<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 26, 1996
REGISTRATION NO. 333-02527
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CABLEVISION SYSTEMS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 4841 11-2776686
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NUMBER)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
----------------
ONE MEDIA CROSSWAYS
WOODBURY, NEW YORK 11797
(516) 364-8450
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
ROBERT S. LEMLE
EXECUTIVE VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
ONE MEDIA CROSSWAYS
WOODBURY, NEW YORK 11797
(516) 364-8450
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
WITH COPIES TO:
JOHN P. MEAD
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the Securities registered on this Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE SHEET
LOCATION IN PROSPECTUS
OF INFORMATION REQUIRED BY
PART I OF FORM S-4
<TABLE>
<CAPTION>
ITEM NO. CAPTION LOCATION IN PROSPECTUS
-------- ------- ----------------------
<C> <S> <C>
Item 1 Forepart of the Registration
Statement and Outside Front
Cover Page of Prospectus........ Facing Page of Registration
Statement; Cross-Reference
Sheet; Outside Front and Inside
Front Cover Page of Prospectus
Item 2 Inside Front and Outside Back
Cover Pages of Prospectus....... Inside Front Cover Pages of
Prospectus
Item 3 Risk Factors, Ratio of Earnings
to Fixed Charges, and Other
Information..................... Summary; Risk Factors; The
Company
Item 4 Terms of the Transaction......... The Exchange Offer; Description
of New Depositary Shares, Series
M Preferred Stock and Exchange
Debentures; Certain Federal
Income Tax Considerations
Item 5 Pro Forma Financial Information.. Not Applicable
Item 6 Material Contracts With the
Company Being Acquired.......... Not Applicable
Item 7 Additional Information Required
for Reoffering by Persons and
Parties Deemed to be
Underwriters.................... Plan of Distribution
Item 8 Interests of Named Experts and
Counsel......................... Not Applicable
Item 9 Disclosure of Commission Position
on Indemnification for
Securities Act Liabilities...... Not Applicable
Item 10 Information with Respect to S-3
Registrants..................... Incorporation of Certain
Item 11 Incorporation of Certain Documents by Reference
Information by Reference........ Incorporation of Certain
Item 12 Information with Respect to S-2 Documents by Reference
or S-3 Registrants.............. Not Applicable
Item 13 Incorporation of Certain
Information by Reference........ Not Applicable
Item 14 Information with Respect to
Registrants Other than S-3 or S-
2 Registrants................... Not Applicable
Item 15 Information With Respect to S-3
Companies....................... Not Applicable
Item 16 Information With Respect to S-2
or S-3 Companies................ Not Applicable
Item 17 Information With Respect to
Companies Other Than S-2 or S-3
Companies....................... Not Applicable
Item 18 Information if Proxies, Consents
or Authorizations Are to be
Solicited....................... Not Applicable
Item 19 Information if Proxies, Consents
or Authorizations are Not to be
Solicited, or in an Exchange
Offer........................... Summary; The Exchange Offer;
Description of New Depositary
Shares, Series M Preferred Stock
and Exchange Debentures; Certain
Federal Income Tax
Considerations
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 26, 1996
OFFER TO EXCHANGE
ALL OUTSTANDING DEPOSITARY SHARES
EACH REPRESENTING A ONE ONE-HUNDREDTH INTEREST IN A SHARE OF
11 1/8 SERIES L REDEEMABLE
EXCHANGEABLE PREFERRED STOCK
($677,573,000 AGGREGATE LIQUIDATION PREFERENCE)
FOR
DEPOSITARY SHARES
EACH REPRESENTING A ONE ONE-HUNDREDTH INTEREST IN A SHARE OF
11 1/8% SERIES M REDEEMABLE
EXCHANGEABLE PREFERRED STOCK
OF
CABLEVISION SYSTEMS CORPORATION
----------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON JULY 31,
1996, UNLESS EXTENDED
----------
Cablevision Systems Corporation, a Delaware corporation (the "Company"),
hereby offers, upon the terms and subject to the conditions set forth in this
Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and together with this Prospectus, the "Exchange Offer"), to
exchange $100 aggregate liquidation preference of its Depositary Shares (the
"New Depositary Shares") each representing a one one-hundredth interest in a
share of its 11 1/8% Series M Redeemable Exchangeable Preferred Stock (the
"Series M Preferred Stock"), which have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement (as defined herein) of which this Prospectus constitutes a part, for
each $100 aggregate liquidation preference of its Depositary Shares (the "Old
Depositary Shares") each representing a one one-hundredth interest in a share
of the outstanding 11 1/8% Series L Redeemable Exchangeable Preferred Stock
(the "Series L Preferred Stock") of the Company. The New Depositary Shares and
the Old Depositary Shares are collectively referred to herein as the
"Depositary Shares".
The Company will accept for exchange any and all Old Depositary Shares that
are validly tendered on or prior to 5:00 p.m., New York City time, on the date
the Exchange Offer expires, which will be July 31, 1996, unless the Exchange
Offer is extended to a date not later than August 31, 1996 (the "Expiration
Date"). Tenders of Old Depositary Shares may be withdrawn at any time prior to
5:00 p.m., New York City time, on the business day prior to the Expiration
Date, unless previously accepted for exchange. The Exchange Offer is not
conditioned upon any minimum principal amount of Old Depositary Shares being
tendered for exchange. However, the Exchange Offer is subject to certain
conditions which may be waived by the Company and to the terms and provisions
of the Registration Rights Agreement (as defined herein). See "The Exchange
Offer".
The form and terms of the New Depositary Shares are the same in all material
respects as the form and terms of the Old Depositary Shares except that the New
Depositary Shares have been registered under the Securities Act and will not
contain terms restricting the transfer of such New Depositary Shares. Following
the completion of the Exchange Offer, none of the Depositary Shares will be
entitled to the benefits of the Registration Rights Agreement, relating to
contingent increases in the dividend rate provided for pursuant thereto. See
"The Exchange Offer".
INVESTMENT IN THE DEPOSITARY SHARES INVOLVES SIGNIFICANT RISKS DISCUSSED UNDER
"RISK FACTORS" ON PAGE 18 WHICH SHOULD BE CONSIDERED BY PROSPECTIVE
INVESTORS.
Dividends on the shares of Series M Preferred Stock represented by the New
Depositary Shares are payable out of legally available funds and are cumulative
from the most recent dividend payment date to which dividends on the Old
Depositary Shares were paid (the "Accrual Date"). Holders of Old Depositary
Shares whose Old Depositary Shares are
(Continued on next page)
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
The date of this Prospectus is July 1, 1996.
<PAGE>
(Continued from previous page)
accepted for exchange will be deemed to have waived the right to receive any
payment in respect of dividends on the Old Depositary Shares accumulated from
the Accrual Date to the date of the issuance of the New Depositary Shares.
Consequently, holders who exchange their Old Depositary Shares for New
Depositary Shares will receive the same dividend payment on the next dividend
payment date after consummation of the Exchange Offer (expected to be October
1, 1996) that they would have received had they not accepted the Exchange
Offer, except that if such dividend is not paid in cash, it will be paid in New
Depositary Shares instead of Old Depositary Shares. The Company paid dividends
on April 1, 1996 and July 1, 1996 with respect to the Old Depositary Shares by
issuing additional Old Depositary Shares (the "Dividend Shares"). Dividend
Shares may be exchanged for New Depositary Shares. Dividends on the shares of
Series M Preferred Stock represented by the New Depositary Shares are payable
quarterly in arrears on January 1, April 1, July 1 and October 1 of each year,
commencing October 1, 1996, accumulating from the Accrual Date at the annual
rate of 11 1/8% per New Depositary Share.
Before April 1, 2001, dividends may, at the option of the Company, be paid in
cash or by issuing New Depositary Shares representing fully paid and
nonassessable shares of Series M Preferred Stock with an aggregate liquidation
preference equal to the amount of such dividends. On and after April 1, 2001,
dividends must be paid in cash. The Series M Preferred Stock has a liquidation
preference of $10,000 per share (equivalent to $100 per New Depositary Share)
plus accumulated and unpaid dividends thereon.
Based on no-action letters issued by the staff of the Securities and Exchange
Commission (the "Commission") to third parties, the Company believes the New
Depositary Shares issued pursuant to the Exchange Offer may be offered for
resale, resold and otherwise transferred by holders thereof (other than a
"Restricted Holder," being (i) a broker-dealer who acquires such New Depositary
Shares directly from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act or (ii) a person that is an
affiliate of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that such New Depositary Shares are
acquired in the ordinary course of such holders' business and such holders have
no arrangements with any person to participate in the distribution of such New
Depositary Shares. Eligible holders wishing to accept the Exchange Offer must
represent to the Company that such conditions have been met. Each broker-dealer
that receives New Depositary Shares for its own account pursuant to the
Exchange Offer must acknowledge that it will deliver a prospectus in connection
with any resale of such New Depositary Shares. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of New
Depositary Shares received in exchange for Old Depositary Shares where such Old
Depositary Shares were acquired by such broker-dealer as a result of market-
making activities or other trading activities. The Company has agreed that it
will make this Prospectus and any amendment or supplement to this Prospectus
available to any broker-dealer for use in connection with any such resale for a
period of 90 days from the date of this Prospectus, or such shorter period as
will terminate when all Old Depositary Shares acquired by broker-dealers for
their own accounts as a result of market-making activities or other trading
activities have been exchanged for New Depositary Shares and resold by such
broker-dealers. See "Plan of Distribution".
The Company will not receive any proceeds from this offering, and no
underwriter is being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD DEPOSITARY SHARES IN ANY
JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE
IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
The New Depositary Shares are new securities for which there currently is no
public market. If a market for the New Depositary Shares should develop, the
New Depositary Shares could trade at a discount from their aggregate
liquidation preference. The Company does not intend to list the New Depositary
Shares on a national securities exchange or to apply for quotation of the New
Depositary Shares through the National Association of Securities Dealers
Automated Quotation System. There can be no assurance that an active public
market for the New Depositary Shares will develop.
The Company has been advised by Bear, Stearns & Co. Inc., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co. Incorporated that
they intend to make a market in the New Depositary Shares; however, such
entities are under no obligation to do so and any market making activities with
respect to the New Depositary Shares may be discontinued at any time.
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company may be inspected and copied at the public reference facilities of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the following regional offices: Seven World Trade Center,
13th Floor, New York, New York 10048; and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and copies of such material can be
obtained from the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such
reports, proxy statements and other information also may be inspected at the
offices of the American Stock Exchange, 86 Trinity Place, New York, New York
10006.
This Prospectus constitutes a part of a registration statement (the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
Registration Statement and the exhibits and schedules thereto and reference is
hereby made to the Registration Statement and the exhibits and schedules
thereto for further information with respect to the Company and the securities
offered hereby. Statements contained herein concerning the provisions of any
documents filed as an exhibit to the Registration Statement or otherwise filed
with the Commission are not necessarily complete, and in each instance
reference is made to the copy of such document so filed. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus the
following documents or information filed with the Commission:
(a) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (the "Form 10-K");
(b) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996 (the "Form 10-Q");
(c) the Company's Current Reports on Form 8-K filed March 26, 1996 and
May 17, 1996 (the "May Form 8-K"); and
(d) all documents filed by the Company pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act on or after the date of this Prospectus and
prior to the termination of the offering made hereby.
Any statement contained herein or in any documents incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for the purpose of this Prospectus to the extent that a subsequent
statement contained herein or in any subsequently filed document which also is
or is deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
As used herein, unless the context otherwise requires, the term "Company"
refers to Cablevision Systems Corporation and its subsidiaries. The term
"Consolidated Financial Statements" refers to the Company's Consolidated
Financial Statements and the notes thereto incorporated by reference from the
Form 10-K and the term "Management's Discussion and Analysis" refers to the
Management's Discussion and Analysis of Financial Condition and Results of
Operations incorporated by reference from the Form 10-K and the Form 10-Q. The
term "Condensed Pro Forma Consolidated Financial Statements" refers to the
Condensed Pro Forma Consolidated Financial Statements incorporated by reference
from the May Form 8-K.
3
<PAGE>
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT PRESENTED
HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE WITHOUT CHARGE UPON
WRITTEN OR ORAL REQUEST FROM ROBERT S. LEMLE, EXECUTIVE VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY OF THE COMPANY AT THE COMPANY'S PRINCIPAL EXECUTIVE
OFFICES LOCATED AT ONE MEDIA CROSSWAYS, WOODBURY, NEW YORK 11797, TELEPHONE
NUMBER (516) 364-8450. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY JULY 24, 1996.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH
TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH
OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Summary................................................................... 5
Risk Factors.............................................................. 18
The Company............................................................... 22
Use of Proceeds........................................................... 25
The Exchange Offer........................................................ 26
Capitalization............................................................ 33
Description of Capital Stock.............................................. 35
Description of New Depositary Shares, Series M Preferred Stock and Ex-
change Debentures........................................................ 45
Certain Federal Income Tax Considerations................................. 65
Plan of Distribution...................................................... 66
Validity of the New Depositary Shares..................................... 66
Experts................................................................... 67
</TABLE>
4
<PAGE>
SUMMARY
The following information is qualified in its entirety by the more detailed
information, financial statements and pro forma financial information appearing
elsewhere in this Prospectus or incorporated by reference herein. Investment in
the securities offered hereby involves significant risks. See "Risk Factors".
THE COMPANY
The Company is one of the largest operators of cable television systems in
the United States, with approximately 2,752,000 subscribers in 19 states as of
March 31, 1996 based on the number of basic subscribers in systems which the
Company manages and which it owns or in which it has investments. The Company
also has ownership interests in companies that produce and distribute national
and regional programming services and provide advertising sales services for
the cable television industry. The Company was formed in 1985 to effect a
reorganization of its predecessors.
CABLE TELEVISION
The cable television systems that are majority owned and managed by the
Company (the "Company's cable television systems") served approximately
2,085,000 subscribers as of March 31, 1996 in New York, Ohio, Connecticut, New
Jersey, Michigan and Massachusetts. In addition, the Company has non-majority
investments in and manages cable television systems which served approximately
667,000 subscribers as of March 31, 1996 in Alabama, Arkansas, Florida,
Illinois, Kansas, Kentucky, Maine, Massachusetts, Mississippi, Missouri, New
Jersey, New York, North Carolina, Oklahoma, Pennsylvania and Tennessee. The
Company's cable television systems have generally been characterized by
relatively high revenues per subscriber ($37.28 for March 1996) and ratios of
premium service units to basic subscribers (1.8:1 for March 1996). In
calculating revenue per subscriber, the Company includes only recurring service
revenues and excludes installation charges and certain other revenues such as
advertising, pay-per-view and home shopping revenues.
On May 10, 1996, the Company entered into an agreement with Warburg, Pincus
Investors, L.P. ("Warburg") to acquire (the "Pending Warburg Transactions")
from Warburg the interests in A-R Cable Services, Inc. ("A-R Cable"), A-R Cable
Partners, Cablevision of Newark and Cablevision of Framingham Holdings, Inc.
("CFHI") that the Company does not already own. See "Recent Developments--
Pending Warburg Transactions" in the May Form 8-K.
PROGRAMMING SERVICES
The Company conducts its programming activities through Rainbow Programming
Holdings, Inc. ("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 Liberty Media Corporation. Rainbow Programming's businesses include eight
regional SportsChannel services, four national entertainment services (American
Movie Classics Company, Bravo Network, MuchMusic and the Independent Film
Channel), Rainbow News 12 (regional news services serving suburban areas
surrounding New York City) and the sports services of Prime SportsChannel
Networks (Prime Network and NewSport). Rainbow Programming also owns an
interest in Madison Square Garden, L.P.
ADVERTISING SERVICES
Rainbow Advertising Sales Corporation sells advertising time to national,
regional and local advertisers on behalf of the Company's cable television
systems and the SportsChannel and Rainbow News 12 programming services, as well
as on behalf of unaffiliated cable television systems.
5
<PAGE>
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to 6,775,730 Old Depositary
Shares representing shares of Series L Preferred Stock with an aggregate
liquidation preference of $677,573,000 for up to 6,775,730 New Depositary
Shares representing shares of Series M Preferred Stock with the same aggregate
liquidation preference. The form and terms of the New Depositary Shares are the
same as the form and terms of the Old Depositary Shares except that the New
Depositary Shares have been registered under the Securities Act and will not
contain terms restricting the transfer of such New Depositary Shares (and hence
are not entitled to the benefits of the Registration Rights Agreement relating
to the contingent increases in the dividend rate provided for pursuant
thereto). The Old Depositary Shares and the New Depositary Shares are herein
collectively referred to as the "Depositary Shares". See "Description of New
Depositary Shares, Series M Preferred Stock and Exchange Debentures".
The Exchange Offer......
One New Depositary Share representing a one one-
hundredth interest in a share of Series M
Preferred Stock with an aggregate liquidation
preference of $10,000 (equivalent to $100 per
New Depositary Share) will be issued in exchange
for each Old Depositary Share representing a one
one-hundredth interest in a share of Series L
Preferred Stock with an aggregate liquidation
preference of $10,000 (equivalent to $100 per
Old Depositary Share). As of the date hereof,
6,775,730 Old Depositary Shares representing
shares of Series L Preferred Stock with an
aggregate liquidation preference of $677,573,000
are issued and outstanding. The Company will
issue the New Depositary Shares to tendering
holders of Old Depositary Shares on or promptly
after the Expiration Date.
Resale.................. The Company believes that the New Depositary
Shares issued pursuant to the Exchange Offer
generally will be freely transferable by the
holders thereof without registration or any
prospectus delivery requirement under the
Securities Act, except that a "dealer" or any of
the Company's "affiliates", as such terms are
defined under the Securities Act, that exchanges
Old Depositary Shares held for its own account
(a "Restricted Holder") may be required to
deliver copies of this Prospectus in connection
with any resale of New Depositary Shares (the
"Resale Depositary Shares") issued in exchange
for such Old Depositary Shares (the "Prospectus
Delivery Requirement"). See "The Exchange
Offer--General" and "Plan of Distribution".
Expiration Date.........
5:00 p.m., New York City time, on July 31, 1996,
unless the Exchange Offer is extended to a date
not later than August 31, 1996, in which case
the term "Expiration Date" means the latest date
and time to which the Exchange Offer is
extended. The maximum period that the Exchange
Offer will remain in effect shall be from the
date of this Prospectus until the Expiration
Date. See "The Exchange Offer--Expiration Date;
Extensions; Amendments".
Accumulated Dividends
on the New Depositary
Shares and the Old
Depositary Shares......
Dividends on the shares of Series M Preferred
Stock represented by the New Depositary Shares
will accumulate from the Accrual
6
<PAGE>
Date. Holders of Old Depositary Shares whose Old
Depositary Shares are accepted for exchange will
be deemed to have waived the right to receive
any payment in respect of dividends on the
Series L Preferred Stock represented by such Old
Depositary Shares accumulated from the Accrual
Date to the date of the issuance of the New
Depositary Shares. Consequently, holders who
exchange their Old Depositary Shares for New
Depositary Shares will receive the same dividend
payment on the next dividend payment date after
the consummation of the Exchange Offer (expected
to be October 1, 1996) that they would have
received had they not accepted the Exchange
Offer, except that if such dividend is not paid
in cash, it will be paid by issuing New
Depositary Shares instead of Old Depositary
Shares. See "The Exchange Offer--Dividends on
the Series M Preferred Stock".
Termination of the
Exchange Offer......... The Company may terminate the Exchange Offer if
it determines that its ability to proceed with
the Exchange Offer could be materially impaired
due to any legal or governmental action, any new
law, statute, rule or regulation or any
interpretation of the staff of the Commission of
any existing law, statute, rule or regulation or
if the Company reasonably deems it advisable to
terminate the Exchange Offer. Holders of Old
Depositary Shares will have certain rights
against the Company under the Registration
Rights Agreement should the Company fail to
consummate the Exchange Offer. See "The Exchange
Offer--Termination".
No federal or state regulatory requirements must
be complied with or approvals obtained in
connection with the Exchange Offer, other than
applicable requirements under federal and state
securities laws.
Procedures For
Tendering Old
Depositary Shares...... Each holder of Old Depositary Shares wishing to
accept the Exchange Offer must complete, sign
and date the Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
the depositary receipts (the "Depositary
Receipts") evidencing Old Depositary Shares to
be exchanged and any other required
documentation to The First National Bank of
Boston, as Exchange Agent, at the address set
forth herein and therein or effect a tender of
Old Depositary Shares pursuant to the procedures
for book-entry transfer as provided for herein.
See "The Exchange Offer--Procedures for
Tendering".
Special Procedures for
Beneficial Holders .... Any beneficial holder whose Old Depositary Shares
are registered in the name of his broker,
dealer, commercial bank, trust company or other
nominee and who wishes to tender in the Exchange
Offer should contact such registered holder
promptly
7
<PAGE>
and instruct such registered holder to tender on
his behalf. If such beneficial holder wishes to
tender on his own behalf, such beneficial holder
must, prior to completing and executing the
Letter of Transmittal and delivering the
Depositary Receipts evidencing his Old
Depositary Shares, either make appropriate
arrangements to register ownership of the Old
Depositary Shares in such holder's name or
obtain a properly completed stock power from the
registered holder. The transfer of record
ownership may take considerable time. See "The
Exchange Offer--Procedures for Tendering".
Guaranteed Delivery Holders of Old Depositary Shares who wish to
Procedures............. tender their Old Depositary Shares and whose Old
Depositary Shares are not immediately available
or who cannot deliver the Depositary Receipts
evidencing their Old Depositary Shares and a
properly completed Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date may tender their Old Depositary
Shares according to the guaranteed delivery
procedures set forth in "The Exchange Offer--
Guaranteed Delivery Procedures".
Withdrawal Rights....... Tenders of Old Depositary Shares may be withdrawn
at any time prior to 5:00 p.m., New York City
time, on the business day prior to the
Expiration Date, unless previously accepted for
exchange. See "The Exchange Offer--Withdrawal of
Tenders".
Acceptance of Old
Depositary Shares and
Delivery of New
Depositary Shares......
Subject to certain conditions (as summarized
above in "Termination of the Exchange Offer" and
described more fully in "The Exchange Offer--
Termination"), the Company will accept for
exchange any and all Old Depositary Shares which
are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the
Expiration Date. The New Depositary Shares
issued pursuant to the Exchange Offer will be
delivered promptly following the Expiration
Date. See "The Exchange Offer--General".
Certain Tax The exchange pursuant to the Exchange Offer will
Considerations......... generally not be a taxable event for federal
income tax purposes. See "Certain Federal Income
Tax Considerations".
Exchange Agent.......... The First National Bank of Boston is serving as
exchange agent (the "Exchange Agent") in
connection with the Exchange Offer.
Use of Proceeds......... There will be no cash proceeds payable to the
Company from the issuance of the New Depositary
Shares pursuant to the Exchange Offer. Of the
net proceeds received by the Company from the
sale of the Old Depositary Shares, approximately
$570.0 million was applied to make a capital
contribution to V
8
<PAGE>
Cable, Inc. ("V Cable"). Such proceeds were used
to repay approximately $500.0 million of
indebtedness of V Cable and VC Holding, Inc. and
to make a capital contribution of approximately
$70.0 million to U.S. Cable Television Group,
L.P. The Company applied the balance of
approximately $55.0 million to repay borrowings
under the Company's principal bank credit
agreement (the "Credit Agreement"). The Company
expects to reborrow the amount repaid under the
Credit Agreement in the future for general
corporate purposes. See "Use of Proceeds".
SUMMARY OF TERMS OF THE NEW DEPOSITARY SHARES, SERIES M PREFERRED STOCK AND THE
EXCHANGE DEBENTURES
NEW DEPOSITARY SHARES AND SERIES M PREFERRED STOCK
Dividends............... Cumulative at 11 1/8% per annum out of legally
available funds. Dividends will accumulate from
the Accrual Date and are payable quarterly in
arrears on January 1, April 1, July 1 and
October 1 of each year, commencing October 1,
1996. The rights to dividends on the Series M
Preferred Stock represented by the New
Depositary Shares will be cumulative (whether or
not earned or declared) on a daily basis. Before
April 1, 2001, dividends may, at the option of
the Company, be paid in cash or by issuing New
Depositary Shares representing additional fully
paid and nonassessable shares of Series M
Preferred Stock with an aggregate liquidation
preference equal to the amount of such
dividends. On or after April 1, 2001, dividends
are payable only in cash. For federal income tax
purposes, distributions with respect to the New
Depositary Shares will not qualify as dividends
and will be treated as a return of capital until
the Company has earnings and profits. See "Risk
Factors--Risks Related to the Securities--
Certain Federal Income Tax Consequences".
Liquidation Preference.. $10,000 per share of Series M Preferred Stock
(equivalent to $100 per New Depositary Share)
plus accumulated and unpaid dividends thereon.
Voting.................. Holders of the Series M Preferred Stock have no
general voting rights except as provided by law
and as provided in the Certificate of
Designations therefor. Upon the failure of the
Company to (i) pay dividends on the Series L
Preferred Stock or the Series M Preferred Stock
in cash or, to the extent permitted by its
terms, by the issuance of additional Old
Depositary Shares or New Depositary Shares, as
the case may be, for more than six quarters or
(ii) discharge any redemption obligation with
respect to the Series L Preferred Stock or the
Series M Preferred Stock, the size of the
Company's Board of Directors will be increased
by one director, and holders of a majority of
the outstanding shares of Series L Preferred
Stock and the Series M Preferred Stock, voting
or consenting, as the
9
<PAGE>
case may be, as a single class, will be entitled
to elect a director to fill the newly created
vacancy. The Company may not issue any new class
of Senior Securities (as defined herein) without
the approval of the holders of at least a
majority of the shares of the Series L Preferred
Stock and the Series M Preferred Stock then
outstanding, voting or consenting, as the case
may be, as a single class.
Mandatory Redemption.... The Company is required to redeem the Series M
Preferred Stock out of legally available funds
on April 1, 2008 at a redemption price equal to
the liquidation preference of $10,000 per share
(equivalent to $100 per New Depositary Share),
plus accumulated and unpaid dividends thereon to
the date of redemption.
Optional Redemption..... On and after April 1, 2003, the Series M
Preferred Stock is redeemable, at the option of
the Company, in whole or in part, at the
redemption prices set forth herein, plus
accumulated and unpaid dividends thereon to the
date of redemption. In addition, shares of the
Series M Preferred Stock representing up to 50%
of the aggregate liquidation preference of the
Series M Preferred Stock may be redeemed before
April 1, 1999 at a redemption price per share
equal to the liquidation preference of $10,000
per share (equivalent to $100 per New Depositary
Share) plus accumulated and unpaid dividends
thereon plus a premium of $1,000 per share
(equivalent to $10 per New Depositary Share) of
Series M Preferred Stock out of the net proceeds
of a sale of Junior Stock (as defined herein) to
a Strategic Equity Investor (as defined herein)
or a public offering of Class A Common Stock,
provided that following such redemption at least
3,250,000 Depositary Shares (representing at
least 50% of the amount of Depositary Shares
initially issued) remain outstanding.
Furthermore, the Company may, at its option,
prior to April 1, 2003, redeem the Series M
Preferred Stock, in whole but not in part, at
any time within 180 days after a Change of
Control (as defined herein), at a redemption
price per share equal to the sum of (i) the
liquidation preference of $10,000 per share
(equivalent to $100 per New Depositary Share)
plus (ii) accumulated and unpaid dividends to
the date of redemption plus (iii) the Make-Whole
Premium (as defined herein), which is based on a
discount rate equal to the Treasury Rate (as
defined herein) plus 50 basis points.
Exchange Feature........ The New Depositary Shares are exchangeable into
the Exchange Debentures at the option of the
Company, in whole but not in part.
