<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 8-K
___________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 6, 1995
CABLEVISION SYSTEMS CORPORATION
(Exact Name of Registrant as specified in its charter)
Delaware
(State of Incorporation)
1-9046 11-2776686
(Commission File Number) (IRS Employer
Identification Number)
One Media Crossways, Woodbury, New York 11797
(Address of principal executive offices)
Registrant's telephone number, including area code:
(516) 364-8450
<PAGE>
Item 5. Other Events.
PROPOSED V CABLE TRANSACTIONS
Cablevision Systems Corporation (the "Company" or the "Registrant"), V Cable,
Inc. ("V Cable") and VC Holding, Inc. ("VC Holding") have entered into a
general, non-binding letter of intent with General Electric Capital Corporation
("GECC"), the principal creditor of V Cable. In the transactions proposed by the
letter of intent, the Company would issue to GECC preferred stock having an
initial aggregate liquidation preference of $500 million for an aggregate
purchase price of $500 million. It is anticipated that such preferred stock
would be redeemable at the option of the Company and would be convertible at the
option of the holder at certain times and in certain circumstances in whole or
in part into the Company's Class A common stock at a conversion rate based upon
the trading value of the Company's Class A common stock at the time of such
conversion. The Company would make an equity capital contribution to V Cable of
the gross proceeds from such issuance and V Cable would apply such amounts as
set forth below.
As part of the proposed transactions contemplated by the letter of intent
(together with the issuance of the preferred stock to GECC, the "Proposed V
Cable Transactions"), the $500 million capital contribution received by V Cable
would be applied as follows: (i) approximately $26 million to repay V Cable's
outstanding indebtedness to GECC; (ii) approximately $93 million to repay to
GECC a portion of debt U.S. Cable Television Group, L.P. ("U.S. Cable") payable
by V Cable under certain circumstances; (iii) approximately $331 million to
repay to GECC a portion of VC Holding's indebtedness; and (iv) $50 million would
be used by VC Holding to make a preferred capital contribution to U.S. Cable as
discussed below. The Company's $500 million capital contribution to V Cable
requires the approval of a majority of the Company's banks under the Company's
principal credit agreement (the "Credit Agreement").
The Proposed V Cable Transactions also contemplate that V Cable will enter
into one or more agreements pursuant to which, following the receipt of any
required franchise and regulatory approvals, V Cable or one or more of its
subsidiaries (i) will purchase the 80% of U.S. Cable that V Cable does not
already own for approximately $4 million, (ii) will make a preferred capital
contribution to U.S. Cable of $50 million, and (iii) will assume approximately
$165 million of U.S. Cable indebtedness payable to GECC.
As part of the Proposed V Cable Transactions, GECC would also agree to
provide two new credit facilities, a $325 million three year revolving credit
facility for V Cable's Ohio subsidiary (approximately $210 million of which
would be drawn upon entering into such agreement) and a $260 million two year
revolving credit facility for V Cable's Long Island subsidiary (approximately
$220 million of which would be drawn upon entering into such agreement). The
initial amounts drawn under the respective revolving credit facilities will be
used to repay all remaining VC Holding debt to GECC. Both the Ohio and Long
Island credit facilities would be entered into upon completion of final
documentation and the receipt of any required franchise or regulatory
approvals.
The letter of intent between the Company and GECC is a general, non-binding
letter of intent. There can be no assurances that the Proposed V Cable
Transactions will be consummated or will be consummated in the form described in
the letter of intent. If the Proposed V Cable Transactions, or similar
transactions with respect to V Cable, fail to occur, then V Cable believes that
it is likely that it will be unable to meet certain of its financial covenants
as of September 30, 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's restricted group of subsidiaries (the
"Restricted Group"). During 1995, the Restricted Group has made equity
contributions aggregating $1.9 million to enable V Cable to meet certain of its
financial covenants. There can be no assurance as to V Cable's ability to
accomplish either 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 credit line will be sufficient to service its debt, to fund
its capital expenditures and to meet its working capital requirements through
1996.
See Item 7(b) hereto (Pro Forma Financial Information) for the pro forma
financial information with respect to the Proposed V Cable Transactions and the
other transactions that would be required pursuant to Article 11 of Regulation
S-X for the six months ended June 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
The discussion under "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" in the
Company's Quarterly Report on Form 10-Q for the quarterly period ended June 30,
1995 (the "Form 10-Q") is amended as follows:
The Company believes for the Restricted Group that, subject to the
limitations described in the following paragraphs, internally generated funds
together with funds available under the Credit Agreement will be sufficient
through December 31, 1996 to (i) meet its debt service requirements, including
its amortization requirements under the Credit Agreement, (ii) fund its ongoing
capital expenditures, including those related to Cablevision of New York City
and the required upgrades under the New York upgrade agreement, (iii) fund its
anticipated investments in Cablevision of New York City and the $5.6 million
annual payment to Charles F. Dolan in connection with the Cablevision of New
York City acquisition, (iv) fund payments with respect to the proposed
Cablevision of Boston Limited Partnership ("Cablevision of Boston") acquisition
and (v) fund any anticipated equity requirements in A-R Cable Services, Inc.
("A-R Cable") and/or V Cable.
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The Company intends to incur additional expenditures to sufficiently upgrade
its plant to facilitate the startup of such adjunct businesses as information
services; video on demand and near video on demand; and residential telephony.
To successfully implement these plans, the Company will require additional
capital from the sale of equity in the capital markets or to a strategic
investor.
Absent the receipt of proceeds from the issuance of additional equity or an
amendment to the financial covenants contained in the Credit Agreement, the
Company would have to implement internal expense reductions and delay its
capital upgrade plan and/or sell assets in order to remain in compliance with
its Credit Agreement during 1996. There can be no assurance that any of such
alternatives will be accomplished.
RISK FACTORS
Purchase of the Company's securities involves various risks, including the
following principal factors, which, together with the other matters set forth
herein or incorporated by reference herein, which as revised as set forth below
should be considered by holders and purchasers of the Company's securities:
Substantial Indebtedness and High Degree of Leverage. The Company has
incurred substantial indebtedness, primarily to finance acquisitions and
expansion of its operations and, to a lesser extent, for investments in and
advances to affiliates. The Company's consolidated debt and Series E Redeemable
Convertible Exchangeable Preferred Stock (the "Series E Preferred Stock")
aggregated approximately $3.4 billion at June 30, 1995 ($3.2 billion on a pro
forma basis after giving effect to the proposed acquisition of Cablevision of
Boston and the Proposed V Cable Transactions) with varying maturities to 2023,
including an aggregate of approximately $711.1 million maturing on or prior to
December 31, 1999. See Note 4 of Notes to the Consolidated Financial
Statements and notes thereto (the "Consolidated Financial Statements")
incorporated by reference from the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994 (the "Form 10-K"). In addition, the
Company's consolidated subsidiary, Rainbow Programming Holding Inc. ("Rainbow
Programming"), incurred approximately $94.0 million of indebtedness in July 1995
in connection with the exercise of its option (the "NBC Option") to purchase the
interest of National Broadcasting Company, Inc. ("NBC") in SportsChannel (New
York) Associates and Rainbow News 12 Company.
