<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K405
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _______________to_________________.
Commission File Number: 1-9046
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Cablevision Systems Corporation
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(Exact name of registrant as specified in its charter)
Delaware 11-2776686
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Media Crossways, Woodbury, New York 11797
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 364-8450
----------------------
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class: Class A Common Stock
Name of each exchange on which registered: American Stock Exchange
Securities registered pursuant to Section 12(g)
of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K 405 or any
amendment to this Form 10-K405. X
Aggregate market value of voting stock held by nonaffiliates of the registrant
based on the closing price at which such stock was sold on the American Stock
Exchange on March 16, 1995: $597,150,522
Number of shares of common stock outstanding as of March 16, 1995:
Class A Common Stock - 12,012,035
Class B Common Stock - 11,678,781
Documents incorporated by reference - The Company intends to file with the
Securities and Exchange Commission, not later than 120 days after the close of
its fiscal year, a definitive proxy statement or an amendment on Form 8 to this
report containing the information required to be disclosed under Part III of
Form 10-K405.
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TABLE OF CONTENTS
Page
PART I
Item 1. Business. 3
2. Properties. 31
3. Legal Proceedings. 31
4. Submission of Matters to a Vote of
Security Holders. 31
PART II
5. Market for the Registrant's Common Equity
and Related Stockholder Matters. 32
6. Selected Financial Data. 34
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.36
8. Consolidated Financial Statements. 53
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. 93
PART III
10.Directors and Executive Officers of the *
Registrant.
11.Executive Compensation. *
12.Security Ownership of Certain Beneficial
Owners and Management. *
13.Certain Relationships and Related
Transactions. *
PART IV
14.Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. 93
* These items are omitted because the registrant intends to file with the
Securities and Exchange Commission, not later than 120 days after the close
of its fiscal year, a definitive proxy statement or an amendment on Form 8
to this report containing the information required to be disclosed under
Part III of Form 10-K405.
(2)
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PART I
ITEM 1. BUSINESS
THE COMPANY
Cablevision Systems Corporation, a Delaware corporation and its majority owned
subsidiaries (the "Company") own and operate cable television systems in six
states with approximately 1,768,000 subscribers at December 31, 1994. The
Company also has ownership interests in and/or manages other cable television
systems which served an aggregate of approximately 861,000 subscribers at
December 31, 1994 and has interests in companies that produce and distribute
national and regional programming services and that provide advertising sales
services for the cable television industry. The Company was formed in 1985 to
effect a reorganization of its predecessors.
Cable television is a service that delivers multiple channels of television
programming to subscribers who pay a monthly fee for the services they receive.
Television and radio signals are received over-the-air or via satellite delivery
by antennas, microwave relay stations and satellite earth stations and are
modulated, amplified and distributed over a network of coaxial and fiber optic
cable to the subscribers' television sets. Cable television systems typically
are constructed and operated pursuant to non-exclusive franchises awarded by
local governmental authorities for specified periods of time.
The Company's cable television systems offer varying levels of service which may
include, among other programming, local broadcast network affiliates and
independent television stations, satellite-delivered "superstations" such as
WTBS (Atlanta), certain other news, information and entertainment channels such
as CNN, CNBC, ESPN, MTV and certain premium services such as HBO, Showtime, The
Movie Channel and Cinemax.
The Company's cable television revenues are derived principally from monthly
fees paid by subscribers. In addition to recurring subscriber revenues, the
Company derives revenues from installation charges, from the sales of
pay-per-view movies and events, and from the sale of advertising time on
advertiser supported programming. Certain services and equipment provided by
substantially all of the Company's cable television systems are subject to
regulation. See "Business - Cable Television Operations - Regulation - 1992
Cable Act."
For financing purposes, the Company is structured as a restricted group,
consisting of Cablevision Systems Corporation and certain of its subsidiaries,
including Cablevision of New York City ("CNYC") (the "Restricted Group"), and an
unrestricted group of subsidiaries, consisting primarily of V Cable, Inc. ("V
Cable"), Cablevision MFR, Inc. ("Cablevision MFR"), and Rainbow Programming
Holdings, Inc. (including Rainbow Advertising Sales Corporation ("Rainbow
Advertising")) ("Rainbow Programming"). In addition, the Company has an
unrestricted group of investments, consisting of investments in A-R Cable
Services, Inc. ("A-R Cable"), U.S. Cable Television Group, L.P. ("U.S.
(3)
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Cable"), Cablevision of Framingham Holdings, Inc. ("CFHI"), A-R Cable Partners,
Cablevision of Boston Limited Partnership ("Cablevision of Boston"),
Cablevision of Chicago and Cablevision of Newark.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources" for a discussion of the financing
of the Company including a discussion of restrictions on investments by the
Restricted Group.
The Company's consolidated cable television systems are concentrated in the New
York City greater metropolitan area (79.6% of the Company's total subscribers)
and the greater Cleveland metropolitan area (16.5% of total subscribers). The
Company believes that its cable systems on Long Island comprise the largest
group of contiguous cable television systems under common ownership in the
United States (measured by number of subscribers).
RECENT DEVELOPMENTS
On March 10, 1995, MSG Holdings, L.P. ("Holdings"), a partnership between a
subsidiary of Rainbow Programming and a subsidiary of ITT Corporation, a
Delaware corporation ("ITT"), acquired Madison Square Garden Corporation ("MSG")
in a transaction in which MSG merged with and into Holdings. The purchase price
paid by Holdings for MSG was $1,009.1 million.
Holdings funded the purchase price of the acquisition through (i) borrowings of
$289.1 million under a $450 million credit agreement among Holdings, various
lending institutions and Chemical Bank as administrative agent, (ii) an equity
contribution from Rainbow Programming of $110 million, and (iii) an equity
contribution from ITT of $610 million. ITT, Rainbow Programming and the Company
are parties to an agreement made as of August 15, 1994 (the "Bid Agreement")
pursuant to which it has been agreed that within 12 months following the MSG
closing, Rainbow Programming may elect to acquire interests in Holdings from ITT
sufficient to equalize the equity ownership of ITT and Rainbow Programming in
Holdings (the "Equalization Interest"). Rainbow Programming has the option
during the 12 months following the MSG acquisition closing to (i) acquire all or
a portion of the Equalization Interest for cash (including interest on such
Equalization Interest at the rate of 11 1/2% per year calculated from the MSG
acquisition closing date), (ii) maintain its investment at the initial level, or
(iii) require ITT to purchase one half of Rainbow Programming's initial interest
in Holdings at the price paid by Rainbow Programming plus an adjustment for
Rainbow Programming's share of Holdings' operating income after interest expense
following the MSG acquisition closing. Rainbow Programming has until one year
from the time of the MSG acquisition closing to make its election and has not
yet decided which alternative it will pursue.
Initially Holdings will be managed on a 50-50 basis by Rainbow Programming and
ITT. If, as discussed above, Rainbow Programming does not equalize its
ownership interest in Holdings by the first anniversary of the closing, its
management role will be effectively
(4)
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eliminated. Rainbow Programming also has the right to voluntarily relinquish
any power to direct the management and policies of Holdings.
Pursuant to an agreement between Rainbow Programming and National Broadcasting
Company, Inc. ("NBC"), NBC may require Rainbow Programming, by notice given on
or before April 13, 1995, to purchase its interests in SportsChannel (New York)
Associates ("SCNY") and Rainbow News 12 Company (the "NBC Put") for an aggregate
purchase price which, as of February 28, 1995, would amount to approximately $93
million. In the event that NBC elects to require Rainbow Programming to
purchase such interest, Rainbow Programming will have 120 days to consummate the
acquisition. On January 27, 1995, Rainbow Programming entered into an amended
and restated credit agreement with Toronto Dominion (Texas), Inc. and the
Canadian Imperial Bank of Commerce, as co-agents, and a group of banks
increasing Rainbow Programming's credit facility from $105 million to $202
million to provide funds in the event the NBC Put is exercised. The facility
will reduce to $108 million if the NBC Put is not exercised.
(5)
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CABLE TELEVISION OPERATIONS
GENERAL.
As of December 31, 1994, the Company's consolidated cable television systems
served approximately 1,768,000 subscribers in New York, Ohio, Connecticut, New
Jersey, Michigan, and Massachusetts.
The following table sets forth certain statistical data regarding the Company's
consolidated cable television operations (1). During 1994 CNYC became part of
the Restricted Group and for comparative purposes CNYC is included in the
Restricted Group for 1993 and 1992.
<TABLE>
<CAPTION>
As of December 31,
------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Homes passed (2):
Restricted Group. . . . . . . . 2,139,000 1,731,000 1,515,000
V Cable . . . . . . . . . . . . 512,000 509,000 504,000
Cablevision MFR . . . . . . . . 248,000 - -
--------- --------- ---------
Company consolidated . . . . . 2,899,000 2,240,000 2,019,000
--------- --------- ---------
--------- --------- ---------
Basic service subscribers:
Restricted Group. . . . . . . . 1,243,000 1,029,000 924,000
V Cable . . . . . . . . . . . . 364,000 350,000 338,000
Cablevision MFR . . . . . . . . 161,000 - -
--------- --------- ---------
Company consolidated . . . . . 1,768,000 1,379,000 1,262,000
--------- --------- ---------
--------- --------- ---------
Average number of premium units per
basic subscriber:
Restricted Group. . . . . . . . 2.2 2.5 2.5
V Cable . . . . . . . . . . . . 1.0 1.3 1.4
Cablevision MFR . . . . . . . . 0.8 - -
Company consolidated. . . . . . 1.8 2.2 2.2
Average revenue per basic subscriber (3):
Restricted Group. . . . . . . . $38.29 $38.65 $39.96
V Cable . . . . . . . . . . . . 30.41 30.56 31.30
Cablevision MFR . . . . . . . . 34.67 - -
Company consolidated. . . . . . $36.33 $36.59 $37.64
-----------------------------------
<FN>
(1) No information is provided in this table for any period in which
an entity was not a consolidated subsidiary of the Company.
(2) Homes passed is based upon homes actually marketed and does not
include multiple dwelling units passed by the cable plant that
are not connected to it.
(3) Based on recurring service revenues for the last month of the
period, excluding installation charges and certain other
non-recurring revenues such as pay-per-view, advertising and home
shopping revenues. See "Business - Cable Television Operations -
Subscriber Rates and Services; Marketing and Sales".
</TABLE>
(6)
<PAGE>
The following table sets forth certain statistical data regarding
the Company's managed, unconsolidated cable television operations (1):
<TABLE>
<CAPTION>
As of December 31,
----------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Homes passed (2):
Cablevision of Boston . . . . . . 254,000 252,000 249,000
Cablevision of Chicago. . . . . . 195,000 193,000 193,000
A-R Cable . . . . . . . . . . . . 446,000 442,000 438,000
U.S. Cable. . . . . . . . . . . . 330,000 317,000 305,000
North Coast Cable . . . . . . . . - 214,000 213,000
Newark. . . . . . . . . . . . . . 119,000 118,000 117,000
A-R Cable Partners. . . . . . . . 55,000 - -
CFHI. . . . . . . . . . . . . . . 28,000 - -
--------- --------- ---------
1,427,000 1,536,000 1,515,000
--------- --------- ---------
--------- --------- ---------
Basic service subscribers:
Cablevision of Boston . . . . . . 136,000 129,000 122,000
Cablevision of Chicago. . . . . . 88,000 83,000 79,000
A-R Cable . . . . . . . . . . . . 308,000 299,000 292,000
U.S. Cable. . . . . . . . . . . . 229,000 213,000 202,000
North Coast Cable . . . . . . . . - 83,000 79,000
Newark. . . . . . . . . . . . . . 48,000 46,000 45,000
A-R Cable Partners. . . . . . . . 36,000 - -
CFHI. . . . . . . . . . . . . . . 16,000 - -
--------- --------- ---------
861,000 853,000 819,000
--------- --------- ---------
--------- --------- ---------
Average number of premium units per
basic subscriber:
Cablevision of Boston . . . . . . 1.8 2.1 2.1
Cablevision of Chicago. . . . . . 1.4 1.6 1.7
A-R Cable . . . . . . . . . . . . 0.9 0.9 0.9
U.S. Cable. . . . . . . . . . . . 1.1 0.8 0.4
North Coast Cable . . . . . . . . - 1.4 1.5
Newark. . . . . . . . . . . . . . 2.1 2.0 1.6
A-R Partners. . . . . . . . . . . 0.8 - -
CFHI. . . . . . . . . . . . . . . 0.6 - -
Average revenue per basic subscriber (3):
Cablevision of Boston . . . . . . $35.22 $36.81 $35.89
Cablevision of Chicago. . . . . . $31.45 $32.21 $34.80
A-R Cable . . . . . . . . . . . . $27.68 $28.42 $29.70
U.S. Cable. . . . . . . . . . . . $26.36 $25.72 $26.10
North Coast Cable . . . . . . . . - $33.95 $34.47
Newark. . . . . . . . . . . . . . $35.92 $37.12 $36.85
A-R Cable Partners. . . . . . . . $33.39 $ - $ -
CFHI. . . . . . . . . . . . . . . $33.81 $ - $ -
---------------------------------
<FN>
(1) No information is provided in this table for any period in which an
entity was not a managed and unconsolidated affiliate of the
Company. North Coast Cable became a wholly-owned member of the
Restricted group in March, 1994.
(2) Homes passed is based upon homes actually marketed and does not
include multiple dwelling units passed by the cable plant that are
not connected to it.
(3) Based on recurring service revenues for the last month of the
period, excluding installation charges and certain other
non-recurring revenues such as pay-per-view, advertising and home
shopping revenues. See "Business - Cable Television Operations -
Subscriber Rates and Services; Marketing and Sales".
</TABLE>
(7)
<PAGE>
SUBSCRIBER RATES AND SERVICES; MARKETING AND SALES.
The Company's cable television systems offer a package of services, generally
marketed as "Family Cable", which includes, among other programming, broadcast
network local affiliates and independent television stations,
satellite-delivered "superstations" and certain other news, information and
entertainment channels such as CNN, CNBC, ESPN and MTV. For additional charges,
the Company's cable television systems provide certain premium services such as
HBO, Showtime, The Movie Channel and Cinemax, which may be purchased either
individually (in conjunction with Family Cable) or in combinations or in tiers.
In addition, the Company's cable television systems offer a basic package which
includes broadcast network local affiliates and public, educational or
governmental channels and certain public leased access channels.
The Company offers premium services on an individual basis and as components of
different "tiers". Successive tiers include additional premium services for
additional charges that reflect discounts from the charges for such services if
purchased individually. For example, in most of the Company's cable systems,
subscribers may elect to purchase Family Cable plus one, two or three premium
services with declining incremental costs for each successive tier. In
addition, most systems offer a "Rainbow" package consisting of between five and
seven premium services, and a "Rainbow Gold" package consisting of between eight
and ten premium services.
Since its existing cable television systems are substantially fully built, the
Company's sales efforts are primarily directed toward increasing penetration and
revenues in its franchise areas. The Company sells its cable television
services through door-to-door selling supported by telemarketing, direct mail
advertising, promotional campaigns and local media and newspaper advertising.
Certain services and equipment (converters which are leased to subscribers)
provided by substantially all of the Company's cable television systems are
subject to regulation. See "Business - Cable Television Operations - Regulation
- 1992 Cable Act."
SYSTEM CAPACITY.
The Company is engaged in an ongoing effort to upgrade the technical
capabilities of its cable plant and to increase channel capacity for the
delivery of additional programming and new services. The Company's cable
television systems have a minimum capacity of 35 channels and 80% of its
subscribers are currently served by systems having a capacity of at least 52
channels. As a result of currently ongoing upgrades, the Company expects that
by December 1995 approximately 44% of its subscribers will be served by systems
having a capacity of at least 77 channels. A substantial portion of the system
upgrades either completed or underway will utilize fiber optic cable.
(8)
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PROGRAMMING.
Adequate programming is available to the Company from a variety of sources.
Program suppliers' compensation is typically a fixed, per subscriber monthly fee
based, in most cases, either on the total number of subscribers of the cable
systems of the Company and certain of its affiliates, or on the number of
subscribers subscribing to the particular service. The Company's programming
contracts are generally for a fixed period of time and are subject to negotiated
renewal. The Company's cable programming costs have increased in recent years
and are expected to continue to increase due to additional programming being
provided to most subscribers, increased costs to produce or purchase cable
programming and other factors. Management believes that the Company will
continue to have access to programming services at reasonable price levels.
FRANCHISES.
The Company's cable television systems are operated primarily under nonexclusive
franchise agreements with local governmental franchising authorities, in some
cases with the approval of state cable television authorities. Franchising
authorities generally charge a fee of up to 5% based on a percentage of certain
revenues of the franchisee. In 1994 franchise fee payments made by the Company
aggregated approximately 4% of total revenues.
The Company's franchise agreements are generally for a term of ten to fifteen
years from the date of grant, although recently renewals have often been for
five to ten year terms. Some of the franchises grant the Company an option to
renew. Except for the Company's franchise for the Town of Brookhaven, New York
which expired in 1991, the expiration dates for the Company's ten largest
franchises range from 1995 to 2001. In certain cases, including the Town of
Brookhaven, the Company is operating under temporary licenses while negotiating
renewal terms with the franchising authorities. Franchises usually require the
consent of the franchising authority prior to the sale, assignment, transfer or
change in ownership or operating control of the franchisee.
The Cable Communications Policy Act of 1984 (the "1984 Cable Act") and the Cable
Television Consumer Protection and Competition Act of 1992 (the "1992 Cable
Act") provide significant procedural protections for cable operators seeking
renewal of their franchises. See "Business - Cable Television Operations -
Regulation". In connection with a renewal, a franchising authority may impose
different and more stringent terms. The Company has never lost a franchise as a
result of a failure to obtain a renewal.
COMPETITION.
The Company's cable television systems generally compete with the direct
reception of broadcast television signals by antenna and with other methods of
delivering television signals to the home for a fee. The extent of such
competition depends upon the number and quality of the signals available by
direct antenna reception as compared to the number and quality of signals
distributed by the cable system. The Company's cable television
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systems also compete to varying degrees with other communications and
entertainment media, including movies, theater and other entertainment
activities.
The 1984 Cable Act, Federal Communications Commission ("FCC") regulations and
the 1982 federal court consent decree (the "Modified Final Judgment") that
settled the 1974 antitrust suit against American Telephone & Telegraph Company
regulate the provision of video programming and other information services by
telephone companies. A federal district court in 1991 issued an opinion, upheld
on appeal, lifting the Modified Final Judgment prohibition on the provision of
information services by the seven Bell Operating Companies ("BOCs"), allowing
the BOCs to acquire or construct cable television systems outside of their own
service areas. Several BOCs have purchased or made investments in cable systems
outside their service areas in reliance on this decision. The 1984 Cable Act
codified FCC cross-ownership regulations which, in part, prohibit local exchange
telephone companies, including the BOCs, from providing video programming
directly to subscribers within their local exchange service areas, except in
rural areas or by specific waiver of FCC rules. The statutory provision and
corresponding FCC regulations are of particular competitive importance because
these telephone companies already own much of the plant necessary for cable
television operations, such as poles, underground conduit, associated
rights-of-way and connections to the home.
Numerous federal court decisions, including two at the appeals court level, have
agreed with challenges to the constitutionality of the statutory ban on
telephone company ownership of cable systems. These rulings apply to telephone
company ownership of cable systems in several states in which the Company owns
systems. Similar lawsuits have been filed in other states in which the Company
owns systems. Legislation to repeal this ban, subject to certain regulatory
requirements, was introduced in the U.S. Senate and House of Representatives in
the last Congress; repeal has also been endorsed by the Clinton Administration.
Under the terms of these bills, a telephone company could build and operate a
cable system within the region or acquire an in-region cable operator, under
certain circumstances. The bills would also, INTER ALIA, preempt state and
locally-imposed barriers to the provision of intrastate and interstate
telecommunications services by the Company and other cable systems operators, in
competition with local telephone companies. Similar legislation has been
introduced in the current Congress, and one version of such a bill has been
approved by the Senate Commerce, Service and Transportation Committee.
In July 1992, the FCC voted to authorize additional competition to cable
television by video programmers using broadband common carrier facilities
constructed by telephone companies. The FCC allowed telephone companies to take
ownership interests of up to 5% in such programmers. The FCC also reaffirmed an
earlier holding, recently upheld on appeal by a federal court, that the
programmers using such a telephone company-provided "video dialtone" system
would not need to obtain a state or municipal franchise. Several telephone
companies have sought approval from the FCC to build such "video dialtone"
systems. Such a system has been proposed in several communities in which the
Company currently holds a cable franchise and several of such systems have been
approved by the FCC.
(10)
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Cable television also competes with the home video industry. Owners of
videocassette recorders are able to rent many of the same movies, special events
and music videos that are available on certain premium services. The
availability of videocassettes has affected the degree to which the Company is
able to sell premium service units and pay-per-view offerings to some of its
subscribers.
Multipoint distribution services ("MDS"), which deliver premium television
programming over microwave superhigh frequency channels received by subscribers
with a special antenna, and multichannel multipoint distribution service
("MMDS"), which is capable of carrying four channels of television programming,
also compete with certain services provided by the Company's cable television
systems. By acquiring several MMDS licenses or subleasing from several MMDS
operators and holders of other types of microwave licenses, a single entity can
increase channel capacity to a level more competitive with cable systems. MDS
and MMDS systems are not required to obtain a municipal franchise, are less
capital intensive, require lower up-front capital expenditures and are subject
to fewer local and FCC regulatory requirements than cable systems. The ability
of MDS and MMDS systems to serve homes and to appeal to consumers is affected by
their less extensive channel capacity and the need for unobstructed line of
sight over-the-air transmission. The Company competes with MDS and MMDS
operators generally in its metropolitan service areas.
Satellite master antenna systems ("SMATV") generally serve large multiple
dwelling units. The FCC has preempted all state and local regulation of SMATV
operations. SMATV is limited to the buildings within which the operator has
received permission from the building owner to provide service. The FCC has
recently streamlined its MDS regulations and opened substantially more microwave
channels to MDS and SMATV operators, which could increase the strength of their
competition with cable television systems. The Company competes with SMATV
operators primarily in the New York City metropolitan service area.
In January 1993, the FCC proposed establishing a new local multipoint
distribution service ("LMDS", sometimes referred to as "cellular cable") in the
virtually unused 28 GHz band of the electromagnetic spectrum that could be used
to offer multichannel video in competition with cable systems, as well as
two-way communications services. The FCC has proposed issuing two LMDS licenses
per market, using auctions or lotteries to select licensees. Suite 12 Group,
the originator of this service, currently holds an experimental license and has
constructed a video transmission service using the 28 Ghz band in a portion of
the Company's New York City service area.
The 1984 Cable Act specifically legalized, under certain circumstances,
reception by private home earth stations of satellite-delivered cable
programming services. By law, dish owners have the right to receive broadcast
superstations and network affiliate transmissions in return for a compulsory
copyright fee. Cable programmers have developed new marketing efforts to reach
these viewers. Direct broadcast satellite ("DBS") systems currently permit
satellite transmissions from the low-power C-Band to be received by antennae
approximately 60 to 72 inches in diameter at the viewer's home.
(11)
<PAGE>
New higher power DBS systems providing transmissions over the Ku-Band permit the
use of smaller receiver antennae and thus may be more appealing to customers.
Three DBS systems are now operational in the United States. Both C-Band and
Ku-Band DBS delivery of television signals are competitive alternatives to cable
television.
Other technologies supply services that may compete with certain services
provided by cable television. These technologies include translator stations
(which rebroadcast signals at different frequencies at lower power to improve
reception) and low-power television stations (which operate on a single channel
at power levels substantially below those of most conventional broadcasters and,
therefore, reach a smaller service area).
The full extent to which developing media will compete with cable television
systems may not be known for several years. There can be no assurance that
existing, proposed or as yet undeveloped technologies will not become dominant
in the future and render cable television systems less profitable or even
obsolete. In particular, certain major telephone companies have demonstrated an
interest in acquiring cable television systems or providing video services to
the home through fiber optic technology. Changes in the laws and regulations
mentioned above governing telephone companies could allow these companies in the
future to provide information and entertainment services to the home.
Although substantially all the Company's cable television franchises are
non-exclusive, most franchising authorities have granted only one franchise in
an area. Other cable television operators could receive franchises for areas in
which the Company operates or a municipality could build a competing cable
system. One company has applied for a franchise to build and operate a
competing cable television system in several communities in Connecticut in which
the Company currently holds a cable franchise. The state regulatory authority
is currently conducting hearings on this application and a decision is expected
during the second or third fiscal quarters of this year. The 1992 Cable Act
described below prohibits municipalities from unreasonably refusing to grant
competitive franchises and facilitates the franchising of second cable systems
or municipally-owned cable systems. See "Regulation - 1992 Cable Act," below.
(12)
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REGULATION.
1984 CABLE ACT. In 1984, Congress enacted the 1984 Cable Act, which set uniform
national guidelines for cable regulation under the Communications Act of 1934.
While several of the provisions of the 1984 Cable Act have been amended or
superseded by the 1992 Cable Act, described below, other provisions of the 1984
Act, including the principal provisions relating to the franchising of cable
television systems, remain in place. The 1984 Cable Act authorizes states or
localities to franchise cable television systems but sets limits on their
franchising powers. It sets a ceiling on cable franchise fees of 5% of gross
revenues and prohibits localities from requiring cable operators to carry
specific programming services. The 1984 Cable Act protects cable operators
seeking franchise renewals by limiting the factors a locality may consider and
requiring a due process hearing before denial. The 1984 Cable Act does not,
however, prevent another cable operator from being authorized to build a
competing system. The 1992 Cable Act prohibits franchising authorities from
granting exclusive cable franchises and from unreasonably refusing to award an
additional competitive franchise.
The 1984 Cable Act allows localities to require free access to public,
educational or governmental channels, but sets limits on the number of
commercial leased access channels cable television operators must make available
for potentially competitive services. The 1984 Cable Act prohibits obscene
programming and requires the sale or lease of devices to block programming
considered offensive.
1992 CABLE ACT. On October 5, 1992, Congress enacted the 1992 Cable Act which
represents a significant change in the regulatory framework under which cable
television systems operate.
After the effective date of the 1984 Cable Act, and prior to the enactment of
the 1992 Cable Act, rates for cable services were unregulated for substantially
all of the Company's systems. The 1992 Cable Act reintroduced rate regulation
for certain services and equipment provided by most cable systems in the United
States, including substantially all of the Company's systems. On April 1, 1993,
the FCC adopted rules implementing the rate regulation provisions of the 1992
Cable Act.
The 1992 Cable Act requires each cable system to establish a basic service
package consisting, at a minimum, of all local broadcast signals and all
non-satellite delivered distant broadcast signals that the cable system wishes
to carry, and all public, educational and governmental access programming. The
rates for the basic service package are subject to regulation by local
franchising authorities. Under the FCC's April 1, 1993 rate regulation rules, a
cable operator whose per channel rates as of September 30, 1992 exceeded an FCC
established benchmark was required to reduce its per channel rates for the basic
service package by up to 10% unless it could justify higher rates on the basis
of its costs. On February 22, 1994, after reconsideration, the FCC ordered a
further reduction of 7% in rates for the basic service tier in effect on
September 30, 1992, for an overall reduction of 17% from those rates. The
amount of this 17% decrease that is below a new per channel benchmark need not
be implemented pending completion of FCC
(13)
<PAGE>
studies of the costs of below-benchmark cable systems. In the interim, however,
the amount of the 17% decrease that is below this benchmark must be computed by
the cable system and must be offset against otherwise allowable rate increases
by these systems. Franchise authorities (local municipalities or state cable
television regulators) are also empowered to regulate the rates charged for the
installation and lease of the equipment used by subscribers to receive the basic
service package (including a converter box, a remote control unit and, if
requested by a subscriber, an addressable converter box or other equipment
required to access programming offered on a per channel or per program basis),
including equipment that may also be used to receive other packages of
programming, and the installation and monthly use of connections for additional
television sets. The FCC's rules require franchise authorities to regulate
rates for equipment and connections for additional television sets on the basis
of an actual cost formula developed by the FCC, plus a return of 11.25%. No
additional charge is permitted for the delivery of regulated services to
additional sets unless the operator incurs additional programming costs in
connection with the delivery of such services to multiple sets.
The FCC may, in response to complaints by a subscriber, municipality or other
governmental entity, reduce the rates for service packages other than the basic
service package if it finds that such rates are unreasonable. The FCC will in
response to complaints also regulate, on the basis of actual cost, the rates for
equipment used only to receive these higher packages. Services offered on a per
channel or per program basis or packages comprised only of services that are
also available on a per channel or per program basis are not subject to rate
regulation by either municipalities or the FCC. The FCC on February 22, 1994
adopted criteria to assess whether certain discounted packages of "a la carte"
or per channel offerings should be regulated as a tier of services by the FCC or
should be treated as unregulated per channel offerings.
The regulations adopted by the FCC on April 1, 1993, including the original rate
benchmarks, became effective on September 1, 1993. The new rate regulations
adopted by the FCC on February 22, 1994, including the new benchmarks, became
effective in May, 1994.
The FCC's rules provide that, unless a cable operator can justify higher rates
on the basis of its costs, increases in the rates charged by the operator for
the basic service package or any other regulated package of service 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 that exceed the inflation index. A cable operator may not
pass through to subscribers any amounts paid by the operator on or before
October 6, 1994, to broadcast stations for the retransmission of their signals.
Increases in retransmission fees above those in effect on that day may be passed
through to subscribers. As part of the implementation of its rate regulations,
the FCC froze all cable service rates until May 15, 1994 and provided cable
operators with the option to defer refund liabilities by continuing rates in
effect until July 15, 1994. The Company elected to defer its refund
liabilities.
(14)
<PAGE>
On February 22, 1994, the FCC adopted guidelines for cost-of-service showings
that establish a regulatory framework pursuant to which a cable television
operator may attempt to justify rates in excess of the benchmarks. Such
justification would be based upon (i) the operator's costs in operating a cable
television system (including certain operating expenses, depreciation and taxes)
and (ii) a return on the investment the operator has made to provide regulated
cable television services in such system (such investment being referred to as
its "ratebase", which includes working capital and certain costs associated with
the construction of such system). The guidelines (1) create a rebuttable
presumption that excludes from a cable television operator's ratebase any
"excess acquisition costs" (equal to the excess of the purchase price for a
cable television system over the original construction cost of such system, or
its book value at the time of acquisition), (2) include in the rate base the
costs associated with certain intangibles such as franchise rights and customer
lists, and (3) set a uniform rate of return for regulated cable television
service of 11.25% after taxes. The interim guidelines originally included a
"productivity offset feature" that could reduce otherwise justifiable rate
increases based on a claimed increase in a cable television system's operational
efficiencies. The FCC dropped this proposal in September, 1994.
On November 10, 1994, the FCC reversed its policy regarding rate regulation of
packages of a la carte services. A la carte services that are offered in a
package will now be subject to rate regulation by the FCC. In light of the
uncertainty created by the various criteria that the FCC previously applied to a
la carte packages, the FCC, in those cases in which it was not clear how the
FCC's previous criteria should have been applied to the package at issue, and
where only a "small number" of channels were moved from a previously regulated
tier to the package, will allow cable operators to treat existing packages as
new product tiers ("NPT") as discussed below.
The FCC, in addition to revising its rules governing a la carte channels, also
on November 10, 1994 revised its regulations governing the manner in which cable
operators may charge subscribers for new cable programming services. The FCC
instituted a three-year flat fee mark-up plan for charges relating to new
channels of cable programming services in addition to the present formula for
calculating the permissible rate for new services. Commencing on January 1,
1995, operators may charge for new channels of cable programming services added
after May 14, 1994 at a markup of up to 20 cents per channel over actual
programming costs, but may not make adjustments to monthly rates for these new
services totaling more than $1.20, plus an additional 30 cents solely for
programming license fees, per subscriber over the first two years of the three-
year period. Cable operators may charge an additional 20 cents in the third
year only for channels added in that year. Cable operators electing to use the
20 cent per channel adjustment may not take a 7.5% mark-up on programming cost
increases, which is permitted under the FCC's current rate regulations. The FCC
requested further comment on whether cable operators should continue to receive
the 7.5% mark-up on increases in license fees on existing programming services.
Additionally, the FCC will permit cable operators to offer NPTs at rates which
they elect so long as, among other conditions, other service tiers that are
subject to rate regulation
(15)
<PAGE>
are priced in conformity with applicable FCC regulations and cable operators do
not remove programming services from existing service tiers and offer them on
the NPT.
Under the 1992 Cable Act, systems may not require subscribers to purchase any
service package other than the basic service package as a condition of access to
video programming offered on a per channel or per program basis. Cable systems
are allowed up to ten years to the extent necessary to implement the necessary
technology to facilitate this access. Substantially all of the Company's
systems are currently capable of implementing the technology mandated by the
1992 Cable Act.
In addition, the 1992 Cable Act (i) requires cable programmers under certain
circumstances to offer their programming to present and future competitors of
cable television such as MMDS, SMATV and DBS, and prohibits new exclusive
contracts with program suppliers without FCC approval, (ii) directs the FCC to
set standards for limiting the number of channels that a cable television system
operator could program with programming services controlled by such operator,
(iii) bars municipalities from unreasonably refusing to grant additional
competitive franchises, (iv) requires cable television operators to carry ("Must
Carry") all local broadcast stations (including home shopping broadcast
stations), or, at the option of a local broadcaster, to obtain the broadcaster's
prior consent for retransmission of its signal ("Retransmission Consent"), (v)
requires cable television operators to obtain the consent of any non-local
broadcast station prior to retransmitting its signal, and (vi) regulates the
ownership by cable operators of other media such as MMDS and SMATV. In
connection with clause (ii) above concerning limitations on affiliated
programming, the FCC has established a 40% limit on the number of channels of a
cable television system that can be occupied by programming services in which
the system operator has an attributable interest and a national limit of 30% on
the number of households that any cable company can serve. In connection with
clause (iv) above concerning retransmission of a local broadcaster's signals, a
substantial number of local broadcast stations are currently carried by the
Company's cable television systems and have elected to negotiate with the
Company for Retransmission Consent. Although the Company has obtained
Retransmission Consent agreements with all broadcast stations it currently
carries, a number of these agreements are temporary in nature and the potential
remains for discontinuation of carriage if an agreement is not ultimately
reached.
The FCC has imposed new regulations under the 1992 Cable Act in the areas of
customer service, technical standards, equal employment opportunity, privacy,
rates for leased access channels, obscenity and indecency, disposition of a
customer's home wiring and compatibility between cable systems and other
consumer electronic equipment such as "cable ready" television sets and
videocassette recorders.
A number of lawsuits have been filed in federal court challenging the
constitutionality of various provisions of the 1992 Cable Act. A challenge to
the constitutionality of the 1992 Cable Act's Must Carry rules was denied by a
federal court in April 1993. On appeal, the United States Supreme Court
returned this decision to the lower court for further proceedings. Most other
challenged provisions of the 1992 Cable Act have been upheld
(16)
<PAGE>
at the federal district court level, including provisions governing rate
regulation and retransmission consent, but an appeal to the U.S. Court of
Appeals for the District of Columbia Circuit of that decision has been filed.
Other challenges to the FCC's rate regulation scheme have been separately
brought directly to the District of Columbia Circuit. The Company cannot
predict the outcome of any of the foregoing litigation affecting the 1992 Cable
Act. The material provisions of the 1992 Cable Act remain in effect during the
pendency of the litigation.
Legislation recently approved by the Senate Commerce, Service and Transportation
Committee would significantly modify the rate regulation provisions of the 1992
Cable Act. The Company cannot predict the likelihood of passage of this or
other legislation that would reduce the regulatory restrictions on the Company's
ability to market and price its services.
OTHER FCC REGULATION. In addition to the rules and regulations promulgated by
the FCC under the 1984 Cable Act and the 1992 Cable Act, the FCC has promulgated
other rules affecting the Company. FCC rules require that cable systems black
out certain network and sports programming on imported distant broadcast signals
upon request. The FCC also requires that cable systems delete syndicated
programming carried on distant signals upon the request of any local station
holding the exclusive right to broadcast the same program within the local
television market and, in certain cases, upon the request of the copyright owner
of such programs. These rules affect the diversity and cost of the Company's
programming options for its cable systems.
FCC regulation also includes matters regarding restrictions on origination and
cablecasting by cable system operators; application of the rules governing
political broadcasts; customer service; home wiring and limitations on
advertising contained in nonbroadcast children's programming.
Implementing provisions of the 1993 Budget Act, the FCC has adopted requirements
for payment of annual "regulatory fees". For 1994, cable television systems are
required to pay regulatory fees of $0.37 per subscriber, which may be passed on
to subscribers as "external cost" adjustments to basic cable service. This fee
is proposed to be increased to $0.51 per subscriber for 1995. Fees are also
assessed for other licenses, including licenses for business radio, cable
television relay systems (CARS) and earth stations, which, however, may not be
collected directly from subscribers.
The FCC has the authority to regulate utility company rates for cable rental of
pole and conduit space. States can establish preemptive regulations in this
area, and the states in which the Company's cable television systems operate
have done so. The FCC's technical guidelines for signal leakage became
substantially more stringent in 1990, requiring upgrading expenditures by the
Company. Two-way radio stations, microwave-relay stations and satellite earth
stations used by the Company's cable television systems are licensed by the FCC.
(17)
<PAGE>
FEDERAL COPYRIGHT REGULATION. There are no restrictions on the number of
distant broadcast television signals that cable television systems can import,
but cable systems are required to pay copyright royalty fees to receive a
compulsory license to carry them. The United States Copyright Office has
increased the royalty fee from time to time. The FCC has recommended to
Congress the abolition of the compulsory licenses for cable television carriage
of broadcast signals. Any such action by Congress could adversely affect the
Company's ability to obtain such programming and could increase the cost of such
programming.
CABLE TELEVISION CROSS-MEDIA OWNERSHIP LIMITATIONS. The 1984 Cable Act
prohibits any person or entity from owning broadcast television and cable
properties in the same market. The 1984 Cable Act also bars co-ownership of
telephone companies and cable television systems operating in the same service
areas, with limited exceptions for rural areas. The FCC may also expand the
rural exemption for telephone companies offering cable service within their
service areas. The FCC has modified its rule that formerly barred the
commercial broadcasting networks (NBC, CBS and ABC) from owning cable television
systems. The FCC rule does not allow the networks to acquire cable systems in
markets in which they already own a broadcast station, and sets limitations on
the percentage of homes that can be passed, both nationally and locally, by
network-owned cable systems. The 1992 Cable Act imposed limits on new
acquisitions of SMATV or MMDS systems by cable operators in their franchise
areas. There is no federal bar to newspaper ownership of cable television
systems. The Company does not have any prohibited cross-ownership interests. A
bill recently approved by the Senate Commerce, Service and Transportation
Committee would eliminate or modify these cross-ownership limitations.
STATE AND MUNICIPAL REGULATION OF CABLE TELEVISION. Regulatory responsibility
for essentially local aspects of the cable business such as franchisee
selection, system design and construction, safety, and consumer services remains
with either state or local officials and, in some jurisdictions, with both. The
1992 Cable Act expands the factors that a franchising authority can consider in
deciding whether to renew a franchise and limits the damages for certain
constitutional claims against franchising authorities for their franchising
activities. New York law provides for comprehensive state-wide regulation,
including approval of transfers of cable franchises and consumer protection
legislation. State and local franchising jurisdiction is not unlimited,
however, and must be exercised consistently with the provisions of the 1984
Cable Act and the 1992 Cable Act. Among the more significant restrictions that
the Cable Act imposes on the regulatory jurisdiction of local franchising
authorities is a 5% ceiling on franchise fees and mandatory renegotiation of
certain franchise requirements if warranted by changed circumstances.
(18)
<PAGE>
CONSOLIDATED CABLE AFFILIATES
V CABLE. On December 31, 1992, the Company consummated a significant
restructuring and reorganization involving its unrestricted subsidiary V Cable,
U.S. Cable and General Electric Capital Corporation ("GECC"), V Cable's
principal creditor (the "V Cable Reorganization"). In the V Cable
Reorganization, V Cable acquired, for $20.0 million, a 20% partnership interest
in U.S. Cable, and U.S. Cable acquired, for $3.0 million, a 19% non-voting
interest in a newly incorporated subsidiary of V Cable ("VC Holding") that was
formed to hold substantially all of V Cable's assets. As a result, V Cable now
owns an effective 84.8% interest in VC Holding. GECC then provided new
long-term credit facilities to each of V Cable, VC Holding and U.S. Cable. The
debt of V Cable and VC Holding is guaranteed by, and secured by a pledge of all
of the assets of, V Cable, VC Holding and each of their subsidiaries, including
a pledge of all direct and indirect ownership interests in such subsidiaries.
The debt of U.S. Cable is guaranteed by all subsidiaries of U.S. Cable, and
secured by all the assets of each subsidiary of U.S. Cable; U.S. Cable's debt is
also guaranteed (and cross-collateralized in most cases) by each of V Cable, VC
Holding and each of their subsidiaries. All of the V Cable, VC Holding and U.S.
Cable credit facilities are non-recourse to the Company other than with respect
to the common stock of V Cable owned by the Company. The Company manages the
U.S. Cable properties and the V Cable systems under management agreements that
provide for cost reimbursement, including an allocation of overhead charges.
In connection with the V Cable Reorganization, on December 31, 1997 V Cable will
assume approximately $121.0 million face value ($87.3 million present value as
of December 31, 1994) of debt of U.S. Cable (all of which is owed to GECC),
which amount is subject to adjustment, upward or downward, depending on U.S.
Cable's ratio of debt to cash flow (as defined) in 1997. Each year thereafter,
until the final adjustment upon occurrence of an exchange described below, the
amount of U.S. Cable debt assumed by V Cable may be similarly adjusted, upward
or downward. V Cable's agreement to assume the U.S. Cable debt was made in
connection with, and in consideration for, the restructuring of V Cable's credit
facilities with GECC.
V Cable has the option to exchange its interest in U.S. Cable for all of U.S.
Cable's interest in VC Holding and thus recover full ownership of the V Cable
systems from and after January 1, 1998. Upon such an exchange, the guarantee
and cross collateralization by V Cable and VC Holding of any portion of the
U.S. Cable senior credit facilities not assumed by V Cable would terminate.
Such option may not be exercised prior to November 30, 2001 unless the U.S.
Cable systems have been sold for a net purchase price sufficient to repay to
GECC certain of the U.S. Cable loans not assumed by V Cable, as well as a fixed
additional amount. In addition, V Cable may exercise the option prior to
January 1, 1998 if the U.S. Cable systems have been sold, all outstanding
indebtedness of V Cable, VC Holding and U.S. Cable to GECC (other than junior
subordinated debt and certain other excluded indebtedness) is repaid, and an
additional fixed amount is paid to GECC.
(19)
<PAGE>
The Company accounts for its investment in U.S. Cable using the equity method of
accounting.
CABLEVISION OF NEW YORK CITY. In July 1992, the Company acquired (the "CNYC
Acquisition") substantially all of the remaining interests in Cablevision of New
York City - Phase I through Phase V ("CNYC"), the operator of a cable television
system that is under development in The Bronx and parts of Brooklyn, New York.
Prior to the CNYC Acquisition, the Company had a 15% interest in CNYC and
Charles F. Dolan, the chief executive officer and principal shareholder of the
Company, owned the remaining interests. Mr. Dolan remains a partner in CNYC,
with a 1% interest and the right to certain preferential payments.
CNYC holds franchises that permit construction of the franchised areas in
specified phases. Construction of the systems in the Brooklyn and The Bronx
franchises has been substantially completed.
Under the agreement between the Company and Mr. Dolan, a new limited partnership
("CNYC LP") was formed and holds 99% of the partnership interests in CNYC. The
remaining 1% interest in CNYC is owned by the existing corporate general
partner, Cablevision Systems New York City Corporation, which is a wholly-owned
subsidiary of the Company. Subsidiaries of the Company own a 1% general
partnership interest and a 98% limited partnership interest in CNYC LP and Mr.
Dolan retains a 1% limited partnership interest in CNYC LP plus certain
preferential rights. Mr. Dolan's preferential rights entitle him to an annual
cash payment (the "Annual Payment") of 14% multiplied by the outstanding balance
of his "Minimum Payment". The Minimum Payment is $40.0 million and is to be
paid to Mr. Dolan prior to any distributions from CNYC LP to partners other than
Mr. Dolan. In addition, Mr. Dolan has the right, exercisable on December 31,
1997, and as of the earlier of (1) December 31, 2000 and (2) December 31 of the
first year after 1997 during which CNYC achieves an aggregate of 400,000
subscribers, to require the Company to purchase (Mr. Dolan's "put") his interest
in CNYC LP. The Company has the right to require Mr. Dolan to sell his interest
in CNYC LP to the Company (the Company's "call") during the three-year period
commencing one year after the expiration of Mr. Dolan's second put. In the
event of a put, Mr. Dolan will be entitled to receive from the Company the
Minimum Payment, any accrued but unpaid Annual Payments, a guaranteed return on
certain of his investments in CNYC LP and a Preferred Payment defined as a
payment (not exceeding $150.0 million) equal to 40% of the Appraised Equity
Value (as defined) of CNYC LP after making certain deductions including a
deduction of a 25% compound annual return on approximately 85% of the Company's
investments with respect to the construction of Phases III, IV and V of CNYC and
100% of certain of the Company's other investments in CNYC, including Mr.
Dolan's Annual Payment. In the event the Company exercises its call, the
purchase price will be computed on the same basis as for a put except that there
will be no payment in respect of the Appraised Equity Value amount.
The Company has the right to make payment of the put or call exercise price in
the form of shares of the Company's Class B Common Stock or, if Mr. Dolan so
elects, Class A
(20)
<PAGE>
Common Stock, except that all Annual Payments must be paid in cash to the extent
permitted under the Company's Credit Agreement (as defined below). Under the
Credit Agreement, the Company is currently prohibited from paying the Preferred
Payment in cash and, accordingly, without the consent of the bank lenders, would
be required to pay it in shares of the Company's Common Stock.
The Company has agreed to invest in CNYC LP sufficient funds to permit CNYC LP
to make the required Annual Payments to Mr. Dolan and to make certain equity
contributions to CNYC. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources -
Restricted Group."
The subsidiaries of the Company that own all of the Company's interests in CNYC
have succeeded to the rights and obligations of Mr. Dolan under a security
agreement relating to CNYC's credit agreement and in connection therewith have
pledged all of the Company's interests in CNYC and CNYC LP to secure the
obligations to the bank lenders under the CNYC credit agreement. Recourse
against these subsidiaries, which are members of the Restricted Group, is
limited solely to the pledged interests in CNYC and CNYC LP.
CABLEVISION MFR. In August 1994, Cablevision MFR, Inc. ("Cablevision MFR"), a
wholly-owned subsidiary of the Company, acquired substantially all of the assets
of Monmouth Cablevision Associates, L.P. ("Monmouth Cablevision") and Riverview
Cablevision Associates, L.P. ("Riverview Cablevision") consisting of cable
television systems in New Jersey. The operations of Monmouth Cablevision and
Riverview Cablevision are consolidated with those of the Company as of the date
of acquisition. The aggregate purchase price for the two New Jersey systems was
$391.2 million. Approximately $237.8 million of such purchase price was
financed by a senior credit facility of newly formed subsidiaries of Cablevision
MFR secured solely by the assets of the systems. The remaining $153.4 million
of such purchase price was paid with cash of approximately $12.1 million and the
issuance, by Cablevision MFR, of subordinated promissory notes (the "MFR Notes")
totalling $141.3 million due in 1998 and bearing interest at 6% until the third
anniversary and 8% thereafter increasing to 8% and 10%, respectively, if the
Company exercises its option to pay interest in shares of the Company's Class A
common stock.
Principal and interest on the Cablevision MFR promissory notes, which may be
paid in cash or, under certain circumstances at the Company's option, in shares
of the Company's Class A common stock, are guaranteed by the Company. The
Company's obligations under the guarantees rank pari passu with the Company's
public subordinated debt. In certain circumstances, Cablevision MFR may extend
the maturity date of the promissory notes until 2003 for certain additional
consideration. In the event the maturity is so extended, the interest and
principal of such notes may thereafter be paid only in cash.
(21)
<PAGE>
CABLEVISION CLEVELAND. In March, 1994, Cablevision of Cleveland, L.P.
("Cablevision Cleveland"), a partnership comprised of subsidiaries of the
Company, purchased substantially all of the assets and assumed certain
liabilities of North Coast Cable Limited Partnership, which operates a cable
television system in Cleveland, Ohio (the "North Coast Cable Acquisition"). The
net cash purchase price for interests not previously owned by the Company (and
excluding excess liabilities assumed by the Company) aggregated approximately
$103.4 million including expenses. The cost of the acquisition was financed
principally by borrowings under the Company's Credit Agreement. Cablevision
Cleveland is part of the Restricted Group.
OTHER CABLE AFFILIATES
A-R CABLE. In May 1992, the Company and A-R Cable consummated a restructuring
and refinancing transaction that had the effect of retiring a substantial
portion of A-R Cable's subordinated debt and reducing the Company's economic and
voting interest in A-R Cable. Among other things, Warburg, Pincus Investors,
L.P. ("Warburg Pincus") purchased a new Series A Preferred Stock of A-R Cable
for a cash investment of $105.0 million, and the Company purchased a new
Series B Preferred Stock of A-R Cable for a cash investment of $45.0 million.
The Company acquired the funds for its investment in A-R Cable through
borrowings under the Company's credit agreement. In addition, GECC provided A-R
Cable with an additional $70.0 million under a secured revolving credit line.
In connection with Warburg Pincus' investment in A-R Cable, upon the receipt of
certain regulatory approvals, Warburg Pincus will be permitted to elect three of
the six members of the A-R Cable board of directors, will have approval rights
over certain major corporate decisions of A-R Cable and will be entitled to 60%
of the vote on all matters on which holders of capital stock are entitled to
vote (other than the election of directors). A-R Cable Investments, Inc., a
wholly-owned subsidiary of the Company owns all of the common stock, as well as
the Series B Preferred Stock, of A-R Cable and the Company continues to manage
A-R Cable under a management agreement that provides for cost reimbursement, an
allocation of overhead charges and a management fee of 3-1/2% of gross receipts,
as defined, with interest on unpaid annual amounts thereon at a rate of 10% per
annum. The 3-1/2% fee and interest thereon is payable by A-R Cable only after
repayment in full of its senior debt and certain other obligations. Under
certain circumstances, the fee is subject to reduction to 2-1/2% of gross
receipts.
During 1994, Warburg Pincus purchased additional shares of Series A Preferred
Stock for a cash investment of approximately $1.0 million and CSC purchased
additional shares of Series B Preferred Stock for a cash investment of
approximately $0.4 million.
After May 11, 1997, either Warburg Pincus or the Company may irrevocably cause
the sale of A-R Cable, subject to certain conditions. In certain circumstances,
Warburg Pincus may cause the sale of A-R Cable prior to that date. If Warburg
Pincus initiates the sale, the Company will have the right to purchase A-R Cable
through an appraisal procedure. The Company's purchase right may be forfeited
in certain circumstances. Upon the sale
(22)
<PAGE>
of A-R Cable, the net sales proceeds, after repayment of all outstanding
indebtedness and other liabilities, will be used as follows: first, to repay
Warburg Pincus' investment in the Series A Preferred Stock; second, to repay the
Company's investment in the Series B Preferred Stock; third, to repay the
accumulated unpaid dividends on the Series A Preferred Stock (19% annual rate);
fourth, to repay the accumulated unpaid dividends on the Series B Preferred
Stock (12% annual rate); fifth, to pay the Company for all accrued and unpaid
management fees together with accrued but unpaid interest thereon; sixth, pro
rata 60% to the Series A Preferred Stockholders, 4% to the Series B Preferred
Stockholders and 36% to the common stockholder(s).
Also in connection with the purchase of the A-R Cable Notes, A-R Cable retired
its previously outstanding preferred stock (undesignated as to series) which it
had purchased from an affiliate, a wholly-owned subsidiary of V Cable, Inc., for
nominal consideration. In connection with the purchase of the preferred stock,
a transaction fee agreement between A-R Cable and GECC was terminated and A-R
Cable's obligations thereunder were extinguished.
As a result of the rights to which Warburg Pincus is entitled discussed above,
the Company no longer has financial or voting control over A-R Cable's
operations. Accordingly, the Company no longer consolidates the financial
position or results of operations of A-R Cable. For reporting purposes, the
Company is accounting for its investment using the equity method of accounting.
The Company continues to guarantee the debt of A-R Cable to GECC under a limited
recourse guarantee wherein recourse to the Company is limited solely to the
common stock and Series B Preferred Stock of A-R Cable owned by a wholly-owned
subsidiary of the Company.
(23)
<PAGE>
CABLEVISION OF BOSTON. Cablevision of Boston, a Massachusetts limited
partnership, is engaged in the construction, ownership and operation of cable
television systems in Boston and Brookline, Massachusetts. The Company had
advanced net funds to Cablevision of Boston as of December 31, 1994 amounting to
approximately $52.2 million. Due to uncertainties existing during 1985 (which
subsequently were resolved), the Company wrote off for accounting purposes its
entire investment in and advances to Cablevision of Boston of $34.5 million as
of September 30, 1985. Subsequent to 1985, a subsidiary of the Company
exchanged $45.7 million of advances, consisting of amounts previously written
off of $34.5 million, interest of $3.2 million that had not been recognized for
accounting purposes, and $8.0 million of subsequent advances, for $45.7 million
of preferred equity in Cablevision of Boston. After this exchange, the Company
advanced an additional $9.7 million to Cablevision of Boston; in addition, at
December 31, 1994, $101.0 million of unpaid distributions had accrued on the
Company's preferred equity. At December 31, 1994, as a result of the write-off
referred to above and non-recognition for accounting purposes of the unpaid
distributions, the Company's consolidated financial statements reflects $17.7
million due from Cablevision of Boston. The contractual terms of the preferred
equity provide that the Company is to receive (i) cumulative distributions equal
to an annual rate of 15% (compounded semi-annually) on its investment, (ii) the
right to a priority return of the equity investment and any amounts of unpaid
cumulative distributions when permitted to be paid and (iii) the right to
receive 20% of all amounts available for postpayout distribution. Certain
questions exist as to whether the preferred equity is entitled to its full
contractual rights. In connection with the proposed acquisition of Cablevision
of Boston by the Company discussed below, the Company has agreed to substantial
reductions in the amounts that it would otherwise be entitled to receive in that
transaction in respect of its preferred equity interests in order to induce the
Limited Partners of Cablevision of Boston to approve the transaction. The
Company's preferred equity is subordinated to the indebtedness of Cablevision of
Boston (including the Company's $9.7 million of advances accruing interest at an
annual rate of 10.5% (with no set maturity date) not converted to preferred
equity) and accrued but unpaid management fees due to a corporation owned by
Charles F. Dolan, the managing general partner, which indebtedness and
management fees aggregated approximately $90.8 million at December 31, 1994, and
any working capital deficit incurred in the ordinary course of business.
In addition to the Company's preferred equity interest in Cablevision of Boston,
the Company is a limited partner in Cablevision of Boston and currently holds a
7% prepayout interest and a 20.7% postpayout interest. Mr. Dolan holds directly
or indirectly a 1% prepayout general partnership interest and a 23.5% postpayout
general partnership interest in Cablevision of Boston. With respect to
Cablevision of Boston, "payout" means the date on which the limited partners
are distributed the amount of their original investment.
In June 1994, the Company and Cablevision of Boston entered into an agreement
which is designed to give the Company full ownership of Cablevision Boston. The
agreement provides for the acquisition by the Company of the interests of
Cablevision Boston which it does not already own in a series of transactions.
The Company and Cablevision Boston
(24)
<PAGE>
have filed with the Securities and Exchange Commission a Consent Solicitation
Statement/Prospectus with respect to the proposed transactions. Each of the
transactions is subject to a number of conditions, including the approval by the
limited partners of Cablevision Boston who are unaffiliated with the general
partners of Cablevision Boston. Consummation of the transactions would result
in the limited partners in Cablevision Boston receiving Class A Common Stock of
the Company with an expected aggregate market value of approximately $40
million.
CABLEVISION OF CHICAGO. Cablevision of Chicago owns cable television systems
operating in the suburban Chicago area. The Company does not have a material
ownership interest in Cablevision of Chicago but had loans and advances
outstanding to Cablevision of Chicago in the amount of $12.3 million (plus $13.4
million in accrued interest which the Company has fully reserved) as of December
31, 1994, which loans and advances are subordinated to Cablevision of Chicago's
senior credit facility, accrue interest at an annual rate of 14% and have no set
maturity date. Mr. Dolan currently holds directly or indirectly an approximate
1% prepayout and a 32.7% postpayout general partnership interest in the cable
television systems owned and operated by Cablevision of Chicago. With respect
to Cablevision of Chicago, "payout" means the date on which the limited partners
in Cablevision of Chicago are distributed the amount of their original
investment, plus interest thereon, if applicable.
In January, 1995, Cablevision of Chicago signed a definitive agreement to sell
its cable systems to Continental Cablevision, Inc. The transfer is subject to
franchise approvals and is expected to close later in 1995.
CABLEVISION OF NEWARK. In April 1992, Cablevision of Newark, a partnership 25%
owned and managed by the Company and 75% owned by an affiliate of Warburg
Pincus, acquired cable television systems located in Newark and South Orange,
New Jersey ("Gateway Cable") from Gilbert Media Associates, L.P. for a cash
purchase price of approximately $76.5 million. Gateway Cable served
approximately 43,600 subscribers as of the date of acquisition. The Company's
total capital contributions to Cablevision of Newark were approximately $6.0
million. The Company manages the operations of Cablevision of Newark for a fee
equal to 3-1/2% of gross receipts, as defined, plus reimbursement of certain
costs and an allocation of certain selling, general and administrative expenses.
U.S. CABLE. In connection with the V Cable Reorganization (see Note 2 of Notes
to Consolidated Financial Statements), V Cable acquired for $20.0 million a 20%
interest in U.S. Cable. The Company has managed the properties of U.S. Cable
since June 1992 under management agreements that provide for cost reimbursement,
including an allocation of overhead charges.
A-R CABLE PARTNERS. In June 1994, A-R Cable Partners, a partnership comprised
of subsidiaries of the Company and E.M. Warburg, Pincus & Co., Inc. completed
the purchase of certain assets of Nashoba Communications, a group of three
limited partnerships, for a purchase price of approximately $90.5 million of
which $46.7 million
(25)
<PAGE>
was provided by a senior credit facility secured by the assets of such systems.
The remainder of the purchase price was provided by equity contributions and
subordinated loans from the partners in A-R Cable Partners. The Company
provided $11.9 million for its 30% interest in A-R Cable Partners and $1.5
million in loans. The Company manages the operations of A-R Cable Partners
pursuant to a management agreement which provides for a fee equal to 3-1/2% of
gross receipts, as defined, plus reimbursement of certain costs and an
allocation of certain selling, general and administrative expenses.
CABLEVISION OF FRAMINGHAM. On August 8, 1994, Cablevision of Framingham
Holdings, Inc. ("CFHI"), a corporation owned by the Company and E.M. Warburg,
Pincus Investors, L.P., acquired substantially all of the assets of Framingham
Cablevision Associates, L.P. ("Framingham Cablevision") consisting of cable
television systems in Massachusetts. The aggregate purchase price, including
fees and expenses, for Framingham Cablevision's assets was $37.5 million.
Approximately $22.7 million of such purchase price was financed by a senior
credit facility of a wholly-owned subsidiary of CFHI secured by the assets of
such system. Approximately $9.7 million of such purchase price was paid by the
issuance by CFHI of a promissory note, guaranteed by the Company, (the "CFHI
Note") due in 1998 and bearing interest at 6% until the third anniversary and 8%
thereafter (increasing to 8% and 10%, respectively, if interest is paid in
shares of the Company's Class A Common Stock). The remaining amount was
financed by loans and capital contributions from its stockholders, of which the
Company provided approximately $1.3 million as a capital contribution and $0.3
million as a loan for its 30% interest in CFHI. The Company manages the
operations of CFHI pursuant to a management agreement which provides for a fee
equal to 3-1/2% of gross receipts, as defined, plus reimbursement of certain
costs and an allocation of certain selling, general and administrative expenses.
(26)
<PAGE>
PROGRAMMING OPERATIONS
GENERAL.
The Company conducts its programming activities through Rainbow Programming, its
wholly owned subsidiary, and through subsidiaries of Rainbow Programming in
partnership with certain unaffiliated entities, including National Broadcasting
Company, Inc. ("NBC") and Tele-Communications, Inc. ("TCI"). Rainbow
Programming's businesses include eight regional SportsChannel services, four
national entertainment services (American Movie Classics Company ("AMCC"), Bravo
Network ("Bravo") Much Music ("MM") and the Independent Film Channel ("IFC")),
News 12 Long Island (a regional news service serving Long Island, New York) and
the national backdrop sports services of Prime SportsChannel Networks ("Prime
SportsChannel"). Rainbow Programming also owns an interest in Courtroom
Television Network and in Madison Square Garden (discussed below). Rainbow
Programming's SportsChannel services provide regional sports programming to the
New York, Philadelphia, New England, Chicago, Cincinnati, Cleveland, San
Francisco and Florida areas. AMCC is a national program service featuring
classic, unedited and non-colorized films from the 1930's through the 1970's.
Bravo is a national program service offering international films and performing
arts programs, including jazz, dance, classical music, opera and theatrical
programs. MM is a Canadian music service featuring music primarily from
Canadian artists. IFC is a national program service that airs independent films
made outside the Hollywood system.
Rainbow Programming acts as managing partner for each of these programming
businesses, other than Courtroom Television Network (which is managed by Time
Warner) and Madison Square Garden (which is managed jointly with ITT), and
reflects its share of the profits or losses in these businesses using the equity
method of accounting except for AMCC, whose operations are now consolidated with
those of the Company. Certain of Rainbow Programming's programming interests
are held through Rainbow Program Enterprises ("RPE"), which is substantially
wholly owned by Rainbow Programming.
In March 1995, subsidiaries of Rainbow Programming and ITT completed a
transaction to purchase Madison Square Garden. For a complete description, see
"Recent Developments", above.
Rainbow Programming and NBC formed a venture to exploit the pay-per-view
television rights to the 1992 Summer Olympics. Rainbow Programming's share of
the losses of the venture amounted to its maximum obligation of $50 million and
this payment was made to NBC in January 1993.
In July 1994, Rainbow Programming completed the purchase of a 50% interest held
by Liberty Media Corporation ("Liberty") in AMCC for a purchase price of
approximately $181.0 million, increasing Rainbow Programming's interest in AMCC
to approximately 75%. The results of AMCC's operations are consolidated with
those of the Company as
(27)
<PAGE>
of the date of acquisition. The acquisition was financed with a separate $105
million credit facility entered into by Rainbow Programming and by an equity
infusion of $76.0 million by the Company into Rainbow Programming.
Rainbow Programming's financing needs have been funded by the Restricted Group's
investments in and advances to Rainbow Programming, by sales of equity interests
in the programming businesses and, through separate, external debt financing.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources".
The Company is considering possible transactions that could result in Rainbow
Programming, or another entity holding the Company's programming interests,
becoming a publicly-held company, including a spin-off of all or a portion of
Rainbow Programming or such entity to the Company's common stockholders.
COMPETITION.
There are numerous programming services with which Rainbow Programming competes
for cable television system distribution and for subscribers, including network
television, other national and regional cable services, independent broadcast
television stations, television superstations, the home videocassette industry,
and developing pay-per-view services. Rainbow Programming and the other
programming services are competing for limited channel capacity and for
inclusion in the basic service tier of the systems offering their programming
services. Many of these program distributors are large, publicly-held companies
which have greater financial resources than Rainbow Programming.
Rainbow Programming also competes for the availability of programming, through
competition for telecast rights to films and competition for rights agreements
with sports teams. The Company anticipates that such competition will increase
as the number of programming distributors increases.
In general, the programming services offered by Rainbow Programming compete with
other forms of television-related services and entertainment media on the basis
of the price of services, the variety and quality of programming offered and the
effectiveness of Rainbow Programming's marketing efforts.
REGULATION.
Cable television program distributors such as Rainbow Programming are not
regulated by the FCC under the Communications Act of 1934. To the extent that
regulations and laws, either presently in force or proposed, hinder or stimulate
the growth of the cable television and satellite industries, the business of
Rainbow Programming will be directly affected. As discussed above under
"Business - Cable Television Operations - Regulation", the 1992 Cable Act limits
in certain ways the Company's ability to freely manage the Rainbow Programming
services or carry the Rainbow Programming services on their affiliates' systems
and imposes or could impose other regulations on the Rainbow Programming
companies.
(28)
<PAGE>
The 1984 Cable Act prohibits localities from requiring carriage of specific
programming services, providing a more open market for Rainbow Programming and
other cable program distributors. The 1984 Cable Act limits the number of
commercial leased access channels that a cable television operator must make
available for potentially competitive services but the 1992 Cable Act empowers
the FCC to set the rates and conditions for such leased access channels. The
reimposition of the FCC's rules requiring blackout of syndicated programming on
distant broadcast signals for which a local broadcasting station has an
exclusive contract opened new channels for Rainbow Programming's services.
Satellite common carriers, from whom Rainbow Programming and its affiliates
obtain transponder channel time to distribute their programming, are directly
regulated by the FCC. All common carriers must obtain from the FCC a
certificate for the construction and operation of their interstate
communications facilities. Satellite common carriers must also obtain FCC
authorization to utilize satellite orbital slots assigned to the United States
by the World Administrative Radio Conference. Such slots are finite in number,
thus limiting the number of carriers that can provide satellite service and the
number of channels available for program producers and distributors such as
Rainbow Programming and its affiliates. Nevertheless, there are at present
numerous competing satellite services that provide transponders for video
services to the cable industry.
All common carriers must offer their communications service to Rainbow
Programming and others on a nondiscriminatory basis (including by means of a
lottery). A satellite carrier cannot unreasonably discriminate against any
customer in its charges or conditions of carriage.
(29)
<PAGE>
ADVERTISING SERVICES
Rainbow Advertising represents certain of the Company's cable television systems
in the sales of advertising time to regional and local advertisers. Rainbow
Advertising also represents each of the SportsChannel regional programming
services and the News 12 Long Island programming service in the sales of
advertising time to national and regional advertisers. Rainbow Advertising
represents cable television systems unaffiliated with the Company in the sales
of spot advertising to national and regional advertisers. Rainbow Advertising
also has contracted with certain unaffiliated cable television operators to act
as their exclusive representative for the sales of advertising time to local
advertisers.
OTHER AFFILIATES
ATLANTIC PUBLISHING. Atlantic Cable Television Publishing Corporation
("Atlantic Publishing") holds a minority equity interest and a debt interest in
a company that publishes a weekly cable television guide which is offered to the
Company's subscribers and to other unaffiliated cable television operators. As
of December 31, 1994, the Company had advanced an aggregate of approximately
$17.7 million to Atlantic Publishing, reflecting approximately $0.6 million and
$0.5 million paid back during 1994 and 1993, respectively. The Company has
written off all of its advances to Atlantic Publishing other than $3.4 million.
Atlantic Publishing is owned by a trust for certain Dolan family members;
however, the Company has the option to purchase Atlantic Publishing for an
amount equal to the owner's net investment therein plus interest. The current
owner has made only a nominal investment in Atlantic Publishing to date.
RADIO STATION WKNR. The Company is the owner of Cleveland Radio Associates
("WKNR"), an AM radio station serving the Cleveland metropolitan area with an
all-sports format.
EMPLOYEES AND LABOR RELATIONS
As of December 31, 1994, the Company had 4,096 full-time, 453 part-time and 149
temporary employees. During 1991, the International Brotherhood of Electrical
Workers ("IBEW") conducted an organizing campaign among employees involved in
the operation of News 12 Long Island. In connection with that campaign, the
IBEW claimed that various unfair labor practices were committed. An NLRB
administrative law judge found that News 12's downsizing of its work force in
1991 was based upon valid economic factors and was not an unfair labor practice.
The administrative law judge has also found that News 12 offered improper
promises to certain employees and improper threats of retaliation to others.
These decisions have been upheld upon appeal to the NLRB. Each of News 12 and
the IBEW may appeal these decisions to Federal Court. As of December 31, 1994,
News 12 Long Island had 99 full-time, 11 part-time and 79 temporary employees.
There are no collective bargaining agreements with employees of the Company.
The Company believes that its relations with its employees are satisfactory.
(30)
<PAGE>
ITEM 2. PROPERTIES
The Company generally leases the real estate where its business offices,
microwave receiving antennae, earth stations, transponders, microwave towers,
warehouses, headend equipment, hub sites, program production studios and access
studios are located. Significant leasehold properties include eleven business
offices, comprising the Company's headquarters located in Woodbury, New York
with approximately 264,000 square feet of space, and the headend sites. The
Company believes its properties are adequate for its use.
The Company generally owns all assets (other than real property) related to the
cable television operations of the Restricted Group, including its program
production equipment, headend equipment (towers, antennae, electronic equipment
and satellite earth stations), cable system plant (distribution equipment,
amplifiers, subscriber drops and hardware), converters, test equipment, tools
and maintenance equipment. Similarly, the unconsolidated entities managed by
the Company generally own such assets related to their cable television
operations. The Company generally leases its service and other vehicles.
Substantially all of the assets of the Restricted Group, V Cable, VC Holding and
Cablevision MFR are pledged to secure borrowings under their respective credit
agreements.
ITEM 3. LEGAL PROCEEDINGS
The Company is party to various lawsuits, some involving substantial amounts.
Management does not believe that such lawsuits will have a material adverse
impact on the financial position of the Company. See Note 12 of Notes to
Consolidated Financial Statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
(31)
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Class A Common Stock, par value $.01 per share ("Class A Common
Stock"), is traded on the American Stock Exchange under the symbol "CVC". The
following table sets forth the high and low sales prices for the last two years
of Class A Common Stock as reported by the American Stock Exchange for the
periods indicated.
<TABLE>
<CAPTION>
1994 1993
---------------- ----------------
Quarter High Low High Low
-------- ------ ------ ------ ------
<C> <S> <S> <S> <S>
First 67-7/8 52-3/8 44 34-3/8
Second 52-7/8 39 38-7/8 29-3/8
Third 61-3/8 45-7/8 49-5/8 37-1/2
Fourth 59-7/8 45-7/8 72 48-1/4
</TABLE>
As of March 16, 1995, there were 653 holders of record of Class A Common Stock.
There is no public trading market for the Company's Class B Common Stock, par
value $.01 per share ("Class B Common Stock"). As of March 16, 1995, there were
25 holders of record of Class B Common Stock.
DIVIDENDS. The Company has not paid any dividends on shares of Class A or Class
B Common Stock. The Company intends to retain earnings to fund the growth of
its business and does not anticipate paying any cash dividends on shares of
Class A or Class B Common Stock in the foreseeable future.
The Company may pay cash dividends on its capital stock only from surplus as
determined under Delaware law. Holders of Class A and Class B Common Stock are
entitled to receive dividends equally on a per share basis if and when such
dividends are declared by the Board of Directors of the Company from funds
legally available therefor. No dividend may be declared or paid in cash or
property on shares of either Class A or Class B Common Stock unless the same
dividend is paid simultaneously on each share of the other class of common
stock. In the case of any stock dividend, holders of Class A Common Stock are
entitled to receive the same percentage dividend (payable in shares of Class A
Common Stock) as the holders of Class B Common Stock receive (payable in shares
of Class B Common Stock). The Company is restricted from paying dividends on
its preferred stock (other than on the Company's 8% Series C Cumulative
Preferred Stock and on the Company's Series E Redeemable Exchangeable
Convertible Preferred Stock) under the provisions of its senior credit agreement
if a default has occurred and is continuing under such agreement. Additionally,
the Company's senior subordinated debt instruments may restrict the payment of
dividends in respect of any shares of capital stock in certain circumstances.
Dividends may not be paid in respect of shares of Class A or Class B Common
Stock unless all dividends due and payable in respect of the preferred stock of
the Company have been paid or provided for. Further, dividends may not be paid
in respect of shares
(32)
<PAGE>
of Class A or Class B Common Stock under the Company's senior credit agreement.
See Item 7.-"Management's Discussion and Analysis - Liquidity and Capital
Resources-Restricted Group."
(33)
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL AND STATISTICAL DATA
The operating and balance sheet data included in the following selected
financial data have been derived from the consolidated financial statements of
the Company. Acquisitions made by the Company were accounted for under the
purchase method of accounting and, accordingly, the acquisition costs were
allocated to the net assets acquired based on their fair value, except for
assets previously owned by Mr. Dolan or affiliates of Mr. Dolan which were
recorded at historical cost. Acquisitions are reflected in operating, balance
sheet and statistical data from the time of acquisition. The operating data for
1992 reflects the deconsolidation of the Company's A-R Cable subsidiary for
reporting purposes, effective January 1, 1992. The selected financial data
presented below should be read in conjunction with the financial statements of
the Company and notes thereto included in Item 8 of this Report.
<TABLE>
<CAPTION>
CABLEVISION SYSTEMS CORPORATION
----------------------------------------------------------------------
December 31,
----------------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ----------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues . . . . . . . . . . . . . . . . . . . . . $ 837,169 $ 666,724 $ 572,487 $ 603,272 $ 562,989
Operating expenses . . . . . . . . . . . . . . . .
Technical . . . . . . . . . . . . . . . . . . . 302,885 241,877 204,449 213,059 202,850
Selling, general and administrative . . . . . . 195,942 172,687 120,356 121,527 118,825
Restructuring charge. . . . . . . . . . . . . . 4,306 - - - -
Depreciation and amortization . . . . . . . . . 271,343 194,904 168,538 215,326 216,288
--------- --------- --------- --------- ----------
Operating profit . . . . . . . . . . . . . . . . . 62,693 57,256 79,144 53,360 25,026
Other income (expense):. . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . (261,781) (230,327) (193,379) (257,189) (261,114)
Share of affiliates' net loss . . . . . . . . . (82,864) (61,017) (47,278) (23,780) (39,980)
Gain (loss) on sale of programming interests,
net. . . . . . . . . . . . . . . . . . . . . . - (330) 7,053 15,505 -
Gain on sale of marketable securities, net. . . - - 733 5,806 -
Provision for loss on Olympics venture. . . . . - - (50,000) - -
Loss on sale of preferred stock . . . . . . . . - - (20,000) - -
Write off of deferred financing costs . . . . . (9,884) (1,044) (12,284) - -
Loss on redemption of debentures. . . . . . . . (7,088) - - - -
Settlement of litigation and related matters. . - - (5,655) (9,677) -
Provision for preferential payment to related
party. . . . . . . . . . . . . . . . . . . . . (5,600) (5,600) (2,662) - -
Minority interest . . . . . . . . . . . . . . . (3,429) 3,000 - - -
Miscellaneous, net. . . . . . . . . . . . . . . (7,198) (8,720) (6,175) (11,224) (10,066)
--------- --------- --------- --------- ----------
Net loss . . . . . . . . . . . . . . . . . . . . . (315,151) (246,782) (250,503) (227,199) (271,375)
Preferred dividend requirement . . . . . . . . . . (6,385) (885) (885) (4,464) (4,065)
--------- --------- --------- --------- ----------
Net loss applicable to common shareholders . . . . $(321,536) $(247,667) $(251,388) $(231,663) $(275,440)
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
Net loss per common share. . . . . . . . . . . . . $ (13.72) $ (10.83) $ (11.17) $ (10.32) $ (12.36)
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
Average number of common shares outstanding
(in thousands). . . . . . . . . . . . . . . . . . 23,444 22,859 22,512 22,446 22,290
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
Cash dividends declared per common share . . . . . $ - $ - $ - $ - $ -
--------- --------- --------- --------- ----------
--------- --------- --------- --------- ----------
</TABLE>
(34)
<PAGE>
<TABLE>
<CAPTION>
CABLEVISION SYSTEMS CORPORATION
-----------------------------------------------------------------------
December 31,
-----------------------------------------------------------------------
1994 1993 1992 1991 1990
--------- --------- --------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets . . . . . . . . . . . . . . . . . . . $2,176,413 $1,327,418 $ 1,251,157 $1,475,672 $1,641,612
Total debt . . . . . . . . . . . . . . . . . . . . 3,169,236 2,235,499 2,004,452 2,211,056 2,170,275
Deficit investment in affiliates . . . . . . . . . 393,637 325,732 251,679 - -
Cumulative Redeemable Preferred Stock. . . . . . . - - - 32,094 28,515
Stockholders' deficiency . . . . . . . . . . . . . (1,818,535) (1,503,244) (1,250,248) (932,428) (702,448)
STATISTICAL DATA:
Homes passed by cable. . . . . . . . . . . . . . . 2,899,000 2,240,000 2,019,000 2,005,000 1,976,000
Basic service subscribers. . . . . . . . . . . . . 1,768,000 1,379,000 1,262,000 1,372,000 1,326,000
Basic service subscribers as a percentage of
homes passed. . . . . . . . . . . . . . . . . . 61.0% 61.6% 62.5% 68.4% 67.1%
Number of premium television units . . . . . . . . 3,208,000 3,003,000 2,802,000 2,326,000 2,401,000
Average number of premium units per basic
subscriber at period end. . . . . . . . . . . . 1.8 2.2 2.2 1.7 1.8
Average monthly revenue per basic subscriber (1) . $36.33 $36.59 $37.64 $34.43 $34.09
-------------------------------------------
<FN>
(1) Based on recurring service revenues divided by average subscribers for the month of December.
</TABLE>
(35)
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
RECENT CABLE REGULATORY DEVELOPMENTS
The most recent round of FCC rate regulations (which was implemented in July,
1994) resulted in a regulated revenue decrease of approximately 4% on an
annualized basis, or less than 2% of total revenues. For a further description
see Item 1 - "Business - Cable Television Operations - Competition and
Regulation".
