth in the Offer multiplied by the percentage of
interest in the PARTNERSHIP of the defaulting partner in the manner and in
accordance with the time schedule set forth above.
ARTICLE XV
Death, Bankruptcy, Incompetency
-------------------------------
The death, bankruptcy or incompetency of a general partner shall not
terminate the PARTNERSHIP and shall have no effect upon the continuing of the
business of the PARTNERSHIP. In the event of death or incompetency of a partner
having less than a majority in interest in the PARTNERSHIP, then the guardian
or personal representative, as the case may be, of such partner shall become a
partner in the PARTNERSHIP with the same interest
- 6 -
<PAGE>
in the profits, losses and capital of the PARTNERSHIP as possessed by the
deceased or incompetent partner at the time of death or incompetency and with
the same rights and privileges as though originally named as a partner herein.
In the event of the death, bankruptcy or incompetency of a partner having a
majority in interest in the PARTNERSHIP, then the interest of such partner shall
immediately be transferred to Dennis J. McGillicuddy to be held by him in trust
for said partner in the case of incompetency or bankruptcy of said partner or
for the party who was to receive said interest in the event of the death of said
partner. During the period that said interest is so held in trust, the affairs
of the PARTNERSHIP shall continue to be conducted in accordance with the terms
of this PARTNERSHIP, and the authority and control attendant with the majority
in interest shall be exercised by Dennis J. McGillicuddy. The conflict arising
by virtue of Dennis J. McGillicuddy holding partnership interests both for
himself and in trust is hereby acknowledged by the partners, and such conflict
shall not be grounds for disqualification of Dennis J. McGillicuddy, who shall
be subject to removal only upon proof of actual breach of his fiduciary duties.
As trustee, Dennis J. McGillicuddy shall use his best efforts to liquidate the
interest held in trust upon such terms as are fair, reasonable and proper under
the circumstances within five (5) years from the date that such interest
commenced to be so held in trust. In the event that Dennis J. McGillicuddy is
unwilling or unable to hold such interest in trust, such interest shall be
transferred in trust to such party as shall be determined by the majority of
Dennis J. McGillicuddy, Martin Thaler and Michael McGillicuddy, or by a majority
of such of them as shall then be living. The party holding said interest in
trust shall have the same powers and duties as granted herein to Dennis J.
McGillicuddy and the party holding said interest in trust, including Dennis J.
McGillicuddy, may receive compensation for services rendered to the PARTNERSHIP
or for services rendered in behalf of the interest held in trust.
ARTICLE XVI
Power of Attorney
-----------------
The general partners, by the execution hereof, jointly and
- 7 -
<PAGE>
severally, hereby irrevocably constitute and appoint those general partners that
have the authority to bind the PARTNERSHIP (in accordance with ARTICLE VII
hereof), with full power of substitution, their true and lawful
attorney-in-fact, in their name, place and stead, to make, execute, sign,
acknowledge, record and file on behalf of each of them and on behalf of the
PARTNERSHIP and and all instruments as may be deemed desirable by such general
partners authorized to bind the PARTNERSHIP (in accordance with ARTICLE VII
hereof) to carry out fully and completely the provisions of this AGREEMENT. The
grant of authority set forth above: (1) is a Special Power of Attorney coupled
with an interest; (2) is irrevocable and shall survive the death, bankruptcy,
incompetency or withdrawal of the general partner granting the power; (3) may be
exercised by any of the general partners who form part of the majority of the
general partners authorized to bind the PARTNERSHIP (in accordance with ARTICLE
VII hereof) by using a facsimile signature or by listing all of the general
partners executing any instrument with a single signature as attorney-in-fact
for all of them; and (4) shall survive any transfer of a partner's interest in
the PARTNERSHIP (whether by operation of law or otherwise).
ARTICLE XVII
Liability of the Partners
-------------------------
The partners shall not be liable, responsible or accountable, in damages or
otherwise to the PARTNERSHIP or any partner for any act, or failure to act, on
behalf of the PARTNERSHIP that is within the scope of the authority conferred on
such general partners by this Agreement or by the Uniform Partnership Act of
Florida or otherwise, unless such act or omission was performed or omitted
fraudulently or in bad faith or constituted wanton and willful misconduct or
gross negligence.
ARTICLE XVIII
Indemnification
---------------
The PARTNERSHIP shall indemnify and hold harmless any and all partners and
their agents from and against any loss, expense, damage or injury suffered or
sustained by him by reason of any
-8-
<PAGE>
act, omission or alleged act or omission arising out of his activities on
behalf of the PARTNERSHIP or in furtherance of the interests of the PARTNERSHIP
including, but not limited to, any judgement, award, settlement, reasonable
attorneys' fees, and other costs or expenses incurred in connection with the
defense of any actual or threatened action, proceeding, or claim and including
any payments made by any or all of the general partners to any of his attorneys
or agents; provided that the act or omission upon which such actual or
threatened action, proceeding or claim is based is not judicially determined to
have been performed or omitted fraudulently or in bad faith or as a result of
wanton and willful misconduct or gross negligence by any or all of the general
partners or their agents.
ARTICLE XIX
Fiscal Year
-----------
The fiscal year of the PARTNERSHIP shall be the calendar year.
ARTICLE XX
Miscellaneous Provisions
------------------------
(A) Any notice which is to be given in connection with the business of
the PARTNERSHIP shall be duly given if it shall be in writing and shall be
deliverable personally to the person to whom it is to be given, or if it shall
be sent by mail or telegraph, to the address of the person on whom it is to be
served or to such other address as such partner to whom it is to be given
designates.
(B) If any term or provision in this Agreement or portion thereof is
deemed to be illegal or in any way contrary to law, then such term or provision
only, or portion thereof, shall be held for naught as though such term or
provision were not contained in this Agreement, and the remaining terms and
provisions of this Agreement shall remain operative and be given full force and
effect.
(C) This Agreement shall be governed by the laws of the State of Florida.
(D) This Agreement shall be binding upon, and shall inure to the benefit
of, the partners and their executors, administrators, heirs, devisees,
successors, assigns, and other legal representatives (whether by operation of
law or otherwise).
-9-
<PAGE>
(E) The captions contained in this Agreement are included herein solely
for the convenience of the parties hereto and shall not be used to construe
or interpret this Agreement, or any provision thereof, in any manner whatsoever.
(F) The singular number shall include, where appropriate, the plural
number and the masculine gender shall include the feminine and neuter genders.
(G) This Agreement may be executed in any number of counterparts, each
counterpart constituting an original but all together constituting one and the
same GENERAL PARTNERSHIP AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals on
the day and year first above written.
WITNESS:
[SIGNATURE APPEARS HERE] /s/ Barry Silverstein (Seal)
- --------------------------------- ----------------------------------
Barry Silverstein
WITNESS:
[SIGNATURE APPEARS HERE] /s/ Dennis J. McGillicuddy (Seal)
- --------------------------------- ----------------------------------
Dennis J. McGillicuddy
WITNESS:
[SIGNATURE APPEARS HERE] /s/ D. Stevens McVoy (Seal)
- --------------------------------- ----------------------------------
D. Stevens McVoy
STATE OF Florida
COUNTY OF Sarasota
In order that this Agreement be effective with respect to any provisions
that could be deemed trust or testamentary provisions, I hereby acknowledge that
the signature of Barry Silverstein was witnessed by each of the witnesses listed
above and that Barry Silverstein acknowledged his signature before me this
3rd day February, 1978.
- --- --------
My Commission Expires: [SIGNATURE APPEARS HERE]
-----------------------------------
Notary Public
NOTARY PUBLIC, State of Florida at Large
My Commission Expires July 29, 1978
Bonded by Auto Owners Insurance
<PAGE>
EXHIBIT A
In December of 1977, the principals of Phoenix Associates, as well as other
parties and entities, commenced negotiations with Aetna Business Credit, Inc.,
hereinafter referred to as Aetna, for the purpose of obtaining a loan from Aetna
(and Huntington National Bank of Columbus as a participating lender) in the
amount of $4,550,000.00. It is contemplated that this loan will be closed in
February of 1978 pursuant to the terms of a General Loan and Security Agreement
to be entered into between Phoenix Associates, Aetna, Broadband Financial
Corporation, Coaxial Communications, Inc., various corporations that are
subsidiaries or affiliates of Coaxial Communications, Inc., Coaxial Associates
of Columbus I, Coaxial Associates of Columbus II, and Coaxial Communications of
Reynoldsburg, Inc. The collateral securing the contemplated loan will be, among
other things, the goods, inventory, contract rights, accounts, documents,
franchises, permits and leasehold interests owned by the Coaxial entities
indicated above and the instruments of indebtedness owned by CNA Financial
Corporation, or its subsidiaries, and Donald I. Grauer, which are secured by,
among other things, the CATV system located in and about Columbus, Ohio, and
owned by some of the Coaxial entities indicated above. Phoenix Associates is to
become the owner of the aforementioned CNA and Grauer instruments of
indebtedness pursuant to a Memorandum of Agreement to be entered into
immediately prior to or simultaneously with the closing of the aforementioned
General Loan and Security Agreement. This Memorandum of Agreement will provide
for the dismissal of litigations, the transfer of various assets to Phoenix
Associates, including, the CNA and Graver indebtedness, the payment of
$3,400,000.00 to CNA, and various other promises, representations, warranties
and agreements.
<PAGE>
Exhibit 3.4
CERTIFICATE OF FORMATION
------------------------
OF
INSIGHT COMMUNICATIONS OF CENTRAL OHIO, LLC
The undersigned, an authorized natural person, for the purpose of forming a
limited liability company, under the provisions and subject to the requirements
of the State of Delaware (particularly Chapter 18, Title 6 of the Delaware Code
and the acts amendatory thereof and supplemental thereto, and known, identified
and referred to as the "Delaware Limited Liability Company Act"), hereby
certifies that:
FIRST: The name of the limited liability company is Insight
Communications of Central Ohio, LLC (hereinafter called the "limited liability
company");
SECOND: The address of the registered office and the name and address of
the registered agent of the limited liability company for service of process,
required to be maintained by Section 18-104 of the Delaware Limited Liability
Company Act are The Corporation Trust Company, 1209 Orange Street, Wilmington,
New Castle County, Delaware 19801.
Executed on July 23, 1998
/s/ Barry A. Cassell
-----------------------------
Barry A. Cassell, Esq.
Sole Organizer
Cooperman Levitt Winikoff
Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
<PAGE>
Exhibit 3.5
OPERATING AGREEMENT
OF
INSIGHT COMMUNICATIONS OF CENTRAL OHIO, LLC
<PAGE>
OPERATING AGREEMENT
OF
INSIGHT COMMUNICATIONS OF CENTRAL OHIO, LLC
TABLE OF CONTENTS
Page
- -----------------------------------------------------------------------------
SECTION 1. DEFINITIONS
1.1 Terms Defined in this Section 2
1.2 Terms Defined Elsewhere in this Agreement 11
SECTION 2. THE COMPANY AND ITS BUSINESS
2.1 Formation 12
2.2 Filing of Certificate of Formation 12
2.3 Company Name 12
2.4 Term of the Company 13
2.5 Purposes of the Company 13
2.6 Authority of the Company 13
2.7 Actions of Company Prior to Closing 15
2.8 Scope of Members' Authority 16
2.9 Principal Office and Other Offices; Registered Agent 16
2.10 Foreign Qualification 16
2.11 Fiscal Year 16
2.12 Addresses of the Members 16
2.13 Tax Classification 17
SECTION 3. COMPANY CAPITAL
3.1 Contributions 17
3.2 Additional Capital Contributions 17
3.3 Assumption of Liabilities 18
3.4 Return of Contributions 18
3.5 Refinancing and Purchase of Senior Debt and Subordinated Debt 18
SECTION 4. CASH DISTRIBUTIONS
4.1 Distributions Prior to Liquidation 26
4.2 Withholding 30
4.3 Redemption 30
-i-
<PAGE>
Page
----
4.4 Certain Remedies 32
SECTION 5. ALLOCATIONS OF PROFITS AND LOSSES
5.1 Allocations of Net Profit and Net Loss 33
5.2 Special Provisions Regarding Allocations of Income and Loss 34
5.3 Section 754 Adjustments 37
5.4 Allocations for Tax Purposes 37
5.5 Allocations Following a Transfer of Membership Interest 38
SECTION 6. AUTHORITY OF THE MANAGER; OTHER MATTERS AFFECTING
MANAGER
6.1 Authority of Manager 38
6.2 Resignation as Manager 38
6.3 Tax Matters Member 39
6.4 Reimbursement of Expenses 40
SECTION 7. STATUS OF MEMBERS
7.1 No Management and Control 41
7.2 Limited Liability 41
7.3 Return of Distributions of Capital 41
7.4 Specific Limitations 41
7.5 Issuance of Membership Interests 42
SECTION 8. MANAGEMENT OF THE COMPANY
8.1 Creation of Management Committee 42
8.3 Meetings of the Management Committee 43
8.4 Procedural Matters 43
8.5 Matters Requiring Approval by the Principals 44
8.6 Permitted Transactions 46
8.7 Other Management Matters 47
SECTION 9. ASSIGNMENT, TRANSFER, OR SALE OF INTERESTS IN THE COMPANY
9.1 Limitations on Transfers 47
9.2 Assignee 48
9.3 Substitute Members 49
9.4 Other Consents and Requirements 49
9.5 Assignment Not In Compliance 50
9.6 Tag-Along and Drag-Along Rights 50
9.7 Pledge and Assignment of Interest 57
9.8 Condition on Change in Control of the Company 58
9.9 Substitution of Parent Undertaking 58
9.10 Continuing Rights and Privileges 59
9.11 Insight's Right to Put Its Interest 59
9.12 Treatment of Certain Membership Interests 60
-ii-
<PAGE>
Page
----
SECTION 10. DISSOLUTION AND TERMINATION OF THE COMPANY
10.1 Events of Dissolution 60
10.2 Liquidation 61
10.3 Distribution in Kind 62
10.4 No Action for Dissolution 63
10.5 No Further Claim 63
SECTION 11. INDEMNIFICATION
11.1 General 63
11.2 Exculpation 64
11.3 Persons Entitled to Indemnity 64
SECTION 12. BOOKS, RECORDS, ACCOUNTING, AND REPORTS
12.1 Books and Records 64
12.2 Delivery to Member and Inspection 65
12.3 Annual Statements 65
12.4 Quarterly Financial Statements 66
12.5 Monthly Statements 66
12.6 Other Information 67
12.7 Tax Matters 67
12.8 Other Filings 67
12.9 Non-Disclosure 67
SECTION 13. AMENDMENTS AND WAIVERS
13.1 Amendments to Operating Agreement 68
13.2 Waivers 69
SECTION 14. STATUS OF PRINCIPALS
14.1 Principals Not Members 69
14.2 Provisions for the Benefit of Principals 69
14.3 Assignment or Rights 69
14.4 Termination of Rights and Obligations 69
14.5 Actions by Principals 70
14.6 Limited Recourse 70
SECTION 15. MISCELLANEOUS
15.1 Captions 70
15.2 Pronouns; Singular and Plural Form 70
15.3 Further Action 70
15.4 Entire Agreement 71
15.5 Agreement Binding 71
15.6 Equitable Remedies 71
-iii-
<PAGE>
Page
----
15.7 Notices 71
15.8 Severability 71
15.9 Counterparts 72
15.10 Governing Law 72
15.11 No Third-Party Beneficiaries 72
-iv-
<PAGE>
OPERATING AGREEMENT
OF
INSIGHT COMMUNICATIONS OF CENTRAL OHIO, LLC
THIS OPERATING AGREEMENT of INSIGHT COMMUNICATIONS OF CENTRAL OHIO, LLC
is entered into effective as of August 21, 1998, by and among Coaxial
Communications of Central Ohio, Inc., an Ohio corporation, Insight Holdings of
Ohio, LLC, a Delaware limited liability company, Barry Silverstein, an
individual resident of the State of Florida, Dennis McGillicuddy, an individual
resident of the State of Florida, and D. Stevens McVoy, an individual resident
of the State of Ohio.
RECITALS
Barry Silverstein is the sole member of Coaxial LLC, a Delaware limited
liability company, Dennis McGillicuddy is the sole member of Coaxial DJM LLC, a
Delaware limited liability company, and D. Stevens McVoy is the sole member of
Coaxial DSM LLC, a Delaware limited liability company. The Shareholders
collectively own all the issued and outstanding shares of Central.
Insight and the Shareholders have entered into certain Management
Agreements, providing for the management by Insight of the Shareholders. Through
its management of the Shareholders, Insight possesses the right to direct the
business and affairs of the Shareholders, subject to certain exceptions.
Central and Insight desire to enter into this Operating Agreement to
provide for the formation and organization of the Company, the allocation of
profits and losses, cash flow, and other proceeds of the Company between the
Members, the respective rights, obligations, and interests of the Members to
each other and to the Company, and certain other matters. Central, Insight, and
the Principals further desire to set forth in this Operating Agreement certain
agreements and understandings among them concerning the ownership and operation
of the Company and Central. The parties intend, therefore, that this Operating
Agreement will constitute both a "limited liability company agreement" between
the Members for purposes of the Act as well as an agreement among all the
parties with respect to the matters set forth herein.
AGREEMENT
In consideration of the mutual covenants and agreements set forth in
this Agreement, the parties agree as follows.
SECTION 1. DEFINITIONS
<PAGE>
1.1 Terms Defined in this Section.
The following terms, as used in this Agreement, have the meanings set
forth in this Section:
"Act" means the Delaware Limited Liability Company Act, as amended from
time to time.
"Adjusted Capital Account" means with respect to either Member, the
balance in such Member's Capital Account as of the end of the relevant Fiscal
Year, after:
(i) crediting to such Capital Account any amounts that such
Member is obligated to restore to the Company pursuant to Treasury Regulations
Section 1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant to
the penultimate sentences of Treasury Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5); and
(ii) debiting from such Capital Account the items described in
Treasury Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5),
and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to
comply with the provisions of Treasury Regulations Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person. For purposes of this
definition and the definition of "Subsidiary," the term "controls" means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a Person, whether through the ownership of voting
securities, by contract, or otherwise. The terms "controlled by" and "under
common control with" have meanings corresponding to the meaning of "controls."
"Agreement" means this Operating Agreement, as it may be amended from
time to time.
"Assignee" means a Person that has acquired a beneficial interest in a
Membership Interest in accordance with the provisions of Section 9 but has not
become a Member in accordance with the provisions of Section 9.3.
"Borrowers" means, with respect to the Senior Debt, Central and Phoenix
Associates, and, with respect to the Subordinated Debt, the Shareholders and
Coaxial Financing Corp., a Delaware corporation.
"Business Day" means any day (other than a day that is a Saturday or
Sunday) on which banks are permitted to be open for business in the State of New
York.
"Capital Account" means an account to be maintained for each Member in
accordance with the Code, which, subject to any contrary requirements of the
Code, shall equal (i) the amount of money contributed by such Member to the
Company, if any; (ii) the fair market value without regard
-2-
<PAGE>
to Code Section 7701(g) of property, if any, contributed by such Member to the
Company (net of liabilities secured by such contributed property that the
Company or the other Member is considered to assume under Code Section 752);
(iii) allocations to such Member of Net Profit pursuant to Section 5; and (iv)
other additions made in accordance with the Code; and decreased by (i) the
amount of cash distributed to such Member by the Company; (ii) allocations to
such Member of Net Loss pursuant to Section 5; (iii) the fair market value
without regard to Code Section 7701(g) of property distributed to such Member by
the Company (net of liabilities secured by such distributed property that such
Member is considered to assume or is considered to take under Code Section 752);
and (iv) other deductions made in accordance with the Code. The Members'
respective Capital Accounts shall be determined and maintained at all times in
accordance with all the provisions of Treasury Regulations Section 1.704-
1(b)(2)(iv).
"Capital Contributions" means, with respect to each Member, the amount
of money and the net fair market value of property contributed by such Member to
the Company pursuant to this Agreement.
"Central" means Coaxial Communications of Central Ohio, Inc., an Ohio
corporation.
"Class A Common Interest" means, at any time, any Common Interest owned
at such time by Insight.
"Class B Common Interest" means, at any time, any Common Interest owned
at such time by Central.
"Closing" and "Closing Date" have the meanings assigned to them in the
Contribution Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and any subsequent federal law of similar import, and, to the extent
applicable, the Treasury Regulations.
"Common Interest" means that portion of the Membership Interest of
either Member other than the Preferred A Interest and the Preferred B Interest,
including that portion of the Membership Interest of either Member having the
rights and privileges specified in this Agreement as pertaining to the Common
Interest.
"Company" means the limited liability company formed by the Members
pursuant to this Agreement.
"Contribution Agreement" means the Contribution Agreement, dated as
of June 30, 1998, between Central and Insight Communications Company, L.P.
(which assigned its rights and delegated its obligations thereunder to Insight),
as amended by amendments thereto dated as of July 15, 1998 and as of August 21,
1998, and as it may hereafter be amended from time to time in accordance with
its terms.
-3-
<PAGE>
"Depreciation" means, for each Fiscal Year, an amount equal to the
depreciation, amortization, or other cost recovery deduction allowable with
respect to an asset for such Fiscal Year, except that if the Gross Asset Value
of an asset differs from its adjusted basis for federal income tax purposes at
the beginning of such Fiscal Year, Depreciation shall be determined in the
manner described in Treasury Regulations Section 1.704-1(b)(2)(iv)(g)(3).
"Discount Notes" means the Senior Discount Notes issued by Coaxial LLC
and Coaxial Financing Corp., a Delaware corporation, concurrently with the
Closing.
"Distributable Cash" means, on any Guaranteed Payment Date, Preferred A
Distribution Date, or Preferred B Distribution Date, (a) the total amount on
such date of the Company's cash, cash equivalents, and other assets, such as
marketable securities, that can readily be converted into cash, plus (b) the
amount then available to be borrowed by the Company under any existing credit
facility the proceeds of which may be used to make distributions to Members,
plus (c) the amount of any discretionary capital expenditures made by the
Company during the period since the preceding Guaranteed Payment Date, Preferred
A Distribution Date, or Preferred B Distribution Date, as applicable, less (d)
any portion of such amounts that the Company is then prohibited from
distributing to its Members pursuant to Section 18-607(a) of the Act.
"Fiscal Year" means the Company's fiscal year, as specified in Section
2.11.
"Gross Asset Value" means with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
(i) The initial Gross Asset Value of any asset contributed by
a Member to the Company shall be the gross fair market value of such asset, as
agreed to by the Members;
(ii) The Gross Asset Values of all assets of the Company shall
be adjusted to equal their respective gross fair market values, as determined by
the Management Committee, as of the following times: (A) the acquisition of an
additional interest in the Company by any new or existing Member in exchange for
more than a de minimis Capital Contribution; (B) the distribution by the Company
to a Member of more than a de minimis amount of property (including cash) as
consideration for an interest in the Company; and (C) the liquidation of the
Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g);
provided, however, that the adjustments pursuant to clauses (A) and (B) above
shall be made only if and to the extent that the Manager determines that such
adjustments are necessary or appropriate to reflect the relative economic
interests of the Members in the Company;
(iii) The Gross Asset Value of any asset of the Company
distributed to either Member shall be the gross fair market value of such asset
on the date of distribution, as agreed to by the Members or, in the absence of
an agreement by the Members, as determined by the Management Committee; and
(iv) The Gross Asset Value of the assets of the Company shall
be increased (or decreased) to reflect any adjustments to the adjusted basis of
such assets pursuant to Code Section
-4-
<PAGE>
734(b) or Code Section 743(b), but only to the extent that such adjustments are
taken into account in determining Capital Accounts pursuant to Treasury
Regulations Section 1.704-1(b)(2)(iv)(m) and Section 5.3; provided, however,
that Gross Asset Value shall not be adjusted pursuant to this paragraph (iv) to
the extent that the Management Committee determines that an adjustment pursuant
to paragraph (ii) of this definition is necessary or appropriate in connection
with a transaction that would otherwise result in an adjustment pursuant to this
paragraph (iv).
If the Gross Asset Value of an asset has been determined or adjusted
pursuant to paragraph (i), (ii), or (iv) of this definition, the Gross Asset
Value of such asset shall thereafter be adjusted by the Depreciation taken into
account with respect to such asset for purposes of computing Net Profit and Net
Loss.
"Insight" means Insight Holdings of Ohio, LLC, a Delaware limited
liability company, or any other Person that succeeds to its Membership Interest
and is admitted as a Member in accordance with the provisions of this Agreement.
"Lien" has the meaning specified in the Contribution Agreement.
"Loan Document" means any agreement or other instrument, including any
note or indenture, evidencing all or any part of the Senior Debt or the
Subordinated Debt or pursuant to which all or any part of the Senior Debt or the
Subordinated Debt exists or is outstanding.
"Management Committee" means the Management Committee established by
Section 8.
"Management Return" means, for each Management Return Payment Date (or
for the date on which a distribution pursuant to Section 10.2(d)(iii)(D) is
made), the product of (x) three percent and (y) the gross revenues received by
the Company from services or goods sold to subscribers or other customers of the
Company (including subscriber fees, pay channel fees, leased channel fees,
installation fees, disconnection fees, launch or incentive fees, and advertising
revenue, but excluding extraordinary or non-recurring income, any customer
deposits (unless forfeited to the Company), interest, dividends, royalties, and
other investment income, and proceeds of the sale of any capital assets or any
financing), determined in accordance in generally accepted accounting principles
consistently applied, during the period beginning on the preceding Management
Return Payment Date (or, in the case of the first Management Return Payment
Date, the Closing Date) and ending on the day prior to such Management Return
Payment Date (or, in the case of a distribution pursuant to Section
10.2(d)(iii)(D), the date on which such distribution is made).
"Manager" means Insight, any new Manager appointed as successor to
Insight in accordance with the provisions of this Agreement, and, to the extent
provided in Section 4.4(b)(ii), a Person designated by the Principals.
"Member" means Central, Insight, and any other Person who may hereafter
become a Member pursuant to this Agreement, but does not include any of the
Principals (except to the extent that any of the Principals hereafter becomes a
Member pursuant to this Agreement).
-5-
<PAGE>
"Membership Interest" means the entire ownership interest of a Member
in the Company at any particular time, including all of its rights and
obligations hereunder and under the Act, which may include one or more of a
Common Interest (which may be designated as a Class A Common Interest or a Class
B Common Interest), a Preferred A Interest, or a Preferred B Interest.
"Net Profit" and "Net Loss" means for each Fiscal Year or other period,
an amount equal to the Company's taxable income or loss for such year or period,
determined in accordance with Code Section 703(a) (for this purpose, all items
of income, gain, loss, or deduction required to be stated separately pursuant to
Code Section 703(a)(1) shall be included in taxable income or loss), with the
following adjustments:
(i) Any income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing Net Profit or Net
Loss shall be added to such taxable income or loss;
(ii) Any expenditures of the Company described in Code Section
705(a)(2)(B), or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(i), and which are not otherwise
taken into account in computing such Net Profit or Net Loss, shall be subtracted
from such taxable income or loss;
(iii) If the Gross Asset Value of any asset of the Company is
adjusted pursuant to paragraph (ii) or (iii) of the definition of Gross Asset
Value, the amount of such adjustment shall be taken into account as gain or loss
from the disposition of such asset for purposes of computing Net Profit or Net
Loss;
(iv) Gain or loss resulting from any disposition of property
by the Company with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset Value of
the property disposed of, notwithstanding that the adjusted tax basis of such
property differs from its Gross Asset Value;
(v) In lieu of the depreciation, amortization, and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such Fiscal Year or other
period;
(vi) Notwithstanding anything to the contrary in the
definition of the terms "Net Profit" and "Net Loss," any items that are
specially allocated pursuant to Section 5.2 of this Agreement shall not be taken
into account in computing Net Profit or Net Loss; and
(vii) For purposes of this Agreement, any deduction for a loss
on a sale or exchange of property that is disallowed to the Company under Code
Section 267(a)(1) or Code Section 707(b) shall be treated as a Code Section
705(a)(2)(B) expenditure.
"Nonrecourse Deductions" means losses, deductions, or Code Section
705(a)(2)(B) expenditures attributable to Partnership Nonrecourse Liabilities.
The amount of Nonrecourse Deductions shall be determined pursuant to Treasury
Regulations Section 1.704-2(c), which provides
-6-
<PAGE>
generally that the amount of Nonrecourse Deductions for a Fiscal Year shall
equal the net increase, if any, in Partnership Minimum Gain during that Fiscal
Year, reduced (but not below zero) by the aggregate distributions made during
that Fiscal Year of proceeds of a Nonrecourse Liability that are allocable to an
increase in Partnership Minimum Gain.
"Nonrecourse Liability" has the meaning set forth in Treasury
Regulations Section 1.752-1(a)(2).
"Partner Nonrecourse Debt" has the meaning set forth in Treasury
Regulations Section 1.704- 2(b)(4), which generally defines "Partner Nonrecourse
Debt" as any liability of the Company to the extent such liability is
nonrecourse and a Member (or related person) bears the economic risk of loss
pursuant to Treasury Regulations Section 1.752-2.
"Partner Nonrecourse Debt Minimum Gain" has the meaning set forth in
Treasury Regulations Section 1.704-2(i)(2), which generally defines "Partner
Nonrecourse Debt Minimum Gain" as the Partnership Minimum Gain attributable to
Partner Nonrecourse Debt. The amount of Partner Nonrecourse Debt Minimum Gain
shall be determined in accordance with Treasury Regulations Section
1.704-2(i)(3).
"Partner Nonrecourse Deductions" means losses, deductions, or Code
Section 705(a)(2)(B) expenditures attributable to Partner Nonrecourse Debt. The
amount of Nonrecourse Deductions shall be determined pursuant to Treasury
Regulations Section 1.704-2(i)(2), which provides generally that the amount of
Partner Nonrecourse Deductions for a Fiscal Year shall equal the net increase,
if any, in Partner Nonrecourse Debt Minimum Gain during that Fiscal Year,
reduced (but not below zero) by the proceeds of Partner Nonrecourse Debt
distributed during the Fiscal Year to the Member bearing the economic risk of
loss for such Partner Nonrecourse Debt that are both attributable to such
Partner Nonrecourse Debt and allocable to an increase in Partner Nonrecourse
Debt Minimum Gain.
"Partnership Minimum Gain" means the excess of the Partnership
Nonrecourse Liabilities over the adjusted tax basis of property securing such
Liabilities. The amount of Partnership Minimum Gain shall be determined in
accordance with Treasury Regulations Section 1.704-2(d), which provides
generally that the amount of Partnership Minimum Gain shall be determined by
first computing for each Nonrecourse Liability any gain the Company would
realize if it disposed of the property subject to that Nonrecourse Liability for
no consideration other than full satisfaction of such Nonrecourse Liability, and
then aggregating the separately computed gains.
"Percentage Interest" means, with respect to a Member, the number of
Units assigned to the Common Interest of such Member divided by the aggregate
number of Units assigned to the Common Interests of both Members.
"Permitted Liens" has the meaning specified in the Contribution
Agreement.
-7-
<PAGE>
"Person" means an individual, corporation, limited liability company,
association, general partnership, limited partnership, limited liability
partnership, joint venture, trust, estate, or other entity or organization.
"Phoenix Associates" means Phoenix Associates, a Florida general
partnership.
"Preferred A Capital Amount" means, at any time, the product of (A)
$140,000,000 times (B) the percentage of the Preferred A Interest that as of
such time has not been redeemed pursuant to Section 4.3.
"Preferred B Capital Amount" means, at any time, the product of (A) the
sum of (i) $30,000,000 and (ii) the cumulative increases in the Preferred B
Capital Amount made pursuant to Section 4.1(a)(iii), times (B) the percentage of
the Preferred B Interest that as of such time has not been redeemed pursuant to
Section 4.3.
"Preferred A Interest" means that portion of the Membership Interest of
Central (or any other Person that succeeds to that portion of the Membership
Interest of Central) represented by a Capital Account balance of $140,000,000 as
of the Closing and having the rights and privileges specified in this Agreement
as pertaining to the Preferred A Interest.
"Preferred B Interest" means that portion of the Membership Interest of
Central (or any other Person that succeeds to that portion of the Membership
Interest of Central) represented by a Capital Account balance of $30,000,000 as
of the Closing and having the rights and privileges specified in this Agreement
as pertaining to the Preferred B Interest.
"Preferred A Preference Amount" means, for each Preferred A
Distribution Date (or for the date on which a distribution pursuant to Section
10.2(d)(iii)(B) is made), an amount equal to the excess of (A) the product of
(x) the Preferred A Rate and (y) the Preferred A Capital Amount, computed for
the period since the later of the Closing Date or the preceding Preferred A
Distribution Date on the basis of a 360-day year of twelve 30-day months, over
(B) with respect to the first Preferred A Distribution Date after the date of
this Agreement, a pro rata portion of the Guaranteed Payment Amount, based on
the ratio of the number of days between the Closing Date and such date to the
number of days between the preceding Guaranteed Payment Date (although prior to
the Closing Date) and such date, computed on the basis of a 360-day year of
twelve 30-day months, and, with respect to any other Preferred A Distribution
Date, the Guaranteed Payment Amount.
"Preferred B Preference Amount" shall mean, for each Preferred B
Distribution Date (or for the date on which a distribution pursuant to Section
10.2(d)(iii)(C) is made), the product of (x) the Preferred B Rate and (y) the
Preferred B Capital Amount, computed for the period since the later of the
Closing Date or the preceding Preferred B Distribution Date on the basis of a
360-day year of twelve 30-day months.
"Principals" means Barry Silverstein, Dennis McGillicuddy, and D.
Stevens McVoy, and their respective permitted successors and assigns, as
provided in Section 14.3.
-8-
<PAGE>
"Representative" means an individual appointed pursuant to Section 8 or
Section 4.4(b)(ii) to serve as a representative on the Management Committee.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Debt" means all obligations arising under the Senior Notes and
every subsequent amendment, modification, restructuring, extension, renewal, or
consolidation of any such obligations, and any obligation incurred in
refinancing or replacement of or substitution for any such obligations.
"Senior Notes" means the obligations of Central and Phoenix Associates,
originally incurred under that certain Credit Agreement, dated November 15,
1994, among Central, Phoenix Associates, certain other parties, and the lenders
named therein, as amended, as such obligations shall have been restructured in
connection with the purchase thereof concurrently with the Closing.
"Shareholders" means Coaxial LLC, a Delaware limited liability company,
Coaxial DJM LLC, a Delaware limited liability company, and Coaxial DSM LLC, a
Delaware limited liability company.
"Subordinated Debt" means all obligations arising under the Discount
Notes and the LLC Mirror Notes (as defined in the offering memorandum for the
Discount Notes) issued by Coaxial DJM LLC and Coaxial DSM LLC concurrently with
the Closing, and every subsequent amendment, modification, restructuring,
extension, renewal, or consolidation of any such obligations, and any obligation
incurred in refinancing or replacement of or substitution for any such
obligations.
"Subsidiary" means any corporation, limited liability company, general
partnership, limited partnership, limited liability partnership, or joint
venture controlled by the Company.
"Tax Matters Member" means the Member designated pursuant to Section
6.3 as the "tax matters partner" of the Company in accordance with Code Section
6231(a)(7).
"Treasury Regulations" means the Income Tax Regulations, including
Temporary Regulations, promulgated under the Code, as such regulations may be
amended from time to time (including corresponding provisions of succeeding
regulations).
"Unit" means, for purposes of calculating a Member's Percentage
Interest, the value assigned to such Member's Common Interest in accordance with
the following provisions:
(i) in consideration for the Capital Contributions to be made
pursuant to Section 3.1(a), there shall be assigned to the Class A Common
Interest of Insight, effective on the date of this Agreement, a number of Units
equal to the product of 100,000 times a fraction, the numerator of which is the
sum of $10,000,000 plus the aggregate amount of any Capital Contributions made
by Insight pursuant to Section 2.1(d)(4)(A)(1) of the Contribution Agreement and
the denominator of which is $13,333,333;
-9-
<PAGE>
(ii) in consideration for the Capital Contributions to be made
pursuant to Section 3.1(a), after giving effect to the issuance to Central of
the Preferred A Interest and the Preferred B Interest, there shall be assigned
to the Class B Common Interest of Central, effective on the date of this
Agreement, a number of Units equal to the product of 100,000 times a fraction,
the numerator of which is $3,333,333 minus the aggregate amount of any Capital
Contributions described in Section 2.1(d)(4) of the Contribution Agreement for
which Central's obligation is canceled pursuant to Section 2.1(d)(4)(B) of the
Contribution Agreement and the denominator of which is $13,333,333;
(iii) in consideration for any Capital Contribution made by
any Person pursuant to Section 2.1(d)(4)(A)(2) of the Contribution Agreement,
there shall be assigned to the Common Interest of such Person, effective as of
the date of this Agreement, a number of Units equal to the product of 100,000
times a fraction, the numerator of which is the amount of all Capital
Contribution made by such Person pursuant to Section 2.1(d)(4)(A)(2) of the
Contribution Agreement and the denominator of which is $13,333,333; and
(iv) there shall be assigned to any other Common Interest
issued pursuant to Section 7.5, including any additional Common Interest issued
to Insight or Central, the number of Units required to be assigned to such
Common Interest under the terms of its issuance.
"Voting Interests" means the Preferred A Interest and the Preferred B
Interest, collectively, except that, at such time as (1) the Preferred A
Interest and the Preferred B Interest both cease to be outstanding, or (2) a
Person other than Central owns a majority of the Preferred A Interest and the
Preferred B Interest (determined in the manner described in the following
sentence), or (3) none of the Principals owns, directly or indirectly, any
interest in Central, or (4) Central ceases to be controlled, directly or
indirectly, by Insight or any Affiliate of Insight, then "Voting Interests"
shall mean the Common Interests. A "majority" of the outstanding Voting
Interests means, if the Voting Interests consist of the Preferred A Interest and
the Preferred B Interest, any portion of the Preferred A Interest and the
Preferred B Interest that together represents a majority of the sum of the
Preferred A Capital Amount and the Preferred B Capital Amount that is
represented by the total outstanding Preferred A Interest and Preferred B
Interest, and, if the Voting Interests consist of the Common Interests, any
portion of the Common Interests to which has been assigned a majority of the
Units assigned to all the outstanding Common Interests.
1.2 Terms Defined Elsewhere in this Agreement.
For purposes of this Agreement, the following terms have the meanings
set forth in the sections indicated:
Term Section
- ---- -------
AMT Liability Section 4.1(e)(iii)
April Distribution Section 4.1(a)(iv)
Capital Default Section 4.4(a)
Central's Appraiser Section 9.6(e)(i)
-10-
<PAGE>
Term Section
- ---- -------
Estimated Tax Distributions Section 4.1(a)(iv)
Guaranteed Payment Amount Schedule III
Guaranteed Payment Date Schedule III
Indemnified Persons Section 11.1
Insight Parent Section 3.5(e)
Insight's Appraiser Section 9.6(e)(i)
Liquidator Section 10.2(b)
Management Return Payment Date Schedule III
Offered Asset Purchase Price Section 9.6(g)(iii)(B)
Preferred A Distribution Date Schedule III
Preferred A Rate Schedule III
Preferred B Distribution Date Schedule III
Preferred B PIK Termination Date Schedule III
Preferred B Rate Schedule III
Regular Tax Liability Section 4.1(e)(ii)
Regulatory Allocations Section 5.2(f)
Related Party Section 8.5(b)(i)
Secretary Section 6.3(c)
Secured Party Section 9.7
Tax Amount Section 4.1(e)
Third Appraiser Section 9.6(e)(iii)
Third-Party Purchaser Section 9.6(a)
Transfer Section 9.1(a)
Unit Liquidation Amount Section 9.6(g)(iii)(A)
SECTION 2. THE COMPANY AND ITS BUSINESS
-11-
<PAGE>
2.1 Formation.
The Members agree to form the Company as a limited liability company
pursuant to the provisions of the Act. Except as provided in this Agreement, all
rights, liabilities, and obligations of the Members, both as between themselves
and with respect to Persons not parties to this Agreement, shall be as provided
in the Act, and this Agreement shall be construed in accordance with the
provisions of the Act. To the extent that the rights or obligations of either
Member are different by reason of any provision of this Agreement than they
would be in the absence of such provision, this Agreement shall, to the extent
permitted by the Act, control, except that neither Member shall be personally
liable for obligations of the Company beyond the liability provided in the Act.
2.2 Filing of Certificate of Formation.
The Manager has caused a Certificate of Formation conforming with the
Act to be filed with the Secretary of State of Delaware. The Manager will cause
the Certificate of Formation to be filed or recorded in any other public office
where filing or recording is required or advisable. The Members and the Company
shall do, and continue to do, all other things that are required or advisable to
maintain the Company as a limited liability company existing pursuant to the
laws of the State of Delaware.
2.3 Company Name.
The name of the Company shall be "Insight Communications of Central
Ohio, LLC." The business and operations of the Company may be conducted under
that name or any other name or names that the Manager may from time to time
select. The Company shall file any assumed name certificates and similar
filings, and any amendments thereto, that the Manager considers appropriate or
advisable.
2.4 Term of the Company.
The term of the Company commenced on the date of the filing of the
Certificate of Formation of the Company with the Secretary of State of Delaware
and shall continue until the Company is terminated pursuant to Section 10 of
this Agreement.
2.5 Purposes of the Company.
The purposes of the Company are to do the following, directly or
indirectly through interests in one or more Subsidiaries:
(a) to engage in the business of acquiring, developing,
owning, designing, constructing, maintaining, operating, managing, and selling
the cable television systems and other assets to be contributed to the Company
by Central pursuant to the Contribution Agreement;
-12-
<PAGE>
(b) to acquire, develop, own, design, construct, maintain,
operate, manage, and sell additional cable television systems;
(c) to acquire, develop, own, design, construct, maintain,
operate, manage, and sell, or invest in, businesses related to and ancillary to
those referred to above (including high-speed data service, Internet access,
telephony services, and other telecommunications and telephony-related
investments or businesses, and video wireless services and wireless
communications services and other wireless-related investments or businesses);
(d) to conduct other business of the type and character in
which cable television operators generally become involved, as the Management
Committee may determine;
(e) to possess, transfer, mortgage, pledge, or otherwise deal
in, and to exercise all rights, powers, privileges, and other incidents of
ownership or possession with respect to securities or other assets held or owned
by the Company, and to hold securities or assets in the name of a nominee or
nominees; and
(f) to form and own one or more corporations, trusts, or
partnerships (but no entity so formed or owned, while it is a Subsidiary, may do
what the Company is prohibited by this Agreement from doing).
2.6 Authority of the Company.
The Company shall be empowered and authorized to do all lawful acts and
things necessary, appropriate, proper, advisable, incidental to, or convenient
for the furtherance and accomplishment of its purposes. Without limiting the
foregoing, the Company shall be empowered and authorized, for itself or on
behalf of any Subsidiary, to the extent necessary, appropriate, proper,
advisable, incidental to, or convenient for the furtherance and accomplishment
of its purposes, to:
(a) construct, operate, maintain, improve, expand, buy, own,
sell, convey, assign, mortgage, refinance, rent, or lease real and personal
property, which shall be held in the name of the Company or a Subsidiary, as
applicable;
(b) enter into, perform, and carry out contracts, leases, and
agreements of any kind necessary to, in connection with, or incidental to
accomplishing the purposes of the Company;
(c) operate, maintain, finance, improve, construct, own, grant
options with respect to, sell, convey, assign, mortgage, and lease real and
personal property;
(d) sell, exchange, or otherwise dispose of all or any part of
the property and assets of the Company or of any Subsidiary for property, cash,
or on terms, or any combination thereof;
(e) obtain loans, secured and unsecured, for the Company or
any Subsidiary and secure the same by mortgaging, assigning for security
purposes, pledging, or otherwise
-13-
<PAGE>
hypothecating all or any part of the property and assets of the Company or of
any Subsidiary (and in connection therewith to place record title to any such
property or assets in the name or names of a nominee or nominees);
(f) prepay in whole or in part, refinance, recast, increase,
decrease, modify, amend, restate, or extend any such mortgage, security
assignment, pledge, or other security instrument, and in connection therewith to
execute and deliver, for and on behalf of the Company or any Subsidiary, any
extensions, renewals, or modifications thereof, any new mortgage, security
assignment, pledge, or other security instrument in lieu thereof;
(g) draw, make, accept, endorse, sign, and deliver any notes,
drafts, or other negotiable instruments or commercial paper;
(h) establish, maintain, and draw upon checking, savings, and
other accounts in the name of the Company or any Subsidiary in such banks or
other financial institutions as the Manager may from time to time select;
(i) employ, fix the compensation of, oversee, and discharge
agents and employees of the Company and of any Subsidiary as it shall deem
advisable in the operation and management of the business of the Company,
including such accountants, attorneys, consultants, engineers, and appraisers,
on such terms and for such compensation, as the Manager shall determine;
(j) enter into management agreements with third parties
pursuant to which the management, supervision, or control of the business or
assets of the Company may be delegated to third parties for reasonable
compensation;
(k) enter into joint ventures, general or limited
partnerships, or other agreements relating to the Company's purposes;
(l) compromise any claim or liability due to the Company or
any Subsidiary;
(m) execute, acknowledge, verify, and file any notifications,
applications, statements, and other filings that the Manager considers necessary
or desirable to be filed with any state or federal securities administrator or
commission;
(n) execute, acknowledge, verify, and file any and all
certificates, documents, and instruments that the Manager considers necessary or
desirable to permit the Company or any Subsidiary to conduct business in any
state in which the Manager deems advisable;
(o) bring and defend actions in law and equity;
(p) to borrow or raise money, and from time to time to issue,
accept, endorse, and execute promissory notes, loan agreements, options, stock
purchase agreements, contracts, documents, checks, drafts, bills of exchange,
warrants, bonds, debentures, and other negotiable or non-negotiable instruments
and evidences of indebtedness, and to secure the payment of any thereof
-14-
<PAGE>
and of the interest thereon by mortgage upon or pledge, conveyance, or
assignment in trust of, the whole or any part of the property of the Company
whether at the time owned or thereafter acquired and to guarantee the
obligations of others and to sell, pledge, or otherwise dispose of such bonds or
other obligations of the Company for its purposes; and
(q) to maintain an office or offices in such place or places
as the Manager shall determine and in connection therewith to rent or acquire
office space, engage personnel, and do such other acts and things as may be
necessary or advisable in connection with the maintenance of such office, and on
behalf of and in the name of the Company to pay and incur reasonable expenses
and obligations for legal, accounting, investment advisory, consultative, and
custodial services, and other reasonable expenses including taxes, travel,
insurance, rent, supplies, interest, salaries and wages of employees, and all
other reasonable costs and expenses incident to the operation of the Company.
2.7 Actions of Company Prior to Closing.
Notwithstanding any other provisions hereof, until the Closing, the
sole activities of the Company shall be efforts to obtain the consents and
approvals required under the Contribution Agreement, to cooperate in the
consummation of the transactions contemplated by the Refinancing Proposals (as
defined in the Contribution Agreement), and to otherwise take actions in
accordance with the terms of the Contribution Agreement to consummate the
transactions contemplated thereby.
2.8 Scope of Members' Authority.
Except as otherwise expressly and specifically provided in this
Agreement, neither Member shall have any authority to act for, or assume any
obligation or responsibility on behalf of, the Company.
2.9 Principal Office and Other Offices; Registered Agent.
The address of the Company's registered office that is required to be
maintained by the Company in the State of Delaware pursuant to Section 18-104 of
the Act shall initially be located at 1209 Orange Street, Wilmington, New Castle
County, Delaware 19801, and the name of the Company's registered agent at such
address is The Corporation Trust Company. The principal office of the Company
shall be located at 126 E. 56th Street, New York, New York 10022, or at such
other place as the Management Committee shall from time to time designate. The
Company may maintain any other offices and conduct business at any other places
that the Manager deems advisable. The Company may, upon compliance with the
applicable provisions of the Act, change its principal office or registered
agent from time to time in the discretion of the Management Committee.
2.10 Foreign Qualification.
The Manager shall cause the Company to be authorized to conduct
business legally in the State of Ohio and all other appropriate jurisdictions,
including registration
-15-
<PAGE>
or qualification of the Company as a foreign limited liability company in those
jurisdictions that provide for registration or qualification and the filing of a
certificate of limited liability company in the appropriate public offices of
those jurisdictions that do not provide for registration or qualification.
2.11 Fiscal Year.
The Fiscal Year of the Company shall be the calendar year, except that
the first Fiscal Year commenced on the date on which the Company was formed
under the Act and the last Fiscal Year shall end on the date on which the
winding up of the Company is completed. The Company shall have the same Fiscal
Year for income tax purposes and for financial and partnership accounting
purposes.
2.12 Addresses of the Members.
The respective addresses of the Members are set forth on Schedule I.
2.13 Tax Classification.
Notwithstanding any other provision of this Agreement, no Member nor
any Affiliate of any Member, nor any employee of the Company, may take any
action (including the filing of a U.S. Treasury Form 8832 Entity Classification
Election) that would cause the Company to be characterized as an entity other
than a partnership for federal income tax purposes without the affirmative
unanimous consent of the Members and the prior written consent of the
Principals, except that this sentence shall not preclude or in any way limit any
Person from taking any action that would cause any Affiliate of Insight (other
than the Company and any Person more than half of the assets of which consist of
direct or indirect equity interests in the Company at the time such action is
taken) to be characterized as a corporation for federal income tax purposes. A
determination of whether any action would cause the Company to be characterized
as an entity other than a partnership for federal income tax purposes will be
based upon a declaratory judgment or similar relief obtained from a court of
competent jurisdiction, a favorable ruling from the Internal Revenue Service, or
the receipt of an opinion of counsel reasonably satisfactory to the Members.
SECTION 3. COMPANY CAPITAL
3.1 Contributions.
(a) Contributions Pursuant to Contribution Agreement. At the
Closing, or at such later time as provided in Section 2.1(d), Section 8.3(c),
and Section 8.3(d) of the Contribution Agreement, and pursuant to the terms of
the Contribution Agreement:
(i) Central will contribute or cause to be
contributed to the Company, free and clear of all Liens (other than Permitted
Liens), the assets specified in Section 2.1 of the Contribution Agreement
(subject only to Assumed Liabilities as specified in the Contribution Agreement)
and, if applicable, cash in the amount specified in Section 2.1(d) and Section
8.3(d) of the Contribution Agreement; and
-16-
<PAGE>
(ii) Insight will contribute or cause to be
contributed to the Company, in cash, the sum of Ten Million Dollars.
(b) Fair Market Value of Contributions. The fair market value
of the assets contributed to the Company by Central pursuant to Section 3.1(a)
shall be as specified in the Contribution Agreement.
3.2 Additional Capital Contributions.
There shall be no further assessments for additional Capital
Contributions by the Members to the Company.
3.3 Assumption of Liabilities.
In accordance with the terms and conditions of the Contribution
Agreement, the Company will, at the Closing, assume and undertake to pay,
discharge, and perform only those obligations and liabilities of Central and
Insight that are specified in Section 4.1 and Section 12.2 of the Contribution
Agreement or are otherwise required to be paid by the Company pursuant to
Section 6.4(b).
3.4 Return of Contributions.
Except as provided in Section 4.3, neither Member shall have the right
to demand a return of all or any part of its Capital Contribution during the
term of the Company, and any return of the Capital Contribution of either Member
shall be only in accordance with the terms of this Agreement.
3.5 Refinancing and Purchase of Senior Debt and Subordinated Debt.
(a) Interim Refinancing.
(i) Insight may obtain and submit to Central
and the Principals at any time and from time to time a proposal from a financial
institution of nationally recognized standing for the refinancing of the Senior
Debt or the Subordinated Debt. In addition, if (A) any portion of the Senior
Debt or the Subordinated Debt becomes due and payable before its stated
maturity, or (B) the Company fails to make any distributions required by Section
4.1(a)(i), Section 4.1(a)(ii), or Section 4.1(a)(iii) on or before the
applicable Guaranteed Payment Date, Preferred A Distribution Date, or Preferred
B Distribution Date, or (C) Insight determines that the Company is likely to be
unable to make all distributions required by Section 4.1(a)(i), Section
4.1(a)(ii), and Section 4.1(a)(iii) at the next applicable Guaranteed Payment
Date, Preferred A Distribution Date, or Preferred B Distribution Date, Insight
shall use commercially reasonable efforts to obtain and submit to Central and
the Principals either (as elected by Insight in good faith) a proposal from a
financial institution of nationally recognized standing for the refinancing of
the Senior Debt and the Subordinated Debt or a proposal from the holders of the
Senior Debt and the Subordinated Debt to modify the terms thereof in response to
the condition described in this sentence.
-17-
<PAGE>
(ii) After obtaining any proposal pursuant to
Section 3.5(a)(i), Insight may require that the Borrowers refinance or modify
the Senior Debt or the Subordinated Debt in accordance with the terms of such
proposal, and the parties agree that the Borrowers will comply with such
requirement, so long as the terms of the Senior Debt and the Subordinated Debt
as it would exist after the consummation of such refinancing or modification (A)
would not require any Person or its assets (including assets that may be
acquired after such refinancing or modification) to be liable or otherwise
responsible for the payment or collection of such Senior Debt or Subordinated
Debt, or for the performance of the obligations of any other Person, to a
greater extent than such Person or its assets is liable or otherwise responsible
under the Senior Debt and the Subordinated Debt as it exists prior to the
consummation of such refinancing or modification, (B) would not impose any
covenants on any Person other than a Borrower that are not imposed on such
Person under the Senior Debt and the Subordinated Debt as it will exist at the
Closing, and (C) would not otherwise modify the structure of the Senior Debt or
the Subordinated Debt in a manner that is adverse to the Principals.
(iii) If Insight is unable to obtain a proposal
pursuant to Section 3.5(a)(i) to refinance or modify the Senior Debt or the
Subordinated Debt on terms that conform with the criteria described in Section
3.5(a)(ii), and the second sentence of Section 3.5(a)(i) does not apply, then
the Principals may elect, in their sole discretion, whether the Borrowers will
consummate the refinancing or modification of the Senior Debt and the
Subordinated Debt on the terms of any proposal obtained by Insight and submitted
to Central and the Principals.
(iv) If Insight is unable to obtain a proposal
pursuant to Section 3.5(a)(i) to refinance or modify the Senior Debt or the
Subordinated Debt on terms that conform with the criteria described in Section
3.5(a)(ii) and the second sentence of Section 3.5(a)(i) applies, then the
Principals shall elect either (A) that the Borrowers will consummate the
refinancing or modification of the Senior Debt and the Subordinated Debt on the
terms of the proposal, if any, submitted to Central and the Principals, or (B)
that the Principals shall sell to Insight or a Person designated by Insight, and
Insight or a Person designated by Insight shall purchase from the Principals,
for one dollar (plus the Tax Amount that would be distributable to Central on
the date of the next scheduled April Distribution, calculated as if the
Company's Fiscal Year ended on the closing of such purchase), all of the
outstanding membership interests in the Shareholders; provided, however, that
(A) the Principals may not elect to require that Insight or a Person designated
by Insight purchase all of the outstanding membership interests in the
Shareholders, and the Principals shall be deemed to have elected that the
Borrowers will consummate the proposed refinancing or modification, if the
conditions specified in Section 3.5(f)(vi) are not satisfied at the time that
the Principals make such election, and (B) the Principals shall be deemed to
have elected that the Borrowers will consummate the proposed refinancing or
modification if the Principals fail to notify Insight of their election within
twenty-one days after the delivery to the Principals and their legal counsel of
the proposal obtained by Insight pursuant to Section 3.5(a)(i) and any other
information concerning the proposed refinancing or modification that the
Principals shall have reasonably requested within ten days after their receipt
of such proposal. If the Principals elect to require that Insight or a Person
designated by Insight purchase all of the outstanding membership interests in
the Shareholders, the closing of such purchase shall occur immediately prior to
the earlier of (A) the acceleration of the Senior Debt or the Subordinated
Debt as it then exists (if acceleration of the Senior Debt or the Subordinated
-18-
<PAGE>
Debt shall not have already occurred) or (B) the consummation of the proposed
refinancing or modification of the Senior Debt or the Subordinated Debt, and,
upon such closing, Insight agrees that it or its designee will accept all of the
outstanding membership interests in the Shareholders, provided that neither
Insight nor its designee shall thereby acquire any personal liability for either
the Senior Debt or the Subordinated Debt.
(v) If either the Senior Debt or the
Subordinated Debt is accelerated, then, regardless whether Insight had the
opportunity to obtain a proposal pursuant to Section 3.5(a)(i) to refinance or
modify the Senior Debt or the Subordinated Debt, the Principals may elect to
sell to Insight or a Person designated by Insight, and Insight or a Person
designated by Insight shall purchase from the Principals, for one dollar (plus
the Tax Amount that would be distributable to Central on the date of the next
scheduled April Distribution, calculated as if the Company's Fiscal Year ended
on the closing of such purchase), all of the outstanding membership interests in
the Shareholders; provided, however, that the Principals may not elect to
require that Insight or a Person designated by Insight purchase all of the
outstanding membership interests in the Shareholders if the conditions specified
in Section 3.5(f)(vi) are not satisfied at the time that the Principals would
otherwise be permitted to make such election. If the Principals elect to require
that Insight or a Person designated by Insight purchase all of the outstanding
membership interests in the Shareholders, the closing of such purchase shall
occur as soon as practicable following such election and, in any event, prior to
any redemption of the Preferred A Interest or the Preferred B Interest. Upon
such closing, Insight agrees that it or its designee will accept all of the
outstanding membership interests in the Shareholders, provided that neither
Insight nor its designee shall thereby acquire any personal liability for either
the Senior Debt or the Subordinated Debt.
(b) Refinancing at Maturity of Senior Debt.
(i) Prior to the maturity of the Senior Debt,
Insight shall use commercially reasonable efforts to obtain and submit to
Central and the Principals a proposal from a financial institution of nationally
recognized standing for the refinancing of the Senior Debt at or prior to its
maturity. Insight shall use commercially reasonable efforts to obtain such
proposal sufficiently in advance of the maturity of the Senior Debt so as to
permit the refinancing of the Senior Debt to be consummated at or prior to the
maturity of the Senior Debt in a manner consistent with the rights and
obligations of the parties under this Section 3.5.
(ii) If Insight is able to obtain a proposal pursuant
to Section 3.5(b)(i) to refinance the Senior Debt that (A) would not require any
Person or its assets (including assets that may be acquired after such
refinancing) to be liable or otherwise responsible for the payment or collection
of such Senior Debt, or for the performance of the obligations of any other
Person, to a greater extent than such Person or its assets is liable or
otherwise responsible under the Senior Debt as it exists prior to the
consummation of such refinancing, (B) would not impose any covenants on any
Person other than a Borrower that are not imposed on such Person under the
Senior Debt as it will exist at the Closing, and (C) would not otherwise modify
the structure of the Senior Debt or the Subordinated Debt in a manner that is
adverse to the Principals, then (1) the parties agree that the Borrowers will
consummate the refinancing of the Senior Debt on the terms of such proposal and
(2) Insight agrees that, if the refinancing contemplated by such proposal is not
consummated for any
-19-
<PAGE>
reason (other than inaction by a Principal to which Section 3.5(d) applies)
prior to the maturity of the Senior Debt as it exists prior to the consummation
of such refinancing, Insight or an Affiliate of Insight will itself refinance
the Senior Debt on the terms of such proposal (and such substitution of Insight
or its Affiliate as the lender shall not constitute action by Insight or its
Affiliate to modify the structure of the Senior Debt or the Subordinated Debt).
(iii) If Insight is unable to obtain a proposal to
refinance the Senior Debt on terms that conform with the criteria described in
Section 3.5(b)(ii), then the Principals shall elect either (A) that the
Borrowers will consummate the refinancing of the Senior Debt on the terms of the
proposal, if any, submitted to Central and the Principals or (B) that the
Principals shall sell to Insight or a Person designated by Insight, and Insight
or a Person designated by Insight shall purchase from the Principals, for one
dollar (plus the Tax Amount that would be distributable to Central on the date
of the next scheduled April Distribution, calculated as if the Company's Fiscal
Year ended on the closing of such purchase), all of the outstanding membership
interests in the Shareholders; provided, however, that (A) the Principals may
not elect to require that Insight or a Person designated by Insight purchase all
of the outstanding membership interests in the Shareholders, and the Principals
shall be deemed to have elected that the Borrowers will consummate the proposed
refinancing, if the conditions specified in Section 3.5(f)(vi) are not satisfied
at the time that the Principals make such election, and (B) the Principals shall
be deemed to have elected that the Borrowers will consummate the proposed
refinancing if the Principals fail to notify Insight of their election within
twenty-one days after the delivery to the Principals and their legal counsel of
the proposal obtained by Insight pursuant to Section 3.5(b)(i) and any other
information concerning the proposed refinancing that the Principals shall have
reasonably requested within ten days after their receipt of such proposal. If
the Principals elect to require that Insight or a Person designated by Insight
purchase all of the outstanding membership interests in the Shareholders, the
closing of such purchase shall occur immediately prior to the earlier of (A) the
maturity of the Senior Debt as it then exists or (B) the consummation of the
proposed refinancing of the Senior Debt, and, upon such closing, Insight agrees
that it or its designee will accept all of the outstanding membership interests
in the Shareholders, provided that neither Insight nor its designee shall
thereby acquire any personal liability for either the Senior Debt or the
Subordinated Debt.
(iv) Upon the refinancing of any Senior Debt pursuant
to this Section 3.5,
including any refinancing pursuant to this Section 3.5(b) (including any such
refinancing by Insight or an Affiliate of Insight), the obligations of Insight
under this Section 3.5(b) shall again apply upon the maturity of the Senior Debt
as it exists after the consummation of such refinancing.
(v) The obligations of Insight under this Section
3.5(b) shall terminate upon the earliest of (A) the death of the last to die of
Barry Silverstein, Dennis McGillicuddy, and D. Stevens McVoy, (B) the first date
on which none of the Principals owns, directly or indirectly, any interest in
any of the Borrowers, or (C) the receipt by the Principals of an opinion of
their legal counsel that, in its opinion, there are no circumstances under which
the refinancing, retirement, satisfaction, or purchase of the Senior Debt, in
any manner and on any terms, would increase by more than a de minimis amount the
likelihood of those adverse tax consequences to the Principals that were
intended to be avoided by the Senior Debt and the Subordinated Debt, as it will
exist at the Closing.
-20-
<PAGE>
(c) Funding Purchase of Debt. The Company may make loans to
Insight or any Affiliate of Insight for the purpose of funding the acquisition
by such Person of any of the outstanding Senior Debt or Subordinated Debt. The
proceeds used to make such loans may include the proceeds of the issuance of
Membership Interests (subject to the restrictions on the issuance of Membership
Interests provided in Section 8.5(b)). The terms of any such loan shall:
(i) provide that all obligations and
liabilities of such Person with respect to such loan shall be secured by all of
such Person's interest in the Senior Debt or Subordinated Debt so purchased, and
any replacements or proceeds thereof (but such loan shall otherwise be non-
recourse to such Person);
(ii) require the payment to the Company, either
as principal, interest, or additional interest, of all amounts received by such
Person with respect to the Senior Debt or Subordinated Debt so purchased; and
(iii) require that the Person to which the loan is
made, if other than Insight,
remain an Affiliate of Insight.
(d) Financing by the Company. If Insight obtains and submits
to Central and the Principals a proposal for the refinancing or modification of
the Senior Debt or Subordinated Debt pursuant to Section 3.5(a)(i) or Section
3.5(b)(i) and either (1) the terms of the proposed refinancing or modification
conform with the criteria described in Section 3.5(a)(ii) or Section 3.5(b)(ii),
as applicable, or (2) the Principals expressly agreed that the Borrowers will
consummate the refinancing or modification of the Senior Debt and the
Subordinated Debt on the terms of such proposal, and, thereafter, any of the
Principals fails to take any action reasonably necessary to consummate the
refinancing or modification of the Senior Debt and the Subordinated Debt on the
terms of such proposal (including executing and delivering any consent,
approval, or authority) and fails to cure such failure within ten Business Days
after its receipt of written notice from Insight specifying such failure and
specifying that Insight believes this Section 3.5(d) applies to such failure,
then Insight may cause the Company or any Subsidiary of the Company to incur
indebtedness directly, on terms approved by the Management Committee, and use
the proceeds of such indebtedness to purchase or repay the Senior Debt or the
Subordinated Debt.
(e) Other Actions Prohibited. Insight agrees that, except as
specifically permitted by this Section 3.5, neither Insight nor any of its
Affiliates (including the Company) will take any willful or intentional action
in any capacity (including as manager of the Shareholders) that is intended to
have, and has, the effect of modifying the structure of the Senior Debt or the
Subordinated Debt (such as by imposing any covenants on any Person other than a
Borrower that are not imposed on such Person under the Senior Debt or the
Subordinated Debt as it will exist at the Closing or agreeing that any Person or
its assets would be liable or otherwise responsible for the payment or
collection of the Senior Debt or the Subordinated Debt, or for the performance
of the obligations of any Borrower, to a greater extent than such Person or its
assets is liable or otherwise responsible under the Senior Debt and the
Subordinated Debt as then in effect). The Principals and Central agree that any
action taken by Insight in connection with its management of the business and
-21-
<PAGE>
operations of the Company, Central, or the Shareholders (whether under this
Agreement or under any of the management agreements between the Shareholders and
Insight) that does not directly relate to the structure of the Senior Debt or
the Subordinated Debt shall not be considered an action that was intended to
have the effect of modifying the structure of the Senior Debt or the
Subordinated Debt unless Insight, in taking such action, intended that a
modification of such structure result from such action. Solely for purposes of
this Section 3.5(e), (1) a Person shall not be considered an Affiliate of
Insight with respect to any action taken by such Person if neither Insight
Parent nor any Person controlling Insight Parent possessed the power, directly
or indirectly, to cause such Person to refrain from taking such action, whether
through the ownership of voting securities, contractually, or otherwise, and (2)
"Insight Parent" means Insight Communications Company, L.P., or, if Insight
ceases to be controlled, directly or indirectly, by one or more individuals who,
on the date of this Agreement, collectively control Insight, the ultimate parent
entity (as determined in accordance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder) of Insight.
(f) Other General Provisions.
(i) The manner of soliciting and obtaining any
refinancing proposal pursuant to this Section 3.5 shall be determined by
Insight. The Principals will cooperate, as reasonably requested by Insight, in
connection with Insight's efforts to solicit and obtain any refinancing proposal
pursuant to this Section 3.5.
(ii) In connection with any refinancing
pursuant to this Section 3.5, the Company shall pay all costs and expenses
incurred by any of the Borrowers, any of the Principals, or any of their
respective Affiliates in connection with the consummation of such refinancing,
including the authorization, preparation, execution, and performance of any
agreements or other instruments relating thereto, to the extent such costs and
expenses are similar in kind to the costs and expenses that the Company would
have incurred in issuing indebtedness similar to the Senior Debt or the
Subordinated Debt.
(iii) In connection with any refinancing or purchase
of any of the Senior Debt or the Subordinated Debt pursuant to this Section 3.5,
Insight and the Principals shall agree to appropriate modifications to the terms
of the Preferred A Interest and the Preferred B Interest, to the extent
necessary to preserve the reasonable expectations of Insight and the Principals
under this Agreement. Any agreement between Insight and the Principals pursuant
to this Section 3.5(f)(iii) as to any modification to the terms of the Preferred
A Interest and the Preferred B Interest shall be binding on the Members.
(iv) For purposes of this Section 3.5,
(A) the terms of any refinancing or
modification of the Senior Debt or the Subordinated Debt will be conclusively
deemed not to modify the structure of the Senior Debt or the Subordinated Debt
in a manner that is adverse to the Principals if, within twenty-one days after
the delivery to the Principals and their legal counsel of the applicable
refinancing or modification proposal and any other information concerning the
proposed refinancing or modification that the Principals shall have reasonably
requested within ten days after their receipt of such proposal, the Principals
do not receive and deliver to Insight an opinion of the Principals' legal
counsel that, in its opinion, consummation of such refinancing or
-22-
<PAGE>
modification on the terms proposed would modify the structure of the Senior Debt
or the Subordinated Debt in a manner that would increase by more than a de
minimis amount the likelihood of those adverse tax consequences to the
Principals that were intended to be avoided by the Senior Debt and the
Subordinated Debt, as it will exist at the Closing; and
(B) the terms of any refinancing or
modification of the Senior Debt or the Subordinated Debt will be conclusively
deemed to modify the structure of the Senior Debt or the Subordinated Debt in a
manner that is adverse to the Principals if, within twenty-one days after the
delivery to the Principals and their legal counsel of the applicable refinancing
or modification proposal and any other information concerning the proposed
refinancing or modification that the Principals shall have reasonably requested
within ten days after their receipt of such proposal, the Principals receive and
deliver to Insight an opinion of the Principals' legal counsel that, in its
opinion, consummation of such refinancing or modification on the terms proposed
would modify the structure of the Senior Debt or the Subordinated Debt in a
manner that would increase by more than a de minimis amount the likelihood of
those adverse tax consequences to the Principals that were intended to be
avoided by the Senior Debt and the Subordinated Debt, as it will exist at the
Closing.
(v) The Principals agree that any legal counsel from
which the Principals request an opinion described in Section 3.5(f)(iv) will be
reasonably satisfactory to Insight.
(vi) The Principals may not elect to require that
Insight or a Person designated by Insight purchase all of the outstanding
membership interests in the Shareholders pursuant to Section 3.5(a)(iv), Section
3.5(a)(v), or Section 3.5(b)(iii) unless, at the time that the Principals make
such election:
(A) all outstanding stock of Central
shall have been duly and validly issued and shall be fully paid and
nonassessable;
(B) Central shall have no liabilities
other than the Senior Debt, liabilities arising under this Agreement or under
any other agreement between Central and the Company, Insight, or any Affiliate
of the Company or Insight, liabilities incurred at the direction of Insight,
directly or indirectly, through its control over the business and affairs of
Central, and other liabilities (such as accrued administrative expenses) that
are not significant in amount and for which the Principals agree to indemnify
Insight, on terms reasonably satisfactory to Insight;
(C) Central shall have no assets other
than its equity interest in the Company, contractual rights arising under any of
the Loan Documents, this Agreement, and any other agreement between Central and
the Company, Insight, or any Affiliate of the Company or Insight, assets
acquired at the direction of Insight, directly or indirectly, through its
control over the business and affairs of Central, and other assets (such as
internal corporate records) that are not significant in amount;
-23-
<PAGE>
(D) all of the outstanding shares of
Central shall be free and clear of all claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, and encumbrances of any nature
whatsoever, other than liens securing the Senior Debt, the Subordinated Debt,
and any other obligations and liabilities arising under the Loan Documents;
(E) all outstanding membership interests
of the Shareholders shall have been duly and validly issued and shall be fully
paid and nonassessable;
(F) the Shareholders shall have no
liabilities other than the Subordinated Debt, liabilities arising under any
agreement between the Shareholders and Central, the Company, Insight, or any
Affiliate of the Company or Insight, liabilities incurred at the direction of
Insight, directly or indirectly, through its management of the Shareholders, and
other liabilities (such as accrued administrative expenses) that are not
significant in amount and for which the Principals agree to indemnify Insight,
on terms reasonably satisfactory to Insight;
(G) the Shareholders shall have no assets
other than their equity interests in Central, the LLC Mirror Notes, contractual
rights arising under any of the Loan Documents, any agreement between the
Shareholders, and Central, the Company, Insight, or any Affiliate of the Company
or Insight, assets acquired at the direction of Insight, directly or indirectly,
through its management of the Shareholders, and other assets (such as internal
corporate records) that are not significant in amount; and
(H) all of the outstanding membership
interests of the Shareholders shall be free and clear of all claims,
liabilities, security interests, mortgages, liens, pledges, conditions, charges,
and encumbrances of any nature whatsoever, other than liens securing the Senior
Debt, the Subordinated Debt, and any other obligations and liabilities arising
under the Loan Documents.
(vii) If the Principals elect to require that Insight
or a Person designated by Insight purchase all of the outstanding membership
interests in the Shareholders pursuant to Section 3.5(a)(iv), Section 3.5(a)(v),
or Section 3.5(b)(iii), then (A) the Principals covenant that the conditions
specified in Section 3.5(f)(vi) will also be satisfied at the closing of the
purchase and sale of all of the outstanding membership interests in the
Shareholders, and (B) it shall be a condition to the purchase by Insight or a
Person designated by Insight of the outstanding membership interests in the
Shareholders that the conditions specified in Section 3.5(f)(vi) will also be
satisfied at the closing.
(viii) At Insight's request, Central and the
Principals agree to join in making an election under Code Section 338(h)(10)
with respect to the deemed purchase and sale of the shares of Central resulting
from the purchase and sale of all of the outstanding membership interests in the
Shareholders pursuant to Section 3.5(a)(iv), Section 3.5(a)(v), or Section
3.5(b)(iii).
-24-
<PAGE>
SECTION 4. CASH DISTRIBUTIONS
4.1 Distributions Prior to Liquidation.
(a) Distributions Generally. Except as provided in
Section 10.2(d), the Company shall make cash distributions as follows:
(i) First, on each Guaranteed Payment Date,
commencing on the first Guaranteed Payment Date after the Closing, so long as
the Preferred A Interest is outstanding, the Company shall distribute to the
holder of the Preferred A Interest (A) on the first such date, a pro rata
portion of the Guaranteed Payment Amount, based on the ratio of the number of
days between the Closing Date and such date to the number of days between the
preceding Guaranteed Payment Date (although prior to the Closing Date) and such
date, computed on the basis of a 360-day year of twelve 30-day months, and (B)
on each other such date, the Guaranteed Payment Amount.
(ii) Second, on each Preferred A Distribution Date,
commencing on the first Preferred A Distribution Date after the Closing, so long
as the Preferred A Interest is outstanding, the Company shall distribute to the
holder of the Preferred A Interest the Preferred A Preference Amount.
(iii) Third, on each Preferred B Distribution Date,
commencing on the first Preferred B Distribution Date after the Closing, so long
as the Preferred B Interest is outstanding, the Company shall distribute to the
holder of the Preferred B Interest the Preferred B Preference Amount; provided,
however, that on any such Preferred B Distribution Date falling prior to the
Preferred B PIK Termination Date, the Company shall, in lieu of making such
distribution, accrue such amount, and any such accrued and unpaid amount shall
be added to the Preferred B Capital Amount.
(iv) Fourth, no less than three days prior to April
15 of each year, the Company shall distribute to each Member holding a Common
Interest, the excess of such Member's Tax Amount over the amounts previously
distributed to such Member under this Section 4.1(a)(iv), including Estimated
Tax Distributions (the "April Distribution"). If the Company's taxable income
for any year is increased above the amount used to compute the April
Distribution as a result of an adjustment deemed necessary by the Company or as
the result of a tax audit, the Company shall distribute to the Members holding
the Common Interests such amount as the Management Committee shall determine is
appropriate, in its good faith discretion, taking into account the respective
additional federal, state, and local tax liability of the Members as a result of
such increase and any related penalties and interest. The Company shall also
make distributions ("Estimated Tax Distributions") for the payment of taxes at
such times as either Member would be required to pay federal estimated taxes in
an amount not in excess of the Company's good faith estimate of the Tax Amount
for the period to which such estimated taxes relate. Notwithstanding anything to
the contrary herein, distributions under this Section 4.1(a)(iv) shall be made
in proportion to the Members' Percentage Interests.
-25-
<PAGE>
(v) Fifth, on each Management Return Payment
Date, commencing on the first Management Return Payment Date after the Closing,
the Company shall distribute to the Manager the Management Return.
(vi) Thereafter, at such times and in such
amounts as the Management Committee may determine, to the Members holding Common
Interests in proportion to their Percentage Interests.
(b) Late Distributions.
(i) If the Company fails to make any
distribution required to be made pursuant to Section 4.1(a)(i) on or before the
applicable Guaranteed Payment Date, then the Guaranteed Payment Amount payable
with respect to that Guaranteed Payment Date shall be increased at a rate per
year equal to the Preferred A Rate for the number of days from the applicable
Guaranteed Payment Date to the date on which the required distribution is
actually made.
(ii) If the Company fails to make any distribution
required to be made pursuant to Section 4.1(a)(ii) on or before the applicable
Preferred A Distribution Date, then the amount to be distributed with respect to
that Preferred A Distribution Date shall be increased at a rate per year equal
to the Preferred A Rate for the number of days from the applicable Preferred A
Distribution Date to the date on which the required distribution is actually
made.
(iii) If the Company fails to make any distribution
required to be made pursuant to Section 4.1(a)(iii) on or before the applicable
Preferred B Distribution Date, then the amount to be distributed with respect to
that Preferred B Distribution Date shall be increased at a rate per year equal
to the Preferred B Rate for the number of days from the applicable Preferred B
Distribution Date to the date on which the required distribution is actually
made; provided, however, that this Section 4.1(b)(iii) shall apply only to
distributions required to be made on Preferred B Distribution Dates occurring on
or after the Preferred B PIK Termination Date.
(iv) If the Company fails to make any distribution
required to be made pursuant to Section 4.1(a)(v) on or before the applicable
Management Return Payment Date, then the amount to be distributed with respect
to that Management Return Payment Date shall bear interest at the Preferred A
Rate from that Management Return Payment Date to the date that the required
distribution is actually made.
(c) Borrowings for Guaranteed Payments. To the extent the
Company does not have sufficient cash to make the distribution required to be
made pursuant to Section 4.1(a)(i) then, unless the Manager or the Principals
object, the Manager shall cause the Company to borrow funds in order to make
such distributions in a full and timely manner.
(d) Treatment of Guaranteed Payments. The distributions
provided for in Section 4.1(a)(i) are required to be made without regard to the
income of the Company and shall be treated as guaranteed payments as described
in Code Section 707(c). No Member shall take a position inconsistent with such
treatment.
-26-
<PAGE>
(e) Determination of Tax Amount. For purposes of Section
4.1(a)(iv), the "Tax Amount" of a Member holding a Common Interest means, the
sum of such Member's tax liabilities for all previous Fiscal Years, determined
in accordance with, and subject to, the following:
(i) The tax liability of a Member holding a
Common Interest for any Fiscal Year shall be the greater of such Member's
Regular Tax Liability or its AMT Liability for such Fiscal Year.
(ii) The "Regular Tax Liability" of a Member
holding a Common Interest for any Fiscal Year shall be determined separately for
ordinary income and each character of capital gain income to which separate
federal income tax rates may apply, and for each such type of income shall be
computed as the product of (A) the excess of (1) the aggregate amount of taxable
income (if any) allocated to such Member with respect to its Common Interest in
such Fiscal Year over (2) the aggregate amount of taxable losses (if any)
allocated to such Member with respect to its Common Interest for all prior
Fiscal Years since the beginning of the Company and not previously taken into
account for purposes of computing such Member's Tax Amount, and (B) the highest
marginal combined federal, state, and local tax rate (taking into count the
provisions of Code Section 68) imposed on an individual resident in New York
City for income of such type.
(iii) The "AMT Liability" of a Member holding a
Common Interest for any Fiscal Year shall be computed as the product of (A) the
aggregate amount of alternative minimum taxable income (if any) allocated to
such Member with respect to its Common Interest in such Fiscal Year (less any
alternative minimum tax losses allocated to such Member with respect to its
Common Interest for all prior Fiscal Years since the beginning of the Company
and not previously taken into account for purposes of computing such Member's
Tax Amount) and (B) the highest marginal combined federal, state, and local tax
rate imposed on the alternative minimum taxable income of an individual resident
in New York City (taking into account the lack of deductibility for state and
local taxes under the federal alternative minimum tax).
(iv) For purposes of determining a Member's
Regular Tax Liability or AMT Liability, any Member who receives a Common
Interest in a transfer with respect to which an election under Code Section 754
has not been made (or is not in effect) shall be deemed to have been allocated
any taxable losses or income allocated to the transferor of such Common
Interest. For purposes of determining a Member's April Distribution, any Member
who receives a Common Interest in a transfer with respect to which an election
under Code Section 754 has not been made (or is not in effect) shall be deemed
to have received any distributions made pursuant to Section 4.1(a)(iv) to the
transferor of such Common Interest.
(v) Notwithstanding anything to the contrary
herein, for purposes of calculating a Member's Tax Amount under this Section
4.1(e), the taxable income or taxable loss (including alternative minimum
taxable income and alternative minimum taxable loss) allocated to a Member shall
exclude (and no April Distributions or Estimated Tax Distributions shall be made
with respect to) (A) gain allocated to any Member with respect to the sale,
exchange, or other actual or deemed disposition of any assets contributed to the
Company by either Member, (B) gross income
-27-
<PAGE>
allocated to the holder of the Preferred A Interest with respect to
distributions made under Section 4.1(a)(i), (C) gross income allocated to the
holder of the Preferred A Interest under Section 5.2(h), (D) gross income
allocated to the holder of the Preferred B Interest under Section 5.2(i), and
(E) gross income allocated to the Manager under Section 5.2(k).
(f) Delaying Distributions. If (i) any default (other than a
notification or delivery default) shall have occurred and be continuing under
any of the Loan Documents, or if Insight in good faith determines that such a
default under any of the Loan Documents is reasonably likely to occur, and (ii)
Insight determines in good faith that, as a result of such existing or
anticipated default, it would be in the best interests of the Company for the
Company not to make any distribution required pursuant to Section 4.1(a)(i),
Section 4.1(a)(ii), or Section 4.1(a)(iii), and (iii) Insight notifies the
Principals in writing that it has made such determination, then Insight may
cause the Company not to make such distribution until such time as Insight shall
have determined that it is no longer in the best interests of the Company for
the Company not to make such distribution. To the extent, but only for so long
as, Insight is authorized by this Section 4.1(f) to cause the Company not to
make such distribution, then (i) neither Insight nor the Company shall have any
liability to the holder of the Preferred A Interest or the holder of the
Preferred B Interest as a result of the Company's failure to make any
distribution required pursuant to Section 4.1(a)(i), Section 4.1(a)(ii), or
Section 4.1(a)(iii), and (ii) the Company's failure to make such distribution
shall not constitute a Capital Default. The provisions of Section 4.1(b) shall
apply to the Company's failure to make any distribution required pursuant to
Section 4.1(a)(i), Section 4.1(a)(ii), or Section 4.1(a)(iii) notwithstanding
Insight's rights under this Section 4.1(f) to cause the Company not to make any
such distribution.
4.2 Withholding.
All amounts withheld pursuant to the Code or any provision of any state
or local tax law with respect to any payment or distribution to the Company or
the Members shall be treated as amounts distributed to Members pursuant to
Section 4 for all purposes of this Agreement.
4.3 Redemption.
(a) Redemption of Preferred B Interest.
(i) Subject to Section 4.3(a)(iv), the Company
shall redeem the Preferred B Interest in full on the tenth anniversary of the
Closing Date. Subject to Section 4.3(a)(iv), the Company shall redeem the
Preferred B Interest in full if (A) the Discount Notes shall have been
accelerated, (B) the holders of the Discount Notes shall have commenced the
enforcement of any remedies available to them under any agreement under which
shares of Central and the LLC Mirror Notes (as defined in the offering
memorandum for the Discount Notes) are pledged as security for the Discount
Notes, (C) at least ten days shall have elapsed since the maturity or
acceleration of the Discount Notes, and (D) the holders of the Discount Notes,
acting on their own behalf or through the trustee of the Discount Notes, shall
have requested redemption of the Preferred B Interest in accordance with the
provisions of any agreement under which shares of Central and the LLC Mirror
-28-
<PAGE>
Notes (as defined in the offering memorandum for the Discount Notes) are pledged
as security for the Discount Notes.
(ii) The Company may redeem the Preferred B
Interest, in whole or in part, at any time at its option if (A) the Principals
shall have received an opinion of their legal counsel that the redemption of the
Preferred B Interest would not, in its opinion, increase by more than a de
minimis amount the likelihood of those adverse tax consequences to the
Principals that were intended to be avoided by the Senior Debt and the
Subordinated Debt, as it will exist at the Closing, and (B) the Borrowers would
be permitted under the Loan Documents to use the proceeds of the redemption of
the Preferred B Interest to repay or purchase the Subordinated Debt.
(iii) Except as expressly provided in this Section
4.3(a), the Company may not redeem the Preferred B Interest, in whole or in
part, without the consent of the Principals.