Net Losses and Stockholders' Deficit. The Company reported net losses for the
six months ended June 30, 1995 and 1994 of $195.4 million and $111.9 million,
respectively, and for the years ended December 31, 1994, 1993 and 1992 of
$315.2 million, $246.8 million and $250.5 million, respectively. At June 30,
1995, the Company had a stockholders' deficit of $2.0 billion. The losses
primarily reflect high levels of interest expense and depreciation and
amortization charges relating to the depreciation of assets obtained through,
and debt incurred to finance, acquisitions. Interest expense and depreciation
and amortization charges remained at a high level throughout 1992, 1993 and
1994 and will continue at high levels in the future as a result of previously
completed, pending and future acquisitions, expected capital expenditures and
additional investments in the Company's programming operations, including the
approximately $95.5 million payment made in connection with the exercise of the
NBC Option. The Company expects to continue incurring substantial losses for at
least the next several years. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources"
in the Form 10-K and Form 10-Q.
Need for Additional Financing. The Company's business requires substantial
investment on a continuing basis to finance capital expenditures and related
expenses for, among other things, upgrade of the Company's cable plant
(including the need to make cable system upgrades mandated by franchise
authorities), the offering of new services and the servicing, repayment or
refinancing of its indebtedness and preferred stock. The Company will require
significant additional financing, through debt or equity issuances, to meet its
capital expenditure plans and to pay its debt and preferred stock obligations.
There can be no assurance
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that the Company will be able to issue additional debt or obtain additional
equity capital on satisfactory terms, or at all, to meet its future financing
needs. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" in the Form 10-K and the
Form 10-Q.
Future Capital Expenditures and Programming Commitments. The Company's cable
systems have commitments for capital expenditures, including major system
upgrades, which will involve substantial expenditures over the next several
years. In addition, the Company, through Rainbow Programming, has entered into
numerous contracts relating to cable television programming, including rights
agreements with professional and other sports teams. These contracts typically
require substantial payments over extended periods of time. See Note 8 of Notes
to Consolidated Financial Statements for a discussion of commitments and
contingencies. The Company also has a commitment to fund annual payments to Mr.
Dolan related to Cablevision of New York City. See "Business--Consolidated Cable
Affiliates--Cablevision of New York City" and "Business--Programming
Operations" in the Form 10-K and "Management's Discussion and Analysis of
Financial Condition and Results of Operation--Liquidity and Capital Resources"
in the Form 10-K and the Form 10-Q.
Intangible Assets. The Company had total assets at June 30, 1995 of
approximately $2.3 billion, of which approximately $0.9 billion were intangible
assets, principally subscriber lists, franchises, excess cost over fair value
of net assets acquired, deferred financing, acquisition and other costs and
deferred interest expense. It is possible that no cash would be recoverable
from the voluntary or involuntary sale of these intangible assets.
Losses on Investments in and Advances to Certain Affiliates. The Company has
made investments in and advances to certain affiliates of which Charles F.
Dolan is the managing general partner or in which Mr. Dolan has substantial
ownership interests. At June 30, 1995, investments in and advances (less
applicable reserves) to such affiliates aggregated approximately $33.7 million
(consisting of $17.6 million for Cablevision of Boston, $12.5 million for
Cablevision of Chicago (which has subsequently been repaid, as explained
below), and $3.6 million for Atlantic Cable Television Publishing Corporation
("Atlantic Publishing")). Because Mr. Dolan is the managing general partner or
has a substantial interest in such affiliates, an inherent conflict of interest
exists with respect to such investments and advances. There can be no
assurances that such investments and advances and any amounts accrued with
respect thereto will be fully recovered or that conflicts of interest will not
arise with respect to the recovery of such amounts.
The Company wrote off for accounting purposes its entire investment in and
advances to one such affiliate, Cablevision of Boston, of $34.5 million at
September 30, 1985. Between September 1985 and May 1988, the Company made
additional subordinated advances to Cablevision of Boston which amounted to
approximately $17.6 million at June 30, 1995. Management currently anticipates
that no further funds will be advanced by the Company to Cablevision of Boston
to support operations. See "Business--Other Cable Affiliates--Cablevision of
Boston" in the Form 10-K. In June 1994, the Company and Cablevision of Boston
entered into an agreement which is designed to give the Company full ownership
of Cablevision of Boston. The agreement provides for the acquisition by the
Company of the interests of Cablevision of Boston which it does not already own
in a series of transactions. See "Condensed Pro Forma Consolidated Financial
Information" under Item 7(b) hereto. Consummation of the transactions would
result in the limited partners in Cablevision of Boston receiving Class A common
stock of the Company (the "Class A Common Stock") with an expected aggregate
market value of approximately $40 million. All outstanding subordinated advances
made by the Company to Cablevision of Boston will become intercompany
indebtedness if the acquisition of Cablevision of Boston is consummated.
On August 4, 1995, Cablevision of Chicago sold its cable television systems
to Continental Cablevision, Inc. and the loans from the Company to Cablevision
of Chicago, together with accrued interest reserved by the Company, were repaid
in full. Accordingly, in connection therewith, the Company will recognize a
gain in the third quarter of 1995 of approximately $15.6 million.
Atlantic Publishing holds a minority equity interest in a company that
publishes cable television guides which are offered to the Company's
subscribers and to other unaffiliated cable television operators. As of June
30, 1995, the Company had advanced an aggregate of $17.9 million to Atlantic
Publishing, of which
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approximately $0.7 million was advanced during 1992, approximately $0.5 million
was repaid during 1993, $0.6 million was repaid during 1994 and approximately
$0.2 million was advanced during 1995. The Company has written off all advances
to Atlantic Publishing other than approximately $3.6 million. Atlantic
Publishing is owned by a trust for certain family members of Mr. Dolan;
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 only a nominal investment in Atlantic Publishing. See "Business--
Other Affiliates--Atlantic Publishing" in the Form 10-K.
See "Business--Consolidated Cable Affiliates--Cablevision of New York City"
in the Form 10-K for a discussion of the Company's acquisition of substantially
all of Mr. Dolan's interest in Cablevision of New York City, which was
consummated as described therein in July 1992.
Voting Control by Majority Stockholder; Disparate Voting Rights. Charles F.
Dolan beneficially owned, as of July 31, 1995, 340,200 shares or 2.8% of the
Company's outstanding Class A Common Stock and 2,347,494 shares or 20.1% of the
Company's outstanding Class B common stock (the "Class B Common Stock" and,
collectively with the Class A Common Stock, the "Common Stock"). On a combined
basis, these shares represented 11.3% of the total number of shares of both
classes of Common Stock and 20.9% of the total voting power of the classes.