Following the latest FCC rate regulation, the Company introduced certain
marketing measures, including offering additional services and discounting the
pricing of certain services and certain service packages. The Company is not
able to predict fully the extent of the effect these measures will have in
mitigating the impact of the rate regulation referred to above.
RECENT ACQUISITIONS AND RESTRUCTURINGS
The Company's high levels of interest expense and depreciation and amortization,
largely associated with acquisitions made by the Company in the past, have had
and will continue to have a negative impact on the reported results of the
Company. Consequently, the Company expects to report substantial net losses for
at least the next several years.
1994 ACQUISITIONS In March 1994, the Company completed the North Coast Cable
Acquisition. In July 1994, the Company through its wholly-owned subsidiary
Rainbow Programming, purchased an additional 50% interest in AMCC giving Rainbow
Programming a 75% ownership interest in AMCC and in August 1994, the Company
consummated the acquisition of Monmouth Cablevision and Riverview Cablevision.
The foregoing acquisitions will collectively be referred to as the "1994
Acquisitions".
For a description of the Company's recent acquisitions and restructurings, see
Item 1 - "Business - Recent Developments, Consolidated Cable Affiliates and
Other Cable Affiliates" and Note 2 of Notes to Consolidated Financial
Statements.
(36)
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth on a historical basis certain items related to
operations as a percentage of net revenues for the periods indicated.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA Years Ended December 31,
----------------------------------------------------------------------
1994 1993
-------------------------- ------------------------- (Increase)
% of Net % of Net Decrease
Amount Revenues Amount Revenues in Net loss
---------- -------- --------- -------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . $ 837,169 100% $ 666,724 100% $170,445
Operating expenses:. . . . . . . . . . . . . . . .
Technical . . . . . . . . . . . . . . . . . . . 302,885 36 241,877 36 (61,008)
Selling, general & administrative . . . . . . . 195,942 23 172,687 26 (23,255)
Restructuring charge. . . . . . . . . . . . . . 4,306 1 - - (4,306)
Depreciation and amortization . . . . . . . . . 271,343 32 194,904 29 (76,439)
--------- --- --------- --- --------
Operating profit . . . . . . . . . . . . . . . . . 62,693 8 57,256 9 5,437
Other income (expense):. . . . . . . . . . . . . .
Interest expense, net . . . . . . . . . . . . . (261,781) (31) (230,327) (35) (31,454)
Share of affiliates' net loss . . . . . . . . . (82,864) (10) (61,017) (9) (21,847)
Gain (loss) on sale of programming interests, net - - (330) - 330
Write off of deferred financing costs . . . . . (9,884) (1) (1,044) - (15,928)
Loss on redemption of debt. . . . . . . . . . . (7,088) (1) - - -
Provision for preferential payment to related party (5,600) (1) (5,600) (1) -
Minority interest . . . . . . . . . . . . . . . (3,429) - 3,000 - (6,429)
Miscellaneous . . . . . . . . . . . . . . . . . (7,198) (1) (8,720) (1) 1,522
--------- --- --------- --- --------
Net loss . . . . . . . . . . . . . . . . . . . . . $(315,151) (38)% $(246,782) (37)% $(68,369)
--------- --- --------- --- --------
--------- --- --------- --- --------
OTHER OPERATING DATA:
Operating profit before depreciation
and amortization (1). . . . . . . . . . . . . . $334,036 $252,160
Currently payable interest expense, net. . . . . . 208,685 182,225
Net cash provided by operating activities (2). . . 126,625 85,822
Net cash used in investing activities (2). . . . . 953,870 243,022
Net cash provided by financing activities (2). . . 825,651 167,423
<FN>
(1) Operating profit before depreciation and amortization is presented here to
provide additional information about the Company's ability to meet future
debt service, capital expenditures and working capital requirements.
Operating profit before depreciation and amortization should be considered
in addition to and not as a substitute for net income and cash flows as
indicators of financial performance and liquidity as reported in accordance
with generally accepted accounting principles.
(2) See Item 8. - "Consolidated Statements of Cash Flows".
</TABLE>
(37)
<PAGE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1994 VERSUS YEAR ENDED DECEMBER 31, 1993.
REVENUES for the year ended December 31, 1994 increased $170.4 million (26%) as
compared to net revenues for the prior year. Approximately $105.0 million (16%)
of the increase was attributable to the 1994 Acquisitions; approximately $58.4
million (9%) to internal growth of 129,200 (10%) in the average number of
subscribers during the year; and approximately $23.6 million (4%) resulted from
an increase in other revenue sources such as advertising. These increases were
partially offset by a decrease of approximately $16.6 million (3%) attributable
to lower revenue per subscriber resulting primarily from rate reductions
effected in compliance with FCC regulations and to subscribers purchasing, on
average, lower levels of service.
TECHNICAL EXPENSES for 1994 increased $61.0 million (25%) over 1993.
Approximately 16% was attributable to 1994 Acquisitions; the remaining 9% was
attributable to increased costs directly associated with the growth in
subscribers and revenues discussed above. As a percentage of net revenues,
technical expenses remained relatively constant during 1994 as compared to 1993.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased $23.3 million (13%) in
1994 as compared to the 1993 level. Increases of $27.3 million (15%) directly
attributable to the 1994 Acquisitions, $11.8 million (7%) relating to the
Company's growing New York City operations and $5.6 million (3%) resulting from
other general cost increases were partially offset by a $21.4 million (12%)
decrease in net expenses incurred in connection with incentive stock plans,
primarily due to a decrease in the market price of the Company's Class A Common
stock at December 31, 1994 compared to its market price at December 31, 1993.
The net decrease in such stock plan expenses reflects a charge of $13.2 million
made in the fourth quarter of 1994 attributable to the Company's cash settlement
of executive stock options granted under the Company's Amended and Restated
Employee Stock Plan. See Note 10 of Notes to Consolidated Financial Statements.
RESTRUCTURING CHARGE The Company recorded a one time charge in the first quarter
of 1994 to provide for employee severance and related costs, resulting from a
restructuring of its operations. This restructuring was undertaken in response
to recent FCC mandated rate reductions in substantially all of the Company's
cable television systems.
OPERATING PROFIT BEFORE DEPRECIATION AND AMORTIZATION increased $81.9 million
(32%) to $334.0 million in 1994 from $252.2 million in 1993. The increase was
comprised of $39.8 million (16%) attributable to the 1994 Acquisitions, with the
remaining increase resulting from the combined effect of the revenue and expense
changes discussed above. Operating profit before depreciation and amortization
is presented here to provide additional information about the Company's ability
to meet future debt service, capital expenditures and working capital
requirements. Operating profit before depreciation and amortization should be
considered in addition to and not as a substitute for net income and cash flows
as indicators of financial performance and liquidity as reported in accordance
with generally accepted accounting principles.
(38)
<PAGE>
DEPRECIATION AND AMORTIZATION EXPENSE increased $76.4 million (39%) during 1994
as compared to 1993. Approximately $53.3 million (27%) of this increase was a
direct result of the 1994 Acquisitions. The remaining $23.1 million (12%)
increase consisted of increased depreciation charges (including $12.6 million
(6%) for CNYC) relating to capital expenditures made throughout 1994 and 1993
offset partially by a decrease in amortization expense due to certain intangible
assets becoming fully amortized.
NET INTEREST EXPENSE increased $31.5 million (14%) during 1994 compared to 1993.
Approximately $26.0 million (11%) of the increase is attributable to the 1994
Acquisitions. The remaining increase of $5.5 million was the combined result of
the increasing accretion of interest on certain components of V Cable's debt and
the net effect of the Company's issuances of senior subordinated debentures
during 1993, the proceeds of which bore generally higher average interest rates
than the bank debt they replaced.
SHARE OF AFFILIATES' NET LOSSES increased $21.8 million (36%) in 1994 compared
to 1993. Such amounts consist primarily of the Company's share in the net
losses of certain cable affiliates which, for the years ended December 31, 1994
and 1993, amounted to $81.9 million and $69.8 million, respectively, and in the
net (income) or losses of certain programming businesses (in which the Company
has varying ownership interests) which aggregated $1.0 million and $(8.8)
million for the respective 1994 and 1993 years.
MINORITY INTEREST in 1994 represents NBC's 25% share in the net income of AMCC
from the date that the Company purchased its additional 50% interest in AMCC and
therefore began consolidating AMCC's results of operations. See Note 4 of Notes
to Consolidated Financial Statements. In 1993 minority interest represents U.S.
Cable's share of losses in a subsidiary of V Cable, limited to its $3.0 million
investment.
OTHER ITEMS
During 1994, the Company wrote off net deferred financing charges of
approximately $9.9 million associated with the Company's former credit facility.
The Company entered into a new $1.5 billion Restricted Group Credit facility on
October 14, 1994. See "Liquidity and Capital Resources", below, and Note 4 of
Notes to Consolidated Financial Statements.
In November 1994, the Company incurred a loss of $7.1 million related to the
redemption of its $200 million Senior Subordinated Reset Debentures (the "Reset
Debentures"). The loss reflects the payment of a $2.0 million premium over the
face amount; the write off of $4.5 million in unamortized deferred finance costs
incurred in connection with their issuance in November, 1988; and $0.6 million
representing the unamortized portion of their original issue discount.
In connection with the acquisition of CNYC, the Company expensed $5.6 million in
1994 representing the amount due with respect to the Annual Payment. For the
year ended December 31, 1994, the Company has provided for an additional $100.3
million due Mr. Dolan in respect of the Preferred Payment that would be due him
as further described under "Business - Cable Television Operations -
Consolidated Cable Affiliates -
(39)
<PAGE>
Cablevision of New York City". The additional provision is based on
management's estimate of the Appraised Equity Value of the system at December
31, 1994 and has been charged to par value in excess of capital contributed in
the accompanying consolidated financial statements. The total amount due Mr.
Dolan as of December 31, 1994 in respect of the Preferred Payment amounted to
$150 million. See Note 2 of Notes to Consolidated Financial Statements.
In May 1993, the Financial Accounting Standards Board (FASB) issued SFAS 115
"Accounting for Certain Investments in Debt and Equity Securities". SFAS 115
addresses the accounting and reporting for investments in equity securities that
have readily determinable fair values, other than those accounted for under the
equity method or as investments in consolidated subsidiaries, and all
investments in debt securities. SFAS 115 is effective for fiscal years
beginning after December 15, 1993. The effect of initially adopting SFAS 115 is
reported in a manner similar to a cumulative effect of a change in accounting
principle. The implementation of SFAS 115 did not have a material effect on the
financial position and results of operations of the Company.
In November 1992, the FASB issued SFAS No. 112 "Employers Accounting for Post-
employment Benefits". This statement is effective for fiscal years beginning
after December 15, 1993. The implementation of this statement did not have a
significant impact on the results of operations or financial position of the
Company.
INFLATION. The effects of inflation on the Company's costs have generally been
offset by increases in subscriber rates.
(40)
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth on a historical basis certain items related to
operations as a percentage of net revenues for the periods indicated. The
results of operations of CNYC are included in 1992 from the date of acquisition.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA Years Ended December 31,
-----------------------------------------------------
1993 1992
------------------------- ----------------------- (Increase)
% of Net % of Net Decrease
Amount Revenues Amount Revenues in Net loss
------ -------- ------ -------- -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . $ 666,724 100% $ 572,487 100% $ 94,237
Operating expenses:
Technical . . . . . . . . . . . . . . . . . . . 241,877 36 204,449 36 (37,428)
Selling, general & administrative . . . . . . . 172,687 26 120,356 21 (52,331)
Depreciation and amortization . . . . . . . . . 194,904 29 168,538 29 (26,366)
--------- ---------- ----------
Operating profit . . . . . . . . . . . . . . . . . 57,256 9 79,144 14 (21,888)
Other income (expense):
Interest expense, net . . . . . . . . . . . . . (230,327) (35) (193,379) (34) (36,948)
Share of affiliates' net loss . . . . . . . . . (61,017) (9) (47,278) (8) (13,739)
Gain (loss) on sale of programming interests, net (330) - 7,053 1 (7,383)
Gain on sale of marketable securities, net. . . - - 733 - (733)
Provision for loss on Olympics venture. . . . . - - (50,000) (9) 50,000
Loss on sale of preferred stock . . . . . . . . - - (20,000) (3) 20,000
Write off of deferred financing costs . . . . . (1,044) - (12,284) (2) 11,240
Settlement of litigation and related matters. . - - (5,655) (1) 5,655
Provision for preferential payment to related party (5,600) (1) (2,662) - (2,938)
Minority interest . . . . . . . . . . . . . . . 3,000 - - - 3,000
Miscellaneous . . . . . . . . . . . . . . . . . (8,720) (1) (6,175) (1) (2,545)
--------- --------- --------
Net loss . . . . . . . . . . . . . . . . . . . . . $(246,782) (37)% $(250,503) (44)% $ 3,721
--------- --------- --------
--------- --------- --------
OTHER OPERATING DATA:
Operating profit before depreciation
and amortization (1). . . . . . . . . . . . . . $252,160 $247,682
Currently payable interest expense, net. . . . . . 182,225 141,843
Net cash provided by operating activities (2). . . 85,822 83,555
Net cash used in investing activities (2). . . . . 243,022 159,291
Net cash provided by financing activities (2). . . 167,423 75,818
<FN>
(1) Operating profit before depreciation and amortization is presented here to
provide additional information about the Company's ability to meet future
debt service, capital expenditures and working capital requirements.
Operating profit before depreciation and amortization should not be
considered as an alternative to net income as an indicator of operating
performance, or as an alternative to cash flows, as such would be
determined pursuant to generally accepted accounting principles, as a
measure of liquidity.
(2) See Item 8. - "Consolidated Statements of Cash Flows".
</TABLE>
(41)
<PAGE>
COMPARISON OF YEAR ENDED DECEMBER 31, 1993 VERSUS YEAR ENDED DECEMBER 31, 1992.
REVENUES for the year ended December 31, 1993 increased $94.2 million (16%) as
compared to net revenues for the prior year. Approximately $45.8 million (8%)
of the increase is attributable to the CNYC Acquisition on July 10, 1992;
approximately $37.1 million (6%) to internal growth of over 112,700 (9%) in the
average number of subscribers during the year; and approximately $11.6 million
(2%) resulted from an increase in other revenue sources such as advertising.
These increases were offset slightly by a decrease of approximately $0.3 million
attributable to decreased revenue per subscriber resulting primarily from
compliance with FCC regulations. See "Recent Cable Regulatory Developments"
above.
TECHNICAL EXPENSES for 1993 increased $37.4 million (18%) over the 1992 amount.
Approximately 11% is attributable to the CNYC acquisition (whose programming
costs reflect high premium service penetration); the remaining 7% is
attributable to increased costs directly associated with the growth in
subscribers and revenues discussed above. As a percentage of net revenues,
technical expenses increased less than 1% during 1993 as compared to 1992;
excluding the effect of the CNYC Acquisition, such expenses would have remained
relatively constant during 1993.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES increased $52.3 million (43%) for
1993 as compared to the 1992 level. Approximately 13% of this 43% increase is
directly attributable to the CNYC Acquisition, 17% to expense adjustments
related to an incentive stock plan and 13% to general cost increases, including
higher administrative and sales and marketing costs (a portion of which was
attributable to compliance with FCC regulation during the third quarter of
1993). As a percentage of net revenues, selling, general and administrative
expenses increased 5%; excluding the effects of the CNYC Acquisition and the
incentive stock plan expense adjustments, such expenses, as a percent of net
revenues, would have decreased 1% during 1993.
OPERATING PROFIT BEFORE DEPRECIATION AND AMORTIZATION increased $4.5 million
(2%) to $252.2 million for 1993 from $247.7 million for 1992. A $7.8 million
(3%) increase, attributable to the CNYC Acquisition, was partially offset by the
combined effect of the revenue and expense changes, primarily the impact of the
higher selling, general and administrative expenses, noted above. Operating
profit before depreciation and amortization is presented here to provide
additional information about the Company's ability to meet future debt service,
capital expenditures and working capital requirements. Operating profit before
depreciation and amortization should be considered in addition to and not as a
substitute for net income and cash flows as indicators of financial performance
and liquidity as reported in accordance with generally accepted accounting
principles.
DEPRECIATION AND AMORTIZATION EXPENSE increased $26.4 million (16%) during 1993
as compared to the 1992 amount. The acquisition of CNYC contributed $8.6
million (5%) of this increase. The components of the remaining increase in
depreciation and
(42)
<PAGE>
amortization of $17.8 million (11%) are as follows: Depreciation expense for
the Company, excluding CNYC, increased $10.7 million during 1993 resulting
primarily from depreciation charges on capital expenditures made during 1993 and
1992. Amortization expense, excluding CNYC, increased $7.1 million, reflecting
an increase of $10.1 million due to the implementation of SFAS 109 during 1993
offset to some extent by a decrease of $3.0 million primarily due to certain
intangible assets becoming fully amortized.
NET INTEREST EXPENSE increased $36.9 million (19%) during 1993 compared to 1992.
Approximately $3.7 million (2%) of the increase is attributable to the CNYC
Acquisition. An increase of $18.2 million (9%) is due to the net effect of the
repayment of bank debt, bearing lower average interest rates with the issuances
of a series of senior subordinated debentures as well as to an increase in
average debt levels in 1993. An additional $15.0 million (8%) increase resulted
from V Cable's debt restructuring on December 31, 1992, primarily from
amortization of deferred interest expense incurred in connection therewith.
SHARE OF AFFILIATES' NET LOSSES of $61.0 million for 1993 and $47.3 million for
1992 consist primarily of the Company's share of A-R Cable's net losses ($56.4
million in 1993 and $30.3 million in 1992), the Company's net share of the
profits and losses in certain programming businesses in which the Company has
varying ownership interests, (amounting to an $8.8 million profit in 1993 and a
$12.4 million loss in 1992) and the Company's share of the net losses of other
entities, primarily U.S. Cable (in 1993) and Cablevision of Newark (in 1993 and
1992), which amounted to $13.4 million and $4.6 in 1993 and 1992, respectively.
MINORITY INTEREST in 1993 represents U.S. Cable's share of the losses of VC
Holding, limited to its $3.0 million investment. At December 31, 1992, as part
of a restructuring and reorganization involving the Company's unrestricted
subsidiary V Cable, V Cable acquired a 20% interest in U.S. Cable for $20
million, and U.S. Cable acquired a 19% interest in VC Holding (a subsidiary of V
Cable formed to hold substantially all of V Cable's assets) for $3.0 million.
OTHER ITEMS
During 1993, net deferred financing charges of approximately $1.0 million,
associated with the reduction of the Company's credit facility with proceeds
from the issuance of the Company's $150 million debentures in April, were
written off.
In connection with the acquisition of CNYC, the Company expensed $5.6 million
for the year ended December 31, 1993, representing the proportionate amount due
with respect to the Annual Payment. For the year ended December 31, 1993, the
Company has provided for an additional $22.7 million due Mr. Dolan in respect of
the Preferred Payment that would be due him in the event he exercises his "put"
as further described under "Business - Cable Television Operations -
Consolidated Cable Affiliates - Cablevision of New York City". The additional
provision was based on management's estimate of the Appraised Equity Value of
the system as of December 31, 1993 and has been charged to par value in excess
of capital contributed in the accompanying
(43)
<PAGE>
consolidated financial statements. The total amount due Mr. Dolan as of
December 31, 1993 in respect of the Preferred Payment amounted to $91.6 million,
reflecting a reduction of $3.7 million in 1993 representing Mr. Dolan's
obligation to reimburse the Company in connection with certain claims paid or
owing by CNYC. See Note 2 of Notes to Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
For financing purposes, the Company is structured as the Restricted Group,
consisting of Cablevision Systems Corporation and certain of its subsidiaries
and an unrestricted group of certain subsidiaries which includes V Cable
(including VC Holding), Rainbow Programming and Cablevision MFR. On October 14,
1994, CNYC, formerly an unrestricted subsidiary, became a member of the
Restricted Group.
The Restricted Group has executed limited recourse guarantees with respect to
A-R Cable and V Cable, as described below, and has guaranteed the MFR Notes and
the CFHI Note. Otherwise, the Restricted Group does not guarantee the
indebtedness of any unrestricted subsidiary nor does any unrestricted subsidiary
guarantee the indebtedness of the Restricted Group.
(44)
<PAGE>
The following table presents selected historical results of operations and other
financial information related to the captioned groups or entities for the year
ended December 31, 1994. (Rainbow Programming, Rainbow Advertising, WKNR and
AMCC are included in "Other Unrestricted Subsidiaries").
<TABLE>
<CAPTION>
Total Other Cablevision
Restricted Restricted Monmouth/ Unrestricted Systems
Group CNYC Group V Cable Riverview Subsidiaries Corporation
--------- ------- ---------- ------- --------- ------------ -----------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $435,171 $149,396 $ 584,567 $140,691 $ 29,135 $ 82,776 $ 837,169
Operating expenses:
Technical 154,638 67,098 221,736 53,433 9,638 18,078 302,885
Selling, general and
administrative 64,032 45,370 109,402 18,473 3,157 64,910 195,942
Restructuring charge 4,113 - 4,113 193 - - 4,306
Depreciation and
amortization 119,760 34,427 154,187 79,732 26,206 11,218 271,343
-------- -------- --------- -------- -------- -------- ----------
Operating profit
(loss) $ 92,628 (1) $ 2,501 (1) $ 95,129 $(11,140) $ (9,866) $(11,430) $ 62,693
-------- -------- --------- -------- -------- -------- ----------
-------- -------- --------- -------- -------- -------- ----------
Currently payable
interest expense $134,305 $ 11,558 $ 145,863 $ 47,190 $ 10,210 $ 5,422 $ 208,685
-------- -------- --------- -------- -------- -------- ----------
-------- -------- --------- -------- -------- -------- ----------
Total interest expense $138,154 $ 12,472 $ 150,626 $ 96,723 $ 10,377 $ 5,573 $ 263,299
-------- -------- --------- -------- -------- -------- ----------
-------- -------- --------- -------- -------- -------- ----------
Senior debt $829,895 $140,000 $ 969,895 $862,440 $230,000 $149,020 $2,211,355
-------- -------- --------- -------- -------- -------- ----------
-------- -------- --------- -------- -------- -------- ----------
Subordinated debt $623,534 $ - $ 623,534 $ - $141,268 (3) $ - $ 764,802
-------- -------- --------- -------- -------- -------- ----------
-------- -------- --------- -------- -------- -------- ----------
Obligation to related
party $ - $193,079 (2) $ 193,079 $ - $ - $ - $ 193,079
-------- -------- --------- -------- -------- -------- ----------
-------- -------- --------- -------- -------- -------- ----------
Deficit investment in
affiliates $379,345 $ - $ 379,345 $ - $ - $ 14,292 $ 393,637
-------- -------- --------- -------- -------- -------- ----------
-------- -------- --------- -------- -------- -------- ----------
Capital expenditures $147,534 $103,544 $ 251,078 $ 19,981 $ 4,214 $ 10,226 $ 284,858 (4)
-------- -------- --------- -------- -------- -------- ----------
-------- -------- --------- -------- -------- -------- ----------
Ending Cable subscribers 928,000 315,000 1,243,000 364,000 161,000 - 1,768,000
-------- -------- --------- -------- -------- -------- ----------
-------- -------- --------- -------- -------- -------- ----------
_______________________
<FN>
(1) Includes management fees from CNYC of $5,228.
(2) Obligation of NYC LP Corp., a wholly-owned Restricted Group subsidiary,
relating to the CNYC Acquisition.
(3) Guaranteed by the Restricted Group.
(4) Includes intercompany elimination of $641.
</TABLE>
(45)
<PAGE>
RESTRUCTURING
The Company recorded a one time charge of $4.3 million in the three month period
ended March 31, 1994 to provide for severance and related costs, attributable
entirely to terminated employees, resulting from a restructuring of its
operations. The restructuring was undertaken in response to recent FCC-mandated
rate reductions in substantially all of the Company's cable television systems.
RESTRICTED GROUP
On March 10, 1995 the Company invested $110 million in the MSG acquisition. The
funds were provided by borrowings under the Credit Agreement. See Item 1 -
"Business - Recent Developments".
On November 15, 1994 the Company redeemed all of its Reset Debentures at 101% of
principal plus accrued interest aggregating $216 million. Funds for the
redemption were provided by borrowings under the Credit Agreement.
On March 31, 1994, the Company issued and sold 100,000 shares of a new series of
preferred stock to Toronto-Dominion Investments, Inc. in a private transaction.
The proceeds of $100 million were used to repay bank debt. See Note 5 of Notes
to Consolidated Financial Statements.
On October 14, 1994, the Company entered into new $1.5 billion Restricted Group
credit facilities with a group of banks led by Toronto-Dominion (Texas) as
agent. The Credit Agreement consists of a $750 million Term Loan and Reducing
Revolver facilities aggregating $750 million. The Term Loan has a final
maturity of June 30, 2003 and begins amortizing on a scheduled quarterly basis
on June 30, 1997 with 24% being amortized by December 31, 1998. The Reducing
Revolver facilities have final maturities on June 30, 2003 and the facilities
begin to reduce on December 31, 1996.
CNYC, which became a restricted subsidiary on October 14, 1994, continues to
have a separate bank credit agreement which is guaranteed by the Company. The
CNYC facility converted to a term loan on December 31, 1994 with amortization
beginning on March 31, 1995 and has a final maturity of June 30, 2000.
Reductions in the CNYC facility are funded by borrowings under the Company's
Revolver. At March 20, 1995 CNYC had $140 million outstanding on its term loan
and outstanding Letters of Credit of $7 million.
On March 20, 1995 the Restricted Group, including CNYC, had total usage under
the Credit Agreement of $1,098 million and Letters of Credit of $22.7 million
issued on behalf of the Company and CNYC. Unrestricted and undrawn funds
available to the Restricted Group under the Credit Agreement amounted to
approximately $379 million at March 20, 1995. The Credit Agreement contains
certain financial covenants that may limit the Restricted Group's ability to
utilize all of the undrawn funds available thereunder, including covenants
requiring the Restricted Group to maintain certain financial ratios and
restricting the permitted uses of borrowed funds.
(46)
<PAGE>
As of March 20, 1995 the Company and CNYC had entered into interest exchange
(swap and interest rate cap) agreements with several of their banks on a
notional amount of $285 million, on which the Company pays a fixed rate of
interest and receives a variable rate of interest for specified periods, with an
average maturity of two years. The average effective annual interest rate on
all bank debt outstanding as of February 28, 1995 was approximately 8.4%.
The Restricted Group, excluding CNYC, made capital expenditures of approximately
$147.5 million in 1994 and $106.4 million in 1993, primarily in connection with
system rebuilds and upgrades, the expansion of existing cable plant to pass
additional homes and other general capital needs. On October 31, 1994 CNYC gave
notice that it had completed construction of the last phase of each franchise in
accordance with the franchise agreements. CNYC made capital expenditures of
$103.5 million in 1994 and $86.7 million in 1993.
The cable systems located in New York State that are owned by the Restricted
Group and VC Holding are subject to agreements (the "New York Upgrade
Agreements") with the New York State Commission on Cable Television (the "New
York Cable Commission"). The New York Upgrade Agreements applicable to the
Restricted Group requires the substantial upgrade of its systems, ultimately to
a 77 channel capacity by 1995-1996, subject to certain minor exceptions. As
part of this planned upgrade of the Restricted Group's New York systems, the
Company expects to use fiber optic cable extensively in its trunk and
distribution networks. The upgrade of portions of the Restricted Group's cable
television systems in Westchester, Putnam and Dutchess counties, which were
required to have been completed by year-end 1994 under the New York Upgrade
Agreements, were not completed at that time. Additionally, the Company
anticipates that the upgrade of portions of certain other cable television
systems that are required to be completed by year-end 1995, will not be
completed at that time. The Company has requested an amendment to the New York
Upgrade Agreements to provide additional time to complete the upgrades, and is
confident that such amendment will be obtained, although there can be no
assurance that such amendment will be so obtained. The Company believes that
the remaining portion of the upgrade, as of December 31, 1994, will cost up to
an additional $68 million. In addition, the Company anticipates upgrading
certain of its New York systems beyond the level required by the New York
Upgrade Agreements along with upgrading certain other of its Restricted Group
systems. The Company anticipates that the capital costs of these additional
upgrades may be substantial.
Under the CNYC purchase agreement, the Restricted Group has guaranteed certain
payments to Charles F. Dolan, the Chairman and Chief Executive Officer of the
Company consisting of an annual payment of $5.6 million (the "Annual Payment") a
$40 million minimum payment (the "Minimum Payment") and a preferred payment (not
to exceed $150 million) based upon an appraised value of CNYC (the "Preferred
Payment"). The Minimum Payment and the Preferred Payment are each payable in
cash or common stock at the Company's election. Under the Credit Agreement, the
Company is currently prohibited from paying amounts in respect of the Preferred
Payment in cash.
(47)
<PAGE>
The Company believes that, for the Restricted Group, internally generated funds
together with funds available under its existing Credit Agreement will be
sufficient through December 31, 1996 (i) to meet its debt service requirements
including its amortization requirements under the Credit Agreement, (ii) to fund
its ongoing capital expenditures, including CNYC and the required upgrades under
the New York Upgrade Agreement, (iii) to fund its anticipated investments
including the $5.6 million Annual Payment to Charles Dolan in connection with
the CNYC acquisition, (iv) to fund payments with respect to the proposed
Cablevision of Boston transactions and (v) to fund any anticipated equity
requirements through 1996 in A-R Cable, V Cable and/or Monmouth/Riverview.
Further acquisitions and other investments by the Company, if any, will be
funded by undrawn borrowing capacity and by possible increases in the amount
available under the Credit Agreement, additional borrowings from other sources,
and/or possible future sales of debt, equity or equity related securities.
The senior secured indebtedness incurred by A-R Cable and V Cable is guaranteed
by the Restricted Group, but recourse against the Restricted Group is limited
solely to the common stock of A-R Cable and of V Cable pledged to A-R Cable's
and V Cable's senior secured lenders, respectively. The Cablevision MFR and
CFHI promissory notes are guaranteed by the Company and the obligations under
the guarantees rank pari passu with the Company's public subordinated debt. The
promissory notes are payable in cash or, at the Company's option through the
first anniversary of the notes, in shares of the Company's Class A common stock.
Under the terms of its Credit Agreement, as amended, the Company is permitted to
make unspecified investments of up to $250 million, which include any future
investment in Rainbow Programming (including the $110 million investment for the
MSG acquisition) and in any other unrestricted subsidiaries or affiliates.
The terms of the instruments governing A-R Cable's, V Cable's, Cablevision MFR's
and CFHI's indebtedness prohibit transfer of funds (except for certain
payments, related to corporate overhead allocations, by A-R Cable, V Cable,
Cablevision MFR and CFHI and payments pursuant to income tax allocation
agreements with respect to V Cable and Cablevision MFR) from A-R Cable, V Cable,
Cablevision MFR and CFHI to the Restricted Group and are expected to prohibit
such transfer of funds for the foreseeable future. Payments to the Restricted
Group in respect of its investments in and advances to Cablevision of Chicago
and Cablevision of Boston are also presently prohibited by the terms of those
companies' applicable debt instruments and are expected to be prohibited for the
foreseeable future, although upon consummation of the proposed sale of
Cablevision of Chicago, the Company expects it will be repaid its unpaid
advances and accrued interest thereon aggregating $25.7 million as of December
31, 1994. The Restricted Group does not expect that such limitations on
transfer of funds or payments will have an adverse effect on the ability of the
Company to meet its obligations.
(48)
<PAGE>
V CABLE
The existing long-term credit facilities extended by General Electric Capital
Corporation ("GECC") to V Cable and VC Holding on December 31, 1992, refinanced
all of V Cable's pre-existing debt. Under the credit agreement between V Cable
and GECC (the "V Cable Credit Agreement"), GECC has provided a term loan (the "V
Cable Term Loan") in the amount of $24.6 million, as of December 31, 1994, which
loan accretes interest at a rate of 10.62% compounded semi-annually until
December 31, 1997 (the reset date) and is payable in full on December 31, 2001.
Under the credit agreement between VC Holding and GECC, GECC has extended to
VC Holding a $505 million term loan (the "Series A Term Loan"), a $245.5 million
term loan (the "Series B Term Loan") and a $25 million revolving line of credit
(the "Revolving Line"). The Series A Term Loan and any amounts drawn under the
Revolving Line pay current cash interest and mature on December 31, 2001. The
Series B Term Loan does not pay cash interest but rather accretes interest at a
rate of 10.62% compounded semi-annually until December 31, 1997 (the reset date)
and is payable in full on December 31, 2001. On March 6, 1995 VC Holding had no
amounts outstanding under the Revolving Line and had letters of credit issued
approximating $1.8 million. Accordingly, unrestricted and undrawn funds under
the VC Holding Revolving Line amounted to approximately $23.2 million on March
6, 1995.
The VC Holding Credit Agreement also provides for the assumption by VC Holding
of certain loans of U.S. Cable, the present value of which amounted to $87.3
million at December 31, 1994.
The outstanding principal amount of the V Cable Term Loan is payable in full,
with accreted interest, at maturity on December 31, 2001. VC Holding is
obligated to make principal payments on a portion of the Series A Term Loan
beginning on June 30, 1997 totalling $18 million, $20 million, $30 million, $40
million and $56 million for the years ending December 31, 1997, 1998, 1999, 2000
and 2001, respectively. The remaining balance of the Series A Term Loan, as
well as any amounts borrowed under the VC Holding Revolving Line, is due
December 31, 2001. In addition, VC Holding and V Cable are required to apply
all consolidated available cash flow (as defined), as well as the net proceeds
of any disposition of assets, to the reduction of the VC Holding Term Loans and
the V Cable Term Loan.
V Cable made capital expenditures of approximately $20.0 million during 1994 and
$20.3 million during 1993, primarily in connection with the expansion of
existing cable plant to pass additional homes and for system upgrades and other
general capital needs. The New York Upgrade Agreement applicable to V Cable
requires the substantial upgrade of its systems in New York State, ultimately to
a 77 channel capacity in 1995.
In 1992 V Cable completed the first phase of this required upgrade, under which
it expanded all of its New York cable systems to a 52 channel capacity. The
Company believes that the upgrade of V Cable's New York systems from 52 to 77
channels will
(49)
<PAGE>
cost up to an additional $4.5 million, as of December 31, 1994, which would be
spent during 1995.
After taking into account the reductions to regulated revenue arising from the
latest round of FCC regulation, V Cable believes that it is likely that it will
be unable to meet certain of its financial covenants during 1995. To remedy the
anticipated covenant defaults, V Cable may request waivers and/or amendments to
its credit agreement and/or seek equity contributions from the Restricted Group.
There can be no assurance as to V Cable's ability to accomplish any of these
alternatives in the future or the terms or timing of such alternatives.
Assuming any covenant defaults are waived or cured, V Cable anticipates that its
cash flow from operations and amounts available under the VC Holding Revolving
Line will be sufficient to service its debt, to fund its capital expenditures
and to meet its working capital requirements through 1996.
MONMOUTH AND RIVERVIEW
On August 8, 1994, Cablevision MFR acquired substantially all of the assets of
Monmouth Cablevision and Riverview Cablevision. Simultaneously with the
acquisition, Cablevision MFR contributed all of the acquired assets and assumed
liabilities along with the new credit facility, discussed below, to its
subsidiaries Cablevision of Monmouth Inc. and Cablevision of Riverview Inc.
(collectively "Monmouth/Riverview") and was released from any obligations under
the credit facility.
Monmouth/Riverview are party to a credit facility with a group of banks led by
Nations Bank of Texas, N.A., as agent (the "Monmouth/Riverview Credit
Facility"). The maximum amount available to Monmouth/Riverview under the
Monmouth/Riverview Credit Facility is $285 million with a final maturity at June
30, 2003. The facility is a reducing revolving loan, with scheduled facility
reductions beginning on March 31, 1996 resulting in a 15% reduction by December
31, 1998. As of March 20, 1995, Monmouth/Riverview had outstanding bank
borrowings of $230 million. Unrestricted and undrawn funds available to
Monmouth/Riverview under the Monmouth/Riverview Credit Facility amounted to
approximately $55 million at March 20, 1995. The Monmouth/Riverview Credit
Facility contains certain financial covenants that may limit
Monmouth/Riverview's ability to utilize all of the undrawn funds available
thereunder, including covenants requiring Monmouth/Riverview to maintain certain
financial ratios. Under the terms of the Monmouth/Riverview Credit Facility,
Monmouth/Riverview is prohibited from transferring funds to Cablevision MFR.
As of March 20, 1995, Monmouth Cablevision and Riverview Cablevision have
entered into interest rate swap and cap agreements with several banks on a
notional amount of $130 million. The weighted average interest rate on all bank
indebtedness as of February 28, 1995 was approximately 8.9%.
On February 24, 1995 Monmouth/Riverview obtained a waiver from the banks party
to the Monmouth/Riverview Credit facility of a default under a financial
covenant and an amendment to other covenants through April 30, 1995.
Monmouth/Riverview anticipates
(50)
<PAGE>
that it will be in default of certain of its financial covenants in 1995.
Monmouth/Riverview intends to seek an amendment of its credit agreement which
may require equity contributions by the Restricted Group. There can be no
assurance that such amendment can be obtained or that the Restricted Group will
provide an equity contribution. The Company believes that for
Monmouth/Riverview, internally generated funds together with funds available
under its existing credit agreement, assuming such amendment is obtained, will
be sufficient to meet its debt service requirements including its amortization
requirements and to fund its capital expenditures through 1996.
On August 8, 1994, Cablevision MFR issued promissory notes totalling $141.3
million, due in 1998 and bearing interest at 6% until the third anniversary and
8% thereafter (increasing to 8% and 10% respectively, if interest is paid in
shares of the Company's Class A Common Stock). Principal and interest on the
notes is payable at Cablevision MFR's election, in cash or in shares of the
Company's Class A Common Stock. The promissory notes are guaranteed by the
Company and the obligations under the guarantee rank pari passu with the
Company's public subordinated debt. In certain circumstances, Cablevision MFR
may extend the maturity date of the promissory notes until 2003 for certain
additional consideration.
RAINBOW PROGRAMMING
Rainbow Programming's financing needs have been funded by the Restricted Group's
investments in and advances to Rainbow Programming, by sales of equity interests
in the programming businesses and, in the case of one of the programming
businesses, through separate external debt financing. The Company expects that
the future cash needs of Rainbow Programming's current programming partnerships
will increasingly be met by internally generated funds, although certain of such
partnerships will at least in the near future rely to some extent upon their
partners (including Rainbow Programming) for certain cash needs. The partners'
contributions may be supplemented through the sale of additional equity
interests in, or through the incurrence of indebtedness by, such programming
businesses.
On July 11, 1994, Rainbow Programming entered into a $105 million credit
facility with a group of banks. On January 27, 1995 Rainbow entered into an
amended and restated credit facility with Toronto-Dominion (Texas), Inc., and
Canadian Imperial Bank of Commerce, as co-agents and a group of banks for $202
million of which $108 million was drawn on such date to refinance the original
facility. The balance of the funds are available only to purchase NBC's 50%
interest in SportsChannel (New York) Associates if NBC decides to exercise its
option to sell such interests. The proceeds of the initial $105 million loan
plus $76 million of equity from the Company were used to purchase Liberty
Media's 50% interest in AMCC giving Rainbow Programming a 75% ownership interest
in AMCC. The credit facility is payable in full at maturity on December 31,
1996 and bears interest at varying rates based upon the banks' Base Rate or
Eurodollar Rate, as defined in the credit agreement. Repayment of the loan is
anticipated to be made by Rainbow Programming from one or a combination of the
following: (i) internally generated funds; (ii) refinancing the existing Rainbow
Programming $202 million credit
(51)
<PAGE>
facility; (iii) refinancing the existing $59 million credit agreement of AMCC;
(iv) the sale of equity interests in, or assets of, the programming businesses;
and (v) advances from the Restricted Group. The loan is secured by a pledge of
the Company's stock in Rainbow Programming and is guaranteed by the subsidiaries
of Rainbow Programming as permitted.
On March 10, 1995, MSG Holdings, L.P. ("Holdings"), a partnership between a
subsidiary of Rainbow Programming and a subsidiary of ITT Corporation, a
Delaware corporation ("ITT"), acquired Madison Square Garden Corporation ("MSG")
in a transaction in which MSG merged with and into Holdings. The purchase price
paid by Holdings for MSG was $1,009.1 million. See Item 1.-"Business - Recent
Developments".
In connection with obtaining the consent of the National Hockey League (the
"NHL") and the National Basketball Association ("NBA") to the indirect transfers
of the New York Rangers and the New York Knickerbockers, respectively, resulting
from the merger, the Company and Rainbow Programming entered into agreements
with the NHL and the NBA, agreeing, among other things, to conduct themselves in
accordance with the relevant rules of each league.
Pursuant to an agreement between Rainbow Programming and National Broadcasting
Company, Inc. ("NBC"), NBC may require Rainbow Programming, by notice given on
or before April 13, 1995, to purchase its interests in SportsChannel (New York)
Associates ("SCNY") and Rainbow News 12 Company (the "NBC Put") for an aggregate
purchase price which, as of February 28, 1995, would amount to approximately $93
million. In the event that NBC elects to require Rainbow Programming to
purchase such interest, Rainbow Programming will have 120 days to consummate the
acquisition. On January 27, 1995, Rainbow Programming entered into an amended
and restated credit agreement with Toronto Dominion (Texas), Inc. and the
Canadian Imperial Bank of Commerce, as co-agents, and a group of banks
increasing Rainbow Programming's credit facility from $105 million to $202
million to provide funds in the event the NBC Put is exercised. The facility
will reduce to $108 million if the NBC Put is not exercised.
(52)
<PAGE>
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS.
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report . . . . . . . . . . . . . . . . . 54
Consolidated Balance Sheets - December 31, 1994 and 1993 . . . 55
Consolidated Statements of Operations - years
ended December 31, 1994, 1993 and 1992. . . . . . . . . . . 57
Consolidated Statements of Stockholders' Deficiency - years
ended December 31, 1994, 1993 and 1992. . . . . . . . . . . 58
Consolidated Statements of Cash Flows - years ended
December 31, 1994, 1993 and 1992. . . . . . . . . . . . . . 59
Notes to Consolidated Financial Statements . . . . . . . . . . 61
(53)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Cablevision Systems Corporation
We have audited the accompanying consolidated balance sheets of Cablevision
Systems Corporation and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, stockholders' deficiency and cash
flows for each of the years in the three-year period ended December 31, 1994.
In connection with our audits of the consolidated financial statements, we also
audited the financial statement schedule as listed in Item 14(a)(2). These
consolidated financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and the financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cablevision Systems
Corporation and subsidiaries at December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1994 in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule
referred to above, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
--------------------------
KPMG Peat Marwick LLP
Jericho, New York
March 10, 1995
(54)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS 1994 1993
---- ----
<S> <C> <C>
Cash and cash equivalents. . . . . . . . . . . . $ 11,350 $ 12,944
Accounts receivable trade (less allowance
for doubtful accounts of $10,087 and $5,055) . 72,881 49,211
Notes receivable affiliates. . . . . . . . . . . 2,143 2,858
Notes and other receivables. . . . . . . . . . . 14,280 8,730
Prepaid expenses and other assets. . . . . . . . 18,950 9,042
Property, plant and equipment, net . . . . . . . 886,028 643,499
Investments in affiliates. . . . . . . . . . . . 42,954 45,548
Advances to affiliates . . . . . . . . . . . . . 36,681 38,157
Acquisition related costs and deposits . . . . . 1,844 16,737
Feature film inventory . . . . . . . . . . . . . 129,496 -
Subscriber lists, net of accumulated
amortization of $266,528 and $237,456. . . . . 10,727 39,799
Franchises, net of accumulated amortization
of $240,609 and $183,599 . . . . . . . . . . . 436,686 131,362
Excess costs over fair value of net
assets acquired and other intangible
assets, net of accumulated amortization of
$209,145 and $174,211. . . . . . . . . . . . . 419,301 221,790
Deferred financing, acquisition and other
costs, net of accumulated amortization of
$18,422 and $20,780. . . . . . . . . . . . . . 50,949 51,550
Deferred interest expense, net of
accumulated amortization of
$28,095 and $14,047. . . . . . . . . . . . . . 42,143 56,191
----------- -----------
$ 2,176,413 $ 1,327,418
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to
consolidated financial statements.
(55)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31, 1994 and 1993
(Dollars in thousands)
<TABLE>
<CAPTION>
1994 1993
---- ----
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
<S> <C> <C>
Accounts payable . . . . . . . . . . . . . . . . . . . . . $ 120,627 $ 100,017
Accrued liabilities:
Interest . . . . . . . . . . . . . . . . . . . . . . . . 39,322 29,172
Payroll and related benefits . . . . . . . . . . . . . . 34,085 27,068
Franchise fees . . . . . . . . . . . . . . . . . . . . . 19,179 18,809
Litigation settlement and related matters. . . . . . . . 4,227 4,227
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 81,820 73,902
Accounts payable to affiliates . . . . . . . . . . . . . . 22,273 16,236
Feature film rights payable. . . . . . . . . . . . . . . . 110,542 -
Bank debt. . . . . . . . . . . . . . . . . . . . . . . . . 1,335,419 480,079
Senior debt. . . . . . . . . . . . . . . . . . . . . . . . 862,440 832,866
Subordinated debentures. . . . . . . . . . . . . . . . . . 623,534 822,781
Subordinated notes payable . . . . . . . . . . . . . . . . 141,268 -
Obligation to related party. . . . . . . . . . . . . . . . 193,079 91,619
Capital lease obligations and other debt . . . . . . . . . 13,496 8,154
----------- -----------
Total liabilities. . . . . . . . . . . . . . . . . . . . 3,601,311 2,504,930
----------- -----------
Deficit investment in affiliates . . . . . . . . . . . . . 393,637 325,732
----------- -----------
Commitments and contingencies
Stockholders' deficiency:
8% Series C Cumulative Preferred Stock, $.01 par
value, 112,500 shares authorized, 110,622 shares
issued ($100 per share liquidation preference). . . . 1 1
8% Series D Cumulative Preferred Stock, $.01 par value,
112,500 shares authorized, none issued ($100 per
share liquidation preference). . . . . . . . . . . . . - -
Series E Redeemable Exchangeable Convertible Preferred
Stock, $.01 par value, 100,000 shares authorized and
issued ($1,000 per share liquidation preference) . . . 1 -
Class A Common Stock, $.01 par value, 50,000,000
shares authorized, 11,850,242 and 10,853,607 shares
issued . . . . . . . . . . . . . . . . . . . . . . . . 119 108
Class B Common Stock, $.01 par value, 20,000,000
shares authorized, 11,787,622 and 12,411,532 shares
issued . . . . . . . . . . . . . . . . . . . . . . . . 118 124
Par value in excess of capital contributed . . . . . . . (74,016) (80,255)
Accumulated deficit. . . . . . . . . . . . . . . . . . . (1,741,521) (1,419,985)
----------- -----------
(1,815,298) (1,500,007)
Less treasury stock, at cost (50,000 shares) . . . . . . (3,237) (3,237)
----------- -----------
Total stockholders' deficiency . . . . . . . . . . . . . (1,818,535) (1,503,244)
----------- -----------
$ 2,176,413 $ 1,327,418
----------- -----------
----------- -----------
</TABLE>
See accompanying notes
to consolidated financial statements.
(56)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(Dollars in thousands except per share data)
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenues (including affiliate amounts of $8,290, $7,558 and
$6,441) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 837,169 $ 666,724 $ 572,487
----------- ----------- -----------
Operating expenses:
Technical (including affiliate amounts of $20,232, $26,732 and
$23,388) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302,885 241,877 204,449
Selling, general and administrative (including affiliate amounts of
$(1,003), $(1,479) and $(2,332)) . . . . . . . . . . . . . . . . . . . . . 195,942 172,687 120,356
Restructuring charge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,306 - -
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . 271,343 194,904 168,538
----------- ----------- -----------
774,476 609,468 493,343
----------- ----------- -----------
Operating profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,693 57,256 79,144
----------- ----------- -----------
Other income (expense):
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (263,299) (232,434) (194,628)
Interest income (including affiliate amounts of $493, $567 and $882). . . . . . 1,518 2,107 1,249
Share of affiliates' net loss . . . . . . . . . . . . . . . . . . . . . . . . . (82,864) (61,017) (47,278)
Gain (loss) on sale of programming interests, net . . . . . . . . . . . . . . . - (330) 7,053
Gain on sale of marketable securities, net. . . . . . . . . . . . . . . . . . . - - 733
Provision for loss on Olympics venture. . . . . . . . . . . . . . . . . . . . . - - (50,000)
Loss on sale of preferred stock . . . . . . . . . . . . . . . . . . . . . . . . - - (20,000)
Write off of deferred financing costs . . . . . . . . . . . . . . . . . . . . . (9,884) (1,044) (12,284)
Loss on redemption of debentures. . . . . . . . . . . . . . . . . . . . . . . . (7,088) - -
Settlement of litigation and related matters. . . . . . . . . . . . . . . . . . - - (5,655)
Provision for preferential payment to related party . . . . . . . . . . . . . . (5,600) (5,600) (2,662)
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,429) 3,000 -
Miscellaneous, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,198) (8,720) (6,175)
----------- ----------- -----------
(377,844) (304,038) (329,647)
----------- ----------- -----------
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (315,151) (246,782) (250,503)
Dividend requirements applicable to preferred stocks . . . . . . . . . . . . . . . . (6,385) (885) (885)
----------- ----------- -----------
Net loss applicable to common shareholders . . . . . . . . . . . . . . . . . . . . . $ (321,536) $ (247,667) $ (251,388)
----------- ----------- -----------
----------- ----------- -----------
Net loss per common share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (13.72) $ (10.83) $ (11.17)
----------- ----------- -----------
----------- ----------- -----------
Average number of common shares outstanding (in thousands) . . . . . . . . . . . . . 23,444 22,859 22,512
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See accompanying notes
to consolidated financial statements.
(57)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
Years Ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
<TABLE>
<CAPTION>
Par Value
Series C Series E Class A Class B in Excess
Preferred Preferred Common Common of Capital Accumulated Treasury
Stock Stock Stock Stock Contributed Deficit Stock Total
--------- --------- --------- --------- ----------- ------------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1991. . . . . . . . $ 1 $ - $ 98 $ 127 $(11,724) $ (920,930) $ - $ (932,428)
Net loss. . . . . . . . . . . . . . . - - - - - (250,503) - (250,503)
Cost of acquisitions. . . . . . . . . - - - - (71,333) - - (71,333)
Employee stock transactions . . . . . - - 4 (3) 4,900 - - 4,901
Preferred dividend requirement. . . . - - - - - (885) - (885)
----- ----- ----- ----- ---------- ----------- ------- ------------
Balance December 31, 1992. . . . . . . . 1 - 102 124 (78,157) (1,172,318) - (1,250,248)
Net loss. . . . . . . . . . . . . . . - - - - - (246,782) - (246,782)
Cost of acquisitions. . . . . . . . . - - 2 - (11,977) - - (11,975)
Employee stock transactions . . . . . - - 2 2 9,879 - - 9,883
Purchase of treasury stock. . . . . . - - (3,237) (3,237)
Conversion of Class B to Class A. . . - - 2 (2) - - - -
Preferred dividend requirement. . . . - - - - - (885) - (885)
----- ----- ----- ----- ---------- ----------- ------- ------------
Balance December 31, 1993. . . . . . . . 1 - 108 124 (80,255) (1,419,985) (3,237) (1,503,244)
Net loss. . . . . . . . . . . . . . . - - - - - (315,151) - (315,151)
Issuance of Series E preferred
stock . . . . . . . . . . . . . . . . - 1 - - 98,406 - - 98,407
Cost of acquisition . . . . . . . . . - - - - (101,600) - - (101,600)
Employee stock transactions . . . . . - - 5 - 9,433 - - 9,438
Conversion of Class B to Class A. . . - - 6 (6) - - - -
Preferred dividend requirements . . . - - - - - (6,385) - (6,385)
----- ----- ----- ----- ---------- ----------- ------- ------------
Balance December 31, 1994. . . . . . . . $ 1 $ 1 $119 $118 $(74,016) $(1,741,521) $(3,237) $(1,818,535)
----- ----- ----- ----- ---------- ----------- -------- -----------
----- ----- ----- ----- ---------- ----------- -------- -----------
</TABLE>
See accompanying notes
to consolidated financial statements.
(58)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 and 1992
(Dollars in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(315,151) $(246,782) $(250,503)
--------- --------- ---------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . 271,343 194,904 168,538
Share of affiliates' net loss . . . . . . . . . . . . . . . . . . . . . . . 82,864 61,017 47,278
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,429 (3,000) -
Loss (gain) on sale of programming interests, net . . . . . . . . . . . . . - 330 (7,053)
Gain on sale of marketable securities, net. . . . . . . . . . . . . . . . . - - (733)
Write off of deferred financing costs . . . . . . . . . . . . . . . . . . . 9,884 1,044 12,284
Loss on redemption of debentures. . . . . . . . . . . . . . . . . . . . . . 7,088 - -
Loss on sale of equipment, net. . . . . . . . . . . . . . . . . . . . . . . 3,844 2,106 1,185
Amortization of deferred financing. . . . . . . . . . . . . . . . . . . . . 4,844 3,950 4,134
Amortization of deferred interest expense . . . . . . . . . . . . . . . . . 14,048 14,047 -
Amortization of debenture discount. . . . . . . . . . . . . . . . . . . . . 148 138 74
Accretion of interest on debt . . . . . . . . . . . . . . . . . . . . . . . 35,574 32,074 -
Amortization of original issue discount on subordinated notes payable . . . - - 47,203
Change in assets and liabilities, net of effects of acquisitions:
Increase in accounts receivable trade . . . . . . . . . . . . . . . . (3,923) (6,888) (8,351)
Decrease in notes receivable affiliates . . . . . . . . . . . . . . . 715 812 722
(Increase) decrease in notes and other receivables. . . . . . . . . . (3,076) 753 (3,944)
(Increase) decrease in prepaid expenses and other assets. . . . . . . (8,675) 1,058 (495)
(Increase) decrease in advances to affiliates . . . . . . . . . . . . 1,326 3,275 (221)
Decrease in feature film inventory. . . . . . . . . . . . . . . . . . 7,760 - -
Increase in accounts payable. . . . . . . . . . . . . . . . . . . . . 19,069 27,070 28,513
Increase (decrease) in accrued liabilities. . . . . . . . . . . . . . (2,126) 48,463 (6,093)
Increase (decrease) in accrued obligation, Olympics venture . . . . . - (50,000) 50,000
Increase (decrease) in accounts payable to affiliates . . . . . . . . 6,037 1,451 1,017
Decrease in feature film rights payable . . . . . . . . . . . . . . . (8,397) - -
--------- --------- ---------
Total adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441,776 332,604 334,058
--------- --------- ---------
Net cash provided by operating activities. . . . . . . . . . . . . . . . . . . 126,625 85,822 83,555
--------- --------- ---------
Cash flows from investing activities:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (284,858) (214,604) (108,802)
Payments for acquisitions, net of cash acquired . . . . . . . . . . . . . . . . . (688,504) (14,464) (292)
Proceeds from sale of programming interests . . . . . . . . . . . . . . . . . . . - 543 8,254
Proceeds from sale of securities. . . . . . . . . . . . . . . . . . . . . . . . . - - 4,096
Proceeds from sale of equipment . . . . . . . . . . . . . . . . . . . . . . . . . 1,515 3,643 3,576
Increase in investments in affiliates, net. . . . . . . . . . . . . . . . . . . . 3,457 (425) (66,123)
(Increase) decrease in acquisition related costs and deposits . . . . . . . . . . 14,893 (16,737) -
Additions to intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . (373) (978) -
--------- --------- ---------
Net cash used in investing activities. . . . . . . . . . . . . . . . . . . . . (953,870) (243,022) (159,291)
--------- --------- ---------
</TABLE>
See accompanying notes
to consolidated financial statements.
(59)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 and 1992
(Dollars in thousands)
(continued)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from financing activities:
Issuance of bank debt to finance acquisitions . . . . . . . . . . . $ 542,608 $ - $ -
Proceeds from bank debt . . . . . . . . . . . . . . . . . . . . . . 965,654 197,286 185,301
Repayment of bank debt. . . . . . . . . . . . . . . . . . . . . . . (698,435) (373,479) (393,632)
Proceeds from senior debt . . . . . . . . . . . . . . . . . . . . . 2,500 25,750 46,236
Repayment of senior debt. . . . . . . . . . . . . . . . . . . . . . (8,500) (23,750) (16,950)
Redemption of debentures. . . . . . . . . . . . . . . . . . . . . . (202,000) - -
Issuance of subordinated notes payable and other debt . . . . . . . 145,268 - -
Issuance of subordinated debentures . . . . . . . . . . . . . . . . - 348,396 275,000
Net proceeds from issuance of redeemable exchangeable
convertible preferred stock. . . . . . . . . . . . . . . . . . . 98,407 - -
Preferred stock dividends . . . . . . . . . . . . . . . . . . . . . (6,385) (885) (885)
Issuance of common stock. . . . . . . . . . . . . . . . . . . . . . 9,438 9,883 4,901
Purchase of treasury stock. . . . . . . . . . . . . . . . . . . . . - (3,237) -
Obligation to related party . . . . . . . . . . . . . . . . . . . . - 5,600 -
Payments on capital lease obligations and other debt. . . . . . . . (2,678) (2,682) (4,920)
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . - - 3,000
Additions to deferred financing and other . . . . . . . . . . . . . (20,226) (15,459) (22,233)
---------- --------- ---------
Net cash provided by financing activities. . . . . . . . . . . . 825,651 167,423 75,818
---------- --------- ---------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . (1,594) 10,223 82
Cash and cash equivalents at beginning of year . . . . . . . . . . . . 12,944 2,721 2,639
---------- --------- ---------
Cash and cash equivalents at end of year . . . . . . . . . . . . . . . $ 11,350 $ 12,944 $ 2,721
---------- --------- ---------
---------- --------- ---------
</TABLE>
See accompanying notes
to consolidated financial statements.
(60)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Cablevision
Systems Corporation and its majority owned subsidiaries (the "Company"). All
significant intercompany transactions and balances have been eliminated in
consolidation.
REVENUE RECOGNITION
The Company recognizes revenues as cable television services are provided to
subscribers.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including construction materials, are carried at
cost, which includes all direct costs and certain indirect costs associated with
the construction of cable television transmission and distribution systems, and
the costs of new subscriber installations.
FEATURE FILM INVENTORY
Rights to feature film inventory acquired under license agreements along with
the related obligations are recorded at the contract value. Costs are amortized
on the straight-line method over either the contract period or the intended
number of days to be aired.
DEFERRED FINANCING COSTS
Costs incurred to obtain debt are deferred and amortized, on the straight-line
basis, over the life of the related debt.
SUBSCRIBER LISTS, FRANCHISES, AND OTHER INTANGIBLE ASSETS
Subscriber lists are amortized on the straight-line basis over varying periods
(4 to 8 years) during which subscribers are expected to remain connected to the
systems. Franchises are amortized on the straight-line basis over the average
remaining terms (7 to 11 years) of the franchises at the time of acquisition.
Other intangible assets are amortized on the straight-line basis over the
periods benefited (2 to 10 years). Excess costs over fair value of net assets
acquired are being amortized over periods ranging from 5 to 20 years on the
straight line basis. The Company assesses the recoverability of such excess
costs based upon undiscounted anticipated future cash flows of the businesses
acquired.
(61)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which requires the liability method of accounting for deferred income
taxes and permits the recognition of deferred tax assets, subject to an ongoing
assessment of realizability. Adoption of SFAS 109 had no material impact on the
operations of the Company.
LOSS PER SHARE
Net loss per common share is computed based on the average number of common
shares outstanding after giving effect to dividend requirements on the Company's
preferred stock. Common stock equivalents were not included in the computation
as their effect would be to decrease net loss per share.
CASH FLOWS
For purposes of the consolidated statements of cash flows, the Company considers
short-term investments with a maturity at date of purchase of three months or
less to be cash equivalents. The Company paid cash interest expense of
approximately $198,535, $173,073 and $142,807 during 1994, 1993 and 1992,
respectively. During 1994, 1993 and 1992, the Company's noncash investing and
financing activities included obligations to related party of $101,460, $19,019
and $67,000, respectively, and capital lease obligations of $4,020, $2,695 and
$5,953, respectively, incurred when the Company entered into leases for new
equipment, the issuance in 1993 of 164,051 shares of the Company's Class A
Common Stock (fair value of $10,725) for the remaining interests in Cablevision
of Connecticut (see Note 2) and the $70,238 present value of debt to be assumed
by V Cable in 1997, recorded in 1992 (see Note 4).
INVESTMENTS IN AND ADVANCES TO AFFILIATES
The Company accounts for its investments in affiliates using the equity method
of accounting whereby the Company records its appropriate share of the net
income or loss of the affiliate. The Company's advances to affiliates are
carried at cost adjusted for any known diminution in value (see Note 8).
(62)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
NOTE 2. ACQUISITIONS, RESTRUCTURINGS AND DISPOSITIONS
1994 ACQUISITIONS:
In March 1994, Cablevision of Cleveland, L.P. ("Cablevision Cleveland"), a
partnership whose partners are subsidiaries of the Company, purchased
substantially all of the assets and assumed certain liabilities of North Coast
Cable Limited Partnership, which operates a cable television system in
Cleveland, Ohio (the "North Coast Cable Acquisition"). The operations of North
Coast Cable are consolidated with those of the Company as of the date of
acquisition. The net cash purchase price for interests not previously owned by
the Company (and excluding excess liabilities assumed by the Company) aggregated
approximately $103,359 including expenses. The cost of the acquisition was
financed principally by borrowings under the Company's credit agreement.
In June 1994, A-R Cable Partners, a partnership comprised of subsidiaries of the
Company and E.M. Warburg, Pincus & Co., Inc. completed the purchase of certain
assets of Nashoba Communications, a group of three limited partnerships, for a
purchase price of approximately $90,500, of which approximately $47,000 was
provided by a senior credit facility secured by the assets of such systems. The
remainder of the purchase price was provided by equity contributions and
subordinated loans from the partners in A-R Cable Partners. The Company
provided approximately $12,000 for its 30% interest in A-R Cable Partners and
$1,500 in loans.
In July 1994, Rainbow Programming Holdings, Inc. ("Rainbow Programming"), a
wholly-owned subsidiary of the Company, purchased an additional 50% interest in
American Movie Classics Company ("AMCC") for a purchase price of approximately
$181,000, increasing Rainbow Programming's interest in AMCC to approximately
75%. The results of AMCC's operations are consolidated with those of the
Company as of the date of acquisition. The acquisition was financed with a
separate $105,000 credit facility entered into by Rainbow Programming and by
borrowings under the Company's credit agreement of approximately $76,000 which
was contributed to Rainbow Programming.
In August 1994, Cablevision MFR, Inc. ("Cablevision MFR"), a wholly-owned
subsidiary of the Company, acquired substantially all of the assets of Monmouth
Cablevision Associates, L.P. ("Monmouth Cablevision") and Riverview Cablevision
Associates, L.P. ("Riverview Cablevision") consisting of cable television
systems in New Jersey. The operations of Monmouth Cablevision and Riverview
Cablevision are consolidated with those of the Company as of the date of
acquisition. The aggregate purchase price for the two New Jersey systems was
$391,215. Approximately $237,800 of such purchase price was financed by a
senior credit facility of newly formed subsidiaries of Cablevision MFR secured
solely by the assets of the systems. The remaining $153,415 of such purchase
(63)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
price was paid with cash of approximately $12,147 and the issuance, by
Cablevision MFR, of subordinated promissory notes (the "MFR Notes") totalling
$141,268 due in 1998.
Also in August 1994, Cablevision of Framingham Holdings, Inc. ("CFHI"), a
corporation owned 30% by the Company and 70% by E.M. Warburg, Pincus Investors,
L.P., acquired substantially all of the assets of Framingham Cablevision
Associates, L.P. ("Framingham Cablevision") consisting of cable television
systems in Massachusetts. The aggregate purchase price, including fees and
expenses, for Framingham Cablevision's assets was $37,517. Approximately
$22,700 of the purchase price was financed by a senior credit facility of a
wholly-owned subsidiary of CFHI secured by the assets of Framingham Cablevision;
approximately $9,732 was paid by the issuance by CFHI of a promissory note,
guaranteed by the Company, due in 1998 and the remaining amount was financed by
capital contributions and loans to CFHI from its stockholders. The Company
provided a capital contribution of approximately $1,320 and $300 as a loan for
its 30% interest in CFHI.
The acquisitions of North Coast Cable, AMCC, Monmouth Cablevision and Riverview
Cablevision were accounted for as purchases whereby the acquisition costs were
allocated to the various assets acquired and liabilities assumed based upon
their respective fair values. The excess of the purchase price over the book
value of net assets acquired of these entities, aggregating $625,946, has been
allocated to the specific assets acquired as follows:
<TABLE>
<S> <C>
Plant and equipment $ 31,200
Franchises 362,301
Excess cost over fair value of net assets acquired 232,445
--------
$625,946
--------
--------
</TABLE>
With the exception of AMCC, for which an appraisal is being prepared, the
allocations of fair value have been based on independent appraisals.
1993 ACQUISITIONS:
In December 1986, the Company had purchased substantially all the limited
partnership interests in Cablevision of Connecticut. In November 1993, the
Company purchased the remaining interests in exchange for 164,051 shares of the
Company's Class A Common Stock which had a fair market value of approximately
$10,725. Such amount was charged to excess cost over fair value of net assets
acquired and is being amortized over the remaining original amortization period.
(64)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
In November 1993, the Company purchased the business of CATV Enterprises, Inc.
("CATV") in Riverdale, The Bronx, New York following the expiration of CATV's
temporary permit to operate its cable television system in Riverdale. The cost
of $8,500 is included in excess cost over fair value of net assets acquired.
1992 ACQUISITION:
In July 1992, the Company acquired (the "CNYC Acquisition") substantially all of
the remaining interests in Cablevision of New York City - Phase I through Phase
V (collectively, "CNYC" or "Phase Partnerships"), the operator of a cable
television system in The Bronx and parts of Brooklyn, New York. Prior to the
CNYC Acquisition, the Company had a 15% interest in CNYC and Charles F. Dolan,
the chief executive officer and principal shareholder of the Company, owned the
remaining interests. Mr. Dolan remains a partner in CNYC with a 1% interest and
the right to certain preferential payments.
Mr. Dolan's preferential rights entitle him to an annual cash payment (the
"Annual Payment") of 14% multiplied by the outstanding balance of his "Minimum
Payment". The Minimum Payment is $40,000 and is to be paid to Mr. Dolan prior
to any distributions to partners other than Mr. Dolan. In addition, Mr. Dolan
has the right, exercisable beginning on December 31, 1997, to require the
Company to purchase his interest. Mr. Dolan would be entitled to receive from
the Company the Minimum Payment, any accrued but unpaid Annual Payments, a
guaranteed return on certain of his investments in CNYC and a Preferred Payment
defined as a payment (not exceeding $150,000) equal to 40% of the Appraised
Equity Value (as defined) of CNYC after making certain deductions.
The Company accounted for the purchase of CNYC in 1992 in a manner similar to a
pooling of interests whereby the assets and liabilities of CNYC were recorded at
historical values and the excess of the purchase price over the book value of
the net assets acquired, amounting to approximately $44,000, was charged to par
value in excess of capital contributed. Based upon estimates for accounting
purposes of the Appraised Equity Value of CNYC made by the Company at December
31, 1994, 1993 and 1992, approximately $101,600, $22,700 and $27,000,
respectively, was accrued as additional obligations to Mr. Dolan relating to the
Company's purchase of CNYC, which have also been charged to par value in excess
of capital contributed. The total amount owed to Mr. Dolan at December 31, 1994
of approximately $193,100 in respect of the Preferred Payment, the Minimum
Payment and the Annual Payment reflects a reduction of approximately $3,800 at
December 31, 1994 representing Mr. Dolan's obligation to reimburse the Company
in connection with certain claims paid or owed by CNYC.
(65)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
1992 RESTRUCTURINGS:
V CABLE, INC.
On December 31, 1992, the Company consummated a significant restructuring and
reorganization (the "V Cable Reorganization") involving its subsidiary, V Cable,
Inc. ("V Cable"), U.S. Cable Television Group, L.P. ("U.S. Cable") and General
Electric Capital Corporation ("GECC"), V Cable's principal creditor. In the
V Cable Reorganization, V Cable acquired a 20% interest in U.S. Cable for
$20,000 and U.S. Cable acquired a 19% non-voting interest in a newly
incorporated subsidiary of V Cable that holds substantially all of V Cable's
assets ("VC Holding") for $3,000. As a result, V Cable now owns an effective
84.8% interest in VC Holding. GECC has provided long-term credit facilities to
each of V Cable, VC Holding and U.S. Cable, secured in each case by the assets
of the borrower and in most cases cross-collateralized by the assets of the
other two entities. The credit facilities are non-recourse to the Company other
than with respect to the common stock of V Cable owned by the Company (see Note
4). The Company has management responsibility for the U.S. Cable properties and
for the V Cable systems. The Company accounts for its investment in U.S. Cable
using the equity method of accounting and accordingly its share of losses in
U.S. Cable for 1994 and 1993 amounted to $8,594 and $8,566, respectively. Also
in 1993, included in the accompanying consolidated statements of operations is
U.S. Cable's share of losses in VC Holding, limited to its $3,000 investment
described above.
In contemplation of the V Cable Reorganization, in May, 1992 GECC provided a
$20,000 loan to V Cable, which lent the proceeds to one of its operating
subsidiaries which, in turn, paid GECC an aggregate of $20,000 in order to
acquire all of the then outstanding shares of A-R Cable Services, Inc. ("A-R
Cable") preferred stock from GECC and to obtain the termination of certain
transaction fee agreements pursuant to which GECC was entitled under certain
circumstances to receive payments from V Cable and A-R Cable. On May 11, 1992,
A-R Cable purchased, for a nominal amount, the shares of A-R Cable preferred
stock held by the operating subsidiary of V Cable. For the purposes of these
consolidated financial statements, the Company recognized a net loss of $20,000
on the purchase and retirement of the shares of A-R Cable's preferred stock.
In consideration of V Cable's assumption of U.S. Cable debt in 1997 (see Note 4)
and the cross-collateralization of U.S. Cable debt by V Cable and VC Holding, V
Cable has the option to exchange its interest in U.S. Cable for all of U.S.
Cable's interest in VC Holding and thus recover full ownership of the V Cable
systems from and after January 1, 1998, subject to certain limitations. Upon
such an exchange, the guarantee by V Cable and VC Holding of any portion of the
U.S. Cable senior credit facilities not
(66)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
assumed by V Cable, as well as the guarantee and cross-collateralization by U.S.
Cable of the V Cable and VC Holding credit facilities, would terminate.
A-R CABLE. In May 1992 the Company and A-R Cable consummated a restructuring
and refinancing transaction (the "A-R Cable Restructuring") that had the effect
of retiring a substantial portion of A-R Cable's subordinated debt and reducing
the Company's economic and voting interest in A-R Cable. Among other things,
this transaction involved an additional $45,000 investment in A-R Cable by the
Company to purchase a new Series B Preferred Stock and the purchase of a new
Series A Preferred Stock in A-R Cable by Warburg Pincus Investors, L.P.
("Warburg Pincus") for $105,000. After the receipt of certain regulatory
approvals, the Company will have a 40% economic and voting interest in A-R
Cable. As a result of the A-R Cable Restructuring, the Company no longer has
financial or voting control over A-R Cable's operations. For reporting
purposes, the Company accounts for its investment in A-R Cable using the equity
method of accounting whereby the Company records 100% of the net losses of A-R
Cable since it continues to own 100% of A-R Cable's outstanding common stock.
Included in share of affiliates' net loss in the accompanying consolidated
statements of operations for the years ended December 31, 1994, 1993 and 1992 is
$67,092, $56,420 and $30,326, respectively, representing A-R Cable's net loss
plus dividend requirements for the Series A Preferred Stock of A-R Cable, which
is not owned by the Company. Included in deficit investment in affiliates is
$374,423 and $307,758 at December 31, 1994 and 1993, respectively, representing
A-R Cable losses and external dividend requirements recorded by the Company in
excess of amounts invested by the Company therein. At December 31, 1994 and
1993 and for the years then ended, A-R Cable's total assets, liabilities
(including preferred stock) and net revenues amounted to $246,125 and $288,348;
$681,717 and $650,099; $107,026 and $108,711, respectively.
The Company continues to guarantee the debt of A-R Cable to GECC under a limited
recourse guarantee wherein recourse to the Company is limited solely to the
common and Series B Preferred Stock of A-R Cable owned by the Company.
The Company continues to manage A-R Cable under a management agreement that
provides for cost reimbursement, an allocation of overhead charges and a
management fee of 3-1/2% of gross receipts, as defined, with interest on unpaid
amounts thereon at a rate of 10% per annum. The 3-1/2% fee and interest thereon
is payable by A-R Cable only after repayment in full of its senior debt and
certain other obligations. Under certain circumstances, the fee is subject to
reduction to 2-1/2% of gross receipts.
(67)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
During 1994, Warburg Pincus purchased additional shares of Series A Preferred
Stock for a cash investment of $998 and CSC purchased additional shares of
Series B Preferred Stock for a cash investment of $427.
After May 11, 1997, either Warburg Pincus or the Company may irrevocably cause
the sale of A-R Cable, subject to certain conditions. In certain circumstances,
Warburg Pincus may cause the sale of A-R Cable prior to that date. Upon the
sale of A-R Cable, the net sales proceeds, after repayment of all outstanding
indebtedness and other liabilities, will be used as follows: first, to repay
Warburg Pincus' investment in the Series A Preferred Stock; second, to repay the
Company's investment in the Series B Preferred Stock; third, to repay the
accumulated unpaid dividends on the Series A Preferred Stock (19% annual rate);
fourth, to repay the accumulated unpaid dividends on the Series B Preferred
Stock (12% annual rate); fifth, to pay the Company for all accrued and unpaid
management fees together with accrued but unpaid interest thereon; sixth, pro
rata 60% to the Series A Preferred Stockholders, 4% to the Series B Preferred
Stockholders and 36% to the common stockholder(s).
SALE OF PROGRAMMING INTERESTS:
In October 1992 and January 1993, Tele-Communications, Inc. ("TCI") exercised
its option to purchase from each of a subsidiary of National Broadcasting Co.
("NBC") and Rainbow Programming an additional 12.5% of SportsChannel Chicago
Associates for an aggregate purchase price of approximately $15,000 plus
approximately $1,600 in interest. In connection with this transaction, the
Company recorded a net gain of approximately $7,100.
PRO FORMA RESULTS OF OPERATIONS
The following unaudited pro forma condensed results of operations are presented
for the years ended December 31, 1994 and 1993 as if the acquisitions of
Monmouth Cablevision and Riverview Cablevision; the purchase of the 50% interest
in AMCC; and the North Coast Cable Acquisition had occurred on January 1, 1994
and 1993, respectively.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------
1994 1993
-------- ---------
<S> <C> <C>
Net revenues $ 941,948 $ 864,534
--------- ---------
--------- ---------
Net loss $(359,732) $(346,259)
--------- ---------
--------- ---------
Net loss per common share $ (15.62) $ (15.19)
--------- ---------
--------- ---------
</TABLE>
(68)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
NOTE 3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following items, which are
depreciated or amortized primarily on a straight-line basis over the estimated
useful lives shown below:
<TABLE>
<CAPTION>
December 31,
--------------------- Estimated
1994 1993 Useful Lives
----------- --------- --------------
<S> <C> <C> <C>
Cable television transmission
and distribution systems:
Converters . . . . . . . . $ 270,660 $ 189,287 3 to 5 years
Headends . . . . . . . . . 66,583 52,100 6 to 9 years
Distribution systems . . . 963,545 764,717 10 to 15 years
Program, service and test
equipment . . . . . . . . 80,384 64,302 4 to 7 years
Microwave equipment. . . . 5,082 4,787 7 1/2 years
Construction in progress (including
materials and supplies) . 54,709 22,112 -
Furniture and fixtures . . . . . . . . 20,758 16,540 5 to 12 years
Transportation equipment . . . . . . . 33,508 19,482 2 to 12 years
Building and building improvements . . 19,446 10,569 22 to 39 years
Leasehold improvements . . . . . . . . 34,627 27,878 Term of lease
Land and land improvements . . . . . . 8,995 3,971 -
----------- ---------
1,558,297 1,175,745
Less accumulated depreciation and
amortization. . . . . . . . 672,269 532,246
----------- ---------
$ 886,028 $ 643,499
----------- ---------
----------- ---------
</TABLE>
NOTE 4. DEBT
BANK DEBT
RESTRICTED GROUP
For financing purposes, Cablevision Systems Corporation and certain of its
subsidiaries are collectively referred to as the "Restricted Group". On October
14, 1994, the Restricted Group entered into new $1.5 billion credit facilities
(the "Credit Agreement") with a group of banks led by Toronto-Dominion (Texas),
as agent.
(69)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
The Credit Agreement consists of a $750,000 Term Loan and Reducing Revolver
facilities aggregating $750,000. The Term Loan has a final maturity of June 30,
2003 and begins amortizing on a scheduled quarterly basis on June 30, 1997. The
Reducing Revolver facilities begin to reduce on December 31, 1996 and have a
final maturity of June 30, 2003. The total amount of bank debt outstanding
(including CNYC) at December 31, 1994 and 1993 was $956,419 and $480,079,
respectively. As of December 31, 1994, approximately $24,700 was restricted for
certain letters of credit issued for the Company and CNYC.