Ranking................. The Series M Preferred Stock represented by the
New Depositary Shares will rank, subject to
certain conditions, junior as to payment of
dividends upon liquidation, winding-up or
dissolution of the Company to (i) each class of
capital stock of the Company or series of
preferred stock issued by the
10
<PAGE>
Company established after the initial issuance
of the Series M Preferred Stock the terms of
which specifically provide that such class or
series will rank senior to the Series M
Preferred Stock as to dividends and
distributions upon the liquidation, winding-up
or dissolution of the Company and (ii) all
liabilities and obligations (whether or not for
borrowed money) of the Company. The Series M
Preferred Stock will rank on a parity with the
Series L Preferred Stock and the Company's
Series B Cumulative Preferred Stock, 8% Series C
Cumulative Preferred Stock ("Series C Preferred
Stock"), 8% Series D Cumulative Preferred Stock
(which may be issued in exchange for shares of
Series C Preferred Stock), 11 3/4% Series G
Redeemable Exchangeable Preferred Stock ("Series
G Preferred Stock") and 11 3/4% Series H
Redeemable Exchangeable Preferred Stock ("Series
H Preferred Stock") (which have been issued in
exchange for shares of Series G Preferred Stock)
and 8 1/2% Series I Cumulative Convertible
Exchangeable Preferred Stock ("Series I
Preferred Stock").
Exchange Offer
Registration Rights ...
The Company has entered into a registration
rights agreement with the Initial Purchasers of
the Old Depositary Shares (the "Registration
Rights Agreement") pursuant to which the Company
agreed, for the benefit of the holders of the
Old Depositary Shares, at the Company's cost (i)
within 60 days after the date of original issue
of the Old Depositary Shares, to file a
registration statement (the "Exchange Offer
Registration Statement") with the Commission
with respect to a registered offer to exchange
(the "Exchange Offer") the Old Depositary Shares
for the New Depositary Shares and (ii) use its
best efforts to cause the Exchange Offer
Registration Statement to be declared effective
under the Securities Act within 180 days after
the date of original issuance of the Old
Depositary Shares. Upon the Exchange Offer
Registration Statement being declared effective,
the Company agreed to offer the New Depositary
Shares in exchange for surrender of the Old
Depositary Shares. For each Old Depositary Share
surrendered to the Company pursuant to the
Exchange Offer, the holder of such Old
Depositary Share will receive a New Depositary
Share. In the event that the Exchange Offer is
not consummated within 240 days of the date of
issuance of the Old Depositary Shares, the
Company has agreed, at its cost, as promptly as
practicable to file a shelf registration
statement (the "Shelf Registration Statement")
covering resales of the Old Depositary Shares
and use its best efforts to cause the Shelf
Registration Statement to be declared effective
under the Securities Act.
In the event that the Exchange Offer is not
consummated or the Shelf Registration Statement
is not declared effective on or prior to the
240th calendar day following the date of
original issue of the Old Depositary Shares, the
dividend rate borne by the Series L Preferred
Stock shall be increased by one-quarter of
11
<PAGE>
one percent per annum for the first 90 days
following such 240-day period. Such dividend
rate will increase by an additional one-quarter
of one percent per annum at the beginning of
each subsequent 90-day period, up to a maximum
aggregate increase of one percent per annum.
Upon the consummation of the Exchange Offer or
the effectiveness of the Shelf Registration
Statement, as the case may be, the dividend rate
borne by the Series L Preferred Stock will be
reduced to the original dividend rate. Dividends
on the Series M Preferred Stock will accumulate
at the original dividend rate accruing on the
Series L Preferred Stock.
Absence of Public The New Depositary Shares are new securities for
Market................. which there currently is no market. Although
Bear, Stearns & Co. Inc., Merrill Lynch, Pierce,
Fenner & Smith Incorporated and Morgan Stanley &
Co. Incorporated, the initial purchasers of the
Old Depositary Shares (collectively, the
"Initial Purchasers"), have informed the Company
that they currently intend to make a market in
the Old Depositary Shares, the New Depositary
Shares and, if issued, the Exchange Debentures,
they are not obligated to do so and any such
market making may be discontinued at any time
without notice. Accordingly, there can be no
assurance as to the development or liquidity of
any market for the Old Depositary Shares, the
New Depositary Shares and, if issued, the
Exchange Debentures. The Company does not intend
to apply for listing of the Old Depositary
Shares, the New Depositary Shares or, if issued,
the Exchange Debentures on any securities
exchange or for quotation through the National
Association of Securities Dealers Automated
Quotation System.
EXCHANGE DEBENTURES
Maturity Date........... April 1, 2008.
Interest................ Interest will accrue at the dividend rate of the
Series M Preferred Stock and be payable in
arrears on January 1 and July 1 of each year,
commencing with the first of such dates to occur
after the date upon which Exchange Debentures
are issued in exchange for the New Depositary
Shares ("Exchange Date"). Before April 1, 2001,
interest may, at the option of the Company, be
paid in cash or by issuing additional Exchange
Debentures with a principal amount equal to such
interest. On and after April 1, 2001, interest
on the Exchange Debentures may be paid only in
cash.
Optional Redemption..... At any time on and after April 1, 2003, the
Exchange Debentures are redeemable, at the
option of the Company, in whole or in part, at
the redemption prices set forth herein plus
accrued and unpaid interest thereon to the
redemption date. In addition, prior to April 1,
1999 up to 50% in aggregate principal amount of
the Exchange Debentures may be redeemed at a
price of 110% of the principal amount thereof,
plus accrued and unpaid interest thereon, out of
the net proceeds of a sale of Junior Stock
12
<PAGE>
to a Strategic Equity Investor or a public
offering of Class A Common Stock, provided that
following such redemption at least $325,000,000
principal amount of Exchange Debentures remains
outstanding. See "Description of New Depositary
Shares, Series M Preferred Stock and Exchange
Debentures".
Subordination........... The Exchange Debentures will be subordinated to
all existing and future Senior Indebtedness (as
defined) of the Company and will rank pari passu
with the Company's $275,000,000 of 10 3/4%
Senior Subordinated Debentures due 2004,
$200,000,000 of 9 7/8% Senior Subordinated
Debentures due 2013, $150,000,000 of 9 7/8%
Senior Subordinated Debentures due 2023,
$300,000,000 of 9 1/4% Senior Subordinated Notes
due 2005, $250,000,000 of 10 1/2% Senior
Subordinated Debentures due 2016, $150,000,000
of 9 7/8% Senior Subordinated Notes due 2006, 8
1/2% Convertible Subordinated Debentures due
2007 (that may be issued in exchange for the
Series I Preferred Stock) and 11 3/4% Senior
Subordinated Debentures due 2007 (that may be
issued in exchange for the Series G Preferred
Stock and the Series H Preferred Stock)
(collectively, the "Existing Debentures"). The
amount of Senior Indebtedness outstanding at
March 31, 1996, adjusted to give pro forma
effect to the transactions described under
"Capitalization" and the application of the net
proceeds to the Company from the offering of the
Series L Preferred Stock represented by Old
Depositary Shares, would have been approximately
$569.4 million. At March 31, 1996, the Company
also had outstanding, adjusted to give pro forma
effect to the transactions described under
"Capitalization", $1,663 million of senior
subordinated indebtedness and obligations
(including $339.7 million of indebtedness of
subsidiaries guaranteed by the Company) that
would have ranked pari passu with the Exchange
Debentures. Also, at March 31, 1996,
consolidated subsidiaries of the Company had
outstanding, adjusted to give pro forma effect
to the transactions described under
"Capitalization", approximately $1,346 million
of indebtedness (not including $339.7 million of
indebtedness of subsidiaries guaranteed by the
Company, described above) which, insofar as the
assets of those subsidiaries are concerned,
would have been effectively senior to the
Exchange Debentures.
Certain Restrictions.... The Indenture for the Exchange Debentures, among
other things, contains restrictions (with
certain exceptions) on the ability of the
Company and its Restricted Subsidiaries (as
defined) to incur additional indebtedness, make
certain dividend payments or payments to redeem
or retire capital stock, invest in Unrestricted
Subsidiaries (as defined) or affiliates, engage
in certain transactions with affiliates and
merge or consolidate with or transfer all or
substantially all of their assets to another
entity. The Indenture also prohibits the Company
from issuing any indebtedness that is senior in
right of payment to the Exchange Debentures and
expressly subordinate in right of payment to any
other indebtedness of the Company.
13
<PAGE>
SELECTED FINANCIAL DATA
The historical consolidated statement of operations data (except for book
value per common share, deficiency of earnings available to cover fixed charges
and deficiency of earnings available to cover fixed charges and preferred stock
dividends) and balance sheet data for each year ended December 31 and as of
December 31 in each year in the five-year period ended December 31, 1995,
included in the following selected financial data have been derived from the
Consolidated Financial Statements of the Company, audited by KPMG Peat Marwick
LLP, independent certified public accountants. The historical consolidated
statement of operations data and balance sheet data for the periods ended and
as of March 31, 1996 and 1995 included in the following selected financial data
have been derived from financial statements of the Company that have not been
audited, but that, in the opinion of the management of the Company, reflect all
adjustments necessary for the fair presentation of such data for the interim
periods. The results of operations for the three-month period ended March 31,
1996 are not necessarily indicative of the results of operations for the full
year, although the Company expects to incur a substantial loss for the year
ended December 31, 1996.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- ------------------------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- ---------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS
DATA(1):
Net revenues............ $ 304,165 $ 245,401 $1,078,060 $ 837,169 $ 666,724 $ 572,487 $ 603,272
Operating expenses:
Technical............... 128,690 93,225 412,479 302,885 241,877 204,449 213,059
Selling, general and ad-
ministrative........... 72,888 55,817 266,209 195,942 172,687 120,356 121,527
Restructuring charge.... -- -- -- 4,306(2) -- -- --
Depreciation and amorti-
zation................. 84,694 82,654 319,929 271,343 194,904 168,538 215,326
--------- --------- ---------- --------- --------- --------- ---------
Operating profit........ 17,893 13,705 79,443 62,693 57,256 79,144 53,360
Other income (expense):
Interest expense, net... (67,895) (75,328) (311,887) (261,781) (230,327) (193,379) (257,189)
Provision for preferen-
tial payment to
related party.......... (1,400) (1,400) (5,600) (5,600) (5,600) (2,662) --
Provision for loss on
Olympics venture....... -- -- -- -- -- (50,000)(3) --
Loss on sale of pre-
ferred stock........... -- -- -- -- -- (20,000)(4) --
Write-off of deferred
financing costs........ -- (2,888)(5) (5,517)(5) (9,884)(5) (1,044)(5) (12,284)(5) --
Loss on redemption of
debentures............. -- -- -- (7,088)(5) -- -- --
Share of affiliates' net
loss................... (20,968) (29,105) (93,024) (82,864) (61,017) (47,278) (23,780)
Gain (loss) on sale of
programming
and affiliate inter-
ests, net.............. -- -- 35,989 -- (330) 7,053 15,505
Minority interest....... (2,355) (2,110) (8,637) (3,429) 3,000 -- --
Gain on sale of
marketable securities,
net.................... -- -- -- -- -- 733 5,806
Settlement of litigation
and related matters.... -- -- -- -- -- (5,655) (9,677)
Miscellaneous, net...... (1,577) (1,376) (8,225) (7,198) (8,720) (6,175) (11,224)
--------- --------- ---------- --------- --------- --------- ---------
Net loss................ (76,302) (98,502) (317,458) (315,151) (246,782) (250,503) (227,199)
Dividend requirements
applicable to preferred
stock.................. (24,378) (2,471) (20,249) (6,385) (885) (885) (4,464)
--------- --------- ---------- --------- --------- --------- ---------
Net loss applicable to
common shareholders.... $(100,680) $(100,973) $ (337,707) $(321,536) $(247,667) $(251,388) $(231,663)
========= ========= ========== ========= ========= ========= =========
Net loss per common
share.................. $ (4.06) $ (4.27) $ (14.17) $ (13.72) $ (10.83) $ (11.17) $ (10.32)
========= ========= ========== ========= ========= ========= =========
Average number of common
shares
outstanding (in thou-
sands)................. 24,810 23,669 23,826 23,444 22,859 22,512 22,446
========= ========= ========== ========= ========= ========= =========
Book value per common
share.................. $ (81.17) $ (81.16) $ (76.61) $ (76.93) $ (64.61) $ (55.28) $ (41.49)
========= ========= ========== ========= ========= ========= =========
Deficiency of earnings
available to cover
fixed charges.......... $ (76,283) $ (98,484) $ (317,384) $(315,003) $(246,644) $(250,429) $(227,124)
========= ========= ========== ========= ========= ========= =========
Deficiency of earnings
available to cover
fixed charges and
preferred stock
dividends.............. $(100,661) $(100,955) $ (337,633) $(321,388) $(247,529) $(251,314) $(231,588)
========= ========= ========== ========= ========= ========= =========
</TABLE>
(footnotes on following page)
14
<PAGE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
MARCH 31, ----------------------------------------------------------
1996 1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA(1):
Total assets........... $2,593,106 $2,502,305 $2,176,413 $1,327,418 $1,251,157 $1,475,672
Total debt............. 2,696,580 3,157,107 3,169,236 2,235,499 2,004,452 2,211,056
Redeemable preferred
stock(4)............... 924,574 257,751 -- -- -- 32,094(4)
Stockholders'
deficiency............. (2,014,893) (1,891,676) (1,818,535) (1,503,244) (1,250,248) (932,428)
STATISTICAL DATA(1):
Homes passed(6)........ 3,339,000 3,328,000 2,899,000 2,240,000 2,019,000 2,005,000
Basic service
subscribers............ 2,085,000 2,061,000 1,768,000 1,379,000 1,262,000 1,372,000
Basic penetration(7)... 62.4% 61.9% 61.0% 61.6% 62.5% 68.4%
Number of premium
television units....... 3,841,000 3,990,000 3,208,000 3,003,000 2,802,000 2,326,000
Average number of
premium units per
basic
subscriber............ 1.8 1.9 1.8 2.2 2.2 1.7
Average monthly revenue
per basic
subscriber(8)......... $ 37.28 $ 37.07 $ 36.33 $ 36.59 $ 37.64 $ 34.43
</TABLE>
- --------
(1) The consolidated statement of operations, balance sheet and statistical
data reflect (i) the deconsolidation of A-R Cable, effective as of January
1, 1992, as a result of the restructuring of A-R Cable, (ii) the
acquisition of Cablevision of New York City ("Cablevision of NYC"),
effective as of July 10, 1992, and (iii) various acquisitions of cable
television systems and other businesses during the periods presented. (See
"Business--Cable Television Operations" in the Form 10-K and "Condensed Pro
Forma Consolidated Financial Information" herein.) Acquisitions made by the
Company during the periods presented 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 the
acquisition of partnership interests in Cablevision of NYC from Charles F.
Dolan and entities affiliated with him, which were recorded at Mr. Dolan's
and such entities' historical costs. Acquisitions are reflected in the
consolidated statement of operations, balance sheet and statistical data
from the time of acquisition. Certain reclassifications have been made to
the 1991 financial statement amounts to conform to the 1992 presentation.
(2) 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.
(3) In 1992, the Company recognized a $50.0 million loss in connection with
Rainbow Programming's commitment in respect of its venture with NBC
relating to the 1992 Summer Olympics, which the Company paid in January
1993.
(4) In connection with the 1992 reorganization of V Cable, Inc. ("V Cable"),
the Company redeemed A-R Cable's redeemable preferred stock on May 11,
1992, incurring a loss of $20 million.
(5) In connection with the 1992 reorganization of V Cable, the Company wrote
off approximately $7.5 million of deferred financing costs related to the
debt of V Cable, Inc. Also, a portion of the Company's deferred financing
costs of approximately $4.8 million in 1992 and $1.0 million in 1993,
related to the replacement of bank debt with subordinated debt, were
written off. In October 1994, the Company entered into a new bank credit
agreement and redeemed $200 million of its reset debentures. The related
deferred financing costs and unamortized discount relating to each were
written off (the portions relating to Cablevision of NYC and Cablevision of
New Jersey amounting to $3.2 million were written off in 1995) and
approximately $2.0 million in redemption fees were incurred in connection
with the redemption of the reset debentures. In January 1995, Rainbow
Programming amended its credit agreement to refinance its existing
borrowings and to provide funds for the acquisition of SportsChannel
Associates and Rainbow News 12, resulting in an approximately $2.3 million
write-off of deferred financing costs.
(6) Homes passed is based upon homes passed by cable actually marketed and does
not include multiple dwelling units passed by the cable plant that are not
connected to it.
(7) Basic penetration represents basic service subscribers at the end of the
period as a percentage of homes passed at the end of the period.
(8) Based on recurring service revenues, excluding installation charges and
certain other revenues such as advertising, pay-per-view and home shopping
revenues, for the last month of the period, divided by average basic
subscribers for that month.
15
<PAGE>
SUPPLEMENTAL FINANCIAL AND OPERATING DATA
The following tables set forth information concerning the Company's
Restricted Group (as defined under "The Company") and Unrestricted Cable (as
defined under "The Company") on the date or for the period indicated, as the
Restricted Group and Unrestricted Cable were constituted on March 31, 1996, and
for the periods ended and as of March 31, 1996 and December 31, 1995,
respectively, adjusted to give pro forma effect to the transactions described
under "Condensed Pro Forma Consolidated Financial Information" in the May Form
8-K, and assuming that U.S. Cable Television Group, L.P., A-R Cable Partners
and CFHI become part of Unrestricted Cable and Cablevision of Newark becomes
part of the Restricted Group. The data should be read in conjunction with the
Company's Consolidated Financial Statements and "Management's Discussion and
Analysis".
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
---------------------------------------- -----------------------------------------------------
FINANCIAL DATA 1996 1995 1995 1994 1993
-------------- ------------------------- ---------- ------------------------ ---------- ----------
PRO FORMA ACTUAL PRO FORMA ACTUAL
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
RESTRICTED GROUP:
STATEMENT OF OPERATIONS
DATA:
Revenues............... $ 207,634 $ 194,181 $ 157,737 $ 793,112 $ 679,025 $ 584,567 $ 495,354
Operating profit before
depreciation and
amortization(1)....... 83,593 76,233 69,041 330,381 275,323 249,316 215,563
Depreciation and amor-
tization.............. 54,549 49,672 41,631 212,800 168,067 154,187 111,366
Operating profit....... 29,044 26,561 27,410 117,581 117,256 95,129 104,197
Total interest expense. 51,771(2) 38,092(2) 41,254(2) 179,991(2) 170,863(2) 153,923(2) 137,960
BALANCE SHEET DATA:
Total assets........... $2,242,067 $2,021,231 $1,207,405 $1,582,936 $1,415,777 $1,119,882 $ 838,746
Senior debt............ 569,387 601,029 1,108,950 472,229 567,249 969,895 488,128
Subordinated debt...... 1,474,012(2) 1,064,895(2) 764,820(2) 1,473,993(2) 1,064,876(2) 764,802(2) 822,781
Obligation to related
party................. 188,713 188,713 188,845 192,945 192,945 193,079 91,619
Total debt............. 2,232,112(2) 1,854,637(2) 2,062,615(2) 2,139,167(2) 1,825,070(2) 1,927,776(2) 1,402,528
FINANCIAL RATIOS AND
OTHER DATA:
Operating profit before
depreciation and
amortization to
revenues.............. 40.3% 39.3% 43.8% 41.7% 42.0% 42.6% 43.5%
Total debt to operating
profit before
depreciation and
amortization.......... 6.7x(3) 6.1x(3) 7.5x(3) 6.5x 6.4x 7.7x 6.5x
Operating profit before
depreciation and
amortization to total
interest expense...... 1.6x 2.0x 1.7x 1.8x 1.7x 1.6x 1.6x
Capital expenditures... $ 53,674 $ 53,597 $ 44,053 $ 247,369 $ 234,516 $ 251,078 $ 193,048
UNRESTRICTED CABLE:
STATEMENT OF OPERATIONS
DATA:
Revenues............... $ 104,879 $ 57,657 $ 53,624 $ 407,887 $ 226,130 $ 169,826 $ 137,853
Operating profit before
depreciation and
amortization(1)....... 40,198 25,764 25,401 167,002 107,093 84,932 65,789
Depreciation and
amortization.......... 44,567 26,714 35,273 187,096 124,488 105,938 80,287
Operating profit
(loss)................ (4,369) (950) (9,872) (20,094) (17,395) (21,006) (14,498)
Total interest expense. 25,900 26,269 30,844 107,545 123,741 103,803 94,452
BALANCE SHEET DATA:
Total assets........... $1,217,339 $ 778,090 $ 788,346 $1,056,916 $ 716,399 $ 823,363 $ 536,629
Total debt............. 1,111,970 608,160 1,101,919 1,091,813 1,094,003 1,092,440 832,964
FINANCIAL RATIOS AND
OTHER DATA:
Operating profit before
depreciation and
amortization to net
revenues.............. 38.3% 44.7% 47.4% 40.9% 47.4% 50.0% 47.7%
Total debt to operating
profit before
depreciation and
amortization.......... 6.9x(4) 5.9x(4) 10.8x(3) 6.5x 10.2x 9.9x(4) 12.7x
Operating profit before
depreciation and
amortization to total
interest expense...... 1.6x 1.0x 0.8x 1.6x 0.9x 0.8x 0.7x
Capital expenditures... $ 32,854 $ 21,646 $ 7,279 $ 90,753 $ 43,707 $ 24,195 $ 20,304
</TABLE>
(footnotes on following page)
16
<PAGE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1996 AS OF DECEMBER 31,
---------------------- ------------------------------------
STATISTICAL DATA PRO FORMA ACTUAL 1995 1994 1993
---------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
RESTRICTED GROUP:
Homes passed(4)........ 2,665,000 2,559,000 2,549,000 2,138,000 1,731,000
Basic service
subscribers at end of
period................ 1,657,000 1,534,000 1,512,000 1,243,000 1,029,000
Basic penetration(5)... 62.2% 59.9% 59.3% 58.1% 59.4%
Number of premium
television units...... 3,397,000 3,269,000 3,375,000 2,699,000 2,557,000
Average number of
premium units per
basic subscriber...... 2.1 2.2 2.2 2.2 2.5
Average revenue per
basic subscriber(6)... $ 38.52 $ 38.92 $ 38.82 $ 38.29 $ 38.65
UNRESTRICTED CABLE:
Homes passed(4)........ 1,665,000 780,000 779,000 760,000 509,000
Basic service
subscribers at end of
period................ 1,095,000 551,000 549,000 525,000 350,000
Basic penetration(5)... 65.8% 70.6% 70.5% 69.1% 68.7%
Number of premium
television units...... 1,201,000 572,000 615,000 508,000(7) 446,000
Average number of
premium units per
basic subscriber...... 1.1 1.0 1.1 1.0 1.3
Average revenue per
basic subscriber(6)... $ 30.58 $ 32.74 $ 32.45 $ 31.72 $ 30.56
</TABLE>
FOOTNOTES
(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) Excludes Cablevision MFR, Inc. seller note in the amount of approximately
$141.3 million that is, together with related interest expense, guaranteed
by the Restricted Group and, for pro forma amounts, also includes CFMI
seller note in the amount of approximately $9.7 million.
(3) Operating profit before depreciation and amortization is annualized for
purposes of preparing interim financial ratios that include balance sheet
items.
(4) Cablevision MFR, Inc. was acquired in August 1994, and operating profit
before depreciation and amortization for 1994 is annualized for purposes of
preparing financial ratios.
(5) Homes passed is based upon homes passed by cable actually marketed and does
not include multiple dwelling units passed by the cable plant that are not
connected to it.
(6) Basic penetration represents basic service subscribers at the end of the
period as a percentage of homes passed at the end of the period.
(7) Based on recurring service revenues, excluding installation charges and
certain other revenues such as advertising, pay-per-view and home shopping
revenues, for the last month in the period presented, divided by the
average number of basic subscribers for that month.
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<PAGE>
RISK FACTORS
Purchase of the New Depositary Shares representing the Series M Preferred
Stock offered hereby (the "Offering") involves various risks, including the
following principal factors, which, together with the other matters set forth
herein or incorporated by reference herein, should be carefully considered by
prospective investors.
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 plus the 11 3/4% Series
G Redeemable Exchangeable Preferred Stock (the "Series G Preferred Stock") and
Series L Preferred Stock aggregated approximately $3.6 billion at March 31,
1996 ($4.5 billion on a pro forma basis after giving effect to the transactions
described under "Capitalization") with varying maturities to 2023, including an
aggregate of approximately $539.5 million ($1,149.8 million on a pro forma
basis after giving effect to the transactions described under "Capitalization")
maturing on or prior to December 31, 2000. See Note 4 of Notes to the
Consolidated Financial Statements.
Net Losses and Stockholders' Deficit. The Company reported net losses for the
three months ended March 31, 1996 and 1995 of $76.3 million and $98.5 million,
respectively, and for the years ended December 31, 1995, 1994 and 1993 of
$317.5 million, $315.2 million and $246.8 million, respectively. At March 31,
1996, the Company had a stockholders' deficiency of $2.0 billion. The net
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 1993, 1994, 1995
and the first quarter of 1996 and will continue at high levels throughout the
remainder of 1996 and future years as a result of previously completed, pending
and future acquisitions, expected capital expenditures and additional
investments in the Company's programming operations. The Company expects to
continue incurring substantial losses for at least the next several years. See
"Management's Discussion and Analysis--Liquidity and Capital Resources".
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. The Company will require significant
additional financing, through debt and/or equity issuances, to meet its capital
expenditure plans and to pay its debt and preferred stock obligations. There
can be no assurance 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--Liquidity
and Capital Resources".
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 11 of
Notes to Consolidated Financial Statements for a discussion of commitments.
Rainbow Programming has the right to acquire interests in Madison Square
Garden, L.P. ("MSG Holdings") from ITT Corporation ("ITT") sufficient to
equalize the interests of ITT and Rainbow Programming in MSG Holdings by making
certain scheduled payments totalling $250 million (plus interest on any unpaid
portion thereof) on specified dates up to and including March 17, 1997. See
"The Company--Programming Services". The Company and Rainbow Programming may
fund the interest payments on the unpaid portion of the $250 million amount
required to equalize the interests of ITT and Rainbow Programming in MSG
Holdings from available cash balances or amounts borrowed under the Company's
18
<PAGE>
principal bank credit agreement (the "Credit Agreement"). Accordingly, the
Company funded an approximate $29 million interest payment on March 11, 1996
and the $2.2 million and $1.8 million monthly interest payments on April 15,
1996 and May 15, 1996, respectively, from funds available under the Credit
Agreement. The Company has not yet identified specific funding sources for the
up to $250 million that could be required in connection with the ITT/MSG
Holdings transactions. The Company also has a commitment to fund annual
payments to Charles F. Dolan related to Cablevision of New York City
("Cablevision of NYC"). 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--Liquidity and Capital
Resources".
Intangible Assets. The Company had total assets at March 31, 1996 of
approximately $2.6 billion, of which approximately $1.0 billion were intangible
assets, principally franchises, affiliation agreements, 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.