Trusts established by Mr. Dolan for the benefit of certain Dolan family
members, and as to which Mr. Dolan disclaims beneficial ownership, owned, as of
July 31, 1995, an additional 500,000 shares of Class A Common Stock or 4.1% of
the Class A Common Stock and 9,326,928 shares of the Class B Common Stock, or
76.3% of the Class B Common Stock and 72.8% of the total voting power of all
classes of the Common Stock. As a result of this stock ownership, Dolan family
members have the power to elect all 12 directors subject to election by holders
of the Class B Common Stock, which directors constitute 75% of the entire 16-
member Board of Directors of the Company. Moreover, because holders of Class B
Common Stock are entitled to ten votes per share while holders of Class A
Common Stock are entitled to one vote per share, Dolan family members may
control stockholder decisions on matters in which holders of Class A and Class
B Common Stock vote together as a class. These matters include the amendment of
certain provisions of the Company's restated certificate of incorporation (the
"Certificate of Incorporation") and the approval of fundamental corporate
transactions, including mergers. In addition, because the affirmative vote or
consent of the holders of at least 66 2/3% of the outstanding shares of the
Class B Common Stock, voting separately as a class, is required to approve (i)
the authorization or issuance of any additional shares of Class B Common Stock
and (ii) any amendment, alteration or repeal of any of the provisions of the
Certificate of Incorporation of the Company which adversely affects the powers,
preferences or rights of the Class B Common Stock, Dolan family members also
have the power to prevent such issuance or amendment. The voting rights of the
Class B Common Stock beneficially owned by Mr. Dolan will not be modified as a
result of any transfer of legal or beneficial ownership thereof.
Restrictive Covenants. The Credit Agreement and certain of the Company's other
debt instruments contain various financial and operating covenants which, among
other things, require the maintenance of certain financial ratios and restrict
the Company's ability to borrow funds from other sources and to utilize funds
for various purposes, including investments in certain subsidiaries. Violation
of the covenants in the Credit Agreement could result in a default under the
Credit Agreement which would permit the bank lenders thereunder to restrict the
Company's ability to borrow undrawn funds under the Credit Agreement and to
accelerate the maturity of borrowings thereunder. In addition, certain of the
Company's debt instruments restrict the Company's ability to pay dividends on
capital stock. The Company currently is not in violation of any covenant under
the Credit Agreement or such other debt instruments. Absent the receipt of
proceeds from the issuance of additional equity or an amendment to the financial
covenants contained in the Credit Agreement, the Company would have to implement
internal expense reductions and delay its capital upgrade program and/or sell
assets in order to remain in compliance with its Credit Agreement during 1996.
Failure to meet its financial covenants could have a material adverse effect on
the Company. There can be no assurance that any of such alternatives will be
accomplished. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" in the Form 10-K and
the Form 10-Q.
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Conflicts of Interest. Mr. Dolan and trusts for Dolan family interests have
varying economic interests in the Company's affiliates. Mr. Dolan and other
officers and directors of the Company are also officers and directors of
affiliated companies. Such officers and directors of the Company devote such
time to the business of the Company as is reasonably required; however, they
have other responsibilities which require various amounts of their time and
which would conflict with their duties to the Company.
Risks Related to Regulation. The Company's cable television operations may be
adversely affected by government regulation, the impact of competitive forces
and technological changes. In 1992, Congress enacted the 1992 Cable Act, which
represented a significant change in the regulatory framework under which cable
television systems operate. In April 1993 and February 1994, the FCC ordered
reductions in cable television rates. Telecommunications legislation pending in
Congress would relax the cable rate regulation required by the 1992 Cable Act
and would also open the local telephone business to competition from cable
television companies and other providers and preempt state and local barriers
to entry into that market. While both the U.S. Senate and the House of
Representatives have passed telecommunications bills, the Company cannot
predict whether the legislation ultimately will be enacted into law or what
form any final legislation will take. See "Business--Cable Television
Operations--Competition" and "Business--Cable Television Operations--
Regulation" in the Form 10-K and "Recent Developments--Impact of Pending
Telecommunications Legislation on FCC Cable Rate Regulation".
Risk of Competition. Cable operators compete with a variety of distribution
systems, including broadcast television stations, multichannel multipoint
distribution services ("MMDS"), satellite master antenna systems ("SMATV"),
direct broadcast satellite systems ("DBS"), and private home dish earth
stations. For example, CAI Wireless Systems, Inc., an MMDS operator, has
received investments from Bell Atlantic Corporation and NYNEX Corporation and
owns operating systems or spectrum rights in a significant portion of the
Company's systems. In addition, three DBS systems are now operational in the
United States. The 1992 Cable Act prohibits a cable programmer that is owned by
or affiliated with a cable operator (such as Rainbow Programming) from
unreasonably discriminating among or between cable operators and other
multichannel video distribution systems with respect to the price, terms and
conditions of sale or distribution of the programmer's service and from
unreasonably refusing to sell service to any multichannel video programming
distributor. Cable systems also compete with the entities that make videotaped
movies and programs available for home rental. The 1992 Cable Act regulates the
ownership by cable operators of MMDS and SMATV. 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, upheld on appeal by a
Federal appeals court, that 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. Additional competition to cable
systems is possible if the FCC authorizes the licensing of local multipoint
distribution services ("LMDS"). The FCC has proposed to license this type of
service to providers.
Competition from Telephone Companies. The 1984 Cable Act bars co-ownership of
telephone companies and cable television systems operating in the same service
areas ("cable-telco cross-ownership prohibition"). Numerous Federal district
courts have held this prohibition to be unconstitutional. Several of these
decisions have been upheld on appeal and a number of other decisions are
pending on appeal in various Federal appellate courts. The United States
Supreme Court is expected to consider the constitutionality of the prohibition
during the 1995-96 term. Neither the 1984 Cable Act nor the 1992 Cable Act bars
a telephone company from acquiring cable systems outside its telephone service
area, and several Regional Bell operating companies have purchased or made
investments in cable systems. Legislation to repeal the cable-telco cross-
ownership prohibition, subject to certain regulatory requirements, has passed
both the U.S. Senate and the House of Representatives; repeal has also been
endorsed by the Clinton Administration. These bills also
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would permit a telephone company to acquire an in-region cable operator in
certain small markets under certain circumstances. The Company cannot predict
whether the legislation ultimately will be enacted into law or what form any
final legislation would take. See "Business--Cable Television Operations--
Regulation" in the Form 10-K.
Risk of Non-Exclusive Franchises and Franchise Renewals. The Company's cable
television systems are operated primarily under nonexclusive franchise
agreements with local government franchising authorities, in some cases with
the approval of state cable television authorities. The Company's business is
dependent on its ability to obtain and renew its franchises. Although the
Company has never lost a franchise as a result of a failure to obtain a
renewal, its franchises are subject to non-renewal or termination under certain
circumstances. In certain cases, franchises have not been renewed at expiration
and the Company operates under temporary licenses while negotiating renewal
terms with the franchising authorities. See "Business--Cable Television
Operations--Franchises" in the Form 10-K.
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Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(b) Pro Forma Financial Information
The Company files herewith the pro forma financial information that
would be required pursuant to Article 11 of Regulation S-X for the six months
ended June 30, 1995.