Unrestricted and undrawn funds available to the Restricted Group under the
Credit Agreement amounted to approximately $523,300 at December 31, 1994. The
Credit Agreement contains certain financial covenants that may limit the
Restricted Group's ability to utilize all of the undrawn funds available
thereunder. The Credit Agreement contains various restrictive covenants, among
which are limitations on the amount of investments that may be made in
affiliated entities and certain other subsidiaries, the maintenance of various
financial ratios and tests, and limitations on various payments, including
preferred dividends. The Company is restricted from paying any dividends on its
common stock. The Company was in compliance with the covenants of its Credit
Agreements at December 31, 1994.
Interest on outstanding amounts may be paid, at the option of the Company, based
on various formulas which relate to the prime rate, rates for certificates of
deposit or other prescribed rates. In addition, the Company has entered into
interest rate swap agreements with several banks on a notional amount of
$235,000 as of December 31, 1994 whereby the Company pays a fixed rate of
interest and receives a variable rate. Interest rates and terms vary in
accordance with each of the agreements. The Company enters into interest rate
swap agreements to hedge against interest rate risk, as required by its credit
agreements, and therefore accounts for these agreements as hedges of floating
rate debt, whereby interest expense is recorded using the revised rate, with any
fees or other payments amortized as yield adjustments. As of December 31, 1994,
the interest rate agreements expire at various times through the year 2000 and
have a weighted average life of approximately two years. The Company is exposed
to credit loss in the event of nonperformance by the other parties to the
interest rate swap agreements; however, the Company does not anticipate
nonperformance by the counterparties. The weighted average interest rate on all
indebtedness was 8.2% and 8.9% on December 31, 1994 and 1993, respectively. The
Company is also obligated to pay fees of 3/8 of 1% per annum on the unused loan
commitment and from 1-3/8% to 1-5/8% per annum on letters of credit issued under
the Credit Agreement.
(70)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
Substantially all of the assets of the Restricted Group (excluding the assets of
CNYC), amounting to approximately $929,400 at December 31, 1994, have been
pledged to secure the borrowings under the Credit Agreement.
CNYC, which became part of the Restricted Group in October 1994, continues to
have a separate bank credit agreement which is guaranteed by the Company. The
amount outstanding under the CNYC facility is restricted under the Reducing
Revolver facilities. Reductions in the CNYC facility increase availability in
the Reducing Revolver facilities. At December 31, 1994 and 1993, CNYC had
outstanding bank borrowings of $140,000 and $129,023, respectively, and
outstanding letters of credit totalling $7,000 at December 31, 1994. The CNYC
facility converted to a term loan on December 31, 1994 with amortization
beginning on March 31, 1995 with a final maturity of June 30, 2000.
Substantially all of the assets of CNYC, amounting to approximately $279,529 at
December 31, 1994, have been pledged to secure the borrowings under the CNYC
credit agreement. The CNYC credit agreement contains various restrictive
covenants, among which are the maintenance of various financial ratios and tests
and limitations on various payments. CNYC was in compliance with all the
covenants of the CNYC credit agreement at December 31, 1994.
CABLEVISION MFR
Cablevision MFR and its subsidiaries, Monmouth Cablevision and Riverview
Cablevision, are party to a credit facility with a group of banks led by Nations
Bank of Texas, N.A., as agent (the "MFR Credit Facility"). The maximum amount
available to Cablevision MFR under the MFR Credit Facility is $285,000 with a
final maturity at June 30, 2003. The facility is a reducing revolving loan,
with scheduled facility reductions beginning on March 31, 1996 resulting in a
15% reduction by December 31, 1998. As of December 31, 1994, Cablevision MFR
had outstanding bank borrowings of $230,000. Unrestricted and undrawn funds
available to Cablevision MFR under the MFR Credit Facility amounted to
approximately $55,000 at December 31, 1994. The MFR Credit Facility contains
certain financial covenants that may limit Cablevision MFR's ability to utilize
all of the undrawn funds available thereunder, including covenants requiring
Cablevision MFR to maintain certain financial ratios. Under the terms of the
MFR Credit Facility, Monmouth Cablevision and Riverview Cablevision are
prohibited from transferring funds to the Company. The loan is secured by a
pledge of the Company's stock in Cablevision MFR and substantially all of
Cablevision MFR's assets which amounted to approximately $376,000 at December
31, 1994. Monmouth Cablevision and Riverview Cablevision have entered into
interest rate swap and cap agreements with several banks on a notional amount of
$130,000 as of December 31, 1994, whereby Monmouth Cablevision and
(71)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
Riverview Cablevision pay a fixed rate of interest and receive a variable rate.
Monmouth Cablevision and Riverview Cablevision account for their interest rate
swap and cap agreements as hedging of floating rate debt, as may be required
under the MFR Credit Facility whereby interest expense is recorded using the
revised rate, with any fees or other payments amortized as yield adjustments.
Cablevision MFR is exposed to credit loss in the event of nonperformance by the
other parties to the agreements; however, Cablevision MFR does not anticipate
nonperformance by the counterparties. The interest rate agreements expire in
1997. The weighted average interest rate on all bank indebtedness was
approximately 8.3% on December 31, 1994. The MFR Credit Facility contains
various restrictive covenants with which Cablevision MFR was in compliance or
had obtained waivers of compliance at December 31, 1994.
RAINBOW PROGRAMMING
On July 11, 1994, Rainbow Programming entered into a $105,000 credit facility
with a group of banks. At December 31, 1994, $105,000 was outstanding under
this facility. On January 27, 1995 Rainbow Programming entered into an amended
and restated credit facility for $202,000. The credit facility is payable on
December 31, 1996 and bears interest at varying rates based upon the banks' Base
Rate or LIBOR Rate, as defined in the credit agreement. The loan is secured by
a pledge of the Company's stock in Rainbow Programming and is guaranteed by the
subsidiaries of Rainbow Programming as permitted. The weighted average interest
rate during 1994 was 7.8%. The credit agreement contains various restrictive
covenants with which Rainbow Programming was in compliance at December 31, 1994.
AMERICAN MOVIE CLASSICS COMPANY
AMCC is party to a loan agreement (The "AMCC Loan Agreement") with a group of
banks (with the Toronto Dominion Bank as Lead Bank). The AMCC Loan Agreement,
which permits maximum borrowings of $59,000 and matures on June 30, 1998, is
comprised of a $44,000 term loan and a $15,000 revolver. At December 31, 1994,
there were no borrowings under the revolver and an outstanding balance of
$44,000 under the term loan. Borrowings under the AMCC Loan Agreement bear
interest at varying rates above the Lead Bank's Base, CD or LIBOR rate depending
on the ratio of debt to cash flow, as defined in the Loan Agreement. AMCC has
entered into an interest rate swap agreement on a notional amount of $20,000
under which AMCC pays a fixed rate and receives a variable rate. The interest
rate swap agreement expires on October 6, 1997. AMCC is exposed to credit loss
in the event of nonperformance by the other parties to the interest rate swap
agreement; however, it does not anticipate nonperformance by the counterparties.
At December 31, 1994 the weighted average interest rate on bank indebtedness
approximated 7.3%. Substantially all of the assets of AMCC, amounting to
(72)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
$148,270 at December 31, 1994, have been pledged to secure the borrowings under
the AMCC Loan Agreement. The AMCC Loan Agreement contains various restrictive
covenants with which AMCC was in compliance at December 31, 1994.
SUBORDINATED DEBENTURES
In February 1993, the Company issued $200,000 face amount $(198,867 amortized
amount at December 31, 1994) of its 9-7/8% Senior Subordinated Debentures due
2013 (the "2013 Debentures"). Interest is payable on the 2013 Debentures semi-
annually on February 15 and August 15. The 2013 Debentures are redeemable, at
the Company's option, on February 15, 2003, February 15, 2004, February 15, 2005
and February 15, 2006 at the redemption price of 104.80%, 103.60%, 102.40% and
101.20%, respectively, of the principal amount and thereafter at the redemption
price of 100% of the principal amount, in each case together with accrued
interest to the redemption date. The indenture under which the 2013 Debentures
were issued contains various covenants, which are generally less restrictive
than those contained in the Company's Credit Agreement, with which the Company
was in compliance at December 31, 1994. The 2013 Debentures are not entitled to
the benefits of a sinking fund. The net proceeds of approximately $193,150 were
used to reduce bank borrowings.
Also in 1993, the Company issued $150,000 face amount ($149,667 amortized amount
at December 31, 1994) of its 9-7/8% Senior Subordinated Debentures due 2023 (the
"2023 Debentures"). Interest is payable on the 2023 Debentures semi-annually on
April 1 and October 1. The 2023 Debentures are redeemable, at the Company's
option, on and after April 1, 2003 at the redemption price of 104.938% reducing
ratably to 100% of the principal amount on and after April 1, 2010, in each case
together with accrued interest to the redemption date. The indenture under
which the 2023 Debentures were issued contains various covenants, which are
generally less restrictive than those contained in the Company's Credit
Agreement, with which the Company was in compliance at December 31, 1994. The
2023 Debentures are not entitled to the benefits of a sinking fund.
Approximately $105,000 of the net proceeds of $145,896 were used to reduce bank
and commercial paper borrowings. In connection with such repayment, the Company
wrote off approximately $1,044 of deferred financing costs.
In April 1992, the Company issued $275,000 of its 10-3/4% Senior Subordinated
Debentures due 2004 (the "2004 Debentures"). Interest is payable on the 2004
Debentures semi-annually on April 1 and October 1. The 2004 Debentures are
redeemable, at the Company's option, on April 1, 1997 and April 1, 1998 at the
redemption price of 103.071% and 101.536%, respectively, of the principal
amount, and on April 1, 1999 and thereafter at the redemption price of 100% of
the principal amount, in each case together with accrued interest to the
redemption date. The Indenture under which the 2004
(73)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
Debentures were issued contains various covenants, which are generally less
restrictive than those contained in the Company's Credit Agreement, with which
the Company was in compliance at December 31, 1994. The Indenture requires a
sinking fund providing for the redemption on April 1, 2002 and April 1, 2003 of
$68,750 principal amount of the 2004 Debentures, at a redemption price equal to
100% of the principal amount, plus accrued interest to the redemption date. The
net proceeds of approximately $267,000 from the offering were used to repay
borrowings under the Company's Credit Agreement. In connection with such
repayment, the Company wrote off approximately $4,783 of deferred financing
costs.
In October 1994, the Company redeemed its $200,000 face amount 12-1/4% Senior
Subordinated Reset Debentures due November 15, 2003, (the "Reset Debentures").
In connection with the redemption, the Company paid a premium over face
amounting to $2,000, incurred a loss of $605 representing the unamortized
portion of the original issue discount and wrote off $4,483 of deferred finance
costs. The total loss incurred related to the redemption of the Reset
Debentures amounted to $7,088.
SENIOR DEBT
Under the credit agreement between V Cable and GECC (the "V Cable Credit
Agreement"), GECC has provided a term loan (the "V Cable Term Loan") in the
amount of $20,000 to V Cable, which accretes interest at a rate of 10.62%
compounded semi-annually until December 31, 1997 (the reset date). In addition,
GECC has extended to VC Holding a $505,000 term loan (the "Series A Term Loan),
a $25,000 revolving line of credit (the "Revolving Line") and a $202,554 term
loan (the "Series B Term Loan"), all of which comprise the VC Holding Credit
Agreement. Interest on the Series A Term Loan and on any amounts drawn under
the Revolving Line of credit is payable currently. Interest on the Series B
Term Loan accretes at a rate of 10.62% compounded semi-annually until
December 31, 1997 (the reset date) and is payable in full on December 31, 2001.
At December 31, 1994 and 1993, amounts outstanding under the V Cable Term Loan,
the Series A Term Loan, the Series B Term Loan and the Revolving Line were
$24,606 and $22,187; $505,000 and $505,000; $245,507 and $221,373; and $-0- and
$6,000, respectively. Unrestricted and undrawn funds available to VC Holding at
December 31, 1994 amounted to $23,200.
In 1992, approximately $7,501 of deferred financing costs related to V Cable's
debt prior to its restructuring with GECC was written off.
Interest rates on $254,000 of the Series A Term Loan are fixed at 10.12% through
December 31, 1997. The remaining $251,000 bears interest at rates based on
either GECC's Index Rate (as defined) or LIBOR plus applicable percentages.
Interest on any
(74)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
borrowings under the Revolving Line is paid based on either GECC's Index Rate
(as defined) or LIBOR plus applicable percentages which vary depending upon
certain prescribed financial ratios. Scheduled quarterly principal payments on
the Series A Term Loan commence June 30, 1997 and continue through December 31,
2001.
Also in connection with the V Cable Reorganization, V Cable agreed to assume, on
December 31, 1997, approximately $121,000 of debt of U.S. Cable, which amount is
subject to adjustment, upward or downward, depending on U.S. Cable's ratio of
debt to cash flow (as defined) in 1997 and thereafter. Included in Senior Debt
at December 31,1994 and 1993 is $87,327 and $78,306, respectively, representing
the present value of debt of U.S. Cable to be assumed in 1997. The difference
at December 31, 1994 of approximately $33,673 will be charged to interest
expense during the period from January 1, 1995 to December 31, 1997. The
effective interest rate on this debt is approximately 11%. This debt matures on
December 31, 2001. Amortization of deferred interest expense in connection with
the assumption of U.S. Cable's debt, which is being amortized on a straight line
basis through December 31, 1997, amounted to $14,048 and $14,047 for 1994 and
1993, respectively.
The debt of V Cable and VC Holding is guaranteed by, and secured by a pledge of
all of the assets of, V Cable, VC Holding and each of their subsidiaries,
including a pledge of all direct and indirect ownership interests in such
subsidiaries. U.S. Cable's debt is also guaranteed and cross-collateralized by
each of V Cable, VC Holding and each of their subsidiaries. All of the V Cable,
VC Holding and U.S. Cable credit facilities are non-recourse to the Company
other than with respect to the common stock of V Cable owned by the Company.
Substantially all of the assets of V Cable, amounting to approximately $447,400
at December 31, 1994, have been pledged to secure borrowings under the V Cable
and VC Holding Credit Agreements. At December 31, 1994 V Cable's liabilities
exceeded its assets by approximately $451,900.
The V Cable and VC Holding Credit Agreements contain various restrictive
covenants, among which are the maintenance of certain financial ratios,
limitations regarding certain transactions, prohibitions against the transfer of
funds to the parent company (except for reimbursement of certain expenses), and
limitations on levels of permitted capital expenditures. V Cable and VC Holding
were in compliance or had obtained waivers of compliance with all of the
covenants of their loan agreements at December 31, 1994.
Due to reductions to regulated revenue arising from the latest round of FCC
regulation, V Cable believes that it is likely that it will be unable to meet
several of its financial covenants during 1995. To remedy the anticipated
covenant defaults, V Cable may request waivers and/or amendments to its credit
agreement and/or seek equity contributions from the Company. In January 1995,
the Company contributed $700 to
(75)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
V Cable, thereby enabling it to remain in compliance with its financial
covenants at December 31, 1994.
SUBORDINATED NOTES PAYABLE
In connection with the acquisition of Monmouth Cablevision and Riverview
Cablevision, in August 1994, Cablevision MFR issued promissory notes totalling
$141,268, due in 1998 and bearing interest at 6% until the third anniversary and
8% thereafter (increasing to 8%and 10% respectively, if interest is paid in
shares of the Company's Class A Common Stock). Principal and interest on the
notes is payable, at Cablevision MFR's election, in cash or in shares of the
Company's Class A Common Stock. The promissory notes are guaranteed by the
Company and the obligations under the guarantee rank pari passu with the
Company's subordinated debentures. In certain circumstances, Cablevision MFR
may extend the maturity date of the promissory notes until 2003 for certain
additional consideration.
SUMMARY OF FIVE YEAR DEBT MATURITIES
Total amounts payable by the Company and its subsidiaries under its various debt
obligations, including capital leases, during the five years subsequent to
December 31, 1994 are as follows:
<TABLE>
<CAPTION>
Restricted Cablevision Rainbow
Group V Cable MFR Programming AMCC Total
-------- ------- ----------- ----------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
1995 $ 6,464 $ - $ - $ 11 $ 8,000 $ 14,475
1996 2,517 - - 105,009 17,000 124,526
1997 70,015 18,000 - - 13,000 101,015
1998 114,154 20,000 141,268 - 6,000 281,422
1999 159,326 30,000 30,500 - - 219,826
</TABLE>
NOTE 5. PREFERRED STOCK
On March 31, 1994, the Company issued and sold 100,000 shares of its Series E
Redeemable Exchangeable Convertible Preferred Stock (the "Series E Preferred
Stock") to Toronto-Dominion Investments, Inc. in a private transaction. The
Series E Preferred Stock was sold for a purchase price of $1,000 per share and
carries a liquidation
(76)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
preference of a like amount plus accrued and unpaid dividends. Dividends accrue
at a floating rate of LIBOR plus 2.5 percent and are payable, at the Company's
option, either in cash or in registered shares of Class A common stock with a
value equalling 105 percent of the required dividend. Additional dividend
payments may be required with respect to the availability of the dividend
received deduction. The Series E Preferred Stock is redeemable at any time at
the option of the Company at par plus accrued and unpaid dividends to the
redemption date and are convertible after March 31, 1995 into Class A common
stock, at the option of the holder, at a conversion rate based on 95 percent of
the average closing price of the Class A Common Stock for the twenty business
days prior to conversion. Additionally, the holders of the Series E Preferred
Stock have the right to convert their shares in connection with certain change
in control transactions (regardless of when they occur) into a number of shares
of Class A Common Stock which would yield $100,000 based upon an auction process
involving the Class A Common Stock issuable on such conversion or, at the
holder's election, at a conversion rate based on 95 percent of the average
closing price of the Class A Common Stock for the twenty business days prior to
conversion. The Company has the right to suspend the conversion of the Series E
Preferred Stock from March 31, 1995 through March 31, 1997 as long as it is in
compliance with its Restricted Group Credit Agreement financial covenants and is
current in dividend payments on the Series E Preferred Stock.
The Company paid cash dividends on the Series E Preferred Stock during 1994 of
approximately $5,500.
The holders of the Company's 8% Series C Cumulative Preferred Stock ("Series C
Preferred Stock") may require the Company to redeem for cash at any time
commencing December 31, 1997 all or a portion of the outstanding shares of the
Series C Preferred Stock. The Company has the right, upon notice to the holders
requesting redemption, to convert all or a part of such shares into shares of
Class B Common Stock. If, in the future, holders require the Company to redeem
their Series C Preferred Stock, it is the Company's intention to convert such
shares into Class B Common Stock. The Company paid cash dividends on the Series
C Preferred Stock during each of 1994 and 1993 of $885.
(77)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(continued)
NOTE 6. INCOME TAXES
The Company and its majority-owned subsidiaries file consolidated federal income
tax returns. At December 31, 1994 the Company had consolidated net operating
loss carry forwards for tax purposes of approximately $867,909, which expire
between 2001 and 2009.
The tax effects of temporary differences which give rise to significant portions
of deferred tax assets or liabilities and the corresponding valuation allowance
at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
DEFERRED ASSET (LIABILITY)
Depreciation and amortization $(74,833) $(108,327)
Receivables from affiliates 19,312 29,135
Benefit plans 15,046 17,939
Allowance for doubtful accounts 3,192 2,210
Deficit investment in affiliate 200,111 168,975
Benefits of tax loss carry forwards 364,522 299,852
Other 8,643 5,562
--------- ---------
Net deferred tax assets 535,993 415,346
Valuation allowance (535,993) (415,346)
--------- ---------
$ - $ -
--------- ---------
--------- ---------
</TABLE>
The Company has provided a valuation allowance for the total amount of net
deferred tax assets since realization of these assets was not assured due
principally to the Company's history of operating losses.
(78)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
NOTE 7. OPERATING LEASES
The Company leases certain office, production and transmission facilities under
terms of leases expiring at various dates through 2004. The leases generally
provide for fixed annual rentals plus certain real estate taxes and other costs.
Rent expense for the years ended December 31, 1994, 1993 and 1992 amounted to
$12,036, $10,849 and $10,071, respectively.
In addition, the Company rents space on utility poles for its operations. The
Company's pole rental agreements are for varying terms, and management
anticipates renewals as they expire. Pole rental expense for the years ended
December 31, 1994, 1993 and 1992 amounted to approximately $6,947, $6,177 and
$5,042, respectively. The minimum future annual rentals for all operating
leases during the next five years, including pole rentals from January 1, 1995
through December 31, 1999, and thereafter, at rates now in force are
approximately: 1995, $16,123; 1996, $14,531; 1997, $12,810; 1998, $11,684,
1999, $11,070; thereafter, $7,278.
NOTE 8. AFFILIATE TRANSACTIONS
The Company has affiliation agreements with certain cable television programming
companies, varying ownership interests in which were held, directly or
indirectly, by Rainbow Programming during the three years ended December 31,
1994. Rainbow Programming's investment in these programming companies is
accounted for on the equity basis of accounting. Accordingly, the Company
recorded income (losses) of approximately $(1,007), $8,828 and $(12,428) in
1994, 1993 and 1992, respectively, representing its percentage interests in the
results of operations of these programming companies. Such amounts include
$4,304, $5,656 and $3,919 for 1994, 1993 and 1992, respectively, of the
Company's share of the net income of AMCC prior to its consolidation with the
Company in July 1994. At December 31, 1994 and 1993, the Company's investment
in these programming companies amounted to approximately $31,258 and $17,721,
respectively. Costs incurred by the Company for programming services provided
by these affiliates and included in technical expense for the years ended
December 31, 1994, 1993 and 1992 amounted to approximately $20,232, $26,732 and
$23,388, respectively. At December 31, 1994 and 1993, amounts due from certain
of these programming affiliates aggregated $62 and $1,367, respectively, and are
included in advances to affiliates. Also, at December 31, 1994 and 1993 amounts
due to certain of these affiliates, primarily for programming services provided
to the Company, aggregated $13,731 and $16,236, respectively, and are included
in accounts payable to affiliates.
(79)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
Summarized combined financial information relating to these programming
companies at December 31, 1994, 1993 and 1992 and for the years then ended is as
follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
Current assets $ 97,184 $133,060 $115,806
Noncurrent assets $ 33,815 $126,826 $ 86,812
Current liabilities $ 64,000 $ 93,071 $ 95,841
Noncurrent liabilities $ 6,257 $123,184 $102,847
Net revenues $ 270,676 $363,727 $322,019
Net income (loss) $ 3,473 $ 39,423 $ (9,272)
</TABLE>
NBC and Rainbow Programming formed a partnership which distributed on a
multi-channel, pay-per-view basis certain events of the 1992 Summer Olympics.
Pursuant to the agreement, profits and losses from the broadcast network
coverage and the pay-per-view coverage of the 1992 Summer Games were shared
equally by NBC and Rainbow Programming; however, Rainbow Programming's liability
under this agreement was limited to $50,000. The Company paid its share of the
loss ($50,000) in January 1993 with borrowings under the Credit Agreement.
Cablevision of Boston Limited Partnership ("Cablevision Boston") is a
Massachusetts limited partnership in which Mr. Dolan is the general partner and
in which the Company has certain direct and indirect partnership interests. The
Company is a limited partner in Cablevision Boston and currently holds a 7%
prepayout (prior to repayment of capital contributions to limited partners)
interest and a 20.7% postpayout interest in Cablevision Boston.
As of December 31, 1994 and 1993, the Company's consolidated financial
statements reflect advances ($8,000 of which were converted to Preferred Equity
in Cablevision Boston) to Cablevision Boston of approximately $17,718 and
$17,540, respectively. Such amounts are fully subordinated to certain of
Cablevision Boston's obligations to other lenders aggregating approximately
$63,000 and $68,250 plus accrued interest at December 31, 1994 and 1993,
respectively.
In June 1994, the Company and Cablevision Boston entered into an agreement which
is designed to give the Company full ownership of Cablevision Boston. The
agreement provides for the acquisition by the Company of the interests in
Cablevision Boston which it does not already own in a series of transactions.
The Company and Cablevision Boston have filed with the Securities and Exchange
Commission a Consent Solicitation
(80)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
Statement/Prospectus with respect to the proposed transactions. Each of the
transactions is subject to a number of conditions, including the approval by the
limited partners of Cablevision Boston who are unaffiliated with the general
partners of Cablevision Boston. Consummation of the transactions would result
in the limited partners in Cablevision Boston receiving Class A Common Stock of
the Company with an expected aggregate market value of approximately $40,000.
The Company has also advanced funds to Cablevision of Chicago ("Cablevision
Chicago"), an Illinois limited partnership and an affiliate whose general
partner is Mr. Dolan. At December 31, 1994 and 1993 a net of approximately
$12,310 and $12,445, respectively, was owed the Company and is included in
advances to affiliates in the accompanying consolidated balance sheets. Of the
amount owed, approximately $12,300 principal amount is evidenced by a
subordinated note bearing interest at the rate of 14% per annum, payable as to
principal and interest on demand. Repayment of this subordinated note and
accrued interest thereon is restricted until repayment of Cablevision Chicago's
bank indebtedness. The Company has reserved all amounts in respect of accrued
interest on this note.
In January, 1995, Cablevision of Chicago signed a definitive agreement to sell
its cable television systems to Continental Cablevision, Inc. The sale is
subject to franchise approvals and is expected to close in 1995. Upon
consummation of the sale, the Company expects that it will be repaid its
advances together with accrued interest thereon and would accordingly recognize
a gain (which, if recognized at December 31, 1994, would amount to approximately
$13,394) representing the cumulative unpaid interest reserved on the advances as
of that date.
During 1994, 1993 and 1992, the Company made advances to or incurred costs on
behalf of other affiliates engaged in providing cable television, cable
television programming, and related services. Amounts due from these affiliates
amounted to $6,591 and $6,805 at December 31, 1994 and 1993, respectively and
are included in advances to affiliates.
Cablevision of Newark, a partnership 25% owned and managed by the Company and
75% owned by an affiliate of Warburg Pincus, owns cable television systems
located in Newark and South Orange, New Jersey. The Company's share of the net
losses of Cablevision of Newark amounted to $3,631, $4,206 and $3,070 in 1994,
1993 and 1992, respectively. The Company manages the operations of Cablevision
of Newark for a fee equal to 3-1/2% of gross receipts, as defined, plus
reimbursement of certain costs and an allocation of certain selling, general and
administrative expenses. For 1994, 1993 and 1992, such management fees and
expenses amounted to $1,822, $1,632 and $1,526, respectively, of which $904,
$800 and $506, respectively, representing management fees, has been fully
reserved by the Company.
(81)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
In connection with the V Cable Reorganization (see Note 2), V Cable acquired for
$20,000, a 20% interest in U.S. Cable. The Company manages the properties of
U.S. Cable under management agreements that provide for cost reimbursement,
including an allocation of overhead charges. For 1994, 1993 and 1992, such cost
reimbursement amounted to $5,803, $4,894 and $2,160, respectively, which
included an allocation of overhead charges of $2,720, $2,604 and $1,200,
respectively.
The Company also manages A-R Cable under a management agreement that provides
for cost reimbursement, an allocation of overhead charges and a management fee
of 3-1/2% of gross receipts, as defined, with interest on unpaid annual
amounts thereon at a rate of 10% per annum beginning in 1993. Such management
fees amounted to $3,738 and $3,801 for 1994 and 1993, respectively and interest
thereon amounted to $659 and $244 for 1994 and 1993, respectively. Management
fees and interest thereon have been fully reserved by the Company.
In connection with its 30% interest in A-R Cable Partners (see note 2), the
Company recorded its share of the losses of A-R Cable Partners amounting to
$1,886 for the period from acquisition through December 31, 1994. The Company
manages the operations of A-R Cable Partners for a fee equal to 3-1/2% of gross
receipts, as defined, plus reimbursement of certain costs and an allocation of
certain selling, general and administrative expenses. For 1994 such management
fees and expenses amounted to approximately $249 of which $137, representing
management fees, was fully reserved by the Company.
Also, in connection with its 30% interest in CFHI (see note 2), the Company
recorded its share of the losses of CFHI amounting to $654 from the date of
acquisition through December 31, 1994. The Company manages the operations of
CFHI for a fee equal to 3-1/2% of gross receipts, as defined, plus reimbursement
of certain costs and an allocation of certain selling, general and
administrative expenses. For 1994 such management fees and expenses amounted to
approximately $108 of which $98, representing management fees, was fully
reserved by the Company.
On December 14, 1993, the Company purchased 50,000 shares of Class A Common
Stock from John Tatta, a director of the Company, at a price equal to the
closing price of a share of Class A Common Stock on such date. These shares are
being held as treasury stock.
(82)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
NOTE 9. BENEFIT PLANS
The Company maintains the CSSC Supplemental Benefit Plan (the "Benefit Plan")
for the benefit of certain officers and employees of the Company. As part of
the Benefit Plan, the Company established a nonqualified defined benefit pension
plan, which provides that, upon attaining normal retirement age, a participant
will receive a benefit equal to a specified percentage of the participant's
average compensation, as defined. Participants vest in all components of the
Benefit Plan 40% after four years of service and 10% for each additional year of
service. Net periodic pension cost for the years indicated consisted of the
following:
<TABLE>
<CAPTION>
1994 1993 1992
---- ----- -----
<S> <C> <C> <C>
Service cost for benefits earned
during the year $269 $350 $378
Interest cost on projected benefit
obligation 308 346 373
Actual return on plan assets (89) (1,292) (1,091)
Net amortization and deferral (385) 964 756
---- ----- -----
Total pension cost $103 $368 $416
---- ----- -----
---- ----- -----
</TABLE>
The following table sets forth the funded status of the Benefit Plan at
December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $3,770 $3,843
Non vested benefits - 10
------- -------
Projected benefit obligation 3,770 3,853
Plan assets at fair value 5,542 5,578
------- -------
Assets greater than
projected benefit obligation 1,772 1,725
Unrecognized net gain (1,526) (1,602)
Remaining unrecognized obligation 504 567
------- -------
Prepaid pension cost $ 750 $ 690
------- -------
------- -------
</TABLE>
The projected benefit obligation for the plan was determined using an assumed
discount rate and assumed long range rate of return of 8% in each of 1994 and
1993. No assumed rate of salary increase was used to compute the projected
benefit obligation, since substantially all participants are currently at their
maximum benefit level.
(83)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
(continued)
In addition, the Company accrues a liability in the amount of 7% of certain
officers' and employees' compensation, as defined. Each year the Company also
accrues for the benefit of these officers and employees interest on such
amounts. The officer or employee will receive such amounts upon termination of
employment. Such benefits will vest 40% after four years of service and 10%
each additional year of service. The cost associated with this plan for the
years ended December 31, 1994, 1993 and 1992 was approximately $337, $497 and
$358, respectively.
Prior to 1993, the Company, with other affiliates, maintained a defined
contribution pension plan covering substantially all employees. The Company
contributed 3% of eligible employees' annual compensation (as defined), and
employees could voluntarily contribute up to 10% of their annual compensation.
Effective January 1, 1993, the Board of Directors of the Company approved the
adoption of an amended and restated Pension and 401(K) Savings Plan (the
"Plan"), in part to permit employees of the Company and its affiliates to make
contributions to the Plan on a pre-tax salary reduction basis in accordance with
the provisions of Section 401(K) of the Internal Revenue Code, and to introduce
new investment options under the Plan. The Company contributes 1-1/2% of
eligible employees' annual compensation, as defined, to the defined contribution
portion of the Plan (the "Pension Plan") and an equivalent amount to the Section
401(K) portion of the Plan (the "Savings Plan"). Employees may voluntarily
contribute up to 15% of eligible compensation, subject to certain restrictions,
to the Savings Plan, with an additional matching contribution by the Company of
1/4 of 1% for each 1% contributed by the employee, up to a maximum contribution
by the Company of 1/2 of 1% of eligible base pay. Employee contributions are
fully vested as are employer base contributions to the Savings Plan. Employer
contributions to the Pension Plan and matching contributions to the Savings Plan
become vested in years three through seven. The cost associated with these
plans was approximately $3,125, $2,905 and $2,322 for the years ended
December 31, 1994, 1993 and 1992, respectively.
NOTE 10. STOCK BENEFIT PLANS
In June 1992, the Stockholders of the Company approved the Amended and Restated
Employee Stock Plan (the "Amended Plan") which consolidated the Company's prior
Stock Plan, Nonqualified Plan and Bonus Award Plan (the "Prior Plans"). Under
the Amended Plan, the Company is authorized to issue a maximum of 3,500,000
shares. The
(84)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
(continued)
Company may grant incentive stock options, nonqualified stock options,
restricted stock, conjunctive stock appreciation rights, stock grants and stock
bonus awards. The exercise price of stock options may not be less than the fair
market value per share of class A common stock on the date the option is granted
and the options expire no longer than ten years from date of grant. Conjunctive
stock appreciation rights permit the employee to elect to receive payment in
cash, either in lieu of the right to exercise such option or in addition to the
stock received upon the exercise of such option, equal to the difference between
the fair market value of the stock as of the date the right is exercised, and
the exercise price. Pursuant to its terms, no awards may be granted under the
Amended Plan after December 5, 1995.
Under the Amended Plan, during 1994 the Company issued options to purchase
525,400 shares of Class A common stock, stock appreciation rights related to
525,400 shares under option and stock awards of 68,400 common shares. 95,400 of
the options and related conjunctive stock appreciation rights are exercisable at
$42.00 per share and vest in 25% annual increments beginning from the date of
grant. 430,000 options and conjunctive rights are exercisable at $56.50 per
share and are currently vested. The stock awards vest 100% in May 1998.
In November 1994, the Company entered into agreements with three employees to
pay the value, as of that date, of options exercised with respect to 405,000
shares of the Company's Class A Common Stock, and to replace those options with
a combination of stock appreciation rights and newly issued options, with the
exercise price set at the market price of such stock on that date. In
accordance with the agreement, one-third of the value of the exercised options
was paid in cash with the remaining portion payable in equal installments on
November 18, 1995 and November 18, 1996. Accordingly, the Company recorded
expense related to the purchase of these options amounting to $13,215 in 1994,
representing the cash payment of approximately $4,673 and a liability for future
payments, included in accounts payable to affiliates in the accompanying
financial statements, amounting to approximately $8,542.
Under the Amended Plan, during 1993 the Company issued options to purchase
15,225 shares of class A common stock, stock appreciation rights related to
15,225 shares under option and stock awards of 10,225 common shares. The
options and related conjunctive stock appreciation rights are exercisable at
various prices ranging from $27.625 to $38.25 per share in 25% and 33% annual
increments beginning from the date of grant. The stock awards vest 100% by May
1996.
Under the Amended Plan, during 1992 the Company issued options to purchase
211,350 shares of class A common stock, stock appreciation rights related to
211,350 shares under option and stock awards of 211,350 common shares. The
options and related conjunctive
(84)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
(continued)
stock appreciation rights are exercisable at $27.625 per share in 25% annual
increments beginning one year from the date of grant. The stock awards vest
100% four years from date of grant. Also, during 1992 the Company granted to
certain employees conjunctive stock appreciation rights with respect to 472,500
shares under options granted in prior years under the Company's 1985 Employee
Stock Plan. Those options are exercisable at prices ranging from $16.625 to
$36.00 and vest at various times during the period from October 1992 through
October 1996.
Pursuant to a Bonus Award Plan ("Bonus Plan"), adopted in 1986, in 1990 the
Company granted to fifteen employees the right to receive 118,900 shares of
class A common stock or, at the election of the Stock Option Committee, cash
equal to the product of such number of shares times the closing price of a share
of Class A Common Stock at the time of issuance. In May 1992, in accordance
with the provisions of the Bonus Plan, the Company paid in cash the value of
59,450 shares based on a market price of $28-6/8, totalling $1,709. Rights to
the remaining 49,969 shares (after cancellation of 9,481 shares resulting from
employee terminations) vested on May 17, 1994 and were paid in cash based on a
market price of $42.00 (for 43,800 shares on that date) and $64.00 (for 6,169
shares vested on a pro rata basis on February 28, 1994), totalling $2,234.
Stock transactions under the Amended Plan and Prior Plans are as follows:
<TABLE>
<CAPTION>
Shares Stock Stock or
Under Appreciation Bonus Available Option
Option Rights Awards For Grant Price Range
---------- ------------ --------- ---------- --------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1991 2,249,988 274,938 325,650 354,994 $14.50-$37.13
Granted 211,350 683,850 211,350 (422,700) $16.63-$36.00
Exercised/issued (132,537) (8,387) (92,825) $14.50-$24.50
Cancelled (6,675) (6,675) (85,700) 92,375 $24.50-$27.625
---------- ---------- --------- ---------
Balance, December 31, 1992 2,322,126 943,726 358,475 24,669 $14.50-$37.13
Granted 15,225 15,225 10,225 (25,450) $27.63-$38.25
Exercised/issued (478,582) (84,017) (15,000) $14.50-$36.00
Cancelled (124,074) (19,989) (28,050) 152,124 $16.63-$37.13
---------- ---------- --------- ---------
Balance, December 31, 1993 1,734,695 854,945 325,650 151,343 $14.50-$38.25
Granted 525,400 525,400 68,400 (593,800) $42.00-$56.50
Exercised/issued (358,528) (161,952) (48,430) - $14.50-$36.00
Cancelled (434,390) (59,866) (109,241) 543,631 $16.63-$42.00
---------- ---------- --------- ---------
Balance, December 31, 1994 1,467,177 1,158,527 236,379 101,174 $14.50-$56.50
---------- ---------- --------- ---------
---------- ---------- --------- ---------
</TABLE>
(86)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
(continued)
At December 31, 1994, options for approximately 1,060,000 shares were
exercisable. As a result of the stock awards, bonus awards, stock appreciation
rights and the expensing of the cash payment made for certain executive stock
options, the Company expensed approximately $6,814, $28,234 and $9,656 in 1994,
1993 and 1992, respectively. The 1994 amount reflects a credit of approximately
$6,401 primarily resulting from a decline in the market price of the Company's
Class A Common Stock.
NOTE 11. COMMITMENTS AND CONTINGENCIES
The Company, through Rainbow Programming, has entered into several contracts
relating to feature film rights and has guaranteed rights payments to
professional and other sports teams. These contracts typically require
substantial payments over extended periods of time. Amounts payable by AMCC or
guaranteed by the Company during the five years subsequent to December 31, 1994
relating to feature film rights and rights payments to professional and other
sports teams amount to $33,313 in 1995, $28,691 in 1996, $24,280 in 1997,
$11,578 in 1998, and $7,188 in 1999.
The Company has employment agreements with certain of its executive officers
expiring at various dates through December 31, 1997. The agreements provide for
minimum annual salaries and, in certain cases, additional amounts and
acceleration of certain stock options, stock appreciation rights and stock
awards in the event of a change in control of the Company, as defined in the
agreements. Aggregate minimum payments under the salary portion of these
agreements amount to $1,830 in 1995, $1,230 in 1996 and $2,130 in 1997.
The Company does not provide post-retirement benefits to any of its employees.
NOTE 12. OTHER MATTERS
During 1992, the Company recorded expenses of $5,655 in connection with the
settlement of certain litigation pending against Mr. Dolan and the Company and
other related matters. The litigation was based upon an alleged breach of
fiduciary duty by Mr. Dolan, as the general partner of Cablevision Programming
Investments and Rainbow Program Enterprises ("RPE"), involving the allocation of
partnership profits from 1983 through 1986 and Rainbow Programming's offer to
purchase limited partnership interests in 1986. The amounts provided also
include an estimated value of certain untendered interests in RPE based upon the
values utilized in connection with the settlements relating to Cablevision
Programming Investments.
(87)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share amounts)
(continued)
In addition, the Company is party to various other lawsuits, some involving
substantial amounts. Management does not believe that the resolution of these
lawsuits will have a material adverse impact on the financial position of the
Company.
The cable systems located in New York State that are owned by the Company are
subject to agreements (the "New York Upgrade Agreements") with the New York
State Commission on Cable Television (the "New York Cable Commission"). The New
York Upgrade Agreements require the substantial upgrade of certain cable systems
by 1995-1996, subject to certain minor exceptions. The upgrade of portions of
these cable television systems, which were required to have been completed by
year-end 1994 under the New York Upgrade Agreements, were not completed at that
time. Additionally, the Company anticipates that the upgrade of portions of
certain other cable television systems that are required to be completed by
year-end 1995, will not be completed at that time. The Company has requested an
amendment to the New York Upgrade Agreements to provide additional time to
complete the upgrades and based upon conversations with the New York Cable
Commission, is confident that such amendment will be obtained, although there
can be no assurance that such amendment will be so obtained. Management of the
Company does not expect that the resolution of these matters will have a
material adverse effect on the financial position of the Company.
The Company recorded a one time charge of $4,306 during 1994 to provide for
severance and related costs, attributable entirely to terminated employees,
resulting from a restructuring of its operations. Substantially all of such
amounts were paid during 1994.
NOTE 13. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL
INSTRUMENTS
CASH AND CASH EQUIVALENTS, TRADE ACCOUNTS RECEIVABLE, NOTES AND OTHER
RECEIVABLES, ACCOUNTS PAYABLE, ACCRUED LIABILITIES, ACCOUNTS PAYABLE TO
AFFILIATES, FEATURE FILM RIGHTS PAYABLE AND OBLIGATION TO RELATED PARTY
The carrying amount approximates fair value due to the short maturity of these
instruments.
BANK DEBT, SENIOR DEBT, SENIOR SUBORDINATED DEBENTURES, AND SUBORDINATED NOTES
PAYABLE
The fair values of each of the Company's long-term debt instruments are based on
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
(88)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
INTEREST RATE SWAP AGREEMENTS
The fair values of interest rate swap agreements are obtained from dealer
quotes. These values represent the estimated amount the Company would receive
or pay to terminate agreements, taking into consideration current interest rates
and the current creditworthiness of the counterparties.
The fair value of the Company's financial instruments are summarized as follows:
<TABLE>
<CAPTION>
December 31, 1994
----------------------------
Carrying Estimated
Amount Fair Value
---------- -----------
<S> <C> <C>
Long term debt instruments:
Bank debt $1,335,419 $1,335,419
Senior debt 862,440 862,440
Senior subordinated debentures 623,534 587,000
Subordinated notes payable 141,268 122,700
---------- ----------
$2,962,661 $2,907,559
---------- ----------
---------- ----------
Interest rate swap and cap agreements:
In a net receivable position $ - $ 1,126
---------- ----------
---------- ----------
</TABLE>
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
NOTE 14. RECENT CABLE TELEVISION REGULATIONS
In October, 1992, the Congress of the United States passed the Cable Television
Consumer Protection and Competition Act of 1992 (the "1992 Cable Act") which
among other matters, provides for the regulation of basic and certain other
cable programming services. In April 1993, the Federal Communications
Commission ("FCC") adopted regulations governing rates for basic and certain
other cable programming services which became effective September 1, 1993.
Under the provisions of these regulations, certain revenues derived from cable
television are determined under either a "benchmark" or "cost of service"
method. Effective September 1, 1993 the Company's systems had set their
(89)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
rates using the benchmark method which compares the Company's rates to those
which are in effect at cable systems deemed to face effective competition by the
FCC.
In February 1994 and November 1994, the FCC significantly modified the September
1993 rate regulations. These modifications were designed to further reduce
subscriber rates and most annual basic and cable programming service rate
increases (other than per-event and per-channel services), as well as to provide
cable television system operators financial incentive to introduce new
programming services. Management has implemented the rules in a manner it
believes to be consistent with the regulations promulgated by the FCC and,
accordingly, does not expect such modifications to have a material adverse
effect on the future operations of the Company.
NOTE 15. SUBSEQUENT EVENTS
On March 10, 1995, MSG Holdings, L.P. ("Holdings"), a partnership between a
subsidiary of Rainbow Programming and a subsidiary of ITT Corporation, a
Delaware corporation ("ITT"), acquired Madison Square Garden Corporation ("MSG")
in a transaction in which MSG merged with and into Holdings. The purchase price
paid by Holdings for MSG was $1,009,100.
Holdings funded the purchase price of the acquisition through (i) borrowings of
$289,100 under a $450,000 credit agreement among Holdings, various lending
institutions and Chemical Bank as administrative agent, (ii) an equity
contribution from Rainbow Programming of $110,000, and (iii) an equity
contribution from ITT of $610,000. ITT, Rainbow Programming and the Company are
parties to an agreement made as of August 15, 1994 (the "Bid Agreement")
pursuant to which it has been agreed that within 12 months following the MSG
closing, Rainbow Programming may elect to acquire interests in Holdings from ITT
sufficient to equalize the equity ownership of ITT and Rainbow Programming in
Holdings (the "Equalization Interest"). Rainbow Programming has the option
during the 12 months following the MSG acquisition closing to (i) acquire all or
a portion of the Equalization Interest for cash (including interest on such
Equalization Interest at the rate of 11 1/2% per year calculated from the MSG
acquisition closing date), (ii) maintain its investment at the initial level, or
(iii) require ITT to purchase one half of Rainbow Programming's initial interest
in Holdings at the price paid by Rainbow Programming plus an adjustment for
Rainbow Programming's share of Holdings' operating income after interest expense
following the MSG acquisition closing. Rainbow Programming has until one year
from the time of the MSG closing to make its election and has not yet decided
which alternative it will pursue.
(90)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
Initially Holdings will be managed on a 50-50 basis by Rainbow Programming and
ITT. If, as discussed above, Rainbow Programming does not equalize its
ownership interest in Holdings by the first anniversary of the closing, its
management role will be effectively eliminated. Rainbow Programming also has
the right to voluntarily relinquish any power to direct the management and
policies of Holdings.
Pursuant to an agreement between Rainbow Programming and National Broadcasting
Company, Inc. ("NBC"), NBC may require Rainbow Programming, by notice given on
or before April 13, 1995, to purchase its interests in SportsChannel (New York)
Associates ("SCNY") and Rainbow News 12 Company (the "NBC Put") for an aggregate
purchase price which, as of February 28, 1995, would amount to approximately
$93,000. In the event that NBC elects to require Rainbow Programming to
purchase such interest, Rainbow Programming will have 120 days to consummate the
acquisition. On January 27, 1995, Rainbow Programming entered into an amended
and restated credit agreement with Toronto Dominion (Texas), Inc., and the
Canadian Imperial Bank of Commerce, as co-agents and a group of banks increasing
Rainbow Programming's credit facility from $105,000 to $202,000 to provide funds
in the event the NBC Put is exercised. The facility will reduce to $108,000 if
the NBC Put is not exercised.
(91)
<PAGE>
CABLEVISION SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
NOTE 16. INTERIM FINANCIAL INFORMATION (UNAUDITED)
The following is a summary of selected quarterly financial data for the years
ended December 31, 1994 and 1993.
<TABLE>
<CAPTION>
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, TOTAL
------------------ ------------------ ------------------ ------------------- --------------------
1994 1993 1994 1993 1994 1993 1994 1993 1994 1993
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues . . . . . . . $176,087 $157,023 $192,090 $168,170 $223,468 $169,563 $245,524 $171,968 $ 837,169 $ 666,724
Operating expenses . . . 154,934 139,850 166,511 147,465 195,818 149,083 257,213 173,070 774,476 609,468
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Operating profit (loss). $ 21,153 $ 17,173 $ 25,579 $ 20,705 $ 27,650 $ 20,480 $(11,689) $ (1,102) $ 62,693 $ 57,256
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net loss applicable to
common shareholders . . $(57,348) $(55,910) $(56,557) $(49,007) $(68,925) $(55,649) $(138,706) $(87,101) $(321,536) $(247,667)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
Net loss per common
share . . . . . . . . . $ (2.46) $ (2.46) $ (2.42) $ (2.15) $ (2.93) $ (2.44) $ (5.87) $ (3.78) $ (13.72) $ (10.83)
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
-------- -------- -------- -------- -------- -------- -------- -------- --------- ---------
</TABLE>
(92)
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
The information called for by Item 10, Directors and Executive Officers of the
Registrant, Item 11, Executive Compensation, Item 12, Security Ownership of
Certain Beneficial Owners and Management and Item 13, Certain Relationships and
Related Transactions, is hereby incorporated by reference to the Company's
definitive proxy statement for its Annual Meeting of Shareholders anticipated to
be held in June, 1995 or if such definitive proxy statement is not filed with
the Commission prior to April 30, 1995, to an amendment to this report on Form
10-K405 filed under cover of Form 8.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULE, AND
REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this report:
1. The financial statements as indicated in the index is set
forth on page 53.
2. Financial Statement schedule:
Page
No.
----
Schedule supporting consolidated financial statements:
Schedule II - Valuation and Qualifying Accounts. . . . 94
Schedules other than that listed above have been omitted, since they are either
not applicable, not required or the information is included elsewhere herein.
3. Independent auditors report and accompanying financial
statements of A-R Cable Services, Inc. are filed as part of
this report on page 95.
4. The Index to Exhibits is on page 115.
(b) Reports on Form 8-K:
There were no reports on Form 8k filed during the last quarter of the fiscal
period covered by this report.
(93)
<PAGE>
CABLEVISION SYSTEMS CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)
<TABLE>
<CAPTION>
Balance at
Beginning Charged to Costs Charged to Deductions- Balance at
of Period and Expenses Other Accounts Write-Offs End of Period
----------- ---------------- -------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful
accounts. . . . . . . . $5,055 $11,849 $ - $(6,817) $10,087
------ ------- ------ -------- -------
------ ------- ------ -------- -------
YEAR ENDED DECEMBER 31, 1993
Allowance for doubtful
accounts. . . . . . . . $3,232 $ 9,138 $ - $(7,315) $ 5,055
------ ------- ------ -------- -------
------ ------- ------ -------- -------
YEAR ENDED DECEMBER 31, 1992
Allowance for doubtful
accounts. . . . . . . . $1,965 $ 5,654 $1,972 $(6,359) $ 3,232
------ ------- ------ -------- -------
------ ------- ------ -------- -------
</TABLE>
(94)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of
Cablevision Systems Corporation)
Consolidated Financial Statements
December 31, 1994 and 1993
(With Independent Auditors' Report Thereon)
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
A-R Cable Services, Inc.
We have audited the accompanying consolidated balance sheets of A-R Cable
Services, Inc. (a wholly-owned subsidiary of Cablevision Systems Corporation)
and subsidiaries as of December 31, 1994 and 1993 and the related consolidated
statements of operations, stockholder's deficiency and cash flows for each of
the years in the three-year period ended December 31, 1994. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of A-R Cable Services,
Inc. and subsidiaries at December 31, 1994 and 1993 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1994 in conformity with generally accepted accounting
principles.
As described in Note 7 to the consolidated financial statements, the Company
adopted the provisions of the Financial Accounting Standards Board's Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes", on a
prospective basis in 1993.
/s/ KPMG Peat Marwick LLP
---------------------------
KPMG Peat Marwick LLP
Jericho, New York
March 10, 1995
(96)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(in thousands)
<TABLE>
<CAPTION>
1994 1993
--------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . $ 41 $ 398
Accounts receivable trade (less allowance for doubtful . .
accounts of $321 and $260). . . . . . . . . . . 1,345 1,369
Notes and other receivables. . . . . . . . . . . . . . . . 1,616 1,524
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . 621 647
Property, plant and equipment, net . . . . . . . . . . . . 107,004 99,109
Subscriber lists, net of accumulated amortization of . . .
$53,760 and $46,080 . . . . . . . . . . . . . . 7,040 14,720
Franchises, net of accumulated amortization of . . . . . .
$226,707 and $194,320 . . . . . . . . . . . . . 13,493 45,880
Excess costs over fair value of net assets acquired, net of
accumulated amortization of $60,683 and $52,077 111,833 120,439
Deferred financing and other costs, net of accumulated . .
amortization of $6,295 and $4,665 . . . . . . . 3,132 4,262
-------- --------
$246,125 $288,348
-------- --------
-------- --------
</TABLE>
See accompanying notes to
consolidated financial statements.
(97)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
(in thousands)
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S DEFICIENCY
Accounts payable . . . . . . . . . . . . . . . . . . . . $ 14,175 $ 14,566
Accrued liabilities:
Interest. . . . . . . . . . . . . . . . . . . 6,475 1,754
Payroll and related benefits. . . . . . . . . 1,677 1,956
Franchise fees. . . . . . . . . . . . . . . . 1,424 1,556
Insurance . . . . . . . . . . . . . . . . . . 942 989
Other . . . . . . . . . . . . . . . . . . . . 5,461 6,673
Amounts payable to affiliates, net . . . . . . . . . . . 238 602
Due to parent. . . . . . . . . . . . . . . . . . . . . . 11,325 7,191
Senior term loan . . . . . . . . . . . . . . . . . . . . 400,575 397,500
Capital lease obligations. . . . . . . . . . . . . . . . 71 232
Subscriber deposits. . . . . . . . . . . . . . . . . . . 782 873
Deferred income taxes. . . . . . . . . . . . . . . . . . 6,082 20,127
-------- --------
Total liabilities . . . . . . . . . . . . . . 449,227 454,019
-------- --------
Commitments and contingencies
Preferred Stock - Series A . . . . . . . . . . . . . . . 170,812 141,578
-------- --------
Preferred Stock - Series B . . . . . . . . . . . . . . . 61,678 54,502
-------- --------
Stockholder's deficiency:
Common stock $.50 par value, 20,000 shares
authorized, 19,000 shares issued and
outstanding . . . . . . . . . . . . . . . . 9,500 9,500
Paid-in capital . . . . . . . . . . . . . . . 41,350 41,350
Accumulated deficit . . . . . . . . . . . . . (486,442) (412,601)
-------- --------
Total stockholder's deficiency. . . . . . . (435,592) (361,751)
-------- --------
$ 246,125 $ 288,348
-------- --------
-------- --------
</TABLE>
See accompanying notes
to consolidated financial statements.
(98)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Revenues (including affiliate amounts of
$1,306, $1,090 and $862). . . . . . . . . . . . . . $107,026 $108,711 $105,629
-------- -------- --------
Operating expenses:
Technical expenses (including affiliate amounts of
$2,246, $2,787 and $2,690) . . . . . . . . . . . . 38,269 38,316 36,107
Selling, general and administrative expenses (including
affiliate amounts of $7,262, $7,174 and $5,102). . 22,592 24,664 19,860
Depreciation and amortization . . . . . . . . . . . 64,695 63,731 50,204
-------- -------- --------
125,556 126,711 106,171
-------- -------- --------
Operating loss. . . . . . . . . . . . . . . . . . (18,530) (18,000) (542)
Other income (expense):
Interest expense, net (including affiliate amounts of
$659, $244 and $0) . . . . . . . . . . . . . . . . (33,572) (27,894) (44,326)
Loss on retirement of debt. . . . . . . . . . . . . - (390) (2,435)
Gain on retirement of 1987 Cumulative Preferred
Stock. . . . . . . . . . . . . . . . . . . . . . . - 33,509
Miscellaneous, net. . . . . . . . . . . . . . . . . (799) (792) (2,051)
-------- -------- --------
Net loss before income tax benefit . . . . . . . . . . . . . . (52,901) (47,076) (15,845)
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . 14,045 14,168 -
-------- -------- --------
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . (38,856) (32,908) (15,845)
-------- -------- --------
Dividend requirements applicable to:
1987 Cumulative Preferred Stock . . . . . . . . . . - - (1,415)
Series A Preferred Stock. . . . . . . . . . . . . . (28,236) (23,512) (13,066)
Series B Preferred Stock. . . . . . . . . . . . . . (6,749) (5,998) (3,504)
-------- -------- --------
(34,985) (29,510) (17,985)
-------- -------- --------
Net loss applicable to common stockholder. . . . . . . . . . . $(73,841) $(62,418) $(33,830)
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes
to consolidated financial statements.
(99)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIENCY
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands)
<TABLE>
<CAPTION>
Common Stock
--------------- Paid-In Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ----------- ----------
<S> <C> <C> <C> <C>
Balance December 31, 1991. . . . . . . . . 19,000 $9,500 $40,500 $(316,353) $(266,353)
Preferred dividend requirements - - - (17,985) (17,985)
Net loss. . . . . . . . . . . . - - - (15,845) (15,845)
------ ------ ------- ---------- ---------
Balance December 31, 1992. . . . . . . . . 19,000 9,500 40,500 (350,183) (300,183)
Preferred dividend requirements - - - (29,510) (29,510)
Net loss. . . . . . . . . . . . - - - (32,908) (32,908)
Capital contributions . . . . . - - 850 - 850
------ ------ ------- ---------- ---------
Balance December 31, 1993. . . . . . . . . 19,000 9,500 41,350 (412,601) (361,751)
Preferred dividend requirements - - - (34,985) (34,985)
Net loss. . . . . . . . . . . . - - - (38,856) (38,856)
------ ------ ------- ---------- ---------
Balance December 31, 1994. . . . . . . . . 19,000 $9,500 $41,350 $(486,442) $(435,592)
------ ------ ------- ---------- ---------
------ ------ ------- ---------- ---------
</TABLE>
See accompanying notes
to consolidated financial statements.
(100)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands)
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . $(38,856) $(32,908) $(15,845)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Income tax benefit. . . . . . . . . . . . . . . (14,045) (14,168) -
Depreciation and amortization . . . . . . . . . 64,695 63,731 50,204
Amortization of deferred financing costs. . . . 1,630 1,577 1,487
Amortization of original issue discount
on subordinated notes payable. . . . . . . . . - - 16,911
Loss on retirement of debt. . . . . . . . . . . - 390 2,435
Gain on retirement of cumulative preferred
stock. . . . . . . . . . . . . . . . . . . . . - - (33,509)
(Gain) loss on sale of equipment. . . . . . . . 165 (104) 449
Change in assets and liabilities:
Decrease in accounts receivable trade . . . . . 24 24 371
Increase in notes and other receivables . . . . (92) (463) (238)
Decrease (increase) in prepaid expenses . . . . 26 (32) 60
Increase (decrease) in accounts payable . . . . (391) 5,298 1,112
Increase (decrease) in accrued liabilities. . . 3,051 3,800 (5,316)
Increase (decrease) in amounts payable to
affiliates, net. . . . . . . . . . . . . . . . (364) (192) 73
Increase in due to parent . . . . . . . . . . . 4,134 4,292 2,034
Decrease in subscriber deposits . . . . . . . . (91) (77) (69)
-------- -------- --------
Total adjustments. . . . . . . . . . . . . . . 58,742 64,076 36,004
-------- -------- --------
Net cash provided by operating activities. . . 19,886 31,168 20,159
-------- -------- --------
Cash flows from investing activities:
Capital expenditures. . . . . . . . . . . . . . . (24,404) (25,220) (10,724)
Proceeds from sale of equipment . . . . . . . . . 322 242 137
-------- -------- --------
Net cash used in investing activities. . . . . . $(24,082) $(24,978) $(10,587)
-------- -------- --------
-------- -------- --------
</TABLE>
See accompanying notes
to consolidated financial statements.
(101)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(in thousands)
(continued)
<TABLE>
<CAPTION>
1994 1993 1992
------- -------- --------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from senior debt . . . . . . . . . . $ 9,500 $ 39,639 $ 95,803
Repayments of senior debt . . . . . . . . . . (6,425) (17,500) (31,692)
Redemption of subordinated notes payable. . . - (28,793) (219,861)
Proceeds from issuance of Series A Preferred
Stock. . . . . . . . . . . . . . . . . . . . 998 - 105,000
Proceeds from issuance of Series B Preferred
Stock. . . . . . . . . . . . . . . . . . . . 427 - 45,000
Capital contributions . . . . . . . . . . . . - 850 -
Repayment of capital lease obligations. . . . (161) (299) (451)
Additions to deferred financing and other costs (500) (206) (3,611)
------- -------- --------
Net cash provided by (used in) financing
activities. . . . . . . . . . . . . . . . . 3,839 (6,309) (9,812)
------- -------- --------
Net decrease in cash and cash equivalents. . . . . . . . (357) (119) (240)
Cash and cash equivalents at beginning of year . . . . . 398 517 757
------- -------- --------
Cash and cash equivalents at end of year . . . . . . . . $ 41 $ 398 $ 517
------- -------- --------
------- -------- --------
</TABLE>
See accompanying notes
to consolidated financial statements.
(102)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 1994, 1993 and 1992
(Dollars in thousands)
NOTE 1. THE COMPANY
A-R Cable Services, Inc. ("A-R Cable" or the "Company") a wholly-owned
subsidiary of Cablevision Systems Corporation ("CSC") or ("Parent") was
organized for the purpose of constructing and operating cable television
systems.
NOTE 2. 1992 RESTRUCTURING
On May 11, 1992, the Company and CSC consummated a restructuring and
refinancing transaction whereby the Company repurchased approximately
$236,841 principal amount of Senior Subordinated Deferred Interest Notes (the
"A-R Cable Notes"), representing approximately 86.9% principal amount of the
A-R Cable Notes outstanding pursuant to the terms of a tender offer. In
connection with the consummation of the tender offer, Warburg, Pincus
Investors, L.P. ("Warburg Pincus") purchased a new Series A Preferred Stock
of the Company for a cash investment of $105,000, and CSC purchased a new
Series B Preferred Stock of the Company for a cash investment of $45,000. In
addition, General Electric Capital Corporation ("GECC") provided the Company
with an additional $70,000 under a secured revolving credit line.
In connection with Warburg Pincus' investment in the Company, upon the
receipt of certain regulatory approvals, Warburg Pincus will be permitted to
elect three of the six members of the Company's board of directors, will have
approval rights over certain major corporate decisions of the Company and
will be entitled to 60% of the vote on all matters on which holders of
capital stock are entitled to vote (other than the election of directors).
CSC (through a wholly- owned subsidiary) continues to own the common stock,
as well as the Series B Preferred Stock, and CSC continues to manage the
Company under a management agreement that provides for cost reimbursement, an
allocation of overhead charges and a management fee of 3-1/2% of gross
receipts, as defined, with interest on unpaid annual amounts thereon at a
rate of 10% per annum. The 3-1/2% fee is payable by the Company only after
repayment in full of its senior debt and certain other obligations. Under
certain circumstances, the fee is subject to reduction to 2-1/2% of gross
receipts.
After May 11, 1997, either Warburg Pincus or CSC may irrevocably cause the
sale of the Company, subject to certain conditions. In certain
circumstances, Warburg Pincus may cause the sale of the Company prior to that
date. If Warburg Pincus initiates the sale, CSC will have the right to
purchase the Company through an appraisal procedure. CSC's purchase right
may be forfeited in certain circumstances. Upon the sale of the
(103)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
Company, the net sales proceeds, after repayment of all outstanding
indebtedness and other liabilities, will be used as follows: first, to repay
Warburg Pincus' investment in the Series A Preferred Stock; second, to repay
CSC's investment in the Series B Preferred Stock; third, to repay the
accumulated unpaid dividends on the Series A Preferred Stock (19% annual
rate); fourth, to repay the accumulated unpaid dividends on the Series B
Preferred Stock (12% annual rate); fifth, to pay CSC for all accrued and
unpaid management fees together with accrued but unpaid interest thereon;
sixth, pro rata 60% to the Series A Preferred Stockholders, 4% to the Series
B Preferred Stockholders and 36% to the common stockholder(s).
Also in connection with the purchase of the A-R Cable Notes, the Company
purchased from an affiliate, for nominal consideration, and retired its
previously outstanding 1987 Cumulative Preferred Stock ("1987 Preferred
Stock"). The affiliate had purchased the 1987 Preferred Stock from GECC. In
connection with the purchase of the 1987 Preferred Stock, a transaction fee
agreement between the Company and GECC was terminated and the Company's
obligations thereunder were extinguished. The Company recognized a gain of
$33,509 on its purchase of the 1987 Preferred Stock.
In October and November 1992, the Company repurchased approximately $6,900
principal amount of the A-R Cable Notes and in February 1993, the Company
redeemed all of its remaining outstanding A-R Cable Notes in the aggregate
principal amount of $28,793 (plus accrued interest of $522) in accordance
with the terms of the Indenture with respect to the A-R Cable Notes. The
funds for such redemptions were obtained from the proceeds of additional
borrowings provided by GECC under the Company's secured revolving credit line.
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of the Company include the accounts of
the Company and its subsidiaries, all of which are wholly owned. All
significant intercompany balances and transactions have been eliminated in
consolidation.
REVENUE RECOGNITION
The Company recognizes revenues as cable television services are provided to
subscribers.
(104)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including construction materials, are recorded
at cost, which includes all direct costs and certain indirect costs
associated with the construction of cable television transmission and
distribution systems, and the costs of new subscriber installations.
Property, plant and equipment are being depreciated over their estimated
useful lives using the straight-line method. Leasehold improvements are
amortized over the shorter of their useful lives or the term of the related
leases.
DEFERRED FINANCING COSTS
Costs incurred to obtain debt are deferred and amortized on the straight-line
basis over the life of the related debt.
SUBSCRIBER LISTS, FRANCHISES, AND EXCESS COSTS OVER FAIR VALUE OF NET ASSETS
ACQUIRED
Subscriber lists are amortized on the straight-line basis over varying
periods during which subscribers are expected to remain connected to the
system (averaging approximately 8 years). Franchises are amortized on the
straight-line basis over the average remaining term of the franchises
(approximately 7 years). Excess costs over fair value of net assets acquired
are being amortized over 20 years on the straight-line basis. The Company
assesses the recoverability of such excess costs based upon undiscounted
anticipated future cash flows of the businesses acquired.
INCOME TAXES
The Company is not a member of the CSC consolidated group for federal tax
purposes and, accordingly, files a separate federal income tax return on
behalf of itself and its consolidated subsidiaries.
Effective January 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which requires the liability method of accounting for deferred income
taxes and permits the recognition of deferred tax assets, subject to an
ongoing assessment of realizability. Prior years' financial statements have
not been restated to reflect the provisions of SFAS 109.
(105)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
CASH FLOWS
For purposes of the consolidated statements of cash flows, the Company
considers short-term investments with a maturity at date of purchase of three
months or less to be cash equivalents. The Company paid cash interest
expense of approximately $26,672, $25,030 and $43,008 during the years ended
December 31, 1994, 1993 and 1992, respectively. The Company's noncash
investing and financing activities included preferred stock dividend
requirements of $34,985, $29,510 and $17,985 in 1994, 1993 and 1992,
respectively.
NOTE 4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following items which are
depreciated over the estimated useful lives shown below:
<TABLE>
<CAPTION>
December 31, December 31, Estimated
1994 1993 Useful Lives
------------ ------------ ------------
<S> <C> <C> <C>
Distribution systems . . . . . . $199,702 $178,469 5-15 years
Machinery and equipment. . . . . 6,038 5,532 5-7 years
Furniture and fixtures . . . . . 1,327 1,229 7 years
Vehicles . . . . . . . . . . . . 7,256 6,387 4 years
Buildings. . . . . . . . . . . . 2,047 2,047 25 years
Leasehold improvements . . . . . 1,273 1,075 Life of lease
Land . . . . . . . . . . . . . . 920 920 -
-------- --------
218,563 195,659
Less accumulated depreciation
and amortization . . . . . . . 111,559 96,550
-------- --------
$107,004 $ 99,109
-------- --------
-------- --------
</TABLE>
NOTE 5. SENIOR TERM LOAN
The Company's outstanding borrowings under its senior term loan and revolving
lines of credit (the "Senior Term Loan") with GECC amounted to $400,575 and
$397,500 at December 31, 1994 and 1993, respectively. The facility consists
of a $285,000 senior term loan, $95,000 in special funding advances and a
$45,000 revolving line of credit. The Senior Term Loan and revolving line of
credit are non-amortizing and mature on December 30, 1997. The special
funding advances require amortization, amounting to $3,750 per quarter,
commencing January 1, 1997. The balance is due on December 30, 1997.
Aggregate undrawn funds available under the revolving line of credit at
December 31, 1994 amounted to approximately $24,425 of which $191 was
restricted for certain letters of credit issued on behalf of the Company.
(106)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
Interest rates on $400,575 of the Senior Term Loan are at floating rates
based on either GECC's LIBOR (as defined in the agreement) or Index Rate plus
applicable percentages, which vary depending upon certain prescribed
financial ratios. The weighted average interest rate approximated 9.05% at
December 31, 1994. In addition, the Company entered into an interest rate
cap agreement with a bank on a notional amount of $155,000 which limits the
interest rate the Company will pay on that amount to 7.25%. The cap
agreement terminates in May 1995. The Company is exposed to credit loss in
the event of nonperformance by the other party to the cap agreement.
However, the Company does not anticipate nonperformance by the counterparty.
Substantially all of the assets of the Company have been pledged to secure
the borrowings under the Senior Term Loan agreement.
The Senior Term Loan agreement contains various restrictive covenants, among
which are the maintenance of certain financial ratios, limitations regarding
certain transactions by the Company, prohibitions against the transfer of
funds to the parent company (except for reimbursement of certain expenses)
and limitations on levels of permitted capital expenditures. The Company was
in compliance with all of the covenants of its Senior Term Loan agreement at
December 31, 1994.
NOTE 6. PREFERRED STOCK
In January, 1988, the Company issued and GECC purchased 200,000 shares of the
1987 Preferred Stock for a purchase price of $100 per share. Dividends on or
before January 4, 1993 were payable in additional shares of preferred stock
at a rate of one share per $100. The 1987 Preferred Stock was mandatorily
redeemable, at a redemption price of $100 per share. In connection with the
purchase of the A-R Cable Notes, the Company purchased from an affiliate,
(which in 1992 had purchased the 1987 Preferred Stock from GECC) for nominal
consideration, and retired the 1987 Preferred Stock. The Company recognized
a gain of $33,509 on its purchase of the 1987 Preferred Stock.
In connection with the consummation of the tender offer for the A-R Cable Notes,
Warburg Pincus purchased a new Series A Preferred Stock of the Company for a
cash investment of $105,000, and CSC purchased a new Series B Preferred Stock of
the Company for a cash investment of $45,000. During 1994, Warburg Pincus
purchased additional shares of the new Series A Preferred Stock for a cash
investment of $998 and CSC purchased additional shares of the new Series B
Preferred Stock for a cash investment of $427. The Series A Preferred Stock is
entitled to a 19% annual dividend.
(107)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
The Series B Preferred Stock is entitled to a 12% annual dividend. Dividends
on the Series A and Series B Preferred Stock are not payable until the
repayment in full of all outstanding indebtedness to GECC (see Note 5).
NOTE 7. INCOME TAXES
The Company's tax returns for the years 1984 to 1989 have been examined by
the Internal Revenue Service and certain issues related to the amortization
of intangible assets are being appealed by the Company. Management believes
that any settlement arising out of this examination will not have a material
adverse effect on the financial position of the Company.
At December 31, 1994, the Company had a net operating loss carry forward of
approximately $217,644, which expires in varying amounts from 2003 to 2009.
Due to the 1992 transaction (Note 2), the Company underwent an ownership
change within the meaning of Internal Revenue Code Section 382. This would
limit the amount of net operating loss carry forward from the period prior to
the transaction that could be utilized to offset any taxable income in
periods subsequent to the transaction. There is a pro rata allocation in the
year that the ownership change occurs. Therefore, of the $217,644 of net
operating loss carry forwards for tax purposes, $201,588 is restricted and
$16,056 is currently available.
Usage of the $201,588 net operating loss carry forward is limited to a fixed
annual amount, calculated using the Federal long-term tax-exempt rate times
the value of the Company prior to the ownership change. This amount is
increased in any year in which the Company recognizes any built in gain from
the sale of assets owned prior to the ownership change. Based on this
formula, none of the $201,588 restricted net operating loss carry forwards
would currently be available to the Company.
(108)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
The tax effects of temporary differences which give rise to significant
portions of deferred tax assets or liabilities and the corresponding
valuation allowance at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
DEFERRED ASSET (LIABILITY) 1994 1993
-------------------------- -------- --------
<S> <C> <C>
Depreciation and amortization $(23,760) $(39,294)
Benefit plans 674 1,111
Allowance for doubtful accounts 148 118
Benefits of tax loss carry forwards 82,705 78,566
Other (701) 1,055
-------- --------
Net deferred tax assets 59,066 41,556
Valuation allowance (65,148) (61,683)
-------- --------
Net deferred tax liabilities $ (6,082) $(20,127)
-------- --------
-------- --------
</TABLE>
The Company has provided a valuation allowance of $65,148 for deferred tax
assets since realization of these assets was not assured due to the Company's
history of operating losses. Also, in connection with the acquisition of the
Company by CSC in January 1988, the Company recorded certain fair value
adjustments net of their tax effects. In accordance with SFAS 109, these
assets have been adjusted to their remaining pre tax amounts at January 1,
1993, the date the Company adopted SFAS 109. Amortization of these amounts
in 1994 and 1993 resulted in the recognition of income tax benefits of
$14,045 and $14,168, respectively.
NOTE 8. AFFILIATE TRANSACTIONS
The Company has an agreement with CSC whereby commencing January 1, 1993 the
Company is managed by CSC in exchange for a management fee of 3-1/2% of gross
receipts, as defined. Interest on unpaid amounts accumulates at a rate of
10% per annum.
Such management fees amounted to $3,738 and $3,801 in 1994 and 1993,
respectively, and interest thereon amounted to $659 and $244 in 1994 and
1993, respectively.
The Company is also charged for cost reimbursement and an allocation of
certain selling, general and administrative expenses by CSC. For the years
ended December 31, 1994, 1993 and 1992 these cost reimbursements and expense
allocations approximated $3,524, $3,373, and $2,719, respectively. In
accordance with certain restrictive covenants
(109)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
contained in its Senior Term Loan agreement, the Company may not pay in
excess of specified amounts, subject to certain escalation provisions, of
allocated corporate overhead expenses charged by CSC in any fiscal year. At
December 31, 1994 and 1993, the total balance due CSC for management fees,
interest, cost reimbursement and such allocated expenses amounted to $11,325
and $7,191, respectively.
CSC has interests in several companies engaged in providing cable television
services and programming services to the cable television industry, including
the Company. During 1994, 1993 and 1992, the Company was charged
approximately $2,246, $2,787 and $2,690, respectively, by these companies for
these services and the total amount due these companies as of December 31,
1994 and 1993 was $238 and $602, respectively.
NOTE 9. BENEFIT PLANS
Prior to 1993, the Company was a participant, with other affiliates, in a
defined contribution pension plan covering substantially all of its
employees. The Company contributed three percent of each eligible employee's
annual compensation, as defined, and employees could voluntarily contribute
up to ten percent of their annual compensation.
Effective January 1, 1993, the Board of Directors of CSC approved the
adoption of an amended and restated Pension and 401(K) Savings Plan (the
"Plan"), in part to permit employees of CSC and its affiliates to make
contributions to the Plan on a pre-tax salary reduction basis in accordance
with the provisions of Section 401(K) of the Internal Revenue Code, and to
introduce new investment options under the Plan. The Company contributes
1-1/2% of eligible employees' annual compensation, as defined, to the defined
contribution portion of the Plan (the "Pension Plan") and an equivalent
amount to the section 401(K) portion of the Plan (the "Savings Plan").
Employees may voluntarily contribute up to 15% of eligible compensation,
subject to certain restrictions, to the Savings Plan, with an additional
matching contribution by the Company of 1/4 of 1% for each 1% contributed by
the employee, up to a maximum contribution by the Company of 1/2 of 1%.
Employee contributions are fully vested as are employer base contributions to
the Savings Plan. Employer contributions to the Pension Plan and matching
contributions to the Savings Plan become vested in years three through seven.
Total expense related to these plans for the years ended December 31, 1994,
1993 and 1992 was approximately $334, $339 and $234, respectively.
The Company does not provide any postretirement benefits to its employees.
(110)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
NOTE 10. OPERATING LEASES
The Company leases certain office, production, satellite transponder, and
transmission facilities under terms of operating leases expiring at various
dates. The leases generally provide for fixed annual rentals plus certain
real estate taxes and other costs. Rent expense for the years ended December
31, 1994, 1993 and 1992 was approximately $1,240, $842 and $910, respectively.
In addition, the Company rents space on utility poles for its operations.
The Company's pole rental agreements are for varying terms, and management
anticipates renewals as they expire. Pole rental expense for the years ended
December 31, 1994, 1993 and 1992 was approximately $1,745, $1,507 and $1,265,
respectively.
The minimum future annual rentals for all operating leases, including pole
rentals, from January 1, 1995 through December 31, 1999 at rates now in force
are approximately: 1995, $2,621; 1996, $2,553; 1997, $2,128; 1998, $1,882;
1999, $1,757.
NOTE 11. RECENT CABLE TELEVISION REGULATIONS
In October, 1992, the Congress of the United States passed the Cable
Television Consumer Protection and Competition Act of 1992 (Cable Act) which
among other matters, provides for the regulation of basic and cable
programming services. In April 1993, the Federal Communications Commission
("FCC") adopted regulations governing rates for basic and cable programming
services which became effective September 1, 1993. Under the provisions of
these regulations, certain revenues derived from cable television are
determined under either a "benchmark" or "cost of service" method. Effective
September 1, 1993 the Company's systems had set their rates using the
benchmark method which compares the Company's rates to those which are in
effect at cable systems deemed to face effective competition by the FCC.
In February 1994 and November 1994, the FCC significantly modified the September
1993 rate regulations. These modifications were designed to further reduce
subscriber rates and most annual basic and cable programming service rate
increases (other than per-event and per-channel services), as well as to provide
cable television system operators financial incentive to introduce new
programming services. Management has implemented the rules in a manner it
believes to be consistent with the regulations promulgated by the FCC and,
accordingly, does not expect such modifications to have a material adverse
effect on the future operations of the Company.