Voting Control by Majority Stockholders; Disparate Voting Rights. As of March
31, 1996, Charles F. Dolan beneficially owned and possessed sole voting power
with respect to 259,306 shares or 1.8% of the Company's outstanding Class A
Common Stock and 2,346,281 shares or 20.3% 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"). In addition, as of March 31, 1996, an
aggregate of 4,000,000 shares or 34.6% of the outstanding Class B Common Stock
were held by two Grantor Retained Annuity Trusts (the "GRA Trusts") established
by Mr. Dolan for estate planning purposes. Mr. Dolan may be deemed to have
beneficial ownership of the shares of Class B Common Stock held by the GRA
Trusts due to his right to reacquire the Class B Common Stock held by the GRA
Trusts by substituting other property of equivalent value, but, until such
event, each of the GRA Trusts, through their co-trustees (who are family
members of Mr. Dolan) has the power to vote and dispose of the shares of Class
B Common Stock held by the GRA Trusts. As a result of his beneficial ownership
of the shares held by the GRA Trusts, as of March 31, 1996, Mr. Dolan
beneficially owned 259,306 shares or 1.8% of the Company's outstanding Class A
Common Stock and 6,346,281 shares or 54.8% of the Company's outstanding Class B
Common Stock. On a combined basis, these shares represented 25.5% of the total
number of shares of both classes of Common Stock and 49.0% of the total voting
power of the classes. Other 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 March 31, 1996, an additional 500,000 shares of Class A
Common Stock or 3.5% of the Class A Common Stock and 5,225,928 shares of the
Class B Common Stock, or 45.2% of the Class B Common Stock and 40.6% 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 the directors
subject to election by holders of the Class B Common Stock, which directors
constitute 75% of the entire 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 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 Company's Credit Agreement and certain of the
Company's other debt instruments contain various financial and operating
covenants which, among other things, require the
19
<PAGE>
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. See "Management's Discussion and Analysis--Liquidity
and Capital Resources".
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. In June 1995, a Federal appeals court
upheld the material aspects of the FCC's rate regulation scheme. Congress has
enacted legislation (the "Telecommunications Act of 1996") that relaxes the
regulation of cable television rates. The FCC is formulating rules to implement
the Telecommunications Act of 1996. These rules will determine the effect of
the legislation on the Company. See "Business--Cable Television Operations--
Competition" and "Business--Cable Television Operations--Regulation" in the
Form 10-K.
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 areas. In addition, four DBS systems are now operational in
the United States and recently AT&T Corp. announced an investment in Hughes
Electronics Corp.'s DirecTv system. 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. Under the
Telecommunications Act of 1996, the cross-ownership provisions do not apply to
any cable operator in a franchise area in which a cable operator faces
competition from video programming distributors meeting certain statutory
requirements. 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. The Telecommunications Act of
1996 repeals the "video dialtone" rules, but gives telephone companies (and
cable companies, to the extent permitted by the FCC) the option of providing
video programming to subscribers through "open video systems" that closely
resemble video dialtone systems and that would not require a local cable
franchise. 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 barred co-ownership
of telephone companies and cable television systems operating in the same
service areas. Numerous Federal district courts held this prohibition to be
unconstitutional. Several of these decisions have been upheld on appeal. The
Telecommunications Act of 1996 repeals this restriction and permits a telephone
company to provide video programming directly to subscribers in its telephone
service territory, subject to certain regulatory
20
<PAGE>
requirements, but generally prohibits a telephone company from acquiring an in-
region cable operator, except in certain small markets under certain
circumstances. Telephone companies (Ameritech Corp. in Ohio and Southern New
England Telephone Co. in Connecticut) have obtained or applied for local
franchises to construct and operate cable television systems in several
communities in which the Company currently holds cable franchises. 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. 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.
Risks Related to the Securities.
Absence of Public Market. The New Depositary Shares are new securities for
which there currently is no market. Although Bear, Stearns & Co. Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated and Morgan Stanley & Co.
Incorporated, the initial purchasers of the Old Depositary Shares
(collectively, the "Initial Purchasers"), have informed the Company that they
currently intend to make a market in the Old Depositary Shares, the New
Depositary Shares and, if issued, the Exchange Debentures, they are not
obligated to do so and any such market making may be discontinued at any time
without notice. Accordingly, there can be no assurance as to the development or
liquidity of any market for the Old Depositary Shares, the New Depositary
Shares and, if issued, the Exchange Debentures. The Company does not intend to
apply for listing of the New Depositary Shares or, if issued, the Exchange
Debentures on any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation System.
Restrictions on Company's Ability to Pay Dividends on the Series L Preferred
Stock and the Series M Preferred Stock. Certain of the Company's debt
instruments contain covenants that restrict the Company's ability to pay, or
may prevent the payment of, dividends on the Company's preferred stock,
including the Series L Preferred Stock and the Series M Preferred Stock. In
addition, under Delaware law, dividends on capital stock may only be paid from
"surplus" or if there is no surplus from the corporation's net profits for the
then current or the preceding fiscal year. The Company does not anticipate
having net profits for the foreseeable future and its ability to pay dividends
on the Series L Preferred Stock and the Series M Preferred Stock will require
the availability of adequate "surplus", which is defined as the excess, if any,
of the Company's net assets (total assets less total liabilities) over its
capital (generally the par value of its issued capital stock). As of March 31,
1996, the Company's total liabilities, including deficit investment in
affiliates and Series G Preferred Stock, exceeded its total assets by $2.0
billion. Accordingly, in connection with dividend payments on the Series L
Preferred Stock or the Series M Preferred Stock, the Company's Board of
Directors will have to determine that the Company has adequate surplus on the
basis of valuations of the Company's assets at higher amounts than are
reflected in the Company's financial statements. There can be no assurance that
the Company's Board of Directors will be able to make such determination and
that adequate surplus will be available to pay dividends on the Series L
Preferred Stock or the Series M Preferred Stock.
Certain Federal Income Tax Consequences. The Company believes that it does
not presently have any current or accumulated earnings and profits as
determined under United States federal income tax principles and that it is
unlikely to have current or accumulated earnings and profits for the
foreseeable future. As a result, until such time as the Company does have
earnings and profits, distributions on the New Depositary
21
<PAGE>
Shares will be treated as a nontaxable return of capital and will be applied
against and reduce the adjusted tax basis of the New Depositary Shares in the
hands of each holder (but not below zero), thus increasing the amount of any
gain (or reducing the amount of any loss) which would otherwise be realized by
such holder upon the disposition of such New Depositary Shares. Consequently,
distributions with respect to the New Depositary Shares will not qualify as
dividends for federal income tax purposes and, as a result, will not be
eligible for the dividends-received deduction.
THE COMPANY
The Company is one of the largest operators of cable television systems in
the United States, with approximately 2,752,000 subscribers in 19 states as of
March 31, 1996 based on the number of basic subscribers in systems which the
Company manages and which it owns or in which it has investments. The Company
also has ownership interests in companies that produce and distribute national
and regional programming services and provide advertising sales services for
the cable television industry.
For financing purposes, the Company is structured as a restricted group
(collectively, the "Restricted Group"), including Cablevision of NYC and, as of
December 15, 1995, a subsidiary holding the cable television assets previously
a part of Cablevision of Boston, and an unrestricted group of subsidiaries. The
unrestricted group of subsidiaries consists primarily of Cablevision of Ohio
(as defined under "Recent Developments--V Cable Transactions" in the Form 10-
K), Cablevision MFR, Inc. ("Cablevision MFR" and, collectively with Cablevision
of Ohio, "Unrestricted Cable") and Rainbow Programming Holdings, Inc.
(including Rainbow Advertising Sales Corporation ("Rainbow Advertising"),
American Movie Classics and SportsChannel Associates ("SportsChannel New
York")) (collectively, "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. Cable"),
Cablevision of Framingham Holding, Inc. ("CFHI"), A-R Cable Partners and
Cablevision of Newark. The Company's unrestricted subsidiaries and investments
are collectively referred to herein as the "Unrestricted Group". See "Recent
Developments" in the Form 10-K and the May Form 8-K for a discussion of certain
transactions involving members of the Unrestricted Group, including Cablevision
of Ohio, A-R Cable, CFHI, A-R Cable Partners and Cablevision of Newark. The
Restricted Group and each member of the Unrestricted Group that operates cable
television systems are individually and separately financed. The indebtedness
of V Cable and A-R Cable is non-recourse to the Company, other than with
respect to the capital stock of such entities owned by the Company. Rainbow
Programming's cash requirements have been financed to date by the Restricted
Group, by sales of equity interests in the programming businesses and, as set
forth below under "--Programming Services", through separate external debt
financing. Rainbow Programming's future cash requirements may be financed with
separate external debt financing, which, as to the assets of Rainbow
Programming, would be structurally senior to any of the Company's indebtedness.
See "Management's Discussion and Analysis--Liquidity and Capital Resources" for
a discussion of the restrictions on investments by the Restricted Group and
certain other matters.
STRATEGY
The Company's strategy has been to concentrate its cable television systems
in and around three major metropolitan areas, New York City, Boston and
Cleveland, with a view to being the largest cable provider in each of these
markets; to maximize its revenue per subscriber through the use of "tiered"
packaging strategies for marketing premium services; to develop and promote
niche programming services; and to remain an industry leader in upgrading the
technological capabilities of its systems.
The Company believes that its cable television systems on Long Island, New
York comprise the largest contiguous group of cable television systems under
common ownership in the United States (measured by number of subscribers). By
developing systems in and around major metropolitan areas, including expansion
through acquisitions in areas in which the Company has existing systems, the
Company has been able to
22
<PAGE>
realize economies of scale in the operation and management of its systems, and
capitalize on opportunities to create and market programming of regional
interest.
Through the current and planned upgrade of its cable plant, including the
utilization of fiber optic cable and associated electronics, the Company is
seeking to significantly increase its analog channel capacity and add new
digital channel capacity that will facilitate the development of such adjunct
new businesses as information services, interactive services (including
Internet access), video on demand, near video on demand, residential telephony
and commercial telephony. To successfully roll out these adjunct new businesses
significantly beyond the initial development phases, the Company will require
additional capital from the sale of equity in the capital markets or to a
strategic investor.
CABLE TELEVISION
The cable television systems that are majority owned and managed by the
Company (the "Company's cable televisions systems") served approximately
2,085,000 subscribers as of March 31, 1996 in New York, Ohio, Connecticut, New
Jersey, Michigan and Massachusetts. In addition, the Company has non-majority
investments in and manages cable television systems which served approximately
667,000 subscribers as of March 31, 1996 in Alabama, Arkansas, Florida,
Illinois, Kansas, Kentucky, Maine, Massachusetts, Mississippi, Missouri, New
Jersey, New York, North Carolina, Oklahoma, Pennsylvania and Tennessee. The
Company's cable television systems have generally been characterized by
relatively high revenues per subscriber ($37.28 for March 1996) and ratios of
premium service units to basic subscribers (1.8:1 for March 1996). In
calculating revenue per subscriber, the Company includes only recurring service
revenues and excludes installation charges and certain other revenues such as
advertising, pay-per-view and home shopping revenues.
The cable television operations in the Restricted Group served approximately
1,534,000 subscribers as of March 31, 1996, primarily on Long Island, New York,
in New York City, in Connecticut (principally Fairfield County), in northern
New Jersey, in Westchester County, New York and in Cleveland, Ohio. See "Recent
Developments--V Cable Transactions" in the Form 10-K and the May Form 8-K for a
discussion of the transactions pursuant to which the Company's cable television
systems in Cleveland, Ohio were contributed to Cablevision of Ohio (a part of
Unrestricted Cable) on April 17, 1996. The revenue per subscriber and ratio of
premium service units to basic subscribers for cable television systems in the
Restricted Group for March 1996 were $38.92 and 2.1:1, respectively.
The cable television operations in Unrestricted Cable served approximately
551,000 subscribers as of March 31, 1996 and are conducted through the
Company's unrestricted subsidiaries, Cablevision of Ohio and Cablevision MFR,
and through its unrestricted investments, consisting of A-R Cable, U.S. Cable,
CFHI, A-R Cable Partners and Cablevision of Newark. The revenue per subscriber
and ratio of premium service units to basic subscribers for the Company's
unrestricted subsidiaries for March 1996 were $32.74 and 1.0:1, respectively.
See "Recent Developments--Pending Warburg Transactions" in the May Form 8-K for
a discussion of the Company's agreement to acquire the remaining interests in
A-R Cable, A-R Cable Partners, Cablevision of Newark and CFHI (collectively,
the "Warburg Companies") and "Recent Developments--V Cable Transactions" in the
May Form 8-K for a discussion of the transactions pursuant to which U.S. Cable
will become part of Unrestricted Cable.
In August 1994, Cablevision MFR, a wholly-owned subsidiary of the Company,
acquired substantially all of the assets of Monmouth Cablevision Associates
("Monmouth Cable") and Riverview Cablevision Associates, L.P. ("Riverview
Cable"), consisting of cable television systems in New Jersey. Also in August
1994, CFHI, a corporation jointly owned by the Company and E.M. Warburg Pincus
Investors, L.P., acquired substantially all of the assets of Framingham
Cablevision Associates Limited Partnership ("Framingham Cable"), consisting of
a cable television system in Massachusetts. Additionally, in June 1994, a
partnership comprised of subsidiaries of the Company and E.M. Warburg, Pincus &
Co. Inc. completed
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the purchase of certain assets of Nashoba Communications, a group of three
limited partnerships that operate three cable television systems in
Massachusetts.
See "Recent Developments--V Cable Transactions" in the May Form 8-K and
"Business--Recent Developments--V Cable Transactions" in the Form 10-K for a
description of the reorganization and recapitalization of V Cable. This
transaction resulted in the inclusion within the Restricted Group of V Cable's
Long Island cable television systems (which served approximately 161,000
subscribers as of March 31, 1996) and the transfer of the North Coast Cable
cable television systems (which served approximately 87,000 subscribers as of
March 31, 1996) from the Restricted Group to Unrestricted Cable and will
result in the acquisition of the 80% of U.S. Cable (which served approximately
245,000 subscribers as of March 31, 1996) not owned by the Company. U.S. Cable
will be part of the Unrestricted Cable.
PROGRAMMING SERVICES
The Company conducts its programming activities through Rainbow Programming,
its wholly-owned subsidiary and member of the Unrestricted Group, and through
subsidiaries of Rainbow Programming in partnership with certain unaffiliated
entities, including National Broadcasting Company, Inc. ("NBC") and Liberty
Media Corporation ("Liberty"). Rainbow Programming's businesses include eight
regional SportsChannel services, four national entertainment services
(American Movie Classics, Bravo, MuchMusic ("MM") and the Independent Film
Channel ("IFC")), Rainbow News 12 (regional news services serving suburban
areas surrounding New York City) and the sports services of Prime
SportsChannel Networks (Prime Network and NewSport). Rainbow Programming also
owns an interest in MSG Holdings. Rainbow Programming's SportsChannel services
provide regional sports programming to the New York, Philadelphia, New
England, Chicago, Cincinnati, Cleveland, San Francisco and Florida areas.
American Movie Classics is a national program service featuring classic,
unedited and non-colorized films from the 1930s through the 1970s. Bravo is a
national program service offering international films and performing arts
programs, including jazz, dance, classical music, opera and theatrical
programs. See "Business--Programming Operations--General" in the Form 10-K. 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
traditional Hollywood system.
In March 1995, MSG Holdings, a partnership among subsidiaries of Rainbow
Programming and subsidiaries of ITT, acquired the business and assets of
Madison Square Garden ("MSG") in a transaction in which MSG merged with and
into MSG Holdings. MSG Holdings owns the Madison Square Garden Arena and the
adjoining Theater at MSG, the New York Rangers professional hockey team, the
New York Knicks professional basketball team and the Madison Square Garden
Network, a sports programming network with over five million subscribers. The
purchase price paid by MSG Holdings for MSG was $1,009.1 million.
MSG Holdings funded the purchase price of the acquisition through (i)
borrowings of $289.1 million under a $450 million credit agreement among MSG
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 (as amended, the "Bid Agreement") that, as amended, provides Rainbow
Programming the right to acquire interests in MSG Holdings from ITT sufficient
to equalize the interests of ITT and Rainbow Programming in MSG Holdings by
making certain scheduled payments totalling $250 million (plus interest on any
unpaid portion thereof) on specified dates up to and including March 17, 1997.
Rainbow Programming may acquire all or part of such interests in MSG Holdings
through (i) the payment of cash to ITT, (ii) the delivery to ITT, at the
option of the Company, of common or preferred stock of the Company (together
with the commitment of a nationally recognized underwriter to promptly
purchase such common or preferred stock for cash), or a combination of cash
and common or preferred stock (with such a commitment), or (iii) the delivery
to ITT, at the option of ITT, subject to certain conditions and in lieu of
payment of a limited amount of the required cash or common or preferred stock
for the purchase of a portion of such interests, of certain designated
programming interests of Rainbow Programming. If any
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scheduled payment is not made on the applicable due date, then Rainbow
Programming will forfeit (a) its right to equalize the interests in MSG
Holdings and (b) certain minority rights. The Company and Rainbow Programming
may fund the interest payments on the unpaid portion of the $250 million amount
required to equalize the interests of ITT and Rainbow Programming in MSG
Holdings from available cash balances or from funds available from the Credit
Agreement. Accordingly, the Company funded an approximately $29 million
interest payment on March 11, 1996 and the $2.2 million and $1.8 million
monthly interest payments on April 15, 1996 and May 15, 1996, respectively,
from funds available under the Credit Agreement. If certain conditions are met
and Rainbow Programming has forfeited its right to equalize the interests in
MSG Holdings, then Rainbow Programming will also have the right to require ITT
to purchase all of Rainbow Programming's interest in MSG Holdings for an amount
equal to (i) the price paid by Rainbow Programming for such interest plus (ii)
all interest paid by Rainbow Programming on the unpaid portion of the $250
million of scheduled payments (as described above).
Initially MSG Holdings will be managed on a 50-50 basis by Rainbow
Programming and ITT. If, as discussed above, Rainbow Programming does not
equalize the interests in MSG Holdings, 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 MSG Holdings. In connection
with obtaining the consent of the National Hockey League (the "NHL") and the
National Basketball Association (the "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 matters, to conduct themselves in
accordance with the relevant rules of each league.
ADVERTISING SERVICES
Rainbow Advertising sells advertising time to national, regional and local
advertisers on behalf of the Company's cable television systems and the
SportsChannel and Rainbow News 12 Company programming services, as well as on
behalf of unaffiliated cable television systems.
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the New
Depositary Shares offered hereby. In consideration for issuing the New
Depositary Shares as contemplated in this Prospectus, the Company will receive
in exchange a like number of shares of Old Depositary Shares with a like
aggregate liquidation preference, the terms of which are identical in all
material respects to the New Depositary Shares. The Old Depositary Shares
surrendered in exchange for the New Depositary Shares will be retired and
cancelled and cannot be reissued. Accordingly, issuance of the New Depositary
Shares will not result in any change in capitalization of the Company.
The net proceeds received by the Company from the offering of the Old
Depositary Shares were $625.0 million. The Company applied approximately $570.0
million to make a capital contribution to V Cable. Such proceeds were used to
repay approximately $500.0 million of indebtedness of V Cable and VC Holding,
Inc. and to make a capital contribution of approximately $70.0 million to U.S.
Cable. The Company applied the balance of approximately $55.0 million to repay
borrowings under the Credit Agreement. The Company expects to reborrow the
amount repaid under the Credit Agreement in the future for general corporate
purposes. See "Management's Discussion and Analysis--Liquidity and Capital
Resources" for information concerning the Company's significant expected
expenditures.
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THE EXCHANGE OFFER
GENERAL
In connection with the sale of the Old Depositary Shares, the purchasers
thereof became entitled to the benefits of certain registration rights (the
"Registration Rights"). Pursuant to the agreement governing the Registration
Rights (the "Registration Rights Agreement"), the Company agreed (x) within 60
days after February 15, 1996 to file a registration statement (the "Exchange
Offer Registration Statement") with the Securities and Exchange Commission (the
"Commission") with respect to a registered offer to exchange the Old Depositary
Shares for the New Depositary Shares, which will have terms identical to the
Old Depositary Shares (except that the New Depositary Shares will not contain
terms with respect to transfer restrictions) and (y) to use its best efforts to
cause the Exchange Offer Registration Statement to become effective within 180
days after February 15, 1996. Upon the Exchange Offer Registration Statement
being declared effective, the Company will offer the New Depositary Shares in
exchange for surrender of the Old Depositary Shares. The Company will keep the
Exchange Offer open for not less than 30 days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
holders of the Old Depositary Shares. For each Old Depositary Share surrendered
to the Company pursuant to the Exchange Offer, the holder of such Old
Depositary Share will receive a New Depositary Share representing Series M
Preferred Stock having a liquidation preference equal to that of the Series L
Preferred Stock represented by the surrendered Old Depositary Share.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the New Depositary Shares would in general
be freely transferable after the Exchange Offer without further registration
under the Securities Act by holders thereof (other than a "Restricted Holder",
being (i) a broker-dealer who purchases such New Depositary Shares directly
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such New Depositary Shares are acquired in the
ordinary course of such holders' business and such holders have no arrangements
with any person to participate in the distribution of such New Depositary
Shares. Eligible holders wishing to accept the Exchange Offer must represent to
the Company that such conditions have been met. Each broker-dealer that
receives New Depositary Shares for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a prospectus in connection with any
resale of such New Depositary Shares.
In the event that applicable interpretations of the staff of the Commission
would not permit the Company to effect the Exchange Offer or, if for any other
reason the Exchange Offer was not consummated within 240 days of the issuance
of the Old Depositary Shares, the Company agreed to use its best efforts to
cause to become effective a shelf registration statement (the "Shelf
Registration Statement") with respect to the resale of the Old Depositary
Shares and to keep the Shelf Registration Statement effective until three years
after the date of issuance of the Old Depositary Shares or such shorter period
to terminate once all the Old Depositary Shares covered by the Shelf
Registration Settlement have been sold pursuant to such Shelf Registration
Statement.
Each holder of Old Depositary Shares who wishes to exchange Old Depositary
Shares for New Depositary Shares in the Exchange Offer will be required to make
certain representations, including that (i) it is neither an affiliate of the
Company nor a broker-dealer tendering Old Depositary Shares acquired directly
from the Company for its own account, (ii) any New Depositary Shares to be
received by it were acquired in the ordinary course of its business and (iii)
at the time of commencement of the Exchange Offer, it has no arrangement with
any person to participate in the distribution (within the meaning of the
Securities Act) of the New Depositary Shares. In addition, in connection with
any resales of New Depositary Shares, any broker-dealer (a "Participating
Broker-Dealer") who acquired Old Depositary Shares for its own account as a
result of market-making activities or other trading activities must deliver a
prospectus meeting the requirements of the Securities Act. The Commission has
taken the position in no-action letters issued to third parties that
Participating Broker-Dealers may fulfill their prospectus delivery requirements
with respect to the New Depositary Shares (other than a resale of an unsold
allotment from the original sale of Old
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Depositary Shares) with the prospectus contained in the Exchange Offer
Registration Statement. Under the Registration Rights Agreement, the Company is
required to allow Participating Broker-Dealers and other persons, if any,
subject to similar prospectus delivery requirements to use the prospectus
contained in the Exchange Offer Registration Statement in connection with the
resale of such New Depositary Shares. The Company also agreed that in the event
that either (i) the Exchange Offer Registration Statement was not filed with
the Commission on or prior to the 60th calendar day following the date of
original issue of the Old Depositary Shares, or (ii) the Exchange Offer was not
consummated or a Shelf Registration Statement was not declared effective on or
prior to the 240th calendar day following the date of original issue of the Old
Depositary Shares, the dividend rate borne by the Series L Preferred Stock
would be increased by one-quarter of one percent per annum for the first 30
days following such 60-day period in the case of (i) above or the first 90 days
following such 240-day period in the case of (ii) above. Such dividend rate
would increase by an additional one-quarter of one percent per annum at the
beginning of each subsequent 30-day period in the case (i) above, or 90-day
period in the case of (ii) above, up to a maximum aggregate increase of one
percent per annum. The Company agreed that upon (x) the filing of the Exchange
Offer Registration Statement or (y) the consummation of the Exchange Offer or
the effectiveness of the Shelf Registration Statement, as the case may be, the
dividend rate borne by the Series L Preferred Stock would be reduced to the
original dividend rate. The Exchange Offer Registration Statement was filed
within 60 days of the date of original issue of the Old Depositary Shares, and
thus no increase in the dividend rate borne by the Series L Preferred Stock has
been made under (i) above.
In the event an exchange offer is consummated, the Company will not be
required under the Registration Rights Agreement to file a Shelf Registration
Statement to register any outstanding Old Depositary Shares, and the dividend
rate on the Series L Preferred Stock will remain at its initial level of 11
1/8%. The Exchange Offer shall be deemed to have been consummated upon the
earlier to occur of (i) the Company having exchanged New Depositary Shares for
all outstanding Old Depositary Shares (other than Old Depositary Shares held by
a Restricted Holder) pursuant to the Exchange Offer and (ii) the Company having
exchanged, pursuant to the Exchange Offer, New Depositary Shares for all Old
Depositary Shares that have been tendered and not withdrawn on the date that is
30 days following the commencement of such Exchange Offer. In such event,
holders of Old Depositary Shares seeking liquidity in their investment would
have to rely on exemptions to registration requirements under the securities
laws, including the Securities Act.
Upon the terms and subject to the conditions set forth in this Prospectus and
in the accompanying Letter of Transmittal, the Company will accept all Old
Depositary Shares properly tendered prior to 5:00 p.m., New York City time, on
the Expiration Date. The Company will issue one New Depositary Share
representing Series M Preferred Stock with a liquidation preference of $100 in
exchange for each issued and outstanding Old Depositary Share representing
Series L Preferred Stock with a liquidation preference of $100 accepted in the
Exchange Offer.
Based on no-action letters issued by the staff of the Commission to third
parties, the Company believes that the New Depositary Shares issued pursuant to
the Exchange Offer in exchange for Old Depositary Shares may be offered for
resale, resold and otherwise transferred by holders thereof (other than any
such holder that is an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery requirements of the Securities Act provided that such New
Depositary Shares are acquired in the ordinary course of such holders' business
and such holders have no arrangement with any person to participate in the
distribution of such New Depositary Shares. Any holder of Old Depositary Shares
who tenders in the Exchange Offer for the purpose of participating in a
distribution of the New Depositary Shares could not rely on such interpretation
by the staff of the Commission and must comply with the registration and
prospectus delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Depositary Shares for
its own account in exchange for Old Depositary Shares, where such Old
Depositary Shares were acquired by such broker-dealer as a result of market-
making activities or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such New Depositary
Shares. See "Plan of Distribution".
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As of the date of this Prospectus, 6,775,730 Old Depositary Shares
representing Series L Preferred Stock with an aggregate liquidation preference
of $677,573,000 are issued and outstanding. In connection with the issuance of
the Old Depositary Shares, the Company arranged for the Old Depositary Shares
to be eligible for trading in the Private Offering, Resale and Trading through
Automated Linkages (PORTAL) Market, the National Association of Securities
Dealers' screen based, automated market trading of securities eligible for
resale under Rule 144A.
This Prospectus, together with the accompanying letter of transmittal (the
"Letter of Transmittal"), is being sent to all registered holders as of June 4,
1996 (the "Record Date").
The Company shall be deemed to have accepted validly tendered Old Depositary
Shares when, as and if the Company has given oral or written notice thereof to
The First National Bank of Boston (the "Exchange Agent"). See "Exchange Agent".
The Exchange Agent will act as agent for the tendering holders of Old
Depositary Shares for the purpose of receiving New Depositary Shares from the
Company and delivering Depositary Receipts evidencing New Depositary Shares to
such holders.
If any tendered Old Depositary Shares are not accepted for exchange because
of an invalid tender or the occurrence of certain other events set forth
herein, Depositary Receipts evidencing any such unaccepted Old Depositary
Shares will be returned, without expense, to the tendering holder thereof as
promptly as practicable after the Expiration Date.
Holders of Old Depositary Shares who tender in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the exchange of
Old Depositary Shares pursuant to the Exchange Offer. The Company will pay all
such charges and expenses, other than certain applicable taxes, in connection
with the Exchange Offer. See "Fees and Expenses".