CONDENSED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following condensed pro forma consolidated balance sheet as of June 30,
1995 presents the Company's financial position as adjusted to give effect to the
proposed acquisition of Cablevision of Boston and the Proposed V Cable
Transactions, as if they had occurred as of that date. The following condensed
pro forma consolidated statement of operations for the year ended December 31,
1994 presents the Company's consolidated results of operations as adjusted to
give effect to (i) the acquisition (the "AMCC Acquisition") of partnership
interests in American Movie Classics Company ("AMCC"), (ii) the acquisition of
substantially all of the assets of Monmouth Cable, Riverview Cable and
Framingham Cable, (iii) the proposed acquisition of Cablevision of Boston, and
(iv) the Proposed V Cable Transactions as if the acquisition of interests in
AMCC, the acquisition of Monmouth Cablevision Associates ("Monmouth Cable"),
Riverview Cablevision Associates, L.P. ("Riverview Cable") and Framingham
Cablevision Associates Limited Partnership ("Framingham Cable") the acquisition
of Cablevision of Boston and the Proposed V Cable Transactions had occurred at
the beginning of the period presented. The following condensed pro forma
consolidated statement of operations for the six months ended June 30, 1995
presents the Company's consolidated results of operations as adjusted to give
effect to the proposed acquisition of Cablevision of Boston and the Proposed V
Cable Transactions as if the proposed acquisition of Cablevision of Boston and
the Proposed V Cable Transactions had occurred at the beginning of the period
presented. The condensed pro forma consolidated financial statements should be
read in conjunction with the notes thereto and the historical consolidated
financial statements and notes thereto incorporated herein by reference. The pro
forma financial information is not necessarily indicative of what the actual
financial position or results of operations of the Company would have been had
the transactions occurred on the dates indicated nor does it purport to indicate
the future results of operations or the future financial condition of the
Company.
CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
JUNE 30, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS*
----------------------------
PROPOSED
CABLEVISION OF V CABLE
HISTORICAL BOSTON TRANSACTIONS PRO FORMA
----------- -------------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............ $ 23,487 $ 5,967 (1) $ 236 (4) $ 22,690
(3,000)(2) (4,000)(5)
Accounts receivable,
trade.................. 71,406 2,165 (1) 331 (4) 73,902
Notes and other
receivables............ 17,872 601 (1) 502 (4) 18,975
Prepaid expenses and
other current assets... 13,256 470 (1) 464 (4) 14,190
Property, plant and
equipment, net......... 916,312 35,863 (1) 103,604 (4) 1,055,779
Investments in and
advances to affiliates. 182,080 (17,462)(1) 324 (4) 164,942
Feature film inventory.. 151,113 151,113
Intangible assets, net.. 795,631 114,188 (2) 133,610 (6) 1,042,204
(1,225)(3)
Deferred financing,
interest expense and
other costs, net....... 83,711 1,000 (2) (33,617)(5) 51,094
----------- -------- --------- -----------
$ 2,254,868 $138,567 $ 201,454 $ 2,594,889
=========== ======== ========= ===========
LIABILITIES AND
STOCKHOLDERS'
DEFICIENCY
Accounts payable........ $ 117,203 $ 9,286 (1) $ 9,381 (4) $ 135,870
Accrued expenses........ 213,562 9,186 (1) 10,690 (4) 233,438
Accounts payable to
affiliates............. 27,577 665 (1) 28,242
Feature film rights
payable................ 131,026 131,026
Bank debt............... 1,499,762 80,773 (2) 1,580,535
Senior debt............. 880,888 215,000 (4) 595,888
(500,000)(5)
Subordinated debentures. 623,571 623,571
Subordinated notes
payable................ 141,268 141,268
Obligation to related
party.................. 190,212 190,212
Capital lease
obligations and other
debt................... 10,241 2,048 (1) 12,289
----------- -------- --------- -----------
3,835,310 101,958 (264,929) 3,672,339
----------- -------- --------- -----------
Deficit investment in
affiliates............. 436,321 436,321
----------- -----------
Stockholders'
deficiency:
Preferred stock........ 2 5 (5) 7
Common stock........... 238 6 (2) 244
Par value in excess of
capital contributed... (71,888) 37,828 (2) 499,995 (5) 464,710
(1,225)(3)
Accumulated deficit.... (1,941,878) (33,617)(5) (1,975,495)
----------- -------- --------- -----------
(2,013,526) 36,609 466,383 (1,510,534)
Less, treasury stock, at
cost (50,000 shares)... (3,237) (3,237)
----------- -------- --------- -----------
(2,016,763) 36,609 466,383 (1,513,771)
----------- -------- --------- -----------
$ 2,254,868 $138,567 $ 201,454 $ 2,594,889
=========== ======== ========= ===========
</TABLE>
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* See Note A of Notes to Condensed Pro Forma Consolidated Financial Statements.
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CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS*
-----------------------------------------------------------
MONMOUTH
CABLE,
RIVERVIEW CABLE
AMERICAN AND CABLEVISION PROPOSED
MOVIE FRAMINGHAM OF V CABLE
HISTORICAL CLASSICS CABLE BOSTON TRANSACTIONS PRO FORMA
---------- -------- --------------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Net Revenues............ $ 837,169 $50,951 (7) $ 47,286 (13) $59,239 (19) $ 71,960 (22) $1,066,605
--------- ------- -------- ------- -------- ----------
Operating expenses:
Technical............. 302,885 16,262 (7) 15,127 (13) 26,749 (19) 29,674 (22) 390,697
Selling, general and
administrative....... 195,942 16,105 (7) 9,199 (13) 17,119 (19) 20,776 (22) 254,162
(859)(11) (2,028)(16) (2,092)(20)
Restructuring charge.. 4,306 4,306
Depreciation and
amortization......... 271,343 142 (7) 12,488 (13) 8,428 (19) 41,861 (22) 379,478
10,827 (12) 27,273 (14) 11,038 (20) (3,922)(26)
--------- ------- -------- ------- -------- ----------
774,476 42,477 62,059 61,242 88,389 1,028,643
--------- ------- -------- ------- -------- ----------
Operating profit
(loss).............. 62,693 8,474 (14,773) (2,003) (16,429) 37,962
--------- ------- -------- ------- -------- ----------
Other income (expense)
Interest expense...... (263,299) (1,510)(7) (4,657)(13) (8,955)(19) (24,195)(22) (266,443)
(7,615)(9) (11,093)(15) 1,552 (21) 47,323 (23)
6,006 (25)
Interest income......... 1,518 305 (7) 59 (13) 216 (19) 236 (22) 2,334
Share of affiliates'
net loss............. (82,864) (4,304)(10) (521)(17) 8,594 (22) (79,367)
(272)(18)
Write off of deferred
financing costs...... (9,884) (9,884)
Loss on redemption of
debt................. (7,088) (40,457)(23) (47,545)
Provision for
preferential
payment to related
party................ (5,600) (5,600)
Minority interest..... (3,429) (4,321)(8) (7,750)
Miscellaneous, net.... (7,198) (23)(7) (131)(13) (307)(19) (1,280)(22) (8,939)
--------- ------- -------- ------- -------- ----------
Net loss................ (315,151) (8,994) (31,388) (9,497) (20,202) (385,232)
Preferred stock dividend
requirement............ (6,385) (43,403)(24) (49,788)
--------- ------- -------- ------- -------- ----------
Net loss applicable to
common
shareholders.......... $(321,536) $(8,994) $(31,388) $(9,497) $(63,605) $ (435,020)
========= ======= ======== ======= ======== ==========
Net loss per common
share................. $ (13.72) $ (18.10)
========= ==========
Average number of
common shares
outstanding (in
thousands)............ 23,444 593(19) 24,037
========= ======= ==========
</TABLE>
- --------
* See Note B of Notes to Condensed Pro Forma Consolidated Financial Statements.