(111)
<PAGE>
A-R CABLE SERVICES, INC. AND SUBSIDIARIES
(a wholly-owned subsidiary of Cablevision Systems Corporation)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(continued)
NOTE 12. DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL
INSTRUMENTS
CASH AND CASH EQUIVALENTS, TRADE ACCOUNTS RECEIVABLE, NOTES AND OTHER
RECEIVABLES, ACCOUNTS PAYABLE, ACCRUED LIABILITIES, ACCOUNTS PAYABLE TO
AFFILIATES AND DUE TO PARENT
The carrying amount approximates fair value because of the short maturity of
these instruments.
SENIOR TERM LOAN
The fair values of the Company's long-term debt instruments are based on
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
INTEREST RATE CAP AGREEMENT
The fair value of the interest rate cap agreement is obtained from dealer
quotes. This value represents the estimated amount the Company would receive
or pay to terminate agreements, taking into consideration current interest
rates and the current credit worthiness of the counterparties.
The fair value of the Company's financial instruments are summarized as
follows:
<TABLE>
December 31, 1994
-----------------------
Carrying Estimated
Amount Fair Value
--------- ----------
<S> <C> <C>
Long term debt instruments:
Senior term loans . . . . . . . . . $400,575 $400,575
-------- --------
Interest rate cap agreement
In a net receivable position. . . . $ -0- $ 21
-------- --------
-------- --------
</TABLE>
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
(112)
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized on
the 29th day of March, 1995.
Cablevision Systems Corporation
By:/s/ William J. Bell
-----------------------
Name: William J. Bell
Title: Vice Chairman
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Francis F. Randolph, Jr., Marc A. Lustgarten
and Robert S. Lemle, and each of them, his true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for him in
his name, place and stead, in any and all capacities, to sign this report,
and file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents, 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 he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Charles F. Dolan Chairman of the Board of Directors March 29, 1995
------------------------ and Chief Executive Officer
Charles F. Dolan (Principal Executive Officer)
/s/ Barry J. O'Leary Senior Vice President-Finance and March 29, 1995
------------------------ Treasurer (Principal Financial
Barry J. O'Leary Officer)
/s/ Jerry Shaw Vice President and Controller March 29, 1995
------------------------ (Principal Accounting Officer)
Jerry Shaw
(113)
<PAGE>
SIGNATURES
(continued)
/s/ William J. Bell Vice Chairman and Director March 29, 1995
------------------------
William J. Bell
/s/ Marc A. Lustgarten Vice Chairman and Director March 29, 1995
------------------------
Marc A. Lustgarten
/s/ Robert S. Lemle Executive Vice President, General March 29, 1995
------------------------ Counsel, Secretary and Director
Robert S. Lemle
/s/ Sheila A. Mahony Vice President and Director March 29, 1995
------------------------
Sheila A. Mahony
/s/ John Tatta Director and Chairman of the March 29, 1995
------------------------ Executive Committee
John Tatta
/s/ Director
------------------------
James L. Dolan
/s/ Patrick F. Dolan Director March 29, 1995
------------------------
Patrick F. Dolan
/s/ Francis F. Randolph, Jr. Director March 29, 1995
------------------------
Francis F. Randolph, Jr.
/s/ Daniel T. Sweeney Director March 29, 1995
------------------------
Daniel T. Sweeney
/s/ Charles D. Ferris Director March 29, 1995
------------------------
Charles D. Ferris
/s/ Richard H. Hochman Director March 29, 1995
------------------------
Richard H. Hochman
Victor Oristano Director March 29, 1995
------------------------
Victor Oristano
/s/ A. Jerrold Perenchio Director March 29, 1995
------------------------
A. Jerrold Perenchio
</TABLE>
(114)
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
3.1 --Certificate of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 3.1 to the
Company's Registration Statement on Form S-1 dated January
17, 1986, File No. 33-1936 (the "S-1"))
3.1A --Amendment to Certificate of Incorporation and complete
copy of amended and restated Certificate of Incorporation
(incorporated herein by reference to Exhibits 3.1A(i) and
3.1A(ii) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989 (the "1989 10-K"))
3.1B --Certificate of Designations for the Series E Redeemable
Exchangeable Convertible Preferred Stock (incorporated
herein by reference to the Company's Report on form 10-K/A
for the year ended December 31, 1993, filed on April 13,
1994)
3.1C --Certificate of Designations for the Series F Redeemable
Preferred Stock (incorporated herein by reference to the
Company's Report on Form 10-K/A for the year ended December
31, 1993, filed on April 13, 1994)
3.2 --By-laws of the Registrant (incorporated herein by
reference to Exhibit 3.2 to the S-1)
3.2A --Amendment to By-laws and complete copy of amended and
restated By-laws (incorporated herein by reference to
Exhibit 3.2 to the 1989 10-K)
3.2B --Amendment to By-laws and complete copy of amended and
restated By-laws (incorporated herein by reference to
Exhibit 3.2B to the Company's Annual Report on Form 10K for
the fiscal year ended December 31, 1992 (the "1992 10-K").
3.2C --Amendment to By-laws and complete copy of amended and
restated By-laws.
4.1 --Indenture dated as of November 10, 1988 relating to the
Registrant's $200,000,000 Senior Subordinated Debentures
due October 15, 2003 (incorporated herein by reference to
Exhibit 4.6 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1988, File No. 1-9046
(the "1988 10-K").
(115)
<PAGE>
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
4.2 --Indenture dated as of April 1, 1992 relating to the
Registrant's $275,000,000 10 3/4% Senior Subordinated
Debentures due April 1, 2004 (incorporated herein by
reference to Exhibit 4.2 to the 1992 10-K).
4.3 --Indenture dated as of February 15, 1993 relating to the
Registrant's $200,000,000 9 7/8% Senior Subordinated
Debentures due February 15, 2013 (incorporated herein by
reference to Exhibit 4.3 to the 1992 10-K).
10.1 --Registration Rights Agreement between Cablevision Systems
Company and the Registrant (incorporated herein by
reference to Exhibit 10.1 of the S-1).
10.2 --Registration Rights Agreement between CSC Holdings
Company and the Registrant (incorporated herein by
reference to Exhibit 10.2 to the S-1)
10.4 --Form of Right of First Refusal Agreement between Dolan
and the Registrant (incorporated herein by reference to
Exhibit 10.4 to the S-1)
10.5 --Supplemental Benefit Plan of the Registrant (incorporated
herein by reference to Exhibit 10.7 to the S-1)
10.6 --Cablevision Money Purchase Pension Plan, and Trust
Agreement dated as of December 1, 1983 between Cablevision
Systems Development Company and Dolan and Tatta, as
Trustees (incorporated herein by reference to Exhibit 10.8
to the S-1)
10.6A --Amendment to the Cablevision Money Purchase Pension Plan
adopted November 6, 1992 (incorporated herein by reference
to Exhibit 10.6A to the 1992 10-K).
10.7 --Employment Agreement between Charles F. Dolan and the
Registrant dated January 27, 1986 (incorporate herein by
reference to Exhibit 10.9 to the S-1)
10.8 --Amended and Restated Agreement dated as of June 1, 1983
between SportsChannel Associates and Cablevision Systems
Holdings Company (incorporated herein by reference to
Exhibit 10.11 to the S-1)
(116)
<PAGE>
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
10.9 --Assignment of Partnership Interest dated as of
November 30, 1984 between Cablevision Systems Company,
Cablevision Company and Cablevision of Boston Limited
Partnership (incorporated herein by reference to Exhibit
10.15 to the S-1)
10.10 --Promissory Note of Cablevision of Chicago dated
November 30, 1984 payable to Cablevision Company
(incorporated herein by reference to Exhibit 10.16 to the
S-1)
10.11 --Promissory Note of Cablevision of Chicago dated August
11, 1989 payable to Cablevision Systems Corporation
(incorporated herein by reference to Exhibit 10.16A to the
1989 10-K)
10.12 --Lease Agreement dated as of October 9, 1978 between
Cablevision Systems Development Company and Industrial and
Research Associates Co. and amendment dated June 21, 1985
between Industrial and Research Associates Co. and
Cablevision Company (incorporated herein by reference to
Exhibit 10.18 to the S-1)
10.13 --Lease Agreement dated May 1, 1982 between Industrial and
Research Associates Co. and Cablevision Systems Development
Company (incorporated herein by reference to Exhibit 10.19
to the S-1)
10.14 --Agreement of Sublease dated as of July 9, 1982 between
Cablevision Systems Development Company and Ontel
Corporation (incorporated herein by reference to Exhibit
10.20 to the S-1)
10.15 --Agreement of Sublease dated as of June 21, 1985 between
Grumman Data Systems Corporation and Cablevision Company
(incorporated herein by reference to Exhibit 10.21 to the
S-1)
10.16 --Agreement dated as of June 21, 1985 between Industrial
and Research Associates Co., Grumman Data Systems
Corporation and Cablevision Company (incorporated herein by
reference to Exhibit 10.22 to the S-1)
(117)
<PAGE>
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
10.17 --Lease Agreement dated as of June 21, 1985 between
Industrial and Research Associates Co. and Cablevision
Company (incorporated herein by reference to Exhibit 10.23
to the S-1)
10.18 --Lease Agreement dated as of February 1, 1985 between
Cablevision Company and County of Nassau (incorporated
herein by reference to Exhibit 10.24 to the S-1)
10.19 --Lease Agreement dated as of January 1, 1981 between
Cablevision Systems Development Company and Precision
Dynamics Corporation and amendment dated January 15, 1985
between Cablevision Company and Nineteen New York
Properties Limited Partnership (incorporated herein by
reference to Exhibit 10.25 to the S-1)
10.20 --Option Certificate for 840,000 Shares Issued Pursuant to
the 1986 Nonqualified Stock Option Plan of the Registrant
(incorporated herein by reference to Exhibit 10.29 to the
S-1)
10.21 --New Ventures Agreement, dated as of April 20, 1989, among
the Registrant and certain of its subsidiaries, and
National Broadcasting Company, Inc. and certain of its
subsidiaries (incorporated herein by reference to Exhibit
2.3 to the April 1989 8-K)
10.22 --Letter Agreement dated as of December 19, 1991 among U.S.
Cable Television Group, L.P., V Cable, Inc. and General
Electric Capital Corporation (incorporated herein by
reference to Exhibit 2(a) to the January 1992 8-K).
10.23 --Letter Agreement dated as of December 19, 1991 among
General Electric Capital Corporation, the Registrant and
V Cable, Inc. (incorporated herein by reference to Exhibit
2(b) to the January 1992 8-K).
10.24 --Amendment dated February 12, 1992 to Letter Agreement
dated as of December 19, 1991 among General Electric
Capital Corporation, the Registrant and V Cable, Inc.
(incorporated herein by reference to Exhibit 2(b) to the
March 1992 Form 8).
(118)
<PAGE>
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
10.25 --Purchase and Reorganization Agreement dated as of
December 20, 1991 between the Registrant and Charles F.
Dolan (incorporated herein by reference to Exhibit 2(c) to
the January 1992 8-K).
10.26 --Amendment No. 1 dated as of March 28, 1992 to Purchase
and Reorganization Agreement dated as of December 20, 1991
between the Registrant and Charles F. Dolan (incorporated
herein by reference to Exhibit 2(g) to the March 1992 Form
8).
10.27 --Letter Agreement dated February 12, 1992, among the
Registrant, A-R Cable Services, Inc. and Warburg Pincus
Investors, L.P. (incorporated herein by reference to
Exhibit 28(a) to the Registrant's Current Report on Form
8-K under the Securities Exchange Act of 1934 dated
February 21, 1992 (the "February 1992 8-K")).
10.28 --Letter Agreement dated February 12, 1992 among the
Registrant, A-R Cable Services, Inc. and General Electric
Capital Corporation (incorporated herein by reference to
Exhibit 28(b) to the February 1992 8-K).
10.29 --Letter Agreement dated February 12, 1992 among the
Registrant and A-R Cable Services, Inc. (incorporated
herein by reference to Exhibit 28(b) to the February 1992
8-K).
10.30 --Non-Competition Agreement, dated as of December 31, 1992,
among V Cable, Inc., VC Holding, Inc. and the Registrant,
for the benefit of V Cable, Inc., VC Holding, Inc. and
General Electric Capital Corporation (incorporated herein
by reference to Exhibit 10.37 to the 1992 10-K).
10.31 --Non-Competition Agreement, dated as of December 31, 1992,
between U.S. Cable Television Group, L.P. and the
Registrant, for the benefit of U.S. Cable Television Group,
L.P. and General Electric Capital Corporation (incorporated
herein by reference to Exhibit 10.38 to the 1992 10-K).
10.32 --CSC Nonrecourse Guaranty and Pledge Agreement, dated as
of December 31, 1992, between the Registrant and General
Electric Capital Corporation, as Agent for the Lenders
(incorporated herein by reference to Exhibit 10.39 to the
1992 10-K).
(119)
<PAGE>
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
10.33 --U.S. Cable Investment Agreement, dated as of June 30,
1992, among V Cable, Inc., V Cable GP, Inc., U.S. Cable
Television Group, L.P. and U.S. Cable Partners
(incorporated herein by reference to Exhibit 10.40 to the
1992 10-K).
10.34 --Newco Investment Agreement, dated as of December 31,
1992, among VC Holding, Inc., V Cable, Inc. and U.S. Cable
Television Group (incorporated herein by reference to
Exhibit 10.41 to the 1992 10-K).
10.35 --Senior Loan Agreement, dated as of December 31, 1992,
among V Cable, Inc., the Lenders named therein and General
Electric Capital Corporation, as Agent for the Lenders and
as Lender (incorporated herein by reference to Exhibit
10.42 to the 1992 10-K).
10.36 --Senior Loan Agreement, dated as of December 31, 1992,
among U.S. Cable Television Group, L.P., the Lenders named
therein and General Electric Capital Corporation, as Agent
for the Lenders and as Lender (incorporated herein by
reference to Exhibit 10.43 to the 1992 10-K).
10.37 --Cablevision Systems Corporation Amended and Restated
Employee Stock Plan (incorporated herein by reference to
Exhibit 10.46 to the 1992 10-K).
10.38 --Cablevision Systems Corporation 401(K) Savings Plan
(incorporated herein by reference to Exhibit 10.47 to the
1992 10-K).
10.39 --Fourth Amended and Restated Credit Agreement, dated as of
June 18, 1993, among Cablevision of New York City - Phase I
L.P., Cablevision Systems New York City Corporation,
Cablevision of New York City- Master L.P., each of the
Banks signatory thereto, The Chase Manhattan Bank (National
Associates) as Agent and The First National Bank of Chicago
and CIBC, Inc. each as Co-Agent (incorporated herein by
reference to Exhibit 10.49 of the Company's Annual Report
on Form 10-K for the year ended December 31, 1993).
(120)
<PAGE>
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
10.40 --Asset Purchase Agreement, dated as of July 23, 1993, by
and between Cablevision of Cleveland, L.P. and North Coast
Cable Limited Partnership (incorporated herein by reference
to Exhibit 10.50 to the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1993).
10.41 --Master Agreement, dated as of October 26, 1993, between
Cablevision MFR, Inc., Monmouth Cablevision Associates,
Framingham Cablevision Associates and Riverview Cablevision
Associates, L.P. (incorporated herein by reference to
Exhibit 10.51 to the Company's Quarterly Report on Form 10-
Q for the fiscal quarter ended September 30, 1993 (the
"September 1993 10-Q").
10.42 --Asset Purchase Agreement, dated as of October 26, 1993,
between Monmouth Cablevision Associates and Cablevision
MFR, Inc. (incorporated herein by reference to Exhibit
10.52 to the September 1993 10-Q).
10.43 --Asset Purchase Agreement, dated as of October 26, 1993,
between Framingham Cablevision Associates, Limited
Partnership and Cablevision MFR, Inc. (incorporated herein
by reference to Exhibit 10.53 to the September 1993 10-Q).
10.44 --Asset Purchase Agreement, dated as of October 26, 1993
between Riverview Cablevision Associates, L.P. and
Cablevision MFR, Inc. (incorporated herein by reference to
Exhibit 10.54 to the September 1993 10-Q).
10.45 --Asset Purchase Agreement among A-R Cable Partners,
Nashoba Communications Limited Partnership, Nashoba
Communications Limited Partnership No. 7 and Nashoba
Communications of Belmont Limited Partnership dated as of
November 5, 1993 (incorporated herein by reference to
Exhibit 10.55 to the September 1993 10-Q).
10.46 --Preferred Stock Purchase Agreement, dated as of March 30,
1994, by and among the Company and Toronto Dominion
Investments, Inc. (incorporated herein by reference to
Exhibit 10.56 of the Company's Report on Form 10-K/A for
the year ended December 31, 1993 filed on April 13, 1994).
(121)
<PAGE>
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
10.47 --Registration Rights Agreement, dated as of March 30,
1994, by and among the Company and Toronto Dominion
Investments, Inc. (Incorporated herein by reference to
Exhibit 10.57 of the Company's Report on Form 10-K/A for
the year ended December 31, 1993, filed on April 13, 1994).
10.48 --Loan Agreement, dated as of June 30, 1994 among Rainbow
Programming Holdings, Inc., the Guarantors as defined
therein, Toronto-Dominion Bank, the other banks party
thereto and Toronto-Dominion (Texas), Inc., as Agent
(incorporated herein by reference to Exhibit 10.58 to the
Company's June 30, 1994 10-Q).
10.49 --Acquisition Agreement and Plan of Merger and
Reorganization, dated as of June 14, 1994, among
Cablevision of Boston Limited Partnership, Cablevision of
Boston, Inc., Charles F. Dolan, Cablevision Systems Boston
Corporation, Cablevision Systems Corporation, COB, Inc.,
Cablevision Systems Services Corporation and Cablevision
Finance Limited Partnership (incorporated herein by
reference to Exhibit 10.59 to the Company's June 30, 1994
10-Q).
10.50 --Credit Agreement, dated as of June 15, 1994, among
Cablevision of Framingham, Inc., the several lenders
parties thereto, The Chase Manhattan Bank, N.A., as Agent
and CIBC Inc., as Co-Agent (incorporated herein by
reference to Exhibit 10.60 to the Company's June 30, 1994
10-Q).
10.51 --Amendment No. 1, dated as of August 8, 1994, to the
Credit Agreement, dated as of June 15, 1994, among
Cablevision of Framingham, Inc., the several lenders
parties thereto, the Chase Manhattan Bank, N.A., as Agent
and CIBC, Inc., as Co-Agent (incorporated herein by
reference to Exhibit 10.61 to the Company's June 30, 1994
10-Q).
10.52 --Asset Purchase Agreement, dated as of October 26, 1993,
between Monmouth Cablevision Associates and Cablevision
MFR, Inc. as amended by Amendment No. 1 thereto, dated as
of April 6, 1994 and Amendment No. 2 thereto, dated as of
June 3, 1994 (restated) (incorporated herein by reference
to Exhibit 10.62 to the Company's June 30, 1994 10-Q).
(122)
<PAGE>
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
10.53 --Asset Purchase Agreement, dated as of October 26, 1993,
between Riverview Cablevision Associates, Limited
Partnership, and Cablevision MFR, Inc., as amended by
Amendment No. 1 thereto, dated as of April 6, 1994 and
Amendment No. 2 thereto, dated as of June 3, 1994
(restated) (incorporated herein by reference to Exhibit
10.63 to the Company's June 30, 1994 10-Q).
10.54 --Asset Purchase Agreement, dated as of October 26, 1993,
between Framingham Cablevision Associates, Limited
Partnership, and Cablevision MFR, Inc., as amended and
assigned to Cablevision Framingham Holdings, Inc. by
Amendment No. 1 thereto, dated as of April 6, 1994, and as
further amended by Amendment No. 2 thereto, dated as of
June 3, 1994 (restated) (incorporated herein by reference
to Exhibit 10.64 to the Company's June 30, 1994 10-Q).
10.55 --Credit Agreement, dated as of June 15, 1994 (the "Credit
Agreement"), by and among Cablevision MFR, Inc.,
Cablevision of Riverview, Inc. and Cablevision of Monmouth,
Inc., the Lenders from time to time party thereto and
NationsBank of Texas, N.A., as Administrative Lender
(incorporated herein by reference to Exhibit 10.65 to the
Company's June 30, 1994 10-Q).
10.56 --Agreement, dated as of August 15, 1994 among ITT
Corporation, the Registrant and Rainbow Programming
Holdings, Inc. (incorporated herein by reference to Exhibit
10.65 of the Registrants report on Form 8-K dated September
21, 1994.
10.57 --Amendment Agreement, dated as of September 12, 1994 among
ITT Corporation, the Registrant and Rainbow Programming
Holdings, Inc. (incorporated herein by reference to Exhibit
10.66 of the Registrants report on Form 8-K dated September
21, 1994.
10.58 --Agreement and Plan of Merger, (the "MSG Merger
Agreement") dated as of August 27, 1994 among Viacom Inc.,
Paramount Communications Realty Corporation, ITT
Corporation, Rainbow Garden Corporation and MSG Holdings,
Inc. (incorporated herein by reference to Exhibit 10.67 of
the Registrants report on Form 8-K dated September 21,
1994.
(123)
<PAGE>
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
10.59 --Fourth Amended and Restated Credit Agreement, dated as of
October 14, 1994, among Cablevision Systems Corporation,
the Restricted Subsidiaries (as defined therein) banks
party thereto, Toronto Dominion (Texas), Inc., as Agent,
and Bank of Montreal, Chicago Branch, The Bank of New York,
The Bank of Nova Scotia, The Canadian Imperial Bank of
Commerce and NationsBank of Texas, N.A., as Co-Agents
(incorporated herein by reference to Exhibit 10.68 to the
Company's September 30, 1994 10-Q).
10.60 --First Amended and Restated Credit Agreement, dated as of
October 14, 1994, among Cablevision of New Jersey, Inc.
Cablevision Systems Corp., the banks party thereto, Toronto
Dominion (Texas), Inc., as Agent and Bank of Montreal,
Chicago Branch, The Bank of New York, The Bank of Nova
Scotia, The Canadian Imperial Bank of Commerce and
NationsBank of Texas, N.A., as Co-Agents (incorporated
herein by reference to Exhibit 10.69 to the Company's
September 30, 1994 10-Q).
10.61 --Amendment No. 1 to Fourth Amended and Restated Credit
Agreement, dated as of October 14, 1994, among Cablevision
Systems Corporation, the Restricted Subsidiaries (as
defined therein) banks party thereto, Toronto Dominion
(Texas), Inc., as Agent, and Bank of Montreal, Chicago
Branch, The Bank of New York, The Bank of Nova Scotia, The
Canadian Imperial Bank of Commerce and NationsBank of
Texas, N.A., as Co-Agents.
10.62 --Amendment No. 1 to First Amended and Restated Credit
Agreement, dated as of October 14, 1994, among Cablevision
of New Jersey, Inc. Cablevision Systems Corp., the banks
party thereto, Toronto Dominion (Texas), Inc., as Agent and
Bank of Montreal, Chicago Branch, The Bank of New York, The
Bank of Nova Scotia, The Canadian Imperial Bank of Commerce
and NationsBank of Texas, N.A., as Co-Agents.
10.63 --Amended and Restated Loan Agreement, dated as of January
27, 1995 among Rainbow Programming Holdings, Inc., the
guarantors (as defined therein), Toronto Dominion (Texas)
Inc. and Canadian Imperial Bank of Commerce, as co-agents
and Toronto Dominion (Texas), Inc., as administrative
agent.
(124)
<PAGE>
INDEX TO EXHIBITS
(continued)
EXHIBIT PAGE
NO. DESCRIPTION NO.
------- ----------- ----
<S> <C> <C>
10.64 --Amendment No. 1 dated as of March 10, 1995 to the MSG
Merger Agreement
10.65 --Amendment No. 2 dated as of March 10, 1995 to the MSG
Merger Agreement
10.66 --Agreement and undertaking, dated as of March 10, 1995
from MSG Holdings, LP, MSG Eden Corporation, the
Registrant, Rainbow Programming Holdings, Inc., Rainbow
Garden Corporation, Garden L.P. Holdings Corp., ITT
Corporation, ITT Eden Corp. in favor of the National
Basketball Association (the "NBA"), the member terms of the
NBA, NBA Properties, Inc., the NBA Market Extension
Partnership and Planet Insurance, Ltd.
10.67 --Consent Agreement, dated as of March 10, 1995 by and
among the National Hockey League, MSG Holdings, L.P., MSG
Eden Corporation, ITT Eden Corporation, ITT MSG Inc., ITT
Corporation, Garden L.P. Holdings Corp., Rainbow Garden
Corporation, Rainbow Programming Holdings Inc. and the
Registrant.
10.68 --Amendment to consulting agreement dated as of November
28, 1994 between the Company and John Tatta.
10.69 --Employment Agreement, dated as of November 30, 1994,
between the Registrant and William J. Bell.
10.70 --Employment Agreement, dated as of November 30, 1994,
between the Registrant and Marc A. Lustgarten.
10.71 --Employment Agreement, dated as of November 30, 1994,
between the Registrant and Robert S. Lemle.
22 --Subsidiaries of the Registrant
23.1 --Consent of Independent Auditors
27 --Financial Data Schedule
28.1 --Form of Guarantee and Indemnification Agreement among
Dolan, the Registrant and directors and officers of the
Registrant (incorporated herein by reference to Exhibit 28
to the S-1)
</TABLE>
(125)
<PAGE>
Article VI of the By Laws is amended by adding the following provision at the
end thereof:
-- ADVANCE NOTICE OF STOCKHOLDER PROPOSALS. At any annual or
special meeting of stockholders, proposals by stockholders and persons nominated
for election as directors by stockholders shall be considered only if advance
notice thereof has been timely given as provided herein. Notice of any proposal
to be presented by any stockholder or of the name of any person to be nominated
by any stockholder for election as a director of the Corporation at any meeting
of stockholders shall be given to the Secretary of the Corporation not less than
50 nor more than 90 days prior to the date of the meeting; provided, however,
that if the date of the meeting is first publicly announced or disclosed less
than 70 days prior to the date of the meeting, such notice shall be given not
more than ten days after such date is first so announced or disclosed. Not
additional public announcement or disclosure of the date of any annual meeting
of stockholders need be made if the Corporation shall have previously disclosed,
in these by-laws or otherwise, that the annual meeting in each year is to be
held on a determinable date, unless and until the Board determines to hold the
meeting on a different date. any stockholder who gives notice of any such
proposal shall deliver therewith the text of the proposal to be presented and a
brief written statement of the reasons why such stockholder favors the proposal
and setting forth such stockholder's name and address, the number and class of
all shares of each class of stock of the Corporation beneficially owned by such
stockholder and any material interest of such stockholder in the proposal (other
than as a stockholder). Any stockholder desiring to nominate any person for
election as a director of the Corporation shall deliver with such notice a
statement in writing setting forth the name of the person to be nominated, the
number and class of all shares of each class of stock of the Corporation
beneficially owned by such person, the information regarding such person
required by paragraphs (d), (e) and (f) of Item 401 of Regulation S-K adopted by
the Securities and Exchange Commission (or the corresponding provisions of any
regulation subsequently adopted by the Securities and Exchange Commission
applicable to the Corporation), such person's signed consent to serve as a
director of the Corporation if elected, such stockholder's name and address and
the number and class of all shares of each class of stock of the Corporation
beneficially owned by such stockholder. As used herein, shares "beneficially
owned" shall mean all shares as to which such person, together with such
person's affiliates and associates (as defined in Rule 12b-2 under the
Securities Exchange Act of 1934), may be deemed to beneficially own pursuant to
Rules 13d-3 and 13d-5 under the Securities and Exchange Act of 1934, as well as
all shares as to which such person, together with such person's affiliates and
associates, has the right to become the beneficial owner pursuant to any
agreement or understanding, or upon the exercise of warrants, options or rights
to convert or exchange (whether such rights are exercisable immediately or only
after the passage of time or the occurrence of conditions). The person
presiding at the meeting shall determine whether such notice has been duly given
and shall direct that proposals and nominees
<PAGE>
not be considered it such notice has not been given.
<PAGE>
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
BY-LAWS
OF
CABLEVISION SYSTEMS CORPORATION
(As Amended February 13, 1995)
(A Delaware Corporation)
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
<PAGE>
CABLEVISION SYSTEMS CORPORATION
BY-LAWS
TABLE OF CONTENTS
ARTICLE I PAGE
Stockholders.......................................... 1
1. Certificates Representing Stock............. 1
2. Fractional Share Interests.................. 2
3. Stock Transfers............................. 2
4. Record Date for Stockholders................ 2
5. Meaning of Certain Terms.................... 3
6. Stockholders Meetings....................... 3
- Time................................... 3
- Place................................. 3
- Call................................... 4
- Notice or Waiver of Notice............. 4
- Stockholder List....................... 4
- Conduct of Meeting..................... 5
- Proxy Representation................... 5
- Inspectors and Judges.................. 5
- Quorum................................. 6
- Voting................................. 6
- Advance Notice of Stockholder Proposals 6
7. Stockholder Action Without Meetings.......... 7
ARTICLE II
Directors............................................. 8
1. Functions and Definitions................... 8
2. Qualifications and Number................... 8
3. Election and Term........................... 8
4. Meetings.................................... 8
- Time................................... 8
- First Meeting.......................... 8
- Place.................................. 9
- Call................................... 9
- Notice or Actual or Constructive Waiver 9
- Quorum and Action...................... 9
- Chairman of the Meeting................ 10
5. Removal of Directors........................ 10
6. Action in Writing........................... 10
7. Executive Committee......................... 10
- Powers................................. 10
- Chairman and Secretary.................. 11
- Minutes................................. 11
- Meetings.................................11
8. Other Committees..............................11
9. Approval of Transaction with Dolan Affiliates..12
(i)
<PAGE>
ARTICLE III
Officers............................................... 12
1. Executive Officers........................... 12
2. Term of Office: Removal...................... 12
3. Authority and Duties......................... 12
4. The Chairman................................. 12
5. Other Officers............................... 13
ARTICLE IV
Voting of Stocks in Other Companies.................... 13
ARTICLE V
Corporate Seal and Corporate Books..................... 13
ARTICLE VI
Fiscal Year............................................ 13
ARTICLE VII
Control Over By-Laws................................... 14
ARTICLE VIII
Indemnification........................................ 14
(ii)
<PAGE>
BY-LAWS
OF
CABLEVISION SYSTEMS CORPORATION
(As Amended February 13, 1995)
(A Delaware Corporation)
--------------------
ARTICLE I
STOCKHOLDERS
1. CERTIFICATES REPRESENTING STOCK. Every holder of stock in the
corporation shall be entitled to have a certificate signed by, or in the name
of, the corporation by the Chairman or Vice Chairman, if any, or by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the corporation certifying the number
of shares owned by him in the corporation. If such certificate is countersigned
by a transfer agent other than the corporation or its employee or by a registrar
other than the corporation or its employee, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent, or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent, or registrar
before such certificate is issued, it may be issued by the corporation with the
same effect as if he were such officer, transfer agent, or registrar at the date
of issue.
Whenever the corporation shall be authorized to issue more than one
class of stock or more than one series of any class of stock, and whenever the
corporation shall issue any shares of its stock as partly paid stock, the
certificates representing shares of any such class or series or of any such
partly paid stock shall set forth thereon the statements prescribed by the
General Corporation Law. Any restrictions on the transfer or registration of
transfer of any shares of stock of any class or series shall be noted
conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock in place of any
certificate theretofore issued by it, alleged to have been lost, stolen, or
destroyed, and the Board of Directors may require the owner of any lost, stolen,
or destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify the corporation against any claim that may be made
<PAGE>
against it on account of the alleged loss, theft, or destruction of any such
certificate or the issuance of any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not
be required to, issue fractions of a share. In lieu thereof it shall either pay
in cash the fair value of fractions of a share, as determined by the Board of
Directors, to those entitled thereto or issue scrip or fractional warrants in
registered or bearer form over the manual or facsimile signature of an officer
of the corporation or of its agent, exchangeable as therein provided for full
shares, but such scrip or fractional warrants shall not entitle the holder to
any rights of a stockholder except as therein provided. Such scrip or
fractional warrants may be issued subject to the condition that the same shall
become void if not exchanged for certificates representing full shares of stock
before a specified date, or subject to the condition that the shares of stock
for which such scrip or fractional warrants are exchangeable may be sold by the
corporation and the proceeds thereof distributed to the holders of such scrip or
fractional warrants, or subject to any other conditions which the Board of
Directors may determine.
3. STOCK TRANSFERS. Upon compliance with provisions restricting the
transfer or registration of transfer of shares of stock, if any, transfers or
registration of transfer of shares of stock of the corporation shall be made
only on the stock ledger of the corporation by the registered holder thereof, or
by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary of the corporation or with a transfer agent or a
registrar, if any, and on surrender of the certificate or certificates for such
shares of stock properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to any corporate action in
writing without a meeting, or for the purpose of determining stockholders
entitled to receive payment of any dividend or other distribution or the
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion, or exchange of stock, or for the purpose of any other lawful
action, the directors may fix, in advance, a date as the record date for any
such determination of stockholders. Such date shall not be more than sixty days
nor less then ten days before the date of such meeting, nor more than sixty days
prior to any other action. If no record date is fixed, the record date for the
determination of stockholders entitled (a) to notice of or to vote at a meeting
of stockholders shall be at the close of business on the day next preceding the
day on which notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held and (b) to
express consent to corporate action in writing without a meeting, when no prior
action by the Board of Directors is necessary, shall be the day on which the
first written consent is expressed; the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of
2
<PAGE>
Directors adopts the resolution relating thereto. When a determination of
stockholders of record entitled to notice of or to vote at any meeting of
stockholders has been made as provided in this paragraph, such determination
shall apply to any adjournment thereof; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
5. MEANING OF CERTAIN TERMS. As used herein in respect of the right
to notice of a meeting of stockholders or a waiver thereof or to participate or
vote thereat or to consent or dissent in writing in lieu of a meeting, as the
case may be, the term "share" or "shares" or "share of stock" or "shares of
stock" or "stockholder" or "stockholders" refers to an outstanding share or
shares of stock and to a holder or holders of record of outstanding shares of
stock when the corporation is authorized to issue only one class of shares of
stock, and said reference is also intended to include any outstanding share or
shares of stock and any holder or holders of record of outstanding shares of
stock of any class upon which or upon whom the certificate of incorporation
confers such rights where there are two or more classes or series of shares of
stock or upon which or upon whom the General Corporation Law confers such rights
notwithstanding that the certificate of incorporation may provide for more than
one class or series of shares of stock, one or more of which are limited or
denied such rights thereunder; provided, however, that no such right shall vest
in the event of an increase or a decrease in the authorized number of shares of
stock of any class or series which is otherwise denied voting rights under the
provisions of the certificate of incorporation, including any Preferred Stock
which is denied voting rights under the provisions of the resolution or
resolutions adopted by the Board of Directors with respect to the issuance
thereof.
6. STOCKHOLDER MEETINGS.
-- TIME. The annual meeting shall be held on the date and at the
time fixed, from time to time, by the directors, provided, that the first annual
meeting shall be held on a date within thirteen months after the organization of
the corporation, and each successive annual meeting shall be held on a date
within thirteen months after the date of the preceding annual meeting. A
special meeting shall be held on the date and at the time fixed by the
directors.
-- PLACE. Annual meetings and special meetings shall be held at
such place, within or without the State of Delaware, as the directors may, from
time to time, fix. Whenever the directors shall fail to fix such place, the
meeting shall be held at the registered office of the corporation in the State
of Delaware.
-- CALL. Annual meetings and special meetings may be called by
resolution of the Board of Directors only.
-- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall
be given, stating the place, date, and hour of the
3
<PAGE>
meeting. The notice of an annual meeting shall state that the meeting is called
for the election of directors and for the transaction of other business which
may properly come before the meeting, and shall (if any other action which could
be taken at a special meeting is to be taken at such annual meeting), state such
other action or actions as are known at the time of such notice. The notice of a
special meeting shall in all instances state the purpose or purposes for which
the meeting is called. If any action is proposed to be taken which would, if
taken, entitle stockholders to receive payment for their shares of stock, the
notice shall include a statement of that purpose and to that effect. Except as
otherwise provided by the General Corporation Law, a copy of the notice of any
meeting shall be given, personally or by mail, not less than ten days nor more
than sixty days before the date of the meeting, unless the lapse of the
prescribed period of time shall have been waived, and directed to each
stockholder at his record address or at such other address which he may have
furnished for such purpose in writing to the Secretary of the corporation.
Notice by mail shall be deemed to be given when deposited, with postage thereon
prepaid, in the United States mail. If a meeting is adjourned to another time,
not more than thirty days hence, and/or to another place, and if an announcement
of the adjourned time and/or place is made at the meeting, it shall not be
necessary to give notice of the adjourned meeting unless the directors, after
adjournment, fix a new record date for the adjourned meeting. Notice need not
be given to any stockholder who submits a written waiver of notice by him before
or after the time stated therein. Attendance of a person at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice.
-- STOCKHOLDER LIST. There shall be prepared and made, at least ten
days before every meeting of stockholders, a complete list of the stockholders,
arranged in alphabetical order, and showing the address of each stockholder and
the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting either at a place within the city or other municipality or
community where the meeting is to be held, which place shall be specified in the
notice of the meeting, or if not so specified, at the place where the meeting
to is be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present. The stock ledger shall be the only evidence as to
who are the stockholders entitled to examine the stock ledger, the list required
by this section or the books of the corporation, or to vote at any meeting of
stockholders.
4
<PAGE>
-- CONDUCT OF MEETING. Meetings of the stockholders shall be
presided over by one of the following officers in the order of seniority and if
present and acting, the Chairman, if any, a Vice Chairman, if any, the
President, a Vice President, a chairman for the meeting chosen by the Board of
Directors, or, if none of the foregoing is in office and present and acting, by
a chairman to be chosen by the stockholders. The Secretary of the corporation,
or in his absence, an Assistant Secretary, shall act as secretary of every
meeting, but if neither the Secretary nor an Assistant Secretary is present, the
chairman for the meeting shall appoint a secretary of the meeting. The
presiding officer shall: call the meeting to order; determine when proxies must
be filed with the secretary of the meeting; open the polls, establish the time
period for which polls remain open and close the polls; decide who may address
the meeting and generally determine the order of business and time for
adjournment of the meeting. The presiding officer shall also maintain proper
and orderly conduct, and shall take all means reasonably necessary to prevent or
cease disruptions, personal attacks or inflammatory remarks at the meeting. In
addition to the powers and duties specified herein, the presiding officer shall
have the authority to make all other determinations necessary for the order and
proper conduct of the meeting.
-- PROXY REPRESENTATION. Every Stockholder may authorize another
person or persons to act for him by proxy in all matters in which a stockholder
is entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the stockholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after three years from its date unless such
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and, if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation generally.
-- INSPECTORS AND JUDGES. The directors, in advance of any meeting,
may, but need not, appoint one or more inspectors of election or judges of the
vote, as the case may be, to act at the meeting or any adjournment thereof. If
an inspector or inspectors or judge or judges are not appointed, the person
presiding at the meeting may, but need not, appoint one or more inspectors or
judges. In case any person who may be appointed as an inspector or judge fails
to appear or act, the vacancy may be filled by appointment made by the person
presiding thereat. Each inspector or judge, if any, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of inspector or judge at such meeting with strict impartiality and
according to the best of his ability. The inspectors or judges, if any, shall
determine the number of shares of stock outstanding and the voting power of
each, the shares of stock represented at the meeting, the existence of a quorum,
the validity and effect of
5
<PAGE>
proxies, and shall receive votes, ballots or consents, hear and determine all
challenges and questions arising in connection with the right to vote, count and
tabulate all votes, ballots or consents, determine the result, and do such acts
as are proper to conduct the election or vote with fairness to all stockholders.
On request of the person presiding at the meeting, the inspector or inspectors
or judge or judges, if any, shall make a report in writing of any challenge,
question or matter determined by him or them and execute a certificate of any
fact found by him or them.
-- QUORUM. Except as the General Corporation Law or these by-laws
may otherwise provide, the holders of a majority of the votes represented by the
outstanding shares of stock entitled to vote shall constitute a quorum at a
meeting of stockholders for the transaction of any business; provided, however,
that if the certificate of incorporation or General Corporation Law provides
that voting on a particular action is to be by class, a majority of the votes
represented by the outstanding shares of stock of such class shall constitute a
quorum at a meeting of stockholders for the authorization of such action. The
stockholders present may adjourn the meeting despite the absence of a quorum.
When a quorum is once present to organize a meeting, it is not broken by the
subsequent withdrawal of any stockholders.
-- VOTING. Except as otherwise provided in these by-laws, the
certificate of incorporation or, with respect to Preferred Stock, the resolution
or resolutions of the Board of Directors providing for the issuance thereof, and
except as otherwise provided by the General Corporation Law, at every meeting of
the stockholders, each stockholder entitled to vote at such meeting shall be
entitled to the number of votes as specified, and to the extent provided for, in
the certificate of incorporation or, with respect to Preferred Stock, the
resolution or resolutions of the Board of Directors providing for the issuance
thereof, in person or by proxy, for each share of stock entitled to vote held by
such stockholder. In the election of directors, a plurality of the votes cast
by each class of stock, voting separately as a class, shall elect the directors
that such class is authorized to elect as specified, and to the extent provided
for, in the certificate of incorporation. Any other action shall be authorized
by a majority of the votes cast except where the certificate of incorporation
of the General Corporation Law prescribes a different percentage of votes and/or
a different exercise of voting power. Voting by ballot shall not be required
for corporate action except as otherwise provided by the General Corporation
Law.
-- ADVANCE NOTICE OF STOCKHOLDER PROPOSALS. At any annual or
special meeting of stockholders, proposals by stockholders and persons nominated
for election as directors by stockholders shall be considered only if advance
notice thereof has been timely given as provided herein. Notice of any proposal
to be presented by any stockholder or of the name of any person to be nominated
by any stockholder for election as a director of the Corporation at any meeting
of stockholders shall be given to the Secretary of the Corporation not less than
50 nor more than 90 days
6
<PAGE>
prior to the date of the meeting; provided, however, that if the date of the
meeting is first publicly announced or disclosed less than 70 days prior to the
date of the meeting, such notice shall be given not more than ten days after
such date is first so announced or disclosed. Not additional public
announcement or disclosure of the date of any annual meeting of stockholders
need be made if the Corporation shall have previously disclosed, in these by-
laws or otherwise, that the annual meeting in each year is to be held on a
determinable date, unless and until the Board determines to hold the meeting on
a different date. any stockholder who gives notice of any such proposal shall
deliver therewith the text of the proposal to be presented and a brief written
statement of the reasons why such stockholder favors the proposal and setting
forth such stockholder's name and address, the number and class of all shares of
each class of stock of the Corporation beneficially owned by such stockholder
and any material interest of such stockholder in the proposal (other than as a
stockholder). Any stockholder desiring to nominate any person for election as a
director of the Corporation shall deliver with such notice a statement in
writing setting forth the name of the person to be nominated, the number and
class of all shares of each class of stock of the Corporation beneficially owned
by such person, the information regarding such person required by paragraphs
(d), (e) and (f) of Item 401 of Regulation S-K adopted by the Securities and
Exchange Commission (or the corresponding provisions of any regulation
subsequently adopted by the Securities and Exchange Commission applicable to the
Corporation), such person's signed consent to serve as a director of the
Corporation if elected, such stockholder's name and address and the number and
class of all shares of each class of stock of the Corporation beneficially owned
by such stockholder. As used herein, shares "beneficially owned" shall mean all
shares as to which such person, together with such person's affiliates and
associates (as defined in Rule 12b-2 under the Securities Exchange Act of 1934),
may be deemed to beneficially own pursuant to Rules 13d-3 and 13d-5 under the
Securities and Exchange Act of 1934, as well as all shares as to which such
person, together with such person's affiliates and associates, has the right to
become the beneficial owner pursuant to any agreement or understanding, or upon
the exercise of warrants, options or rights to convert or exchange (whether such
rights are exercisable immediately or only after the passage of time or the
occurrence of conditions). The person presiding at the meeting shall determine
whether such notice has been duly given and shall direct that proposals and
nominees not be considered it such notice has not been given.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Except as provided in the
certificate of incorporation, any action required to be taken, or any action
which may be taken, at any annual or special meeting of stockholder, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
the outstanding stock having not less than the minimum number of votes that
would be necessary to authorize or to take such action under the provisions of
the General Corporation Law or the certificate of incorporation at a meeting at
which all shares
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entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
ARTICLE II
DIRECTORS
1. FUNCTIONS AND DEFINITIONS. The business of the corporation shall
be managed by the Board of Directors of the corporation. The use of the phrase
"whole Board of Directors" herein refers to the total number of directors which
the corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. A director need not be a stockholder,
a citizen of the United States, or a resident of the State of Delaware. The
initial Board of Directors shall consist of ten persons. Thereafter the number
of directors constituting the whole Board of Directors shall be at least three.
Subject to the foregoing limitation and except for the first Board of Directors,
such number may be fixed from time to time by action of the directors only, or,
if the number is not fixed, the number shall be ten.
3. ELECTION AND TERM. The first Board of Directors shall be elected
by the incorporator and shall hold office until the next election of the class
for which such directors have been chosen and until their successors have been
elected and qualified or until their earlier resignation or removal. Any
director may resign at any time upon written notice to the corporation.
Thereafter, directors who are elected at an annual meeting of stockholders, and
directors who are elected in the interim to fill vacancies and newly created
directorships, shall hold office for the term of the class for which such
directors shall have been chosen and until their successors have been elected
and qualified or until their earlier resignation or removal. Subject to the
provisions of the certificate of incorporation, in the interim between annual
meetings of stockholders or of special meetings of stockholders called for the
election of directors and/or for the removal of one or more directors and for
the filling of any vacancies in the Board of Directors, including vacancies
resulting from the removal of directors for cause or without cause, any vacancy
in the Board of Directors may be filled by the vote of a majority of the
remaining directors then in office, although less than a quorum, or by the sole
remaining director.
4. MEETING.
-- TIME. Meetings shall be held at such time as the Board of
Directors shall fix.
-- FIRST MEETING. The first meeting of each newly elected Board of
Directors may be held immediately after each annual meeting of the stockholders
at the same place at which the
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annual meeting of stockholders is held, and no notice of such meeting shall be
necessary, provided a quorum shall be present. In the event such first meeting
is not so held immediately after the annual meeting of the stockholders, it may
be held at such time and place as shall be specified in the notice given as
hereinafter provided for special meetings of the Board of Directors, or at such
time and place as shall be fixed by the consent in writing of all of the
directors.
-- PLACE. Meetings, both regular and special, shall be held at such
place within or without the State of Delaware as shall be fixed by the Board of
Directors .
-- CALL. No call shall be required for regular meetings for which
the time and place have been fixed. Special meetings may be called by or at the
direction of the Chairman, if any, a Vice Chairman, if any, or the President, or
of a majority of the directors in office.
-- NOTICE OR ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be
required for regular meetings for which the time and place have been fixed.
Written, oral, or any other mode of notice of the time and place shall be given
for special meetings in sufficient time for the convenient assembly of the
directors thereat. The notice of any meeting need not specify the purpose of
the meeting. Any requirement of furnishing a notice shall be waived by any
director who signs a written waiver of such notice before or after the time
stated therein.
Attendance of a director at a meeting of the Board of Directors shall
constitute a waiver of notice of such meeting, except when the director attends
a meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened.
-- QUORUM AND ACTION. A majority of the whole Board of Directors
shall constitute a quorum except when a vacancy or vacancies prevents such
majority, whereupon a majority of the directors in office shall constitute a
quorum, provided that such majority shall constitute at least one-third (1/3) of
the whole Board of Directors. Any director may participate in a meeting of the
Board of Directors by means of a conference telephone or similar communications
equipment by means of which all directors participating in the meeting can hear
each other, and such participation in a meeting of the Board of Directors shall
constitute presence in person at such meeting. A majority of the directors
present, whether or not a quorum is present, may adjourn a meeting to another
time and place. Except as herein otherwise provided, and except as otherwise
provided by the General Corporation Law or the certificate of incorporation, the
act of the Board of Directors shall be the act by vote of a majority of the
directors present at a meeting, a quorum being present. The quorum and voting
provisions herein stated shall not be construed as conflicting with any
provisions of the General Corporation Law and
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these by-laws which govern a meeting of directors held to fill vacancies and
newly created directorships in the Board of Directors.
-- CHAIRMAN OF THE MEETING. The Chairman, if any and if present and
acting, shall preside at all meetings; otherwise, any other director chosen by
the Board of Directors shall preside.
5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed
for cause or without cause by the Board of Directors or by the stockholders;
provided, however, that so long as the certificate of incorporation provides
that each class of stock, voting separately as a class, shall elect a certain
percentage of directors, a director may be removed without cause by stockholders
only by the vote of class of stock, voting separately as a class, that either
elected such director or elected the predecessor of such director whose position
was filled by such director due to the predecessor director's death, resignation
or removal.
6. ACTION IN WRITING. Any action required or permitted to be taken
at any meeting of the Board of Directors or any committee thereof may be taken
without a meeting if all members of the Board of Directors or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee.
7. EXECUTIVE COMMITTEE.
-- POWERS. The Board of Directors may appoint an Executive
Committee of the Board of Directors of the corporation of such number of members
as shall be determined from time to time by the Board of Directors. The term of
office of each member of the Executive Committee shall be co-extensive with the
term of his office as director. Any member of the Executive Committee who
shall cease to be a director of the corporation shall ipso facto cease to be a
member of the Executive Committee. A majority of the members of the Executive
Committee shall constitute a quorum for the valid transaction of business. The
Executive Committee may meet at stated times or on two days' notice by any
member of the Executive Committee to all other members, by delivered letter, by
mail or by telegram. The provisions of Section 4 of this Article II with
respect to waiver of notice of meetings of the Board of Directors and
participation at meetings of the Board of Directors by means of a conference
telephone or similar communications equipment shall apply to meetings of the
Executive Committee. The provisions of Section 6 of this Article II with
respect to action taken by a committee of the Board of Directors without a
meeting shall apply to action taken by the Executive Committee. At all times
whenever the Board of Directors is not in session, the Executive Committee shall
have and may exercise all of the powers of said Board of Directors in the
management of the business and affairs of the corporation except as limited by
the General Corporation Law, including, without limitation, (a) the powers of
the Board of Directors referred to in the certificate of incorporation or in the
resolution or resolutions providing for the
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issuance of preferred stock adopted by the Board of Directors as provided in the
certificate of incorporation to effect, or which are related or incidental to,
the redemption or conversion of the corporation's capital stock, (b) the
authority to declare dividends, (c) the authority to issue capital stock of the
corporation and (d) the adoption of a certificate of ownership and merger
pursuant to Section 253 of the General Corporation Law, and may also authorize
the seal of the corporation to be affixed to all papers which may require it;
provided, however, that the Executive Committee may not approve any contract or
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers or have a material financial interest. The
Executive Committee shall have power to make rules and regulations for the
conduct of its business. Vacancies in the membership of the Executive Committee
shall be filled by the Board of Directors from among the directors at a regular
meeting, or at a special meeting, held for that purpose.
-- CHAIRMAN AND SECRETARY. The Executive Committee shall elect from
its own members a chairman who shall hold office during the term of his office
as a member of the Executive Committee. When present he shall preside over all
meetings of the Executive Committee. The Executive Committee shall also elect a
secretary of the Executive Committee who shall attend all meetings of the
Executive Committee and keep the minutes of its acts and proceedings. Such
secretary shall be a member of the Board of Directors and may, but need not, be
a member of the Executive Committee.
-- MINUTES. The Executive Committee shall keep minutes of its acts
and proceedings which shall be submitted at the next meeting of the Board of
Directors, and any action taken by the Board of Directors with respect thereto
shall be entered in the minutes of the Board of Directors.
-- MEETINGS. The Executive Committee may hold meetings, both
regular and special, either within or without the State of Delaware, as shall be
set forth in the Notice of the Meeting or in a duly executed Waiver of Notice
thereof.
8. OTHER COMMITTEES. The Board of Directors may from time to time,
by resolution adopted by affirmative vote of a majority of the whole Board of
Directors, appoint other committees of the Board of Directors which shall have
such powers and duties as the Board of Directors may properly determine. No
such other committee of the Board of Directors shall be composed of fewer than
two (2) directors. Meetings of such committees of the Board of Directors may be
held at any place, within or without the State of Delaware, from time to time
designated by the Board of Directors, of the committee in question. Such
committees may meet at stated times on two days' notice by any member of such
committee to all other members, by delivered letter, by mail or by telegram.
The provisions of Section 4 of this Article II with respect to waiver
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of notice of meetings of the Board of Directors and participation at meetings of
the Board of Directors by means of a conference telephone or similar
communications equipment shall apply to meetings of such other committees.
9. APPROVAL OF TRANSACTION WITH DOLAN AFFILIATES. The corporation
shall make any investment in or advance to a Dolan Affiliate (as defined below)
only if such investment or advance shall be approved by a committee of
Independent Directors (as defined below) of the Board of Directors. An
"Independent Director" of the Board of Directors is a director who is not an
officer or director of the Dolan Affiliate which is a party to the transaction
at issue and who is not an officer or employee of the corporation. A "Dolan
Affiliate" is Charles F. Dolan or any corporation, partnership, association or
other organization owned or controlled by Charles F. Dolan provided that a Dolan
Affiliate shall not include any entity which is a subsidiary of the corporation.
ARTICLE III
OFFICERS
1. EXECUTIVE OFFICERS. The directors may elect or appoint a
Chairman, one or more Vice Chairmen, a President, one or more Vice Presidents
(one or more of whom may be denominated "Executive Vice President" or "Senior
Vice President"), a Secretary, one or more Assistant Secretaries, a Treasurer,
one or more Assistant Treasurers, a Controller, one or more Assistant
Controllers and such other officers as they may determine. Any number of
officers may be held by the same person.
2. TERM OF OFFICE: REMOVAL. Unless otherwise provided in the
resolution of election or appointment, each officer shall hold office until the
meeting of the Board of Directors following the next annual meeting of
stockholders and until his successor has been elected and qualified. The Board
of Directors may remove any officer for cause or without cause.
3. AUTHORITY AND DUTIES. All officers, as between themselves and
the corporation, shall have such authority and perform such duties in the
management of the corporation as may be provided in these by-laws, or, to the
extent not so provided, by the Board of Directors. Either the Chairman or the
President shall be the Chief Executive Officer of the corporation, and either
the Chairman, any Vice Chairman or President shall be the Chief Operating
Officer of the corporation, in each case as the Board of Directors shall from
time to time determine.
4. THE CHAIRMAN. The Chairman, if any, and if present and acting,
shall be involved in policy making and strategic planning. In addition, the
Chairman shall preside at all meetings of the Board of Directors; otherwise, any
other director chosen by the Board of Directors shall preside. The Chairman, if
any, shall
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have such additional duties as the Board of Directors may prescribe.
5. OTHER OFFICERS. The other officers of the corporation shall have
such powers and duties as generally pertain to their respective offices, as well
as such powers and duties as from time to time may be conferred by the Chairman,
the President or the Board of Directors.
ARTICLE V
VOTING OF STOCKS IN OTHER COMPANIES
Unless otherwise ordered by the Board of Directors, the Chairman, a
Vice Chairman, the President, a Vice President, the Secretary or the Treasurer
shall have full power and authority on behalf of the corporation to attend and
to act and vote at any meetings of stockholders of any corporation in which the
corporation may hold stock and at any such meeting shall possess and exercise
any and all of the rights and powers incident to the ownership of such stock and
which as the owner thereof the corporation might have possessed and exercised if
present or the Chairman, a Vice Chairman, the President, or a Vice President may
in his discretion give a proxy or proxies in the name of the corporation to any
other person or persons, who may vote said stock and exercise any and all other
rights in regard to it here accorded to the officers. The Board of Directors by
resolution from time to time may limit or curtail such power.
ARTICLE V
CORPORATE SEAL
AND
CORPORATE BOOKS
The corporate seal shall be in such form as the Board of Directors
shall prescribe.
The books of the corporation may be kept within or without the State
of Delaware, at such place or places as the Board of Directors may, from time to
time, determine.
ARTICLE VI
FISCAL YEAR
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The fiscal year of the corporation shall be fixed, and shall be
subject to change, by the Board of Directors.
ARTICLE VII
CONTROL OVER BY-LAWS
The power to amend, alter, and repeal these by-laws and to adopt new
by-laws shall be vested in both the Board of Directors and the stockholders
entitled to vote in the election of directors.
ARTICLE VIII
INDEMNIFICATION
A. The corporation shall indemnify each person who was or is made a
party or is threatened to be made a party to or is involved in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she, or a person of who he or she is the legal representative,
is or was a director or officer of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged action in an official capacity as a director,
officer, employee or agent or alleged action in any other capacity while serving
as a director, officer, employee or agent, to the maximum extent authorized by
the Delaware General Corporation Law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the corporation to provide broader indemnification rights than
said law permitted the corporation to provide prior to such amendment), against
all expense, liability and loss (including attorney's fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred by such person in connection with such proceeding such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators. The right to indemnification conferred in this
Article shall be a contract right and shall include the right to be paid by the
corporation the expenses incurred in defending any such proceeding in advance of
its final disposition; provided that, if the Delaware General Corporation Law so
requires, the payment of such expenses incurred by a director or officer in
advance of the final disposition of a proceeding shall be made only upon receipt
by the corporation of an undertaking by or on behalf of such person to repay all
amounts so advanced if it shall ultimately be determined that such person is not
entitled to be indemnified by the corporation as authorized in this Article or
otherwise.
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B. The right to indemnification and advancement of expenses
conferred on any person by this Article shall not limit the corporation from
providing any other indemnification permitted by law nor shall it be deemed
exclusive of any other right which and such person may have or hereafter acquire
under any statute, provision of the certificate of incorporation, by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
C. The corporation may purchase and maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent of the
corporation or another corporation, partnership, joint venture, or other
enterprise against any expense, liability or loss, whether or not the
corporation would have the power to indemnify such person against such expense,
liability or loss under the Delaware General Corporation Law.
PLUSAPM/BYLAWDE.CSC
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CONFORMED COPY
AMENDMENT NO. 1
Dated as of March 6, 1995
to
FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of October 14, 1994
CABLEVISION SYSTEMS CORPORATION, a Delaware corporation (the
"Company"), the Restricted Subsidiaries (as defined in the Credit Agreement
referred to below), the banks parties to such Credit Agreement (the "Banks"),
BANK OF MONTREAL, Chicago Branch, THE BANK OF NEW YORK, THE BANK OF NOVA SCOTIA,
THE CANADIAN IMPERIAL BANK OF COMMERCE and NATIONSBANK OF TEXAS, N.A., as Co-
Agents (the "Co-Agents"), and TORONTO DOMINION (TEXAS), INC., as Agent (the
"Agent"), agree as follows:
ARTICLE I
AMENDMENTS
Section 1.1. CREDIT AGREEMENT. Reference is made to the Fourth
Amended and Restated Credit Agreement dated as of October 14, 1994 among the
Company, the Restricted Subsidiaries, the Banks, the Co-Agents and the Agent
(the "Credit Agreement"). Terms used in this Amendment No. 1 (this "Agreement")
that are not otherwise defined herein shall have the meanings given to such
terms in the Credit Agreement. The Credit Agreement as amended by this
Agreement (the "Amended Credit Agreement") is and shall continue to be in full
force and effect and is hereby in all respects ratified and confirmed.
Section 1.2. CERTAIN AMENDMENTS. Upon and after the Amendment
Effective Date (as defined in Section 1.3 hereof):
(a) Section 1.01 of the Credit Agreement shall be amended by (i)
inserting the words "(less the aggregate principal amount of the Revolving
Credit Loans and Letter of Credit Liabilities then outstanding on such day) PLUS
CNJ Availability on such day PLUS Net Cash Proceeds from the issuance of New
Subordinated Debt used to prepay Loans at any time during such period as to
which no notice has been given pursuant to Section 2.04(c)(i)(A) stating that
such Net Cash Proceeds shall
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constitute Refunding Proceeds" after the words "Total Available Revolving Credit
Commitment as of the first day of such period" set forth in the defined term
"Free Cash Flow Coverage Ratio" set forth therein, (ii) inserting the following
defined term in the appropriate alphabetical order: "'CNJ AVAILABILITY' shall
mean, as of any date, the CNJ Commitment as of such date MINUS CNJ Loans
outstanding each as of such date." and (iii) deleting the ")" after the word
"Proceeds" set forth in clause (iii) of the defined term "Total Debt Expense"
and inserting ")" after the words "CNYC Agreement" set forth in clause (iv)
thereof.
(b) Section 9.25(a) of the Credit Agreement shall be amended by
deleting the paragraphs set forth under the column headings "PERIOD" and "RATIO"
and inserting the following in lieu
thereof:
"from and including the Effective
Date to and including the
Quarter ended December 31, 1996 1.50 to 1
from and including January 1, 1997
to and including the Quarter ended
December 31, 1997 1.75 to 1
on and after the Quarter ended
March 31, 1998 2.00 to 1".
(c) Section 9.26 of the Credit Agreement shall be amended by deleting
the paragraphs set forth under the column headings "PERIOD" and "RATIO" and
inserting the following in lieu
thereof:
"from and including the Effective Date
to and including December 31, 1994 6.50 to 1
from and including January 1, 1995 to
and including September 30, 1995 6.75 to 1
from and including October 1, 1995 to
and including March 31, 1996 6.50 to 1
from and including April 1, 1996 to
and including September 30, 1996 6.25 to 1
from and including October 1, 1996 to
and including March 31, 1997 6.00 to 1
from and including April 1, 1997 to
and including September 30, 1997 5.75 to 1
from and including October 1, 1997 to
and including December 31, 1997 5.50 to 1
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from and including January 1, 1998 to
and including March 31, 1998 5.00 to 1
from and including April 1, 1998 to
and including December 31, 1998 4.75 to 1
on and after January 1, 1999 4.50 to 1".
(d) Section 9.11(ii) of the Credit Agreement shall be amended by
deleting the text set forth therein and inserting the words "short-term
Indebtedness incurred for working capital purposes up to but not exceeding
$20,000,000 in aggregate principal amount at any one time outstanding PROVIDED
HOWEVER that no more than $10,000,000 of such short-term Indebtedness may be
incurred from any Person that is not a Bank;" in lieu thereof.
(e) Section 9.17(i)(C) of the Credit Agreement shall be amended by
inserting the words "PROVIDED that, prior to such use of Refunding Proceeds, the
Company shall have issued New Subordinated Debt the Net Cash Proceeds of which
shall have been used to prepay Loans (and shall not have reborrowed any such
Loans to the extent such reborrowed amounts would constitute Refunding
Proceeds), in an aggregate amount for the period from the Effective Date to the
date of such Restricted Payment equal to (I) $200,000,000 if the Company has
acquired CBos or (II) $100,000,000 if the Company has not acquired CBos"
following the words "Refunding Proceeds".
(f) Section 12.06(c) of the Credit Agreement shall be amended by (i)
inserting the words "of all or" immediately before the words "in part of its
rights" set forth therein and (ii) inserting the words "if any" after the words
"such Bank's Aggregate Commitment not so participated" set forth in clause (v)
thereof.
Section 1.3. EFFECTIVE DATE. This Agreement shall be effective on
the first date (the "Amendment Effective Date") when the following conditions
shall have been satisfied:
(a) This Agreement shall have been duly executed and delivered by each
of the Company, the Restricted Subsidiaries, the Agent and the Majority Banks.
(b) The Company and the Restricted Subsidiaries shall have provided
the Agents (with copies to be provided for each Bank) with:
(i) certified copies of the name and signature of each of the persons
authorized to sign this Agreement on behalf of the Company and such of the
Restricted Subsidiaries parties hereto;
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(ii) an opinion of Robert Lemle, Esq., General Counsel to the Company
and the Restricted Subsidiaries covering such matters as any Bank or
special New York counsel to the Agents may reasonably request; and
(iii) an opinion of Sullivan & Crowmell, special New York Counsel to
the Company and the Restricted Subsidiaries covering such matters as any
Bank or special New York counsel to the Agents may reasonably request.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. REPRESENTATIONS AND WARRANTIES. Each of the Company and
the Restricted Subsidiaries represents and warrants as follows:
(a) POWER; BINDING AGREEMENTS. Each of the Company and the
Restricted Subsidiaries has full power, authority and legal right to make and
perform this Agreement and the Amended Credit Agreement to which it is a party.
This Agreement and the Amended Credit Agreement constitute the legal, valid and
binding obligations of each of the Company and the Restricted Subsidiaries which
is a party thereto, enforceable in accordance with their terms (except for
limitations on enforceability under bankruptcy, reorganization, insolvency and
other similar laws affecting creditors' rights generally and limitations on the
availability of the remedy of specific performance imposed by the application of
general equitable principles).
(b) AUTHORITY; NO CONFLICT. The making and performance of this
Agreement and the Amended Credit Agreement by each of the Company and the
Restricted Subsidiaries which is a party thereto have been duly authorized by
all necessary action and do not and will not (i) violate any provision of any
laws, orders, rules or regulations presently in effect (other than violations
that, singly or in the aggregate, have not had and are not likely to have a
Materially Adverse Effect), or any provision of any of the Company's or the
Restricted Subsidiaries' respective partnership agreements, charters or by-laws
presently in effect; (ii) result in the breach of, or constitute a default or
require any consent under, any existing indenture or other agreement or
instrument to which the Company or any of the Restricted Subsidiaries is a party
or by which their respective properties may be bound or affected (other than any
breach, default or required consent that, singly or in the aggregate, have not
had and are not likely to have a Materially Adverse Effect); or (iii) result in,
or require, the creation or imposition of any Lien (other than those
contemplated by the Security Documents) upon or with respect to any of the
properties
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or assets now owned or hereafter acquired by the Company or any of the
Restricted Subsidiaries.
(c) APPROVAL OF REGULATORY AUTHORITIES. No approval or consent of,
or filing or registration with, any federal, state or local commission or other
regulatory authority is required in connection with the execution, delivery and
performance by the Company and the Restricted Subsidiaries of this Agreement and
the Amended Credit Agreement.
Section 2.2. SURVIVAL. Each of the foregoing representations
and warranties shall be made at and as of the Amendment Effective Date and shall
constitute a representation and warranty of the Company and the Restricted
Subsidiaries made under the Amended Credit Agreement and it shall be an Event of
Default if any such representation and warranty shall prove to have been
incorrect or misleading in any material respect when made. Each of the
representations and warranties made under the Amended Credit Agreement (and
including those representations and warranties made herein) shall survive and
not be waived by the execution and delivery of this Agreement.
ARTICLE III
MISCELLANEOUS
Section 3.1. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York.
Section 3.2. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
such separate counterparts shall together constitute but one and the same
instrument.
Section 3.3. EXPENSES. The Company hereby agrees to pay or reimburse
the Agent for all reasonable fees and expenses, including attorneys' fees,
incurred in connection with the negotiation, preparation, execution and delivery
of this Agreement.
[THE NEXT PAGE IS A SIGNATURE PAGE]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers in counterparts all as of the
day and year first above written.
CABLEVISION SYSTEMS CORPORATION,
for itself and as a General
Partner of Cablevision
Finance Limited Partnership
By /s/ William J. Bell
---------------------
Title: Vice Chairman
CABLEVISION AREA 9 CORPORATION
CABLEVISION FAIRFIELD CORPORATION
CABLEVISION FINANCE CORPORATION
CABLEVISION LIGHTPATH, INC.
CABLEVISION OF CLEVELAND GP, INC.,
for itself and as a General Partner
of Cablevision of Cleveland Limited
Partnership
CABLEVISION OF CLEVELAND LP, INC.
CABLEVISION OF CONNECTICUT CORPORATION
CABLEVISION OF MICHIGAN, INC.
CABLEVISION SYSTEMS DUTCHESS CORPORATION
CABLEVISION SYSTEMS EAST HAMPTON CORPORATION
CABLEVISION SYSTEMS GREAT NECK CORPORATION
CABLEVISION SYSTEMS HUNTINGTON CORPORATION
CABLEVISION SYSTEMS ISLIP CORPORATION
CABLEVISION SYSTEMS LONG ISLAND CORPORATION
CABLEVISION SYSTEMS SUFFOLK CORPORATION
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CABLEVISION SYSTEMS WESTCHESTER CORPORATION
COMMUNICATIONS DEVELOPMENT CORPORATION
CSC ACQUISITION CORPORATION
CSC ACQUISITION - MA, INC.
CSC ACQUISITION - NY, INC.
By /s/ William J. Bell
---------------------
Title: Vice Chairman
of each of the above-named
twenty corporations
CABLEVISION FINANCE LIMITED PARTNERSHIP
By Cablevision Systems
Corporation, as General Partner
CABLEVISION OF CLEVELAND LIMITED PARTNERSHIP
By Cablevision of Cleveland GP,
Inc., as General Partner
-7-
<PAGE>
THE TORONTO-DOMINION BANK,
Grand Cayman Islands
Branch, B.W.I.
By /s/ Melissa B. Nigro
------------------------------------
Title: Manager of Syndications
and Credit Administration
BANK OF MONTREAL,
Chicago Branch
as Bank and Co-Agent
By /s/ Yvonne Bos
------------------------------------
Title: Managing Director
THE BANK OF NEW YORK,
as Bank and Co-Agent
By /s/ Brendan T. Nedzi
------------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Bank and Co-Agent
By /s/ Vincent J. Fitzgerald, Jr.
------------------------------------
Title: Authorized Signatory
THE CANADIAN IMPERIAL BANK
OF COMMERCE,
as Bank and Co-Agent
By /s/ Deborah Strek
------------------------------------
Title: Authorized Signatory
NATIONSBANK OF TEXAS, N.A.,
as Bank and Co-Agent
By /s/ Jennifer Zydney
------------------------------------
Title: Assistant Vice President
-8-
<PAGE>
CREDIT LYONNAIS,
Cayman Island Branch
By /s/ M. Bernadette Collins
------------------------------------
Title: Vice President
MELLON BANK, N.A.
By /s/ G. Lois Ashley
------------------------------------
Title: First Vice President
ROYAL BANK OF CANADA
By /s/ Barbara Meijer
------------------------------------
Title: Manager
THE FIRST NATIONAL BANK OF BOSTON
By /s/ David B. Herter
------------------------------------
Title: Director
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By /s/ Anna Garcia
------------------------------------
Title: Vice President
CHEMICAL BANK
By /s/ John J. Huber, III
------------------------------------
Title: Managing Director
BANQUE PARIBAS
By /s/ Philippe Vuarchex
------------------------------------
Title: Vice President
By /s/ Errol R. Antzis
------------------------------------
Title: Group Vice President
-9-
<PAGE>
CITIBANK, N.A.
By /s/ Robert A. Keller
------------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Gary S. Gage
------------------------------------
Title: Senior Vice President
SHAWMUT BANK CONNECTICUT, N.A.
By /s/ Anne Dorsey
------------------------------------
Title: Director
BARCLAYS BANK PLC
By /s/ Michael Ballard
------------------------------------
Title: Associate Director
CORESTATES BANK, N.A.
By /s/ Douglas E. Blackman
------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By /s/ William F. LaPorte, III
------------------------------------
Title: Vice President
THE FUJI BANK LIMITED,
New York Branch
By /s/ Katsunori Nozawa
------------------------------------
Title: Vice President and Manager
LTCB Trust Company
By /s/ Hiroshi Sasaki
------------------------------------
Title: Senior Vice President
-10-
<PAGE>
NATWEST BANK N.A.
(formerly National Westminster Bank
USA)
By /s/ Eric S. Meyer
------------------------------------
Title: Vice President
PNC BANK, National Association
By /s/ Thomas P. Carden
------------------------------------
Title: Vice President
SOCIETE GENERALE
By /s/ Elaine Khalil
------------------------------------
Title: Vice President
UNION BANK
By /s/ Steven D. Olson
------------------------------------
Title: Vice President
TORONTO DOMINION (TEXAS), INC.,
as Agent
By /s/ Melissa B. Nigro
------------------------------------
Title: Vice President
-11-
<PAGE>
CONFORMED COPY
AMENDMENT NO. 1
Dated as of March 6, 1995
to
FIRST AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of October 14, 1994
CABLEVISION OF NEW JERSEY, INC. a Delaware corporation (the
"Company"), CABLEVISION SYSTEMS CORPORATION, a Delaware corporation ("CSC"), the
banks parties to such Credit Agreement (the "Banks"), BANK OF MONTREAL, Chicago
Branch, THE BANK OF NEW YORK, THE BANK OF NOVA SCOTIA, THE CANADIAN IMPERIAL
BANK OF COMMERCE and NATIONSBANK OF TEXAS, N.A., as Co-Agents (the "Co-Agents"),
and TORONTO DOMINION (TEXAS), INC., as Agent (the "Agent"), agree as follows:
ARTICLE I
AMENDMENTS
Section 1.1. CREDIT AGREEMENT. Reference is made to the First
Amended and Restated Credit Agreement dated as of October 14, 1994 among the
Company, CSC, the Banks, the Co-Agents and the Agent (the "Credit Agreement").
Terms used in this Amendment No. 1 (this "Agreement") that are not otherwise
defined herein shall have the meanings given to such terms in the Credit
Agreement. The Credit Agreement as amended by this Agreement is and shall
continue to be in full force and effect and is hereby in all respects ratified
and confirmed.
Section 1.2. CERTAIN AMENDMENTS. Upon and after the Amendment
Effective Date (as defined in Section 1.3 hereof):
(a) Section 11.05(c) of the Credit Agreement shall be amended by (i)
inserting the words "of all or" immediately before the words "in part of its
rights" set forth therein and (ii) inserting the words "if any" after the words
"such Bank's Aggregate Commitment not so participated" set forth in clause (v)
thereof.
Section 1.3. EFFECTIVE DATE. This Agreement shall become effective
when each of the Company, CSC, the Agent and the Majority Banks shall have duly
executed and delivered this Agreement (the "Amendment Effective Date").
<PAGE>
ARTICLE II
MISCELLANEOUS
Section 2.1. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York.
Section 2.2. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original, but all
such separate counterparts shall together constitute but one and the same
instrument.
Section 2.3. EXPENSES. The Company hereby agrees to pay or reimburse
the Agent for all reasonable fees and expenses, including attorneys' fees,
incurred in connection with the negotiation, preparation, execution and delivery
of this Agreement.
[THE NEXT PAGE IS A SIGNATURE PAGE]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their duly authorized officers in counterparts all as of the
day and year first above written.
CABLEVISION OF NEW JERSEY, INC.
By /s/ William J. Bell
---------------------
Title: Vice Chairman
CABLEVISION SYSTEMS CORPORATION
By /s/ William J. Bell
---------------------
Title: Vice Chairman
<PAGE>
THE TORONTO-DOMINION BANK,
Grand Cayman Islands
Branch, B.W.I.
By /s/ Melissa B. Nigro
------------------------------------
Title: Manager of Syndications and
Credit Administration
BANK OF MONTREAL,
Chicago Branch
as Bank and Co-Agent
By /s/ Yvonne Bos
------------------------------------
Title: Managing Director
THE BANK OF NEW YORK,
as Bank and Co-Agent
By /s/ Brendan T. Nedzi
------------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA,
as Bank and Co-Agent
By /s/ Vincent J. Fitzgerald, Jr.
------------------------------------
Title: Authorized Signatory
THE CANADIAN IMPERIAL BANK
OF COMMERCE,
as Bank and Co-Agent
By /s/ Deborah Strek
------------------------------------
Title: Authorized Signatory
NATIONSBANK OF TEXAS, N.A.,
as Bank and Co-Agent
By /s/ Jennifer Zydney
------------------------------------
Title: Assistant Vice President
<PAGE>
CREDIT LYONNAIS,
Cayman Island Branch
By /s/ M. Bernadette Collins
------------------------------------
Title: Vice President
MELLON BANK, N.A.
By /s/ G. Lois Ashley
------------------------------------
Title: First Vice President
ROYAL BANK OF CANADA
By /s/ Barbara Meijer
------------------------------------
Title: Manager
THE FIRST NATIONAL BANK OF BOSTON
By /s/ David B. Herter
Title: Director
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
By /s/ Anna Garcia
------------------------------------
Title: Vice President
CHEMICAL BANK
By /s/ John J. Huber, III
------------------------------------
Title: Managing Director
BANQUE PARIBAS
By /s/ Philippe Vuarchex
------------------------------------
Title: Vice President
By /s/ Errol R. Antzis
------------------------------------
Title: Group Vice President
<PAGE>
CITIBANK, N.A.
By /s/ Robert A. Keller
------------------------------------
Title: Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Gary S. Gage
------------------------------------
Title: Senior Vice President
SHAWMUT BANK CONNECTICUT, N.A.
By /s/ Anne Dorsey
------------------------------------
Title: Director
BARCLAYS BANK PLC
By /s/ Michael Ballard
------------------------------------
Title: Associate Director
CORESTATES BANK, N.A.
By /s/ Douglas E. Blackman
------------------------------------
Title: Vice President
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By /s/ William F. LaPorte, III
------------------------------------
Title: Vice President
THE FUJI BANK LIMITED,
New York Branch
By /s/ Katsunori Nozawa
------------------------------------
Title: Vice President and Manager
LTCB Trust Company
By /s/ Hiroshi Sasaki
------------------------------------
Title: Senior Vice President
<PAGE>
NATWEST BANK N.A.