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean July 31, 1996 unless the Company, in
its sole discretion, extends the Exchange Offer to a date not later than August
31, 1996, in which case the term "Expiration Date" shall mean the latest date
to which the Exchange Offer is extended. The maximum period that the Exchange
Offer will remain in effect shall be from the date of this Prospectus until the
Expiration Date.
In order to extend the Expiration Date, the Company will notify the Exchange
Agent of any extension by oral or written notice and will mail to the record
holders of Old Depositary Shares an announcement thereof, each prior to 9:00
a.m., New York City time, on the next business day after the previously
scheduled Expiration Date. Such announcement may state that the Company is
extending the Exchange Offer for a specified period of time.
The Company reserves the right (i) to delay acceptance of any Old Depositary
Shares, to extend the Exchange Offer or to terminate the Exchange Offer and to
refuse to accept Old Depositary Shares not previously accepted, if any of the
conditions set forth herein under "Termination" shall have occurred and shall
not have been waived by the Company (if permitted to be waived by the Company),
by giving oral or written notice of such delay, extension or termination to the
Exchange Agent, and (ii) to amend the terms of the Exchange Offer in any manner
deemed by it to be advantageous to the holders of the Old Depositary Shares.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by oral or written notice thereof. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment in a manner
reasonably calculated to inform the holders of the Old Depositary Shares of
such amendment.
Without limiting the manner in which the Company may choose to make public
announcements of any delay in acceptance, extension, termination or amendment
of the Exchange Offer, the Company shall have no obligation to publish,
advertise, or otherwise communicate any such public announcement, other than by
making a timely release to the Dow Jones News Service.
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DIVIDENDS ON THE SERIES M PREFERRED STOCK
Dividends on the Series M Preferred Stock will accumulate from the most
recent dividend payment date to which dividends on the Series L Preferred Stock
were paid (the "Accrual Date") and are payable quarterly in arrears on January
1, April 1, July 1 and October 1, of each year commencing on October 1, 1996,
at the rate of 11 1/8% per annum out of legally available funds. Holders of Old
Depositary Shares whose Old Depositary Shares are accepted for exchange will be
deemed to have waived the right to receive any payment in respect of dividends
on the Series L Preferred Stock accumulated from the Accrual Date until the
date of the issuance of the New Depositary Shares. Consequently, holders who
exchange their Old Depositary Shares for New Depositary Shares will receive the
same dividend payment on the next dividend payment date after the consummation
of the Exchange Offer (expected to be October 1, 1996) that they would have
received had they not accepted the Exchange Offer, except that if such dividend
is not paid in cash, it will be paid in shares of New Depositary Shares instead
of Old Depositary Shares.
PROCEDURES FOR TENDERING
To tender in the Exchange Offer, a holder must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, have the signatures thereon
guaranteed if required by the Letter of Transmittal, and mail or otherwise
deliver such Letter of Transmittal or such facsimile, together with the
Depositary Receipts evidencing Old Depositary Shares and any other required
documents, to the Exchange Agent prior to 5:00 p.m., New York City time, on the
Expiration Date.
The tender by a holder of Old Depositary Shares will constitute an agreement
between such holder and the Company in accordance with the terms and subject to
the conditions set forth herein and in the Letter of Transmittal.
Delivery of all documents must be made to the Exchange Agent at its address
set forth herein. Holders may also request that their respective brokers,
dealers, commercial banks, trust companies or nominees effect such tender for
such holders.
The method of delivery of Depositary Receipts evidencing Old Depositary
Shares and the Letter of Transmittal and all other required documents to the
Exchange Agent is at the election and risk of the holders. Instead of delivery
by mail, it is recommended that holders use an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. No Letter of Transmittal or Depositary Receipts evidencing Old
Depositary Shares should be sent to the Company.
Only a holder of Old Depositary Shares may tender such Old Depositary Shares
in the Exchange Offer. The term "holder" with respect to the Exchange Offer
means any person in whose name the Old Depositary Shares are registered on the
books of the Company or any other person who has obtained a properly completed
stock power from the registered holder.
Holders of Old Depositary Shares who wish to tender additional Old Depositary
Shares received on April 1, 1996 and July 1, 1996 as a dividend payment with
respect to the Series L Preferred Stock may do so.
Any beneficial holder whose Old Depositary Shares are registered in the name
of his broker, dealer, commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on his behalf. If such beneficial holder
wishes to tender on his own behalf, such beneficial holder must, prior to
completing and executing the Letter of Transmittal and delivering his
Depositary Receipts evidencing Old Depositary Shares, either make appropriate
arrangements to register ownership of the Old Depositary Shares in such
holder's name or obtain a properly completed stock power from the registered
holder. The transfer of record ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of Rule
17Ad-15 under the Exchange Act (an "Eligible Institution") unless the Old
Depositary Shares tendered pursuant thereto are tendered (i) by a registered
holder who has not completed the box entitled "Special Issuance Instructions"
or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution.
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If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Depositary Shares listed therein, the Depositary Receipts
evidencing such Old Depositary Shares must be endorsed or accompanied by
appropriate stock powers which authorize such person to tender the Old
Depositary Shares on behalf of the registered holder, in either case signed as
the name of the registered holder or holders appears on the Depositary Receipts
evidencing Old Depositary Shares.
If the Letter of Transmittal or any Depositary Receipts evidencing Old
Depositary Shares or stock powers are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and unless waived by the Company, evidence satisfactory
to the Company of their authority to so act must be submitted with the Letter
of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of the tendered Old Depositary Shares will
be determined by the Company in its sole discretion, which determination will
be final and binding. The Company reserves the absolute right to reject any and
all Old Depositary Shares not properly tendered or any Old Depositary Shares
the Company's acceptance of which would, in the opinion of counsel for the
Company, be unlawful. The Company also reserves the absolute right to waive any
irregularities or conditions of tender as to particular Old Depositary Shares.
The Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Old Depositary Shares must be cured within such time
as the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of defects or
irregularities with respect to tenders of Old Depositary Shares nor shall any
of them incur any liability for failure to give such notification. Tenders of
Old Depositary Shares will not be deemed to have been made until such
irregularities have been cured or waived. Any Depositary Receipts evidencing
Old Depositary Shares received by the Exchange Agent that are not properly
tendered and as to which the defects or irregularities have not been cured or
waived will be returned without cost by the Exchange Agent to the tendering
holder of such Old Depositary Shares unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any Old Depositary Shares that remain outstanding
subsequent to the Expiration Date, or, as set forth under "Termination", to
terminate the Exchange Offer and (b) to the extent permitted by applicable law,
purchase Old Depositary Shares in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers may differ
from the terms of the Exchange Offer.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Depositary Shares and (i) whose Old
Depositary Shares are not immediately available, or (ii) who cannot deliver
their Depositary Receipts evidencing Old Depositary Shares, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, or (iii) who cannot complete the procedure for book-entry
transfer on a timely basis, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder of the Old Depositary
Shares, the number or numbers of Depositary Receipts evidencing such Old
Depositary Shares and the number of Old Depositary Shares tendered, stating
that the tender is being made thereby, and guaranteeing that, within five
business days after the Expiration Date, the Letter of Transmittal (or
facsimile thereof), together with the Depositary Receipts evidencing the
Old Depositary Shares to be tendered in proper form for transfer and any
other documents required by the Letter of Transmittal, will be deposited by
the Eligible Institution with the Exchange Agent; and
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(c) Such properly completed and executed Letter of Transmittal (or
facsimile thereof), together with Depositary Receipts evidencing all
tendered Old Depositary Shares in proper form for transfer and all other
documents required by the Letter of Transmittal are received by the
Exchange Agent within five business days after the Expiration Date.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Depositary Shares may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the business
day prior to the Expiration Date, unless previously accepted for exchange.
To withdraw a tender of Old Depositary Shares in the Exchange Offer, a
written or facsimile transmission notice of withdrawal must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York
City time, on the business day prior to the Expiration Date and prior to
acceptance for exchange thereof by the Company. Any such notice of withdrawal
must (i) specify the name of the person having deposited the Old Depositary
Shares to be withdrawn (the "Depositor"), (ii) identify the Old Depositary
Shares to be withdrawn (including the Depositary Receipt number or numbers and
number of Old Depositary Shares), (iii) be signed by the Depositor in the same
manner as the original signature on the Letter of Transmittal by which such Old
Depositary Shares were tendered (including any required signature guarantees)
or be accompanied by documents of transfer sufficient to permit the Trustee
with respect to the Old Depositary Shares to register the transfer of such Old
Depositary Shares into the name of the Depositor withdrawing the tender, and
(iv) specify the name in which any such Old Depositary Shares are to be
registered, if different from that of the Depositor. All questions as to the
validity, form and eligibility (including time of receipt) of such withdrawal
notices will be determined by the Company, whose determination shall be final
and binding on all parties. Any Old Depositary Shares so withdrawn will be
deemed not to have been validly tendered for purposes of the Exchange Offer and
no New Depositary Shares will be issued with respect thereto unless the Old
Depositary Shares so withdrawn are validly retendered. Any Old Depositary
Shares which have been tendered but which are not accepted for exchange will be
returned to the holder thereof without cost to such holder as soon as
practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Depositary Shares may be retendered by
following one of the procedures described above under "Procedures for
Tendering" at any time prior to the Expiration Date.
TERMINATION
Notwithstanding any other term of the Exchange Offer, the Company will not be
required to accept for exchange, or exchange New Depositary Shares for, any Old
Depositary Shares not theretofore accepted for exchange, and may terminate or
amend the Exchange Offer as provided herein before the acceptance of such Old
Depositary Shares if: (i) any action or proceeding is instituted or threatened
in any court or by or before any governmental agency with respect to the
Exchange Offer, which, in the Company's judgment, might materially impair the
Company's ability to proceed with the Exchange Offer, (ii) any law, statute,
rule or regulation is proposed, adopted or enacted, or any existing law,
statute, rule or regulation is interpreted by the staff of the Commission in a
manner, which, in the Company's judgment, might materially impair the Company's
ability to proceed with the Exchange Offer, or (iii) the Company reasonably
deems it advisable to terminate the Exchange Offer.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any Old Depositary Shares and
return any Depositary Receipts evidencing Old Depositary Shares that have been
tendered to the holders thereof, (ii) extend the Exchange Offer and retain all
Old Depositary Shares tendered prior to the Expiration of the Exchange Offer,
subject to the rights of such holders of tendered Old Depositary Shares to
withdraw their tendered Old Depositary Shares, (iii) waive such termination
event with respect to the Exchange Offer and accept all properly tendered Old
Depositary Shares that have not been withdrawn. If such waiver constitutes a
material change in the Exchange Offer, the Company will disclose such change by
means of a supplement to this Prospectus that will be distributed to each
registered holder of Old Depositary Shares, and the Company will extend the
Exchange Offer for a period of five to ten business days, depending upon the
significance of the waiver and the manner of disclosure
31
<PAGE>
to the registered holders of the Old Depositary Shares, if the Exchange Offer
would otherwise expire during such period. See "Description of New Depositary
Shares, Series M Preferred Stock and Exchange Debentures--Registration Rights
Agreement".
EXCHANGE AGENT
The First National Bank of Boston has been appointed as Exchange Agent for
the Exchange Offer.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Company. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail. Additional solicitations may be made by
officers and regular employees of the Company and its affiliates in person, by
telegraph or telephone.
The Company will not make any payments to brokers, dealers or other persons
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, Letters of
Transmittal and related documents to the beneficial owners of the Old
Depositary Shares and in handling or forwarding tenders for exchange.
The expenses to be incurred by the Company and the Exchange Agent in
connection with the Exchange Offer, including the fees of the Exchange Agent
and accounting and legal fees, will be paid by the Company.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Depositary Shares pursuant to the Exchange Offer. If, however,
Depositary Receipts evidencing New Depositary Shares or Old Depositary Shares
not tendered or accepted for exchange are to be delivered to, or are to be
registered or issued in the name of, any person other than the registered
holder of the Old Depositary Shares tendered, or if tendered Old Depositary
Shares are registered in the name of any person other than the person signing
the Letter of Transmittal, or if a transfer tax is imposed for any reason other
than the exchange of Old Depositary Shares pursuant to the Exchange Offer, then
the amount of any such transfer taxes (whether imposed on the registered holder
or any other persons) will be payable by the tendering holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Company
upon the consummation of the Exchange Offer as the expenses of the Exchange
Offer will be charged to paid-in capital.
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<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company
and its consolidated subsidiaries at March 31, 1996 and as adjusted to reflect
the pro forma consolidated capitalization of the Company and its consolidated
subsidiaries at March 31, 1996, adjusted to give effect to (i) the transactions
described under "Recent Developments--V Cable Transactions" in the Form 10-K
and the May Form 8-K (the "V Cable Transactions"), (ii) the Pending Warburg
Transactions described in the May Form 8-K, (iii) the cancellation of treasury
shares and (iv) the issuance of $150,000,000 of the Company's 9 7/8% Senior
Subordinated Notes due 2006 and $250,000,000 of the Company's 10 1/2% Senior
Subordinated Debentures due 2016 on May 21, 1996, and the application of the
estimated net proceeds to the Company from such offerings. See "Recent
Developments" in the Form 10-K and the May Form 8-K, "Use of Proceeds" and
"Condensed Pro Forma Consolidated Financial Information" in the May Form 8-K.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
----------------------
HISTORICAL PRO FORMA
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
LONG-TERM DEBT:
Restricted Group:
Bank indebtedness(1)............................ $ 591,743 $ 560,101
10 3/4% Senior Subordinated Debentures due
2004........................................... 275,000 275,000
9 1/4% Senior Subordinated Notes due 2005....... 300,000 300,000
9 7/8% Senior Subordinated Notes due 2006....... -- 149,385
9 7/8% Senior Subordinated Debentures due 2013.. 198,946 198,946
10 1/2% Senior Subordinated Debentures due
2016........................................... -- 250,000
9 7/8% Senior Subordinated Debentures due 2023.. 149,681 149,681
Subordinated notes(2)........................... 141,268 151,000
Obligation to related party(3).................. 188,713 188,713
Capitalized lease obligations................... 9,286 9,286
---------- ----------
Total......................................... 1,854,637 2,232,112
---------- ----------
V Cable:
Senior debt..................................... 414,660 --
---------- ----------
Cablevision of Ohio:
Bank debt....................................... -- 288,600
---------- ----------
MFR:
Senior bank debt................................ 193,500 193,500
---------- ----------
Other Unrestricted Subsidiaries:
Bank debt....................................... 233,783 450,453
Senior Indebtedness............................. -- 413,200
---------- ----------
Total......................................... 233,783 863,653
---------- ----------
Total long-term debt........................ 2,696,580 3,577,865
---------- ----------
Series G Redeemable Exchangeable Preferred Stock... 265,336 265,336
---------- ----------
Series L Redeemable Exchangeable Preferred Stock... 659,238 659,238
---------- ----------
STOCKHOLDERS' DEFICIENCY:
Series C/D Cumulative Preferred Stock:
Authorized--225,000 shares
Outstanding--110,622 shares..................... 1 1
Series I Cumulative Convertible Exchangeable
Preferred Stock................................. 14 14
Class A Common Stock:
Authorized--50,000,000 shares
Outstanding--14,341,169 shares historical and
13,249,616 pro forma........................... 143 132
Class B Common Stock:
Authorized--20,000,000 shares
Outstanding--11,572,709 shares.................. 116 116
Paid-in capital.................................. 225,354 272,712
Accumulated deficit.............................. (2,180,129) (2,206,005)
---------- ----------
(1,954,501) (1,933,030)
Treasury stock (1,091,553 shares historical and 0
shares pro forma)............................... (60,392) --
---------- ----------
Total stockholders' deficiency................ (2,014,893) (1,933,030)
---------- ----------
Total capitalization........................ $1,606,261 $2,569,409
========== ==========
</TABLE>
(footnotes on following page)
33
<PAGE>
FOOTNOTES:
(1) See "Management's Discussion and Analysis--Liquidity and Capital Resources"
and the Consolidated Financial Statements for a description of the bank
indebtedness. These amounts do not include approximately $17.2 million
reserved under the Company's bank credit agreements for certain letters of
credit issued on behalf of the Company. The Company and its New Jersey
subsidiary are jointly and severally liable under the New Jersey subsidiary
credit agreement.
(2) Represents Cablevision MFR, Inc. seller notes in the amount of $141.3
million for Monmouth Cable and Riverview Cable and $9.7 million for
Framingham Cable (after giving effect to the Pending Warburg Transactions).
These amounts are guaranteed by the Restricted Group.
(3) Obligation of NYC LP Corp., a wholly-owned Unrestricted Group subsidiary,
relating to the acquisition of Cablevision of NYC, which obligation has
been guaranteed by the Company. NYC LP Corp.'s obligation under such
guarantee may be paid in cash or, at the Company's option, shares of the
Company's Common Stock. Under the Credit Agreement, the Company is
currently prohibited from paying all but $40.0 million of this obligation
in cash and, accordingly, without the consent of the Company's bank
lenders, would be required to pay it in shares of the Company's Common
Stock.
(4) Represents the cancellation of 1,091,553 shares of treasury stock of which
1,041,553 shares were issued to a wholly-owned subsidiary of the Company in
connection with the Company's acquisition of Cablevision of Boston.
34
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue 80,000,000 shares of capital stock, of
which 50,000,000 shares are Class A Common Stock, par value $.01 per share,
20,000,000 shares are Class B Common Stock, par value $.01 per share, and
10,000,000 shares are preferred stock, par value $.01 per share, of which the
Series M Preferred Stock offered hereby will be a series.
CLASS A COMMON STOCK AND CLASS B COMMON STOCK
Voting. Holders of Class A Common Stock are entitled to one vote per share.
Holders of Class B Common Stock are entitled to ten votes per share. All
actions submitted to a vote of stockholders are voted on by holders of Class A
Common Stock and Class B Common Stock voting together as a single class, except
for the election of directors and as otherwise set forth below. With respect to
the election of directors, holders of Class A Common Stock vote as a separate
class and are entitled to elect 25% of the total number of directors
constituting the whole Board of Directors (the "Class A Directors") and, if
such 25% is not a whole number, then the holders of Class A Common Stock are
entitled to elect the nearest higher whole number of directors that is at least
25% of the total number of directors. Holders of Class B Common Stock, voting
as a separate class, are entitled to elect the remaining directors. If,
however, on the record date for any stockholder meeting at which directors are
to be elected, the number of outstanding shares of Class A Common Stock is less
than 10% of the total number of outstanding shares of both classes of Common
Stock, the holders of Class A Common Stock and Class B Common Stock will vote
together as a single class with respect to the election of directors and the
holders of Class A Common Stock will not have the right to elect 25% of the
total number of directors but will have one vote per share for all directors
and holders of Class B Common Stock will have ten votes per share for all
directors. If, on the record date for any stockholder meeting at which
directors are to be elected, the number of outstanding shares of Class B Common
Stock is less than 12 1/2% of the total number of outstanding shares of both
classes of Common Stock, then the holders of Class A Common Stock, voting as a
separate class, would continue to elect a number of Class A Directors equal to
25% of the total number of directors constituting the whole Board of Directors
and, in addition, would vote together with the holders of Class B Common Stock
to elect the remaining directors to be elected at such meeting, with the
holders of Class A Common Stock entitled to one vote per share and the holders
of Class B Common Stock entitled to ten votes per share.
In addition, the affirmative vote or consent of the holders of at least 66
2/3% of the outstanding shares of Class B Common Stock, voting separately as a
class, is required for the authorization or issuance of any additional shares
of Class B Common Stock and for any amendment, alteration or repeal of any
provisions of the Company's Certificate of Incorporation which would affect
adversely the powers, preferences or rights of the Class B Common Stock. The
Company's Certificate of Incorporation does not provide for cumulative voting.
Conversion. The Class A Common Stock has no conversion rights. The Class B
Common Stock is convertible into Class A Common Stock in whole or in part at
any time and from time to time on the basis of one share of Class A Common
Stock for each share of Class B Common Stock.
Dividends. Holders of Class A Common Stock 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 from funds legally available
therefor. No dividend may be declared or paid in cash or property on shares of
either Class A Common Stock 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 holders of Class B Common Stock receive (payable in shares of Class B
Common Stock). The Company's Certificate of Incorporation provides that the
distribution of shares of capital stock of any subsidiary to common
stockholders may differ to the extent that the common stock differs as to
voting rights and rights in connection with certain dividends.
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<PAGE>
Liquidation. Holders of Class A Common Stock and Class B Common Stock share
with each other on a ratable basis as a single class in the net assets
available for distribution in respect of Class A Common Stock and Class B
Common Stock in the event of liquidation.
Other Terms. Neither the Class A Common Stock nor the Class B Common Stock
may be subdivided, consolidated, reclassified or otherwise changed unless
contemporaneously therewith the other class of shares is subdivided,
consolidated, reclassified or otherwise changed in the same proportion and in
the same manner. In any merger, consolidation or business combination the
consideration to be received per share by holders of either Class A Common
Stock or Class B Common Stock must be identical to that received by holders of
the other class of Common Stock, except that in any such transaction in which
shares of capital stock are distributed, such shares may differ as to voting
rights only to the extent that voting rights now differ between Class A Common
Stock and Class B Common Stock.
Restrictions on Ownership. Transfer of shares of Class A Common Stock or
Class B Common Stock which could result in a change of control of the Company
may require the approval of state agencies or local franchising authorities in
certain states in which the Company operates.
Transfer Agent. The Company's transfer agent and registrar for the Class A
Common Stock is Chemical Mellon Shareholder Services, L.L.C.
No Preemptive Rights. The shares of common stock have no preemptive or other
rights to subscribe for or purchase any proportionate part of any new or
additional issues of stock of any class or of securities convertible into stock
of any class.
PREFERRED STOCK
The following description of the terms of the Company's preferred stock sets
forth certain general terms and provisions of the preferred stock. The
description set forth below is subject to and qualified in its entirety by
reference to the certificate of designations establishing a particular series
of preferred stock.
General. Under the Certificate of Incorporation, the Board of Directors of
the Company is authorized, without further stockholder action, to provide for
the issuance of up to 10,000,000 shares of preferred stock in one or more
series. Subject to limitations imposed by law or the Company's Certificate of
Incorporation, the Board of Directors is empowered to determine (a) the maximum
number of shares to constitute the series and the distinctive designation
thereof; (b) whether the shares of such series shall have voting rights, in
addition to any voting rights provided by law, and, if so, the terms of such
voting rights; (c) the dividend rate, if any, on the shares of such series, the
conditions and dates upon which such dividends shall be payable, the preference
or relation which such dividends shall bear to the dividends payable on any
other class or classes or on any other series of capital stock, and whether
such dividends shall be cumulative or non-cumulative; (d) whether the shares of
such series shall be subject to redemption by the Company, and, if made subject
to redemption, the times, prices and other terms and conditions of such
redemption; (e) the rights of the holders of shares of such series upon the
liquidation, dissolution or winding up of the Company; (f) whether or not the
shares of such series shall be subject to the operation of a retirement or
sinking fund, and, if so, the extent to and manner in which any such retirement
or sinking fund shall be applied to the purchase or redemption of the shares of
such series for retirement or to other corporate purposes and the terms and
provisions relative to the operation thereof; (g) whether or not the shares of
such series shall be convertible into, or exchangeable for, shares of stock of
any other class or classes, or of any other series of the same class, and if so
convertible or exchangeable, the price or prices or the rate or rates of
conversion or exchange and the method, if any, of adjusting the same; (h) the
limitations and restrictions, if any, to be effective while any shares of such
series are outstanding upon the payment of dividends or making of other
distributions on, and upon the purchase, redemption or other acquisition by the
Company of, the Class A Common Stock, the Class B Common Stock or any other
class or classes of stock of the Company ranking junior to the shares of such
series either as to dividends or upon liquidation; (i) the conditions or
restrictions,
36
<PAGE>
if any, upon the creation or indebtedness of the Company or upon the issue or
any additional stock (including additional shares of such series or of any
other series or of any other class) ranking on a parity with or prior to the
shares of such series as to dividends or distribution of assets on liquidation,
dissolution or winding up; (j) whether fractional interests in shares of the
series will be offered in the form of depositary shares; and (k) any other
preference and relative, participating, optional or other special rights or
qualifications, limitations or restrictions thereof.
Designated Preferred Stock.
General. The authorized preferred stock of the Company consists of (i)
200,000 shares of Series B Cumulative Preferred Stock, $.01 par value and $100
liquidation value per share (the "Series B Preferred Stock"), none of which are
outstanding, (ii) 112,500 shares of 8% Series C Cumulative Preferred Stock,
$.01 par value and $100 liquidation value per share (the "Series C Preferred
Stock"), of which 110,622 shares were outstanding at December 31, 1995, (iii)
112,500 shares of 8% Series D Cumulative Preferred Stock, $.01 par value and
$100 liquidation value per share, none of which are outstanding (the "Series D
Preferred Stock"), (iv) 1,750,000 shares of 11 3/4% Series G Redeemable
Exchangeable Preferred Stock, $.01 par value and $100 liquidation preference
per share, none of which are outstanding, (v) 4,500,000 shares of Series H
Preferred Stock, 2,653,354 shares of which were issued on May 21, 1996 and are
outstanding, (vi) 1,380,000 shares of 8 1/2% Series I Cumulative Convertible
Exchangeable Preferred Stock, $.01 par value and $250 liquidation value per
share (the "Series I Preferred Stock"), 1,380,000 shares of which are
outstanding and represented by 13,800,000 depositary shares, and (vii) 115,000
shares of 11 1/8% Series L Redeemable Exchangeable Preferred Stock, $.01 par
value and $10,000 liquidation value per share (the "Series L Preferred Stock"),
65,000 shares of which were issued on February 15, 1996 and are outstanding and
are represented by 6,500,000 depositary shares and 923.79 shares of which were
issued on April 1, 1996 and are outstanding and are represented by 92,379
depositary shares (the Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series G Preferred Stock, Series H Preferred Stock,
Series I Preferred Stock and Series L Preferred Stock are hereinafter sometimes
collectively referred to as the "Authorized Preferred Stock"). The Series A
Preferred Stock, $.01 par value, was cancelled by the Board of Directors on
February 2, 1988. The Company does not expect to issue any Series B Preferred
Stock. The Series D Preferred Stock is issuable upon conversion of the Series C
Preferred Stock. On May 21, 1996, the Board of Directors cancelled 100,000
shares of Series E Redeemable Exchangeable Convertible Preferred Stock, 100,000
shares of Series F Redeemable Preferred Stock and 2,750,000 shares of 11 3/4%
Series G Redeemable Exchangeable Preferred Stock (not included in the
authorized Series G Preferred Stock referred to above). The Company anticipates
that it will, prior to the consummation of the Exchange Offer, file a
certificate of cancellation with respect to all of the authorized shares of
Series G Preferred Stock with the Delaware Secretary of State. The right to
dividends on shares of the Authorized Preferred Stock are cumulative.
Series B, Series C and Series D Preferred Stock. The holders of such Series B
Preferred Stock are entitled, when declared by the Board of Directors, to
dividends at the time legally available at the annual rate of $12.00 per share
prior and in preference to any declaration of payment of any dividend on the
common stock of the Company. The holders of Series C Preferred Stock and Series
D Preferred Stock are entitled, when declared by the Board of Directors, to
dividends out of legally available funds at the annual rate of $8.00 per share
prior and in preference to any declaration of payment of any dividend on the
common stock of the Company.