(iv) Notwithstanding Section 4.3(a)(i), the
Company shall not redeem the Preferred B Interest if the Company is required to
redeem the Preferred A Interest pursuant to Section 4.3(b)(i) and has not yet
done so.
(v) If the Company redeems all or part of the
Preferred B Interest pursuant to this Section 4.3(a), the redemption price shall
equal the sum of (A) the amount that would be distributed to the holder of the
Preferred B Interest with respect to the redeemed portion of the Preferred B
Interest pursuant to Section 10.2(d)(iii)(C) upon dissolution and liquidation of
the Company, assuming that the distribution pursuant to Section 10.2(d)(iii)(C)
was made on the date of such redemption and that the proceeds of the liquidation
of the Company were sufficient to permit the Company to make the full
distribution provided for in Section 10.2(d)(iii)(C), plus (B) the amount of any
premium required to be paid by the Borrowers to the holders of the Subordinated
Debt in connection with the Borrowers' use of the proceeds of the redemption of
the Preferred B Interest to repay or purchase the Subordinated Debt.
(b) Redemption of Preferred A Interest.
(i) The Company shall redeem the Preferred A
Interest in full if (A) the Senior Notes shall be payable in full (either upon
reaching their stated maturity or upon their acceleration), (B) the holders of
the Senior Notes shall have commenced the enforcement of any remedies available
to them under any agreement under which the Preferred A Interest is pledged as
security for the Senior Notes, (C) at least ten days shall have elapsed since
the maturity or acceleration of the Senior Notes, and (D) the holders of the
Senior Notes, acting on their own behalf or through the trustee of the Senior
Notes, shall have requested redemption of the Preferred A Interest in accordance
with the provisions of any agreement under which the Preferred A Interest is
pledged as security for the Senior Notes.
(ii) The Company may redeem the Preferred A
Interest, in whole or in part, at any time at its option if (A) the Principals
shall have received an opinion of their legal counsel that the redemption of the
Preferred A Interest would not, in its opinion, increase by more than a de
minimis amount the likelihood of those adverse tax consequences to the
Principals that
-29-
<PAGE>
were intended to be avoided by the Senior Debt and the Subordinated Debt, as it
will exist at the Closing, and (B) the Borrowers would be permitted under the
Loan Documents to use the proceeds of the redemption of the Preferred A Interest
to repay or purchase the Senior Debt.
(iii) Except as expressly provided in this Section
4.3(b), the Company may not redeem the Preferred A Interest, in whole or in
part, without the consent of the Principals.
(iv) If the Company redeems all or part of the
Preferred A Interest pursuant to this Section 4.3(b), the redemption price shall
equal the sum of (A) the amount that would be distributed to the holder of the
Preferred A Interest with respect to the redeemed portion of the Preferred A
Interest pursuant to Section 10.2(d)(iii)(A) and Section 10.2(d)(iii)(B) upon
dissolution and liquidation of the Company, assuming that the distributions
pursuant to Section 10.2(d)(iii)(A) and Section 10.2(d)(iii)(B) were made on the
date of such redemption and that the proceeds of the liquidation of the Company
were sufficient to permit the Company to make the full distributions provided
for in Section 10.2(d)(iii)(A) and Section 10.2(d)(iii)(B), plus (B) the amount
of any premium required to be paid by the Borrowers to the holders of the Senior
Debt in connection with the Borrowers' use of the proceeds of the redemption of
the Preferred A Interest to repay or purchase the Senior Debt.
4.4 Certain Remedies.
(a) As used in this Agreement, a "Capital Default" means:
(i) Except as provided in Section 4.1(f), the
failure of the Company to make any distribution required pursuant to Section
4.1(a)(i), Section 4.1(a)(ii), or Section 4.1(a)(iii) on or before the
applicable Guaranteed Payment Date, Preferred A Distribution Date, or Preferred
B Distribution Date (other than a distribution pursuant to Section 4.1(a)(iii)
required to be made before the Preferred B PIK Termination Date), if on such
date the Company had Distributable Cash (taking into account any other
distributions pursuant to Section 4.1(a)(i), Section 4.1(a)(ii), or Section
4.1(a)(iii) that were made on such date and after giving effect to any
borrowings pursuant to Section 4.1(c)), in an amount at least equal to the
entire amount of such distribution; provided, however, that the failure to make
any such distribution shall not constitute a Capital Default (A) if a Person
designated by the Principals shall have become an additional Manager pursuant to
Section 4.4(b)(ii) and such Person shall have had the power to cause such
distribution to be made or (B) to the extent such distribution would violate any
covenant contained in any agreement or other instrument, including any note or
indenture, evidencing any indebtedness of the Company to a Person that is not an
Affiliate of either Member or pursuant to which any such indebtedness of the
Company exists or is outstanding; or
(ii) The redemption of the Preferred A Interest
or the Preferred B Interest in violation of Section 4.3; provided, however, that
such redemption shall not constitute a Capital Default if a Person designated by
the Principals shall have become an additional Manager pursuant to Section
4.4(b)(ii) and such Person shall have caused such redemption to occur; or
-30-
<PAGE>
(iii) The willful and intentional breach by
Insight of any of its obligations under Section 3.5.
(b) Upon the occurrence of a Capital Default:
(i) Insight shall indemnify, defend, and hold
harmless Central, each other Borrower, and each of the Principals, from any
liability, loss, or damage incurred by any such Person, including costs and
attorneys' fees (which attorneys' fees may be paid as incurred) and any amounts
expended in the settlement of any claims of liability, loss, or damage, and
including any tax liabilities incurred as a result of the receipt of any
indemnification payment under this Section 4.4(b)(i), that either (A) arise out
of or result from such Capital Default or (B) to the extent such Capital Default
consists of an action taken to modify the structure of the Senior Debt or the
Subordinated Debt, arise out of or result from any failure of the Senior Debt
and the Subordinated Debt to prevent those adverse tax consequences to the
Principals that were intended to be avoided by the Senior Debt and the
Subordinated Debt, as it will exist at the Closing. Insight acknowledges and
agrees that any Capital Default could result in significant tax liabilities
being incurred by the Principals, and that such tax liabilities are included in
the possible damages for which the Principals would be entitled to indemnity
under this Section 4.4(b)(i).
(ii) Subject to the receipt of any required
consents, approvals, waivers, or authorizations of governmental authorities, (A)
the number of Representatives constituting the Management Committee shall be
increased to six, three of which shall be appointed by holders of a majority of
the outstanding Voting Interests and three of which shall be appointed by the
Principals, and (B) a Person designated by the Principals shall become an
additional Manager of the Company and shall have the authority to exercise, to
the same extent as Insight, all powers designated in this Agreement as powers of
the Manager or delegated to the Manager by the Management Committee, including
the power to cause distributions to be made to the Members in accordance with
Section 4.1(a)(i), Section 4.1(a)(ii), and Section 4.1(a)(iii) or to cause the
Preferred A Interest or the Preferred B Interest to be redeemed pursuant to
Section 4.3.
SECTION 5. ALLOCATIONS OF PROFITS AND LOSSES
5.1 Allocations of Net Profit and Net Loss.
(a) Allocations of Net Profit. For purposes of maintaining
Capital Accounts, except as otherwise provided in this Agreement, Net Profit for
each taxable year (or portion thereof) shall be allocated to the Members as
follows:
(i) First, to the Members to reverse any
allocations of Net Losses to the Members pursuant to Section 5.1(b)(iii) and
Section 5.1(b)(ii) (in reverse order to the order in which such Net Losses were
allocated to the Members) to the extent not previously reversed under this
Section 5.1(a)(i); and
(ii) Thereafter, to the Members holding Common
Interests in proportion to their Percentage Interests.
-31-
<PAGE>
(b) Allocations of Net Loss. Net Loss for each taxable year
(or portion thereof) shall be allocated to the Members as follows:
(i) First, to the Members in proportion to
their Percentage Interests; provided, however, that no allocation pursuant to
this Section 5.1(b)(i) shall reduce a Member's Adjusted Capital Account balance
below zero;
(ii) Second, to the Members in proportion to
their positive Adjusted Capital Account balances until each Member's Adjusted
Capital Account balance is at zero; and
(iii) Thereafter, to all Members in proportion to
their Percentage Interests.
5.2 Special Provisions Regarding Allocations of Income and Loss.
The following special allocations for purposes of maintaining Capital
Accounts shall be made in the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in
Treasury Regulations Section 1.704-2(f), notwithstanding any other provision of
this Section 5, if there is a net decrease in Partnership Minimum Gain for any
Fiscal Year, each Member shall be specially allocated items of Company income
and gain for such Fiscal Year (and if necessary for succeeding Fiscal Years) in
an amount equal to such Member's share of the net decrease in Partnership
Minimum Gain, determined in accordance with Treasury Regulations Section
1.704-2(g). Allocations made pursuant to the preceding sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items of Company income and gain to be allocated pursuant
to this Section 5.2(a) shall be determined in accordance with Treasury
Regulations Section 1.704-2(f)(6) and Treasury Regulations Section
1.704-2(j)(2). The amount of Partnership Minimum Gain shall be determined in
accordance with Treasury Regulations Section 1.704-2(d). This Section 5.2(a) is
intended to comply with the minimum gain chargeback requirement in Treasury
Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.
(b) Partner Minimum Gain Chargeback. Except as otherwise
provided in Treasury Regulations Section 1.704-2(i)(4), notwithstanding any
other provision of this Section 5 except Section 5.2(a), if during any Fiscal
Year there is a net decrease in Partner Nonrecourse Debt Minimum Gain, each
Member that has a share of that Partner Nonrecourse Debt Minimum Gain
(determined in accordance with Treasury Regulations Section 1.704-2(i)(5)) as of
the beginning of such Fiscal Year shall be allocated items of Company income and
gain for the Fiscal Year (and, if necessary, for succeeding Fiscal Years) equal
to that Member's share of the net decrease in the Partner Nonrecourse Debt
Minimum Gain (determined in accordance with Treasury Regulations Section
1.704-2(i)(4)). Allocations pursuant to the preceding sentence shall be made in
proportion to the respective amounts required to be allocated to each Member
pursuant thereto. The items of Company income and gain to be allocated pursuant
to this Section 5.2(b) shall be determined in accordance with Treasury
Regulations Section 1.704-2(i)(4) and Treasury Regulations Section
-32-
<PAGE>
1.704-2(j)(2). The amount of Partner Nonrecourse Debt Minimum Gain shall be
determined in accordance with Treasury Regulations Section 1.704-2(i)(3). This
Section 5.2(b) is intended to comply with the minimum gain chargeback
requirement in Treasury Regulations Section 1.704-2(i)(4) and shall be
interpreted consistently therewith.
(c) Nonrecourse Deductions. Nonrecourse Deductions for any
Fiscal Year or other period shall be specially allocated between the Members in
proportion to their Percentage Interests.
(d) Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Fiscal Year or other period shall be specially allocated to
the Member that bears the economic risk of loss with respect to the Partner
Nonrecourse Debt to which such Partner Nonrecourse Deductions are attributable
in accordance with Treasury Regulations Section 1.704-2(i).
(e) Qualified Income Offset. If either Member unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704- 1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of Company income and gain shall be specially
allocated to such Member in an amount and manner sufficient to eliminate, to the
extent required by the Treasury Regulations, the Adjusted Capital Account of
such Member as quickly as possible; provided, however, that an allocation
pursuant to this Section 5.2(e) shall be made if and only to the extent that
such Member would have an Adjusted Capital Account after all other allocations
provided for in this Section 5 have been tentatively made as if this Section
5.2(e) were not in this Agreement.
(f) Curative Allocations. The allocations set forth in the
foregoing provisions of this Section 5.2 (the "Regulatory Allocations") are
intended to comply with certain requirements of the Treasury Regulations. It is
the intent of the Members that, to the extent possible, all Regulatory
Allocations shall be offset either with other Regulatory Allocations or with
special allocations of other items of Company income, gain, loss, or deduction
pursuant to this Section 5.2. Therefore, notwithstanding any other provision of
this Section 5 (other than the Regulatory Allocations), the Company shall make
such offsetting special allocations of Company income, gain, loss, or deduction
in whatever manner that the Management Committee determines is appropriate so
that, after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not in this Agreement.
In exercising its discretion under this Section 5.2(f), the Management Committee
shall take into account future Regulatory Allocations under Section 5.2(a) and
Section 5.2(b) that, although not yet made, are likely to offset other
Regulatory Allocations previously made under Section 5.2(c) and Section 5.2(d).
(g) Recharacterization of Payments. If any payments or
expenses deducted for federal income tax purposes by a Member are
recharacterized by a final determination of the Internal Revenue Service as
nondeductible contributions to the Company, any corresponding items of loss or
deduction available to the Company shall be allocated to such Member so that, to
the extent possible, such Member has the same tax consequences as it would have
had if such payments or expenses had been deductible by such Member.
-33-
<PAGE>
(h) Allocations with Respect to Preferred A Interest. There
shall be allocated to the holder of the Preferred A Interest an amount of gross
income of the Company for any taxable year equal to the cumulative distributions
made with respect to the Preferred A Interest pursuant to Section 4.1(a)(ii)
(including any late payments on such distributions pursuant to Section
4.1(b)(ii)) in such taxable year.
(i) Allocations with Respect to Preferred B Interest. There
shall be allocated to the holder of the Preferred B Interest an amount of gross
income of the Company for any taxable year equal to the sum of (A) cumulative
distributions made with respect to the Preferred B Interest pursuant to Section
4.1(a)(iii) (including any late payments on such distributions pursuant to
Section 4.1(b)(iii)) in such taxable year and (B) the cumulative amount of
increases in the Preferred B Capital Amount pursuant to Section 4.1(a)(iii)
occurring during such taxable year.
(j) Allocations to Central.
(i) There shall be allocated to Central an
amount of gross income of the Company for any taxable year equal to $513,400
(pro-rated for any taxable year having less than 365 days), but only to the
extent that the cumulative allocations made under this Section 5.2(j)(i) (in all
taxable years) do not exceed $4,107,200.
(ii) There shall be allocated to Central an
amount of gross income of the Company for any taxable year equal to $161,300
(pro-rated for any taxable year having less than 365 days), but only to the
extent that the cumulative allocations made under this Section 5.2(j)(ii) (in
all taxable years) do not exceed $1,613,000.
(k) Allocations to Manager. There shall be allocated to the
Manager an amount of gross income of the Company for any taxable year equal to
the cumulative distributions made to the Manager pursuant to Section 4.1(a)(v)
during such taxable year.
(l) Amortization Deductions Attributable to Certain Intangible
Assets. Amortization deductions attributable to intangible assets contributed to
the Company by Central that have an initial Gross Asset Value in excess of
initial adjusted basis for federal income tax purposes shall be allocated as
follows: (i) in any taxable year, amortization deductions equal to the
amortization deductions for income tax purposes available with respect to such
assets shall be allocated to Insight, (ii) in any taxable year, amortization
deductions in excess of amortization deductions for income tax purposes shall be
allocated to Central, provided that the cumulative allocations made to Central
under this clause shall not exceed the initial Gross Asset Value of such assets
reduced by $30 million, provided further that no allocation pursuant to this
clause shall reduce Central's Adjusted Capital Account balance below zero, (iii)
thereafter, all amortization deductions in respect of such assets shall be
allocated to Insight, provided that no allocation pursuant to this clause shall
reduce Insight's Adjusted Capital Account balance below zero, and (iv) any
remaining amortization deductions available with respect to such assets shall be
allocated to Central to the extent of Central's positive Adjusted Capital
Account balance and thereafter to the Members in accordance with their
Percentage Interests. Any "book-up" or recapture of the amortization
-34-
<PAGE>
deductions described in the preceding sentence shall be allocated to the Member
to which the previously claimed deduction was allocated.
(m) Allocations Upon Liquidation. Notwithstanding anything to
the contrary herein, upon a liquidation of the Company, allocations of Net
Profit and Net Loss, and if necessary, of gross income and deductions, shall be
made so that, after such allocations have been made, the Capital Accounts of the
Members will equal as closely as possible the amounts to be distributed to the
Members pursuant to Section 10.2(d)(iii), with distributions under Section
10.2(d)(iii)(E) made in proportion to each Member's Percentage Interests.
5.3 Section 754 Adjustments.
To the extent any adjustment to the adjusted tax basis of any asset of
the Company pursuant to Code Section 734(b) or Code Section 743(b) is required,
pursuant to Treasury Regulations Section 1.704- 1(b)(2)(iv)(m), to be taken into
account in determining Capital Accounts, the amount of such adjustment shall be
treated as an item of gain (if the adjustment increases the basis of the asset)
or loss (if the adjustment decreases such basis), and such gain or loss shall be
specially allocated to the Members in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to such
section of the Treasury Regulations. An election under Code Section 754 shall be
made by the Company only with the consent of the Principals.
5.4 Allocations for Tax Purposes.
(a) Except as otherwise provided herein, for federal income
tax purposes, (i) each item of income, gain, loss and deduction shall be
allocated between the Members in the same manner as its correlative items of
"book" income, gain, loss or deduction is allocated pursuant to Section 5.1,
Section 5.2, and Section 5.3, and (ii) each tax credit shall be allocated to the
Members in the same manner as the receipt or expenditure giving rise to such
credit is allocated pursuant to Section 5.1, Section 5.2, and Section 5.3.
(b) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss, and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated between the Members so as to take account of any
variation between the adjusted basis of such property to the Company for federal
income tax purposes and its initial Gross Asset Value. The Company shall use the
"traditional method" of making Code Section 704(c) allocations (as described in
Treasury Regulations Section 1.704-3(b)).
(c) If the Gross Asset Value of any asset of the Company is
adjusted pursuant to paragraph (ii) of the definition of Gross Asset Value,
subsequent allocations of income, gain, loss, and deduction with respect to such
asset shall take account of any variation between the adjusted basis of such
asset for federal income tax purposes and its Gross Asset Value in the same
manner as under Code Section 704(c) and the Treasury Regulations thereunder.
-35-
<PAGE>
(d) Any elections or other decisions relating to allocations
described in Section 5.4(b) and Section 5.4(c) shall be made by the Management
Committee in any manner that reasonably reflects the purpose and intention of
this Agreement. Allocations pursuant to Section 5.4(b) and Section 5.4(c) are
solely for purposes of federal, state, and local taxes and shall not affect, or
in any way be taken into account in computing, either Member's Capital Account
or share of Net Profit, Net Loss, other items, or distributions pursuant to any
provision of this Agreement.
5.5 Allocations Following a Transfer of Membership Interest.
If a Membership Interest is transferred in accordance with Section 9 of
this Agreement, Net Profit and Net Loss shall be allocated between the periods
before and after the transfer by the interim closing of the Company books method
set forth in Treasury Regulation Section 1.706-1(c)(2)(ii). As of the date of
such transfer, the transferee shall succeed to the Capital Account of the
transferor with respect to the transferred Membership Interest. This paragraph
shall apply for purposes of computing a Member's Capital Account and for federal
income tax purposes.
SECTION 6. AUTHORITY OF THE MANAGER; OTHER
MATTERS AFFECTING MANAGER
6.1 Authority of Manager.
The Manager agrees that, except as otherwise expressly provided herein,
the Manager acting alone shall not give any consent to any matter or take any
other action as the Manager, including acting on behalf of or binding the
Company with respect to any matter in respect of which approval by the
Management Committee or the Members is required by the provisions of this
Agreement or the Act, unless such consent, matter, or other action shall first
have been adopted or approved by the Management Committee or the Members, as the
case may be, or authority to consent to such matter or to take such other action
shall have been expressly delegated to the Manager by the Management Committee
or the Members, as the case may be, in each case in accordance with the
provisions of this Agreement or the Act as applicable.
6.2 Resignation as Manager.
(a) Insight may not resign as the Manager without the consent
of holders of a majority of the outstanding Voting Interests and the consent of
the Principals (except in the case of a Transfer of all of Insight's Membership
Interest that is permitted by this Agreement, including a Transfer pursuant to
Section 9.11, where the Assignee of Insight's Membership Interest has been
admitted as a substitute Member in accordance with Section 9.3). If holders of a
majority of the outstanding Voting Interests and the Principals consent to such
resignation, the Company shall dissolve in accordance with the provisions of
Section 10 unless, within ninety days after the resignation of Insight as the
Manager, all the Members and the Principals elect to continue the business of
the Company and agree to the appointment, effective as of the date of the
resignation of Insight as the Manager, of one or more new Managers.
-36-
<PAGE>
(b) Any change in the identity of the Manager shall be subject
to and conditioned upon receipt of all necessary governmental approvals and
other material third-party consents.
(c) Without limiting any other rights or remedies that the
Company or Central may have at law or in equity, upon any resignation by Insight
as the Manager in violation of this Agreement, then, notwithstanding any other
provision of this Agreement to the contrary, no consent of Insight required
under any provision of this Agreement shall any longer be required and Central
shall be entitled to grant all such consents and take all actions relating to
the Company and its business.
6.3 Tax Matters Member.
(a) The Manager is hereby designated as the Tax Matters Member
of the Company, as provided in Treasury Regulations pursuant to Code Section
6231 and analogous provisions of state law. Each Member, by the execution of
this Agreement, consents to such designation of the Tax Matters Member and
agrees to execute, certify, acknowledge, deliver, swear to, file, and record at
the appropriate public offices such documents as may be necessary or appropriate
to evidence such consent.
(b) The Manager, as the Tax Matters Member, is authorized to
represent the Company before taxing authorities and courts in tax matters
affecting the Company and the Members in their capacity as Members and is
entitled to take any actions on behalf of the Company in any such tax
proceedings that the Manager, in its reasonable business judgment, deems to be
in the best interests of the Company and the Members, except that, without the
written consent of Central and the Principals, the Manager shall not extend the
statute of limitations for assessment of tax deficiencies against the Members
with respect to adjustments to the Company's federal, state, and local tax
returns, agree to any deficiency or other adjustment of any kind that adversely
affects Central or any of the Principals, make any material tax elections, or
execute any agreements or other documents relating to or affecting any tax
matters that are binding on the Company or Central or any of the Principals;
provided, however, that intangible assets contributed to the Company by Central
that have an initial Gross Asset Value in excess of their initial adjusted basis
for federal income tax purposes shall be amortized over a 25-year period.
(c) To the extent and in the manner provided by applicable law
and Treasury Regulations, the Tax Matters Member shall furnish the name,
address, profits interest, and taxpayer identification number of each Member and
any Assignee to the Secretary of the Treasury or his delegate (the "Secretary").
(d) The Tax Matters Member shall notify each Member and each
Principal of any audit that is brought to the attention of the Tax Matters
Member by notice from the Internal Revenue Service, and shall forward to each
Member and each Principal copies of any written notices, correspondence,
reports, or other documents received by the Tax Matters Member in connection
with such audit within ten Business Days following its notification by the
Internal Revenue Service or its receipt, as the case may be. The Tax Matters
Member shall provide each Member and each Principal with reasonable advance
notice of, and shall afford each Member and each Principal the
-37-
<PAGE>
right to participate in, any administrative proceedings or other material
discussions with the Internal Revenue Service, including any closing conference
with the examiner and any appeals conference, relating to the Company.
(e) The Tax Matters Partner shall, at the Company's expense,
cause all federal, state, local, and other tax returns and reports (including
amended returns) required to be filed by the Company or any Subsidiary to be
prepared and timely filed with the appropriate authorities. The Tax Matters
Partner shall cause all income or franchise tax returns or reports required to
be filed by the Company or any Subsidiary to be sent to each Member and each
Principal for review at least five Business Days prior to filing, and the Tax
Matters Partner shall afford each Member and each Principal a reasonable
opportunity to comment on any such return prior to filing.
(f) Any Member that receives a notice of an administrative
proceeding under Code Section 6223 relating to the Company shall promptly notify
the Tax Matters Member of the treatment of any Company item on such Member's
federal income tax return that is or may be inconsistent with the treatment of
that item on the Company's return.
(g) Any Member that enters into a settlement agreement with
the Secretary with respect to any Company item shall notify the Tax Matters
Member of such agreement and its terms within thirty days after its date, and
the Tax Matters Member shall notify each other Member and each Principal of the
settlement agreement within thirty days of such notification.
6.4 Reimbursement of Expenses.
(a) The Company shall reimburse the Manager for all direct,
out-of-pocket expenses incurred by or on behalf of the Manager that directly
relate to its management of the business and operations of the Company,
including any such expenses incurred in connection with the management of the
Shareholders pursuant to the management agreements between the Shareholders and
Insight; provided, however, that the Manager shall not be entitled to
reimbursement from the Company for corporate overhead (including employee
bonuses and health, welfare, retirement, and other employee benefits and
overhead expenses of its corporate office management, development, internal
accounting, and finance management personnel).
(b) The Company shall reimburse the Borrowers for all direct,
out-of-pocket expenses incurred by or on behalf of the Borrowers in complying
with the terms of the Loan Documents (excluding any payment of principal or
interest under the Senior Debt or the Subordinated Debt). The Company shall pay,
or shall reimburse the Borrowers for, any amounts required to be paid by any
Borrower as a result of any indemnification or reimbursement obligation arising
under any of the Loan Documents or otherwise arising in connection with the
offer or sale of any of the Senior Debt or the Subordinated Debt.
Notwithstanding the foregoing, no Borrower shall be entitled to reimbursement
from the Company for costs and expenses incurred in connection with maintaining
the legal existence of any Borrower, preparing and filing tax returns and
reports on behalf of the Borrower, or any other similar recurring expenses.
-38-
<PAGE>
SECTION 7. STATUS OF MEMBERS
7.1 No Management and Control.
Except as expressly provided in this Agreement, neither Member (other
than the Manager) shall take part in or interfere in any manner with the
control, conduct, or operation of the Company or have any right or authority to
act for or bind the Company or to vote on matters relating to the Company.
7.2 Limited Liability.
Neither Member shall be bound by or personally liable for the expenses,
liabilities, or obligations of the Company. In no event shall either Member be
required to make up a deficiency in its Capital Account upon the dissolution and
termination of the Company.
7.3 Return of Distributions of Capital.
A Member may, under certain circumstances, be required by law to return
to the Company, for the benefit of the Company's creditors, amounts previously
distributed. Neither Member shall be obligated by this Agreement to pay those
distributions to or for the account of the Company or any creditor of the
Company. However, if any court of competent jurisdiction holds that,
notwithstanding the provisions of this Agreement, a Member must return or pay
over any part of those distributions, the obligation shall be that of such
Member alone and not of the other Member. Any payment returned to the Company by
a Member or made directly by a Member to a creditor of the Company shall be
deemed a Capital Contribution by such Member.
7.4 Specific Limitations.
Neither Member shall have the right or power to (a) resign as a Member
(except in the case of a Transfer of all of a Member's Membership Interest that
is permitted by this Agreement, including a Transfer pursuant to Section 9.11,
where the Assignee of such Member's Membership Interest has been admitted as a
substitute Member in accordance with Section 9.3, and except as provided in
Section 6.2(a) with respect to the Manager), (b) reduce its Capital Contribution
except as a result of the dissolution of the Company or as otherwise provided by
law, or (c) demand or receive property other than cash in return for its Capital
Contribution. Except as otherwise set forth in this Agreement or in any
agreement permitted to be entered into under this Agreement with respect to the
purchase, redemption, retirement, or other acquisition of Membership Interests,
neither Member shall have priority over the other Member either as to the return
of its Capital Contribution or as to Net Profit, Net Loss, or distributions.
Other than upon the termination and dissolution of the Company as provided by
this Agreement, and except has provided in Section 4.3, there has been no time
agreed upon when the Capital Contribution of either Member will be returned.
-39-
<PAGE>
7.5 Issuance of Membership Interests.
Subject to any approval that may be required by Section 8.5(b) and, if
such approval is required, in accordance with the terms thereof, the Manager may
issue additional Membership Interests to any Person and may admit to the Company
as additional Members the Persons acquiring such Membership Interests, if such
Persons were not previously admitted as Members. The Persons acquiring such
Membership Interests shall have the rights and be subject to the obligations
attributable to such Membership Interests in the form issued to them. A Person
admitted as a new Member shall only be entitled to distributions and allocations
of Net Profit and Net Loss attributable to the period beginning on the effective
date of its admission to the Company, and the Company shall attribute Net Profit
and Net Loss to the period before the effective date of the admission of a new
Member and to the period beginning on the effective date of the admission of a
new Member by the closing of the books method.
SECTION 8. MANAGEMENT OF THE COMPANY
8.1 Creation of Management Committee.
(a) Except as otherwise expressly provided in this Agreement,
the business and operations of the Company shall be managed by a Management
Committee consisting of four Representatives, three of which shall be appointed
by holders of a majority of the outstanding Voting Interests and one of which
shall be appointed by the Principals. The initial Representatives are specified
in Schedule II.
(b) All decisions of the Management Committee shall be by
resolution duly adopted in accordance with the provisions of this Agreement. The
Management Committee may delegate such general or specific authority to the
Manager and the officers of the Company as it from time to time considers
desirable, and the Manager and the officers of the Company may exercise the
authority granted to them, subject to any restraints or limitations imposed by
the Management Committee and the provisions of Section 8.5 and any other express
provisions of this Agreement.
8.2 Appointment and Removal of Representatives.
(a) The Chairman and Secretary of the Management Committee
shall be chosen by the Management Committee.
(b) Holders of a majority of the outstanding Voting Interests
may vote at any time to remove any of the Representatives previously appointed
by the holders of a majority of the outstanding Voting Interests, with or
without cause, and may replace any Representative so removed, by sending notice
of such removal and replacement to the other Members and the Principals. The
Principals may at any time remove the Representative appointed by them, with or
without cause, and may replace the Representative so removed, by sending notice
of such removal and replacement to the Members. No Representative shall be
removed from office, with or without cause, other than as provided in the
preceding two sentences.
-40-
<PAGE>
(c) If any Representative is unwilling or unable to serve as
such or is removed from office, before the transaction of any other business by
the Management Committee, holders of a majority of the outstanding Voting
Interests, in the case of any Representative appointed by holders of a majority
of the outstanding Voting Interests, or the Principals, in the case of the
Representative appointed by the Principals, shall appoint a successor to such
Representative.
(d) No compensation of, or expenses incurred by, the
Representatives incident to their duties and responsibilities as such under this
Agreement shall be paid by, or charged to, the Company.
8.3 Meetings of the Management Committee.
The Management Committee shall hold one regular meeting each year at
such time and place as shall be determined by the Chairman of the Management
Committee. Special meetings of the Management Committee may be called at any
time by any Representative upon not less than three Business Days' prior notice
to the other Representatives, which may be waived by each Representative either
before or after the meeting. Except as otherwise determined by the Chairman of
the Management Committee, all special and regular meetings of the Management
Committee shall be held at the principal office of the Company.
8.4 Procedural Matters.
(a) Each Representative shall have one vote in all matters
presented to the Management Committee for decision or approval. At all meetings
of the Management Committee, except as otherwise expressly provided for in this
Agreement, the affirmative vote of a majority of the Representatives, present at
such meeting in person or by proxy, shall be required for all actions and
decisions of the Management Committee. If a majority of the Representatives are
not present in person or represented by proxy at any meeting, the
Representatives present may adjourn the meeting from time to time, without
notice other than an announcement at the meeting, until a majority of the
Representatives shall be present or represented.
(b) Any notice of a special meeting of the Management
Committee shall state the purpose for which such meeting has been called.
(c) Each Representative entitled to vote at a meeting of the
Management Committee or to express consent to any action in writing without a
meeting or to express consent to any action pursuant to any other provision of
this Agreement may authorize another Representative or any individual reasonably
acceptable to the other Representatives to act for him by proxy. Any
Representative may designate another individual reasonably acceptable to the
other Representatives to act as the alternate of such Representative at any
meeting of the Management Committee.
(d) Any action required or permitted to be taken by the
Management Committee may be taken without a meeting if all Representatives
consent in writing to such action. Such consent shall have the same effect as a
vote of the Management Committee. Members of the
-41-
<PAGE>
Management Committee shall have the right to participate in a meeting of the
Management Committee by means of a conference telephone or similar
communications equipment by means of which all Representatives participating in
the meeting can hear each other and be heard, and such participation shall
constitute presence in person at the meeting.
(e) The Management Committee shall cause to be kept a book of
minutes of all of its meetings in which there shall be recorded the time and
place of each such meeting, whether regular or special, and if special, by whom
called, the notice thereof given, the names of those present, and the
proceedings thereof.
8.5 Matters Requiring Approval by the Principals.
Notwithstanding any provision in this Agreement to the contrary, and in
addition to any other consent or approval that may be required by the express
terms of this Agreement, without the consent of the Principals, which may be
withheld by the Principals in their sole discretion, the Company shall not, and
neither the Manager nor the Management Committee shall have any authority to
cause the Company to, or cause or permit any Subsidiary to:
(a) enter into any transaction between the Company or any
Subsidiary and either Member or any Affiliate of either Member, unless such
transaction is on commercially reasonable terms;
(b) except for a Membership Interest issued in accordance with
Section 2.1(d)(4)(A) of the Contribution Agreement, issue any Membership
Interest or any option, warrant, or other debt or equity interest convertible
into or evidencing the right to acquire (whether or not for additional
consideration) any Membership Interest, unless:
(i) either (A) at least twenty-five percent of
the Membership Interests or other debt or equity interests so issued are issued
to Persons that are not Related Parties of Insight (for purposes of this Section
8.5(b), a "Related Party" of Insight means any Affiliate of Insight, any member,
partner, officer, director, shareholder, employee, or agent of Insight or of any
Affiliate of Insight, and any Person that has a material financial relationship
with Insight or any Affiliate of Insight), or (B) the Company has obtained and
delivered to Central and the Principals an opinion of an independent investment
banking firm of nationally recognized standing that the terms and conditions on
which such Membership Interests or other debt or equity interests are to be
issued are fair, from an economic standpoint, to the Company and the holders of
the outstanding Membership Interests; and
(ii) any of such Membership Interests or other debt
or equity interests that are issued to Persons that are Related Parties of
Insight are issued on the same terms and conditions as the Membership Interests
or other debt or equity interests that are issued to Persons that are not
Related Parties of Insight; and
(iii) the Company shall have afforded the Principals
or their designee (provided that such designee, if it is not Central, shall be
entirely owned, directly or indirectly, by
-42-
<PAGE>
one or more of the Principals and shall be owned, at least in part, directly or
indirectly, by Dennis McGillicuddy) the opportunity to acquire a portion of the
Membership Interests or other debt or equity interests so issued (other than any
Membership Interests or other debt or equity interests that are issued to
Persons that are not Related Parties of Insight) equal to a fraction, the
numerator of which is the number of Units assigned to the Common Interests held
by Central or otherwise held directly or indirectly by the Principals
immediately prior to such issuance and the denominator of which is the sum of
the number of Units assigned to all Common Interests held by Insight and Related
Parties of Insight prior to such issuance plus the number of Units assigned to
the Common Interests held by Central or otherwise held directly or indirectly by
the Principals immediately prior to such issuance;
(c) sell or otherwise dispose of, or cause or permit any
Subsidiary to sell or otherwise dispose of, any assets of the Company or any
Subsidiary that were contributed to the Company by Central or any assets of the
Company or any Subsidiary the initial adjusted tax basis of which is determined,
in whole in part, with reference to the adjusted tax basis of the assets
contributed by Central, except upon the liquidation and dissolution of the
Company in accordance with Section 10 and except for:
(i) sales and dispositions of assets that do not
involve the disposition of any of the Company's cable television subscribers;
and
(ii) any disposition of assets that does not,
together with all prior dispositions previously made by the Company, represent a
portion of the Company's business serving more than 1,000 cable television
subscribers in the aggregate;
(d) sell or otherwise dispose of, or cause or permit any
Subsidiary to sell or otherwise dispose of, any assets of the Company or any
Subsidiary if such sale or other disposition would trigger the right of any
holder of any of the Senior Debt or any of the Subordinated Debt to require that
any of such Senior Debt or Subordinated Debt be repaid, purchased, or redeemed;
(e) enter into any agreement restricting the ability of the
Company to make any distribution required to be made pursuant to Section
4.1(a)(i), Section 4.1(a)(ii), or Section 4.1(a)(iii) or to redeem the Preferred
B Interest to the extent required by Section 4.3;
(f) liquidate or dissolve except in accordance with
Section 10; or
(g) do any act in contravention of this Agreement, the
Certificate of Formation of the Company, or the Act.
The parties acknowledge and agree that each provision of this Section
8.5 is intended to be a separate condition and that therefore, for example, a
sale or disposition described in Section 8.5(c) would require the consent of the
Principals under Section 8.5(c) even if such sale or other disposition did not
require the consent of the Principals under any other provision of this Section
8.5. The parties agree to negotiate in good faith and, if such negotiations are
successful, to enter into an amendment to this Agreement that would (a) permit
the Company to consummate transactions that
-43-
<PAGE>
are intended to qualify, in whole or in part, under Code Section 1031, so long
as, in the opinion of nationally-recognized tax counsel based on an appraisal
acceptable to the Principals, the aggregate federal, state, or local tax
liability of the Principals resulting from all such dispositions and any
dispositions made pursuant to Section 8.5(c)(ii) does not exceed $2,750,000, (b)
provide a means to allow the Principals to pay any federal, state, or local tax
liability in excess of $2,750,000 if any transaction that was intended to be
within the limitations in clause (a) ultimately generates a greater federal,
state, or local tax liability to the Principals than was originally
contemplated, (c) allocate any additional depreciation and amortization for tax
purposes and other economic factors resulting from the recognition of income or
gain in any transaction that was intended to qualify under Code Section 1031,
and (d) make additional changes to this Agreement consistent with the principles
underlying the amendments described in the foregoing clauses.
8.6 Permitted Transactions.
(a) Other Businesses. Nothing in this Agreement shall limit
the ability of either Member, any partner, Affiliate, or agent of either Member,
or any Representative to engage in or possess an interest in other business
ventures of any nature or description, independently or with others, whether
currently existing or hereafter created and whether or not competitive with or
advanced by the business of the Company. Neither the Company nor the other
Member shall have any rights in or to the income or profits derived therefrom,
nor shall either Member have any obligation to the other Member with respect to
any such enterprise or related transaction. The foregoing provisions shall not
impair or otherwise affect any limitation to which either Member is or may be
subject with respect to his business activities under any other agreement
between the Company and such Member.
(b) Dealings with the Company. Subject to Section 8.5(a), the
Company may, in the discretion of the Management Committee, contract with any
Person (including either Member or any Person that is an Affiliate of either
Member or in which either Member may be interested) for the performance of any
services that may reasonably be required to carry on the business of the
Company, and any such Person dealing with the Company, whether as an independent
contractor, agent, employee, or otherwise, may receive from others or from the
Company profits, compensation, commissions, or other income incident to such
dealings.
8.7 Other Management Matters.
(a) Central and the Shareholders as Affiliates of Insight. The
parties agree that each Shareholder shall be an Affiliate of Insight for
purposes of this Agreement so long as the management agreement between Insight
and such Shareholder remains in effect and that Central shall be an Affiliate of
Insight for purposes of this Agreement so long the management agreements between
Insight and Shareholders holding a majority of the outstanding shares of Central
remain in effect. Notwithstanding the foregoing or any other provision of this
Agreement, Insight shall not be in violation of any provision of this Agreement
restricting any action by its Affiliates with respect to any action taken by
Central or any Shareholder to the extent that such action was caused to be taken
by one or more of the Principals exercising authority reserved to the Principals
under the management agreements between Insight and Shareholders, and Insight
shall not be in violation of
-44-
<PAGE>
any provision of this Agreement requiring any action by its Affiliates with
respect to any action not taken by Central or any Shareholder to the extent that
such action was prevented from being taken by one or more of the Principals
exercising authority reserved to the Principals under the management agreements
between Insight and Shareholders.
(b) Programming and Other Discounts. Insight agrees to make
available to the Company the benefits of any currently existing programming or
equipment discounts or other similar beneficial arrangements that are available
to Insight Communications Company, L.P.
SECTION 9. ASSIGNMENT, TRANSFER, OR SALE OF
INTERESTS IN THE COMPANY
9.1 Limitations on Transfers.
(a) Except as provided in Section 9.1(b), neither Member may
sell, assign, transfer, or otherwise dispose of, or pledge, hypothecate, or
otherwise encumber all or any part of its Membership Interest (any such action,
a "Transfer"), whether voluntarily, involuntarily, or by operation of law,
unless approved by the other Member and the Principals. Notwithstanding the
approval of the other Member and the Principals to any Transfer by a Member, the
rights of any Assignee shall be subject at all times to the limitations set
forth in Section 9.2.
(b) The restrictions of Section 9.1(a) shall not apply and no
consent of the other Member or the Principals shall be required for:
(i) a Transfer to an Affiliate of the
transferring Member;
(ii) a redemption of the Preferred A Interest or
the Preferred B Interest pursuant to Section 4.3;
(iii) a Transfer pursuant to Section 9.7;
(iv) a sale of all or part of the Common Interest
of Insight if Insight complies with Section 9.6(a);
(v) a sale of all or part of the Common Interest
of Central in accordance with Section 9.6(a), Section 9.6(b), or Section 9.6(c);
or
(vi) a sale of Insight's Membership Interest to a
Person designated by the Principals pursuant to Section 9.11.
9.2 Assignee.
If the provisions of this Section 9 have been complied with, an
Assignee shall be entitled to receive distributions of cash or other property,
and allocations of Net Profit and Net Loss and of items of income, deduction,
gain, loss, or credit, from the Company attributable to the assigned
-45-
<PAGE>
Membership Interests from and after the effective date of the assignment, and
shall have the right to receive a copy of the financial statements required
herein to be provided the Members, but an Assignee shall have no other rights of
a Member herein, such as rights to any other information, an accounting,
inspection of books or records, or voting as a Member on matters required by
law, unless and until such Assignee is admitted as a substitute Member pursuant
to the provisions of Section 9.3. The Company and the Manager shall be entitled
to treat the assignor as the absolute owner of the Membership Interests in all
respects, and shall incur no liability for distributions, allocations of Net
Profit or Net Loss, or transmittal of reports and notices required to be given
to Members that are made in good faith to the assignor until the effective date
of the assignment, or, in the case of the transmittal of reports (other than the
financial statements referred to above) or notices, until the Assignee is so
admitted as a substitute Member. The effective date of an assignment shall be
the first day of the calendar month following the month in which the Manager has
received an executed instrument of assignment in compliance with this Section 9
or the first day of a later month if specified in the executed instrument of
assignment. The Assignee shall be deemed an Assignee on the effective date, and
shall be only entitled to distributions and allocations of Net Profit and Net
Loss attributable to the period beginning on the effective date of assignment.
The Company shall attribute Net Profit and Net Loss to the period before the
effective date of assignment and to the period beginning on the effective date
of assignment by the interim closing of the Company books method set forth in
Treasury Regulation Section 1.706-1(c)(2)(ii). Each Assignee will inherit the
balance of the Capital Account, as of the effective date of assignment, of the
assignor with respect to the Membership Interests assigned.
9.3 Substitute Members.
Any Assignee of Insight's Membership Interest pursuant to Section 9.11
shall be automatically admitted as a substitute Member. Any other Assignee may
not become a substitute Member unless all of the following conditions are first
satisfied:
(a) a duly executed and acknowledged written instrument of
assignment shall have been filed with the Company, specifying the Membership
Interests being assigned and setting forth the intention of the assignor that
the Assignee succeed to the assignor's interest as a substitute Member;
(b) the assignor and Assignee shall have executed and
acknowledged any other instruments that the Principals, in the case of a
Transfer by Insight, or Insight, in the case of any other Transfer, deems
necessary or desirable for substitution, including the written acceptance and
adoption by the Assignee of the provisions of this Agreement and the assumption
by the Assignee of all obligations of the assignor under this Agreement
(including, in the case of a Transfer by Insight, the obligations of Insight
under Section 3.5);
(c) except in the case of an assignment permitted by Section
9.1(b), the Principals, in the case of a Transfer by Insight, or Insight, in the
case of any other Transfer, shall have consented in writing to the admission of
the Assignee as a substitute Member, the granting of which may be withheld by
the Principals or Insight, as applicable, in their or its sole and absolute
discretion; and
-46-
<PAGE>
(d) the assignment to the Assignee shall have complied with
the other provisions of this Section 9.
9.4 Other Consents and Requirements.
Any Transfer must be in compliance with all requirements imposed by any
state securities administrator having jurisdiction over the Transfer and the
United States Securities and Exchange Commission and must not cause the Company
or any Subsidiary to be in violation of any cable television franchise, any
provision of the Communications Act of 1934, as amended, or any other law
subsequently enacted, or any rule, regulation, or policy of the Federal
Communications Commission promulgated thereunder restricting the ownership and
control of communications properties (including cable television systems,
television broadcast stations, radio broadcast stations, telephone companies,
and newspapers), including those relating to multiple ownership, cross-ownership
and cross-interest, as those terms are commonly understood in the communications
industry.
9.5 Assignment Not In Compliance.
Any Transfer in contravention of any of the provisions of this Section
9 (whether voluntarily, involuntarily or by operation of law) shall be void and
of no effect, and shall neither bind nor be recognized by the Company.
9.6 Tag-Along and Drag-Along Rights.
(a) Tag-Along Rights. If Insight desires at any time to sell
to any other Person (the "Third-Party Purchaser") all or any part of any Common
Interest held by Insight, Insight shall send Central and the Principals a
written notice of the proposed sale and shall afford Central the opportunity to
sell to the Third-Party Purchaser, for the type of consideration provided in
Section 9.6(d), on terms equivalent as to purchase price per Unit (subject to
Section 9.6(g)) and otherwise identical (subject to Section 9.6(f)) to those
applicable to the sale of the Common Interest proposed to be sold by Insight,
that percentage of its Common Interest equal to a fraction, the numerator of
which is the number of Units assigned to the Common Interest proposed to be sold
by Insight and the denominator of which is the number of Units assigned to all
of the Common Interests of Insight. For purposes of this Section 9.6(a), Central
shall have been afforded the opportunity to sell its Common Interest if Central
and the Principals shall have received, at least thirty days prior to the sale
by Insight, the notice from Insight referred to in the first sentence of this
Section 9.6(a), specifying the material terms of the proposed sale, the purchase
price and other terms and conditions of payment, and the anticipated date on or
about which the proposed sale is to be made, and accompanied by an offer from
the Third-Party Purchaser to purchase Central's Common Interest on the terms
described in this Section 9.6(a). Central shall accept the offer to sell its
Common Interest pursuant to this Section 9.6(a) if the Principals so elect, and
Insight's notice to Central and the Principals pursuant to this Section 9.6(a)
shall specify the deadline before which the Principals must notify Insight of
their election that Central sell any of its Common Interest pursuant to this
Section 9.6(a), which deadline may not be before the later of (1) the fifteenth
day after the Principals' receipt
-47-
<PAGE>
of Insight's notice or (2) the fifth day after the amount of consideration
allocable to Insight's Common Interest is agreed to between Insight and the
Principals or otherwise determined pursuant to Section 9.6(e). Any purchase and
sale of any part of Central's Common Interest pursuant to this Section 9.6(a)
shall be conditioned on the consummation of the purchase and sale of Insight's
Common Interest to which this Section 9.6(a) applies.
(b) Drag-Along Rights. In connection with any sale by Insight
of all or any part of its Common Interests, Insight may elect to require that
Central sell (and, upon such election, Central shall be obligated to sell) to
the Third-Party Purchaser, for the type of consideration provided in Section
9.6(d), on terms equivalent as to purchase price per Unit (subject to Section
9.6(g)) and otherwise identical (subject to Section 9.6(f)) to those applicable
to the sale by Insight of its Common Interest, that percentage of its Common
Interest equal to a fraction, the numerator of which is the number of Units
assigned to the Common Interest to be sold by Insight and the denominator of
which is the number of Units assigned to all of the Common Interests of Insight.
Notwithstanding the foregoing, Insight's right to elect that Central sell all or
part of its Common Interest and Central's obligation to sell all or part of its
Common Interest shall be subject to any required consent or approval of the
holders of the Senior Debt or the holders of the Subordinated Debt and to any
liens securing the Senior Debt, the Subordinated Debt, or any other obligations
and liabilities arising under the Loan Documents. Any purchase and sale of all
or part of Central's Common Interest pursuant to this Section 9.6(b) shall be
conditioned on the consummation of the purchase and sale of Insight's Common
Interest to which this Section 9.6(b) applies.
(c) Put and Call of Central's Common Interest.
(i) Prior to the consummation of any transaction
or series of related transactions that would result in Insight ceasing to be
controlled, directly or indirectly, by one or more individuals who, on the date
of this Agreement, collectively control Insight (other than a transaction to
which Section 9.6(a) applies), Insight shall send Central and the Principals a
written notice setting forth the material terms of the proposed transaction and
setting forth the purchase price that would be paid for Central's Common
Interest if the Principals make an election pursuant to this Section 9.6(c), as
determined in accordance with Section 9.6(e). Within fifteen days after their
receipt of such notice, the Principals may elect, by delivering written notice
of their election to Insight, to require that Insight purchase all of Central's
Common Interest and that Central sell all of its Common Interest to Insight, for
the purchase price determined pursuant to Section 9.6(e) (subject to Section
9.6(g)) and otherwise on terms comparable (subject to Section 9.6(f)) to those
applicable to the transaction involving Insight to which this Section 9.6(c)
applies. Upon an election by the Principals pursuant to this Section 9.6(c),
Insight shall be obligated to purchase and Central shall be obligated to sell
all of Central's Common Interest. Insight's notice to Central and the Principals
pursuant to this Section 9.6(c)(i) shall specify the deadline before which the
Principals must notify Insight of their election to require that Central sell
its Common Interest pursuant to this Section 9.6(c), which deadline may not be
before the later of (A) the fifteenth day after the Principals' receipt of
Insight's notice or (B) the fifth day after the amount of consideration
allocable to Insight's Common Interest is agreed to between Insight and the
Principals or otherwise determined pursuant to Section 9.6(e).
-48-
<PAGE>
(ii) In connection with the consummation of any
transaction or series of related transactions that would result in Insight
ceasing to be controlled, directly or indirectly, by one or more individuals
who, on the date of this Agreement, collectively control Insight (other than a
transaction to which Section 9.6(a) applies), Insight may elect to require that
Central sell (and, upon such election, Central shall be obligated to sell) to
Insight all of Central's Common Interest for the purchase price determined
pursuant to Section 9.6(e) (subject to Section 9.6(g)) and otherwise on terms
comparable (subject to Section 9.6(f)) to those applicable to the transaction
involving Insight to which this Section 9.6(c) applies. Notwithstanding the
foregoing, Insight's right to elect that Central sell its Common Interest and
Central's obligation to sell its Common Interest shall be subject to any
required consent or approval of the holders of the Senior Debt or the holders of
the Subordinated Debt and to any liens securing the Senior Debt, the
Subordinated Debt, or any other obligations and liabilities arising under the
Loan Documents.
(iii) Any purchase and sale of Central's Common
Interest pursuant to this Section 9.6(c) shall be conditioned on the
consummation of the transaction involving Insight to which this Section 9.6(c)
applies.
(iv) The closing of the purchase and sale of
Central's Common Interest pursuant to this Section 9.6(c) shall occur
concurrently with the closing of the transaction that results in Insight ceasing
to be controlled, directly or indirectly, by one or more individuals who, on the
date of this Agreement, collectively control Insight. At the closing of the
purchase and sale of Central's Common Interest pursuant to this Section 9.6(c),
Insight shall pay or cause to be paid to Central the purchase price in the form
provided in Section 9.6(d), and Central will convey to Insight all of its Common
Interest free and clear of all claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, and encumbrances of any nature
whatsoever, other than the rights granted to other parties under this Agreement
and liens securing the Senior Debt, the Subordinated Debt, and any other
obligations and liabilities arising under the Loan Documents.
(d) Consideration for Purchase of Central's Common
Interest; Tax Loans.
(i) In case of a sale of all or part of
Central's Common Interest pursuant to Section 9.6(a), Section 9.6(b), or Section
9.6(c), the purchase price shall be paid through the delivery to Central of
property (including cash) of the same kind, and in the same proportions, as that
received by Insight or any direct or indirect owner of Insight in connection
with the transaction that triggered the right or obligation of Central to sell
all or part of Central's Common Interest pursuant to Section 9.6(a), Section
9.6(b), or Section 9.6(c). For purposes of this Section 9.6(d)(i) and Section
9.6(e), any liabilities assumed by the purchaser as part of the transaction that
triggered the right or obligation of Central to sell all or part of Central's
Common Interest pursuant to Section 9.6(a), Section 9.6(b), or Section 9.6(c)
(whether assumed directly or indirectly as part of the acquisition of the
outstanding equity interests in any entity, other than liabilities of the
Company) shall be treated as cash received by the selling Person. Any property
other than cash received by Central pursuant to this Section 9.6(d)(i) shall
have the same rights as to liquidity and marketability, including, in the case
of securities, registration rights, as the property received by Insight or any
direct or indirect owner of Insight.
-49-
<PAGE>
(ii) To the extent that (A) the amount of cash plus
the fair market value of any marketable securities received by Central as
consideration for the sale of Central's Common Interest pursuant to Section
9.6(b) or Section 9.6(c)(ii), is less than the tax liabilities of Central, the
Principals, and their respective Affiliates resulting from the sale of Central's
Common Interest, and (B) Central (or any Person, including any Principal, to
whom the consideration for the sale of Central's Common Interest is distributed
by Central and the Shareholders) is unable, after using commercially reasonable
efforts, to borrow the amount of such tax liabilities on the terms described in
clauses (1), (2), and (3) of the last sentence of this Section 9.6(d)(ii) with
respect to loans from Insight and at an interest rate not materially higher than
that described in clause (4) of the last sentence of this Section 9.6(d)(ii)
with respect to loans from Insight, then Insight agrees to lend to Central the
amount of such tax liabilities (less any amount that Central was able to borrow
from a lender other than Insight). Any such loan from Insight shall (1) be non-
recourse to the borrower, (2) secured only by any consideration received by
Central as consideration for the sale of its Common Interest, other than cash,
marketable securities, and any security given to secure Central's borrowings
pursuant to this Section 9.6(d)(ii) from a lender other than Insight, (3) not
require that it be repaid prior to such time as Central (or any successor) is
able to liquidate the consideration (other than cash and marketable securities)
received for the sale of Central's Common Interest, and (4) bear interest at the
weighted average cost of funds of Insight Communications Company, L.P. and its
subsidiaries for their secured debt or, if Insight Communications Company, L.P.
and its subsidiaries have no secured debt, for their senior debt.
(e) Allocation of Consideration. If Insight (i) sends a notice
to Central and the Principals pursuant to Section 9.6(a) or makes an election
pursuant to Section 9.6(b) with respect to any proposed sale to a Third-Party
Purchaser that contemplates a sale of all or part of Insight's Common Interest
in conjunction with other assets or (ii) sends a notice to Central pursuant to
Section 9.6(c)(i), Insight and the Principals shall cause the amount of
consideration proposed to be paid in any such transaction that is allocable to
Insight's Common Interest to be determined. Unless Insight and the Principals
otherwise agree (either as to the applicable value or as to an alternative
method of determining such value, including the use of a single appraiser agreed
upon between Insight and the Principals), the amount of consideration allocable
to all or part of Insight's Common Interest shall be determined as provided
below in this Section 9.6(e):
(i) Insight shall deliver to the Principals a
notice stating that Insight intends to send a notice or make an election to
which this Section 9.6(e) applies and identifying an appraiser ("Insight's
Appraiser") who has been retained by the Company to allocate the total
consideration proposed to be paid in such transaction pursuant to this Section
9.6(e). Within ten business days after their receipt of Insight's notice
pursuant to the preceding sentence, the Principals shall send a notice to
Insight identifying a second appraiser ("Central's Appraiser") who shall also be
retained by the Company to make such allocation pursuant to this Section 9.6(e).
(ii) Insight's Appraiser and Central's Appraiser
shall submit their independent determinations of the amount of consideration
allocable to the portion of Insight's Common Interest proposed to be transferred
(directly or indirectly) within thirty days after the date on which Central's
Appraiser is retained. If the respective determinations of Insight's Appraiser
and Central's Appraiser vary by less than ten percent of the higher
determination, the amount of
-50-
<PAGE>
consideration allocable to the portion of Insight's Common Interest proposed to
be transferred (directly or indirectly) shall be the average of the two
determinations.
(iii) If the respective determinations of Insight's
Appraiser and Central's Appraiser vary by ten percent or more of the higher
determination, the two appraisers shall promptly designate a third appraiser
(the "Third Appraiser"), who shall also be retained by the Company to make an
allocation or conduct an appraisal pursuant to this Section 9.6(e). Insight's
Appraiser and Central's Appraiser shall be instructed not to, and neither Member
nor any Affiliate of either Member shall, provide any information to the Third
Appraiser as to the determinations of Insight's Appraiser and Central's
Appraiser or otherwise influence the Third Appraiser's determination in any way.
The Third Appraiser shall submit its determination of the amount of
consideration allocable to the portion of Insight's Common Interest proposed to
be transferred (directly or indirectly) within thirty days after the date on
which the Third Appraiser is retained. If a Third Appraiser is retained, the
amount of consideration allocable to the portion of Insight's Common Interest
proposed to be transferred (directly or indirectly) shall equal the average of
the two closest of the three determinations, except that, if the difference
between the highest and middle determinations is no more than 105% and no less
than 95% of the difference between the middle and lowest determinations, then
the amount of consideration allocable to the portion of Insight's Common
Interest proposed to be transferred (directly or indirectly) shall equal the
middle determination.
(iv) Any appraiser retained pursuant to this
Section 9.6(e) shall be nationally recognized as being qualified and experienced
in the appraisal of cable television systems, assets comparable to Insight's
Common Interest, any other assets proposed to be sold by Insight, and any other
assets owned by relevant Persons owning direct or indirect ownership interests
in Insight, each as applicable, and shall not be an Affiliate of either Member.
All fees and expenses of any appraiser retained pursuant to this Section 9.6(e)
shall be paid by the Company.
(v) In determining the fair market value of any
asset, to the extent relevant to its allocation of consideration to Insight's
Common Interest, each appraiser retained pursuant to this Section 9.6(e) shall
(A) assume that the fair market value of the applicable asset is the price at
which the asset would change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or sell and each having reasonable
knowledge of all relevant facts; (B) assume that the applicable asset would be
sold for cash; (C) use valuation techniques then prevailing in the relevant
industry; (D) assume that any assets constituting a going concern would be sold,
in the aggregate, as a going concern, in a single transaction; (E) assume that
the value of Insight's Common Interest includes the value of any right of
Insight or any Affiliate of Insight to control the Company, regardless whether
such right inures in any other Membership Interest or arises under any other
agreement.
(vi) For purposes of Section 9.6(a), Section
9.6(b), or Section 9.6(c), the purchase price to be paid for any portion of
Insight's Common Interest proposed to be transferred (directly or indirectly)
shall be the amount of the total consideration that is allocated to such portion
of Insight's Common Interest pursuant to this Section 9.6(e) (subject to Section
9.6(g)).
-51-
<PAGE>
(f) Absence of Representations.
(i) In connection with any sale by Central
pursuant to Section 9.6(a), Section 9.6(b), or Section 9.6(c), neither Central
nor any Principal shall be required to (i) make any representation or warranty
to the Third-Party Purchaser other than (A) a representation and warranty to the
effect that, at the closing of the purchase and sale of Central's Common
Interest, Central will hold its Common Interest free and clear of all claims,
liabilities, security interests, mortgages, liens, pledges, conditions, charges,
and encumbrances of any nature whatsoever, other than the rights granted to
other parties under this Agreement and liens securing the Senior Debt, the
Subordinated Debt, and any other obligations and liabilities arising under the
Loan Documents, and (B) customary, non-operational representations and
warranties (such as those relating to Central's legal existence and corporate
authority, due authorization of the purchase and sale agreement, and the absence
of legal impediments to the consummation of the sale that relate specifically to
Central), (ii) make any covenant except as to the delivery to the Third-Party
Purchaser of Central's Common Interest, or (iii) indemnify the Third-Party
Purchaser for any liability other than damages resulting from a breach of the
representations described in this Section 9.6(f).
(ii) Notwithstanding the foregoing provisions of
this Section 9.6(f), but subject to Section 9.6(f)(iii), in connection with any
sale by Central pursuant to Section 9.6(a) or Section 9.6(b), Central shall be
responsible for Central's proportionate share (calculated per Unit) of any
purchase price reduction or indemnity obligation of Insight that is attributable
to:
(A) a breach of any customary
representation, warranty, or covenant relating to the business, operations, or
liabilities of the Company (but not any representation, warranty, or covenant
that relates specifically to Insight, such as those relating to Insight's legal
existence and authority, due authorization of the purchase and sale agreement,
and the absence of legal impediments to the consummation of the sale by
Insight); and
(B) any provision in the purchase and sale
agreements with respect to the Common Interests that requires customary deferred
adjustments to the purchase price (such as those relating to net working
capital, cash flow, and numbers of subscribers) until a reasonable period after
the closing of the purchase and sale of the Common Interest pursuant to Section
9.6(a) or Section 9.6(b).
(iii) Under no circumstances shall Central be
required to reimburse Insight for any part of any special, incidental,
consequential, exemplary, or punitive damages that may be payable to any Third-
Party Purchaser as a result of any breach by Insight of any representation or
warranty in connection with the sale of Common Interests pursuant to Section
9.6(a) or Section 9.6(b).
-52-
<PAGE>
(g) Reallocation of Purchase Price.
(i) Subject to Section 9.6(g)(iv), in connection
with any sale to a Third-Party Purchaser pursuant to Section 9.6(a) or Section
9.6(b) of all or a majority of the outstanding Common Interests that includes a
sale of all or a majority of the Common Interest held by Insight and the same
percentage of the Common Interest held by Central, if Insight has received an
offer described in Section 9.6(g)(iii)(B) and, before giving effect to this
Section 9.6(g), the consideration that would be paid to Insight per Unit for its
Common Interest would be less than the Unit Liquidation Amount, then the total
consideration to be paid by the Third-Party Purchaser to Insight and Central for
their Common Interest shall be reallocated so that:
(A) the amount paid to Insight for its
Common Interest, in the aggregate, shall equal the lesser of (1) the product of
the Unit Liquidation Amount times the number of Units assigned to the Common
Interest being sold by Insight and (2) the total consideration to be paid by the
Third-Party Purchaser to Insight and Central for their Common Interests; and
(B) the amount paid to Central for its
Common Interest, in the aggregate, shall equal the amount, if any, by which the
total consideration to be paid by the Third-Party Purchaser to Insight and
Central for their Common Interests exceeds the amount payable to Insight
pursuant to Section 9.6(g)(i)(A).
(ii) Subject to Section 9.6(g)(iv), in connection
with any transaction described in Section 9.6(c), if Insight has received an
offer described in Section 9.6(g)(iii)(B) and the amount of consideration that
is allocated to Insight's Common Interest pursuant to Section 9.6(e) is less
than the Unit Liquidation Amount, then the purchase price to be paid for
Central's Common Interest shall be reduced by the lesser of (A) one-half of the
amount by which the amount of consideration that is allocated to Insight's
Common Interest pursuant to Section 9.6(e) is less than the Unit Liquidation
Amount, and (B) the purchase price to be paid for Central's Common Interest
before giving effect to this Section 9.6(g).
(iii) For purposes of this Section 9.6(g),
(A) the "Unit Liquidation Amount" means
the amount that would have been distributed to Insight upon dissolution and
liquidation of the Company with respect to its Common Interest, per Unit, if (1)
the assets of the Company had been sold for the Offered Asset Purchase Price,
(2) Net Profit and Net Loss and items specially allocated in accordance with
Section 5.2, including any gain or loss resulting from the sale described in
clause (1), were allocated in accordance with Section 5, (3) the Company paid
its accrued, but unpaid, liabilities, other than liabilities that would have
been assumed by the purchaser in connection with the sale described in clause
(1), and (4) the Company distributed the remaining proceeds received by it (net
of reserves for contingent or unknown liabilities and any transaction costs that
would have been incurred in connection with such sale) to the Members in
liquidation; and
-53-
<PAGE>
(B) the "Offered Asset Purchase Price"
means the highest purchase price offered to be paid by any Person that is not an
Affiliate of Insight for all the assets of the Company in a bona fide written
offer where (1) all terms and conditions of such offer with respect to
representations, warranties, covenants, indemnities, adjustments, closing
conditions, and other relevant non-price matters are customary, (2) the offeror
was legally qualified and financially capable (taking into account reasonable
expectations of financing availability) to purchase the assets of the Company
and, at the time the offer was made, there were no significant risks that the
offeror would be unable to close the purchase of the assets of the Company on
the offered terms, and (3) not more than thirty days before the execution of a
binding agreement for the transfer (directly or indirectly) of all of Insight's
Common Interest to which this Section 9.6(g) would apply, Insight sought the
consent of the Principals pursuant to Section 8.5(c) and, if applicable, Section
8.5(d) to a sale of all the assets of the Company to the Person making such
offer, on the terms described in such offer, and the Principals declined to
consent to such sale; provided, however, that if the terms and conditions of any
such offer with respect to relevant non-price matters are less favorable to the
Company, taken as a whole, than the terms and conditions of the sale of the
Common Interests to the Third-Party Purchaser, so as to affect value, then the
amount of the purchase price offered to be paid in such offer shall be reduced
by an appropriate amount to reflect the differences in such terms and
conditions, as agreed to between Insight and the Principals or, if they fail to
agree on the amount, as determined by an independent investment banking firm of
nationally recognized standing that is agreed to between Insight and the
Principals, or if they fail to agree on such investment banking firm, as agreed
to by an independent investment banking firm of nationally recognized standing
selected by Insight and an independent investment banking firm of nationally
recognized standing selected by the Principals.
(iv) This Section 9.6(g) shall not apply to any sale
of Common Interests occurring prior to the second anniversary of the Closing
Date or any transaction described in Section 9.6(c) occurring prior to the
second anniversary of the Closing Date.
9.7 Pledge and Assignment of Interest.
Central may pledge its Membership Interest only for the purposes of
securing the Senior Debt, the Subordinated Debt, and any other obligations and
liabilities arising under the Loan Documents. Insight may pledge its Membership
Interest only for the purposes of securing obligations of Insight Communications
Company, L.P. and its subsidiaries under its senior bank credit agreement, and
every subsequent amendment, modification, restructuring, extension, renewal, or
consolidation of such obligations, and any obligation incurred in refinancing or
replacement of or substitution for such obligations. Notwithstanding any
provision of this Agreement to the contrary, any Person to which Central or
Insight pledges its Membership Interest pursuant to this Section 9.7 (each, a
"Secured Party") may exercise all rights and remedies incident to the pledge of
such Membership Interest, which may include authority for the Secured Party
(without dissolving the Company unless dissolution is required by law):
(a) to cause the pledged Membership Interest to be assigned in
whole or in part on one or more occasions to one or more Persons (which may
include the Secured Party); provided,
-54-
<PAGE>
however, that any Transfer of Insight's Common Interest upon the exercise of any
rights or remedies incident to any pledge thereof shall be conditioned on
Insight's compliance with Section 9.6(a);
(b) to cause any assignee of the pledged Membership Interest
to be admitted as a Member having the interest so assigned;
(c) to cause the holder of the pledged Membership Interest to
resign as a Member once all of its Membership Interest has been assigned; and
(d) to cause one or more amended Certificates of Formation to
be filed with respect to the Company.
9.8 Condition on Change in Control of the Company.
Prior to the consummation of any transaction or series of related
transactions by Insight or any of its Affiliates, including any Transfer by
Insight of all or any part of its Membership Interest, that would trigger the
right of any holder of any of the Senior Debt or any of the Subordinated Debt to
require that such Senior Debt or Subordinated Debt be repaid, purchased, or
redeemed, Insight or, in the case of a Transfer, Insight or its Assignee shall:
(a) agree to purchase such Senior Debt or Subordinated Debt
from the holder thereof in the event the holder elects to require that such
Senior Debt or Subordinated Debt be repaid, purchased, or redeemed, and, upon
such purchase, Insight or its Assignee shall waive any right to require that
such Senior Debt or Subordinated Debt be repaid, purchased, or redeemed, or
(b) obtain an irrevocable, binding agreement of the holder of
such Senior Debt or Subordinated Debt not to require that such Senior Debt or
Subordinated Debt be repaid, purchased, or redeemed upon the consummation of
such Transfer.
9.9 Substitution of Parent Undertaking.
Prior to the consummation of any transaction or series of related
transactions, including any Transfer, that would result in Insight ceasing to be
controlled, directly or indirectly, by one or more individuals who, on the date
of this Agreement, collectively control Insight, Insight shall cause the Person
that, after giving effect to such transaction, would be the ultimate parent
entity (as determined in accordance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder) of Insight, or such other Person reasonably acceptable to the
Principals, to execute and deliver to Central and the Principals an agreement,
substantially in the form of the parent undertaking executed and delivered by
Insight Communications Company, L.P. in connection with the execution and
delivery of this Agreement.
-55-
<PAGE>
9.10 Continuing Rights and Privileges.
Notwithstanding the sale or other disposition by Central of all of its
Common Interest in accordance with this Agreement, Central shall continue to be
a Member of the Company so long as it continues to hold the Preferred A Interest
or the Preferred B Interest and shall have the rights and privileges specified
in this Agreement as pertaining to the Preferred A Interest or the Preferred B
Interest or specified in this Agreement as rights and privileges of Central.
9.11 Insight's Right to Put Its Interest.
Insight may elect at any time, by delivering written notice of its
election to Central and the Principals, to require that a Person designated by
the Principals purchase all of Insight's Membership Interest, for one dollar
(plus the Tax Amount that would be distributable to Insight on the date of the
next scheduled April Distribution after the closing of such purchase, calculated
as if the Company's Fiscal Year ended on the closing of such purchase). Upon an
election by Insight pursuant to this Section 9.11, the Principals shall be
obligated to cause a Person designated by the Principals to purchase and Insight
shall be obligated to sell all of Insight's Membership Interest. Insight's right
to make an election pursuant to this Section 9.11, and any purchase and sale of
Insight's Membership Interest pursuant to this Section 9.11, shall be subject to
the following provisions:
(a) At the closing of the purchase and sale of Insight's
Membership Interest pursuant to this Section 9.11, the Person designated by the
Principals shall pay to Insight one dollar and shall assign to Insight its right
to receive that portion of the next April Distribution after the closing equal
to the balance of the purchase price for Insight's Membership Interest, and
Insight will convey to the Person designated by the Principals all of its
Membership Interest free and clear of all claims, liabilities, security
interests, mortgages, liens, pledges, conditions, charges, and encumbrances of
any nature whatsoever, other than the rights granted to other parties under this
Agreement. The Company shall pay to Insight that portion of the next April
Distribution after the closing that was assigned to Insight, which payment shall
be considered payment by the Person designated by the Principals of the balance
of the purchase price for Insight's Membership Interest.
(b) The closing of the purchase and sale of Insight's
Membership Interest pursuant to this Section 9.11 shall occur on a date to be
specified by the Principals that is within 180 days after the Principals'
receipt of Insight's election pursuant to this Section 9.11, subject to the
receipt of all necessary governmental approvals and other material third-party
consents.
(c) Each of the management agreements between Insight and the
Shareholders shall terminate automatically upon the closing of the purchase and
sale of Insight's Membership Interest pursuant to this Section 9.11.
9.12 Treatment of Certain Membership Interests.
Any Membership Interests purchased by the Principals or their designee,
if it is not Central, pursuant to Section 8.5(b)(iii) shall be treated as if
such Membership Interests were owned by Central for purposes of this Section 9
(which includes Insight's right to require that such Membership
-56-
<PAGE>
Interests be sold under certain circumstances pursuant to Section 9.6(b) or
Section 9.6(c) and the Principals' right to require that such Membership
Interests be purchased under certain circumstances pursuant to Section 9.6(a) or
Section 9.6(c), in each case on the same terms as would be applicable to
Membership Interests owned by Central).
SECTION 10. DISSOLUTION AND TERMINATION OF THE
COMPANY
10.1 Events of Dissolution.
The Company shall be dissolved upon the happening of any of the
following events:
(a) December 31, 2058;
(b) if the Principals consent to the resignation of
Insight as Manager pursuant to Section 6.2(a) but the Members and the Principals
do not elect to continue the Company thereafter in accordance with the
provisions of Section 6.2(a);
(c) upon agreement of Insight and the Principals;
(d) upon the affirmative vote of holders of a majority of
the outstanding Voting Interests; provided, however, that the holders of the
outstanding Voting Interests may not vote to dissolve the Company at any time
prior to the earlier of (1) the death of the last to die of Barry Silverstein,
Dennis McGillicuddy, and D. Stevens McVoy, or (2) the receipt by the Principals
of an opinion of their legal counsel that the dissolution and liquidation of the
Company would not, in its opinion, increase by more than a de minimis amount the
likelihood of adverse tax consequences to the Principals (other than adverse tax
consequences that are incurred after the triggering of all adverse tax
consequences to the Principals relating to the Senior Debt, the Subordinated
Debt, and the holding of the Preferred A Interest and the Preferred B Interest);
(e) upon the sale of all or substantially all of the
assets of the Company in a manner permitted by this Agreement;
(f) the termination of the Contribution Agreement in
accordance with its terms prior to the Closing; or
(g) subject to any provision of this Agreement that
limits or prevents dissolution, the happening of any event that, under
applicable law, causes the dissolution of a limited liability company.
10.2 Liquidation.
(a) Upon dissolution of the Company for any reason, the
Company shall immediately commence to wind up its affairs. A reasonable period
of time shall be allowed for the orderly termination of the Company business,
discharge of its liabilities, and distribution or
-57-
<PAGE>
liquidation of the remaining assets so as to enable the Company to minimize the
normal losses attendant to the liquidation process.
(b) Liquidation of the assets of the Company shall be
managed on behalf of the Company by the "Liquidator," which shall be (i) if
Insight wrongfully caused the dissolution of the Company, a liquidating trustee
selected by the Principals, and (ii) in all other events, Insight or a
liquidating trustee selected by Insight. The Liquidator shall be responsible for
soliciting offers to purchase the entirety of the Company's assets (including
equity interests in other Persons) or portions or clusters of assets of the
Company.
(c) The Liquidator shall cause a full accounting of the
assets and liabilities of the Company to be taken and a statement thereof to be
furnished to each Member and each Principal within thirty days after the
distribution of all of the assets of the Company.
(d) The property and assets of the Company and the
proceeds from the liquidation thereof shall be applied in the following order of
priority:
(i) first, to payment of the debts and
liabilities of the Company, in the order of priority provided by law (including
any loans by either Member to the Company) and payment of the expenses of
liquidation;
(ii) second, to setting up of such reserves as
the Liquidator may deem reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Company or any obligation or liability not
then due and payable; provided, however, that any such reserve shall be paid
over by the Liquidator into a Company account or a liquidating trust account
established for such purpose, to be held in such account for the purpose of
disbursing such reserves in payment of such liabilities, and, at the expiration
of such holdback period as the Liquidator shall deem advisable, to distribute
the balance thereafter remaining in the manner hereinafter provided; and
(iii) finally, remaining proceeds shall be
distributed to the Members as follows:
(A) First, if the Preferred A Interest
is then outstanding, to the holder of the Preferred A Interest in an amount
equal to the sum of (x) the amount of any distributions that were required to be
made pursuant to Section 4.1(a)(i) but were not made (including any increase to
such amount pursuant to Section 4.1(b)(i)), plus (y) a pro rata portion of the
Guaranteed Payment Amount, based on the ratio of the number of days between the
immediately preceding Guaranteed Payment Date and the date on which the
distribution is made pursuant to this Section 10.2(d)(iii)(A) to the number of
days between the immediately preceding Guaranteed Payment Date and the next
following Guaranteed Payment Date, computed on the basis of a 360-day year of
twelve 30-day months;
(B) Second, if the Preferred A Interest
is then outstanding, to the holder of the Preferred A Interest in an amount
equal to the sum of (x) the Preferred A Capital Amount, plus (y) the amount of
any distributions that were required to be made pursuant to Section
-58-
<PAGE>
4.1(a)(ii) but were not made (including any increase to such amount pursuant to
Section 4.1(b)(ii)), plus (z) the amount by which the Preferred A Preference
Amount exceeds the amount described in clause (y) of Section 10.2(d)(iii)(A);
(C) Third, if the Preferred B Interest
is then outstanding, to the holder of the Preferred B Interest in an amount
equal to the sum of (x) the Preferred B Capital Amount, plus (y) the amount of
any distributions that were required to be made pursuant to Section 4.1(a)(iii)
but were not made (including any increase to such amount pursuant to Section
4.1(b)(iii)), plus (z) the Preferred B Preference Amount;
(D) Fourth, to the Manager in an amount
equal to the sum of (x) the amount of any distributions that were required to be
made pursuant to Section 4.1(a)(v) but were not made (including any increase to
such amount pursuant to Section 4.1(b)(iv)), plus (y) the Management Return;
(E) Thereafter, pro rata to the Members
in proportion to their remaining positive Capital Account balances, after
reducing the Members' Capital Account balances to take into account
distributions pursuant to the foregoing paragraphs of this Section 10.2(d)(iii).
The distributions pursuant to this Section 10.2(d)(iii) shall, to the extent
possible, be made prior to the later of the end of the Fiscal Year in which the
dissolution occurs or the ninetieth day after the date of dissolution, or such
other time period which may be permitted under Treasury Regulations Section
1.704-1(b)(2)(ii)(b).
10.3 Distribution in Kind.
The Company shall not distribute any non-cash asset to either Member
without the consent of each Member and the Principals, except that, upon
liquidation of the Company, the Company may distribute identical assets (such as
shares of stock or other securities) to the Members pro rata pursuant to Section
10.2(d)(iii)(E). The amount distributed and charged to the Capital Account of
each Member receiving any non-cash asset shall be the fair market value of such
asset, as agreed to by the Members and the Principals (net of any liability
secured by such asset that such Member assumes or takes subject to). Gain or
loss on the disposition of any asset distributed in kind to one or more Members
shall be determined as if such asset were sold for its fair market value, as
agreed to by the Members and the Principals, and such gain or loss shall then be
allocated pursuant to Section 5.
10.4 No Action for Dissolution.
The Members acknowledge that irreparable damage would be done to the
goodwill and reputation of the Company if either Member should bring an action
in court to dissolve the Company under circumstances where dissolution is not
required by Section 10.1. This Agreement has been drawn carefully to provide
fair treatment of all parties and equitable payment in liquidation of the
Membership Interests of both Members. Accordingly, except where liquidation and
dissolution are required by Section 10.1, each Member hereby waives and
renounces its right to initiate legal action
-59-
<PAGE>
to seek dissolution or to seek the appointment of a receiver or trustee to
liquidate the Company or to seek partition of any assets of the Company.
10.5 No Further Claim.
Upon dissolution, each Member shall look solely to the assets of the
Company for the return of its investment, and if the property of the Company
remaining after payment or discharge of the debts and liabilities of the
Company, including debts and liabilities owed to one or more of the Members, is
insufficient to return the aggregate capital contributions of a Member, neither
Member shall have any recourse against the other Member.
SECTION 11. INDEMNIFICATION
11.1 General.
The Company shall indemnify, defend, and hold harmless each Member and
its members, partners, officers, directors, shareholders, employees, and agents,
the employees, officers, and agents of the Company, the Principals, and the
Representatives (all indemnified persons being referred to as "Indemnified
Persons" for purposes of this Section 11.1), from any liability, loss, or damage
incurred by the Indemnified Person by reason of any act performed or omitted to
be performed by the Indemnified Person in connection with the business of the
Company (including, in the case of Insight, any such act in connection with the
management of the Shareholders pursuant to the management agreements between the
Shareholders and Insight, or arising by reason of Insight's status as manager of
the Shareholders), including costs and attorneys' fees (which attorneys' fees
may be paid as incurred) and any amounts expended in the settlement of any
claims of liability, loss, or damage; provided, however, that, if the liability,
loss, damage, or claim arises out of any action or inaction of an Indemnified
Person, indemnification under this Section 11.1 shall not be available if the
action or inaction constituted fraud, gross negligence, breach of fiduciary duty
(which shall not be construed to encompass mistakes in judgment or any breach of
any Indemnified Person's duty of care that did not constitute gross negligence),
willful misconduct, or a breach of this Agreement by the Indemnified Person; and
provided, further, however, that indemnification under this Section 11.1 shall
be recoverable only from the assets of the Company and not from any assets of
the Members. The Company may pay for insurance covering liability of the
Indemnified Persons for negligence in operation of the Company's affairs.
11.2 Exculpation.
No Indemnified Person shall be liable, in damages or otherwise, to the
Company or to either Member for any loss that arises out of any act performed or
omitted to be performed by it or him pursuant to the authority granted by this
Agreement unless the conduct of the Indemnified Person constituted fraud, gross
negligence, breach of fiduciary duty (which shall not be construed to encompass
mistakes in judgment or any breach of any Indemnified Person's duty of care that
did not constitute gross negligence), willful misconduct, or a breach of this
Agreement by such Indemnified Person.
-60-
<PAGE>
11.3 Persons Entitled to Indemnity.
Any Person who is within the definition of "Indemnified Person" at the
time of any action or inaction in connection with the business of the Company
shall be entitled to the benefits of Section 11.1 as an "Indemnified Person"
with respect thereto, regardless of whether such Person continues to be within
the definition of "Indemnified Person" at the time of his or its claim for
indemnification or exculpation hereunder.
SECTION 12. BOOKS, RECORDS, ACCOUNTING, AND
REPORTS
12.1 Books and Records.
The Company shall maintain at its principal office all of the
following:
(a) A current list of the full name and last known business or
residence address of each Member together with the Capital Contributions and
Membership Interest of each Member;
(b) A copy of the Certificate of Formation, this Agreement,
and any and all amendments to either thereof, together with executed copies of
any powers of attorney pursuant to which any certificate or amendment has been
executed;
(c) Copies of the Company's federal, state, and local income
tax or information returns and reports, if any, for the six most recent taxable
years;
(d) The audited financial statements of the Company for the
six most recent Fiscal Years; and
(e) The Company's books and records for at least the current
and past three Fiscal Years.
12.2 Delivery to Member and Inspection.
(a) Upon the request of a Member or a Principal, the Company
shall promptly deliver to the requesting Member or Principal, at the expense of
the Company, a copy of the information required to be maintained by Section 12.1
except for Section 12.1(e).
(b) Each Member and each Principal, or its duly authorized
representative, has the right, upon reasonable request, to inspect and copy
during normal business hours any of the Company records.
-61-
<PAGE>
12.3 Annual Statements.
(a) The Company shall cause to be prepared for each Member and
each Principal at least annually, at Company expense, audited financial
statements of the Company and a consolidated audited financial statement for the
Company and the Subsidiaries in accordance with generally accepted accounting
principles, along with supplemental information for the Company and each
Subsidiary, and accompanied by a report thereon containing the opinion of Ernst
& Young LLP or other nationally recognized accounting firm chosen by the
Management Committee. The financial statements will include a balance sheet,
statement of income or loss, statement of cash flows, and statement of Members'
equity. The supplemental information will consist of a consolidating balance
sheet and a consolidating statement of operations and Members' equity for the
preceding Fiscal Year. The Company shall distribute the financial statements or
portions thereof to each Member and each Principal as follows:
(i) the Company shall distribute to each Member
and each Principal a statement setting forth the net income or loss of the
Company for each Fiscal Year within forty-five days after the close of such
Fiscal Year;
(ii) the Company shall distribute to each Member
and each Principal the balance sheet, statement of income or loss, statement of
cash flows, and statement of Members' equity to be included in the financial
statements for each Fiscal Year within forty-five days after the close of such
Fiscal Year;
(iii) the Company shall distribute to each Member
and each Principal the complete audited financial statements for each Fiscal
Year as soon as practicable after the close of such Fiscal Year and, in any
event, by March 15 of the year following the close of such Fiscal Year.
(b) The Company shall have prepared at least annually,
at Company expense, Company information necessary for the preparation of each
Member's federal and state income tax returns. The Company shall send the
information described in this paragraph to each Member and each Principal within
ninety days after the end of each Fiscal Year and shall use commercially
reasonable efforts to send such information to each Member and each Principal
within seventy-five days after the end of each Fiscal Year.