(formerly National Westminster Bank
USA)
By /s/ Eric S. Meyer
------------------------------------
Title: Vice President
PNC BANK, National Association
By /s/ Thomas P. Carden
------------------------------------
Title: Vice President
SOCIETE GENERALE
By /s/ Elaine Khalil
------------------------------------
Title: Vice President
UNION BANK
By /s/ Steven D. Olson
------------------------------------
Title: Vice President
TORONTO DOMINION (TEXAS), INC.,
as Agent
By /s/ Melissa B. Nigro
------------------------------------
Title: Vice President
<PAGE>
1/26/95
AMENDED AND RESTATED LOAN AGREEMENT
AMONG RAINBOW PROGRAMMING HOLDINGS, INC.,
THE GUARANTORS (as defined herein),
TORONTO DOMINION (TEXAS), INC.
and
CANADIAN IMPERIAL BANK OF COMMERCE,
AS CO-AGENTS,
THE OTHER BANKS PARTY HERETO
and
TORONTO DOMINION (TEXAS), INC.,
as administrative agent for the Banks,
Index Page
ARTICLE 1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 - The Loans . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.1 The Term Loan. . . . . . . . . . . . . . . . . . . . . . 20
Section 2.2 The Put Loan . . . . . . . . . . . . . . . . . . . . . . 20
Section 2.3 Manner of Borrowing and Disbursement . . . . . . . . . . 21
Section 2.4 Interest . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 2.5 Prepayment . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.6 Repayment. . . . . . . . . . . . . . . . . . . . . . . . 24
Section 2.7 Notes; Loan Accounts . . . . . . . . . . . . . . . . . . 24
Section 2.8 Manner of Payment. . . . . . . . . . . . . . . . . . . . 25
Section 2.9 Reimbursement. . . . . . . . . . . . . . . . . . . . . . 26
Section 2.10 Application of Payments. . . . . . . . . . . . . . . . . 26
Section 2.11 Capital Adequacy . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 3 - Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.1 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . 28
Section 3.2 Waivers and Releases . . . . . . . . . . . . . . . . . . 28
Section 3.3 Miscellaneous. . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 4 - Conditions Precedent. . . . . . . . . . . . . . . . . . . . 31
Section 4.1 Conditions Precedent to Initial Advance of the Term
Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 4.2 Conditions Precedent to Initial Advance of the Put
Loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 5 - Representations and Warranties. . . . . . . . . . . . . . . 35
Section 5.1 Representations and Warranties . . . . . . . . . . . . . 35
Section 5.2 Survival of Representations and Warranties, etc. . . . . 41
ARTICLE 6 - General Covenants . . . . . . . . . . . . . . . . . . . . . 41
Section 6.1 Preservation of Existence and Similar Matters. . . . . . 42
-i-
<PAGE>
Index
(Cont'd) Page
-------- ----
Section 6.2 Compliance with Applicable Law . . . . . . . . . . . . . 42
Section 6.3 Maintenance of Properties. . . . . . . . . . . . . . . . 42
Section 6.4 Accounting Methods and Financial Records . . . . . . . . 42
Section 6.5 Insurance. . . . . . . . . . . . . . . . . . . . . . . . 42
Section 6.6 Payment of Taxes and Claims. . . . . . . . . . . . . . . 43
Section 6.7 Visits and Inspections . . . . . . . . . . . . . . . . . 43
Section 6.8 Payment of Indebtedness. . . . . . . . . . . . . . . . . 43
Section 6.9 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . 43
Section 6.10 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 6.11 Further Assurances . . . . . . . . . . . . . . . . . . . 44
Section 6.12 Broker's Claims. . . . . . . . . . . . . . . . . . . . . 44
Section 6.13 Indemnity. . . . . . . . . . . . . . . . . . . . . . . . 44
Section 6.14 Delivery of Certificates and Documents in the Event of
an Asset Disposition.. . . . . . . . . . . . . . . . . . . . . . . 45
Section 6.15 Pledge of Acquired Interests and Non-Cash Proceeds from
Sales, Exchanges or other Disposition of Assets. . . . . . . . . . 45
Section 6.16 New Subsidiaries to be Guarantors. . . . . . . . . . . . 47
ARTICLE 7 - Information Covenants . . . . . . . . . . . . . . . . . . . 47
Section 7.1 Quarterly Financial Statements and Information . . . . . 47
Section 7.2 Annual Financial Statements and Information;
Certificate of No Default. . . . . . . . . . . . . . . . . . . . . 47
Section 7.3 Performance Certificates . . . . . . . . . . . . . . . . 48
Section 7.4 Copies of Other Reports. . . . . . . . . . . . . . . . . 49
Section 7.5 Notice of Litigation and Other Matters . . . . . . . . . 49
ARTICLE 8 - Negative Covenants. . . . . . . . . . . . . . . . . . . . . 50
Section 8.1 Indebtedness of the Borrower . . . . . . . . . . . . . . 51
Section 8.2 Investments. . . . . . . . . . . . . . . . . . . . . . . 51
Section 8.3 Limitation on Liens. . . . . . . . . . . . . . . . . . . 52
Section 8.4 Amendment and Waiver . . . . . . . . . . . . . . . . . . 53
Section 8.5 Liquidation; Disposition or Acquisition of Assets. . . . 53
Section 8.6 Limitation on Guaranties . . . . . . . . . . . . . . . . 56
Section 8.7 Restricted Payments and Purchases. . . . . . . . . . . . 56
Section 8.8 Value to Debt Ratios . . . . . . . . . . . . . . . . . . 56
Section 8.9 Cash Flow Ratios . . . . . . . . . . . . . . . . . . . . 57
Section 8.10 Affiliate Transactions . . . . . . . . . . . . . . . . . 57
Section 8.11 Real Estate. . . . . . . . . . . . . . . . . . . . . . . 57
Section 8.12 ERISA Liabilities. . . . . . . . . . . . . . . . . . . . 57
Section 8.13 Change in Business . . . . . . . . . . . . . . . . . . . 57
Section 8.14 Sales and Leasebacks . . . . . . . . . . . . . . . . . . 57
ARTICLE 9 - Default . . . . . . . . . . . . . . . . . . . . . . . . . . 58
Section 9.1 Events of Default. . . . . . . . . . . . . . . . . . . . 58
Section 9.2 Remedies . . . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE 10 - The Agents . . . . . . . . . . . . . . . . . . . . . . . . 61
-ii-
<PAGE>
Index
(Cont'd) Page
-------- ----
Section 10.1 Appointment and Authorization. . . . . . . . . . . . . . 61
Section 10.2 Delegation of Duties . . . . . . . . . . . . . . . . . . 61
Section 10.3 Interest Holders . . . . . . . . . . . . . . . . . . . . 61
Section 10.4 Consultation with Counsel. . . . . . . . . . . . . . . . 62
Section 10.5 Documents. . . . . . . . . . . . . . . . . . . . . . . . 62
Section 10.6 Agents and Affiliates. . . . . . . . . . . . . . . . . . 62
Section 10.7 Responsibility of the Agents . . . . . . . . . . . . . . 62
Section 10.8 Action by Agents . . . . . . . . . . . . . . . . . . . . 62
Section 10.9 Notice of Default or Event of Default. . . . . . . . . . 63
Section 10.10 Responsibility Disclaimed. . . . . . . . . . . . . . . . 63
Section 10.11 Indemnification. . . . . . . . . . . . . . . . . . . . . 64
Section 10.12 Credit Decision. . . . . . . . . . . . . . . . . . . . . 64
Section 10.13 Successor Agents . . . . . . . . . . . . . . . . . . . . 64
ARTICLE 11 - Change in Circumstances Affecting Eurodollar Advances. . . 65
Section 11.1 Eurodollar Basis Determination Inadequate or Unfair. . . 65
Section 11.2 Illegality . . . . . . . . . . . . . . . . . . . . . . . 65
Section 11.3 Increased Costs. . . . . . . . . . . . . . . . . . . . . 66
Section 11.4 Effect On Other Advances . . . . . . . . . . . . . . . . 67
ARTICLE 12 - Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . 67
Section 12.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 12.3 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 12.4 Set-Off. . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 12.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . 71
Section 12.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . 72
Section 12.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . 72
Section 12.8 Severability . . . . . . . . . . . . . . . . . . . . . . 73
Section 12.9 Headings . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 12.10 Interest . . . . . . . . . . . . . . . . . . . . . . . . 73
Section 12.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . 73
Section 12.12 Amendment and Waiver . . . . . . . . . . . . . . . . . . 73
Section 12.13 Other Relationships. . . . . . . . . . . . . . . . . . . 74
Section 12.14 Confidentiality. . . . . . . . . . . . . . . . . . . . . 74
Section 12.15 Liability of General Partners and Other Persons. . . . . 74
ARTICLE 13 - Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . 75
Section 13.1 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . 75
-iii-
<PAGE>
Exhibits
Exhibit A - Form of Assignment and Assumption Agreement
Exhibit B - Form of Borrower Pledge Agreement
Exhibit C - Form of Interest Rate Confirmation
Exhibit D - Form of Stock Pledge Agreement
Exhibit E-1- Form of Request for Advance for Term Loan
Exhibit E-2- Form of Request for Advance for Put Loan
Exhibit F - Form of Subordination Agreement
Exhibit G - Form of Subordination of Fees Agreement
Exhibit H - Form of Term Note
Exhibit I - Form of Put Note
Exhibit J - Form of Borrower's Certificate
Exhibit K - Form of Parent Company's Certificate
Exhibit L - Form of Guarantor Certificate
Exhibit M - Form of Parent Company Availability Certificate
Exhibit N - Form of Assignment of Partnership Interests
Exhibit O - Put Agreement
Exhibit P - Form of Subsidiary Certificate
Schedules
Schedule 1 - Guarantors
Schedule 2 - Operating Entities
Schedule 3 - Subsidiaries
Schedule 4 - Trademarks
Schedule 5.1 - Liabilities
Schedule 5.2 - Litigation
Schedule 6 - Trademarks Subject to Challenge
Schedule 7 - Name Changes
Schedule 8 - Guaranties
Schedule 9 - Affiliate Transactions
Schedule 10 - Bank Addresses
-i-
<PAGE>
AMENDED AND RESTATED LOAN AGREEMENT
AMONG
RAINBOW PROGRAMMING HOLDINGS, INC.,
THE GUARANTORS,
TORONTO DOMINION (TEXAS), INC.
and
CANADIAN IMPERIAL BANK OF COMMERCE,
AS CO-AGENTS,
THE OTHER BANKS PARTY HERETO
and
TORONTO DOMINION (TEXAS), INC.,
as administrative agent for the Banks,
agree as follows as of the 27th day of January, 1995:
BACKGROUND
The Borrower, the Guarantors, certain of the Banks and the Administrative
Agent are parties to the Prior Loan Agreement dated as of June 30, 1994,
pursuant to which the Prior Bank Group made advances to the Borrower in an
aggregate principal amount of $105,000,000.
The Borrower has entered into the Put Agreement with NBC, pursuant to which
NBC has obtained the right to require the Borrower to purchase all of NBC's
interests in SC-NY and News 12 at the price specified therein.
The parties wish to amend and restate the Prior Loan Agreement, as
hereinafter provided, to (i) add Chemical Bank, N.A., NationsBank of Texas, N.A.
and Mellon Bank, N.A. as "Banks" hereunder, (ii) increase the amount of the Term
Loan from $105,000,000 to $108,000,000, (iii) extend the maturity date of the
Term Loan to December 31, 1996, (iv) add a new tranche of loans in the aggregate
principal amount not to exceed $94,000,000 for the purpose of financing the
Borrower's obligation to pay for the NBC Put, (v) provide that the Obligations
shall be secured by the Security Documents, (vi) amend and restate the financial
and other covenants and (vii) otherwise amend the Prior Loan Agreement as more
particularly set forth herein.
ARTICLE 1 DEFINITIONS.
For the purposes of this Agreement:
"ADMINISTRATIVE AGENT" shall mean Toronto Dominion (Texas), Inc., a
Delaware corporation, acting as Administrative Agent for the Banks.
"ADMINISTRATIVE AGENT'S OFFICE" shall mean the office of the Administrative
Agent located at the address set forth in Section 12.1 hereof, or such other
office as may be designated
<PAGE>
pursuant to the provisions of Section 12.1 hereof.
"ADVANCE" or "ADVANCES" shall mean amounts advanced by the Banks to the
Borrower pursuant to Article 2 hereof on the occasion of any borrowing.
"AFFILIATE" shall mean any Person (other than a Person whose sole
relationship with the Borrower is as an employee) directly or indirectly
controlling, controlled by, or under common control with the Borrower, and, to
the extent not otherwise so deemed an Affiliate, Courtroom Television Network
and each Operating Entity shall be deemed an Affiliate of the Borrower. For
purposes of this definition, "control" when used with respect to any Person
includes the power to direct or cause the direction of the management and
policies of such Person, whether by control or otherwise.
"AGENTS" shall mean, collectively, the Administrative Agent and the Co-
Agents, and "AGENT" shall mean any one of them, individually.
"AGREEMENT" shall mean this Loan Agreement, as amended or supplemented from
time to time.
"AGREEMENT DATE" shall mean the date as of which this Agreement is dated.
"AMC" shall mean American Movie Classics Company, a New York general
partnership.
"AMC HOLDING CORPORATION" shall mean American Movie Classics Holding
Corporation, a New York corporation and wholly owned Subsidiary of the Borrower.
"AMC INTEREST" shall mean (i) the 49.9 percent ownership interest in AMC
and (ii) the option to acquire the remaining 0.1% ownership interest in AMC.
"AMC INTEREST ASSIGNMENT AGREEMENT" shall mean, collectively, those certain
agreements entered into as of July 11, 1994 by AMC Holding Corporation, the
Parent Company, LMCC and Rainbow Programming Enterprises pursuant to which AMC
Holding Corporation purchased the AMC Interest and the Parent Company purchased
LMCC's rights under the Consulting Agreement.
"AMC LOAN AGREEMENT" shall mean that certain Loan Agreement, dated as of
June 26, 1992, by and among AMC, The Toronto-Dominion Bank and Toronto Dominion
(Texas), Inc., as agent, as amended, modified or supplemented from time to
time.
"AMC OPERATING CASH FLOW" shall mean, with respect to AMC in respect of any
period, (a) the sum of (x) the Net Income of AMC and (y) interest expense,
depreciation, amortization (other than Programming Rights Amortization), and
other non-cash expenses
-2-
<PAGE>
(other than Programming Rights Amortization) deducted in determining the Net
Income of AMC, PLUS (b) operating expenses for the Romance Classics Channel in
an aggregate amount not to exceed $5,000,000 per year during such period.
"APPLICABLE LAW" shall mean, in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person, including, without limitation,
all orders and decrees of all courts and arbitrators in proceedings or actions
to which the Person in question is a party or by which it is bound.
"ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean each Assignment and
Assumption Agreement in substantially the form of EXHIBIT A attached hereto,
pursuant to which each Bank may, subject to Section 12.5 hereof, sell a portion
of its Term Loan, Put Loan, Term Loan Commitment or Put Loan Commitment.
"AUTHORIZED SIGNATORY" shall mean, with respect to any Person, such senior
personnel of such Person as may be duly authorized and designated in writing by
the Person to execute documents, agreements, and instruments on behalf of the
Person.
"AVAILABLE CASH FLOW" means, with respect to the Borrower or any
Subsidiary, (i) cash distributions to the Borrower from any Subsidiary or to the
Borrower or any Subsidiary from any Operating Entity, (ii) cash contributions to
the Borrower from the Parent Company and (iii) net cash proceeds of any
disposition of a partnership or other equity interest held by the Borrower or
any Subsidiary in any Subsidiary or Operating Entity (other than any net cash
proceeds required to be applied to the Loans pursuant to Section 2.5).
"BANKS" shall mean those banks whose names are set forth on the signature
pages hereof under the heading "Banks" and any assignees of the Banks which
hereafter become parties hereto pursuant to and in accordance with Section 12.5
hereof; and "BANK" shall mean any one of the foregoing Banks.
"BASE RATE" shall mean, as of any date, a fluctuating interest rate per
annum equal to the sum of (a) the higher of (i) the Prime Rate, and (ii) the sum
of (A) the Federal Funds Rate, PLUS (B) five-eighths percent (5/8%), PLUS (b)
the Base Rate Applicable Margin. The Base Rate shall be adjusted automatically
as of the opening of business on the effective date of each change in the Prime
Rate or the Federal Funds Rate, as the case may be.
"BASE RATE ADVANCE" shall mean an Advance which the Borrower requests to be
made as a Base Rate Advance or which is reborrowed as a Base Rate Advance in
accordance with the provisions of Section 2.3 hereof, and which shall be in a
principal amount of at least $500,000 or an integral multiple of $250,000 in
excess thereof.
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"BASE RATE APPLICABLE MARGIN" shall mean, at any time, with respect to any
Base Rate Advance, the per annum rate of interest equal to: (i) 1.750%, at any
time after the Agreement Date and before the Put Loan Closing Date, (ii) 2.000%,
at any time on and after the Put Loan Closing Date and before the date
thereafter on which the aggregate outstanding principal amount of the Put Loan
is less than one-half of the amount of the initial Advance of the Put Loan,
(iii) 1.875%, on and after the date on which the aggregate outstanding principal
amount of the Put Loan is less than one-half of the amount of the initial
Advance of the Put Loan and before the date on which the Put Loan is repaid in
full, and (iv) 1.750%, at any time after the Put Loan has been repaid in full
and prior to the Maturity Date.
"BORROWER" shall mean Rainbow Programming Holdings, Inc., a New York
corporation.
"BORROWER ADJUSTED INTEREST EXPENSE" shall mean, as of any date with
respect to the twelve month period then ending, the sum of (i) the interest
expense of the Borrower in respect of Total Adjusted Borrower Debt for such
period together with any fees accruing during such period pursuant to
Section 2.2(c), plus (ii) the product of (x) the interest expense of AMC in
respect of Total AMC Debt for such period, together with any commitment fees
pertaining thereto pursuant to the AMC Loan Agreement, times (y) the Borrower's
direct and indirect ownership interest percentage in AMC, expressed as a
decimal.
"BORROWER ALLOCATED CASH FLOW" shall mean, as of any date for the twelve
month period then ending, the sum of (i) the product of (x) AMC Operating Cash
Flow for such period, times (y) the Borrower's direct and indirect ownership
interest percentage in AMC, expressed as a decimal, (ii) the product of (x) the
Operating Cash Flow of SC-NY for such period, times (y) the Borrower's direct
and indirect ownership interest percentage in SC-NY, expressed as a decimal, and
(iii) the product of (x) the Operating Cash Flow of SC-CHI for such period,
times (y) the Borrower's direct and indirect ownership interest percentage in
SC-CHI, expressed as a decimal.
"BORROWER INTEREST EXPENSE" shall mean, as of any date with respect to the
twelve month period then ending, the sum of (i) the interest expense of the
Borrower in respect of Total Borrower Debt for such period, plus (ii) the
product of (x) the interest expense of AMC in respect of Total AMC Debt for such
period, together with any commitment fees pertaining thereto pursuant to the AMC
Loan Agreement, times (y) the Borrower's direct and indirect ownership interest
percentage in AMC, expressed as a decimal.
"BORROWER PLEDGE AGREEMENT" shall mean that certain Pledge Agreement to be
executed and delivered by the Borrower in accordance with subsection 6.15(a)
hereof, which agreement shall be substantially in the form of EXHIBIT B attached
hereto.
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"BUSINESS" shall mean (i) the creation, acquisition, use, production,
exhibition, distribution or development of (or investment in) programming and
programming services (including, without limitation, any "home-shopping"
programming services), (ii) the provision of management, uplink and transmission
facilities and services (including without limitation direct broadcast satellite
transmission and services), (iii) acquiring and holding the MSG Interests and
operating, managing or otherwise participating in any businesses, including
without limitation, ownership of a sports and entertainment arena, sports teams,
entertainment facilities and programming services, with respect to such MSG
Interests, and (iv) the distribution and sale of advertisements and advertising
services and related businesses with respect to any of the above.
"BUSINESS DAY" shall mean a day on which banks are not authorized or
required to be closed and foreign exchange markets are open for the transaction
of business required for this Agreement in London, England, and New York, New
York, as relevant to the determination to be made or the action to be taken.
"CAPITAL EXPENDITURES" shall mean expenditures for the purchase of assets
of long-term use which are capitalized in accordance with GAAP; and shall not
include expenditures for and under Programming Rights Agreements.
"CAPITALIZED LEASE OBLIGATION" shall mean that portion of any obligation of
a Person as lessee under a lease which at the time would be required to be
capitalized on the balance sheet of such lessee in accordance with GAAP.
"CO-AGENTS" means, collectively, Toronto Dominion (Texas), Inc. and
Canadian Imperial Bank of Commerce, as co-agents for the Banks.
"CODE" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITMENT" shall mean the several obligations of the Banks to advance the
aggregate sum of up to $202,000,000 to the Borrower pursuant to the Term Loan
Commitment and the Put Loan Commitment, pursuant to the terms hereof.
"CONSULTING AGREEMENT" shall mean that certain Consulting Agreement dated
as of January 1, 1987 between LMCC, as assignee of TCI Networks of Delaware,
Inc., and AMC , which was purchased by the Parent Company pursuant to the AMC
Interest Assignment Agreement.
"DEFAULT" shall mean any Event of Default, and any other event specified in
Section 9.1 hereof which with any passage of time or giving of notice (or both)
would constitute such event an Event of Default.
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"DEFAULT RATE" shall mean a simple per annum interest rate equal to the sum
of the otherwise applicable Interest Rate Basis hereunder plus two percent (2%).
"DOLAN" shall mean Charles F. Dolan, his spouse, his descendants, or any
spouse of any such descendant and trusts for the benefit of, inter alia, him,
his spouse, his descendants, or any spouse of any such descendants, and any
estate, testamentary trust, or executor, administrator, conservator or legal or
personal representative of any of the foregoing.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
in effect on the Agreement Date and as such Act may be amended thereafter from
time to time.
"ERISA AFFILIATE" shall mean (a) any corporation which is a member of the
same controlled group of corporations (within the meaning of Code Section
414(b)) as is the Borrower, (b) any other trade or business (whether or not
incorporated) under common control (within the meaning of Code Section 414(c))
with the Borrower, (c) any other corporation, partnership or other organization
which is a member of an affiliated service group (within the meaning of Code
Section 414(m)) with the Borrower, or (d) any other entity required to be
aggregated with the Borrower pursuant to regulations under Code Section 414(o).
"EURODOLLAR ADVANCE" shall mean an Advance which the Borrower requests to
be made as a Eurodollar Advance or which is reborrowed as a Eurodollar Advance
in accordance with the provisions of Section 2.3 hereof, and which shall be in a
principal amount of at least $500,000 or an integral multiple of $250,000 in
excess thereof.
"EURODOLLAR BASIS" shall mean a simple per annum interest rate equal to the
sum of (a) the quotient of (i) the Eurodollar Rate divided by (ii) one minus the
Eurodollar Reserve Percentage, stated as a decimal, plus (b) the Eurodollar Rate
Applicable Margin. The Eurodollar Basis shall be rounded upward to the nearest
one-hundredth of one percent (1/100%) and shall apply to Interest Periods of one
(1), two (2), three (3) and six (6) months, and, subject to the last sentence of
this definition, nine (9) and twelve (12) months, and, once determined, shall be
subject to Article 10 hereof and shall remain unchanged during the applicable
Interest Period, except for changes to reflect adjustments in the Eurodollar
Reserve Percentage. The Borrower may not elect an Interest Period for a
Eurodollar Advance in excess of six (6) months unless the Administrative Agent
has notified the Borrower (i) that each of the Banks has available to it funds
for such Bank's share of the proposed Advance which are not required for other
purposes, and (ii) that such funds are available to each Bank at a rate
(exclusive of reserves and other adjustments) at or below the Eurodollar Rate
for such proposed Advance and Interest Period,
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and (iii) that each Bank has, in its sole discretion, agreed to fund such
Advance.
"EURODOLLAR RATE" shall mean, with respect to any Eurodollar Advance for
any Interest Period therefor, the rate per annum (rounded upwards, if necessary,
to the nearest 1/16 of 1%) quoted by The Toronto-Dominion Bank, New York Branch,
at approximately 11:00 a.m. London time (or as soon thereafter as practicable)
on the date two Business Days prior to the first day of such Interest Period for
the offering to The Toronto-Dominion Bank by leading banks reasonably selected
by the Administrative Agent in the London interbank market of United States
Dollar deposits having a term comparable to such Interest Period and in an
amount comparable to the principal amount of such Eurodollar Advance; provided
that, if The Toronto-Dominion Bank shall cease to receive such offers,
"Eurodollar Rate" shall mean, with respect to any Eurodollar Advance the rate
per annum (rounded upwards, if necessary to the nearest 1/16 of 1%) reported, on
the date two Business Days prior to the first day of such Interest Period, on
Telerate Access Service page 3750 (British Bankers Association Settlement Rate)
for United States Dollar deposits having a term comparable to such Interest
Period and in an amount comparable to the principal amount of such Eurodollar
Advance.
"EURODOLLAR RATE APPLICABLE MARGIN" shall mean, at any time, with respect
to any Eurodollar Advance, the per annum rate of interest equal to: (i) 2.750%,
at any time after the Agreement Date and before the Put Loan Closing Date, (ii)
3.000%, at any time on and after the Put Loan Closing Date and before the date
thereafter on which the aggregate outstanding principal amount of the Put Loan
is less than one-half of the amount of the initial Advance of the Put Loan,
(iii) 2.875%, from and after the date on which the aggregate outstanding
principal amount of the Put Loan is less than one-half of the amount of the
initial Advance of the Put Loan and before the date on which the Put Loan is
repaid in full, and (iv) 2.750%, at any time after the Put Loan has been repaid
in full and prior to the Maturity Date.
"EURODOLLAR RESERVE PERCENTAGE" shall mean the percentage which is in
effect from time to time under Regulation D of the Board of Governors of the
Federal Reserve System, as such regulation may be amended from time to time, as
the actual reserve requirement applicable with respect to Eurocurrency
Liabilities (as that term is defined in Regulation D), to the extent any Bank
has any Eurocurrency Liabilities subject to such reserve requirement at that
time. The Eurodollar Basis for any Eurodollar Advance shall be adjusted as of
the effective date of any change in the Eurodollar Reserve Percentage.
"EVENT OF DEFAULT" shall mean any of the events specified in Section 9.1
hereof, provided that any requirement for notice or lapse of time, or both, has
been satisfied.
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"EXCESS FUNDING GUARANTOR" shall have the meaning ascribed thereto in
Article 3 of this Agreement.
"EXCESS PAYMENT" shall have the meaning ascribed thereto in Article 3 of
this Agreement.
"FEDERAL FUNDS RATE" shall mean, as of any date, the weighted average of
the rates on overnight federal funds transactions with the members of the
Federal Reserve System arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions received by the Administrative Agent from three federal
funds brokers of recognized standing selected by the Administrative Agent.
"FEES AGREEMENTS" shall mean, collectively, (i) those certain agreements of
even date herewith between the Borrower and each Bank setting forth the
applicable bank fees relating to this Agreement, and (ii) that certain agreement
of even date herewith by and between the Co-Agents and the Borrower setting
forth the applicable agent fees relating to this Agreement.
"GAAP" shall mean generally accepted accounting principles in the United
States, as in effect from time to time, consistently applied.
"GUARANTORS" shall mean the Persons set forth on SCHEDULE 1 attached hereto
and each new Subsidiary of the Borrower.
"GUARANTY" or "GUARANTEED," as applied to an obligation (each a "primary
obligation"), shall mean and include (a) any guaranty, direct or indirect, in
any manner, of any part or all of such primary obligation, and (b) any
agreement, direct or indirect, contingent or otherwise, the practical effect of
which is to assure in any way the payment or performance (or payment of damages
in the event of non-performance) of any part or all of such primary obligation,
including, without limiting the foregoing, any reimbursement obligations as to
amounts drawn down by beneficiaries of outstanding letters of credit, and any
obligation of such Person (the "primary obligor"), whether or not contingent,
(i) to purchase any such primary obligation or any property or asset
constituting direct or indirect security therefor, (ii) to advance or supply
funds (1) for the purchase or payment of such primary obligation or (2) to
maintain working capital, equity capital or the net worth, cash flow, solvency
or other balance sheet or income statement condition of any other Person, (iii)
to purchase property, assets, securities or services primarily for the purpose
of assuring the owner or holder of any primary obligation of the ability of the
primary obligor with respect to such primary obligation to make payment thereof
or (iv) otherwise to assure or hold harmless the
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owner or holder of such primary obligation against loss in respect thereof.
"GP" is used herein as defined in the MSG Agreement.
"I SUB" is used herein as defined in the MSG Agreement.
"INDEBTEDNESS" shall mean, with respect to any Person, (a) (i) all items
(EXCEPT items of shareholders' and partners' equity or capital stock or surplus
or general contingency or deferred tax reserves) which in accordance with GAAP
would be included in determining total liabilities as shown on the liability
side of a balance sheet of such Person and (ii) the Subordinated Indebtedness,
(b) all direct or indirect obligations secured by any Lien to which any property
or asset owned by such Person is subject, whether or not the obligation secured
thereby shall have been assumed, (c) to the extent not otherwise included, all
Capitalized Lease Obligations of such Person, and (d) all reimbursement
obligations with respect to outstanding letters of credit.
"INDEBTEDNESS FOR MONEY BORROWED" shall mean, with respect to any Person,
all money borrowed by such Person and Indebtedness represented by notes payable
by such Person and drafts accepted representing extensions of credit to such
Person, all obligations of such Person evidenced by bonds, debentures, notes, or
other similar instruments, all Indebtedness of such Person upon which interest
charges are customarily paid, and all Indebtedness of such Person issued or
assumed as full or partial payment for property or services, whether or not any
such notes, drafts, obligations, or Indebtedness represent Indebtedness for
money borrowed. For purposes of this definition, interest which is accrued but
not paid on the original due date or within any applicable cure or grace period
as provided by the underlying contract for such interest shall be deemed
Indebtedness for Money Borrowed.
"INTEREST HEDGE AGREEMENT" shall mean any interest swap agreement, interest
rate cap agreement, interest rate collar agreement, or any similar arrangement
designed to hedge interest rate risk, arising at any time between the Borrower,
on the one hand, and the Administrative Agent, one or more of the Banks, or any
other Person, on the other hand, as such agreement or arrangement may be
modified, supplemented, amended, and in effect from time to time.
"INTEREST PERIOD" shall mean, (a) in connection with any Base Rate Advance,
the period beginning on the date such Advance is made and ending on the last
Business Day of the calendar quarter in which such Advance is made; PROVIDED,
HOWEVER, that if a Base Rate Advance is made on the last day of any calendar
quarter, it shall have an Interest Period ending on, and its Payment Date shall
be, the last Business Day of the following calendar quarter; and (b) in
connection with any Eurodollar Advance, the term of such Advance
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selected by the Borrower or otherwise determined in accordance with this
Agreement. Notwithstanding the foregoing, however, (i) any applicable Interest
Period which would otherwise end on a day which is not a Business Day shall be
extended to the next succeeding Business Day unless, with respect to Eurodollar
Advances only, such Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Business Day; (ii) with
respect to Eurodollar Advances only, any applicable Interest Period which begins
on a Business Day for which there is no numerically corresponding day in the
calendar month during which such Interest Period is to end shall (subject to
clause (i) above) end on the last Business Day of such calendar month; and
(iii) no Interest Period shall extend beyond the Maturity Date or such earlier
date as would interfere with the repayment obligations of the Borrower under
Section 2.6 hereof. Interest shall be due and payable with respect to any
Advance as provided in Section 2.4 hereof.
"INTEREST RATE CONFIRMATION" shall mean any certificate signed by an
Authorized Signatory of the Borrower with respect to any Advance after the
initial Advance under this Agreement, which shall specify the date of the
Advance which shall be a Business Day, the amount of the Advance, the type of
Advance, and with respect to a "Eurodollar Advance", the Interest Period
selected by the Borrower, which certificate shall be substantially in the form
of EXHIBIT C attached hereto.
"ITT" shall mean ITT Corporation, a Delaware corporation.
"LICENSES" shall mean any rights, whether bound upon any agreement,
statute, order, ordinance, or otherwise, granted by any governmental authority
to Borrower or its Subsidiaries to operate their respective businesses, together
with any amendment, modification or replacement with respect thereto.
"LIEN" shall mean, with respect to any property, any mortgage, lien,
pledge, assignment, charge, security interest, title retention agreement, levy,
execution, seizure, attachment, garnishment, or other encumbrance of any kind in
respect of such property, whether or not choate, vested, or perfected.
"LMCC" shall mean LMC Classics, Inc., a Nevada corporation.
"LOAN DOCUMENTS" shall mean this Agreement, the Term Notes, the Put Notes,
the Fees Agreements, the Parent Pledge Agreement, the Borrower Pledge Agreement,
the Subsidiary Pledge Agreement, the Subordination of Fees Agreement, the
Subordination Agreement and all Interest Hedge Agreements in respect of the Term
Loans between the Borrower and the Administrative Agent, the Banks, or any of
them.
"LOANS" shall mean, collectively, the Put Loans and the Term Loans; and
"LOAN" shall mean any of the foregoing.
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"LP" is used herein as defined in the MSG Agreement.
"MAJORITY BANKS" shall mean, at any time, (a) if there are no Term Loans
outstanding, Banks the total of whose Term Loan Commitment Ratios equals or
exceeds sixty percent (60%), (b) if there are Term Loans outstanding but no Put
Loans outstanding, Banks the total of whose Term Loans outstanding equals or
exceeds sixty percent (60%) of the total principal amount of the Term Loans
outstanding hereunder, or (c) if there are Put Loans and Term Loans outstanding,
Banks the total of whose Term Loans outstanding and Put Loans outstanding, in
the aggregate, equals or exceeds sixty percent (60%) of the total principal
amount of the Term Loans and Put Loans outstanding hereunder.
"MANAGEMENT AGREEMENT" shall mean, collectively, the Management Agreement,
dated as of April 20, 1989, between the Parent Company and Rainbow Program
Enterprises, a New York limited partnership, and the Management Agreement, dated
as of April 20, 1989 between the Parent Company and the Borrower, in each case
as modified, amended or supplemented from time to time.
"MATERIALLY ADVERSE EFFECT" shall mean any materially adverse effect upon
the business, assets, financial condition or results of operations of the
Borrower, on a combined basis with its Subsidiaries and taking into account the
interests of the Borrower and the Subsidiaries in the Operating Entities, taken
as a whole on a consolidated basis in accordance with GAAP, or upon the ability
of the Borrower and its Subsidiaries, taken as a whole, to perform their
Obligations under this Agreement or any other Loan Document.
"MATURITY DATE" shall mean December 31, 1996 or such earlier date as
payment of the Loans shall be due (whether by acceleration or otherwise).
"MSG AGREEMENT" shall mean that certain agreement dated August 15, 1994
among ITT, the Parent and the Borrower with respect to the Madison Square Garden
Corporation, as amended September 12, 1994 and as amended from time to time.
"MSG INTERESTS" shall mean any partnership interests or shares of stock
owned by the Borrower, or any Subsidiary of the Borrower, in LP or GP (as such
terms are defined in the MSG Agreement).
"MSO AGREEMENT" shall mean any agreement between the Borrower or any of its
Subsidiaries or any of the Operating Entities and a cable television operator
covering 1,000,000 or more subscribers pursuant to which such operator agrees,
among other things, to distribute and exhibit to its subscribers programming of
the Borrower or such Subsidiary.
"MULTIEMPLOYER PLAN" shall have the meaning set forth in Section 4001(a)(3)
of ERISA.
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"NBC" shall mean National Broadcasting Company, a Delaware corporation.
"NBC HOLDING" shall mean NBC/SC Holding, Inc., a Delaware corporation and
an indirect wholly-owned Subsidiary of NBC.
"NBC PUT" shall mean the exercise by NBC of its right under the Put
Agreement to cause NBC Holding to sell to the Borrower (or a Subsidiary of the
Borrower, as the Borrower may determine), and to cause the Borrower (or a
Subsidiary of the Borrower, as the Borrower may determine) to purchase from NBC
Holding, all of NBC Holding's interests in SC-NY and News 12.
"NET INCOME" shall mean, with respect to any Person for any period, the
aggregate amount of net income of such Person, after taxes (unless such Person
is a partnership), for such period as determined in accordance with GAAP.
"NEWS 12" shall mean Rainbow News 12 Company, a New York general
partnership.
"OBLIGATIONS" shall mean (a) all payment and performance obligations of the
Borrower and all other obligors to the Banks and the Administrative Agent under
this Agreement and the other Loan Documents, as they may be amended from time to
time, or as a result of making the Loans, including, without limitation,
obligations of the Borrower under Interest Hedge Agreements (only to the extent
that such Interest Hedge Agreements are permitted pursuant to Section 8.1(c))
with the Administrative Agent, the Banks, or any of them and (b) the obligation
pursuant to Section 6.13 to pay an amount equal to the amount of any and all
damages which the Banks and the Administrative Agent, or any of them, may suffer
by reason of a breach by the Borrower or any other obligor of any obligation,
covenant, or undertaking with respect to this Agreement or any other Loan
Document.
"OPERATING ADVANCES" shall mean all intercompany charges incurred by the
Borrower, or any of its Subsidiaries, to the Parent Company in the ordinary
course of their respective Businesses and as consistent with past practices.
"OPERATING CASH FLOW" shall mean, with respect to any Person for any
period, (i) the Net Income of such Person, plus (ii) interest expense,
depreciation, amortization and other non-cash expenses, to the extent deducted
in determining such Person's Net Income.
"OPERATING ENTITIES" shall mean the partnerships and corporations listed on
SCHEDULE 2 attached hereto and any additional partnerships and corporations that
may be entered into or formed by the Borrower or its Subsidiaries from time to
time; PROVIDED, HOWEVER, that the term Operating Entity shall not include
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Courtroom Television Network, a New York general partnership, LP or GP.
"PARENT COMPANY" shall mean Cablevision Systems Corporation, a Delaware
corporation.
"PARENT COMPANY LOAN AGREEMENT" shall mean that certain Fourth Amended and
Restated Credit Agreement, dated as of October 14, 1994, as amended, by and
among the Parent Company, Toronto Dominion (Texas), Inc., as agent, Bank of
Montreal, Chicago Branch, The Bank of New York, The Bank of Nova Scotia and The
Canadian Imperial Bank of Commerce and NationsBank of Texas, N.A., as co-agents,
and certain lenders, as further amended, restated, modified or supplemented from
time to time.
"PARENT PLEDGE AGREEMENT" shall mean that certain Stock Pledge Agreement,
dated as of the Closing Date, between the Parent Company and the Administrative
Agent, pursuant to which the Parent Company has pledged to the Administrative
Agent on behalf of the Banks all of the issued and outstanding stock of the
Borrower to secure the Obligations and in substantially the form of EXHIBIT D
attached hereto.
"PAYMENT DATE" shall mean the last day of each Interest Period.
"PERMITTED LIENS" shall mean, as applied to any Person:
(a) Any Lien in favor of the Administrative Agent or the Banks given
to secure the Obligations;
(b) (i) Liens on real estate for real estate taxes not yet
delinquent and (ii) Liens for taxes, assessments, judgments, governmental
charges or levies, or claims the non-payment of which is being contested in good
faith by appropriate proceedings and for which adequate reserves have been set
aside on such Person's books, but only so long as no foreclosure, distraint,
sale, or similar proceedings have been commenced with respect thereto and remain
unstayed for a period of thirty (30) days after their commencement;
(c) Liens of carriers, warehousemen, mechanics, laborers, and
materialmen incurred in the ordinary course of business for sums not yet due or
being contested in good faith, if such reserve or appropriate provision, if any,
as shall be required by GAAP shall have been made therefor;
(d) Liens incurred in the ordinary course of business in connection
with worker's compensation and unemployment insurance;
(e) Restrictions on the transfer of assets imposed by any agreement
(other than any agreement relating to Indebtedness), or by any federal, state or
local statute, regulation or ordinance applicable to such Person;
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(f) Easements, rights-of-way, restrictions, and other similar
encumbrances on the use of real property which do not interfere with the
ordinary conduct of the business of such Person, or Liens incidental to the
conduct of the business of such Person or to the ownership of its properties
which were not incurred in connection with Indebtedness or other extensions of
credit and which do not in the aggregate materially detract from the value of
such properties or materially impair their use in the operation of the business
of such Person;
(g) Purchase money mortgages or security interests, conditional sale
arrangements, other similar security interests or capital leases, on any
property or assets hereinafter acquired by the Borrower (hereinafter referred to
individually as a "Purchase Money Security Interest"); PROVIDED, HOWEVER, that:
(i) the transaction in which any Purchase Money Security
Interest is proposed to be created is not otherwise prohibited by this
Agreement;
(ii) any Purchase Money Security Interest shall attach only to
the property or asset acquired in such transaction and shall not extend to
or cover any other assets or properties of the Borrower;
(iii) the Indebtedness secured or covered by any
Purchase Money Security Interest shall not exceed the cost of the property
or asset acquired and shall not be renewed or extended by the Borrower; and
(iv) the aggregate outstanding amount of all Indebtedness secured
by Purchase Money Security Interests shall not at any time exceed an amount
equal to $5,000,000.
"PERSON" shall mean an individual, corporation, partnership, trust, or
unincorporated organization, or a government or any agency or political
subdivision thereof.
"PLAN" shall mean an employee benefit plan within the meaning of
Section 3(3) of ERISA maintained by or contributed to by the Borrower or any
ERISA Affiliate.
"PRIME RATE" shall mean, at any time, the rate of interest adopted by The
Toronto-Dominion Bank, New York Branch, as its reference rate for the
determination of interest rates for loans of varying maturities in United States
dollars to United States residents of varying degrees of creditworthiness and
being quoted at such time by such bank as its "prime rate." The Prime Rate is
not necessarily the lowest rate of interest charged to borrowers of The Toronto-
Dominion Bank, New York Branch.
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"PRIOR BANK GROUP" shall mean the financial institutions party to the Prior
Loan Agreement as "Banks" (as such term is defined in the Prior Loan Agreement).
"PRIOR LOAN AGREEMENT" shall mean that certain Loan Agreement among the
Borrower, the Guarantors, the Prior Bank Group, The Toronto-Dominion Bank and
the Administrative Agent, as agent for the Prior Bank Group, dated as of June
30, 1994.
"PROGRAMMING RIGHTS AGREEMENTS" shall mean any agreement between the
Borrower or any of its Subsidiaries and any other Person for the right to use,
produce, exhibit or distribute programming.
"PROGRAMMING RIGHTS AMORTIZATION" shall mean the amortization of the
Borrower's and the Borrower's Subsidiaries' expenditures for the acquisition of
programming, which expenditures shall, at all times, be amortized in accordance
with GAAP.
"PRO RATA SHARE" shall have the meaning ascribed thereto in Article 3 of
this Agreement.
"PUT AGREEMENT" shall mean that certain agreement between NBC and the
Borrower dated as of August 26, 1994, and as amended November 4, 1994, and from
time to time, a true and correct copy of which (as of the Agreement Date) is
attached hereto as EXHIBIT O.
"PUT FUNDING DATE" shall mean the date on which the Borrower (or a
Subsidiary of the Borrower, as the Borrower may determine) shall pay the amount
required to be paid in respect of the NBC Put.
"PUT LOAN" shall mean the amount advanced by the Banks to the Borrower
under the Put Loan Commitment, not to exceed the Put Loan Commitment, and
evidenced by the Put Notes.
"PUT LOAN CLOSING DATE" shall mean the date on which all the conditions set
forth in Section 4.2 hereof shall be satisfied.
"PUT LOAN COMMITMENT" shall mean the several obligations of the Banks to
advance the aggregate sum of up to $94,000,000 to the Borrower on the Put
Funding Date pursuant to the terms hereof, as such amount may be reduced from
time to time in accordance with the terms hereof.
"PUT LOAN COMMITMENT EXPIRATION DATE" shall mean the first to occur of (i)
the expiration of the NBC Put in accordance with the Put Agreement, (ii) the
date which is one hundred twenty-five (125) days following the exercise by NBC
of the NBC Put or such later date as may be agreed to by the parties to the Put
Agreement in connection with any Hart-Scott-Rodino waiting period, or (iii) the
Maturity Date.
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<PAGE>
"PUT LOAN COMMITMENT RATIOS" shall mean the percentages in which the Banks
are severally bound to satisfy the Put Loan Commitment to advance the amount of
the Put Loan to the Borrower, which as of the Agreement Date are as set forth
below:
<TABLE>
<CAPTION>
Dollar
Bank Percentage Commitment
---- ---------- ----------
<S> <C> <C>
Toronto Dominion (Texas), Inc. 25.247524752% $23,732,673.27
CIBC Inc. 25.247524752% $23,732,673.27
Shawmut Bank Connecticut, N.A. 12.376237624% $11,633,663.37
The Bank of Nova Scotia 9.900990099% $9,306,930.69
Chemical Bank, N.A. 9.900990099% $9,306,930.69
NationsBank of Texas, N.A. 9.900990099% $9,306,930.69
Mellon Bank, N.A. 7.425742574% $6,980,198.02
TOTAL: 100% $94,000,000
</TABLE>
"PUT NOTES" shall mean those certain promissory notes in the aggregate
principal amount of $94,000,000, one such note issued to each of the Banks by
the Borrower, each one in substantially the form of EXHIBIT I attached hereto,
and any extensions, renewals or amendments to any of the foregoing.
"R SUB" is used herein as defined in the MSG Agreement.
"REGULATORY CHANGE" shall mean, with respect to any Bank, any change on or
after the date of this Agreement in United States Federal, state or foreign laws
or regulations (including Regulation D of the Board of Governors of the Federal
Reserve System) or the adoption or making on or after such date of any
interpretations, directives or requests applying to a class of banks including
such Bank of or under any United States Federal or state, or any foreign, laws
or regulations (whether or not having the force of law) by any court or
governmental or monetary authority charged with the interpretation or
administration thereof.
"REPORTABLE EVENT" shall have the meaning set forth in Section 4043(b) of
ERISA.
"REQUEST FOR ADVANCE FOR TERM LOAN" shall mean any certificate signed by an
Authorized Signatory of the Borrower requesting the initial Advance of the Term
Loan hereunder which certificate shall be in substantially the form of
EXHIBIT E-1 attached hereto.
"REQUEST FOR ADVANCE FOR PUT LOAN" shall mean any certificate signed by an
Authorized Signatory of the Borrower requesting the initial Advance of the Put
Loan hereunder which certificate shall be in substantially the form of EXHIBIT
E-2 attached hereto.
"RESTRICTED PAYMENT" shall mean (a) any direct or indirect distribution,
dividend, or other payment to any Person on account
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<PAGE>
of any shares of capital stock or other securities of, the Borrower, (b) any
consulting or management fees, or any interest thereon, payable by the Borrower
or any of its Subsidiaries to the Parent Company, or to any other Affiliate of
the Borrower and (c) any direct or indirect payment to any Person on account of
the Subordinated Indebtedness.
"RESTRICTED PURCHASE" shall mean any payment on account of the purchase,
redemption, or other acquisition or retirement of any partnership interest in,
or shares of capital stock or other securities of, the Borrower or any of its
Subsidiaries.
"SC-CHI" shall mean SportsChannel Chicago Associates, a New York general
partnership.
"SC-NY" shall mean SportsChannel Associates, a New York general
partnership, having as its general partners SC-NY Holdings and NBC Holding.
"SC-NY HOLDINGS" shall mean SportsChannel New York Holding Partnership, a
New York general partnership and an indirect Subsidiary of the Borrower.
"SECOND MSG INVESTMENT" shall mean the purchase by R Sub of the Share
Differential (as defined in the MSG Agreement) pursuant to Section 3 of the MSG
Agreement in an amount not to exceed $250,000,000 plus interest thereon
calculated in accordance with the provisions of Section 3 of the MSG Agreement.
"SECURITY DOCUMENTS" shall mean the Assignment of Partnership Interests,
the Borrower Pledge Agreement, the Stock Pledge Agreement, any other agreement
or instrument providing collateral for the Obligations whether now or hereafter
in existence, and any filings, instruments, agreements and documents related
thereto and providing the Administrative Agent, for itself and for the benefit
of the Co-Agents and the Banks, with collateral for the Obligations.
"SOLVENT" shall mean, with respect to the Borrower on any date, that on
such date the fair value of the assets of the Borrower (including, without
limitation, the direct or indirect interests of the Borrower in the equity of
its Subsidiaries and the Operating Entities) is greater than the amount of the
Indebtedness (excluding Subordinated Indebtedness and those Guaranties set forth
on SCHEDULE 8 hereto as amended from time to time) of the Borrower.
"SUBORDINATED INDEBTEDNESS" shall mean Indebtedness the payment of which is
subordinated to the Obligations pursuant to the Subordination Agreement or such
other terms of subordination as shall be acceptable to the Co-Agents and to the
Majority Banks.
"SUBORDINATION AGREEMENT" shall mean that certain Subordination Agreement,
dated as of the Closing Date, among the
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Parent Company, the Borrower, and the Administrative Agent, pursuant to which
payment by the Borrower, any of its Subsidiaries or the Operating Entities
referred to therein of the Subordinated Indebtedness has been subordinated to
the Obligations as provided therein, which Agreement is substantially in the
form of EXHIBIT F attached hereto.
"SUBORDINATION OF FEES AGREEMENT" shall mean that certain Subordination of
Fees Agreement, dated as of the Closing Date, among the Parent Company, Rainbow
Program Enterprises, the Borrower and the Administrative Agent, pursuant to
which payment of management fees under the Management Agreement has been
subordinated to the Obligations as provided therein, which Agreement is
substantially in the form of EXHIBIT G attached hereto.
"SUBSIDIARY" shall mean, as applied to any Person, (a) any corporation of
which fifty percent (50%) or more of the outstanding stock (other than
directors' qualifying shares) having ordinary voting power to elect a majority
of its board of directors, regardless of the existence at the time of a right of
the holders of any class or classes of securities of such corporation to
exercise such voting power by reason of the happening of any contingency, or any
partnership of which fifty percent (50%) or more of the outstanding partnership
interests is at the time owned by such Person, or by one or more Subsidiaries of
such Person, or by such Person and one or more Subsidiaries of such Person, and
(b) any other entity which is controlled or capable of being controlled by such
Person, or by one or more Subsidiaries of such Person, or by such Person and one
or more Subsidiaries of such Person PROVIDED that, in the case of the Borrower
and its Subsidiaries, the term "Subsidiary" shall not include the Operating
Entities, LP, or GP.
"TERM LOAN" shall mean the amount advanced by the Banks to the Borrower
under the Term Loan Commitment, not to exceed the Term Loan Commitment, and
evidenced by the Term Notes.
"TERM LOAN CLOSING DATE" shall mean the date as of which all the conditions
set forth in Section 4.1 hereof shall be satisfied.
"TERM LOAN COMMITMENT" means the several obligations of the Banks to
advance the aggregate sum of up to $108,000,000 to the Borrower on the Agreement
Date pursuant to the terms hereof, as such amount may be reduced from time to
time in accordance with the terms hereof.
"TERM LOAN COMMITMENT RATIOS" shall mean the percentages in which the Banks
are severally bound to satisfy the Term Loan
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<PAGE>
Commitment to advance the amount of the Term Loan to the Borrower, which as of
the Agreement Date are as set forth below:
<TABLE>
<CAPTION>
Dollar
Bank Percentage Commitment
---- ---------- ----------
<S> <C> <C>
Toronto Dominion (Texas), Inc. 25.247524752% $27,267,326.73
CIBC Inc. 25.247524752% $27,267,326.73
Shawmut Bank Connecticut, N.A. 12.376237624% $13,366,336.63
The Bank of Nova Scotia 9.900990099% $10,693,069.31
Chemical Bank, N.A. 9.900990099% $10,693,069.31
NationsBank of Texas, N.A. 9.900990099% $10,693,069.31
Mellon Bank, N.A. 7.425742574% $8,019,801.98
TOTAL: 100% $108,000,000
</TABLE>
"TERM NOTES" shall mean those certain promissory notes in the aggregate
principal amount of $108,000,000, one such note issued to each of the Banks by
the Borrower, each one in substantially the form of EXHIBIT H attached hereto,
and any extensions, renewals or amendments to any of the foregoing.
"TOTAL AMC DEBT" shall mean, as of any date, (a) all outstanding
Indebtedness for Money Borrowed of AMC and its Subsidiaries, on a consolidated
basis as of such date, (b) all obligations Guaranteed by AMC or any of its
Subsidiaries with respect to Indebtedness for Money Borrowed, and (c) all
Capitalized Lease Obligations of AMC and its Subsidiaries, on a consolidated
basis as of such date.
"TOTAL AMC ENTERPRISE VALUE" shall mean, as of any date, the product of
(a) the Operating Cash Flow of AMC and its Subsidiaries, on a consolidated basis
for the twelve month period ending on such date, MULTIPLIED BY (b) twelve (12).
"TOTAL BORROWER DEBT" shall mean, as of any date, (a) all outstanding
Indebtedness for Money Borrowed (other than Subordinated Indebtedness) of the
Borrower and its Subsidiaries on a consolidated basis, (b) all obligations
Guaranteed by the Borrower and its Subsidiaries in respect of Indebtedness for
Money Borrowed, and (c) all Capitalized Lease Obligations of the Borrower and
its Subsidiaries on a consolidated basis (excluding Subordinated Indebtedness,
Operating Advances and those Guaranties set forth on SCHEDULE 8 hereto as
amended from time to time).
"TOTAL ADJUSTED BORROWER DEBT" shall mean, as of any date, Total Borrower
Debt, less the outstanding amount of the Put Loans.
"TOTAL BORROWER VALUE" shall mean, as of any date, the sum of (a) the
product of (i) Total AMC Enterprise Value less Total AMC Debt multiplied by
(ii) the Borrower's direct and indirect ownership interest percentage in AMC,
expressed as a decimal, PLUS, (b) the product of (i) Operating Cash Flow of SC-
NY for the twelve month period ending on such date, multiplied by (ii) twelve
(12),
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<PAGE>
multiplied by (iii) the Borrower's direct and indirect ownership interest
percentage in SC-NY, expressed as a decimal, PLUS (c) the product of (i)
Operating Cash Flow of SC-CHI for the twelve month period ending on such date,
multiplied by (ii) twelve (12), multiplied by (iii) the Borrower's direct and
indirect ownership interest percentage in SC-CHI, expressed as a decimal.
"TRADEMARKS" shall mean all registered trademarks and pending applications
for trademarks of the Borrower and its Subsidiaries which are more fully
described on SCHEDULE 4 attached hereto.
Each definition of an agreement in this Article 1 shall include such
agreement as modified, amended, or supplemented from time to time with the prior
written consent of the Majority Banks, except as provided in Section 12.12
hereof, and except where the context otherwise requires, definitions imparting
the singular shall include the plural and vice versa. Except where otherwise
specifically restricted, reference to a party to a Loan Document includes that
party and its successors and assigns. All terms used herein which are defined in
Article 9 of the Uniform Commercial Code in effect in the State of New York on
the date hereof and which are not otherwise defined herein shall have the same
meanings herein as set forth therein.
All accounting terms used herein without definition shall be used as
defined under GAAP. Unless otherwise expressly stated herein, all references to
financial information and results of the Borrower shall be determined on a
consolidated basis with the Borrower's Subsidiaries taking into account the
interests of the Borrower and the Borrower's Subsidiaries in the Operating
Entities.
This Agreement amends, restates and replaces the Prior Loan Agreement in
its entirety, including any notes or other loan documents executed or delivered
in connection with the Prior Loan Agreement.
ARTICLE 2 - THE LOANS.
Section 2.1 THE TERM LOAN.
(a) TERM LOAN. The Banks agree, severally in accordance with their
respective Term Loan Commitment Ratios and not jointly, upon the terms and
subject to the conditions of this Agreement, to lend to the Borrower, on the
Term Loan Closing Date, an amount which in the aggregate does not exceed the
Term Loan Commitment. Subject to the terms hereof, Advances under the Term Loan
Commitment may be repaid and then reborrowed as provided in Sections 2.3(b)(ii)
and 2.3(c)(ii) hereof so as to change the Interest Rate Bases or Interest
Periods for Advances outstanding, PROVIDED, HOWEVER, that there shall be no
increase in the principal amount of the Term Loan outstanding after the Term
Loan Closing Date.
(b) USE OF PROCEEDS. The Co-Agents, the Banks, and the Borrower agree
that the proceeds of the Term Loan shall be used solely to re-finance the
obligations of the Borrower under the
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<PAGE>
Prior Loan Agreement and to pay the fees, costs and expenses associated with
this Agreement.
Section 2.2 THE PUT LOAN.
(a) PUT LOAN. The Banks agree, severally in accordance with their
respective Put Loan Commitment Ratios and not jointly, upon the terms and
subject to the terms of this Agreement, to lend to the Borrower on the Put Loan
Closing Date, but before the Put Loan Commitment Expiration Date, an amount
which in the aggregate does not exceed the Put Loan Commitment. Subject to the
terms hereof, Advances under the Put Loan Commitment may be repaid and then
reborrowed as provided in Sections 2.3(b)(ii) and 2.3(c)(ii) hereof so as to
change the Interest Rate Bases or Interest Periods for Advances outstanding,
PROVIDED, HOWEVER, that there shall be no increase in the principal amount of
the Put Loan outstanding after the Put Loan Closing Date.
(b) USE OF PROCEEDS. The Co-Agents, the Banks and the Borrower agree
that the proceeds of the Put Loan shall be used to finance the cost to the
Borrower of the exercise by NBC of the NBC Put and to pay the Fees then due
hereunder.
(c) UNUSED COMMITMENT FEE. The Borrower agrees to pay to the
Administrative Agent, for the benefit of each of the Banks, in accordance with
their respective Put Loan Commitment Ratios, an unused commitment fee, for each
day from the Agreement Date until the earlier of the Put Loan Closing Date or
the Put Loan Commitment Expiration Date, in the aggregate equal to the product
of (x) three-eighths of one percent (0.375%), multiplied by (y) the Put Loan
Commitment. Such unused commitment fee shall be computed on the basis of a year
of 365/366 days for the actual number of days elapsed, shall be payable
quarterly in arrears on the last Business Day of each calendar quarter,
commencing on March 31, 1995, and on the first to occur of the Put Loan Closing
Date or the Put Loan Commitment Expiration Date, and shall be fully earned when
due and non-refundable when paid.
(d) REDUCTION AND EXPIRATION OF COMMITMENT. The Put Loan Commitment
shall terminate in its entirety if the Put Loan Closing Date has not occurred
before the Put Loan Commitment Expiration Date. On the Put Loan Closing Date,
the Put Loan Commitment shall be reduced to an amount equal to the Advance of
the Put Loan made on the Put Loan Closing Date.
Section 2.3 MANNER OF BORROWING AND DISBURSEMENT.
(a) CHOICE OF INTEREST RATE, ETC. Any Advance under the Commitment
shall, at the option of the Borrower, be made as a Base Rate Advance or a
Eurodollar Advance; PROVIDED, HOWEVER, that (i) if the Borrower fails to give
the Administrative Agent written notice specifying whether an Advance is to be
repaid or reborrowed on a Payment Date, such Advance shall be repaid and then
reborrowed
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<PAGE>
as a Base Rate Advance on the Payment Date and (ii) the Borrower may not select
a Eurodollar Advance if, at the time of such selection, a Default or Event of
Default has occurred and is continuing. Eurodollar Advances shall in all cases
be subject to Section 2.4(e) and Article 11 hereof. Any notice given to the
Administrative Agent in connection with a requested Advance hereunder shall be
given to the Administrative Agent prior to 11:00 a.m. (Eastern time) in order
for such Business Day to count toward the minimum number of Business Days
required.
(b) BASE RATE ADVANCES.
(i) INITIAL ADVANCE. The Borrower shall give the
Administrative Agent in the case of Base Rate Advances irrevocable written
notice not later than 11:00 a.m. (Eastern time) on the date of the requested
Advance in the form of a Request for Advance, or notice by telephone or telecopy
followed immediately by a Request for Advance; PROVIDED, HOWEVER, that the
failure by the Borrower to confirm any notice by telephone or telecopy with a
Request for Advance shall not invalidate any notice so given. Upon receipt of
such notice from the Borrower, the Administrative Agent shall promptly notify
each Bank by telephone or telecopy of the contents thereof.
(ii) REPAYMENTS AND REBORROWINGS. Subject to the provisions of
Section 2.4(e) hereof, the Borrower may repay or prepay a Base Rate Advance
without regard to its Payment Date and (a) upon irrevocable written notice not
later than 11:00 a.m. (Eastern time) on the date of such reborrowing, reborrow
all or a portion of the principal amount thereof as one or more Base Rate
Advances, (b) upon at least three (3) Business Days' irrevocable prior written
notice in the form of an Interest Rate Confirmation, reborrow all or a portion
of the principal thereof on such day as one or more Eurodollar Advances, or
(c) upon at least one (1) Business Day's irrevocable prior written notice and
subject to Section 2.5 hereof, not reborrow all or any portion of such Base Rate
Advance. On the date indicated by the Borrower, such Base Rate Advance shall be
so repaid and, as applicable, reborrowed.
(c) EURODOLLAR ADVANCES.
(i) INITIAL ADVANCE. The Borrower shall give the
Administrative Agent in the case of Eurodollar Advances at least three (3)
Business Days' irrevocable written notice in the form of a Request for Advance,
or notice by telephone or telecopy followed immediately by a Request for
Advance; PROVIDED, HOWEVER, that the failure of the Borrower to confirm any
notice by telephone or telecopy with a Request for Advance shall not invalidate
any notice so given. The Administrative Agent, whose determination shall be
conclusive, shall determine the available Eurodollar Bases and shall notify the
Borrower of such Eurodollar Bases. The Borrower shall promptly notify the
Administrative Agent by telecopy or by telephone, and shall immediately confirm
any such telephonic notice
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<PAGE>
in writing, of its selection of a Eurodollar Basis and Interest Period for such
Advance. Upon receipt of such notice from the Borrower, the Administrative Agent
shall promptly notify each Bank by telephone or telecopy of the contents
thereof.
(ii) REPAYMENTS AND REBORROWINGS. At least three (3) Business
Days prior to each Payment Date for a Eurodollar Advance, subject to
Section 2.4(e) hereof, the Borrower shall give the Administrative Agent written
notice in the form of an Interest Rate Confirmation specifying whether all or a
portion of any Eurodollar Advance outstanding on the Payment Date (a) is to be
repaid and then reborrowed in whole or in part on such day as a Eurodollar
Advance, (b) is to be repaid and then reborrowed in whole or in part as one or
more Base Rate Advances, or (c) subject to Section 2.5 hereof, is to be repaid
and not reborrowed. Upon such Payment Date such Eurodollar Advance will, subject
to the provisions hereof, be so repaid and, as applicable, reborrowed.
(d) NOTIFICATION OF BANKS. Upon receipt of a written notice under
this Section 2.3 from the Borrower with respect to a reborrowing of any then
outstanding Advance on the Payment Date for such Advance, the Administrative
Agent shall promptly notify each Bank by telephone or telecopy of the contents
thereof and the amount of such Bank's portion of the applicable Advance.
Section 2.4 INTEREST.
(a) ON BASE RATE ADVANCES. Interest on each Base Rate Advance shall
be computed on the basis of a year of 365/366 days for the actual number of days
elapsed and shall be payable at the Base Rate for such Advance in arrears on the
applicable Payment Date. Interest on Base Rate Advances then outstanding shall
also be due and payable on the Maturity Date.
(b) ON EURODOLLAR ADVANCES. Interest on each Eurodollar Advance shall
be computed on the basis of a 360-day year for the actual number of days elapsed
and shall be payable at the Eurodollar Basis for such Advance in arrears on the
applicable Payment Date, and, in addition, if the Interest Period for a
Eurodollar Advance exceeds three (3) months, interest on such Eurodollar Advance
shall also be due and payable in arrears on each three (3) month anniversary of
the making of such Advance. Interest on Eurodollar Advances then outstanding
shall also be due and payable on the Maturity Date.
(c) IF NO NOTICE OF SELECTION OF INTEREST RATE. If the Borrower shall
fail to elect to reborrow any Eurodollar Advance then outstanding prior to the
last Payment Date applicable thereto in accordance with the provisions of
Section 2.3(c)(ii) hereof, as applicable, the Base Rate shall apply to such
Advance commencing on and after such Payment Date, until timely notice of the
Borrower's selection of a Eurodollar Basis is given.
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<PAGE>
(d) UPON DEFAULT. Upon the occurrence and during the continuance of
an Event of Default, the Majority Banks shall have the option (but shall not be
required to give prior notice thereof to the Borrower to accelerate the maturity
of the Loans, or exercise any other rights or remedies hereunder in connection
with the exercise of this right), to charge interest on the outstanding
principal balance of the Loans at the Default Rate from the date of such Event
of Default. Such interest shall be payable on the earlier of Demand or the
Maturity Date and shall accrue until the earlier of (i) waiver or cure (to the
satisfaction of the Majority Banks) of the applicable Event of Default,
(ii) agreement by the Majority Banks to rescind the charging of interest at the
Default Rate, or (iii) payment in full of the Obligations.
(e) EURODOLLAR CONTRACTS; CONVERSIONS. At no time may the number of
outstanding Eurodollar Advances exceed eight (8).
Section 2.5 PREPAYMENT.
(a) The principal amount of any Base Rate Advance may be prepaid in
full or in part at any time, upon irrevocable written notice to the
Administrative Agent no later than 11:00 a.m. (Houston time) one (1) Business
Day before the date of such prepayment, without penalty and without regard to
the Payment Date for such Advance. Eurodollar Advances may be prepaid prior to
the applicable Payment Date, upon three (3) Business Days' prior written notice
to the Administrative Agent, provided that the Borrower shall reimburse the
Banks and the Administrative Agent, on the earlier of demand or the Maturity
Date as set forth in Section 2.9 hereof. Each notice of prepayment shall be
irrevocable, and all amounts prepaid on the Loans shall be applied as provided
in Section 2.10 hereof. Partial prepayments shall be in a principal amount of
not less than $500,000 or an integral multiple of $100,000 in excess thereof.
Amounts prepaid may not be reborrowed on a subsequent date. Upon receipt of any
notice of prepayment, the Administrative Agent shall promptly notify each Bank
of the contents thereof by telephone or telecopy and of such Bank's portion of
the prepayment.
(b) Upon the receipt of any cash proceeds distributed to the Borrower
under Sections 8.5(a)(2), 8.5(a)(3), 8.5(a)(4), 8.5(a)(5) and 8.14, the Borrower
shall apply such cash proceeds, to the extent required in such Sections, toward
the prepayment of the Loans in accordance with the prepayment procedures set
forth in Section 2.5(a).
Section 2.6 REPAYMENT.
The principal balance of the Term Loan, the Put Loan and all other
Obligations then outstanding shall be due and payable, in full, on the Maturity
Date.
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Section 2.7 NOTES; LOAN ACCOUNTS.
(a) The Term Loan shall be repayable in accordance with the terms and
provisions set forth herein, and shall be evidenced by the Term Notes. One of
the Term Notes shall be payable to the order of each Bank in accordance with the
respective Term Loan Commitment Ratios of the Banks. The Term Notes shall be
issued by the Borrower to the Banks and shall be duly executed and delivered by
Authorized Signatories of the Borrower.
(b) The Put Loan shall be repayable in accordance with the terms and
provisions set forth herein, and shall be evidenced by the Put Notes. One of the
Put Notes shall be payable to the order of each Bank in accordance with the
respective Put Loan Commitment Ratios of the Banks. The Put Notes shall be
issued by the Borrower to the Banks and shall be duly executed and delivered by
Authorized Signatories of the Borrower.
(c) Each Bank may open and maintain on its books in the name of the
Borrower a loan account with respect to the Loans and interest thereon. Each
Bank which opens such loan account or accounts shall debit the applicable loan
account for the principal amount of each Advance made by it and accrued interest
thereon, and shall credit such loan account for each payment on account of
principal of or interest on the Loans. The records of each Bank with respect to
the loan accounts maintained by it shall be prima facie evidence of the Loans
and accrued interest thereon, but the failure to maintain such records shall not
impair the obligation of the Borrower to repay Indebtedness hereunder.
(d) Each Advance from the Banks under this Agreement shall be made
pro rata by the Banks on the basis of their respective Term Loan Commitment
Ratios or Put Loan Commitment Ratios, as applicable.
Section 2.8 MANNER OF PAYMENT.
(a) Each payment (including any prepayment) by the Borrower on
account of the principal of or interest on the Loans, fees, and any other amount
owed to the Banks or the Administrative Agent under this Agreement, the Notes,
or the other Loan Documents shall be made not later than 12:00 noon (Eastern
time) on the date specified for payment under this Agreement or such other Loan
Document to the Administrative Agent to an account designated by the
Administrative Agent at Morgan Guaranty Trust or such other member bank of the
Federal Reserve System designated by the Administrative Agent, for the account
of the Banks or the Administrative Agent, as the case may be, in lawful money of
the United States of America in immediately available funds. Any payment
received by the Administrative Agent after 1:00 p.m. (Eastern time) shall be
deemed received on the next Business Day for purposes of interest accrual. In
the case of a payment for the account of a Bank, the Administrative Agent will
promptly
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thereafter distribute the amount so received in like funds to such Bank. If the
Administrative Agent shall not have received any payment from the Borrower as
and when due, the Administrative Agent will promptly notify the Banks
accordingly.
(b) If any payment under this Agreement or any of the Notes shall be
specified to be made upon a day which is not a Business Day, it shall be made on
the next succeeding day which is a Business Day, and such extension of time
shall in such case be included in computing interest and fees, if any, in
connection with such payment.
(c) The Borrower agrees to pay principal, interest, fees, and all
other amounts due hereunder or under the Notes without set-off or counterclaim
or any deduction whatsoever.
Section 2.9 REIMBURSEMENT. Whenever any Bank shall actually incur any
losses or out-of-pocket expenses in connection with (i) failure by the Borrower
to borrow any Eurodollar Advance after having given notice of its intention to
borrow in accordance with Section 2.3 hereof (whether by reason of the election
of the Borrower not to proceed or the non-fulfillment of any of the conditions
set forth in Article 4) other than a failure to borrow resulting from an
unavailability which occurs after notice from the Administrative Agent to the
Borrower pursuant to Section 11.1 or 11.2 hereof, or (ii) prepayment of any
Eurodollar Advance in whole or in part (including a prepayment pursuant to
Sections 11.2 and 11.3(b) hereof), the Borrower agrees to pay to such Bank, upon
the earlier of such Bank's demand or the Maturity Date, an amount sufficient to
compensate such Bank for all such losses and out-of-pocket expenses, but
excluding any Bank's loss of margin due to such prepayment. Such Bank's good
faith determination of the amount of such losses and out-of-pocket expenses,
absent manifest error, shall be binding and conclusive. Upon request of the
Borrower, any Bank seeking reimbursement under this Section 2.9 shall provide a
certificate setting forth the amount to be paid to it by the Borrower hereunder
and calculations therefor.
Section 2.10 APPLICATION OF PAYMENTS.
(a) Payments made to the Agents or the Banks, or any of them, or otherwise
received by the Agents or the Banks, or any of them (from realization on
collateral for the Obligations or otherwise), shall be distributed as follows:
FIRST, to the costs and expenses, if any, incurred by the Agents or the Banks,
or any of them, to the extent permitted by Section 12.2 hereof, in the
collection of such amounts under this Agreement or any of the other Loan
Documents, including, without limitation, any reasonable costs incurred in
connection with the sale or disposition of any collateral for the Obligations;
SECOND, pro rata among the Agents and the Banks based on the total amount of
fees then due and payable, to any Agents' fees then due and payable hereunder or
under any other Loan Document and to any other fees then due and payable to the
Banks
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under this Agreement or any Loan Document; THIRD, pro rata among the Banks based
on the outstanding principal amount of the Put Loans outstanding immediately
prior to such payment, to any unpaid interest which may have accrued on the Put
Loans; FOURTH, pro rata among the Banks based on the outstanding principal
amount of the Term Loans outstanding immediately prior to such payment, to any
unpaid interest which may have accrued on the Term Loans; FIFTH, pro rata among
the Banks based on the outstanding principal amount of the Put Loans outstanding
immediately prior to such payment, to any unpaid principal amount of the Put
Loan then due; SIXTH, pro rata among the Banks based on the outstanding
principal amount of the Term Loans outstanding immediately prior to such
payment, to any unpaid principal of the Term Loan then due; SEVENTH, to any
other Obligations not otherwise referred to in this Section 2.10 until all such
Obligations are paid in full; EIGHTH, to damages incurred by the Agents or the
Banks, or any of them, by reason of any breach hereof or of any other Loan
Documents as provided in Section 6.13; and NINTH, upon satisfaction in full of
all Obligations, to the Borrower or as otherwise required by law.
(b) If any Bank shall obtain any payment (whether involuntary or
otherwise) on account of the Loans made by it in excess of its ratable share of
the Loans then outstanding and such Bank's share of any expenses, fees and other
items due and payable to it hereunder, such Bank shall forthwith purchase from
the other Banks such participation in the Loans made by such other Banks as
shall be necessary to cause such purchasing Bank to share the excess payment
ratably with each of them; PROVIDED, HOWEVER, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Bank, such purchase
from each Bank shall be rescinded and such Bank shall repay to each purchasing
Bank the purchase price to the extent of such recovery. The Borrower agrees that
any Bank so purchasing a participation from another Bank pursuant to this
Section may, to the fullest extent permitted by law, exercise all its rights of
payment with respect to such participation as fully as if such Bank were the
direct creditor of the Borrower in the amount of such participation so long as
the Borrower's Obligations are not increased.
Section 2.11 CAPITAL ADEQUACY. In the event that any Bank shall have
determined that a Regulatory Change has the effect of reducing the rate of
return on such Bank's capital as a consequence of its obligations hereunder to a
level below that which such Bank could have achieved but for such adoption,
change or compliance (taking into consideration such Bank's policies with
respect to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time, ten (10) days after submission by such Bank to the
Borrower (with a copy to the Agents) of a written request therefor, together
with a certificate (which shall be conclusive absent manifest error), setting
forth the calculations evidencing such requested additional amount, and the law
or regulation with respect thereto and certifying that such request is
consistent with such Bank's treatment of other similar customers having similar
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provisions generally in their agreements with such Bank and that such request is
being made on the basis of a reasonable allocation of the costs resulting from
such law or regulation, the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank for such reduction. Allocations
shall not be deemed reasonable unless made ratably, to the extent practicable,
to all affected assets, commitments, activities or other relevant aspects of
such Bank's business, whether or not the Bank is entitled to compensation with
respect thereto. Notwithstanding the foregoing, the Borrower shall only be
obligated to compensate such Bank for any amount under this subsection arising
or occurring during (i) in the case of each such request for compensation, any
time or period commencing not more than ninety (90) days prior to the date on
which such Bank submits such request and (ii) any other time or period during
which, because of the unannounced retroactive application of such law,
regulation, interpretation, request or directive, such Bank reasonably could not
have known that the resulting reduction in return might arise. Each Bank will
notify the Borrower that it is entitled to compensation pursuant to this
subsection as promptly as practicable after it determines to request such
compensation; PROVIDED, HOWEVER, that the failure to provide such notice shall
not restrict the ability of such Bank to be reimbursed under this Section 2.11.
ARTICLE 3 - GUARANTEE
Section 3.1 GUARANTEE. Each of the Guarantors, jointly and severally,
hereby unconditionally guarantees to the Banks and the Agents and their
respective permitted successors and assigns and the subsequent holders of the
Notes, irrespective of the validity and enforceability of this Agreement, the
Term Notes, the Put Notes or the other Loan Documents or the Obligations of the
Borrower or any of the other Guarantors hereunder or thereunder, the value or
sufficiency of any collateral or any other circumstance that might otherwise
affect the liability of a guarantor, that: (i) the principal of and interest on
the Term Loan, the Term Notes, the Put Loan, the Put Notes and all other
Obligations of the Borrower and the other Guarantors to the Banks and the Agents
under this Agreement, the Term Notes, the Put Notes and the other Loan Documents
shall be promptly paid in full when due, whether at stated maturity, by
acceleration or otherwise, in accordance with the terms hereof and thereof; and
(ii) in case of any extension of time of payment or renewal of any Term Notes,
the Put Notes or any of such other Obligations, the same shall be promptly paid
in full when due in accordance with the terms of the extension or renewal,
whether at stated maturity, by acceleration or otherwise. Failing payment when
due of any amount so guaranteed for whatever reason, the Guarantors will be
obligated, jointly and severally, to pay the same immediately.
Section 3.2 WAIVERS AND RELEASES. Each of the Guarantors hereby waives
notice of, and consents to, any extension of time of payment, renewals, releases
of collateral, delays in obtaining or
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realizing upon or failures to obtain, perfect, or maintain perfection of, or
realize upon collateral or other indulgence from time to time granted by any of
the Banks or the Agents in respect of this Agreement, the Term Notes, the Put
Notes or any other Loan Document. Each of the Guarantors hereby releases the
Borrower from all, and agrees not to assert or enforce (whether by or in a legal
or equitable proceeding or otherwise), any "claims" (as defined in 11 U.S.C.
Section 101(4)), whether arising under Applicable Law or otherwise, to which
such Guarantors are or would be entitled by virtue of their obligations
hereunder, any payment made pursuant hereto or the exercise by the Banks or the
Agents of their rights with respect to any collateral, including any such claims
to which such Guarantors may be entitled as a result of any right of
subrogation, exoneration or reimbursement. To the extent not released by such
Guarantors under this Article 3, each of the Guarantors agrees that it shall not
be entitled to any right of subrogation, exoneration, reimbursement or
contribution in respect of any Obligations guaranteed hereby. With respect to
this Agreement, the Put Notes and the Term Notes, each of the Guarantors hereby
waives presentment, protest, demand of payment, notice of dishonor and all other
notices and demands whatsoever. Each of the Guarantors further agrees that, as
between such Guarantor, on the one hand, and the Agents and the Banks, on the
other hand, (i) the maturity of the Obligations guaranteed hereby may be
accelerated as provided in Section 9.2 hereof for the purposes of this
Guarantee, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the Obligations guaranteed hereby, and (ii) in
the event of any declaration of acceleration of such Obligations as provided in
Section 9.2 hereof, such Obligations (whether or not due and payable) shall
forthwith become due and payable by each of the Guarantors for purposes of this
guarantee. The Obligations of the Guarantors under this Article 3 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of the Borrower is rescinded or must otherwise be restored by any
holder of any of the Obligations guaranteed hereunder, whether as a result of
any proceedings in bankruptcy or reorganization or otherwise, and each Guarantor
agrees that it will indemnify the Banks and the Agents on demand for reasonable
costs and expenses (including, without limitation, reasonable fees and expenses
of counsel) incurred by the Banks or the Agents in connection with such
rescission or restoration. Each Guarantor further agrees with the Borrower for
the benefit of each of its creditors (including, without limitation, the Agents
and the Banks) that any payment referred to in Article 3 by a Guarantor shall
constitute a contribution of capital by such Guarantor to the Borrower (or an
investment in the equity capital of the Borrower by such Guarantor).