At any time and from time to time commencing on December 31, 1997, the
holders of Series C Preferred Stock and Series D Preferred Stock may require
the Company to redeem, upon 30 days' notice to the Company, any or all of the
shares of Series C Preferred Stock and Series D Preferred Stock then
outstanding at a price equal to the lesser of (i) $100 per share or (ii) the
present value of $100, discounted from December 31, 2007 to the date of such
redemption, plus, in each case, all dividends (whether or not earned or
declared) accrued and unpaid on the shares of Series C Preferred Stock and
Series D Preferred Stock to the date fixed for redemption (the "Series C
Preferred Stock and Series D Preferred Stock Redemption
37
<PAGE>
Price"). The Company may, at its option, upon notice to the holders requesting
redemption within 20 days of such holders' notice to the Company, convert all
or part of such shares of Series C Preferred Stock into Class B Common Stock
and all or part of such shares of Series D Preferred Stock into Class A Common
Stock. The Company at its option may, but shall not be required to, redeem, at
any time and from time to time after December 31, 1997 on not less than 30
days' nor more than 60 days' prior notice, any or all of the shares of Series C
Preferred Stock and Series D Preferred Stock then outstanding at the Series C
Preferred Stock and Series D Preferred Stock Redemption Price.
If the Company elects to convert any shares of Series C Preferred Stock or
Series D Preferred Stock after a demand for redemption by such holders, the
number of shares to be issued by the Company shall be calculated by dividing
the applicable Series C Preferred Stock and Series D Preferred Stock Redemption
Price by the average of the market price of a share of Class A Common Stock for
the 30 trading days preceding the date on which a holder gives notice of its
election to convert such shares. Holders of Series C Preferred Stock and Series
D Preferred Stock have no voting rights except as to which they may be entitled
under the laws of the State of Delaware.
In the event of any liquidation, dissolution or winding up the Company, the
holders of Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock are entitled to receive a preferential amount equal to $100 for
each share of Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock held plus all dividends (whether or not earned or declared)
accumulated and unpaid on such shares of Authorized Preferred Stock to the date
of final distribution in preference to any such distribution to the holders of
the common stock of the Company. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the amounts payable with
respect to the Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock are not paid in full , the holders of the Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and any other
preferred stock on parity therewith will share equally and ratably in any
distribution of the assets of the Company in proportion to the full liquidation
preference to which each is entitled. Neither the sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all the property or assets of the Company nor the
consolidation or merger of the Company with one or more corporations shall be
deemed a liquidation, dissolution or winding up of the Company.
Series H Preferred Stock. The Series H Preferred Stock, with respect to
dividends and distributions upon the liquidation, winding-up and dissolution of
the Company, ranks (i) senior to all classes of Common Stock and each other
class of capital stock or series of preferred stock established by the Board of
Directors (except as set forth below) which does not expressly provide that it
ranks senior to the Series H Preferred Stock as to dividends and distributions
upon the liquidation, winding-up and dissolution of the Company (collectively
referred to as "Series H Junior Stock"); (ii) on a parity with the Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series G
Preferred Stock, Series I Preferred Stock, Series L Preferred Stock, Series M
Preferred Stock and any other class of capital stock or series of preferred
stock issued by the Company established after the initial issuance of the
Series H Preferred Stock by the Board of Directors, the terms of which
expressly provide that such class or series will rank on a parity with the
Series H Preferred Stock as to dividends and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred
to as "Series H Parity Securities"); and (iii) junior to each class of capital
stock or series of preferred stock issued by the Company established after the
initial issuance of the Series H Preferred Stock by the Board of Directors,
the terms of which specifically provide that such class or series will rank
senior to the Series H Preferred Stock as to dividends and distributions upon
the liquidation, winding-up and dissolution of the Company (collectively
referred to as "Series H Senior Securities").
No full dividends may be declared or paid or funds set apart for the payment
of dividends on any Series H Parity Securities for any period unless full
cumulative dividends shall have been paid or set apart for such payment on the
Series H Preferred Stock. If full dividends are not so paid, the Series H
Preferred Stock shall
38
<PAGE>
share dividends pro rata with the Series H Parity Securities. Subject to
certain exceptions set forth in the certificate of designations for the Series
H Preferred Stock, no dividends may be paid or set apart for such payment on
Series H Junior Stock (except dividends on Series H Junior Stock in additional
shares of Series H Junior Stock), and no Series H Junior Stock may be
repurchased, redeemed or otherwise retired nor may funds be set apart for
payment with respect thereto, if full dividends have not been paid on the
Series H Preferred Stock.
The Company may redeem the Series H Preferred Stock at any time after October
1, 2002, in whole or in part, at certain redemption prices. In addition, the
Company may redeem shares of Series H Preferred Stock at any time before
October 1, 1998 at a redemption price per share equal to the liquidation
preference of $100, plus accumulated and unpaid dividends plus a premium of $10
per share, out of the net proceeds of the sale of Series H Junior Stock to a
Strategic Equity Investor (as defined in the certificate of designations for
the Series H Preferred Stock) or a public offering of Class A Common Stock.
Furthermore, the Company may, at its option, prior to October 1, 2002, redeem
the Series H Preferred Stock at any time within 180 days, at certain redemption
prices, after a Change in Control (as defined in the certificate of
designations for the Series H Preferred Stock). On October 1, 2007, the Company
will be required to redeem all outstanding shares of Series H Preferred Stock
out of funds legally available.
The Company may, at its option, on any scheduled dividend payment date,
exchange the Series H Preferred Stock for the Company's 11 3/4% Senior
Subordinated Debentures due 2007.
In the event of any liquidation, winding-up or dissolution of the Company,
holders of Series H Preferred Stock will be entitled to receive a preferential
amount equal to $100 per share, plus all accumulated and unpaid dividends
thereon to the date fixed for liquidation, dissolution or winding-up of the
Company (including an amount equal to a prorated dividend from the last
dividend payment date to the date fixed for liquidation, dissolution or
winding-up), before any distribution is made on the Series H Junior Stock. If
upon any voluntary or involuntary liquidation, dissolution or winding up of the
Company, the amounts payable with respect to the Series H Preferred Stock and
all other Series H Parity Securities are not paid in full, the holders of the
Series H Preferred Stock and the Series H Parity Securities will share equally
and ratably in any distribution of assets of the Company in proportion to the
full liquidation preference to which each is entitled. After payment of the
full amount of the liquidation preferences to which they are entitled, the
holders of shares of Series H Preferred Stock will not be entitled to any
further participation in any distribution of assets of the Company. Neither the
sale, conveyance, exchange or transfer (for cash, shares of stock, securities
or other consideration) of all or substantially all the property or assets of
the Company nor the consolidation or merger of the Company with one or more
corporations shall be deemed a liquidation, dissolution or winding up of the
Company.
Holders of the Series H Preferred Stock will have no voting rights with
respect to general corporate matters except as provided by law or as set forth
in the certificate of designations therefor. The certificate of designations
for the Series H Preferred Stock provides that if (a) dividends on the Series H
Preferred Stock are in arrears and unpaid (and if after October 1, 2000, such
dividends are not paid in cash) for six quarterly periods (whether or not
consecutive), or (b) the Company fails to discharge its redemption obligation
to redeem the Series H Preferred Stock on October 1, 2007, the number of
directors constituting the Board of Directors will be adjusted to permit the
holders of the majority of the then outstanding Series H Preferred Stock,
voting as a class, to elect a director. Such voting rights will continue until
such time as all dividends in arrears on the Series H Preferred Stock are paid
in full (and in the case of dividends payable after October 1, 2000, paid in
cash) and any failure, breach or default referred to in clause (b) is remedied,
at which time the term of the directors elected pursuant to the provisions of
this paragraph shall terminate. Each such event described in clauses (a) and
(b) above is referred to herein as a "Series H Voting Rights Triggering Event".
The certificate of designations for the Series H Preferred Stock also
provides that the Company will not authorize any class of Series H Senior
Securities without the affirmative vote or consent of holders of at least a
majority of the shares of Series H Preferred Stock then outstanding, voting or
consenting, as the case may be, separately as one class. The Company may not
amend the certificate of designations for the Series H
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Preferred Stock so as to affect adversely the specified rights, preferences,
privileges or voting rights of holders of shares of the Series H Preferred
Stock, or authorize the issuance of any additional shares of Series H Preferred
Stock, without the affirmative vote or consent of the holders of at least a
majority of the outstanding shares of Series H Preferred Stock, voting or
consenting, as the case may be, as one class.
Without the affirmative vote or consent of a majority of the issued and
outstanding shares of Series H Preferred Stock, the Company may not consolidate
or merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, any person unless: (a)
the entity formed by such consolidation or merger (if other than the Company)
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made shall be a corporation organized and existing
under the laws of the United States or any State thereof or the District of
Columbia; (b) the Series H Preferred Stock shall be converted into or exchanged
for and shall become shares of such successor, transferee or resulting
corporation, having in respect of such successor, transferee or resulting
corporation the same powers, preferences and relative participating, optional
or special rights, and the qualifications, limitations or restrictions thereon,
that the Series H Preferred Stock had immediately prior to such transactions;
and (c) immediately after giving effect to such transaction, no Series H Voting
Rights Triggering Event shall have occurred and be continuing. Notwithstanding
the foregoing, the Company may consolidate or merge with or into, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially
all of its assets to, any person if the Company makes adequate provision (i)
prior to October 1, 2002, to redeem the Series H Preferred Stock after a Change
in Control (as defined in the certificate of designations for the Series H
Preferred Stock) or (ii) on or after October 1, 2002, to redeem the Series H
Preferred Stock at the applicable redemption price set forth in the certificate
of designations therefor.
Series I Preferred Stock. The Series I Preferred Stock, with respect to
dividends and distributions upon the liquidation, winding-up and dissolution of
the Company, ranks (i) senior to all classes of Common Stock and each other
class of capital stock or series of preferred stock established by the Board of
Directors after the issuance of the Series I Preferred Stock which does not
expressly provide that it ranks senior to or on a parity with the Series I
Preferred Stock as to dividends and distributions upon the liquidation,
winding-up and dissolution of the Company (collectively referred to as "Series
I Junior Stock"); (ii) on a parity with the Company's Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock (which may be issued in
exchange for shares of the Series C Preferred Stock), Series G Preferred Stock,
Series H Preferred Stock, Series L Preferred Stock, Series M Preferred Stock
and any other class of capital stock or series of preferred stock established
by the Board of Directors after the initial issuance of the Series I Preferred
Stock, the terms of which expressly provide that such class or series will rank
on a parity with the Series I Preferred Stock as to dividends and distributions
upon the liquidation, winding-up and dissolution of the Company (collectively
referred to as "Series I Parity Stock"); and (iii) junior to each class of
capital stock or series of preferred stock established by the Board of
Directors after the initial issuance of the Series I Preferred Stock, the terms
of which specifically provide that such class or series will rank senior to the
Series I Preferred Stock as to dividends and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred
to as "Series I Senior Stock").
Holders of the Series I Preferred Stock are entitled, when declared by the
Board of Directors, out of funds legally available therefor, to receive
cumulative cash dividends on each outstanding share of the Series I Preferred
Stock, at the annual rate of 8 1/2% or $21.25 per share of Series I Preferred
Stock (equivalent to $2.125 per annum per depositary share). Dividends on the
Series I Preferred Stock are payable quarterly in arrears on January 1, April
1, July 1 and October 1 of each year. Dividends will be payable to the holder
of record on the respective record date as may be fixed by the Board of
Directors in advance of each dividend. The right to dividends on the Series I
Preferred Stock will be cumulative (whether or not earned or declared) from the
date of issuance of the Series I Preferred Stock. If any dividend (or portion
thereof) payable on any dividend payment date is not paid in full on the
dividend payment date therefor, the amount of such dividend that is payable and
that is not paid on such date will increase at the rate of 8 1/2% per annum per
share of Series I Preferred Stock from such dividend payment date until paid in
full.
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No full dividends may be declared or paid or funds set apart for the payment
of dividends on any Series I Parity Stock for any period unless full cumulative
dividends shall have been paid or set apart for such payment on the Series I
Preferred Stock. If the funds available for the payment of dividends are
insufficient to pay in full the dividends payable on all outstanding shares of
Series I Preferred Stock and any series of Series I Parity Stock, the total
available funds to be paid in partial dividends shall be divided among the
Series I Preferred Stock and such other series pro rata in proportion to the
aggregate amount of dividends accrued and unpaid with respect to such Series I
Preferred Stock and such other series. Subject to various exceptions set forth
in the certificate of designations for the Series I Preferred Stock, no
dividends may be paid or set apart for such payment on Series I Junior Stock
(except dividends on Series I Junior Stock in additional shares of Series I
Junior Stock), and no Series I Junior Stock, or any warrants, rights, calls or
options exercisable for or convertible into any Series I Junior Stock, may be
repurchased, redeemed or otherwise retired nor may funds be set apart for
payment with respect thereto, if full dividends have not been paid on the
Series I Preferred Stock. After dividends on the Series I Preferred Stock for
all past and current quarterly dividend periods have been paid in full, the
Series I Preferred Stock will not be entitled to participate in any further
distributions by the Company.
On or after January 1, 1998, the Company may, at its option, on any scheduled
dividend payment date, exchange the Series I Preferred Stock, in whole but not
in part, for the Company's 8 1/2% Convertible Subordinated Debentures due 2007
(the "Series I Exchange Debentures").
The Company at its option may redeem the Series I Preferred Stock (subject to
contractual and other restrictions with respect thereto and to the legal
availability of funds therefor) at any time after November 1, 1999, in whole or
in part, at certain redemption prices.
Each share of Series I Preferred Stock is convertible into shares of Class A
Common Stock at the option of the holder at a conversion rate equal to $250.00
(the original liquidation preference of the shares of Series I Preferred
Stock), divided by the conversion price, except that, if shares of Series I
Preferred Stock are called for redemption or the Company elects to issue Series
I Exchange Debentures in exchange for the Series I Preferred Stock, the
conversion right will terminate at the close of business five business days
prior to the date fixed for redemption or exchange. The initial conversion
price is $67.44 per share. The conversion price is subject to adjustment (under
formulas set forth in the certificate of designations for the Series I
Preferred Stock) in certain events, including (a) the issuance of Class A
Common Stock as a dividend or distribution on any class of the capital stock of
the Company; (b) subdivisions, reclassifications and combinations of the Class
A Common Stock; (c) the issuance to all holders of Class A Common Stock of
certain rights or warrants entitling them to subscribe for or purchase Class A
Common Stock at less than the current market price (as defined in the
certificate of designations for the Series I Preferred Stock); and (d) certain
distributions to all holders of Class A Common Stock of capital stock or
evidences of indebtedness of the Company or cash or other assets of the
Company.
In case of (i) any consolidation of the Company with, or merger of the
Company into, any other entity, (ii) any merger of another entity into the
Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Class A Common
Stock of the Company), or (iii) any sale or transfer of all or substantially
all of the assets of the Company, subject to certain exceptions set forth in
the certificate of designations for the Series I Preferred Stock, each holder
of a share of Series I Preferred Stock then outstanding shall have the right
thereafter to convert their shares of Series I Preferred Stock only into the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by a holder of the number of shares of
Class A Common Stock of the Company into which such share of Series I Preferred
Stock might have been converted immediately prior to such consolidation,
merger, sale or transfer.
The Series I Preferred Stock has a special conversion right that becomes
effective upon the occurrence of certain types of significant transactions
affecting ownership or control of the Company or the market for the Class A
Common Stock. In the event of any liquidation, dissolution or winding-up of the
Company, after
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payment or processing for payment of the debts and other liabilities of the
Company and of liquidation preferences in respect of any Series I Senior Stock,
holders of Series I Preferred Stock will be entitled to receive out of the
remaining net assets of the Company, if any, a preferential amount equal to
$250.00 per share (equivalent to $25.00 per depositary share), plus all
accumulated and unpaid dividends thereon to the date fixed for liquidation,
dissolution or winding-up of the Company (including an amount equal to a
prorated dividend from the last dividend payment date to the date fixed for
liquidation, dissolution or winding-up), before any distribution is made on any
Series I Junior Stock, including, without limitation, on any Common Stock. If,
upon any voluntary or involuntary liquidation, dissolution or winding-up of the
Company, the amounts payable with respect to the Series I Preferred Stock and
all other Series I Parity Stock are not paid in full, the holders of the Series
I Preferred Stock and the Series I Parity Stock will share equally and ratably
in any distribution of assets of the Company in proportion to the full
liquidation preference to which each is entitled. After payment of the full
amount of the liquidation preferences to which they are entitled, the holders
of shares of Series I Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Company. Neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Company nor the consolidation or merger of the Company with one or more
corporations shall be deemed to be a liquidation, dissolution or winding-up of
the Company.
Holders of the Series I Preferred Stock will have no voting rights with
respect to general corporate matters except as provided by law or as set forth
in the certificate of designations. The certificate of designations provides
that if dividends on the Series I Preferred Stock are in arrears and unpaid for
six quarterly periods (whether or not consecutive), then the number of
directors constituting the Board of Directors will be adjusted to permit the
holders of the majority of the then outstanding Series I Preferred Stock,
voting as a class, to elect one director and a second director if the right to
elect a second director is required by the American Stock Exchange or any other
national securities exchange on which the Company elects to list the Class A
Common Stock or by the requirements of the Nasdaq National Market System if the
Company elects to have the Class A Common Stock traded thereon. Such voting
rights will continue until such time as all dividends in arrears on the Series
I Preferred Stock are paid in full, at which time the term of the directors
elected pursuant to the provisions of this paragraph shall terminate. Such
event described above is referred to herein as a "Series I Voting Rights
Triggering Event".
Any vacancy occurring in the office of the director elected by holders of the
Series I Preferred Stock may be filled by the remaining director, if any, or
otherwise by the departing director unless and until such vacancy shall be
filled by such holders.
The certificate of designations also provides that the Company will not
authorize any class of Series I Senior Stock without the affirmative vote or
consent of holders of at least 66 2/3% of the shares of Series I Preferred
Stock then outstanding, voting or consenting, as the case may be, separately as
one class. The certificate of designations also provides that the Company may
not amend the certificate of designations so as to affect adversely the
specified rights, preferences, privileges or voting rights of holders of shares
of the Series I Preferred Stock, or authorize the issuance of any additional
shares of Series I Preferred Stock, without the affirmative vote or consent of
the holders of at least 66 2/3% of the outstanding shares of Series I Preferred
Stock, voting or consenting, as the case may be, as one class. The holders of
at least 66 2/3% of the outstanding shares of Series I Preferred Stock, voting
or consenting, as the case may be, as one class, may also waive compliance with
any provision of the certificate of designations. The certificate of
designations also provides that (a) the creation, authorization, existence or
issuance of any shares of Series I Parity Stock or Series I Junior Stock or (b)
the increase or decrease in the amount of authorized capital stock of any
class, including any preferred stock, shall not require the consent of the
holders of Series I Preferred Stock and shall not be deemed to affect adversely
the rights, preferences, privileges or voting rights of holders of shares of
Series I Preferred Stock.
Without the affirmative vote or consent of the holders of a majority of the
issued and outstanding shares of Series I Preferred Stock, the Company may not
consolidate or merge with or into, or sell, assign, transfer,
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lease, convey or otherwise dispose of all or substantially all of its assets
to, any person unless: (a) the entity formed by such consolidation or merger
(if other than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (the "resulting entity")
shall be a corporation organized or existing under the laws of the United
States or any State thereof or the District of Columbia; (b) the Series I
Preferred Stock shall remain unchanged or be converted into or exchanged for
and shall become shares of such resulting entity, having in respect of such
resulting entity the same (or more favorable) powers, preferences and relative
participating, optional or other special rights, and the same (or more
favorable) qualifications, limitations or restrictions thereon, that the Series
I Preferred Stock had immediately prior to such transaction (provided that (i)
if, in accordance with the certificate of designations for the Series I
Preferred Stock, the Series I Preferred Stock shall become convertible into a
different amount or type of securities, cash or other property, such change
shall not be deemed to be a change in the powers, preferences and relative
participating, optional or other special rights of the Series I Preferred Stock
and (ii) the fact that the resulting entity has authorized or outstanding any
securities other than Series I Senior Stock, shall not be deemed to be a change
in the powers, preferences and relative participating, optional or other
special rights of the Series I Preferred Stock); and (c) immediately after
giving effect to such transaction, no Series I Voting Rights Triggering Event
shall have occurred or be continuing; provided, however, that the foregoing
shall not be applicable to a transaction or event that constitutes a Change of
Control (as defined in the certificate of designations for the Series I
Preferred Stock).
Series L Preferred Stock and Series M Preferred Stock. The Series L Preferred
Stock, with respect to dividends and distributions upon the liquidation,
winding-up and dissolution of the Company, ranks (i) senior to all classes of
Common Stock and each other class of capital stock or series of preferred stock
established by the Board of Directors (except as set forth below) which does
not expressly provide that it ranks senior to the Series L Preferred Stock as
to dividends and distributions upon the liquidation, winding-up and dissolution
of the Company (collectively referred to as "Series L Junior Stock"); (ii) on a
parity with the Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I
Preferred Stock, Series M Preferred Stock and any other class of capital stock
or series of preferred stock issued by the Company established after the
initial issuance of the Series L Preferred Stock by the Board of Directors, the
terms of which expressly provide that such class or series will rank on a
parity with the Series L Preferred Stock as to dividends and distributions upon
the liquidation, winding-up and dissolution of the Company (collectively
referred to as "Series L Parity Securities"); and (iii) junior to each class of
capital stock or series of preferred stock issued by the Company established
after the initial issuance of Series L Preferred Stock by the Board of
Directors, the terms of which specifically provide that such class or series
will rank senior to the Series L Preferred Stock as to dividends and
distributions upon the liquidation, winding-up or dissolution of the Company
(collectively referred to as "Series L Senior Securities").
No full dividends may be declared or paid or funds set apart for the payment
of dividends on any Series L Parity Securities for any period unless full
cumulative dividends shall have been paid or set apart for such payment on the
Series L Preferred Stock. If full dividends are not so paid, the Series L
Preferred Stock shall share dividends pro rata with the Series L Parity
Securities. Subject to certain exceptions set forth in the certificate of
designations for the Series L Preferred Stock, no dividends may be paid or set
apart for such payment on Series L Junior Stock (except dividends on Series L
Junior Stock in additional shares of Series L Junior Stock), and no Series L
Junior Stock may be repurchased, redeemed or otherwise retired nor may funds by
set apart for payment with respect thereto, if full dividends have not been
paid on the Series L Preferred Stock.
The Company may redeem the Series L Preferred Stock at any time after April
1, 2003, in whole or in part, at certain redemption prices. In addition, the
Company may redeem shares of Series L Preferred Stock at any time before April
1, 1999 at a redemption price per share equal to the liquidation preference of
$10,000, plus accumulated and unpaid dividends plus a premium of $1,000 per
share, out of the net proceeds of the sale of Series L Junior Stock to a
Strategic Equity Investor (as defined in the certificate of designations for
the Series L Preferred Stock) or a public offering of Class A Common Stock.
Furthermore, the Company may, at its option, prior to April 1, 2003, redeem the
Series L Preferred Stock at any time within 180 days, at
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certain redemption prices, after a Change of Control (as defined in the
certificate of designations for the Series L Preferred Stock). On April 1,
2008, the Company will be required to redeem all outstanding shares of Series L
Preferred Stock out of funds legally available therefrom.
The Company may, at its option, on any scheduled dividend payment date,
exchange the Series L Preferred Stock for the Company's 11 1/8% Senior
Subordinated Debentures due 2008.
In the event of any liquidation, winding-up or dissolution of the Company,
holders of Series L Preferred Stock will be entitled to receive a preferential
amount equal to $10,000 per share, plus all accumulated and unpaid dividends
thereon to the date fixed for liquidation, dissolution or winding-up of the
Company (including an amount equal to a prorated dividend from the last
dividend payment date to the date fixed for liquidation, dissolution or winding
up), before any distribution is made on the Series L Junior Stock. If upon any
voluntary or involuntary liquidation, dissolution or winding-up of the Company,
the amounts payable with respect to the Series L Preferred Stock and all other
Series L Parity Securities are not paid in full, the holders of the Series L
Preferred Stock and the Series L Parity Securities will share equally and
ratably in any distribution of assets of the Company in proportion to the full
liquidation preference to which each is entitled. After payment of the full
amount of the liquidation preferences to which they are entitled, the holders
of shares of Series L Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Company. Neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all the property or assets of the
Company nor the consolidation or merger of the Company with one or more
corporations shall be deemed a liquidation, dissolution or winding-up of the
Company.
Holders of the Series L Preferred Stock have no voting rights with respect to
general corporate matters except as provided by law or as set forth in the
certificate of designations therefor. The certificate of designations for the
Series L Preferred Stock provides that (a) dividends on the Series L Preferred
Stock are in arrears and unpaid (and if after April 1, 2001, such dividends are
not paid in cash) for six quarterly periods (whether or not consecutive), or
(b) the Company fails to discharge its redemption obligation to redeem the
Series L Preferred Stock on April 1, 2008, the number of directors constituting
the Board of Directors will be adjusted to permit the holders of a majority of
the then outstanding Series L Preferred Stock and the Series M Preferred Stock,
voting or consenting, as the case may be, separately as a single class, to
elect a director. Such voting rights will continue until such time as all
dividends in arrears on the Series L Preferred Stock are paid in full (and in
the case of dividends payable after April 1, 2001, paid in cash) and any
failure, breach or default referred to in clause (b) is remedied, at which time
the term of the directors elected pursuant to the provisions of this paragraph
shall terminate. Each such event described in clauses (a) and (b) above is
referred to herein as a "Series L Voting Rights Triggering Event".
The certificate of designations for the Series L Preferred Stock also
provides that the Company will not authorize any class of Series L Senior
Securities without the affirmative vote or consent of holders of at least a
majority of the shares of Series L Preferred Stock and Series M Preferred Stock
then outstanding, voting or consenting, as the case may be, separately as a
single class. The Company may not amend the certificate of designations for the
Series L Preferred Stock so as to affect adversely the specified rights,
preferences, privileges or voting rights of holders of shares of the Series L
Preferred Stock, or authorize the issuance of any additional shares of Series L
Preferred Stock, without the affirmative vote or consent of the holders of at
least a majority of the outstanding shares of Series L Preferred Stock and
Series M Preferred Stock, voting or consenting, as the case may be, separately
as a single class.
Without the affirmative vote or consent of a majority of the issued and
outstanding shares of Series L Preferred Stock and Series M Preferred Stock,
voting or consenting, as the case may be, separately as a single class, the
Company may not consolidate or merge with or into, or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its assets
to, any person unless: (a) the entity formed by such consolidation or merger
(if other than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made shall be a corporation
organized and existing under
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the laws of the United States or any State thereof or the District of Columbia;
(b) the Series L Preferred Stock shall be converted into or exchanged for and
shall become shares of such successor, transferee or resulting corporation,
having in respect of such successor, transferee or resulting corporation the
same powers, preferences and relative participating, optional or special
rights, and the qualifications, limitations or restrictions thereon, that the
Series L Preferred Stock had immediately prior to such transactions; and (c)
immediately after giving effect to such transaction, no Series L Voting Rights
Triggering Event shall have occurred and be continuing. Notwithstanding the
foregoing, the Company may consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets to, any person if the Company makes adequate provision (i) prior to
April 1, 2003, to redeem the Series L Preferred Stock after a Change of Control
(as defined in the certificate of designations for the Series L Preferred
Stock) or (ii) on or after April 1, 2003, to redeem the Series L Preferred
Stock at the applicable redemption price set forth in the certificate of
designations therefor.
The Series M Preferred Stock will be on a parity with the Series L Preferred
Stock and will have the same terms in all material respects as the Series L
Preferred Stock, except that the Series M Preferred Stock will not contain
terms restricting the transfer thereof.
DESCRIPTION OF NEW DEPOSITARY SHARES,
SERIES M PREFERRED STOCK AND EXCHANGE DEBENTURES
NEW DEPOSITARY SHARES
The following summary description of the New Depositary Shares offered hereby
does not purport to be complete and is subject to, and qualified in its
entirety by reference to, the Deposit Agreement referred to below.