(c) The Company shall also cause to be distributed to
each Member and each Principal, within ten days after delivery to the Company,
any audited financial statements that are prepared with respect to any
Subsidiary the financial statements of which are not consolidated with the
financial statements of the Company.
(d) The Company, shall distribute to each Member and
each Principal, promptly after they become available, copies of the Company's
federal, state, and local income tax or information returns for each taxable
year.
-62-
<PAGE>
12.4 Quarterly Financial Statements.
At the close of each of the first three quarters of any Fiscal Year,
the Company shall cause to be distributed to each Member and each Principal a
quarterly report covering each calendar quarter of the operations of the Company
and the Subsidiaries, consisting of unaudited financial statements (comprising a
balance sheet, a statement of income or loss, and a statement of cash flows),
and a statement of other pertinent information regarding the Company and the
Subsidiaries and their activities. The Company shall cause copies of the
statements and other pertinent information (including selected financial data of
the Company that complies with the requirements of APB Opinion No. 18 and Rule
4-08(g) of Regulation S-X under the Securities Act and any other applicable
rules pursuant to Regulation S-X under the Securities Act) to be distributed to
each Member and each Principal within thirty days after the close of the
calendar quarter to which the statements relate. The Company shall distribute to
each Member and each Principal a statement setting forth the net income or loss
of the Company for each calendar quarter within thirty days after the close of
such calendar quarter. The Company shall also cause to be distributed to each
Member and each Principal, within ten days after delivery to the Company, any
quarterly report that is prepared with respect to any Subsidiary the operating
results of which are not included in the quarterly report of the Company.
12.5 Monthly Statements.
The Company shall cause to be distributed to each Member and each
Principal a monthly report covering each calendar month of the operations of the
Company and each Subsidiary, consisting of unaudited statements of income and
loss for the Company and each Subsidiary. The Company shall cause copies of the
statements to be distributed to each Member and each Principal within thirty
days after the close of the calendar month covered by such report. The Company
shall also cause to be distributed to each Member and each Principal, within ten
days after delivery to the Company, any monthly report that is prepared with
respect to any Subsidiary the operating results of which are not included in the
monthly report of the Company.
12.6 Other Information.
The Company shall provide to each Member and each Principal any other
information and reports relating to any cable television systems or other
businesses owned by, and the financial condition of, the Company, each
Subsidiary, and any other Person in which the Company owns, directly or
indirectly, an equity interest, that such Member or Principal may reasonably
request, including, in the case of Central, any information that Central is
required to distribute to holders of the Senior Debt. or the Subordinated
Debt. The Company shall distribute to each Member and each Principal, promptly
after the receipt thereof by the Company, any financial or other information
with respect to any Person in which the Company owns, directly or indirectly, an
equity interest, but which is not a Subsidiary.
-63-
<PAGE>
12.7 Tax Matters.
To the extent permitted by law, the Company shall be treated as a
partnership for federal and state income tax and franchise tax purposes. This
Section 12.7 shall not prohibit any Member or any Affiliate of any Member from
taking any action that is not prohibited by Section 2.13.
12.8 Other Filings.
The Company, at Company expense, shall also prepare and timely file,
with appropriate federal and state regulatory and administrative bodies, all
reports required to be filed by the Company with those entities under then
current applicable laws, rules, and regulations. The reports shall be prepared
on the accounting or reporting basis required by the regulatory bodies. Upon
written request, the Manager shall provide each Member and each Principal with a
copy of any of such reports, without expense to the requesting Member or
Principal.
12.9 Non-Disclosure.
Any Member or Principal to which non-public information is furnished
pursuant to this Agreement agrees to keep such information confidential and not
to disclose such information, in any manner whatsoever, in whole or in part, and
to use the degree of care that it uses with respect to its own confidential
information to prevent disclosure of such information by its agents,
representatives, or employees, in any manner whatsoever, in whole or in part,
except that:
(a) each Member and Principal shall be permitted to disclose
such information to those of its agents, representatives, and employees who need
to be familiar with such information in connection with such Member or
Principal's investment in the Company,
(b) each Member and Principal shall be permitted to disclose
such information to its Affiliates,
(c) Central shall be permitted to disclose such information to
its lenders and to the other Borrowers, and each Borrower shall be permitted to
disclose such information to its lenders;
(d) the Principals may use such information, as appropriate,
in the preparation of their personal financial statements and other similar
documents, which may then be disclosed by the Principals as they deem
appropriate;
(e) each Member shall be permitted to disclose information to
the extent required by law, including federal or state securities laws or
regulations, or by the rules and regulations of any stock exchange or
association on which securities of such Member or any of its Affiliates are
traded, so long as such Member shall have first afforded the Company with a
reasonable opportunity to contest the necessity of disclosing such information,
-64-
<PAGE>
(f) each Member and Principal shall be permitted to disclose
information to the extent necessary for the enforcement of any right or the
performance of any obligation of such Member and Principal (including
obligations of a Member in its capacity as Manager) arising under this
Agreement,
(g) each Member and Principal shall be permitted to disclose
information that is or becomes generally available to the public other than as a
result of a disclosure by such Member or Principal, its agents, representatives,
or employees, and
(h) each Member and Principal shall be permitted to disclose
information that becomes available to such Member or Principal on a
nonconfidential basis from a source (other than the Company, a Member, or their
respective agents, representatives, and employees) that such Member or Principal
believes is not prohibited from disclosing such information to such Member or
Principal by a legal, contractual, or fiduciary obligation to the Company or
either Member.
SECTION 13. AMENDMENTS AND WAIVERS
13.1 Amendments to Operating Agreement.
(a) This Agreement may only be modified or amended with the
consent of all the Members and the Principals.
(b) The Company shall prepare and file any amendment to the
Certificate of Formation that may be required to be filed under the Act as a
consequence of any amendment to this Agreement.
13.2 Waivers.
The observance or performance of any term or provision of this
Agreement may be waived (either generally or in a particular instance, and
either retroactively or prospectively) by the party entitled to the benefits of
such term or provision, but no provision of this Agreement may be waived except
by a written instrument specifically waiving such provision and executed by the
party to be charged with such waiver, and no provision of this Agreement may be
waived by Central without the prior written consent of the Principals in a
written instrument specifically consenting to such waiver. No delay on the part
of either Member in exercising any right, power, or privilege under this
Agreement shall operate as a waiver thereof, nor shall any waiver on the part of
either Member of any right, power, or privilege under this Agreement operate as
a waiver of any other right, power, or privilege under this Agreement, 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 under this Agreement.
-65-
<PAGE>
SECTION 14. STATUS OF PRINCIPALS
14.1 Principals Not Members.
The Principals are not members of the Company for purposes of the Act
and shall have none of the rights of a member of a limited liability company
under the Act, except to the extent that the Principals are afforded such rights
under the express provisions of this Agreement.
14.2 Provisions for the Benefit of Principals.
The parties acknowledge that the Principals have a significant economic
interest in the Company through their ownership of the Shareholders and are
relying on the provisions of this Agreement to protect and preserve such
interest. Accordingly, each provision of this Agreement is intended to be for
the benefit of, and shall be enforceable by, the Principals.
14.3 Assignment or Rights.
None of the rights of any Principal under this Agreement may be
assigned or otherwise transferred except, following the death of a Principal,
pursuant to the laws of descent and distribution.
14.4 Termination of Rights and Obligations.
Notwithstanding any provision of this Agreement to the contrary, all
rights of the Principals under this Agreement shall terminate at such time as
the Principals cease to own, directly or indirectly, any interest in the
Company.
14.5 Actions by Principals.
Any action to be taken by the Principals under this Agreement
(including exercising any right, granting any consent or approval, making any
election, or giving any notice) shall be taken by all of the Principals
collectively, with the decision to take or to refrain from taking any such
action being made by the Principals in such manner as they may agree upon among
themselves. The Principals shall from time to time jointly designate one or more
agents to execute on their behalf any instrument necessary to evidence any
action taken collectively by the Principals under this Agreement. The Company
and each Member shall be entitled to rely upon any instrument delivered to it
under this Agreement and purporting to be (a) the joint designation by the
Principals of any such agent or (b) an instrument executed by such agent to
evidence any action taken collectively by the Principals under this Agreement,
and may assume that any Person signing such instrument has been duly authorized
to do so.
-66-
<PAGE>
14.6 Limited Recourse.
Each party agrees that no Principal shall have any personal liability
whatsoever under this Agreement, and any damages suffered by any party as a
result of any failure of a Principal to perform his obligations under this
Agreement, to the extent such party would be entitled to remedy therefor but for
this Section 14.6, shall be satisfied, if at all, from the assets of Central.
SECTION 15. MISCELLANEOUS
15.1 Captions.
All article, section, or paragraph captions contained in this Agreement
are for convenience only and shall not be deemed part of this Agreement.
15.2 Pronouns; Singular and Plural Form.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, and neuter as the identity of the Person or Persons
referred to may require, and all words shall include the singular or plural as
the context or the identity of Persons may require. The words "include,"
"includes," and "including" are not limiting.
15.3 Further Action.
Each Member agrees to execute, with acknowledgment or affidavit, if
required, any documents and writings in furtherance of this Agreement, including
(a) amendments of this Agreement adopted pursuant to this Agreement, (b) any
amendments, certificates, and other documents that the Company deems necessary
or appropriate to qualify or continue the Company as a limited liability company
in all jurisdictions in which the Company conducts or plans to conduct business
or owns or plans to own property, and (c) all agreements, certificates, tax
statements, tax returns, and other documents that may be required of the Company
or its Members under applicable law.
15.4 Entire Agreement.
This Agreement contains the entire understanding among the parties and
supersedes any prior understandings and agreements among them regarding the
subject matter of this Agreement.
15.5 Agreement Binding.
This Agreement shall be binding upon the successors and assigns of the
parties.
-67-
<PAGE>
15.6 Equitable Remedies.
The rights and remedies of the parties under this Agreement are not
mutually exclusive. Each of the parties confirms that damages at law may not
always be an adequate remedy for a breach or threatened breach of this Agreement
and agrees that, in the event of a breach or threatened breach of any provision
of this Agreement, the respective rights and obligations under this Agreement
shall be enforceable by specific performance, injunction, or other equitable
remedy.
15.7 Notices.
All notices, demands, and requests required or permitted to be given
under the provisions of this Agreement shall be in writing and shall be deemed
to have been duly delivered and received (a) on the date of personal delivery,
or (b) on the date of receipt (as shown on the return receipt) if mailed by
registered or certified mail, postage prepaid and return receipt requested, or
if sent by Federal Express or similar courier service, with all charges prepaid,
in each case addressed to the Member or Principal at the address set forth on
Schedule I or at the last address furnished by the Member or Principal to the
other parties by notice pursuant to this Section 15.7. Nothing in this Section
15.7 shall preclude the delivery of notices by appropriate means other than
those described above, including telex or facsimile.
15.8 Severability.
If any provision or part of any provision of this Agreement shall be
invalid or unenforceable in any respect, such provision or part of any provision
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provision or the
remaining provision of this Agreement.
15.9 Counterparts.
This Agreement may be signed in counterparts with the same effect as if
the signature on each counterpart were upon the same instrument.
15.10 Governing Law.
This Agreement shall be governed, construed, and enforced in accordance
with the laws of the State of Delaware (without regard to the choice of law
provisions thereof).
15.11 No Third-Party Beneficiaries.
This Agreement is not intended to, and shall not be construed to,
create any right enforceable by any Person that is not a party to this
Agreement, including any creditor of the Company or of any of the Members or
Principals.
-68-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first written above.
MEMBERS:
COAXIAL COMMUNICATIONS OF CENTRAL
OHIO, INC.
By: /s/
------------------------------
Name:
-----------------------------
Title:
----------------------------
INSIGHT HOLDINGS OF OHIO, LLC
By: Insight Communications Company, L.P., its
member
By: ICC Associates, L.P., its general partner
By: Insight Communications, Inc., its general
partner
By: /s/
-------------------------------
Name:
-----------------------------
Title:
----------------------------
PRINCIPALS:
/s/ Barry Silverstein
----------------------------------
Barry Silverstein
/s/ Dennis McGillicuddy
----------------------------------
Dennis McGillicuddy
-69-
<PAGE>
/s/ D. Stevens McVoy
______________________________
D. Stevens McVoy
-70-
<PAGE>
SCHEDULE I
TO
OPERATING AGREEMENT
ADDRESSES OF THE PARTIES
Insight Holdings of Ohio, LLC
c/o Insight Communications, Inc.
126 E. 56th Street
New York, New York 10022
Coaxial Communications of Central
Ohio, Inc.
c/o Coaxial Communications
5111 Ocean Boulevard
Suite C
Sarasota, Florida 34242
Barry Silverstein
c/o Coaxial Communications
5111 Ocean Boulevard
Suite C
Sarasota, Florida 34242
Dennis McGillicuddy
c/o Coaxial Communications
5111 Ocean Boulevard
Suite C
Sarasota, Florida 34242
D. Stevens McVoy
c/o Coaxial Communications
5111 Ocean Boulevard
Suite C
Sarasota, Florida 34242
<PAGE>
SCHEDULE II
TO
OPERATING AGREEMENT
INITIAL MEMBERS OF THE MANAGEMENT COMMITTEE
1. Initial Representatives designated by a majority of the outstanding
Voting Interests pursuant to Section 8.1(a):
Sidney R. Knafel
Michael S. Willner
Kim D. Kelly
2. Initial Representative designated by the Principals pursuant to Section
8.1(a):
Dennis J. McGillicuddy
<PAGE>
SCHEDULE III
TO
OPERATING AGREEMENT
TERMS RELATING TO PREFERRED INTERESTS
"Guaranteed Payment Amount" means $2,991,791.38.
"Guaranteed Payment Date" means each February 15 and August 15 of each
year.
"Management Return Payment Date" means each February 15 and August 15
of each year.
"Preferred A Distribution Date" means each February 15 and August 15 of
each year.
"Preferred A Rate" means ten percent per year; provided, however, that
the Preferred A Rate shall be increased by the amount of any increase in the
interest rate payable with respect to the Senior Notes pursuant to Section 4 of
the Senior Notes Registration Rights Agreement, dated as of August 21, 1998.
"Preferred B Distribution Date" means each February 15 and August 15 of
each year.
"Preferred B PIK Termination Date" means August 15, 2003.
"Preferred B Rate" means twelve and seven-eighths percent per year;
provided, however, that the Preferred B Rate shall be increased by the amount of
any increase in the interest rate payable with respect to the Discount Notes
pursuant to Section 4 of the Discount Notes Registration Rights Agreement, dated
as of August 21, 1998.
<PAGE>
EXHIBIT 4.1
-----------
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
PHOENIX ASSOCIATES
$140,000,000
10% Senior Notes due 2006
RESTRUCTURING AGREEMENT
-----------------------
August 17, 1998
CIBC Oppenheimer Corp.
425 Lexington Avenue
3rd Floor
New York, New York 10017
Ladies and Gentlemen:
Coaxial Communications of Central Ohio, Inc., an Ohio corporation
("Coaxial"), and Phoenix Associates, a Florida general partnership (each a
"Company" and, collectively, the "Companies"), and Insight Communications of
------- ---------
Central Ohio, LLC, a Delaware limited liability company (the "Guarantor"),
---------
hereby confirm their agreement with you (the "Initial Purchaser"), as set forth
-----------------
below.
1. The Securities. Subject to the terms and conditions herein
--------------
contained, the Companies propose to issue and sell to the Initial Purchaser
$140,000,000 aggregate principal amount of their 10% Senior Notes due 2006 (the
"Notes"). The obligations of the Companies under the Indenture (as hereinafter
-----
defined) and the Notes will be conditionally guaranteed (the "Guarantees") by
----------
the Guarantor, as described in the Indenture (as defined below). The Notes and
the Guarantees are hereinafter referred to collectively as the "Securities." The
----------
Securities are to be issued pursuant to an indenture (the "Indenture"), dated as
---------
of August 21, 1998, among the Companies, the Guarantor and Bank of Montreal
Trust Company, as trustee (the "Trustee"). The Notes will be secured by the
-------
Pledged Collateral (as defined in the Pledge Agreement) pursuant to a pledge
agreement (the "Pledge Agreement") to be dated the Closing Date (as defined in
----------------
Section 3 below).
Simultaneously with the issuance of the Notes, the Initial Purchaser
will enter into an assignment agreement (the "Assignment Agreement") in the form
--------------------
attached as Annex A hereto, pursuant to which the Initial Purchaser will
purchase from the
<PAGE>
-2-
lenders named in the Assignment Agreement approximately $137,000,000 of
indebtedness of the Companies and certain of their affiliates (the "Chase
-----
Debt"). The Chase Debt will then be restructured (the "Restructuring") and will
-------------
be evidenced by the Notes.
The Securities will be offered and sold to the Initial Purchaser without
such offers and sales being registered under the Securities Act of 1933, as
amended (together with the rules and regulations of the Securities and Exchange
Commission (the "Commission") promulgated thereunder, the "Act"), in reliance on
---------- ---
exemptions therefrom.
In connection with the sale of the Securities, the Companies have prepared
a preliminary offering memorandum dated July 29, 1998 and a final offering
memorandum dated August 17, 1998 (the "Memorandum"), setting forth or including
----------
a description of the terms of the Securities, the terms of the offering of the
Securities, a description of the Companies and the Guarantor and any material
developments relating to the Companies and the Guarantor occurring after the
date of the most recent historical financial statements included therein.
The Companies and the Guarantor understand that the Initial Purchaser
proposes to make an offering of the Securities only on the terms and in the
manner set forth in the Memorandum and Section 9 hereof as soon as the Initial
Purchaser deems advisable after this Agreement has been executed and
delivered, to persons in the United States whom the Initial Purchaser reasonably
believes to be qualified institutional buyers ("QIBs") as defined in Rule 144A
----
under the Act, as such rule may be amended from time to time ("Rule 144A"), in
---------
transactions under Rule 144A, and in private sales exempt from registration
under the Act, and outside the United States to certain persons in reliance on
Regulation S under the Act.
The Initial Purchaser and its direct and indirect transferees of the
Securities will be entitled to the benefits of a registration rights agreement
to be dated the Closing Date, among the parties hereto (the "Registration Rights
-------------------
Agreement") pursuant to which the Companies and the Guarantor have agreed, among
- ---------
other things, to file (i) a registration statement (the "Registration
------------
Statement") with the Commission registering the Securities or the Exchange Notes
- ---------
(as defined in the Registration Rights Agreement) under the Act or (ii) a
<PAGE>
-3-
shelf registration statement pursuant to Rule 415 under the Act relating to the
resale of the Securities by holders thereof or, if applicable, relating to the
resale of Private Exchange Notes (as defined in the Registration Rights
Agreement) by the Initial Purchaser pursuant to an exchange of the Notes for
Private Exchange Notes.
The Securities, the Exchange Notes, the Private Exchange Notes, the
Indenture, the Registration Rights Agreement, the Pledge Agreement and this
Agreement are herein collectively referred to as the "Basic Documents". The
---------------
Companies propose to issue the Notes in connection with the Restructuring and
the System Acquisition to be effected pursuant to the Financing Plan
(collectively, the "Transactions") (together with each other agreement entered
------------
into in connection with any of the foregoing, the "Transaction Documents").
---------------------
Capitalized terms used herein without definition have the meanings ascribed to
such terms in the Memorandum.
2. Representations and Warranties of the Companies and the
-------------------------------------------------------
Guarantor. The Companies, jointly and severally, represent and warrant to and
agree with the Initial Purchaser and the Guarantor represents and warrants to
and agrees with the Initial Purchaser with respect to the Guarantor only that:
(i) Neither the Memorandum nor any amendment or supplement thereto as
of the date thereof and at all times subsequent thereto up to the Closing Date
(as defined in Section 3 below) contained or contains any untrue statement of a
material fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this Section 2(i) do not apply to statements or omissions made in reliance
upon and in conformity with information relating to the Initial Purchaser
furnished to the Companies or the Guarantor in writing by the Initial Purchaser
expressly for use in the Memorandum or any amendment or supplement thereto.
(ii) As of the Closing Date, the Companies will have the authorized,
issued and outstanding combined capitalization set forth in the Memorandum under
the "as adjusted" column below the caption "Capitalization"; all of the
outstanding ownership interests in the Companies and the Guarantor have been,
and as of the Closing Date will be, duly authorized and
<PAGE>
-4-
validly issued, are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights; except as set forth in the
Memorandum, all of the outstanding ownership interests in the Guarantor are,
and as of the Closing Date will be, owned, directly or indirectly, by Coaxial
and Insight Holdings of Ohio, LLC, free and clear of all liens, encumbrances,
equities and claims or restrictions on transferability (other than those imposed
by the Act and the securities or "Blue Sky" laws of certain jurisdictions and
the Operating Agreement) or voting; except as set forth in the Memorandum and in
the Operating Agreement, there are no (i) options, warrants or other rights to
purchase from either Company or the Guarantor shares of capital stock of or
other ownership interests in, as the case may be, either Company or the
Guarantor outstanding, (ii) agreements or other obligations of either Company
or the Guarantor to sell such shares or interests or (iii) other rights to
convert any obligation into, or exchange any securities for, such shares or
interests. Except for the Guarantor or as disclosed in the Memorandum, the
Companies do not own, directly or indirectly, any shares of capital stock of, or
any other equity securities in, any firm, partnership, joint venture or other
entity which shares or equity securities entitle the Companies to elect at least
a majority of the board of directors or other governing body of such firm,
partnership, joint venture or other entity.
(iii) Each of the Companies and the Guarantor has been duly formed or
incorporated, as the case may be, is validly existing and is in good standing as
a limited liability company, partnership or a corporation, as the case may be,
under the laws of its jurisdiction of formation or incorporation, as the case
may be, with all requisite power and authority as a limited liability company,
partnership or corporation, as the case may be, to own its properties and
conduct its business as now conducted, and as described in the Memorandum; each
of the Companies and the Guarantor is duly qualified to do business as a foreign
limited liability company, partnership or corporation, as the case may be, in
good standing in all other jurisdictions where the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be so qualified would not, individually or in the
aggregate, have a material adverse effect on the general affairs, management,
business, condition (financial or otherwise), prospects or results of operations
of the Companies and
<PAGE>
-5-
the Guarantor, taken as a whole (any such event, a "Material Adverse Effect").
-----------------------
(iv) Each of the Companies has all requisite power and authority as a
partnership or corporation, as the case may be to execute, deliver and perform
each of its obligations under the Notes, the Exchange Notes and the Private
Exchange Notes. The Notes, the Exchange Notes and the Private Exchange Notes
have each been duly and validly authorized by each Company and, when executed by
each of the Companies and authenticated by the Trustee in accordance with the
provisions of the Indenture and, in the case of the Notes, when delivered to and
paid for by the Initial Purchaser in accordance with the terms of this
Agreement, will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of each of the Companies,
entitled to the benefits of the Indenture and enforceable against each of the
Companies in accordance with their terms, except that the enforcement thereof
may be subject to (i) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally, and (ii) general principles of equity
and the discretion of the court before which any proceeding therefor may be
brought.
(v) The Guarantor has all requisite power and authority as a limited
liability company to execute, deliver and perform its obligations under the
Guarantees. The Guarantees endorsed on the Notes, the Exchange Notes and the
Private Exchange Notes have been duly and validly authorized by the Guarantor
and, when the Notes, the Exchange Notes and the Private Exchange Notes are
executed by each of the Companies and the Guarantor and authenticated by the
Trustee in accordance with the provisions of the Indenture and, in the case of
the Notes, delivered to and paid for by the Initial Purchaser in accordance with
the terms of this Agreement, will constitute valid and legally binding
obligations of the Guarantor, entitled to the benefits of the Indenture and
enforceable against the Guarantor in accordance with its terms, except that the
enforcement thereof may be subject to (i) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (ii) general principles of
equity and the discretion of the court before which any proceeding therefor
may be brought.
(vi) The Pledge Agreement, when duly executed and delivered by the
parties thereto, will create and constitute a
<PAGE>
-6-
valid and enforceable security interest in, lien upon or pledge of all of the
Pledged Collateral, subject to no other security interest, claim, lien,
encumbrance or adverse interest of any nature and no right or option to acquire
the same in favor of any other person or entity, except as permitted by the
Pledge Agreement. Upon the filing of UCC-1 financing statements in appropriate
form in the requisite filing offices, the security interest, lien or pledge
created by the Pledge Agreement will be a perfected security interest with
respect to that portion of the Pledged Collateral in which a security interest
can be perfected by the filing of a financing statement, prior to all other
claims or security interests therein except as permitted by the Pledge
Agreement. The Pledge Agreement has been duly and validly authorized by Coaxial
and, when executed and delivered by Coaxial, will constitute a valid and legally
binding agreement of Coaxial enforceable against Coaxial in accordance with its
terms, except that the enforcement thereof may be subject to (a) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and (b)
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(vii) Each of the Companies and the Guarantor has all requisite power
and authority, as a limited liability company, partnership or corporation, as
the case may be, to execute, deliver and perform each of its obligations under
the Indenture. The Indenture meets the requirements for qualification under the
Trust Indenture Act of 1939, as amended (the "TIA"). The Indenture has been duly
---
and validly authorized by each of the Companies and the Guarantor and, when
executed and delivered by the Companies and the Guarantor (assuming the due
authorization, execution and delivery by the Trustee), will constitute a valid
and legally binding agreement of each of the Companies and the Guarantor,
enforceable against each of the Companies and the Guarantor in accordance with
its terms, except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other similar
laws now or hereafter in effect relating to creditors' rights generally and (ii)
general principles of equity and the discretion of the court before which any
proceeding therefor may be brought.
(viii) Each of the Companies and the Guarantor has all requisite
power and authority, as a limited liability company, partnership or corporation,
as the case may be, to execute, deliver and perform each of its obligations
under the Registra-
<PAGE>
-7-
tion Rights Agreement. The Registration Rights Agreement has been duly and
validly authorized by each of the Companies and the Guarantor and, when executed
and delivered by the Companies and the Guarantor, will constitute a valid and
legally binding obligation of each of the Companies and the Guarantor
enforceable against each of the Companies and the Guarantor in accordance with
its terms, except that (A) the enforcement thereof may be subject to (i)
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (ii) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought and (B) any rights to
indemnity or contribution thereunder may be limited by federal and state
securities laws and public policy considerations.
(ix) Each of the Companies and the Guarantor has all requisite power
and authority, as a limited liability company, partnership or corporation, as
the case may be, to execute, deliver and perform each of its obligations under
the Transaction Documents. The Transaction Documents have been duly and
validly authorized by each of the Companies and the Guarantor and, when executed
and delivered by each of the Companies and the Guarantor, will constitute a
valid and legally binding agreement of each of the Companies and the Guarantor
enforceable against each of the Companies and the Guarantor in accordance
with its terms, except that the enforcement thereof may be subject to (a)
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other similar laws now or hereafter in effect relating to creditors' rights
generally and (b) general principles of equity and the discretion of the court
before which any proceeding therefor may be brought.
(x) Each of the Companies and the Guarantor has all requisite power
and authority, as a limited liability company, partnership or corporation, as
the case may be, to execute, deliver and perform each of their obligations under
this Agreement and to consummate the transactions contemplated hereby. This
Agreement has been duly and validly authorized, executed and delivered by each
of the Companies and the Guarantor. No consent, approval, authorization or
order of any court or governmental agency or body (including, without
limitation, the Federal Communications Commission (the "FCC")) is required for
---
the performance of this Agreement by the Companies or the Guarantor or the
consummation by the Companies and the Guarantor of the transactions
contemplated hereby, except such as have been obtained and other than such as
may be required under state securities or "Blue Sky" laws or non-United States
<PAGE>
-8-
jurisdictions in connection with the purchase and resale of the Securities by
the Initial Purchaser. None of the Companies or the Guarantor is (i) in
violation of its certificate of incorporation or bylaws (or similar
organizational document (including any certificate of formation)), (ii) in
violation of any statute, judgment, decree, order, rule or regulation applicable
to any of them or any of their respective properties or assets (including,
without limitation, the Cable Acts and the 1996 Telecom Act (collectively, the
"Communications Act") as such terms are defined in the Memorandum and the rules
------------------
and regulations of the FCC thereunder), except for any such violation which
would not, individually or in the aggregate, have a Material Adverse Effect, or
(iii) in breach or default in the performance or observance of (nor has any
event occurred which, with notice or passage of time or both, would constitute a
default under) any obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement or
instrument to which any of them is a party or to which any of them or their
respective properties or assets is subject (including, without limitation,
those relating to the Communications Act), except for any such breach, default
or event which would not, individually or in the aggregate, have a Material
Adverse Effect.
(xi) The execution, delivery and performance by each of the Companies
and the Guarantor of this Agreement and the Transaction Documents to which it is
a party and the consummation by each of the Companies and the Guarantor of the
transactions contemplated hereby and thereby, and the fulfillment of the terms
hereof and thereof, will not conflict with or constitute or result in a breach
of or a default under (or an event which with notice or passage of time or both
would constitute a default under) or violation of or cause the revocation or
termination of (i) any indenture, mortgage, deed of trust, loan agreement, note,
lease, license, franchise agreement, permit, certificate, contract or other
agreement or instrument to which any of the Companies or the Guarantor is a
party or to which any of them or their respective properties or assets is
subject (including, without limitation, those relating to the Cable Acts and the
1996 Telecom Act), except for any such conflict, breach, violation, default,
event, revocation or termination which would not, individually or in the
aggregate, have a Material Adverse Effect, (ii) the certificate of incorporation
or bylaws (or similar organizational document (including any certificate of
limited liability company)) of any of the Companies or the Guarantor, or (iii)
(assuming compliance with all applicable state securities or "Blue Sky" laws and
assuming
<PAGE>
-9-
the accuracy of the representations and warranties of the Initial Purchaser in
Section 9 hereof) any statute, judgment, decree, order, rule or regulation
applicable to any of the Companies or the Guarantor or any of their respective
properties or assets (including, without limitation, the Communications Act
and the rules and regulations of the FCC thereunder), except for any such
conflict, breach or violation which would not, individually or in the aggregate,
have a Material Adverse Effect.
(xii) The audited consolidated financial statements of the Companies
and Central Ohio Cable System Operating Unit included in the Memorandum present
fairly in all material respects the financial position, results of operations
and cash flows of the Companies at the dates and for the periods to which they
relate and have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, except as otherwise stated therein.
The summary and selected financial and statistical data in the Memorandum
present fairly in all material respects the financial information shown
therein and have been prepared and compiled on a basis consistent with the
audited financial statements included therein, except as otherwise stated
therein. Arthur Andersen LLP (the "Independent Auditors") is an independent
--------------------
certified public accounting firm within the meaning of the Act and the rules and
regulations promulgated thereunder.
(xiii) There is not pending or, to the best knowledge of either Company
or the Guarantor, threatened any action, suit, proceeding, inquiry or
investigation to which any of the Companies or the Guarantor is a party, or to
which the property or assets of any of the Companies or the Guarantor is
subject, before or brought by any court or governmental agency or body which
would be required to be described in a prospectus that is subject to Item 103 of
Regulation S-K under the Act, or which seeks to restrain, enjoin, or prevent the
consummation of or otherwise challenge the issuance or sale of the Securities to
be sold hereunder or the consummation of the other transactions described in the
Memorandum under the caption "Use of Proceeds."
(xiv) Each of the Companies and the Guarantor possesses, or upon
consummation of the System Acquisition will possess all licenses, permits,
certificates, consents, orders, approvals and other authorizations from, and has
made all declarations and filings with, all federal, state, local and other
governmental authorities (including, without limitation, the FCC), all self-
regulatory organizations and all courts and
<PAGE>
-10-
other tribunals, presently required or necessary to own or lease, as the case
may be, and to operate its respective properties and to carry on its respective
businesses as now or proposed to be conducted as set forth in the Memorandum,
except where the failure to obtain such licenses, permits, certificates,
consents, orders, approvals and other authorizations, or to make all such
declarations and filings, would not, individually or in the aggregate, have a
Material Adverse Effect, and none of the Companies or the Guarantor has received
any notice of any proceeding relating to revocation or modification of any such
license, permit, certificate, consent, order, approval or other authorization,
except as described in the Memorandum and except where such revocation or
modification would not, individually or in the aggregate, have a Material
Adverse Effect. The licenses issued to the Companies and the Guarantor by the
FCC (the "Licenses") are valid and in full force and effect with no restrictions
--------
or qualifications which would have a Material Adverse Effect. No event has
occurred which permits, or with notice or lapse of time or both would permit,
and no legal governmental proceeding has been instituted or, the knowledge of
either Company or the Guarantor, threatened which could reasonably be likely to
cause, the revocation or termination of any of the Licenses or which might
reasonably be likely to result in any other impairment or modification of the
rights of either Company or the Guarantor therein which in any such case would
have a Material Adverse Effect. Except as described in the Memorandum, the
Companies have no reason to believe that any License issued by the FCC that is
required for the operation of the System will not be renewed in the ordinary
course.
(xv) Since the respective dates as of which information is given in
the Memorandum, except as described therein, (i) none of the Companies or the
Guarantor has incurred any liabilities or obligations, direct or contingent,
with respect to the System, except normal trade or business obligations incurred
in the ordinary course of business, the performance of which will not, to the
knowledge of either Company or the Guarantor, have a Material Adverse Effect, or
entered into or agreed to enter into any transactions or contracts (written or
oral) not in the ordinary course of business and (ii) none of the Companies or
the Guarantor has purchased any of its outstanding capital stock or other
ownership interests, nor declared, paid or otherwise made any dividend or
distribution of any kind on its capital stock or other ownership interests.
(xvi) Each of the Companies and the Guarantor has filed all necessary
federal, state and foreign income and franchise tax returns required to be filed
(or has duly re-
<PAGE>
-11-
quested extension thereof) prior to the date hereof, except where the failure to
so file such returns would not, individually or in the aggregate, have a
Material Adverse Effect, and has paid all taxes which have become due and
payable, whether or not so shown on any such return; and other than tax
deficiencies which any Company or the Guarantor is contesting in good faith and
for which such Company or the Guarantor has provided adequate reserves, there is
no tax deficiency that has been asserted against any of the Companies or the
Guarantor that would have, individually or in the aggregate, a Material Adverse
Effect.
(xvii) None of the Companies, the Guarantor or any agent acting on
their behalf has taken or will take any action that might cause this Agreement
or the sale of the Notes to violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System, in each case as in effect, or as the
same may hereafter be in effect, on the Closing Date.
(xviii) Each of the Companies and the Guarantor has indefeasible fee
simple title to all real property and good title to all personal property
described in the Memorandum as being owned by it and valid and enforceable
leasehold interests in the real and personal property described in the
Memorandum as being leased by it free and clear of all liens, charges,
encumbrances or restrictions, except as described in the Memorandum or to the
extent the failure to have such title or leasehold interests or the existence of
such liens, charges, encumbrances or restrictions would not, individually or in
the aggregate, have a Material Adverse Effect. All leases, contracts and
agreements to which any of the Companies or the Guarantor is a party or by which
any of them is bound are valid and enforceable against such Company or the
Guarantor, and are valid and enforceable against the other party or parties
thereto and are in full force and effect with only such exceptions as would not,
individually or in the aggregate, have a Material Adverse Effect.
(xix) Except as described in the Memorandum, each of the Companies
and the Guarantor is in compliance in all material respects with all laws,
rules or regulations relating to pollution or protection of public or employee
health or the environment ("Environmental Law") and with the terms and
-----------------
conditions of any permit, license or approval required under any applicable
Environmental Laws in connection with the ownership, operation or use of its
business, property and assets where the failure to be in such compliance could
reasonably be expected to have, individually or in the aggregate, a
<PAGE>
-12-
Material Adverse Effect; except as disclosed in the Memorandum, none of the
Companies or the Guarantor is subject to any liability, absolute or contingent,
under any Environmental Law which liability would, individually or in the
aggregate, have a Material Adverse Effect; except as disclosed in the
Memorandum, there is no civil, criminal or administrative action, suit, demand,
hearing, notice of violation or deficiency, investigation, proceeding or notice
of potential responsibility or demand letter or request for information pending
or, to the knowledge of either Company of the Guarantor, threatened against any
of the Companies or the Guarantor under any Environmental Law which, if
determined adversely to any such Company or Guarantor would, individually or in
the aggregate, result in a Material Adverse Effect.
(xx) Except as set forth in the Memorandum, there is no strike,
labor dispute, slowdown or work stoppage with the employees of any of the
Companies or the Guarantor which is pending or, to the best knowledge of any
Company or the Guarantor, threatened.
(xxi) Each of the Companies and the Guarantor carries insurance
(including self insurance) in such amounts and covering such risks as in its
reasonable determination is adequate for the conduct of its business and the
value of its properties.
(xxii) None of the Companies or the Guarantor has any liability for
any prohibited transaction or funding deficiency or any complete or partial
withdrawal liability with respect to any pension, profit sharing or other plan
which is subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), to which any Company or the Guarantor makes or ever has made
-----
a contribution and in which any employee of any Company or the Guarantor is or
has ever been a participant. With respect to such plans, each Company and the
Guarantor is in compliance in all material respects with all applicable
provisions of ERISA.
(xxiii) None of the Companies or the Guarantor is, and after giving
effect to the offering and sale of the Securities and the application of the
proceeds thereof as described in the Memorandum, will be an "investment company"
or "promoter" or "principal underwriter" for an "investment company," as such
terms are defined in the Investment Company Act of 1940, as amended, and the
rules and regulations thereunder.
<PAGE>
-13-
(xxiv) The Securities, the Exchange Notes, the Indenture, the
Registration Rights Agreement, and the Transaction Documents will, when
executed, and this Agreement does, conform in all material respects to the
descriptions thereof in the Memorandum.
(xxv) No holder of securities of any Company or the Guarantor will
be entitled to have such securities registered under the registration statements
required to be filed by the Companies pursuant to the Registration Rights
Agreement.
(xxvi) After the consummation of the transactions contemplated by
this Agreement, the fair value and present fair saleable value of the assets of
the Companies and the Guarantor (on a consolidated basis) will exceed the sum of
their stated liabilities and identified contingent liabilities (on a
consolidated basis); the Companies and the Guarantor (on a consolidated basis)
are not, and the Companies and the Guarantor (on a consolidated basis) will not
be, after giving effect to the execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby, (a)
left with unreasonably small capital with which to carry on their business as it
is proposed to be conducted, (b) unable to pay their debts (contingent or
otherwise) as they mature or (c) otherwise insolvent.
(xxvii) None of the Companies, the Guarantor or any of their
respective Affiliates (as defined in Rule 501(b) of Regulation D under the Act)
has directly, or through any agent, (i) sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any "security" (as defined in
the Act) which is or will be integrated with the sale of the Securities in a
manner that would require the registration under the Act of the Securities or
(ii) engaged in any form of general solicitation or general advertising in
connection with the offering of the Securities (as those terms are used in
Regulation D under the Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Act.
(xxviii) Assuming the accuracy of the representations and warranties
of the Initial Purchaser in Section 9 hereof, it is not necessary in connection
with the offer, sale and delivery of the Securities to the Initial Purchaser in
the manner contemplated by this Agreement to register any of the Securities
under the Act or to qualify the Indenture under the TIA.
(xxix) No securities of any Company or the Guarantor are of the same
class (within the meaning of Rule 144A under
<PAGE>
-14-
the Act) as the Securities and listed on a national securities exchange
registered under Section 6 of the Exchange Act, or quoted in a U.S. automated
inter-dealer quotation system.
(xxx) None of the Companies or the Guarantor has taken, nor will any
of them take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation of the
price of the Securities.
(xxxi) None of the Companies, the Guarantor, any of their respective
Affiliates or any person acting on its or their behalf (other than the Initial
Purchaser) has engaged in any directed selling efforts (as that term is defined
in Regulation S under the Act ("Regulation S")) with respect to the Securities
------------
and the Companies, the Guarantor and their respective Affiliates and any person
acting on its or their behalf (other than the Initial Purchaser) have acted in
accordance with the offering restrictions requirement of Regulation S.
Any certificate signed by any officer of the Companies or the
Guarantor and delivered to the Initial Purchaser or to counsel for the Initial
Purchaser shall be deemed a joint and several representation and warranty by the
Companies and the Guarantor, respectively, to the Initial Purchaser as to the
matters covered thereby.
3. Purchase, Sale and Delivery of the Securities. On the basis of
---------------------------------------------
the representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Companies agree to
issue and sell to the Initial Purchaser, and the Initial Purchaser and the
Companies agree to restructure the Chase Debt such that the Chase Debt will be
evidenced by the Notes. As consideration for acting as placement agent with
respect to the Notes and for restructuring the Chase Debt, the Companies agree
to pay the Initial Purchaser on the Closing Date a fee of $3,850,000.00.
One or more certificates in definitive form for the Notes and the
related Guarantees that the Initial Purchaser has agreed to purchase hereunder,
and in such denomination or denominations and registered in such name or names
as the Initial Purchaser requests upon notice to the Companies at least 48 hours
prior to the Closing Date (as defined) shall be delivered by or on behalf of the
Companies, against payment by or on behalf of the Initial Purchaser, of the
purchase price therefor by wire transfer of immediately available funds to the
<PAGE>
-15-
account of the Companies previously designated by it in writing or as the
Companies otherwise direct. Such delivery of and payment for the Notes and the
related Guarantees shall be made at the offices of Cahill Gordon & Reindel, 80
Pine Street, New York, New York 10005, at 10:00 A.M., New York time, on
August 21, 1998, or at such date as the Initial Purchaser and the Companies may
agree upon, such time and date of delivery against payment being herein referred
to as the "Closing Date." The Companies will make such certificate or
------------
certificates for the Notes and the related Guarantees available for checking and
packaging by the Initial Purchaser at the offices in New York, New York of CIBC
Oppenheimer Corp. at least 24 hours prior to the Closing Date.
4. Offering by the Initial Purchaser. The Initial Purchaser
---------------------------------
proposes to make an offering of the Securities at the price and upon the terms
set forth in the Memorandum as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchaser is advisable.
5. Certain Covenants. The Companies jointly and severally
-----------------
covenant and agree with the Initial Purchaser that:
(i) The Companies will not amend or supplement the Memorandum or
any amendment or supplement thereto of which the Initial Purchaser shall not
have been advised and furnished a copy for a reasonable period of time prior to
the proposed amendment or supplement and as to which the Initial Purchaser shall
not have given its consent (which consent shall not be unreasonably withheld).
The Companies will promptly, upon the reasonable request of the Initial
Purchaser or counsel for the Initial Purchaser, make any amendments or
supplements to the Memorandum that may be necessary in connection with the
resale of the Securities by the Initial Purchaser.
(ii) The Companies will cooperate with the Initial Purchaser in
arranging for the qualification of the Securities for offering and sale under
the securities or "Blue Sky" laws of such jurisdictions as the Initial Purchaser
may designate and will continue such qualifications in effect for as long as may
be necessary to complete the resale of the Securities by the Initial Purchaser;
provided, however, that in connection therewith none of the Companies shall be
- -------- -------
required to qualify as a foreign corporation or partnership or to execute a
general consent to service of process in any jurisdiction or to take any other
action that would subject it to general service of process or to taxation in
excess of a nominal amount in respect
<PAGE>
-16-
of doing business in any jurisdiction in which it is not otherwise subject.
(iii) If, at any time prior to the completion of the initial resale
by the Initial Purchaser of the Notes or the Private Exchange Notes, any event
shall occur as a result of which it is necessary, in the opinion of counsel for
the Initial Purchaser, to amend or supplement the Memorandum in order to make
such Memorandum not misleading in the light of the circumstances existing at the
time it is delivered to a purchaser, or if for any other reason it shall be
necessary to amend or supplement the Memorandum in order to comply with
applicable laws, rules or regulations, the Companies shall (subject to Section
5(i)) forthwith amend or supplement such Memorandum at their own expense so
that, as so amended or supplemented, such Memorandum will not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances existing at
the time it is delivered to a purchaser, not misleading and will comply with all
applicable laws, rules or regulations.
(iv) The Companies will, without charge, provide to the Initial
Purchaser and to counsel for the Initial Purchaser as many copies of the
Memorandum or any amendment or supplement thereto as the Initial Purchaser may
reasonably request.
(v) None of the Companies or any of their respective Affiliates
will sell, offer for sale or solicit offers to buy or otherwise negotiate in
respect of any "security" (as defined in the Act) which could be integrated with
the sale of the Securities in a manner which would require the registration
under the Act of the Securities.
(vi) For so long as any of the Securities remain outstanding and
are restricted securities under Rule 144(a)(3) of the Act, the Companies will
furnish to the Initial Purchaser (a) as soon as available, a copy of each report
or other communication (financial or otherwise) of the Companies mailed to the
Trustee or holders of the Securities or stockholders or filed with the
Commission or any national securities exchange on which any class of securities
of the Companies may be listed, and (b) from time to time such other information
concerning the Companies and the Guarantor as the Initial Purchaser may
reasonably request.
<PAGE>
-17-
(vii) The Companies will apply the net proceeds from the sale of the
Securities as set forth under "Use of Proceeds" in the Memorandum.
(viii) Prior to the Closing Date, the Companies will furnish to the
Initial Purchaser, as soon as they have been prepared by or are available to the
Companies, a copy of any unaudited interim consolidated financial statements of,
the Companies and the Central Ohio Cable System Operating Unit, for any period
subsequent to the period covered by the most recent financial statements
appearing in the Memorandum.
(ix) The Companies and the Guarantor will not engage in any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Act) in connection with the offering of the Securities
or in any manner involving a public offering within the meaning of Section 4(2)
of the Act.
(x) For so long as any of the Securities remain outstanding and
are "restricted securities" under Rule 144(a)(3) of the Act, the Companies will
make available at their expense, upon request, to any holder of Securities and
any prospective purchasers thereof the information specified in Rule 144A(d)(4)
under the Act, unless the Companies are then subject to Section 13 or 15(d) of
the Exchange Act.
(xi) The Companies will use their best efforts to (i) permit the
Securities to be designated PORTAL securities in accordance with the rules and
regulations adopted by the National Association of Securities Dealers, Inc. (the
"NASD") relating to trading in the Private Offerings, Resales and Trading
----
through Automated Linkages market (the "Portal Market") and (ii) permit the
-------------
Securities to be eligible for clearance and settlement through The Depository
Trust Company.
(xii) In connection with Securities offered and sold in an offshore
transaction (as defined in Regulation S), the Companies will not register any
transfer of such Securities not made in accordance with the provisions of
Regulation S and will not, except in accordance with the provisions of
Regulation S, if applicable, issue any such Securities in the form of definitive
securities.
(xiii) If this Agreement shall terminate or shall be terminated after
execution pursuant to any provision hereof (other than by reason of a default or
omission by the Initial Purchaser of its obligations hereunder) or if this
Agreement
<PAGE>
-18-
shall be terminated by the Initial Purchaser because of any failure or refusal
on the part of the Companies to comply with the terms or fulfill any of the
conditions of this Agreement, the Companies agree to reimburse the Initial
Purchaser for all reasonable out-of-pocket expenses (including fees and expenses
of Cahill Gordon & Reindel, counsel for the Initial Purchaser) incurred by the
Initial Purchaser in connection herewith, but in no event will the Companies be
liable to the Initial Purchaser for damages on account of loss of anticipated
profits from the sale of the Securities.
(xiv) The Companies will use their best efforts to do and perform
all things required to be done and performed by them under this Agreement and
the other Basic Documents prior to or after the Closing Date and to satisfy all
conditions precedent on their part to the obligations of the Initial Purchaser
to purchase and accept delivery of the Securities.
6. Expenses. Notwithstanding any termination of this Agreement
--------
(pursuant to Section 11 or otherwise), the Companies jointly and severally agree
to pay the following costs and expenses and all other costs and expenses
incident to the performance by the Companies of their obligations hereunder:
(i) the negotiation, preparation, printing, typing, reproduction, execution and
delivery of this Agreement and of the other Basic Documents, any amendment or
supplement to or modification of any of the foregoing and any and all other
documents furnished pursuant hereto or thereto or in connection herewith or
therewith; (ii) the preparation, printing or reproduction of the Memorandum and
each amendment or supplement to the Memorandum; (iii) the printing (or
reproduction) and delivery (including postage, air freight charges and charges
for counting and packaging) of such copies of the Memorandum and all amendments
or supplements to the Memorandum as may be reasonably requested for use in
connection with the offering and sale of the Securities; (iv) the preparation,
printing, authentication, issuance and delivery of certificates for the and the
related Guarantees, including any stamp taxes in connection with the original
issuance and sale of the Securities and trustees' fees; (v) the registration
or qualification of the Securities for offer and sale under the securities or
Blue Sky laws of the several states in accordance with the provisions of Section
5(ii) hereof (including filing fees and the reasonable fees, expenses and
disbursements of Cahill Gordon & Reindel, counsel to the Initial Purchaser,
relating to such registration and qualification); (vi) all expenses and listing
fees incurred in connection with the application for quotation of the Notes on
PORTAL; (vii) except as otherwise
<PAGE>
-19-
agreed to by the parties, the transportation and other expenses incurred by or
on behalf of Companies' representatives in connection with presentations to
prospective purchasers of the Securities; (viii) the fees and expenses of the
Companies' accountants and the fees and expenses of counsel (including local and
special counsel) for the Companies and the Guarantor; (ix) fees and expenses of
the Trustee including fees and expenses of its counsel; and (x) any fees charged
by investment rating agencies for the rating of the Securities.
7. Conditions of the Initial Purchaser's Obligations. The
-------------------------------------------------
obligation of the Initial Purchaser to purchase and pay for the Securities is
subject to the accuracy of the representations and warranties contained herein,
to the performance by the Companies and the Guarantor of their respective
covenants and agreements hereunder and to the following additional conditions
unless waived in writing by the Initial Purchaser:
(i) The Initial Purchaser shall have received an opinion from of
Dow, Lohnes & Albertson, PLLC, special counsel to the Companies, Cooperman
Levitt Winikoff Lester & Newman, P.C., counsel to the Guarantor and Fleischman &
Walsh, regulatory counsel to the Companies, in form and substance satisfactory
to the Initial Purchaser and Cahill Gordon & Reindel, counsel to the Initial
Purchaser, dated the Closing Date, substantially in the form of, respectively,
Exhibit B-1, Exhibit B-2 and Exhibit B-3 hereto. In rendering such opinions,
- ----------- ----------- -----------
each of Dow, Lohnes & Albertson, PLLC and Cooperman Levitt Winikoff Lester &
Newman, P.C. shall have received and may rely upon such certificates and other
documents and information, including one or more opinions of local counsel
reasonably acceptable to the Initial Purchaser and Cahill Gordon & Reindel,
counsel to the Initial Purchaser, as they may reasonably request to pass upon
such matters.
(ii) The Initial Purchaser shall have received an opinion, dated
the Closing Date, of Cahill Gordon & Reindel, counsel to the Initial Purchaser,
with respect to the sufficiency of certain legal matters relating to this
Agreement and such other related matters as the Initial Purchaser may require.
In rendering such opinion, Cahill Gordon & Reindel shall have received and may
rely upon such certificates and other documents and information as they may
reasonably request to pass upon such matters. In addition, in rendering their
opinion, Cahill Gordon & Reindel may state that their opinion is limited to
matters of New York, Delaware corporate and federal law.
<PAGE>
-20-
(iii) The Initial Purchaser shall have received from Arthur Andersen
LLP, independent public accountants for the Companies "comfort" letters dated
the date hereof and the Closing Date, in form and substance reasonably
satisfactory to the Initial Purchaser and Cahill Gordon & Reindel, counsel to
the Initial Purchaser.
(iv) The representations and warranties of the Companies and the
Guarantor contained in this Agreement shall be true and correct on and as of the
Closing Date; the Companies and the Guarantor shall have in all material
respects complied with all agreements and satisfied all conditions on their part
to be performed or satisfied hereunder at or prior to the Closing Date.
(v) There shall not have been any change in the capital stock of
the Companies or the Guarantor or any material increase in the consolidated
short-term or long-term debt of the Companies or the Guarantor from that set
forth or contemplated in the Memorandum and the Companies and the Guarantor
shall not have any liabilities or obligations, contingent or otherwise (whether
or not in the ordinary course of business), that are material to the Companies
and the Guarantor, taken as a whole, other than those reflected in the
Memorandum.
(vi) None of the issuance and sale of the Securities pursuant to
this Agreement or any of the transactions contem plated by any of the other
Basic Documents or the Transaction Documents shall be enjoined (temporarily or
permanently) and no restraining order or other injunctive order shall have been
issued; and there shall not have been any legal action, order, decree or other
administrative proceeding instituted or threatened against any of the
Companies, the Guarantor or the Initial Purchaser relating to the issuance of
the Securities or the Initial Purchaser's activities in connection therewith or
any other transactions contemplated by this Agreement or the Memorandum, the
other Basic Documents or the Transaction Documents.
(vii) Subsequent to the date of this Agreement and since the date of
the most recent financial statements in the Memorandum (exclusive of any
amendment or supplement thereto after the date hereof), there shall not have
occurred (i) any change, or any development involving a prospective change, not
contemplated by the Memorandum, which would result in a Material Adverse
Effect, or (ii) any event or development relating to or involving any of the
Companies or the Guarantor or any of the officers or directors of the Companies
or the Guarantor
<PAGE>
-21-
that makes any material statement made in the Memorandum untrue or that, in the
opinion of the Companies, the Guarantor and their respective counsel or the
Initial Purchaser and its counsel, requires the making of any addition to or
change in the Memorandum in order to state a material fact required by any
applicable law, rule or regulation to be stated therein or necessary in order to
make the statements made therein not misleading.
(viii) The Initial Purchaser shall have received certificates, dated the
Closing Date and signed by the chairman and the chief financial officer of each
Company and the Guarantor, to the effect that:
a. All of the representations and warranties of the Companies and
the Guarantor set forth in this Agreement are true and correct as if made on and
as of the Closing Date and the Companies and the Guarantor have in all material
respects complied with all agreements and covenants in this Agreement and
satisfied all conditions on their part to be performed or satisfied at or prior
to the Closing Date.
b. The issuance and sale of the Securities pursuant to this
Agreement or the Memorandum and the consummation of the transactions
contemplated by the Transaction Documents have not been enjoined (temporarily or
permanently) and no restraining order or other injunctive order has been issued
and there has not been any legal action, order, decree or other administrative
proceeding instituted or threatened against any of the Companies and the
Guarantor relating to the issuance of the Securities or the Initial Purchaser's
activities in connection therewith or in connection with any other transactions
contemplated by this Agreement or the Memorandum, the other Basic Documents or
the Transaction Documents.
c. Subsequent to the date of this Agreement and since the date of
the most recent financial statements in the Memorandum (exclusive of any
amendment or supplement thereto after the date hereof), there has not occurred
(i) any change, or any development involving a prospective change, not
contemplated by the Memorandum, which would result in a Material Adverse Effect,
or (ii) any event or development relating to or involving any of the Companies
or the Guarantor or any of the respective officers or directors of the Companies
or the Guarantor that makes any material statement made in the Memorandum untrue
or that requires the making of any addition to or change in the Memorandum in
order to state a material fact required by any applicable law, rule or
regulation to be stated
<PAGE>
-22-
therein or necessary in order to make the statements made therein not
misleading.
d. (a) There has not been any change in the capital stock,
partnership interests or membership interests of the Companies or the Guarantor
nor any material increase in the consolidated short-term or long-term debt of
the Companies or the Guarantor from that set forth or contemplated in the
Memorandum and (b) the Companies and the Guarantor have no liabilities or
obligations, contingent or otherwise (whether or not in the ordinary course of
business), that are material to the Companies and the Guarantor, taken as a
whole, other than those reflected in the Memorandum.
e. At the Closing Date and after giving effect to the consummation
of the transactions contemplated by this Agreement, the other Basic Documents
and the Transaction Documents, there exists no Default or Event of Default (as
defined in the Indenture).
(ix) Each of the Transaction Documents and each other agreement or
instrument executed in connection with the Transactions shall be reasonably
satisfactory in form and substance to the Initial Purchaser and shall have been
executed and delivered by all the respective parties thereto and shall be in
full force and effect, and there shall have been no material amendments,
alterations, modifications or waivers of any provision thereof since the date of
this Agreement.
(x) All proceedings taken in connection with the issuance of the
Securities and the transactions contemplated by this Agreement, the other Basic
Documents and the Transaction Documents and all documents and papers relating
thereto shall be reasonably satisfactory to the Initial Purchaser and counsel to
the Initial Purchaser. The Initial Purchaser and counsel to the Initial
Purchaser shall have received copies of such papers and documents as they may
reasonably request in connection therewith, all in form and substance reasonably
satisfactory to them.
(xi) There shall not have been any announcement by any "nationally
recognized statistical rating organization," as defined for purposes of Rule
436(g) under the Act, that (A) it is downgrading its rating assigned to any debt
securities of the Companies, or (B) it is reviewing its rating assigned to any
debt securities of the Companies with a view to possible downgrading, or with
negative implications, or direction not determined.
<PAGE>
-23-
(xii) On or before the Closing Date, the Initial Purchaser shall have
received the Registration Rights Agreement executed by the Companies and the
Guarantor and such agreement shall be in full force and effect at all times from
and after the Closing Date.
(xiii) The Companies and the Guarantor shall have furnished or caused
to be furnished to the Initial Purchaser such further certificates and documents
as the Initial Purchaser shall have reasonably requested.
(xiv) The System Acquisition shall have been consummated and the
assets constituting the System (other than the Retained Assets, as defined in
the Contribution Agreement) shall have been contributed to the Guarantor and the
Guarantor shall have received at least $10.0 million cash in equity from Insight
Holdings of Ohio, LLC.
(xv) The Certificate of Formation for the Guarantor shall have been
filed and become effective with the Secretary of State of the State of Delaware
and the Operating Agreement shall have been adopted.
(xvi) The Preferred Interests and a 25% common membership interest
in the Guarantor shall have been issued to Coaxial.
(xvii) The Initial Purchaser shall have received an executed Pledge
Agreement.
All such opinions, certificates, letters, schedules, documents or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to
the Initial Purchaser and counsel to the Initial Purchaser. The Companies and
the Guarantor shall furnish to the Initial Purchaser such conformed copies of
such opinions, certificates, letters, schedules, documents and instruments in
such quantities as the Initial Purchaser shall reasonably request.
8. Indemnification and Contribution. (a) Each of the Companies,
--------------------------------
jointly and severally, and the Guarantor agree to indemnify and hold harmless
the Initial Purchaser, each director, officer, employee or agent of the Initial
Purchaser and each person, if any, who controls the Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, against any
losses, claims, damages, liabilities or expenses to which the Initial
Purchaser or such direc-
<PAGE>
-24-
tor, officer, employee, agent or controlling person may become subject under the
Act, the Exchange Act or otherwise, insofar as any such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) arise out of or are
based upon:
(i) any untrue statement or alleged untrue statement of any material fact
contained in (A) the Memorandum or any amendment or supplement thereto or (B)
any of the Basic Documents or any application or other document, or any
amendment or supplement thereto, executed by any Issuer or based upon written
information furnished by or on behalf of any Issuer filed in any jurisdiction in
order to qualify the Securities under the securities or "Blue Sky" laws thereof
or filed with the Commission or any securities association or securities
exchange (collectively, the "Documents"); or
---------
(ii) the omission or alleged omission to state, in the Memorandum or any
amendment or supplement thereto, or any of the Documents, a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, and
will reimburse, as incurred, the Initial Purchaser and each such director,
officer, employee, agent or controlling person for any legal or other expenses
reasonably incurred by the Initial Purchaser or such director, officer,
employee, agent or controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability, expense or action; provided, however, that
-------- -------
none of the Companies or the Guarantor will be liable in any such case to the
Initial Purchaser or any director, officer, employee, agent or controlling
person of the Initial Purchaser to the extent that any such loss, claim,
damages, liability expense or action arises out of or is based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
the Memorandum or any amendment or supplement thereto, or any Document, in
reliance upon and in conformity with written information furnished to the
Companies or the Guarantor by or on behalf of the Initial Purchaser specifically
for use therein; and provided, further, that none of the Companies or the
-------- -------
Guarantor will be liable to the Initial Purchaser or any director, officer,
employee, agent or any person controlling the Initial Purchaser with respect to
any such untrue statement or omission made in any Memorandum that is corrected
in any amendment or supplement thereto if the person asserting any such loss,
claim, damage, expense or liability purchased Securities from the Initial
Purchaser in reliance upon such Memorandum but was not sent or given a copy of
the amendment or supplement thereto
<PAGE>
-25-
that was made available by the Companies or the Guarantor to the Initial
Purchaser at or prior to the written confirmation of the sale of the Securities
to such person in any case where such delivery of such Memorandum (as so amended
or supplemented) is required by the Act, unless such failure to deliver such
Memorandum (as amended or supplemented) was a result of noncompliance by the
Companies or the Guarantor with Section 5(iv) of this Agreement. This indemnity
agreement will be in addition to any liability that the Companies or the
Guarantor may otherwise have to the indemnified parties. The Companies or the
Guarantor further agree that the indemnification, contribution and
reimbursement commitments set forth in this Section 8 shall apply whether or not
the Initial Purchaser is a formal party to any such lawsuits, claims or other
proceedings. Neither of the Companies nor the Guarantor will without the prior
written consent of the Initial Purchaser, settle or compromise or consent to the
entry of any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification by the Initial Purchaser may be
sought hereunder (whether or not the Initial Purchaser or any person who
controls the Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act is a party to such claim, action, suit or
proceeding), unless such settlement, compromise or consent includes an
unconditional release of the Initial Purchaser and each such director, officer,
employee, agent or controlling person from all liability arising out of such
claim, action, suit or proceeding.
(b) The Initial Purchaser will indemnify and hold harmless the
Companies, the Guarantor, their respective directors, officers, employees and
agents and each person, if any, who controls any of the Companies or the
Guarantor within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any losses, claims, damages or liabilities to which any of
the Companies or the Guarantor or any such director, officer, employee, agent or
controlling person may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement or omission of any material fact contained in the Memorandum or
any amendment or supplement thereto or any Document, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue statement
was made in reliance upon and in conformity with written information furnished
to any of the Companies or the Guarantor by or on behalf of the Initial
Purchaser specifically for use therein; and, subject to the limitation set
forth
<PAGE>
-26-
immediately preceding this clause, will reimburse, as incurred, any legal
or other expenses reasonably incurred by any of the Companies or the Guarantor
or any such director, officer, employee, agent or controlling person in
connection with investigating or defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action in
respect thereof. This indemnity agreement will be in addition to any
liability that the Initial Purchaser may otherwise have to the indemnified
parties.
(c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party of the commencement thereof; but the
omission so to notify the indemnifying party will not relieve it from any
liability that it may have to any indemnified party except to the extent that
such omission results in the forfeiture by the indemnifying party of
substantial rights and defenses. In case any such action is brought against any
indemnified party, and such indemnified party notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the named
-------- -------
parties in any such action (including any impleaded parties) include both the
indemnified party and the indemnifying party and counsel for the indemnified
party shall have reasonably concluded that there may be one or more legal
defenses available to it and/or other indemnified parties that are different
from or additional to those available to any such indemnifying party, then the
indemnifying parties shall not have the right to direct the defense of such
action on behalf of such indemnified party or parties and such indemnified party
or parties shall have the right to select separate counsel to defend such action
on behalf of such indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof and approval by such indemnified party of counsel appointed to
defend such action, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses, other
than reasonable out-of-pocket costs of investigation, incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the immediately preceding sentence (it being understood, however,
<PAGE>
-27-
that in connection with such action the indemnifying party shall not be liable
for the expenses of more than one separate counsel (in addition to local
counsel) in any one action or separate but substantially similar actions in the
same jurisdiction arising out of the same general allegations or circumstances,
representing the indemnified parties under such paragraph (a) or paragraph (b),
as the case may be, who are parties to such action or actions); (ii) the
indemnifying party has authorized in writing the employment of counsel for the
indemnified party at the expense of the indemnifying parties; or (iii) the
indemnifying party shall have failed to assume the defense or retain counsel
reasonably satisfactory to the indemnified party. After such notice from the
indemnifying parties to such indemnified party (so long as the indemnified party
shall have informed the indemnifying parties of such action in accordance with
this Section 8 on a timely basis prior to the indemnified party seeking
indemnification hereunder), the indemnifying parties will not be liable under
this Section 8 for the costs and expenses of any settlement of such action
effected by such indemnified party without the consent of the indemnifying
party, unless such indemnified party waived its rights under this Section 8, in
which case the indemnified party may effect such a settlement without such
consent.
(d) In circumstances in which the indemnity agreement provided for
in the preceding paragraphs of this Section 8 is unavailable or insufficient to
hold harmless an indemnified party in respect of any losses, claims, damages,
expenses or liabilities (or actions in respect thereof), each indemnifying
party, in order to provide for just and equitable contribution, shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages, expenses or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages, expenses or
liabilities (or actions in respect thereof). The relative benefits received by
the Companies and the Guarantor on the one hand and the Initial Purchaser on the
other shall be deemed to be in the same proportion as the total proceeds from
the offering of the Securities (before deducting expenses) received by the
Compa-
<PAGE>
-28-
nies and the Guarantor bear to the total discounts and commissions received by
the Initial Purchaser. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Companies or the Guarantor on the one
hand or the Initial Purchaser on the other, the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission, and any other equitable considerations appropriate in
the circumstances. The amount paid or payable by a party as a result of the
losses, claims, damages and liabilities referred to above shall be deemed to
include any legal or other fees or expenses incurred by such party in connection
with investigating or defending any such claim. The Companies and the Guarantor
and the Initial Purchaser agree that it would not be equitable if the amount of
such contribution were determined by pro rata or per capita allocation (even
if the Companies and the Guarantor on the one hand and the Initial Purchaser on
the other hand were treated as one entity for such purpose) or by any other
method of allocation that does not take into account the equitable
considerations referred to in the first sentence of this paragraph (d).
Notwithstanding any other provision of this paragraph (d), the Initial Purchaser
shall not be obligated to make contributions hereunder that in the aggregate
exceed the total discounts and commissions received by the Initial Purchaser
under this Agreement, less the aggregate amount of any damages that the Initial
Purchaser has otherwise been required to pay by reason of the untrue or alleged
untrue statements, and no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. For
purposes of this paragraph (d), each director, officer, employee or agent of and
each person, if any, who controls the Initial Purchaser within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Initial Purchaser, and each director, officer,
employee and agent of any of the Companies and the Guarantor and each person, if
any, who controls any of the Companies and the Guarantor within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act shall have the same
rights to contribution as the Companies and the Guarantor.
(e) Notwithstanding anything to the contrary in this Section 8, the
indemnification and contribution provisions of
<PAGE>
-29-
the Registration Rights Agreement shall govern any claim with respect thereto.
9. Offering of Securities; Restrictions on Transfer. (a) The
------------------------------------------------
Initial Purchaser represents and warrants that it is a QIB. The Initial
Purchaser agrees with the Companies and the Guarantor that (i) it has not and
will not solicit offers for, or offer or sell, the Securities by any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Act; and (ii) it has and will solicit offers
for the Securities only from, and will offer the Securities only to, (A) in the
case of offers inside the United States persons whom the Initial Purchaser
reasonably believes to be QIBs or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when such person has represented to the Initial Purchaser that each such
account is a QIB, to whom notice has been given that such sale or delivery is
being made in reliance on Rule 144A and, in each case, in transactions under
Rule 144A and (B) in the case of offers outside the United States, to persons
other than U.S. persons ("foreign purchasers," which term shall include dealers
or other professional fiduciaries in the United States acting on a discretionary
basis for foreign beneficial owners (other than an estate or trust)); provided,
--------
however, that, in the case of this clause (B), in purchasing such Securities
- -------
such persons are deemed to have represented and agreed as provided under the
caption "Notice to Investors" contained in the Memorandum.
(b) The Initial Purchaser represents and warrants with respect to
offers and sales outside the United States that (i) it has and will comply with
all applicable laws and regulations in each jurisdiction in which it acquires,
offers, sells or delivers Securities or has in its possession or distributes any
Memorandum or any such other material, in all cases at its own expense; (ii) the
Securities have not been and will not be offered or sold within the United
States or to, or for the account or benefit of, U.S. persons except in
accordance with Regulation S under the Act or pursuant to an exemption from the
registration requirements of the Act; (iii) it has offered the Securities and
will offer and sell the Securities (A) as part of its distribution at any time
and (B) otherwise until 40 days after the later of the commencement of the
offering and the Closing Date, only in accordance with Rule 903 of Regulation S
or as otherwise permitted in Section 9(a) and, accordingly, neither it nor any
persons acting on its behalf have engaged or
<PAGE>
-30-
will engage in any directed selling efforts (within the meaning of Regulation S)
with respect to the Securities, and any such persons have complied and will
comply with the offering restrictions requirements of Regulation S; and (iv) it
agrees that, at or prior to confirmation of sales of the Securities, it will
have sent to each distributor, dealer or person receiving a selling concession,
fee or other remuneration that purchases Securities from it during the
restricted period a confirmation or notice to substantially the following
effect:
"The securities covered hereby have not been registered under the United
States Act of 1933 (the "Act") and may not be offered and sold within the
United States or to, or for the account or benefit of, U.S. persons (i) as
part of the distribution of the securities at any time or (ii) otherwise
until 40 days after the later of the commencement of the offering and the
closing date of the offering, except in either case in accordance with
Regulation S (or Rule 144A if available) under the Act. Terms used above
have the meaning given to them in Regulation S."
Terms used in this Section 9 and not defined in this Agreement have the meanings
given to them in Regulation S.
10. Survival Clause. The respective representations, warranties,
---------------
agreements, covenants, indemnities and other statements of the Companies and the
Guarantor, their respective officers and the Initial Purchaser set forth in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Companies or the Guarantor, any of
their respective officers or directors, the Initial Purchaser or any controlling
person referred to in Section 8 hereof and (ii) delivery of, payment for or
disposition of the Securities, and shall be binding upon and shall inure to
the benefit of any successors, assigns, heirs or personal representatives of the
Companies or the Guarantor, the Initial Purchaser and indemnified parties
referred to in Section 8 hereof. The respective agreements, covenants,
indemnities and other statements set forth in Sections 6 and 8 hereof shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement.
11. Termination. (a) This Agreement may be terminated in the sole
-----------
discretion of the Initial Purchaser by notice to the Companies and the Guarantor
given in the event that the
<PAGE>
-31-
Companies or the Guarantor shall have failed, refused or been unable to satisfy
all conditions on their part to be performed or satisfied hereunder on or prior
to the Closing Date or if at or prior to the Closing Date:
(i) any of the Companies or the Guarantor shall have sustained any
loss or interference with respect to their respective businesses or properties
from fire, flood, hurricane, earthquake, accident or other calamity, whether or
not covered by insurance, or from any labor dispute or any legal or governmental
proceeding, which loss or interference, in the sole judgment of the Initial
Purchaser, has had or has a material adverse effect on the general affairs,
management, business, condition (financial or other), properties, prospects or
results of operations of the Companies and the Guarantor, taken as a whole, or
there shall have been any material adverse change, or any development involving
a prospective material adverse change (including without limitation a change in
management or control of the Companies or the Guarantor), in the general
affairs, management, business, condition (financial or other), properties,
prospects or results of operations of the Companies and the Guarantor, taken as
a whole, except as described in or contemplated by the Memorandum (exclusive of
any amendment or supplement thereto);
(ii) trading in securities of the Companies or of the Guarantor or in
securities generally on the New York Stock Exchange, the American Stock
Exchange, the Montreal or Toronto Stock Exchange or the Nasdaq National Market
shall have been suspended or minimum or maximum prices shall have been
established on any such exchange;
(iii) a banking moratorium shall have been declared by New York, United
States or Canadian authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States, Canada and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict involving the
United States, Canada or any other national or international calamity or
emergency that in the sole judgment of the Initial Purchaser, is material and
adverse, or (C) any material change in the financial markets of the United
States or Canada that, in the case of (A), (B) or (C) above, in the sole
judgment of the Initial Purchaser, makes it impracticable or inadvisable to
proceed with the delivery of the Securities as contemplated by the Memorandum,
as amended as of the date hereof; or
<PAGE>
-32-
(v) any securities of the Companies or of the Guarantor shall have
been downgraded or placed on any "watch list" for possible downgrading by any
nationally recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Notices. All communications hereunder shall be in writing and,
-------
if sent to the Initial Purchaser, shall be hand delivered, mailed by first-class
mail, couriered by next-day air courier or telecopied and confirmed in writing
to CIBC Oppenheimer Corp., 425 Lexington Avenue, 3rd Floor, New York, New York
10017, Attention: Corporate Finance Department, and with a copy to Cahill
Gordon & Reindel, 80 Pine Street, New York, New York 10005, Attention: Roger
Meltzer, Esq. If sent to any of the Companies or the Guarantor, shall be
mailed, delivered or telecopied and confirmed in writing, to Kim D. Kelly,
Insight Communications, 126 E. 56th Street, New York, NY 10022, and with a copy
to Cooperman Levitt Winikoff Lester & Newman P.C., 800 Third Avenue, New York,
NY 10022 Attention: Robert L. Winikoff, Esq, and to Dennis McGillicuddy, Coaxial
Communications, Inc., 5111 Ocean Boulevard, Suite C, Sarasota, Florida, 34242
and with a copy to Dow, Lohnes and Albertson, PLLC, 1200 New Hampshire Avenue,
N.W., Suite 800, Washington, D.C. 20036-6802 Attention: Timothy J. Kelley, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier guaranteeing over night
delivery; and when receipt is acknowledged by the addressee, if telecopied.
13. Successors. This Agreement shall inure to the benefit of and be
----------
binding upon the Initial Purchaser and each of the Companies, the Guarantor and
their respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained; this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Companies and the Guarantor contained in Section 8 of
this Agreement shall also
<PAGE>
-33-
be for the benefit of the directors, officers, employees and agents and any
person or persons who control the Initial Purchaser within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act and (ii) the indemnities
of the Initial Purchaser contained in Section 8 of this Agreement shall also be
for the benefit of the directors, officers, employees and agents of the
Companies, the Guarantor and any person or persons who control any Company or
the Guarantor within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act. No purchaser of Securities from the Initial Purchaser will be
deemed a successor because of such purchase.
14. No Waiver; Modifications in Writing. No failure or delay on the
-----------------------------------
part of any Issuer or the Initial Purchaser in exercising any right, power or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The remedies provided for herein are cumulative and are not exclusive of any
remedies that may be avail able to any Company, the Guarantor or the Initial
Purchaser at law or in equity or otherwise. No waiver of or consent to any
departure by any Issuer or the Initial Purchaser from any provision of this
Agreement shall be effective unless signed in writing by the party entitled to
the benefit thereof, provided that notice of any such waiver shall be given to
--------
each party hereto as set forth below. Except as otherwise provided herein, no
amendment, modification or termination of any provision of this Agreement shall
be effective unless signed in writing by or on behalf of each of the Companies,
the Guarantor and the Initial Purchaser. Any amendment, supplement or
modification of or to any provision of this Agreement, any waiver of any
provision of this Agreement, and any consent to any departure by the Companies,
the Guarnator or the Initial Purchaser from the terms of any provision of this
Agreement shall be effective only in the specific instance and for the specific
purpose for which made or given. Except where notice is specifically required
by this Agreement, no notice to or demand on the Companies or the Guarantor in
any case shall entitle the Companies or the Guarantor to any other or further
notice or demand in similar or other circumstances.
15. Information Supplied by the Initial Purchaser. The statements set
---------------------------------------------
forth in the first paragraph on page (i) of the Memorandum and in the
penultimate paragraph under the heading "Plan of Distribution" in the Memorandum
(to the extent such statements relate to the Initial Purchaser) constitute the
only information furnished by the Initial Purchaser to the
<PAGE>
-34-
Companies and the Guarantor for purposes of Section 2(i) hereof and Section 8
hereof.
16. Restructuring of Chase Debt. The parties hereto agree that on
---------------------------
the Closing Date the Chase Debt will be restructured and the Chase Debt will
be evidenced by the Notes.
17. Entire Agreement. This Agreement constitutes the entire
----------------
agreement among the parties hereto and supersedes all prior agreements,
understandings and arrangements, oral or written, among the parties hereto with
respect to the subject matter hereof.
18. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
--------------
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAW.
19. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. Joint and Several Obligations. All of the obligations of the
-----------------------------
Companies hereunder shall be joint and several obligations of each of them.
<PAGE>
-1-
If the foregoing correctly sets forth our understanding, please indicate
your acceptance thereof in the space provided below for that purpose, whereupon
this Agreement shall constitute a binding agreement among the Companies, the
Guarantor and the Initial Purchaser.
Very truly yours,
COAXIAL COMMUNICATIONS OF CENTRAL
OHIO, INC.
By: /s/ Dennis J. McGillicuddy
-------------------------------------
Name: Dennis J. McGillicuddy
Title: Chairman
PHOENIX ASSOCIATES
By: PHOENIX DJM LLC
By: /s/ Dennis J. McGillicuddy
-------------------------------------
Name: Dennis J. McGillicuddy
Title: Its Sole Member
INSIGHT COMMUNICATIONS OF CENTRAL
OHIO, LLC
By: /s/ Kim D. Kelly
-------------------------------------
Name: Kim D. Kelly
Title: Executive Vice President
<PAGE>
-2-
The foregoing Agreement is
hereby confirmed and accepted as
of the date first above written.
CIBC OPPENHEIMER CORP.
By: /s/
Name:
Title:
<PAGE>
-3-
Exhibit B-1
-----------
Form of Opinion of Counsel to Coaxial and Phoenix
-------------------------------------------------
(i) Each of the Issuers is duly formed or incorporated, as the case
may be, validly existing and in good standing under the laws of its respective
jurisdiction of formation or incorporation, as the case may be, and has all
requisite power and authority as a partnership or a corporation, as the case may
be, to own, lease and operate its properties and to conduct its business as
described in the Memorandum. Each of the Issuers is duly qualified as a foreign
partnership or corporation, as the case may be, and in good standing in each
jurisdiction where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect.
(ii) Each of the Issuers has the authorized, issued and outstanding
capitalization set forth in the Memorandum under the "as adjusted" column below
the caption "Capitalization"; all of the outstanding shares of capital stock of
or other ownership interests in the Issuers have been duly authorized and
validly issued, are fully paid and nonassessable and, to the knowledge of such
counsel, were not issued in violation of any preemptive or similar rights.
(iii) Except as set forth in the Memorandum, to the knowledge of such
counsel (A) no options, warrants or other rights to purchase from any Issuer
shares of capital stock of or other ownership interests in, as the case may be,
are outstanding, (B) no agreements or other obligations of the Issuer to issue,
or other rights to cause any Issuer to convert, any obligation into, or exchange
any securities for, shares of capital stock of or other ownership interests in,
as the case may be, in any Issuer are outstanding and (C) no holder of
securities of any Issuer is entitled to have such securities registered under a
registration statement filed under the Act.
(iv) The Notes are in the form contemplated by the Indenture. The
Notes, the Exchange Notes and the Private Exchange Notes have each been duly and
validly authorized by each of the Issuers and when executed (and assuming the
due
<PAGE>
-4-
authorization, execution and delivery of the Indenture by the Trustee and the
execution, delivery and authentication of the Notes, the Exchange Notes and the
Private Exchange Notes by the Trustee in accordance with the Indenture) and
delivered by each of the Issuers and, paid for by the Initial Purchaser in
accordance with the terms of the Purchase Agreement, will constitute the valid
and legally binding obligations of each of the Issuers enforceable against each
of the Issuers in accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether a
proceeding is sought in equity or at law), and except that such counsel need not
express any opinion as to the enforceability of the waiver as to usury,
extension or stay laws.
(v) Each of the Issuers has all requisite power and authority as a
partnership or a corporation, as the case may be, to execute, deliver and
perform its obligations under the Indenture and the Notes; the Indenture is in
sufficient form for qualification under the TIA; the Indenture has been duly and
validly authorized by each of the Issuers and, when duly executed and delivered
by each of the Issuers (assuming the due authorization, execution and delivery
thereof by the Trustee), will constitute the valid and legally binding
obligation of each of the Issuers, enforceable against each of the Issuers in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether a proceeding is sought in
equity or at law), and except that such counsel need not express any opinion as
to the enforceability of the waiver as to usury, extension or stay laws.
(vi) Each of the Issuers has all requisite power and authority as a
partnership or a corporation, as the case may be, to execute, deliver and
perform its obligations under the Registration Rights Agreement; the
Registration Rights Agreement has been duly and validly authorized by each of
the Issuers and when duly executed and delivered by each of the Issuers, will
constitute the valid and legally binding obligation of each of the Issuers,
enforceable against each of the Issuers in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar
<PAGE>
-5-
laws affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether a
proceeding is sought in equity or at law), and subject to the limitations of
federal and state securities laws and public policy considerations as to any
rights to indemnity or contribution thereunder.
(vii) Each of the Issuers has all requisite power and authority as a
partnership or a corporation, as the case may be, to execute, deliver and
perform its obligations under the Purchase Agreement and to consummate the
transactions contemplated hereby; the execution, delivery and performance of the
Purchase Agreement by each of the Issuers and the Guarantor and the consummation
by each of the Issuers and the Guarantor of the transactions contemplated hereby
have been duly and validly authorized by all necessary limited liability Issuer
or corporate action, as the case may be, on the part of each of the Issuers and
the Guarantor. This Agreement has been duly executed and delivered by each of
the Issuers.
(viii) Each of the Issuers has all requisite power and authority, as
a partnership or a corporation, as the case may be, to execute, deliver and
perform each of their obligations under the Transaction Documents. The
Transaction Documents have been duly and validly authorized by each of the
Issuers and, when executed and delivered by the Issuers, will constitute a valid
and legally binding agreement of each of the Issuers enforceable against each of
the Issuers in accordance with its terms, except that the enforcement thereof
may be subject to (a) bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (b) general principles of equity and
the discretion of any proceeding therefor may be brought.
(ix) The Indenture, the Notes, the Guarantees, the Registration Rights
Agreement, the Operating Agreement, the Contribution Agreement and the
Transaction Documents conform in all material respects to the descriptions
thereof contained in the Memorandum.
(x) After due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which any of the Issuers is a
party or to which the property or assets of any Issuer is subject which would be
required to be described in a prospectus that is subject to Item 103 of
<PAGE>
-6-
Regulation S-K under the Act, or which seek to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the Notes to be
sold hereunder or the consummation of the other transactions described in the
Memorandum under the caption "Use of Proceeds."
(xi) To the knowledge of such counsel, none of the Issuers is (i) in
violation of its certificate of incorporation or bylaws (or similar
organizational document (including any certificate of limited liability
Issuer)), (ii) in violation of any statute, judgment, decree, order, rule or
regulation applicable to any of them or any of their respective properties or
assets, except for any such violation which would not, individually or in the
aggregate, have a Material Adverse Effect, or (iii) in breach or default in the
performance or observance of (nor has any event occurred which, with notice or
passage of time or both, would constitute a default under) any obligation,
agreement, covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, note, lease, license, franchise agreement, permit,
certificate, contract or other agreement or instrument known to such counsel
(including in any event any of the foregoing which have been filed by the
Issuers or the Guarantor with the Commission) to which any of them is a party or
to which any of them or their respective properties or assets is subject, except
for any such breach, default or event which would not, individually or in the
aggregate, have a Material Adverse Effect.
(xii) The execution and delivery of the Purchase Agreement, the
Indenture, the Registration Rights Agreement, the Pledge Agreement and the
Transaction Documents (including, without limitation, the Contribution
Agreement) and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the issuance and sale of the Securities
to the Initial Purchaser) will not conflict with or constitute or result in a
breach or violation of or a default under (or an event which with notice or
passage of time or both would constitute a default under) or violation of any of
(i) the terms or provisions of any indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement, permit, certificate,
contract or other agreement or instrument known to such counsel (including in
any event any of the foregoing which have been filed by the Issuers with the
Commission) to which any of the Issuers is a party or to which any of them or
their respective properties or assets is subject, except for any such conflict,
breach, violation,
<PAGE>
-7-
default or event which would not, individually or in the aggregate, have a
Material Adverse Effect, (ii) the certificate of incorporation or bylaws (or
similar organizational document (including any certificate of limited liability
Issuer)) of any of the Issuers, or (iii) (assuming compliance with all
applicable state securities or "Blue Sky" laws and assuming the accuracy of the
representations and warranties of the Initial Purchaser in Section 9 of the
Purchase Agreement) any statute, judgment, decree, order, rule or regulation
known to such counsel to be applicable to any of the Issuers or any of their
respective properties or assets, except for any such conflict, breach or
violation which would not, individually or in the aggregate, have a Material
Adverse Effect.