Section 3.3 MISCELLANEOUS.
(a) If a claim is ever made upon the Agents or any of the Banks for the
repayment or recovery of any amount or amounts received by such Person in
payment of any of the Obligations and
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such Person repays all or part of such amount by reason of (i) any judgment,
decree or order of any court or administrative body having jurisdiction over
such Person or any of its property, or (ii) any settlement or compromise of any
such claim effected by such Person with any such claimant, including the
Borrower, then in such event the Guarantors agree that any such judgment,
decree, order, settlement or compromise shall be binding upon the Guarantors,
notwithstanding any revocation hereof or the cancellation of any promissory note
or other instrument evidencing any of the Obligations, and the Guarantors shall
be and remain obligated to such Person hereunder for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by such Person.
(b) The Guarantors expressly represent and acknowledge that any financial
accommodations by the Agents and the Banks, or any of them, to the Borrower,
including without limitation the extension of the Term Loan and, if made, the
Put Loan, are and will be of direct interest, benefit and advantage to the
Guarantors.
(c) The Guarantors hereby agree among themselves that if any Guarantor
shall become an Excess Funding Guarantor by reason of the payment by such
Guarantor of any Obligations, each other Guarantor shall, on demand of such
Excess Funding Guarantor (but subject to the next sentence), pay to such Excess
Funding Guarantor an amount equal to such Guarantor's Pro Rata Share (as
determined, for this purpose, without reference to the properties, debts and
liabilities of such Excess Funding Guarantor) of the Excess Payment in respect
of such Obligations. The payment obligation of a Guarantor to any Excess Funding
Guarantor under this Section 3.3(c) shall be subordinate and subject in right of
payment to the prior payment in full of the obligations of such Guarantor under
the other provisions of this Article 3, and such Excess Funding Guarantor shall
not exercise any right or remedy with respect to such excess until payment and
satisfaction in full of all Obligations. For purposes of this Section 3.3(c),
(i) "EXCESS FUNDING GUARANTOR" shall mean, in respect of any Obligations, a
Guarantor that has paid an amount in excess of its Pro Rata Share of such
Obligations, (ii) "EXCESS PAYMENT" shall mean, in respect of any Obligations,
the amount paid by an Excess Funding Guarantor in excess of its Pro Rata Share
of such Obligations and (iii) "PRO RATA SHARE" shall mean, for any Guarantor,
the ratio (expressed as a percentage) of (x) the amount by which the aggregate
present fair saleable value of all properties of such Guarantor (excluding any
shares of stock of any other Guarantor) exceeds the amount of all the debts and
liabilities of such Guarantor (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of such Guarantor
hereunder and any obligations of any other Guarantor that have been guaranteed
by such Guarantor) to (y) the amount by which the aggregate fair saleable value
of all properties of the Borrower and all of the Guarantors exceeds the amount
of all the debts and liabilities (including contingent, subordinated, unmatured
and unliquidated liabilities, but excluding
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the obligations of the Borrower and the Guarantors hereunder) of the Borrower
and all of the Guarantors, all as of the Agreement Date. If any Subsidiary
becomes a Guarantor hereunder subsequent to the Agreement Date, then for
purposes of this Section 3.3(c) such subsequent Guarantor shall be deemed to
have been a Guarantor as of the Agreement Date and the aggregate present fair
saleable value of the properties, and the amount of the debts and liabilities,
of such subsequent Guarantor as of the Agreement Date shall be deemed to be
equal to such value and amount on the date such subsequent Guarantor becomes a
Guarantor hereunder.
ARTICLE 4 - CONDITIONS PRECEDENT.
Section 4.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE OF THE TERM LOAN.
The obligation of the Banks to undertake the Term Loan Commitment and to make
the initial Advance of the Term Loan hereunder is subject to the prior
fulfillment of each of the following conditions:
(a) The Co-Agents shall have received each of the following, in form
and substance reasonably satisfactory to the Co-Agents and to the Majority
Banks:
(i) a certificate of the Borrower, substantially in the form
of EXHIBIT J hereto, certifying that the loan certificate issued by the Borrower
in connection with the Prior Loan Agreement remains true and correct and that
none of the documents attached thereto have been amended, terminated or
superseded as of the Agreement Date, except as expressly provided therein, and
authorizing the Agents, and the Banks to rely thereon in connection with this
Agreement;
(ii) a certificate of the Parent Company, substantially in the
form of EXHIBIT K hereto, certifying that the loan certificate issued by the
Parent Company in connection with the Prior Loan Agreement remains true and
correct and that none of the documents attached thereto have been amended,
terminated or superseded as of the Agreement Date, except as expressly provided
therein, and authorizing the Agents and the Banks to rely thereon in connection
with this Agreement;
(iii) a certificate of each Guarantor, substantially in the form
of EXHIBIT L hereto, certifying that the loan certificate issued by such
Guarantor in connection with the Prior Loan Agreement remains true and correct
and that none of the documents attached thereto have been amended, terminated or
superseded as of the Agreement Date, except as expressly provided therein, and
authorizing the Agents and the Banks to rely thereon in connection with this
Agreement;
(iv) duly executed Term Notes;
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(v) duly executed (A) Parent Pledge Agreement, together with
appropriate stock certificates and stock powers relating thereto, (B) Borrower
Pledge Agreement, together with appropriate stock certificates and stock powers
relating thereto, (C) Subordination Agreement and (D) Subordination of Fees
Agreement;
(vi) duly executed Fees Agreements;
(vii) opinions of counsel to the Borrower, the Parent Company
and the Guarantors addressed to each Bank and the Agents;
(viii) the duly executed Request for Advance for the initial
Advance of the Term Loans;
(ix) audited financial statements for the Borrower for the
calendar year ended December 31, 1993 and the unaudited financial statements for
the calendar quarter ended September 30, 1994;
(x) copies of certificates of insurance covering the assets of
the Borrower and otherwise meeting the requirements of Section 6.5 hereof to the
extent required by Section 6.5 hereof;
(xi) receipt of all fees due at such time from the Borrower to
the Agents and the Banks in accordance with the Fees Agreements;
(xii) duly executed Assignment of Partnership Interests
substantially in the form of EXHIBIT N hereto, with respect to the Borrower's
interests in LP (as defined in the MSG Agreement) (provided that such Assignment
of Partnership Interests shall provide that the Agents shall obtain the consent
of ITT before foreclosing on such security interest) together with duly executed
UCC-1 financing statements or any other documents reasonably requested by the
Administrative Agent for the purpose of perfecting such security interest; and
(xiii) a certificate of the Parent Company in form and substance
satisfactory to the Co-Agents and duly executed by an Authorized Signatory of
the Parent Company certifying that (i) (A) the Parent Company has sufficient
borrowing availability under the revolving credit facility provided for under
the Parent Company Loan Agreement, and sufficient borrowing availability under
the covenant set forth in Section 9.16 of the Parent Company Loan Agreement to
make the interest payments on the Term Loans due under this Agreement or the
Term Notes for the next succeeding twelve (12) months following the date of
such certificate or (B) at the sole option of the Parent Company, that an
escrow account has been established with the Administrative Agent on such terms
as shall be reasonably satisfactory to the Majority Banks and in an amount
sufficient to make the interest payments on the Term Loans due under this
Agreement or the Term Notes for the next succeeding
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twelve (12) months following the date of such certificate, (ii) payment by the
Parent Company of interest on the Term Loans due under this Agreement or the
Term Notes for the next succeeding three (3) months following the date of such
certificate will not cause the Parent Company to be in default of Section 9.26
(or any comparable covenant of the Parent Company Loan Agreement, if the same
is amended) of the Parent Company Loan Agreement and (iii) there is no event of
default, or any event which with the giving of notice or the passage of time
would constitute an event of default, under the Parent Company Loan Agreement
as of the Closing Date.
(b) All of the representations and warranties of the Borrower under
this Agreement shall be true and correct in all material respects, both before
and after giving effect to the application of the proceeds of the initial
Advance of the Term Loan.
(c) No litigation shall have been commenced against the Borrower
since September 30, 1994 which, if determined adversely to the Borrower, could
have a Materially Adverse Effect.
(d) There shall have been no material adverse change in the
Borrower's business, assets or financial condition from that reflected in the
Borrower's December 31, 1993 audited financial statements or September 30, 1994
unaudited financial statements, copies of which have been provided to the Co-
Agents.
Section 4.2 CONDITIONS PRECEDENT TO INITIAL ADVANCE OF THE PUT LOAN. The
obligation of the Banks to make the initial Advance of the Put Loan hereunder is
subject to the prior fulfillment of each of the following conditions:
(a) Each of the conditions precedent set forth in Section 4.1(a)
hereof shall have been satisfied.
(b) The Co-Agents shall have received each of the following, in form
and substance reasonably satisfactory to the Co-Agents and to the Majority
Banks:
(i) duly executed Request for Advance for the Advance of the
Put Loans;
(ii) duly executed Put Notes;
(iii) evidence satisfactory to the Majority Banks that the
purchase by the Borrower (or a Subsidiary of the Borrower, as the Borrower may
determine) of 100% of NBC's interests in SC-NY will be completed upon funding of
such Advance and confirmation from the Borrower as to whether NBC/News 12
Holding, Inc.'s interest in News 12 is also to be acquired by the Borrower in
connection therewith;
(iv) duly executed Assignment of Partnership Interests
substantially in the form of EXHIBIT N hereto, with
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respect to the Borrower's interests in SC-NY, if such are to be acquired
pursuant to the Put Agreement, and News 12, if such are to be acquired pursuant
to the Put Agreement, together with duly executed UCC-1 financing statements or
any other documents reasonably requested by the Administrative Agent for the
purpose of perfecting such security interest;
(v) if to be acquired by the Borrower pursuant to the Put
Agreement, SC-NY and News 12, as applicable, shall have become Guarantors
hereunder and SCHEDULE 1 hereto shall have been revised accordingly;
(vi) receipt of all fees due at such time from the Borrower to
the Agents and the Banks in accordance with the Fees Agreements;
(vii) a certificate of the Borrower in form and substance
satisfactory to the Co-Agents and duly executed by an Authorized Signatory for
the Borrower certifying that (A) the amount of the initial Advance of the Put
Loan does not exceed, in the aggregate, (I) the amount paid by the Borrower (or
a Subsidiary of the Borrower, as the Borrower may determine) in respect of the
purchase of all of NBC Holding's interests in SC-NY and News 12, as applicable,
plus (II) the amount of the additional fees due hereunder on the Put Loan
Closing Date, and (B) after giving effect to the Advance of the Put Loan
request, the Borrower would have been in compliance with the financial covenants
in Section 8.8 and 8.9 hereof, on a pro forma basis, as of the end of the most
recently completed calendar quarter for which financial information is available
under Section 7.1 hereof;
(viii) a certificate of the Parent Company in form and substance
satisfactory to the Co-Agents and duly executed by an Authorized Signatory of
the Parent Company certifying that (i) (A) the Parent Company has sufficient
borrowing availability under the revolving credit facility provided for under
the Parent Company Loan Agreement, and sufficient borrowing availability under
the covenant set forth in Section 9.16 of the Parent Company Loan Agreement to
make the interest payments on the Loans due under this Agreement or the Notes
for the next succeeding twelve (12) months following the date of such
certificate or (B) at the sole option of the Parent Company, that an escrow
account has been established with the Administrative Agent on such terms as
shall be reasonably satisfactory to the Majority Banks and in an amount
sufficient to make the interest payments on the Loans due under this Agreement
or the Notes for the next succeeding twelve (12) months following the date of
such certificate, (ii) payment by the Parent Company of interest on the Loans
due under this Agreement or the Notes for the next succeeding three (3) months
following the date of such certificate will not cause the Parent Company to be
in default of Section 9.26 (or any comparable covenant of the Parent Company
Loan Agreement, if the same is amended) of the Parent Company Loan Agreement and
(iii) there is no event of default, or any event
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which with the giving of notice or the passage of time would constitute an event
of default, under the Parent Company Loan Agreement as of the Closing Date; and
(ix) opinions of counsel to the Borrower, the Parent Company
and the Guarantors addressed to each Bank and the Agents, in form and substance
substantially as provided with respect to the initial Advance of the Term Loan,
with such changes as are appropriate with respect to the Put Loan.
(c) All of the representations and warranties of the Borrower under
this Agreement shall be true and correct in all material respects, both before
and after giving effect to the application of the proceeds of the initial
Advance of the Put Loan.
(d) No litigation shall have been commenced against the Borrower or
any Guarantor since the Agreement Date which, if determined adversely to the
Borrower or such Guarantor, could have a Materially Adverse Effect.
(e) There shall have occurred no material amendment or modification
of the Put Agreement without the consent of the Majority Banks, which consent
shall not be unreasonably withheld.
ARTICLE 5 - REPRESENTATIONS AND WARRANTIES.
Section 5.1 REPRESENTATIONS AND WARRANTIES. The Borrower hereby
agrees, represents, and warrants that:
(a) ORGANIZATION; POWER; QUALIFICATION. The Borrower is a corporation
duly organized and validly existing under the laws of the State of New York,
having the Parent Company as its sole shareholder. Each of the Guarantors is
duly organized and validly existing under the laws of the jurisdiction of its
organization. Each of the Borrower and the Guarantors has the power and
authority to own or lease and operate its properties and to carry on its
business as now being and hereafter proposed to be conducted, and is duly
qualified and authorized to do business in each jurisdiction in which such
qualification is necessary in view of the character of its properties or the
nature of its business requires such qualification or authorization, except for
qualifications and authorizations, the lack of which, singly or in the
aggregate, has not had and is not likely to have a Materially Adverse Effect.
There are no shareholders' or voting trust agreements in effect with respect to
the Borrower.
(b) AUTHORIZATION; ENFORCEABILITY. The Borrower and each Guarantor
has all corporate power and has taken all necessary corporate action to
authorize it to execute, deliver, and perform this Agreement and each of the
other Loan Documents to which it is a party in accordance with the terms thereof
and to consummate the
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transactions contemplated hereby and thereby. This Agreement has been duly
executed and delivered by the Borrower and each Guarantor, and is, and the
Notes, when issued for value received will be, and each of the other Loan
Documents to which the Borrower or such Guarantor is a party is, a legal, valid
and binding obligation of the Borrower or such Guarantor enforceable in
accordance with its terms, subject to limitations on enforceability under
bankruptcy, reorganization, insolvency and similar laws affecting creditors'
rights generally and limitations on the availability of the remedy of specific
performance imposed by the application of general equity principles.
(c) SUBSIDIARIES. Except as listed on SCHEDULE 3 attached hereto (as
amended by the Borrower upon written notice to the Banks from time to time), the
Borrower has no Subsidiaries. With respect to each Subsidiary of the Borrower,
SCHEDULE 3 also sets forth (i) the direct owners of such Subsidiary and the
extent of such ownership; (ii) the state of its incorporation or organization;
(iii) all jurisdictions in which such Subsidiary is qualified to do business as
a foreign corporation or partnership; and (iv) the address of the principal
place of business of such Subsidiary. Except as set forth on SCHEDULE 2 attached
hereto (as amended by the Borrower upon written notice to the Banks from time to
time), there are no Operating Entities. With respect to each Operating Entity,
SCHEDULE 2 sets forth (i) the direct owners of such Operating Entity and the
extent of such ownership, (ii) the state of its organization; (iii) all
jurisdictions in which such Operating Entity is qualified to do business as a
foreign partnership or corporation, as the case may be; and (iv) the address of
the principal place of business of such Operating Entity.
(d) COMPLIANCE WITH LAWS, ETC., OF AGREEMENT, OTHER LOAN DOCUMENTS,
AND CONTEMPLATED TRANSACTIONS. The execution, delivery, and performance of this
Agreement and each of the other Loan Documents in accordance with the terms and
the consummation of the transactions contemplated hereby and thereby do not and
will not (i) violate any Applicable Law, (ii) result in a breach of, or
constitute a default under the certificate of incorporation or by-laws or
partnership agreement, as the case may be and as amended, of the Borrower or any
Guarantor, or under any indenture, agreement, or other instrument to which the
Borrower or any Guarantor or any of its or their Subsidiaries is a party or by
which it or any of its or their properties may be bound, or (iii) result in or
require the creation or imposition of any Lien upon or with respect to any
property now owned or hereafter acquired by the Borrower or any Guarantor except
Permitted Liens; except where such violations, breaches, defaults or Liens, if
any, singly or in the aggregate, has not had and is not likely to have a
Materially Adverse Effect.
(e) NECESSARY AUTHORIZATIONS. No approval or consent of, or filing or
registration with, any federal, state or local
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commission or other regulatory authority is required in connection with (i) the
execution, delivery and performance by the Borrower of this Agreement, the Term
Notes, the Put Notes and the other Loan Documents to which it is a party, (ii)
the execution and delivery of this Agreement by the Borrower on behalf of the
Guarantors and the performance by each Guarantor of its obligations hereunder.
All such described action required to be taken as a condition to the execution
and delivery of each of this Agreement, the Term Notes, the Put Notes and other
Loan Documents to which the Borrower or any Guarantor is a party has been duly
taken by all such commissions and authorities or other Persons, as the case may
be, and all such action required to be taken as a condition to the initial
Advance of the Term Loan and the Put Loan as applicable, hereunder has been or
will be duly taken prior to each such initial Advance.
(f) TITLE TO PROPERTIES. Each of the Borrower and its Subsidiaries
has good and legal title to, or a valid leasehold interest in, all of their
respective material properties and assets free and clear of all Liens, except
Permitted Liens and rights, if any, of third parties under the partnership
agreements or other organization documents of the Operating Entities.
(g) COLLECTIVE BARGAINING. Except as disclosed to the Co-Agents in
writing prior to the Agreement Date, there are no collective bargaining
agreements between the Borrower, any of its Subsidiaries or any of the Operating
Entities and any trade or labor union or other employee collective bargaining
agent.
(h) TAXES. All federal, state, and other tax returns of the Borrower
and each of its Subsidiaries required by law to be filed have been duly filed,
and all federal, state, and other taxes, assessments, and other governmental
charges or levies upon the Borrower, each of its Subsidiaries and any of their
respective properties, income, profits, and assets, which are due and payable,
have been paid, except any such tax payment of which the Borrower or its
Subsidiary, as the case may be, is contesting in good faith by appropriate
proceedings, and as to which neither any Lien other than a Permitted Lien has
attached nor any foreclosure, distraint, sale, or similar proceedings have been
commenced, and except any such tax payments which the failure to pay, singly or
in the aggregate, has not had and is not likely to have a Materially Adverse
Effect. The charges, accruals, and reserves on the books of the Borrower and
each of its Subsidiaries in respect of taxes are, in the reasonable judgment of
the Borrower, adequate.
(i) FINANCIAL STATEMENTS.
(1) The Borrower has furnished, or caused to be furnished, to
the Banks audited financial statements for the Borrower and its Subsidiaries on
a consolidated basis as at December 31, 1993 and unaudited financial statements
for the Borrower and its Subsidiaries as at September 30, 1994, all of
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which are complete and correct in all material respects and present fairly in
accordance with GAAP the financial position of the Borrower as at such dates,
and the results of operations for the periods then ended, subject to normal
year-end adjustments with respect to the September 30, 1994 statements. Except
as disclosed in such financial statements or SCHEDULE 5.1, the Borrower had no
material liabilities, contingent or otherwise, and there are no material
unrealized or anticipated losses of the Borrower which have not heretofore been
disclosed in writing to the Banks.
(2) The Borrower has furnished, or caused to be furnished, to
the Banks audited financial statements for the Parent Company on a consolidated
basis as at December 31, 1993 and unaudited financial statements for the Parent
Company as at September 30, 1994, all of which are complete and correct in all
material respects and present fairly in accordance with GAAP the financial
position of the Parent Company as at such dates, and the results of operations
for the periods then ended, subject to normal year-end adjustments with respect
to the September 30, 1994 statements. Except as disclosed in such financial
statements, the Parent Company had no material liabilities, contingent or
otherwise, and there are no material unrealized or anticipated losses of the
Parent Company which have not heretofore been disclosed in writing to the Banks.
(j) NO ADVERSE CHANGE. Since September 30, 1994, there has occurred
no event which would have a Materially Adverse Effect.
(k) INVESTMENTS AND GUARANTIES. Neither the Borrower nor any of its
Subsidiaries has made investments in, advances to, or guaranties of, the
obligations of any Person, except as reflected in the financial statements
referred to in Section 5.1(i)(1) above, SCHEDULE 8 or disclosed to the Banks in
writing.
(l) LIABILITIES, LITIGATION, ETC. Except (i) as disclosed on SCHEDULE
5.1 hereto, (ii) liabilities incurred in the normal course of business and (iii)
as disclosed or referred to in the financial statements described in Section
5.1(i) above, neither the Borrower nor any of its Subsidiaries has any material
(individually or in the aggregate) direct or contingent liabilities. Except as
disclosed on SCHEDULE 5.2 attached hereto, there is no litigation, legal or
administrative proceeding, investigation, or other action of any nature pending
or, to the knowledge of the Borrower, threatened against the Borrower, any of
its Subsidiaries, any of the Operating Entities or any of its or their
respective properties which involves the possibility of any judgment or
liability not fully covered by insurance that, singly or in the aggregate, could
reasonably be expected to have a Materially Adverse Effect.
(m) ERISA. The Borrower and each ERISA Affiliate and each of their
respective Plans are in substantial compliance with
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ERISA and the Code and neither the Borrower nor any of its ERISA Affiliates has
incurred any accumulated funding deficiency with respect to any such Plan within
the meaning of ERISA or the Code. The Borrower and each of its ERISA Affiliates
have complied with all requirements of ERISA Sections 601 through 608 and Code
Section 4980B in all material respects. The Borrower has incurred no material
liability to the Pension Benefit Guaranty Corporation in connection with any
Plan. The assets of each Plan which is subject to Title IV of ERISA are
sufficient to provide the benefits under such Plan, the payment of which the
Pension Benefit Guaranty Corporation would guarantee if such Plan were
terminated, and such assets are also sufficient to provide all other "benefit
liabilities" (as defined in ERISA Section 4001(a)(16)) due under the plan upon
termination. No Reportable Event has occurred and is continuing with respect to
any Plan. No Plan or trust created thereunder, or party in interest (as defined
in Section 3(14) of ERISA), or fiduciary (as defined in Section 3(21) of ERISA),
has engaged in a "prohibited transaction" (as such term is defined in
Section 406 of ERISA or Section 4975 of the Code) which would subject the
Borrower or any ERISA Affiliate to a material penalty or tax on "prohibited
transactions" imposed by Section 502 of ERISA or Section 4975 of the Code.
Neither the Borrower nor any of its ERISA Affiliates is a participant in or is
obligated to make any payment to a Multiemployer Plan.
(n) PATENTS, TRADEMARKS, ETC. Except as disclosed on SCHEDULE 6
attached hereto (as amended by the Borrower upon written notice to the Banks
from time to time), or where the lack of ownership, right to use or possession
of which is not likely to have a Materially Adverse Effect, the Borrower, each
of its Subsidiaries and the Operating Entities owns, possesses or has the right
to use all licenses and rights to all patents, Trademarks, trademark rights,
trade names, trade name rights, service marks, and copyrights, and rights with
respect thereto, necessary to conduct its business in all material respects as
now conducted, without known conflict with any patent, trademark, trade name,
service mark, license or copyright of any other Person, and in each case, with
respect to patents, Trademarks, trademark rights, trade names, trade name and
copyrights and licenses with respect thereto owned by the Borrower, its
Subsidiaries or the Operating Entities, subject to no mortgage, pledge, lien,
lease, encumbrance, charge, security interest, title retention agreement or
option other than as otherwise permitted hereunder. Except to the extent that
there is not likely to be a Materially Adverse Effect resulting from such
ineffectiveness or non-compliance, all such licenses and rights with respect to
patents, Trademarks, trademark rights, trade names, trade name rights, service
marks and copyrights are in full force and effect, and to the extent applicable,
the Borrower, its Subsidiaries and the Operating Entities are in full compliance
in all material respects with all of the provisions thereof. Except as set forth
on SCHEDULE 6 attached hereto (as amended by the Borrower upon written notice to
the Banks from time to time), no such patent, Trademark, trademark rights, trade
names, trade name
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rights, service marks, copyrights or licenses is subject to any pending or, to
the best of the Borrower's knowledge, threatened attack or revocation. Except as
set forth on SCHEDULE 6 attached hereto, neither the Borrower nor any of its
Subsidiaries nor any of the Operating Entities owns any registered patents and
the Borrower's business is not subject to any License.
(o) COMPLIANCE WITH LAW; ABSENCE OF DEFAULT. The Borrower, each of
its Subsidiaries and each of the Operating Entities is in compliance with all
Applicable Laws the non-compliance with which is likely to have a Materially
Adverse Effect and with all of the provisions of its certificate of
incorporation and by-laws, or partnership agreement, as applicable, which would
adversely affect the Borrower's or any Guarantor's ability to perform the
Obligations, and no event has occurred or has failed to occur which has not been
remedied or waived, the occurrence or non-occurrence of which constitutes (i) a
Default or (ii) a default by the Borrower, any of its Subsidiaries or any of the
Operating Entities under any other indenture, agreement, or other instrument, or
under any MSO Agreement or Programming Rights Agreement, or any judgment,
decree, or order to which the Borrower, any of its Subsidiaries, or any of the
Operating Entities is a party or by which the Borrower, any of its Subsidiaries,
any of the Operating Entities or any of its or their properties may be bound,
which default, judgment, decree or order could reasonably be considered to have
a Materially Adverse Effect.
(p) CASUALTIES; TAKING OF PROPERTIES, ETC. Since the date of the most
recent financial statements provided to the Co-Agents and the Banks by the
Borrower, neither the business nor the properties of the Borrower, its
Subsidiaries or the Operating Entities have been materially and adversely
affected as a result of any fire, explosion, earthquake, flood, drought,
windstorm, accident, strike or other labor disturbance, embargo, requisition or
taking of property or cancellation of contracts, permits or concessions by any
domestic or foreign government or any agency thereof, riot, activities of armed
forces, or acts of God or of any public enemy.
(q) ACCURACY AND COMPLETENESS OF INFORMATION. None of the financial
statements or any written statements delivered to the Co-Agents or the Banks
pursuant to this Agreement contains, as at the date of delivery thereof, any
untrue statement of material fact nor do such financial statements, and such
written statements, taken as a whole, omit to state a material fact or any fact
necessary to make the statements contained therein not misleading.
(r) COMPLIANCE WITH REGULATIONS G, T, U, AND X. Neither the Borrower
nor any of its Subsidiaries is engaged principally or as one of its important
activities in the business of extending credit for the purpose of purchasing or
carrying, and the Borrower does not own or presently intend to acquire, any
"margin security" or "margin stock" as defined in Regulations G, T, U, and X (12
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C.F.R. Parts 207, 220, 221 and 224) of the Board of Governors of the Federal
Reserve System (herein called "margin stock"). None of the proceeds of the Loans
will be used, directly or indirectly, for the purpose of purchasing or carrying
any margin stock or for the purpose of reducing or retiring any Indebtedness
which was originally incurred to purchase or carry margin stock or for any other
purpose which would constitute this transaction a "purpose credit" within the
meaning of said Regulations G, T, U, and X. The Borrower has not taken and will
not take any action which would cause this Agreement or the Notes to violate
Regulation G, T, U, or X or any other regulation of the Board of Governors of
the Federal Reserve System or to violate the Securities Exchange Act of 1934. If
so requested by the Co-Agents, the Borrower will furnish the Co-Agents with
(i) a statement or statements in conformity with the requirements of Federal
Reserve Forms G-3 and U-1 referred to in Regulations G and U of said Board of
Governors and (ii) other documents evidencing its compliance with the margin
regulations, including without limitation an opinion of counsel in form and
substance reasonably satisfactory to the Banks.
(s) SOLVENCY. The Borrower is and after giving effect to the
transactions contemplated hereby and by the Loan Documents will be, Solvent.
(t) BROKER'S OR FINDER'S COMMISSIONS. No broker's or finder's fee or
commission will be payable with respect to the issuance of the Notes, and no
other similar fees or commissions will be payable by the Borrower for any other
services rendered to the Borrower ancillary to the transactions contemplated
herein.
(u) BUSINESS. The Borrower is primarily a holding/management company
whose assets consist of the equity interests of its Subsidiaries and the
Operating Entities and other tangible assets used in the foregoing activities
and whose business consists primarily of the Business.
(v) NAME OF BORROWER. Except as set forth on SCHEDULE 7 hereto,
neither the Borrower, nor any of the Guarantors or Operating Entities has
changed its name within the preceding five (5) years from the Agreement Date,
and has not transacted business under any other name or trade name and has not
acquired any assets except for valid consideration.
(w) INVESTMENT COMPANY ACT. Neither the Borrower nor any of its
Subsidiaries is required to register under the provisions of the Investment
Company Act of 1940, as amended, and neither the entering into or performance by
the Borrower of this Agreement nor the issuance of the Term Notes violates any
provision of such Act or requires any consent, approval, or authorization of, or
registration with, any governmental or public body or authority pursuant to any
of the provisions of such Act.
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Section 5.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties made under this Agreement shall survive, and not
be waived by, the execution hereof by the Banks and the Agents, any
investigation or inquiry by any Bank or the Agents, or the making of any Advance
under this Agreement.
ARTICLE 6 - GENERAL COVENANTS.
So long as any of the Obligations is outstanding and unpaid or the Borrower
shall have the right to borrow hereunder (whether or not the conditions to
borrowing have been or can be fulfilled), and unless the Majority Banks shall
otherwise consent in writing:
Section 6.1 PRESERVATION OF EXISTENCE AND SIMILAR MATTERS. The Borrower
will, and will cause each of its Subsidiaries to, (i) preserve and maintain
their respective existences, rights, Licenses, and privileges in their
respective jurisdictions of incorporation and (ii) qualify and remain qualified
and authorized to do business in each jurisdiction in which such qualification
is necessary in view of the character of their respective properties or in which
the nature of their respective businesses requires such qualification or
authorization, except for qualifications and authorizations, the lack of which,
singly or in the aggregate, has not had and is not likely to have a Materially
Adverse Effect; PROVIDED that the Borrower or any of its Subsidiaries may (1)
liquidate, dissolve, or cause the liquidation or dissolution of any Subsidiary
or Operating Entity that holds no assets and conducts no business activities,
and (2) liquidate, sell or otherwise dispose of any Subsidiary or Operating
Entity as permitted by Section 8.5 hereof.
Section 6.2 COMPLIANCE WITH APPLICABLE LAW. The Borrower will comply,
and will cause each of its Subsidiaries and Operating Entities to comply, with
the requirements of all Applicable Law, except where failure to comply has not
had and is not likely to have a Materially Adverse Effect.
Section 6.3 MAINTENANCE OF PROPERTIES. The Borrower will maintain, and
will cause each of its Subsidiaries to maintain, or cause to be maintained in
the ordinary course of business in good repair, working order, and condition all
properties necessary in their respective businesses (whether owned or held under
lease).
Section 6.4 ACCOUNTING METHODS AND FINANCIAL RECORDS. The Borrower, or
the Parent Company on the Borrower's behalf, will maintain, and will cause each
of its Subsidiaries and Operating Entities to maintain, or will maintain on
their behalf, a system of accounting established and administered in accordance
with GAAP, and will (or the Parent Company on the Borrower's, Borrower's
Subsidiaries' and Operating Entities' behalf will), keep and cause each of its
Subsidiaries and Operating Entities to keep adequate records and books of
account in which complete entries will be made
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in accordance with such accounting principles consistently applied and
reflecting all transactions required to be reflected by such accounting
principles.
Section 6.5 INSURANCE. The Borrower, or the Parent Company on the
Borrower's behalf, will maintain or cause to be maintained insurance on the
assets and properties and on the operations of the Borrower, its Subsidiaries
and the Operating Entities including, but not limited to, public liability,
business interruption and fidelity coverage insurance, from responsible
insurance companies in such amounts and against such risks as shall be
reasonably acceptable to the Majority Banks. The Borrower, or the Parent Company
on the Borrower's behalf, shall at all times maintain insurance coverage
comparable to that in place on the Agreement Date, taking into account the
growth of the Borrower's business and operations after the Agreement Date.
Section 6.6 PAYMENT OF TAXES AND CLAIMS. The Borrower will pay and
discharge, and will cause each of its Subsidiaries to pay and discharge, all
taxes, assessments, and governmental charges or levies imposed upon them or upon
their respective incomes or profits or upon any properties belonging to them
prior to the date on which penalties attach thereto, and all lawful claims for
labor, materials, and supplies which, if unpaid, would become a Lien other than
a Permitted Lien upon any of their respective properties; except that no such
tax, assessment, charge, levy, or claim need be paid which is being contested in
good faith by appropriate proceedings and for which adequate reserves shall have
been set aside on the appropriate books, but only so long as such tax,
assessment, charge, levy, or claim does not become a Lien or charge other than a
Permitted Lien and no foreclosure, distraint, sale, or similar proceedings shall
have been commenced and remain unstayed for a period of thirty (30) days after
such commencement.
Section 6.7 VISITS AND INSPECTIONS. The Borrower will permit, and will
cause each of its Subsidiaries to permit, representatives of (a) prior to a
Default, the Co-Agents upon three (3) Business Days' written notice to the
Borrower, and (b) subsequent to a Default, the Co-Agents and each Bank, upon
notice prior to 10:00 a.m. (Eastern time) on such date, to (i) visit and inspect
the properties of the Borrower and each of its Subsidiaries during normal
business hours, (ii) inspect and make extracts from and copies of their
respective books and records, and (iii) discuss with their respective principal
officers its businesses, assets, liabilities, financial positions, results of
operations, and business prospects relating to the Borrower and each of its
Subsidiaries.
Section 6.8 PAYMENT OF INDEBTEDNESS. The Borrower will pay, and will
cause each of its Subsidiaries to pay, subject to any provisions therein
regarding subordination, any and all of their respective Indebtedness for Money
Borrowed when and as the same becomes due, other than amounts duly disputed in
good faith the
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non-payment of which is not likely to have a Materially Adverse Effect.
Section 6.9 USE OF PROCEEDS. The Borrower will use the proceeds of the
Loans solely as provided in Sections 2.1(b) and 2.2(b) hereof, as applicable.
Section 6.10 ERISA. The Borrower shall (a) promptly after the filing
thereof, furnish to the Co-Agents copies of any annual report required to be
filed pursuant to ERISA in connection with each Plan of it and its ERISA
Affiliates; (b) notify the Banks as soon as practicable of any Reportable Event
and of any additional act or condition arising in connection with any such Plan
which the Borrower believes would constitute grounds for the termination thereof
by the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee to administer such Plan;
and (c) furnish to the Banks, promptly upon the Banks' request therefor, such
additional information concerning any such Plan as may be reasonably requested
by the Banks.
Section 6.11 FURTHER ASSURANCES. The Borrower will promptly cure, or
cause to be cured, defects in the creation and issuance of the Term Notes and
the Put Notes and the execution and delivery of the Loan Documents (including
this Agreement), resulting from any act or failure to act by the Borrower or any
of its Subsidiaries or any employee or officer thereof. The Borrower at its
expense will promptly execute and deliver to the Agents and the Banks, or cause
to be executed and delivered to the Agents and the Banks, all such other and
further documents, agreements, and instruments in compliance with or for the
accomplishment of the covenants and agreements of the Borrower in the Loan
Documents, including this Agreement, or to correct any omissions in the Loan
Documents, or more fully to state the obligations set out herein or in any of
the Loan Documents, or to obtain any consents, all as may be necessary or
appropriate in connection therewith and as may be reasonably requested.
Section 6.12 BROKER'S CLAIMS. The Borrower hereby indemnifies and agrees
to hold the Agents and each of the Banks harmless from and against any and all
losses, liabilities, damages, costs and expenses which may be suffered or
incurred by the Agents and each of the Banks in respect of any claim, suit,
action or cause of action now or hereafter asserted by a broker or any Person
acting in a similar capacity arising from or in connection with the execution
and delivery of this Agreement or any other Loan Document or the consummation of
the transactions contemplated herein or therein.
Section 6.13 INDEMNITY. The Borrower and each of the Guarantors, jointly
and severally, will indemnify and hold harmless the Agents and each of the Banks
and each of their respective employees, representatives, officers and directors
from and against
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any and all claims, liabilities, losses, damages, actions, and demands by any
party (other than with respect to any claims, actions or demands made by other
such indemnified parties or any liabilities, losses or damages caused thereby)
against the Agents, the Banks, or any of them resulting from any breach or
alleged breach by the Borrower or any of its Subsidiaries of any representation
or warranty made hereunder, or otherwise arising out of the Commitment or the
making, administration or enforcement of the Loan Documents and the Loans;
unless, with respect to any of the above, the Agents, the Banks, or any of them
are finally judicially determined to have acted or failed to act with gross
negligence or wilful misconduct. This Section 6.13 shall survive termination of
this Agreement.
Section 6.14 DELIVERY OF CERTIFICATES AND DOCUMENTS IN THE EVENT OF AN
ASSET DISPOSITION. With respect to any transaction permitted by subsections
8.5(a)(2), 8.5(a)(3), 8.5(a)(4) and 8.5(a)(5) hereof, the Borrower shall, or, if
applicable, shall cause the appropriate Subsidiary to, deliver to the Co-Agents
(a) as soon as practicable and in no event less than 10 days prior to the
closing date of any such transaction a certificate of the Borrower or such
Subsidiary, as the case may be, signed by an Authorized Signatory thereof
setting forth (i) a description of the transaction in such reasonable detail so
as to permit the Co-Agents and the Banks to obtain an accurate understanding of
all of the essential features of such transaction (which description shall
include, without limitation, a summary of the consideration to be received and
how the Business of the Borrower, or such Subsidiary, as the case may be, will
benefit from such transaction) and (ii) a certification by such Authorized
Signatory on behalf of the Borrower or such Subsidiary, as the case may be, that
the total value received by the Borrower or such Subsidiary, as the case may be,
is not less than the total value of the assets and properties sold, exchanged or
otherwise disposed and (b) as soon as available and in no event more than 30
days after the closing date of such transaction, copies of all agreements,
instruments, opinions and other documents executed and delivered in connection
with such transaction, together with a certificate of the Borrower or such
Subsidiary, as the case may be, signed by an Authorized Signatory thereof
certifying that the copies so delivered are true and complete copies of all
agreements, instruments, opinions and documents executed and delivered with
respect to such transaction.
Section 6.15 PLEDGE OF ACQUIRED INTERESTS AND NON-CASH PROCEEDS FROM
SALES, EXCHANGES OR OTHER DISPOSITION OF ASSETS. (a) As soon as available and
in any event on the date of acquisition or receipt thereof, all shares of
capital stock, partnership interests and any other interest or benefit acquired
by the Borrower from time to time in any Subsidiary or Operating Entity, and
all non-cash proceeds received by the Borrower under any transaction permitted
by subsections 8.5(a)(2) and 8.5(a)(4) hereof, shall be pledged by the Borrower
to the Administrative Agent for the ratable benefit of the Banks pursuant to a
pledge agreement substantially
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in the form of EXHIBIT B attached hereto and made a part hereof (modified as
appropriate for pledge of partnerships or interests other than capital stock) as
additional security for the Borrower's Obligations under the Loan Documents to
the extent that the pledge of any such shares, partnership interests or other
interests or non-cash proceeds will not violate the articles of incorporation,
partnership agreement or any stockholder agreement, as the case may be,
applicable thereto in or with respect to a Subsidiary or Operating Entity which
is not wholly-owned directly or indirectly by the Borrower (after giving effect
to an acquisition contemplated by this Section 6.15(a)) (and if the pledge of
any such shares, partnership interests or other interests or non-cash proceeds
shall violate any such applicable documents, such shares, partnership interests
or other interests or non-cash proceeds shall be held by the Borrower subject to
the terms and conditions of this Agreement and the other Loan Documents) and,
with respect only to non-cash proceeds received by the Borrower under any
transaction permitted by subsection 8.5(a)(4), if such pledge shall not require
any consent of an unaffiliated third party which consent the Borrower is unable
to obtain after taking reasonable steps to obtain such consent. In connection
with such pledge, the Borrower shall execute and deliver to the Administrative
Agent for the ratable benefit of the Banks the Borrower Pledge Agreement (if
such agreement has not been delivered previously) and all such other agreements,
instruments and documents as the Co-Agents may reasonably request. Unless
prohibited by the related articles of incorporation, partnership agreement or
any stockholder agreement, as the case may be, in or with respect to a
Subsidiary or Operating Entity which is not wholly-owned directly or indirectly
by the Borrower (after giving effect to an acquisition contemplated by this
Section 6.15(a)) any Operating Entity with respect to which such acquisition is
consummated shall also become a Guarantor hereunder, and the Borrower shall
modify, or cause to be modified, SCHEDULE 1 hereto accordingly. The formation of
a new Subsidiary by the Borrower shall be deemed an acquisition subject to the
terms of this Section 6.15(a).
(b) As soon as available and in any event on the date of receipt
thereof, all non-cash proceeds received by any Subsidiary under any transaction
permitted by subsections 8.5(a)(2) or 8.5(a)(4) hereof shall be pledged by any
such Subsidiary to the Administrative Agent for the ratable benefit of the Banks
as additional security for the Borrower's Obligations under the Loan Documents
(the Borrower hereby agrees to cause such pledge and to cause such Subsidiary to
execute and deliver in connection therewith all such documents or instruments as
the Co-Agents may reasonably deem appropriate in form and substance reasonably
satisfactory to the Co-Agents) to the extent that the pledge of any such non-
cash proceeds will not violate the articles of incorporation, partnership
agreement or any stockholder agreement, as the case may be, applicable thereto
in or with respect to a Subsidiary or Operating Entity which is not wholly-owned
directly or indirectly by the Borrower (after giving effect to an
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acquisition contemplated by this Section 6.15(b)); (and if the pledge of any
such non-cash proceeds shall violate any such applicable documents, the Borrower
shall cause such Subsidiary, or, if applicable, the appropriate Operating
Entity, to hold such non-cash proceeds, in each case subject to the terms and
conditions of this Agreement and the other Loan Documents). The formation of a
new Subsidiary by an existing Subsidiary of the Borrower shall be deemed an
acquisition subject to the terms of this Section 6.15(b).
(c) To the extent such consent is required by the MSG Agreement, the
Borrower will, in good faith, attempt to obtain the consent of ITT to a
collateral assignment of the Borrower's interests in LP pursuant to an
Assignment of Partnership Interests substantially in the form of EXHIBIT N
hereto.
Section 6.16 NEW SUBSIDIARIES TO BE GUARANTORS. With respect to each
Subsidiary formed or acquired by the Borrower after the date of this Agreement,
the Borrower shall, on the date of such acquisition or formation, take all
necessary action, and shall cause such Subsidiary to take all necessary action,
to provide to the Administrative Agent, on behalf of the Co-Agents and the
Banks, a subsidiary certificate substantially in the form of EXHIBIT P hereto
and add such Subsidiary to the list of Guarantors on SCHEDULE 1 to this
Agreement.
ARTICLE 7 - INFORMATION COVENANTS.
So long as any of the Obligations is outstanding and unpaid or the Borrower
has a right to borrow hereunder (whether or not the conditions to borrowing have
been or can be fulfilled) and unless the Majority Banks shall otherwise consent
in writing, the Borrower will furnish or cause to be furnished to each Bank and
to the Co-Agents at their respective offices:
Section 7.1 QUARTERLY FINANCIAL STATEMENTS AND INFORMATION. Within
ninety (90) days after the last day of each quarter in each calendar year of
each of the Parent Company, Borrower, SC-NY, SC-CHI and AMC, respectively,
except the last quarter in each calendar year, the balance sheet of each of the
Parent Company, Borrower, SC-NY, SC-CHI and AMC as at the end of such quarter,
and the related statement of income and retained earnings and related statement
of cash flows of each of the Parent Company and Borrower, and, in the case of
SC-NY, SC-CHI and AMC, related statements of income and retained earnings and
related statements of Operating Cash Flow, for such quarter and for the elapsed
portion of the year ended with the last day of such quarter (all of which, in
the case of the Parent Company and the Borrower, shall be on a consolidated
basis with their respective Subsidiaries) and certified by an Authorized
Signatory of each of the Parent Company, the Borrower, SC-NY, SC-CHI and AMC,
respectively, to, in his or her opinion, present fairly, in accordance with
GAAP, the financial position of the Parent Company, Borrower, SC-NY, SC-CHI and
AMC, respectively,
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as at the end of such period, and the results of operations for such period, and
for the elapsed portion of the year ended with the last day of such period,
subject only to normal year-end adjustments. In addition, the financial
statements delivered under this Section 7.1 with respect to AMC shall set forth
the operating expenses of the Romance Classics Channel as a separate line item
in the statements themselves or the footnotes thereto.
Section 7.2 ANNUAL FINANCIAL STATEMENTS AND INFORMATION; CERTIFICATE OF
NO DEFAULT. Within one hundred twenty (120) days after the end of each calendar
year of each of the Parent Company, the Borrower, SC-NY, SC-CHI and AMC
respectively, the audited balance sheets of each of the Parent Company, the
Borrower, SC-NY, SC-CHI and AMC as at the end of such calendar year (all of
which, in the case of the Parent Company and the Borrower, shall be on a
consolidated basis with their respective Subsidiaries), and the related audited
statements of income and retained earnings and related audited statements of
cash flows of each of the Parent Company and the Borrower, and, in the case of
AMC, SC-NY and SC-CHI related audited statements of income and retained earnings
and related audited statements of Operating Cash Flow, for such calendar year,
which financial statements shall set forth in comparative form such figures as
at the end of and for the previous calendar year, and shall be accompanied by an
opinion of KPMG Peat Marwick or a firm of independent certified public
accountants of recognized standing selected by the Parent Company, the Borrower,
SC-NY, SC-CHI and AMC and satisfactory to the Majority Banks (and, in the case
of the Borrower, together with a statement of such accountants certifying that
no Default or Event of Default, including, without limitation, any Default under
Sections 8.8 and 8.9 hereof, was detected during the examination of the
Borrower), and that such accountants have authorized the Parent Company, the
Borrower, SC-NY, SC-CHI and AMC, respectively, to deliver such financial
statements and opinion thereon to the Co-Agents and the Banks pursuant to this
Agreement. In addition, the financial statements delivered under this Section
7.2 with respect to AMC shall set forth the operating expenses of the Romance
Classics Channel as a separate line item in the statements themselves of the
footnotes thereto.
Section 7.3 PERFORMANCE CERTIFICATES. At the time the financial
statements are furnished pursuant to Sections 7.1 and 7.2 hereof,
(a) a certificate of an Authorized Signatory of the Borrower in form
and substance reasonably satisfactory to the Majority Banks (i) setting forth as
at the end of such quarter or calendar year, as the case may be, the arith-
metical calculations required to establish whether or not the Borrower was in
compliance with the requirements of Sections 8.8 and 8.9 hereof; and (ii)
stating that, to the best of his or her knowledge, no Default or Event of
Default has occurred as at the end of such quarter or year, as the case may be,
or, if a Default or an Event of Default
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has occurred, disclosing each such Default or Event of Default and its nature,
when it occurred, whether it is continuing, and the steps being taken by the
Borrower with respect to such Default or Event of Default.
(b) a certificate of an Authorized Signatory of the Parent Company
substantially in the form of EXHIBIT L attached hereto (i) stating that (x) the
Parent Company has sufficient borrowing availability under the revolving credit
facility provided for under the Parent Company Loan Agreement, and sufficient
borrowing availability under the covenant set forth in Section 9.16 of the
Parent Company Loan Agreement to make the interest payments on the Loans due
under this Agreement or the Notes for the next succeeding twelve (12) months
following the date of such certificate or (y) at the sole option of the Parent
Company, that an escrow account has been established with the Administrative Co-
Agents on such terms as shall be reasonably satisfactory to the Majority Banks
and in an amount sufficient to make the interest payments on the Loans due under
this Agreement or the Notes for the next succeeding twelve (12) months following
the date of such certificate; (ii) stating that payment by the Parent Company of
interest on the Loans due under this Agreement or the Notes for the next
succeeding three (3) months following the date of such certificate will not
cause the Parent Company to be in default of Section 9.26 (or any comparable
covenant of the Parent Company Loan Agreement, if the same is amended) of the
Parent Company Loan Agreement; and (iii) stating that no event of default, or
event which with the giving of notice or the passage of time will constitute an
event of default, has occurred under the Parent Company Loan Agreement as at the
end of such quarter or year, as the case may be, which will prevent the Parent
Company from making any borrowing thereunder.
Section 7.4 COPIES OF OTHER REPORTS.
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower by its independent public accountants regarding the
Borrower or any of its Subsidiaries, including, without limitation, any
management report prepared in connection with the annual audit referred to in
Section 7.2 hereof.
(b) Promptly after the preparation of the same, copies of all
material reports or financial information filed with any governmental agency,
department, bureau, division or other governmental authority or regulatory body,
or evidencing facts or containing information which could have a Materially
Adverse Effect.
(c) From time to time and promptly upon each request, such data,
certificates, reports, statements, documents, or further information regarding
the business, assets, liabilities, financial position, projections or results of
operations of the Borrower or
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any of its Subsidiaries as the Co-Agents, upon request of the Majority Banks,
may reasonably request.
Section 7.5 NOTICE OF LITIGATION AND OTHER MATTERS. Prompt notice of the
following events as to which the Borrower has received notice or otherwise
become aware thereof:
(a) The commencement of all material proceedings and investigations
by or before any governmental body and all actions and proceedings in any court
or before any arbitrator (i) against or (ii) to the extent known to the
Borrower, in any other way relating adversely and directly to the Borrower or
any of its Subsidiaries, or any of the Operating Entities or any of their
respective properties, assets, or businesses, or which calls into question the
validity of this Agreement or any other Loan Document, except where the adverse
outcome of such proceeding or investigation is not likely to have a Materially
Adverse Effect;
(b) Any notice of (i) termination or partial termination of any MSO
Agreement (other than in accordance with its terms) which results in a reduction
of 1,000,000 or more subscribers in the aggregate in any calendar quarter when
added to all other terminations in such quarter, or (ii) termination of any of
the Programming Rights Agreements (other than in accordance with its terms) the
loss of which would cause a Materially Adverse Effect.
(c) Any material adverse change with respect to the business, assets,
liabilities, financial position, or results of operations of the Borrower or any
of its Subsidiaries, other than changes in the ordinary course of business which
have not had and are not likely to have a Materially Adverse Effect;
(d) Any material written notice or other material written information
received by the Borrower from NBC in respect of the NBC Put or the Put
Agreement, including copies of any amendments to the Put Agreement;
(e) Any material written notice or other material written information
received by the Borrower in respect of the MSG Agreement, including copies of
any amendment to the MSG Agreement, but excluding information with respect to
the operation of the properties of MSG;
(f) Any Default or default by the Borrower under any agreement (other
than this Agreement) to which the Borrower or any of its Subsidiaries is party
or by which any of their respective properties is bound or the occurrence of any
other event which could have a Materially Adverse Effect, giving in each case
the details thereof and specifying the action proposed to be taken with respect
thereto; and
(g) The occurrence of any Reportable Event or a "prohibited
transaction" (as such term is defined in Section 406 of
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ERISA or Section 4975 of the Code) with respect to any Plan of the Borrower or
any of its ERISA Affiliates or the institution or threatened institution by the
Pension Benefit Guaranty Corporation of proceedings under ERISA to terminate or
to partially terminate any such Plan or the commencement or threatened
commencement of any litigation regarding any such Plan or naming it or the
Trustee of any such Plan with respect to such Plan.
ARTICLE 8 - NEGATIVE COVENANTS.
So long as any of the Obligations is outstanding and unpaid or the Borrower
has a right to borrow hereunder (whether or not the conditions to borrowing have
been or can be fulfilled) and unless the Majority Banks shall otherwise give
their prior consent in writing:
Section 8.1 INDEBTEDNESS OF THE BORROWER. The Borrower shall not create,
assume, incur or otherwise become or remain obligated in respect of, or permit
to be outstanding, and except any obligation of any Subsidiary arising solely
from such Subsidiary being a partner of an Operating Entity or LP, shall not
permit any of its Subsidiaries or Rainbow Advertising Sales Corporation to
create, assume, incur or otherwise become or remain obligated in respect of, or
permit to be outstanding, any Indebtedness for Money Borrowed except:
(a) Indebtedness under this Agreement, the Term Notes, the Put Notes
and the other Loan Documents;
(b) Capitalized Lease Obligations (whether or not secured) in an
aggregate amount for the Borrower and its Subsidiaries not in excess of
$2,000,000 at any one time outstanding over the remainder of the term of such
obligations;
(c) Indebtedness with respect to Interest Hedge Agreements, provided
that the aggregate notional amount thereof does not exceed $202,000,000 and the
term of any such Interest Hedge Agreement does not extend beyond the Maturity
Date; and
(d) Intercompany Indebtedness among any of the Borrower, the
Borrower's Subsidiaries and the Operating Entities, PROVIDED that repayment of
any such Indebtedness owed by the Borrower or any of its Subsidiaries to any
Operating Entity shall be subordinated to the prior payment in full of the
Obligations;
(e) Subordinated Indebtedness in an aggregate amount not to exceed
the sum of (i) $253,000,000 and (ii) $70,304,000 owed by Rainbow Advertising
Sales Corporation to the Parent Company; and
(f) Operating Advances.
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Section 8.2 INVESTMENTS. The Borrower shall not and, shall not permit
any of its Subsidiaries to, make any loan, advance, or otherwise acquire
evidences of Indebtedness, capital stock or other securities of any Person,
except (i) that the Borrower may purchase or otherwise acquire and own
(A) marketable, direct obligations of the United States of America maturing
within three hundred sixty-five (365) days of the date of purchase,
(B) commercial paper issued by any Bank or by corporations, each of which shall
have a consolidated net worth of at least $250,000,000 and each of which
conducts a substantial part of its business in the United States of America,
maturing within one hundred eighty (180) days from the date of the original
issue thereof, and rated "P-1" or better by Moody's Investors Service, Inc.,
(C) repurchase agreements in such amounts and with such financial institutions
having a rating of Baa or better from Moody's Investors Service, Inc., as the
Borrower may select from time to time and (D) certificates of deposit maturing
within three hundred sixty-five (365) days of the date of purchase which are
issued by any Bank or by a United States national or state bank or foreign bank
having capital, surplus and undivided profits totaling more than $100 million,
and having a rating of Baa or better from Moody's Investors Service, Inc.,
(ii) that the Borrower may make investments in and loans to its Subsidiaries,
PROVIDED, HOWEVER, that any such investments or loans shall be funded solely
from Available Cash Flow and may not be made by Borrower following the
occurrence and during the continuance of an Event of Default; (iii) that
Subsidiaries may make investments in and loans to the Borrower; (iv) that the
Borrower or any of its Subsidiaries may acquire the remaining 0.1% interest in
AMC pursuant to the exercise of the option acquired by AMC Holding Corporation
as a part of the AMC Interest; (v) that the Borrower and its Subsidiaries may
make investments and acquire interests in any businesses or ventures related to
the Business, PROVIDED, HOWEVER, that any such investments or acquisitions shall
be funded solely from Available Cash Flow and may not be made after the
occurrence and during the continuance of an Event of Default; (vi) that the
Borrower and its Subsidiaries may make investments in and loans to any Operating
Entity, PROVIDED, HOWEVER, that any such investments or loans shall be funded
solely from Available Cash Flow and may not be made after the occurrence and
during the continuance of an Event of Default; (vii) that the Borrower (or a
Subsidiary of the Borrower, as the Borrower may determine) may purchase all of
the interests of NBC in SC-NY and News 12 pursuant to the Put Agreement, upon
NBC's exercise of the NBC Put, PROVIDED, HOWEVER, that any such investment shall
be funded solely from Available Cash Flow and the Put Loan and may not be made
after the occurrence and during the continuance of an Event of Default; (viii)
the Borrower may make the initial investment in LP and GP required to be made by
the Borrower pursuant to Section 2 of the MSG Agreement; PROVIDED, HOWEVER, that
any such investment shall be funded solely from equity contributions made to the
Borrower; and (ix) the Borrower may purchase the ownership interests in LP and
the common stock of GP so that the interests of I Sub and R Sub in LP are equal
and the interests of the Borrower and ITT in GP are
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equal, pursuant to Section 3(b) of the MSG Agreement; PROVIDED, HOWEVER, that
any such investment shall be funded solely from equity contributions made to the
Borrower.
Section 8.3 LIMITATION ON LIENS. The Borrower shall not create, assume,
incur or permit to exist or to be created, assumed, incurred or permitted to
exist, directly or indirectly, and shall not permit any of its Subsidiaries to
create, assume, incur, or permit to exist or to be created, assumed, incurred or
permitted to exist, directly or indirectly, any Lien on any of its properties or
assets, whether now owned or hereafter acquired, except for Permitted Liens.
Except for the agreement set forth in the foregoing sentence, neither the
Borrower nor any of its Subsidiaries shall agree with any other Person not to
grant a Lien on any material portion of their respective assets to secure
Indebtedness.
Section 8.4 AMENDMENT AND WAIVER. The Borrower shall not, without the
prior written consent of the Majority Banks, enter into any material amendment
of, or agree to or accept any material waiver, which would adversely affect the
rights of the Agents and the Banks under this Agreement or any other Loan
Document or which would have a Materially Adverse Effect, of any of the
provisions of, (a) its certificate of incorporation or by-laws, (b) the
certificate of incorporation or by laws, or partnership agreement, as applicable
of any Subsidiary or (c) the Management Agreement. The Borrower shall give
written notice to the Co-Agents of any amendment or waiver of any material
provision in the AMC Loan Agreement or any partnership agreement, articles of
incorporation, by-laws, stockholder agreement or any document of similar import
of an Operating Entity, in each case not less than five (5) Business Days prior
to the effectiveness thereof.
Section 8.5 LIQUIDATION; DISPOSITION OR ACQUISITION OF
ASSETS. (a) Unless otherwise permitted hereunder, the Borrower shall not and
shall not permit any of its Subsidiaries to, at any time, (i) liquidate or
dissolve itself (or suffer any liquidation or dissolution) or otherwise wind up,
(ii) sell, lease, abandon, transfer, exchange or otherwise dispose of any
capital stock or partnership interests of any of the Borrower's Subsidiaries or
any other assets or business in excess of $1,000,000 in the aggregate during the
term of this Agreement or (iii) enter into any merger or consolidation except,
in each case, for:
(1) sales, dispositions, mergers, consolidations or exchanges by any
Subsidiary of Borrower of its business, assets, or rights (including any
interest of any Subsidiary of the Borrower in an Operating Entity) to or
with the Borrower or another Subsidiary of Borrower;
(2) liquidations, mergers, consolidations, exchanges, sales or
dispositions of any assets or properties (including, without limitation,
any interest of the Borrower or any
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Subsidiary in any Operating Entity), other than any direct or indirect
interest of the Borrower or any Subsidiary of Borrower in AMC, MSG, SC-NY,
News 12 or SC-CHI, as the case may be which is provided for in subsections
8.5(a)(3) and 8.5(a)(4) and 8.5(a)(5) hereof, conducted strictly in
accordance with the following requirements:
(A) any cash proceeds received by the Borrower from any such
transaction shall be either (x) applied by the Borrower promptly after
the receipt thereof towards the prepayment of the Loans in accordance
with Section 2.5 hereof or (y) so long as an Event of Default has not
occurred and is continuing, reinvested by the Borrower in its Business
or the Business of any Subsidiary of Borrower or any Operating Entity;
(B) any cash proceeds received by any Subsidiary of Borrower from
any such transaction shall be either (x) distributed to the Borrower
promptly after the receipt thereof (and the Borrower hereby agrees to
cause such Subsidiary to make such distribution) to be applied by the
Borrower in accordance with subsection (A) immediately above or (y) so
long as an Event of Default has not occurred and is continuing,
reinvested by such Subsidiary in its Business or the Business of any
other Subsidiary of Borrower or any Operating Entity;
(C) the Borrower shall comply with the requirements of Section
6.14 hereof in all respects; and
(D) any non-cash proceeds received by the Borrower or, if
applicable, any Subsidiary shall be pledged to the Administrative
Agent or held in accordance with Section 6.15 hereof; and
(3) With respect to AMC, the sale of partnership interests in the
aggregate which, after giving effect thereto, would not reduce the Borrower's
interests, directly or indirectly, to an amount less than 50% of the then-
outstanding partnership interests of AMC, provided that:
(A) no such single sale shall be for less than 10% of the
outstanding partnership interests of AMC;
(B) each such sale shall be for cash, and the cash proceeds
received by the Borrower or any of its Subsidiaries from any such sale
shall be applied by the Borrower (or distributed to the Borrower for
such application, by such Subsidiary if applicable) and applied
promptly after the receipt thereof towards the prepayment of the Loans
in accordance with Section 2.5 hereof;
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(C) the payment received by the Borrower or its Subsidiary for
such interests shall not be less than an amount determined on the
basis of an aggregate value for AMC of not less than $390,000,000;
(D) the Borrower or any of its Subsidiaries shall remain the
managing general partner of AMC; and
(E) the Borrower shall notify the Co-Agents in writing as soon as
reasonably practicable after reaching an agreement for the sale of any
such interest in AMC and, in any event, at least ten (10) days prior
to the closing of any such sale.
(4) A sale by the Borrower (or one or more Subsidiaries of the
Borrower) of any of the MSG Interests in accordance with the MSG Agreement,
provided, that fifty percent (50%) of the first $110,000,000 of the cash
proceeds received by the Borrower or any of its Subsidiaries shall be applied by
the Borrower (or distributed to the Borrower for such application, by such
Subsidiary if applicable) and applied promptly after the receipt thereof towards
prepayment of the Loans in accordance with Section 2.5 hereof, provided,
however, that such proceeds shall not be required to be so applied to the extent
such proceeds are used by the Borrower or its Subsidiaries to make the Second
MSG Investment and further provided that any non-cash proceeds from such sale
shall be pledged to the extent that the pledge of any such shares of stock,
partnership interests or other interests or non-cash proceeds will not (i)
violate the articles of incorporation, partnership agreement or any stockholder
agreement applicable thereto or (ii) require any consent of an unaffiliated
third party which consent the Borrower is unable to obtain after taking
reasonable steps to obtain such consent.
(5) From and after the Put Loan Closing Date, with respect to News
12, SC-NY, and SC-CHI, the sale of partnership interests in each such
partnership in the aggregate which, after giving effect thereto, would not
reduce the Borrower's interests, directly or indirectly, in SC-NY or News 12 to
an amount less than 50% of the partnership interests thereof owned by the
Borrower on the day before the Put Loan Closing Date, provided that:
(A) each such sale shall be for cash, and the cash proceeds
received by the Borrower or any of its Subsidiaries from any such sale
shall be applied by the Borrower (or distributed to the Borrower for
such application, by such Subsidiary if applicable) and applied
promptly after the receipt thereof towards prepayment of the Loans in
accordance with Section 2.5 hereof; and
(B) the Borrower shall notify the Co-Agents in writing as soon
as reasonably practicable after reaching
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an agreement for the sale of any such interests and, in any event, at
least ten (10) days prior to the closing of any such sale.
(6) Sales or dispositions in the ordinary course of business of
obsolete or worn-out property and other property reasonably determined by the
management of the disposing entity to be not used or useful in its business; and
(7) Liquidations, dissolutions, sales or dispositions of any
Subsidiary or Operating Entities that holds no assets and conducts no business
activities; or
(b) the Borrower shall not, and shall not permit any of its
Subsidiaries to, at any time acquire assets, property, stock or business of any
other Person, except for (i) Capital Expenditures in the ordinary course of the
Borrower's or such Subsidiary's Business, (ii) Programming Rights Agreements,
(iii) acquisitions and investments permitted under Section 8.2 hereof, and (iv)
acquisitions of assets, property, stock or businesses by the Borrower or such
Subsidiary solely in exchange for equity interests in a Subsidiary or an
Operating Entity.
Section 8.6 LIMITATION ON GUARANTIES. The Borrower shall not, and shall
not permit any of its Subsidiaries to, at any time Guaranty, or assume, be
obligated with respect to, or permit to be outstanding any Guaranty of, any
obligation of any other Person other than (a) under any Loan Document,
(b) obligations under agreements to indemnify Persons who have issued bid or
performance bonds or letters of credit issued in lieu of such bonds in the
ordinary course of business of the Borrower or such Subsidiary securing
performance by the Borrower or any Subsidiary of activities otherwise
permissible hereunder, (c) a guaranty by endorsement of negotiable instruments
for collection in the ordinary course of business and (d) those Guaranties
described on SCHEDULE 8 attached hereto (as such schedule may be amended by the
Borrower from time to time), undertaken in the ordinary course of the Borrower's
Business or any such Subsidiary's Business for purposes of securing (i)
programming or transponder rights, (ii) production, sports team and product
related arrangements, (iii) affiliation agreements, (iv) advertising
representation agreements, marketing and service arrangements, or (v) real
estate leases, and extensions, replacements and modifications of the foregoing
PROVIDED that the aggregate amount of all such Guaranties at any time
outstanding does not exceed $150,000,000.
Section 8.7 RESTRICTED PAYMENTS AND PURCHASES. The Borrower shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly, declare
or make any Restricted Payment or Restricted Purchase, except (i) that
Borrower's Subsidiaries may make Restricted Payments to the Borrower, (ii) so
long as no Event of Default then exists or would be caused thereby the Borrower
may make Restricted Payments in amounts received by the Borrower from
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the Parent Company pursuant to Section 6(e) of the Parent Pledge Agreement
relating to payments made to the Parent Company under the Consulting Agreement
and (iii) so long as no Event of Default then exists or would be caused thereby
and subject to the terms of the Subordination of Fees Agreement, for payment of
fees under the Management Agreements.
Section 8.8 VALUE TO DEBT RATIOS. As of the end of any calendar quarter,
the Borrower shall not permit the ratio of:
(a) (y) Total Borrower Value to (z) Total Adjusted Borrower Debt to be
less than (i) on or before December 31, 1995, 2.50, and (ii) on and after
January 1, 1996, 2.75; and
(b) (y) Total Borrower Value to (z) Total Borrower Debt to be less
than (i) on or before December 31, 1995, 1.50, (ii) on or after January 1,
1996 but on or before June 30, 1996, 1.60, and (iii) on or after July 1,
1996, 1.75.
Section 8.9 CASH FLOW RATIOS. As of the end of any calendar quarter
with respect to the twelve calendar months then ended, the Borrower shall not
permit the ratio of:
(a) (y) Borrower Allocated Cash Flow to (z) Borrower Adjusted Interest
Expense, to be less than 1.75; and
(b) (y) Borrower Allocated Cash Flow to (z) Borrower Interest Expense,
to be less than (i) on or before December 31, 1995, 1.20 and (ii) at any
time after December 31, 1995, 1.25.
Section 8.10 AFFILIATE TRANSACTIONS. The Borrower shall not, and shall
not permit any of its Subsidiaries to, at any time engage in any transaction
with an Affiliate, or make an assignment or other transfer of any of its assets
to any Affiliate, on terms less advantageous to the Borrower or such Subsidiary
than would be the case if such transaction had been effected with a non-
Affiliate, in each case other than as set forth on SCHEDULE 9 attached hereto or
as otherwise permitted under this Agreement.
Section 8.11 REAL ESTATE. Neither the Borrower nor any of its
Subsidiaries shall purchase or become obligated to purchase real estate in an
amount in excess of $500,000 in the aggregate during the term of this Agreement.
Section 8.12 ERISA LIABILITIES. The Borrower shall not, and shall not
permit any ERISA Affiliate to, fail to meet all of the applicable minimum
funding requirements of ERISA and the Code, without regard to any waivers
thereof, and, to the extent that the assets of any of its Plans would be less
than an amount sufficient to provide all accrued benefits payable under such
Plans, shall make the maximum deductible contributions allowable under the Code.
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The Borrower shall not, and shall not permit any ERISA Affiliate to, become a
participant in any Multiemployer Plan.
Section 8.13 CHANGE IN BUSINESS. The Borrower shall not, and shall not
permit any of its Subsidiaries to, engage in any businesses other than the
Business.
Section 8.14 SALES AND LEASEBACKS. Neither the Borrower nor any of its
Subsidiaries will enter into any arrangement, directly or indirectly, with any
Person whereby the Borrower or any of its Subsidiaries shall sell or transfer
any property, real or personal, whether now owned or hereafter acquired, and
whereby the Borrower or any of its Subsidiaries shall then or thereafter rent or
lease as lessee such property or any part thereof or other property which the
Borrower or any such Subsidiary intends to use for substantially the same
purpose or purposes as the property sold or transferred unless, in each case,
the proceeds of any such transaction received by the Borrower or any such
Subsidiary shall be applied to the prepayment of the Loans in accordance with
Section 2.5 hereof.
ARTICLE 9 - DEFAULT.
Section 9.1 EVENTS OF DEFAULT. Each of the following shall constitute an
Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule, or regulation of any
governmental or non-governmental body:
(a) Any representation or warranty made under this Agreement shall
prove incorrect or misleading in any material respect when made or deemed to
have been made;
(b) The Borrower shall default (i) in the payment of any interest and
fees payable hereunder or under the Notes, or any of them, or under the other
Loan Documents and such Default shall not have been cured by payment of such
overdue amounts in full within five (5) days from the date such payment became
due, or (ii) in the payment of any principal when due under the Notes, or any of
them.
(c) The Borrower shall default in the performance or observance of
any agreement or covenant contained in Article 8;
(d) There shall occur any Default in the performance or observance of
any agreement or covenant or breach of any representation or warranty contained
in any of the Loan Documents (other than this Agreement or as otherwise provided
in Section 9.1 of this Agreement), which shall not be cured to the Majority
Banks' satisfaction within the applicable cure period, if any, provided for in
such Loan Document;
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(e) The Borrower shall default in the performance or observance of
any other agreement or covenant contained in this Agreement not specifically
referred to elsewhere in this Section 9.1, and such Default shall not be cured
to the Majority Banks' satisfaction within a period of thirty (30) days from the
occurrence of such default;
(f) Both Dolan and the Parent Company shall cease to own not less
than 60% of the outstanding voting stock of the Borrower;
(g) There shall be entered a decree or order for relief in respect of
the Borrower, any of its Subsidiaries, AMC, SC-NY, News 12, SC-CHI, or the
Parent Company under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other applicable federal or state bankruptcy law or
other similar law, or appointing a receiver, liquidator, assignee, trustee,
custodian, sequestrator, or similar official of the Borrower, any of its
Subsidiaries, AMC, SC-NY, News 12, SC-CHI, or the Parent Company, or of any
substantial part of their respective properties, or ordering the winding-up or
liquidation of the affairs of any of the Borrower, any of its Subsidiaries, AMC,
SC-NY, News 12, SC-CHI, or the Parent Company, or an involuntary petition shall
be filed against any of the Borrower, any of its Subsidiaries, AMC, SC-NY, News
12, SC-CHI, or the Parent Company, and a temporary stay entered, and (i) such
petition and stay shall not be diligently contested, or (ii) any such petition
and stay shall continue undismissed for a period of thirty (30) consecutive
days;
(h) The Borrower, any of its Subsidiaries, AMC, SC-NY, News 12, SC-
CHI, or the Parent Company shall file a petition, answer, or consent seeking
relief under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable federal or state bankruptcy law or other
similar law, or the Borrower, any of its Subsidiaries, AMC, SC-NY, News 12, SC-
CHI, or the Parent Company shall consent to the institution of proceedings
thereunder or to the filing of any such petition or to the appointment or taking
of possession of a receiver, liquidator, assignee, trustee, custodian,
sequestrator, or other similar official of the Borrower, any of its
Subsidiaries, AMC, SC-NY, News 12, SC-CHI, or the Parent Company, or of any
substantial part of their respective properties, or the Borrower, any of its
Subsidiaries, AMC, SC-NY, News 12, SC-CHI, or the Parent Company shall fail
generally to pay their respective debts as they become due, or the Borrower, any
of its Subsidiaries, AMC, SC-NY, News 12, SC-CHI, or the Parent Company shall
take any action in furtherance of any such action;
(i) A final judgment shall be entered by any court against any of the
Borrower, any of its Subsidiaries, SC-NY, News 12, SC-CHI or AMC for the payment
of money which exceeds $1,000,000, or a warrant of attachment or execution or
similar process shall be issued or levied against property of any of the
Borrower, any of its Subsidiaries SC-NY, News 12, SC-CHI or AMC
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which, together with all other property of the Borrower, its Subsidiaries SC-NY,
News 12, SC-CHI and AMC subject to other such process, exceeds in value
$1,000,000 in the aggregate, and if, within thirty (30) days after the entry,
issue, or levy thereof, such judgment, warrant, or process shall not have been
paid or discharged or stayed pending appeal, or if, after the expiration of any
such stay, such judgment, warrant, or process shall not have been paid or
discharged;
(j) (i) There shall be at any time any "accumulated funding
deficiency," as defined in ERISA or in Section 412 of the Code, with respect to
any Plan; or (ii) a trustee shall be appointed by a United States District Court
to administer any Plan; or the Pension Benefit Guaranty Corporation shall
institute proceedings to terminate any Plan; or (iii) any of the Borrower and
its ERISA Affiliates shall incur any liability to the Pension Benefit Guaranty
Corporation in connection with the termination of any Plan; or (iv) any Plan or
trust created under any Plan of any of the Borrower and its ERISA Affiliates
shall engage in a non-exempt "prohibited transaction" (as such term is defined
in Section 406 of ERISA or Section 4975 of the Code) which would subject the
Borrower or any ERISA Affiliate to the tax or penalty on "prohibited
transactions" imposed by Section 502 of ERISA or Section 4975 of the Code; and
by reason of any or all of the events described in clauses (i) through (iv), as
applicable, the Borrower shall have waived or incurred liability in excess of
$1,000,000 in the aggregate and, if any such default shall occur in respect of
any Subsidiary of the Borrower, such default would have a Materially Adverse
Effect;
(k) There shall occur any default (which default is not cured or
waived within any applicable cure period) under any material indenture,
agreement, or instrument evidencing Indebtedness for Money Borrowed of the
Borrower, any of its Subsidiaries or AMC, including but not limited to the AMC
Loan Agreement, and, if any such default shall occur in respect of any
Subsidiary of the Borrower, such default would have a Materially Adverse Effect;
(l) There shall occur any default under the Parent Company Loan
Agreement which prohibits the Parent Company from obtaining advances under the
Parent Company Loan Agreement in an aggregate amount sufficient to pay, and
which aggregate amount shall be permitted under the Parent Company Loan
Agreement for use in the payment of, interest on the Loans in accordance with
Section 2.4 of this Agreement and the Notes and any fees required to be paid
under Section 2.2(c) hereof;
(m) All or any portion of any Loan Document shall at any time and for
any reason be declared by a court of competent jurisdiction in a suit with
respect to such Loan Document to be null and void, or a proceeding shall be
commenced by any governmental authority involving a legitimate dispute or by the
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Borrower or any of its Subsidiaries, having jurisdiction over the Borrower or
any of its Subsidiaries, seeking to establish the invalidity or unenforceability
thereof (exclusive of questions of interpretation of any provision thereof), or
the Borrower or any of its Subsidiaries shall deny that it has any liability or
obligation for the payment of principal or interest purported to be created
under any Loan Document; or
(n) There shall occur a default by AMC, SC-NY, News 12 or SC-CHI
(which default is not cured or waived within any applicable grace period) under
any MSO Agreement, which default would have a Materially Adverse Effect.
Section 9.2 REMEDIES. If an Event of Default shall have occurred and
shall be continuing:
(a) With the exception of an Event of Default specified in Sections
9.1(g) or (h) hereof, the Co-Agents, at the direction of the Majority Banks,
shall (i) terminate the Commitment or (ii) declare the principal of and interest
on the Loans and the Notes and all other obligations to be forthwith due and
payable without presentment, demand, protest, or notice of any kind, all of
which are hereby expressly waived, anything in this Agreement or in the Notes to
the contrary notwithstanding, or both.
(b) Upon the occurrence and continuance of an Event of Default
specified in Sections 9.1(g) or (h) hereof, such principal, interest, and other
obligations shall thereupon and concurrently therewith become due and payable,
and the Commitment of the Banks shall forthwith terminate, all without any
action by the Agents or the Banks or the Majority Banks or the holders of the
Notes and without presentment, demand, protest, or other notice of any kind, all
of which are expressly waived, anything in this Agreement or in the Notes to the
contrary notwithstanding.
(c) The Agents, with the concurrence of the Majority Banks, shall
exercise all of the post-default rights granted to it and to them under the Loan
Documents or under Applicable Law.
(d) The rights and remedies of the Agents and the Banks hereunder
shall be cumulative, and not exclusive.
ARTICLE 10 - THE AGENTS.