GENERAL
Each New Depositary Share represents a one one-hundredth interest in a share
of Series M Preferred Stock. The shares of Series M Preferred Stock underlying
the New Depositary Shares will be deposited with The First National Bank of
Boston, as Depositary (the "Depositary"), under a Deposit Agreement (the
"Deposit Agreement"), among the Company, the Depositary and all holders from
time to time of depositary receipts issued by the Depositary thereunder (the
"Depositary Receipts"). The Company does not plan to apply to list the Old
Depositary Shares, the New Depositary Shares, the Series L Preferred Stock or
the Series M Preferred Stock on any national securities exchange or any similar
system of automated dissemination of quotations of securities. Accordingly, the
Company does not expect that there will be any public trading market for the
Old Depositary Shares, the New Depositary Shares, the Series L Preferred Stock
or the Series M Preferred Stock. The New Depositary Shares will be evidenced by
Depositary Receipts.
Subject to the terms of the Deposit Agreement, each owner of a New Depositary
Share will be entitled through the Depositary, in proportion to the one one-
hundredth interest in a share of Series M Preferred Stock underlying such New
Depositary Share, to all the rights, preferences and privileges of a share of
Series M Preferred Stock (including dividend, voting, redemption, conversion
and liquidation rights), and will be subject to all of the limitations of the
fractional share of Series M Preferred Stock represented thereby, which are
summarized below under "Series M Preferred Stock". Since each share of Series M
Preferred Stock entitles the holder thereof to one vote on matters on which the
Series M Preferred Stock is entitled to vote, each New Depositary Share will,
in effect, entitle the holder thereof to one one-hundredth of a vote thereon,
rather than one full vote. See "Series M Preferred Stock--Voting Rights" below.
The Depositary will act as transfer agent and registrar and paying agent with
respect to the Depositary Shares.
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ISSUANCE OF DEPOSITARY RECEIPTS AND WITHDRAWAL OF SERIES M PREFERRED STOCK
FROM DEPOSIT
Immediately following the issuance by the Company of the shares of Series M
Preferred Stock to be represented by the New Depositary Shares, the Company
will deposit such shares of Series M Preferred Stock with the Depositary, which
will then issue and deliver the Depositary Receipts evidencing New Depositary
Shares in exchange for Depositary Receipts evidencing Old Depositary Shares.
Depositary Receipts will be issued evidencing only whole New Depositary Shares.
Upon surrender of the Depositary Receipts evidencing Old Depositary Shares at
the Corporate Office (as defined in the Deposit Agreement) of the Depositary
(or such other office as the Depositary may designate), the owner of the
Depositary Receipts evidencing New Depositary Shares is entitled at such office
to certificates evidencing the number of shares of Series M Preferred Stock
(but only in whole shares of Series M Preferred Stock) represented by such
Depositary Receipts. If the Depositary Receipts delivered by the holder
evidence a number of New Depositary Shares in excess of the number of whole
shares of Series M Preferred Stock to be withdrawn, the Depositary will deliver
to such holder at the same time a new Depositary Receipt evidencing such excess
number of New Depositary Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends, dividends paid in New
Depositary Shares representing fully paid and nonassessable shares of Series M
Preferred Stock or other cash distributions received in respect of the Series M
Preferred Stock to the record holders of New Depositary Shares representing
such Series M Preferred Stock in proportion to the numbers of such New
Depositary Shares owned by such holders on the relevant record date. In the
event of a distribution other than in cash, the Depositary will distribute
property received by it to the record holders of New Depositary Shares entitled
thereto, unless the Depositary determines that it is not feasible to make such
distribution, in which case the Depositary may, with the approval of the
Company, sell such property and distribute the net proceeds from such sale to
such holders.
REDEMPTION OF NEW DEPOSITARY SHARES
If the Series M Preferred Stock underlying the New Depositary Shares is
subject to redemption, the New Depositary Shares will be redeemed from the
proceeds received by the Depositary resulting from the redemption, in whole or
in part, of such Series M Preferred Stock held by the Depositary. The
redemption price per New Depositary Share will be equal to the applicable
fraction of the redemption price per share payable with respect to such Series
M Preferred Stock. If less than all the New Depositary Shares are to be
redeemed, the New Depositary Shares to be redeemed will be selected by lot or
pro rata.
After the date fixed for redemption (which will be the same date as the
redemption date for the Series M Preferred Stock), the New Depositary Shares so
called for redemption will no longer be deemed to be outstanding and all rights
of the holders of the New Depositary Shares will cease, except the right to
receive the moneys payable upon such redemption and any money or other property
to which the holders of such New Depositary Shares were entitled upon such
redemption upon surrender to the Depositary of the Depositary Receipts
evidencing such New Depositary Shares.
VOTING
Upon receipt of notice of any meeting at which the holders of the Series M
Preferred Stock are entitled to vote, the Depositary will mail the information
contained in such notice of meeting to the record holders of the New Depositary
Shares relating to such Series M Preferred Stock. Each record holder of such
New Depositary Shares on the record date (which will be the same date as the
record date for the Series M Preferred Stock) will be entitled to instruct the
Depositary as to the exercise of the voting rights pertaining to the number of
shares of Series M Preferred Stock underlying such holder's New Depositary
Shares. The Depositary will endeavor, insofar as practicable, to vote the
number of shares of Series M Preferred Stock underlying such New Depositary
Shares in accordance with such instructions, and the Company will agree to take
all action which may be deemed necessary by the Depositary in order to enable
the Depositary to do
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<PAGE>
so. The Depositary will abstain from voting shares of Series M Preferred Stock
to the extent the Depositary does not receive specific instructions from the
holders of New Depositary Shares relating to such shares.
AMENDMENT OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the New Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary. However, any amendment which materially
and adversely alters the rights of the holders of New Depositary Shares will
not be effective unless such amendment has been approved by the holders of at
least 66 2/3% of the New Depositary Shares then outstanding. Every holder of an
outstanding Depositary Receipt at the time any amendment becomes effective will
be deemed, by continuing to hold such Depositary Receipt, to consent and agree
to such amendment and to be bound by the Deposit Agreement as amended thereby.
In no event will any amendment impair the right, subject to the provisions of
the Deposit Agreement, of any owner of any New Depositary Shares to surrender
any Depositary Receipt evidencing such New Depositary Shares to the Depositary
with instructions to deliver to the holder the Series M Preferred Stock and all
money, and other property, if any, represented thereby, except in order to
comply with mandatory provisions of applicable law or the rules and regulations
of any governmental body, agency or commission, the National Association of
Securities Dealers, Inc. or any applicable stock exchange.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
that arise solely from the existence of the depositary arrangements. The
Company will pay the charges of the Depositary in connection with the initial
deposit of the Series M Preferred Stock and any redemption of the Series M
Preferred Stock. Holders of New Depositary Shares will pay all other transfer
and other taxes and governmental charges and, in addition, such other charges
as are expressly provided in the Deposit Agreement to be for their accounts.
MISCELLANEOUS
The Depositary will forward to the holders of New Depositary Shares all
reports and communications from the Company which the Company is required to
furnish to the holders of the Series M Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstances beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder, and they will not be obligated to prosecute
or defend any legal proceedings in respect of any New Depositary Shares or
Series M Preferred Stock unless satisfactory indemnity is furnished. They may
rely upon written advice of counsel or accountants, or information provided by
persons presenting Series M Preferred Stock for deposit, holders of New
Depositary Shares or other persons believed to be competent and on documents
believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY; TERMINATION OF THE DEPOSIT AGREEMENT
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary will be appointed by the Company within 45 days after delivery of
the notice of resignation or removal. The Deposit Agreement may be terminated
at the direction of the Company or by the Depositary if a period of 45 days
shall have expired after the Depositary has delivered to the Company written
notice of its election to resign and a successor depositary shall not have been
appointed. Upon termination of the Deposit Agreement, the Depositary will
discontinue the transfer of Depositary Receipts, will suspend the distribution
of dividends to the holders thereof and will not give any further notices
(other than notice of such termination) or perform any further acts under the
Deposit Agreement, except that the Depositary will
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continue to collect dividends and other distributions pertaining to the Series
M Preferred Stock, will sell rights, preferences or privileges as provided in
the Deposit Agreement and will continue to deliver Series M Preferred Stock
certificates together with such dividends and distributions and the net
proceeds of any sales of rights, preferences, privileges or other property in
exchange for Depositary Receipts surrendered. At any time after the expiration
of two years from the date of termination, the Depositary may sell the Series M
Preferred Stock and hold the proceeds of such sale, without interest, for the
benefit of the holders of Depositary Receipts who have not then surrendered
their Depositary Receipts. After making such sale, the Depositary will be
discharged from all obligations under the Deposit Agreement except to account
for such proceeds.
SERIES M PREFERRED STOCK
The Series M Preferred Stock will be issued pursuant to a certificate of
designations (the "Certificate of Designations"). The summary contained herein
of certain provisions of the Series M Preferred Stock does not purport to be
complete and is qualified in its entirety by reference to the provisions of the
Certificate of Designations. The definitions of certain terms used in the
Certificate of Designations and in the following summary are set forth below
under "--Definitions".
GENERAL
The Company will (assuming the exchange of all outstanding Old Depositary
Shares for New Depositary Shares) authorize the issuance of up to 115,000
shares of Series M Preferred Stock, which will consist of 67,757.3 shares of
Series M Preferred Stock represented by New Depositary Shares exchanged for Old
Depositary Shares plus 47,242.7 additional shares of Series M Preferred Stock
which may be used to pay dividends on the Series M Preferred Stock if the
Company elects to pay dividends in additional shares of Series M Preferred
Stock, and will file a Certificate of Designations with respect thereto with
the Secretary of State of the State of Delaware as required by Delaware law.
The Series L Preferred Stock surrendered will be retired and cancelled and
cannot be reissued. Accordingly, issuance of the Series M Preferred Stock will
not result in any change in capitalization of the Company. The Series M
Preferred Stock when issued in accordance with the terms of the Exchange Offer,
will be fully paid and non-assessable, and the holders thereof will have no
subscription or preemptive rights related thereto.
RANKING
The Series M Preferred Stock represented by the New Depositary Shares, with
respect to dividends and distributions upon the liquidation, winding-up and
dissolution of the Company, will rank (i) senior to all classes of Common Stock
and each other class of capital stock or series of preferred stock established
by the Board of Directors which does not expressly provide that it ranks senior
to or on a parity with the Series M Preferred Stock as to dividends and
distributions upon the liquidation, winding-up and dissolution of the Company
(collectively referred to as "Junior Stock"); (ii) on a parity with the Series
L Preferred Stock and the Company's Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock (which may be issued in exchange for
shares of the Series C Preferred Stock), Series G Preferred Stock, Series H
Preferred Stock, Series I Preferred Stock and any other class of capital stock
or series of preferred stock issued by the Company established after the
initial issuance of the Series M Preferred Stock by the Board of Directors, the
terms of which expressly provide that such class or series will rank on a
parity with the Series M Preferred Stock as to dividends and distributions upon
the liquidation, winding-up and dissolution of the Company (collectively
referred to as "Parity Securities"); and (iii) junior to each class of capital
stock or series of preferred stock issued by the Company established after the
initial issuance of the Series M Preferred Stock by the Board of Directors, the
terms of which specifically provide that such class or series will rank senior
to the Series M Preferred Stock as to dividends and distributions upon the
liquidation, winding-up and dissolution of the Company (collectively referred
to as "Senior Securities").
The Company may not issue any new class of Senior Securities without the
approval of the holders of at least a majority of the shares of Series L
Preferred Stock and Series M Preferred Stock then outstanding, voting or
consenting, as the case may be, as a single class.
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<PAGE>
DIVIDENDS
Holders of Series M Preferred Stock are entitled, when declared by the Board
of Directors, out of funds legally available therefor, to receive dividends on
each outstanding share of the Series M Preferred Stock, at the annual rate of
11 1/8% per share of Series M Preferred Stock. Dividends on the Series M
Preferred Stock will accumulate from the Accrual Date and are payable quarterly
in arrears on January 1, April 1, July 1 and October 1 of each year. Holders of
Series L Preferred Stock whose shares of Series L Preferred Stock are accepted
for exchange will be deemed to have waived the right to receive any payment in
respect of dividends on the Series L Preferred Stock accumulated from the
Accrual Date until the date of the issuance of the Series M Preferred Stock.
Consequently, holders who exchange their Series L Preferred Stock for Series M
Preferred Stock will receive the same dividend payment on the next dividend
payment date after the consummation of the Exchange Offer (expected to be
October 1, 1996) that they would have received had they not accepted the
Exchange Offer, except that if such dividend is not paid in cash, it will be
paid in shares of Series M Preferred Stock instead of Series L Preferred Stock.
Before April 1, 2001, dividends may, at the option of the Company, be paid
either in cash or fully paid and non-assessable shares of Series M Preferred
Stock with an aggregate liquidation preference equal to the amount of such
dividend. On and after April 1, 2001, dividends may only be paid in cash. If
any dividend (or portion thereof) payable on any dividend payment date on or
after April 1, 2001 is not paid in full in cash on the dividend payment date
therefor, the amount of such dividend that is payable and that is not paid in
cash on such date will increase at the rate of 11 1/8% per annum from such
dividend payment date until paid in full.
No full dividends may be declared or paid or funds set apart for the payment
of dividends on any Parity Securities for any period unless full cumulative
dividends shall have been paid or set apart for such payment on the Series M
Preferred Stock. If full dividends are not so paid, the Series M Preferred
Stock shall share dividends pro rata with the Parity Securities. No dividends
may be paid or set apart for such payment on Junior Stock (except dividends on
Junior Stock in additional shares of Junior Stock), and no Junior Stock may be
repurchased, redeemed or otherwise retired nor may funds be set apart for
payment with respect thereto, if full dividends have not been paid on the
Series M Preferred Stock, except for (i) any conversion of Class B Common Stock
of the Company into Class A Common Stock of the Company, (ii) prior to April 1,
2001, the occurrence of the Rainbow Spin-Off, (iii) repurchases of Common Stock
issued under the Company's stock incentive programs from employees of the
Company, and (iv) dividends or distributions payable-in-kind in additional
shares of, or warrants, rights, calls or options exercisable for or convertible
into additional shares of Junior Stock. See "Risk Factors--Risks Related to the
Securities--Restrictions on Company's Ability to Pay Dividends on the Series L
Preferred Stock and Series M Preferred Stock".
OPTIONAL REDEMPTION
The Company at its option may, but shall not be required to, redeem the
Series M Preferred Stock (subject to contractual and other restrictions with
respect thereto and to the legal availability of funds therefor) at any time
after April 1, 2003, in whole or in part, at the redemption prices (expressed
in percentage of liquidation preference) set forth below together with all
accumulated and unpaid dividends from the last payment date to the redemption
date, if redeemed during the 12-month period beginning April 1 of the years
indicated:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003........................................................... 105.563%
2004........................................................... 103.708
2005........................................................... 101.854
2006 and thereafter............................................ 100.000
</TABLE>
In addition, the Company may redeem shares of Series M Preferred Stock having
an aggregate liquidation preference of up to 50% of the shares of Series M
Preferred Stock then outstanding at any time before April 1, 1999 at a
redemption price per share equal to the liquidation preference of $10,000 per
share
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<PAGE>
(equivalent to $100 per New Depositary Share), plus accumulated and unpaid
dividends plus a premium of $1,000 per share (equivalent to $10 per New
Depositary Share) out of the net proceeds of the sale of Junior Stock to a
Strategic Equity Investor (as defined herein) or a public offering of Class A
Common Stock; provided that following such redemption, at least 3,250,000
Depositary Shares (representing at least 50% of the amount of Depositary Shares
initially issued) shall remain outstanding.
Furthermore, the Company may, at its option, prior to April 1, 2003, redeem
the Series M Preferred Stock, in whole but not in part, at any time within 180
days after a Change of Control (as defined herein), at a redemption price per
share equal to the sum of (i) the liquidation preference of $10,000 per share
(equivalent to $100 per New Depositary Share) plus (ii) accumulated and unpaid
dividends to the date of redemption plus (iii) the Make-Whole Premium (as
defined herein), which is based on a discount rate equal to the Treasury Rate
(as defined herein) plus 50 basis points.
In the event of partial redemptions of Series M Preferred Stock, the shares
to be redeemed will be determined pro rata or by lot, as determined by the
Company, except that the Company may redeem such shares held by any holders of
fewer than 100 shares (or shares held by holders who would hold less than 100
shares as a result of such redemption), as may be determined by the Company.
MANDATORY REDEMPTION
On April 1, 2008 (the "Mandatory Redemption Date"), the Company will be
required to redeem (subject to contractual and other restrictions with respect
thereto and to the legal availability of funds therefor) all outstanding shares
of Series M Preferred Stock at a price equal to the liquidation preference of
$10,000 per share (equivalent to $100 per New Depositary Share) plus all
accumulated and unpaid dividends from the last payment date to the date of
redemption. Future agreements of the Company may restrict or prohibit the
Company from redeeming the Series M Preferred Stock. See "Risk Factors--Risks
Related to the Securities--Restrictions on the Company's Ability to Pay
Dividends on Series L Preferred Stock and Series M Preferred Stock".
PROCEDURE FOR REDEMPTION
On and after a redemption date, unless the Company defaults in the payment of
the applicable redemption price, dividends will cease to accumulate on shares
of Series M Preferred Stock called for redemption and all rights of holders of
such shares will terminate except for the right to receive the redemption
price, without interest. The Company will send a written notice of redemption
by first class mail to each holder of record of shares of Series M Preferred
Stock, not fewer than 30 days nor more than 60 days prior to the date fixed for
such redemption. Shares of Series M Preferred Stock issued and reacquired will,
upon compliance with the applicable requirements of Delaware law, have the
status of authorized but unissued shares of preferred stock of the Company
undesignated as to series and may with any and all other authorized but
unissued shares of preferred stock of the Company be designated or redesignated
and issued or reissued, as the case may be, as part of any series of preferred
stock of the Company, except that any issuance or reissuance of shares of
Series M Preferred Stock must be in compliance with the Certificate of
Designations.
EXCHANGE
The Company may, at its option, on any scheduled dividend payment date,
exchange the New Depositary Shares representing the Series M Preferred Stock,
in whole but not in part, for the Exchange Debentures. See "--The Exchange
Debentures" below for the terms of the Exchange Debentures. Holders of Series M
Preferred Stock so exchanged will be entitled to receive a principal amount of
Exchange Debentures equal to $100 for each $100 of liquidation preference of
New Depositary Shares representing the Series M Preferred Stock held by such
holders at the time of exchange plus an amount per share in cash (or prior to
April 1, 2001, in principal amount of Exchange Debentures) equal to all
accumulated but unpaid dividends
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thereon from the last dividend payment date to the exchange date. The Exchange
Debentures will be issuable only in denominations of $1,000 and integral
multiples thereof. An amount in cash will be paid to holders for any principal
amount otherwise issuable which is less than $1,000. Following such exchange,
all dividends on the Series M Preferred Stock will cease to accrue, the rights
of the holders of Series M Preferred Stock as stockholders of the Company shall
cease and the person or persons entitled to receive the Exchange Debentures
issuable upon exchange shall be treated as the registered holder or holders of
such Exchange Debentures. Notice of exchange will be mailed at least 30 days
but not more than 60 days prior to the date of exchange to each holder of New
Depositary Shares representing the Series M Preferred Stock. See "--The
Exchange Debentures" below.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding-up of the Company,
holders of Series M Preferred Stock will be entitled to receive a preferential
amount equal to $10,000 per share (equivalent to $100 per New Depositary
Share), plus all accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up of the Company (including an amount
equal to a prorated dividend from the last dividend payment date to the date
fixed for liquidation, dissolution or winding-up), before any distribution is
made on any Junior Stock, including, without limitation, on any Common Stock.
If upon any voluntary or involuntary liquidation, dissolution or winding-up of
the Company, the amounts payable with respect to the Series M Preferred Stock
and all other Parity Securities are not paid in full, the holders of the Series
M Preferred Stock and the Parity Securities will share equally and ratably in
any distribution of assets of the Company in proportion to the full liquidation
preference to which each is entitled. After payment of the full amount of the
liquidation preferences to which they are entitled, the holders of shares of
Series M Preferred Stock will not be entitled to any further participation in
any distribution of assets of the Company. However, neither the sale,
conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Company nor the consolidation or merger of the Company with one or more
corporations shall be deemed to be a liquidation, dissolution or winding-up of
the Company.
The Certificate of Designations does not contain any provision requiring
funds to be set aside to protect the liquidation preference of the Series M
Preferred Stock, although such liquidation preference will be substantially in
excess of the par value of such shares of Series M Preferred Stock. In
addition, the Company is not aware of any provision of Delaware law or any
controlling decision of the courts of the State of Delaware (the state of
incorporation of the Company) that requires a restriction upon any surplus of
the Company solely because the liquidation preference of the Series M Preferred
Stock will exceed its par value. Consequently, there will be no restriction
upon any surplus of the Company solely because the liquidation preference of
the Series M Preferred Stock will exceed the par value and there will be no
remedies available to holders of the Series M Preferred Stock before or after
the payment of any dividend, other than in connection with the liquidation of
the Company, solely by reason of the fact that such dividend would reduce any
surplus of the Company to an amount less than the difference between the
liquidation preference of the Series M Preferred Stock and its par value. See
"Risk Factors--Risks Related to the Securities--Restrictions on the Company's
Ability to Pay Dividends on the Series L Preferred Stock and Series M Preferred
Stock".
VOTING RIGHTS
Holders of the Series M Preferred Stock will have no voting rights with
respect to general corporate matters except as provided by law or as set forth
in the Certificate of Designations. The Certificate of Designations provides
that if (a) dividends on the Series L Preferred Stock or Series M Preferred
Stock are in arrears and unpaid (and if after April 1, 2001, such dividends are
not paid in cash) for six quarterly periods (whether or not consecutive), or
(b) the Company fails to discharge its redemption obligation to redeem the
Series L Preferred Stock or Series M Preferred Stock on the Mandatory
Redemption Date, then the number of directors constituting the Board of
Directors will be adjusted to permit the holders of the majority of the
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<PAGE>
then outstanding Series L Preferred Stock and Series M Preferred Stock, voting
or consenting, as the case may be, as a single class, to elect a director. Such
voting rights will continue until such time as all dividends in arrears on the
Series L Preferred Stock and Series M Preferred Stock are paid in full (and in
the case of dividends payable after April 1, 2001, paid in cash) and any
failure, breach or default referred to in clause (b) is remedied, at which time
the term of the directors elected pursuant to the provisions of this paragraph
shall terminate. Each such event described in clauses (a) and (b) above is
referred to herein as a "Voting Rights Triggering Event".
Any vacancy occurring in the office of the director elected by holders of the
Series L Preferred Stock and Series M Preferred Stock may be filled by the
departing director unless and until such vacancy shall be filled by such
holders.
The Certificate of Designations also provides that, except as stated above
under "--Ranking", the Company will not authorize any class of Senior
Securities without the affirmative vote or consent of holders of at least a
majority of the shares of Series L Preferred Stock and Series M Preferred Stock
then outstanding, voting or consenting, as the case may be, separately as a
single class. The Certificate of Designations also provides that the Company
may not amend the Certificate of Designations so as to affect adversely the
specified rights, preferences, privileges or voting rights of holders of shares
of the Series L Preferred Stock or Series M Preferred Stock, or authorize the
issuance of any additional shares of Series L Preferred Stock or Series M
Preferred Stock, without the affirmative vote or consent of the holders of at
least a majority of the outstanding shares of Series L Preferred Stock and
Series M Preferred Stock, voting or consenting, as the case may be, as a single
class. The holders of at least a majority of the outstanding shares of Series L
Preferred Stock and Series M Preferred Stock, voting or consenting, as the case
may be, as a single class, may also waive compliance with any provision of the
Certificate of Designations. The Certificate of Designations also provides
that, except as set forth above, (a) the creation, authorization or issuance of
any shares of Parity Securities or Junior Stock or (b) the increase or decrease
in the amount of authorized capital stock of any class, including any preferred
stock, shall not require the consent of the holders of Series L Preferred Stock
or Series M Preferred Stock and shall not be deemed to affect adversely the
rights, preferences, privileges or voting rights of holders of shares of Series
L Preferred Stock or Series M Preferred Stock.
Under Delaware law, holders of a class of preferred stock will be entitled to
vote as a class upon a proposed amendment to the certificate of incorporation,
whether or not entitled to vote thereon by the certificate of incorporation, if
the amendment would increase or decrease the aggregate number of authorized
shares of such class, increase or decrease the par value of the shares of such
class, or alter or change the powers, preferences or special rights of the
shares of such class so as to affect them adversely. The Certificate of
Designations will expressly provide that any such vote will be taken with
respect to the Series L Preferred Stock and Series M Preferred Stock, voting or
consenting, as the case may be, as a single class.
MERGER, CONSOLIDATION AND SALE OF ASSETS
Without the affirmative vote or consent of the holders of a majority of the
issued and outstanding shares of Series L Preferred Stock and Series M
Preferred Stock, the Company may not consolidate or merge with or into, or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its assets to, any Person unless: (a) the entity formed by
such consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made shall be a corporation organized or existing under the laws of the United
States or any State thereof or the District of Columbia; (b) any and all
outstanding shares of Series L Preferred Stock and Series M Preferred Stock
shall be converted into or exchanged for and shall become shares of such
successor, transferee or resulting corporation, having in respect of such
successor, transferee or resulting corporation the same powers, preferences and
relative participating, optional or other special rights, and the
qualifications, limitations or restrictions thereon, that the Series L
Preferred Stock or Series M Preferred Stock, as the case may be, had
immediately prior to such transaction; and (c) immediately after giving effect
to such transaction, no Voting Rights Triggering Event shall have occurred or
be continuing. Notwithstanding the foregoing, the Company
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<PAGE>
may consolidate or merge with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its assets to, any Person
if the Company makes adequate provision (i) prior to April 1, 2003, to redeem
the Series L Preferred Stock and Series M Preferred Stock after a Change of
Control or (ii) on or after April 1, 2003, to redeem the Series L Preferred
Stock and Series M Preferred Stock at the applicable redemption price set forth
herein.
COVENANT TO REPORT
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or Section 15(d) of the Exchange Act, the Company
will file with the Commission and provide the Transfer Agent and the holders of
the Series M Preferred Stock with all information, documents and reports
specified in Section 13 and Section 15(d) of the Exchange Act.
TRANSFER AGENT AND REGISTRAR
The First National Bank of Boston is the transfer agent and registrar for the
Series M Preferred Stock.
THE EXCHANGE DEBENTURES
The Exchange Debentures will be issued under an Indenture dated as of
February 15, 1996 (the "Exchange Indenture"), between the Company and The Bank
of New York, as trustee (the "Trustee"). The Exchange Indenture is subject to
and is governed by the Trust Indenture Act of 1939, as amended. The following
summaries of certain provisions of the Exchange Indenture do not purport to be
complete, and where reference is made to particular provisions of the Exchange
Indenture, such provisions, including the definitions of certain terms, are
incorporated by reference as a part of such summaries or terms, which are
qualified in their entirety by such reference. The definitions of certain
capitalized terms used in the Exchange Indenture and in the following summary
are set forth below under "Definitions".
The Exchange Debentures will be unsecured obligations of the Company and will
be limited in aggregate principal amount to the aggregate liquidation
preference of the Series L Preferred Stock and Series M Preferred Stock, plus
accumulated and unpaid dividends on the date of exchange of the Series L
Preferred Stock or Series M Preferred Stock, as the case may be, into Exchange
Debentures (plus any additional Exchange Debentures issued in lieu of cash
interest as described herein). The Exchange Debentures will be issued only in
fully registered form without coupons, in denominations of $1,000 or any
integral multiple thereof (other than with respect to additional Exchange
Debentures issued in lieu of cash interest as described herein). The Exchange
Debentures will be subordinated to all existing and future Senior Indebtedness
of the Company.