-8-
<PAGE>
CONDENSED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS*
-----------------------------
PROPOSED
CABLEVISION OF V CABLE
HISTORICAL BOSTON TRANSACTIONS PRO FORMA
---------- -------------- ------------ ---------
<S> <C> <C> <C> <C>
Net Revenues............. $ 509,135 $30,671 (27) $ 37,892 (30) $ 577,698
--------- ------- -------- ---------
Operating expenses:
Technical................ 193,243 14,334 (27) 16,596 (30) 224,173
Selling, general and
administrative........... 131,611 9,510 (27) 11,004 (30) 151,035
(1,090)(28)
Depreciation and
amortization............. 159,537 4,421 (27) 19,560 (30) 187,419
5,519 (28) (1,618)(34)
--------- ------- -------- ---------
484,391 32,694 45,542 562,627
--------- ------- -------- ---------
Operating profit (loss).. 24,744 (2,023) (7,650) 15,071
--------- ------- -------- ---------
Other income (expense)
Interest expense......... (155,318) (5,397)(27) (12,642)(30) (144,371)
1,753 (29) 23,672 (31)
3,561 (33)
Interest income.......... 790 162 (27) 38 (30) 990
Share of affiliates' net
loss..................... (52,692) 2,840 (30) (49,852)
Write off of deferred
financing costs.......... (2,888) (2,888)
Loss on redemption of
debt..................... -- (33,652)(31) (33,652)
Provision for
preferential payment to
related party............ (2,800) (2,800)
Minority interest........ (4,276) (4,276)
Miscellaneous, net....... (2,999) (89)(27) (237)(30) (3,325)
--------- ------- -------- ---------
Net loss................. (195,439) (5,594) (24,070) (225,103)
Preferred stock dividend (4,918) (21,075)(32) (25,993)
requirement.............. --------- ------- -------- ---------
Net loss applicable to $(200,357) $(5,594) $(45,145) $(251,096)
common shareholders...... ========= ======= ======== =========
Net loss per common $ (8.45) $ (10.33)
share.................... ========= =========
Average number of common
shares outstanding 23,710 593(27) 24,303
(in thousands).......... ========= ======= =========
</TABLE>
- --------
* See Note C of Notes to Condensed Pro Forma Consolidated Financial Statements.
Note A--Notes to Condensed Pro Forma Balance Sheet as of June 30, 1995
CABLEVISION OF BOSTON ACQUISITION
(1) As a result of the acquisition of Cablevision of Boston, the assets and
liabilities purchased will be combined with the Company's consolidated
balance sheet amounts. The adjustments referenced by this Note (1) reflect
the consolidation of such amounts as of the balance sheet date.
(2) Represents (a) the total cost of interests in Cablevision of Boston not
owned by the Company to be paid by the issuance of Class A Common Stock of
the Company valued at $37,834,000, (b) estimated transaction costs of
$2,000,000 and financing costs of $1,000,000, (c) bank borrowings of
$80,773,000 to be used to refinance Cablevision of Boston's bank debt and
accrued interest thereon of $61,106,000 and repay amounts owed to Mr. Dolan
aggregating $19,667,000 for management fees, loans, accrued interest
thereon and preferred equity and (d) the excess ($114,188,000) of the
purchase price over the value of the net liabilities acquired.
-9-
<PAGE>
(3) Represents the amount paid to Mr. Dolan for his general partnership
interest and the assumption of his share of the excess liabilities over
net assets of Cablevision of Boston ($1,225,000) (such amount to be
charged to par value in excess of capital contributed). Interests in the
Dolan-owned assets and liabilities are recorded in the pro forma balance
sheet at Cablevision of Boston's historical cost.
PROPOSED V CABLE TRANSACTIONS
(4) As a result of the proposed acquisition of 80% of the partnership
interests in U.S. Cable not already owned by V Cable to be effected in
connection with the Proposed V Cable Transactions, the assets and
liabilities of U.S. Cable will be combined with the Company's consolidated
balance sheet amounts. The adjustments referenced by this Note (4) reflect
the consolidation of such amounts as of the balance sheet date.
(5) In connection with the Proposed V Cable Transactions, the Company will
redeem the outstanding preferred stock on the books of U.S. Cable for
$4,000,000 and will issue $500,000,000 of its preferred stock to GECC. The
proceeds from this issuance will be used to repay $450,000,000 of V Cable
and/or VC Holding debt to GECC and provide V Cable with $50,000,000 to make
a preferred capital contribution to U.S. Cable, which will repay an
equivalent amount of its debt to GECC. Deferred interest expense and
financing costs of $33,617,000 related to V Cable's assumption of U.S.
Cable's debt in the 1992 V Cable Reorganization will be written off in
connection with the repayment of such debt.
(6) Represents the excess ($133,610,000) of the purchase price of U.S. Cable
over the value of the net liabilities acquired.
Note B--Notes to Condensed Pro Forma Consolidated Statement of Operations for
the Year Ended
December 31, 1994
AMERICAN MOVIE CLASSICS COMPANY ACQUISITION
(7) As a result of the AMCC Acquisition, which was consummated on July 11,
1994, the results of operations of AMCC are combined with the Company's
consolidated results of operations. The adjustments referenced by this
Note (7) reflect the consolidation of such amounts for the period January
1, 1994 through July 10, 1994.
(8) Represents the 25.1% minority partnership interest in the results of
operations of AMCC owned by NBC and Liberty Media Corporation.
(9) Represents interest expense, at 8.0% per annum, on the $181,903,000 of
debt incurred by the Company to fund the purchase of the additional
approximate 50% interest in AMCC. NBC will not share in this expense.
(10) Represents the income of AMCC previously recorded by the Company using
the equity method of accounting.
(11) Represents the elimination of management fees paid to the former partner
by AMCC. In connection with the purchase of the approximate 50% interest
in AMCC, the Company also purchased the right to receive such fees in the
future.
(12) Represents the amortization, based on an average 10-year life, of the
excess cost over fair value of assets acquired resulting from the
purchase of the additional approximate 50% interest in AMCC. NBC will not
share in this expense.
MONMOUTH CABLE, RIVERVIEW CABLE AND FRAMINGHAM CABLE ACQUISITION
(13) As a result of the acquisition of Monmouth Cable and Riverview Cable,
which was consummated on August 8, 1994, the results of operations of
Monmouth Cable and Riverview Cable are combined with the Company's
consolidated results of operations. The adjustments referenced by this
Note (13) reflect the consolidation of such amounts for the period
January 1, 1994 through August 7, 1994.