Section 10.1 APPOINTMENT AND AUTHORIZATION. Each Bank hereby irrevocably
appoints and authorizes, and hereby agrees that it will require any transferee
of any of its interest in its Term Loan and in its Term Notes and in its Put
Loan and in its Put Notes, irrevocably to appoint and authorize, the Agents to
take such actions as its agent on its behalf and to exercise such powers
hereunder as are delegated by the terms hereof, together with such powers as are
reasonably incidental thereto. Neither the Agents
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nor any of their respective directors, officers, employees, or agents shall be
liable for any action taken or omitted to be taken by any of them hereunder or
in connection herewith, except for their respective gross negligence or willful
misconduct.
Section 10.2 DELEGATION OF DUTIES. The Agents may execute any of their
respective duties under the Loan Documents by or through agents or attorneys
selected by them, respectively, using reasonable care and shall be entitled to
advice of counsel concerning all matters pertaining to such duties. The Agents
shall not be responsible to any Bank for the negligence or misconduct of any
agents or attorneys selected by any of them, respectively, with reasonable care.
Section 10.3 INTEREST HOLDERS. The Agents may treat each Bank, or the
Person designated in the last notice filed with the Agents under this
Section 10.3, as the holder of all of the interests of such Bank in its Loans
and in its Notes until written notice of transfer, signed by such Bank (or the
Person designated in the last notice filed with the Agents) and by the Person
designated in such written notice of transfer, in form and substance
satisfactory to the Co-Agents, shall have been filed with the Agents.
Section 10.4 CONSULTATION WITH COUNSEL. Each Agent may consult with legal
counsel selected by it and shall not be liable for any action taken or suffered
by it in good faith in reliance thereon.
Section 10.5 DOCUMENTS. Each Agent shall be under no duty to examine,
inquire into, or pass upon the validity, effectiveness, or genuineness of this
Agreement, any Note, or any instrument, document, or communication furnished
pursuant hereto or in connection herewith, and each Agent shall be entitled to
assume that they are valid, effective, and genuine, have been signed or sent by
the proper parties, and are what they purport to be.
Section 10.6 AGENTS AND AFFILIATES. With respect to the Commitment and
the Loans, any Bank which is an Affiliate of an Agent shall have the same rights
and powers hereunder as any other Bank, and each Agent and its respective
Affiliates may accept deposits from, lend money to, and generally engage in any
kind of business with the Borrower or any Affiliates of, or Persons doing
business with, the Borrower, as if it were not affiliated with such Agent and
without any obligation to account therefor.
Section 10.7 RESPONSIBILITY OF THE AGENTS. The duties and obligations of
the Agents under this Agreement are only those expressly set forth in this
Agreement. Each Agent shall be entitled to assume that no Default or Event of
Default has occurred and is continuing unless it has actual knowledge, or has
been notified by the Borrower, of such fact, or has been notified by a Bank that
such Bank considers that a Default or an Event of Default
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has occurred and is continuing, and such Bank shall specify in detail the nature
thereof in writing. Each Agent shall not be liable to the Banks hereunder for
any action taken or omitted to be taken except for its own gross negligence or
willful misconduct. The Agents shall provide each Bank with copies of such
documents received from the Borrower as such Bank may reasonably request.
Section 10.8 ACTION BY AGENTS.
(a) Except for action requiring the approval of the Majority Banks or
all of the Banks, each Agent shall be entitled to use its discretion with
respect to exercising or refraining from exercising any rights which may be
vested in it by, and with respect to taking or refraining from taking any action
or actions which it may be able to take under or in respect of, this Agreement,
unless such Agent shall have been instructed by the Majority Banks to exercise
or refrain from exercising such rights or to take or refrain from taking such
action, provided that such Agent shall not exercise any rights under Section
9.2(a) of this Agreement without the request of the Majority Banks. Each Agent
shall incur no liability under or in respect of this Agreement with respect to
anything which it may do or refrain from doing in the reasonable exercise of its
judgment or which may seem to it to be necessary or desirable in the
circumstances, except for its gross negligence or willful misconduct.
(b) Each Agent shall not be liable to the Banks or to any Bank in
acting or refraining from acting under this Agreement in accordance with the
instructions of the Majority Banks, and any action taken or failure to act
pursuant to such instructions shall be binding on all Banks unless the action or
refraining from action requires the consent of all of the Banks.
Section 10.9 NOTICE OF DEFAULT OR EVENT OF DEFAULT. In the event that any
Agent or any Bank shall acquire actual knowledge, or shall have been notified in
writing, of any Default or Event of Default, such Agent or such Bank shall
promptly notify the Banks and the other Agents, and each Agent shall take such
action and assert such rights under this Agreement as the Majority Banks shall
request in writing, and each Agent shall not be subject to any liability by
reason of its acting pursuant to any such request. If the Majority Banks shall
fail to request an Agent to take action or to assert rights under this Agreement
in respect of any Default or Event of Default within ten (10) days after their
receipt of the notice of any Default or Event of Default from such Agent, or
shall request inconsistent action with respect to such Default or Event of
Default, such Agent may, but shall not be required to, take such action and
assert such rights (other than rights under Article 9 hereof) as it deems in its
discretion to be advisable for the protection of the Banks, except that, if the
Majority Banks have instructed such Agent not to take such action or assert such
right, in no event shall such Agent act contrary to such instructions.
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Section 10.10 RESPONSIBILITY DISCLAIMED. Each Agent shall be under no
liability or responsibility whatsoever as Agent:
(a) To the Borrower or any other Person or entity as a consequence of
any failure or delay in performance by or any breach by, any Bank or Banks of
any of its or their obligations under this Agreement;
(b) To any Bank or Banks, as a consequence of any failure or delay in
performance by, or any breach by, the Borrower or any other obligor of any of
its obligations under this Agreement or the Term Notes or any other Loan
Document; or
(c) To any Bank or Banks for any statements, representations, or
warranties in this Agreement, or any other document contemplated by this
Agreement or any information provided pursuant to this Agreement, any other Loan
Document, or any other document contemplated by this Agreement, or for the
validity, effectiveness, enforceability, or sufficiency of this Agreement, the
Notes, any other Loan Document, or any other document contemplated by this
Agreement.
Section 10.11 INDEMNIFICATION. The Banks agree to indemnify each Agent (to
the extent not reimbursed by the Borrower) pro rata according to their
respective Commitment Ratios, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses (including fees and expenses of experts, agents, consultants, and
counsel), or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against such Agent in any way relating to or
arising out of this Agreement, any other Loan Document, or any other document
contemplated by this Agreement or any action taken or omitted by such Agent
under this Agreement, any other Loan Document, or any other document
contemplated by this Agreement, except that no Bank shall be liable to such
Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses, or disbursements
resulting from the gross negligence or willful misconduct of such Agent. The
provisions of this Section 10.11 shall survive the termination of this
Agreement.
Section 10.12 CREDIT DECISION. Each Bank represents and warrants to each
other and to each Agent that:
(a) In making its decision to enter into this Agreement and to make
Advances it has independently taken whatever steps it considers necessary to
evaluate the financial condition and affairs of the Borrower and that it has
made an independent credit judgment, and that it has not relied upon information
provided by any Agent; and
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(b) So long as any portion of the Loans remains outstanding, it will
continue to make its own independent evaluation of the financial condition and
affairs of the Borrower.
Section 10.13 SUCCESSOR AGENTS. Subject to the appointment and acceptance
of a successor Agent (which shall be any Bank or a commercial Bank organized
under the laws of the United States of America or any political subdivision
thereof which has a combined capital and reserves in excess of $250,000,000) as
provided below, any Agent may resign at any time by giving written notice
thereof to the Banks and the Borrower and may be removed at any time for cause
by the Majority Banks. Upon any such resignation or removal, the Majority Banks
shall have the right to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Majority Banks, and shall have accepted such
appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation or the Majority Banks' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent which
shall be any Bank or a commercial bank organized under the laws of the United
States of America or any political subdivision thereof which has combined
capital and reserves in excess of $250,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges,
duties, and obligations of the retiring Agent, and the retiring Agent shall be
discharged from its duties and obligations hereunder. After any retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Section 10.13
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as an Agent.
ARTICLE 11 - CHANGE IN CIRCUMSTANCES
AFFECTING EURODOLLAR ADVANCES
Section 11.1 EURODOLLAR BASIS DETERMINATION INADEQUATE OR UNFAIR.
Notwithstanding anything contained herein which may be construed to the
contrary, if with respect to any proposed Eurodollar Advance for any Interest
Period, the Agents determines after consultation with the Banks that deposits in
dollars (in the applicable amount) are not being offered to each of the Banks in
the relevant market for such Interest Period, the Agents shall forthwith give
notice thereof to the Borrower and the Banks, whereupon until the Agents
notifies the Borrower that the circumstances giving rise to such situation no
longer exist, the obligations of the Banks to make such type of Eurodollar
Advances shall be suspended.
Section 11.2 ILLEGALITY. If any applicable law, rule, or regulation, or
any change therein, or any interpretation or change in interpretation or
administration thereof by any governmental authority, central bank, or
comparable agency charged with the
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interpretation or administration thereof, or compliance by any Bank with any
request or directive (whether or not having the force of law) of any such
authority, central bank, or comparable agency, shall make it unlawful or
impossible for any Bank to make, maintain, or fund its Eurodollar Advances, such
Bank shall so notify the Agents, and the Agents shall forthwith give notice
thereof to the other Banks and the Borrower. Before giving any notice to the
Agents pursuant to this Section 10.2, such Bank shall designate a different
lending office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. Upon receipt of such notice, notwithstanding anything contained in
Article 2 hereof, the Borrower shall repay in full the then outstanding
principal amount of each affected Eurodollar Advance of such Bank so affected,
together with accrued interest thereon, either (a) on the last day of the then
current Interest Period applicable to such Advance if such Bank may lawfully
continue to maintain and fund such Advance to such day or (b) immediately if
such Bank may not lawfully continue to fund and maintain such Advance to such
day. Concurrently with repaying each affected Eurodollar Advance of such Bank,
notwithstanding anything contained in Article 2 or Article 3 hereof, the
Borrower shall borrow a Base Rate Advance from such Bank, and such Bank shall
make such Base Rate Advance in an amount such that the outstanding principal
amount of the Note held by such Bank shall equal the outstanding principal
amount of such Note immediately prior to such repayment.
Section 11.3 INCREASED COSTS.
(a) If any Regulatory Change:
(i) Shall subject any Bank to any tax, duty, or other charge with
respect to its obligation to make Eurodollar Advances, or its Eurodollar
Advances, or shall change the basis of taxation of payments to any Bank of
the principal of or interest on its Eurodollar Advances or in respect of
any other amounts due under this Agreement in respect of its Eurodollar
Advances or its obligation to make Eurodollar Advances (except for changes
in the rate of tax on the overall net income of such Bank imposed by the
jurisdiction in which such Bank's principal executive office is located);
or
(ii) Shall impose, modify, or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System, but excluding any included in an applicable Eurodollar
Reserve Percentage) special deposit, assessment or other requirement or
condition against assets of, deposits with or for the account of, or
commitments or credit extended by any Bank, or shall impose on any Bank or
the eurodollar interbank borrowing market any other condition affecting
such Bank's obligation to make such Eurodollar Advances or its Eurodollar
Advances;
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and the result of any of the foregoing is to increase the cost to such Bank of
making or maintaining any such Eurodollar Advances, or to reduce the amount of
any sum received or receivable by such Bank under this Agreement or under its
Term Notes with respect thereto, then, on the earlier of demand by such Bank or
the Maturity Date, the Borrower agrees to pay to such Bank such additional
amount or amounts as will compensate such Bank for such increased costs. Each
Bank will promptly notify the Borrower and the Agents of any event of which it
has knowledge, occurring after the date hereof, which will entitle such Bank to
compensation pursuant to this Section 11.3 and will designate a different
lending office if such designation will avoid the need for, or reduce the amount
of, such compensation and will not, in the sole judgment of such Bank, be
otherwise disadvantageous to such Bank.
(b) A certificate of any Bank claiming compensation under this
Section 11.3 and setting forth the additional amount or amounts to be paid to it
hereunder and calculations therefor shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods. If any Bank demands compensation under this
Section 11.3, the Borrower may at any time, upon at least five (5) Business
Days' prior notice to such Bank, prepay in full the then outstanding affected
Eurodollar Advances of such Bank, together with accrued interest thereon to the
date of prepayment, along with any reimbursement required under Section 2.8
hereof. Concurrently with prepaying such Eurodollar Advances the Borrower shall
borrow a Base Rate Advance from such Bank, and such Bank shall make such Base
Rate Advance in an amount such that the outstanding principal amount of the
Notes held by such Bank shall equal the outstanding principal amount of such
Notes immediately prior to such prepayment.
Section 11.4 EFFECT ON OTHER ADVANCES. If notice has been given pursuant
to Section 11.1, 11.2 or 11.3 hereof suspending the obligation of any Bank to
make any type of Eurodollar Advance, or requiring Eurodollar Advances of any
Bank to be repaid or prepaid, then, unless and until such Bank notifies the
Borrower that the circumstances giving rise to such repayment no longer apply,
all Advances which would otherwise be made by such Bank as Eurodollar Rate
Advance shall, at the option of the Borrower, be made instead as Base Rate
Advances.
ARTICLE 12 - MISCELLANEOUS.
Section 12.1 NOTICES.
(a) All notices and other communications under this Agreement shall
be in writing and shall be deemed to have been given three (3) days after
deposit in the mail, designated as certified mail, return receipt requested,
post-prepaid, or one (1) day after being entrusted to a reputable commercial
overnight
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delivery service, or sent by telecopy addressed to the party to which such
notice is directed at its address determined as provided in this Section 12.1
All notices and other communications under this Agreement shall be given to the
parties hereto at the following addresses:
(i) If to the Borrower, to it at:
Rainbow Programming Holdings, Inc.
150 Crossways Park West
Woodbury, New York 11797
Attn: President
Telecopy No.: (516) 364-2297
with copies to:
Rainbow Programming Holdings, Inc.
150 Crossways Park West
Woodbury, New York 11797
Attn: Executive Vice President,
Legal and Business Affairs
Telecopy No.: (516) 364-4085
and
Rainbow Programming Holdings, Inc.
150 Crossways Park West
Woodbury, New York 11797
Attn: SVP-Finance
Telecopy No.: (516) 364-2297
and
Cablevision Systems Corporation
One Media Crossways
Woodbury, New York 11797
Attn: Chief Financial Officer and
General Counsel
Telecopy No.: (516) 496-1780
(ii) If to the Administrative Agent, to it at:
Toronto Dominion (Texas), Inc.
909 Fannin, Suite 1700
Houston, Texas 77010
Attn: Manager, Agency
Telecopy No.: (713) 951-9921
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with a copy to:
Paul, Hastings, Janofsky & Walker
133 Peachtree Street, N.E.
42nd Floor
Atlanta, Georgia 30303
Attn: Chris D. Molen, Esq.
Telecopy No.: (404) 523-1542
(iii) If to any Co-Agent, to each of them at:
Canadian Imperial Bank of Commerce
425 Lexington Avenue
New York, New York 10017
Attn: Vice President, U.S. Media Group
Telecopy No.: (212) 856-3558
Toronto Dominion (Texas), Inc.
909 Fannin, Suite 1700
Houston, Texas 77010
Attn: Manager, Agency
Telecopy No.: (713) 951-9921
with a copy to:
The Toronto-Dominion Bank
USA Division
31 West 52nd Street
New York, New York 10019-6101
Attn: Vice President, Communications Finance
Telecopy No.: (212) 262-1928
(iv) If to the Banks, to them at the addresses set forth for them
in SCHEDULE 10 hereto.
Copies shall be provided to persons other than parties hereto only in the case
of notices under Article 8 hereof.
(b) Any party hereto may change the address to which notices shall be
directed under this Section 12.1 by giving ten (10) days' written notice of such
change to the other parties.
Section 12.2 EXPENSES. The Borrower agrees to promptly pay:
(a) All reasonable out-of-pocket expenses of the Agents on the
Closing Date in connection with the preparation, negotiation, execution, and
delivery of this Agreement and the other Loan Documents executed on the
Agreement Date, the transactions contemplated hereunder and thereunder, and the
making of the initial Advance hereunder, including, but not limited to, the
reasonable fees and disbursements of counsel for the Agents;
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(b) All reasonable out-of-pocket expenses of the Agents in connection
with the preparation and negotiation of any waiver, amendment, or consent by the
Banks relating to this Agreement or the other Loan Documents whether or not
executed, including, but not limited to, the reasonable fees and disbursements
of counsel for the Agents;
(c) All reasonable out-of-pocket expenses of the Agents in connection
with the syndication of the Loans; and
(d) From and after the occurrence of an Event of Default, all
reasonable out-of-pocket costs and expenses of the Agents in respect of such
Event of Default, irrespective of whether suit or other proceeding has commenced
in respect thereto, which shall include reasonable fees and out-of-pocket
expenses of counsel for the Agents, and the reasonable fees and out-of-pocket
expenses of any experts, agents, or consultants engaged by the Agents.
Section 12.3 WAIVERS. The rights and remedies of the Agents and the Banks
under this Agreement and the other Loan Documents shall be cumulative and not
exclusive of any rights or remedies which they would otherwise have. No failure
or delay by the Agents, the Majority Banks, or the Banks in exercising any right
shall operate as a waiver of such right. The Agents and the Banks expressly
reserve the right to require strict compliance with the terms of this Agreement
in connection with any funding of a request for an Advance. In the event the
Banks decide to fund a request for an Advance at a time when the Borrower is not
in strict compliance with the terms of this Agreement, such decision by the
Banks shall not be deemed to constitute an undertaking by the Banks to fund any
further requests for Advances or preclude the Banks from exercising any rights
available to the Banks under the Loan Documents or at law or equity. Any waiver
or indulgence granted by the Banks or by the Majority Banks shall not constitute
a modification of this Agreement, except to the extent expressly provided in
such waiver or indulgence, or constitute a course of dealing by the Banks at
variance with the terms of the Agreement such as to require further notice by
the Banks of the Banks' intent to require strict adherence to the terms of the
Agreement in the future.
Section 12.4 SET-OFF. In addition to any rights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, after the
Maturity Date (whether by acceleration or otherwise), the Banks and any
subsequent holder or holders of the Notes are hereby authorized by the Borrower
at any time or from time to time, without notice to the Borrower or to any other
Person, any such notice being hereby expressly waived, to set-off and to
appropriate and apply any and all deposits (general or special, time or demand,
including, but not limited to, Indebtedness evidenced by certificates of
deposit, in each case whether matured or unmatured) and any other Indebtedness
at any time held or owing by the Banks or such holder to or for the credit
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or the account of the Borrower, against and on account of the obligations and
liabilities of the Borrower, to the Banks or such holder under this Agreement,
the Term Notes, the Put Notes and any other Loan Document, including, but not
limited to, all claims of any nature or description arising out of or connected
with this Agreement, the Term Notes, the Put Notes or any other Loan Document,
irrespective of whether or not (a) the Banks or the holder of the Term Notes or
the Put Notes shall have made any demand hereunder or (b) the Banks shall have
declared the principal of and interest on the Term Loans, the Put Loans, the Put
Notes and the Term Notes and other amounts due hereunder to be due and payable
as permitted by Section 9.2 hereof and although said obligations and
liabilities, or any of them, shall be contingent or unmatured. Any sums obtained
by any Bank or by any subsequent holder of the Term Notes or the Put Notes shall
be subject to the application of payments provisions of Article 2 hereof. Upon
direction by the Agents, with the consent of the Majority Banks, after the
Maturity Date (whether by reason of acceleration or otherwise) each Bank holding
deposits of the Borrower shall exercise its set-off rights as so directed.
Section 12.5 ASSIGNMENT.
(a) The Borrower may not assign or transfer any of its rights or
obligations hereunder or under the Term Notes or the Put Notes without the prior
written consent of each Bank.
(b) Each of the Banks may at any time enter into assignment
agreements or participations with respect to its interest hereunder and under
the other Loan Documents with one or more other banks or other Persons provided
that, except after the occurrence and during the continuance of an Event of
Default, any such assignment shall not be in an amount less than $10,000,000 and
each Bank shall retain an interest in not less than $10,000,000 of such Bank's
pro rata share of the Commitment, unless the Borrower shall otherwise consent in
writing. Notwithstanding the foregoing, each Bank may sell assignments or
participations of up to one hundred percent (100%) of its interest hereunder and
under the other Loan Documents to one or more Affiliates of such Bank. All of
the foregoing assignments and participants shall be done on a pro rata basis
with respect to the Loans, and shall be subject to the following:
(i) Except for assignments made to any Federal Reserve Bank and
assignments or participations made between any Bank and any Affiliate of
such Bank, no assignment or participation shall be sold without the consent
of the Borrower and the Agents, which consent shall not be unreasonably
withheld.
(ii) Any Person purchasing a participation or an assignment of the
Loans from any Bank shall be required to
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represent and warrant that its purchase shall not constitute a "prohibited
transaction" (as defined in Section 5.1(m) hereof).
(iii) The Borrower, the Banks, and the Agents agree that assignments
permitted hereunder (including the assignment of any Advance or portion
thereof) may be made with all voting rights, and shall be made pursuant to
an Assignment and Assumption Agreement. An administrative fee of $2,500
shall be payable to the Agents by the assigning Bank at the time of any
assignment hereunder.
(iv) No participation agreement shall confer any rights under this
Agreement or any other Loan Document to any purchaser thereof, or relieve
any issuing Bank from any of its obligations under this Agreement, and all
actions hereunder shall be conducted as if no such participation had been
granted; PROVIDED, HOWEVER, that any participation agreement may confer on
the participant the right to approve or disapprove changes in the interest
rate and principal amount, fees and the Maturity Date for the Loans and the
release of any collateral or any guaranty.
(v) Each Bank agrees to provide the Agents and the Borrower with
prompt written notice of any issuance of participations or assignments of
its interests hereunder.
(vi) No assignment, participation or other transfer of any rights
hereunder or under the Notes shall be effected that would result in any
interest requiring registration under the Securities Act of 1933, as
amended, or qualification under any state securities law.
(vii) No such assignment, participation or transfer may be made to
any bank or other financial institution (x) with respect to which a
receiver or conservator (including, without limitation, the Federal Deposit
Insurance Corporation, the Resolution Trust Company or the Office of Thrift
Supervision) has been appointed or (y) that has failed to meet any of the
capital requirements of its primary regulator or insurer.
(viii) If applicable, each Bank shall, and shall cause each of its
assignees to provide to the Agents on or prior to the Agreement Date or
effective date of any assignment, as the case may be, an appropriate
Internal Revenue Service form as required by Applicable Law supporting such
Bank's position that no withholding by the Borrower or the Agents for U.S.
income tax payable by the Bank in respect of amounts received by it
hereunder is required. For purposes of this Agreement, an appropriate
Internal Revenue Service form shall mean Form 1001 (Ownership Exemption or
Reduced Rate Certificate of the U.S. Department of Treasury), or Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
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<PAGE>
Conduct of a Trade or Business in the United States), or any successor or
related forms adopted by the relevant U.S. taxing authorities.
(c) Except as specifically set forth in Section 12.5(b) hereof,
nothing in this Agreement or the Notes, expressed or implied, is intended to or
shall confer on any Person other than the respective parties hereto and thereto
and their successors and assignees permitted hereunder and thereunder any
benefit or any legal or equitable right, remedy or other claim under this
Agreement or the Notes.
Section 12.6 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same
instrument.
Section 12.7 GOVERNING LAW. THIS AGREEMENT AND THE NOTES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN SUCH
STATE.
Section 12.8 SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable shall be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions
hereof in that jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.
Section 12.9 HEADINGS. Headings used in this Agreement are for
convenience only and shall not be used in connection with the interpretation of
any provision hereof.
Section 12.10 INTEREST.
(a) In no event shall the amount of interest due or payable
hereunder or under the Notes exceed the maximum rate of interest allowed by
Applicable Law, and in the event any such payment is inadvertently made by the
Borrower or any Guarantor or is inadvertently received by any Bank, then such
excess sum shall be credited as a payment of principal, unless the Borrower or
such Guarantor shall notify such Bank in writing that it elects to have such
excess sum returned forthwith. It is the express intent hereof that the Borrower
and the Guarantors not pay and the Banks not receive, directly or indirectly in
any manner whatsoever, interest in excess of that which may legally be paid by
the Borrower and the Guarantors under Applicable Law.
(b) Notwithstanding the use by the Banks of the Prime Rate, the
Eurodollar Rate, and the Federal Funds Rate as reference rates for the
determination of interest on the Loans, the Banks shall be under no obligation
to obtain funds from any particular
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<PAGE>
source in order to charge interest to the Borrower at interest rates tied to
such reference rates.
Section 12.11 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement, the Notes, and the other Loan Documents embody the
entire agreement and understanding among the parties hereto and thereto and
supersede all prior agreements, understandings, and conversations relating to
the subject matter hereof and thereof.
Section 12.12 AMENDMENT AND WAIVER. Neither this Agreement nor any term
hereof may be amended orally, nor may any provision hereof be waived orally but
only by an instrument in writing signed by the Majority Banks and, in the case
of an amendment, also by the Borrower, except that in the event of (a) any
change in the principal amount of the Term Loan or the Put Loan, (b) any change
in the timing of, or reduction of the amount of, payments of principal,
interest, and fees due hereunder or under any other Loan Document, (c) any
release or impairment of collateral or any guaranty issued in favor of the
Agents and the Banks, (d) any waiver of any Event of Default due to the failure
by the Borrower to pay any sum due hereunder, (e) any change to the priority of
payments applicable to distributions to the Agents and the Banks of proceeds
realized from dispositions of collateral, (f) any change in the sharing of
payment procedures described in Section 2.10(b) hereof, (g) any waiver or
amendment of the mandatory prepayment requirements of Sections 2.5(b), 8.5 or
8.14, or (h) any amendment of this Section 12.12 or of the definition of
Majority Banks, any amendment or waiver may be made only by an instrument in
writing signed by each of the Banks and, in the case of an amendment, also by
the Borrower.
Section 12.13 OTHER RELATIONSHIPS. No relationship created hereunder or
under any other Loan Document shall in any way affect the ability of the Agents
and each Bank to enter into or maintain business relationships with the
Borrower, or any of its Affiliates, beyond the relationships specifically
contemplated by this Agreement and the other Loan Documents.
Section 12.14 CONFIDENTIALITY. The parties hereto shall preserve in a
confidential manner all information received from any other party pursuant to
the Loan Documents and the transactions contemplated thereunder, and shall not
disclose such information except to those Persons with which a confidential
relationship is maintained (including designated agents, legal counsel,
accountants and regulators), or where required by law.
Section 12.15 LIABILITY OF GENERAL PARTNERS AND OTHER PERSONS.
Notwithstanding anything else in this Agreement to the contrary, the parties
hereto expressly agree that no partner, officer, director or other holder of an
ownership interest of or in the Borrower, any Subsidiary of the Borrower, any
Operating Entity, any Guarantor or the Parent Company, or any partnership,
corporation or
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<PAGE>
other entity which is a partner, stockholder or holder of an ownership interest
of or in the Borrower, any Subsidiary of the Borrower, any Operating Entity, any
Guarantor or the Parent Company shall have any personal or individual liability
or responsibility in respect of Obligations of the Borrower, any Subsidiary of
the Borrower, any Guarantor or the Parent Company pursuant to this Agreement or
any other Loan Document solely by reason of his or her status as such partner,
officer, director, stockholder or holder.
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<PAGE>
ARTICLE 13 - WAIVER OF JURY TRIAL.
Section 13.1 WAIVER OF JURY TRIAL. THE BORROWER, EACH OF THE GUARANTORS
AND EACH OF THE AGENTS AND THE BANKS HEREBY AGREE TO WAIVE THE RIGHT TO A TRIAL
BY JURY IN ANY COURT AND IN ANY ACTION OR PROCEEDING OF ANY TYPE IN WHICH THE
BORROWER, ANY OF THE GUARANTORS, ANY OF THE BANKS, THE AGENTS, OR ANY OF THEIR
RESPECTIVE SUCCESSORS OR ASSIGNS IS A PARTY, AS TO ALL MATTERS AND THINGS
ARISING DIRECTLY OR INDIRECTLY OUT OF THIS AGREEMENT, ANY OF THE NOTES OR THE
OTHER LOAN DOCUMENTS AND THE RELATIONS AMONG THE PARTIES LISTED IN THIS SECTION
13.1.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused it to be executed under seal by their duly authorized officers, all as of
the day and year first above written.
BORROWER AND GUARANTORS: RAINBOW PROGRAMMING HOLDINGS, INC.,
a New York corporation, on behalf of itself and as
attorney-in-fact for each of the Guarantors set
forth on Schedule 1 hereto.
By:
-----------------------------------------------
Title:
--------------------------------------
[CORPORATE SEAL]
Attest:
-------------------------------------------
Title:
--------------------------------------
CO-AGENTS: TORONTO DOMINION (TEXAS), INC.
By:
-----------------------------------------------
Title:
--------------------------------------
CANADIAN IMPERIAL BANK OF COMMERCE
By:
-----------------------------------------------
Title:
--------------------------------------
ADMINISTRATIVE AGENT: TORONTO DOMINION (TEXAS), INC.
By:
-----------------------------------------------
Title:
--------------------------------------
BANKS: TORONTO DOMINION (TEXAS), INC.
By:
-----------------------------------------------
Title:
--------------------------------------
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<PAGE>
CIBC INC.
By:
-----------------------------------------------
Title:
--------------------------------------
SHAWMUT BANK CONNECTICUT, N.A.
By:
-----------------------------------------------
Title:
--------------------------------------
THE BANK OF NOVA SCOTIA
By:
-----------------------------------------------
Title:
--------------------------------------
CHEMICAL BANK, N.A.
By:
-----------------------------------------------
Title:
--------------------------------------
NATIONSBANK OF TEXAS, N.A.
By:
-----------------------------------------------
Title:
--------------------------------------
MELLON BANK, N.A.
By:
-----------------------------------------------
Title:
--------------------------------------
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<PAGE>
AMENDMENT NO. 1, dated as of March 10, 1995 (this "AMENDMENT"), to
the Agreement and Plan of Merger, dated as of August 27, 1994 (the "Merger
Agreement"), among VIACOM INC., a Delaware corporation ("VIACOM"), PARAMOUNT
COMMUNICATIONS REALTY CORPORATION, a Delaware corporation and an indirect
wholly owned subsidiary of Viacom (the "SELLER"), MADISON SQUARE GARDEN
CORPORATION, a Delaware corporation and a wholly owned subsidiary of the
Seller ("MSG"), ITT CORPORATION, a Delaware corporation ("ITT"), RAINBOW GARDEN
CORPORATION, a Delaware corporation ("RAINBOW" and together with ITT, each a
"PARENT" and collectively, the "PARENTS"), and MSG HOLDINGS, L.P., a Delaware
limited partnership (the "PURCHASER").
W I T N E S S E T H:
WHEREAS, Viacom, the Seller, ITT, Rainbow and the Purchaser have
entered into the Merger Agreement; capitalized terms not defined herein have
the meanings ascribed to them in the Merger Agreement); and
WHEREAS, Viacom, the Seller, ITT, Rainbow and the Purchaser desire
to amend the Merger Agreement in certain respects and MSG desires to become a
party thereto;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and understandings hereinafter set forth, the parties hereto
hereby agree as follows:
SECTION 1. AMENDMENTS TO MERGER AGREEMENT. The Merger Agreement
is, effective as of the date hereof, hereby amended as follows:
(a) In the preamble, the phrase "MADISON SQUARE GARDEN
CORPORATION, a Delaware corporation and a wholly owned subsidiary of the
Seller ("MSG")," shall be inserted immediately after the phrase "(the
"SELLER")," and immediately before the word "ITT".
(b) In the first WHEREAS clause, the phrase "Madison Square Garden
Corporation, a Delaware corporation ("MSG")" shall be deleted and the word
"MSG" shall be inserted in its place.
(c) In the third WHEREAS clause, the phrase "MSG," shall be inserted
immediately after the phrase "of each of" and immediately before the
phrase "the Seller".
<PAGE>
2
(d) In the fifth paragraph, which begins with the phrase "NOW,
THEREFORE,", the phrase ", MSG" shall be inserted immediately after the
word "Viacom" and immediately before the phrase "and the Seller".
(e) In the definition of the word "Agreement" in Section 1.01, the
phrase "MSG," shall be inserted immediately after the phrase "the
Seller," and immediately before the phrase "each Parent".
(f) In the definition of the word "MSG" in Section 1.01, the word
"recitals" shall be deleted and the word "preamble" shall be inserted
in its place.
(g) In the last sentence of Section 5.05, the word ", MSG" shall
be inserted immediately after the word "Viacom" and immediately before
the phrase "and the Seller".
(h) The heading and preamble to Section 8.01 shall be deleted in
their entirety and the following text shall be inserted in their place:
"SECTION 8.01. CONDITIONS TO OBLIGATIONS OF VIACOM, THE SELLER AND
MSG. The obligations of Viacom, the Seller and MSG to consummate the
transactions contemplated by this Agreement and to effect the Merger
shall be subject to the fulfillment or waiver, at or prior to the
Closing, of each of the following conditions."
(i) The text of Section 8.02(a)(ii) shall be deleted in its
entirety and the following text shall be inserted in its place:
"(ii) the covenants contained in this Agreement to be
complied with by Viacom, the Seller or MSG on or before the Closing
shall have been complied with in all material respects, except
where the failure to so comply would not have a Material Adverse
Effect, and"
(j) In Section 10.03(a), the phrase "MSG," shall be inserted
immediately after the phrase "if to" and immediately before the phrase
"the Seller or Viacom".
(k) In Section 10.07, the phrase ", MSG, the Parents" shall be
inserted immediately after the phrase "the Seller" and immediately
before the phrase "and the Purchaser".
(l) In Section 10.10, the phrase "MSG," shall be inserted
immediately after the phrase "the Seller," and immediately before the
phrase "the Purchaser".
<PAGE>
3
(m) In the last full paragraph, which begins with the phrase "IN
WITNESS WHEREOF," the phrase "MSG," shall be inserted immediately after
the phrase "the Seller," and immediately before the phrase "the
Purchaser".
(n) The following text shall be added to the end of the Merger
Agreement:
"MADISON SQUARE GARDEN
CORPORATION
By "
-----------------------------
SECTION 2. EFFECT OF AMENDMENTS. Except as and to the extent
expressly modified by this Amendment, the Merger Agreement shall remain in
full force and effect in all respects.
SECTION 3. GOVERNING LAW. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York
applicable to contracts executed in an to be performed in that State.
SECTION 4. COUNTERPARTS. This Amendment may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
<PAGE>
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be executed on their behalf as of the date first written above.
VIACOM INC.
By /s/ Michael D. Fricklas
-------------------------------------
Name: Michael D. Fricklas
Title: Senior Vice President
PARAMOUNT COMMUNICATIONS
REALTY CORPORATION
By /s/ Michael D. Fricklas
------------------------------------
Name: Michael D. Fricklas
Title: Senior Vice President
ITT CORPORATION
By /s/ Harlan W. Murray
-------------------------------------
Name: Harlan W. Murray
Title: Vice President
<PAGE>
5
RAINBOW GARDEN CORPORATION
By /s/ Marc A. Lustgarten
-------------------------------------
Name: Marc A. Lustgarten
Title: Vice Chairman
MSG HOLDINGS, L.P., by MSG Eden
Corp., as general partner
By /s/ Harlan W. Murray
-------------------------------------
Name: Harlan W. Murray
Title: Vice President
MADISON SQUARE GARDEN
CORPORATION
By /s/ Michael D. Fricklas
-------------------------------------
Name: Michael D. Fricklas
Title: Senior Vice President
<PAGE>
AMENDMENT NO. 2, dated as of March 10, 1995 (this "AMENDMENT"), to
the Agreement and Plan of Merger, dated as of August 27, 1994, as amended as
of the date hereof (the "Merger Agreement"), among VIACOM INC., a Delaware
corporation ("VIACOM"), PARAMOUNT COMMUNICATIONS REALTY CORPORATION, a
Delaware corporation and an indirect wholly owned subsidiary of Viacom (the
"SELLER"), MADISON SQUARE GARDEN CORPORATION, a Delaware corporation and a
wholly owned subsidiary of the Seller ("MSG"), ITT CORPORATION, a Delaware
corporation ("ITT"), RAINBOW GARDEN CORPORATION, a Delaware corporation
("RAINBOW" and together with ITT, each a "PARENT" and collectively, the
"PARENTS"), and MSG HOLDINGS, L.P., a Delaware limited partnership (the
"PURCHASER").
W I T N E S S E T H:
WHEREAS, the parties hereto are parties to the Merger Agreement
(capitalized terms not defined herein have the meanings ascribed to them in
the Merger Agreement); and
WHEREAS, the parties hereto desire to amend the Merger Agreement in
certain respects and resolve certain matters thereunder;
NOW THEREFORE, in consideration of the premises and of the mutual
agreements and understandings hereinafter set forth, the parties hereto
hereby agree as follows:
SECTION 1. AMENDMENTS TO MERGER AGREEMENT. The Merger Agreement
is, effective as of the date hereof, hereby amended as follows:
(a) The definitions contained in Section 1.01 of the terms "Final
Net Worth", "Post-Closing Balance Sheet", "Purchaser's Accountants" and
"Seller's Accountants" shall be deleted in their entirety.
(b) The text of Section 2.05 shall be deleted in its entirety and
the following text shall be inserted in its place:
"SECTION 2.05. POST-CLOSING ADJUSTMENT. The Merger
Consideration shall be subject to adjustment after the Closing as
specified in this Section 2.05:
(a) The Merger Consideration shall be subject to a
post-Closing downward adjustment in an amount equal to $65,900,000
(the "POST-CLOSING ADJUSTMENT AMOUNT").
<PAGE>
2
(b) The Purchaser shall deduct from the Merger Consideration
payable by the Purchaser at the Closing pursuant to Section 2.04 an
amount equal to the Post-Closing Adjustment Amount.
(c) The text of Section 5.12 shall be deleted in its entirety
and the following text shall be inserted in its place:
"SECTION 5.12. CHRISTMAS SHOW. Prior to the Closing, Viacom
shall cause Antics Inc., a Delaware corporation and an indirect
wholly owned subsidiary of Viacom ("ANTICS"), and all other direct
and indirect subsidiaries of Viacom which have any right, title or
interest in or to any of the property or assets, including, without
limitation, contractual and intellectual property rights, used in
the presentation, promotion and exploitation of that musical
adaptation of Charles Dickens' "A Christmas Carol" presented in the
Paramount Theater in 1994 (the "CHRISTMAS SHOW"), to assign to MSG
all of such right, title and interest, including the right to
present, promote and exploit the Christmas Show on a worldwide
basis, and MSG shall assume all of the liabilities and obligations
of Viacom, Antics and such other subsidiaries relating to the
Christmas Show. Viacom shall cause the Letter Agreement, dated
August 15, 1994, between Antics and MSG, to be terminated effective
as of the Closing, whereupon such agreement shall be of no further
force and effect. Following such assignment and assumption, Viacom
and its subsidiaries shall have no further rights to present,
promote or exploit the Christmas Show. Notwithstanding anything to
the contrary contained herein, in the Letter Agreement, dated
August 15, 1994, between Antics and MSG, or in any other document
or communication, the Partnership shall have no rights whatsoever
in the name "Nickelodeon", "Nickelodeon Family Classics", "MTV
Networks", "Viacom" or any other name, trade name, trademark or
service mark owned by Viacom or its affiliates (other than MSG)
other than those used or intended to be used exclusively in
connection with the presentation, promotion and exploitation of the
Christmas Show, and shall not in any manner use or otherwise
exploit the name "Nickelodeon", "Nickelodeon Family Classics", "MTV
Networks" or "Viacom" or any other such name, trade name, trademark
or service mark or any name, trade name, trademark or service mark
similar or related thereto."
(d) In Section 7.01(a), the phrase "the amount reflected as current
Taxes payable in the Post-Closing Balance Sheet" shall be deleted and the
phrase "$2,564,500" shall be inserted in its place.
<PAGE>
3
(e) In Section 7.01(c), the phrase "the amount reflected as
current Taxes payable in the Post-Closing Balance Sheet" shall be
deleted and the phrase "$2,564,500" shall be inserted in its place.
(f) The text of Section 10.01 shall be deleted in its entirety and
the following text shall be inserted in its place:
"SECTION 10.01. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The covenants and agreements of the Seller and Viacom under Section
5.01 and the representations and warranties of the parties hereto
contained herein shall expire with, and shall be terminated and
extinguished upon, the Closing, the Purchaser and the Parents shall
have no remedy whatsoever for breach of the covenants and
agreements of the Seller and Viacom under Section 5.01, and the
parties hereto shall have no remedy whatsoever for breach of the
representations and warranties of any other party contained herein;
PROVIDED, HOWEVER, that the representations and warranties of the
Seller and Viacom contained in Section 3.03 shall survive the
Closing and shall remain in full force and effect, regardless of
any investigation made by or on behalf of any party hereto, for a
period of six months after the Closing Date; and PROVIDED FURTHER,
HOWEVER, that the indemnities contained in Article VII of this
Agreement shall survive until 60 days after the expiration of the
applicable statute of limitations."
SECTION 2. EFFECT OF AMENDMENTS. Except as and to the extent
expressly modified by this AGREEMENT, the Merger Agreement shall remain in
full force and effect in all respects.
SECTION 3. EFFECTIVENESS. This Amendment shall terminate and be
of no force and effect if the Closing shall not have occurred by 5:00 p.m. on
Friday, March 10, 1995.
SECTION 4. GOVERNING LAW. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York
applicable to contracts executed in and to be performed in that State.
SECTION 5. COUNTERPARTS. This Amendment may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original
but all of which taken together shall constitute one and the same agreement.
<PAGE>
4
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed on their behalf as of the date first written above.
VIACOM INC.
By /s/ Michael D. Fricklas
---------------------------------
Name: Michael D. Fricklas
Title: Senior Vice President
PARAMOUNT COMMUNICATIONS
REALTY CORPORATION
By /s/ Michael D. Fricklas
---------------------------------
Name: Michael D. Fricklas
Title: Senior Vice President
MADISON SQUARE GARDEN
CORPORATION
By /s/ Michael D. Fricklas
---------------------------------
Name: Michael D. Fricklas
Title: Senior Vice President
ITT CORPORATION
By /s/ Harlan W. Murray
--------------------------------
Name: Harlan W. Murray
Title: Vice President
<PAGE>
5
RAINBOW GARDEN CORPORATION
By /s/ Marc A. Lustgarten
---------------------------------
Name: Marc A. Lustgarten
Title: Vice Chairman
MSG HOLDINGS, L.P., by MSG Eden
Corp., as general partner
By /s/ Harlan W. Murray
---------------------------------
Name: Harlan W. Murray
Title: Vice President
<PAGE>
AGREEMENT AND UNDERTAKING
Agreement and Undertaking dated March 10, 1995, from MSG HOLDINGS,
L.P., a Delaware limited partnership ("New MSG"), MSG EDEN CORPORATION, a
Delaware corporation (the "General Partner"), CABLEVISION SYSTEMS CORPORATION, a
Delaware corporation ("Cablevision"), RAINBOW PROGRAMMING HOLDINGS, INC., a New
York corporation ("Rainbow"), RAINBOW GARDEN CORPORATION, a Delaware
corporation, GARDEN L.P. HOLDING CORP., a Delaware corporation, ITT CORPORATION,
a Delaware corporation ("ITT"), ITT EDEN CORP., a Delaware corporation, and ITT
MSG INC., a Delaware corporation (the foregoing corporations, together with New
MSG, being collectively referred to as the "Owners"), in favor of the NATIONAL
BASKETBALL ASSOCIATION ("NBA"), the member teams of the NBA ("Teams"), NBA
PROPERTIES, INC., THE NBA MARKET EXTENSION PARTNERSHIP, PLANET INSURANCE, LTD.,
and any other entity formed generally by the Teams after this date (together
with the NBA, the "NBA Entities").
WHEREAS, in connection with the merger (the "Merger") of Madison
Square Garden Corporation, a Delaware corporation ("Old MSG"), with and into
New MSG, New MSG has acquired all of the assets of Old MSG, including Old MSG's
NBA franchise and other NBA-related assets (collectively, the
"Knickerbockers"), and has assumed all of the liabilities of Old MSG; and
WHEREAS, each of the other Owners directly or indirectly owns
partnership interests in New MSG; and
WHEREAS, the transfer of the Knickerbockers to New MSG requires the
approval of the Board of Governors of the NBA; and
WHEREAS, the Board of Governors of the NBA has granted such approval
upon the condition that each of the Owners executes, delivers and performs this
Agreement and Undertaking;
NOW, THEREFORE, in consideration of the approval by the Board of
Governors of the NBA of the transfer to New MSG of the Knickerbockers, New MSG
and each of the other Owners agrees and undertakes as follows:
1. Notwithstanding anything to the contrary in any agreement between
New MSG and Old MSG, New MSG shall pay, perform and discharge the following
debts, liabilities and obligations, howsoever arising, whether known or unknown,
fixed or contingent, mature or unmatured, whether or not existing on the date
hereof or arising in the future:
(a) all debts, liabilities and obligations of Old MSG and
its predecessors under all
<PAGE>
agreements with players, coaches and other employees of the
Knickerbockers including, by way of example but not of
limitation, all deferred compensation obligations;
(b) all debts, liabilities and obligations of Old MSG and
its predecessors under all pension, insurance and other benefit
programs covering players, coaches and employees of the
Knickerbockers; and
(c) all debts, liabilities and obligations of Old MSG and
its predecessors to any of the Teams and to any of the other NBA
Entities.
2. New MSG shall pay and be responsible for the payment and
performance of Old MSG's share of all debts, liabilities and obligations of the
NBA Entities (excluding the other Teams), and New MSG's share of all debts,
liabilities and obligations of the NBA Entities (excluding the other Teams).
3. New MSG shall purchase its workers' compensation insurance with
respect to its NBA players through the NBA's league-wide workers' compensation
program.
4. (a) For so long as it owns, directly or indirectly, any interest
in an NBA franchise, each Owner shall be bound by and conduct itself in
accordance with, and shall cause each of its affiliates and subsidiaries over
which it has effective control (collectively, the "Related Parties") to be bound
by and conduct itself in accordance with, (i) the Constitution and By-Laws of
the NBA, (ii) the governing documents of each of the NBA Entities (excluding the
other Teams), (iii) all present and future rules, regulations, memoranda,
resolutions and directives of each of the NBA Entities (excluding the other
Teams) and the NBA Commissioner, and (iv) any agreements and arrangements to
which the Teams generally or any of the other NBA Entities are (or after the
date of this agreement may become) subject or by which they or their assets are
(or may become) bound, in each case as they may be amended or adopted from time
to time and including the custom and practice thereunder (clauses (i)-(iv)
collectively, "NBA Rules"), including, but not limited to, (w) NBA Rules
relating to franchise relocation, secured indebtedness and ownership transfers,
(x) NBA Rules relating to territorial rights and limitations, (y) NBA Rules
relating to the telecast or broadcast, by over-the-air television,
non-broadcast television, radio or any other means, whether on a local,
regional, national or international basis, of NBA games, and (z) NBA Rules
relating to advertising and promotional arrangements with establishments that
have or offer legalized gambling.
2
<PAGE>
(b) Notwithstanding anything to the contrary in paragraph 4(a), the
Owners and the NBA Entities acknowledge the following:
(i) If any act or omission of a Related Party taken on behalf
of, as agent for or for the benefit of the Knickerbockers (including, for
example, compensation arrangements with players on the Knickerbockers' roster)
shall constitute a violation of NBA Rules, the NBA Entities shall have, against
the Knickerbockers and the Owner or Owners that control the Related Party, the
right to take all actions then permitted under NBA Rules for such violations as
though the Knickerbockers and such Owner or Owners had themselves violated NBA
Rules, including, but not limited to, the levying of fines or penalties, the
exercise of set-off rights against payments due to New MSG and the
Knickerbockers from any of the NBA Entities, and the termination of the
Knickerbockers NBA franchise or the direct or indirect ownership interest of
such Owner or Owners in the Knickerbockers NBA franchise; provided that
Cablevision shall not be liable for any fines, penalties or other monetary
damages with respect to any such acts or omissions of its Related Parties (but
any such fines, penalties or other monetary damages may be assessed against
Rainbow, Rainbow's subsidiaries which are Owners, or the Knickerbockers).
(ii) (A) Subject to paragraph 4(b) (iii) below, if any act or
omission of a Related Party shall constitute a violation of NBA Rules not
subject to paragraph 4(b)(i), the NBA Entities shall have the right, in
accordance with the procedures established under NBA Rules and as their sole
remedy under NBA Rules, to terminate the direct or indirect ownership interest
in the Knickerbockers of the Owner or Owners that control such Related Party.
Any Owner which may be subject to termination of its interest pursuant to the
preceding sentence shall be given prior written notice of, and a reasonable
period (not to exceed 30 days) to cure such violation, but no notice need be
given pursuant to this section for a second violation within any twelve month
period of such NBA Rule by the Related Parties of an Owner if a notice has
previously been given within such period to the Owner of a prior violation by
one of its Related Parties.
(B) No Owner shall be subject to termination of its
interest for a violation by one of its Related Parties of any NBA Rule that
becomes effective after the date of this Agreement and Undertaking unless (a)
that NBA Rule relates to the misconduct provisions contained in Article 35.1
(other than paragraph (a) thereof) of the NBA Constitution or any successor to
that provision ("Misconduct") or (b) (1) that NBA Rule applies generally to the
relationship between an NBA team and any person or entity operating in the same
business or line of business as the Related Party (a "Similar Person") and (2)
the NBA takes (or causes a Team to take) action that is commercially
3
<PAGE>
reasonable, in light of the facts and circumstances (including (A) the proposed
termination of the ownership interest in the Knickerbockers of such Owner, (B)
the nature and extent of the violation of such Similar Person and the Related
Party and (C) the nature of the rights of the NBA against such Similar Person,
((A), (B) and (C), collectively, the "Relevant Considerations")) against any
Similar Person (x) against which it (or the Team) has the right to take action
and (y) which is then in violation of such NBA Rule. An NBA Rule shall be deemed
to have become effective after the date hereof if (i) it is adopted or issued
(including, without limitation, the adoption or issuance of instructions or
directions pursuant to an NBA Rule which is not self executing without further
instruction or direction) after the date hereof, even if the authority to adopt
or issue the rule (including, without limitation, the authority to adopt or
issue instructions or directions) existed prior to the date hereof, (ii) it
constitutes an application, interpretation or implementation of an existing NBA
Rule materially different from any prior application, interpretation or
implementation of such NBA Rule, or (iii) in the case of an NBA Rule that has
not previously been applied, interpreted or implemented, it constitutes an
application, interpretation or implementation materially different from the
express provisions of such NBA Rule.
(C) No Owner shall be subject to termination of its
interest for a violation by one of its Related Parties of any NBA Rule that
became effective on or prior to the date of this Agreement and Undertaking
unless (a) that NBA Rule relates to Misconduct or (b) (1) that NBA Rule applies
to the relationship between an NBA team and a Related Party and (2) the NBA
takes (or causes a Team to take) action that is commercially reasonable, in
light of the facts and circumstances, including the Relevant Considerations,
against any Similar Person (x) against which it (or the Team) has the right to
take action and (y) which is then in violation of such NBA Rule. Neither the NBA
nor, based on a review of the NBA Rules listed on annex A hereto, any Owner has
reason to believe that any NBA Rule existing on the date hereof applies to a
Related Party materially differently than to the Similar Persons.
(iii) If any act or omission of a Related Party shall constitute a
violation of NBA Rules not subject to paragraph 4(b)(i), the NBA Entities shall
have the right against the Related Party to take such action as they may then
have under any then applicable law or then existing agreement or arrangement
(other than this Agreement and Undertaking and NBA Rules), whether as a direct
party, third-party beneficiary or otherwise.
(iv) If any act or omission of a Related Party creates a cause of
action (whether in contract, tort or otherwise) in favor of any NBA Entity, but
such act or omission does not constitute a violation of NBA Rules, the NBA
Entities
4
<PAGE>
shall not have the right to take action against any of the Owners for such act
or omission by virtue of this Agreement and Undertaking and NBA Rules (but the
NBA Entity having the cause of action shall have the right to pursue it
separately under such other agreement, law or doctrine as may be applicable).
(v) If at any time ITT breaches its agreements with the NBA
dated January _, 1995 with respect to its gaming operations, the NBA Entities
shall be entitled to exercise such rights and remedies (legal, equitable or
otherwise) as may be available to them under that agreement, NBA Rules and
applicable law against ITT and its wholly-owned subsidiaries (including, but not
limited to, their right to terminate ITT's direct and indirect ownership
interests in the Knickerbockers) but shall not have any rights as a result of
such breach against New MSG (unless the breach also constitutes a violation of
paragraph 4(b)(i) above) or against Cablevision, Rainbow or their respective
Related Parties.
(vi) The consequences of termination of the interest of any Owner
in the Knickerbockers shall be as set forth in the NBA Constitution and By-laws,
as they may be amended from time to time.
5. If at any time the Knickerbockers shall be sold, transferred or
otherwise assigned to any unaffiliated third-party (whether directly or
indirectly, by operation of law or otherwise and including any change of
control), all contracts, agreements and other arrangements (including, but not
limited to, any leases or telecast or broadcast agreements) between New MSG or
any division of New MSG operating the Knickerbockers and any other divisions of
New MSG (or if either ITT, on the one hand, or Cablevision or Rainbow, on the
other hand, no longer owns a direct or indirect interest in the Knickerbockers,
any of New MSG's parent entities or any of their respective controlled
subsidiaries), shall terminate upon such sale, transfer or assignment unless the
NBA Entities shall otherwise consent.
6. Each Owner severally represents, warrants and agrees as follows:
(a) The Agreement dated as of August 15, 1994 and amended as of
September 12, 1994 among ITT, Cablevision and Rainbow (the "Bid Agreement")
constitutes a valid and binding obligation enforceable against each of its
parties in accordance with its terms, and contains a complete statement of all
the arrangements between its parties and their subsidiaries with respect to the
ownership and control of New MSG and the other matters included therein. Without
limiting the generality of the preceding sentence, pursuant to the Bid
Agreement:
(i) On the date of this Agreement and Undertaking: (1) the
General Partner, as a general partner, owns
5
<PAGE>
a 1% partnership interest in New MSG; (2) ITT MSG Inc., as a limited partner,
owns an approximately 83.9% partnership interest in New MSG; (3) Garden L.P.
Holding Corp., as a limited partner, owns an approximately 15.1% partnership
interest in New MSG; (4) the outstanding capital stock of the General Partner is
owned equally by ITT Eden Corp. and Rainbow Garden Corporation; (5) ITT MSG Inc.
and ITT Eden Corp. are wholly-owned subsidiaries of ITT Corporation and (6)
Garden L.P. Holding Corp. and Rainbow Garden Corporation are wholly-owned
subsidiaries of Rainbow, which in turn is a wholly-owned subsidiary of
Cablevision.
(ii) Garden L.P. Holding Corp. has the right, exercisable within
eighteen months from the date of the Merger, to purchase additional limited
partnership interests in New MSG from ITT MSG Inc. such that, following such
purchase, Garden L.P. Holding Corp and ITT MSG Inc. would each own a 49.5%
limited partnership interest in New MSG (the "Rainbow Post Closing Purchase").
If Garden L.P. Holding Corp. does not consummate the Rainbow Post Closing
Purchase, Rainbow has the right, exercisable within 135 days after the
expiration of the period in which Rainbow had the right to consummate the
Rainbow Post Closing Purchase, to sell to ITT (or its designees), in whole or in
part, the interests in New MSG held by Garden L.P. Holding Corp. and Rainbow
Garden Corporation (the "ITT Post Closing Purchase").
(b) Initially, the person representing New MSG on the NBA Board
of Governors shall be Rand V. Araskog, and the person having the
responsibilities of New MSG's Alternate Governor shall be Robert A. Bowman.
(c) Except for those securities listed on schedule 1 attached
hereto and for options to purchase shares of ITT or Cablevision, in each case,
which, if exercised or converted, would not require NBA approval under Article
7(c)(iii) of the NBA Constitution, and the rights of Cablevision and ITT under
the Bid Agreement, there are no options, warrants, rights or convertible
securities of any kind entitling any person or entity to acquire, directly or
indirectly, any shares, partnership interests, debt instruments or other
economic rights in New MSG or any of the Owners nor does New MSG or any of the
Owners have any obligation to issue any such options, warrants, rights or
securities.
(d) All information furnished by such Owner to the NBA Entities
in connection with the request for approval of the acquisition of the
Knickerbockers and related financing by New MSG is true and correct in all
material respects and has not omitted any material statement which would make
such information not misleading.
(e) With respect to the Merger, all applicable waiting periods
under the Hart-Scott-Antitrust Improvement Act of 1976, as amended, have
expired, and there are no outstanding
6
<PAGE>
requests for additional information under that act or any other law that have
not been complied with.
7. (a) The Owners acknowledge and agree that, subject to
paragraph 8 below and Article 7(c)(iii) of the NBA Constitution (which currently
shall apply only to transfers of interests in ITT and Cablevision), any direct
or indirect change in the ownership of any equity interest (regardless of the
size of the interest) in New MSG, the General Partner or any of the other
Owners, other than exercise within the time periods described in paragraph
5(a)(ii) of this Agreement and Undertaking of the Rainbow Post Closing Purchase
or the ITT Post Closing Purchase (the "Step-Up Options"), or the change in the
voting rights of the capital stock of the General Partner contemplated by the
Bid Agreement upon the failure of the Rainbow Post Closing Purchases to occur
(the "GP Event"), shall require the prior consent of the NBA Board of Governors
in accordance with NBA Rules. New MSG shall promptly deliver to the NBA
Commissioner a notice of the exercise of either Step-Up Option (which shall
include a reasonable description of the extent to which the applicable Step-Up
Option has been exercised and the expected closing date of the transaction) or
of the occurrence of the GP Event, as the case may be. In each case, the Owners
shall deliver to the Commissioner copies of any documents relating to the
Step-Up Option or the GP Event that have not previously been delivered and a
certificate as to such factual matters arising out of the transaction as the
Commissioner shall reasonably request (including, for example, a certificate
specifying the direct and indirect ownership interest of each Owner in the
Knickerbockers and New MSG, and the names of the directors of the General
Partner, after consummation of the transaction, and confirming that the ITT Post
Closing Purchase, the Rainbow Post Closing Purchase, or the GP Event, as
applicable, has been consummated substantially as described herein).
(b) For purposes of clarification, the parties have agreed upon
the following illustration as an example of the application of Article 7(c)(iii)
of the NBA Constitution, as currently drafted:
If at anytime (i) Cablevision directly or indirectly, has an
equity interest in New MSG of 50%, and (ii) Cablevision's Class A Common Stock
then has in the aggregate economic rights equal to 50% of the rights of all
common stockholders in Cablevision (after giving effect to all conversions and
similar rights), then no holder of Class A Common Stock will be considered to
have a 5% or greater interest in New MSG unless it owns 20% or more of the Class
A Common Stock.
8. The parties acknowledge and agree that if shares of ITT and/or
Cablevision and/or Rainbow (following the spin-off) shall be sold or transferred
in violation of NBA Rules, the NBA Entities shall be entitled to exercise such
rights and remedies
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<PAGE>
(legal, equitable or otherwise) as may be available to them under NBA Rules and
applicable law (including, but not limited to, termination of the Knickerbockers
NBA franchise or the direct or indirect ownership interest in the Knickerbockers
of the transferor or transferee); provided that (a) the NBA Entities shall not
be entitled to assess any fines, penalties or other monetary damages against
Cablevision with respect to any such violations by it or its Related Parties,
but may assess any such fines, penalties or other monetary damages against
Rainbow, Rainbow's subsidiaries which are Owners, or the Knickerbockers, (b) the
NBA Entities shall not be entitled to seek injunctive relief to prevent any such
transaction and (c) such NBA Rules shall not limit the right of the transferor
of such shares to convey good title in the shares to a transferee. It is
acknowledged and agreed that shares of Cablevision common stock held by members
of the family of Charles F. Dolan or trusts established for the benefit of
members of the family of Charles F. Dolan shall be deemed to be held by Charles
F. Dolan for the purposes of this Agreement and Undertaking and the NBA Rules.
Further, nothing herein or therein shall restrict transfers of such common stock
between or among Charles F. Dolan, members of the family of Charles F. Dolan or
such family trusts. In addition, any "spin-off" (or other corporate
reorganization) of one of the wholly-owned subsidiaries of ITT or Cablevision
included in the definition of "Owners" that results in the ownership of common
stock of such subsidiary immediately after the spin-off or reorganization being
substantially identical to the ownership of common stock of ITT or Cablevision,
as the case may be, as of the record date with respect to such spin-off or
reorganization (without giving effect to any when-issued trading) shall not
constitute a transfer of an interest in a Member under Article 7 of the NBA
Constitution, provided that (i) to the extent that and for so long as ITT or
Cablevision, as the case may be, are under common control with such subsidiary
following such spin-off or reorganization, then ITT or Cablevision, as the case
may be, and their respective Related Parties shall continue to be Related
Parties for purposes of this Agreement and Undertaking and (ii) such subsidiary
certifies to the NBA Commissioner (and provides reasonable support therefor)
that the ownership of the common stock of such subsidiary will be
"substantially identical" in accordance with this provision.
9. Subject to the limitations contained in this Agreement and
Undertaking, in the event of any breach by any of the Owners of its agreements
contained herein, in addition to all other legal and equitable rights and
remedies available to the NBA and the Teams, such breach shall constitute a
failure to fulfill a contractual obligation within the meaning of Article 13(c)
of the NBA Constitution.
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10. This Agreement and Undertaking may be executed in two or more
counterparts, which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Owners have executed and delivered this
Agreement and Undertaking, intending to be bound hereby, as of the date first
written above.
MSG HOLDINGS, L.P.
By: MSG Eden Corporation,
its General Partner
By: /S/ ROBERT F. SHEEHY
------------------------------------
Vice President
MSG EDEN CORPORATION
By: /S/ ROBERT F. SHEEHY
------------------------------------
Vice President
CABLEVISION SYSTEMS CORPORATION
By: /S/ MARC A. LUSTGARTEN
------------------------------------
RAINBOW PROGRAMMING HOLDINGS, INC.
By: /S/ MARC A. LUSTGARTEN
------------------------------------
RAINBOW GARDEN CORPORATION
By: /S/ MARC A. LUSTGARTEN
------------------------------------
GARDEN L.P. HOLDING CORP.
By: /S/ MARC A. LUSTGARTEN
------------------------------------
MARC A. LUSTGARTEN
VICE CHAIRMAN
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ITT CORPORATION
By: /S/ ROBERT F. SHEEHY
------------------------------------
Vice President
ITT EDEN CORP.
By: /S/ ROBERT F. SHEEHY
------------------------------------
Vice President
ITT MSG INC.
By: /S/ ROBERT F. SHEEHY
------------------------------------
Vice President
ACKNOWLEDGED AND AGREED
NATIONAL BASKETBALL ASSOCIATION,
as agent for the NBA Entities
By: /S/ JEFFREY A. MISKIN
------------------------------------
10
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SCHEDULE 1
11
<PAGE>
SCHEDULE I
1. CONVERTIBLE PREFERRED STOCK. On March 31, 1994, Cablevision issued and
sold 100,000 shares of its Series E Redeemable Exchangeable Convertible
Preferred Stock (the "Series E Preferred Stock") to Toronto-Dominion
Investments, Inc. in a private transaction. The Series E Preferred Stock
was sold for a purchase price of $1,000 per share and carry a liquidation
preference of a like amount plus accrued and unpaid dividends. Dividends
accrue at a floating rate of LIBOR plus 2.5 percent and are payable, at
Cablevision's option, either in cash or in registered shares of Class A
common stock with a value equalling 105 percent of the required dividend.
Additional dividend payments may be required with respect to the
availability of the dividend received deduction. The Series E Preferred
Stock is redeemable at any time at the option of Cablevision at par plus
accrued and unpaid dividends to the redemption date and are convertible
after March 31, 1995 into Class A common stock, at the option of the
holder, at a conversion rate based on 95 percent of the average closing
price of the Class A Common Stock for the twenty business days prior to
conversion. Additionally, the holders of the Series E Preferred Stock have
the right to convert their shares in connection with certain change in
control transactions (regardless of when they occur) into a number of
shares of Class A Common stock which would yield $100,000 based upon an
auction process involving the Class A Common stock issuable on such
conversion or, at the holder's election, at a conversion rate based on 95
percent of the average closing price of the Class A Common Stock for the
twenty business days prior to conversion. Cablevision has the right to
suspend the conversion of the Series E Preferred Stock from March 31,
1995 through March 31, 1997 as long as it is in compliance with its
Restricted Group financial covenants and is current in dividend payments
of the Series E Preferred Stock.
2. SUTTON CAPITAL SUBORDINATED NOTES. On August 8, 1994, subsidiaries of
Cablevision issued promissory notes totalling $151 million, due in 1998 and
bearing interest at 6% until the third anniversary and 8% thereafter
(increasing to 8% and 10% respectively, if interest is paid in shares of
Cablevision's Class A Common Stock). Principal and interest on the notes
is payable, at Cablevision's election, in cash or in shares of
Cablevision's Class A Common Stock. In certain circumstances, Cablevision
may extend the maturity date of the promissory notes until 2003 for
certain additional consideration.
3. CABLEVISION OF NEW YORK CITY. Charles F. Dolan holds a 1% limited
partnership interest in the subsidiary of Cablevision that holds the New
York City cable franchises and holds certain preferential rights therein
that entitle
<PAGE>
him to an annual cash payment (the "Annual Payment") of 14% multiplied by
the outstanding balance of his "Minimum Payment". The Minimum Payment is
$40.0 million and is to be paid to Mr. Dolan prior to any distributions
from CNYC LP to partners other than Mr. Dolan. In addition, Mr. Dolan has
the right, exercisable on December 31, 1997, and as of the earlier of (1)
December 31, 2000 and (2) December 31 of the first year after 1997 during
which CNYC achieves an aggregate of 400,000 subscribers, to require
Cablevision to purchase (Mr. Dolan's "put") his interest in such
subsidiary. Cablevision has the right to require Mr. Dolan to sell his
interest in such subsidiary to Cablevision (Cablevision's "call") during
the three year period commencing one year after the expiration of
Mr. Dolan's second put. In the event of a put, Mr. Dolan will be entitled
to receive from Cablevision the Minimum Payment, any accrued but unpaid
Annual Payments, a guaranteed return on certain of his investments in such
subsidiary and a Preferred Payment defined as a payment (not exceeding
$150.0 million) equal to 40% of the Appraised Equity Value (as defined) of
such subsidiary after making certain deductions including a deduction of a
25% compound annual return on approximately 85% of Cablevision's
investments with respect to the construction of Phases III, IV and V of
CNYC and 100% of certain of Cablevision's other investments in CNYC,
including Mr. Dolan's Annual Payment. In the event Cablevision exercises
its call, the purchase price will be computed on the same basis as for a
put except that there will be no payment in respect of the Appraised Equity
Value amount. Cablevision has the right to make payment of the put or call
exercise price in the form of shares of Cablevision's Class B Common stock
or, if Mr. Dolan so elects, Class A Common Stock, except that all Annual
Payments must be paid in cash to the extent permitted under Cablevision's
Credit Agreement. Under the Credit Agreement, Cablevision is currently
prohibited from paying the put or call exercise price in cash and,
accordingly, without the consent of the bank lenders, would be required to
pay it in shares of Cablevision's Common Stock.
4. EMPLOYEE STOCK PROGRAMS. Under its employee stock programs, Cablevision
has issued to employees options, restricted stock and bonus award shares
with respect to its Class A Common Stock. As of the date hereof, there
options and awards outstanding representing approximately 1.66 million
shares.
5. CABLEVISION OF BOSTON. In June 1994, Cablevision and Cablevision of Boston
Limited Partnership ("Cablevision Boston") entered into an agreement which
is designed to give Cablevision full ownership of Cablevision Boston. The
agreement provides for the acquisition by Cablevision of the interests of
Cablevision Boston which it does not already own in a series of
transactions. Cablevision and Cablevision Boston have filed with the
Securities and
2
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Exchange Commission a Consent Solicitation Statement/Prospectus with
respect to the proposed transactions. Each of the transactions is subject
to a number of conditions, including the approval by the limited partners
of Cablevision Boston who are unaffiliated with the general partners of
Cablevision Boston. Consummation of the transactions would result in the
limited partners in Cablevision Boston receiving Class A Common stock of
Cablevision with an expected aggregate market value of approximately $40
million.
5. EXISTING PLEDGES. Cablevision has pledged the capital stock of Rainbow
Programming to Toronto Dominion (Texas), Inc. as Administrative Agent, in
support of Rainbow Programming's senior credit facility. Charles F. Dolan
has pledged certain shares of Cablevision stock to various lenders in
support of personal loans to himself and to members of his family.
3
<PAGE>
ANNEX A
I. NBA
A. Minutes of the Annual Meeting of the Board of Governors of the NBA
10/4/94 & 10/5/94, 11/3/93 & 11/4/93, 10/20/92 & 10/21/92, 10/30/91,
10/24/90 & 10/25/90, 10/3/89 & 10/4/89, 9/28/88 & 9/29/88, 10/12/87,
10/21/86, 6/26/85, 6/26/84, 6/22/82, 6/2/81, 6/3/80, 6/21/79 &
6/22/79, 6/14/78 & 6/15/78, 6/15/77 & 6/16/77, 6/16/76 & 6/17/76,
6/4/75 & 6/5/75
B. Minutes of the Special Meeting of the Board of Governors of the NBA
6/21/94, 4/26/94 & 4/27/94, 2/14/94, 4/27/93 & 4/28/93, 1/15/93,
4/21/92 & 4/22/92, 4/22/91 & 4/23/91, 2/9/91, 4/23/90 & 4/24/90,
2/10/90, 4/24/89 & 4/25/89, 2/11/89, 4/25/88 & 4/26/88,
4/21/87 & 4/22/87, 2/7/87, 4/14/86 & 4/15/86, 2/8/86, 4/15 & 4/16/85,
2/9/85, 3/26/84 & 3/27/84, 1/15/83, 5/9/83, 3/31/83, 3/11/83, 2/12/83,
10/10/82, 1/30/82, 9/21/81, 1/30/82, 9/21/81, 1/31/81, 9/18/80,
3/6/80, 2/2/80, 9/28/79, 6/8/79, 5/7/79, 2/3/79, 8/9/78, 7/7/78,
2/4/78, 7/13/77, 2/12/77, 9/16/76, 2/2/76 & 2/3/76, 11/10/75,
10/21/75, 7/1/75
C. Minutes of Certain Committee Meetings
Meeting of NBA Competition Committee 6/25/76
D. Charter and By-Laws of NBA
1. Certificate of Incorporation of NBA
2. By-Laws of NBA
E. Telex Memoranda Re NBA Board of Governors Resolutions
Robertson Settlement Agreement 7/2/76, Sale of Shares by Denver
12/20/76, Election of Directors of Mil(?) 12/20/76, Amendment of
Rule 12B, Section VII Section C 3/3/77, Houston Transfer (Greenway
Plaza Ltd) 3/3/77, Nets Use of Rutgers Arena for '77-'78 10/5/77,
Seattle Move from Coliseum to Kingdome 12/15/77, Portland's Request to
add Willie Norwood 4/26/78, Proposed Extension of Network TV Contract
w/CBS 5/4/78, Fishman v. NBA Settlement 12/28/78, 1980 All-
Star/Washington, 1985 All-Star/Boston 4/2/79, Playing Rule Change
Restricting Coaches Movement 8/27/79, Dallas Expansion Agreement
Modification 4/28/80, 1981 All-Star/Cleveland 6/11/80, Request by
Dallas to Carry Players Until 11/10-1/2 1980, Motion to Change Date
for Coinflip defeated 4/7/81, CBS Negotiations/Network TV Contract
12/22/81, Denver Transfer (McCombs) 7/14/82, Houston Transfer
(Thomas/Shlenker) 8/25/82, Kings Transfer of Stock 8/24/82, Labor
Negotiation Implementation of Impasse 11/22/82,
<PAGE>
2
Continuing Labor Negotiation Salary Limitation Plan 12/16/82, Boston
Transfer (Gaston/Dupee/Cohen) 9/23/83, Supersonics' Playing in Tacoma
Dome 9/23/83, Phoenix Restructuring/Pledge of Stock & Assets 9/27/83,
Agreement w/ Continental Basketball Association 10/13/83, Agreement
w/Turner Broadcasting System, Inc. 6/6/84, Cleveland Merger
(Nationwide) 10/15/84, Detroit Pistons Financing 12/21/84, LA Lakers
Financing 12/21/84, Request by Utah to Play Last Home Games in SLC
12/28/84, Chicago Ownership (Reinsdorf) 1/30/85, Utah Transfer
(miller) 5/9/85, CBS Sports Contract 12/20/85, League Wide
Comprehensive General Liability Insurance Program 6/6/86, Golden State
transfer (Fitz/Finnane/Cullen) 7/9/86, Sacramento Kings Pledge
7/17/86, Agreement w/ National Association of Basketball Referees
9/23/86, San Antonio Transfer (McComb) 12/23/86, Agreement w/Players
Association re Moratorium 6/8/87, TBS (Atlanta Hawks) Sale of Equity
Units 6/30/87, Dan Finnane Sale of Interest 6/30/87, Detroit Transfer
of Home Playing Site to Auburn Hills 8/26/87, Pledge of Denver Nuggets
to Heller Financial 9/2/87, Pledge of LA Lakers to Bankers Trust
9/2/87, Clippers Settlement 10/1/87, Agreement w/ Turner Broadcasting
Systems, Inc. 11/19/87, Portland Transfer (Paul Allen) 6/28/88, San
Antonio Transfer (McCombs 100%) 6/28/88, Charlotte Transfer of
Ownership (Shinn) 6/21/89, Orlando Pledge to NCNB National Bank
8/9/89, Agreement w/NBC Sports 11/10/89, Agreement w/ Continental
Basketball Association 11/10/89, Denver Transfer (Lee/Bynoe) 11/30/89,
Agreement w/Turner Network Television 12/4/89, Denver Pledge to NCNB
National Bank 3/9/90, National Radio Contract w/ Public Interest
Affiliates, Inc. (PIA) 3/14/90, Houston Pledge to First City 6/29/90,
Inc. of Pledge of SA to Wells Fargo 6/29/90, Pledge of Utah Jazz to
Sumitomo Trust 8/31/90, Pledge of New Jersey Nets to Chemical Bank
9/28/90, Modification of MN Pledge to 1st Bank, New Jersey Transfer re
Taubs 8/2/91, Phoenix Transfer re Ross Farnsworth 12/20/91, Settlement
of Defined Gross Revenues Proceeding 2/20/92, Golden State Transfer
(Cohan) 2/20/92, Houston/Hardship Application Re Olajuwan 3/31/92,
Sacramento Transfer to Jim Thomas 4/3/92, San Antonio Pledge to Esping
4/3/92, Denver Nuggets Transfer (Bynoe/Lee) 9/3/92, Miami Heat
Transfer & Pledge (Cunningham/Schaffel) 9/3/92, Agreement w/
Continental Basketball Association 9/15/92, Agreement w/ National
Association of Basketball Referees 10/2/92, Boston Restructuring
12/11/92 Disapproved, San Antonio Transfer - SAAC Coleman 3/18/93, San
Antonio Transfer to SAAC Coleman re National West 3/24/93, SA Pledge
to NatWest 6/24/93, Houston, Phoenix, Sacramento 7/28/93, Turner
National Cable TV '94-95 through '97-'98 9/22/93, Re-Weighted Lottery
11/10/93, Copyright Ownership Radio Broadcasts 12/17/93, Minnesota
Timberwolves Amending Article 9A 2/22/94, Golden State - Sale to Chris
Cohan 1/17/95
F. Miscellaneous Agreements
1. Collective Bargaining Agreement between the NBA and the NBA
PLayers Association dated 11/1/88.
2. Collective Bargaining Agreement Side Letters
<PAGE>
3
Reviewed binder containing all of the side letters relating to
the Collective Bargaining Agreement (not including materials
under tab 8 which were missing from the binder).
3. Collective Bargaining Referee Agreements
Agreement dated 10/1/92 between NBA and National Association of
Basketball Referees ("NABR")
Agreement dated 9/20/86 between NBA and NABR (effective until
9/1/89)
Agreement dated 12/8/83 between NBA and NABR (effective until
9/1/86)
Agreement dated 9/6/80 between NBA and NABR (effective until
9/1/83)
Agreement dated 10/18/77 between NBA and NABR (effective until
9/1/80)
4. NBA Players' Benefit Program
5. NBA Temporary Total Disability Insurance Program Description
Booklet Edition 5/9/93
6. Bermuda Certificate of Registration dated 1/1/81 for Plant
Insurance Ltd. under Section 4 of the Insurance Act of 1978 and
Certificate of Deposit of Memorandum and Memorandum of
Association and By-Laws of Association of Plant Insurance LTD.
dated 7/14/79.
7. Bridgeman Stipulation and Settlement Agreement
8. Summary Plan Description for the NBA Pension Plan for General
Managers, Coaches, Assistant Coaches and Trainers dated 2/91.