(xiii) None of the Issuers is, or immediately after the sale of the
Securities to be sold hereunder and the application of the proceeds from such
sale (as described in the Memorandum under the caption "Use of Proceeds") will
be, an "investment company" as such term is defined in the Investment Company
Act of 1940, as amended.
(xiv) The Contribution Agreement has been duly authorized by
requisite corporate action on the part of Coaxial Communications of Central
Ohio, Inc. and constitutes the legal, valid and binding agreement of Coaxial
Communications of Central Ohio, Inc., enforceable against Coaxial Communications
of Central Ohio, Inc. in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether a proceeding is sought in
equity or at law). All conditions to effect the System Acquisition set forth in
the Contribution Agreement have been satisfied without waiver.
(xv) The execution and delivery by the Issuers of, and the
performance by each of the Issuers of their obligations under the Purchase
Agreement, the Indenture, the Registration Rights Agreement, the Notes and the
Guarantees, or the Transaction Documents as applicable, did not or will not
result in a violation of the Communications Act or any order, rule or regulation
of the FCC;
(xvi) No consent, approval, authorization, order, registration or
qualification of or with any governmental agency or body is required under the
Communications Act or the
<PAGE>
-8-
rules and regulations of the FCC for the execution and delivery by each of the
Issuers and the performance by each of the Issuers and the Guarantors of their
obligations under, the Purchase Agreement, the Registration Rights Agreement,
the Indenture, the Notes and the Guarantees, or the Transaction Documents, as
applicable;
(xvii) The Issuers are the holders of the Licenses issued by the FCC
and listed in Exhibit 1, appended hereto (the "FCC Licenses"), all of which are
validly issued by the FCC and in full force and effect, with no material
restrictions or qualifications such FCC Licenses constitute all of the FCC
Licenses necessary for the Issuers to own their properties and to conduct their
businesses in the manner and to the full extent now operated or proposed to be
operated as described in the Memorandum;
(xviii) The business and operations of the Issuers comply in all
material respects with the Communications Act and all published orders, rules
and regulations of the FCC;
(xix) We are not aware of (a) any proceedings threatened, pending or
contemplated before the FCC against or involving the properties, businesses or
FCC Licenses of the Issuers and the Guarantors, or (b) any communications laws
or regulations of the United States applicable to such properties, businesses or
FCC Licenses, which in either case could have a material adverse effect on the
Issuers taken as a whole;
(xx) To the best of our knowledge after due inquiry, no event has
occurred which permits, or with notice or lapse of time or both would permit,
the revocation or non-renewal of any of the FCC Licenses, assuming the filing of
timely license renewal applications and the timely payment of all applicable
filing and regulatory fees to the FCC, or which might result in any other
material impairment of the rights of the Issuers in the FCC Licenses; and
(xxi) The statements in the Final Memorandum under the caption "Risk
Factors Regulation in the Cable Television Industry" and "Legislation and
Regulation" insofar as such statements constitute summaries of the legal
matters, documents or proceedings referred to therein, fairly present the
information called for with respect to such legal matters, documents and
proceedings and fairly summarize the matters referred to therein.
<PAGE>
-9-
Such counsel shall additionally state that in its capacity as counsel
to the Issuers, it has participated in conferences with officers and other
representatives of the Issuers and Insight, representatives of the independent
public accountants for the Issuers and representatives of the Initial Purchaser
at which the contents of the Memorandum and related matters were discussed and,
although it is not passing upon and does not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the Memorandum
(except as indicated in clause (x) above) and has not made any independent check
or verification thereof, on the basis of the foregoing (relying as to
materiality to a large extent upon the statements of officers and other
representatives of the Issuers) no facts have come to its attention that have
caused it to believe that the Memorandum as of its date and as of the date
hereof, or any amendment or supplement thereto as of its date and as of the date
hereof, contained or contains an untrue statement of a material fact or omitted
or omits to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading (it being understood that such counsel need express no opinion on the
financial statements or other financial and statistical data included in the
Memorandum).
<PAGE>
-1-
Exhibit B-2
-----------
Form of Opinion of Counsel to Guarantor
(i) The Guarantor is duly formed, validly existing and in good
standing under the laws of Delaware and has all requisite power and authority as
a limited liability company to own, lease and operate its properties and to
conduct its business as described in the Memorandum. The Guarantor is duly
qualified as a foreign limited liability company and in good standing in each
jurisdiction where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect.
(ii) All of the outstanding ownership interests in the Guarantor
are owned as set forth in the Memorandum and are free and clear of all perfected
security interests, other than those liens pursuant to the Pledge Agreements.
(iii) Except as set forth in the Memorandum, to the knowledge of
such counsel (A) no options, warrants or other rights to purchase from the
Guarantor ownership interests in, the Guarantor are outstanding, (B) no
agreements or other obligations of the Guarantor to issue, or other rights to
cause the Guarantor to convert, any obligation into, or exchange any securities
for, other ownership interests in the Guarantor are outstanding and (C) no
holder of securities of any Company or the Guarantor is entitled to have such
securities registered under a registration statement filed under the Act.
(iv) The notations on the Notes relating to the Guarantees are in
the form contemplated by the Indenture. The Guarantor has all requisite power
and authority as a limited liability company to execute, deliver and perform its
obligations under the Guarantees. The Guarantees endorsed on the Notes, the
Exchange Notes and the Private Exchange Notes have each been duly and validly
authorized by the Guarantor and, when the Notes, the Exchange Notes and the
Private Exchange Notes are executed by each of Companies and the Guarantor and
authenticated by the Trustee in accordance with the provisions of the Indenture
and, in the case of the Notes, delivered to and paid for by the Initial
Purchaser in accordance with the terms of this Agreement, will constitute the
valid and legally
<PAGE>
-2-
binding obligations of the Guarantor, enforceable against the Guarantor in
accordance with their terms, subject to applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium and similar laws affecting
creditors' rights and remedies generally and subject as to enforceability, to
general principles of equity (regardless of whether a proceeding is sought in
equity or at law), and except that such counsel need not express any opinion as
to the enforceability of the waiver as to usury, extension or stay laws.
(v) The Guarantor has all requisite power and authority as a
limited liability company to execute, deliver and perform its obligations under
the Indenture and the Notes; the Indenture is in sufficient form for
qualification under the TIA; the Indenture has been duly and validly authorized
by the Guarantor and, when duly executed and delivered by the Guarantor
(assuming the due authorization, execution and delivery thereof by the Trustee),
will constitute the valid and legally binding obligation of the Guarantor,
enforceable against the Guarantor in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether a proceeding is sought in equity or at law), and except that such
counsel need not express any opinion as to the enforceability of the waiver as
to usury, extension or stay laws.
(vi) The Guarantor has all requisite power and authority as a
limited liability company to execute, deliver and perform its obligations under
the Registration Rights Agreement; the Registration Rights Agreement has been
duly and validly authorized by the Guarantor and when duly executed and
delivered by the Guarantor, will constitute the valid and legally binding
obligation of the Guarantor, enforceable against the Guarantor in accordance
with its terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting creditors' rights and remedies generally
and subject, as to enforceability, to general principles of equity (regardless
of whether a proceeding is sought in equity or at law), and subject to the
limitations of federal and state securities laws and public policy
considerations as to any rights to indemnity or contribution thereunder.
(vii) The Guarantor has all requisite power and authority as a
limited liability company to execute, deliver
<PAGE>
-3-
and perform its obligations under the Purchase Agreement and to consummate the
transactions contemplated hereby; the execution, delivery and performance of the
Purchase Agreement by the Guarantor and the consummation by the Guarantor of the
transactions contemplated hereby have been duly and validly authorized by all
necessary limited liability company on the part of the Guarantor. This Agreement
has been duly executed and delivered by the Guarantor.
(viii) The Guarantor has all requisite power and authority, as a
limited liability company to execute, deliver and perform each of its
obligations under the Transaction Documents. The Transaction Documents have been
duly and validly authorized by the Guarantor and, when executed and delivered by
the Guarantor, will constitute a valid and legally binding agreement of the
Guarantor enforceable against the Guarantor in accordance with its terms, except
that the enforcement thereof may be subject to (a) bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally and (b) general
principles of equity and the discretion of any proceeding therefor may be
brought.
(ix) The Indenture, the Notes, the Guarantees, the Registration
Rights Agreement, the Operating Agreement, the Contribution Agreement and the
Transaction Documents conform in all material respects to the descriptions
thereof contained in the Memorandum.
(x) After due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Guarantor is a party
or to which the property or assets of the Guarantor is subject which would be
required to be described in a prospectus that is subject to Item 103 of
Regulation S-K under the Act, or which seek to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the Notes to be
sold hereunder or the consummation of the other transactions described in the
Memorandum under the caption "Use of Proceeds."
(xi) To the knowledge of such counsel, the Guarantor is not (i) in
violation of its certificate of formation or operating agreement, (ii) in
violation of any statute, judgment, decree, order, rule or regulation
applicable to the Guarantor or its properties or assets, except for any such
violation which would not, individually or in the aggregate,
<PAGE>
-4-
have a Material Adverse Effect, or (iii) in breach or default in the performance
or observance of (nor has any event occurred which, with notice or passage of
time or both, would constitute a default under) any obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement, permit, certificate,
contract or other agreement or instrument known to such counsel (including in
any event any of the foregoing which have been filed by the Guarantor with the
Commission) to which the Guarantor is a party or to which it properties or
assets is subject, except for any such breach, default or event which would not,
individually or in the aggregate, have a Material Adverse Effect.
(xii) The execution and delivery of this Agreement, the Indenture,
the Registration Rights Agreement, the Pledge Agreement, and the Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby (including, without limitation, the Contribution Agreement) will not
conflict with or constitute or result in a breach or violation of or a default
under (or an event which with notice or passage of time or both would constitute
a default under) or violation of any of (i) the terms or provisions of any
indenture, mort gage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement or
instrument known to such counsel (including in any event any of the foregoing
which have been filed by the Guarantor with the Commission) to which the
Guarantor is a party or to which its properties or assets is subject, except for
any such conflict, breach, violation, default or event which would not,
individually or in the aggregate, have a Material Adverse Effect, (ii) the
certificate of formation or operating agreement of the Guarantor, or (iii)
(assuming compliance with all applicable state securities or "Blue Sky" laws and
assuming the accuracy of the representations and warranties of the Initial
Purchaser in Section 9 of the Purchase Agreement) any statute, judgment, decree,
order, rule or regulation known to such counsel to be applicable to the
Guarantor or any of their respective properties or assets, except for any such
conflict, breach or violation which would not, individually or in the aggregate,
have a Material Adverse Effect.
(xiii) To the best knowledge of such counsel, no consent, approval,
authorization or order of any governmental authority is required for the
issuance and sale by the Companies and the Guarantor of the Securities to the
Initial Pur-
<PAGE>
-5-
chaser or the other transactions contemplated hereby, except such as may be
required under Blue Sky laws, as to which such counsel need express no opinion,
and those which have previously been obtained.
(xiv) No registration under the Act of the Securities is required in
connection with the sale of the Notes to the Initial Purchaser as contemplated
by this Agreement and the Memorandum or in connection with the initial resale of
the Securities by the Initial Purchaser in accordance with Section 9 of the
Purchase Agreement, and prior to the commencement of the Exchange Offer (as
defined in the Registration Rights Agreement) or the effectiveness of the Shelf
Registration Statement (as defined in the Registration Rights Agreement), the
Indenture is not required to be qualified under the TIA, in each case assuming
(i) that the purchasers who buy the Notes in the initial resales are qualified
institutional buyers as defined in Rule 144A promulgated under the Act ("QIBs"
or "Qualified Institutional Buyers"), accredited investors as defined in Rule
501(a) (1), (2), (3) or (7) promulgated under the Act ("Accredited Investors")
or not U.S. persons (as defined in Regulation S promulgated under the Act), (ii)
the accuracy of the Initial Purchaser's representations in Section 9 and those
of the Companies and the Guarantor contained in the Purchase Agreement regarding
the absence of a general solicitation or general advertising in connection
with the sale of the Notes to the Initial Purchaser and the initial resales and
(iii) the due performance by the Initial Purchaser of the agreements set forth
in Section 9 hereof.
(xv) Neither the consummation of the transactions contemplated by
this Agreement nor the sale, issuance, execution or delivery of the Securities
will violate Regulation T, U or X of the Board of Governors of the Federal
Reserve System.
(xvi) The Contribution Agreement has been duly authorized by
requisite corporate action on the part of Insight Communications Company, L.P.
and constitutes the legal, valid and binding agreement of Insight Communications
Company, L.P., enforceable against Insight Communications Company, L.P. in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally and subject, as to enforceability, to general principles of
equity (regardless of whether a proceeding is sought in equity or at law). All
<PAGE>
-6-
conditions to effect the System Acquisition set forth in the Contribution
Agreement have been satisfied without waiver.
(xvii) The Pledge Agreement has been duly authorized and executed by
the parties thereto. The Pledge Agreement, together with the delivery of
certificates evidencing the Pledged Securities Shares (as defined in the Pledge
Agreement), duly endorsed in the name of the Trustee or in blank (or accompanied
by an appropriate stock power or separate document of assignment duly executed
in the name of the Trustee or in blank), to the Trustee in the State of New
York, will create in favor of the Trustee a valid and perfected security
interest therein as security for the Secured Obligations (as defined in the
Pledge Agreement). Assuming that the Trustee took delivery of the Pledged
Securities without notice of any adverse claim (within the meaning of the
Uniform Commercial Code as in effect in the State of New York as of the date
hereof (the "UCC")), the Trustee will acquire its interest in the Pledged
Securities free of any adverse claim.
(xviii) The Pledge Agreement creates in favor of the Trustee Agent (as
defined in the Security Agreement) for the benefit of the Secured Parties (as
defined in the Security Agreement) a valid security interest in Pledged
Collateral and the Pledged Collateral (as defined in the Security Agreement) in
each case to the extent that the Uniform Commercial Code of the State of New
York (the "New York UCC") is applicable thereto and governs the creation of
------------
security interest therein.
Such counsel shall additionally state that in its capacity as counsel
to the Guarantor, it has participated in conferences with officers and other
representatives of the Issuers and Insight, representatives of the independent
public accountants for the Issuers and representatives of the Initial Purchaser
at which the contents of the Memorandum and related matters were discussed and,
although it is not passing upon and does not assume any responsibility for the
accuracy, complete ness or fairness of the statements contained in the
Memorandum (except as indicated in clause (x) above) and has not made any
independent check or verification thereof, on the basis of the foregoing
(relying as to materiality to a large extent upon the statements of officers and
other representatives of the Guarantor) no facts have come to its attention
that have caused it to believe that the Memorandum as of its date and as of the
date hereof, or any amendment or supplement thereto as of its date and as of the
date hereof, contained or contains an untrue
<PAGE>
-7-
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading (it being understood that such
counsel need express no opinion on the financial statements or other financial
and statistical data included in the Memorandum).
<PAGE>
Exhibit 4.2
SENIOR NOTES
REGISTRATION RIGHTS AGREEMENT
Dated as of August 21, 1998
by and among
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.,
PHOENIX ASSOCIATES,
INSIGHT COMMUNICATIONS OF CENTRAL OHIO, LLC
and
THE INITIAL PURCHASER
named herein
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. Definitions............................................................. 1
--
2. Exchange Offer.......................................................... 5
--
3. Shelf Registration...................................................... 9
--
4. Additional Interest..................................................... 11
--
5. Registration Procedures................................................. 13
--
6. Registration Expenses................................................... 24
--
7. Indemnification......................................................... 25
--
8. Rules 144 and 144A...................................................... 29
--
9. Underwritten Registrations.............................................. 30
--
10. Miscellaneous.......................................................... 30
--
(a) Remedies........................................................ 30
--
(b) Enforcement..................................................... 30
--
(c) No Inconsistent Agreements...................................... 30
--
(d) Adjustments Affecting Registrable Notes......................... 31
--
(e) Amendments and Waivers.......................................... 31
--
(f) Notices......................................................... 31
--
(g) Successors and Assigns.......................................... 32
--
(h) Counterparts.................................................... 32
--
(i) Headings........................................................ 32
--
(j) Governing Law................................................... 32
--
(k) Severability.................................................... 33
--
(l) Entire Agreement................................................ 33
--
(m) Notes Held by the Issuers, the Guarantor or their Affiliates.... 33
--
-i-
<PAGE>
-1-
SENIOR NOTES REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of
August 21, 1998, by and among Coaxial Communications of Central Ohio, Inc., an
Ohio corporation ("Coaxial"), Phoenix Associates, a Florida general partnership
("Phoenix" and together with Coaxial, the "Issuers") and Insight Communications
of Central Ohio, LLC, a Delaware limited liability company (the "Guarantor") and
CIBC Oppenheimer Corp. (the "Initial Purchaser").
This Agreement is entered into in connection with the Restructuring
Agreement, dated as of August 17, 1998 among the Issuers, the Guarantor and the
Initial Purchaser (the "Restructuring Agreement") relating to the sale by the
Issuers to the Initial Purchaser of $140,000,000 aggregate principal amount of
the Issuers' 10% Senior Notes due 2006 (the "Notes"). In order to induce the
Initial Purchaser to enter into the Restructuring Agreement, the Issuers and the
Guarantor have agreed to provide the registration rights set forth in this
Agreement to the Initial Purchaser and its direct and indirect transferees and
assigns. The execution and delivery of this Agreement is a condition to the
Initial Purchaser's obligation to purchase the Notes under the Restructuring
Agreement.
The parties hereby agree as follows:
1. Definitions
-- -----------
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a).
-------------------
Advice: See Section 5.
------
Applicable Period: See Section 2(b).
-----------------
Closing: See the Restructuring Agreement.
-------
Effectiveness Date: The 150th day after the Issue Date.
------------------
Effectiveness Period: See Section 3(a).
--------------------
Event Date: See Section 4(b).
----------
<PAGE>
-2-
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: See Section 2(a).
--------------
Exchange Offer: See Section 2(a).
--------------
Exchange Registration Statement: See Section 2(a).
-------------------------------
Filing Date: The 60th day after the Issue Date.
-----------
Holder: Any holder of a Registrable Note or Registrable Notes.
------
Indemnified Person: See Section 7(c).
------------------
Indemnifying Person: See Section 7(c).
-------------------
Indenture: The Indenture, dated as of August 21, 1998, among the
---------
Issuers, the Guarantor and Bank of Montreal Trust Company, as trustee, pursuant
to which the Notes are being issued, as amended or supplemented from time to
time in accordance with the terms thereof.
Initial Purchaser: See the introductory paragraph to this Agreement.
-----------------
Initial Shelf Registration: See Section 3(a).
--------------------------
Inspectors: See Section 5(o).
----------
Issue Date: The date on which the original Notes are sold to the
----------
Initial Purchaser pursuant to the Restructuring Agreement.
Issuers: See the introductory paragraph to this Agreement.
-------
Lien: See the Indenture.
----
NASD: See Section 5(t).
----
Notes: See the second introductory paragraph to this Agreement.
-----
<PAGE>
-3-
Participant: See Section 7(a).
-----------
Participating Broker-Dealer: See Section 2(b).
---------------------------
Person: An individual, corporation, limited liability company,
------
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
Private Exchange: See Section 2(b).
----------------
Private Exchange Notes: See Section 2(b).
----------------------
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any portion
of the Registrable Notes covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Records: See Section 5(o).
-------
Registrable Notes: The Notes upon original issuance of the Notes and
-----------------
at all times subsequent thereto and, if issued, the Private Exchange Notes,
until in the case of any such Notes or any such Private Exchange Notes, as the
case may be, (i) a Registration Statement covering such Notes or such Private
Exchange Notes has been declared effective by the SEC and such Notes or such
Private Exchange Notes, as the case may be, have been disposed of in accordance
with such effective Registration Statement, (ii) such Notes or such Private
Exchange Notes, as the case may be, are sold in compliance with Rule 144, (iii)
in the case of any Note, such Note has been exchanged for an Exchange Note or
Exchange Notes pursuant to an Exchange Offer or (iv) such Notes or such Private
Exchange Notes, as the case may be, cease to be outstanding.
<PAGE>
-4-
Registration Default: See Section 4(a).
--------------------
Registration Statement: Any registration statement of the Issuers and
----------------------
the Guarantor, including, but not limited to, the Exchange Registration
Statement, which covers any of the Registrable Notes pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Restructuring Agreement: See the second introductory paragraph to
-----------------------
this Agreement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
------------
<PAGE>
-5-
Shelf Registration: See Section 3(b).
------------------
Subsequent Shelf Registration: See Section 3(b).
-----------------------------
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee: The trustee under the Indenture and, if existent, the
-------
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Issuers and the Guarantor are sold to an underwriter(s)
for reoffering to the public.
2. Exchange Offer
-- --------------
(a) Each of the Guarantor and the Issuers agrees to use its
reasonable best efforts to file with the SEC as soon as practicable after
the Closing, but in no event later than the Filing Date, an offer to
exchange (the "Exchange Offer") any and all of the Registrable Notes (other
than the Private Exchange Notes, if any) for a like aggregate principal
amount of debt securities of the Issuers which are identical to the Notes
(the "Exchange Notes") (and which are entitled to the benefits of the
Indenture or a trust indenture which is substantially identical to the
Indenture in all material respects (other than such changes to the
Indenture or any such identical trust indenture as are necessary to comply
with any requirements of the SEC to effect or maintain the qualification
thereof under the TIA) and which, in either case, has been qualified under
the TIA), except that the Exchange Notes (other than the Private Exchange
Notes, if any) shall have been registered pursuant to an effective
Registration Statement under the Securities Act and will not contain terms
with respect to transfer restrictions. The Exchange Offer will be
registered under the Securities Act on the appropriate form (the "Exchange
Registration Statement") and will comply with all applicable tender offer
rules and regulations under the Exchange Act. Each of the Guarantor and the
Issuers agrees to use its reasonable best efforts to (x) cause the Exchange
Registration Statement to become effective under the Securities Act on or
before the Effectiveness Date; (y)
<PAGE>
-6-
keep the Exchange Offer open for at least 20 business days (or longer if
required by applicable law) after the date that notice of the Exchange Offer is
mailed to Holders; and (z) consummate the Exchange Offer on or prior to the
180th day following the Issue Date. If after such Exchange Registration
Statement is initially declared effective by the SEC, the Exchange Offer or the
issuance of the Exchange Notes thereunder is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Exchange Registration Statement shall be deemed not to
have become effective for purposes of this Agreement. Each Holder who
participates in the Exchange Offer will be required to represent that any
Exchange Notes received by it will be acquired in the ordinary course of its
business, that at the time of the consummation of the Exchange Offer such Holder
will have no arrangement or understanding with any Person to participate in the
distribution of the Exchange Notes in violation of the provisions of the
Securities Act, that such Holder is not an affiliate of any of the Issuers, the
Guarantor or their subsidiaries within the meaning of Rule 405 promulgated under
the Securities Act or if it is such an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act, to the
extent applicable and that it is not acting on behalf of any Person who could
not truthfully make the foregoing representations. Upon consummation of the
Exchange Offer in accordance with this Section 2, the provisions of this
Agreement shall continue to apply, mutatis mutandis, solely with respect to
------- --------
Registrable Notes that are Private Exchange Notes and Exchange Notes held by
Participating Broker-Dealers, and the Issuers and the Guarantor shall have no
further obligation to register Registrable Notes (other than Private Exchange
Notes and Exchange Notes held by Participating Broker-Dealers) pursuant to
Section 3 of this Agreement.
(b) The Issuers and the Guarantor shall include within the Prospectus
contained in the Exchange Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchaser, which shall
contain a summary statement of the positions taken or policies made by the staff
of the SEC with respect to the potential "underwriter" status of any
<PAGE>
-7-
broker-dealer that is the beneficial owner (as defined in Rule 13d-3
promulgated under the Exchange Act) of Exchange Notes received by such
broker-dealer in the Exchange Offer (a "Participating Broker-Dealer"),
whether such positions or policies have been publicly disseminated by the
staff of the SEC or such positions or policies, in the reasonable judgment
of the Initial Purchaser, represent the prevailing views of the staff of the
SEC. Such "Plan of Distribution" section shall also allow the use of the
Prospectus by all Persons subject to the prospectus delivery requirements of
the Securities Act, including all Participating Broker-Dealers, and include
a statement describing the means by which Participating Broker-Dealers may
resell the Exchange Notes.
Each of the Guarantor and the Issuers shall use its reasonable best
efforts to keep the Exchange Registration Statement effective and to amend and
supplement the Prospectus contained therein, in order to permit such Prospectus
to be lawfully delivered by all Persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such Persons must
comply with such requirements in order to resell the Exchange Notes, provided
--------
that such period shall not exceed 180 days (or such longer period if extended
pursuant to the last paragraph of Section 5) (the "Applicable Period").
If, upon consummation of the Exchange Offer, the Initial Purchaser
holds any Notes acquired by it and having, or which are reasonably likely to be
determined to have, the status as an unsold allotment in the initial
distribution, the Issuers and the Guarantor upon the request of the Initial
Purchaser shall, simultaneously with the delivery of the Exchange Notes in the
Exchange Offer, issue and deliver to the Initial Purchaser, in exchange (the
"Private Exchange") for the Notes held by the Initial Purchaser, a like
principal amount of debt securities of the Issuers that are identical in all
material respects to the Exchange Notes (the "Private Exchange Notes") (and
which are issued pursuant to the same indenture as the Exchange Notes) except
for the placement of a restrictive legend on the Private Exchange Notes. If
possible, the Private Exchange Notes shall bear the same CUSIP number as the
Exchange Notes. Interest on the Exchange Notes and Private Exchange Notes will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor
<PAGE>
-8-
or, if no interest has been paid on the Notes, from the Issue Date.
In connection with the Exchange Offer, the Issuers and the Guarantor
shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Registration Statement, together with an appropriate letter of
transmittal and related documents;
(ii) utilize the services of a depositary for the Exchange Offer with an
address in the Borough of Manhattan, The City of New York which may be the
Trustee or an affiliate thereof; and
(iii) permit Holders to withdraw tendered Notes at any time prior to the
close of business, New York time, on the last business day on which the
Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Issuers and the Guarantor shall:
(i) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
(ii) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(iii) cause the Trustee to authenticate and deliver promptly to each Holder
of Notes, Exchange Notes or Private Exchange Notes, as the case may be,
equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Notes and the Private Exchange Notes may be issued under
(i) the Indenture or (ii) an indenture substantially identical to the Indenture,
which in either event will provide that (1) the Exchange Notes will not be
subject to the transfer restrictions set forth in the Indenture and (2) the
Private Exchange Notes will be subject to the transfer restrictions set forth in
the Indenture. The Indenture or such
<PAGE>
-9-
indenture shall provide that the Exchange Notes, the Private Exchange Notes and
the Notes will vote and consent together on all matters as one class and that
neither the Exchange Notes, the Private Exchange Notes nor the Notes will have
the right to vote or consent as a separate class on any matter.
(a) If (1) prior to the consummation of the Exchange Offer, the
Issuers and the Guarantor or Holders of at least a majority in aggregate
principal amount of the Registrable Notes reasonably determine in good
faith that (i) the Exchange Notes would not, upon receipt, be tradeable by
such Holders which are not affiliates (within the meaning of the Securities
Act) of the Issuers and the Guarantor without restriction under the
Securities Act and without restrictions under applicable state securities
laws, (ii) the interests of the Holders under this Agreement would be
adversely affected by the consummation of the Exchange Offer or (iii) after
conferring with counsel, the SEC is unlikely to permit the commencement of
the Exchange Offer prior to the Effectiveness Date, (2) subsequent to the
consummation of the Private Exchange, any holder of the Private Exchange
Notes so requests or (3) the Exchange Offer is commenced and not
consummated within 180 days of the Issue Date, then the Issuers and the
Guarantor shall promptly deliver to the Holders and the Trustee written
notice thereof (the "Shelf Notice") and shall file an Initial Shelf
Registration pursuant to Section 3. Following the delivery of a Shelf
Notice to the Holders of Registrable Notes (in the circumstances
contemplated by clauses (1) and (3) of the preceding sentence), the Issuers
and the Guarantor shall not have any further obligation to conduct the
Exchange Offer or the Private Exchange under this Section 2.
(b) As a condition to its participation in the Exchange Offer
pursuant to the terms of this Agreement, each Holder represents and
warrants to the Issuers and the Guarantor that, (A) it is not an affiliate
of the Issuers and the Guarantor, (B) it is not engaged in, and does not
intend to engage in, and has no arrangement or understanding with any
Person to participate in, a distribution of the Exchange Notes to be issued
in the Exchange Offer, and (C) it is acquiring the Exchange Notes in its
ordinary course of business. Each Holder hereby acknowledges and agrees
that any Participating Broker-
<PAGE>
-10-
Dealer and any Holder using the Exchange Offer to participate in a
distribution of Exchange Notes (1) could not under SEC policy as in effect
on the date of this Agreement rely on the position of the SEC enunciated in
Morgan Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital
--------------------------- -------------
Holdings Corporation (available May 13, 1988), as interpreted in the SEC's
--------------------
letter to Shearman & Sterling dated July 2, 1993, and similar no-action
letters, and (2) must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale
transaction and that such a secondary resale transaction must be covered by
an effective registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation S-K
if the resales are of Notes obtained by such Holder in exchange for Notes
acquired by such Holder directly from the Issuers and the Guarantor or an
affiliate thereof.
1. Shelf Registration
-- ------------------
If a Shelf Notice is delivered as contemplated by Section 2(c), then:
(a) Initial Shelf Registration. The Issuers and the Guarantor
--- --------------------------
shall prepare and file with the SEC a Registration Statement for an
offering to be made on a continuous basis pursuant to Rule 415 covering all
of the Registrable Notes (the "Initial Shelf Registration"). If the Issuers
and the Guarantor shall have not yet filed an Exchange Registration
Statement, the Issuers and the Guarantor shall use their best efforts to
file with the SEC the Initial Shelf Registration on or prior to the Filing
Date. In any other instance, the Issuers and the Guarantor shall use their
reasonable best efforts to file with the SEC the Initial Shelf Registration
within 30 days of the delivery of the Shelf Notice. The Initial Shelf
Registration shall be on Form S-1 or another appropriate form permitting
registration of such Registrable Notes for resale by such Holders in the
manner or manners designated by them (including, without limitation, one or
more underwritten offerings). The Issuers and the Guarantor shall not
permit any securities other than the Registrable Notes to be included in
the Initial Shelf Registration or any Subsequent Shelf Registration (as
defined below). The
<PAGE>
-11-
Issuers and the Guarantor shall use their reasonable best efforts to cause
the Initial Shelf Registration to be declared effective under the
Securities Act, if an Exchange Registration Statement has not yet been
declared effective, on or prior to the Effectiveness Date, or, in any other
instance, as soon as practicable thereafter and in no event later than 45
days after filing of the Initial Shelf Registration, and to keep the
Initial Shelf Registration continuously effective under the Securities Act
until the date which is 24 months from the date on which such Initial Shelf
Registration is declared effective (subject to extension pursuant to the
last paragraph of Section 5 hereof), or such shorter period ending when (i)
all Registrable Notes covered by the Initial Shelf Registration have been
sold in the manner set forth and as contemplated in the Initial Shelf
Registration or (ii) a Subsequent Shelf Registration covering all of the
Registrable Notes has been declared effective under the Securities Act (the
"Effectiveness Period").
(b) Subsequent Shelf Registrations. If the Initial Shelf Registration
--- ------------------------------
or any Subsequent Shelf Registration ceases to be effective for any reason
at any time during the Effectiveness Period (other than because of the sale
of all the securities registered thereunder), the Issuers and the Guarantor
shall use their reasonable best efforts to obtain the prompt withdrawal of
any order suspending the effectiveness thereof, and in any event shall
within 45 days of such cessation of effectiveness amend the Shelf
Registration in a manner reasonably expected to obtain the withdrawal of
the order suspending the effectiveness thereof, or file an additional
"shelf" Registration Statement pursuant to Rule 415 covering all of the
Registrable Notes (a "Subsequent Shelf Registration"). If a Subsequent
Shelf Registration is filed, the Issuers and the Guarantor shall use their
reasonable best efforts to cause the Subsequent Shelf Registration to be
declared effective as soon as practicable after such filing and to keep
such Registration Statement continuously effective for a period equal to
the number of days in the Effectiveness Period less the aggregate number of
days during which the Initial Shelf Registration or any Subsequent Shelf
Registration was previously continuously effective. As used herein the
<PAGE>
-12-
term "Shelf Registration" means the Initial Shelf Registration and any
Subsequent Shelf Registration.
(c) Supplements and Amendments. The Issuers and the Guarantor shall
--- --------------------------
promptly supplement and amend the Shelf Registration if required by the
rules, regulations or instructions applicable to the registration form used
for such Shelf Registration, if required by the Securities Act, or if
requested by the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement or by any
underwriter(s) of such Registrable Notes.
2. Additional Interest
-- -------------------
(a) The Issuers, the Guarantor and the Initial Purchaser agree that
the Holders of Registrable Notes will suffer damages if the Issuers and the
Guarantor fail to fulfill their obligations under Section 2 or Section 3
hereof and that it would not be feasible to ascertain the extent of such
damages with precision. Accordingly, the Issuers and the Guarantor agree to
pay additional interest on the Notes ("Additional Interest") under the
circumstances and to the extent set forth below:
(i) if the Exchange Registration Statement has not been filed on or prior
to the Filing Date;
(ii) if the Exchange Registration Statement has not been declared
effective on or prior to the Effectiveness Date;
(iii) if an Initial Shelf Registration required by Section 2(c) has not
been filed on or prior to the date required by Section 3(a);
(iv) if an Initial Shelf Registration required by Section 2(c) has not
been declared effective on or prior to the date required by Section 3(a);
and/or
(v) if (A) the Issuers have not exchanged the Exchange Notes for all
Notes validly tendered in accordance with the terms of the Exchange Offer
on or prior to 180 days after the Issue Date or (B) the Exchange
Registration Statement ceases to be effective at any time prior to the time
that the Exchange Offer is consummated or (C) if
<PAGE>
-13-
applicable, the Shelf Registration has been declared effective and such
Shelf Registration ceases to be effective at any time during the
Effectiveness Period;
(each such event referred to in clauses (i) through (v) above is a "Registration
Default"), the sole remedy available to Holders of the Notes will be the
immediate accrual of Additional Interest as follows: the per annum interest
rate on the Notes will increase by 50 basis points during the first 90-day
period following the occurrence of a Registration Default and until it is waived
or cured; and the per annum interest rate will increase by an additional 25
basis points for each subsequent 90-day period during which the Registration
Default remains uncured, up to a maximum additional interest rate of 200 basis
points per annum, provided, however, that only Holders of Private Exchange Notes
-------- -------
shall be entitled to receive Additional Interest as a result of a Registration
Default pursuant to clause (iii) or (iv), provided, further, that (1) upon the
-------- -------
filing of the Exchange Registration Statement or the Initial Shelf Registration
(in the case of (i) above), (2) upon the effectiveness of the Exchange
Registration Statement or a Shelf Registration (in the case of (ii) above), (3)
upon the filing of the Shelf Registration (in the case of (iii) above), (4) upon
the effectiveness of the Shelf Registration (in the case of (iv) above), or (5)
upon the exchange of Exchange Notes for all Notes tendered (in the case of
(v)(A) above), or upon the effectiveness of the Exchange Registration Statement
which had ceased to remain effective (in the case of (v)(B) above), or upon the
effectiveness of the Shelf Registration which had ceased to remain effective (in
the case of (v)(C) above), Additional Interest on the Notes as a result of such
clause (i), (ii), (iii), (iv) or (v) (or the relevant subclause thereof), as the
case may be, shall cease to accrue and the interest rate on the Notes will
revert to the interest rate originally borne by the Notes.
(b) The Issuers and the Guarantor shall notify the Trustee within
one business day after each and every date on which an event occurs in
respect of which Additional Interest is required to be paid (an "Event
Date"). Any amounts of Additional Interest due pursuant to (a) of this
Section 4 will be payable in cash semi-annually on each February 15 and
August 15 (to the Holders of record on the February 1 and August 1
immediately preceding such dates), commencing with the first such date
<PAGE>
-14-
occurring after any such Additional Interest commences to accrue and until
such Registration Default is cured, by depositing with the Trustee, in
trust for the benefit of such Holders, immediately available funds in sums
sufficient to pay such Additional Interest. The amount of Additional
Interest will be determined by multiplying the applicable Additional
Interest rate by the principal amount of the Registrable Notes, multiplied
by a fraction, the numerator of which is the number of days such Additional
Interest rate was applicable during such period (determined on the basis of
a 360-day year comprised of twelve 30-day months and, in the case of a
partial month, the actual number of days elapsed), and the denominator of
which is 360.
3. Registration Procedures
- -- -----------------------
In connection with the filing of any Registration Statement pursuant to
Section 2 or 3 hereof, the Issuers and the Guarantor shall effect such
registrations to permit the sale of the securities covered thereby in accordance
with the intended method or methods of disposition thereof, and pursuant thereto
the Issuers and the Guarantor shall:
(a) Prepare and file with the SEC, prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by Section
2 or 3, and use their reasonable best efforts to cause each such
Registration Statement to become effective and remain effective as provided
herein, provided that, if (1) such filing is pursuant to Section 3, or (2)
--------
a Prospectus contained in an Exchange Registration Statement filed pursuant
to Section 2 is required to be delivered under the Securities Act by any
Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, before filing any Registration Statement or Prospectus
or any amendments or supplements thereto, the Issuers and the Guarantor
shall, if requested, furnish to and afford the Holders of the Registrable
Notes covered by such Registration Statement and each such Participating
Broker-Dealer, as the case may be, their counsel and the managing
underwriter(s), if any, a reasonable opportunity to review copies of all
such documents (including copies of any documents to be incorporated by
reference therein and all exhibits thereto) proposed to be filed (at least
5 business days
<PAGE>
-15-
prior to such filing). The Issuers and the Guarantor shall not file any
Registration Statement or Prospectus or any amendments or supplements
thereto in respect of which the Holders must be afforded an opportunity to
review prior to the filing of such document, if the Holders of a majority
in aggregate principal amount of the Registrable Notes covered by such
Registration Statement, or such Participating Broker-Dealer, as the case
may be, their counsel, or the managing underwriter(s), if any, shall
reasonably object.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Registration Statement,
as the case may be, as may be necessary to keep such Registration Statement
continuously effective for the Effectiveness Period or the Applicable
Period, as the case may be; cause the related Prospectus to be supplemented
by any prospectus supplement required by applicable law, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provisions
then in force) under the Securities Act; and comply with the provisions of
both the Securities Act and the Exchange Act, and the rules and regulations
of the SEC thereunder, applicable to them with respect to the disposition
of all securities covered by such Registration Statement as so amended or
in such Prospectus as so supplemented and with respect to the subsequent
resale of any securities being sold by a Participating Broker-Dealer
covered by any such Prospectus; the Issuers and the Guarantor shall be
deemed not to have used their reasonable best efforts to keep a
Registration Statement effective during the Applicable Period if any of
them voluntarily takes any action that would result in selling Holders of
the Registrable Notes covered thereby or Participating Broker-Dealers
seeking to sell Exchange Notes not being able to sell such Registrable
Notes or such Exchange Notes during that period unless such action is
required by applicable law or unless the Issuers and the Guarantor comply
with this Agreement, including without limitation, the provisions of clause
5(c)(v) below.
(c) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section
<PAGE>
-16-
2 is required to be delivered under the Securities Act by any Participating
Broker-Dealer who seeks to sell Exchange Notes during the Applicable
Period, notify the selling Holders of Registrable Notes, or each such
Participating Broker-Dealer, as the case may be, their counsel and the
managing underwriter(s), if any, promptly (but in any event within two
business days), and confirm such notice in writing, (i) when a Prospectus
or any prospectus supplement or post-effective amendment thereto has been
filed, and, with respect to a Registration Statement or any post-effective
amendment thereto, when the same has become effective under the Securities
Act (including in such notice a written statement that any Holder may, upon
request, obtain, without charge, one conformed copy of such Registration
Statement or post-effective amendment thereto including financial
statements and schedules, documents incorporated or deemed to be
incorporated by reference and exhibits), (ii) of the issuance by the SEC of
any stop order suspending the effectiveness of a Registration Statement or
of any order preventing or suspending the use of any preliminary Prospectus
or the initiation of any proceedings for that purpose, (iii) if at any time
when a Prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Notes or resales of Exchange Notes
by Participating Broker-Dealers the representations and warranties of the
Issuers and the Guarantor contained in any agreement (including any
underwriting agreement) contemplated by Section 5(n) below cease to be true
and correct, (iv) of the receipt by the Issuers and the Guarantor of any
notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose, (v) of the happening of any
event or any information becoming known that makes any statement made in
such Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in
any material respect or that requires the making of any changes in, or
amendments or supplements to, such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and that in the case of the Prospectus,
it will not contain any untrue
<PAGE>
-17-
statement of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading, and that in the case of the Prospectus, it will not contain any
untrue, statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
and (vi) of the Issuers' and the Guarantor's reasonable determination that
a post-effective amendment to a Registration Statement would be
appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, use their reasonable best efforts to prevent the
issuance of any order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of a Prospectus
or suspending the qualification (or exemption from qualification) of any of
the Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer, for sale in any jurisdiction, and, if any such order is
issued, to use their reasonable best efforts to obtain the withdrawal of
any such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and if
requested by the managing underwriter(s), if any, or the Holders of a
majority in aggregate principal amount of the Registrable Notes being sold
in connection with an underwritten offering, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment such information as the
managing underwriter(s), if any, or such Holders reasonably request to be
included therein and (ii) make all required filings of such Prospectus
supplement or such post-effective amendment as soon as practicable after
the Issuers and the Guarantor have received notification of the matters to
be incorporated in such Prospectus supplement or post-effective amendment.
<PAGE>
-18-
(f) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, furnish to each selling Holder of Registrable Notes
who so requests and to each such Participating Broker-Dealer who so
requests and to counsel and the managing underwriter(s), if any, without
charge, one conformed copy of the Registration Statement or Registration
Statements and each post-effective amendment thereto, including financial
statements and schedules, and, if requested, all documents incorporated or
deemed to be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, deliver to each selling Holder of Registrable Notes,
or each such Participating Broker-Dealer, as the case may be, their
counsel, and the managing underwriter or underwriters, if any, without
charge, as many copies of the Prospectus or Prospectuses (including each
form of preliminary Prospectus) and each amendment or supplement thereto
and any documents incorporated by reference therein as such Persons may
reasonably request; and, subject to the last paragraph of this Section 5,
the Issuers and the Guarantor hereby consent to the use of such Prospectus
and each amendment or supplement thereto by each of the selling Holders of
Registrable Notes or each such Participating Broker-Dealer, as the case may
be, and the managing underwriter or underwriters or agents, if any, and
dealers (if any), in connection with the offering and sale of the
Registrable Notes covered by, or the sale by Participating Broker-Dealers
of the Exchange Notes pursuant to, such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Registration Statement
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the
<PAGE>
-19-
Applicable Period, to use their reasonable best efforts to register or
qualify, and to cooperate with the selling Holders of Registrable Notes or
each such Participating Broker-Dealer, as the case may be, the managing
underwriter or underwriters, if any, and their respective counsel in
connection with the registration or qualification of (or exemption from
such registration or qualification), such Registrable Notes for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any selling Holder, Participating Broker-Dealer, or the
managing underwriter or underwriters, if any, reasonably request in
writing, provided that where Exchange Notes held by Participating Broker-
--------
Dealers or Registrable Notes are offered other than through an underwritten
offering, the Issuers and the Guarantor agree to cause their counsel to
perform Blue Sky investigations and file registrations and qualifications
required to be filed pursuant to this Section 5(h); keep each such
registration or qualification (or exemption therefrom) effective during the
period such Registration Statement is required to be kept effective and do
any and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Exchange Notes held by
Participating Broker-Dealers or the Registrable Notes covered by the
applicable Registration Statement; provided that the Issuers and the
--------
Guarantor shall not be required to (A) qualify generally to do business in
any jurisdiction where it is not then so qualified, (B) take any action
that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold,
which certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
reasonably request.
<PAGE>
-20-
(j) Use their reasonable best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the managing underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Notes, except as may be required solely as a consequence of the nature of
such selling Holder's business, in which case the Issuers and the Guarantor
will cooperate in all reasonable respects with the filing of such
Registration Statement and the granting of such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, upon the occurrence of any event contemplated by
paragraph 5(c)(v) or 5(c)(vi), as promptly as reasonably practicable
prepare and (subject to Section 5(a)) file with the SEC, at the expense of
the Issuers and the Guarantor, a supplement or post-effective amendment to
the Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Notes being sold thereunder or to the
purchasers of the Exchange Notes to whom such Prospectus will be delivered
by a Participating Broker-Dealer, any such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
(l) Use their reasonable best efforts to cause the Registrable Notes
covered by a Registration Statement or the Exchange Notes, as the case may
be, to be rated with the appropriate rating agencies, if so requested by
the Holders of a majority in aggregate principal amount of Registrable
Notes covered by such Registration Statement or the Exchange Notes, as the
case may be, or the managing underwriter or underwriters, if any.
<PAGE>
-21-
(m) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes or Exchange Notes, as the case may
be, in a form eligible for deposit with The Depository Trust Company and
(ii) provide a CUSIP number for the Registrable Notes or Exchange Notes, as
the case may be.
(n) In connection with an underwritten offering of Registrable Notes
pursuant to a Shelf Registration, enter into an underwriting agreement as
is customary in underwritten offerings of debt securities similar to the
Notes and take all such other actions as are reasonably requested by the
managing underwriter(s), if any, in order to expedite or facilitate the
registration or the disposition of such Registrable Notes, and in such
connection, (i) to the extent possible, make such representations and
warranties to the managing underwriter or underwriters on behalf of any
underwriters, with respect to the business of the Issuers, the Guarantor
and their subsidiaries and the Registration Statement, Prospectus and
documents, if any, incorporated or deemed to be incorporated by reference
therein, in each case, as are customarily made by issuers to underwriters
in underwritten offerings of debt securities similar to the Notes, and
confirm the same if and when requested; (ii) obtain opinions of counsel to
the Issuers and the Guarantor and updates thereof in form and substance
reasonably satisfactory to the managing underwriter or underwriters,
addressed to the managing underwriter or underwriters covering the matters
customarily covered in opinions requested in underwritten offerings of debt
securities similar to the Notes and such other matters as may be reasonably
requested by the managing underwriter(s); (iii) obtain "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory
to the managing underwriter or underwriters from the independent certified
public accountants of the Issuers and the Guarantor (and, if necessary, any
other independent certified public accountants of any subsidiary of any of
the Issuers and the Guarantor or of any business acquired by the Issuers or
the Guarantor for which financial statements and financial data are, or are
required to be, included in the Registration Statement), addressed to the
managing underwriter or underwriters on
<PAGE>
-22-
behalf of any underwriters, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters
in connection with underwritten offerings of debt securities similar to the
Notes and such other matters as may be reasonably requested by the managing
underwriter or underwriters; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable than those set forth in Section 7 hereof (or
such other provisions and procedures acceptable to Holders of a majority in
aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section. The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section 3, or
(2) a Prospectus contained in an Exchange Registration Statement filed
pursuant to Section 2 is required to be delivered under the Securities Act
by any Participating Broker-Dealer who seeks to sell Exchange Notes during
the Applicable Period, make available for inspection by any selling Holder
of such Registrable Notes being sold, or each such Participating Broker-
Dealer, as the case may be, the managing underwriter or underwriters
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by any such selling Holder or
each such Participating Broker-Dealer, as the case may be (collectively,
the "Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Issuers, the Guarantor and their respective
subsidiaries (collectively, the "Records") as shall be reasonably necessary
to enable them to exercise any applicable due diligence responsibilities,
and cause the officers, directors and employees of the Issuers, the
Guarantor and their respective subsidiaries to supply all information in
each case reasonably requested by any such Inspector in connection with
such Registration Statement. Records which the Issuers and the Guarantor
determine, in good faith, to be confidential and any Records which they
notify the Inspectors are confidential shall not be
<PAGE>
-23-
disclosed by the Inspectors unless (i) the disclosure of such Records is
necessary to avoid or correct a material misstatement or material omission
in such Registration Statement, (ii) the release of such Records is ordered
pursuant to a subpoena or other order from a court of competent
jurisdiction or (iii) the information in such Records has been made
generally available to the public. Each selling Holder of such Registrable
Notes and each such Participating Broker-Dealer or underwriter will be
required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Issuers and the
Guarantor or for any purpose other than in connection with such
Registration Statement unless and until such is made generally available to
the public. Each selling Holder of such Registrable Notes and each such
Participating Broker-Dealer will be required to further agree that it will,
upon learning that disclosure of such Records is sought in a court of
competent jurisdiction, give prompt notice to the Issuers and the Guarantor
and allow the Issuers and the Guarantor to undertake appropriate action to
prevent disclosure of the Records deemed confidential at their expense.
(p) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a), as the case may be, to be qualified
under the TIA not later than the effective date of the Exchange
Registration Statement or the first Registration Statement relating to the
Registrable Notes; and in connection therewith, cooperate with the trustee
under any such indenture and the Holders of the Registrable Notes, to
effect such changes to such indenture as may be required for such indenture
to be so qualified in accordance with the terms of the TIA; and execute,
and use their reasonable best efforts to cause such trustee to execute, all
documents as may be required to effect such changes, and all other forms
and documents required to be filed with the SEC to enable such indenture to
be so qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the SEC and
make generally available to its
<PAGE>
-24-
securityholders earnings statements satisfying the provisions of Section
11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the end
of any 12-month period (or 90 days after the end of any 12-month period if
such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Notes are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold to
underwriters in such an offering, commencing on the first day of the first
fiscal quarter of the Issuers and the Guarantor after the effective date of
a Registration Statement, which statements shall cover said 12-month
periods.
(r) Upon consummation of an Exchange Offer or a Private Exchange,
obtain an opinion or opinions of counsel to the Issuers and the Guarantor,
in a form customary for underwritten offerings of debt securities similar
to the Notes, addressed to the Trustee for the benefit of all Holders of
Registrable Notes participating in the Exchange Offer or the Private
Exchange, as the case may be, and which includes an opinion that (i) the
Issuers and the Guarantor have duly authorized, executed and delivered the
Exchange Notes and Private Exchange Notes and the related indenture and
(ii) each of the Exchange Notes or the Private Exchange Notes, as the case
may be, and related indenture constitutes a legal, valid and binding
obligation of the Issuers and the Guarantor, enforceable against the
Issuers and the Guarantor in accordance with its respective terms (with
customary exceptions).
(s) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Issuers and the
Guarantor (or to such other Person as directed by the Issuers and the
Guarantor) in exchange for the Exchange Notes or the Private Exchange
Notes, as the case may be, the Issuers and the Guarantor shall mark, or
cause to be marked, on such Registrable Notes that such Registrable Notes
are being canceled in exchange for the Exchange Notes or the Private
Exchange Notes, as the case may be; and, in no event shall such Registrable
Notes be marked as paid or otherwise satisfied.
<PAGE>
-25-
(t) Cooperate with each seller of Registrable Notes covered by any
Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc. (the "NASD").
(u) Use their reasonable best efforts to take all other reasonable
steps necessary to effect the registration of the Registrable Notes covered
by a Registration Statement contemplated hereby.
The Issuers and the Guarantor may require each seller of Registrable
Notes or Participating Broker-Dealer as to which any registration is being
effected to furnish to the Issuers and the Guarantor such information regarding
such seller or Participating Broker-Dealer and the distribution of such
Registrable Notes or Exchange Notes to be sold by such Participating Broker-
Dealer, as the case may be, as the Issuers and the Guarantor may, from time to
time, reasonably request. The Issuers and the Guarantor may exclude from such
registration the Registrable Notes of any seller or Participating Broker-Dealer
who unreasonably fails to furnish such information within a reasonable time
after receiving such request. Each seller as to which any Shelf Registration is
being effected agrees to furnish promptly to the Issuers and the Guarantor all
information required to be disclosed in order to make the information previously
furnished to the Issuers and the Guarantor by such seller not materially
misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon receipt of any
notice from the Issuers and the Guarantor of the happening of any event of the
kind described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi) hereof, such
Holder will forthwith discontinue disposition of such Registrable Notes covered
by such Registration Statement or Prospectus or Exchange Notes to be sold by
such Holder or Participating Broker-Dealer, as the case may be, until such
Holder's or Participating Broker-Dealer's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(k), or until it is
advised in writing (the "Advice") by the
<PAGE>
-26-
Issuers and the Guarantor that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto. In
the event the Issuers and the Guarantor shall give any such notice, each of the
Effectiveness Period and the Applicable Period shall be extended by the number
of days during such periods from and including the date of the giving of such
notice to and including the date when each seller of Registrable Notes covered
by such Registration Statement or Exchange Notes to be sold by such Holder or
Participating Broker-Dealer, as the case may be, shall have received (x) the
copies of the supplemented or amended Prospectus contemplated by Section 5(k) or
(y) the Advice.
4. Registration Expenses
-- ---------------------
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Issuers and the Guarantor shall be
borne by the Issuers and the Guarantor, whether or not the Exchange Offer
or a Shelf Registration is filed or becomes effective, including, without
limitation, (i) all registration and filing fees (including, without
limitation, (A) fees with respect to filings required to be made with the
NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of counsel in connection with
Blue Sky qualifications of the Registrable Notes or Exchange Notes and
determination of the eligibility of the Registrable Notes or Exchange Notes
for investment under the laws of such jurisdictions in the United States
(x) where the Holders of Registrable Notes are located, in the case of the
Exchange Notes, or (y) as provided in Section 5(h), in the case of
Registrable Notes or Exchange Notes to be sold by a Participating Broker-
Dealer during the Applicable Period)), (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable Notes
or Exchange Notes in a form eligible for deposit with The Depository Trust
Company and of printing Prospectuses if the printing of Prospectuses is
reasonably requested by the managing underwriter or underwriters, if any,
or, in respect of Registrable Notes or Exchange Notes to be sold by any
Participating Broker-Dealer during the Applicable Period, by the Holders of
a majority in
<PAGE>
-27-
aggregate principal amount of the Registrable Notes included in any
Registration Statement or of such Exchange Notes, as the case may be),
(iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Issuers and the Guarantor and fees and
disbursements of one special counsel for the sellers of Registrable Notes
(subject to the provisions of Section 6(b)), (v) fees and disbursements of
all independent certified public accountants referred to in Section
5(n)(iii) (including, without limitation, the expenses of any special audit
and "cold comfort" letters required by or incident to such performance, but
excluding fees and expenses of counsel to the underwriters (other than fees
and expenses set forth in clause (i) above) or the Holders), (vi) rating
agency fees, (vii) Securities Act liability insurance, if the Issuers and
the Guarantor desire such insurance, (viii) fees and expenses of the
Trustee, (ix) fees and expenses of all other Persons retained by the
Issuers and the Guarantor, (x) internal expenses of the Issuers and the
Guarantor (including, without limitation, all salaries and expenses of
officers and employees of the Issuers and the Guarantor performing legal or
accounting duties), (xi) the expense of any annual audit, (xii) the fees
and expenses incurred in connection with any listing of the securities to
be registered on any securities exchange, (xiii) the fees and disbursements
of underwriters, if any, customarily paid by issuers or sellers of
securities (but not including any underwriting discounts or commissions or
transfer taxes, if any, attributable to the sale of the Registrable Notes
which discounts, commissions or taxes shall be paid by Holders or such
Registrable Notes) and (xiv) the expenses relating to printing, word
processing and distributing all Registration Statements, underwriting
agreements, securities sales agreements, indentures and any other documents
necessary in order to comply with this Agreement.
(b) In connection with any Shelf Registration hereunder, the Issuers
and the Guarantor shall reimburse the Holders of the Registrable Notes
being registered in such registration for the reasonable fees and
disbursements of not more than one counsel (in addition to appropriate
local counsel) chosen by the Holders of a majority in aggregate principal
amount of the Registrable
<PAGE>
-28-
Notes to be included in such Registration Statement and other reasonable
out-of-pocket expenses of the Holders of Registrable Notes incurred in
connection with the registration of the Registrable Notes. The Issuers and
the Guarantor shall not have any obligation to pay any underwriting fees,
discounts or commissions attributable to the sale of Registrable
Securities.
5. Indemnification
-- ---------------
(a) The Guarantor and each of the Issuers, jointly and severally,
agree to indemnify and hold harmless each Holder of Registrable Notes and
each Participating Broker-Dealer selling Exchange Notes during the
Applicable Period, the officers and directors of each such Person, and each
Person, if any, who controls any such Person within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a
"Participant"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, the reasonable legal fees and
other expenses actually incurred in connection with any suit, action or
proceeding or any claim asserted) caused by, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement or Prospectus (as amended or
supplemented if the Issuers and the Guarantor shall have furnished any
amendments or supplements thereto) or any preliminary Prospectus, or caused
by, arising out of or based upon any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Participant furnished to the Issuers and the
Guarantor in writing by such Participant expressly for use therein;
provided that the foregoing indemnity with respect to any preliminary
--------
Prospectus shall not inure to the benefit of any Participant (or to the
benefit of an officer or director of such Participant or any Person
controlling such Participant) from whom the Person asserting any such
losses, claims, damages or liabilities purchased
<PAGE>
-29-
Registrable Notes or Exchange Notes if such untrue statement or omission or
alleged untrue statement or omission made in such preliminary Prospectus is
eliminated or remedied in the related Prospectus (as amended or
supplemented if the Issuers and the Guarantor shall have furnished any
amendments or supplements thereto) and a copy of the related Prospectus (as
so amended or supplemented) shall have been furnished to such Participant
at or prior to the sale of such Registrable or Exchange Notes, as the case
may be, to such Person.
(b) Each Participant will be required to agree, severally and not
jointly, to indemnify and hold harmless the Guarantor and each Issuer, their
directors and officers and each Person who controls any of the Issuers or
the Guarantor within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Guarantor and each Issuer to each Participant, but only with
reference to information relating to such Participant furnished to the
Guarantor and each Issuer in writing by such Participant expressly for use
in any Registration Statement or Prospectus, any amendment or supplement
thereto, or any preliminary Prospectus. The liability of any Participant
under this paragraph (b) shall in no event exceed the proceeds received by
such Participant from sales of Registrable Notes or Exchange Notes giving
rise to such obligations.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted
against any Person in respect of which indemnity may be sought pursuant to
either paragraph (a) or (b) of this Section 7, such Person (the "Indemnified
Person") shall promptly notify the Person against whom such indemnity may be
sought (the "Indemnifying Person") in writing, and the Indemnifying Person,
upon request of the Indemnified Person, shall retain one counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person
and any others the Indemnifying Person may reasonably designate in such
proceeding and shall pay the reasonable fees and expenses incurred by such
counsel related to such proceeding. In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but
<PAGE>
-30-
the fees and expenses of such counsel shall be at the expense of such
Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed in writing to the contrary, (ii) the
Indemnifying Person has failed within a reasonable time to retain counsel
reasonably satisfactory to the Indemnified Person or (iii) the named parties
in any such proceeding (including any impleaded parties) include both the
Indemnifying Person and the Indemnified Person and such Indemnified Person
shall have been advised by counsel that there may be one or more legal
defenses available to it which are different from or additional to those
available to any such Indemnifying Person. It is understood that the
Indemnifying Person shall not, in connection with any proceeding or related
proceeding in the same jurisdiction, be liable for the fees and expenses of
more than one separate law firm (in addition to any local counsel) for all
Indemnified Persons, and that all such fees and expenses shall be reimbursed
as they are incurred. Any such separate firm for the Participants and such
control Persons of Participants shall be designated in writing by
Participants who sold a majority in interest of Registrable Notes and
Exchange Notes sold by all such Participants and any such separate firm for
the Issuers, the Guarantor, their respective directors, their respective
officers and such control Persons of the Issuers and the Guarantor shall be
designated in writing by the Issuers and the Guarantor. The Indemnifying
Person shall not be liable for any settlement of any proceeding effected
without its prior written consent, but if settled with such consent or if
there be a final judgment for the plaintiff for which the Indemnified Person
is entitled to indemnification pursuant to this Agreement, the Indemnifying
Person agrees to indemnify any Indemnified Person from and against any loss
or liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have
requested an Indemnifying Person to reimburse the Indemnified Person for
reasonable fees and expenses incurred by counsel as contemplated by the
third sentence of this paragraph, the Indemnifying Person agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 60 days
after receipt by such Indemnifying Person of the aforesaid request and
<PAGE>
-31-
(ii) such Indemnifying Person shall not have reimbursed the Indemnified
Person in accordance with such request prior to the date of such
settlement; provided, however, that the Indemnifying Person shall not be
-------- -------
liable for any settlement effected without its consent pursuant to this
sentence if the Indemnifying Party is contesting, in good faith, the
request for reimbursement. No Indemnifying Person shall, without the prior
written consent of the Indemnified Person, effect any settlement of any
pending or threatened proceeding in respect of which any Indemnified Person
is or could have been a party and indemnity could have been sought
hereunder by such Indemnified Person, unless such settlement includes an
unconditional release of such Indemnified Person from all liability on
claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraphs (a) and (b) of
this Section 7 is unavailable to an Indemnified Person or insufficient in
respect of any losses, claims, damages or liabilities referred to therein,
then each Indemnifying Person under such paragraphs, in lieu of
indemnifying such Indemnified Person thereunder, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such
losses, claims, damages or liabilities in such proportion as is appropriate
to reflect the relative fault of the Issuers and the Guarantor on the one
hand and the Participants on the other in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault of
the Issuers and the Guarantor on the one hand and the Participants on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied
by the Issuers and the Guarantor or by the Participants and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata
--- ----
allocation (even if the
<PAGE>
-32-
Participants were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 7, in no
event shall a Participant be required to contribute any amount in excess of
the amount by which proceeds received by such Participant from sales of
Registrable Notes or Exchange Notes exceeds the amount of any damages that
such Participant has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
6. Rules 144 and 144A
- -- ------------------
The Issuers and the Guarantor covenant that they will file the reports
required to be filed by them under the Securities Act and the Exchange Act and
the rules and regulations adopted by the SEC thereunder in a timely manner and,
if at any time the Issuers and the Guarantor are not required to file such
reports, they will, upon the request of any Holder of Registrable Notes, make
publicly available other information of a like nature so long as necessary to
permit sales pursuant to Rule 144 or Rule 144A. The Issuers and the Guarantor
further covenant that so long as any Registrable Notes remain outstanding to
make available to any Holder of Registrable Notes in connection with any sale
thereof, the information required by Rule 144A(d)(4) under the Securities Act in
order to permit resales of such Registrable Notes
<PAGE>
-33-
pursuant to (a) such Rule 144A, or (b) any similar rule or regulation hereafter
adopted by the SEC.
7. Underwritten Registrations
- -- --------------------------
If any of the Registrable Notes covered by any Shelf Registration are to
be sold in an underwritten offering, the investment banker or investment bankers
and manager or managers that will manage the offering will be selected by the
Holders of a majority in aggregate principal amount of such Registrable Notes
included in such offering and shall be reasonably acceptable to the Issuers and
the Guarantor.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
8. Miscellaneous
- -- -------------
(a) Remedies. In the event of a breach by the Issuers, the
--- --------
Guarantor or their subsidiaries of any of their obligations under this
Agreement, other than the occurrence of an event which requires payment of
Additional Interest, each Holder of Registrable Notes, in addition to being
entitled to exercise all rights provided herein, in the Indenture or, in the
case of the Initial Purchaser, in the Restructuring Agreement or granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Issuers and the Guarantor agree that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach by them of any of the provisions of this Agreement and hereby further
agree, jointly and severally, that, in the event of any action for specific
performance in respect of such breach, they shall waive the defense that a
remedy at law would be adequate.
<PAGE>
-34-
(b) Enforcement. The Trustee shall be authorized to enforce the
--- -----------
provisions of this Agreement for the ratable benefit of the Holders.
(c) No Inconsistent Agreements. The Issuers and the Guarantor
--- --------------------------
have not, as of the date hereof, and the Issuers and the Guarantor shall
not, after the date of this Agreement, enter into any agreement with
respect to any of their securities that is inconsistent with the rights
granted to the Holders of Registrable Notes in this Agreement or otherwise
conflicts with the provisions hereof. The Issuers and the Guarantor have
not entered and will not enter into any agreement with respect to any of
their securities which will grant to any Person piggy-back rights with
respect to a Registration Statement required to be filed under this
Agreement.
(d) Adjustments Affecting Registrable Notes. The Issuers and
--- ---------------------------------------
the Guarantor shall not, directly or indirectly, take any action with
respect to the Registrable Notes as a class that would adversely affect the
ability of the Holders of Registrable Notes to include such Registrable
Notes in a registration undertaken pursuant to this Agreement.
(e) Amendments and Waivers. The provisions of this Agreement,
--- ----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions
hereof may not be given, unless the Issuers and the Guarantor have obtained
the written consent of Holders of at least a majority of the then
outstanding aggregate principal amount of Registrable Notes.
Notwithstanding the foregoing, a waiver or consent to depart from the
provisions hereof with respect to a matter that relates exclusively to the
rights of Holders of Registrable Notes whose securities are being sold
pursuant to a Registration Statement and that does not directly or
indirectly affect, impair, limit or compromise the rights of other Holders
of Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Notes being sold by such
Holders pursuant to such Registration Statement, provided that the
--------
provisions of this sentence may not be amended, modified or supplemented
<PAGE>
-35-
except in accordance with the provisions of the immediately preceding
sentence.
(f) Notices. All notices and other communications (including
--- -------
without limitation any notices or other communications to the Trustee)
provided for or permitted hereunder shall be made in writing by hand-
delivery, registered first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Notes or any Participating Broker-
Dealer, at the most current address given by the Trustee to the Issuers and
the Guarantor; and
(ii) if to the Issuers and the Guarantor, c/o Insight Communications
Company, L.P., 126 E. 56th Street, New York, New York 10022, Attention: Kim
D. Kelly, with a copy to Cooperman Levitt Winikoff Lester & Newman, P.C.,
800 Third Avenue, New York, NY 10027 Attention: Elliot Brecher, Esq. and to
Coaxial Communications, Inc., 5111 Ocean Boulevard, Suite C, Sarasota,
Florida 34242, Attention: Dennis McGillicuddy, with a copy to Dow, Lohnes &
Albertson, PLLC, 1200 New Hampshire Avenue, N.W., Suite 800, Washington,
D.C. 20036-6802, Attention: Timothy J. Kelley, Esq.
All such notices and communications shall be deemed to have been duly
given: (i) when delivered by hand, if personally delivered; (ii) five business
days after being deposited in the mail, postage prepaid, if mailed; (iii) one
business day after being timely delivered to a next-day air courier; and (iv)
when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee under the
Indenture at the address specified in such Indenture.
(g) Successors and Assigns. This Agreement shall inure to the
--- ----------------------
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Notes.
<PAGE>
-36-
(h) Counterparts. This Agreement may be executed in any number
--- ------------
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for
--- --------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
--- -------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED
TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES
TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
(k) Severability. If any term, provision, covenant or
--- ------------
restriction of this Agreement is held by a court of competent jurisdiction
to be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in
full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto shall use their reasonable best efforts
to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction.
(l) Entire Agreement. This Agreement, together with the
--- ----------------
Restructuring Agreement and the Indenture, is intended by the parties as a
final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties
hereto in respect of the subject matter contained herein and therein.
(m) Notes Held by the Issuers, the Guarantor or their
--- -------------------------------------------------
Affiliates. Whenever the consent or approval of Holders of a specified
----------
percentage of Registrable Notes is required hereunder, Registrable Notes
held by the Issuers, the Guarantor or their affiliates (as such term is
defined
<PAGE>
-37-
in Rule 405 under the Securities Act) shall not be counted in determining
whether such consent or approval was given by the Holders of such required
percentage.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Senior Notes
Registration Rights Agreement as of the date first written above.
COAXIAL COMMUNICATIONS OF CENTRAL
OHIO, INC.
By: /s/ Dennis J. McGillicuddy
Name: Dennis J. McGillicuddy
Title: Chairman
PHOENIX ASSOCIATES
By: PHOENIX DJM LLC
By: /s/ Dennis J. McGillicuddy
Name: Dennis J. McGillicuddy
Title: Its Sole Member
INSIGHT COMMUNICATIONS OF CENTRAL
OHIO, LLC
By: /s/ Kim D. Kelly
Name: Kim D. Kelly
Title: Executive Vice
President
<PAGE>
The foregoing Agreement is hereby confirmed and accepted as of the date
first above written.
CIBC OPPENHEIMER CORP.
By: /s/
Name:
Title:
<PAGE>
Exhibit 4.3
-----------
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
and PHOENIX ASSOCIATES,
as Issuers,
INSIGHT COMMUNICATIONS OF CENTRAL OHIO, LLC,
as Guarantor,
and
BANK OF MONTREAL TRUST COMPANY,
as Trustee
----------------
INDENTURE
Dated as of August 21, 1998
----------------
$140,000,000
10% Senior Notes due 2006
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- -------
310(a)(1) 7.10
(a)(2) 7.10
(a)(3) N.A.
(a)(4) N.A.
(b) 7.08; 7.10;
12.02
(b)(1) 7.10
(b)(9) 7.10
(c) N.A.
311(a) 7.11
(b) 7.11
(c) N.A.
312(a) 2.05
(b) 12.03
(c) 12.03
313(a) 7.06
(b)(1) 7.06
(b)(2) 7.06
(c) 12.02
(d) 7.06
314(a) 4.02; 4.04;
12.02
(b) N.A.
(c)(1) 12.04; 12.05
(c)(2) 12.04; 12.05
(c)(3) N.A.
(d) N.A.
(e) 12.05
(f) N.A.
315(a) 7.01; 7.02
(b) 7.05; 12.02
(c) 7.01
(d) 6.05; 7.01; 7.02
(e) 6.11
316(a) (last sentence) 2.10
(a)(1)(A) 6.05
(a)(1)(B) 6.04
(a)(2) 8.02
(b) 6.07
(c) 8.04
317(a)(1) 6.08
(a)(2) 6.09
(b) 7.12
318(a) 12.01
- --------------------
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be a
part of the Indenture
<PAGE>
Page
----
TABLE OF CONTENTS
Page
----
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions................................................ 1
-
Section 1.02. Other Definitions.......................................... 27
--
Section 1.03. Incorporation by Reference of Trust Indenture Act.......... 28
--
Section 1.04. Rules of Construction...................................... 28
--
ARTICLE 2
THE NOTES
Section 2.01. Amount of Notes............................................ 29
--
Section 2.02. Form and Dating............................................ 30
--
Section 2.03. Execution and Authentication............................... 31
--
Section 2.04. Registrar and Paying Agent................................. 32
--
Section 2.05. Paying Agent to Hold Money in Trust........................ 32
--
Section 2.06. Noteholder Lists........................................... 33
--
Section 2.07. Transfer and Exchange...................................... 33
--
Section 2.08. Replacement Notes.......................................... 34
--
Section 2.09. Outstanding Notes.......................................... 35
--
Section 2.10. Treasury Notes............................................. 35
--
Section 2.11. Temporary Notes............................................ 36
--
Section 2.12. Cancellation............................................... 36
--
Section 2.13. Defaulted Interest......................................... 37
--
Section 2.14. CUSIP Number............................................... 37
--
Section 2.15. Deposit of Moneys.......................................... 38
--
Section 2.16. Book-Entry Provisions for Global Notes..................... 38
--
Section 2.17. Special Transfer Provisions................................ 41
--
Section 2.18. Computation of Interest.................................... 44
--
ARTICLE 3
REDEMPTION
-i-
<PAGE>
Page
----
Section 3.01. Notices to Trustee......................................... 44
--
Section 3.02. Selection by Trustee of Notes to Be Redeemed............... 45
--
Section 3.03. Notice of Redemption....................................... 45
--
Section 3.04. Effect of Notice of Redemption............................. 47
--
Section 3.05. Deposit of Redemption Price................................ 47
--
Section 3.06. Notes Redeemed in Part..................................... 48
--
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes........................................... 48
--
Section 4.02. SEC Reports................................................ 48
--
Section 4.03. Waiver of Stay, Extension or Usury Laws.................... 50
--
Section 4.04. Compliance Certificate..................................... 50
--
Section 4.05. Taxes...................................................... 51
--
Section 4.06. Limitation on Additional Indebtedness...................... 51
--
Section 4.07. Enforcement of Rights...................................... 52
--
Section 4.08. Limitation on Capital Stock of Restricted
Subsidiaries............................................. 53
--
Section 4.09. Limitation on Restricted Payments.......................... 53
--
Section 4.10. Limitation on Certain Asset Sales.......................... 57
--
Section 4.11. Limitation on Transactions with Affiliates................. 59
--
Section 4.12. Limitations on Liens....................................... 60
--
Section 4.13. [Intentionally Omitted].................................... 61
--
Section 4.14. Limitation on Creation of Subsidiaries..................... 61
--
Section 4.15. [Intentionally Omitted].................................... 61
--
Section 4.16. Limitation on Sale and Lease-Back Transactions............. 61
--
Section 4.17. Payments for Consent....................................... 62
--
Section 4.18. Legal Existence............................................ 62
--
Section 4.19. Change of Control.......................................... 63
--
Section 4.20. Maintenance of Office or Agency............................ 66
--
Section 4.21. Maintenance of Properties; Insurance;
Books and Records; Compliance with Law................... 67
--
Section 4.22. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries........... 68
--
Section 4.23. Limitation on Disqualified Capital Stock
of Restricted Subsidiaries............................... 69
--
Section 4.24. Limitation on Asset Swaps.................................. 69
--
-ii-
<PAGE>
Page
----
Section 4.25. Payment of Pass Through Dividends.......................... 70
--
Section 4.26. Limitation on Conduct of Business.......................... 70
--
Section 4.27. Further Assurance to the Trustee........................... 70
--
Section 4.28. No Recourse Against the Issuers............................ 71
--
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and Sale of Assets..... 71
--
Section 5.02. Successor Person Substituted............................... 72
--
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.......................................... 73
--
Section 6.02. Acceleration............................................... 75
--
Section 6.03. Other Remedies............................................. 77
--
Section 6.04. Waiver of Past Defaults and Events of Default.............. 78
--
Section 6.05. Control by Majority........................................ 78
--
Section 6.06. Limitation on Suits........................................ 78
--
Section 6.07. Rights of Holders to Receive Payment....................... 79
--
Section 6.08. Collection Suit by Trustee................................. 80
--
Section 6.09. Trustee May File Proofs of Claim........................... 80
--
Section 6.10. Priorities................................................. 81
--
Section 6.11. Undertaking for Costs...................................... 81
--
Section 6.12. Restoration of Rights and Remedies......................... 82
--
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.......................................... 82
--
Section 7.02. Rights of Trustee.......................................... 84
--
Section 7.03. Individual Rights of Trustee............................... 85
--
Section 7.04. Trustee's Disclaimer....................................... 85
--
Section 7.05. Notice of Defaults......................................... 86
--
Section 7.06. Reports by Trustee to Holders.............................. 86
--
Section 7.07. Compensation and Indemnity................................. 87
--
Section 7.08. Replacement of Trustee..................................... 88
--
-iii-
<PAGE>
Page
----
Section 7.09. Successor Trustee by Consolidation, Merger, Etc............ 89
--
Section 7.10. Eligibility; Disqualification.............................. 90
--
Section 7.11. Preferential Collection of Claims Against the Issuers...... 90
--
Section 7.12. Paying Agents.............................................. 90
--
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders................................. 91
--
Section 8.02. With Consent of Holders.................................... 92
--
Section 8.03. Compliance with Trust Indenture Act........................ 94
--
Section 8.04. Revocation and Effect of Consents.......................... 94
--
Section 8.05. Notation on or Exchange of Notes........................... 95
--
Section 8.06. Trustee to Sign Amendments, etc............................ 95
--
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture..................................... 96
--
Section 9.02. Legal Defeasance........................................... 97
--
Section 9.03. Covenant Defeasance........................................ 97
--
Section 9.04. Conditions to Legal Defeasance or Covenant Defeasance...... 98
--
Section 9.05. Deposited Money and U.S. Government Obligations to Be Held
in Trust; Other Miscellaneous Provisions................. 100
---
Section 9.06. Reinstatement.............................................. 101
---
Section 9.07. Moneys Held by Paying Agent................................ 102
---
Section 9.08. Moneys Held by Trustee..................................... 102
---
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Guarantee.................................................. 103
---
Section 10.02. Execution and Delivery of Guarantees....................... 104
---
Section 10.03. Limitation of Guarantee.................................... 105
---
Section 10.04. Additional Guarantors...................................... 105
---
Section 10.05. Release of Guarantor....................................... 106
---
Section 10.06. Waiver of Subrogation...................................... 106
---
-iv-
<PAGE>
Page
----
ARTICLE 11
SECURITY
Section 11.01. Pledge of Senior Notes Collateral.......................... 107
---
Section 11.02. Recording; Priority; Opinions, Etc......................... 108
---
Section 11.03. Release of the Senior Notes Collateral..................... 109
---
Section 11.04. Trust Indenture Act Requirements........................... 110
---
Section 11.05. Suits to Protect Senior Notes Collateral................... 110
---
Section 11.06. Purchase Protected......................................... 111
---
Section 11.07. Powers Exercisable by Receiver or Trustee.................. 111
---
Section 11.08. Determinations Relating to Senior Notes Collateral......... 112
---
Section 11.09. Release upon Termination of the Issuers' Obligations....... 112
---
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls............................... 113
---
Section 12.02. Notices.................................................... 113
---
Section 12.03. Communications by Holders with Other Holders............... 115
---
Section 12.04. Certificate and Opinion as to Conditions Precedent......... 115
---
Section 12.05. Statements Required in Certificate and Opinion............. 116
---
Section 12.06. Rules by Trustee and Agents................................ 116
---
Section 12.07. Business Days; Legal Holidays.............................. 117
---
Section 12.08. Governing Law.............................................. 117
---
Section 12.09. No Adverse Interpretation of Other Agreements.............. 117
---
Section 12.10. No Recourse Against Others................................. 118
---
Section 12.11. Successors................................................. 118
---
Section 12.12. Multiple Counterparts...................................... 119
---
Section 12.13. Table of Contents, Headings, etc........................... 119
---
Section 12.14. Separability............................................... 119
---
SIGNATURES................................................................. S-1
-v-
<PAGE>
Page
----
EXHIBITS
- --------
Exhibit A Form of Note.................................................. A-1
Exhibit B Form of Legend and Assignment for Rule 144A Note.............. B-1
Exhibit C Form of Legend and Assignment for Regulation S Note........... C-1
Exhibit D Form of Legend for Global Note................................ D-1
Exhibit E Form of Certificate to Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors................... E-1
Exhibit F Form of Certificate to Be Delivered in Connection with
Transfers Pursuant to Regulation S.......................... F-1
Exhibit G Form of Guarantee............................................. G-1
-vi-
<PAGE>
-1-
INDENTURE, dated as of August 21, 1998, among COAXIAL COMMUNICATIONS OF
CENTRAL OHIO, INC., an Ohio corporation ("Coaxial"), PHOENIX ASSOCIATES, a
Florida general partnership ("Phoenix" and, together with Coaxial, the
"Issuers"), the Guarantors (as hereinafter defined) and Bank of Montreal Trust
Company, as trustee (the "Trustee").
Each party agrees as follows for the benefit of the other parties and for
the equal and ratable benefit of the Holders of the Issuers' 10% Senior Notes
due 2006 (the "Notes"):
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
-----------
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or is merged into or consolidated with any other Person or which is
assumed in connection with the acquisition of assets from such Person and, in
each case, not incurred by such Person in connection with, or in anticipation or
contemplation of, such Person becoming a Restricted Subsidiary or such merger,
consolidation or acquisition.
"Additional Interest" means additional interest on the Notes which the
Issuers and the Guarantors, jointly and severally, agree to pay to the Holders
pursuant to Section 4 of the Registration Rights Agreement.
"Adjusted Net Assets" of any Person at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Person exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities),
but excluding liabilities under the Guarantee of such Person at such date and
(y) the present fair salable value of the assets of such Person at such date
exceeds the amount that will be required to pay the probable liability of such
Person on its debts (after giving effect to all other fixed and contingent
liabilities and after giving effect to any
<PAGE>
-2-
collection from any Subsidiary of such Person in respect of the obligations of
such Person under the Guarantee of such Person), excluding Indebtedness in
respect of the Guarantee of such Person, as they become absolute and matured.
"Affiliate" means, with respect to any specific Person, any other Person
that directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with"), as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by agreement or
otherwise; provided that, for purposes of Section 4.11 hereof beneficial
--------
ownership of at least 10% of the voting securities of a Person, either directly
or indirectly, shall be deemed to be control.
"Agent" means any Registrar, Paying Agent, or agent for service of notices
and demands.
"Annualized EBITDA" means EBITDA of the Issuers and their Restricted
Subsidiaries for the latest fiscal quarter for which financial statements are
available multiplied by four (such fiscal quarter the "One Quarter Period"). For
purposes of this definition, "EBITDA" shall be calculated for any period after
giving effect on a pro forma basis to (i) the incurrence or repayment of any
--- -----
Indebtedness of such Person or any of its Restricted Subsidiaries (and the
application of the proceeds thereof) giving rise to the need to make such
calculation and any incurrence or repayment of other Indebtedness (and the
application of the proceeds thereof), other than the incurrence or repayment of
Indebtedness in the ordinary course of business for working capital purposes
pursuant to working capital facilities, occurring during the One Quarter Period
or at any time subsequent to the last day of the One Quarter Period and on or
prior to the Transaction Date, as if such incurrence or repayment, as the case
may be (and the application of the proceeds thereof), occurred on the first day
of the One Quarter Period and (ii) any Asset Sales or Asset Acquisitions
(including, without limitation, any Asset Acquisition giving rise to the need to
make such calculation as a result of such Person or one of its Restricted
Subsidiaries (including any Person who becomes a Restricted Subsidiary as a
result of the
<PAGE>
-3-
Asset Acquisition) incurring, assuming or otherwise being liable for Acquired
Indebtedness and also including any EBITDA (provided that such EBITDA shall be
--------
included only to the extent includable pursuant to the definition of
"Consolidated Net Income") attributable to the assets which are the subject of
the Asset Acquisition or Asset Sale during the One Quarter Period) occurring
during the One Quarter Period or at any time subsequent to the last day of the
One Quarter Period and on or prior to the Transaction Date, as if such Asset
Sale or Asset Acquisition (including the incurrence, assumption or liability for
any such Acquired Indebtedness) occurred on the first day of the One Quarter
Period. If such Person or any of its Restricted Subsidiaries directly or
indirectly guarantees Indebtedness of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Indebtedness as if such
Person or any Restricted Subsidiary of such Person had directly incurred or
otherwise assumed such guaranteed Indebtedness. For purposes of this definition,
whenever pro forma effect is to be given to an Asset Sale or Asset Acquisition
--- -----
(including pursuant to the System Acquisition), the amount of income or earnings
and any net cost savings relating thereto and the amount of Consolidated
Interest Expense associated with any Indebtedness incurred in connection
therewith, the pro forma calculations shall be determined in accordance with
--- -----
Regulation S-X under the Securities Act.
"Asset Acquisition" means (a) an Investment by an Issuer or any Restricted
Subsidiary of an Issuer in any other Person pursuant to which such Person shall
become a Restricted Subsidiary of an Issuer or any Restricted Subsidiary of an
Issuer, or shall be merged with or into an Issuer or any Restricted Subsidiary
of an Issuer or (b) the acquisition by an Issuer or any Restricted Subsidiary of
an Issuer of the assets of any Person (other than a Restricted Subsidiary of an
Issuer) which constitute all or substantially all of the assets of such Person
or comprise any division or line of business of such Person or any other
properties or assets of such Person other than in the ordinary course of
business.