-10-
<PAGE>
(14) Represents the depreciation and amortization, based on an average 10-year
life, of the step-up in property, plant and equipment, franchise costs and
the excess cost over fair value of assets acquired of $39,761,000 for the
period, offset by the elimination of pre-acquisition depreciation and
amortization of $12,488,000.
(15) Represents interest expense of $15,750,000 attributable to $237,800,000 of
bank borrowings (interest expense of $10,444,000 at a 7.32% interest
rate); $132,158,000 of 6% senior subordinated notes (interest expense of
$4,758,000); $9,110,000 of a 6% indemnification note (interest expense of
$328,000); and amortization of deferred finance costs of $220,000 offset
by pre-acquisition interest expense of $4,657,000 incurred by Monmouth
Cable and Riverview Cable.
(16) Represents the elimination of management fees of $2,378,000 paid to a
former general partner by Monmouth Cable and Riverview Cable and the
elimination of an adjustment ($350,000) made in the first half of 1994 to
reduce prior period overaccruals of franchise fees.
(17) As a result of the acquisition of Framingham Cable, which was consummated
on August 8, 1994, by the Company and Warburg Pincus, a 30% Pre-Payout
Interest in the results of Framingham Cable will be combined with the
Company's consolidated results of operations. The adjustment referenced by
this Note (17) reflects the 30% Pre-Payout Interest for the period January
1, 1994 through August 7, 1994.
(18) Represents the Company's 30% share of reduced costs for Framingham Cable
management fees of $56,000, offset by additional expenses relating to the
Framingham Cable acquisition for depreciation and amortization of $249,000
and interest of $79,000.
CABLEVISION OF BOSTON ACQUISITION
(19) As a result of the acquisition of Cablevision of Boston (and related
issuance of approximately 593,000 shares of the Company's Class A Common
Stock), the results of operations of Cablevision of Boston will be
combined with the Company's consolidated results of operations. The
adjustments referenced by this Note (19) reflect the consolidation of such
amounts for the year ended December 31, 1994.
(20) Represents the amortization, based on an average 10-year life, of the
excess cost over fair value of assets acquired of $11,296,000 for the
period, offset by the elimination of amortization of previous intangibles
of $258,000 and the elimination from selling, general and administrative
expenses of management fees payable by Cablevision of Boston to
Cablevision Systems Services Corporation ($2,092,000).
(21) Represents interest expense of $7,188,000 attributable to $80,773,000 of
bank debt (8.9% interest rate) reduced by pre-acquisition interest expense
of $8,740,000 incurred by Cablevision of Boston on its bank debt and debt
owed to Mr. Dolan and the Company.
PROPOSED V CABLE TRANSACTIONS
(22) As a result of the proposed acquisition of 80% of the partnership
interests in U.S. Cable not already owned by V Cable to be effected in
connection with the Proposed V Cable Transactions, the results of
operations of U.S. Cable will be combined with the Company's consolidated
results of operations. The adjustments referenced by this Note (22)
reflect the consolidation of such amounts for the year ended December 31,
1994 and the elimination of the Company's share of losses in U.S. Cable
previously recorded on the equity basis.
(23) Represents the reduction in interest expense, at an average interest rate
of 10.5%, resulting from the net repayment of $450,000,000 of V Cable
and/or VC Holding debt from the proceeds of the issuance of the preferred
stock in the Proposed V Cable Transactions. In addition, the Company will
write off deferred interest and financing costs of $40,457,000 in
connection with the repayment of U.S. Cable debt assumed by V Cable in the
1992 V Cable Reorganization.
(24) Represents the dividends payable to GECC on the preferred stock to be
issued in the Proposed V Cable Transactions. This amount does not take
into account any gross up required to be paid to a holder of preferred
stock failing to obtain a dividends received deduction.
-11-
<PAGE>
(25) Represents the reduction in interest expense, at an average interest rate
of 12.0%, resulting from the repayment of $50,000,000 of U.S. Cable debt
from the proceeds of the issuance of preferred stock and certain
reductions in U.S. Cable's debt resulting from the Proposed V Cable
Transactions.
(26) Represents the depreciation and amortization, based on an average 10-year
life, of the step-up in property, plant and equipment, franchise costs and
the excess cost over fair value of assets acquired of $37,939,000 for the
period, offset by the elimination of pre-acquisition depreciation and
amortization of $41,861,000.
Note C--Notes to Condensed Pro Forma Consolidated Statement of Operations for
the Six Months Ended June 30, 1995
CABLEVISION OF BOSTON ACQUISITION
(27) As a result of the acquisition of Cablevision of Boston (and related
issuance of approximately 593,000 shares of the Company's Class A Common
Stock), the results of operations of Cablevision of Boston will be
combined with the Company's consolidated results of operations. The
adjustments referenced by this Note (27) reflect the consolidation of such
amounts for the six months ended June 30, 1995.
(28) Represents the amortization, based on an average 10-year life, of the
excess cost over fair value of assets acquired of $5,648,000 for the
period, offset by the elimination of amortization of previous intangibles
of $129,000 and the elimination from selling, general and administrative
expenses of management fees payable by Cablevision of Boston to
Cablevision Systems Services Corporation ($1,090,000).
(29) Represents interest expense of $3,565,000 attributable to $80,773,000 of
bank debt (8.9% interest rate) reduced by pre-acquisition interest expense
of $5,318,000 incurred by Cablevision of Boston on its bank debt and debt
owed to Mr. Dolan and the Company.
PROPOSED V CABLE TRANSACTIONS
(30) As a result of the proposed acquisition of 80% of the partnership
interests in U.S. Cable not already owned by V Cable to be effected in
connection with the Proposed V Cable Transactions, the results of
operations of U.S. Cable will be combined with the Company's consolidated
results of operations. The adjustments referenced by this Note (30)
reflect the consolidation of such amounts for the six months ended June
30, 1995 and the elimination of the Company's share of losses in U.S.
Cable previously recorded on the equity basis.
(31) Represents the reduction in interest expense, at an average interest rate
of 10.6%, resulting from the net repayment of $450,000,000 of V Cable
and/or VC Holding debt from the proceeds of the issuance of the preferred
stock in the Proposed V Cable Transactions. In addition, the Company will
write off deferred interest and financing costs of $33,652,000 in
connection with the repayment of U.S. Cable debt assumed by V Cable in the
1992 V Cable Reorganization.
(32) Represents the dividends payable to GECC on the preferred stock to be
issued in the Proposed V Cable Transactions. This amount does not take
into account any gross up required to be paid to a holder of preferred
stock failing to obtain a dividends received deduction.
(33) Represents the reduction in interest expense, at an average interest rate
of 11.6%, resulting from the repayment of $50,000,000 of U.S. Cable debt
from the proceeds of the issuance of preferred stock and certain
reductions in U.S. Cable's debt resulting from the Proposed V Cable
Transactions.
(34) Represents the depreciation and amortization, based on an average 10-year
life, of the step-up in property, plant and equipment, franchise costs and
the excess cost over fair value of assets acquired of $17,942,000 for the
period, offset by the elimination of pre-acquisition depreciation and
amortization of $19,560,000.
(c) Exhibits
1. Letter, dated September 6, 1995, between the Company, V Cable and VC
Holding and GECC.