The Exchange Debentures will mature on April 1, 2008. Each Exchange Debenture
will accrue interest at the dividend rate of the Series L Preferred Stock or
Series M Preferred Stock, as the case may be, from the Exchange Debenture Issue
Date or from the most recent interest payment date to which interest has been
paid or provided for.
Interest will be payable semi-annually in cash (or, on or prior to April 1,
2001, in additional Exchange Debentures having a principal amount equal to the
cash interest otherwise payable, or in a combination of cash and Exchange
Debentures, at the option of the Company) in arrears on January 1 and July 1 of
each year, commencing with the first such date after the Exchange Debenture
Issue Date. Interest on the Exchange Debentures will be computed on the basis
of a 360-day year of twelve 30-day months and the actual number of days
elapsed.
Principal of and premium, if any, and interest on the Exchange Debentures
will be payable, and the Exchange Debentures will be exchangeable and
transferable, at the office or agency of the Company in The City of New York
(which initially will be the Corporate Trust Office of the Trustee); provided,
however, that payment of interest, to the extent paid in cash, may be made at
the option of the Company by check mailed
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to the person entitled thereto as shown on the Register of the Exchange
Debentures. No service charge will be made for any registration of transfer or
exchange of Exchange Debentures, except for any tax or other governmental
charge that may be imposed in connection therewith.
The Exchange Indenture will not contain any provisions that limit the ability
of the Company to incur indebtedness or that afford Holders of the Exchange
Debentures protection in the event of a highly leveraged or similar transaction
involving the Company, other than as described under "--Certain Covenants of
the Company--Limitation on Indebtedness".
SINKING FUND
The Exchange Debentures will not be entitled to the benefits of a sinking
fund.
SUBORDINATION
The indebtedness represented by the Exchange Debentures will be subordinated
in right of payment to the prior payment in full of all Senior Indebtedness.
(Section 1201) Upon the maturity of any Senior Indebtedness, by lapse of time,
acceleration or otherwise, or upon any payment default (with or without the
giving of notice or lapse of time or both, in accordance with the terms of the
instrument governing such Senior Indebtedness, and without any waiver or
forgiveness) with respect to any Senior Indebtedness, all obligations with
respect to such Senior Indebtedness must first be paid in full, or such payment
duly provided for, before any payment is made with respect to the Exchange
Debentures or before any acquisition of Exchange Debentures by the Company.
(Section 1202)
Upon (i) a default with respect to any Senior Indebtedness (other than under
circumstances when the terms of the previous paragraph are applicable), as such
default is defined therein or in the instrument under which it is outstanding,
permitting the holders of Senior Indebtedness to accelerate the maturity
thereof, and (ii) written notice thereof ("Default Notice") given to the
Company and the Trustee by the agent or agents under the Credit Agreement,
then, unless and until such default shall have been cured or waived by the
holders of such Senior Indebtedness or shall have ceased to exist, no direct or
indirect payment may be made by the Company with respect to the principal of or
interest on the Exchange Debentures (other than payments made in Junior
Securities) or to acquire any of the Exchange Debentures or on account of the
redemption provisions of the Exchange Debentures; provided, however, that such
provision shall not prevent the making of any payment (which is not otherwise
prohibited by the previous paragraph) for more than 120 days after the Default
Notice shall have been given unless the Senior Indebtedness in respect of which
such event of default exists has been declared due and payable in its entirety,
in which case no such payment may be made until such acceleration has been
rescinded or annulled or such Senior Indebtedness has been paid in full.
Notwithstanding the foregoing, not more than one Default Notice may be given
with respect to Senior Indebtedness within a period of 240 consecutive days.
The Exchange Indenture will provide that, upon any payment by or distribution
of the assets of the Company to creditors upon any dissolution, winding up,
liquidation, bankruptcy, reorganization, assignment for the benefit of
creditors, or any insolvency, receivership or similar proceeding relating to
the Company, all Senior Indebtedness must be paid in full, or such payment duly
provided for, before any payment or distribution (other than in Junior
Securities) is made on account of the principal of or interest on the Exchange
Debentures. (Section 1203)
By reason of such subordination, in the event of liquidation or insolvency,
creditors of the Company who are holders of Senior Indebtedness may recover
more, ratably, than other creditors of the Company and creditors of the Company
who are not holders of Senior Indebtedness or of the Exchange Debentures (or
the Company's 10 3/4% Senior Subordinated Debentures due 2004, the 9 1/4%
Senior Subordinated Notes due 2005, the 9 7/8% Senior Subordinated Notes due
2006, the 9 7/8% Senior Subordinated Debentures due 2013, the 10 1/2% Senior
Subordinated Debentures due 2016 and the 9 7/8% Senior Subordinated Debentures
due
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2023 (collectively, the "Debentures")) may recover more, ratably, than the
Holders of the Exchange Debentures.
A Holder of Exchange Debentures by such holder's acceptance of the Exchange
Debentures agrees to be bound by such provisions and authorizes and expressly
directs the Trustee, on his behalf, to take such action as may be necessary or
appropriate to effectuate the subordination provided for in the Exchange
Indenture and appoints the Trustee his attorney-in-fact for such purpose.
(Section 1209)
The amount of Senior Indebtedness outstanding at March 31, 1996, adjusted to
give pro forma effect to the transactions described under "Capitalization" and
the application of the net proceeds to the Company from the offering of the
Company's Series L Preferred Stock, would have been approximately $569.4
million.
OPTIONAL REDEMPTION.
The Exchange Debentures will be subject to redemption at any time on or after
April 1, 2003, at the option of the Company, in whole or in part, on not less
than 30 nor more than 60 days' prior notice at the following redemption prices
(expressed as percentages of the principal amount), if redeemed during the
12-month period beginning April 1 of the years indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003........................................................... 105.563%
2004........................................................... 103.708
2005........................................................... 101.854
2006 and thereafter............................................ 100.000
</TABLE>
in each case together with accrued interest to the redemption date (subject to
the right of Holders of record on relevant record dates to receive interest due
on an interest payment date). If less than all of the Exchange Debentures are
to be redeemed, the Trustee shall select the Exchange Debentures or portions
thereof to be redeemed either pro rata or by lot.
In addition, up to 50% in aggregate principal amount of the Exchange
Debentures may be redeemed before April 1, 1999 at a price of 110% of the
principal amount thereof, plus accrued and unpaid interest thereon, out of the
net proceeds of a sale of Junior Stock to a Strategic Equity Investor or a
public offering of Class A Common Stock, provided that following such
redemption at least $325,000,000 principal amount of Exchange Debentures
remains outstanding.
The Credit Agreement currently prohibits the Company from making optional
redemptions of the Exchange Debentures other than through the issuance of
subordinated indebtedness, preferred stock or common stock.
CERTAIN COVENANTS OF THE COMPANY
Upon issuance of the Exchange Debentures, the following covenants shall be
applicable:
Limitation on Indebtedness. The Exchange Indenture provides that the Company
shall not, and shall not permit any Restricted Subsidiary to, directly or
indirectly incur, create, issue, assume, guarantee or otherwise become liable
for, contingently or otherwise, or become responsible for the payment of,
contingently or otherwise, any Indebtedness (other than Indebtedness between or
among any of the Company and Restricted Subsidiaries) unless, after giving
effect thereto, the Cash Flow Ratio shall be less than or equal to 9 to 1.
(Section 1007)
At March 31, 1996, such Cash Flow Ratio was approximately 5.7 to 1.
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Limitation on Senior Subordinated Indebtedness. The Exchange Indenture
provides that the Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become liable for, contingently or otherwise, or become
responsible for the payment of, contingently or otherwise, any Indebtedness
which is both (i) senior in right of payment to the Exchange Debentures and
(ii) expressly subordinate in right of payment to any other Indebtedness of the
Company. For purposes of this covenant, Indebtedness is deemed to be senior in
right of payment to the Exchange Debentures if it is not subordinate in right
of payment to Senior Indebtedness at least to the same extent as the Exchange
Debentures are subordinate to Senior Indebtedness. (Section 1008)
Limitation on Restricted Payments. The Exchange Indenture provides that, so
long as any of the Exchange Debentures remains outstanding, the Company will
not, and will not permit any Restricted Subsidiary to, make any Restricted
Payment if (a) at the time of such proposed Restricted Payment, a Default or
Event of Default shall have occurred and be continuing or shall occur as a
consequence of such Restricted Payment or (b) immediately after giving effect
to such Restricted Payment, the aggregate of all Restricted Payments that shall
have been made on or after July 1, 1988 would exceed the sum of:
(i) $25,000,000, plus
(ii) an amount equal to the difference between (A) the Cumulative Cash
Flow Credit and (B) 1.2 multiplied by Cumulative Interest Expense.
Notwithstanding the foregoing, so long as no Default or Event of Default
shall have occurred and be continuing, the Company may make any Permitted
Restricted Payment; provided, however, that such Permitted Restricted Payment
shall thereafter be counted as a Restricted Payment solely for purposes of
calculating whether any future Restricted Payments are permitted under clause
(b) of the preceding sentence.
For purposes of the "Limitation on Restricted Payments" covenant, the amount
of any Restricted Payment or Permitted Restricted Payment, if other than cash,
shall be based upon fair market value as determined by the Board of Directors
of the Company, whose good faith determination shall be conclusive. (Section
1009)
The foregoing provisions do not prevent: (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at such date of
declaration such payment complied with the above provisions; (ii) the
retirement or redemption of any shares of the Company's capital stock or
warrants, rights or options to acquire capital stock of the Company, in
exchange for, or out of the proceeds of a substantially concurrent sale of,
other shares of the Company's capital stock or warrants, rights or options to
acquire capital stock of the Company (other than Disqualified Stock); and (iii)
the redemption of or payments of cash dividends on the Series C Preferred Stock
outstanding on January 1, 1995, which redemptions or dividends are provided for
by the terms of the Series C Preferred Stock in effect on such date (or the
redemption of or payment of cash dividends on any security of the Company
issued in exchange for or upon the conversion of such Series C Preferred Stock;
provided that the aggregate amount payable pursuant to the terms of such
security is no greater than the aggregate amount payable pursuant to the terms
of the Series C Preferred Stock). For purposes of determining the aggregate
permissible amount of Restricted Payments in accordance with clause (b) of the
first paragraph of this covenant, all amounts expended pursuant to clauses (i)
and (iii) of this paragraph shall be included and all amounts expended or
received pursuant to clause (ii) of this paragraph shall be excluded; provided,
however, that amounts paid pursuant to clause (i) of this paragraph shall be
included only to the extent that such amounts were not previously included in
calculating Restricted Payments. (Section 1009)
For the purposes of the foregoing provisions, the net proceeds from the
issuance of shares of capital stock of the Company upon conversion of
Indebtedness shall be deemed to be an amount equal to (i) the accreted value of
such Indebtedness so converted on the date of such conversion and (ii) the
additional consideration, if any, received by the Company upon such conversion
thereof, less any cash payment on account of fractional shares (such
consideration, if in property other than cash, to be determined by the Board
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of Directors of the Company, whose good faith determination shall be
conclusive). If the Company makes a Restricted Payment which, at the time of
the making of such Restricted Payment, would in the good faith determination of
the Company be permitted under the requirements of this covenant, such
Restricted Payment shall be deemed to have been made in compliance with this
covenant notwithstanding any subsequent adjustments made in good faith to the
Company's financial statements affecting Cumulative Cash Flow Credit or
Cumulative Interest Expense for any period. (Section 1009)
As of March 31, 1996, this covenant would have permitted the Company to make
Restricted Payments of $613.1 million.
Limitation on Investments in Unrestricted Subsidiaries and Affiliates. The
Company will not, and will not permit any Restricted Subsidiary to, directly or
indirectly (i) make any Investment or (ii) allow any Restricted Subsidiary to
become an Unrestricted Subsidiary (a "redesignation of a Restricted
Subsidiary"), in each case unless (a) no Default or Event of Default shall have
occurred and be continuing or shall occur as a consequence of such Investment
or such redesignation of a Restricted Subsidiary and (b) after giving effect
thereto, the Cash Flow Ratio shall be less than or equal to 9 to 1.
The foregoing provisions of this covenant shall not prohibit (i) any renewal
or reclassification of any Investment existing on the date hereof or (ii) trade
credit extended on usual and customary terms in the ordinary course of
business. (Section 1010)
Transactions with Affiliates. The Exchange Indenture provides that the
Company shall not, and shall not permit any of its subsidiaries to, sell,
lease, transfer or otherwise dispose of any of its properties or assets to or
purchase any property or assets from, or enter into any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, an
Affiliate of the Company that is not a subsidiary of the Company, having a
value, or for consideration having a value, in excess of $10,000,000
individually or in the aggregate unless the Board of Directors of the Company
shall make a good faith determination that the terms of such transaction are,
taken as a whole, no less favorable to the Company or such subsidiary, as the
case may be, than those which might be available in a comparable transaction
with an unrelated Person. For purposes of clarification, this provision shall
not apply to Restricted Payments or Permitted Restricted Payments permitted
under "Limitation on Restricted Payments". (Section 1011)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets to, any Person, unless: (i) the entity formed by such consolidation or
merger (if other than the Company) or to which such sale, assignment, transfer,
lease, conveyance or disposition shall have been made shall be a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia, and shall assume by a supplemental indenture all
the obligations of the Company under the Exchange Debentures and the Exchange
Indenture; (ii) immediately before and immediately after such transaction, and
after giving effect thereto, no Default or Event of Default shall have occurred
and be continuing; and (iii) immediately after such transaction, and after
giving effect thereto, the Person formed by or surviving any such consolidation
or merger, or to which such sale, assignment, transfer, lease or conveyance or
disposition shall have been made, shall have a Cash Flow Ratio not in excess of
9 to 1. (Section 801)
EVENTS OF DEFAULT
The following are Events of Default under the Exchange Indenture: (1) default
for 30 days in payment of interest on the Exchange Debentures; (2) default in
payment of principal or premium, if any, on the Exchange Debentures at
Maturity, upon acceleration, redemption or otherwise; (3) failure to comply
with any other covenant or agreement of the Company, continued for 60 days (or,
with respect to certain covenants or agreements, 30 days) after written notice
as provided in the Exchange Indenture; (4) a default or defaults
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under any mortgage, indenture or instrument which secures or evidences any
Indebtedness for money borrowed or guaranteed by the Company or a Restricted
Subsidiary in an aggregate amount of $10,000,000 or more (but excluding any
Indebtedness for the deferred purchase price of property or services owed to
the Person providing such property or services as to which the Company or such
Restricted Subsidiary is contesting its obligation to pay the same in good
faith and by proper proceedings and for which the Company or such Restricted
Subsidiary has established appropriate reserves) which result from the failure
to pay such Indebtedness at final maturity or which have resulted in the
acceleration of such Indebtedness; (5) the entry of a final judgment or final
judgments for the payment of money by a court or courts of competent
jurisdiction against the Company or any Restricted Subsidiary in an aggregate
amount exceeding $10,000,000 which remain undischarged and unbonded for a
period (during which execution shall not be effectively stayed) of 60 days or
as to which an enforcement proceeding has been commenced by any creditor, and
(6) certain events of bankruptcy, insolvency or reorganization. (Section 501)
If an Event of Default (other than as specified in clause (6) above) shall
occur and be continuing under the Exchange Indenture, either the Trustee or the
Holders of not less than 25% in aggregate principal amount of the outstanding
Exchange Debentures, by written notice to the Company and the agents, if any,
under the Credit Agreement (and to the Trustee if such notice is given by the
Holders), may declare all the unpaid principal of, premium, if any, and
interest on the Exchange Debentures to be due and payable as provided in the
Exchange Indenture. Upon a declaration of acceleration, such principal,
premium, if any, and accrued interest shall be due and payable upon the first
to occur of an acceleration under the Credit Agreement or ten days after
receipt by the Company and the agents, if any, under the Credit Agreement of
such written notice. No action on the part of the Trustee or any Holder of the
Exchange Debentures is required for such acceleration if an Event of Default
specified in clause (6) above shall occur and be continuing. The Holders of at
least a majority in principal amount of the Exchange Debentures then
outstanding may rescind an acceleration and its consequences if (i) all
existing Events of Default, other than the nonpayment of principal of, premium,
if any, or interest on the Exchange Debentures which have become due solely
because of the acceleration, have been cured or waived and (ii) the rescission
would not conflict with any judgment or decree of a court of competent
jurisdiction. A declaration of acceleration because of an Event of Default
specified in clause (4) of the preceding paragraph would be automatically
annulled if the Indebtedness referred to therein were discharged, or the
Holders thereof rescinded their declaration of acceleration referred to
therein, within 30 days after the acceleration of the Exchange Debentures and
no other Event of Default had occurred and not been cured or waived during such
period. (Section 502) The Holders of a majority in principal amount of the
Exchange Debentures outstanding also have the right to waive certain past
defaults under the Exchange Indenture. (Section 513)
No Holder of any Exchange Debentures issued under the Exchange Indenture has
any right to institute any proceeding with respect to such Exchange Indenture
or for any remedy thereunder, unless (i) such Holder has previously given to
the Trustee written notice of a continuing Event of Default under the Exchange
Indenture, (ii) the Holders of at least 25% in principal amount of the
outstanding Exchange Debentures issued under the Exchange Indenture have made
written request and offered reasonable indemnity to the Trustee to institute
such proceeding as Trustee under the Exchange Indenture, and (iii) the Trustee
has not received from the Holders of a majority in principal amount of the
outstanding Exchange Debentures a direction inconsistent with such request and
the Trustee has failed to institute such proceeding within 60 days after
receipt of such notice. (Section 507) Such limitations do not apply, however,
to a suit instituted by a Holder of an Exchange Debenture for the enforcement
of payment of the principal of or premium, if any, or interest on such Exchange
Debenture on or after the respective due dates expressed in such Exchange
Debenture. (Section 508)
During the existence of an Event of Default, the Trustee is required to
exercise such rights and powers vested in it under the Exchange Indenture and
use the same degree of care and skill in its exercise thereof as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs. Subject to the provisions of the Exchange Indenture relating to
the duties of the Trustee, in case an Event of Default
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<PAGE>
shall occur and be continuing, the Trustee is not under any obligation to
exercise any of its rights or powers under the Exchange Indenture at the
request or direction of any of the Holders unless such Holders shall have
offered to the Trustee reasonable security or indemnity. (Section 602) Subject
to such provisions for the indemnification of the Trustee, the Holders of a
majority in principal amount of the outstanding Exchange Debentures have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or exercising any trust or power conferred on
the Trustee under the Exchange Indenture. (Section 512)
The Company is required to furnish to the Trustee an annual statement as to
the performance by the Company of its obligations under the Exchange Indenture
and as to any default in such performance. (Section 1013)
DEFEASANCE
The Company may at any time terminate all of its obligations with respect to
the Exchange Debentures ("defeasance"), except for certain obligations,
including those regarding the Defeasance Trust (as defined below) and
obligations to register the transfer or exchange of Exchange Debentures, to
replace mutilated, destroyed, lost or stolen Exchange Debentures and to
maintain agencies in respect of the Exchange Debentures. The Company may also
at any time terminate its obligations under the covenants set forth in the
Exchange Indenture, which are described under "--Certain Covenants of the
Company" above, and any omission to comply with such obligations shall not
constitute a Default or an Event of Default with respect to the Exchange
Debentures ("covenant defeasance"). (Sections 1402, 1403 and 1404)
In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit in trust, for the benefit of the Holders, with
the Trustee money or U.S. Government Obligations, or a combination thereof, in
such amounts as will be sufficient to pay the principal of and premium, if any,
and interest on the Exchange Debentures to redemption or maturity (the
"Defeasance Trust"), (ii) the Company must deliver opinions of counsel to the
effect that such Holders will not recognize income, gain or loss for federal
income tax purposes as a result of such defeasance or covenant defeasance and
will be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred (in the case of defeasance, such opinion
must refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable federal income tax laws), (iii) no event or condition
shall exist that, pursuant to certain provisions described under
"Subordination" above, would prevent the Company from making payments of
principal of and premium, if any, and interest on the Exchange Debentures at
the date of the irrevocable deposit referred to above or at any time during the
period ending on the 91st day after such deposit date and (iv) the Company must
comply with certain other conditions. (Section 1404)
SATISFACTION AND DISCHARGE OF THE EXCHANGE INDENTURE AND THE EXCHANGE
DEBENTURES
The Exchange Indenture will cease to be of further effect (except as to
surviving rights of registration of transfer or exchange of Exchange
Debentures, as expressly provided for in the Exchange Indenture) when either
(i) all such Exchange Debentures theretofore authenticated and delivered
(except lost, stolen or destroyed Exchange Debentures which have been replaced
or paid) have been delivered to the Trustee for cancellation and the Company
has paid all sums payable by it under the Exchange Indenture or (ii) all such
Exchange Debentures not theretofore delivered to the Trustee for cancellation
(a) have become due and payable, or (b) will become due and payable within one
year, or (c) are to be called for redemption within one year, and the Company
has irrevocably deposited or caused to be deposited with the Trustee funds in
an amount sufficient to pay the entire indebtedness on such Exchange Debentures
not theretofore delivered to the Trustee for cancellation, for principal (and
premium, if any) and interest to the date of deposit (if such Exchange
Debentures are then due and payable) or to the applicable maturity or
redemption date (as the case may be), and the Company has paid all sums payable
by it under the Exchange Indenture. (Section 401)
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MODIFICATION AND WAIVER
Modifications and amendments of the Exchange Indenture or the Exchange
Debentures may be made by the Company and the Trustee with the consent of the
Holders of not less than a majority in aggregate principal amount of the
outstanding Exchange Debentures; provided, however, that no such modification
or amendment may, without the consent of the Holder of each outstanding
Exchange Debenture, (i) change the Stated Maturity of the principal of, or the
premium, if any, or any installment of interest on, the Exchange Debentures,
(ii) reduce the principal amount of, or the premium, if any, or interest on,
the Exchange Debentures, (iii) change the Currency in which any Exchange
Debenture or any premium or the interest thereon is payable, (iv) impair the
right to institute suit for the enforcement of any payment on or with respect
to the Exchange Debentures, (v) reduce the percentage in principal amount of
outstanding Exchange Debentures necessary to waive compliance with certain
provisions of the Exchange Indenture or to waive certain defaults, (vi) modify
any of the provisions relating to supplemental indentures requiring the consent
of Holders or relating to the waiver of past defaults, except to increase the
percentage of outstanding Exchange Debentures required for such actions or to
provide that certain other provisions of the Exchange Indenture cannot be
modified or waived without the consent of the Holder of each Exchange Debenture
affected thereby, or (vii) modify any of the provisions of the Exchange
Indenture relating to the subordination of the Exchange Debentures in a manner
adverse to the Holders thereof. (Sections 901 and 902)
The Holders of a majority in aggregate principal amount of the Exchange
Debentures then outstanding may waive compliance with certain restrictive
covenants and provisions of the Exchange Indenture. (Section 1014)
REGARDING THE TRUSTEE
The Bank of New York ("BONY") is the Trustee under the Exchange Indenture and
the indentures relating to the Company's 10 3/4% Senior Subordinated Debentures
due 2004, the 9 7/8% Senior Subordinated Debentures due 2013, the 9 7/8% Senior
Subordinated Debentures due 2023, the 9 1/4% Senior Subordinated Notes due
2005, the 9 7/8% Senior Subordinated Notes due 2006, the 10 1/2% Senior
Subordinated Debentures due 2016, the 11 3/4% Senior Subordinated Debentures
due 2007 and 8 1/2% Convertible Subordinated Debentures due 2007. BONY is a
party to certain credit agreements with the Company and its subsidiaries,
including the Credit Agreement, borrowings under which constitute Senior
Indebtedness under the Exchange Indenture. BONY may also maintain other banking
arrangements with the Company in the ordinary course of business.
DEFINITIONS
Set forth below is a summary of certain defined terms used in the Certificate
of Designations and in the Exchange Indenture. Reference is made to the
Certificate of Designations and the Exchange Indenture for the full definition
of all such terms, as well as any other capitalized terms used herein for which
no definition is provided.
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
control when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Annualized Operating Cash Flow" means, for any period of three complete
consecutive calendar months, an amount equal to Operating Cash Flow for such
period multiplied by four.
"Banks" means the lenders from time to time under the Credit Agreement.
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"Capitalized Lease Obligation" means any obligation of a person to pay rent
or other amounts under a lease with respect to any property (whether real,
personal or mixed) acquired or leased by such Person and used in its business
that is required to be accounted for as a liability on the balance sheet of
such Person in accordance with generally accepted accounting principles, and
the amount of such Capitalized Lease Obligation shall be the amount so required
to be accounted for as a liability.
"Cash Flow Ratio" means, as at any date, the ratio of (i) the sum of the
aggregate outstanding principal amount of all Indebtedness of the Company and
the Restricted Subsidiaries determined on a consolidated basis but excluding
all Interest Swap Obligations entered into by the Company or any Restricted
Subsidiary and one of the Banks outstanding on such date plus (but without
duplication of Indebtedness supported by Letters of Credit) the aggregate
undrawn face amount of all Letters of Credit outstanding on such date to(ii)
Annualized Operating Cash Flow determined as at the last day of the most recent
month for which financial information is available.
"Change of Control" means any transaction or series of transactions
(including, without limitation, a tender offer, merger or consolidation) the
result of which is that Dolan ceases (i) to elect a majority of the Board of
Directors of the Company or (ii) to be the "beneficial owner" (as defined in
Rule 13(d)(3) under the Exchange Act) of at least 50% of the aggregate voting
power of the voting stock of the Company.
"Cumulative Cash Flow Credit" means the sum of:
(a) cumulative Operating Cash Flow during the period commencing on July
1, 1988 and ending on the last day of the most recent month preceding the
date of the proposed Restricted Payment for which financial information is
available or, if cumulative Operating Cash Flow for such period is
negative, minus the amount by which cumulative Operating Cash Flow is less
than zero, plus
(b) the aggregate net proceeds received by the Company from the issue or
sale (other than to a Restricted Subsidiary) of its capital stock (other
than Disqualified Stock) on or after January 1, 1992, plus
(c) the aggregate net proceeds received by the Company from the issuance
or sale (other than to a Restricted Subsidiary) of its capital stock (other
than Disqualified Stock) on or after January 1, 1992, upon the conversion
of, or exchange for, Indebtedness of the Company or any Restricted
Subsidiary or from the exercise of any options, warrants or other rights to
acquire capital stock of the Company.
For purposes of this definition, the net proceeds in property other than cash
received by the Company as contemplated by clauses (b) and (c) above shall be
valued at the fair market value of such property (as determined by the Board of
Directors of the Company, whose good faith determination shall be conclusive)
at the date of receipt by the Company.
"Cumulative Interest Expense" means, for the period commencing on July 1,
1988 and ending on the last day of the most recent month preceding the proposed
Restricted Payment for which financial information is available, the aggregate
of the interest expense of the Company and its Restricted Subsidiaries for such
period, determined on a consolidated basis in accordance with generally
accepted accounting principles, including interest expense attributable to
Capitalized Lease Obligations.