"Asset Sale" means any direct or indirect sale, issuance, conveyance,
assignment, transfer, lease or other disposition (excluding Asset Swaps), other
than to an Issuer or any of its Wholly Owned Subsidiaries, in any single
transaction or series of related transactions of (a) any Capital Stock of or
other equity interest in any Restricted Subsidiary of an Issuer or (b) any other
property or assets of an Issuer or of
<PAGE>
-4-
any Restricted Subsidiary thereof; provided that Asset Sales shall not include
--------
(i) a transaction or series related transactions for which an Issuer or its
Restricted Subsidiaries receive aggregate consideration of less than $1.5
million, (ii) the sale, lease, conveyance, disposition or other transfer of all
or substantially all of the assets of an Issuer as permitted under Section 5.01
hereof, (iii) any transaction consummated in compliance with Section 4.09 hereof
and (iv) any sale, lease, conveyance, disposition or other transfer of all or
any portion of the Excluded Assets.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by an Issuer or any Restricted Subsidiary of an Issuer from such Asset
Sale (including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Restricted Subsidiary of an Issuer as a result of such Asset Sale, (d)
repayment of Indebtedness that is required to be repaid in connection with such
Asset Sale and (e) deduction of appropriate amounts to be provided by an Issuer
or a Restricted Subsidiary of an Issuer as a reserve, in accordance with GAAP,
against any liabilities associated with the assets sold or disposed of in such
Asset Sale and retained by an Issuer or a Restricted Subsidiary after such Asset
Sale, including, without limitation, pension and other post-employment benefit
liabilities and liabilities related to environmental matters or against any
indemnification obligations associated with the assets sold or disposed of in
such Asset Sale, and (ii) promissory notes and other noncash consideration
received by an Issuer or any Restricted Subsidiary of an Issuer from such Asset
Sale or other disposition upon the liquidation or conversion of such notes or
noncash consideration into cash.
"Asset Swap" means the execution of a definitive agreement, subject only to
customary closing conditions that the Issuers in good faith believe will be
satisfied, for a concurrent purchase and sale or exchange of Related Business
Assets, between an Issuer or any of its Restricted Subsidiaries and another
Person; provided that any amendment to or waiver of any closing condition which
--------
individually or in the aggregate is material to any Asset Swap shall be deemed
to be a new Asset
<PAGE>
-5-
Swap that must comply with Section 4.24 hereof; it being understood that an
Asset Swap may include a cash equalization payment made in connection therewith;
provided that any such cash payment shall be applied in accordance with Section
- --------
4.24 hereof.
"Attributable Indebtedness" in respect of a Sale and Lease-Back Transaction
means, as at the time of determination, the greater of (i) the fair value of the
property subject to such arrangement and (ii) the present value of the notes
(discounted at the rate borne by the Notes, compounded semi-annually) of the
total obligations of the lessee for rental payments during the remaining term of
the lease included in such Sale and Lease-Back Transaction (including any period
for which such lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that have not been applied in
accordance with clause (iii)(a), (iii)(b) or (iii)(c) of the first paragraph of
Section 4.10 and that have not been the basis for an Excess Proceeds Offer in
accordance with clause (iii)(d) of the first paragraph of Section 4.10 hereof.
"Board of Directors" of any Person means the board of directors, management
committee or other body governing the management and affairs of such Person.
"Board Resolution" means a copy of a resolution certified pursuant to an
Officers' Certificate to have been duly adopted by the Board of Directors of an
Issuer or a Guarantor, as appropriate, and to be in full force and effect, and
delivered to the Trustee.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, partnership interests or any other
participation, right or other interest in the nature of an equity interest in
such Person including, without limitation, Common Stock and Preferred Stock of
such Person, or any option, warrant or other security convertible into any of
the foregoing.
"Capitalized Lease Obligations" means with respect to any Person,
Indebtedness represented by obligations under a
<PAGE>
-6-
lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of such Indebtedness shall be the
capitalized amount of such obligations determined in accordance with GAAP.
"Cash Equivalents" means (i) marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government or issued by any
agency or instrumentality thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (ii) marketable direct obligations issued by any state of
the United States of America or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's Investors Service, Inc.
("Moody's"); (iii) commercial paper maturing no more than one year from the date
of creation thereof and, at the time of acquisition, having a rating of at least
A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit or
bankers' acceptances maturing within one year from the date of acquisition
thereof issued by any bank organized under the laws of the United States of
America or any state thereof or the District of Columbia or any U.S. branch of a
foreign bank having at the date of acquisition thereof combined capital and
surplus of not less than $250,000,000; and (v) repurchase obligations with a
term of not more than seven days for underlying securities of the types
described in clause (i) above entered into with any bank meeting the
qualifications specified in clause (iv) above; and (vi) investments in money
market funds which invest substantially all their assets in securities of the
types described in clauses (i) through (v) above.
A "Change of Control" will be deemed to have occurred at such time as (i)
any Person (including a Person's Affiliates and associates), other than a
Permitted Holder, becomes the beneficial owner (as defined under Rule 13d-3 or
any successor rule or regulation promulgated under the Exchange Act) of 50% or
more of the total voting and economic power of Insight Ohio's Capital Stock,
(ii) any Person (including a Person's Affiliates and associates), other than a
Permitted Holder, becomes the beneficial owner of more than 33 1/3% of the total
voting power of Insight Ohio's Capital Stock and the Permitted Holders
beneficially own, in the aggregate, a lesser percentage of the total voting
power of the Capital Stock of Insight Ohio
<PAGE>
-7-
than such other Person and do not have the right or ability by voting power,
contract or otherwise to elect or designate for election a majority of the Board
of Directors of Insight Ohio, (iii) there shall be consummated any consolidation
or merger of Insight Ohio in which Insight Ohio is not the continuing or
surviving corporation or pursuant to which the Capital Stock of Insight Ohio
would be converted into cash, securities or other property, other than a merger
or consolidation of Insight Ohio in which the holders of the Capital Stock of
Insight Ohio outstanding immediately prior to the consolidation or merger hold,
directly or indirectly, at least a majority of the Capital Stock of the
surviving corporation immediately after such consolidation or merger, (iv)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors of Insight Ohio (together with
any new directors whose election by such Board of Directors or whose nomination
for election by the shareholders or members of the Insight Ohio has been
approved by 66 2/3% of the directors then still in office who either were
directors at the beginning of such period or whose election or recommendation
for election was previously so approved) cease to constitute a majority of the
Board of Directors of Insight Ohio or (v) Insight is the beneficial owner of
less than 50% of the total voting and economic power of Insight Ohio's Capital
Stock and ceases to have management control of the day-to-day operations of
Insight Ohio; provided, however, that a Change of Control will be deemed not to
-------- -------
have occurred as provided above if Insight continues to be the manager of
Insight Ohio pursuant to the Operating Agreement or designees of Insight
constitute a majority of the members of the Management Committee.
"Close Corporation Agreement" means the Close Corporation Agreement of
Coaxial Communications of Central Ohio, Inc. by and among Coaxial, Coaxial LLC,
Coaxial DJM LLC and Coaxial DSM LLC as in effect on the Issue Date.
"Coaxial" means Coaxial Communications of Central Ohio, Inc., an Ohio
corporation.
"Coaxial Financing Corp." means Coaxial Financing Corp., a Delaware
corporation.
"Coaxial LLC" means Coaxial LLC, a Delaware limited liability company.
<PAGE>
-8-
"Common Stock" of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Restricted Subsidiaries on a
consolidated basis (including, but not limited to, (i) imputed interest included
in Capitalized Lease Obligations, (ii) all commissions, discounts and other fees
and charges owed with respect to letters of credit and bankers' acceptance
financing, (iii) the net costs associated with Interest Rate Agreements and
other hedging obligations, (iv) amortization of other financing fees and
expenses, (v) the interest portion of any deferred payment obligation, (vi)
amortization of discount or premium, if any, and (vii) all other non-cash
interest expense (other than interest amortized to cost of sales)) plus, without
duplication, all net capitalized interest for such period and all interest
incurred or paid under any guarantee of Indebtedness (including a guarantee of
principal, interest or any combination thereof) of any Person, plus the amount
of all dividends or distributions paid on Disqualified Capital Stock (other than
dividends paid or payable in shares of Capital Stock of an Issuer).
"Consolidated Leverage Ratio" means, with respect to any Person, the ratio
of (i) the sum of the aggregate outstanding amount of Indebtedness of such
Person and its Restricted Subsidiaries as of the date of calculation (the
"Transaction Date") on a consolidated basis determined in accordance with GAAP
to (ii) Annualized EBITDA.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (a) the Net Income of any Person (the "other
-------- -------
Person") in which the Person in question or any of its Restricted Subsidiaries
has less than a 100% interest (which interest does not cause the Net Income of
such other Person to be consolidated into the Net Income of the Person in
question
<PAGE>
-9-
in accordance with GAAP) shall be included only to the extent of the amount of
dividends or distributions paid to the Person in question or the Restricted
Subsidiary, (b) the Net Income of any Restricted Subsidiary of the Person in
question that is subject to any restriction or limitation on the payment of
dividends or the making of other distributions shall be excluded to the extent
of such restriction or limitation, (c)(i) the Net Income of any Person acquired
in a pooling of interests transaction for any period prior to the date of such
acquisition and (ii) any net gain resulting from an Asset Sale by the Person in
question or any of its Restricted Subsidiaries other than in the ordinary course
of business shall be excluded, (d) extraordinary gains and losses shall be
excluded, (e) income or loss attributable to discontinued operations (including,
without limitation, operations disposed of during such period whether or not
such operations were classified as discontinued) shall be excluded, (f) in the
case of a successor to the referent Person by consolidation or merger or as a
transferee of the referent Person's assets, any earnings of the successor
corporation prior to such consolidation, merger or transfer of assets shall be
excluded and (g) Net Income of Phoenix with respect to the Excluded Assets shall
be excluded.
"Corporate Trust Office" means the office of the Trustee at which at any
particular time its corporate trust business shall be principally administered,
which office at the date of execution of this Indenture is located at 88 Pine
Street, 19th Floor, New York, New York 10005.
"Cumulative Consolidated Interest Expense" means, with respect to any
Person, as of any date of determination, Consolidated Interest Expense from July
1, 1998 to the end of such Person's most recently ended full fiscal quarter
prior to such date, taken as a single accounting period.
"Cumulative EBITDA" means, with respect to any Person, as of any date of
determination, EBITDA from July 1, 1998 to the end of such Person's most
recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
"Default" means any condition or event that is, or with the passing of time
or giving of any notice expressly required under Section 6.01 (or both) would
be, an Event of Default.
<PAGE>
-10-
"Depository" means, with respect to the Notes issued in the form of one or
more Global Notes, The Depository Trust Company or another Person designated as
Depository by the Issuers, which Person must be a clearing agency registered
under the Exchange Act.
"Designation Amount" means an amount equal to the fair market value of the
Issuer's aggregate Investment in a Restricted Subsidiary.
"Discount Notes" means the 12 7/8% Senior Discount Notes due 2008 of
Coaxial LLC and Coaxial Financing Corp., as joint issuers, issued to generate
$55,869,000 aggregate principal amount at maturity.
"Discount Notes Collateral" means, collectively, the Stock Collateral and
the LLC Mirror Notes which in the aggregate secure the payment of principal,
interest and premium, if any, on the Notes.
"Discount Notes Indenture" means the Indenture pursuant to which the
Discount Notes are issued.
"Discount Notes Issuers" means Coaxial LLC and Coaxial Financing Corp.
"Disqualified Capital Stock" means any Capital Stock of a Person or a
Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include any Preferred Stock of a Person or a Restricted
Subsidiary of such Person, with respect to either of which, under the terms of
such Preferred Stock, by agreement or otherwise, such Person or Restricted
Subsidiary is obligated to pay current dividends or distributions in cash during
the period prior to the maturity date of the Notes; provided, however, that
-------- -------
Preferred Stock of a Person or any Restricted Subsidiary thereof that is issued
with the benefit of provisions requiring a change of control offer to be made
for such Preferred Stock in the event of a change of control of
<PAGE>
-11-
such Person or Restricted Subsidiary which provisions have substantially the
same effect as the provisions described under Section 4.19 hereof, shall not be
deemed to be Disqualified Capital Stock solely by virtue of such provisions.
"EBITDA" means, with respect to any Person and its Restricted Subsidiaries,
for any period, an amount equal to (a) the sum of (i) Consolidated Net Income
for such period, plus (ii) the provision for taxes for such period based on
income or profits to the extent such income or profits were included in
computing Consolidated Net Income and any provision for taxes utilized in
computing net loss under clause (i) hereof, plus (iii) Consolidated Interest
Expense; provided, however, for purposes of this definition only, that dividends
-------- -------
or distributions paid on Disqualified Capital Stock shall not be included in the
definition of Consolidated Interest Expense to the extent such dividends or
distributions have not been included in the computation of Consolidated Net
Income for such period, plus (iv) depreciation for such period on a consolidated
basis, plus (v) amortization of intangibles for such period on a consolidated
basis, plus (vi) any other non-cash items reducing Consolidated Net Income for
such period, minus (b) all non-cash items increasing Consolidated Net Income for
such period, all for such Person and its Restricted Subsidiaries determined on a
consolidated basis in accordance with GAAP; and provided, however, that, for
-------- -------
purposes of calculating EBITDA during any fiscal quarter, cash income from a
particular Investment of such Person shall be included only (x) if cash income
has been received by such Person with respect to such Investment during each of
the previous four fiscal quarters, or (y) if the cash income derived from such
Investment is attributable to Cash Equivalents.
"Equity Offering" means an offering by an Issuer of shares of its Common
Stock (however designated and whether voting or non-voting) and any and all
rights, warrants or options to acquire such Common Stock.
"Exchange Act" means the Securities Exchange Act of 1934, as amended and
the rules and regulations of the Commission promulgated thereunder.
"Exchange Notes" shall have the meaning assigned thereto in the
Registration Rights Agreement.
<PAGE>
-12-
"Excluded Assets" means (i) any notes and accounts receivable held by
Phoenix and owed by Coaxial Associates of Columbus I ("Columbus I") and Coaxial
Associates of Columbus II ("Columbus II"), and (ii) any debt owed to Phoenix by
its partners as a result of advances made to such partners, in each case as in
effect on the Issue Date.
"fair market value" means, with respect to any asset or property, the price
which could be negotiated in an arm's-length, free market transaction, for cash,
between a willing seller and a willing and able buyer, neither of whom is under
undue pressure or compulsion to complete the transaction. Fair market value
shall be determined by the Board of Directors of an Issuer acting reasonably and
in good faith, and whose determination shall be conclusive and shall be
evidenced by a resolution of the Board of Directors of an Issuer delivered to
the Trustee.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States on the Issue Date.
"Guarantee" means, as the context may require, individually, a guarantee,
or collectively, any and all guarantees, of the Obligations of the Issuers with
respect to the Notes by each Guarantor, if any, pursuant to the terms of Article
10 hereof, substantially in the form set forth in Exhibit G.
"Guarantor" means each of (i) Insight Ohio and (ii) any Restricted
Subsidiary of an Issuer formed, created or acquired after the Issue Date, and
"Guarantors" means such entities, collectively. Each such entity that becomes a
Guarantor pursuant to clause (ii) above shall follow the procedures described in
Section 10.04 hereof.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such Person (and
"incurrence," "incurred," "incurrable," and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
--------
obligation of such Person that exists at such time
<PAGE>
-13-
becoming Indebtedness shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the ordinary
course of business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and shall also include, to the extent not otherwise included (i) any
Capitalized Lease Obligations of such Person, (ii) obligations secured by a lien
to which the property or assets owned or held by such Person is subject, whether
or not the obligation or obligations secured thereby shall have been assumed,
(iii) guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor), (iv) all obligations for the reimbursement
of any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (v) Disqualified Capital Stock of such Person or any Restricted
Subsidiary thereof, and (vi) obligations of any such Person under any currency
agreement or any interest rate agreement applicable to any of the foregoing (if
and to the extent such currency agreement or interest rate agreement obligations
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP). The amount of Indebtedness of any Person at any date
shall be the outstanding balance at such date of all unconditional obligations
as described above and, with respect to contingent obligations, the maximum
liability upon the occurrence of the contingency giving rise to the obligation;
provided that (i) the amount outstanding at any time of any Indebtedness issued
- --------
with original issue discount is the principal amount of such Indebtedness less
the remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP and (ii)
Indebtedness shall not include any liability for federal, state, local or other
taxes. Notwithstanding any other provision of the foregoing definition, any
trade payable
<PAGE>
-14-
arising from the purchase of goods or materials or for services obtained in the
ordinary course of business shall not be deemed to be "Indebtedness" of an
Issuer or any of its Restricted Subsidiaries for purposes of this definition.
Furthermore, guarantees of (or obligations with respect to letters of credit
supporting) Indebtedness otherwise included in the determination of such amount
shall not also be included.
"Indenture" means this Indenture as amended, restated or supplemented from
time to time.
"Independent Financial Advisor" means an investment banking firm of
national reputation in the United States (i) which does not, and whose
directors, officers and employees or Affiliates do not, have a direct or
indirect financial interest in an Issuer and (ii) which, in the judgment of the
Board of Directors of an Issuer, is otherwise independent and qualified to
perform the task for which it is to be engaged.
"Insight" means, collectively, Insight Communications Company, L.P. and
Insight Holdings of Ohio, LLC.
"Insight Ohio" means Insight Communications of Central Ohio, LLC, a
Delaware limited liability company.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501 (a)(1), (2), (3) or
(7) promulgated under the Securities Act.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Notes.
"Interest Rate Agreement" means, with respect to any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
"Investments" means, with respect of any Person, directly or indirectly,
any advance, account receivable (other than an account receivable arising in the
ordinary course of business of such Person), loan or capital contribution to (by
means of transfers of property to others, payments for property or services for
the account or use of others or otherwise), the purchase of any Capital Stock,
bonds, notes, debentures,
<PAGE>
-15-
partnership or joint venture interests or other securities (other than the
purchase of the Notes pursuant to Section 4.10 hereof or "Change of Control
Offer" described in Section 4.19 hereof) of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in any Person. Investments shall exclude (i) extensions of trade
credit on commercially reasonable terms in accordance with normal trade
practices of such Person and (ii) the repurchase of securities of any Person by
such Person. For the purposes of Section 4.09 hereof, (i) "Investment" shall
include and be valued at the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the original cost of such Investment plus the cost of all
additional Investments by an Issuer or any of its Restricted Subsidiaries,
without any adjustments for increases or decreases in value, or write-ups,
write-downs or write-offs with respect to such Investment, reduced by the
payment of cash distributions which constitute a return of capital in connection
with such Investment; provided that the aggregate of all such reductions shall
--------
not exceed the amount of such initial Investment plus the cost of all additional
Investments; provided, further, that no such payment of distributions or receipt
-------- -------
of any such other amounts shall reduce the amount of any Investment if such
payment of distributions or receipt of any such amounts would be included in
Consolidated Net Income. If an Issuer or any Restricted Subsidiary of such
Issuer sells or otherwise disposes of any Common Stock of any direct or indirect
Restricted Subsidiary of such Issuer such that, after giving effect to any such
sale or disposition, the Issuer no longer owns, directly or indirectly, greater
than 50% of the outstanding Common Stock of such Restricted Subsidiary, the
Issuer shall be deemed to have made an Investment on the date of any such sale
or disposition equal to the fair market value of the Common Stock of such
Restricted Subsidiary not sold or disposed of.
"Issue Date" means the date the Notes are first issued by the Issuers and
authenticated by the Trustee under this Indenture.
<PAGE>
-16-
"Issuer Request" means any written request signed in the names of each of
the Issuers by the Chief Executive Officer, the President, any Vice President,
the Chief Financial Officer or the Treasurer of each of the Issuers and attested
to by the Secretary or any Assistant Secretary of each of the Issuers.
"Issuers" means the parties named as such in the first paragraph of this
Indenture until a successor replaces such parties pursuant to Article 5 of this
Indenture and thereafter means the successor and any other obligor on the Notes.
"Lien" means, with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"LLC Mirror Notes" means each of the promissory notes of Coaxial DJM LLC
and Coaxial DSM LLC issued to Coaxial LLC.
"Maturity Date" means August 15, 2006.
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by or
equity contribution to any Person, the aggregate net proceeds received by such
Person, after payment of expenses, commissions and the like incurred in
connection therewith, whether such proceeds are in cash or in property (valued
at the fair market value thereof, as determined in good faith by the Board of
Directors of such Person, at the time of receipt) and (b) in the case of any
exchange, exercise, conversion or surrender of outstanding securities of any
kind for or into shares of Capital Stock of an Issuer which is not
<PAGE>
-17-
Disqualified Capital Stock, the net book value of such outstanding securities on
the date of such exchange, exercise, conversion or surrender (plus any
additional amount required to be paid by the holder to such Person upon such
exchange, exercise, conversion or surrender, less any and all payments made to
the holders, e.g., on account of fractional shares and less all expenses
----
incurred by such Person in connection therewith).
"Non-U.S. Person" means a person who is not a U.S. person, as defined in
Regulation S.
"Notes" means the securities that are issued under this Indenture, as
amended or supplemented from time to time pursuant to this Indenture.
"Obligations" means, with respect to any Indebtedness, any principal,
premium, interest, penalties, fees, indemnifications, reimbursements, damages
and other expenses payable under the documentation governing such Indebtedness.
"Offering" means the offering of the Notes as described in the Offering
Memorandum.
"Offering Memorandum" means the Offering Memorandum dated August 17, 1998
pursuant to which the Notes were offered.
"Officer," with respect to any Person (other than the Trustee), means the
Chief Executive Officer, the President, any Vice President and the Chief
Financial Officer, the Treasurer or the Secretary of such Person, or any other
officer designated by the Board of Directors of such Person, as the case may be.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President and
the Chief Financial Officer or any Treasurer of such Person that shall comply
with applicable provisions of this Indenture and delivered to the Trustee.
"Operating Agreement" means the Operating Agreement of Insight
Communications of Central Ohio, LLC, as in effect on the Issue Date.
<PAGE>
-18-
"Opinion of Counsel" means a written opinion reasonably satisfactory in
form and substance to the Trustee from legal counsel which counsel is reasonably
acceptable to the Trustee including the statements required by Section 12.05 and
delivered to the Trustee.
"Other Pari Passu Debt" means Indebtedness of a Restricted Subsidiary of an
Issuer that is pari passu in right of payment to the Notes (without giving
---- -----
effect to the principles of structural subordination).
"Other Pari Passu Debt Pro Rata Share" means the amount of the applicable
Available Asset Sale Proceeds obtained by multiplying the amount of such
available Asset Sale Proceeds by a fraction, (i) the numerator of which is the
aggregate principal amount and/or accreted value, as the case may be, of all
Other Pari Passu Debt outstanding at the time of the applicable Asset Sale with
respect to which any Restricted Subsidiary of an Issuer is required to use
Available Asset Proceeds to repay or make an offer to purchase or repay and (ii)
the denominator of which is the sum of (a) the aggregate principal amount of all
Notes outstanding at the time of the applicable Asset Sale and (b) the aggregate
principal amount and/or accreted value, as the case may be, of all Other Pari
Passu Debt outstanding at the time of the applicable Asset Sale Offer with
respect to which any Restricted Subsidiary of an Issuer is required to use the
applicable Available Asset Proceeds to offer to repay or make an offer to
purchase or repay.
"Pass Through Dividend" means the dividend required to be made by Coaxial
to Coaxial LLC, Coaxial DJM LLC and Coaxial DSM LLC pursuant to Section 4.25
hereof from the proceeds of a Preferred Payment in respect of the Series B
Preferred Interests.
"Permitted Holders" means (x) Insight and (y) Coaxial LLC.
<PAGE>
-19-
"Permitted Indebtedness" means:
(i) Indebtedness of an Issuer or any Restricted Subsidiary arising under
or in connection with the Senior Credit Facility in an aggregate principal
amount not to exceed $25.0 million outstanding at any time less any mandatory
prepayment actually made thereunder (to the extent, in the case of payments of
revolving credit borrowings, that the corresponding commitments have been
permanently reduced) or scheduled payments actually made thereunder;
(ii) Indebtedness under the Notes, the Exchange Notes, the Guarantees and
the guarantees of the Discount Notes;
(iii) Indebtedness not covered by any other clause of this definition
which is outstanding on the Issue Date;
(iv) Indebtedness of an Issuer to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to an Issuer or another Restricted
Subsidiary;
(v) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which Purchase
Money Indebtedness and Capitalized Lease Obligations do not in the aggregate
exceed $7.5 million;
(vi) Interest Rate Agreements;
(vii) Refinancing Indebtedness; and
(viii) additional Indebtedness of the Restricted Subsidiaries of the
Issuers not to exceed $7.5 million in aggregate principal amount at any one time
outstanding.
"Permitted Investments" means, for any Person, Investments made on or after
the Issue Date consisting of:
(i) Investments by an Issuer, or by a Restricted Subsidiary thereof, in
the Issuer or a Restricted Subsidiary;
(ii) Investments by the Issuer, or by a Restricted Subsidiary thereof,
in a Person, if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary
<PAGE>
-20-
of the Issuer or (b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Issuer or a Restricted Subsidiary thereof;
(iii) Investments in cash and Cash Equivalents;
(iv) an Investment that is made by an Issuer or a Restricted Subsidiary
thereof in the form of any Capital Stock, bonds, notes, debentures, partnership
or joint venture interests or other securities that are issued by a third party
to an Issuer or such Restricted Subsidiary solely as partial consideration for
the consummation of an Asset Sale that is otherwise permitted under Section 4.10
hereof;
(v) Interest Rate Agreements entered into in the ordinary course of an
Issuer's or its Restricted Subsidiaries' business; and
(vi) additional Investments not to exceed $500,000 at any one time
outstanding.
"Permitted Liens" means (i) Liens on property or assets of, or any shares
of Capital Stock of or secured indebtedness of, any corporation existing at the
time such corporation becomes a Restricted Subsidiary of an Issuer or at the
time such corporation is merged into an Issuer or any of its Restricted
Subsidiaries; provided that such Liens are not incurred in connection with, or
--------
in contemplation of, such corporation becoming a Restricted Subsidiary of an
Issuer or merging into an Issuer or any of its Restricted Subsidiaries, (ii)
Liens securing Indebtedness under the Senior Credit Facility which Indebtedness
is incurred pursuant to clause (i) of the definition of Permitted Indebtedness,
(iii) Liens securing Refinancing Indebtedness; provided that any such Lien does
--------
not extend to or cover any Property, Capital Stock or Indebtedness other than
the Property, shares or debt securing the Indebtedness so refunded, refinanced
or extended, (iv) Liens in favor of an Issuer or any of its Restricted
Subsidiaries, (v) Liens securing industrial revenue bonds, (vi) Liens to secure
Purchase Money Indebtedness that is otherwise permitted under this Indenture;
provided that (a) any such Lien is created solely for the purpose of securing
- --------
Indebtedness representing, or incurred to finance, refinance or refund, the cost
(including sales and excise taxes,
<PAGE>
-21-
installation and delivery charges and other direct costs of, and other direct
expenses paid or charged in connection with, such purchase or construction) of
such Property, (b) the principal amount of the Indebtedness secured by such Lien
does not exceed 100% of such costs, and (c) such Lien does not extend to or
cover any Property other than such item of Property and any improvements on such
item, (vii) statutory liens or landlords', carriers', warehouseman's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens arising
in the ordinary course of business which do not secure any Indebtedness and with
respect to amounts not yet delinquent or being contested in good faith by
appropriate proceedings, if a reserve or other appropriate provision, if any, as
shall be required in conformity with GAAP shall have been made therefor, (viii)
Liens for taxes, assessments or governmental charges that are being contested in
good faith by appropriate proceedings or are not yet delinquent, (ix) Liens
securing Capitalized Lease Obligations permitted to be incurred under clause (v)
of the definition of "Permitted Indebtedness"; provided that such Lien does not
--------
extend to any property other than that subject to the underlying lease, (x)
easements, rights-of-way, zoning restrictions and other similar charges or
encumbrances in respect of real property not interfering in any material respect
with the ordinary conduct of the business of the Issuer or any of its Restricted
Subsidiaries, (xi) Liens securing obligations under Interest Rate Agreements,
(xii) attachment or judgment Liens not giving rise to a Default or an Event of
Default, (xiii) other Liens securing obligations incurred in the ordinary course
of business; provided that such Liens do not serve Indebtedness incurred
--------
pursuant to the first paragraph of Section 4.06 hereof, (xiv) liens securing the
Senior Notes Collateral and the Discount Notes Collateral and (xv) any
extensions, substitutions, replacements or renewals of the foregoing.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government (including any agency or political subdivision
thereof).
"Phoenix" means Phoenix Associates, a Florida general partnership.
<PAGE>
-22-
"Physical Notes" means certificated Notes in registered form in
substantially the form set forth in Exhibit A.
"Pledge Agreement" means that certain pledge agreement between Coaxial and
the Trustee, whereby Coaxial will pledge to the Trustee for the benefit of the
holders of the Notes the Series A Preferred Interests in Insight Ohio owned by
Coaxial on the Issue Date or so acquired by Coaxial thereafter all of which
constitutes the Senior Notes Collateral. Such pledge will secure the payment
and performance when due of all the obligations of the Issuers under this
Indenture and the Notes.
"Preferred Interests" means collectively the Series A Preferred Interests
and the Series B Preferred Interests.
"Preferred Payments" means any distribution or mandatory redemption
required to be made to the holder of the Preferred Interests pursuant to the
Operating Agreement.
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Private Exchange Notes" shall have the meaning assigned thereto in the
Registration Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Rule 144A Notes in the form set forth in Exhibit B.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
<PAGE>
-23-
"Qualified Institutional Buyer" or "QIB" shall have the meaning specified
in Rule 144A promulgated under the Securities Act.
"Redemption Date" when used with respect to any Note to be redeemed means
the date fixed for such redemption pursuant to the terms of the Notes.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Indebtedness of an Issuer outstanding on the Issue Date or other
Indebtedness permitted to be incurred by an Issuer or its Restricted
Subsidiaries pursuant to the terms of this Indenture (other than pursuant to
clauses (i), (iv), (v), (vi), (vii) and (viii) of the definition of Permitted
Indebtedness), but only to the extent that (i) the Refinancing Indebtedness is
subordinated to the Notes to at least the same extent as the Indebtedness being
refunded, refinanced or extended, if at all, (ii) the Refinancing Indebtedness
is scheduled to mature either (a) no earlier than the Indebtedness being
refunded, refinanced or extended, or (b) after the maturity date of the Notes,
(iii) the portion, if any, of the Refinancing Indebtedness that is scheduled to
mature on or prior to the maturity date of the Notes has a weighted average life
to maturity at the time such Refinancing Indebtedness is incurred that is equal
to or greater than the weighted average life to maturity of the portion of the
Indebtedness being refunded, refinanced or extended that is scheduled to mature
on or prior to the maturity date of the Notes, (iv) such Refinancing
Indebtedness is in an aggregate principal amount that is equal to or less than
the sum of (a) the aggregate principal amount then outstanding under the
Indebtedness being refunded, refinanced or extended and the amount of any
premium reasonably necessary to accomplish such refinancing, (b) the amount of
accrued and unpaid interest, if any, and premiums owed, if any, not in excess of
preexisting prepayment provisions on such Indebtedness being refunded,
refinanced or extended and (c) the amount of customary fees, expenses and costs
related to the incurrence of such Refinancing Indebtedness, and (v) such
Refinancing Indebtedness is incurred by the same Person that initially incurred
the Indebtedness being refunded, refinanced or extended.
"Registration Rights Agreement" means the Senior Notes Registration Rights
Agreement dated as of August 21, 1998
<PAGE>
-24-
among the Issuers, Insight Ohio, as a Guarantor, and CIBC Oppenheimer Corp., as
Initial Purchaser.
"Regulation S" means Regulation S promulgated under the Securities Act.
"Related Business" means any business related, ancillary or complementary
to the businesses of the Issuers and their Restricted Subsidiaries.
"Related Business Assets" means assets used or useful in a Related
Business.
"Reported Period" means with respect to any Person the most recently ended
full fiscal quarter.
"Responsible Officer" when used with respect to the Trustee, means an
officer or assistant officer assigned to the corporate trust department of the
Trustee (or any successor group of the Trustee) or any other officer of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock of
an Issuer or any Restricted Subsidiary of an Issuer or any payment made to the
direct or indirect holders (in their capacities as such) of Capital Stock of an
Issuer or any Restricted Subsidiary of an Issuer (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Capital
Stock) or in options, warrants or other rights to purchase such Capital Stock
(other than Disqualified Capital Stock), and (y) in the case of Restricted
Subsidiaries of an Issuer, dividends or distributions payable to an Issuer or to
a Wholly Owned Subsidiary of an Issuer), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of an Issuer or any of
its Restricted Subsidiaries (other than Capital Stock owned by an Issuer or a
Restricted Subsidiary of an Issuer, excluding Disqualified Capital Stock) or any
option, warrants or other rights to purchase such Capital Stock, (iii) the
making of any principal payment on, or the purchase, defeasance, repurchase,
redemption or other
<PAGE>
-25-
acquisition or retirement for value, prior to any scheduled maturity, scheduled
repayment or scheduled sinking fund payment, of any Indebtedness which is
subordinated in right of payment to the Notes (other than subordinated
Indebtedness acquired in anticipation of satisfying a scheduled sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition), (iv) the making of any Investment or guarantee
of any Investment in any Person other than a Permitted Investment, (v) any
designation of a Restricted Subsidiary as an Unrestricted Subsidiary on the
basis of the Investment by an Issuer therein and (vi) forgiveness of any
Indebtedness of an Affiliate of an Issuer to an Issuer or a Restricted
Subsidiary of an Issuer. For purposes of determining the amount expected for
Restricted Payments, cash distributed or invested shall be valued at the face
amount thereof and property other than cash shall be valued at its Fair Market
Value.
"Restricted Subsidiary" means a Subsidiary of an Issuer other than an
Unrestricted Subsidiary and includes Insight Ohio. The Board of Directors of an
Issuer may designate any Unrestricted Subsidiary or any Person that is to become
a Subsidiary as a Restricted Subsidiary if immediately after giving effect to
such action (and treating any Acquired Indebtedness as having been incurred at
the time of such action), (i) the Issuers could have incurred at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.06 hereof and (ii) no Default or Event of Default shall have occurred and be
continuing.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by an Issuer or any Restricted Subsidiary of an Issuer
of any real or tangible personal property, which property has been or is to be
sold or transferred by an Issuer or such Restricted Subsidiary to such Person in
contemplation of such leasing.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw-
Hill Companies, Inc., and its successors.
<PAGE>
-26-
"SEC" means the United States Securities and Exchange Commission as
constituted from time to time or any successor performing substantially the same
functions.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means the Credit Agreement to be entered into
between Insight Ohio, the lenders party thereto in their capacities as lenders
thereunder and Canadian Imperial Bank of Commerce, as agent, together with the
related documents thereto (including, without limitation, any guarantee
agreements and security documents), in each case as such agreements may be
amended (including any amendment and restatement thereof), supplemented or
otherwise modified from time to time, including any agreement extending the
maturity of, refinancing, replacing or otherwise restructuring (including
increasing the amount of available borrowings thereunder (provided that such
--------
increase in borrowings is permitted by Section 4.06 hereof) or adding Restricted
Subsidiaries of the Issuer as additional borrowers or guarantors thereunder) all
or any portion of the Indebtedness under such agreement or any successor or
replacement agreement and whether by the same or any other agent, lender or
group of lenders.
"Senior Notes Collateral" means the Series A Preferred Interests which
secure the payment of principal, interest and premium, if any, on the Notes.
"Series A Preferred Interests" means the Series A Preferred Interests of
Insight Ohio with a liquidation preference of $140.0 million.
"Series B Preferred Interests" means the Series B Preferred Interests of
Insight Ohio with an initial liquidation preference of $30.0 million.
"Stock Collateral" means (i) all the shares of Common Stock of Coaxial owed
by Coaxial LLC and (ii) all of Coaxial LLC's interests in the shares of Common
Stock in Coaxial held by Coaxial DJM LLC and Coaxial DSM LLC which shares have
been pledged to Coaxial LLC.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other
<PAGE>
-27-
business entity, whether now existing or hereafter organized or acquired, (i) in
the case of a corporation, of which more than 50% of the total voting power of
the Capital Stock entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, officers or trustees thereof is held by
such first-named Person or any of its Subsidiaries; or (ii) in the case of a
partnership, joint venture, association or other business entity, with respect
to which such first-named Person or any of its Subsidiaries has the power to
direct or cause the direction of the management and policies of such entity by
contract or otherwise or if in accordance with GAAP such entity is consolidated
with the first-named Person for financial statement purposes.
"Tax Distributions" means (i) the distributions required to be made by
Insight Ohio to its members, pursuant to the Operating Agreement, equal to the
estimated taxes (assuming taxes are imposed based on the highest marginal
combined, federal, state, and local tax rate imposed on an individual resident
of New York City) of such members arising from the allocation of income of
Insight Ohio to such members, and (ii) distributions made by Coaxial to Coaxial
LLC, Coaxial DJM LLC and Coaxial DSM LLC of Tax Distributions received from
Insight Ohio.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-
77bbbb) as in effect on the date of this Indenture (except as provided in
Section 8.03 hereof).
"Trustee" means the party named as such in this Indenture until a successor
replaces it pursuant to this Indenture and thereafter means the successor.
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of an Issuer which is designated (a
"Designation") after the Issue Date as an Unrestricted Subsidiary by a
resolution adopted by the Board of Directors of an Issuer; provided that a
--------
Subsidiary may be so Designated as an Unrestricted Subsidiary only if such
classification is in compliance with Section 4.09 hereof. The Trustee shall be
given prompt notice by an Issuer of each resolution adopted by the Board of
Directors of an Issuer under this provision, together with a copy of each such
resolution adopted.
<PAGE>
-28-
"U.S. Government Obligations" means (a) securities that are direct
obligations of the United States of America for the payment of which its full
faith and credit are pledged or (b) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank (as defined in Section 3(a)(2) of
the Securities Act) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any such U.S.
Government Obligation held by such custodian for the account of the holder of
such depository receipt; provided that (except as required by law) such
--------
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or a specific payment of principal or
interest on any such U.S. Government Obligation held by such custodian for the
account of the holder of such depository receipt.
"Wholly Owned Subsidiary" means (i) Insight Ohio and (ii) any Restricted
Subsidiary, all of the outstanding voting securities (other than directors'
qualifying shares) of which are owned, directly or indirectly (including through
Insight Ohio), by an Issuer.
Section 1.02. Other Definitions.
-----------------
The definitions of the following terms may be found in the sections
indicated as follows:
Term Defined in Section
- ---- ------------------
"Affiliate Transaction"................................... 4.11
"Agent Members"........................................... 2.16
"Business Day"............................................ 12.08
"CEDEL"................................................... 2.16
"Change of Control Offer"................................. 4.19
"Change of Control Payment Date".......................... 4.19
"Change of Control Purchase Price"........................ 4.19
"Covenant Defeasance"..................................... 9.03
"Custodian"............................................... 6.01
"Euroclear"............................................... 2.16(a)
<PAGE>
-29-
"Event of Default"........................................ 6.01
"Excess Proceeds Offer"................................... 4.10
"Global Notes"............................................ 2.16
"Legal Defeasance"........................................ 9.02
"Legal Holiday"........................................... 12.08
"Other Notes"............................................. 2.02
"Paying Agent"............................................ 2.04
"Registrar"............................................... 2.04
"Regulation S Global Notes"............................... 2.16(a)
"Regulation S Notes"...................................... 2.02
"Representative".......................................... 11.03
"Restricted Global Note".................................. 2.16(a)
"Rule 144A Notes"......................................... 2.02
Section 1.03. Incorporation by Reference of Trust Indenture Act.
-------------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the portion of
such provision required to be incorporated herein in order for this Indenture to
be qualified under the TIA is incorporated by reference in and made a part of
this Indenture. The following TIA terms used in this Indenture have the
following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor on the indenture securities" means the Issuers, the Guarantors or
any other obligor on the Notes.
All other terms used in this Indenture that are defined by the TIA, defined
in the TIA by reference to another statute or defined by SEC rule have the
meanings therein assigned to them.
Section 1.04. Rules of Construction.
---------------------
Unless the context otherwise requires:
<PAGE>
-30-
(1) a term has the meaning assigned to it herein, whether defined
expressly or by reference;
(2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural include
the singular;
(5) words used herein implying any gender shall apply to every gender;
and
(6) whenever in this Indenture there is mentioned, in any context,
principal, interest or any other amount payable under or with respect to any
Note, such mention shall be deemed to include mention of the payment of
Additional Interest to the extent that, in such context, Additional Interest is,
was or would be payable in respect thereof.
ARTICLE 2
THE NOTES
Section 2.01. Amount of Notes.
---------------
The Trustee shall authenticate Notes for original issue on the Issue
Date in the aggregate principal amount of $140,000,000, upon a written order of
the Issuers in the form of an Officers' Certificate of the Issuers. Such
written order shall specify the amount of Notes to be authenticated and the date
on which the Notes are to be authenticated.
Upon receipt of an Issuer Request and an Officers' Certificate
certifying that a registration statement relating to an exchange offer specified
in the Registration Rights Agreement is effective and that the conditions
precedent to a private exchange thereunder have been met, the Trustee shall
authenticate an additional series of Notes in an aggregate principal amount not
to exceed $140,000,000 for issuance in exchange for the Notes tendered for
exchange pursuant to such exchange offer registered under the Securities Act not
bearing the Private Placement Legend or pursuant to a Private Exchange.
Exchange Notes or Private
<PAGE>
-31-
Exchange Notes may have such distinctive series designations and such changes in
the form thereof as are specified in the Issuer Request referred to in the
preceding sentence.
Section 2.02. Form and Dating.
---------------
The Notes and the Trustee's certificate of authentication with respect
thereto shall be substantially in the form set forth in Exhibit A, which is
---------
incorporated in and forms a part of this Indenture. The Notes may have
notations, legends or endorsements required by law, rule or usage to which the
Issuers are subject. Any such notations, legends or endorsements shall be
furnished to the Trustee in writing. Without limiting the generality of the
foregoing, Notes offered and sold to Qualified Institutional Buyers in reliance
on Rule 144A ("Rule 144A Notes") shall bear the legend and include the form of
assignment set forth in Exhibit B, Notes offered and sold in offshore
---------
transactions in reliance on Regulation S ("Regulation S Notes") shall bear the
legend and include the form of assignment set forth in Exhibit C, and Notes
---------
offered and sold to Institutional Accredited Investors in transactions exempt
from registration under the Securities Act not made in reliance on Rule 144A or
Regulation S ("Other Notes") shall be represented by Physical Notes bearing the
Private Placement Legend. Each Note shall be dated the date of its
authentication.
The terms and provisions contained in the Notes shall constitute, and
are expressly made, a part of this Indenture and, to the extent applicable, the
Issuers and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and agree to be bound thereby.
The Notes may be presented for registration of transfer and exchange
at the offices of the Registrar.
Section 2.03. Execution and Authentication.
----------------------------
Two Officers shall sign, or one Officer shall sign and one Officer
(each of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Notes for each of the Issuers by manual
or facsimile signature.
If an Officer whose signature is on a Note was an Officer at the time
of such execution but no longer holds that
<PAGE>
-32-
office at the time the Trustee authenticates the Note, the Note shall be valid
nevertheless.
No Note shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder. Notwithstanding the foregoing, if
any Note shall have been authenticated and delivered hereunder but never issued
and sold by the Issuers, and the Issuers shall deliver such Note to the Trustee
for cancellation as provided in Section 2.12, for all purposes of this Indenture
such Note shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits of this Indenture.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Issuers to authenticate the Notes. Unless otherwise provided in the
appointment, an authenticating agent may authenticate the Notes whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Issuers and Affiliates of the Issuers.
Each Paying Agent is designated as an authenticating agent for purposes of this
Indenture.
The Notes shall be issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof.
Section 2.04. Registrar and Paying Agent.
--------------------------
The Issuers shall maintain an office or agency (which shall be located
in the Borough of Manhattan in The City of New York, State of New York) where
Notes may be presented for registration of transfer or for exchange (the
"Registrar"), and an office or agency where Notes may be presented for payment
(the "Paying Agent") and an office or agency where notices and demands to or
upon the Issuers, if any, in respect of the Notes and this Indenture may be
served. The Registrar shall keep a register of the Notes and of their transfer
and exchange. The Issuers may have one or more additional Paying Agents. The
term "Paying Agent" includes any additional Paying Agent. Neither the Issuers
nor any Affiliate thereof may act as Paying Agent. The Issuers
<PAGE>
-33-
may change any Paying Agent or Registrar without notice to any Noteholder.
The Issuers shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which shall incorporate the provisions of
the TIA. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Issuers shall notify the Trustee of the name and
address of any such Agent. If the Issuers fail to maintain a Registrar or
Paying Agent, or fail to give the foregoing notice, the Trustee shall act as
such and shall be entitled to compensation in accordance with Section 7.07.
The Issuers initially appoint the Trustee as Registrar, Paying Agent
and agent for service of notices and demands in connection with the Notes and
this Indenture.
Section 2.05. Paying Agent to Hold Money in Trust.
-----------------------------------
Each Paying Agent shall hold in trust for the benefit of the
Noteholders or the Trustee all money held by the Paying Agent for the payment of
principal of or premium or interest on the Notes (whether such money has been
paid to it by the Issuers or any other obligor on the Notes), and the Issuers
and the Paying Agent shall notify the Trustee of any Default by the Issuers (or
any other obligor on the Notes) in making any such payment. Money held in trust
by the Paying Agent need not be segregated except as required by law and in no
event shall the Paying Agent be liable for any interest on any money received by
it hereunder. The Issuers at any time may require the Paying Agent to pay all
money held by it to the Trustee and account for any funds disbursed and the
Trustee may at any time during the continuance of any Event of Default specified
in Section 6.01(1) or (2), upon written request to the Paying Agent, require
such Paying Agent to pay forthwith all money so held by it to the Trustee and to
account for any funds disbursed. Upon making such payment, the Paying Agent
shall have no further liability for the money delivered to the Trustee.
Section 2.06. Noteholder Lists.
----------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Noteholders. If the Trustee is not the Registrar, the Issuers shall furnish
to the Trustee at least five Business Days before each Interest Payment Date,
and
<PAGE>
-34-
at such other times as the Trustee may request in writing, a list in such form
and as of such date as the Trustee may reasonably require of the names and
addresses of the Noteholders.
Section 2.07. Transfer and Exchange.
---------------------
Subject to Sections 2.16 and 2.17, when Notes are presented to the
Registrar with a request from the Holder of such Notes to register a transfer or
to exchange them for an equal principal amount of Notes of other authorized
denominations, the Registrar shall register the transfer as requested if the
requirements of Section 8-401(a) of the New York Uniform Commercial Code are
met. To permit registrations of transfers and exchanges, the Issuers shall
issue and execute and the Trustee shall authenticate new Notes evidencing such
transfer or exchange at the Registrar's request. No service charge shall be
made to the Noteholder for any registration of transfer or exchange. The
Registrar may require from the noteholder payment of a sum sufficient to cover
any transfer taxes or other governmental charge that may be imposed in relation
to a transfer or exchange, but this provision shall not apply to any exchange
pursuant to Section 2.11, 3.06, 4.10, 4.19 or 8.05 (in which events the Issuers
shall be responsible for the payment of such taxes). The Registrar shall not be
required to exchange or register a transfer of any Note for a period of 15 days
immediately preceding the selection of Notes to be redeemed or any Note selected
for redemption.
Any Holder of the Global Note shall, by acceptance of such Global
Note, agree that transfers of the beneficial interests in such Global Note may
be effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Global Note shall be required to be reflected in a book entry.
Each Holder of a Note agrees to indemnify the Issuers and the Trustee
against any liability that may result from the transfer, exchange or assignment
of such Holder's Note in violation of any provision of this Indenture and/or
applicable U.S. Federal or state securities law.
Except as expressly provided herein, neither the Trustee nor the
Registrar shall have any duty to monitor the Issuers' compliance with or have
any responsibility with respect to the Issuers' compliance with any Federal or
state securities laws.
<PAGE>
-35-
Section 2.08. Replacement Notes.
-----------------
If a mutilated Note is surrendered to the Registrar or the Trustee, or
if the Holder of a Note claims that the Note has been lost, destroyed or
wrongfully taken, the Issuers shall issue and the Trustee shall authenticate a
replacement Note if the Holder of such Note furnishes to the Issuers and the
Trustee evidence reasonably acceptable to them of the ownership and the
destruction, loss or theft of such Note and if the requirements of Section 8-405
of the New York Uniform Commercial Code are met. If required by the Trustee or
the Issuers, an indemnity bond shall be posted, sufficient in the judgment of
both to protect the Issuers, the Trustee or any Paying Agent from any loss that
any of them may suffer if such Note is replaced. The Issuers may charge such
Holder for the Issuers' reasonable out-of-pocket expenses in replacing such Note
and the Trustee may charge the Issuers for the Trustee's expenses (including,
without limitation, attorneys' fees and disbursements) in replacing such Note.
Every replacement Note shall constitute an additional contractual obligation of
the Issuers.
Section 2.09. Outstanding Notes.
-----------------
The Notes outstanding at any time are all Notes that have been
authenticated by the Trustee except for (a) those canceled by it, (b) those
delivered to it for cancellation, (c) to the extent set forth in Sections 9.01
and 9.02, on or after the date on which the conditions set forth in Section 9.01
or 9.02 have been satisfied, those Notes theretofore authenticated and delivered
by the Trustee hereunder and (d) those described in this Section 2.09 as not
outstanding. Subject to Section 2.10, a Note does not cease to be outstanding
because an Issuer or one of its Affiliates holds the Note.
If a Note is replaced pursuant to Section 2.08, it ceases to be
outstanding unless the Trustee receives written notice that the replaced Note is
held by a bona fide purchaser in whose hands such Note is a legal, valid and
binding obligation of the Issuers.
If the Paying Agent holds, in its capacity as such, on any Maturity
Date or on any optional redemption date, money sufficient to pay all accrued
interest and principal with respect to the Notes payable on that date and is not
prohibited from paying such money to the Holders thereof pursuant to the terms
of
<PAGE>
-36-
this Indenture, then on and after that date such Notes cease to be outstanding
and interest on them ceases to accrue.
Section 2.10. Treasury Notes.
--------------
In determining whether the Holders of the required principal amount of
Notes have concurred in any declaration of acceleration or notice of Default or
direction, waiver or consent or any amendment, modification or other change to
this Indenture, Notes owned by an Issuer or any Affiliate of an Issuer shall be
disregarded as though they were not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
declaration, notice, direction, waiver or consent or any amendment, modification
or other change to this Indenture, only Notes as to which a Responsible Officer
of the Trustee has received an Officers' Certificate stating that such Notes are
so owned shall be so disregarded. Notes so owned which have been pledged in
good faith shall not be disregarded if the pledgee establishes the pledgee's
right so to act with respect to the Notes and that the pledgee is not either of
the Issuers, any other obligor or guarantor on the Notes or any of their
respective Affiliates.
Section 2.11. Temporary Notes.
---------------
Until definitive Notes are prepared and ready for delivery, the
Issuers may prepare and the Trustee shall authenticate temporary Notes.
Temporary Notes shall be substantially in the form of definitive Notes but may
have variations that the Issuers consider appropriate for temporary Notes.
Without unreasonable delay, the Issuers shall prepare and the Trustee shall
authenticate definitive Notes in exchange for temporary Notes. Until such
exchange, temporary Notes shall be entitled to the same rights, benefits and
privileges as definitive Notes.
Section 2.12. Cancellation.
------------
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall (subject to the record-
retention requirements of the Exchange Act) dispose of cancelled Notes in
accordance with its standard disposition
<PAGE>
-37-
policies in effect at the time. The Issuers may not reissue or resell, or issue
new Notes to replace, Notes that the Issuers have redeemed or paid, or that have
been delivered to the Trustee for cancellation.
Section 2.13. Defaulted Interest.
------------------
If the Issuers default on a payment of interest on the Notes, they
shall pay the defaulted interest, plus (to the extent permitted by law) any
interest payable on the defaulted interest, in accordance with the terms hereof,
to the Persons who are noteholders on a subsequent special record date, which
date shall be at least five Business Days prior to the payment date. The
Issuers shall fix such special record date and payment date and provide the
Trustee at least 20 days notice of the proposed amount of defaulted interest to
be paid and the special payment date and at the same time the Issuers shall
deposit with the Trustee the aggregate amount proposed to be paid in respect of
such defaulted interest. At least 15 days before such special record date, the
Issuers shall mail to each noteholder a notice that states the special record
date, the payment date and the amount of defaulted interest, and interest
payable on defaulted interest, if any, to be paid. The Issuers may make payment
of any defaulted interest in any other lawful manner not inconsistent with the
requirements (if applicable) of any securities exchange on which the Notes may
be listed and, upon such notice as may be required by such exchange, if, after
written notice given by the Issuers to the Trustee of the proposed payment
pursuant to this sentence, such manner of payment shall be deemed practicable by
the Trustee.
Section 2.14. CUSIP Number.
------------
The Issuers in issuing the Notes may use a "CUSIP" number, and if so,
such CUSIP number shall be included in notices of redemption or exchange as a
convenience to Holders; provided that any such notice may state that no
--------
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes, and that reliance may be placed only on
the other identification numbers printed on the Notes. The Issuers shall
promptly notify the Trustee of any such CUSIP number used by the Issuers in
connection with the issuance of the Notes and of any change in the CUSIP number.
Section 2.15. Deposit of Moneys.
-----------------
<PAGE>
-38-
Prior to 10:00 a.m., New York City time, on each Interest Payment Date
and Maturity Date, the Issuers shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date or Maturity Date, as the case may be, in a timely
manner which permits the Trustee to remit payment to the Holders on such
Interest Payment Date or Maturity Date, as the case may be. The principal and
interest on Global Notes shall be payable to the Depository or its nominee, as
the case may be, as the sole registered owner and the sole holder of the Global
Notes represented thereby. The principal and interest on Physical Notes shall
be payable at the office of the Paying Agent.
Section 2.16. Book-Entry Provisions for Global Notes.
--------------------------------------
(a) Rule 144A Notes initially shall be represented by one or more
notes in registered, global form without interest coupons (collectively, the
"Restricted Global Note"). Regulation S Notes initially shall be represented by
one or more notes in registered, global form without interest coupons
(collectively, the "Regulation S Global Note," and, together with the Restricted
Global Note and any other global notes representing Notes, the "Global Notes").
The Global Notes shall bear legends as set forth in Exhibit D. The Global Notes
---------
initially shall (i) be registered in the name of the Depository or the nominee
of such Depository, in each case for credit to an account of an Agent Member
(or, in the case of the Regulation S Global Notes, of Euroclear System
("Euroclear") and Cedel Bank, S.A. ("CEDEL")), (ii) be delivered to the Trustee
as custodian for such Depository and (iii) bear legends as set forth in Exhibit
-------
B with respect to Restricted Global Notes and Exhibit C with respect to
- - ---------
Regulation S Global Notes.
Members of, or direct or indirect participants in, the Depository
("Agent Members") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Notes, and the Depository may be treated by the
Issuers, the Trustee and any agent of the Issuers or the Trustee as the absolute
owner of the Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Trustee or any agent of the Issuers
or the Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depository or impair, as between the Depository
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Note.
<PAGE>
-39-
(b) Transfers of Global Notes shall be limited to transfer in whole,
but not in part, to the Depository, its successors or their respective nominees.
Interests of beneficial owners in the Global Notes may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository and the provisions of Section 2.17. In addition, a Global Note shall
be exchangeable for Physical Notes if (i) the Depository (x) notifies the
Issuers that it is unwilling or unable to continue as depository for such Global
Note and the Issuers thereupon fail to appoint a successor depository or (y) has
ceased to be a clearing agency registered under the Exchange Act, (ii) the
Issuers, at their option, notify the Trustee in writing that they elect to cause
the issuance of such Physical Notes or (iii) there shall have occurred and be
continuing a Default or an Event of Default with respect to the Notes. In all
cases, Physical Notes delivered in exchange for any Global Note or beneficial
interests therein shall be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depository (in accordance with
its customary procedures).
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Issuers
shall execute, and the Trustee shall authenticate and make available for
delivery, one or more Physical Notes of like tenor and amount.
(d) In connection with the transfer of Global Notes as an entirety to
beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to
be surrendered to the Trustee for cancellation, and the Issuers shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in writing in exchange for its beneficial interest
in the Global Notes, an equal aggregate principal amount of Physical Notes of
authorized denominations.
(e) Any Physical Note constituting a Rule 144A Note delivered in
exchange for an interest in a Global Note pursuant to paragraph (b), (c) or (d)
shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section
2.17, bear the Private Placement Legend or, in the case of the Regulation S
Global Note,
<PAGE>
-40-
the legend set forth in Exhibit C, in each case, unless the Issuers determine
---------
otherwise in compliance with applicable law.
(f) On or prior to the 40th day after the later of the commencement
of the offering of the Notes represented by a Regulation S Global Note and the
original issue date of such Notes (such period through and including such 40th
day, the "Restricted Period"), a beneficial interest in the Regulation S Global
Note may be held only through Euroclear or CEDEL, as indirect participants in
DTC, unless transferred to a Person who takes delivery in the form of an
interest in the corresponding Restricted Global Note, only upon receipt by the
Trustee of a written certification from the transferor to the effect that such
transfer is being made (i)(a) to a Person who the transferor reasonably believes
is a Qualified Institutional Buyer in a transaction meeting the requirements of
Rule 144A or (b) pursuant to another exemption from the registration
requirements under the Securities Act which is accompanied by an Opinion of
Counsel regarding the availability of such exemption and (ii) in accordance with
all applicable securities laws of any state of the United States or any other
jurisdiction.
(g) Beneficial interests in the Restricted Global Note may be
transferred to a Person who takes delivery in the form of an interest in the
Regulation S Global Note, whether before or after the expiration of the
Restricted Period, only if the transferor first delivers to the Trustee a
written certificate to the effect that such transfer is being made in accordance
with Rule 903 or 904 of Regulation S or Rule 144 (if available) and that, if
such transfer occurs prior to the expiration of the Restricted Period, the
interest transferred will be held immediately thereafter through Euroclear or
CEDEL.
(h) Any beneficial interest in one of the Global Notes that is
transferred to a Person who takes delivery in the form of an interest in another
Global Note shall, upon transfer, cease to be an interest in such Global Note
and become an interest in such other Global Note and, accordingly, shall
thereafter be subject to all transfer restrictions and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(i) The Holder of any Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take
<PAGE>
-41-
any action which a Holder is entitled to take under this Indenture or the Notes.
Section 2.17. Special Transfer Provisions.
---------------------------
(a) Transfers to Non-QIB Institutional Accredited Investors and Non-
---------------------------------------------------------------
U.S. Persons. The following provisions shall apply with respect to the
- ------------
registration of any proposed transfer of a Note constituting a Rule 144A Note to
any Institutional Accredited Investor which is not a QIB or to any Non-U.S.
Person:
(i) the Registrar shall register the transfer of any Note
constituting a Rule 144A Note, whether or not such Note bears the Private
Placement Legend, if (x) the requested transfer is after August 15, 1999 or
such other date as such Note shall be freely transferable under Rule 144 as
certified in an Officer's Certificate or (y) (1) in the case of a transfer
to an Institutional Accredited Investor which is not a QIB (excluding Non-
U.S. Persons), the proposed transferee has delivered to the Registrar a
certificate substantially in the form of Exhibit E hereto or (2) in the
---------
case of a transfer to a Non-U.S. Person (including a QIB), the proposed
transferor has delivered to the Registrar a certificate substantially in
the form of Exhibit F hereto; provided that in the case of a transfer of a
--------- --------
Note bearing the Private Placement Legend for a Note not bearing the
Private Placement Legend, the Registrar has received an Officers'
Certificate authorizing such transfer; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in a Global Note, upon receipt by the Registrar of (x)
the certificate, if any, required by paragraph (i) above and (y)
instructions given in accordance with the Depository's and the Registrar's
procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in a Global Note to be transferred,
and (b) the Registrar shall reflect on its books and records the date and an
increase in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note transferred or
the Issuers shall execute and the Trustee shall authenticate and make available
for delivery one or more Physical Notes of like tenor and amount.
<PAGE>
-42-
(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed registration of transfer of a Note
constituting a Rule 144A Note to a QIB (excluding transfers to Non-U.S.
Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has checked the box provided for on
such Holder's Note stating, or has otherwise advised the Issuers and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on such Holder's Note stating, or has otherwise advised the
Issuers and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Issuers as it has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that
the transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to
be transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Restricted Global Note, upon receipt by the
Registrar of instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Restricted
Global Note in an amount equal to the principal amount of the Physical
Notes to be transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) Private Placement Legend. Upon the registration of transfer,
------------------------
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the registration of transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i) it has received the Officers' Certificate
required by paragraph (a)(i)(x) of this Section 2.17, (ii) there is delivered to
the Registrar an Opinion
<PAGE>
-43-
of Counsel reasonably satisfactory to the Issuers to the effect that neither
such legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act or (iii) such Note
has been sold pursuant to an effective registration statement under the
Securities Act and the Registrar has received an Officers' Certificate from the
Issuers to such effect.
(d) General. By its acceptance of any Note bearing the Private
-------
Placement Legend, each Holder of such Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain for a period of two years copies of all
letters, notices and other written communications received pursuant to Section
2.16 or this Section 2.17. The Issuers shall have the right to inspect and make
copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable notice to the Registrar.
Section 2.18. Computation of Interest.
-----------------------
Interest on the Notes shall be computed on the basis of a 360 day year
of twelve 30 day months.
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee.
------------------
If the Issuers elect to redeem Notes pursuant to paragraph 5 of the
Notes, at least 45 days prior to the Redemption Date or such shorter period as
the Trustee may agree to (which agreement shall not be unreasonably withheld)
the Issuers shall notify the Trustee in writing of the Redemption Date, the
principal amount of Notes to be redeemed and the redemption price, and deliver
to the Trustee an Officers' Certificate stating that such redemption will comply
with the conditions contained in paragraph 5 of the Notes, as appropriate.
<PAGE>
-44-
Section 3.02. Selection by Trustee of Notes to Be
Redeemed.
---------
In the event that fewer than all of the Notes are to be redeemed, the
Trustee shall select the Notes to be redeemed, if the Notes are listed on a
national securities exchange, in accordance with the rules of such exchange or,
if the Notes are not so listed, either on a pro rata basis or by lot, or such
--- ----
other method as it shall deem fair and equitable; provided, however, that if a
-------- -------
partial redemption is made with the proceeds of an Equity Offering, selection of
the Notes or portion thereof for redemption shall be made by the Trustee on a
pro rata basis, unless such a method is prohibited. The Trustee shall promptly
- --- ----
notify the Issuers of the Notes selected for redemption and, in the case of any
Notes selected for partial redemption, the principal amount thereof to be
redeemed. The Trustee may select for redemption portions of the principal of
the Notes that have denominations larger than $1,000. Notes and portions
thereof the Trustee selects shall be redeemed in amounts of $1,000 or whole
multiples of $1,000. For all purposes of this Indenture unless the context
otherwise requires, provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
--------------------
At least 30 days, and no more than 60 days, before a Redemption Date,
the Issuers shall mail, or cause to be mailed, a notice of redemption by first-
class mail to each Holder of Notes to be redeemed at his or her last address as
the same appears on the registry books maintained by the Registrar pursuant to
Section 2.03 hereof.
The notice shall identify the Notes to be redeemed (including the
CUSIP numbers thereof) and shall state:
(1) the Redemption Date and the amount of premium and accrued interest
to be paid;
(2) the redemption price and the amount of premium and accrued
interest to be paid;
(3) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the Redemption Date
and upon surrender of
<PAGE>
-45-
such Note, a new Note or Notes in principal amount equal to the unredeemed
portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(6) that unless the Issuers Default in making the redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
Redemption Date;
(7) the provision of paragraph 5 of the Notes pursuant to which the
Notes called for redemption are being redeemed; and
(8) the aggregate principal amount of Notes that are being redeemed.
At the Issuers' written request made at least five Business Days prior
to the date on which notice is to be given, the Trustee shall give the notice of
redemption in the Issuers' name and at the Issuers' sole expense.
Section 3.04. Effect of Notice of Redemption.
------------------------------
Once the notice of redemption described in Section 3.03 is mailed,
Notes called for redemption become due and payable on the Redemption Date and at
the redemption price, including any premium, plus interest accrued to the
Redemption Date. Upon surrender to the Paying Agent, such Notes shall be paid
at the redemption price, including any premium, plus interest accrued to the
Redemption Date, provided that if the Redemption Date is after a regular record
--------
date and on or prior to the Interest Payment Date, the accrued interest shall be
payable to the Holder of the redeemed Notes registered on the relevant record
date, and provided, further, that if a Redemption Date is a Legal Holiday,
-------- -------
payment shall be made on the next succeeding Business Day and no interest shall
accrue for the period from such Redemption Date to such succeeding Business Day.
Section 3.05. Deposit of Redemption Price.
---------------------------
On or prior to 10:00 a.m., New York City time, on each Redemption
Date, the Issuers shall deposit with the Paying Agent in immediately available
funds money sufficient to pay the
<PAGE>
-46-
redemption price of and accrued interest on all Notes to be redeemed on that
date other than Notes or portions thereof called for redemption on that date
which have been delivered by the Issuers to the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay the
redemption price of and accrued interest on Notes called for redemption shall
have been made available in accordance with the preceding paragraph, the Notes
called for redemption will cease to accrue interest and the only right of the
Holders of such Notes will be to receive payment of the redemption price of and,
subject to the first proviso in Section 3.04, accrued and unpaid interest on
such Notes to the Redemption Date. If any Note surrendered for redemption shall
not be so paid because money sufficient to pay the redemption price shall not
have been made available, interest will be paid, from the Redemption Date until
such redemption payment is made, on the unpaid principal of the Note and any
interest not paid on such unpaid principal, in each case, at the rate and in the
manner provided in the Notes.
Section 3.06. Notes Redeemed in Part.
----------------------
Upon surrender of a Note that is redeemed in part, the Trustee shall
authenticate for a Holder a new Note equal in principal amount to the unredeemed
portion of the Note surrendered.
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes.
----------------
The Issuers shall pay the principal of and interest (including all
Additional Interest as provided in the Registration Rights Agreement) on the
Notes on the dates and in the manner provided in the Notes, the Registration
Rights Agreement and this Indenture. An installment of principal or interest
shall be considered paid on the date it is due if the Trustee or Paying Agent
holds on that date money designated for and sufficient to pay such installment.
The Issuers shall pay interest on overdue principal (including post-
petition interest in a proceeding under any
<PAGE>
-47-
bankruptcy law), and overdue interest, to the extent lawful, at the rate
specified in the Notes.
Section 4.02. SEC Reports.
-----------
(a) The Issuers will file with the SEC all information, documents and
reports to be filed with the SEC pursuant to Section 13 or 15(d) of the Exchange
Act whether or not the Issuers are required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act unless the SEC does not permit such
filing. The Issuers (at their own expense) will file with the Trustee within 15
days after they file them with the SEC, copies of the annual reports and of the
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) which the
Issuers file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act.
Upon qualification of this Indenture under the TIA, the Issuers shall also
comply with the provisions of TIA (S) 314(a). Delivery of such reports,
information and documents to the Trustee is for informational purposes only and
the Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Issuers' compliance with any of their covenants hereunder
(as to which the Trustee is entitled to rely exclusively on Officers'
Certificates).
(b) At the Issuers' expense, regardless of whether the Issuers are
required to furnish such reports and other information referred to in paragraph
(a) above to their equityholders pursuant to the Exchange Act, the Issuers shall
cause such reports and other information to be mailed to the Holders at their
addresses appearing in the register of Notes maintained by the Registrar within
15 days after they file them with the SEC.
(c) The Issuers shall, upon request, provide to any Holder of Notes
or any prospective transferee of any such Holder any information concerning the
Issuers (including financial statements) necessary in order to permit such
Holder to sell or transfer Notes in compliance with Rule 144A under the
Securities Act; provided, however, that the Issuers shall not be required to
-------- -------
furnish such information in connection with any request made on or after the
date which is two years from the later of (i) the date such Note (or any
predecessor Note) was acquired from the Issuers or (ii) the date such Note (or
any predecessor Note) was
<PAGE>
-48-
last acquired from an "affiliate" of the Issuers within the meaning of Rule 144
under the Securities Act.
Section 4.03. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Issuers covenant (to the extent that they may lawfully do so) that
they shall not at any time insist upon, or plead (as a defense or otherwise) or
in any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law which would prohibit or forgive the
Issuers from paying all or any portion of the principal of, premium, if any,
and/or interest on the Notes as contemplated herein, wherever enacted, now or at
any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that they may lawfully do so)
the Issuers hereby expressly waive all benefit or advantage of any such law, and
covenant that they will not hinder, delay or impede the execution of any power
herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
Section 4.04. Compliance Certificate.
----------------------
(a) The Issuers shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate (one of the signers on
behalf of each of the Issuers of which shall be the principal executive officer,
principal financial officer or principal accounting officer of such Issuer)
stating that (i) the Issuers have obtained an Opinion of Counsel relating to the
validity and perfection of the security interests granted pursuant to the Pledge
Agreement and (ii) a review of the activities of the Issuers and their
Subsidiaries during such fiscal year has been made under the supervision of the
signing Officers with a view to determining whether the Issuers have kept,
observed, performed and fulfilled their obligations under this Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge the Issuers have kept, observed, performed and
fulfilled each and every covenant contained in this Indenture and are not in
Default in the performance or observance of any of the terms, provisions and
conditions hereof (or, if a Default or Event of Default shall have occurred and
is continuing, describing all such Defaults or Events of Default of which he or
she may have knowledge and what action the Issuers are taking or propose to take
with respect thereto) and that to the best of his or her knowledge no event has
occurred and remains in existence
<PAGE>
-49-
by reason of which payments on account of the principal of or interest, if any,
on the Notes is prohibited or if such event has occurred, a description of the
event and what action the Issuers are taking or propose to take with respect
thereto.
(b) The Issuers will, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Issuers are taking or propose to take with
respect thereto.
(c) The Issuers' fiscal year currently ends on December 31. The
Issuers will provide notice to the Trustee of any change in their fiscal year.
Section 4.05. Taxes.
-----
The Issuers shall, and shall cause each of their Subsidiaries to, pay
prior to delinquency all material taxes, assessments, and governmental levies
except as contested in good faith and by appropriate proceedings.
Section 4.06. Limitation on Additional Indebtedness.
-------------------------------------
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, incur any Indebtedness (including
Acquired Indebtedness); provided that if no Default or Event of Default shall
--------
have occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness, Insight Ohio or any of the Issuers' Restricted
Subsidiaries may incur Indebtedness (including Acquired Indebtedness) if after
giving effect to the incurrence of such Indebtedness and the receipt and
application of the proceeds thereof, the Consolidated Leverage Ratio of the
Issuers is less than 7 to 1.
Notwithstanding the foregoing, Insight Ohio and the Issuers'
Restricted Subsidiaries may incur Permitted Indebtedness; provided that such
--------
Person will not incur any Permitted Indebtedness that ranks junior in right of
payment to the Notes that has a maturity or mandatory sinking fund payment prior
to the maturity of the Notes.
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, incur any Indebtedness which by its
<PAGE>
-50-
terms (or by the terms of any agreement governing such Indebtedness) is
subordinated in right of payment to any other Indebtedness of the Issuers or
such Restricted Subsidiary unless such Indebtedness is also by its terms (or by
the terms of any agreement governing such Indebtedness) made expressly
subordinate in right of payment to the Notes or the Guarantee of such Guarantor,
as the case may be, pursuant to subordination provisions that are substantively
identical to the subordination provisions of such Indebtedness (or such
agreement) that are most favorable to the holders of any other Indebtedness of
the Issuers or such Restricted Subsidiary, as the case may be.
For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Indebtedness or is entitled to be incurred pursuant to
the first paragraph of this Section 4.06, the Issuers shall, in their sole
discretion, classify such item of Indebtedness in any manner that complies with
this covenant and such item of Indebtedness shall be treated as having been
incurred pursuant to only one of such clauses or pursuant to the first paragraph
hereof.
Section 4.07. Enforcement of Rights.
---------------------
In the event that the Series A Preferred Interests become mandatorily
redeemable, Coaxial will exercise all rights and remedies available to enforce
Coaxial's rights with respect to the Series A Preferred Interests.
Section 4.08. Limitation on Capital Stock of Restricted Subsidiaries.
------------------------------------------------------
The Issuers will not (i) sell, pledge, hypothecate or otherwise convey
or dispose of any Capital Stock of a Restricted Subsidiary of an Issuer (other
than under the Senior Credit Facility or pursuant to the Pledge Agreement) or
(ii) permit any of their Restricted Subsidiaries to issue any Capital Stock,
other than to an Issuer or a Wholly Owned Subsidiary of an Issuer, provided,
--------
that Insight Ohio may issue additional common membership interests to Insight in
consideration of capital contributions made by Insight. The foregoing
restrictions shall not apply to an Asset Sale made in compliance with Section
4.10 hereof or the issuance of Preferred Stock in compliance with Section 4.23
hereof.
Section 4.09. Limitation on Restricted Payments.
---------------------------------
<PAGE>
-51-
The Issuers will not make, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such Restricted
Payment;
(b) immediately after giving pro forma effect to such Restricted
--- -----
Payment, Insight Ohio and the Issuers' Restricted Subsidiaries could incur $1.00
of additional Indebtedness (other than Permitted Indebtedness) under Section
4.06 hereof; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date does
not exceed the sum of (1) 100% of the Issuers' Cumulative EBITDA minus 1.4 times
the Cumulative Consolidated Interest Expense of the Issuers, (2) 100% of the
aggregate Net Proceeds received by an Issuer from the issue or sale after the
Issue Date of Capital Stock (other than Disqualified Capital Stock or Capital
Stock of an Issuer issued to any Subsidiary of an Issuer) of an Issuer or any
Indebtedness or other securities of an Issuer convertible into or exercisable or
exchangeable for Capital Stock (other than Disqualified Capital Stock) of an
Issuer which has been so converted, exercised or exchanged, as the case may be,
(3) without duplication of any amounts included in clause (c)(2) above, 100% of
the aggregate Net Proceeds received by an Issuer from any equity contribution
from a holder of an Issuer's Capital Stock, excluding, in the case of clauses
(c)(2) and (3), any Net Proceeds from an Equity Offering to the extent used to
redeem the Notes, (4) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Issue Date, an
amount (to the extent not included in the computation of Consolidated Net
Income) equal to the lesser of: (x) the return of capital with respect to such
Investment and (y) the amount of such Investment which was treated as a
Restricted Payment, in either case, less the cost of the disposition of such
Investment and (5) so long as the Designation Amount thereof was treated as a
Restricted Payment made after the Issue Date, with respect to any Unrestricted
Subsidiary that has been redesignated as a Restricted Subsidiary after the Issue
Date in accordance with the provisions of this Indenture, an
<PAGE>
-52-
Issuer's proportionate interest in an amount equal to the excess of (x) the
total assets of such Subsidiary, valued on an aggregate basis at fair
market value, over (y) the total liabilities of such Subsidiary, determined
in accordance with GAAP (and provided that such amount shall not in any
--------
case exceed the Designation Amount with respect to such Restricted
Subsidiary upon its Designation). For purposes of determining under this
clause (c) the amount expended for Restricted Payments, cash distributed
shall be valued at the face amount thereof and property other than cash
shall be valued at its fair market value.
The provisions of this covenant shall not prohibit (i) the payment of
any distribution within 60 days after the date of declaration thereof, if at
such date of declaration such payment would comply with the provisions of this
Indenture, (ii) the repurchase, redemption or other acquisition or retirement of
any shares of Capital Stock of an Issuer or Indebtedness subordinated to the
Notes by conversion into, or by or in exchange for, shares of Capital Stock of
an Issuer (other than Disqualified Capital Stock), or out of the Net Proceeds of
the substantially concurrent sale (other than to a Subsidiary of an Issuer) of
other shares of Capital Stock of an Issuer (other than Disqualified Capital
Stock); provided, however, that any such Net Proceeds or the value of any
-------- -------
Capital Stock issued in exchange for such shares or Indebtedness are excluded
from clause (c)(2) of the preceding paragraph (and were not included therein at
any time), (iii) the redemption or retirement of Indebtedness of an Issuer
subordinated to the Notes in exchange for, by conversion into, or out of the Net
Proceeds of, a substantially concurrent sale or incurrence of Indebtedness of an
Issuer (other than any Indebtedness owed to a Subsidiary) that is contractually
subordinated in right of payment to the Notes to at least the same extent as the
Indebtedness being redeemed or retired, (iv) the retirement of any shares of
Disqualified Capital Stock of an Issuer by conversion into, or by exchange for,
shares of Disqualified Capital Stock of an Issuer, or out of the Net Proceeds of
the substantially concurrent sale (other than to a Subsidiary of an Issuer) of
other shares of Disqualified Capital Stock of an Issuer; provided, however, that
-------- -------
any such Net Proceeds or the value of any Capital Stock issued in exchange for
such shares are excluded from clause (c)(2) of the preceding paragraph (and were
not included therein at any time), (v) whether or not a Default or Event of
Default shall have occurred and be continuing or occur immediately after giving
effect thereto, in amounts necessary to make payments on the
<PAGE>
-53-
Notes and Discount Notes (x) Preferred Payments from Insight Ohio and (y) Pass
Through Dividends by Coaxial, (vi) except if a Default or Event of Default shall
have occurred and be continuing, Tax Distributions, (vii) management fees and
reimbursement of expenses payable to Insight pursuant to the Operating Agreement
provided that (i) the Issuers and their Restricted Subsidiaries could incur at
least $1.00 of additional Indebtedness (other than Permitted Indebtedness) under
Section 4.06 hereof and (ii) no Default or Event of Default shall have occurred
and be continuing in the case of both clauses (i) and (ii) of this clause (vii)
at (x) the time of payment of such management fee and (y) at the Reported
Period, (viii) the purchase of the Notes pursuant to Sections 4.10, 4.19 and
4.24 hereof and (ix) the distribution by Phoenix of any of the Excluded Assets;
provided that in calculating the aggregate amount of Restricted Payments made
subsequent to the Issue Date for purposes of clause (c) of the immediately
preceding paragraph, amounts expended pursuant to clauses (i), (vi) and (viii)
shall be included in such calculation.
Section 4.10. Limitation on Certain Asset Sales.
---------------------------------
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Issuer or such
applicable Restricted Subsidiary, as the case may be, receives consideration at
the time of such sale or other disposition at least equal to the fair market
value of the assets sold or otherwise disposed of; (ii) not less than 80% of the
consideration received by an Issuer or such applicable Restricted Subsidiary, as
the case may be, is in the form of cash or Cash Equivalents; provided, however,
-------- -------
that the amount of any (x) Indebtedness of an Issuer or any Restricted
Subsidiary that is actually assumed by the transferee in such Asset Sale and
from which an Issuer and the Restricted Subsidiaries are fully released shall be
deemed to be cash for purposes of determining the percentage of cash
consideration received by an Issuer or the Restricted Subsidiaries and (y) notes
or other similar obligations received by an Issuer or the Restricted
Subsidiaries from such transferee that are immediately converted, sold or
exchanged (or are converted, sold or exchanged within 30 days of the related
Asset Sale) by an Issuer or the Restricted Subsidiaries into cash shall be
deemed to be cash, in an amount equal to the net cash proceeds realized upon
such conversion, sale or exchange for purposes of determining the percentage of
cash consideration received by an Issuer or the Restricted Subsidiaries; and
(iii) the Asset Sale Proceeds received by an
<PAGE>
-54-
Issuer or such Restricted Subsidiary are applied (a) to the extent an Issuer or
any such Restricted Subsidiary, as the case may be, elects, or is required, to
prepay, repay or purchase indebtedness under the Senior Credit Facility within
180 days following the receipt of the Asset Sale Proceeds from any Asset Sale;
provided that any such repayment shall result in a permanent reduction of the
- --------
commitments thereunder (other than commitments under a revolving credit
facility) in an amount equal to the principal amount so repaid; or (b) to the
extent of the balance of Asset Sale Proceeds, after application, if any, as
described above, to the extent the Issuers elect, on a pro rata basis to the
--- ----
repayment of an amount of Other Pari Passu Debt not exceeding the Other Pari
Passu Debt Pro Rata Share (provided that any such repayment shall result in a
--------
permanent reduction of any commitment in respect thereof in an amount equal to
the principal amount so repaid) within 180 days following the receipt of the
Asset Sale Proceeds from any Asset Sale; or (c) to the extent of the balance of
Asset Sale Proceeds after application as described above, to the extent the
Issuers or a Restricted Subsidiary elect, to an investment in assets (including
Capital Stock or other securities purchased in connection with the acquisition
of Capital Stock or property of another Person) used or useful in businesses
similar, ancillary, complementary or otherwise related to the business of an
Issuer or any such Restricted Subsidiary as then conducted; provided that (1)
--------
such investment occurs or an Issuer or any such Restricted Subsidiary enters
into contractual commitments to make such investment, subject only to customary
conditions (other than the obtaining of financing), within 180 days following
receipt of such Asset Sale Proceeds and (2) Asset Sale Proceeds so contractually
committed are so applied within 270 days following the receipt of such Asset
Sale Proceeds; and (d) if on such 180th day in the case of clauses (iii)(a),
(iii)(b) and (iii)(c)(1) or on such 270th day in the case of clause (iii)(c)(2)
with respect to any Asset Sale, the Available Asset Sale Proceeds exceed $10.0
million, the Issuers shall apply an amount equal to the Available Asset Sale
Proceeds to an offer to repurchase the Senior Notes, at a purchase price in cash
equal to 100% of the principal amount thereof plus accrued and unpaid interest,
if any, to the purchase date (an "Excess Proceeds Offer"). If an Excess Proceeds
Offer is not fully subscribed, the Issuers may retain the portion of the
Available Asset Sale Proceeds not required to repurchase Notes.
If the Issuers are required to make an Excess Proceeds Offer, the
Issuers shall mail, within 30 days following the date
<PAGE>
-55-
specified in clause (iii)(d) above, a notice to the holders stating, among other
things: (1) that such holders have the right to require the Issuers to apply the
Available Asset Sale Proceeds to repurchase such Notes at a purchase price in
cash equal to 100% of the principal amount thereof plus accrued and unpaid
interest, if any, to the purchase date; (2) the purchase date, which shall be no
earlier than 30 days and not later than 45 days from the date such notice is
mailed; (3) the instructions that each holder must follow in order to have such
Notes purchased; and (4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the purchase of such Notes.
In the event of the transfer of substantially all of the property and
assets of the Issuers and their Restricted Subsidiaries as an entirety to a
Person in a transaction permitted under Section 5.01 hereof, the successor
Person shall be deemed to have sold the properties and assets of the Issuers and
their Restricted Subsidiaries not so transferred for purposes of this Section
4.10, and shall comply with the provisions of this Section 4.10 with respect to
such deemed sale as if it were an Asset Sale.
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and other securities laws and regulations thereunder to the extent
such laws and regulations are applicable in connection with the repurchase of
Notes pursuant to an Excess Proceeds Offer. To the extent that the provisions of
any securities laws or regulations conflict with the "Asset Sale" provisions of
this Indenture, the Issuers shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached their obligations under the
"Asset Sale" provisions of this Indenture by virtue thereof.
Section 4.11. Limitation on Transactions with Affiliates.
------------------------------------------
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate (each an "Affiliate Transaction") or extend, renew, waive or otherwise
modify in any material respect the terms of any Affiliate Transaction entered
into prior to the Issue Date unless (i) such Affiliate Transaction is between or
among the Issuers, or an Issuer and a Restricted Subsidiary of an Issuer; or
(ii) the
<PAGE>
-56-
terms of such Affiliate Transaction are fair and reasonable to an Issuer or such
Restricted Subsidiary, as the case may be, and the terms of such Affiliate
Transaction are substantially similar to the terms which could reasonably be
expected to be obtained by an Issuer or such Restricted Subsidiary, as the case
may be, in a comparable transaction made on an arm's-length basis between
unaffiliated parties. In any Affiliate Transaction (or any series of related
Affiliate Transactions which are similar or part of a common plan) involving an
amount or having a fair market value in excess of $3.0 million which is not
permitted under clause (i) above, an Issuer must obtain a resolution of the
Board of Directors of such Issuer certifying that such Affiliate Transaction
complies with clause (ii) above. In any Affiliate Transaction (or any series of
related Affiliate Transactions which are similar or part of a common plan)
involving an amount or having a fair market value in excess of $5.0 million
which is not permitted under clause (i) above, the Issuers must obtain a
favorable written opinion as to the fairness, from a financial point of view, of
such transaction or transactions, as the case may be, from an Independent
Financial Advisor.