-12-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CABLEVISION SYSTEMS CORPORATION
By:
--------------------------------
Barry J. O'Leary
Senior Vice President,
Finance and Treasurer
Dated: September 7, 1995
-13-
<PAGE>
EXHIBIT A
Cablevision Systems Corporation
V Cable, Inc.
VC Holding, Inc.
One Media Crossways
Woodbury, New York 11797-2013
Attention: Barry J. O'Leary,
Senior Vice President and Treasurer
Gentlemen:
General Electric Capital Corporation ("GE Capital" or "Lender") has been
advised by Cablevision Systems Corporation, a Delaware corporation ("CSC"), of a
proposal for CSC, its wholly-owned subsidiary V Cable, Inc., a Delaware
corporation ("V Cable"), V Cable's subsidiaries, and U.S. Cable Television
Group, L.P., a Delaware limited partnership ("USC"), to enter into the following
series of transactions set forth in clauses (a) through (d) below (the
"Transactions"):
(a) CSC would issue 500,000 shares of Series G Preferred Stock having
the terms, rights and preferences summarized in the Preferred Stock
Term Sheet attached hereto as Exhibit A (the "Preferred Stock") to
GE Capital for an aggregate purchase price of $500 million;
(b) Immediately upon the issuance and sale of the Preferred Stock to GE
Capital:
i) CSC would make an equity capital contribution to V Cable of $500
million;
ii) V Cable would apply such funds:
(A) to the repayment of all principal, interest and other
amounts owing to GE Capital under the Loan Agreement dated
December 31, 1992 between V Cable and GE
<PAGE>
Capital (i.e., approximately $26 million as of the date hereof);
(B) to make a capital contribution to USC in an amount equal to the
aggregate amount on such date of (x) the Allocable Term Loan Amount
and (y) the Accreted Value of the Zero Coupon Term Loan, each as
defined in the Senior Loan Agreement dated as of December 31, 1992
between USC and GE Capital (the "USC Senior Loan Agreement") (i.e.,
approximately $93 million as of the date hereof); and
(C) to make an equity capital contribution to VC Holding, Inc. ("VC
Holding") in an amount equal to 81% (i.e., approximately $309
million as of the date hereof) of the remaining funds, after the
uses specified in clauses (b)(ii) (A) and (B) above, and to make an
equity capital contribution to USC in an amount equal to 19% (i.e.,
approximately $72.4 million as of the date hereof) of such remaining
funds;
iii) USC would apply (A) the funds received from V Cable referred to in
clause (b)(ii)(B) above to the prepayment of the Allocable Term Loan and
the Accreted Value of the Zero Coupon Term Loan under the USC Senior
Loan Agreement, and (B) the funds received from V Cable referred to in
clause (b)(ii)(C) above to make an equity capital contribution to VC
Holding in a corresponding amount;
iv) VC Holding would apply the funds received from V Cable referred to in
clause (b)(ii)(C) above and the funds received from USC referred to in
clause (b)(iii)(B) above (A) to make a senior preferred capital
contribution to USC in an amount equal to the greater of (x) $50 million
or (y) the amount necessary to cause the ratio of indebtedness to
annualized system cash flow (each as defined in a manner satisfactory to
GE Capital and CSC) of USC and its subsidiaries, after giving effect to
the Transactions on a pro forma basis, to be not greater than
2
<PAGE>
6.0:1.0/1/ and (B) the balance of such funds to the prepayment in
full of the outstanding principal amount of the Series B Term Loan
under the Loan Agreement dated as of December 31, 1992 between VC
Holding and GE Capital (the "VC Holding Loan Agreement") and, with
the remaining amount of such funds, to the prepayment of a
corresponding amount of the outstanding principal amount of the
Series A Term Loan under the VC Holding Loan Agreement; and
v) USC would apply the funds received from VC Holding referred to in
clause (b) (iv) (A) above to the prepayment of a corresponding
amount of the outstanding principal of the Series B Term Loan under
the USC Senior Loan Agreement;
(c) Concurrently with the execution of a definitive Preferred Stock Purchase
Agreement with respect to the Preferred Stock:
i) CSC, V Cable, VC Holding, USC and GE Capital would enter into a
definitive Master Investment Agreement, on terms and conditions
mutually acceptable to GE Capital and CSC, providing for the
transactions described in clauses (b) (i) through (iv) above and
clauses (d) (i) through (vi) below;
ii) a subsidiary of V Cable would enter into an agreement with the non-V
Cable partners of USC to acquire or cause the redemption by USC of
(as mutually agreed by GE Capital and CSC) the partnership
interests of such partners for aggregate consideration of $4,000,000
(allocated as mutually agreed) and otherwise on terms and conditions
satisfactory to GE Capital and CSC, including a requirement that all
outstanding principal, interest and other
- ----------
1. Alternately, the senior preferred capital contribution would be made to USC
by V Cable and the contributions by V Cable referred to in clause (b) (ii) (c)
would be proportionately reduced. The party making the senior preferred capital
contribution shall be mutually agreed between CSC and GE Capital.
3
<PAGE>
amounts owing under the USC Senior loan Agreement shall be repaid upon
the closing of such acquisition or redemption;
iii) the partners of USC would enter into an amendment to the Amended and
Restated Limited Partnership Agreement of USC dated December 31, 1992,
in form and substance mutually satisfactory to GE Capital and CSC, which
would become effective upon the closing of the purchase by GE Capital of
the Preferred Stock and would provide, inter alia, that:
----- ----
(A) in exchange for the capital contribution to be made by VC Holding or
V Cable (as mutually agreed) to USC referred to in clause (b)(iv)(A)
above, VC Holding or V Cable (as applicable) would receive a
preferred partnership interest in USC that would have priority over
all other partnership interests in USC, would accrue a preferred
return not to exceed a rate per annum to be agreed and could not
receive distributions until at least one year and one day following
the repayment in full of the obligations of USC under the USC Senior
Loan Agreement;
(B) the outstanding principal and interest owing by USC to GE Capital
under the Junior Loan Agreement dated December 31, 1992 between USC
and GE Capital would be distributed by GE Capital to USC in exchange
for a preferred partnership interest in USC that would have priority
over all other partnership interests in USC other than the senior
preferred partnership interest of VC Holding or V Cable (as mutually
agreed) referred to in clause (c)(iii)(A) above; and
(C) such other amendments to the allocation, distribution and other
provisions thereof as shall be mutually satisfactory to GE Capital
and CSC; and
4
<PAGE>
(d) In addition to the transactions described above, upon the closing of
the purchase of the Preferred Stock by GE Capital:
i) GE Capital and VC Holding would amend the terms of the VC Holding
Loan Agreement and GE Capital and USC would amend the terms of
the USC Senior Loan Agreement, in each case on terms and
conditions satisfactory to GE Capital and CSC and agreed upon
prior to the execution of the definitive Preferred Stock Purchase
Agreement;
ii) GE Capital would issue, and the V Cable Ohio and V Cable Long
Island entities would accept and pay a mutually satisfactory
commitment fee in connection with, a commitment by GE Capital on
terms mutually acceptable to the parties to refinance the
obligations under the VC Holding Loan Agreement by providing
credit facilities to V Cable Ohio (approximately $325 million)
and V Cable Long Island (approximately $260 million);
iii) the Management Performance Adjustment and Interborrower Agreement
dated as of December 31, 1992 among V Cable, each of its
subsidiaries party thereto, USC and GE Capital would be
terminated;
iv) USC would distribute to V Cable, without representations,
warranties or recourse, but subject to existing liens securing
indebtedness owed to GE Capital by USC and VC Holding, the
common stock of VC Holding held by USC representing 19% of VC
Holding's issued and outstanding common stock;
v) the Exchange Agreement dated as of December 31, 1992 among V
Cable, V Cable GP, Inc., USC and GE Capital would be amended on
terms and conditions satisfactory to GE Capital and CSC; and
vi) the Management Agreement dated as of December 31, 1992 among CSC,
USC and each of the subsidiaries of USC party thereto would be
amended on terms and conditions satisfactory to GE Capital.