9. NBA Staff Employee Pension Plan (as amended through 2/1/82)
10. NBA Pension Plan for General Managers, Coaches, Assistant
Coaches and Trainers Restated (Effective 6/1/84)
11. NBA Players' Pension Plan Restated (Effective 2/2/84)
12. NBA Referees' Pension Plan (as Amended through 2/1/82)
G. NBA Operations Manual '94-95
<PAGE>
4
II. NBA PROPERTIES, INC. ("NBAP")
A. Minutes of Meetings of the Board of Directors of NBAP
4/27/94, 4/28/93, 10/21/92, 4/22/92, 4/23/91, 10/25/90, 2/10/90,
4/25/89, 2/6/88, 4/15/86, 6/26/85, 6/26/84, 6/21/83, 1/30/82,
1/31/81, 2/2/80, 2/3/79, 2/4/78, 9/16/76, 8/10/72, 6/24/71
B. Minutes of Annual Meetings of Shareholders of NBAP
4/27/94, 4/28/93, 4/22/92, 4/23/91, 2/10/90, 4/25/89, 2/6/88,
4/15/86, 6/26/85, 6/26/84, 6/21/83, 1/30/82, 1/31/81, 2/2/80,
2/3/79, 2/4/78, 9/16/76, 8/10/72, 6/24/71, 8/6/70
C. Minutes of a Special Meeting of the Directors of NBAP
2/2/76, 1/23/73
D. Minutes of Annual Meeting of Stockholders and Directors of NBAP
6/5/75, 6/21/74, 6/21/73
E. Minutes of a Special Combined Meeting of Shareholders and Directors
of NBAP
1/14/75
F. Minutes of First Meeting of Board of Directors of NBAP
9/5/67
G. Minutes of Special Meeting of the Board of Directors of NBAP
1/22/68
H. Minutes of the Special Meeting of the Executive Committee of the Board
of Directors of NBAP
8/28/69, 6/5/68, 5/8/68
I. Waiver of Notice of Special Meeting of the Executive Committee of the
Board of Directors of NBAP
6/5/68, 8/22/68
<PAGE>
5
J. Waiver of Notice of Special Meeting of the Stockholders of NBAP
8/22/68 re CA Sports, Incorporated and 8/22/68 re Riko Enterprises,
Incorporated
K. Minutes of Special Meeting of Stockholders of NBAP
8/22/68
L Charter and By-Laws of NBAP
1. Certificate of Incorporation of NBAP dated 8/30/67.
2. Certificate of Amendment of the Certificate of Incorporation of
NBAP dated 9/30/76.
3. By-Laws of NBAP.
M. Miscellaneous
1. Agreement and Official Signatures of Corporation between NBAP
and Chemical Bank dated 4/81 for account number 112-011128, dated
9/22/76 for account number 026-014114, and dated 4/81 for account
number 112-006361.
2. Certificates of Officers dated 4/81 and 9/22/76 of NBAP to
Chemical.
3. Application for Checking Accounts for NBAP dated 1968.
4. Resolutions of NBAP re Bank Account Authorization dated 9/16/76.
5. Agreement dated 9/15/81 between NBAP and NBA Entertainment, Inc.
6. Designation of NBAP president 11/23/81.
7. Certificate of Merger of NBA International, Ltd. into NBAP dated
11/25/92 and certified by the Secretary of State as of 6/14/94.
8. Assignment and Assumption of License Agreements dated as of
12/1/92 by and between NBAP (assignor), and NBA Entertainment,
Inc., (assignee).
9. Stock Certificates of Ownership of NBA Properties, Inc.
10. Letter of Resignation of George Gallonty, Robert Kaufman and
Ronald Schecht dated 9/5/67.
<PAGE>
6
III. NBA INTERNATIONAL, LTD. ("NBAI")
A. Action By Written Instrument of the Sole Incorporator of NBAI
3/2/87
B. Action by Written Consent of Directors of NBAI
11/15/88
C. Unanimous Consent in lieu of Annual Meeting of Shareholders of NBAI
11/15/88
D. Charter and By-Laws of NBAI
1. Certificate of Inc. of NBAI dated 2/23/87.
2. By-Laws of NBAI.
IV. NBA ENTERTAINMENT, INC. ("NBAE")
A. Unanimous Consent of the Board of Directors of NBAE
9/26/94
B. Unanimous Consent in Lieu of Annual Meeting of the Board of
Directors of NBAE
11/30/93, 1/4/91, 11/15/88, 7/1/87, 7/1/86, 7/1/85, 7/2/84, 6/30/83,
11/3/82, 9/15/81
C. Unanimous Consent in lieu of Annual Meeting of the Shareholders of
NBAE
1/4/91, 11/15/88, 7/1/87, 7/1/86, 7/1/85, 7/2/84, 6/30/83, 11/3/82
D. Waiver of Notice of Incorporator's Meeting
9/15/81
E. Unanimous Consent in Lieu of First Shareholders Meeting of NBAE
9/15/81
F. Minutes of Incorporator's Meeting of NBAE
9/15/81
<PAGE>
7
G. Written Consent of the Board of Directors of NBAE
2/17/94
H. Written Consent of Sole Stockholder of NBAE
2/17/94
I. Miscellaneous
1. Certificate of Incorporation of NBAE
2. By-Laws of NBAE
3. Agreement dated 9/15/81 between NBAP and NBAE
<PAGE>
CONSENT AGREEMENT
THIS CONSENT AGREEMENT is made this 10th day of March, 1995 by and
among the NATIONAL HOCKEY LEAGUE, a joint venture organized as an unincorporated
association not-for-profit (the "NHL"), MSG HOLDINGS, L.P., a Delaware limited
partnership ("MSG Holdings"), MSG EDEN CORPORATION, a Delaware corporation
("Eden"), ITT EDEN CORP., a Delaware corporation ("ITT Eden"), ITT MSG INC., a
Delaware corporation ("ITT MSG"), ITT CORPORATION, a Delaware corporation
("ITT"), GARDEN L.P. HOLDINGS CORP., a Delaware corporation ("Garden Holdings"),
RAINBOW GARDEN CORPORATION, a Delaware corporation ("Rainbow Garden"), RAINBOW
PROGRAMMING HOLDINGS, INC., a New York corporation ("Rainbow Holdings"), and
CABLEVISION SYSTEMS CORPORATION, a Delaware corporation ("Cablevision" and
together with MSG Holdings, Eden, ITT Eden, ITT MSG, ITT, Garden Holdings,
Rainbow Garden and Rainbow Holdings, the "Acquiring Parties").
BACKGROUND
(a) Pursuant to an Agreement and Plan of Merger, dated August 27,
1994 (as amended as of March 10, 1995, the "MERGER AGREEMENT"), among Viacom
Inc., a Delaware corporation ("VIACOM"), Paramount Communications Realty
Corporation, a Delaware corporation and wholly owned subsidiary of Viacom
("PARAMOUNT"), Madison Square Garden Corporation, a Delaware corporation
("MSG"), ITT, Rainbow Garden and MSG Holdings, MSG Holdings has agreed to
acquire MSG, which, indirectly, owns all of the assets which comprise the New
York Rangers Hockey Club (the "RANGERS"). To effectuate the acquisition, MSG
will be merged with and into MSG Holdings, with MSG Holdings being the survivor
of such merger (the "MERGER").
(b) On the date hereof: (i) Eden, as a general partner, owns a 1%
partnership interest in MSG Holdings; (ii) ITT MSG, as a limited partner, owns
an approximately 83.9% partnership interest in MSG Holdings; (iii) Garden
Holdings, as a limited partner, owns an approximately 15.1% partnership interest
in MSG Holdings; (iv) the outstanding capital stock of Eden is owned equally by
ITT Eden and Rainbow Garden; (v) ITT MSG and ITT Eden are wholly-owned
subsidiaries of ITT; (vi) Garden Holdings and Rainbow Garden are wholly-owned
subsidiaries of Rainbow Holdings which, in turn, is a wholly-owned subsidiary of
Cablevision; and (vii) the common stock of ITT is traded on the New York Stock
Exchange. Further, the Acquiring Parties contemplate that Garden Holdings may
in the future purchase additional limited partnership interests in MSG Holdings
from ITT MSG such that, following such purchase, Garden Holdings and ITT MSG
would each own a 49.5% limited partnership interest in
<PAGE>
- 2 -
MSG Holdings (the "RAINBOW POST CLOSING PURCHASE"). If Garden Holdings does not
consummate the Rainbow Post Closing Purchase, the parties also contemplate that
Garden Holdings may sell to ITT, ITT Eden or ITT MSG, in whole or in part, the
interests in MSG Holdings held by Garden Holdings and Rainbow Garden (the "ITT
POST CLOSING PURCHASE").
(c) MSG Holdings has entered into a Credit Agreement dated as of
January 20, 1995 (the "CREDIT AGREEMENT"), among MSG Holdings, the lending
institutions parties thereto and Chemical Bank, as agent, pursuant to which a
$450 million revolving credit facility (the "CREDIT FACILITY") will, subject to
the terms and conditions thereof, be made available to MSG Holdings. The
proceeds of the Credit Facility will be used to pay a portion of the purchase
price under the Merger Agreement and to finance the working capital needs of MSG
Holdings, including, after the Merger, the Rangers. As security for the
financing, MSG Holdings has agreed to grant to Chemical Bank, as Collateral
Agent, a security interest in substantially all of its assets, including the
Rangers. The NHL has consented to the grant of that security interest pursuant
to and subject to the terms of a separate letter to Chemical Bank, as agent.
(d) Charles F. Dolan or his estate ("Dolan") and his family and
trusts for the benefit of members of his family, whether now existing or
hereafter created, so long as any trust created after March 10, 1995, signs the
"Dolan Letter" (the "Family Trusts") collectively own a majority of the
outstanding Class B Shares of Cablevision and, as a result thereof, have the
right to elect 75% of the board of directors of Cablevision, and no person or
entity owns in excess of 5% of the capital stock of ITT.
(e) A portion of the acquisition price in the Merger will be paid by
MSG Holdings to Paramount from equity contributions made to MSG Holdings by
Garden Holdings and ITT MSG in the approximate amounts of $110 million and $610
million, respectively.
(f) The consent of the NHL Board of Governors is required for certain
of the transactions proposed in subsections (a) through (c) above under, INTER
ALIA, Article 3.5 of the NHL Constitution ("Article 3.5") and Bylaw 35, as well
as the NHL resolutions and rules adopted thereunder. (The transactions
described in subsections (a) through (c) above shall be referred to herein as
the "Proposed Transactions.")
(g) The Acquiring Parties have furnished to the NHL true, complete
and correct copies of all material documents relating to the Proposed
Transactions, a complete list of which is provided on Schedule 1A (the
"Transaction Documents").
<PAGE>
- 3 -
(h) On March 3, 1995, the NHL Board of Governors adopted a resolution
(the "Resolution") approving the Proposed Transactions, subject to the terms and
conditions of this Consent Agreement and the terms of the Gaming Letters as
defined in Section 14(d), which are executed by the NHL in accordance with the
authority set forth in the Resolution.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties, covenants and agreements set forth herein, and
subject to the following terms and conditions, it is agreed as follows:
1. NHL CONSENT. Subject to the terms and conditions set forth in
the Resolution and in this Consent Agreement, the NHL hereby consents to the
Proposed Transactions; provided, however, that the NHL's consent to the Rainbow
Post Closing Purchase and the ITT Post Closing Purchase shall be automatically
revoked, effective without further notice, if such transactions are not
consummated on or prior to the date which is 18 months after the date hereof;
provided further, however, that, solely in connection with the consummation of
the ITT Post Closing Purchase, such 18 month period shall be extended for a
period of 135 days. The consent granted herein is limited to the Proposed
Transactions and does not extend to any other transfer, sale, liquidation, wind-
up, dissolution, mortgage, hypothecation, pledge or other impairment or
encumbrance of any assets of, or direct or indirect ownership interests in, MSG
Holdings, whether or not the same may be contemplated by the Transaction
Documents.
2. PERFORMANCE OF AGREEMENTS. Each Acquiring Party agrees to
perform all of the terms and conditions required of it under the Transaction
Documents, including, without limitation, the Merger Agreement and the Bid
Agreement, dated August 15, 1994, among ITT, Cablevision and Rainbow Holdings,
true and complete copies of which have been delivered to the NHL.
3. NHL CONSTITUTION, BYLAWS AND AGREEMENTS.
(a) Notwithstanding anything contained to the contrary in any
Transaction Document:
(i) For so long as it owns a direct or indirect ownership
interest in MSG Holdings, and should it cease to hold such interest,
subject to execution and delivery of documents in form reasonably
satisfactory to the NHL releasing and indemnifying the Affiliated NHL
Parties (as defined in Section 13) from all Losses (as defined in Section
13) arising out of or relating to its former ownership interest in MSG
Holdings, each Acquiring Party jointly and severally agrees to be bound by
and comply with (A) the NHL Constitution, including, without limitations,
<PAGE>
- 4 -
Article 3.5 (Transfer of Ownership), Article 3.9 through 3.12 (concerning
involuntary termination by the NHL and disposition of the Franchise), and
Article 4 (concerning territorial rights), (B) the NHL Bylaws, including,
without limitation, Bylaw 35 (Transfer of Membership or Ownership Interest
in Franchise), Bylaw 36 (Transfer of Franchise Location) and Bylaw 37
(Admission of New Members), (C) all other NHL rules, regulations, policies
and resolutions, (D) the current and future Collective Bargaining
Agreements between the NHL and the National Hockey League Players'
Association and consent decrees and settlement agreements presently or
hereafter in effect or entered into between or among the NHL and its Member
Clubs of the NHL and other persons in furtherance of NHL business or
interests or as otherwise authorized, directly or indirectly, by the NHL
Board of Governors, the NHL Commissioner, the Constitution or the Bylaws,
and (E) the NHL Commissioner's interpretation of any of the foregoing, all
as may be amended from time to time (collectively, the "NHL Constitution
and Agreements"), in each case to the extent that the subject provisions of
the NHL Constitution and Agreements (x) relate directly or indirectly to
MSG Holdings' ownership of the Rangers and (y) are generally applicable to
all Member Clubs.
(ii) For so long as it owns a direct or indirect ownership
interest in MSG Holdings, and should it cease to hold such interest,
subject to execution and delivery of documents in form reasonably
satisfactory to the NHL releasing and indemnifying the Affiliated NHL
Parties (as defined in Section 13) from all Losses (as defined in Section
13) arising out of or relating to its former ownership interest in MSG
Holdings, each Acquiring Party jointly and severally agrees not to take or
support any positions or actions which may be inconsistent with any NHL
obligations or the NHL Constitution and Agreements or which may have a
material adverse impact on the NHL or its Member Clubs, and
(iii) For so long as it owns a direct or indirect ownership
interest in MSG Holdings, and should it cease to hold such interest,
subject to execution and delivery of documents in form reasonably
satisfactory to the NHL releasing and indemnifying the Affiliated NHL
Parties (as defined in Section 13) from all Losses (as defined in Section
13) arising out of or relating to its former ownership interest in MSG
Holdings, each Acquiring Party jointly and severally agrees not to
challenge or support any challenge to, at any time or in any forum, any
aspect of the NHL Constitution and Agreements, except insofar as an
appeal right is provided in NHL Constitution and Agreements.
<PAGE>
- 5 -
(b) Without modifying the foregoing and pursuant to Article 3.5 of
the NHL Constitution, each Acquiring Party agrees and represents to the NHL that
the transactions contemplated by the Transaction Documents shall not, except as
contemplated by the Transactions Documents, materially adversely affect the
Franchise (as hereinafter defined) or the operation or financial condition of
the Rangers and shall not in any way impair or adversely affect any debts,
liabilities or obligations of the Rangers or MSG to any other person, including,
without limitation, to the NHL, its Member Clubs or any related or affiliated
entity of the NHL or of any of its Member Clubs, including, without limitation,
player contracts or deferred compensation to players and other personnel.
4. LOCATION AND TERRITORY OF FRANCHISE.
(a) Except as set forth herein, each Acquiring Party warrants and
represents to the NHL that it has received no representation, commitment,
promise, assurance or other indication of any kind whatsoever with respect to
any future transfer of ownership or change in location of the NHL franchise
known as the New York Rangers (the "Franchise").
(b) The Acquiring Parties jointly and severally warrant, represent
and covenant to the NHL that the acquisition of an interest in the Rangers is
for the purpose of operating the Franchise and hereby agree to so operate the
Franchise and to play the Rangers' schedule of home games in the territory of
the Franchise as provided for in the NHL Constitution and Agreements. The
territorial definition of the Franchise shall be as provided for in the NHL
Constitution and Agreements, including without limitation, Article IV thereof.
The Acquiring Parties and the Rangers jointly and severally hereby confirm and
agree that the "Home Territory" and the "Sphere of Influence" of the Franchise
is as described on Exhibit A hereto and each jointly and severally further
represents and warrants that it has received no representation, commitment,
promise, assurance or other indication of any kind whatsoever contrary thereto.
5. POST MERGER CAPITAL STRUCTURE AND OTHER CONDITIONS. The NHL's
consent granted in Paragraph 1 hereof is subject to (a) the consummation of the
Merger, (b) MSG Holdings entering into the Credit Agreement and pledging its
interests in the Rangers to Chemical Bank, as Collateral Agent, in connection
therewith, and (c) the ownership structure of the Acquiring Parties conforming
to the provisions of paragraph (b) of the "Background" Section hereof. Except
as permitted under this Consent Agreement, or the Toronto-Dominion Pledge Letter
(as defined in Section 6(c)(i)), none of the Acquiring Parties shall pledge the
Franchise, their interest therein or any other hockey-related assets to secure
any debt obligation other than
<PAGE>
- 6 -
amounts outstanding under the Credit Facility without the NHL's prior written
consent.
6. OWNERSHIP, CONTROL, CHANGE IN DOCUMENTS.
(a) The Co-Presidents of Eden as of the date hereof are Marc
Lustgarten and Robert Bowman and they are responsible for and have the authority
to manage the business and affairs of Eden and MSG Holdings, subject to certain
prior approvals of the board of directors of Eden as required by law and by the
stockholder agreement relating to MSG Eden (the "Eden Stockholders Agreement").
The General Manager of the Rangers is Neil Smith, and Mr. Smith is responsible
for and has the authority to manage the business and affairs of the Rangers,
subject to certain prior approvals of the board of directors of MSG Holdings as
required by law and by the Eden Stockholders Agreement.
(b) Notwithstanding any provision in any other agreement which may
be to the contrary, the NHL and NHL Member Clubs may rely upon as binding upon
the Rangers, MSG Holdings and Eden any action of Charles F. Dolan or James L.
Dolan with respect to any communication, agreement, understanding, action,
consent or other transaction with or concerning the NHL, or its Member Clubs.
(c) Each Acquiring Party acknowledges and agrees that:
(i) The ownership of the Franchise, any proposed transfer of the
location of the Franchise and any proposed sale, pledge or other transfer
of the assets of, or any direct or indirect ownership interest in, MSG
Holdings are subject to the NHL Constitution and Agreements and this
Consent Agreement, including particularly Articles 3.5 and 4.2 of the NHL
Constitution and Bylaws 35 and 36. Without limiting the foregoing, any
sale, pledge, or other transfer of the assets of, or a direct or indirect
ownership interest in, the Acquiring Parties shall be subject to and
conditioned upon approval of the NHL pursuant to Article 3.5, unless
otherwise provided in the Constitution and Agreements, PROVIDED that (A)
ITT or Cablevision may effect a "spin-off" (or other corporate
reorganization) of any of its wholly-owned subsidiaries (other than ITT
Eden, ITT MSG, Garden Holdings and Rainbow Garden) which owns a direct or
indirect interest in the Rangers (a "SPUN-OFF SUBSIDIARY") without NHL
consent if and only if (I) after the spin-off the ownership of common stock
in such Spun-off Subsidiary is identical (except for changes in ownership
by "public" shareholders or the grant or exercise of employee stock options
or other similar rights granted to employees of such Spun-off Subsidiary
and without giving effect to
<PAGE>
- 7 -
any when issued trading) to the ownership of common stock in ITT or
Cablevision, as the case may be, on the record date of the spin-off and
(II) following the spin-off, ITT or Cablevision, as the case my be, shall
be released from its obligations under this Consent Agreement, provided
that it executes and delivers documents in form reasonably satisfactory to
the NHL releasing and indemnifying the Affiliated NHL Parties from all
Losses arising out of or relating to its former ownership interest in MSG
Holdings, and PROVIDED further that ITT or Cablevision, as the case may be,
shall continue to be an "affiliate" of such Spun-off Subsidiary to the
extent ITT or Cablevision, as the case may be, remains under common control
with such Spun-off Subsidiary, (B) it is acknowledged and agreed that
shares of Cablevision common stock held by Family Trusts or members of
Dolan's family shall be deemed to be held by Dolan for the purposes of this
Consent Agreement and the NHL Constitution and Agreements and nothing
herein or therein shall restrict transfers of such common stock between
Dolan and such Family Trusts or such family members or among such Family
Trusts or family members, (C) the conversion of the securities described on
Schedule 5A hereto (the "Convertible Securities") into shares of common
stock of Cablevision or the issuance of common stock of Cablevision
otherwise in respect of the Convertible Securities is hereby approved by
the NHL, (D) Dolan, members of his family and his Family Trusts may pledge
stock of Cablevision owned by them as collateral for loans made to them,
PROVIDED that, in the event that after giving effect to any such pledge
Dolan, members of his family and Family Trusts own in the aggregate less
than 51% of the voting power of Cablevision, the pledgee with respect to
such pledge shall have executed and delivered to the NHL a letter similar
to the letter delivered in connection with the Lender Letter Agreement, (E)
the existing pledge of the stock of Rainbow Holdings by Cablevision in
favor of Toronto-Dominion (Texas), Inc. as agent for certain lenders which
have made senior bank facilities available to Rainbow Holdings, and any
replacement, modification, substitution or extension of such pledge in
connection with any refinancing or amendment of such credit facilities, is
hereby approved, PROVIDED that Toronto-Dominion (Texas), Inc., as
administrative agent and as co-agent, and Canadian Imperial Bank of
Commerce, as co-agent, shall have executed and delivered to the NHL a
letter in the form of schedule 6B hereto (the "Toronto-Dominion Pledge
Letter'), and (F) the sale, assignment or transfer of the stock of
Cablevision shall not be deemed to be a transfer of a controlling interest
in Cablevision for purposes of Article 3.5 of the NHL Constitution to the
extent that, following any such sale, assignment or transfer, Dolan and his
family
<PAGE>
- 8 -
and Family Trusts have the right in the aggregate to elect a majority of
the board of directors of Cablevision.
(ii) No Transaction Document (including, without limitation, the
Merger Agreement, the Agreement of Limited Partnership of MSG Holdings and
the respective Certificates of Incorporation and Bylaws of Garden Holdings,
Rainbow Garden, Eden, ITT Eden and ITT MSG) shall be rescinded, canceled,
terminated or amended in any respect which may or will materially affect
the conditions, obligations or duties set forth in this Consent Agreement
or under the NHL Constitution and Agreements or adversely affect the
interests of the NHL without the prior written approval of the NHL. The
NHL shall be promptly notified in writing, pursuant to paragraph 14(c)
hereof, of any proposed change, whether or not the NHL has consent rights
with respect to the change.
(iii) Without limiting the provisions of subsection (i) above, and
except as specifically set forth in (i) above, each Acquiring Party
acknowledges and agrees that each of the below listed actions are subject
to the approval of the NHL and, accordingly, any such actions taken but not
approved by the NHL shall subject the Acquiring Parties and the Franchise
to all remedies and rights which may be enforced by the NHL or its Member
Clubs:
(A) MSG Holdings to change it status as a Delaware limited
partnership or Garden Holdings, Rainbow Garden, Eden, ITT
Eden or ITT MSG to change their respective statuses as
Delaware corporations:
(B) MSG Holdings, Garden Holdings, Rainbow Garden, Eden, ITT
Eden or ITT MSG to liquidate or dissolve or transfer a
substantial part of its assets to another entity, if such
assets include an interest in the Franchise;
(C) a change in the general partner of MSG Holdings or a change
in control of MSG Holdings, whether or not presently
provided in the Agreement of Limited Partnership of MSG
Holdings;
(D) except as set forth in Section 6(c)(i), any transaction that
will result in a change, directly or indirectly, in the
ownership of any of MSG Holdings, Garden Holdings, ITT MSG,
Eden, ITT Eden, Rainbow Garden,
<PAGE>
- 9 -
Rainbow Holdings, Cablevision or ITT, except as may
otherwise be specifically authorized by Article 3.5 of the
NHL Constitution or by this Consent Agreement. The parties
acknowledge and agree that any transfer of a direct
ownership interest in ITT or Cablevision (or, after a spin-
off of a wholly owned subsidiary pursuant to and in
accordance with Section 6(c)(i), the relevant Spun-off
Subsidiary) is subject to compliance with the NHL
Constitution and Agreements, provided that, notwithstanding
anything to the contrary contained in this Consent
Agreement, any such transfer effectuated without the NHL's
prior written consent (if such consent is required under the
NHL Constitution and Agreements) and for which such consent
is not granted within 30 days after such transfer by the
NHL, will subject MSG Holdings and the Franchise, as the
NHL's sole remedy, to any and all rights and remedies that
the NHL may have against MSG Holdings and/or the Franchise
in connection with a material breach by any Acquiring Party
of the NHL Constitution and Agreements, including without
limitation, those enumerated in Section 14(h) below. The
Acquiring Parties agree to be bound by any decision of the
NHL and its Member Clubs, and any actions taken by the NHL
or its Member Clubs in connection with the exercise of the
NHL's remedies contemplated by this Section in respect of
such decision, not to approve any person or entity to whom
any direct ownership interest in ITT or Cablevision (or,
after a spin-off of a wholly owned subsidiary pursuant to
Section 6(c)(i), the relevant Spun-off Subsidiary) is
transferred without the NHL's written consent (if such
consent is required under the NHL Constitution and
Agreements) (a "Transferee") as a holder of an ownership
interest in a Member Club. The Affiliated NHL Parties shall
be entitled to indemnification in accordance with Section 13
hereof with respect to all Losses arising out of any claim
by a Transferee, any Acquiring Party or any affiliate of an
Acquiring Party with respect to the NHL's and its Member
Clubs' decision not to approve such Transferee as a holder
of an
<PAGE>
- 10 -
ownership interest in a Member Club or any actions taken by
the NHL or its Member Clubs in connection with the exercise
of its remedies contemplated by this Section in respect of
such decision not to approve such Transferee. The parties
hereto agree that the failure to obtain the approval of the
NHL and/or its Member Clubs for any transfer described in
this paragraph will not in and of itself affect the ability
of the transferor to convey good title to the shares
transferred. The NHL further agrees that it shall not seek
to enjoin any sale of Cablevision or ITT stock (or, after a
spin-off of a wholly-owned subsidiary pursuant to and in
accordance with Section 6(c)(i), the relevant Spun-off
Subsidiary), provided that the NHL may seek injunctive or
other relief to prevent such transferee from exercising
dominion or control directly or indirectly over MSG Holdings
or the assets of the Rangers.
(iv) The foregoing covenants apply and shall be enforceable
notwithstanding any provision of any document or instrument to the
contrary.
(e) Each of the Acquiring Parties (other than Cablevision, ITT,
Rainbow Holdings, and any Spun-off Subsidiary) agrees that its stock or
partnership certificate or other document evidencing ownership in such entity,
if any, will bear a legend substantially as follows:
"The transfer, pledge or other disposition of [this limited]
partnership interest] [the stock reflected by this certificate] is
subject to the approval and consent of the National Hockey League
pursuant to the NHL Constitution and Bylaws and a certain Consent
Agreement dated March 10, 1995 with the NHL."
7. WORKING CAPITAL, GUARANTIES AND CAPITAL CONTRIBUTIONS.
(a) MSG Holdings agrees that at all times it shall pay in the
ordinary course and in a timely fashion all of the Operating Expenses and shall
maintain Net Working Capital solely for the use in the operations of the
Franchise in an amount equal to not less than $15.0 million. The obligation of
MSG Holdings to maintain the Net Working Capital for each annual period shall
be deemed to be satisfied so long as:
<PAGE>
- 11 -
(i) MSG Holdings has entered into a working capital line of
credit with a commercial bank making available to MSG Holdings an amount at
all times equal to or exceeding the required amount of Net Working Capital;
PROVIDED, THAT, except as set forth in subparagraph (b) below, such line of
credit is not terminable by such bank absent an event of default during
each of the respective annual periods that the Net Working Capital is being
determined (i.e., the annual periods being from the date of signing to
December 31, 1995 and thereafter from each January 1 through the following
December 31), or
(ii) MSG Holdings has agreed in writing to make a line of credit
available to the Rangers in an available amount at all times equal to or
exceeding the required amount of Net Working Capital; PROVIDED, THAT, any
such line of credit shall be on terms satisfactory to the NHL; PROVIDED,
FURTHER, that if MSG Holdings makes any such line of credit available, it
shall be obligated at all times to keep an amount available to be drawn
under the Credit Facility, or a substitute credit facility, for on-lending
to the Rangers, which is sufficient to maintain a minimum of $15.0 million
Net Working Capital in the Rangers.
(b) For purposes of this Consent Agreement, "Net Working Capital"
means (i) the amount of current assets as determined in accordance with
generally accepted accounting principles in effect from time to time in the
United States ("GAAP") and the unused portion of any line of credit entered into
by MSG Holdings in accordance with paragraph (a)(i) or paragraph (a)(ii) above
(provided that, with respect to paragraph (a)(i) above, such line of credit is
not terminable during the forthcoming NHL season for which Net Working Capital
is being determined and, with respect to paragraph (a)(ii) above, neither the
intercompany line of credit nor MSG Holding's line of credit is terminable
during the forthcoming NHL season for which Net Working Capital is being
determined), less (ii) current liabilities as determined in accordance with
GAAP. The computation and determination of Net Working Capital shall not take
into account as an asset any monies, deposits or receipts with respect to
advance ticket sales or, as a liability, a reserve or equivalent account in
respect of such advance ticket sales. All other current assets and current
liabilities, determined in accordance with GAAP, shall be taken into account in
making such working capital computation. Notwithstanding anything contained in
this Consent Agreement to the contrary, for purposes of this paragraph (b) and
paragraph (a) of this Section 7, a line of credit shall not be deemed to be
terminable in the annual period or the forthcoming season if its term is to
expire prior to the start of the NHL regular season, provided that MSG Holdings
has received a written commitment letter from a bank satisfactory to the NHL at
least 30 days prior to the
<PAGE>
- 12 -
expiration of the then existing line of credit to extend or replace the line of
credit through, at least, the next following 12-month period from the expiration
date and provided further that the NHL receives notification that the
replacement line of credit has in fact been timely issued and is available to
MSG Holdings.
(c) For purposes of this Consent Agreement,"Operating Expenses"
includes all expenses incurred in the operation of the Franchise; all
obligations incurred by the Rangers in the operation of any minor league club;
dues and assessments payable to the NHL; any sums required to cure defaults in
the payment of salaries, bonuses, deferred compensation, or other sums due
to any player on the NHL reserve list of the Franchise and any sums required to
take all necessary steps so that, at the close of the applicable NHL season, the
Franchise shall hold valid, enforceable and transferable player contracts for
all of its players that were under contract during the prior season, except as
may be changed in connection with trades and transfers in the ordinary course of
business; the payment of salary, bonus, pension contribution and other
compensation earned by any and all such players, including but not limited to,
withholding taxes and unemployment taxes payable with respect to such
compensation, and the payment of premiums on insurance to cover in the customary
manner the appropriate compensation which may be due or become due to such
players in the event the player becomes disabled and unable to perform his
duties in the course of his employment pursuant to the collective bargaining
agreement between the NHL and the National Hockey League Players' Association
then in effect, or any applicable collective bargaining agreement with a minor
league's players' association.
(d) Notwithstanding anything to the contrary contained in the Consent
Agreement or in any other document or agreement:
(i) ITT agrees to, and does hereby guaranty to and for the
benefit of the NHL to, provide to the Rangers or MSG Holdings as the case
may be from time to time such amounts as from time to time may be necessary
for MSG Holdings to fully and punctually pay, perform and discharge, all
Operating Expenses in the ordinary course and in a timely fashion; and
(ii) In the event that the NHL shall have the exclusive and
unrestricted right under Paragraph 7(b) of the Lender Letter Agreement (as
hereinafter defined) to select the purchaser to whom the Club Collateral
(as defined in the Lender Letter Agreement) shall be sold pursuant to such
Paragraph, ITT hereby agrees, upon the request of the NHL, to purchase the
Club Collateral from
<PAGE>
- 13 -
MSG Holdings at the purchase price specified in Paragraph 7(b)(iii)(A) of
the Lender Letter Agreement (and upon such other reasonable terms and
conditions as may be agreed to by ITT and the NHL), which purchase price
shall be paid to the Collateral Agent in cash at closing (in full release
of the lien of the Collateral Agent on the Club Collateral), all in
accordance with the applicable terms and conditions of Paragraph 7 of the
Lender Letter Agreement and to assume all Operating Expenses. This
provision is intended to be a "last resort" provision and does not, and
shall not be deemed to, give ITT any right of first refusal in the event
the NHL has located another purchaser.
(e) The Acquiring Parties acknowledge and agree that the NHL is a
third party beneficiary of the agreements set forth in Section 7(d) and that the
NHL's provision of the consent contained herein has been conditioned upon the
provision of such agreements. The NHL shall have the right to require that the
agreements set forth in Section 7(d) hereof be enforced in accordance with their
terms.
(f) The Acquiring Parties shall furnish to the NHL, within 90 days of
the end of each fiscal year of the Rangers, true and complete financial
statements for the Rangers, consistent with past practice. The Acquiring
Parties will give the NHL access, at the NHL's request on reasonable notice, to
MSG Holdings' books and records pertaining or relevant to the Rangers in order
to verify the accuracy of the foregoing financial statements or any other
financial information provided to the NHL.
(g) In addition to the financial statements described above, each
Acquiring Party shall deliver to the NHL such other publicly available financial
information with respect to it as the NHL may reasonably request from time to
time.
(h) MSG Holdings, upon the NHL's request, shall (a) promptly deliver
to the NHL a confirmation, in such form and substance as the NHL may reasonably
request, that MSG Holdings then currently maintains the required level of Net
Working Capital and (b) provide the NHL (or its representatives) access to MSG
Holdings' books and records pertaining or relevant to the Rangers in order that
the NHL may confirm the same is true and correct. The NHL agrees, on behalf of
itself and all of its officers and agents, to hold all information furnished by
the Acquiring Parties to the NHL confidential and not to disclose any of such
information to any person or entity without the prior written consent of MSG
Holdings, except as otherwise disclosed pursuant to prior practice or as
generally applicable to all Member Clubs.
<PAGE>
- 14 -
8. REPRESENTATIONS AND WARRANTIES. Each Acquiring Party hereby
represents and warrants to the NHL as follows:
(a) It is a corporation duly organized, validly existing and in good
standing under the laws of the state of its existence, and has the power and
authority to own, operate and lease its properties and to carry on it business.
MSG Holdings is a limited partnership validly existing and in good standing
under the laws of the state of its existence, and has the power and authority to
own, operate and lease its properties and to carry on its business.
(b) It has the power and authority to execute and deliver this
Consent Agreement and to perform its obligations hereunder.
(c) The execution, delivery and performance of this Consent Agreement
constitutes a valid and binding obligation of such Acquiring Party enforceable
in accordance with its terms.
(d) Except for the pledge of the Rainbow Holdings stock consented to
in writing by the NHL, the ownership interests in it described in paragraph (b)
of the "Background" Section hereof are validly issued and fully paid and are
held free and clear of any liens, security interests, pledges, charges,
encumbrances or claims of liability. Except for the Rainbow Post Closing
Purchase and the ITT Post Closing Purchase or as otherwise permitted hereunder,
and the pledges of Rainbow Holdings stock consented to in writing by the NHL,
such Acquiring Party presently has no intention of selling any part of its
interest in the Rangers, whether direct or indirect, or any of the assets of the
Rangers, and, except for the Convertible Securities, there are no options,
warrants, put or call rights or any other rights of acquisition or conversion
that would entitle any person or entity to acquire any of its direct or indirect
interest, whether equity or otherwise, in the Rangers.
(e) All balance sheets, income statements and other financial
statements heretofore furnished by such Acquiring Party to the NHL in connection
with the application for this consent have been prepared in accordance with GAAP
and were prepared in good faith and are complete.
(f) There is no action, suit, or proceeding pending against the
Rangers or such Acquiring Party which involves the likelihood of any adverse
judgement or liability not fully covered by insurance or with respect to which
adequate reserves have not been established in accordance with GAAP and which
may result in a material adverse change in the business, properties or assets or
in the condition, financial or otherwise, of such Acquiring Party or which may
prevent or impede the consummation
<PAGE>
- 15 -
of the transactions contemplated by this Consent Agreement. There is no order,
writ, injunction or decree that has been issued by, or, to the knowledge of such
Acquiring Party, requested by, any court or governmental agency which does or
may result in any material adverse change in the business, properties or assets
or in the condition, financial or otherwise, of such Acquiring Party or which
may prevent or impede the consummation of this Consent Agreement.
(g) To the best of the knowledge and belief of such Acquiring Party,
MSG Holdings and Eden each has complied in all material respects with all
material laws, regulations and orders, federal or otherwise.
(h) All material consents, waivers, approvals, orders and
authorizations of any persons or entities or governmental or regulatory
authorities (or registrations, declarations, filings or recordings with any such
authorities) that are required in connection with the Proposed Transactions have
been obtained and are in full force and effect.
(i) Such Acquiring Party has performed in all material respects all
obligations required to be performed by it to date with respect to the
transactions contemplated by this Consent Agreement and, except as disclosed in
any schedules hereto, it is not in default under any material contract,
agreement, lease, or other instrument relating to the same to which it is a
party or by which it is bound. True and correct copies of all documents
described or referred to herein or in any Schedule attached hereto have
heretofore been delivered or made available to the NHL or will be made available
upon request and will be signed by an officer of Eden for identification upon
request of the NHL.
(j) The execution and delivery of this Consent Agreement, and
compliance with the terms hereof by such Acquiring Party, will not conflict
with, or result in the breach of, any of the terms, conditions or provisions of,
or constitute a default under, or result in the creation of any lien, charge or
encumbrance upon any of its properties or assets (except as contemplated or
disclosed herein or the Schedules hereto) pursuant to any indenture, mortgage,
lease, agreement or other instrument to which it is a party or by which it is
bound.
9. CABLE AGREEMENTS.
(a) (i) Although MSG Holdings is considering numerous alternatives
with respect to the MSG Network which include the matters described in clauses
(A) and (B) below, MSG Holdings has no current intention and has made no
decisions relating to the implementation of (A) cablecasting Rangers games on a
premium cable service, except to the extent consistent with
<PAGE>
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current practice, or (B) merging operations of MSG Network with the operations
of SportsChannel New York.
(ii) At all times, the Acquiring Parties shall cause feeds with
respect to the Rangers to be made available on the terms and conditions and in
accordance with the NHL Constitution and Agreements.
10. LENDER COOPERATION LETTER AGREEMENTS. The parties hereto agree
and acknowledge that, notwithstanding any other provision contained herein to
the contrary, the consent of the NHL referred to herein is specifically subject
to and conditioned upon, and such consent shall not be deemed granted until, the
execution and delivery of an agreement in form and substance satisfactory to
the NHL in its sole discretion: (a) by and among the NHL and Chemical Bank, for
itself and on behalf of all other Lenders (as defined in the Credit Agreement),
relating to the Credit Facility in the total aggregate amount of $450 million,
which is secured by certain ownership interests in the Rangers and certain
hockey-related assets of the Rangers, including the Franchise, in the form set
forth in Schedule 10A attached hereto) (the "Lender Letter Agreement") and (b)
by and among the Acquiring Parties in favor of the NHL relating to certain
gaming activities (the "Gaming Letter").
11. DISTRIBUTIONS. Notwithstanding anything set forth in any
Transaction Document or any other agreement, there will be no payment or
distribution to the partners of MSG Holdings in any year, other than payments of
interest and required payments of principal to non-Acquiring Parties, if such
payment or distribution would reduce the amount of the Net Working Capital below
that required to be maintained by MSG Holdings as set forth in this Consent
Agreement.
12. FINANCING STATEMENTS. The Rangers and the Acquiring Parties
agree to execute any and all financing statements requested by the NHL which the
NHL reasonably deems necessary to notify creditors of the Rangers and the
Acquiring Parties of the existence of Article III of the NHL Constitution and
Agreements and this Consent Agreement, provided that with respect to any
financing statement filed against ITT, Cablevision or Rainbow Holdings, such
financing statement shall be subject to the consent of their secured lenders,
which will not be unreasonably withheld.
13. RELEASE AND LIMITATION OF LIABILITY. (a) As partial
consideration for the NHL providing the consents contained herein, each of the
Acquiring Parties, and Viacom and Paramount, on their own behalf and on behalf
of their successors and assigns, but not on behalf of any affiliate or
subsidiary or in its capacity as a partner, shareholder or agent of any such
affiliate or subsidiary, hereby forever release and discharge
<PAGE>
- 17 -
the NHL, NHL Enterprises, Inc., all of the NHL's Member Clubs (except the
Rangers) and each of their successors and assigns and any of their respective
past, present or future owners, directors, officers, agents, trustees or
employees in their respective capacities as such (collectively, "Affiliated NHL
Parties") from any and all claims, demands, causes of action, and liabilities of
any kind whatsoever (upon any legal or equitable theory, whether contractual,
common-law, statutory, decisional, Canadian, United States, state, provincial,
local or otherwise), which, to the best knowledge of MSG Holdings or MSG, in the
case of the release by MSG Holdings, or, which to the best knowledge of MSG,
Viacom and Paramount, in the case of the release by Viacom and Paramount, exist
as of the date of execution of this Consent Agreement by reason of any act,
omission, transaction or occurrence taken or occurring at any time up to and
including the date of the execution of this Consent Agreement, relating to, or
arising from, any hockey operations or any NHL activity, including without
limitation, the performance, presentation or exploitation of any hockey game or
hockey exhibition or in respect of the Proposed Transactions (collectively,
"HOCKEY MATTERS"); PROVIDED that as to Viacom and Paramount only as to matters
relating to the ownership and operation of the franchise known as The New York
Rangers; and PROVIDED, FURTHER, that nothing in this paragraph shall be
construed or interpreted as a release and discharge by any of the Acquiring
Parties or Viacom or Paramount of (i) any claims, demands, causes of action or
liabilities of any kind whatsoever (upon any legal or equitable theory, whether
contractual, common-law, statutory, decisional, Canadian, United States, state,
provincial, local or otherwise), relating to the matters described on Schedule
13, or (ii) any amounts due to any of the Acquiring Parties or Viacom or
Paramount from any Affiliated NHL Parties in the ordinary course or under
agreements executed prior to the date hereof or in respect of player
transactions. To the extent any Affiliated NHL Party asserts a claim against
any Acquiring Party, Viacom or Paramount, as the case may be, then the release
contained in this paragraph shall not prohibit such Acquiring Party, Viacom or
Paramount, as the case may be, from asserting a defense or counterclaim to that
claim.
(b) The Acquiring Parties hereby agree, based upon facts known to, or
facts that reasonably should have been known to, the Acquiring Parties on the
date hereof, not to initiate a judicial or other proceeding against the NHL
challenging any provision of the NHL Constitution and Agreements as in effect
and interpreted on the date hereof as they may apply to acts or omissions up to
and including the date hereof.
(c) Without limiting any other rights then NHL may have, and without
limiting any party's affirmative obligation to pay the amounts referenced in
this Consent Agreement, the Acquiring Parties and MSG Holdings hereby jointly
and severally
<PAGE>
- 18 -
agree to indemnify and hold harmless the Affiliated NHL Parties from and against
any and all losses, obligations, claims, liabilities, fines, penalties, damages,
costs and expenses (including without limitation, reasonable costs of
investigation and settlement and attorneys' fees, including in actions with
Affiliated NHL Parties) incurred or required to be paid by an Affiliated NHL
Party, (collectively, "Losses") arising out of, attributable to or relating to
legal actions against any Affiliated NHL Party (other than any action by any
Acquiring Party, against any Affiliated NHL Party) with respect to (i) the
transactions contemplated in the Transaction Documents and (ii)(A) any liability
or obligation under this Consent Agreement and (B) any wrongful or allegedly
wrongful act or omission, or any liability or obligation to the Affiliated NHL
Parties, occurring or arising after the date of this Consent Agreement of MSG
Holdings (or any of its shareholders, directors, officers, employees,
representatives or agents in their respective capacities as such), PROVIDED that
no Affiliated NHL Party other than the NHL or NHL Enterprises shall be entitled
to indemnification under clause (ii)(B) unless the Commissioner determines that
such indemnification is reasonable and appropriate. The NHL agrees (i) that it
will give the Acquiring Parties notice of any claim as to which it reasonably
expects to seek indemnification, and (ii) that the Acquiring Parties will be
consulted on a reasonable basis concerning the defense, settlement, or other
response to any claim for which indemnification is sought. The Acquiring
Parties agree that they shall have no right to control the defense or other
response to such a claim and that they will fully cooperate with the League,
its designated counsel and other representatives. No claim against either an
individual Member Club or which is based primarily on an act or omission of the
Rangers for which indemnification is sought will be settled without the consent
of the Acquiring Parties, such consent not to be unreasonably withheld.
(d) Without limiting any other rights the NHL may have, and without
limiting any party's affirmative obligation to pay the amounts referenced in
this Consent Agreement, Viacom and Paramount hereby jointly and severally agree
to indemnify and hold harmless the Affiliated NHL Parties from and against any
and all Losses arising out of, attributable to or relating to (i) the
transactions contemplated in the Transaction Documents, and (ii)(A) any
liability or obligation to the Affiliated NHL Parties based or arising out of
circumstances prior to the date hereof (including without limitation, all
obligations set forth in this Consent Agreement), of or (B) any wrongful or
allegedly wrongful act or omission prior to the date hereof of, any of Paramount
or Viacom, or any of their respective subsidiaries or affiliates and any of
their respective owners, shareholders, officers, directors, employees, agents
and
<PAGE>
- 19 -
representatives, in their capacity as such, as they may relate, directly or
indirectly, to the Rangers or MSG.
(e) Nothing contained in this Consent Agreement shall be, or be
construed or deemed to be, a subordination by the NHL of the NHL's rights (i)
to receive payments on account of indebtedness or liabilities now or hereafter
owing to it by the Rangers or any other entity or (ii) to defer or off-set any
distribution to the Rangers. Nothing in this Consent Agreement shall be
construed in any respect as a guaranty or indemnity by the NHL, or any of its
Member Clubs, of any debts, liabilities or obligations whatsoever of the
Rangers, Paramount, Viacom, any Acquiring Party or any other party.
(f) Notwithstanding anything to the contrary contained in this
Section 13, no Member Club shall be entitled to indemnification pursuant to
clause 13(c)(ii)(B) or clause 13(d)(ii)(B) unless the Commissioner determines
that it would be reasonable and appropriate for the Member Club to be
indemnified under the circumstances.
14. ADDITIONAL PROVISIONS.
(a) The Acquiring Parties agree, in accordance with the third
paragraph of Article 3.5 of the NHL Constitution, that all legal fees and costs
incurred by the NHL with respect to the transactions contemplated by this
Consent Agreement shall be charged to the Franchise and shall be the obligation
thereof.
(b) This Consent Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
including but not limited to, any corporation or other business entity into
which any party shall be merged, consolidated or amalgamated or to which
substantially all of the assets of a party shall be transferred. This Consent
Agreement may not be assigned except as set forth herein or with the written
consent of the NHL. The parties herein agree that the NHL Constitution and
Agreements shall be applicable to each Acquiring Party and to each Acquiring
Party's affiliates and subsidiaries, as appropriate, and, shall be (1) limited
to hockey related matters and the application and interpretation of the NHL
Constitution and Agreements, (2) limited to any such affiliate or subsidiary
which is controlled directly or indirectly by such Acquiring Party, (3) in the
case of matters relating to the production, telecasting or other related
exploitation of hockey games, as set forth in any television rights agreement to
which any such affiliate or subsidiary is a party, including, without
limitation, any provisions in any such agreement regarding compliance with the
NHL Constitution and Agreements and (4) subject to any fiduciary duties or
obligations required by law or contract of such Acquiring Party.
<PAGE>
- 20 -
Any dispute between the parties hereunder relating to the subject matter hereof
which is subject to Section 6.3 of the NHL Constitution shall be resolved in
accordance with Section 6.3 of the Constitution and the Commissioner of the NHL
shall have full and exclusive jurisdiction and authority to arbitrate and
resolve such dispute. Notwithstanding anything to the contrary contained in any
Transaction Document, MSG Holdings shall have the right (i) to amend, modify,
rescind or restate all governing, constitutive, operating and other agreements
or documents relating to the NHL or NHL Enterprises and any of their
subsidiaries or affiliates, whether now existing or formed in the future, and to
liquidate, dissolve or merge any of those entities, (ii) to vote in favor of
any of the actions set forth in clause (i), and (iii) to invest or acquire an
interest in any entity in which NHL teams or Member Clubs generally are
investing or acquiring interests.
(c) All notices, consents, requests, instruments, approvals and other
communications provided for herein shall be validly given, made or served
effective on the date of dispatch thereof, if in writing and delivered
personally or sent by registered or certified mail, postage prepaid, return
receipt requested, or by overnight courier service, as follows:
If to the NHL: National Hockey League
1251 Avenue of the Americas
New York, New York 10020-1198
Attention: General Counsel
If to MSG Holdings, Two Penn Plaza
L.P.: 14th Floor
New York, New York 10121
Attention: General Counsel
If to MSG c/o ITT Corporation
Eden Corporation 1330 Avenue of the Americas
New York, New York 10019
Attention: General Counsel
and
c/o Rainbow Programming Holdings, Inc.
150 Crossways Park West
Woodbury, New York 11797
Attention: General Counsel
If to ITT Corporation, 1330 Avenue of the Americas
ITT MSG Inc. or ITT New York, New York 10019
Eden Corp. Attention: General Counsel
<PAGE>
- 21 -
If to Rainbow 150 Crossways Park West
Programming Holdings, Woodbury, New York 11797
Inc., Rainbow Garden Attention: General Counsel
Corporation or
Garden L.P. Holding
Corp.
If to Cablevision One Media Crossways
Systems Corporation Woodbury, New York 11797
Attention: General Counsel
If to Viacom, Inc. 1515 Broadway
or Paramount New York, New York 10036
Communications Attention: General Counsel
Realty Corporation
or to such other persons or to such other addresses as the parties hereto shall
designate from time to time by like notice.
(d) This Consent Agreement, the Lender Letter Agreement, the Gaming
Letter, the letter from Richard Ward of ITT to the NHL, dated February 27, 1995
(the "February Letter" together with the Gaming Letter, the "Gaming Letters")
and the exhibits and schedules annexed hereto and made a part hereof contain
the entire agreement among the parties hereto with respect to the transactions
contemplated herein and supersede all prior agreements or understandings among
the parties hereto relating to the subject matter hereof (other than the
Resolution). This Consent Agreement shall not be modified, supplemented, or
terminated orally, and shall be governed by the laws of the State of New York,
without reference to the conflicts of law provisions thereof. It is
acknowledged and agreed that the NHL will suffer immediate and irreparable harm
in the event of a breach of this agreement by any other party hereto of any of
its or his obligations hereunder and will not have an adequate remedy at law,
and therefore, the NHL shall in addition to any other remedy available to it at
law or in equity, be entitled to temporary, preliminary and permanent injunctive
relief (except as provided in Section 6(c)(iii)(D)) and a decree for specific
performance in the event of a breach or threatened or attempted breach, without
the necessity of showing any actual damage or irreparable harm or the posting of
any bond or furnishing of any other security. This agreement shall be
interpreted neutrally and without regard to the party that drafted it and, in
particular, no rule of construction shall be applied as against any party hereto
that would result in the resolution of an ambiguity contained herein against the
drafting party.
<PAGE>
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(e) This Consent Agreement may be executed in counterparts, each of
which shall constitute an original, but all of which taken together shall
constitute one and the same instrument.
(f) No failure on the part of any party to exercise, and no delay of
exercising, any right, power or remedy shall operate as a waiver thereof; nor
shall any single or partial exercise of any right, power or remedy preclude any
other or further exercise thereof or of any other right, power or remedy.
(g) Except for the provisions of Section 7, the representations,
covenants and agreements contained in this Consent Agreement shall be construed
as several covenants between, as applicable, each of the parties hereto other
than the NHL, on the one hand, and the NHL, on the other hand, and not as
covenants between any of such parties other than the NHL between each other.
Accordingly, except for the provisions of Section 7, any of such
representations, covenants and agreements, and any of the transactions referred
to in such representations, covenants and agreements, may be waived, amended,
consented to or otherwise approved by the NHL, on the one hand, and the
particular party other than the NHL to which such representations, covenants,
agreements or transactions apply, on the other hand, without the consent or
approval of any other party. By way of illustration and not limitation, changes
in any party's direct or indirect ownership of the Rangers or in the ownership
of any party may, for all purposes of this Consent Agreement, be consented to by
such party and the NHL without the consent of any other party.
(h) The parties hereto acknowledge and agree that the failure by any
of the Acquiring Parties to comply with any of the provisions of this Consent
Agreement, the Gaming Letter, the Ward Letter or the Lender Letter Agreement
shall constitute a material breach of this Consent Agreement which entitles the
NHL to take action permitted by the NHL Constitution and/or this Consent
Agreement. Said action includes, in addition to any and all other rights to
which the NHL shall be entitled to under this Consent Agreement or otherwise,
the right of the NHL to commence termination proceedings under Article III of
the NHL Constitution and except as provided in Section 6(c)(iii)(D) such other
remedies as may be provided by law or in equity for the breach of a material
obligation; provided, that, if in the judgment of the NHL, which shall not be
exercised in an arbitrary or capricious way, a breach that occurs is one which
may be cured by an Acquiring Party, the NHL shall not commence termination
proceedings under Article III of the NHL Constitution, or permit any such
termination proceedings commenced by any other person to be concluded, unless it
shall have first given to such Acquiring Party notice of and such opportunity to
cure the default as the NHL deems appropriate
<PAGE>
- 23 -
under the circumstances in its judgment, which shall not be exercised in an
arbitrary or capricious manner. No party hereto shall attempt to prevent the
NHL's exercise of such rights on the basis that the NHL cannot exercise dominion
or control over its allocable share of the rights or assets that are the subject
of the NHL's actions because it was not the breaching party. The NHL agrees
that notwithstanding anything to the contrary contained herein, it shall not
demand that Cablevision actually pay monetary damages, fines or penalties for
any breach of any representation, warranty, agreement or covenant (including,
without limitation, Section 13) contained herein, regardless of whether it is
joint and several, with respect to any breach by any person other than
Cablevision (including any other party hereto or any affiliate of Cablevision).
This limitation applies solely to the direct payment of monetary damages, fines
and/or penalties by Cablevision.
(i) All of the parties to this Consent Agreement acknowledge and
agree that the NHL has reviewed the Transaction Documents that have been
supplied to it for certain limited purposes only and that the NHL is not charged
with knowledge of, or deemed to have any independent obligations under, any of
the Transaction Documents. For greater certainty and clarity,
<PAGE>
- 23 a -
notwithstanding anything contained in any Transaction Document, whether to the
contrary or otherwise, in the event of any conflict or ambiguity between any
term or provision contained in this Consent Agreement and any Transaction
Document, the terms of this Consent Agreement shall control. Rainbow Holdings,
Garden Holdings and Rainbow Garden hereby agree that any violation by Charles
Dolan of the NHL Constitution and Agreements shall be deemed for all purposes of
this Consent Agreement to be a violation by Rainbow Holdings, Garden Holdings
and Rainbow Garden of the NHL Constitution and Agreements which shall entitle
the NHL to exercise all rights and remedies in respect thereof against Rainbow
Holdings, Garden Holdings and Rainbow Garden under this Consent Agreement and
the NHL Constitution and Agreements as the NHL may have under this Consent
Agreement and the NHL Constitution and Agreements, including a requirement that
Garden Holdings and Rainbow Garden divest themselves of all their ownership
interests in the Franchise at the direction of the Commissioner.
(j) The headings in the sections of this Consent Agreement are
inserted for convenience of reference only and shall not constitute a part
thereof.
IN WITNESS WHEREOF, this Consent Agreement has been executed this 10th
day of March, 1995.
NATIONAL HOCKEY LEAGUE
By: /s/ JEFFREY A. MISHKIN
---------------------------
Name: Jeffrey A. Mishkin
Title: Executive President
and General Counsel
MSG EDEN CORP. MSG HOLDINGS, L.P.
By: /s/ ROBERT F. SHEEHY By: MSG EDEN CORP.,
--------------------------- its general partner
Name: Robert F. Sheehy
Title: Vice President By: /s/ ROBERT F. SHEEHY
--------------------------------
Name: Robert F. Sheehy
Title: Vice President
ITT MSG INC. ITT EDEN CORP.
By: /s/ ROBERT F. SHEEHY By: /s/ ROBERT F. SHEEHY
--------------------------- -------------------------------------
Name: Robert F. Sheehy Name: Vice President
<PAGE>
- 24 -
GARDEN L.P. HOLDINGS CORP. RAINBOW GARDEN CORPORATION
By: /S/ MARC A. LUSTGARTEN By: /S/ MARC A. LUSTGARTEN
--------------------------- -------------------------------------
Name: Marc A. Lustgarten Name: Marc A. Lustgarten
Title: Vice Chairman Title: Vice Chairman
ITT CORPORATION RAINBOW PROGRAMMING HOLDINGS, INC.
By: /S/ ROBERT F. SHEEHY By: /S/ MARC A. LUSTGARTEN
--------------------------- -------------------------------------
Name: Robert F. Sheehy Name: Marc A. Lustgarten
Title: Vice President Title: Vice Chairman
CABLEVISION SYSTEMS CORPORATION
By: /S/ MARC A. LUSTGARTEN
---------------------------
Name: Marc A. Lustgarten
Title: Vice Chairman
Viacom Inc. and Paramount Communications Realty Corporation hereby consent to,
and agree to be bound by, the terms and provisions of Sections 13 (a) and (b)
hereof:
VIACOM INC. PARAMOUNT COMMUNICATIONS REALTY CORPORATION
By:/S/ MICHAEL D. FRICKLAS By: /S/ MICHAEL D. FRICKLAS
--------------------------- -------------------------------------
Name: Michael D. Fricklas Name: Michael D. Fricklas
Title: Senior Vice President Title: Senior Vice President
<PAGE>
[MAP - Description to Come]
<PAGE>
SCHEDULE 1A
TRANSACTION DOCUMENTS
Agreement and Plan of Merger, dated as of August 27, 1994, among
Viacom Inc., Paramount Communications Realty Corporation, Madison Square Garden
Corporation, ITT Corporation, Rainbow Garden Corporation and MSG Holdings, L.P.
Agreement dated August 15, 1994 among ITT Corporation, Cablevision
Systems Corporation and Rainbow Programming Holdings, Inc., as amended by letter
dated September 15, 1994.
<PAGE>
SCHEDULE I
1. CONVERTIBLE PREFERRED STOCK. On March 31, 1994, Cablevision issued and
sold 100,000 shares of its Series E Redeemable Exchangeable Convertible
Preferred Stock (the "Series E Preferred Stock") to Toronto-Dominion
Investments, Inc. in a private transaction. The Series E Preferred Stock
was sold for a purchase price of $1,000 per share and carry a liquidation
preference of a like amount plus accrued and unpaid dividends. Dividends
accrue at a floating rate of LIBOR plus 2.5 percent and are payable, at
Cablevision's option, either in cash or in registered shares of Class A
common stock with a value equalling 105 percent of the required dividend.
Additional dividend payments may be required with respect to the
availability of the dividend received deduction. The Series E Preferred
Stock is redeemable at any time at the option of Cablevision at par plus
accrued and unpaid dividends to the redemption date and are convertible
after March 31, 1995 into Class A common stock, at the option of the
holder, at a conversion rate based on 95 percent of the average closing
price of the Class A Common Stock for the twenty business days prior to
conversion. Additionally, the holders of the Series E Preferred Stock have
the right to convert their shares in connection with certain change in
control transactions (regardless of when they occur) into a number of
shares of Class A Common stock which would yield $100,000 based upon an
auction process involving the Class A Common stock issuable on such
conversion or, at the holder's election, at a conversion rate based on 95
percent of the average closing price of the Class A Common Stock for the
twenty business days prior to conversion. Cablevision has the right to
suspend the conversion of the Series E Preferred Stock from March 31, 1995
through March 31, 1997 as long as it is in compliance with its Restricted
Group financial covenants and is current in dividend payments of the
Series E Preferred Stock.
2. SUTTON CAPITAL SUBORDINATED NOTES. On August 8, 1994, subsidiaries of
Cablevision issued promissory notes totalling $151 million, due in 1998 and
bearing interest at 6% until the third anniversary and 8% thereafter
(increasing to 8% and 10% respectively, if interest is paid in shares of
Cablevision's Class A Common Stock). Principal and interest on the notes
is payable, at Cablevision's election, in cash or in shares of
Cablevision's Class A Common Stock. In certain circumstances, Cablevision
may extend the maturity date of the promissory notes until 2003 for
certain additional consideration.
3. CABLEVISION OF NEW YORK CITY. Charles F. Dolan holds a 1% limited
partnership interest in the subsidiary of Cablevision that holds the New
York City cable franchises and holds certain preferential rights therein
that entitle
<PAGE>
him to an annual cash payment (the "Annual Payment") of 14% multiplied by
the outstanding balance of his "Minimum Payment". The Minimum Payment is
$40.0 million and is to be paid to Mr. Dolan prior to any distributions
from CNYC LP to partners other than Mr. Dolan. In addition, Mr. Dolan has
the right, exercisable on December 31, 1997, and as of the earlier of (1)
December 31, 2000 and (2) December 31 of the first year after 1997 during
which CNYC achieves an aggregate of 400,000 subscribers, to require
Cablevision to purchase (Mr. Dolan's "put") his interest in such
subsidiary. Cablevision has the right to require Mr. Dolan to sell his
interest in such subsidiary to Cablevision (Cablevision's "call") during
the three year period commencing one year after the expiration of
Mr. Dolan's second put. In the event of a put, Mr. Dolan will be entitled
to receive from Cablevision the Minimum Payment, any accrued but unpaid
Annual Payments, a guaranteed return on certain of his investments in such
subsidiary and a Preferred Payment defined as a payment (not exceeding
$150.0 million) equal to 40% of the Appraised Equity Value (as defined) of
such subsidiary after making certain deductions including a deduction of a
25% compound annual return on approximately 85% of Cablevision's
investments with respect to the construction of Phases III, IV and V of
CNYC and 100% of certain of Cablevision's other investments in CNYC,
including Mr. Dolan's Annual Payment. In the event Cablevision exercises
its call, the purchase price will be computed on the same basis as for a
put except that there will be no payment in respect of the Appraised Equity
Value amount. Cablevision has the right to make payment of the put or call
exercise price in the form of shares of Cablevision's Class B Common stock
or, if Mr. Dolan so elects, Class A Common Stock, except that all Annual
Payments must be paid in cash to the extent permitted under Cablevision's
Credit Agreement. Under the Credit Agreement, Cablevision is currently
prohibited from paying the put or call exercise price in cash and,
accordingly, without the consent of the bank lenders, would be required to
pay it in shares of Cablevision's Common Stock.
4. EMPLOYEE STOCK PROGRAMS. Under its employee stock programs, Cablevision
has issued to employees options, restricted stock and bonus award shares
with respect to its Class A Common Stock. As of the date hereof, there
options and awards outstanding representing approximately 1.66 million
shares.
5. CABLEVISION OF BOSTON. In June 1994, Cablevision and Cablevision of Boston
Limited Partnership ("Cablevision Boston") entered into a agreement which
is designed to give Cablevision full ownership of Cablevision Boston. The
agreement provides for the acquisition by Cablevision of the interests of
Cablevision Boston which it does not already own in a series of
transactions. Cablevision and Cablevision Boston have filed with the
Securities and
2
<PAGE>
Exchange Commission a Consent Solicitation Statement/Prospectus with
respect to the proposed transactions. Each of the transactions is subject
to a number of conditions, including the approval by the limited partners
of Cablevision Boston who are unaffiliated with the general partners of
Cablevision Boston. Consummation of the transactions would result in the
limited partners in Cablevision Boston receiving Class A Common stock of
Cablevision with an expected aggregate market value of approximately $40
million.
6. EXISTING PLEDGES. Cablevision has pledged the capital stock of Rainbow
Programming to Toronto Dominion (Texas), Inc. as Administrative Agent, in
support of Rainbow Programming's senior credit facility. Charles F. Dolan
has pledged certain shares of Cablevision stock to various lenders in
support of personal loans to himself and to member of his family.
3
<PAGE>
CLAIMS AND POTENTIAL CLAIMS AGAINST NHL AND NHL CLUBS
1. Any claims arising out of or in connection with the agreement dated May 5,
1972 between the New York Rangers and Nassau Sports (New York Islanders).
2. Any claims arising out of or in connection with the Territorial and
Broadcasting Rights Agreement dated as of June 19, 1982 (and related documents,
including but not limited to a Promissory Note) and the Broadcast Funds
Agreement and Settlement Agreement, dated as of December 18, 1986 between the
New York Rangers and Meadowlanders, Inc. (New Jersey Devils).
3. Any claims arising out of or in connection with the proceeding before the
NHL Commissioner concerning the New York Rangers, the St. Louis Blues, and Mike
Keenan.
4. Any claims arising out of or in connection with the dispute between the New
York Rangers and Esa Tikkanen, which is currently the subject of a grievance
arbitration.
<PAGE>
5. Any claims arising out of or in connection with the dispute between the New
York Rangers and Nick Kypreos, which is currently the subject of a grievance
arbitration.
6. Any claims arising out of or in connection with the dispute concerning the
pension matters addressed in BATHGATE V. NATIONAL HOCKEY LEAGUE PENSION SOCIETY,
ET. AL.
<PAGE>
AMENDMENT TO
CONSULTING AGREEMENT WITH
CABLEVISION SYSTEMS CORPORATION
THIS AMENDMENT, made as of the 28th day of November 1994, by and between
CABLEVISION SYSTEMS CORPORATION, a Delaware corporation (hereinafter the
"Corporation"), and John Tatta (hereinafter "Tatta").
W I T N E S S E T H:
WHEREAS, the Corporation and Tatta entered into a Consulting Agreement on
June 25, 1991 (the "Agreement");
WHEREAS, the Corporation and Tatta wish to renew the Agreement and to
modify the provisions regarding life insurance coverage;
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto hereby agree as follows:
1. The Agreement is hereby renewed for an additional three-year period,
commencing as of January 27, 1995 and continuing for a period of three (3) years
thereafter, upon all the same terms and conditions as set forth in the
Agreement, except as modified hereby.
2. Tatta agrees to name the Corporation as the beneficiary of the
universal life insurance policies with Mutual Benefit Life on the life of Tatta
owned by the Corporation (the "Mutual Benefit policies"). At the request of the
Corporation, Tatta will assign all his right, title and interest in the Mutual
Benefit
<PAGE>
policies to the Corporation.
3. The Agreement is amended by deleting Paragraphs 8(b) and 8(c), and
replacing them with the following new Paragraph 8(b):
"(b) The Corporation will maintain the life insurance policy with New York
Life obtained by the Corporation on the lives of Tatta and his wife, Anne Tatta.
During the lives of Tatta and his wife, the Corporation shall pay the annual
premium necessary to maintain such policy at its current face amount, it being
understood that the cost thereof shall be considered by the Corporation as
compensation to Tatta hereunder."
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and month and year first above written.
CABLEVISION SYSTEMS CORPORATION
By:___________________________
Charles F. Dolan
Chairman and Chief
Executive Officer
______________________________
John Tatta
<PAGE>
November 30, 1994
Mr. William J. Bell
Cablevision Systems Corporation
One Media Crossways
Woodbury, NY 11797
Dear Bill:
This letter will confirm the terms of your employment by
Cablevision Systems Corporation (the "Company") as Vice Chairman
for the three-year period ending December 31, 1997.
Your annual salary will be $450,000, with such increases as
the Compenstion Committee of the Board of Directors shall
determine from time to time.
Your annual bonus will be payable each year at the
discretion of the Compensation Committee.
You will continue to participate in all employee benefits at
the level available to senior management of the Company.
The Company depends upon your flexibility to take on
additional roles and responsibilities, from time to time, whether
permanent or temporary. At the same time, there are certain key
roles and responsibilities that will not be changed without your
consent. If you leave the Company involuntarily (other than for
"cause" (as hereinafter defined)), following a change of control
of the Company, or because, without your consent, (i) your
compensation or title is reduced, (ii) you are no longer a member
of the Board of Directors or the CEO Group, (iii) you are no
longer the chief financial officer of the Company, or (iv) you no
longer report directly to Charles F. Dolan or his successor, you
will receive the following:
(1) a severance payment at the discretion of the
Compensation Committee, but in no event less than the salary
due for the remainder of the term of this Agreement or one
year's annual salary (or three times the sum of your annual
salary plus your prior year's annual bonus in the event of a
change of control (as defined in Appendix 1 of the
Executive's Nonqualified Stock Option Agreement dated as of
the date hereof)), whichever is greater;
<PAGE>
(2) an annual bonus of no less than 50% of your annual
salary, pro rated for the months worked during such year;
(3) payment by the Company of the annual premiums on your
life insurance policies with Mass Mutual and New York Life
for three years;
(4) the right to receive payment of all outstanding bonus
share awards, and to exercise all stock option and
conjunctive rights awards for a period of 120 days, whether
or not such awards shall be due or exercisable at the time;
and
(5) the right to participate in the Company's health plan
for retired executives.
Termination for "cause" means termination for (i) gross
negligence in a manner materially detrimental to the Company or
an affiliate of the Company or willful misfeasance in a matter of
material importance to the Company or an affiliate of the
Company, or (ii) your conviction of a felony involving moral
turpitude.
Your employment term will be extended for an additional one-
year period on January 1 1996, 1997 and 1998, unless the Company
or you gives the other notice of election not to extend by the
preceding October 31.
Sincerely,
CABLEVISION SYSTEMS CORPORATION
By:____________________________
Charles F. Dolan
Chairman and Chief
Executive Officer
Accepted and Agreed:
__________________________
William J. Bell
<PAGE>
November 30, 1994
Mr. Marc Lustgarten
Cablevision Systems Corporation
One Media Crossways
Woodbury, NY 11797
Dear Marc:
This letter will confirm the terms of your employment by Cablevision
Systems Corporation (the "Company") as Vice Chairman for the three-year period
ending December 31, 1997.
Your annual salary will be $450,000, with such increases as the
Compensation Committee of the Board of Directors shall determine from time to
time.
Your annual bonus will be payable each year at the discretion of the
Compensation Committee.
You will continue to participate in all employee benefits at the level
available to senior management of the Company.
The Company depends upon your flexibility to take on additional roles and
responsibilities, from time to time, whether permanent or temporary. At the
same time, there are certain key roles and responsibilities that will not be
changed without your consent. If you leave the Company involuntarily (other
than for "cause" (as hereinafter defined)), following a change of control of the
Company, or because, without your consent, (1) your compensation or title is
reduced, (ii) you are no longer a member of the Board of Directors or the CEO
Group, (iii) you are no longer the chief development officer of the Company, or
(iv) you no longer report directly to Charles F. Dolan or his successor, you
will receive the following:
(1) a severance payment at the discretion of the Compensation Committee,
but in no event less than the salary due for the remainder of the term of
this Agreement or one year's annual salary (or three times the sum of your
annual salary plus your prior year's annual bonus in the event of a change
of control (as defined in Appendix 1 of the Executive's Nonqualified Stock
Option Agreement dated as of the date hereof)), whichever is greater;
<PAGE>
(2) an annual bonus of no less than 50% of your annual salary, pro rated
for the months worked during such year;
(3) payment by the Company of the annual premiums on your life insurance
policies with Mass Mutual and New York Life for three years;
(4) the right to receive payment of all outstanding bonus share awards,
and to exercise all stock option and conjunctive rights awards for a period
of 120 days, whether or not such awards shall be due or exercisable at the
time; and
(5) the right to participate in the Company's health plan for retired
executives.
Termination for "cause" means termination for (i) gross negligence in a
manner materially detrimental to the Company or an affiliate of the Company or
willful misfeasance in a manner of material importance to the Company or an
affiliate of the Company, or (ii) your conviction of a felony involving moral
turpitude.
If you cease to be an employee of the Company as a result of your death or
physical or mental disability, you (or your estate or beneficiary) will receive
payment of all your outstanding bonus share awards, and the right to exercise
all your stock option and conjunctive rights awards as if such awards were due
and exercisable at the time.
Your employment term will be extended for an additional one-year period on
January 1, 1996, 1997 and 1998, unless the Company or you gives the other notice
of election not to extend by the preceding October 31.
Sincerely,
CABLEVISION SYSTEMS CORPORATION
By:
-------------------------------------
Charles F. Dolan
Chairman and Chief
Executive Officer
Accepted and Agreed:
------------------------------
Marc Lustgarten
<PAGE>
November 30, 1994
Robert S. Lemle, Esq.
Cablevision Systems Corporation
One Media Crossways
Woodbury, NY 11797
Dear Robert:
This letter will confirm the terms of your employment by Cablevision
Systems Corporation (the "Company") as Executive Vice President, General Counsel
and Secretary for the three-year period ending December 31, 1997.
Your annual salary will be $330,000, with such increases as the Compenstion
Committee of the Board of Directors shall determine from time to time.
Your annual bonus will be payable each year at the discretion of the
Compensation Committee.
You will continue to participate in all employee benefits at the level
available to senior management of the Company.
The Company depends upon your flexibility to take on additional roles and
responsibilities, from time to time, whether permanent or temporary. At the
same time, there are certain key roles and responsibilities that will not be
changed without your consent. If you leave the Company involuntarily (other
than for "cause" (as hereinafter defined)), following a change of control of the
Company, or because, without your consent, (i) your compensation or title is
reduced, (ii) you are no longer a member of the Board of Directors or the CEO
Group, (iii) you are no longer the chief legal officer of the Company, or (iv)
you no longer report directly to Charles F. Dolan or his successor, you will
receive the following:
(1) a severance payment at the discretion of the Compensation Committee,
but in no event less than the salary due for the remainder of the term of
this Agreement or one year's annual salary (or three times the sum of your
annual salary plus your prior year's annual bonus in the event of a change
of control (as defined in Appendix 1 of the Executive's Nonqualified Stock
Option Agreement dated as of the date hereof)), whichever is greater;
<PAGE>
(2) an annual bonus of no less than 50% of your annual salary, pro rated
for the months worked during such year;
(3) payment by the Company of the annual premiums on your life insurance
policies with Mass Mutual and New York Life for three years;
(4) the right to receive payment of all outstanding bonus share awards,
and to exercise all stock option and conjunctive rights awards for a period
of 120 days, whether or not such awards shall be due or exercisable at the
time; and
(5) the right to participate in the Company's health plan for retired
executives.
Termination for "cause" means termination for (i) gross negligence in a
manner materially detrimental to the Company or an affiliate of the Company or
willful misfeasance in a matter of material importance to the Company or an
affiliate of the Company, or (ii) your conviction of a felony involving moral
turpitude.
If you cease to be an employee of the Company as a result of your death or
physical or mental disability, you (or your estate or beneficiary) will receive
payment of all your outstanding bonus share awards, and the right to exercise
all your stock option and conjunctive rights awards as if such awards were due
and exercisable at the time.
Your employment term will be extended for an additional one-year period on
January 1 1996, 1997 and 1998, unless the Company or you gives the other notice
of election not to extend by the preceding October 31.
Sincerely,
CABLEVISION SYSTEMS CORPORATION
By:____________________________
Charles F. Dolan
Chairman and Chief
Executive Officer
Accepted and Agreed:
__________________________
Robert S. Lemle
<PAGE>
EXHIBIT 22
SUBSIDIARIES
OF
CABLEVISION SYSTEMS CORPORATION
State of
Name Organization
---- ------------
A-R Cable Investments, Inc. Delaware
A-R Cable Services, Inc. Massachusetts
Rainbow Programming Holdings, Inc. New York
V Cable, Inc. Delaware
NYC LP Corp. Delaware
Cablevision of New York City - Master L.P. Delaware
Cablevision MFR, Inc. Delaware
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the registration statements
(numbers 33-05987, 33-08768, 33-19409, 33-20583 and 33-54346) filed on Form S-8
and in the registration statements (numbers 33-29192 and 33-33596) filed on
Form S-3 of Cablevision Systems Corporation of our report dated March 10, 1995,
relating to the consolidated balance sheets of Cablevision Systems Corporation
and Subsidiaries as of December 31, 1994 and 1993 and the related consolidated
statements of operations, stockholders' deficiency and cash flows and related
schedules for each of the years in the three-year period ending December 31,
1994, which report appears in the December 31, 1994 annual report on
Form 10-K405 of Cablevision Systems Corporation.
KPMG PEAT MARWICK L.L.P.
Jericho, New York
March 29, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 11,350
<SECURITIES> 0
<RECEIVABLES> 82,968
<ALLOWANCES> (10,087)
<INVENTORY> 129,496
<CURRENT-ASSETS> 0
<PP&E> 1,558,297
<DEPRECIATION> (672,269)
<TOTAL-ASSETS> 2,176,413
<CURRENT-LIABILITIES> 0
<BONDS> 3,169,236
<COMMON> 237
0
2
<OTHER-SE> (1,818,774)
<TOTAL-LIABILITY-AND-EQUITY> 2,176,413
<SALES> 0
<TOTAL-REVENUES> 837,169
<CGS> 0
<TOTAL-COSTS> 302,885
<OTHER-EXPENSES> 271,343
<LOSS-PROVISION> (11,849)
<INTEREST-EXPENSE> 263,299
<INCOME-PRETAX> (315,151)
<INCOME-TAX> 0
<INCOME-CONTINUING> (315,151)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (315,151)
<EPS-PRIMARY> (13.72)
<EPS-DILUTED> 0<F1>
<FN>
<F1>Not presented as the resultant computation would be a decrease in net loss per
share and therefore not meaningfull.
</FN>
</TABLE>