The foregoing provisions will not apply to (i) any Restricted Payment
that is not prohibited by the provisions described under Section 4.09 hereof,
(ii) reasonable fees and compensation paid to and indemnity provided on behalf
of, officers, directors or employees of the Issuers or any Restricted Subsidiary
of an Issuer as determined in good faith by such Issuer's Board of Directors or
senior management, (iii) arrangements now or hereafter in effect between Insight
and third parties which arrangements can be used for the benefit of a Restricted
Subsidiary and (iv) any forgiveness or distribution by Phoenix of the Excluded
Assets.
Notwithstanding anything contained herein to the contrary, the terms
of the Operating Agreement and the indemnification provisions of the Close
Corporation Agreement and the performance by any party thereto of its
obligations thereunder shall not be considered an Affiliate Transaction.
Section 4.12. Limitations on Liens.
--------------------
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens) upon any property
or asset of an Issuer or any of their Restricted Subsidiaries or any shares of
Capital
<PAGE>
-57-
Stock or Indebtedness of any Restricted Subsidiary of an Issuer which owns
property or assets, now owned or hereafter acquired, unless (i) if such Lien
secures Indebtedness which is pari passu with the Notes (without giving effect
---- -----
to the principles of structural subordination), then the Notes are secured on an
equal and ratable basis with the obligations so secured until such time as such
obligation is no longer secured by a Lien or (ii) if such Lien secures
Indebtedness which is subordinated to any debt of a Restricted Subsidiary, any
such Lien shall be subordinated to the Lien granted to the holders of the Notes
to the same extent as such Indebtedness is subordinated to the Notes.
Section 4.13. [Intentionally Omitted]
Section 4.14. Limitation on Creation of Subsidiaries.
--------------------------------------
The Issuers will not create or acquire, and will not permit any of
their Restricted Subsidiaries to create or acquire, any Subsidiary other than
(i) a Restricted Subsidiary existing as of the Issue Date, or (ii) a Restricted
Subsidiary that is acquired or created in connection with the acquisition by an
Issuer of a related business or asset, or (iii) an Unrestricted Subsidiary;
provided, however, that each Restricted Subsidiary acquired or created pursuant
- -------- -------
to clause (ii) shall have executed a guarantee, satisfactory in form and
substance to the Trustee (and with such documentation relating thereto as the
Trustee shall require, including, without limitation a supplement or amendment
to this Indenture and opinions of counsel as to the enforceability of such
guarantee), pursuant to which such Restricted Subsidiary will become a
Guarantor. As of the Issue Date, the Issuers have no Restricted Subsidiaries,
other than Insight Ohio.
Section 4.15. [Intentionally Omitted]
Section 4.16. Limitation on Sale and Lease-Back Transactions.
----------------------------------------------
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, enter into any Sale and Lease-Back Transaction unless (i) the
consideration received in such Sale and Lease-Back Transaction is at least equal
to the fair market value of the property sold, as determined, in good faith, by
the Board of Directors of an Issuer and evidenced by a board resolution and (ii)
the Issuers could incur the Attributable
<PAGE>
-58-
Indebtedness in respect of such Sale and Lease-Back Transaction in compliance
with Section 4.06 hereof.
Section 4.17. Payments for Consent.
--------------------
The Issuers will not, and will not permit any of their Subsidiaries
to, directly or indirectly, pay or cause to be paid any consideration, whether
by way of interest, fee or otherwise, to any holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
or agreed to be paid to all holders of the Notes which so consent, waive or
agree to amend in the time frame set forth in solicitation documents relating to
such consent, waiver or agreement.
Section 4.18. Legal Existence.
---------------
Subject to Article 5 hereof, the Issuers shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) their
legal existence, and the corporate, partnership or other existence of each
Restricted Subsidiary, in accordance with the respective organizational
documents (as the same may be amended from time to time) of each Restricted
Subsidiary and the rights (charter and statutory), licenses and franchises of
the Issuers and their Restricted Subsidiaries; provided, however, that the
-------- -------
Issuers shall not be required to preserve any such right, license or franchise,
or the corporate, partnership, limited liability company or other existence of
any of their Restricted Subsidiaries if the Board of Directors of the Issuers
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Issuers and their Restricted Subsidiaries, taken
as a whole, and that the loss thereof is not adverse in any material respect to
the Holders.
Section 4.19. Change of Control.
-----------------
Upon the occurrence of a Change of Control, the Issuers shall be
obligated to make an offer to purchase (the "Change of Control Offer") each
holder's outstanding Notes at a purchase price (the "Change of Control Purchase
Price") equal to 101% of the principal amount thereof plus accrued and unpaid
interest, if any, to the Change of Control Payment Date (as defined) in
accordance with the procedures set forth below.
<PAGE>
-59-
Within 20 days of the occurrence of a Change of Control, the Issuers
shall (i) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or similar business news service in the United
States and (ii) send by first-class mail, postage prepaid, to the Trustee and to
each holder of the Notes, at the address appearing in the register maintained by
the Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 30 days nor later than 45 days from
the date such notice is mailed (the "Change of Control Payment Date"));
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Issuers Default in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Notes delivered for purchase, and a
statement that such holder is withdrawing his election to have such Notes
purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered;
<PAGE>
-60-
(8) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to the
extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Issuers. The Paying Agent shall promptly mail to each
holder of Notes so accepted payment in an amount equal to the purchase price for
such Notes, and the Issuers shall execute and issue, and the Trustee shall
promptly authenticate and mail to such holder, a new note equal in principal
amount to any unpurchased portion of the Notes surrendered; provided that each
--------
such new note shall be issued in an original principal amount in denominations
of $1,000 and integral multiples thereof.
If the Senior Credit Facility is in effect, or any amounts are owing
thereunder or in respect thereof, at the time of the occurrence of a Change of
Control, prior to the mailing of the notice to holders described in the second
preceding paragraph, but in any event within 20 days following any Change of
Control, the Issuers shall (i) repay in full all obligations and terminate all
commitments under or in respect of the Senior Credit Facility or offer to repay
in full all obligations and terminate all commitments under or in respect of the
Senior Credit Facility and repay the Indebtedness owed to each such lender who
has accepted such offer or (ii) obtain the requisite consents under the Senior
Credit Facility to permit the repurchase of the Notes as described above. The
Issuers must first comply with the covenant described in the preceding sentence
before it shall be required to purchase Notes in the event of a Change of
Control; provided that the Issuers' failure to comply with the covenant
--------
described in the preceding sentence constitutes an Event of Default described in
clause (3) under Section 6.01 hereof if not cured within 30 days after the
notice required by such clause. As a result of the foregoing, a holder of the
Notes may not be able to compel the Issuers to purchase the Notes unless the
Issuers are able at the time to refinance all of the obligations under or in
respect of the Senior Credit
<PAGE>
-61-
Facility or obtain requisite consents under the Senior Credit Facility.
If an Issuer or any Restricted Subsidiary thereof has issued any
outstanding (i) indebtedness that is subordinated in right of payment to the
Notes or senior in right of payment with respect to Indebtedness of Restricted
Subsidiaries (other than under the Senior Credit Facility) or (ii) Preferred
Stock, and an Issuer or such Restricted Subsidiary is required to make a Change
of Control Offer or to make a distribution with respect to such indebtedness or
Preferred Stock in the event of a change of control, the Issuers shall not
consummate any such offer or distribution with respect to such indebtedness or
Preferred Stock until such time as the Issuers shall have paid the Change of
Control Purchase Price in full to the holders of Notes that have accepted the
Issuers' change of control offer and shall otherwise have consummated the change
of control offer made to holders of the Notes; and the Issuers will not issue
Indebtedness that is subordinated in right of payment to the Notes or Preferred
Stock with change of control provisions requiring the payment of such
Indebtedness or Preferred Stock prior to the payment of the Notes in the event
of a Change in Control under this Indenture.
The Issuers will not be required to make a Change of Control Offer if
a third party makes the Change of Control Offer in the manner, at the time and
otherwise in compliance with the requirements set forth in this Indenture
applicable to a Change of Control Offer made by the Issuers and purchases all
Notes or portions thereof validly tendered and not withdrawn under such Change
of Control Offer.
The Issuers will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of this Indenture, the Issuers shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached their obligations under the "Change of Control" provisions of this
Indenture by virtue thereof.
Section 4.20. Maintenance of Office or Agency.
-------------------------------
<PAGE>
-62-
The Issuers shall maintain an office or agency where Notes may be
surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Issuers in respect of the
Notes and this Indenture may be served. The Issuers shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Issuers shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee as set forth in Section 12.02.
The Issuers may also from time to time designate one or more other offices
or agencies where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations. The Issuers shall
give prompt written notice to the Trustee of such designation or rescission and
of any change in the location of any such other office or agency.
The Issuers hereby initially designate the Corporate Trust Office of the
Trustee set forth in Section 12.02 as such office of the Issuers.
Section 4.21. Maintenance of Properties; Insurance; Books and Records;
Compliance with Law.
--------------------
(a) The Issuers shall, and shall cause each of their Restricted
Subsidiaries to, at all times cause all properties used or useful in the conduct
of their business to be maintained and kept in good condition, repair and
working order (reasonable wear and tear excepted) and supplied with all
necessary equipment, and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereto.
(b) The Issuers shall, and shall cause each of their Restricted
Subsidiaries to, maintain insurance (which may include self-insurance) in such
amounts and covering such risks as are usually and customarily carried with
respect to similar facilities according to their respective locations.
(c) The Issuers shall, and shall cause each of their Subsidiaries to, keep
proper books of record and account, in which full and correct entries shall be
made of all financial transactions and the assets and business of the Issuers
and each
<PAGE>
-63-
Subsidiary of the Issuers, in accordance with GAAP consistently applied to the
Issuers and their Subsidiaries taken as a whole.
(d) The Issuers shall and shall cause each of their Subsidiaries to comply
with all statutes, laws, ordinances or government rules and regulations to which
they are subject, non-compliance with which would materially adversely affect
the business, earnings, assets or financial condition of the Issuers and their
Subsidiaries taken as a whole.
Section 4.22. Limitation on Dividend and Other Payment Restrictions Affecting
Restricted Subsidiaries.
------------------------
The Issuers will not, and will not permit any of their Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of an Issuer to (a)(i) pay dividends or
make any other distributions to an Issuer or any Restricted Subsidiary of an
Issuer (A) on its Capital Stock or (B) with respect to any other interest or
participation in, or measured by, its profits or (ii) repay any Indebtedness or
any other obligation owed to an Issuer or any Restricted Subsidiary of an
Issuer, (b) make loans or advances or capital contributions to an Issuer or any
of its Restricted Subsidiaries or (c) transfer any of its properties or assets
to an Issuer or any of their Restricted Subsidiaries, except for such
encumbrances or restrictions existing under or by reason of (i) encumbrances or
restrictions existing on the Issue Date to the extent and in the manner such
encumbrances and restrictions are in effect on the Issue Date, (ii) (x) this
Indenture, the Notes and the Guarantees and (y) the Discount Notes Indenture,
the Discount Notes and the guarantees of the Discount Notes, (iii) applicable
law, (iv) the Senior Credit Facility, (v) any instrument governing Acquired
Indebtedness, which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person (including any Subsidiary of the Person), so
acquired, (vi) customary non-assignment provisions in leases or other agreements
entered in the ordinary course of business and consistent with past practices,
(vii) Refinancing Indebtedness; provided that such restrictions are no more
--------
restrictive than those contained in the agreements governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded, (viii)
customary restrictions in security agreements or
<PAGE>
-64-
mortgages securing Indebtedness of an Issuer or a Restricted Subsidiary to the
extent such restrictions restrict the transfer of the property subject to such
security agreements and mortgages or (ix) customary restrictions with respect to
a Restricted Subsidiary of an Issuer pursuant to an agreement that has been
entered into for the sale or disposition of all or substantially all of the
Capital Stock or assets of such Restricted Subsidiary.
Section 4.23. Limitation on Disqualified Capital Stock of Restricted
----------
Subsidiaries.
------------
The Issuers will not permit any of their Restricted Subsidiaries to
issue any Disqualified Capital Stock (except Disqualified Capital Stock issued
to an Issuer or a Wholly Owned Subsidiary of an Issuer) or permit any Person
(other than an Issuer or a Wholly Owned Subsidiary of an Issuer) to hold any
such Disqualified Capital Stock unless an Issuer or such Restricted Subsidiary
would be entitled to incur or assume Indebtedness under Section 4.06 hereof
(other than Permitted Indebtedness) in the aggregate principal amount equal to
the aggregate liquidation value of the Disqualified Capital Stock to be issued.
Section 4.24. Limitation on Asset Swaps.
-------------------------
The Issuers will not, and will not permit any Restricted Subsidiary
to, engage in any Asset Swaps which constitutes substantially all of the assets
of the Issuers, unless: (i) at the time of entering into the agreement to swap
assets and immediately after giving effect to the proposed Asset Swap, no
Default or Event of Default shall have occurred and be continuing or would occur
as a consequence thereof; and (ii) the Issuers have been informed in writing by
either S&P or Moody's that any Indebtedness of the Issuers (including the Notes)
will not be downgraded as a result of such Asset Swap. Notwithstanding clause
(ii) of the immediately preceding sentence, the Issuers will be allowed to
consummate an Asset Swap even if such Asset Swap will result in such a
downgrade, if within five days of the occurrence of such Asset Swap, the Issuers
make an offer to purchase Notes in accordance with the procedures described in
Section 4.19 hereof (the "Asset Swap Offer") at the following redemption prices
(expressed as percentages of the principal amount thereof) together, in each
case, with accrued and unpaid interest, if any, to the redemption
<PAGE>
-65-
date, if redeemed during the twelve-month period beginning on August 15 of each
year listed below:
Year Percentage
- ---- ----------
1998 110.0000%
1999 108.7500%
2000 107.5000%
2001 106.2500%
2002 105.0000%
2003 103.7500%
2004 and thereafter 103.0000%
Section 4.25. Payment of Pass Through Dividends.
----------------------------------
Coaxial will immediately use all proceeds received from Insight Ohio
as Preferred Payments in respect of the Series B Preferred Interests to pay a
dividend in like amount to Coaxial LLC, Coaxial DJM LLC and Coaxial DSM LLC.
Section 4.26. Limitation on Conduct of Business.
---------------------------------
The Issuers will not engage in any business other than holding common
membership interests and the Preferred Interests of Insight Ohio and issuing the
Notes and, in the case of Phoenix, holding the Excluded Assets. The Issuers will
not permit their Restricted Subsidiaries to engage in any businesses which are
not the same, similar, related, ancillary or complementary to the businesses in
which Insight Ohio and their Restricted Subsidiaries are then engaged.
Section 4.27. Further Assurance to the Trustee.
--------------------------------
The Issuers shall, upon the reasonable request of the Trustee, execute
and deliver such further instruments and do such further acts as may be
reasonably necessary or proper to carry out more effectively the provisions of
this Indenture.
Section 4.28. No Recourse Against the Issuers.
-------------------------------
The Notes will be non-recourse obligations of the Issuers and the only
recourse a holder of the Notes will have with respect to the payment of
principal or interest on the Notes
<PAGE>
-66-
will be enforcement of the rights granted pursuant to the Pledge Agreement with
respect to the Senior Notes Collateral (which will require mandatory redemptions
of the Series A Preferred Interests) and, failing that, enforcement of the
Guarantee in accordance with the provisions of Section 10.
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger and
Sale of Assets.
---------------
The Issuers will not and will not permit any of their Restricted
Subsidiaries to consolidate with, merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the assets of
the Issuers (as an entirety or substantially as an entirety in one transaction
or a series of related transactions), to any Person unless: (i) an Issuer or
such Restricted Subsidiary, as the case may be, shall be the continuing Person,
or the Person (if other than an Issuer or such Restricted Subsidiary) formed by
such consolidation or into which an Issuer or such Restricted Subsidiary, as the
case may be, is merged or to which the properties and assets of an Issuer or
such Restricted Subsidiary, as the case may be, are sold, assigned, transferred,
leased, conveyed or otherwise disposed of shall be a corporation organized and
existing under the laws of the United States or any State thereof or the
District of Columbia and shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
of the obligations of an Issuer or such Restricted Subsidiary, as the case may
be, under this Indenture, the Notes and the Guarantees, and the obligations
thereunder shall remain in full force and effect; (ii) immediately before and
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; and (iii) immediately after
giving effect to such transaction on a pro forma basis the Issuers or such
--- -----
Person could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under Section 4.06 hereof; provided that Insight Ohio
--------
may merge with Coaxial without complying with this clause (iii).
<PAGE>
-67-
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Issuers shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries of an Issuer the Capital Stock of which constitutes all or
substantially all of the properties and assets of the Issuers, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
the Issuers.
Section 5.02. Successor Person Substituted.
----------------------------
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of any Issuer or any Guarantor in accordance
with Section 5.01 above, the successor corporation formed by such consolidation
or into which such Issuer is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
such Issuer or such Guarantor under this Indenture with the same effect as if
such successor corporation had been named as such Issuer or such Guarantor
herein, and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the Notes.
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
-----------------
An "Event of Default" occurs if
(1) default in payment of any principal of, or premium, if any, on the
Notes whether at maturity, upon redemption or otherwise;
<PAGE>
-68-
(2) default for 30 days in payment of any interest on the Notes;
(3) default by an Issuer or any Restricted Subsidiary in the
observance or performance of any other covenant in the Notes, this
Indenture or the Pledge Agreement for 30 days after written notice from the
Trustee as directed by the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding (except in the case of a
default with respect to Section 4.19 or 5.01 hereof which shall constitute
an Event of Default with such notice requirement but without such passage
of time requirement);
(4) failure to pay when due principal, interest or premium in an
aggregate amount of $7.5 million or more with respect to any Indebtedness
of an Issuer or any Restricted Subsidiary thereof, or the acceleration of
any such Indebtedness aggregating $7.5 million or more which default shall
not be cured, waived or postponed pursuant to an agreement with the holders
of such Indebtedness within 60 days after written notice as provided in
this Indenture, or such acceleration shall not be rescinded or annulled
within 20 days after written notice as provided in this Indenture;
(5) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $7.5 million, net of any amounts
covered by insurance, shall be rendered against an Issuer or any Restricted
Subsidiary thereof, and shall not be discharged for any period of 60
consecutive days during which a stay of enforcement shall not be in effect;
(6) either of the Issuers or any Restricted Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
<PAGE>
-69-
(D) makes a general assignment for the benefit of its creditors,
or
(E) generally is not paying its debts as they become due;
(7) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against either of the Issuers or any Restricted
Subsidiary in an involuntary case,
(B) appoints a Custodian of either of the Issuers or any
Restricted Subsidiary or for all or substantially all of the property
of any of the Issuers or any Restricted Subsidiary, or
(C) orders the liquidation of either of the Issuers or any
Restricted Subsidiary,
and the order or decree remains unstayed and in effect for 60 days;
(8) any modification of the mandatory redemption provisions relating
to the Preferred Interests contained in the Operating Agreement;
(9) any of the Guarantees ceases to be in full force and effect or any
of the Guarantees is declared to be null and void and unenforceable or any
of the Guarantees is found to be invalid or any of the Guarantors denies
its liability under its Guarantee (other than by reason of release of a
Guarantor in accordance with the terms of this Indenture);
(10) failure to have a first priority perfected security interest with
respect to the Senior Notes Collateral; and
(11) the occurrence of an "Event of Default" under the Discount Notes
Indenture.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or similar official under any Bankruptcy
Law.
<PAGE>
-70-
The Trustee may withhold notice to the holders of the Notes of any Default
(except in payment of principal or premium, if any, or interest on the Notes) if
the Trustee considers it to be in the best interest of the holders of the Notes
to do so.
Section 6.02. Acceleration.
------------
If an Event of Default (other than an Event of Default resulting from
certain events of bankruptcy, insolvency or reorganization) shall have occurred
and be continuing, then the Trustee or the holders as directed by not less than
25% in aggregate principal amount of the Notes then outstanding may declare to
be immediately due and payable the entire principal amount of all the Notes then
outstanding plus accrued interest to the date of acceleration (i) and the same
shall become immediately due and payable or (ii) if there are any amounts
outstanding under the Senior Credit Facility, shall become immediately due and
payable upon the first to occur of an acceleration under the Senior Credit
Facility or 5 business days after receipt by an Issuer and the representative
under the Senior Credit Facility of a notice of acceleration; provided, however,
-------- -------
that after such acceleration but before a judgment or decree based on
acceleration is obtained by the Trustee, the holders of a majority in aggregate
principal amount of outstanding Notes may, under certain circumstances, rescind
and annul such acceleration if (i) all Events of Default, other than nonpayment
of principal, premium, if any, or interest that has become due solely because of
the acceleration, have been cured or waived as provided in this Indenture, (ii)
to the extent the payment of such interest is lawful, interest on overdue
installments of interest and overdue principal, which has become due otherwise
than by such declaration of acceleration, has been paid, (iii) if the Issuers
have paid the Trustee its reasonable compensation and reimbursed the Trustee for
its expenses, disbursements and advances and (iv) in the event of the cure or
waiver of an Event of Default of the type described in clauses (6) or (7) of
Section 6.01, the Trustee shall have received an Officers' Certificate and an
Opinion of Counsel that such Event of Default has been cured or waived. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto. In case an Event of Default resulting from certain events of
bankruptcy, insolvency or reorganization shall occur, the principal, premium and
interest amount with respect to all of the Notes shall be due and payable
immediately without any declaration or other act on the part of the Trustee or
the holders of the Notes.
<PAGE>
-71-
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing Default or compliance with any
provision of this Indenture or the Notes and to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
subject to certain limitations provided for in this Indenture and under the TIA.
No holder of any Note will have any right to institute any proceeding with
respect to this Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless the holders of at least 25% in aggregate principal amount of
the outstanding Notes shall have made written request and offered reasonable
indemnity to the Trustee to institute such proceeding as Trustee, and unless the
Trustee shall not have received from the holders of a majority in aggregate
principal amount of the outstanding Notes a direction inconsistent with such
request and shall have failed to institute such proceeding within 60 days.
Notwithstanding the foregoing, such limitations do not apply to a suit
instituted on such Note on or after the respective due dates expressed in such
Note.
Upon the occurrence and during the continuance of an Event of Default, the
Trustee shall enforce its remedies with respect to the pledged Senior Notes
Collateral in accordance with instructions received from holders of a majority
of the aggregate principal amount at maturity of outstanding Notes or, in the
absence of such instructions, in such manner as the Trustee deems appropriate,
in each case as provided herein. All funds received by the Trustee upon any
such enforcement shall be distributed by the Trustee in accordance with the
provisions hereof. Upon the full and final payment and performance of all
obligations of the Issuers under this Indenture and the Notes, the Senior Notes
Collateral shall be released.
Section 6.03. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee may pursue any
available remedy by proceeding at law or in equity to collect the payment of
principal of, or premium, if any, and interest on the Notes or to enforce the
performance of any provision of the Notes or this Indenture and may take any
necessary action requested of it as Trustee to settle, compromise, adjust or
otherwise conclude any proceedings to which it is a party.
<PAGE>
-72-
The Trustee may maintain a proceeding even if it does not possess any of
the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Noteholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
Section 6.04. Waiver of Past Defaults and Events of
Default.
--------
Subject to Sections 6.02, 6.07 and 8.02 hereof, the Holders of a majority
in principal amount of the Notes then outstanding have the right to waive any
existing Default or Event of Default or compliance with any provision of this
Indenture or the Notes. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereto.
Section 6.05. Control by Majority.
-------------------
The Holders of a majority in principal amount of the Notes then outstanding
may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee by this Indenture. The Trustee, however, may refuse to follow any
direction that conflicts with law or this Indenture or that the Trustee
determines may be unduly prejudicial to the rights of another Noteholder not
taking part in such direction, and the Trustee shall have the right to decline
to follow any such direction if the Trustee, being advised by counsel,
determines that the action so directed may not lawfully be taken or if the
Trustee in good faith shall, by a Responsible Officer, determine that the
proceedings so directed may involve it in personal liability; provided that the
--------
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Section 6.06. Limitation on Suits.
-------------------
Subject to Section 6.07 below, a Noteholder may not institute any
proceeding or pursue any remedy with respect to this Indenture or the Notes
unless:
<PAGE>
-73-
(1) the Holder gives to the Trustee written notice of a continuing
Event of Default;
(2) the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding make a written request to the Trustee to pursue the
remedy;
(3) such Holder or Holders offer and if requested provide to the
Trustee indemnity reasonably satisfactory to the Trustee against any loss,
liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer, and, if requested provision, of
indemnity; and
(5) no direction inconsistent with such written request has been given
to the Trustee during such 60 day period by the Holders of a majority in
aggregate principal amount of the Notes then outstanding.
A Noteholder may not use this Indenture to prejudice the rights of
another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. Rights of Holders to Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal of, or premium, if any, and
interest of the Note (including Additional Interest) on or after the respective
due dates expressed in the Note, or to bring suit for the enforcement of any
such payment on or after such respective dates, is absolute and unconditional
and shall not be impaired or affected without the consent of the Holder.
Section 6.08. Collection Suit by Trustee.
--------------------------
If an Event of Default in payment of principal, premium or interest
specified in Section 6.01(1) or (2) hereof occurs and is continuing, the Trustee
may recover judgment in its own name and as trustee of an express trust against
the Issuers or the Guarantors (pursuant to the terms of Section 10) (or any
other obligor on the Notes) for the whole amount of unpaid principal and accrued
interest remaining unpaid, together with interest on overdue principal and, to
the extent that payment of such interest is lawful, interest on overdue
installments of interest, in each case at the rate set forth in the Notes, and
<PAGE>
-74-
such further amounts as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
Section 6.09. Trustee May File Proofs of Claim.
--------------------------------
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Issuers or the
Guarantors (or any other obligor upon the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies or other
property payable or deliverable on any such claims and to distribute the same
after deduction of its charges and expenses to the extent that any such charges
and expenses are not paid out of the estate in any such proceedings and any
custodian in any such judicial proceeding is hereby authorized by each
noteholder to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the
Noteholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Noteholder any plan
or reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder thereof, or to authorize the Trustee to vote in respect
of the claim of any Noteholder in any such proceedings.
Section 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article 6, it shall
pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07 hereof;
SECOND: to Noteholders for amounts due and unpaid on the Notes for
principal, premium, if any, and interest (including Additional Interest, if
any) as to each, ratably,
<PAGE>
-75-
without preference or priority of any kind, according to the amounts due
and payable on the Notes; and
THIRD: to the Issuers or, to the extent the Trustee collects any
amount from any Guarantor, to such Guarantor.
The Trustee may fix a record date and payment date for any payment to
Noteholders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07 hereof or a suit by Holders of more than 10% in
principal amount of the Notes then outstanding.
Section 6.12. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Issuers, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee.
-----------------
(a) If an Event of Default actually known to a Responsible Officer
of the Trustee has occurred and is
<PAGE>
-76-
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the same circumstances in the
conduct of his own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are specifically
set forth in this Indenture and no others.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture but, in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
be under a duty to examine the same to determine whether or not they
conform to the requirements of this Indenture (but need not confirm or
investigate the accuracy of mathematical calculations or other facts stated
therein).
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of this
Section 7.01.
(2) The Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02, 6.05 or 6.06 hereof.
(4) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its rights, powers or duties if it shall have
reasonable grounds
<PAGE>
-77-
for believing that repayment of such funds or adequate indemnity
satisfactory to it against such risk or liability is not reasonably assured
to it.
(d) Whether or not therein expressly so provided, paragraphs (a),
(b), (c) and (e) of this Section 7.01 shall govern every provision of this
Indenture that in any way relates to the Trustee.
(e) The Trustee may refuse to perform any duty or exercise any right
or power unless it receives indemnity satisfactory to it in its sole discretion
against any loss, liability, expense or fee.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Issuers or
any Guarantor. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by the law.
Section 7.02. Rights of Trustee.
-----------------
Subject to Section 7.01 hereof:
(1) The Trustee may rely on any document reasonably believed by it to
be genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel, or both, which shall
conform to the provisions of Section 12.05 hereof. The Trustee shall be
protected and shall not be liable for any action it takes or omits to take
in good faith in reliance on such certificate or opinion.
(3) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
by it with due care.
(4) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it reasonably believes to be authorized or
within its rights or powers.
(5) The Trustee may consult with counsel of its selection, and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and
<PAGE>
-78-
protection from liability in respect of any action taken, omitted or
suffered by it hereunder in good faith and in accordance with the advice
or opinion of such counsel.
Section 7.03. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may make loans to, accept deposits from, perform
services for or otherwise deal with the either of the Issuers or any Guarantor,
or any Affiliates thereof, with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. The Trustee, however, shall
be subject to Sections 7.10 and 7.11 hereof.
Section 7.04. Trustee's Disclaimer.
--------------------
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes or any Guarantee
or as to the value of, or perfection or priority of any security interest in,
any collateral pledged to the Trustee, it shall not be accountable for the
Issuers' or any Guarantor's use of the proceeds from the sale of Notes or any
money paid to the Issuers or any Guaranty pursuant to the terms of this
Indenture and it shall not be responsible for any statement in the Notes,
Guarantee or this Indenture other than its certificate of authentication.
Section 7.05. Notice of Defaults.
------------------
If a Default occurs and is continuing and if it is known to the
Trustee, the Trustee shall mail to each Noteholder notice of the Default within
90 days after it occurs. Except in the case of a Default in payment of the
principal of, or premium, if any, or interest on any Note the Trustee may
withhold the notice if and so long as a committee of its Responsible Officers in
good faith determine(s) that withholding the notice is in the interests of the
Noteholders.
Section 7.06. Reports by Trustee to Holders.
-----------------------------
If required by TIA (S) 313(a), within 60 days after May 15 of any
year, commencing May 15, 1999, the Trustee shall mail to each Noteholder a brief
report dated as of such May 15 that complies with TIA (S) 313(a). The Trustee
also shall comply
<PAGE>
-79-
with TIA (S) 313(b)(2). The Trustee shall also transmit by mail all reports as
required by TIA (S) 313(c) and TIA (S) 313(d).
Reports pursuant to this Section 7.06 shall be transmitted by mail:
(1) to all registered Holders of Notes, as the names and addresses of
such Holders appear on the Registrar's books; and
(2) to such Holder of Notes as have, within the two years preceding
such transmission, filed their names and addresses with the Trustee for that
purpose.
A copy of each report at the time of its mailing to Noteholders shall
be filed with the SEC and each stock exchange on which the Notes are listed. The
Issuers shall promptly notify the Trustee when the Notes are listed on any stock
exchange.
Section 7.07. Compensation and Indemnity.
--------------------------
The Issuers and the Guarantors shall pay to the Trustee and Agents
from time to time such compensation as shall be agreed in writing between the
Issuers and the Trustee for its services hereunder (which compensation shall not
be limited by any provision of law in regard to the compensation of a trustee of
an express trust). The Issuers and the Guarantors shall reimburse the Trustee
and Agents upon request for all reasonable disbursements, expenses and advances
incurred or made by it in connection with its duties under this Indenture,
including the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.
The Issuers and the Guarantors shall indemnify each of the Trustee
and any predecessor Trustee for, and hold each of them harmless against, any and
all loss, damage, claim, liability or expense, including without limitation
taxes (other than taxes based on the income of the Trustee or such Agent) and
reasonable attorneys' fees and expenses incurred by each of them in connection
with the acceptance or performance of its duties under this Indenture including
the reasonable costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder (including, without limitation, settlement costs). The Trustee
or Agent shall notify the Issuers and the Guarantors in writing promptly of any
claim asserted against the Trustee or
<PAGE>
-80-
Agent for which it may seek indemnity. However, the failure by the Trustee or
Agent to so notify the Issuers and the Guarantors shall not relieve the Issuers
and Guarantors of their obligations hereunder except to the extent the Issuers
and the Guarantors are prejudiced thereby.
Notwithstanding the foregoing, the Issuers and the Guarantors need
not reimburse the Trustee for any expense or indemnify it against any loss or
liability incurred by the Trustee through its negligence or bad faith. To secure
the payment obligations of the Issuers and the Guarantors in this Section 7.07,
the Trustee shall have a lien prior to the Notes on all money or property held
or collected by the Trustee except such money or property held in trust to pay
principal of and interest on particular Notes. The obligations of the Issuers
and the Guarantors under this Section 7.07 to compensate and indemnify the
Trustee, Agents and each predecessor Trustee and to pay or reimburse the
Trustee, Agents and each predecessor Trustee for expenses, disbursements and
advances shall be joint and several liabilities of the Issuers and each of the
Guarantors and shall survive the satisfaction, discharge and termination of this
Indenture, including any termination or rejection hereof under any bankruptcy
law.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(6),(7) or (8) hereof occurs, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any bankruptcy law.
For purposes of this Section 7.07, the term "Trustee" shall include
any trustee appointed pursuant to Article 9.
Section 7.08. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Issuers and the Guarantors
in writing. The Holders of a majority in principal amount of the outstanding
Notes may remove the Trustee by notifying the removed Trustee in writing and may
appoint a successor Trustee with the Issuers' written consent which consent
shall not be unreasonably withheld. The Issuers may remove the Trustee at their
election if :
(1) the Trustee fails to comply with Section 7.10 hereof;
<PAGE>
-81-
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property;
(4) the Trustee otherwise becomes incapable of acting; or
(5) a successor corporation becomes successor Trustee pursuant to
Section 7.09 below.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Issuers shall promptly appoint a successor
Trustee.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Issuers or the
Holders of a majority in principal amount of the outstanding Notes may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder. Notwithstanding replacement of the
Trustee pursuant to this Section 7.08, the Issuers obligations under Section
7.07 hereof shall continue for the benefit of the retiring Trustee.
Section 7.09. Successor Trustee by Consolidation, Merger, Etc.
-----------------------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, subject to Section 7.10
<PAGE>
-82-
hereof, the successor corporation without any further act shall be the successor
Trustee.
Section 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S) 310(a)(1) and (2) in every respect. The Trustee, or the
bank holding company of which the Trustee is a wholly-owned Subsidiary, shall
have a combined capital and surplus of at least $140,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA (S) 310(b), including the provision in (S) 310(b)(1).
Section 7.11. Preferential Collection of Claims Against the Issuers.
-----------------------------------------------------
The Trustee shall comply with TIA (S) 311(a), excluding any creditor
relationship listed in TIA (S) 311(b). A Trustee who has resigned or been
removed shall be subject to TIA (S) 311(a) to the extent indicated therein.
Section 7.12. Paying Agents.
-------------
The Issuers shall cause each Paying Agent other than the Trustee to
execute and deliver to it and the Trustee an instrument in which such agent
shall agree with the Trustee, subject to the provisions of this Section 7.12:
(A) that it will hold all sums held by it as agent for the payment of
principal of, or premium, if any, or interest on, the Notes (whether such
sums have been paid to it by the Issuers or by any obligor on the Notes) in
trust for the benefit of Holders of the Notes or the Trustee;
(B) that it will at any time during the continuance of any Event of
Default, upon written request from the Trustee, deliver to the Trustee all
sums so held in trust by it together with a full accounting thereof; and
(C) that it will give the Trustee written notice within three (3)
Business Days of any failure of the Issuers (or by any obligor on the
Notes) in the payment of any installment of the principal of, premium, if
any, or interest on, the Notes when the same shall be due and payable.
<PAGE>
-83-
ARTICLE 8 AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.
--------------------------
The Issuers and the Guarantors, when authorized by a Board Resolution
of each of them, and the Trustee may amend, waive or supplement this Indenture
or the Notes without notice to or consent of any Noteholder:
(1) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(2) to comply with any requirements of the SEC under the TIA;
(3) to cure any ambiguity, defect or inconsistency, or to make any
other change that does not, in the opinion of the Trustee, materially and
adversely affect the rights of any noteholder; or
(4) to add a Guarantor.
The Trustee is hereby authorized to join with the Issuers and the
Guarantors in the execution of any supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained, but the Trustee
shall not be obligated to enter into any such supplemental indenture which
adversely affects its own rights, duties or immunities under this Indenture.
Section 8.02. With Consent of Holders.
-----------------------
The Issuers (each when authorized by a Board Resolution), the Guarantors
(each when authorized by a Board Resolution) and the Trustee may modify or
supplement this Indenture, the Notes and the Pledge Agreement with the written
consent of the Holders of not less than a majority in aggregate principal amount
of the outstanding Notes. The Holders of not less than a majority in aggregate
principal amount of the outstanding Notes may waive compliance in a particular
instance by the Issuers or Guarantors with any provision of this Indenture or
the Notes. Subject to Section 8.04, without the consent of
<PAGE>
-84-
each Noteholder affected, however, an amendment, supplement or waiver, including
a waiver pursuant to Section 6.04, may not:
(1) reduce the amount of Notes whose Holders must consent to an
amendment, supplement or waiver to this Indenture;
(2) reduce the rate of or change the time for payment of interest,
including defaulted interest, on any Note;
(3) reduce the principal of or premium on or change the stated
maturity of any Note or change the date on which any Notes may be subject
to redemption or repurchase or reduce the redemption or repurchase price
thereof;
(4) make any Note payable in money other than that stated in the Note
or change the place of payment from New York, New York;
(5) waive a Default on the payment of principal of, interest on, or
redemption payment with respect to any Note;
(6) make any change in the provisions of this Indenture protecting
the right of each holder of Notes to receive payment of principal of and
interest on such Note on or after the due date thereof or to bring suit to
enforce such payment, or permitting holders of a majority in principal
amount of Notes to waive Defaults or Events of Default;
(7) amend, change or modify in any material respect the obligation of
the Issuers to make and consummate a Change of Control Offer in the event
of a Change of Control or make and consummate an Asset Sale Offer with
respect to any Asset Sale that has been consummated or modify any
provisions or definitions with respect thereto;
(8) modify or change any provision of this Indenture or the related
definitions affecting the ranking of the Notes or any Guarantee in a manner
which adversely affects the holders of Notes;
(9) release any Guarantor from any of its obligations under its
Guarantee or this Indenture otherwise than in accordance with the terms of
this Indenture; or
<PAGE>
-85-
(10) modify or waive a Default with respect to Section 6.01(8).
After an amendment, supplement or waiver under this Section 8.02 or
Section 8.01 becomes effective, the Issuers shall mail to the Holders a notice
briefly describing the amendment, supplement or waiver.
Upon the written request of the Issuers, accompanied by a Board
Resolution authorizing the execution of any such supplemental indenture, and
upon the receipt by the Trustee of evidence reasonably satisfactory to the
Trustee of the consent of the Noteholders as aforesaid and upon receipt by the
Trustee of the documents described in Section 8.06 hereof, the Trustee shall
join with the Issuers and the Guarantors in the execution of such supplemental
indenture unless such supplemental indenture adversely affects the Trustee's own
rights, duties or immunities under this Indenture, in which case the Trustee
may, but shall not be obligated to, enter into such supplemental indenture.
It shall not be necessary for the consent of the Holders under this
Section 8.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
Section 8.03. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to or supplement of this Indenture or the Notes shall
comply with the TIA as then in effect.
Section 8.04. Revocation and Effect of Consents.
---------------------------------
Until an amendment, supplement, waiver or other action becomes
effective, a consent to it by a Holder of a Note is a continuing consent
conclusive and binding upon such Holder and every subsequent Holder of the same
Note or portion thereof, and of any Note issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Note. Any such Holder or subsequent Holder, however, may revoke
the consent as to his Note or portion of a Note, if the Trustee receives the
written notice of revocation before the date the amendment, supplement, waiver
or other action becomes effective.
The Issuers may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled
<PAGE>
-86-
to consent to any amendment, supplement, or waiver. If a record date is fixed,
then, notwithstanding the preceding paragraph, those Persons who were Holders at
such record date (or their duly designated proxies), and only such Persons,
shall be entitled to consent to such amendment, supplement, or waiver or to
revoke any consent previously given, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 90 days after such record date unless the consent of the requisite
number of Holders has been obtained.
After an amendment, supplement, waiver or other action becomes
effective, it shall bind every Noteholder, unless it makes a change described in
any of clauses (1) through (10) of Section 8.02 hereof. In that case the
amendment, supplement, waiver or other action shall bind each Holder of a Note
who has consented to it and every subsequent Holder of a Note or portion of a
Note that evidences the same debt as the consenting Holder's Note.
Section 8.05. Notation on or Exchange of Notes.
--------------------------------
If an amendment, supplement, or waiver changes the terms of a Note,
the Trustee (in accordance with the specific written direction of the Issuers)
shall request the Holder of the Note (in accordance with the specific written
direction of the Issuers) to deliver it to the Trustee. In such case, the
Trustee shall place an appropriate notation on the Note about the changed terms
and return it to the Holder. Alternatively, if the Issuers or the Trustee so
determines, the Issuers in exchange for the Note shall issue, the Guarantors
shall endorse, and the Trustee shall authenticate a new Note that reflects the
changed terms. Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
Section 8.06. Trustee to Sign Amendments, etc.
-------------------------------
The Trustee shall sign any amendment, supplement or waiver authorized
pursuant to this Article 8 if the amendment, supplement or waiver does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not, sign it. In signing or refusing to
sign such amendment, supplement or waiver the Trustee shall be entitled to
receive and, subject to Section 7.01 hereof, shall be fully protected in relying
upon an Officers' Certificate and an
<PAGE>
-87-
Opinion of Counsel stating that such amendment, supplement or waiver is
authorized or permitted by this Indenture and is a legal, valid and binding
obligation of the Issuers and Guarantors, enforceable against the Issuers and
Guarantors in accordance with its terms (subject to customary exceptions).
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.
----------------------
The Issuers and the Guarantors may terminate their obligations under
the Notes, the Guarantees and this Indenture, except the obligations referred to
in the last paragraph of this Section 9.01, if there shall have been canceled by
the Trustee or delivered to the Trustee for cancellation all Notes theretofore
authenticated and delivered (other than any Notes that are asserted to have been
destroyed, lost or stolen and that shall have been replaced as provided in
Section 2.07 hereof) and the Issuers have paid all sums payable by them
hereunder or deposited all required sums with the Trustee.
After such delivery the Trustee upon Issuer request shall acknowledge
in writing the discharge of the Issuers' and the Guarantors' obligations under
the Notes, the Guarantees and this Indenture except for those surviving
obligations specified below.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Issuers in Sections 7.07, 9.05 and 9.06 hereof shall survive.
Section 9.02. Legal Defeasance.
----------------
The Issuers may at their option, by Board Resolution of the Board of
Directors of each of the Issuers, defease and be discharged from their
obligations with respect to the Notes and the Guarantors discharged from their
obligations under the Guarantees on the date the conditions set forth in Section
9.04 below are satisfied (hereinafter, "Legal Defeasance"). For this purpose,
such Legal Defeasance means that the Issuers shall be deemed to have paid and
discharged the entire indebtedness represented by the Notes and to have
satisfied all its other obligations under such Notes and this Indenture insofar
as such
<PAGE>
-88-
Notes are concerned (and the Trustee, at the expense of the Issuers, shall,
subject to Section 9.06 hereof, execute instruments in form and substance
reasonably satisfactory to the Trustee and Issuers acknowledging the same),
except for the following which shall survive until otherwise terminated or
discharged hereunder: (A) the rights of Holders of outstanding Notes to receive
solely from the trust funds described in Section 9.04 hereof and as more fully
set forth in such Section, payments in respect of the principal of, premium, if
any, and interest on such Notes when such payments are due, (B) the Issuers'
obligations with respect to such Notes under Sections 2.03, 2.04, 2.05, 2.06,
2.07, 2.08, 2.09 and 4.20 hereof, (C) the rights, powers, trusts, duties, and
immunities of the Trustee hereunder (including claims of, or payments to, the
Trustee under or pursuant to Section 7.07 hereof) and (D) this Article 9.
Subject to compliance with this Article 9, the Issuers may exercise their option
under this Section 9.02 with respect to the Notes notwithstanding the prior
exercise of its option under Section 9.03 below with respect to the Notes.
Section 9.03. Covenant Defeasance.
-------------------
At the option of the Issuers, pursuant to a Board Resolution of the
Board of Directors of each of the Issuers, the Issuers and the Guarantors shall
be released from their respective obligations under Sections 4.02 through 4.19
and Sections 4.21 through 4.28 hereof, inclusive, with respect to the
outstanding Notes on and after the date the conditions set forth in Section 9.04
hereof are satisfied (hereinafter, "Covenant Defeasance"). For this purpose,
such Covenant Defeasance means that the Issuers and the Guarantors may omit to
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such specified Section or portion thereof, whether
directly or indirectly by reason of any reference elsewhere herein to any such
specified Section or portion thereof or by reason of any reference in any such
specified Section or portion thereof to any other provision herein or in any
other document, but the remainder of this Indenture and the Notes shall be
unaffected thereby.
Section 9.04. Conditions to Legal Defeasance or Covenant Defeasance.
-----------------------------------------------------
The following shall be the conditions to application of Section 9.02
or Section 9.03 hereof to the outstanding Notes:
<PAGE>
-89-
(1) the Issuers shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 7.10 hereof who shall agree to comply with the provisions of
this Article 9 applicable to it) as funds in trust for the purpose of
making the following payments, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of the Notes, (A) money in
an amount, or (B) U.S. Government Obligations which through the scheduled
payment of principal and interest in respect thereof in accordance with
their terms will provide, not later than the due date of any payment, money
in an amount, or (C) a combination thereof, sufficient, in the opinion of a
nationally-recognized firm of independent public accountants expressed in a
written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or other qualifying
trustee) to pay and discharge, the principal of, premium, if any, and
accrued interest on the outstanding Notes at the maturity date of such
principal, premium, if any, or interest, or on dates for payment and
redemption of such principal, premium, if any, and interest selected in
accordance with the terms of this Indenture and of the Notes;
(2) no Event of Default or Default with respect to the Notes shall
have occurred and be continuing on the date of such deposit or, insofar as
Events of Default from bankruptcy, insolvency or reorganization events are
concerned, at any time during the period ending on the 91st day after the
date of such deposit;
(3) such Legal Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest for purposes of the TIA with respect
to any securities of the Issuers;
(4) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute Default under this Indenture or any
other material agreement or instrument to which an Issuer or any of its
Subsidiaries is a party or by which they are bound;
(5) the Issuers shall have delivered to the Trustee an Opinion of
Counsel stating that, as a result of such Legal Defeasance or Covenant
Defeasance, neither the trust nor the Trustee will be required to register
as an
<PAGE>
-90-
investment company under the Investment Company Act of 1940, as amended;
(6) in the case of an election under Section 9.02 above, the Issuers
shall have delivered to the Trustee an Opinion of Counsel to the effect
that the Holders of the outstanding Notes or persons in their positions
will not recognize income, gain or loss for Federal income tax purposes
solely as a result of such Legal Defeasance and will be subject to Federal
income tax on the same amounts, in the same manner, including as a result
of prepayment, and at the same times as would have been the case if such
Legal Defeasance had not occurred;
(7) in the case of an election under Section 9.03 hereof, the
Issuers shall have delivered to the Trustee an Opinion of Counsel to the
effect that the Holders of the outstanding Notes will not recognize income,
gain or loss for Federal income tax purposes as a result of such Covenant
Defeasance and will be subject to Federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred;
(8) the Issuers shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the Legal Defeasance under
Section 9.02 above or the Covenant Defeasance under Section 9.03 hereof (as
the case may be) have been complied with;
(9) the Issuers shall have delivered to the Trustee an Officers'
Certificate stating that the deposit under clause (1) was not made by the
Issuers with the intent of preferring the holders of the Notes over any
other creditors of the Issuers or with the intent of defeating, hindering,
delaying or defrauding any creditors of the Issuers or others; and
(10) the Issuers shall have paid or duly provided for payment under
terms mutually satisfactory to the Issuers and the Trustee all amounts then
due to the Trustee pursuant to Section 7.07 hereof.
<PAGE>
-91-
Section 9.05. Deposited Money and U.S. Government Obligations to Be Held in
Trust; Other Miscellaneous Provisions.
-------------------------------------
All money and U.S. Government Obligations (including the proceeds
thereof) deposited with the Trustee pursuant to Section 9.04 hereof in respect
of the outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent, to the Holders of such Notes, of
all sums due and to become due thereon in respect of principal, premium, if any,
and accrued interest, but such money need not be segregated from other funds
except to the extent required by law.
The Issuers and the Guarantors shall (on a joint and several basis)
pay and indemnify the Trustee against any tax, fee or other charge imposed on or
assessed against the U.S. Government Obligations deposited pursuant to Section
9.04 hereof or the principal, premium, if any, and interest received in respect
thereof other than any such tax, fee or other charge which by law is for the
account of the Holders of the outstanding Notes.
Anything in this Article 9 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Issuers from time to time upon an Issuer
Request any money or U.S. Government Obligations held by it as provided in
Section 9.04 hereof which, in the opinion of a nationally-recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
Section 9.06. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any money or U.S.
Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof by
reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Issuers' and each Guarantor's obligations under this
Indenture, the Notes and the Guarantees shall be revived and reinstated as
though no deposit had occurred pursuant to this Article 9 until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S.
<PAGE>
-92-
Government Obligations in accordance with Section 9.01 hereof; provided,
--------
however, that if the Issuers or the Guarantors have made any payment of
- -------
principal of, premium, if any, or accrued interest on any Notes because of the
reinstatement of their obligations, the Issuers or the Guarantors, as the case
may be, shall be subrogated to the rights of the Holders of such Notes to
receive such payment from the money or U.S. Government Obligations held by the
Trustee or Paying Agent.
Section 9.07. Moneys Held by Paying Agent.
---------------------------
In connection with the satisfaction and discharge of this Indenture,
all moneys then held by any Paying Agent under the provisions of this Indenture
shall, upon written demand of the Issuers, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.01 hereof, to the
Issuers upon an Issuer Request (or, if such moneys had been deposited by the
Guarantors, to such Guarantors), and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.
Section 9.08. Moneys Held by Trustee.
----------------------
Any moneys deposited with the Trustee or any Paying Agent or then
held by the Issuers or the Guarantors in trust for the payment of the principal
of, or premium, if any, or interest on any Note that are not applied but remain
unclaimed by the Holder of such Note for two years after the date upon which the
principal of, or premium, if any, or interest on such Note shall have
respectively become due and payable shall be repaid to the Issuers (or, if
appropriate, the Guarantors) upon an Issuer Request, or if such moneys are then
held by the Issuers or the Guarantors in trust, such moneys shall be released
from such trust; and the Holder of such Note entitled to receive such payment
shall thereafter, as an unsecured general creditor, look only to the Issuers and
the Guarantors for the payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money shall thereupon cease; provided,
--------
however, that the Trustee or any such Paying Agent, before being required to
- -------
make any such repayment, may, at the expense of the Issuers and the Guarantors,
either mail to each Noteholder affected, at the address shown in the register of
the Notes maintained by the Registrar pursuant to Section 2.04 hereof, or cause
to be published once a week for two successive weeks, in a newspaper published
in the English language, customarily published each Business Day and of general
circulation in the
<PAGE>
-93-
City of New York, New York, a notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such mailing or publication, any unclaimed balance of such moneys then
remaining will be repaid to the Issuers. After payment to the Issuers or the
Guarantors or the release of any money held in trust by the Issuers or any
Guarantors, as the case may be, Noteholders entitled to the money must look only
to the Issuers and the Guarantors for payment as general creditors unless
applicable abandoned property law designates another person.
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Guarantee.
---------
Subject to the provisions of this Article 10 each Guarantor hereby
jointly and severally conditionally guarantees, on a senior unsecured basis, to
each Holder of a Note authenticated and delivered by the Trustee and to the
Trustee and its successors, irrespective of the validity and enforceability of
this Indenture, the Notes or the obligations of the Issuers or any other
Guarantors to the Holders or the Trustee hereunder or thereunder, that the
principal of, interest and Additional Interest, if any, with respect to the
Notes will be duly and punctually paid in full when due, whether at maturity, by
acceleration or otherwise, and interest on the overdue principal and (to the
extent permitted by law) interest or Additional Interest, if any, with respect
to the Notes and all other obligations of the Issuers or the Guarantors to the
Holders or the Trustee hereunder or thereunder (including amounts due the
Trustee under Section 7.7 hereof). The conditional Guarantee will become
effective only upon satisfaction of each of the following conditions: (i)
enforcement by the Trustee of the rights granted pursuant to the Pledge
Agreement with respect to the Senior Notes Collateral, (ii) Insight Ohio's
failure to redeem the Series A Preferred Interests after ten days as provided in
the Operating Agreement and (iii) an adjudication (other than a default judgment
based upon a failure to prosecute or defend any claim) is obtained relating to
such failure. The Guarantee of any Guarantor will be subordinate to any secured
Indebtedness of such Guarantor to the extent of the assets securing such
Indebtedness.
<PAGE>
-94-
This Guarantee shall remain in full force and effect and continue to
be effective should any petition be filed by or against the Issuers for
liquidation or reorganization, should the Issuers become insolvent or make an
assignment for the benefit of creditors or should a receiver or trustee be
appointed for all or any significant part of the Issuer's assets, and shall, to
the fullest extent permitted by law, continue to be effective or be reinstated,
as the case may be, if at any time payment and performance of the Notes are
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee on the Notes, whether as a "voidable
preference," "fraudulent transfer," "fraudulent conveyance" or otherwise, all as
though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Notes shall, to the fullest extent permitted by law, be reinstated and deemed
reduced only by such amount paid and not so rescinded, reduced, restored or
returned.
No stockholder, member, partner, agent, officer, director, employee or
incorporator, past, present or future, of any Guarantor, as such, shall have any
personal liability under this Guarantee by reason of his, her or its status as
such stockholder, member, partner, agent, officer, director, employee or
incorporator.
The Guarantors shall have the right to seek contribution from any non-
paying Guarantor so long as the exercise of such right does not impair the
rights of the Holders under this Guarantee.
Section 10.02. Execution and Delivery of Guarantees.
------------------------------------
To further evidence the Guarantee set forth in Section 10.01 hereof,
each Guarantor hereby agrees that a notation of such Guarantee, substantially in
the form included in Exhibit G hereto, shall be endorsed on each Note
---------
authenticated and delivered by the Trustee and such Guarantee shall be executed
by either manual or facsimile signature of an Officer or an Officer of a general
partner, as the case may be, of each Guarantor. The validity and enforceability
of any Guarantee shall not be affected by the fact that it is not affixed to any
particular Note.
Each of the Guarantors hereby agrees that its Guarantee set forth in
Section 10.01 hereof shall remain in full
<PAGE>
-95-
force and effect notwithstanding any failure to endorse on each Note a notation
of such Guarantee.
If an officer of a Guarantor whose signature is on this Indenture or a
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which such Guarantee is endorsed or at any time thereafter, such
Guarantor's Guarantee of such Note shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of any Guarantee set forth in
this Indenture on behalf of the Guarantor.
Section 10.03. Limitation of Guarantee.
-----------------------
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
this Indenture, result in the obligations of such Guarantor under the Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a
Guarantee shall be entitled to a contribution from each other Guarantor in a pro
---
rata amount based on the Adjusted Net Assets of each Guarantor.
- ----
Section 10.04. Additional Guarantors.
---------------------
The Issuers covenant and agree that they shall cause any Person which
becomes a Restricted Subsidiary to execute a supplemental indenture and any
other documentation requested by the Trustee satisfactory in form and substance
to the Trustee pursuant to which such Restricted Subsidiary shall guarantee the
obligations of the Issuers under the Notes and this Indenture in accordance with
this Article 10 with the same effect and to the same extent as if such Person
had been named herein as a Guarantor.
Section 10.05. Release of Guarantor.
--------------------
A Guarantor shall be released from all of its obligations under its
Guarantee if:
<PAGE>
-96-
(i) the Guarantor has sold all or substantially all of its assets
or the Issuers and their Restricted Subsidiaries have sold all of the
Capital Stock of the Guarantor owned by them, in each case in a transaction
in compliance with Sections 4.10 and 5.01 hereof; or
(ii) the Guarantor merges with or into or consolidates with, or
transfers all or substantially all of its assets to, the Issuers or another
Guarantor in a transaction in compliance with Section 5.01 hereof;
and in each such case, such Guarantor has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with.
Section 10.06. Waiver of Subrogation.
---------------------
Each Guarantor hereby irrevocably waives, until the prior payment in
full of all amounts outstanding hereunder and under the Notes, any claim or
other rights which it may now or hereafter acquire against any Issuer that arise
from the existence, payment, performance or enforcement of such Guarantor's
obligations under this Guarantee and this Indenture, including, without
limitation, any right of subrogation, reimbursement, exoneration,
indemnification, and any right to participate in any claim or remedy of any
Holder of Notes against any Issuer, whether or not such claim, remedy or right
arises in equity, or under contract, statute or common law, including, without
limitation, the right to take or receive from any Issuer, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment on account of such claim or other rights. If any amount shall be paid to
any Guarantor in violation of the preceding sentence and the Notes shall not
have been paid in full, such amount shall have been deemed to have been paid to
such Guarantor for the benefit of, and held in trust for the benefit of, the
Holders of the Notes, and shall forthwith be paid to the Trustee for the benefit
of such Holders to be credited and applied upon the Notes, whether matured or
unmatured, in accordance with the terms of this Indenture. Each Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by this Indenture and that the waiver set
forth in this Section 10.06 is knowingly made in contemplation of such benefits.
<PAGE>
-97-
ARTICLE 11
SECURITY
Section 11.01. Pledge of Senior Notes Collateral.
---------------------------------
(a) In order to secure the due and punctual payment of principal of
and interest on the Notes when and as the same shall be due and payable, whether
on an Interest Payment Date, at maturity, by acceleration, repurchase,
redemption or otherwise, and interest on the overdue principal of and interest
(to the extent permitted by law), if any, on the Notes and performance of all
other obligations of the Issuers to the Holders or the Trustee under this
Indenture and the Notes, Coaxial and the Trustee have simultaneously with the
execution of this Indenture entered into the Pledge Agreement, pursuant to which
Coaxial has granted to the Trustee for the benefit of the Trustee and the
Holders a first priority Lien on and security interest in the Senior Notes
Collateral.
(b) So long as no Event of Default shall have occurred and be
continuing, and subject to certain terms and conditions herein, Coaxial will be
entitled to receive all cash distributions made upon or with respect to the
Senior Notes Collateral pledged by it.
(c) Each Holder, by accepting a Note, consents and agrees to all of
the terms and provisions of the Pledge Agreement, as the same may be in effect
from time to time or may be amended from time to time in accordance with the
provisions of the Pledge Agreement and this Indenture, and authorizes and
directs the Trustee to act as secured party with respect thereto.
(d) As set forth in and governed by the Pledge Agreement, as among
the Holders of Notes, the Senior Notes Collateral as now or hereafter
constituted shall be held for the equal and ratable benefit of the Holders of
the Notes without preference, priority or distinction of any thereof over any
other by reason of difference in time of issuance, sale or otherwise, as
security for the Notes.
Section 11.02. Recording; Priority; Opinions, Etc.
----------------------------------
(a) The Issuers shall at their sole cost and expense perform any
and all acts and execute any and all documents
<PAGE>
-98-
(including, without limitation, the execution, amendment or supplementation of
any financing statement and continuation statement or other statement) for
filing under the provisions of the UCC and the rules and regulations thereunder,
or any other statute, rule or regulation of any applicable federal, state or
local jurisdiction, which are necessary or advisable and shall do such other
acts and execute such other documents as may be required under the Pledge
Agreement, from time to time, in order to grant, perfect and maintain in favor
of the Trustee for the benefit of the Trustee and the Holders a valid and
perfected first priority Lien on the Senior Notes Collateral and to fully
preserve and protect the rights of the Trustee and the Holders under this
Indenture.
The Issuers shall from time to time promptly pay and satisfy all
financing and continuation statement recording and/or filing fees, charges and
taxes relating to this Indenture and the Pledge Agreement, any amendments
thereto and any other instruments of further assurance. Without limiting the
generality of the foregoing covenant, in the event at any time the Trustee shall
determine that additional transfer or similar taxes are required to be paid to
perfect or continue any Lien on any Senior Notes Collateral, the Issuers shall
pay such taxes promptly upon demand by the Trustee.
(b) The Issuers shall, promptly after the initial issuance of the
Notes, furnish to the Trustee an Opinion of Counsel relating to the validity and
perfection of the security interests granted pursuant to the Pledge Agreement.
Section 11.03. Release of the Senior Notes Collateral.
--------------------------------------
The Trustee shall not release the Senior Notes Collateral from the
Lien of the Pledge Agreement unless such release is in accordance with the
provisions of this Section 11.03 and of the Pledge Agreement. To the extent
applicable, the Issuers shall cause TIA (S) 314(d) relating to the release of
property or Liens to be complied with.
(a) Satisfaction and Discharge; Defeasance. The Issuers shall be
--------------------------------------
entitled to obtain a full release of all of the Senior Notes Collateral from the
Lien of this Indenture and the Pledge Agreement upon compliance with all of the
conditions precedent for satisfaction and discharge of this Indenture set forth
in Section 9.01 or for defeasance pursuant to Section 9.02. Upon delivery by the
Issuers to the Trustee of an Officers'
<PAGE>
-99-
Certificate and an Opinion of Counsel, each to the effect that all of the
conditions precedent have been complied with (which may be the same Officers'
Certificate and Opinion of Counsel required by Article Nine), the Trustee shall
take all necessary action, at the request and expense of the Issuers, to release
and reconvey to the Issuers all of the Senior Notes Collateral, and shall
deliver such Collateral in its possession to the Issuers including, without
limitation, the execution and delivery of releases or waivers whenever
necessary.
Upon delivery by the Issuers of such documents that the Trustee may
reasonably require, the Trustee shall execute, acknowledge (if applicable) and
deliver to the Issuers such counterpart within 10 Business Days after receipt by
the Trustee of a Release Notice, as applicable, and the satisfaction of the
applicable requirements of this Section 11.03.
At any time when a Default or an Event of Default shall have occurred
and be continuing, no release of the Senior Notes Collateral pursuant to the
provisions of this Indenture or the Pledge Agreement shall be effective as
against the Holders of the Notes.
Section 11.04. Trust Indenture Act Requirements.
--------------------------------
The release of any Senior Notes Collateral from the Pledge Agreement
or the release of, in whole or in part, the Liens created by the Pledge
Agreement, will not be deemed to impair the Lien of the Pledge Agreement in
contravention of the provisions hereof if and to the extent the Senior Notes
Collateral or Liens are released pursuant to the Pledge Agreement and pursuant
to the terms hereof. Any certificate or opinion required by TIA (S) 314(d) may
be made by an officer of the Issuers, except in cases which TIA (S) 314(d)
requires that such certificate or opinion be made by an independent person.
Section 11.05. Suits to Protect Senior Notes Collateral.
----------------------------------------
Subject to the provisions of the Pledge Agreement, the Trustee shall
have power to institute and to maintain such suits and proceedings as it may
reasonably deem expedient to prevent any impairment of the Senior Notes
Collateral by any acts which may be unlawful or in violation of any of the
Pledge Agreement or this Indenture, and such suits and proceedings as the
Trustee may reasonably deem expedient to preserve or protect its interests and
the interests of the Holders in the Senior Notes Collateral
<PAGE>
-100-
(including power to institute and maintain suits or proceedings to restrain the
enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may be unconstitutional or otherwise invalid if
the enforcement of, or compliance with, such enactment, rule or order would
impair the Senior Notes Collateral or be prejudicial to the interests of the
Holders or the Trustee).
Section 11.06. Purchase Protected.
------------------
In no event shall any purchaser in good faith of any property
purported to be released hereunder be bound to ascertain the authority of the
Trustee to execute the release or to inquire as to the satisfaction of any
conditions required by the provisions hereof for the exercise of such authority
or to see to the application of any consideration given by such purchaser or
other transferee; nor shall any purchaser or other transferee of any property or
rights permitted by this Article 11 to be sold be under obligation to ascertain
or inquire into the authority of the Issuers to make any such sale or other
transfer.
Section 11.07. Powers Exercisable by Receiver or Trustee.
-----------------------------------------
In case the Senior Notes Collateral shall be in the possession of a
receiver or trustee, lawfully appointed, the powers conferred in this Article 11
upon the Issuers with respect to the release, sale or other disposition of such
property may be exercised by such receiver or trustee, and an instrument signed
by such receiver or trustee shall be deemed the equivalent of any similar
instrument of the Issuers or of any officer or officers thereof required by the
provisions of this Article 11.
Section 11.08. Determinations Relating to Senior Notes Collateral.
--------------------------------------------------
In the event (i) the Trustee shall receive any written request from
the Issuers under the Pledge Agreement for consent or approval with respect to
any matter or thing relating to any Senior Notes Collateral or the Issuers'
obligations with respect thereto (including, without limitation, the
determination as to whether any portion of the Senior Notes Collateral
constitutes released Senior Notes Collateral) or (ii) there shall be due to or
from the Trustee under the provisions of the Pledge Agreement any performance or
the delivery of any instrument or (iii) the Trustee shall become aware of any
nonperformance by the Issuers of any covenant or any breach of any
representation or warranty
<PAGE>
-101-
of the Issuers set forth in the Pledge Agreement, then, in each such event, the
Trustee shall be entitled to hire experts, consultants, agents and attorneys to
advise the Trustee on the manner in which the Trustee should respond to such
request or render any requested performance or response to such nonperformance
or breach. The Trustee shall be fully protected in the taking of any action
recommended or approved by any such expert, consultant, agent or attorney or
agreed to by a majority of Holders pursuant to Section 6.05.
Section 11.09. Release upon Termination of the Issuers' Obligations.
----------------------------------------------------
In the event that the each of the Issuers delivers an Officers'
Certificate certifying that the provisions of Section 9.01 or 9.02 have been
complied with, the Trustee shall (i) execute and deliver such releases,
termination statements and other instruments as the Issuers may reasonably
request evidencing the termination of the Liens created by the Pledge Agreement
and (ii) not be deemed to hold the Liens for the benefit of the Holders.
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
----------------------------
If any provision of this Indenture limits, qualifies or conflicts with
another provision which is required to be included in this Indenture by the TIA,
the required provision shall control.
Section 12.02. Notices.
-------
Except for notice or communications to Holders any notice or
communication shall be given in writing and delivered in person, sent by
facsimile, delivered by commercial courier service or mailed by first-class
mail, postage prepaid, addressed as follows:
<PAGE>
-102-
If to the Issuers or any Guarantor:
c/o Insight Communications Company, L.P.
126 E. 56th Street
New York, New York 10022
Attention: Chief Financial Officer
Fax Number: (212) 371-1549
and
c/o Coaxial Communications, Inc.
5111 Ocean Boulevard
Suite C
Sarasota, Florida 34242
Attention: Dennis McGillicuddy
Fax Number: (941) 346-2788
Copies to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Attention: Robert L. Winikoff, Esq.
and
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036-6802
Attention: Timothy J. Kelley, Esq.
If to the Trustee:
Bank of Montreal Trust Company
Wall Street Plaza
88 Pine Street
New York, New York 10005
Attention: Amy Roberts
Fax Number: (212) 701-7698
<PAGE>
-103-
Such notices or communications shall be effective when received and
shall be sufficiently given if so given within the time prescribed in this
Indenture.
The Issuers, the Guarantors or the Trustee by written notice to the
others may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Noteholder shall be mailed to
him by first-class mail, postage prepaid, at his address shown on the register
kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication to a Noteholder is mailed in the manner provided
above, it shall be deemed duly given, whether or not the addressee receives it.
In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
Section 12.03. Communications by Holders with Other Holders.
--------------------------------------------
Noteholders may communicate pursuant to TIA (S) 312(b) with other
Noteholders with respect to their rights under this Indenture or the Notes. The
Issuers, the Guarantors, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
Section 12.04. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Issuers or any Guarantor to the
Trustee to take any action under this Indenture, the Issuers or such Guarantor
shall furnish to the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 12.05 below) stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
<PAGE>
-104-
(2) an Opinion of Counsel (which shall include the statements set
forth in Section 12.05 below) stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
Section 12.05. Statements Required in Certificate and Opinion.
----------------------------------------------
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such Person, it or he has
made such examination or investigation as is necessary to enable it or him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
Section 12.06. Rules by Trustee and Agents.
---------------------------
The Trustee may make reasonable rules for action by or meetings of
Noteholders. The Registrar and Paying Agent may make reasonable rules for their
functions.
Section 12.07. Business Days; Legal Holidays.
-----------------------------
A "Business Day" is a day that is not a Legal Holiday. A "Legal
Holiday" is a Saturday, a Sunday, a federally-recognized holiday or a day on
which banking institutions are not required to be open in the State of New York.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
Section 12.08. Governing Law.
-------------
<PAGE>
-105-
THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE NOTES.
Section 12.09. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan,
security or debt agreement of the Issuers or any Subsidiary thereof. No such
indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 12.10. No Recourse Against Others.
--------------------------
No recourse for the payment of the principal of or premium, if any, or
interest on any of the Notes, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or
agreement of the Issuers or any Guarantor in this Indenture or in any
supplemental indenture, or in any of the Notes, or because of the creation of
any Indebtedness represented thereby, shall be had against any stockholder,
member, partner, agent, officer, director or employee, as such, past, present or
future, of the Issuers or of any successor entity or against the property or
assets of any such stockholder, member, partner, agent, officer, employee or
director, either directly or through the Issuers or any Guarantor, or any
successor entity thereof, whether by virtue of any constitution, statute or rule
of law, or by the enforcement of any assessment or penalty or otherwise; it
being expressly understood that this Indenture and the Notes are solely
obligations of the Issuers and the Guarantors, and that no such personal
liability whatever shall attach to, or is or shall be incurred by, any
stockholder, member, partner, agent, officer, employee or director of the
Issuers or any Guarantor, or any successor entity thereof, because of the
creation of the indebtedness hereby authorized, or under or by reason of the
obligations, covenants or agreements contained in this Indenture or the Notes or
implied therefrom, and that any and all such personal liability of, and any and
all claims against every stockholder, member, partner, agent, officer, employee
and director, are hereby expressly waived and released as a condition of, and as
a consideration for, the execution of this Indenture
<PAGE>
-106-
and the issuance of the Notes. It is understood that this limitation on recourse
is made expressly for the benefit of any such stockholder, member, partner,
agent, employee, officer or director and may be enforced by any of them.
Section 12.11. Successors.
----------
All agreements of the Issuers and the Guarantors in this Indenture and
the Notes shall bind their respective successors. All agreements of the Trustee,
any additional trustee and any Paying Agents in this Indenture shall bind its
successor.
Section 12.12. Multiple Counterparts.
---------------------
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 12.13. Table of Contents, Headings, etc.
--------------------------------
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
Section 12.14. Separability.
------------
Each provision of this Indenture shall be considered separable and if
for any reason any provision which is not essential to the effectuation of the
basic purpose of this Indenture or the Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
<PAGE>
S-1
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed all as of the date and year first written above.
COAXIAL COMMUNICATIONS OF CENTRAL
OHIO, INC.
By: /s/ Michael S. Willner
Name: Michael S. Willner
Title:
PHOENIX ASSOCIATES
By: PHOENIX DJM LLC
By: /s/ Dennis McGillicuddy
Name: Dennis McGillicuddy
Title:
INSIGHT COMMUNICATIONS OF CENTRAL
OHIO, LLC
By: /s/ Michael S. Willner
Name: Michael S. Willner
Title:
BANK OF MONTREAL TRUST COMPANY, as
Trustee
By: /s/ Amy Roberts
Name: Amy Roberts
Title: Vice President
<PAGE>
-1-
EXHIBIT A
---------
[FORM OF FACE OF NOTE]
Number CUSIP
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
PHOENIX ASSOCIATES
10% SENIOR NOTE DUE 2006
Coaxial Communications of Central Ohio, Inc., an Ohio corporation
("Coaxial", which term includes any successor corporation), and Phoenix
Associates, a Florida general partnership (jointly and severally, together with
Coaxial, the "Issuers"), for value received promise to pay to or
registered assigns the principal sum of Dollars ($ ),
on August 15, 2006.
Interest Payment Dates: February 15 and August 15, commencing
February 15, 1999
Record Dates: February 1 and August 1
This Note shall not be valid or obligatory for any purpose until the
certificate of authentication shall have been executed by the Trustee by its
manual signature.
Reference is made to the further provisions of this Security contained
herein, which will for all purposes have the same effect as if set forth at this
place.
<PAGE>
-2-
IN WITNESS WHEREOF, the Issuers have caused this Note to be signed
manually or by facsimile by their duly authorized Officers.
COAXIAL COMMUNICATIONS OF CENTRAL
OHIO, INC.
By:
Name: Kim D. Kelly
Title: Chief Operating Officer
By:
Name: Daniel Mannino
Title: Controller
PHOENIX ASSOCIATES
By: PHOENIX DJM LLC,
A GENERAL PARTNER
By:
Name: Dennis J. McGillicuddy
Title: Its Sole Member
By: PHOENIX BAS LLC,
A GENERAL PARTNER
By: BARRY SILVERSTEIN,
Its Sole Member
By:
Name: Dennis J. McGillicuddy
Title: Attorney-In-Fact for
Barry Silverstein
Certificate of Authentication:
This is one of the 10% Senior
<PAGE>
-3-
Notes due 2006 referred to in
the within-mentioned Indenture
Dated:
BANK OF MONTREAL TRUST COMPANY,
as Trustee
By:
Authorized Signature
<PAGE>
-4-
(REVERSE SIDE)
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
PHOENIX ASSOCIATES
10% SENIOR NOTE DUE 2006
1. INTEREST.
Coaxial Communications of Central Ohio, Inc., an Ohio corporation
("Coaxial"), and Phoenix Associates, a Florida general partnership (together
with Coaxial, the "Issuers"), jointly and severally promise to pay interest on
the principal amount of this Note semiannually on February 15 and August 15 of
each year (each an "Interest Payment Date"), commencing on February 15, 1999, at
the rate of 10% per annum. Interest will be computed on the basis of a 360 day
year of twelve 30-day months. Interest on the Notes will accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of the original issuance of the Notes.
The Issuers shall pay interest on overdue principal, and on overdue
premium, if any, and overdue interest, to the extent lawful, at the rate equal
to 2% per annum in excess of the rate borne by the Notes.
2. METHOD OF PAYMENT.
The Issuers will pay interest on this Note provided for in Paragraph 1
above (except Defaulted interest) to the person who is the registered Holder of
this Note at the close of business on the February 1 or August 1 preceding the
Interest Payment Date (whether or not such day is a Business Day). The Holder
must surrender this Note to a Paying Agent to collect principal payments. The
Issuers will pay principal, premium, if any, and interest in money of the United
States that at the time of payment is legal tender for payment of public and
private debts; provided, however, that the Issuers may pay principal, premium,
-------- -------
if any, and interest by check payable in such money. They may mail an interest
check to the Holder's registered address.
3. PAYING AGENT AND REGISTRAR.
<PAGE>
-5-
Initially, Bank of Montreal Trust Company (the "Trustee") will act as
Paying Agent and Registrar. The Issuers may change any Paying Agent or
Registrar without notice to the Holders of the Notes. Neither the Issuers nor
any of their Subsidiaries or Affiliates may act as Paying Agent but may act as
Registrar.
4. INDENTURE; RESTRICTIVE COVENANTS.
The Issuers issued this Note under an Indenture dated as of August 21,
1998 (the "Indenture") among the Issuers, the Guarantor and the Trustee. The
terms of this Note include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
(S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture. This Note is
subject to all such terms, and the Holder of this Note is referred to the
Indenture and said Trust Indenture Act for a statement of them. All capitalized
terms in this Note, unless otherwise defined, have the meanings assigned to them
by the Indenture.
The Notes are nonrecourse secured obligations of the Issuers limited
to $140,000,000 aggregate principal amount. The Indenture imposes certain
restrictions on, among other things, the incurrence of indebtedness, the
incurrence of liens and the issuance of capital stock by Subsidiaries of the
Issuers, mergers and sale of assets, the payments of dividends on, or the
repurchase of, capital stock of the Issuers and their Restricted Subsidiaries,
certain other restricted payments by the Issuers and their Restricted
Subsidiaries, certain transactions with, and investments in, their affiliates,
certain sale and lease-back transactions and a provision regarding change-of-
control transactions.
5. OPTIONAL REDEMPTION.
The Issuers, at their option, may redeem the Notes, in whole at any
time or in part from time to time on or after August 15, 2002 at the following
redemption prices (expressed as percentages of the principal amount thereof),
together, in each case, with accrued and unpaid interest, if any, to the
redemption date, if redeemed during the twelve-month period beginning on August
15 of each year listed below:
Year Redemption Price
- ---- ----------------
2002. . . . . . . . . . . . . 105.500%
<PAGE>
-6-
2003. . . . . . . . . . . . . 103.333%
2004. . . . . . . . . . . . . 101.667%
2005 and thereafter . . . . . 100.000%
Notwithstanding the foregoing, the Issuers may redeem in the aggregate
up to 35% of the original principal amount of Notes at any time and from time to
time prior to August 15, 2001 at a redemption price equal to 110.0% of the
aggregate principal amount so redeemed, plus accrued and unpaid interest, if
any, to the redemption date out of the Net Proceeds of one or more Equity
Offerings; provided that at least $91.0 million of the aggregate principal
--------
amount of Notes remain outstanding immediately after the occurrence of any such
redemption and that any such redemption occurs within 90 days following the
closing of any such Equity Offering.
In the event of a redemption of fewer than all of the Notes, the
Trustee shall select the Notes to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, on which
such Notes are listed, or if such Notes are not then listed on a national
securities exchange, on a pro rata basis, by lot or in such other manner as the
--- ----
Trustee shall deem fair and equitable. The Notes will be redeemable in whole or
in part upon not less than 30 nor more than 60 days' prior written notice,
mailed by first class mail to a holder's last address as it shall appear on the
register maintained by the Registrar of the Notes. On and after any redemption
date, interest will cease to accrue on the Notes or portions thereof called for
redemption as long as funds are deposited with the Paying Agent.
6. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first class mail at least 30
days but not more than 60 days prior to the redemption date to each Holder of
Notes to be redeemed at its registered address as it shall appear on the
register of the Notes maintained by the Registrar. On and after any Redemption
Date, interest will cease to accrue on the Notes or portions thereof called for
redemption unless the Issuers shall fail to redeem any such Note.
7. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales be used,
subject to further limitations contained
<PAGE>
-7-
therein, to make an offer to purchase certain amounts of Notes in accordance
with the procedures set forth in the Indenture. The Issuers are also required to
make an offer to purchase Notes upon the occurrence of a Change of Control or an
Asset Swap in accordance with procedures set forth in the Indenture.
8. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the Issuers, the
Guarantor and CIBC Oppenheimer Corp., as initial purchaser of the Notes, the
Issuers will be obligated to consummate an exchange offer pursuant to which the
Holder of this Note shall have the right to exchange this Note for Notes of a
separate series issued under the Indenture (or a trust indenture substantially
identical to the Indenture in accordance with the terms of the Registration
Rights Agreement) which have been registered under the Securities Act, in like
principal amount and having substantially identical terms as the Notes. The
Holders shall be entitled to receive certain additional interest payments in the
event such exchange offer is not consummated and upon certain other conditions,
all pursuant to and in accordance with the terms of the Registration Rights
Agreement.
9. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples thereof. A Holder may register the transfer or
exchange of Notes in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements and transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any Note
selected for redemption or register the transfer of or exchange any Note for a
period of 15 days before the mailing of notice of redemption of Notes to be
redeemed or any Note after it is called for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
10. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of it
for all purposes.
11. UNCLAIMED MONEY.
<PAGE>
-8-
If money for the payment of principal, premium or interest on any Note
remains unclaimed for two years, the Trustee or Paying Agent will pay the money
back to the Issuers at their written request. After that, Holders entitled to
money must look to the Issuers for payment as general creditors unless an
"abandoned property" law designates another person.
12. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be
modified, amended or supplemented by the Issuers, the Guarantors and the Trustee
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding and any existing Default or compliance with any
provision may be waived in a particular instance with the consent of the Holders
of a majority in principal amount of the Notes then outstanding. Without the
consent of Holders, the Issuers, the Guarantors and the Trustee may amend the
Indenture or the Notes or supplement the Indenture for certain specified
purposes including providing for uncertificated Notes in addition to
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not, in the opinion of the Trustee, materially and
adversely affect the rights of any Holder.
13. SUCCESSOR ENTITY.
When a successor entity assumes all the obligations of its predecessor
under the Notes and the Indenture and immediately before and thereafter no
Default exists and certain other conditions are satisfied, the predecessor
entity will be released from those obligations.
14. DEFAULTS AND REMEDIES.
Events of Default are set forth in the Indenture. If an Event of
Default (other than an Event of Default pursuant to Sections 6.01(6) or (7) of
the Indenture with respect to either of the Issuers) occurs and is continuing,
the Trustee by notice to the Issuers, or the Holders of not less than 25% in
aggregate principal amount of the Notes then outstanding, may declare to be
immediately due and payable the entire principal amount of all the Notes then
outstanding plus accrued but unpaid interest to the date of acceleration;
provided, however, that after such acceleration but before judgment or decree
- -------- -------
based on such acceleration is obtained by the Trustee, the Holders of a
<PAGE>
-9-
majority in aggregate principal amount of the outstanding Notes may, under
certain circumstances, rescind and annul such acceleration and its consequences
if all existing Events of Default, other than the nonpayment of principal,
premium or interest that has become due solely because of the acceleration, have
been cured or waived and if the rescission would not conflict with any judgment
or decree. No such rescission shall affect any subsequent Default or impair any
right consequent thereto. In case an Event of Default specified in Sections
6.01(6) or (7) of the Indenture with respect to either of the Issuers occurs,
such principal amount, together with premium, if any, and interest with respect
to all of the Notes, shall be due and payable immediately without any
declaration or other act on the part of the Trustee or the Holders of the Notes.
15. TRUSTEE DEALINGS WITH THE ISSUERS
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Issuers, any Guarantor or their Affiliates, and may otherwise deal with the
Issuers any Guarantor or their Affiliates, as if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee, stockholder, member, partner, or agent, as such, of the Issuers or any
Guarantor shall not have any liability for any obligations of the Issuers or any
Guarantor under the Notes or the Indenture or for any claim based on, in respect
or by reason of, such obligations or their creation. The Holder of this Note by
accepting this Note waives and releases all such liability. The waiver and
release are part of the consideration for the issuance of this Note.
17. NO RECOURSE AGAINST THE ISSUERS.
This Note will be a non-recourse obligation of the Issuers and the
only recourse a holder of this Note will have with respect to the payment of
principal or interest on this Note will be enforcement of the rights granted
pursuant to the Pledge Agreement with respect to the Senior Notes Collateral
(which will require mandatory redemptions of the Series A Preferred Interests)
and, failing that, enforcement of the Guarantee.
18. DEFEASANCE AND COVENANT DEFEASANCE.
<PAGE>
-10-
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain covenants in the
Indenture upon compliance by the Issuers with certain conditions set forth in
the Indenture.
19. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of a Note
or an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by
the entireties), JT TEN (joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian), and U/G/M/A (Uniform Gifts to Minors
Act).
20. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Note Identification Procedures, the Issuers have caused CUSIP Numbers to be
printed on the Notes and have directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Holders of the Notes. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be placed
only on the other identification numbers placed thereon.
21. GOVERNING LAW.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF
THE PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
NOTE.
THE ISSUERS WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN REQUEST
AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: Coaxial
Communications of Central Ohio, Inc., c/o Insight Communications Company, L.P.,
126 East 56th, New York, New York 12022, Attention: Kim D. Kelly and Phoenix
Associates, c/o Coaxial Communications, Inc., 5111 Ocean Boulevard, Suite C,
Sarasota, Florida 34242, Attention: Dennis J. McGillicuddy.