5
<PAGE>
This letter confirms the mutual intent of GS Capital to purchase, and CSC
to issue and sell to GE Capital, the Preferred Stock, and of GE Capital and
CSC, V Cable and VC Holding (collectively, the "CSC Entities") to enter into
and consummate each of the Transactions to which they are a party.
This letter constitutes a general, non-binding expression of interest on
the part of the parties hereto and is not intended to create a legally binding
commitment or obligation on the part of party, except as provided below in this
paragraph. The creation of such a legally binding obligation is subject, among
other things, to the negotiation, execution and delivery of definitive
agreements containing such covenants, representations, warranties, indemnities,
and other provisions as the parties shall mutually agree upon. It is understood
that no party shall be legally bound by reason of this letter, nor shall any
rights, liabilities or obligations arise as a result of this letter, other than
the obligations set forth in paragraph 1 below with respect to confidentiality,
paragraph 2 below solely with respect to indemnification in certain
circumstances and the penultimate paragraph hereof with respect to the parties'
waiver of trial by jury, each of which shall be binding upon the execution
and delivery hereof by the parties hereto. The mutual obligations of the parties
to effect the Transactions as described in the preceding paragraph shall
be further conditioned on the satisfaction or waiver of certain conditions
precedent as may be mutually agreed upon, including that all documentation
necessary to effect the Transactions and such other documentation as shall be
deemed appropriate by GE Capital or CSC to give effect to the Transactions shall
be mutually acceptable and duly executed by all parties thereto, including all
third parties, and shall be satisfactory to GE Capital and CSC, and all of the
Transactions shall be consummated substantially concurrently on terms
satisfactory to GE Capital and CSC and in compliance with applicable law.
* * *
1. This letter is also delivered to the CSC Entities with the
understanding that neither this letter nor its substance shall be disclosed
publicly by GE Capital or the CSC Entities except as agreed to by the other
parties or as may be required by law (in which event the party intending to
make such disclosure shall furnish to the other parties to the extent reasonably
practicable an opportunity to
6
<PAGE>
review and comment upon the form and content of the proposed disclosure).
If the terms of this letter are acceptable to you, we ask that you return
to us an executed copy of this letter. This letter shall expire at the close of
business on the date hereof unless accepted by you on or prior to such date.
Once accepted by you, this letter shall terminate at 11:59 P.M. on November 30,
1995, unless all of the Transactions shall have theretofore been consummated,
provided that notwithstanding the expiration or termination of this letter, the
obligations set forth herein of the CSC entities with respect to the payment of
fees and expenses, confidentiality and indemnification shall survive such
expiration or termination.
2. Subject to the closing of the purchase of the Preferred Stock by GE
Capital, V Cable agrees to pay or cause to be paid all reasonable costs and
expenses of GE Capital (including all fees and expenses of its counsel) in
excess of $50,000 in the aggregate incurred or sustained in the preparation of
this letter and all documentation for the Transactions (including all diligence,
duplication, audit, search, filing and recording fees). In the event that for
any reason the closing of the purchase of the Preferred Stock by GE Capital
does not occur, V Cable shall not have any obligation to reimburse GE Capital
for, or pay directly, any costs and expenses of GE Capital incurred or sustained
in the preparation of this letter and all documentation for the Transactions
(including all diligence, duplication, audit, search, filing, and recording
fees). By executing this letter, each of the CSC Entities agrees to indemnify
and hold harmless GE Capital and its affiliates, and their respective officers,
directors, employees, agents, consultants, attorneys and advisers (each, an
"Indemnified Party"), from and against any and all losses, claims, damages,
liabilities, costs and expenses including environmental liabilities, costs and
expenses and all reasonable fees, expenses and disbursements of counsel, which
may be incurred by or asserted or awarded against any such Indemnified Party
in connection with or arising out of, or by reason of the preparation of the
defense of, any investigation, litigation or proceeding arising out of, related
to or in connection with this letter, any of the Transactions or the
documentation therefor (including those arising from disputes among the
parties hereto), whether or not such Indemnified Party is a party to such
investigation, litigation or proceeding and whether or not any of the
Transactions are consummated, except to the extent such
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<PAGE>
claim, damage, loss, liability or expense is found in a final judgment by a
court of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct. No Indemnified Party shall be
responsible or liable to any other party hereto or to any other party to the
definitive documentation for the Transactions, any successor, assignee or third
party beneficiary of such person or any other person asserting claims
derivatively through such party, for indirect, punitive, exemplary or
consequential damages related to the Transactions. In the event the parties
execute and deliver definitive documentation for any of the Transactions that
contains indemnification by the CSC Entities with respect to the Transactions
expressly governed thereby, the provisions of such indemnification shall
supersede the provisions of this paragraph to the extent of any actual conflict
between such provisions.
The terms of this letter may not be changed except pursuant to a written
instrument signed by GE Capital and the CSC Entities. This letter shall be
governed by the laws of the State of New York, without regard to principles
thereof relating to conflict of laws. This letter may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument. Neither this letter nor the rights or obligations of the parties
hereunder may be assigned by any party without the prior written consent of the
others.
This letter and the Exhibits hereto hereof constitute the complete
agreement between the parties hereto with respect to the subject matter hereof.
BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS
ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON
AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN
ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A
JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION
OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO
WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO
RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT, OR OTHERWISE ARISING OUT OF,
CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS LETTER.
We look forward to working with you to bring the proposed transactions to
completion.
8
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Very truly yours,
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Michael Cummings
--------------------------------
Name: Michael Cummings
Title: Managing Director
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<PAGE>
Agreed this 6th day of
---
September, 1995:
CABLEVISION SYSTEMS CORPORATION
By: /s/ Barry J. O'Leary
--------------------------------------
Name: Barry J. O'Leary
Title: Senior Vice President, Finance
and Treasurer
V CABLE, INC.
By: /s/ Barry J. O'Leary
--------------------------------------
Name: Barry J. O'Leary
Title: Senior Vice President, Finance
and Treasurer
VC HOLDING, INC.
By: /s/ Barry J. O'Leary
--------------------------------------
Name: Barry J. O'Leary
Title: Senior Vice President, Finance
and Treasurer
10