"Debt" with respect to any Person means, without duplication, any liability,
whether or not contingent, (i) in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereto), but excluding reimbursement
obligations under any surety bond, (ii) representing the balance deferred and
unpaid of the purchase price of any property (including pursuant to Capitalized
Lease Obligations), except any such balance that constitutes a trade payable,
(iii) under Interest Swap Agreements (as defined in the Credit Agreement)
entered into pursuant to the Credit Agreement, (iv) under any other agreement
related to the fixing of interest rates on any Indebtedness, such as an
interest swap, cap or collar agreement (if and to the extent any of the
foregoing would appear as a liability upon a balance sheet of such Person
prepared on a consolidated basis in accordance with generally
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accepted accounting principles), or (v) guarantees of items of other Persons
which would be included within this definition for such other Persons (whether
or not the guarantee would appear on such balance sheet).
"Disqualified Stock" means any capital stock of the Company or any Restricted
Subsidiary which, by its terms (or by the terms of any security into which it
is convertible or for which it is exchangeable), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the maturity date of the Exchange
Debentures.
"Dolan" shall mean Mr. Charles Dolan, his spouse, his descendants or any
spouse of any such descendants 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.
"Exchange Debenture Issue Date" means the date on which the Exchange
Debentures are originally issued under the Exchange Indenture.
"Indebtedness" with respect to any Person, means the Debt of such Person;
provided, however, that, with respect to the Company, the Minimum Payment or
the Preferred Payment (each a "Cablevision of NYC Payment") payable by a
subsidiary of the Company and guaranteed by the Company as a result of the
Cablevision of NYC Acquisition shall not be deemed to be "Indebtedness" so long
as the Company and such subsidiary are permitted to make such Cablevision of
NYC Payment in one or more classes of the Company's capital stock (other than
Disqualified Stock) pursuant to the terms of the Cablevision of NYC Acquisition
agreement and the Company and the Restricted Subsidiaries are prohibited from
making such Cablevision of NYC Payment in cash, debt securities, Disqualified
Stock or any combination thereof, pursuant to the terms of any mortgage,
indenture, credit agreement or other instrument that secures or evidences
Indebtedness for money borrowed or guaranteed by the Company or a Restricted
Subsidiary in an aggregate amount of $10,000,000 or more; provided that, for
purposes of the definition of "Indebtedness" (including the term "Debt" to the
extent incorporated in such definition) and for purposes of the definition of
"Event of Default", the term "guarantee" shall not be interpreted to extend to
a guarantee under which recourse is limited to the capital stock of an entity
that is not a Restricted Subsidiary.
"Interest Swap Obligations" means, with respect to any Person, the
obligations of such Person pursuant to any arrangement with any other Person
whereby, directly or indirectly, such Person is entitled to receive from time
to time periodic payments calculated by applying either a floating or a fixed
rate of interest on a stated notional amount in exchange for periodic payments
made by such Person calculated by applying a fixed or a floating rate of
interest on the same notional amount.
"Investment" means any advance, loan, account receivable (other than an
account receivable arising in the ordinary course of business), or other
extension of credit (excluding, however, accrued and unpaid interest in respect
of any advance, loan or other extension of credit) or any capital contribution
to (by means of transfers of property to others, payments for property or
services for the account or use of others, or otherwise), any purchase or
ownership of any stocks, bonds, notes, debentures or other securities
(including, without limitation, any interests in any partnership, joint venture
or joint adventure) of, or any bank accounts with or guarantee of any
Indebtedness or other obligations of, any Unrestricted Subsidiary or Affiliate
that is not a subsidiary of the Company, provided that (i) the term
"Investment" shall not include any transaction that would otherwise constitute
an Investment of the Company or a subsidiary of the Company to the extent that
the consideration provided by the Company or such subsidiary in connection
therewith shall consist of capital stock of the Company (other than
Disqualified Stock) and (ii) the term "guarantee" shall not be interpreted to
extend to a guarantee under which recourse is limited to the capital stock of
an entity that is not a Restricted Subsidiary.
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"Junior Securities" means securities of the Company as reorganized or
readjusted or securities of the Company or any other company, trust or
corporation provided for by a plan of reorganization or readjustment, junior or
the payment of which is otherwise subordinate, at least to the extent provided
in the Exchange Indenture, to the payment of all Senior Indebtedness at the
time outstanding, and to the payment of all securities issued in exchange
therefor, to the holders of the Senior Indebtedness at the time outstanding.
"Make-Whole Premium" means, with respect to a share of Preferred Stock, (a)
the present value of (i) dividends accruing until and including April 1, 2003
(assuming payment thereof in cash on the applicable dividend payment date) and
(ii) the liquidation preference and any applicable optional redemption premium
therefor payable on such date for such share (in each case assuming payment
thereof on April 1, 2003), computed using a discount rate equal to the Treasury
Rate plus 50 basis points less (b) the liquidation preference of $10,000 per
share (equivalent to $100 per New Depositary Share).
"Operating Cash Flow" means, for any period, the sum of the following for the
Company and the Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with generally accepted accounting principles
(except for the amortization of deferred installation income which shall
be excluded from the calculation of Operating Cash Flow for all purposes of the
Exchange Indenture): (i) aggregate operating revenues minus (ii) aggregate
operating expenses (including technical, programming, sales, selling, general
and administrative expenses and salaries and other compensation, net of amounts
allocated to Affiliates, paid to any general partner, director, officer or
employee of the Company or any Restricted Subsidiary, but excluding interest,
depreciation and amortization and the amount of non-cash compensation in
respect of the Company's employee incentive stock programs for such period (not
to exceed in the aggregate for any calendar year 7% of Operating Cash Flow for
the previous calendar year) and, to the extent otherwise included in operating
expenses, any losses resulting from a writeoff or writedown of Investments by
the Company or any Restricted Subsidiary in Affiliates). For purposes of
determining Operating Cash Flow, there shall be excluded all management fees
until actually paid to the Company or any Restricted Subsidiary in cash.
"Permitted Restricted Payment" means the payment or declaration of any
dividend by the Company or the making by the Company of any other distribution
or the consummation of an exchange offer, or any combination of the foregoing,
which results in all or a portion of the Capital Stock of Rainbow Programming
Holdings, Inc. or of another entity holding only assets that were held by
Rainbow Programming Holdings, Inc. immediately prior to the acquisition thereof
by such entity (in either case, "RPH") being held by all or any portion of the
shareholders of the Company (an "RPH Transaction"), it being understood that
(i) if the Company and its Subsidiaries, after the date of the Exchange
Indenture and prior to the date of an RPH Transaction, make Investments in RPH
(in cash or assets) aggregating not more than $15,000,000, then such RPH
Transaction shall continue to constitute a "Permitted Restricted Payment" and
(ii) if the Company or any Subsidiary makes any Investment in RPH, after the
date of the Exchange Indenture and prior to the date of such RPH Transaction,
that is not permitted by the foregoing clause (i), then such RPH Transaction
shall not constitute a "Permitted Restricted Payment". For purposes of the
foregoing, the value of any assets invested in RPH shall be based upon the fair
market value thereof as determined by the Board of Directors of the Company,
whose good faith determination shall be conclusive.
"Principals" means Charles F. Dolan and trusts established for the benefit of
family members of Charles F. Dolan.
"Rainbow Spin-Off" means the payment of any dividend by the Company or the
making by the Company of any other distribution or the consummation of an
exchange offer, or any combination of the foregoing, which results in all or a
portion of the capital stock of Rainbow Programming Holdings, Inc. or any
successor to the assets or equity interests thereof, or of another entity,
holding only assets that were held by Rainbow Programming Holdings, Inc.
immediately prior to the acquisition thereof by such entity, being held by all
or any portion of the shareholders of the Company.
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"Restricted Payment" means,
(a) any Stock Payment by the Company or a Restricted Subsidiary; or
(b) any direct or indirect payment to redeem, repurchase, defease or
otherwise acquire or retire for value, or permit any Restricted Subsidiary to
redeem, repurchase, defease or otherwise acquire or retire for value, prior to
any scheduled maturity, scheduled repayment or scheduled sinking fund payment,
any Indebtedness of the Company that is subordinate in right of payment to the
Exchange Debentures.
Notwithstanding the foregoing, Restricted Payments shall not include (x)
payments by any Restricted Subsidiary to the Company or any other Restricted
Subsidiary or (y) any Investment or designation of a Restricted Subsidiary as
an Unrestricted Subsidiary permitted under the "Limitation on Investments in
Unrestricted Subsidiaries and Affiliates" covenant.
"Restricted Subsidiary" means any subsidiary of the Company, whether existing
on the date of the Exchange Indenture or created subsequent thereto, designated
from time to time by the Company as a "Restricted Subsidiary"; provided,
however, that no subsidiary can be or remain so designated unless (i) at least
67% of each of the total equity interest and the voting control of such
subsidiary is owned, directly or indirectly, by the Company or another
Restricted Subsidiary and (ii) such subsidiary is not restricted, pursuant to
the terms of any loan agreement, note, indenture or other evidence of
indebtedness, from (a) paying dividends or making any distribution on such
subsidiary's capital stock or other equity securities or paying any
Indebtedness owed to the Company or to any Restricted Subsidiary, (b) making
any loans or advances to the Company or any Restricted Subsidiary or (c)
transferring any of its properties or assets to the Company or any Restricted
Subsidiary (it being understood that a financial covenant any of the components
of which are directly impacted by the taking of the action (e.g., the payment
of a dividend) itself (such as a minimum net worth test) would be deemed to be
a restriction on the foregoing actions, while a financial covenant none of the
components of which is directly impacted by the taking of the action (e.g., the
payment of a dividend) itself (such as a debt to cash flow test) would not be
deemed to be a restriction on the foregoing actions); and provided further,
that the Company may, from time to time, redesignate any Restricted Subsidiary
as an Unrestricted Subsidiary in accordance with the provisions of the
"Limitation on Investments in Unrestricted Subsidiaries and Affiliates"
covenant.
"Senior Indebtedness" means the principal, premium, if any, interest
(including post-petition interest in any proceeding under any Bankruptcy Law,
whether or not such interest is an allowed claim enforceable against the debtor
in a proceeding under such Bankruptcy Law), penalties, fees and other
liabilities payable with respect to (i) all Debt of the Company, other than the
Exchange Debentures and the Company's 10 3/4% Senior Subordinated Debentures
due 2004, the 9 7/8% Senior Subordinated Debentures due 2013, the 9 7/8% Senior
Subordinated Debentures due 2023, the 9 1/4% Senior Subordinated Notes due
2005, the 11 3/4% Senior Subordinated Debentures due 2007 (if issued in
exchange for the Series H Preferred Stock), the 9 7/8% Senior Subordinated
Notes due 2006, the 10 1/2% Senior Subordinated Debentures due 2016 and the 8
1/2% Convertible Debentures due 2007 (if issued in exchange for the Series I
Preferred Stock) (with which the Exchange Debentures are intended to rank on a
parity), whether outstanding on the date of the Exchange Indenture or
thereafter created, incurred or assumed, which is (x) for money borrowed, (y)
evidenced by a note or similar instrument given in connection with the
acquisition of any businesses, properties or assets of any kind or (z) in
respect of any Capitalized Lease Obligations and (ii) all renewals, extensions,
refundings, increases or refinancings thereof, unless, in the case of (i) or
(ii) above, the instrument under which the Debt is created, incurred, assumed
or guaranteed expressly provides that such Debt is not senior in right of
payment to the Exchange Debentures. For purposes of clarification, Senior
Indebtedness includes any liability under Interest Swap Agreements entered into
pursuant to the Credit Agreement. Notwithstanding anything to the contrary
contained in the Exchange Indenture, Senior Indebtedness shall mean and include
all amounts of Senior Indebtedness that is such by virtue of clause (i) or (ii)
of the foregoing definition that are repaid by the Company and subsequently
recovered from the holder of such Senior Indebtedness under any applicable
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Bankruptcy Laws or otherwise (other than by reason of some wrongful conduct on
the part of the holders of such Debt).
"Stock Payment" means, with respect to any Person, the payment or declaration
of any dividend, either in cash or in property (except dividends payable in
common stock or common shares of capital stock of such Person), or the making
by such Person of any other distribution, on account of any shares of any class
of its capital stock, now or hereafter outstanding, or the redemption,
purchase, retirement or other acquisition for value by such Person, directly or
indirectly, of any shares of any class of its capital stock, now or hereafter
outstanding.
"Strategic Equity Investor" means a corporation or entity with an equity
market capitalization, a net asset value or annual revenues of at least $1.0
billion that owns and operates businesses in the telecommunications,
information systems, entertainment, cable or similar or related industries.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities (as compiled and published in the most recent
Federal Reserve Statistical Release H.15(519) which has become publicly
available at least two business days prior to the date fixed for redemption of
the Preferred Stock or, if such Statistical Release is no longer published, any
publicly available source of similar market data with a constant maturity most
nearly equal to the then remaining period to the date scheduled for the
mandatory redemption of the Preferred Stock; provided, however, that if such
period is not equal to the constant maturity of a United States Treasury
security for which a weekly average yield is given, the Treasury Rate shall be
obtained by linear interpolation (calculated to the nearest one-twelfth of a
year) from the weekly average yields of United States Treasury securities for
which such yields are given.
"Unrestricted Subsidiary" means any subsidiary of the Company which is not a
Restricted Subsidiary.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material anticipated federal income tax
consequences of an exchange of the Old Depositary Shares for New Depositary
Shares. This summary is based upon the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), the final, temporary and proposed regulations
promulgated thereunder, and administrative rulings and judicial decisions now
in effect, all of which are subject to change (possibly with retroactive
effect) or different interpretations. This summary does not purport to deal
with all aspects of federal income taxation that may be relevant to an
investor's decision to hold the New Depositary Shares and it is not intended to
be applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations, foreign
persons, persons that hold New Depositary Shares or Exchange Debentures as part
of a straddle or conversion transaction or holders subject to the alternative
minimum tax, may be subject to special rules. In addition, the summary is
limited to persons that will hold the New Depositary Shares and any Exchange
Debentures received in exchange therefor as "capital assets" (generally,
property held for investment) within the meaning of Section 1221 of the Code.
Holders should note that Counsel's opinion is not binding on the Service and
there can be no assurance that the Internal Revenue Service (the "Service")
will take a similar view with respect to the tax consequences described below.
No ruling has been or will be requested by the Company from the Service on any
tax matters relating to the New Depositary Shares or Exchange Debentures. ALL
PROSPECTIVE HOLDERS OF SHARES OF NEW DEPOSITARY SHARES ARE ADVISED TO CONSULT
THEIR OWN TAX ADVISORS REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF NEW DEPOSITARY SHARES OR
EXCHANGE DEBENTURES.
In general, for U.S. federal income tax purposes, holders of New Depositary
Shares will be treated as the owners of the shares of Series M Preferred Stock
represented by those New Depositary Shares.
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TAXATION OF HOLDERS ON EXCHANGE
No gain or loss will be recognized by a holder that exchanges Old Depositary
Shares for New Depositary Shares pursuant to the Exchange Offer. The basis of
New Depositary Shares received by such holder in the exchange will be the same
as the Old Depositary Shares exchanged therefor. The holder's holding period
for such New Depositary Shares will include the holder's holding period for the
Old Depositary Shares so exchanged, provided that the Old Depositary Shares
were held as a capital asset.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Depositary Shares for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such New Depositary Shares. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of New Depositary Shares received
in exchange for Old Depositary Shares where such Old Depositary Shares were
acquired as a result of market-making activities or other trading activities.
The Company has agreed that it will make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection with any
such resale for a period of 90 days from the date of this Prospectus, or such
shorter period as will terminate when all Old Depositary Shares acquired by
broker-dealers for their own accounts as a result of market-making activities
or other trading activities have been exchanged for New Depositary Shares and
resold by such broker-dealers.
The Company will not receive any proceeds from any sale of New Depositary
Shares by broker-dealers. New Depositary Shares received by broker-dealers for
their own account pursuant to the Exchange Offer may be sold from time to time
in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Depositary Shares or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such New
Depositary Shares. Any broker-dealer that resells New Depositary Shares that
were received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such New Depositary
Shares may be deemed to be a "underwriter" within the meaning of the Securities
Act and any profit on any such resale of New Depositary Shares and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days from the date of this Prospectus, or such shorter
period as will terminate when all Old Depositary Shares acquired by broker-
dealers for their own accounts as a result of market-making activities or other
trading activities have been exchanged for New Depositary Shares and resold by
such broker-dealers, the Company will promptly send additional copies of this
Prospectus and any amendment or supplement to this Prospectus to any broker-
dealer that requests such documents in the Letter of Transmittal. The Company
has agreed to indemnify such broker-dealers against certain liabilities,
including liabilities under the Securities Act.
VALIDITY OF THE NEW DEPOSITARY SHARES
The validity of the New Depositary Shares will be passed upon for the Company
by Sullivan & Cromwell, New York, New York.
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EXPERTS
The consolidated financial statements and schedule of the Company and its
subsidiaries as of December 31, 1995 and 1994 and for each of the years in the
three-year period ended December 31, 1995 that are incorporated in this
Prospectus by reference have been incorporated herein and in the Registration
Statement in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of A-R Cable and its subsidiaries as of
December 31, 1995 and 1994 and for each of the years in the three-year period
ended December 31, 1995 that are incorporated in this Prospectus by reference
have been incorporated herein and in the Registration Statement in reliance
upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law provides that a
corporation may indemnify directors and officers as well as other employees and
individuals against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement in connection with specified actions, suits or
proceedings, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the corporation--a "derivative action"),
if they acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe their
conduct was unlawful. A similar standard is applicable in the case of
derivative actions, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with defense or settlement
of such action, and the statute requires court approval before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation. The statute provides that it is not exclusive of other
rights to which those seeking indemnification may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
The first paragraph of Article Ninth of the Corporation's Certificate of
Incorporation provides:
The corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of the State of Delaware, as the same
may be amended and supplemented, or by any successor thereto, indemnify
any and all persons whom it shall have power to indemnify under said
section from and against any and all of the expenses, liabilities or
other matters referred to in or covered by said section. Such right to
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
the heirs, executors and administrators of such a person. The
indemnification provided for herein shall not be deemed exclusive of
any other rights to which those seeking indemnification may be entitled
under any By-Law, agreement, vote of stockholders or disinterested
directors or otherwise.
Article VIII of the By-Laws of the Corporation provides:
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
whom 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
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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.
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 any 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.
The Corporation has entered into indemnification agreements with certain of
its officers and directors indemnifying such officers and directors from and
against certain expenses, liabilities or other matters referred to in or
covered by Section 145 of the Delaware General Corporation Law. The Corporation
has also entered into an agreement with Charles F. Dolan ("Mr. Dolan"), the
Chairman of the Corporation, pursuant to which Mr. Dolan has agreed to
guarantee the Corporation's obligation to indemnify its officers and directors
to the fullest extent permitted by Delaware law. In addition, subject to
certain limitations, Mr. Dolan has agreed to indemnify such officers and
directors against any loss or expense such person may incur in connection with
any transaction involving Mr. Dolan or entities affiliated with Mr. Dolan to
the extent indemnification is not provided by the Corporation. Any payment
required to be made by Mr. Dolan pursuant to such agreement will be reduced by
any proceeds of insurance or reimbursement under any other form of
indemnification reimbursement available to such officer or director. The
Corporation maintains directors' and officers' liability insurance.
Section 102(b)(7) of the Delaware General Corporation Law permits a
corporation to provide in its certificate of incorporation that a director of
the corporation shall not be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for payments of unlawful dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. The second paragraph of Article Ninth of the
Corporation's Certificate of Incorporation provides for such limitation of
liability.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<C> <S>
4.1 --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")).
4.1A --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")).
4.1B --Certificate of Designations for the Series G Redeemable Exchangeable
Preferred Stock (incorporated herein by reference to Exhibit 3.1D to
the Company's Registration Statement on Form S-4, File No. 33-62717)
4.1C --Certificate of Designations for the Series H Redeemable Exchangeable
Preferred Stock (incorporated herein by reference to Exhibit 4.1C to
the Company's Registration Statement on Form S-4, File No. 33-63691).
4.1D --Certificate of Designations for the Series I Cumulative Convertible
Exchangeable Preferred Stock (incorporated herein by reference to
Exhibit 99.3 to the Company's Current Report on
Form 8-K filed November 7, 1995)
</TABLE>
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<TABLE>
<C> <S>
4.1E --Certificate of Designations for the Series L Redeemable Exchangeable
Preferred Stock (incorporated herein by reference from Exhibit 3.1G to
the Company's Form 10-K for the year ended December 31, 1995 (the
"1995 10-K")).
*4.1F --Certificate of Designation for the Series M Redeemable Exchangeable
Preferred Stock.
4.2 --By-laws of the Registrant (incorporated herein by reference to
Exhibit 3.2 to the S-1).
4.2A --Amendment to By-laws of the Registrant and complete copy of amended
and restated By-laws (incorporated herein by reference to Exhibit 3.2
to the 1989 10-K).
4.2B --Amendment to By-laws of the Registrant 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
10-K for the fiscal year ended December 31, 1992).
4.2C --Amendment to By-laws of the Registrant and complete copy of amended
and restated By-laws (incorporated herein by reference to Exhibit 3.2C
to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994).
4.2D --Amendment to By-laws of the Registrant and complete copy of amended
and restated By-laws (incorporated herein by reference to Exhibit 3.2D
to the Company's Registration Statement on Form S-4, File No.
33-62717).
4.3 --Registration Rights Agreement, dated February 15, 1996, between the
Registrant and Bear, Stearns & Co. Inc., Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, and Morgan Stanley & Co.
Incorporated (incorporated by reference from Exhibit 4.6 to the 1995
10-K).
*4.4 --Indenture dated as of February 15, 1996 between the Registrant and
The Bank of New York, Trustee.
*4.5 --Form of 11 1/8% Exchange Debenture due 2008 (included in Exhibit
4.4).
*5 --Opinion of Sullivan & Cromwell.
12 --Computation of ratio of deficiency of earnings to fixed charges
(incorporated herein by reference to Exhibit 12 to the Company's
Current Report on Form 8-K filed May 17, 1996).
23.1 --Consent of KPMG Peat Marwick LLP.
*23.2 --Consent of Sullivan & Cromwell.
*24 --Powers of Attorney.
*25 --Statement of Eligibility of The Bank of New York, Trustee.
*99.1 --Form of Letter of Transmittal.
*99.2 --Form of Notice of Guaranteed Delivery.
</TABLE>
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* Previously filed.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act of 1933 and is, therefore,
II-3
<PAGE>
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by any such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether or not such indemnification is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall
be deemed to be part of this registration statement as of the time it
was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE
REQUIREMENTS FOR FILING ON FORM S-4 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE TOWN OF OYSTER BAY AND THE STATE OF NEW YORK, ON THE 26TH
DAY OF JUNE, 1996.
Cablevision Systems Corporation
/s/ Robert S. Lemle
By __________________________________
ROBERT S. LEMLE
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES INDICATED ON THE 26TH DAY OF JUNE, 1996.
SIGNATURE TITLE
--------- -----
* Chief Executive Officer (Principal
- ------------------------------------- Executive Officer) and Director
(JAMES L. DOLAN)
* Chairman of the Board
- -------------------------------------
(CHARLES F. DOLAN)
* Senior Vice President--Finance and
- ------------------------------------- Treasurer (Principal Financial Officer)
(BARRY J. O'LEARY)
* Vice Chairman (Principal Accounting
- ------------------------------------- Officer)
(WILLIAM J. BELL) and Director
* Vice Chairman and Director
- -------------------------------------
(MARC A. LUSTGARTEN)
/s/ Robert S. Lemle Executive Vice President, General
- ------------------------------------- Counsel, Secretary and Director
(ROBERT S. LEMLE)
II-5
<PAGE>
SIGNATURE TITLE
--------- -----
* Senior Vice President and Director
- ------------------------------------
(SHEILA A. MAHONY)
* Director and Chairman of the
- ------------------------------------ Executive Committee
(JOHN TATTA)
* Director
- ------------------------------------
(PATRICK F. DOLAN)
* Director
- ------------------------------------
(FRANCIS F. RANDOLPH, JR.)
* Director
- ------------------------------------
(DANIEL T. SWEENEY)
* Director
- ------------------------------------
(CHARLES D. FERRIS)
* Director
- ------------------------------------
(RICHARD H. HOCHMAN)
* Director
- ------------------------------------
(VICTOR ORISTANO)
/s/ Robert S. Lemle
*By:________________________________ , as Attorney-in-Fact
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
------- ----------------------- -------------------
<C> <S> <C>
4.1 --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")).
4.1A --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")).
4.1B --Certificate of Designations for the Series G
Redeemable Exchangeable Preferred Stock
(incorporated herein by reference to Exhibit
3.1D to the Company's Registration Statement on
Form S-4, File No. 33-62717).
4.1C --Certificate of Designations for the Series H
Redeemable Exchangeable Preferred Stock
(incorporated herein by reference to Exhibit
4.1C to the Company's Registration Statement on
Form S-4, File No. 33-63691).
4.1D --Certificate of Designations for the Series I
Cumulative Convertible Exchangeable Preferred
Stock (incorporated herein by reference to
Exhibit 99.3 to the Company's Current Report on
Form 8-K filed November 7, 1995)
4.1E --Certificate of Designation for the Series L
Redeemable Exchangeable Preferred Stock
(incorporated herein by reference to Exhibit
3.1G to the Company's Form 10-K for the year
ended December 31, 1995 (the "1995 10-K")).
4.1F --Certificate of Designation for the Series M
Redeemable Exchangeable Preferred Stock.
4.2 --By-laws of the Registrant (incorporated herein
by reference to Exhibit 3.2 to the S-1).
4.2A --Amendment to By-laws of the Registrant and
complete copy of amended and restated By-laws
(incorporated herein by reference to Exhibit
3.2 to the 1989 10-K).
4.2B --Amendment to By-laws of the Registrant 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 10-
K for the fiscal year ended December 31, 1992).
4.2C --Amendment to By-laws of the Registrant and
complete copy of amended and restated By-laws
(incorporated herein by reference to Exhibit
3.2C to the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1994).
4.2D --Amendment to By-laws of the Registrant and
complete copy of amended and restated By-laws
(incorporated herein by reference to Exhibit
3.2D to the Company's Registration Statement to
Form S-4, File No. 33-62717).
4.3 --Registration Rights Agreement, dated February
15, 1996, between the Registrant and Bear,
Stearns & Co. Inc., Merrill Lynch & Co.,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated, and Morgan Stanley & Co.
Incorporated (incorporated by reference from
Exhibit 4.6 to the 1995 10-K).
4.4 --Indenture dated as of February 15, 1996
between the Registrant and The Bank of New
York, Trustee.
4.5 --Form of 11 1/8% Exchange Debenture due 2008
(included in Exhibit 4.4).
5 --Opinion of Sullivan & Cromwell.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LOCATION OF EXHIBIT
EXHIBIT IN SEQUENTIAL
NUMBER DESCRIPTION OF DOCUMENT NUMBERING SYSTEM
------- ----------------------- -------------------
<C> <S> <C>
12 --Computation of ratio of deficiency of earnings
to fixed charges (incorporated herein by
reference to Exhibit 12 to the Company's
Current Report on Form 8-K filed May 17, 1996).
23.1 --Consent of KPMG Peat Marwick LLP.
23.2 --Consent of Sullivan & Cromwell (included in
Exhibit 5).
*24 --Powers of Attorney.
25 --Statement of Eligibility of The Bank of New
York, Trustee.
99.1 --Form of Letter of Transmittal.
99.2 --Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
* Previously filed.
<PAGE>
Exhibit 23.1
Consent of Independent Auditors
-------------------------------
The Board of Directors
Cablevision Systems Corporation
and A-R Cable Services, Inc.:
We consent to the use of our reports, incorporated herein by reference, and to
the references to our firm under the headings "Selected Financial Data" and
"Experts" in the prospectus and the Registration Statement of Cablevision
Systems Corporation on Form S-4.
KPMG Peat Marwick LLP
Jericho, New York
June 25, 1996