22. GUARANTEES.
<PAGE>
-11-
The Notes will be entitled to the benefits of conditional Guarantees
by the Guarantors made for the benefit of the Holders. Reference is hereby made
to the Indenture for a statement of the respective rights, limitations of
rights, duties and obligations thereunder of the Guarantors, the Trustee and the
Holders.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased by
the Issuers pursuant to Section 4.10, Section 4.19 or Section 4.24 of the
Indenture, check the appropriate box:
[_] Section 4.10 [_] Section 4.19 [_] Section 4.24
If you want to have only part of the Note purchased by the pursuant to
Section 4.10, Section 4.19 or Section 4.24 of the Indenture, state the amount
you elect to have purchased:
$
Date:
Your Signature:
(Sign exactly as your name appears on
the face of this Note)
Signature Guaranteed
<PAGE>
EXHIBIT B
---------
[FORM OF LEGEND FOR RULE 144A NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS, EXCEPT AS
SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A)
IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(a)(1),(2),(3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
"OFFSHORE TRANSACTION" PURSUANT TO REGULATION S (WITHIN THE MEANING OF RULE
903(c)(2) OF REGULATION S UNDER THE SECURITIES ACT) AND (2) AGREES THAT IT WILL
NOT, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") THAT IS TWO
YEARS (OR SUCH SHORTER PERIOD AS MAY BE PRESCRIBED BY RULE 144(k) (OR ANY
SUCCESSOR PROVISION THEREOF) UNDER THE SECURITIES ACT) AFTER THE LATER OF THE
ORIGINAL ISSUE DATE AND THE LAST DATE ON WHICH THE ISSUERS OR ANY AFFILIATE
THEREOF WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF SUCH NOTE), RESELL OR
OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE ISSUERS OR ANY SUBSIDIARY
THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE
TRUSTEE AND THE ISSUERS A LETTER SIGNED BY SUCH INVESTOR CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE), (E) OUTSIDE
THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT OR (F) PURSUANT TO ANY OTHER EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT (IF AVAILABLE) AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS NOTE IS TRANSFERRED PRIOR TO THE RESALE REGISTRATION
TERMINATION DATE A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. PRIOR TO
ANY OFFER, SALE OR OTHER TRANSFER OF THIS NOTE PRIOR TO THE RESALE RESTRICTION
TERMINATION DATE PURSUANT TO CLAUSES (D) AND (F) ABOVE, THE HOLDER WILL BE
REQUIRED TO FURNISH TO THE TRUSTEE AND THE ISSUERS SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM OR
B-1
<PAGE>
IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT.
B-2
<PAGE>
[FORM OF ASSIGNMENT FOR RULE 144A NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Issuers. The Agent may
substitute another to act for him.
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided by
Rule 144A thereunder.
or
--
[ ] (b) this Note is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Sections 2.16 and 2.17 of the Indenture shall have been
satisfied.
Date: Your Signature:
----------------------- ------------------------------------
(Sign exactly as your name
appears on the other
side of this Note)
Signature Guarantee:
--------------------------------------------
B-3
<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note for
its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Issuers as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.
Dated:
------------------------- ----------------------------------------
NOTICE:
To be executed by
an executive officer
B-4
<PAGE>
EXHIBIT C
---------
[FORM OF LEGEND FOR REGULATION S NOTE]
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, UNLESS SO
REGISTERED, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS UNLESS REGISTERED UNDER THE SECURITIES
ACT OR EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
C-1
<PAGE>
[FORM OF ASSIGNMENT FOR REGULATION S NOTE]
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Agent to transfer this Note on the books of the Issuers. The Agent may
substitute another to act for him.
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act provided by
Rule 144A thereunder.
or
--
[ ] (b) this Note is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Sections 2.16 and 2.17 of the Indenture shall have been
satisfied.
Date: Your Signature:
---------------------- -------------------------------------
(Sign exactly as your name
appears on the other
side of this Note)
Signature Guarantee:
---------------------------------------------------
C-2
<PAGE>
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note for
its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Issuers as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.
Dated:
------------------------ --------------------------------------------
NOTICE: To be executed by
an executive officer
C-3
<PAGE>
EXHIBIT D
---------
[FORM OF LEGEND FOR GLOBAL NOTE]
Any Global Note authenticated and delivered hereunder shall bear a legend
(which would be in addition to any other legends required in the case of a Rule
144A Note or Regulation S Note) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A
DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN THE NAME OF A
PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE (OTHER
THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUERS OR
THEIR AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IT REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
D-1
<PAGE>
EXHIBIT E
---------
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
,
----------- ----
Attention:
Re: Coaxial Communications of Central Ohio, Inc. ("Coaxial") and
Phoenix Associates (together with Coaxial, the "Issuers") 10%
Senior Notes due 2006 (the "Notes")
----------------------------
Dear Sirs:
In connection with our proposed purchase of Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture
dated as of August 21, 1998 relating to the Notes and we agree to be bound
by, and not to resell, pledge or otherwise transfer the Notes except in
compliance with, such restrictions and conditions and the Securities Act of
1933, as amended (the "Securities Act").
2. We understand that the Notes have not been registered under the
Securities Act, and that the Notes may not be offered, sold, pledged or
otherwise transferred except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, that if we should sell any Notes, we will do
so only (i) to an Issuer or any subsidiary thereof, (ii) pursuant to an
effective registration statement under the Securities Act, (iii) in
accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined in Rule 144A), (iv) to an institutional
"accredited investor" (as defined
E-1
<PAGE>
below) that, prior to such transfer, furnishes (or has furnished on its
behalf by a U.S. broker-dealer) to you a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Notes, (v) outside the United States to persons other than U.S. persons
in offshore transactions meeting the requirements of Rule 904 of Regulation
S under the Securities Act, or (vi) pursuant to any other exemption from
registration under the Securities Act (if available), and we further agree
to provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein.
3. We understand that, on any proposed resale of any Notes, we will
be required to furnish to you and the Issuers such certifications, legal
opinions and other information as you and the Issuers may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting each are able to
bear the economic risk of our or their investment, as the case may be.
5. We are acquiring the Notes purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[Name of Transferee]
E-2
<PAGE>
By:
-------------------------------------
Authorized Signature
E-3
<PAGE>
EXHIBIT F
---------
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
,
---------- ----
Attention:
Re: Coaxial Communications of Central Ohio, Inc. ("Coaxial") and
Phoenix Associates (together with Coaxial, the "Issuers") 10%
Senior Notes due 2006 (the "Notes")
----------------------------
Dear Sirs:
In connection with our proposed sale of $__________ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a U.S. person or to a
person in the United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated offshore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
F-1
<PAGE>
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Issuers are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-------------------------------------
Authorized Signature
F-2
<PAGE>
EXHIBIT G
---------
[FORM OF GUARANTEE]
The undersigned (the "Guarantor") hereby conditionally guarantees, on
a senior unsecured basis, jointly and severally with all other guarantors under
the Indenture dated as of August 21, 1998 by and among Coaxial Communications of
Central Ohio, Inc., an Ohio corporation ("Coaxial"), Phoenix Associates, a
Florida general partnership (together with Coaxial, the "Issuers"), and Bank of
Montreal Trust Company, as trustee (as amended, restated or supplemented from
time to time, the "Indenture"), to the extent set forth in the Indenture and
subject to the provisions of the Indenture, (a) the payment of the principal of
and premium, if any, and interest on the Notes, whether at maturity, by
acceleration or otherwise, the payment of interest on overdue principal of, and
premium, if any, and interest on the Notes, to the extent lawful, and the due
and punctual performance of all other obligations of the Issuers to the
Noteholders or the Trustee, all in accordance with the terms set forth in
Article 10 of the Indenture, and (b) in case of any extension of time of payment
or renewal of any Notes or any of such other obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of the Guarantor to the Noteholders and to the Trustee
pursuant to this Guarantee and the Indenture are expressly set forth in Article
10 of the Indenture and reference is hereby made to the Indenture for the
precise terms and limitations of this Guarantee.
INSIGHT COMMUNICATIONS
OF CENTRAL OHIO, LLC
By:
-------------------------------------
Name: Kim D. Kelly
Title: Chief Operating Officer
G-1
<PAGE>
Exhibit 4.4
SECURITIES PLEDGE AGREEMENT
SECURITIES PLEDGE AGREEMENT (this "Agreement"), dated as of August 21,
1998, made by COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC., an Ohio corporation
having its registered office at 126 East 56th Street, New York, NY 10022, c/o
Insight Communications Company, L.P. ("Pledgor"), in favor of BANK OF MONTREAL
TRUST COMPANY (together with any successors or assigns, the "Trustee"), in its
capacity as trustee under the Indenture (as hereinafter defined).
R E C I T A L S :
- - - - - - - -
A. Pursuant to a certain indenture, dated as of the date hereof (as
amended, amended and restated, supplemented or otherwise modified from time to
time, the "Indenture"; capitalized terms used herein and not defined shall have
the meanings assigned to them in the Indenture), among Pledgor, Phoenix
Associates ("Phoenix" and together with Pledgor the "Issuers"), the Guarantor
named therein and Bank of Montreal Trust Company, as trustee, the Issuers have
agreed to issue $140,000,000 aggregate principal amount of 10% Senior Notes due
2006 (the "Series A Securities"). It is contemplated that the Issuers will,
after the date hereof, issue Series B Securities in exchange for such Series A
Securities (the "Series B Securities;" and, together with the Series A
Securities, the "Securities").
B. Pledgor is the legal and beneficial owner of the Pledged
Collateral (as hereinafter defined).
C. In order to secure the performance of the Secured Obligations
(as hereinafter defined), the parties hereto are entering into this Agreement
regarding the terms and conditions of Pledgor's pledge of the Pledged Collateral
to the Trustee, for the benefit of itself and the holders of the Securities (the
Trustee and such holders, each a "Secured Party" and collectively, the "Secured
Parties").
<PAGE>
-2-
A G R E E M E N T :
- - - - - - - - -
NOW, THEREFORE, in consideration of the foregoing premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor and the Trustee hereby agree as follows:
Section 1. Pledge. In order to secure the payment and performance
------
when due of all the Secured Obligations, Pledgor hereby pledges, assigns,
transfers and grants to the Trustee for its benefit and the benefit of the
Secured Parties, a first priority lien on, continuing security interest in and
pledge of all of Pledgor's present and future right, title and interest in, to
and under the following property (collectively, the "Pledged Collateral"):
(a) the Series A Preferred Interests of Insight Communications of
Central Ohio, LLC ("Insight Ohio") described in Schedule I hereto, together
----------
with all rights, privileges, authority and powers of Pledgor in Insight
Ohio specifically relating to the Series A Preferred Interests pursuant to
the operating agreement , as amended, of Insight Ohio (the "Operating
Agreement")(collectively, the "Initial Pledged Shares"), and the
certificates, instruments and agreements, if any, representing the Initial
Pledged Shares;
(b) all additional rights or interests in respect of the Series A
Preferred Interests including, without limitation, any right relating to
the Series A Preferred Interests in Insight Ohio or under the Operating
Agreement (collectively, the "Additional Interests"; together with the
Initial Pledged Shares, the "Pledged Shares") from time to time acquired by
Pledgor in any manner and the certificates, instruments and agreements, if
any, representing the Additional Interests;
(c) all dividends, cash, options, warrants, rights, instruments,
distributions, returns of capital, income, profits and other property,
interests or proceeds from time to time received, receivable or otherwise
distributed in respect of or in exchange for any or all
<PAGE>
-3-
of the Pledged Shares (collectively, "Distributions"); and
(d) all "proceeds" (as such term is defined in the Uniform Commercial
Code as in effect in any relevant jurisdiction (the "UCC") or under other
relevant law) of any of the foregoing, and in any event, including, without
limitation, any and all (i) proceeds of any insurance (except payments made
to a Person which is not a party to this Agreement), indemnity, warranty or
guarantee payable to the Trustee or to Pledgor from time to time with
respect to any of the Pledged Collateral, (ii) payments (in any form
whatsoever) made or due and payable to Pledgor from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Pledged Collateral by any governmental
authority (or any person acting under color of a governmental authority),
(iii) instruments representing obligations to pay amounts in respect of the
Pledged Collateral, (iv) products of the Pledged Collateral, and (v) other
amounts from time to time paid or payable under or in connection with any
of the Pledged Collateral.
Section 2. Secured Obligations. This Agreement secures, and the
-------------------
Pledged Collateral is collateral security for, the payment and performance in
full when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, the payment of interest and other amounts which
would accrue and become due but for the filing of a petition in bankruptcy or
the operation of the automatic stay under Section 362(a) of the Bankruptcy Code,
11 U.S.C. (S) 362(a)) of (i) all obligations of the Issuers now existing or
hereafter arising under or in respect of the Indenture (including, without
limitation, the Issuers' obligation to pay principal or premium, if any, and
interest on the Securities when due and payable) and all other charges, fees,
expenses, commissions, reimbursements, premiums, indemnities and all other
amounts due or to become due under or in connection with the Indenture and the
Securities, and (ii) without duplication of the amounts described in clause (i),
all obligations, indebtedness and liabilities of Pledgor now existing or
hereafter arising under or in respect of this Agreement,
<PAGE>
-4-
including, without limitation, with respect to all charges, fees, expenses,
commissions, reimbursements, premiums, indemnities and other payments related to
or in respect of the obligations contained in this Agreement, in each case
whether in the regular course of business or otherwise (the obligations
described in clauses (i) and (ii), collectively, the "Secured Obligations").
Section 3. No Release. Nothing set forth in this Agreement shall
----------
relieve Pledgor from the performance of any term, covenant, condition or
agreement on Pledgor's part to be performed or observed under or in respect of
any of the Pledged Collateral or from any liability to any Person under or in
respect of any of the Pledged Collateral or shall impose any obligation on the
Trustee or any Secured Party to perform or observe any such term, covenant,
condition or agreement on Pledgor's part to be so performed or observed or shall
impose any liability on the Trustee or any Secured Party for any act or omission
on the part of Pledgor relating thereto or for any breach of any representation
or warranty on the part of Pledgor contained in this Agreement, under or in
respect of the Pledged Collateral or made in connection herewith or therewith.
The obligations of Pledgor contained in this Section 3 shall survive the
termination of this Agreement and the discharge of Pledgor's other obligations
under this Agreement.
Section 4. Delivery of Pledged Collateral.
------------------------------
(a) Pledgor shall, to the extent permitted by applicable law, record
its pledge of the Pledged Shares on the membership interest register or the
books of Insight Ohio, cause Insight Ohio to execute and deliver to the Trustee
an acknowledgment of the pledge of the Pledged Shares substantially in the form
of Exhibit 2 hereto, execute any customary pledge forms or other documents
---------
necessary or appropriate to complete the pledge and give Trustee the right to
transfer such Pledged Shares under the terms hereof and provide to the Trustee
an opinion of counsel, in form and substance satisfactory to the Trustee,
confirming such pledge.
(b) If the Pledged Shares become certificated, any such certificates,
agreements or instruments representing or
<PAGE>
-5-
evidencing the Pledged Collateral, to the extent not previously delivered to the
Trustee, shall immediately upon receipt thereof by Pledgor be delivered to and
held by or on behalf of the Trustee pursuant hereto; provided, however, that to
-------- -------
the extent the certificates representing the Pledged Shares that have been
delivered to the Trustee are in bearer form, the Trustee shall, on request of
the Pledgor, release and exchange such certificates for certificates in
registered form, issued in the name of the Pledgor and an appropriate amendment
to this Agreement shall be executed by the Pledgor. All such certificated
Pledged Collateral, if any, shall be in suitable form for transfer by delivery
or shall be accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance reasonably satisfactory to the Trustee. The
Trustee shall have the right, at any time upon the occurrence of an Event of
Default which is continuing and without notice to Pledgor (except as required by
law), to endorse, assign or otherwise transfer to or to register in the name of
the Trustee or any of its nominees any or all of the Pledged Collateral. In
addition, the Trustee shall have the right at any time to exchange any
certificates representing or evidencing Pledged Collateral for certificates of
smaller or larger denominations.
Section 5. Supplements, Further Assurances.
-------------------------------
(a) Pledgor agrees that at any time and from time to time, at the sole
cost and expense of Pledgor, Pledgor shall promptly execute and deliver all
further instruments and documents, including, without limitation, supplemental
or additional UCC1 financing statements, and take all further action that may be
necessary or that the Trustee may reasonably request, in order to perfect and
protect the pledge, security interest and Lien granted or purported to be
granted hereby or to enable the Trustee to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral.
(b) Pledgor shall, upon obtaining any additional Pledged Shares of
Insight Ohio, promptly (and in any event within five Business Days) deliver to
the Trustee a pledge amendment, duly executed by Pledgor, in substantially the
form of Exhibit 1 hereto (each, a "Pledge Amendment"), in respect
---------
<PAGE>
-6-
of the additional Pledged Shares which are to be pledged pursuant to this
Agreement, and confirming the attachment of the Lien hereby created on and in
respect of such additional shares. Pledgor hereby authorizes the Trustee to
attach each Pledge Amendment to this Agreement and agrees that all Pledged
Shares listed on any Pledge Amendment delivered to the Trustee shall for all
purposes hereunder be considered Pledged Collateral.
Section 6. Representations, Warranties and Covenants. Pledgor
-----------------------------------------
represents, warrants and covenants as follows:
(a) Perfection Actions; Prior Liens. Upon the completion of the
-------------------------------
deliveries, filings and other actions contemplated hereby, the security
interest granted to Trustee for the benefit of the Secured Parties pursuant
to this Agreement in and to the Pledged Collateral will constitute a
perfected security interest therein, superior and prior to the rights of
all other Persons therein other than with respect to the Liens identified
on Annex A relating to the items of Pledged Collateral identified on such
-------
annex (the "Prior Liens").
(b) No Liens. Pledgor is as of the date hereof, and, as to Pledged
--------
Collateral acquired by it from time to time after the date hereof, Pledgor
will be, the sole direct and beneficial owner of all Pledged Collateral
pledged by it hereunder free from any Lien or other right, title or
interest of any Person other than Prior Liens, and Pledgor shall defend the
Pledged Collateral pledged by it hereunder against all claims and demands
of all Persons at any time claiming any interest therein adverse to Trustee
or any Secured Party. There is no agreement, and Pledgor shall not enter
into any agreement or take any other action, that would result in the
imposition of any other Lien, restrict the transferability of any of the
Pledged Collateral or otherwise impair or conflict with Pledgors'
obligations or the rights of Trustee hereunder, other than Prior Liens.
<PAGE>
-7-
(c) Other Financing Statements. There is no financing statement (or
--------------------------
similar statement or instrument of registration under the law of any
jurisdiction) covering or purporting to cover any interest of any kind in
the Pledged Collateral other than financing statements relating to (i)
Prior Liens and (ii) this Agreement.
(d) No Conflicts, Consents, etc. Neither the execution and delivery
---------------------------
of this Agreement by Pledgor nor the consummation of the transactions
herein contemplated nor the fulfillment of the terms hereof (i) violates
any charter or bylaws or other organizational document of Pledgor or any
issuer of Pledged Securities, (ii) violates the terms of any agreement,
indenture, mortgage, deed of trust, equipment lease, instrument or other
document to which Pledgor is a party, or by which it may be bound or to
which any of its properties or assets may be subject, which violation or
conflict would have a material adverse effect on Insight Ohio, or a
material adverse effect on the value of the Pledged Collateral or an
adverse effect on the security interests hereunder, (iii) conflicts with
any law, order, rule or regulation applicable to Pledgor of any
governmental authority having jurisdiction over Pledgor or its property, or
(iv) results in or requires the creation or imposition of any Lien (other
than the Lien contemplated hereby) upon or with respect to any of the
property now owned or hereafter acquired by Pledgor. No consent of any
party (including, without limitation, equity holders or creditors of
Pledgor or any account debtor under a Receivable) and no consent,
authorization, approval, license or other action by, and no notice to or
filing with, any governmental authority or regulatory body or other Person
is required for (x) the pledge by Pledgor of the Pledged Collateral pledged
by it pursuant to this Agreement or for the execution, delivery or
performance of this Agreement by Pledgor, (y) the exercise by Trustee of
the rights provided for in this Agreement or (z) the exercise by Trustee of
the remedies in respect of the Pledged Collateral pursuant to this
Agreement. In the event that Trustee desires to exercise any remedies or
powers set forth in this Agreement and determines it necessary to obtain
any approvals or consents of any
<PAGE>
-8-
governmental authority or any other Person therefor, then, upon the
reasonable request of Trustee, Pledgor agrees to use its reasonable best
efforts to assist and aid Trustee to obtain as soon as practicable any
necessary approvals for the exercise of any such remedies, rights and
powers.
(e) Due Authorization and Issuance. All of the Pledged Shares have
------------------------------
been, and to the extent hereafter issued will be upon such issuance, duly
authorized and validly issued and fully paid and nonassessable.
(f) Chief Executive Office. Pledgor's chief executive office is
----------------------
managed at 126 East 56th Street, New York, NY 10022, c/o Insight
Communications Company, L.P. Pledgor shall not move its chief executive
office except to such new location as Pledgor may establish in accordance
with the last sentence of this Section 6(f). Pledgor shall not establish a
new location for its chief executive office nor shall it change its name
until (i) it shall have given the Trustee not less than 45 days' prior
written notice of its intention so to do, clearly describing such new
location or name and providing such other information in connection
therewith as the Trustee or any Secured Party may reasonably request, and
(ii) with respect to such new location or name, Pledgor shall have taken
all action satisfactory to the Trustee and the Secured Parties to maintain
the perfection and priority of the security interest of the Trustee for the
benefit of the Secured Parties in the Pledged Collateral intended to be
granted hereby.
(g) Delivery of Pledged Collateral; Filings. Pledgor has delivered to
---------------------------------------
the Trustee any certificates representing the Pledged Collateral and, if
requested by the Trustee, has delivered to the Trustee appropriate UCC1
financing statements to be filed with the Secretary of State of the States
of New York and in such other jurisdiction as is necessary or advisable to
create a valid and perfected first priority security interest in the
Pledged Collateral, in each case, evidencing the Lien created by this
Agreement, and such delivery, filing and pledge of the Pledged Collateral
pursuant to this
<PAGE>
-9-
Agreement will create a valid and perfected first priority security
interest in the Pledged Collateral securing the payment of the Secured
Obligations pursuant to: (i) the UCC in effect in each applicable
jurisdiction, including, without limitation, the State of New York and (ii)
the laws of any such other applicable jurisdiction.
(h) Pledged Collateral. All information set forth herein, including
------------------
the Schedules annexed hereto, and all information contained in any
documents, schedules and lists heretofore delivered to any Secured Party in
connection with this Agreement, in each case, relating to the Pledged
Collateral is accurate and complete in all material respects.
(i) No Violations, etc. The pledge of the Pledged Collateral pursuant
------------------
to this Agreement does not violate Regulation T, U or X of the Federal
Reserve Board.
(j) Operative Agreements. Pledgor has delivered to Trustee true,
--------------------
correct and complete copies of the Operating Agreement. The Operating
Agreement is in full force and effect, and there is no existing default by
any party thereunder or any event which, with the giving of notice of
passage of time or both, would constitute a default by any party
thereunder. Pledgor shall deliver to Trustee a copy of any notice of
default given or received by it under the Operating Agreement within ten
(10) days after Pledgor gives or receives such notice. Pledgor will not
terminate or agree to terminate the Operating Agreement or make any
amendment or modification to the Operating Agreement which would have an
adverse effect on the value of the Pledged Shares or the security intended
to be provided by this Agreement.
(k) No Options, Warrants, etc. Except as provided in the Operating
-------------------------
Agreement, there are no options, warrants, calls, rights, commitments or
agreements of any character to which Pledgor is a party or by which it is
bound obligating Pledgor to issue, deliver or sell or cause to be issued,
delivered or sold, additional Pledged Shares or obligating Pledgor to
grant, extend or enter
<PAGE>
-10-
into any such option, warrant, call, right, commitment or agreement. Except
as provided in the Operating Agreement, there are no voting trusts or other
agreements or understandings to which Pledgor is a party with respect to
the voting of the capital stock of any issuer of the Pledged Shares.
Section 7. Voting Rights; Distributions; etc.
---------------------------------
(a) (i) Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Shares or any part
thereof for any purpose not inconsistent with the terms or purpose of this
Agreement or the Indenture; provided, however, that Pledgor shall not in
-------- -------
any event knowingly exercise such rights in any manner which would impair
the Lien on or have a material adverse effect on the value of the Pledged
Collateral or the security intended to be provided by this Agreement.
(ii) So long as no Event of Default shall have occurred which is
continuing, Pledgor shall be entitled to receive and retain, and to utilize
free and clear of the Lien of this Agreement, any and all Distributions,
but only if and to the extent made in accordance with the provisions of the
Indenture; provided, however, that any and all such Distributions
-------- -------
consisting of rights or interests in the form of securities shall be, and
shall be forthwith delivered to the Trustee to hold as Pledged Collateral
and shall, if received by Pledgor, be received in trust for the benefit of
the Trustee, be segregated from the other property or funds of Pledgor, and
be forthwith delivered to the Trustee as Pledged Collateral in the same
form as so received (with any necessary endorsement).
(iii) The Trustee shall be deemed without further action or formality
to have granted to Pledgor all necessary consents relating to voting rights
and shall, if necessary, upon written request of Pledgor and at Pledgor's
sole cost and expense, from time to time execute and deliver (or cause to
be executed and delivered) to Pledgor all such instruments as Pledgor may
reasonably request in order to permit Pledgor to exercise
<PAGE>
-11-
the voting and other rights which it is entitled to exercise pursuant to
Section 7(a)(i) hereof and to receive the Distributions which it is
authorized to receive and retain pursuant to Section 7(a)(ii) hereof.
(b) Upon the occurrence and during the continuance of an Event of
Default all rights of Pledgor to receive Distributions which it would otherwise
be authorized to receive and retain pursuant to Section 7(a)(ii) hereof shall
cease and all such rights shall thereupon become vested in the Trustee, which
shall during the continuance of such Event of Default have the sole right to
receive and hold as Pledged Collateral such Distributions.
(c) Pledgor shall, at its sole cost and expense, from time to time
execute and deliver to the Trustee appropriate instruments as the Trustee may
reasonably request in order to permit the Trustee to receive all Distributions
which it may be entitled to receive under Section 7(b) hereof.
(d) All Distributions which are received by Pledgor contrary to the
provisions of Section 7(b) hereof shall be received in trust for the benefit of
the Trustee, shall be segregated from other funds of Pledgor and shall
immediately be paid over to the Trustee as Pledged Collateral in the same form
as so received (with any necessary endorsement).
Section 8. Transfers and Other Liens; Additional Shares; Principal
-------------------------------------------------------
Office.
- ------
(a) Pledgor shall not (i) sell, convey, assign or otherwise dispose
of, or grant any option, right or warrant with respect to, any of the Pledged
Collateral except as permitted by the Indenture or the Prior Liens, (ii) create
or permit to exist any Lien upon or with respect to any Pledged Collateral other
than the Lien and security interest granted to the Trustee pursuant to this
Agreement and Prior Liens or (iii) permit the issuer of the Pledged Shares to
merge, consolidate or change its legal form, unless (a) such transaction is
permitted by the Indenture and (b) all of the outstanding equity interests of
the surviving or resulting entity issued in respect of the Pledged Collateral
is, upon such merger or consolidation, pledged hereunder.
<PAGE>
-12-
(b) Pledgor shall (i) cause each issuer of the Pledged Shares not to
issue any stock or other securities in addition to or in substitution for the
Pledged Shares issued by such issuer, except to Pledgor and (ii) pledge
hereunder, immediately upon its acquisition (directly or indirectly) thereof,
any and all additional shares of capital stock or other equity securities of
the issuer of the Pledged Shares which are required to be pledged hereunder.
Section 9. Reasonable Care. The Trustee shall be deemed to have
---------------
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded treatment
substantially equivalent to that which the Trustee, in its individual capacity,
accords its own property consisting of similar instruments or interests, it
being understood that neither the Trustee nor any of the Secured Parties shall
have responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not the Trustee or any other Secured Party has or
is deemed to have knowledge of such matters, or (ii) taking any necessary steps
to preserve rights against any Person with respect to any Pledged Collateral.
Section 10. Remedies Upon Default; Decisions Relating to Exercise of
--------------------------------------------------------
Remedies.
- --------
(a) If an Event of Default shall have occurred which is continuing,
the Trustee shall have the right, in addition to other rights and remedies
provided for herein or otherwise available to it to be exercised from time to
time, (i) to retain and apply the Distributions to the Secured Obligations as
provided in Section 11 hereof, (ii) to enforce the mandatory redemption
provisions of the Series A Preferred Interests pursuant to the Operating
Agreement and (iii) to exercise all the rights and remedies of a secured party
on default under the UCC in effect in the State of New York at that time or
under the laws of any other applicable jurisdiction, and the Trustee may also in
its sole discretion, without notice except as specified below, sell the Pledged
Collateral or any part thereof (including, without limitation, any partial
interest in the Pledged Shares) in one or more
<PAGE>
-13-
parcels at public or private sale, at any exchange, broker's board or at any of
the Trustee's offices or elsewhere, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as may be commercially
reasonable, irrespective of the impact of any such sales on the market price of
the Pledged Collateral. The Trustee or any other Secured Party or any of their
respective Affiliates may be the purchaser of any or all of the Pledged
Collateral at any such sale and shall be entitled, for the purpose of bidding
and making settlement or payment of the purchase price for all or any portion of
the Pledged Collateral sold at such sale, to use and apply any of the Secured
Obligations owed to such Person as a credit on account of the purchase price of
any Pledged Collateral payable by such Person at such sale. Each purchaser at
any such sale shall acquire the property sold absolutely free from any claim or
right on the part of Pledgor, and Pledgor hereby waives, to the fullest extent
permitted by law, all rights of redemption, stay and/or appraisal which it now
has or may at any time in the future have under any rule of law or statute now
existing or hereafter enacted. Pledgor acknowledges and agrees that, to the
extent notice of sale shall be required by law, ten days notice to Pledgor of
the time and place of any public sale or the time after which any private sale
or other intended disposition is to take place shall constitute reasonable
notification of such matters. No notification need be given to Pledgor if it has
signed, after the occurrence and during the continuance of an Event of Default,
a statement renouncing or modifying any right to notification of sale or other
intended disposition. The Trustee shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The Trustee
may adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Subject to the Trustee
acting at all times in good faith and in a commercially reasonable manner,
Pledgor hereby waives, to the fullest extent permitted by law, any claims
against the Trustee arising by reason of the fact that the price at which any
Pledged Collateral may have been sold at such a private sale was less than the
price which might have been obtained at a public sale, even if the Trustee
accepts the first offer received and does not offer such Pledged
<PAGE>
-14-
Collateral to more than one offeree. Subject to the Trustee at all times acting
in good faith and in a commercially reasonable manner, the Trustee shall not be
liable for any incorrect or improper payment made pursuant to this Section 10 in
the absence of gross negligence or willful misconduct.
(b) Pledgor recognizes that, by reason of certain prohibitions
contained in the Securities Act, and applicable state securities laws, the
Trustee may be compelled, with respect to any sale of all or any part of the
Pledged Collateral, to limit purchasers to Persons who will agree, among other
things, to acquire the Pledged Collateral for their own account, for investment
and not with a view to the distribution or resale thereof. Pledgor acknowledges
that any such private sales may be at prices and on terms less favorable to the
Trustee than those obtainable through a public sale without such restrictions
(including, without limitation, a public offering made pursuant to a
registration statement under the Securities Act), and, notwithstanding such
circumstances, agrees that, subject to the Trustee at all times acting in good
faith and in a commercially reasonable manner, any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Trustee shall have no obligation to engage in public sales and no obligation to
delay the sale of any Pledged Collateral for the period of time necessary to
permit the issuer thereof to register it for a form of public sale requiring
registration under the Securities Act or under applicable state securities laws,
even if such issuer would agree to do so.
(c) Notwithstanding the foregoing, Pledgor shall, upon the occurrence
of an Event of Default, at the request of the Trustee, for the benefit of the
Trustee, cause any registration, qualification under or compliance with any
federal or state securities law or laws to be effected with respect to all or
any part of the Pledged Collateral as soon as practicable and at Pledgor's sole
cost and expense. Pledgor will use its reasonable efforts to cause such
registration to be effected (and be kept effective) and will use its reasonable
efforts to cause such qualification and compliance to be effected (and be kept
effective) as may be so requested and as would permit or facilitate the sale and
distribution of such Pledged Collateral, including, without
<PAGE>
-15-
limitation, registration under the Securities Act (or any similar statute then
in effect), appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with any other government
requirements. Pledgor shall cause the Trustee to be kept advised in writing as
to the progress of each such registration, qualification or compliance and as to
the completion thereof, shall furnish to the Trustee such number of
prospectuses, offering circulars or other documents incident thereto as the
Trustee from time to time may request, and shall indemnify and shall cause the
issuer of the Pledged Collateral to indemnify the Trustee and all others
participating in the distribution of such Pledged Collateral against all claims,
losses, damages and liabilities caused by any untrue statement (or alleged
untrue statement) of a material fact contained therein (or in any related
registration statement, notification or the like) or by any omission (or alleged
omission) to state therein (or in any related registration statement,
notification or the like) a material fact required to be stated therein or
necessary to make the statements therein in light of the circumstances under
which made not misleading.
(d) If the Trustee determines to exercise its right to sell any or all
of the Pledged Collateral, upon written request, Pledgor shall from time to time
furnish to the Trustee all such information as the Trustee may request in order
to determine the number of securities included in the Pledged Collateral which
may be sold by the Trustee as exempt transactions under the Securities Act and
the rules of the SEC thereunder, as the same are from time to time in effect.
(e) Pledgor recognizes that, by reason of certain prohibitions
contained in laws, rules, regulations or orders of any foreign governmental
authority, the Trustee may be compelled, with respect to any sale of all or any
part of the Pledged Collateral, to limit purchasers to those who meet the
requirements of such foreign governmental authority. Pledgor acknowledges that
any such sales may be at prices and on terms less favorable to the Trustee than
those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that, subject to the Trustee at all
times acting in good faith, any such restricted sale shall be deemed to have
been made in a commercially reasonable manner
<PAGE>
-16-
and that, except as may be required by applicable law, the Trustee shall have no
obligation to engage in public sales.
(f) In addition to any of the other rights and remedies hereunder, the
Trustee shall have the right to institute a proceeding seeking specific
performance in connection with any of the agreements or obligations hereunder or
under the mandatory redemption provisions of the Series A Preferred Interests
pursuant to the Operating Agreement.
(g) Notwithstanding any other provision of this Agreement, any
foreclosure on, sale, transfer or other disposition of, or the exercise of any
right to vote or consent with respect to, any of the Pledged Collateral as
provided herein or any other action taken or proposed to be taken by the Trustee
hereunder which would affect the operational, voting or other control of the
Pledgor or any of its subsidiaries shall be made in accordance with all
applicable laws, rules and regulations, including the terms of any governmental
franchise under which the Pledgor or such subsidiary operates.
Section 11. Application of Proceeds. All Distributions held from
-----------------------
time to time by the Trustee and all proceeds received by the Trustee in respect
of any sale of, collection from, or other realization upon all or any part of
the Pledged Collateral pursuant to the exercise by the Trustee of its remedies
as a secured creditor as provided in Section 10 hereof shall be applied,
together with any other sums then held by the Trustee pursuant to this
Agreement, promptly by the Trustee as set forth in the Indenture.
Section 12. Expenses. Pledgor will upon demand pay to the Trustee
--------
the amount of any and all reasonable expenses, including the reasonable fees and
expenses of its counsel and the reasonable fees and expenses of any experts and
agents, which the Trustee may incur in connection with (i) the collection of the
Secured Obligations, (ii) the enforcement and administration of this Agreement,
(iii) the custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Pledged Collateral, (iv) the exercise or
enforcement of any of the rights of the Trustee or any Secured Party hereunder
or (v) the failure by Pledgor to
<PAGE>
-17-
perform or observe any of the provisions hereof. All amounts payable by Pledgor
under this Section 12 shall be due upon demand and shall be part of the Secured
Obligations. Pledgor's obligations under this Section 12 shall survive the
termination of this Agreement and the discharge of Pledgor's other obligations
hereunder.
Section 13. No Waiver; Cumulative Remedies.
------------------------------
(a) No failure on the part of the Trustee to exercise, no course of
dealing with respect to, and no delay on the part of the Trustee in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right, power or remedy
hereunder preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies herein provided are cumulative and
are not exclusive of any remedies provided by law.
(b) In the event the Trustee shall have instituted any proceeding to
enforce any right, power or remedy under this Agreement by foreclosure, sale,
entry or otherwise, and such proceeding shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Trustee,
then and in every such case, to the extent permitted by law, Pledgor, the
Trustee and each Secured Party shall be restored to their respective former
positions and rights hereunder with respect to the Pledged Collateral, and all
rights, remedies and powers of the Trustee and the Secured Parties shall
continue as if no such proceeding had been instituted.
Section 14. The Trustee. The Trustee has been appointed as the
-----------
trustee pursuant to the Indenture. The actions of the Trustee hereunder are
subject to the provisions of the Indenture. The Trustee shall have the right
hereunder to make demands, to give notices, to exercise or refrain from
exercising any rights, and to take or refrain from taking action (including,
without limitation, the release or substitution of Pledged Collateral), in
accordance with this Agreement and the Indenture. The Trustee may resign and a
successor Trustee may be appointed in the manner provided in the Indenture.
Upon the acceptance of any appointment as the
<PAGE>
-18-
Trustee by a successor Trustee, that successor Trustee shall thereupon succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Trustee under this Agreement, and the retiring Trustee shall thereupon
be discharged from its duties and obligations under this Agreement. After any
retiring Trustee's resignation, the provisions of this Agreement shall inure to
its benefit as to any actions taken or omitted to be taken by it under this
Agreement while it was the Trustee.
Section 15. The Trustee May Perform; the Trustee Appointed
----------------------------------------------
AttorneyinFact. The Pledgor shall from time to time, and at all times after an
- --------------
Event of Default shall have occurred, execute all such further instruments and
documents and do all such things as the Trustee reasonably may deem desirable
for the purpose of obtaining the full benefit of this Agreement and of the
rights, title, interest, powers, authorities and discretions conferred on the
Trustee by this Agreement. The Pledgor hereby irrevocably appoints the Trustee
its attorneyinfact for it and in its name and on its behalf and as its act and
deed to execute, seal and deliver and otherwise perfect any deed, assurance,
agreement, instrument or take any action which it may deem necessary or
advisable for any of the purposes of this Agreement; provided that the Trustee
--------
shall not exercise such power until an Event of Default shall have occurred and
is continuing. The Trustee shall have full power to delegate this power of
attorney but no such delegation shall preclude the subsequent exercise of such
power by the Trustee itself or preclude the Trustee from subsequent delegation
to some other person and any delegation may be revoked by the Trustee at any
time. The foregoing grant of authority is a power of attorney coupled with an
interest and such appointment shall be irrevocable for the term of this
Agreement. The Pledgor hereby ratifies all that such attorney shall lawfully do
or cause to be done by virtue hereof. Any and all amounts expended by the
Trustee pursuant to this Section 15 shall be paid by Pledgor promptly upon
demand therefor, with interest at the rate then in effect under the Indenture
during the period from and including the date on which funds were so expended to
the date of repayment. Pledgor's obligations under this Section 15 shall survive
the termination of this Agreement and the discharge of Pledgor's other
obligations under this Agreement and the Indenture.
<PAGE>
-19-
Section 16. Indemnity.
---------
(a) Indemnity. Pledgor agrees to indemnify, pay and hold harmless the
---------
Trustee and each of the Secured Parties and the officers, directors, employees,
agents and Affiliates of the Trustee and each of the Secured Parties
(collectively, the "Indemnitees") from and against any and all other
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs (including, without limitation, settlement costs), expenses or
disbursements of any kind or nature whatsoever (including, without limitation,
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto), which may be imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of this Agreement
(including, without limitation, any misrepresentation by Pledgor in this
Agreement) (the "indemnified liabilities"); provided that Pledgor shall not have
--------
any obligation to an Indemnitee hereunder with respect to indemnified
liabilities if it has been determined by a final decision (after all appeals and
the expiration of time to appeal) of a court of competent jurisdiction that such
indemnified liability arose from the gross negligence or willful misconduct of
that Indemnitee. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in the preceding sentence may be unenforceable because it is
violative of any law or public policy, Pledgor shall contribute the maximum
portion which it is permitted to pay and satisfy under applicable law, to the
payment and satisfaction of all indemnified liabilities incurred by the
Indemnitees or any of them.
(b) Survival. The obligations of Pledgor contained in this Section 16
--------
shall survive the termination of this Agreement and the discharge of Pledgor's
other obligations under this Agreement.
(c) Reimbursement. Any amounts paid by any Indemnitee as to which
-------------
such Indemnitee has the right to reimbursement shall constitute Secured
Obligations secured by the Pledged Collateral.
<PAGE>
-20-
Section 17. Modification in Writing. No amendment, modification,
-----------------------
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Pledgor therefrom, shall be effective unless the
same shall be done in accordance with the terms of the Indenture and unless in
writing and signed by the Trustee. Any amendment, modification or supplement of
or to any provision of this Agreement, any waiver of any provision of this
Agreement and any consent to any departure by Pledgor from the terms of any
provision of this Agreement shall be effective only in the specific instance and
for the specific purpose for which made or given. Except where notice is
specifically required by this Agreement or the Indenture, no notice to or demand
on Pledgor in any case shall entitle Pledgor to any other or further notice or
demand in similar or other circumstances.
Section 18. Termination; Release. When all the Secured Obligations
--------------------
have been paid in full, this Agreement shall terminate. Upon termination of
this Agreement or any release of Pledged Collateral in accordance with the
provisions of the Indenture, the Trustee shall, upon the request and at the sole
cost and expense of Pledgor, forthwith assign, transfer and deliver to Pledgor,
against receipt and without recourse to or warranty by the Trustee, such of the
Pledged Collateral to be released (in the case of a release) as may be in the
possession of the Trustee and as shall not have been sold or otherwise applied
pursuant to the terms hereof, and, with respect to any other Pledged Collateral,
proper instruments (including UCC termination statements on Form UCC3)
acknowledging the termination of this Agreement or the release of such Pledged
Collateral, as the case may be.
Section 19. Notices. Unless otherwise provided herein or in the
-------
Indenture, any notice or other communication herein required or permitted to be
given shall be given in the manner set forth in the Indenture, as to either
party, addressed to it at the address set forth in the Indenture or at such
other address as shall be designated by such party in a written notice to the
other party complying as to delivery with the terms of this Section 19; provided
--------
that notices to the Trustee shall not be effective until received by the
Trustee.
<PAGE>
-21-
Section 20. Continuing Security Interest; Assignment. This Agreement
----------------------------------------
shall create a continuing security interest in the Pledged Collateral and shall
(i) be binding upon Pledgor, its successors and assigns and (ii) inure, together
with the rights and remedies of the Trustee hereunder, to the benefit of the
Trustee and the other Secured Parties and each of their respective successors,
transferees and assigns; no other Persons (including, without limitation, any
other creditor of Pledgor) shall have any interest herein or any right or
benefit with respect hereto. Without limiting the generality of the foregoing
clause (ii), any Secured Party may assign or otherwise transfer any indebtedness
held by it secured by this Agreement to any other Person, and such other Person
shall thereupon become vested with all the benefits in respect thereof granted
to such Secured Party, herein or otherwise, subject however, to the provisions
of the Indenture.
Section 21. GOVERNING LAW; TERMS. THIS AGREEMENT SHALL BE GOVERNED
--------------------
BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS, EXCEPT TO
THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE SECURITY INTEREST HEREUNDER,
OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PROPERTY ARE GOVERNED BY THE
LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK.
Section 22. Agent for Service; Submission to Jurisdiction; Waiver of
--------------------------------------------------------
Immunities. By the execution and delivery of this Agreement, the Pledgor
- ----------
submits to the non-exclusive jurisdiction of any federal or state court in The
City of New York, Borough of Manhattan, State of New York in any suit or
proceeding arising out of or relating to this Agreement or the Pledged
Collateral or that may be instituted or brought under federal or state
securities laws.
To the extent that the Pledgor has or hereafter may acquire any
immunity from jurisdiction of any court or from any legal process (whether
through service of notice, attachment prior to judgment, attachment in aid of
execution, execution or otherwise) with respect to itself or its property, it
hereby irrevocably waives such immunity in respect of its obligations under this
Agreement. In addition,
<PAGE>
-22-
the Pledgor irrevocably waives and agrees not to assert, by way of motion, as a
defense, or otherwise in any such suit, action or proceeding, any claim that it
is not personally subject to the jurisdiction of the abovementioned courts for
any reason whatsoever, that such suit, action or proceeding is brought in an
inconvenient forum or that the venue for such suit is improper, or that this
Agreement or the subject matter hereof may not be enforced in such courts.
The Pledgor and the Trustee agree that a final judgment in any such
suit, action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Section 22 shall affect the right of the Trustee to serve legal
process in any other manner permitted by law or affect the right of the Trustee
to bring any action or proceeding against any Pledgor or its property in the
courts of any other jurisdictions.
Section 23. Severability of Provisions. Any provision of this
--------------------------
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 24. Execution in Counterparts. This Agreement and any
-------------------------
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such counterparts together shall constitute one and the same Agreement.
Section 25. Headings. The Section headings used in this Agreement
--------
are for convenience of reference only and shall not affect the construction of
this Agreement.
Section 26. Obligations Absolute. All obligations of Pledgor
--------------------
hereunder shall be absolute and unconditional irrespective of:
<PAGE>
-23-
(i) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Pledgor;
(ii) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(iii) any change in the time, manner or place of pay ment of, or
in any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Indenture
or any other agreement or instrument relating thereto;
(iv) any exchange, release or nonperfection of any other
collateral, or any release or amendment or waiver of or consent to any
departure from any guarantee, for all or any of the Secured Obligations;
(v) any exercise or nonexercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement, the
Indenture or any other documents relating to the Indenture except as
specifically set forth in a waiver granted pursuant to the provisions of
Section 17 hereof; or
(vi) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, Pledgor.
<PAGE>
-24-
IN WITNESS WHEREOF, Pledgor and the Trustee have caused this Agreement
to be duly executed and delivered by their duly authorized officers as of the
date first above written.
COAXIAL COMMUNICATIONS OF CENTRAL
OHIO, INC., as Pledgor
By: Kim Kelly
--------------------------------
Name: Kim Kelly
Title: Executive Vice President
BANK OF MONTREAL TRUST COMPANY
as the Trustee
By: Amy Roberts
--------------------------------
Name: Amy Roberts
Title: Vice President
<PAGE>
Securities Pledge Agreement
---------------------------
SCHEDULE I
----------
Pledged Shares
--------------
CLASS LIQUIDATION
OF INTERESTS PREFERENCE
ISSUER ------------------ ------------
Insight Communications Series A Preferred $140,000,000
of Central Ohio, LLC Interests
<PAGE>
ANNEX A
-------
The Operating Agreement contains transfer restrictions relating to the
Pledged Shares and provisions providing for the termination of voting rights of
the Pledged Shares upon transfer and in certain other circumstances.
<PAGE>
Pledged Shares
--------------
Pledged Shares
--------------
CLASS LIQUIDATION
ISSUER OF INTERESTS PREFERENCE
- ------ ------------ -----------
<PAGE>
EXHIBIT 2
Form of Issuer Acknowledgment
The undersigned hereby (i) acknowledges receipt of a copy of the Pledge
Agreement (as amended, amended and restated, supplemented or otherwise modified
from time to time, the "Agreement"; capitalized terms used herein but not
defined herein have the meanings given such terms in the Agreement), dated as of
August 21, 1998, among Coaxial Communications of Central Ohio, Inc. and Bank of
Montreal Trust Company, as trustee under the Indenture (as defined in the
Agreement), (ii) agrees promptly to note on its books the security interests
granted and confirmed under the Agreement, (iii) agrees that it will comply with
instructions of Trustee with respect to the Pledged Collateral without further
consent by Pledgor, (iv) agrees to notify Trustee upon obtaining knowledge of
any interest in favor of any Person in the Pledged Collateral that is adverse to
the interest of Trustee therein and (v) waives any right or requirement at any
time hereafter to receive a copy of the Agreement in connection with the
registration of any Pledged Collateral thereunder in the name of Trustee or its
nominee or the exercise of voting rights by Trustee or its nominee.
COAXIAL COMMUNICATIONS OF
CENTRAL OHIO, LLC
By: ___________________________
Name:
Title:
<PAGE>
EXHIBIT 1
---------
PLEDGE AMENDMENT
This Pledge Amendment, dated ______________, is delivered pursuant to
Section 5 of the Agreement referred to below. The undersigned hereby agrees
that this Pledge Amendment may be attached to the Securities Pledge Agreement,
dated as of August 21, 1998, between the undersigned and Bank of Montreal Trust
Company, as the Trustee (the "Agreement"; capitalized terms used herein and not
defined shall have the meanings assigned to them in the Agreement) and that the
Pledged Shares listed on this Pledge Amendment shall be deemed to be and shall
become part of the Pledged Collateral and shall secure all Secured Obligations.
COAXIAL COMMUNICATIONS OF CENTRAL
OHIO, INC.,
as Pledgor
By:
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT 5.1
-----------
[LETTERHEAD OF COOPERMAN LEVITT WINIKOFF LESTER & NEWMAN, P.C.]
September 17, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Ladies and Gentlemen:
We have been requested by Coaxial Communications of Central Ohio, Inc., an
Ohio corporation, Phoenix Associates, a Florida general partnership
(collectively, the "Issuers"), and Insight Communications of Central Ohio, LLC,
a Delaware limited liability company (the "Guarantor"), to furnish our opinion
in connection with the registration statement (the "Registration Statement") on
Form S-4, filed concurrently herewith, with respect to the registration of
$140,000,000 aggregate principal amount of 10% Senior Notes due 2006 of the
Issuers (the "Exchange Notes") to be offered in exchange for outstanding 10%
Senior Notes due 2006 (the "Original Notes"), which Exchange Notes will be
guaranteed (the Guarantees") by the Guarantor. The Exchange Notes and the
Guarantees will be issued under an indenture relating to the Original Notes and
the Exchange Notes (the "Indenture") among the Issuers, the Guarantor and Bank
of Montreal Trust Company, as Trustee.
We have made such examination as we have deemed necessary for the purpose
of this opinion. Based upon such examination, it is our opinion that when the
Registration Statement has become effective under the Securities Act of 1933, as
amended, the Exchange Notes have been duly executed and authenticated in
accordance with the Indenture, the Indenture has been qualified under the Trust
Indenture Act of 1939, as amended, the Original Notes have been validly tendered
to the Company and the Exchange Notes have been delivered in exchange therefor,
the Exchange Notes and the Guarantees will be validly issued and binding
obligations
<PAGE>
of the Issuers and the Guarantor, subject in each case to the effect of (i)
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights of creditors generally and (ii) the
application of general principles of equity (regardless of whether enforcement
is considered in proceedings at law or in equity).
We express no opinion as to the applicability (and, if applicable, the
effect) of Section 548 of the United States Bankruptcy Code or any comparable
provision of state law to the conclusions expressed above.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the Federal laws of the
United States of America, and the Limited Liability Company Act of the State of
Delaware.
The opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purposes or relied upon
or furnished to any other person without our prior written consent.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our name under the caption "Legal
Matters" in the prospectus included in the Registration Statement.
Very truly yours,
COOPERMAN LEVITT WINIKOFF
LESTER & NEWMAN, P.C.
By: /s/ Elliot Brecher
--------------------------
<PAGE>
Exhibit 8.1
[LETTERHEAD OF COOPERMAN LEVITT WINIKOFF LESTER & NEWMAN, P.C.]
September 15, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Ladies and Gentlemen:
We have been requested by Coaxial Communications of Central Ohio, Inc.
("Coaxial"), an Ohio corporation, Phoenix Associates (collectively with Coaxial,
the "Issuers"), a Florida general partnership, and Insight Communications of
Central Ohio, LLC, a Delaware limited liability company, to furnish our opinion
in connection with the registration statement (the "Registration Statement") on
Form S-4, filed concurrently herewith, with respect to the registration of
$140,000,000 aggregate principal amount of 10% Senior Notes due 2006 of the
Issuers (the "Exchange Notes") to be offered (the "Exchange Offer") in exchange
for outstanding 10% Senior Notes due 2006 (the "Original Notes").
We have made such examination as we have deemed necessary for the purpose
of this opinion. Based upon the terms of the Exchange Offer, the Original Notes
and the Exchange Notes, which are set forth in the Registration Statement, we
are of the opinion that the exchange of the Original Notes for Exchange Notes
pursuant to the Exchange Offer will not be treated as an "exchange" for federal
income tax purposes because the Exchange Notes will not (in our opinion) be
considered to differ materially in kind or extent from the Original Notes.
Rather, it is our opinion that the Exchange Notes received by a holder will be
treated as a continuation of the Original Notes in the hands of such holder and
that, consequently, there will be no federal income tax consequences to holders
exchanging Original Notes for Exchange Notes pursuant to the Exchange Offer.
The foregoing opinion is based upon current provisions of the Internal
Revenue Code of 1986, as amended, the Treasury Regulations promulgated
thereunder, published pronouncements of the Internal Revenue Service, and case
law, any of which may be changed at any time with retroactive effect. We
undertake no obligation to update this opinion in respect of any such changes.
<PAGE>
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference of our name under the caption "Legal
Matters" in the prospectus included in the Registration Statement.
Very truly yours,
COOPERMAN LEVITT WINIKOFF
LESTER & NEWMAN, P.C.
By /s/ Mark Lubin
---------------------------
<PAGE>
Exhibit 10.1
CLOSE CORPORATION AGREEMENT
OF
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
THIS CLOSE CORPORATION AGREEMENT of COAXIAL COMMUNICATIONS OF CENTRAL OHIO,
INC. is entered into effective as of August 21, 1998, by and among Coaxial
Communications of Central Ohio, Inc., an Ohio corporation, Coaxial LLC, a
Delaware limited liability company, Coaxial DJM LLC, a Delaware limited
liability company, and Coaxial DSM LLC, a Delaware limited liability company.
RECITALS
Barry Silverstein is the sole member of Coaxial LLC, a Delaware limited
liability company, Dennis McGillicuddy is the sole member of Coaxial DJM LLC, a
Delaware limited liability company, and D. Stevens McVoy is the sole member of
Coaxial DSM LLC, a Delaware limited liability company. The Existing Shareholders
collectively own all the issued and outstanding shares of Central.
Insight and the Existing Shareholders have entered into certain Management
Agreements, providing for the management by Insight of the Existing
Shareholders. Through its management of the Existing Shareholders, Insight
possesses the right to direct the business and affairs of the Existing
Shareholders with respect to certain specified matters, including certain
indebtedness of the Existing Shareholders and the business and affairs of
Central with respect to its interest in the Operating Company and certain
indebtedness of Central.
Central and the Existing Shareholders desire to enter into this Close
Corporation Agreement to regulate certain aspects of the internal affairs of
Central.
AGREEMENT
In consideration of the mutual covenants and agreements set forth in this
Agreement, the parties agree as follows.
SECTION 1. DEFINITIONS
1.1 Terms Defined in this Section.
The following terms, as used in this Agreement, have the meanings set forth
in this Section:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person. For purposes of this
definition, the term "controls" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
<PAGE>
Person, whether through the ownership of voting securities, by contract, or
otherwise. The terms "controlled by" and "under common control with" have
meanings corresponding to the meaning of "controls."
"Agreement" means this Close Corporation Agreement, as it may be amended
from time to time.
"Central" means Coaxial Communications of Central Ohio, Inc., an Ohio
corporation.
"Contribution Agreement" means the Contribution Agreement, dated as of June
30, 1998, between Central and Insight Communications Company, L.P. (which
assigned its rights thereunder to Insight), as amended by an amendment thereto
dated as of July 15, 1998 and as it may hereafter be amended from time to time
in accordance with its terms.
"Corporation Law" means the Ohio General Corporation Law, Sections 1701.01
et seq. of the Ohio Revised Code, and any successor statute.
"Existing Shareholders" means Coaxial LLC, a Delaware limited liability
company, Coaxial DJM LLC, a Delaware limited liability company, and Coaxial DSM
LLC, a Delaware limited liability company.
"Insight" means Insight Holdings of Ohio, LLC, a Delaware limited liability
company.
"Operating Agreement" means the Operating Agreement, dated as of August 21,
1998, among Central, Insight, and the Principals, with respect to the Operating
Company.
"Operating Company" means Insight Communications of Central Ohio, LLC, a
Delaware limited liability company.
"Person" means an individual, corporation, limited liability company,
association, general partnership, limited partnership, limited liability
partnership, joint venture, trust, estate, or other entity or organization.
"Principals" means Barry Silverstein, Dennis McGillicuddy, and D. Stevens
McVoy, and their respective permitted successors and assigns.
"Senior Debt" means all obligations of Central and Phoenix Associates, a
Florida general partnership, originally incurred under that certain Credit
Agreement, dated November 15, 1994, among Central, Phoenix Associates, certain
other parties, and the lenders named therein, as amended, as such obligations
shall have been restructured in connection with the purchase thereof
concurrently with the Closing (as defined in the Contribution Agreement), and
every subsequent amendment, modification, restructuring, extension, renewal, or
consolidation of any such obligations, and any obligation incurred in
refinancing or replacement of or substitution for any such obligations.
<PAGE>
1.2 Terms Defined Elsewhere in this Agreement.
For purposes of this Agreement, the following terms have the meanings set
forth in the sections indicated:
Term Section
- ---- -------
Indemnified Persons Section 4.1
Reserved Matters Section 3.2(a)
SECTION 2. CLOSE CORPORATION AGREEMENT
2.1 General Intent.
The Agreement is a "close corporation agreement" for purposes of Section
1701.591 of the Corporation Law. This Agreement and Central shall be governed
under and in accordance with Section 1701.591 of the Corporation Law. This
Agreement shall regulate the internal affairs of Central and the relations of
the shareholders of Central among themselves to the extent set forth in this
Agreement.
2.2 Conflict with Other Documents.
To the extent that the Articles of Incorporation or Code of Regulations of
Central, as now in effect or as amended from time to time, shall be inconsistent
with any provision of this Agreement, this Agreement shall, to the extent
permitted by the Corporation Law, control. To the extent that the Articles of
Incorporation and Code of Regulations of Central are not inconsistent with this
Agreement, such Articles of Incorporation and Code of Regulations shall regulate
the internal affairs of Central and the relations of the shareholders of Central
among themselves.
2.3 Amended Articles of Incorporation.
The Existing Shareholders, acting in their capacity as shareholders of
Central, have adopted an amendment to the Articles of Incorporation of Central,
pursuant to Section 1701.71 of the Corporation Law and have caused such
amendment to be filed with the Secretary of State of Ohio, pursuant to Section
1701.73 of the Corporation Law. A copy of the Articles of Incorporation of
Central, as so amended, is attached to this Agreement as Exhibit A.
SECTION 3. CERTAIN RIGHTS OF SHAREHOLDERS
3.1 Shareholder Approvals.
Central will not take or agree to take any of the following actions without
the affirmative vote of holders of a majority of the outstanding shares of
Central:
<PAGE>
(a) sell or issue any shares of Central or any option, warrant, or
other debt or equity interest convertible into shares of Central;
(b) engage in any transaction with the Operating Company, Insight,
any successor to Insight as manager of any of the Existing Shareholders or as
manager or member of the Operating Company, or any of their respective
Affiliates;
(c) engage in any business activity other than (i) the acquisition,
ownership, holding, and disposition of membership interests in the Operating
Company, and exercising all rights incident thereto, and (ii) the performance of
its obligations under any agreement or other instrument, including any note or
indenture, evidencing all or any part of the Senior Debt or pursuant to which
all or any part of the Senior Debt exists or is outstanding;
(d) amend any provision of its Articles of Incorporation;
(e) amend, alter, or repeal any provision of its Code of Regulations;
(f) purchase, redeem, or otherwise acquire any shares of Central;
(g) merge or consolidate with or into any other Person;
(h) liquidate or dissolve;
(i) acquire, by purchase or lease, any assets;
(j) amend the Operating Agreement (including any amendment to the
terms of the Preferred A Interest or the Preferred B Interest, each as defined
in the Operating Agreement);
(k) sell, assign, transfer, or otherwise dispose of, or pledge,
hypothecate, or otherwise encumber all or any part of its assets, except (1)
with respect to Central's membership interest in the Operating Company, as
permitted by the Operating Agreement, and (2) with respect to the Assets (as
defined in the Contribution Agreement), the contribution of such Assets to the
Operating Company pursuant to the Contribution Agreement and the Operating
Agreement;
(l) incur or prepay, purchase, or redeem any indebtedness (including
any Senior Debt);
(m) agree to any reorganization, arrangement, or similar adjustment
of its debts under any law relating to bankruptcy, insolvency, or reorganization
or relief of debtors;
(n) enter into or amend any contract or other agreement, including
any agreement with respect to the incurring or repayment of any indebtedness
(including any Senior Debt);
<PAGE>
(o) take any action that would cause Central's election to be treated
as an "S corporation" under the Internal Revenue Code to be terminated or
revoked; or
(p) hire any employee or independent contractor or pay any
compensation to any of its officers or directors.
3.2 Authority of the Board of Directors; Rights of Shareholders.
(a) In accordance with Section 1701.59 of the Corporation Law, except
as otherwise provided by law or in the Articles of Incorporation or Code of
Regulations of Central, all of the authority of Central shall be exercised by or
under the direction of the Board of Directors of Central, except for authority
with respect to the following matters (the "Reserved Matters"):
(i) preparing and filing all federal, state, local, and other
tax returns and reports (including amended returns) required to be filed by
Central;
(ii) exercising, prosecuting, or enforcing any rights or claims
of Central that are not contributed to the Operating Company pursuant to the
Contribution Agreement;
(iii) owning, operating, managing, and selling or otherwise
disposing of any Excluded Asset (as defined in the Contribution Agreement);
(iv) exercising, prosecuting, or enforcing any rights or claims
of Central arising under the Contribution Agreement; and
(v) any other matters that do not involve (A) Central's
ownership of membership interests in the Operating Company and its exercise of
any rights incident thereto, (B) Central's incurring of any Senior Debt and its
performance of its obligations under any agreement or other instrument,
including any note or indenture, evidencing all or any part of the Senior Debt
or pursuant to which all or any part of the Senior Debt exists or is
outstanding, or (C) the initiation of any voluntary proceeding with respect to
any reorganization, arrangement, or similar adjustment of Central's debts under
any law relating to bankruptcy, insolvency, or reorganization or relief of
debtors.
(b) Central and its officers and directors shall comply with any
resolution adopted by the shareholders of Central, either at a meeting of the
shareholders of Central or by written consent pursuant to Section 1701.54 of the
Corporation Law, with respect to any of the Reserved Matters.
(c) The shareholders of Central may, by resolution adopted at a
meeting of the shareholders of Central or by written consent pursuant to Section
1701.54 of the Corporation Law, designate any individual (including any
Principal) as an officer of Central with authority to act on behalf of Central
with respect to any of the Reserved Matters. An individual designated as an
officer of Central pursuant to this Section 3.2(c) shall not have authority to
act on behalf of Central other than with respect to any of the Reserved Matters,
except as such
<PAGE>
authority may be delegated to such officer from time to time by the Board of
Directors of Central.
(d) The shareholders of Central shall have the authority, by
resolution adopted at a meeting of the shareholders of Central or by written
consent pursuant to Section 1701.54 of the Corporation Law, to declare and cause
Central to pay dividends to the same extent as the Board of Directors of
Central.
3.3 Agreements Not Impaired.
Nothing in Section 3.1 or Section 3.2 shall impair or otherwise limit the
application of:
(a) any provision of the Operating Agreement by which the Principals
agree to take certain actions, and to cause the Existing Shareholders to take
certain actions, including the granting of necessary consents, approvals, and
authorizations in connection with the refinancing of the Senior Debt and other
transactions to be affected by Central;
(b) any contractual obligations of Central under any agreement or
other instrument, including any note or indenture, evidencing all or any part of
the Senior Debt or pursuant to which all or any part of the Senior Debt exists
or is outstanding; or
(c) any provision of the Operating Agreement or the management
agreements between Insight and the Existing Shareholders imposing limits on the
authority of Insight, the Existing Shareholders, or the Principals with respect
to the management of Central and the Operating Company; or
(d) any provision of any agreement or other instrument, including any
note or indenture, evidencing all or any part of the Senior Debt or pursuant to
which all or any part of the Senior Debt exists or is outstanding, with respect
to the management of Central and the Operating Company.
3.4 Furnishing of Information.
Central shall provide to each shareholder of Central any information and
reports relating to its business and the financial condition of Central, the
Operating Company, any other Person in which Central owns, directly or
indirectly, an equity interest, that such shareholder may reasonably request.
Central shall distribute to each shareholder of Central, promptly after the
receipt thereof by Central, any financial or other information with respect to
the Operating Company or any other Person in which Central owns, directly or
indirectly, an equity interest.
3.5 Exercise of Rights.
None of the rights of the shareholders of Central under this Agreement may
be exercised on behalf of any of the Existing Shareholders by Insight (or any
successor-in-interest of Insight) in its capacity as manager of such Existing
Shareholder, or otherwise, except to the extent that Insight (or its successor-
in-interest) is expressly granted the authority to exercise such right on
<PAGE>
behalf of such Existing Shareholder pursuant to a management agreement executed
by the member of such Existing Shareholder and filed with Central. In the
absence of any such management agreement, any rights of the shareholders of
Central under this Agreement may be exercised on behalf of any of the Existing
Shareholders by the member thereof.
SECTION 4. INDEMNIFICATION
4.1 Indemnification.
Central shall indemnify, defend, and hold harmless each shareholder and its
members, officers, and directors (all indemnified Persons being referred to as
"Indemnified Persons" for purposes of this Section 4) who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative (including any action threatened or instituted by or in the right
of Central), by reason of the fact that such shareholder is or was exercising
any of the powers of a director, officer, employee, or agent of Central by
virtue of the rights granted to such shareholder under this Agreement against
expenses (including attorneys' fees, filing fees, court reporters' fees, and
transcript costs), judgments, fines, and amounts paid in settlement actually and
reasonably incurred by such Indemnified Person in connection with such action,
suit, or proceeding if the act or omission of the Indemnified Person giving rise
to any claim for indemnification under this Section 4.1 was not occasioned by an
intent to cause injury to Central or by a reckless disregard for the best
interests or Central, and in respect of any criminal action or proceeding, such
Indemnified Person had no reasonable cause to believe his or its conduct was
unlawful. It shall be presumed that no act or omission of an Indemnified Person
was occasioned by an intent to cause injury to Central or by a reckless
disregard for the best interests of Central and, in respect to any criminal
matter, that such Indemnified Person had no reasonable cause to believe his or
its conduct was unlawful; the presumption recited in this Section 4.1 can be
rebutted only by clear and convincing evidence, and the termination of any
action, suit, or proceeding by judgment, order, settlement, or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, rebut
such presumption.
4.2 Court-Approved Indemnification.
Anything contained in this Agreement or elsewhere to the contrary
notwithstanding:
(a) Central shall not indemnify any Indemnified Person who was a
party to any completed action or suit instituted by or in the right of Central
to procure a judgment in its favor in respect of any claim, issue, or matter
asserted in such action or suit as to which such Indemnified Person shall have
been adjudged to be liable for an act or omission occasioned by a deliberate
intent to cause injury to Central or by a reckless disregard for the best
interests of Central, unless and only to the extent that the Court of Common
Pleas of Franklin County, Ohio or the court in which such action or suit was
brought shall determine upon application that, despite such adjudication of
liability, and in view of all the circumstances of the case, such Indemnified
Person is fairly and reasonably entitled to such indemnity as such Court of
Common Pleas or such other court shall deem proper; and
<PAGE>
(b) Central shall promptly make any such unpaid indemnification as is
determined by a court to be proper as contemplated by this Section 4.2.
4.3 Determination Required.
Any indemnification required under Section 4.1 and not precluded under
Section 4.2 shall be made by Central only upon a determination that such
indemnification is proper in the circumstances because the Indemnified Person
has met the applicable standard of conduct set forth in Section 4.1. Such
determination may be made only (a) by a majority vote of a quorum consisting of
directors of Central who were not and are not parties to, or threatened with,
any such action, suit, or proceeding, or (b) if such a quorum is not obtainable
or if a majority of a quorum of disinterested directors so directs, in a written
opinion by independent legal counsel other than an attorney, or a firm having
associated with it an attorney, who has been retained by or who has performed
services for Central, or any Person to be indemnified, within the past five
years, or (c) by the shareholders, or (d) by the Court of Common Pleas of
Franklin County, Ohio or (if Central is a party thereto) the court in which such
action, suit, or proceeding was brought, if any; any such determination may be
made by a court under clause (d) of this Section 4.3 at any time, including any
time before, during, or after the time when any such determination may be
requested of, be under consideration by, or have been denied or disregarded by
the disinterested directors under clause (a) or by independent legal counsel
under clause (b) or by the shareholders under clause (c) of this Section 4.3;
and no failure for any reason to make any such determination, and no decision
for any reason to deny any such determination, by the disinterested directors
under clause (a) or by independent legal counsel under clause (b) or by the
shareholders under clause (c) of this Section 4.3 shall be evidence in rebuttal
of the presumption recited in Section 4.1. Any determination made by the
disinterested directors under clause (a) or by independent legal counsel under
clause (b) of this Section 4.3 to make indemnification in respect of any claim,
issue, or matter asserted in an action or suit threatened or brought by or in
the right of Central shall be promptly communicated to the Person who threatened
or brought such action or suit, and within ten days after receipt of such
notification such Person shall have the right to petition the Court of Common
Pleas of Franklin County, Ohio or the court in which such action or suit was
brought, if any, to review the reasonableness of such determination.
4.4 Indemnification for Expenses.
(a) Anything contained in this Agreement or elsewhere to the contrary
notwithstanding, to the extent that an Indemnified Person has been successful on
the merits or otherwise in defense of any action, suit, or proceeding referred
to in Section 4.1, or in defense of any claim, issue, or matter therein, such
Indemnified Person shall be promptly indemnified by Central against expenses
(including attorneys' fees, filing fees, court reporters' fees, and transcript
costs) actually and reasonably incurred by such Indemnified Person in connection
therewith.
(b) The provisions of Section 1701.13(E)(5)(a) of the Corporation Law
do not apply to Central. Expenses (including attorneys' fees, filing fees, court
reporters' fees, and transcript costs) incurred in defending any action, suit,
or proceeding referred to in Section 4.1
<PAGE>
shall be paid by Central in advance of the final disposition of such action,
suit, or proceeding to or on behalf of the Indemnified Person promptly as such
expenses are incurred by the Indemnified Person, but only if such Indemnified
Person shall first agree, in writing, to repay all amounts so paid in respect to
any claim, issue, or other matter asserted in such action, suit, or proceeding
in defense of which such Indemnified Person shall not have been successful on
the merits or otherwise if it is proved by clear and convincing evidence in a
court of competent jurisdiction that, in respect to any such claim, issue, or
other matter, the Indemnified Person's relevant action or failure to act was
occasioned by a deliberate intent to cause injury to Central or a reckless
disregard for the best interests of Central, unless, and only to the extent
that, the Court of Common Pleas of Franklin County, Ohio or the court in which
such action or suit was brought shall determine upon application that, despite
such determination, and in view of all of the circumstances, such Indemnified
Person is fairly and reasonably entitled to all or part of such indemnification.
(c) For the purposes of this Section 4, and as an example and not by
way of limitation, an Indemnified Person shall be deemed to have been successful
on the merits or otherwise in defense of any action, suit, or proceeding
referred to in Section 4.1, or in defense of any claim, issue, or other matter
therein, if such action, suit, or proceeding shall be terminated as to such
Indemnified Person, with or without prejudice, without the entry of a judgement
or order against such Indemnified Person, without a conviction of such
Indemnified Person, without the imposition of a fine upon such Indemnified
Person, and without such Indemnified Person's payment or agreement to pay any
amount in settlement thereof (whether or not any such termination is based upon
a judicial or other determination of the lack of merit of the claims made
against such Indemnified Person or otherwise results in a vindication of such
Indemnified Person).
4.5 Section 4 Not Exclusive.
The indemnification provided by this Section 4 shall not be exclusive of,
and shall be in addition to, any other rights to which any Indemnified Person
may be entitled under the Articles of Incorporation or Code of Regulations of
Central, any agreement, a vote of disinterested directors, or otherwise.
4.6 Insurance.
Central may purchase and maintain insurance, or furnish similar protection,
including trust funds or letters of credit, for or on behalf of any Indemnified
Person against any liability asserted against such Indemnified Person and
incurred by such Indemnified Person, whether or not Central would have the
obligation or the power to indemnify such Indemnified Person against such
liability under the provisions of this Section 4. Insurance may be purchased
from or maintained with a Person in which Central has a financial interest.
4.7 Venue.
Any action, suit, or proceeding to determine a claim for, or for repayment
to Central of, indemnification under this Section 4 may be maintained by the
Indemnified Person claiming
<PAGE>
such
indemnification, or by Central, in the Court of Common Pleas of Franklin County,
Ohio. Central and (by claiming or accepting such indemnification) each
Indemnified Person consents to the exercise of jurisdiction over its or his
person by the Court of Common Pleas of Franklin County, Ohio in any such action,
suit, or proceeding.
4.8 Exculpation.
No Indemnified Person shall be liable, in damages or otherwise, to Central
for any loss that arises out of the exercise by any shareholder of Central of
any of the powers of a director, officer, employee, or agent of Central by
virtue of the rights granted to such shareholder under this Agreement, unless
such Indemnified Person's act or omission was occasioned by an intent to cause
injury to Central or by a reckless disregard for the best interests or Central.
4.9 Persons Entitled to Indemnity.
Any Person who is within the definition of "Indemnified Person" at the time
of any action or inaction relating to the exercise by any shareholder of Central
of its rights under this Agreement shall be entitled to the benefits of this
Section 4 as an "Indemnified Person" with respect thereto, regardless of whether
such Person continues to be within the definition of "Indemnified Person" at the
time of his or its claim for indemnification or exculpation hereunder. The
benefits of this Section 4 shall inure to the benefit of the heirs, executors,
and administrators of any Indemnified Person.
SECTION 5. AMENDMENTS AND WAIVERS; TERMINATION
5.1 Amendments to Agreement.
This Agreement may only be modified or amended with the consent of the
holders of all the outstanding shares of Central.
5.2 Waivers.
The observance or performance of any term or provision of this Agreement
may be waived (either generally or in a particular instance, and either
retroactively or prospectively) by the party entitled to the benefits of such
term or provision, but no provision of this Agreement may be waived except by a
written instrument specifically waiving such provision and executed by the party
to be charged with such waiver. No delay on the part of any shareholder of
Central in exercising any right, power, or privilege under this Agreement shall
operate as a waiver thereof, nor shall any waiver on the part of any shareholder
of Central of any right, power, or privilege under this Agreement operate as a
waiver of any other right, power, or privilege under this Agreement, 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 under this Agreement.
5.3 Termination.
<PAGE>
This Agreement may be terminated only with the consent of the holders of
all the outstanding shares of Central. Upon termination of this Agreement, all
aspects of the internal affairs of Central and the relations of the shareholders
of Central among themselves shall thereupon be governed by the Articles of
Incorporation and Code of Regulations of Central as then effect.
SECTION 6. LEGEND; COPIES OF AGREEMENT
6.1 Legend on Share Certificates.
Each certificate representing shares of Central now or hereafter held by
any holder thereof shall bear any legends required by applicable law and shall
bear a conspicuous statement in substantially the following form:
The issuer of the shares evidenced by the within certificate (the
"Corporation") and such shares are subject to the terms and conditions
contained in the Close Corporation Agreement, dated as of August 21, 1998,
among the Corporation and its shareholders. A copy of the Close Corporation
Agreement is on file at the principal office of the Corporation. Upon
written request of any shareholder of the Corporation, the Corporation
shall furnish, without charge to the shareholder, a copy of the Close
Corporation Agreement.
6.2 Copies to be Made Available.
A copy of this Agreement shall be entered in the record of minutes of
proceedings of the shareholders of Central and shall be subject to the
provisions of division (C) of Section 1701.92 of the Corporation Law. A copy of
this Agreement shall also be placed on file at any other office where a copy of
this Agreement must be placed in accordance with applicable law.
SECTION 7. MISCELLANEOUS
7.1 Captions.
All article, section, or paragraph captions contained in this Agreement are
for convenience only and shall not be deemed part of this Agreement.
7.2 Pronouns; Singular and Plural Form.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, and neuter as the identity of the Person or Persons
referred to may require, and all words shall include the singular or plural as
the context or the identity of Persons may require. The words "include,"
"includes," and "including" are not limiting.
<PAGE>
7.3 Further Action.
Each party to this Agreement agrees to execute, with acknowledgment or
affidavit, if required, any documents and writings in furtherance of this
Agreement.
7.4 Agreement Binding.
This Agreement shall be binding upon the successors and assigns of the
parties.
7.5 Equitable Remedies.
The rights and remedies of the parties under this Agreement are not
mutually exclusive. Each of the parties confirms that damages at law may not
always be an adequate remedy for a breach or threatened breach of this Agreement
and agrees that, in the event of a breach or threatened breach of any provision
of this Agreement, the respective rights and obligations under this Agreement
shall be enforceable by specific performance, injunction, or other equitable
remedy.
7.6 Severability.
If any provision or part of any provision of this Agreement shall be
invalid or unenforceable in any respect, such provision or part of any provision
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provision or the
remaining provision of this Agreement.
7.7 Counterparts.
This Agreement may be signed in counterparts with the same effect as if the
signature on each counterpart were upon the same instrument.
7.8 Governing Law.
This Agreement shall be governed, construed, and enforced in accordance
with the laws of the State of Ohio (without regard to the choice of law
provisions thereof).
7.9 No Third-Party Beneficiaries.
This Agreement is not intended to, and shall not be construed to, create
any right enforceable by any Person that is not a party to this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first written above.
COAXIAL COMMUNICATIONS OF CENTRAL
OHIO, INC.
By:
Name:
Title:
COAXIAL LLC
By: /s/ Barry Silverstein
Barry Silverstein
Its sole member
COAXIAL DJM LLC
By: /s/ Dennis McGillicuddy
Dennis McGillicuddy
Its sole member
COAXIAL DSM LLC
By: /s/ D. Stevens McVoy
D. Stevens McVoy
Its sole member
<PAGE>
Exhibit 10.2
MANAGEMENT AGREEMENT
OF
COAXIAL LLC
THIS MANAGEMENT AGREEMENT OF COAXIAL LLC, is entered into effective as of
August 21, 1998, by and between Coaxial LLC, a limited liability company
organized pursuant to the Delaware Limited Liability Company Act (the
"Company"), Insight Holdings of Ohio, LLC, a Delaware limited liability company
(the "Manager"), and, solely for purposes of Section 3.3 of this Agreement,
Barry Silverstein, an individual resident of the State of Florida.
RECITAL
Member is the sole member of the Company. The Company and the Manager have
agreed that the Company will retain the Manager to direct the business and
affairs of the Company with respect to certain matters, including certain
indebtedness of the Company and the business and affairs of Central with respect
to its interest in the Operating Company and certain indebtedness of Central, on
the terms and conditions set forth herein.
AGREEMENT
In consideration of the mutual covenants and agreements set forth in this
Agreement, the parties agree as follows.
SECTION 1
DEFINITIONS
-----------
The following terms, as used in this Agreement, have the meanings set forth
in this Section:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person. For purposes of
this definition, the term "controls" means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract, or
otherwise. The terms "controlled by" and "under common control with" have
meanings corresponding to the meaning of "controls."
"Agreement" means this Management Agreement, as it may be amended,
restated, modified, or supplemented from time to time in accordance with its
terms.
"Central" means Coaxial Communications of Central Ohio, Inc., an Ohio
corporation, and its successors-in-interest.
<PAGE>
"Close Corporation Agreement" means the Close Corporation Agreement of
Central, dated as of August 21, 1998, among Central and the shareholders of
Central.
"Contribution Agreement" means the Contribution Agreement, dated as of
June 30, 1998, between Central and Insight Communications Company, L.P. (which
assigned its rights thereunder to the Manager), as amended by amendments thereto
dated as of July 15, 1998 and as of August 21, 1998, and as it may hereafter be
amended from time to time in accordance with its terms.
"Discount Notes" means the Senior Discount Notes issued by the Company and
Coaxial Financing Corp., a Delaware corporation, concurrently with the Closing
(as defined in the Contribution Agreement).
"Member" means Barry Silverstein, and any successor-in-interest to Barry
Silverstein as member of the Company.
"Operating Agreement" means the Operating Agreement, dated as of August 21,
1998, among Central, the Manager, and the Principals (as defined therein), with
respect to the Operating Company.
"Operating Company" means Insight Communications of Central Ohio, LLC, a
Delaware limited liability company.
"Person" means an individual, corporation, limited liability company,
association, general partnership, limited partnership, limited liability
partnership, joint venture, trust, estate, or other entity or organization.
"Senior Debt" means all obligations of Central and Phoenix Associates, a
Florida general partnership, originally incurred under that certain Credit
Agreement, dated November 15, 1994, among Central, Phoenix Associates, certain
other parties, and the lenders named therein, as amended, as such obligations
shall have been restructured in connection with the purchase thereof
concurrently with the Closing (as defined in the Contribution Agreement), and
every subsequent amendment, modification, restructuring, extension, renewal, or
consolidation of any such obligations, and any obligation incurred in
refinancing or replacement of or substitution for any such obligations.
"Subordinated Debt" means all obligations arising under the Discount Notes
and the LLC Mirror Notes (as defined in the offering memorandum for the Discount
Notes) issued by Coaxial DJM LLC and Coaxial DSM LLC concurrently with the
Closing (as defined in the Contribution Agreement), and every subsequent
amendment, modification, restructuring, extension, renewal, or consolidation of
any such obligations, and any obligation incurred in refinancing or replacement
of or substitution for any such obligations.
-2-
<PAGE>
SECTION 2
APPOINTMENT OF MANAGER
----------------------
2.1 Appointment.
-----------
On the terms and conditions provided in this Agreement, but subject to
Section 2.2, the Company hereby appoints the Manager, and Manager hereby accepts
such appointment, as manager of the Company, and the Company hereby delegates to
the Manager, and the Manager hereby accepts, all rights, powers, and discretion
of the Member under the Operating Agreement of the Company.
2.2 Exceptions.
----------
The rights, powers, and authority delegated to the Manager under this
Agreement do not include:
(a) any right, power, or authority to take any of the actions
described in Section 5.2 of the Operating Agreement of the Company without the
written consent of the Member;
(b) any right, power, or authority to cause the Company to exercise
any of its rights as a shareholder of Central pursuant to the Close Corporation
Agreement;
(c) any right, power, or authority with respect to any Reserved Matter
(as defined in the Close Corporation Agreement);
(d) any right, power, or authority with respect to preparing and
filing federal, state, local, and other tax returns and reports (including
amended returns) required to be filed by the Company;
(e) any right, power, or authority with respect to the exercise of any
of the rights of the Company as a shareholder of Central pursuant to the Close
Corporation Agreement; or
(f) any right, power, or authority with respect to any matter that
does not involve (1) the Company's activities and operations relating to the
Company's ownership of shares of Central and its exercise of any rights incident
thereto, (2) its incurring of any Subordinated Debt and its performance of its
obligations under any agreement or other instrument, including any note or
indenture, evidencing all or any part of the Subordinated Debt or pursuant to
which all or any part of the Subordinated Debt exists or is outstanding, or (3)
the initiation of any voluntary proceeding with respect to any reorganization,
arrangement, or similar adjustment of the Company's debts under any law relating
to bankruptcy, insolvency, or reorganization or relief of debtors.
-3-
<PAGE>
2.3 Rights Retained by Member.
-------------------------
All rights, powers, and authority, not delegated to the Manager under this
Agreement are reserved to the Member, in its capacity as member of the Company.
2.4 Compensation.
------------
The Manager shall not be entitled to any compensation from the Company
under this Agreement.
2.5 Term of this Agreement.
----------------------
The term of this Agreement shall commence on the Closing Date (as defined
in the Contribution Agreement) and shall terminate at such time as (a) Central
no longer holds any Preferred A Interest or Preferred B Interest (as such terms
are defined in the Operating Agreement), (b) the Company no longer holds any
shares of Central, (c) the Manager sells its membership interest in the
Operating Company to a Person designated by the Principals (as defined in the
Operating Agreement), pursuant to Section 9.11 of the Operating Agreement, (d)
Insight shall have resigned as manager of the Operating Company in violation of
Section 6.1(a) of the Operating Agreement, or (e) the Member shall have sold his
membership interest in the Company to Insight or a Person designated by Insight
pursuant to Section 3.5(a)(iv), Section 3.5(a)(v), or Section 3.5(b)(iii) of the
Operating Agreement. Except as set forth in the preceding sentence, this
Agreement shall not otherwise be terminated without the consent of the Member
and the Manager.
SECTION 3
OTHER MATTERS
-------------
3.1 Other Businesses.
----------------
The Manager or any Affiliate, agent, or representative of the Manager, may
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, whether currently existing or
hereafter created and whether or not competitive with or advanced by the
business of the Company. The Company shall not have any rights in or to the
income or profits derived therefrom.
3.2 Relationship Between the Parties.
--------------------------------
Nothing herein contained shall be deemed to make the Manager a partner, co-
venturer, or other participant in the business or operations of the Company or
in any manner to render the Manager liable as a principal, surety, guarantor,
agent, or otherwise for any of the debts, obligations, or liabilities of the
Company, whether incurred directly by the Company or by the Manager on behalf of
the Company in accordance with this Agreement. The Manager is not a member of
the Company
-4-
<PAGE>
for purposes of the Delaware Limited Liability Company Act and, with respect to
the Company, shall have none of the rights of a member of a limited liability
company under the Delaware Limited Liability Company Act.
3.3 Covenants of the Member.
-----------------------
(a) By executing this Agreement, the Member agrees not to cause the
Company to do or agree to do any of the following prior to the termination of
this Agreement:
(1) sell or issue any membership interest in the Company or any
option, warrant, or other debt or equity interest convertible into any
membership interest in the Company;
(2) admit any Person as an additional member of the Company;
(3) engage in any business activity other than (A) the
acquisition, ownership, holding, and disposition of shares of Central, and
exercising all rights incident thereto, and (B) the performance of its
obligations under any agreement or other instrument, including any note or
indenture, evidencing all or any part of the Subordinated Debt or pursuant to
which all or any part of the Subordinated Debt exists or is outstanding;
(4) merge or consolidate with or into any other Person;
(5) liquidate or dissolve;
(6) acquire, by purchase or lease, any assets;
(7) sell, assign, transfer, or otherwise dispose of, or pledge,
hypothecate, or otherwise encumber its shares in Central, except in accordance
with any agreement or other instrument, including any note or indenture,
evidencing all or any part of the Subordinated Debt or pursuant to which all or
any part of the Subordinated Debt exists or is outstanding;
(8) prepay, purchase, or redeem any Subordinated Debt;
(9) enter into or amend any contract or other agreement with
respect to the incurring or repayment, purchase, or redemption of any
Subordinated Debt;
(10) initiate any voluntary proceeding with respect to any
reorganization, arrangement, or similar adjustment of the Company's debts under
any law relating to bankruptcy, insolvency, or reorganization or relief of
debtors; or
(11) take any action prohibited by any covenant contained in any
agreement or other instrument, including any note or indenture, evidencing all
or any part of the Subordinated
-5-
<PAGE>
Debt or pursuant to which all or any part of the Subordinated Debt exists or is
outstanding, with respect to the management of the Company.
(b) By executing this Agreement, the Member agrees not to take or
agree to take either of the following actions prior to the termination of this
Agreement:
(1) sell, assign, pledge, or otherwise encumber or transfer all
or any part of his interest in the Company to any Person, except for (A) a
transfer following the death of the Member, pursuant to the laws of descent and
distribution and (B) a sale to Insight or a Person designated by Insight
pursuant to Section 3.5(a)(iv), Section 3.5(a)(v), or Section 3.5(b)(iii) of the
Operating Agreement; or
(2) amend the Operating Agreement of the Company.
3.4 Covenants of the Company with Respect to Central.
------------------------------------------------
The Company agrees not to cause Central to take or agree to take any of the
following actions prior to the termination of this Agreement:
(a) sell or issue any shares of Central or any option, warrant, or
other debt or equity interest convertible into shares of Central;
(b) engage in any business activity other than (1) the acquisition,
ownership, holding, and disposition of membership interests in the Operating
Company, and exercising all rights incident thereto, and (2) the performance of
its obligations under any agreement or other instrument, including any note or
indenture, evidencing all or any part of the Senior Debt or pursuant to which
all or any part of the Senior Debt exists or is outstanding;
(c) amend any provision of Central's Articles of Incorporation or
amend or terminate the Close Corporation Agreement of Central;
(d) amend, alter, or repeal any provision of its Code of
Regulations;
(e) merge or consolidate with or into any other Person;
(f) liquidate or dissolve;
(g) acquire, by purchase or lease, any assets;
(h) sell, assign, transfer, or otherwise dispose of, or pledge,
hypothecate, or otherwise encumber (1) its membership interest in the Operating
Company, except as permitted by the Operating Agreement, or (2) any of the
Assets (as defined in the Contribution Agreement),
-6-
<PAGE>
except for the contribution of such Assets to the Operating Company pursuant to
the Contribution Agreement and the Operating Agreement;
(i) prepay, purchase, or redeem any Senior Debt; or
(j) enter into or amend any contract or other agreement with
respect to the incurring or repayment, purchase, or redemption of any Senior
Debt.
3.5 Books and Records.
-----------------
The Manager shall keep accurate books and records of the operation of the
Company which shall be appropriate and adequate for the Company's business and
for carrying out the provisions of this Agreement. All books and records
maintained by the Manager on behalf of the Company shall be available for
inspection and copying by the Member or his duly authorized representatives upon
request.
3.6 Company Funds.
-------------
The Manager shall not commingle the Company's funds with the separate
funds of the Manager, its Affiliates, or any other Person.
3.7 Exculpation.
-----------
The Manager shall not be liable, in damages or otherwise, to the Company or
to the Member for any loss that arises out of any act performed or omitted to be
performed by the Manager pursuant to the authority granted by this Agreement
unless the conduct of the Manager constituted fraud, gross negligence, breach of
fiduciary duty (which shall not be construed to encompass mistakes in judgment
or any breach of the Manager's duty of care that did not constitute gross
negligence), willful misconduct, or a breach of this Agreement by the Manager.
SECTION 4
MISCELLANEOUS
-------------
4.1 Captions.
--------
All section or paragraph captions contained in this Agreement are for
convenience only and shall not be deemed part of this Agreement.
-7-
<PAGE>
4.2 Pronouns, Singular and Plural Form.
----------------------------------
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, and neuter as the identity of the Person or Persons
referred to may require, and all words shall include the singular or plural as
the context or the identity of Persons may require.
4.3 Further Action.
--------------
The parties shall execute and deliver all documents, provide all
information, and take, or forbear from, all actions that may be necessary or
appropriate to achieve the purposes of this Agreement.
4.4 Entire Agreement.
----------------
This Agreement contains the entire understanding among the parties and
supersede any prior understandings and agreements between them regarding the
subject matter of this Agreement.
4.5 Assignment.
----------
Neither party hereto may assign this Agreement without the prior written
consent of the other party, except that the Manager may, without the prior
written consent of the Company, assign this Agreement to any purchaser of all of
the Manager's membership interest in the Operating Company.
4.6 Agreement Binding.
-----------------
This Agreement shall be binding upon the successors and assigns of the
parties.
4.7 Severability.
------------
If any provision or part of any provision of this Agreement shall be
invalid or unenforceable in any respect, such provision or part of any provision
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provision or the
remaining provision of this Agreement.
4.8 Counterparts.
------------
This Agreement may be signed in counterparts with the same effect as if the
signature on each counterpart were upon the same instrument.
-8-
<PAGE>
4.9 Governing Law.
-------------
This Agreement shall be governed, construed, and enforced in accordance
with the laws of the State of Delaware (without regard to the choice of law
provisions thereof).
4.10 No Third-Party Beneficiaries.
----------------------------
Each provision of this Agreement is intended to be for the benefit of, and
shall be enforceable by, the Member. Except as provided in the preceding
sentence, this Agreement is not intended to, and shall not be construed to,
create any right enforceable by any Person not a party hereto.
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement to be
effective as of the date first written above.
COAXIAL LLC
By: /s/ Barry Silverstein,
------------------------------
Barry Silverstein,
its sole member
INSIGHT HOLDINGS OF OHIO, LLC
By: Insight Communications Company, L.P., its
member
By: ICC Associates, L.P., its general partner
By: Insight Communications, Inc., its general
partner
By: /s/
------------------------------
Name:
----------------------------
Title:
---------------------------
FOR PURPOSES OF SECTION 3.3 ONLY:
/s/ Barry Silverstein,
---------------------------------
Barry Silverstein
-10-
<PAGE>
Exhibit 10.3
MANAGEMENT AGREEMENT
OF
COAXIAL DSM LLC
THIS MANAGEMENT AGREEMENT OF COAXIAL DSM LLC, is entered into effective as
of August 21, 1998, by and between Coaxial DSM LLC, a limited liability company
organized pursuant to the Delaware Limited Liability Company Act (the
"Company"), Insight Holdings of Ohio, LLC, a Delaware limited liability company
(the "Manager"), and, solely for purposes of Section 3.3 of this Agreement,
D. Stevens McVoy, an individual resident of the State of Ohio.
RECITAL
Member is the sole member of the Company. The Company and the Manager have
agreed that the Company will retain the Manager to direct the business and
affairs of the Company with respect to certain matters, including certain
indebtedness of the Company and the business and affairs of Central with respect
to its interest in the Operating Company and certain indebtedness of Central, on
the terms and conditions set forth herein.
AGREEMENT
In consideration of the mutual covenants and agreements set forth in this
Agreement, the parties agree as follows.
SECTION 1
DEFINITIONS
-----------
The following terms, as used in this Agreement, have the meanings set forth
in this Section:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person. For purposes of
this definition, the term "controls" means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract, or
otherwise. The terms "controlled by" and "under common control with" have
meanings corresponding to the meaning of "controls."
"Agreement" means this Management Agreement, as it may be amended,
restated, modified, or supplemented from time to time in accordance with its
terms.
"Central" means Coaxial Communications of Central Ohio, Inc., an Ohio
corporation, and its successors-in-interest.
<PAGE>
"Close Corporation Agreement" means the Close Corporation Agreement of
Central, dated as of August 21, 1998, among Central and the shareholders of
Central.
"Contribution Agreement" means the Contribution Agreement, dated as of June
30, 1998, between Central and Insight Communications Company, L.P. (which
assigned its rights thereunder to the Manager), as amended by amendments thereto
dated as of July 15, 1998 and as of August 21, 1998, and as it may hereafter be
amended from time to time in accordance with its terms.
"Discount Notes" means the Senior Discount Notes issued by Coaxial LLC and
Coaxial Financing Corp., a Delaware corporation, concurrently with the Closing
(as defined in the Contribution Agreement).
"Member" means D. Stevens McVoy, and any successor-in-interest to D.
Stevens McVoy as member of the Company..
"Operating Agreement" means the Operating Agreement, dated as of August 21,
1998, among Central, the Manager, and the Principals (as defined therein), with
respect to the Operating Company.
"Operating Company" means Insight Communications of Central Ohio, LLC, a
Delaware limited liability company.
"Person" means an individual, corporation, limited liability company,
association, general partnership, limited partnership, limited liability
partnership, joint venture, trust, estate, or other entity or organization.
"Senior Debt" means all obligations of Central and Phoenix Associates, a
Florida general partnership, originally incurred under that certain Credit
Agreement, dated November 15, 1994, among Central, Phoenix Associates, certain
other parties, and the lenders named therein, as amended, as such obligations
shall have been restructured in connection with the purchase thereof
concurrently with the Closing (as defined in the Contribution Agreement), and
every subsequent amendment, modification, restructuring, extension, renewal, or
consolidation of any such obligations, and any obligation incurred in
refinancing or replacement of or substitution for any such obligations.
"Subordinated Debt" means all obligations arising under the Discount Notes
and the LLC Mirror Notes (as defined in the offering memorandum for the Discount
Notes) issued by the Company and Coaxial DJM LLC concurrently with the Closing
(as defined in the Contribution Agreement), and every subsequent amendment,
modification, restructuring, extension, renewal, or consolidation of any such
obligations, and any obligation incurred in refinancing or replacement of or
substitution for any such obligations.
-2-
<PAGE>
SECTION 2
APPOINTMENT OF MANAGER
----------------------
2.1 Appointment.
-----------
On the terms and conditions provided in this Agreement, but subject to
Section 2.2, the Company hereby appoints the Manager, and Manager hereby accepts
such appointment, as manager of the Company, and the Company hereby delegates to
the Manager, and the Manager hereby accepts, all rights, powers, and discretion
of the Member under the Operating Agreement of the Company.
2.2 Exceptions.
----------
The rights, powers, and authority delegated to the Manager under this
Agreement do not include:
(a) any right, power, or authority to take any of the actions
described in Section 5.2 of the Operating Agreement of the Company without the
written consent of the Member;
(b) any right, power, or authority to cause the Company to exercise
any of its rights as a shareholder of Central pursuant to the Close Corporation
Agreement;
(c) any right, power, or authority with respect to any Reserved Matter
(as defined in the Close Corporation Agreement);
(d) any right, power, or authority with respect to preparing and
filing federal, state, local, and other tax returns and reports (including
amended returns) required to be filed by the Company;
(e) any right, power, or authority with respect to the exercise of any
of the rights of the Company as a shareholder of Central pursuant to the Close
Corporation Agreement; or
(f) any right, power, or authority with respect to any matter that
does not involve (1) the Company's activities and operations relating to the
Company's ownership of shares of Central and its exercise of any rights incident
thereto, (2) its incurring of any Subordinated Debt and its performance of its
obligations under any agreement or other instrument, including any note or
indenture, evidencing all or any part of the Subordinated Debt or pursuant to
which all or any part of the Subordinated Debt exists or is outstanding, or (3)
the initiation of any voluntary proceeding with respect to any reorganization,
arrangement, or similar adjustment of the Company's debts under any law relating
to bankruptcy, insolvency, or reorganization or relief of debtors.
-3-
<PAGE>
2.3 Rights Retained by Member.
-------------------------
All rights, powers, and authority, not delegated to the Manager under this
Agreement are reserved to the Member, in its capacity as member of the Company.
2.4 Compensation.
------------
The Manager shall not be entitled to any compensation from the Company
under this Agreement.
2.5 Term of this Agreement.
----------------------
The term of this Agreement shall commence on the Closing Date (as defined
in the Contribution Agreement) and shall terminate at such time as (a) Central
no longer holds any Preferred A Interest or Preferred B Interest (as such terms
are defined in the Operating Agreement), (b) the Company no longer holds any
shares of Central, (c) the Manager sells its membership interest in the
Operating Company to a Person designated by the Principals (as defined in the
Operating Agreement), pursuant to Section 9.11 of the Operating Agreement, (d)
Insight shall have resigned as manager of the Operating Company in violation of
Section 6.1(a) of the Operating Agreement, or (e) the Member shall have sold his
membership interest in the Company to Insight or a Person designated by Insight
pursuant to Section 3.5(a)(iv), Section 3.5(a)(v), or Section 3.5(b)(iii) of the
Operating Agreement. Except as set forth in the preceding sentence, this
Agreement shall not otherwise be terminated without the consent of the Member
and the Manager.
SECTION 3
OTHER MATTERS
-------------
3.1 Other Businesses.
----------------
The Manager or any Affiliate, agent, or representative of the Manager, may
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, whether currently existing or
hereafter created and whether or not competitive with or advanced by the
business of the Company. The Company shall not have any rights in or to the
income or profits derived therefrom.
3.2 Relationship Between the Parties.
--------------------------------
Nothing herein contained shall be deemed to make the Manager a partner, co-
venturer, or other participant in the business or operations of the Company or
in any manner to render the Manager liable as a principal, surety, guarantor,
agent, or otherwise for any of the debts, obligations, or liabilities of the
Company, whether incurred directly by the Company or by the Manager on behalf of
the Company in accordance with this Agreement. The Manager is not a member of
the Company
-4-
<PAGE>
for purposes of the Delaware Limited Liability Company Act and, with respect to
the Company, shall have none of the rights of a member of a limited liability
company under the Delaware Limited Liability Company Act.
3.3 Covenants of the Member.
-----------------------
(a) By executing this Agreement, the Member agrees not to cause the
Company to do or agree to do any of the following prior to the termination of
this Agreement:
(1) sell or issue any membership interest in the Company or any
option, warrant, or other debt or equity interest convertible into any
membership interest in the Company;
(2) admit any Person as an additional member of the Company;
(3) engage in any business activity other than (A) the
acquisition, ownership, holding, and disposition of shares of Central, and
exercising all rights incident thereto, and (B) the performance of its
obligations under any agreement or other instrument, including any note or
indenture, evidencing all or any part of the Subordinated Debt or pursuant to
which all or any part of the Subordinated Debt exists or is outstanding;
(4) merge or consolidate with or into any other Person;
(5) liquidate or dissolve;
(6) acquire, by purchase or lease, any assets;
(7) sell, assign, transfer, or otherwise dispose of, or pledge,
hypothecate, or otherwise encumber its shares in Central, except in accordance
with any agreement or other instrument, including any note or indenture,
evidencing all or any part of the Subordinated Debt or pursuant to which all or
any part of the Subordinated Debt exists or is outstanding;
(8) prepay, purchase, or redeem any Subordinated Debt;
(9) enter into or amend any contract or other agreement with
respect to the incurring or repayment, purchase, or redemption of any
Subordinated Debt;
(10) initiate any voluntary proceeding with respect to any
reorganization, arrangement, or similar adjustment of the Company's debts under
any law relating to bankruptcy, insolvency, or reorganization or relief of
debtors; or
(11) take any action prohibited by any covenant contained in any
agreement or other instrument, including any note or indenture, evidencing all
or any part of the Subordinated
-5-
<PAGE>
Debt or pursuant to which all or any part of the Subordinated Debt exists or is
outstanding, with respect to the management of the Company.
(b) By executing this Agreement, the Member agrees not to take or
agree to take either of the following actions prior to the termination of this
Agreement:
(1) sell, assign, pledge, or otherwise encumber or transfer all or
any part of his interest in the Company to any Person, except for (A) a transfer
following the death of the Member, pursuant to the laws of descent and
distribution and (B) a sale to Insight or a Person designated by Insight
pursuant to Section 3.5(a)(iv), Section 3.5(a)(v), or Section 3.5(b)(iii) of the
Operating Agreement; or
(2) amend the Operating Agreement of the Company.
3.4 Covenants of the Company with Respect to Central.
------------------------------------------------
The Company agrees not to cause Central to take or agree to take any of the
following actions prior to the termination of this Agreement:
(a) sell or issue any shares of Central or any option, warrant, or
other debt or equity interest convertible into shares of Central;
(b) engage in any business activity other than (1) the acquisition,
ownership, holding, and disposition of membership interests in the Operating
Company, and exercising all rights incident thereto, and (2) the performance of
its obligations under any agreement or other instrument, including any note or
indenture, evidencing all or any part of the Senior Debt or pursuant to which
all or any part of the Senior Debt exists or is outstanding;
(c) amend any provision of Central's Articles of Incorporation or
amend or terminate the Close Corporation Agreement of Central;
(d) amend, alter, or repeal any provision of its Code of Regulations;
(e) merge or consolidate with or into any other Person;
(f) liquidate or dissolve;
(g) acquire, by purchase or lease, any assets;
(h) sell, assign, transfer, or otherwise dispose of, or pledge,
hypothecate, or otherwise encumber (1) its membership interest in the Operating
Company, except as permitted by the Operating Agreement, or (2) any of the
Assets (as defined in the Contribution Agreement),
-6-
<PAGE>
except for the contribution of such Assets to the Operating Company pursuant to
the Contribution Agreement and the Operating Agreement;
(i) prepay, purchase, or redeem any Senior Debt; or
(j) enter into or amend any contract or other agreement with respect
to the incurring or repayment, purchase, or redemption of any Senior Debt.
3.5 Books and Records.
-----------------
The Manager shall keep accurate books and records of the operation of the
Company which shall be appropriate and adequate for the Company's business and
for carrying out the provisions of this Agreement. All books and records
maintained by the Manager on behalf of the Company shall be available for
inspection and copying by the Member or his duly authorized representatives upon
request.
3.6 Company Funds.
-------------
The Manager shall not commingle the Company's funds with the separate
funds of the Manager, its Affiliates, or any other Person.
3.7 Exculpation.
-----------
The Manager shall not be liable, in damages or otherwise, to the Company or
to the Member for any loss that arises out of any act performed or omitted to be
performed by the Manager pursuant to the authority granted by this Agreement
unless the conduct of the Manager constituted fraud, gross negligence, breach of
fiduciary duty (which shall not be construed to encompass mistakes in judgment
or any breach of the Manager's duty of care that did not constitute gross
negligence), willful misconduct, or a breach of this Agreement by the Manager.
SECTION 4
MISCELLANEOUS
-------------
4.1 Captions.
--------
All section or paragraph captions contained in this Agreement are for
convenience only and shall not be deemed part of this Agreement.
-7-
<PAGE>
4.2 Pronouns, Singular and Plural Form.
----------------------------------
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, and neuter as the identity of the Person or Persons
referred to may require, and all words shall include the singular or plural as
the context or the identity of Persons may require.
4.3 Further Action.
--------------
The parties shall execute and deliver all documents, provide all
information, and take, or forbear from, all actions that may be necessary or
appropriate to achieve the purposes of this Agreement.
4.4 Entire Agreement.
----------------
This Agreement contains the entire understanding among the parties and
supersede any prior understandings and agreements between them regarding the
subject matter of this Agreement.
4.5 Assignment.
----------
Neither party hereto may assign this Agreement without the prior written
consent of the other party, except that the Manager may, without the prior
written consent of the Company, assign this Agreement to any purchaser of all of
the Manager's membership interest in the Operating Company.
4.6 Agreement Binding.
-----------------
This Agreement shall be binding upon the successors and assigns of the
parties.
4.7 Severability.
------------
If any provision or part of any provision of this Agreement shall be
invalid or unenforceable in any respect, such provision or part of any provision
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provision or the
remaining provision of this Agreement.
4.8 Counterparts.
------------
This Agreement may be signed in counterparts with the same effect as if the
signature on each counterpart were upon the same instrument.
-8-
<PAGE>
4.9 Governing Law.
-------------
This Agreement shall be governed, construed, and enforced in accordance
with the laws of the State of Delaware (without regard to the choice of law
provisions thereof).
4.10 No Third-Party Beneficiaries.
----------------------------
Each provision of this Agreement is intended to be for the benefit of, and
shall be enforceable by, the Member. Except as provided in the preceding
sentence, this Agreement is not intended to, and shall not be construed to,
create any right enforceable by any Person not a party hereto.
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement to be
effective as of the date first written above.
COAXIAL DSM LLC
By: /s/ D. Stevens McVoy,
--------------------------
D. Stevens McVoy,
its sole member
INSIGHT HOLDINGS OF OHIO, LLC
By: Insight Communications Company, L.P., its
member
By: ICC Associates, L.P., its general partner
By: Insight Communications, Inc., its general
partner
By: /s/
--------------------------
Name:
------------------------
Title:
-----------------------
FOR PURPOSES OF SECTION 3.3 ONLY:
/s/ D. Stevens McVoy,
-----------------------------
D. Stevens McVoy
-10-
<PAGE>
Exhibit 10.4
MANAGEMENT AGREEMENT
OF
COAXIAL DJM LLC
THIS MANAGEMENT AGREEMENT OF COAXIAL DJM LLC, is entered into effective as
of August 21, 1998, by and between Coaxial DJM LLC, a limited liability company
organized pursuant to the Delaware Limited Liability Company Act (the
"Company"), Insight Holdings of Ohio, LLC, a Delaware limited liability company
(the "Manager"), and, solely for purposes of Section 3.3 of this Agreement,
Dennis McGillicuddy, an individual resident of the State of Florida.
RECITAL
Member is the sole member of the Company. The Company and the Manager have
agreed that the Company will retain the Manager to direct the business and
affairs of the Company with respect to certain matters, including certain
indebtedness of the Company and the business and affairs of Central with respect
to its interest in the Operating Company and certain indebtedness of Central, on
the terms and conditions set forth herein.
AGREEMENT
In consideration of the mutual covenants and agreements set forth in this
Agreement, the parties agree as follows.
SECTION 1
DEFINITIONS
-----------
The following terms, as used in this Agreement, have the meanings set forth
in this Section:
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person. For purposes of
this definition, the term "controls" means the possession, direct or indirect,
of the power to direct or cause the direction of the management and policies of
a Person, whether through the ownership of voting securities, by contract, or
otherwise. The terms "controlled by" and "under common control with" have
meanings corresponding to the meaning of "controls."
"Agreement" means this Management Agreement, as it may be amended,
restated, modified, or supplemented from time to time in accordance with its
terms.
"Central" means Coaxial Communications of Central Ohio, Inc., an Ohio
corporation, and its successors-in-interest.
<PAGE>
"Close Corporation Agreement" means the Close Corporation Agreement of
Central, dated as of August 21, 1998, among Central and the shareholders of
Central.
"Contribution Agreement" means the Contribution Agreement, dated as of June
30, 1998, between Central and Insight Communications Company, L.P. (which
assigned its rights thereunder to the Manager), as amended by amendments thereto
dated as of July 15, 1998 and as of August 21, 1998, and as it may hereafter be
amended from time to time in accordance with its terms.
"Discount Notes" means the Senior Discount Notes issued by Coaxial LLC and
Coaxial Financing Corp., a Delaware corporation, concurrently with the Closing
(as defined in the Contribution Agreement).
"Member" means Dennis McGillicuddy, and any successor-in-interest to Dennis
McGillicuddy as member of the Company.
"Operating Agreement" means the Operating Agreement, dated as of August 21,
1998, among Central, the Manager, and the Principals (as defined therein), with
respect to the Operating Company.
"Operating Company" means Insight Communications of Central Ohio, LLC, a
Delaware limited liability company.
"Person" means an individual, corporation, limited liability company,
association, general partnership, limited partnership, limited liability
partnership, joint venture, trust, estate, or other entity or organization.
"Senior Debt" means all obligations of Central and Phoenix Associates, a
Florida general partnership, originally incurred under that certain Credit
Agreement, dated November 15, 1994, among Central, Phoenix Associates, certain
other parties, and the lenders named therein, as amended, as such obligations
shall have been restructured in connection with the purchase thereof
concurrently with the Closing (as defined in the Contribution Agreement), and
every subsequent amendment, modification, restructuring, extension, renewal, or
consolidation of any such obligations, and any obligation incurred in
refinancing or replacement of or substitution for any such obligations.
"Subordinated Debt" means all obligations arising under the Discount Notes
and the LLC Mirror Notes (as defined in the offering memorandum for the Discount
Notes) issued by the Company and Coaxial DSM LLC concurrently with the Closing
(as defined in the Contribution Agreement), and every subsequent amendment,
modification, restructuring, extension, renewal, or consolidation of any such
obligations, and any obligation incurred in refinancing or replacement of or
substitution for any such obligations.
-2-
<PAGE>
SECTION 2
APPOINTMENT OF MANAGER
----------------------
2.1 Appointment.
-----------
On the terms and conditions provided in this Agreement, but subject to
Section 2.2, the Company hereby appoints the Manager, and Manager hereby accepts
such appointment, as manager of the Company, and the Company hereby delegates to
the Manager, and the Manager hereby accepts, all rights, powers, and discretion
of the Member under the Operating Agreement of the Company.
2.2 Exceptions.
----------
The rights, powers, and authority delegated to the Manager under this
Agreement do not include:
(a) any right, power, or authority to take any of the actions
described in Section 5.2 of the Operating Agreement of the Company without the
written consent of the Member;
(b) any right, power, or authority to cause the Company to exercise
any of its rights as a shareholder of Central pursuant to the Close Corporation
Agreement;
(c) any right, power, or authority with respect to any Reserved Matter
(as defined in the Close Corporation Agreement);
(d) any right, power, or authority with respect to preparing and
filing federal, state, local, and other tax returns and reports (including
amended returns) required to be filed by the Company;
(e) any right, power, or authority with respect to the exercise of any
of the rights of the Company as a shareholder of Central pursuant to the Close
Corporation Agreement; or
(f) any right, power, or authority with respect to any matter that
does not involve (1) the Company's activities and operations relating to the
Company's ownership of shares of Central and its exercise of any rights incident
thereto, (2) its incurring of any Subordinated Debt and its performance of its
obligations under any agreement or other instrument, including any note or
indenture, evidencing all or any part of the Subordinated Debt or pursuant to
which all or any part of the Subordinated Debt exists or is outstanding, or (3)
the initiation of any voluntary proceeding with respect to any reorganization,
arrangement, or similar adjustment of the Company's debts under any law relating
to bankruptcy, insolvency, or reorganization or relief of debtors.
-3-
<PAGE>
2.3 Rights Retained by Member.
-------------------------
All rights, powers, and authority, not delegated to the Manager under this
Agreement are reserved to the Member, in its capacity as member of the Company.
2.4 Compensation.
------------
The Manager shall not be entitled to any compensation from the Company
under this Agreement.
2.5 Term of this Agreement.
----------------------
The term of this Agreement shall commence on the Closing Date (as defined
in the Contribution Agreement) and shall terminate at such time as (a) Central
no longer holds any Preferred A Interest or Preferred B Interest (as such terms
are defined in the Operating Agreement), (b) the Company no longer holds any
shares of Central, (c) the Manager sells its membership interest in the
Operating Company to a Person designated by the Principals (as defined in the
Operating Agreement), pursuant to Section 9.11 of the Operating Agreement, (d)
Insight shall have resigned as manager of the Operating Company in violation of
Section 6.1(a) of the Operating Agreement, or (e) the Member shall have sold his
membership interest in the Company to Insight or a Person designated by Insight
pursuant to Section 3.5(a)(iv), Section 3.5(a)(v), or Section 3.5(b)(iii) of the
Operating Agreement. Except as set forth in the preceding sentence, this
Agreement shall not otherwise be terminated without the consent of the Member
and the Manager.
SECTION 3
OTHER MATTERS
-------------
3.1 Other Businesses.
----------------
The Manager or any Affiliate, agent, or representative of the Manager, may
engage in or possess an interest in other business ventures of any nature or
description, independently or with others, whether currently existing or
hereafter created and whether or not competitive with or advanced by the
business of the Company. The Company shall not have any rights in or to the
income or profits derived therefrom.
3.2 Relationship Between the Parties.
--------------------------------
Nothing herein contained shall be deemed to make the Manager a partner, co-
venturer, or other participant in the business or operations of the Company or
in any manner to render the Manager liable as a principal, surety, guarantor,
agent, or otherwise for any of the debts, obligations, or liabilities of the
Company, whether incurred directly by the Company or by the Manager on behalf of
the Company in accordance with this Agreement. The Manager is not a member of
the Company
-4-
<PAGE>
for purposes of the Delaware Limited Liability Company Act and, with respect to
the Company, shall have none of the rights of a member of a limited liability
company under the Delaware Limited Liability Company Act.
3.3 Covenants of the Member.
-----------------------
(a) By executing this Agreement, the Member agrees not to cause the
Company to do or agree to do any of the following prior to the termination of
this Agreement:
(1) sell or issue any membership interest in the Company or any
option, warrant, or other debt or equity interest convertible into any
membership interest in the Company;
(2) admit any Person as an additional member of the Company;
(3) engage in any business activity other than (A) the
acquisition, ownership, holding, and disposition of shares of Central, and
exercising all rights incident thereto, and (B) the performance of its
obligations under any agreement or other instrument, including any note or
indenture, evidencing all or any part of the Subordinated Debt or pursuant to
which all or any part of the Subordinated Debt exists or is outstanding;
(4) merge or consolidate with or into any other Person;
(5) liquidate or dissolve;
(6) acquire, by purchase or lease, any assets;
(7) sell, assign, transfer, or otherwise dispose of, or pledge,
hypothecate, or otherwise encumber its shares in Central, except in accordance
with any agreement or other instrument, including any note or indenture,
evidencing all or any part of the Subordinated Debt or pursuant to which all or
any part of the Subordinated Debt exists or is outstanding;
(8) prepay, purchase, or redeem any Subordinated Debt;
(9) enter into or amend any contract or other agreement with
respect to the incurring or repayment, purchase, or redemption of any
Subordinated Debt;
(10) initiate any voluntary proceeding with respect to any
reorganization, arrangement, or similar adjustment of the Company's debts under
any law relating to bankruptcy, insolvency, or reorganization or relief of
debtors; or
(11) take any action prohibited by any covenant contained in any
agreement or other instrument, including any note or indenture, evidencing all
or any part of the Subordinated
-5-
<PAGE>
Debt or pursuant to which all or any part of the Subordinated Debt exists or is
outstanding, with respect to the management of the Company.
(b) By executing this Agreement, the Member agrees not to take or
agree to take either of the following actions prior to the termination of this
Agreement:
(1) sell, assign, pledge, or otherwise encumber or transfer all
or any part of his interest in the Company to any Person, except for (A) a
transfer following the death of the Member, pursuant to the laws of descent and
distribution and (B) a sale to Insight or a Person designated by Insight
pursuant to Section 3.5(a)(iv), Section 3.5(a)(v), or Section 3.5(b)(iii) of the
Operating Agreement; or
(2) amend the Operating Agreement of the Company.
3.4 Covenants of the Company with Respect to Central.
------------------------------------------------
The Company agrees not to cause Central to take or agree to take any of the
following actions prior to the termination of this Agreement:
(a) sell or issue any shares of Central or any option, warrant, or
other debt or equity interest convertible into shares of Central;
(b) engage in any business activity other than (1) the acquisition,
ownership, holding, and disposition of membership interests in the Operating
Company, and exercising all rights incident thereto, and (2) the performance of
its obligations under any agreement or other instrument, including any note or
indenture, evidencing all or any part of the Senior Debt or pursuant to which
all or any part of the Senior Debt exists or is outstanding;
(c) amend any provision of Central's Articles of Incorporation or
amend or terminate the Close Corporation Agreement of Central;
(d) amend, alter, or repeal any provision of its Code of Regulations;
(e) merge or consolidate with or into any other Person;
(f) liquidate or dissolve;
(g) acquire, by purchase or lease, any assets;
(h) sell, assign, transfer, or otherwise dispose of, or pledge,
hypothecate, or otherwise encumber (1) its membership interest in the Operating
Company, except as permitted by the Operating Agreement, or (2) any of the
Assets (as defined in the Contribution Agreement),
-6-
<PAGE>
except for the contribution of such Assets to the Operating Company pursuant to
the Contribution Agreement and the Operating Agreement;
(i) prepay, purchase, or redeem any Senior Debt; or
(j) enter into or amend any contract or other agreement with respect
to the incurring or repayment, purchase, or redemption of any Senior Debt.
3.5 Books and Records.
-----------------
The Manager shall keep accurate books and records of the operation of the
Company which shall be appropriate and adequate for the Company's business and
for carrying out the provisions of this Agreement. All books and records
maintained by the Manager on behalf of the Company shall be available for
inspection and copying by the Member or his duly authorized representatives upon
request.
3.6 Company Funds.
-------------
The Manager shall not commingle the Company's funds with the separate
funds of the Manager, its Affiliates, or any other Person.
3.7 Exculpation.
-----------
The Manager shall not be liable, in damages or otherwise, to the Company or
to the Member for any loss that arises out of any act performed or omitted to be
performed by the Manager pursuant to the authority granted by this Agreement
unless the conduct of the Manager constituted fraud, gross negligence, breach of
fiduciary duty (which shall not be construed to encompass mistakes in judgment
or any breach of the Manager's duty of care that did not constitute gross
negligence), willful misconduct, or a breach of this Agreement by the Manager.
SECTION 4
MISCELLANEOUS
-------------
4.1 Captions.
--------
All section or paragraph captions contained in this Agreement are for
convenience only and shall not be deemed part of this Agreement.
-7-
<PAGE>
4.2 Pronouns, Singular and Plural Form.
----------------------------------
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, and neuter as the identity of the Person or Persons
referred to may require, and all words shall include the singular or plural as
the context or the identity of Persons may require.
4.3 Further Action.
--------------
The parties shall execute and deliver all documents, provide all
information, and take, or forbear from, all actions that may be necessary or
appropriate to achieve the purposes of this Agreement.
4.4 Entire Agreement.
----------------
This Agreement contains the entire understanding among the parties and
supersede any prior understandings and agreements between them regarding the
subject matter of this Agreement.
4.5 Assignment.
----------
Neither party hereto may assign this Agreement without the prior written
consent of the other party, except that the Manager may, without the prior
written consent of the Company, assign this Agreement to any purchaser of all of
the Manager's membership interest in the Operating Company.
4.6 Agreement Binding.
-----------------
This Agreement shall be binding upon the successors and assigns of the
parties.
4.7 Severability.
------------
If any provision or part of any provision of this Agreement shall be
invalid or unenforceable in any respect, such provision or part of any provision
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of such provision or the
remaining provision of this Agreement.
4.8 Counterparts.
------------
This Agreement may be signed in counterparts with the same effect as if the
signature on each counterpart were upon the same instrument.
-8-
<PAGE>
4.9 Governing Law.
-------------
This Agreement shall be governed, construed, and enforced in accordance
with the laws of the State of Delaware (without regard to the choice of law
provisions thereof).
4.10 No Third-Party Beneficiaries.
----------------------------
Each provision of this Agreement is intended to be for the benefit of, and
shall be enforceable by, the Member. Except as provided in the preceding
sentence, this Agreement is not intended to, and shall not be construed to,
create any right enforceable by any Person not a party hereto.
-9-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement to be
effective as of the date first written above.
COAXIAL DJM LLC
By: /s/ Dennis McGillicuddy,
-------------------------------
Dennis McGillicuddy,
its sole member
INSIGHT HOLDINGS OF OHIO, LLC
By: Insight Communications Company, L.P.,
its member
By: ICC Associates, L.P., its general partner
By: Insight Communications, Inc., its
general partner
By: /s/
--------------------------
Name:
------------------------
Title:
-----------------------
FOR PURPOSES OF SECTION 3.3 ONLY:
/s/ Dennis McGillicuddy,
--------------------------------
Dennis McGillicuddy
-10-
<PAGE>
Exhibit 10.5
MANAGEMENT AGREEMENT
THIS AGREEMENT made as of the 21st day of August, 1998 by and between
Coaxial Communications of Central Ohio, Inc., an Ohio corporation ("Central"),
-------
and Insight Communications of Central Ohio, LLC, a Delaware limited liability
company ( "Manager"). All capitalized terms used herein and not defined herein
-------
shall have the same meanings as set forth in the Contribution Agreement referred
to below.
WHEREAS, pursuant to that certain Contribution Agreement, dated as of June
30, 1998, as amended (the "Contribution Agreement"), between Central and Insight
----------------------
Communications Company, L.P. ("Insight") (which has assigned all of its rights
-------
and obligations thereunder to Insight Holdings of Ohio LLC, a Delaware limited
liability company ("Holdings")), Central has agreed to contribute to Manager
--------
substantially all of Central's assets used in connection with the ownership and
operation of its cable television system in and around Columbus, Ohio (the
"System"); and
- -------
WHEREAS, Central has informed Insight and Holdings that the consents (the
"Consents") required to transfer to the Manager the franchises covering those
- ---------
portions of the System that are listed on Schedule A hereto (the "Retained
--------
Assets") either will not be obtained prior to the Closing Date or have been
- ------
obtained but will not become effective prior to the Closing Date; and
WHEREAS, on the date hereof, Central has transferred to and conveyed to
Manager all of the Assets of the System, other than the Retained Assets,
pursuant to a Bill of Sale, General Assignment and Instrument of Assumption of
Liabilities of even date herewith between Central and Manager (the "Conveyance")
----------
the terms of which provide that at such time as any Consent relating to any of
the Retained Assets shall be obtained and become effective, the Retained Assets
to which such Consent applies shall be automatically transferred by Central to
Manager pursuant to the term of the Conveyance; and
WHEREAS, Central and the Manager desire to enter into this Agreement and
set forth their agreements whereby the Manager will operate and manage the
Retained Assets, until such time as the Retained Assets are transferred and
conveyed to Manager.
NOW, THEREFORE, for the consideration herein stipulated, the parties hereby
agree as follows:
1. Management of the Retained Assets
---------------------------------
(a) From and after the date hereof, the parties shall cooperate with
each other and shall continue to assist each other consistent with the
Contribution Agreement in seeking the consent or approval of the applicable
Governmental Authorities to the transfer of the Retained Assets to the Manager
from Central.
(b) From and after the Closing Date,
<PAGE>
(i) The Manager shall operate and manage the Retained Assets until the
earlier of (A) the transfer of the Retained Assets to the Manager pursuant
to the Conveyance or (B) the dissolution of the Manager pursuant to the
Operating Agreement of the Manager.
(ii) Until such time as the Retained Assets are conveyed to the
Manager, Central shall continue to own and exercise ultimate control over
the operation thereof. The Manager shall not, during the continuance of
this Agreement, take any action inconsistent with the terms and provisions
of this Agreement that would constitute (or fail to take any action
inconsistent with the terms and provisions of this Agreement the effect of
which failure would be to cause) (A) an impermissible change in control
under the franchise or applicable state or local laws or regulations or (B)
an impermissible transfer of a Federal Communications Commission ("FCC")
license.
2. Duties of the Manager. During the term of this Agreement, except as
---------------------
set forth in Section 1, this Section 2 or Section 3, the Manager shall have all
requisite authority to manage the day-to-day operations of the Retained Assets
for the benefit of Central. During the term of this Agreement, the Manager
agrees:
(a) to be responsible for the negotiation, consummation and
performance of any and all agreements, leases, contracts, documents and other
instruments reasonably necessary or convenient for the management and operation
of the Retained Assets;
(b) to supervise the collection of income and other amounts and the
payment of expenses (including but not limited to franchise fees) relating to
the Retained Assets and enforce the rights of Central as a creditor under any
contract in connection with the rendering of any service with respect to the
Retained Assets to the same extent as the Manager would enforce its own rights
as a creditor;
(c) to implement and maintain such accounting and administrative
records, procedures and reports as shall be reasonably necessary to operate the
Retained Assets;
(d) to purchase liability and other insurance reasonably necessary to
protect the Retained Assets and usual and customary for comparable businesses;
to name Central as an additional insured with respect to each such insurance
policy;
(e) to be responsible for all personnel matters, and to provide,
manage and train all employees and other personnel reasonably necessary to
operate the Retained Assets;
(f) to prepare status reports, financial reports and cash
disbursements reports relating to the operation of the Retained Assets;
(g) to keep, in the name and for the account of Central, full and
adequate books of account and other records reflecting the results of operation
of the Retained Assets on an accrual basis, in accordance with generally
accepted accounting principles;
2
<PAGE>
(h) to prepare annual tax reports necessary for the operation of the
Retained Assets (other than Federal, state and local income tax returns relating
to Central), to prepare, as necessary, any reports and other documents required
to be filed with governmental and regulatory agencies (other than with respect
to income tax matters with respect to the operation of the Retained Assets), and
act as liaison with Federal, state and local governmental and regulatory
officials with respect thereto, and to provide Central on a timely basis all
information necessary to prepare its Federal, state and local income tax
returns;
(i) to pay all expenditures incurred by the Manager in the ordinary
course of operating the Retained Assets;
(j) to pay all expenses of the Retained Assets, including, but not
limited to, payroll and all other taxes;
(k) to make all capital expenditures reasonably appropriate or
necessary to maintain operation of the Retained Assets as currently operated;
(l) to manage and operate the Retained Assets in compliance in all
material respects with applicable law, including, not limited to, the
Communications Act of 1934, as amended, and all rules and regulations
promulgated thereunder, all applicable franchise requirements and all other
agreements relating to the Retained Assets;
(m) to operate and manage the Retained Assets with the same level of
care as it operates cable television systems owned by the Manager.
3. Obligations of Central. Notwithstanding anything in Section 1 or 2
----------------------
hereof to the contrary (a) during the term of this Agreement, Central shall be
responsible for decisions affecting the operations of the Retained Assets,
including the matters referred to in Sections 1 and 2 (and including
particularly all financial and personnel matters), to the extent Central must
continue to be responsible for any such decisions under any agreement, including
any and all franchise agreements relating to the Retained Assets, or applicable
law, and (b) Central shall be entitled to control any tax investigation or audit
relating in any way to the Retained Assets to the extent it could affect any
taxes payable by Central for periods prior to the Closing.
4. Compensation of the Manager. For its services pursuant to this
---------------------------
Agreement, the Manager shall be entitled from and after the Closing to all
revenues attributable to the operations of the Retained Assets (the "Retained
Assets Revenue") for the period commencing at the Closing through the date that
the Manager ceases its operation and management of the Retained Assets in
accordance with Section 1 (b) (i) hereof (or such later date as the parties may
agree).
5. No Contributions by Central. During the term of this Agreement,
---------------------------
Central shall not be obligated to contribute any capital to or make any funds
available for the operation of or the obligations or liabilities relating to the
Retained Assets and the Manager shall be solely responsible for all expenses and
expenditures thereof. Without limiting the generality of the foregoing, Central
will not be responsible for any compensation payable to the Manager; such
compensation shall be
3
<PAGE>
payable solely out of the Retained Assets Revenue as provided in Section 4
above. Nothing in this Agreement shall require the Manager to make any payments
for indebtedness of Central in respect of any Retained Assets.
6. Term of Agreement; Effect of Termination. This Agreement shall
----------------------------------------
continue in full force and effect until the date that the Manager ceases its
operation and management of the Retained Assets in accordance with Section l(b)
(i) hereof. Central shall pay to the Manager within 10 days of termination of
this Agreement all amounts due under Section 4 for months ended prior to the
date of termination and a prorated portion, based on days elapsed prior to
termination in the month of termination, of all amounts due under Section 4 for
the month including the date of termination. To the extent that any amount
relating to the period prior to termination which would thereafter have become
due under Section 4 had this Agreement not been terminated, such amount shall be
paid to the Manager on the date it would have been paid had this Agreement not
been terminated.
7. Independent Contractor. The Manager and Central are not partners or
----------------------
joint venturers with each other with respect to the Retained Assets and nothing
herein shall be construed so as to make them such partners or joint venturers.
In fulfilling their obligations hereunder, the parties shall be independent
contractors with respect to one another and not the agent of the other for any
purpose.
8. Non-Assignability of Agreement. Neither party shall have the right to
------------------------------
assign this Agreement.
9. Waiver. No waiver of any term, provision, or condition of this
------
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed or construed as a further and continuing waiver of any such term,
provision or condition, but any party hereto may waive its rights in any
particular instance by a written instrument of waiver.
10. Entire Agreement. This Agreement, together with the Contribution
----------------
Agreement, represents the entire understanding of the parties hereto with
respect to the subject matter hereof, and may not be modified or amended, except
by a written instrument executed by each of the parties hereto designating
specifically the terms and provisions so modified and amended.
11. Choice of Law. The internal laws of the State of New York shall
-------------
govern this Agreement and the construction of any of its terms.
12. Counterparts. This Agreement may be signed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
13. Notices. Any notice, demand or request required or permitted to be
-------
given under the provisions of this Agreement shall be in writing and shall be
deemed to have been duly given and received (i) when delivered if delivered by
hand or by facsimile transmission or telex (with automatic machine confirmation)
and (ii) three business days after mailing if mailed by a nationally recognized
courier service or registered or certified mail, postage prepaid and return
receipt requested, to the parties at the following addresses (or to such other
address as any party may request in a notice
4
<PAGE>
delivered in accordance with this Section 13 to the other parties hereto,
provided that notices of a change of address shall be effective only upon
receipt thereof):
To Central:
c/o Coaxial Communications
5111 Ocean Boulevard
Suite C
Sarasota, Florida 34242
Attention: Dennis McGillicuddy
Telecopier: 941-346-2788
With copy to:
Dow, Lohnes & Albertson, PLLC
1200 New Hampshire Avenue, N.W.
Suite 800
Washington, D.C. 20036-6802
Attention: David Wild, Esq.
Telecopier: 202-776-2222
To Manager:
c/o Insight Communications, Inc.
126 East 56/th/ Street
New York, New York 10022
Attention: Michael S. Willner
Telecopier: 212-371-1549
With copy to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Attention: Robert Winikoff, Esq.
Telecopier: (212) 755-2839
14. Headings. The heading references herein are for convenience purposes
--------
only, do not constitute a part of this Agreement and shall not be deemed to
limit or affect any of the provisions hereof.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date set forth above.
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
By: /s/
-------------------------------
Its: Chairman
-------------------------------
INSIGHT COMMUNICATIONS OF CENTRAL OHIO, LLC
By: Insight Holdings of Ohio, LLC, its Manager
By: Insight Communications Company, L.P., its Member
By: ICC Associates, L.P., its general partner
By: Insight Communications, Inc., its general partner
By: /s/
---------------------------------
Its:
-------------------------------
6
<PAGE>
SCHEDULE A
1. Gahanna - effective September 9, 1998
2. Lockbourne
3. Madison Township
4. Reynoldsburg - effective August 27, 1998
5. Westerville
6. Lockbourne Lodge
7. NACC/Columbus and New Albany
8. Steepchase Village - effective September 17, 1998
7
<PAGE>
Exhibit 12.1
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------- -------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income (loss) from continuing operations $ 5,332 $ 6,977 $ 12,583 $17,461 $ 17,095 $ 16,488 $ 14,350
Total fixed charges 2,539 2,869 5,731 5,780 5,428 2,909 2,133
------- ------- -------- ------- -------- -------- --------
Earnings $ 7,871 $ 9,846 $ 18,314 $23,241 $ 22,523 $ 19,397 $ 16,483
======= ======= ======== ======= ======== ======== ========
Fixed Charges:
Interest $ 2,123 $ 2,538 $ 5,047 $ 5,159 $ 4,803 $ 2,562 $ 1,988
Amortization of loan acquisition costs 349 267 549 507 508 223 24
Interest Element of Rental Expense 67 64 135 114 117 124 121
------- ------- -------- ------- -------- -------- --------
Total of Fixed Charges $ 2,539 $ 2,869 $ 5,731 $ 5,780 $ 5,428 $ 2,909 $ 2,133
======= ======= ======== ======= ======== ======== ========
Ratio of Earnings to Fixed Charges 3.10 3.43 3.19 4.02 4.14 6.66 7.72
======= ======= ======== ======= ======== ======== ========
</TABLE>
<PAGE>
PHOENIX ASSOCIATES
RATIOS OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
---------------- -------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income (loss) from continuing operations $(6,558) $(5,867) $ (8,868) $(12,596) $ (12,481) $ (7,247) $ (7,050)
Total fixed charges 6,961 6,754 13,882 14,526 14,386 9,061 8,590
------- ------- -------- ------- -------- -------- --------
Earnings $ 403 $ 887 $ 5,014 $ 1,930 $ 1,905 $ 1,814 $ 1,540
======= ======= ======== ======= ======== ======== ========
Fixed Charges:
Interest $ 6,961 $ 6,754 $ 13,882 $ 14,526 $ 14,386 $ 8,872 $ 8,415
Amortization of loan acquisition costs - - - - - 189 175
------- ------- -------- ------- -------- -------- --------
Total of Fixed Charges $ 6,961 $ 6,754 $ 13,882 $ 14,526 $ 14,386 $ 9,061 $ 8,590
======= ======= ======== ======= ======== ======== ========
Coverage Deficiency in Earnings to cover Fixed $(6,558) $ (5,867) $ (8,868) $(12,596)$ (12,481) $ (7,247) $ (7,050)
Charges ======= ======= ======== ======== ======== ======== ========
</TABLE>
<PAGE>
COMBINED PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
JUNE 30 DECEMBER 31
---------- -----------
1998 1997
---------- -----------
<S> <C> <C>
Historical fixed charges $ 9,500 $ 19,613
Interest on debt to be sold 9,259 18,520
---------- -----------
18,759 38,133
Interest on debt to be retired 9,414 19,422
---------- -----------
Pro forma fixed charges $ 9,345 $ 18,711
========= ===========
Pro forma Ratio of Earnings to Fixed Charges N/A 1.14
========= ===========
Coverage Deficiency in Earnings to cover Fixed Charges $ (1,671) $ -
========= ===========
</TABLE>
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in of this registration statement.
ARTHUR ANDERSEN LLP
Columbus, Ohio,
September 11, 1998.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility of a Trustee Pursuant to
Section 305(b)___
BANK OF MONTREAL TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
NEW YORK 13-4941093
(STATE OF INCORPORATION OR ORGANIZATION (I.R.S. EMPLOYER
IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
WALL STREET PLAZA, 88 PINE STREET, 19TH FLOOR
NEW YORK, NEW YORK 10005
(ADDRESS OF TRUSTEE'S PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Mark F. McLaughlin
Bank of Montreal Trust Company
Wall Street Plaza, 88 Pine Street 19th Floor
New York, NY 10005
(212) 701-7602
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
------------------------------------
Mediacom LLC and Mediacom Capital Corporation
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
06-1513997
New York 06-1433421
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
100 Crystal Run Road
Middletown, NY 10941
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
--------------------------------------
---SENIOR NOTES---
(Title of Indenture Securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- 2 -
ITEM 1. GENERAL INFORMATION.
--------------------
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Federal Reserve Bank of New York
33 Liberty Street, New York N.Y. 10045
State of New York Banking Department
2 Rector Street, New York, N.Y. 10006
(b) Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
------------------------------
If the obligor is an affiliate of the trustee, describe each such
affiliation.
The obligor is not an affiliate of the trustee.
ITEM 16. LIST OF EXHIBITS.
-----------------
List below all exhibits filed as part of this statement of eligibility.
A Copy of Organization Certificate of Bank of Montreal Trust Company to
transact business and exercise corporate trust powers; incorporated
herein by reference as Exhibit "A" filed with Form T-1 Statement,
Registration No. 33-46118
B. Copy of the existing By-Laws of Bank of Montreal Trust Company;
incorporated herein by reference as Exhibit "B" filed with Form T-1
Statement, Registration No. 33-46118
C. The consent of the Trustee required by Section 321(b) of the Act;
incorporated herein by reference as Exhibit "C" with Form T-1
Statement, Registration No. 33-46118
D. A copy of the latest report of condition of Bank of Montreal Trust
Company published pursuant to law or the requirements of its
supervising or examining authority, attached hereto as Exhibit "D"
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, Bank of Montreal Trust Company, a corporation organized and existing
under the laws of the State of New York, has duly caused this statement of
eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of New York, and State of New York, on the 9th day
of June, 1998.
BANK OF MONTREAL TRUST COMPANY
By: /s/ Therese Gaballah
-------------------------
Therese Gaballah
Vice President
<PAGE>
EXHIBIT "D"
STATEMENT OF CONDITION
BANK OF MONTREAL TRUST COMPANY
NEW YORK
----------------------------
ASSETS
Due From Banks $ 528,979
-----------
Investment Securities:
State & Municipal 17,085,290
Other 100
-----------
TOTAL SECURITIES 17,085,390
Loans and Advances
Federal Funds Sold 4,400,000
Overdrafts 10,000
-----------
TOTAL LOANS AND ADVANCES 4 ,410,000
-----------
Investment in Harris Trust, NY 8,509,571
Premises and Equipment 288,644
Other Assets 2,965,076
-----------
11,763,291
-----------
TOTAL ASSETS $33,787,660
===========
LIABILITIES
Trust Deposits $ 8,680,937
Other Liabilities 824,388
-----------
TOTAL LIABILITIES 9,505,325
-----------
CAPITAL ACCOUNTS
Capital Stock, Authorized, Issued and
Fully Paid - 10,000 Shares of $100 Each 1,000,000
Surplus 4,222,188
Retained Earnings 19,048,815
Equity - Municipal Gain/Loss 11,332
-----------
TOTAL CAPITAL ACCOUNTS 24,282,335
-----------
TOTAL LIABILITIES
AND CAPITAL ACCOUNTS $33,787,660
===========
I, Mark F. McLaughlin, Vice President, of the above-named bank do
hereby declare that this Report of Condition is true and correct to the best of
my knowledge and belief.
Mark F. McLaughlin
December 31, 1997
We, the undersigned directors, attest to the correctness of this
statement of resources and liabilities. We declared that it has been examined
by us, and to the best of our knowledge and belief has been prepared in
conformance with the instructions and is true and correct.
Sanjiv Tandon
Kevin O. Healy
Steven R. Rothbloom
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000724332
<NAME> PHOENIX ASSOCIATES
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 JUN-30-1998
<CASH> 247 0
<SECURITIES> 0 0
<RECEIVABLES> 1,067 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 1,314 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 7,954,462 8,129,425
<CURRENT-LIABILITIES> 721,573 753,918
<BONDS> 105,204,608 104,844,308
0 0
0 0
<COMMON> 0 0
<OTHER-SE> (170,411,703) (176,969,811)
<TOTAL-LIABILITY-AND-EQUITY> 7,954,462 8,129,425
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> (3,226,458) 52,445
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 12,093,970 6,505,663
<INCOME-PRETAX> (8,867,512) (6,558,108)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (8,867,512) (6,558,108)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (8,867,512) (6,558,108)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001070241
<NAME> COAXIAL COMMUNICATIONS OF CENTRAL OHIO INC
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 JUN-30-1998
<CASH> 574,064 266,514
<SECURITIES> 0 0
<RECEIVABLES> 3,249,140 3,771,214
<ALLOWANCES> 374,000 395,000
<INVENTORY> 855,373 1,000,650
<CURRENT-ASSETS> 4,527,839 4,837,146
<PP&E> 71,643,066 73,992,201
<DEPRECIATION> 42,699,293 45,163,475
<TOTAL-ASSETS> 110,828,587 118,226,047
<CURRENT-LIABILITIES> 9,848,173 9,156,084
<BONDS> 29,371,193 30,436,264
0 0
0 0
<COMMON> 1,080 1,080
<OTHER-SE> 54,325,826 58,514,852
<TOTAL-LIABILITY-AND-EQUITY> 110,828,587 118,226,047
<SALES> 48,229,487 23,766,363
<TOTAL-REVENUES> 48,229,487 23,766,363
<CGS> 0 0
<TOTAL-COSTS> 34,145,536 18,052,834
<OTHER-EXPENSES> 271,456 115,273
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,229,717 265,898
<INCOME-PRETAX> 12,582,778 5,332,358
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 12,582,778 5,332,358
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 12,582,778 5,332,358
<EPS-PRIMARY> 11.651 4.937
<EPS-DILUTED> 11.651 4.937
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001070242
<NAME> CENTRAL OHIO CABLE SYSTEM OPERATING UNIT
<S> <C> <C>
<PERIOD-TYPE> YEAR 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 JUN-30-1998
<CASH> 573,989 266,439
<SECURITIES> 0 0
<RECEIVABLES> 3,245,703 3,767,577
<ALLOWANCES> 374,000 395,000
<INVENTORY> 855,373 1,000,650
<CURRENT-ASSETS> 4,502,494 4,811,601
<PP&E> 71,316,888 73,664,290
<DEPRECIATION> 42,433,809 44,884,117
<TOTAL-ASSETS> 33,553,131 33,745,294
<CURRENT-LIABILITIES> 7,788,166 7,266,550
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 25,570,771 25,507,424
<TOTAL-LIABILITY-AND-EQUITY> 33,553,131 33,745,294
<SALES> 48,229,487 23,766,363
<TOTAL-REVENUES> 48,229,487 23,766,363
<CGS> 0 0
<TOTAL-COSTS> 34,127,086 18,038,960
<OTHER-EXPENSES> 271,456 115,273
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (69,990) (22,632)
<INCOME-PRETAX> 13,900,935 5,634,762
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 13,900,935 5,634,762
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 13,900,935 5,634,762
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10% SENIOR NOTES DUE 2006
OF
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
PHOENIX ASSOCIATES
PURSUANT TO THE PROSPECTUS DATED ,
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON , UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should
be completed, signed, and submitted to the Exchange Agent:
Bank of Montreal Trust Company
(the "Exchange Agent"):
IF BY OVERNIGHT COURIER: IF BY HAND:
Bank of Montreal Trust Company Bank of Montreal Trust
88 Pine Street, 19th Floor Company
New York, New York 10005 88 Pine Street, 19th Floor
Attn: Corporate Trust Department New York, New York 10005
IF BY MAIL: Attn: Corporate Trust
Department
Bank of Montreal Trust Company
88 Pine Street, 19th Floor
New York, New York 10005
Attn: Corporate Trust Department
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY ADDITIONAL
INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT 212-701-7655.
The undersigned hereby acknowledges receipt of the Prospectus dated ,
(the "Prospectus") of Coaxial Communications of Central Ohio, Inc., an
Ohio corporation ("Coaxial"), and Phoenix Associates, a Florida general
partnership ("Phoenix" and together with Coaxial, the "Issuers"), and this
Letter of Transmittal (the "Letter of Transmittal"), that together constitute
the Issuers' offer (the "Exchange Offer") to exchange $1,000 in principal
amount of its 10% Senior Notes due 2006 (the "Exchange Notes"), which have
been registered under the Securities Act (as hereinafter defined) pursuant to
a Registration Statement, for each $1,000 in principal amount of its
outstanding 10% Senior Notes due 2006 (the "Notes"), of which $140,000,000
aggregate principal amount is outstanding. Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
The undersigned hereby tenders the Notes described in Box 1 below (the
"Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes ("Beneficial
Owners") a duly completed and executed form of "Instruction to Registered
Holder and/or Book-Entry Transfer Facility Participant from Beneficial Owner"
accompanying this Letter of Transmittal, instructing the undersigned to take
the action described in this Letter of Transmittal.
<PAGE>
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon
the order of, the Issuers, all rights, title, and interest in, to and under
the Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (Box 3), please send or cause to be sent the
certificates for the Exchange Notes (and accompanying documents, as
appropriate) to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned
with respect to the Tendered Notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (i) deliver the Tendered Notes to the Issuers or cause ownership
of the Tendered Notes to be transferred to, or upon the order of, the Issuers,
on the books of the registrar for the Notes and deliver all accompanying
evidences of transfer and authenticity to, or upon the order of, the Issuers
upon receipt by the Exchange Agent, as the undersigned's agent, of the
Exchange Notes to which the undersigned is entitled upon acceptance by the
Issuers of the Tendered Notes pursuant to the Exchange Offer, and (ii) receive
all benefits and otherwise exercise all rights of beneficial ownership of the
Tendered Notes, all in accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Notes pursuant to the procedures
described in the caption "The Exchange Offer" in the Prospectus and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Issuers upon the terms and subject to the conditions of
the Exchange Offer, subject only to withdrawal of such tenders on the terms
set forth in the Prospectus under the caption "The Exchange Offer--Withdrawal
of Tenders." All authority herein conferred or agreed to be conferred shall
survive the death or incapacity of the undersigned and any Beneficial
Owner(s), and every obligation of the undersigned or any Beneficial Owners
hereunder shall be binding upon the heirs, representatives, successors and
assigns of the undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, exchange, assign and transfer the Tendered
Notes and that the Issuers will acquire good and unencumbered title thereto,
free and clear of all liens, restrictions, charges, encumbrances and adverse
claims when the Tendered Notes are acquired by the Issuers as contemplated
herein. The undersigned and each Beneficial Owner will, upon request, execute
and deliver any additional documents reasonably requested by the Issuers or
the Exchange Agent as necessary or desirable to complete and give effect to
the transactions contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired
by the undersigned and any Beneficial Owner(s) in the ordinary course of
business of the undersigned and any Beneficial Owner(s), (ii) the undersigned
and each Beneficial Owner are not participating, do not intend to participate,
and have no arrangement or understanding with any person to participate, in
the distribution of the Exchange Notes, (iii) except as otherwise disclosed in
writing herewith, neither the undersigned nor any Beneficial Owner is an
"affiliate," as defined in Rule 405 under the Securities Act, of the Issuers
or any of their subsidiaries and (iv) the undersigned and each Beneficial
Owner acknowledge and agree that any person participating in the Exchange
Offer with the intention or for the purpose of distributing the Exchange Notes
must comply with the registration and prospectus delivery requirements of the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act"), in connection with a secondary
resale of the Exchange Notes acquired by such person and cannot rely on the
position of the Staff of the Securities and Exchange Commission (the
"Commission") set forth in the no-action letters that are discussed in the
section of the Prospectus entitled "The Exchange Offer." Each broker-dealer
that will receive Exchange Notes for its own account in exchange for Notes
that were acquired as a result of market-making activities or other trading
activities hereby acknowledges that it will deliver a Prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging and by
delivering a Prospectus, such broker-dealer is not deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
2
<PAGE>
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[_] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE
"Use of Guaranteed Delivery" BELOW (Box 4).
[_] CHECK]HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE
TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE "Use of Book-Entry Transfer" BELOW (Box 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
BOX 1
DESCRIPTION OF NOTES TENDERED (ATTACH ADDITIONAL SIGNED PAGES, IF NECESSARY)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND
ADDRESS(ES) OF
REGISTERED
NOTE
HOLDER(S),
EXACTLY AS
NAME(S)
APPEAR(S) ON
NOTE AGGREGATE
CERTIFICATE(S) CERTIFICATE PRINCIPAL AMOUNT AGGREGATE
(PLEASE FILL NUMBER(S) OF REPRESENTED BY PRINCIPAL AMOUNT
IN, IF BLANK) NOTES* CERTIFICATE(S) TENDERED**
- --------------------------------------------------------------------
<S> <C> <C> <C>
---------------------------------
---------------------------------
---------------------------------
---------------------------------
TOTAL
</TABLE>
- -------------------------------------------------------------------------------
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Notes.
All other tenders must be in integral multiples of $1,000 of principal
amount. Unless otherwise indicated in this column, the principal amount
of all Note Certificates identified in this Box 1 or delivered to the
Exchange Agent herewith shall be deemed tendered. See Instruction 4.
BOX 2
BENEFICIAL OWNER(S)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES
BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
<S> <C>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
BOX 3
SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 5, 6 AND 7)
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR NOTES AND UNTENDERED
NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE
UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Notes to:
Name(s):
---------------------------------------------------------------------------
(PLEASE PRINT)
Address:
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
(INCLUDE ZIP CODE)
Tax Identification or Social Security No.:
___________________________________________________________________________
BOX 4
USE OF GUARANTEED DELIVERY (SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
___________________________________________________________________________
Date of Execution of Notice of Guaranteed Delivery: _______________________
Name of Institution which Guaranteed Delivery: ____________________________
BOX 5
USE OF BOOK-ENTRY TRANSFER(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-
ENTRY TRANSFER.
Name of Tendering Institution: ____________________________________________
Account Number: ___________________________________________________________
Transaction Code Number: __________________________________________________
4
<PAGE>
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5)
IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
X _________________________________ Signature Guarantee
X _________________________________ (IF REQUIRED BY INSTRUCTION 5)
(SIGNATURE OF REGISTERED HOLDER(S)
OR AUTHORIZED SIGNATORY) Authorized Signature
Note: The above lines must be X _________________________________
signed by the registered holder(s) Name: _____________________________
of Notes as their name(s) ap- (PLEASE PRINT)
pear(s) on the Notes or by per-
son(s) authorized to become regis-
tered holder(s) (evidence of which
authorization must be transmitted
with this Letter of Transmittal).
If signature is by a trustee, ex-
ecutor, administrator, guardian,
attorney-in-fact, officer, or
other person acting in a fiduciary
or representative capacity, such
person must set forth his or her
full title below. See Instruction
5.
Title: ____________________________
Name of Firm: _____________________
(MUST BE AN ELIGIBLE
INSTITUTION AS DEFINED IN
INSTRUCTION 2)
Address: __________________________
-----------------------------
-----------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
___________________________________
Name(s): __________________________ Dated: ____________________________
___________________________________
Capacity:__________________________
___________________________________
Street Address: ___________________
___________________________________
___________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number:
___________________________________
Tax Identification or Social
Security Number:
___________________________________
5
<PAGE>
- --------------------------------------------------------------------------------
PAYOR'S NAME: COAXIAL COMMUNICATIONS
OF CENTRAL OHIO, INC. PHOENIX ASSOCIATES
Name (if joint names, list first and circle the name of
the person or entity whose number you enter in Part 1
below. See instructions if your name has changed.)
SUBSTITUTE
----------------------------------------------------------
FORM W-9 Address
DEPARTMENT OF THE ----------------------------------------------------------
TREASURY INTERNAL City, State and ZIP Code
REVENUE SERVICE List account number(s) here (optional)
----------------------------------------------------------
----------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR Social Security
TAXPAYER IDENTIFICATION NUMBER Number or TIN
("TIN") IN THE BOX AT RIGHT AND
CERTIFY BY SIGNING AND DATING -----------------
BELOW.
----------------------------------------------------------
PART 2--Check the box if you are NOT subject to backup
withholding under the provisions of section
3406(a)(1)(C) of the Internal Revenue Code because (1)
you have not been notified that you are subject to
backup withholding as a result of failure to report all
interest or dividends or (2) the Internal Revenue
Service has notified you that you are no longer subject
to backup withholding. [_]
- --------------------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES
OF PERJURY, I CERTIFY THAT THE IN-
FORMATION PROVIDED ON THIS FORM IS
TRUE, CORRECT AND COMPLETE.
PART 3 --
Awaiting TIN [_]
SIGNATURE _______________ DATE _____
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER.
6
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1.DELIVERY OF THIS LETTER OF TRANSMITTAL AND NOTES. A properly completed
and duly executed copy of this Letter of Transmittal, including Substitute
Form W-9, and any other documents required by this Letter of Transmittal must
be received by the Exchange Agent at its address set forth herein, and either
certificates for Tendered Notes must be received by the Exchange Agent at its
address set forth herein or such Tendered Notes must be transferred pursuant
to the procedures for book-entry transfer described in the Prospectus under
the caption "The Exchange Offer--Procedures for Tendering" (and a confirmation
of such transfer received by the Exchange Agent), in each case prior to 5:00
p.m., New York City time, on the Expiration Date. The method of delivery of
certificates for Tendered Notes, this Letter of Transmittal and all other
required documents to the Exchange Agent is at the election and risk of the
tendering holder and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. Instead of
delivery by mail, it is recommended that the holder use an overnight or hand
delivery service. In all cases, sufficient time should be allowed to assure
timely delivery. No Letter of Transmittal or Notes should be sent to the
Company. Neither the Issuers nor the registrar is under any obligation to
notify any tendering holder of the Issuers' acceptance of Tendered Notes prior
to the closing of the Exchange Offer.
2.GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Notes
but whose Notes are not immediately available, and who cannot deliver their
Notes, this Letter of Transmittal or any other documents required hereby to
the Exchange Agent prior to the Expiration Date must tender their Notes
according to the guaranteed delivery procedures set forth below, including
completion of Box 4. Pursuant to such procedures: (i) such tender must be made
by or through a firm which is a member of a recognized Medallion Program
approved by the Securities Transfer Association Inc. (an "Eligible
Institution") and the Notice of Guaranteed Delivery must be signed by the
holder; (ii) prior to the Expiration Date, the Exchange Agent must have
received from the holder and the Eligible Institution a properly completed and
duly executed Notice of Guaranteed Delivery (by mail or hand delivery) setting
forth the name and address of the holder, the certificate number(s) of the
Tendered Notes and the principal amount of Tendered Notes, stating that the
tender is being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Expiration Date, this Letter of Transmittal
together with the certificate(s) representing the Notes and any other required
documents will be deposited by the Eligible Institution with the Exchange
Agent; and (iii) such properly completed and executed Letter of Transmittal,
as well as all other documents required by this Letter of Transmittal and the
certificate(s) representing all Tendered Notes in proper form for transfer,
must be received by the Exchange Agent within five New York Stock Exchange
trading days after the Expiration Date. Any holder who wishes to tender Notes
pursuant to the guaranteed delivery procedures described above must ensure
that the Exchange Agent receives the Notice of Guaranteed Delivery relating to
such Notes prior to 5:00 p.m., New York City time, on the Expiration Date.
Failure to complete the guaranteed delivery procedures outlined above will
not, of itself, affect the validity or effect a revocation of any Letter of
Transmittal form properly completed and executed by an Eligible Holder who
attempted to use the guaranteed delivery process.
3.BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may
execute and deliver this Letter of Transmittal. Any Beneficial Owner of
Tendered Notes who is not the registered holder must arrange promptly with the
registered holder to execute and deliver this Letter of Transmittal on his or
her behalf through the execution and delivery to the registered holder of the
Instructions to Registered Holder and/or Book-Entry Transfer Facility
Participant from Beneficial Owner form accompanying this Letter of
Transmittal.
4.PARTIAL TENDERS. Tenders of Notes will be accepted only in integral
multiples of $1,000 in principal amount. If less than the entire principal
amount of Notes held by the holder is tendered, the tendering holder should
fill in the principal amount tendered in the column labeled "Aggregate
Principal Amount Tendered" of
7
<PAGE>
the box entitled "Description of Notes Tendered" (Box 1) above. The entire
principal amount of Notes delivered to the Exchange Agent will be deemed to
have been tendered unless otherwise indicated. If the entire principal amount
of all Notes held by the holder is not tendered, then Notes for the principal
amount of Notes not tendered and Exchange Notes issued in exchange for any
Notes tendered and accepted will be sent to the Holder at his or her
registered address, unless a different address is provided in the appropriate
box on this Letter of Transmittal, as soon as practicable following the
Expiration Date.
5.SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be
issued (and any untendered principal amount of Notes is to be reissued) in the
name of the registered holder(s), then such registered holder(s) need not and
should not endorse any Tendered Notes, nor provide a separate bond power. In
any other case, such registered holder(s) must either properly endorse the
Tendered Notes or transmit a properly completed bond power with this Letter of
Transmittal, with the signature(s) on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be
endorsed or accompanied by appropriate bond powers, in each case, signed as
the name(s) of the registered holder(s) appear(s) on the Tendered Notes, with
the signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered Notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by
the Issuers, evidence satisfactory to the Issuers of their authority to so act
must be submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by this
Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Notes are tendered (i) by a registered holder
who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6.SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in the
applicable box (Box 3), the name and address to which the Exchange Notes
and/or substitute Notes for principal amounts not tendered or not accepted for
exchange are to be sent, if different from the name and address of the person
signing this Letter of Transmittal. In the case of issuance in a different
name, the taxpayer identification or social security number of the person
named must also be indicated.
7.TRANSFER TAXES. The Issuers will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer.
If, however, a transfer tax is imposed for any reason other than the transfer
and exchange of Tendered Notes pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
this Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter
of Transmittal.
8
<PAGE>
8.TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide
the Issuers (as payor) with its correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Issuers are not provided with the correct TIN,
the Holder may be subject to backup withholding and a $50 penalty imposed by
the Internal Revenue Service. (If withholding results in an over-payment of
taxes, a refund may be obtained.) Certain holders (including, among others,
all corporations and certain foreign individuals) are not subject to these
backup withholding and reporting requirements.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result
of failure to report all interest or dividends or (ii) the Internal Revenue
Service has notified the holder that such holder is no longer subject to
backup withholding.
The Issuers reserve the right in their sole discretion to take whatever
steps are necessary to comply with the Issuers' obligation regarding backup
withholding.
9.VALIDITY OF TENDERS. All questions as to the validity, form, eligibility
(including time of receipt), acceptance and withdrawal of Tendered Notes will
be determined by the Issuers in their sole discretion, which determination
will be final and binding. The Issuers reserve the right to reject any and all
Notes not validly tendered or any Notes the Issuers' acceptance of which
would, in the opinion of the Issuers or their counsel, be unlawful. The
Issuers also reserve the right to waive any conditions of the Exchange Offer
or defects or irregularities in tenders of Notes as to any ineligibility of
any holder who seeks to tender Notes in the Exchange Offer. The interpretation
of the terms and conditions of the Exchange Offer (including this Letter of
Transmittal and the instructions hereto) by the Issuers shall be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Notes must be cured within such time as the Issuers
shall determine. Neither the Issuers, the Exchange Agent nor any other person
shall be under any duty to give notification of defects or irregularities with
respect to tenders of Notes, nor shall any of them incur any liability for
failure to give such notification. Tenders of Notes will not be deemed to have
been made until such defects or irregularities have been cured or waived. Any
Notes received by the Exchange Agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the Exchange Agent to the tendering holders, unless otherwise
provided in this Letter of Transmittal, as soon as practicable following the
Expiration Date.
10.WAIVER OF CONDITIONS. The Company reserves the absolute right to amend,
waive or modify any of the conditions in the Exchange Offer in the case of any
Tendered Notes.
11.NO CONDITIONAL TENDER. No alternative, conditional, irregular or
contingent tender of Notes or transmittal of this Letter of Transmittal will
be accepted.
12.MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering holder whose
Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated herein for further instructions.
13.REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance and requests for additional copies of the Prospectus or this Letter
of Transmittal may be directed to the Exchange Agent at the address indicated
herein. Holders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Exchange Offer.
14.ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF NOTES; RETURN OF
NOTES. Subject to the terms and conditions of the Exchange Offer, the Issuers
will accept for exchange all validly tendered Notes as soon as
9
<PAGE>
practicable after the Expiration Date and will issue Exchange Notes therefor
as soon as practicable thereafter. For purposes of the Exchange Offer, the
Issuers shall be deemed to have accepted tendered Notes when, as and if the
Issuers have given written or oral notice (immediately followed in writing)
thereof to the Exchange Agent. If any Tendered Notes are not exchanged
pursuant to the Exchange Offer for any reason, such unexchanged Notes will be
returned, without expense, to the undersigned at the address shown in Box 1 or
at a different address as may be indicated herein under "Special Delivery
Instructions" (Box 3).
15.WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures set
forth in the Prospectus under the caption "The Exchange Offer."
10
<PAGE>
EXHIBIT 99.2
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
PHOENIX ASSOCIATES
10% SENIOR NOTES DUE 2006
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated ,
(the "Prospectus") of Coaxial Communications of Central Ohio, Inc., an Ohio
corporation ("Coaxial") and Phoenix Associates, a Florida general partnership
("Phoenix") and together with Coaxial, the "Issuers"), and the accompanying
Letter of Transmittal (the "Letter of Transmittal"), that together constitute
the Issuers' offer (the "Exchange Offer"). Capitalized terms used but not
defined herein have the meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 10% Senior Notes due 2006 (the "Notes") held by you
for the account of the undersigned.
The aggregate face amount of the Notes held by you for the account of the
undersigned is (FILL IN AMOUNT):
$ of the 10% Senior Notes due 2006
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[_]TO TENDER the following Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF
ANY): $ .
[_]NOT TO TENDER any Notes held by you for the account of the undersigned.
If the undersigned instruct you to tender the Notes held by you for the
account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner, including but not limited to the representations that
(i) the undersigned's principal residence is in the state of (FILL IN STATE)
, (ii) the undersigned is acquiring the Exchange Notes in the ordinary
course of business of the undersigned, (iii) the undersigned is not
participating, does not participate, and has no arrangement or understanding
with any person to participate, in the distribution of the Exchange Notes,
(iv) the undersigned acknowledges that any person participating in the
Exchange Offer for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities
Act of 1933, as amended (the "Act"), in connection with a secondary resale
transaction of the Exchange Notes acquired by such person and cannot rely on
the position of the Staff of the Securities and Exchange Commission set forth
in no-action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer--Purpose and Effect of the Exchange Offer," and
(v) the undersigned is not an "affiliate," as defined in Rule 405 under the
Act, of the Issuers or any of their subsidiaries; (b) to agree, on behalf of
the undersigned, as set forth in the Letter of Transmittal; and (c) to take
such other action as necessary under the Prospectus or the Letter of
Transmittal to effect the valid tender of such Notes.
SIGN HERE
Name of beneficial owner(s): ________________________________________________
Signature(s): _______________________________________________________________
Name (please print): ________________________________________________________
Address: ____________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
Telephone number: ___________________________________________________________
Taxpayer Identification or Social Security Number: __________________________
Date: _______________________________________________________________________
<PAGE>
EXHIBIT 99.3
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
10% SENIOR NOTES DUE 2006
OF
COAXIAL COMMUNICATIONS OF CENTRAL OHIO, INC.
PHOENIX ASSOCIATES
PURSUANT TO THE PROSPECTUS DATED
This form must be used by a holder of 10% Senior Notes due 2006 (the "Notes")
of Coaxial Communication of Central Ohio, Inc, an Ohio corporation ("Coaxial"),
and Phoenix Associates, a Florida general partnership ("Phoenix" and together
with Coaxial, the "Issuers") who wishes to tender Notes to the Exchange Agent
pursuant to the guaranteed delivery procedures described in "The Exchange
Offer--Guaranteed Delivery Procedures" of the Issuers' Prospectus, dated
(the "Prospectus") and in Instruction 2 to the related Letter of
Transmittal. Any holder who wishes to tender Notes pursuant to such guaranteed
delivery procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date of the Exchange Offer.
Capitalized terms used but not defined herein have the meanings ascribed to
them in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON UNLESS EXTENDED (THE "EXPIRATION DATE").
Bank of Montreal Trust Company,
(the "Exchange Agent"):
IF BY OVERNIGHT COURIER: IF BY HAND:
Bank of Montreal Trust Company Bank of Montreal Trust
88 Pine Street, 19th Floor Company
New York, New York 10005 88 Pine Street, 19th Floor
Attn: Corporate Trust Department New York, New York 10005
IF BY MAIL: Attn: Corporate Trust
Department
Bank of Montreal Trust Company
88 Pine Street, 19th Floor
New York, New York 10005
Attn: Corporate Trust Department
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE WILL
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Issuers, upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Notes listed below:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
CERTIFICATE NUMBER(S) (IF KNOWN) OF NOTES OR AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
ACCOUNT NUMBER AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
<S> <C>
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
</TABLE>
PLEASE SIGN AND COMPLETE
- -------------------------------------------------------------------------------
Signatures of Registered Holder(s)
or Authorized Signatory: ___________
Date: _____________,
____________________________________ Address: ___________________________
____________________________________ ____________________________________
Name(s) of Registered Holder(s): ___ Area Code and Telephone No. ________
____________________________________
____________________________________
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Notes or on a security position
listing as the owner of Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s): ____________________________________________________________________
-----------------------------------------------------------------------------
Capacity: ___________________________________________________________________
Address(es): ________________________________________________________________
-----------------------------------------------------------------------------
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers,
Inc., or is a commercial bank or trust company having an office or
correspondent in the United States, or is otherwise an "eligible guarantor
institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, as amended, guarantees deposit with the Exchange Agent
of the Letter of Transmittal (or facsimile thereof), together with the Notes
tendered hereby in proper form for transfer (or confirmation of the book-
entry transfer of such Notes into the Exchange Agent's account at the Book-
Entry Transfer Facility described in the Prospectus under the caption "The
Exchange Offer -- Guaranteed Delivery Procedures" and in the Letter of
Transmittal) and any other required documents, all by 5:00 p.m., New York
City time, on the fifth New York Stock Exchange trading day following the
Expiration Date.
Name of firm _______________________ ____________________________________
(Authorized Signature)
Address ____________________________ Name _______________________________
(Please Print)
____________________________________ Title_______________________________
(Include Zip Code)
Area Code and Tel. No. _____________ Dated _______________________ ,
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed and
duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by
the Exchange Agent at its address set forth herein prior to the Expiration
Date. The method of delivery of this Notice of Guaranteed Delivery and any
other required documents to the Exchange Agent is at the election and sole
risk of the holder, and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. As an alternative
to delivery by mail, the holders may wish to consider using an overnight or
hand delivery service. In all cases, sufficient time should be allowed to
assure timely delivery. For a description of the guaranteed delivery
procedures, see Instruction 2 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant
of the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Notes, the signature must correspond with the name
shown on the security position listing as the owner of the Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s)
appears on the Notes or signed as the name of the participant shown on the
Book-Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests for
assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified herein. Holders may
also contact their broker, dealer, commercial bank, trust company, or other
nominee for assistance concerning the Exchange Offer.
4
